UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
FORM 10-Q

(Mark One)
[ X ]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
or
[    ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to  
___________________

Commission File Number:  33-96358

BOURBON BANCSHARES, INC.
(Exact name of registrant as specified in its charter)

Kentucky           							           61-0993464
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

P.O. Box 157, Paris, Kentucky		         				40362-0157
(Address of principal executive offices)				(Zip Code)

Registrant's telephone number, including area code:  (606)987-1795

Indicate by check mark whether the registrant (1) has filed all reports 
required to be filed by Section 13 or 15(d) of the Securities Exchange 
Act of 1934 during the preceding 12 months (or for such shorter period 
that the registrant was required to file such reports), and (2) has been 
subject to such filing requirements for the past 90 days.	
Yes    X     No _____


Number of shares of Common Stock outstanding as of November 4, 1998:  
1,404,603.

<PAGE>

BOURBON BANCSHARES, INC.

Table of Contents

Part I - Financial Information

Item 1.     Financial Statements

		Consolidated Balance Sheets                            					  3

		Consolidated Statement of Income and Comprehensive Income
			Nine Months Ending September 30, 1998 & 1997	                4

		Consolidated Statement of Income and Comprehensive Income
			Three Months Ending September 30, 1998 & 1997	               5

		Consolidated Statements of Cash Flows
			Nine Months Ending September 30, 1998 & 1997	                6

		Consolidated Statements of Cash Flows
			Three Months Ending September 30, 1998 & 1997	               7
			
		Notes to Consolidated Financial Statements		                  8

Item 2.   Management's Discussion and Analysis of Financial 
          		Condition and Results of Operations				             9

Item 3.	Quantitative and Qualitative Disclosures About
          		Market Risk								                                15

Part II - Other Information							                             19

Signatures										                                           19

<PAGE>

Item 1 - Financial Statements

BOURBON BANCSHARES, INC.

CONSOLIDATED BALANCE SHEET  (unaudited)
(thousands)                                     9/30/98       12/31/97
Assets
  Cash & Due From Banks                        $ 11,707       $ 12,275 
  Federal Funds Sold                              2,950 
    Total Cash & Cash Equivalents              $ 14,657       $ 12,275 
  Investment Securities:
    Securities Held to Maturity                  17,167         15,603 
    Securities Available for Sale                53,085         66,101 
  Federal Home Loan Bank Stock                    3,066          2,905 
  Loans                                        $199,529       $185,161 
  Reserve for Loan Losses                         2,636          2,322 
    Net Loans                                  $196,893       $182,839 
  Premises and Equipment                          6,343          5,765 
  Other Assets                                    5,627          5,167 
    Total Assets                               $296,838       $290,655 



Liabilities & Stockholders' Equity
  Deposits
    Demand                                     $ 36,921       $ 33,481 
    Savings & Interest Checking                  87,526         87,982 
    Certificates of Deposit                     126,671        119,862 
      Total Deposits                           $251,118       $241,325 
  Repurchase Agreements                           3,281          6,990 
  Federal Home Loan Bank Advances                 9,776         10,236 
  Other Borrowed Funds                            1,003          2,468 
  Other Liabilities                               2,908          2,920 
    Total Liabilities                          $268,086       $263,939 

  Stockholders' Equity
  Common Stock                                 $  6,474       $  6,333 
  Retained Earnings                              22,049         20,150 
  Accumulated Other Comprehensive Income            229            233 
    Total Stockholders' Equity                 $ 28,752       $ 26,716 
    Total Liabilities & Stockholders' Equity   $296,838       $290,655 

<PAGE>

BOURBON BANCSHARES, INC.

CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME  (unaudited)
(thousands, except per share amounts)        Nine Months Ending 
                                            9/30/98       9/30/97
INTEREST INCOME:
  Loans, including fees                    $ 12,876      $ 11,408 
  Investment Securities                       3,449         3,903 
  Other                                         201           302 
    Total Interest Income                  $ 16,526      $ 15,613 
INTEREST EXPENSE:
  Deposits                                 $  7,352      $  7,020 
  Other                                         677           691 
    Total Interest Expense                 $  8,029      $  7,711 
  Net Interest Income                      $  8,497      $  7,902 
  Loan Loss Provision                           488           343 
  Net Interest Income After Provision      $  8,009      $  7,559 
OTHER INCOME:
  Service Charges                          $  1,589      $  1,388 
  Securities Gains (Losses)                      35             2 
  Other                                         404           303 
    Total Other Income                     $  2,028      $  1,693 
OTHER EXPENSES:
  Salaries and Benefits                    $  3,371      $  3,154 
  Occupancy Expenses                            854           773 
  Other                                       2,095         1,890 
    Total Other Expenses                   $  6,320      $  5,817 
  Income Before Taxes                      $  3,717      $  3,435 
  Income Taxes                                  978           862 
  Net Income                               $  2,739      $  2,573 

Other Comprehensive Income, net of tax:
  Change in Unrealized Gains on Securities       (4)          175 

Comprehensive Income                       $  2,735      $  2,748 

Earnings per share                         $   1.96      $   1.84 
Earnings per share - assuming dilution     $   1.91      $   1.81 

<PAGE>

BOURBON BANCSHARES, INC.

CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME  (unaudited)
(thousands, except per share amounts)
                                             Three Months Ending 
                                            9/30/98       9/30/97
INTEREST INCOME:
  Loans, including fees                    $  4,398      $  3,992 
  Investment Securities                       1,229         1,271 
  Other                                         (60)           99 
    Total Interest Income                  $  5,567      $  5,362 
INTEREST EXPENSE:
  Deposits                                 $  2,482      $  2,459 
  Other                                         218           233 
    Total Interest Expense                 $  2,700      $  2,692 
  Net Interest Income                      $  2,867      $  2,670 
  Loan Loss Provision                           163           131 
  Net Interest Income After Provision      $  2,704      $  2,539 
OTHER INCOME:
  Service Charges                          $    555      $    484 
  Securities Gains (Losses)                       7            (6)
  Other                                         162            94 
    Total Other Income                     $    724      $    572 
OTHER EXPENSES:
  Salaries and Benefits                    $  1,124      $  1,049 
  Occupancy Expenses                            304           269 
  Other                                         742           604 
    Total Other Expenses                   $  2,170      $  1,922 
  Income Before Taxes                      $  1,258      $  1,189 
  Income Taxes                                  328           308 
  Net Income                               $    930      $    881 

Other Comprehensive Income, net of tax:
Change in Unrealized Gains on Securities         93           122 

Comprehensive Income                       $  1,023      $  1,003 

Earnings per share                         $   0.67      $   0.63 
Earnings per share - assuming dilution     $   0.65      $   0.62 

<PAGE>

BOURBON BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS  (unaudited)
(thousands)
                                                          Nine Months Ending 
                                                        9/30/98       9/30/97
Cash Flows From Operating Activities
  Net Income                                         $    2,739    $    2,573 
  Adjustments to reconcile net income to
   net cash provided by operating activities:
  Depreciation                                              428           383 
  Amortization                                              352           313 
  Investment securities (accretion) amortization, net       (22)           48 
  Provision for loan losses                                 488           343 
  Deferred Income Taxes                                     (50)           15 
  Investment securities losses (gains), net                 (35)           (2)
  Originations of loans held for sale                   (24,272)      (14,678)
  Proceeds from sale of loans                            27,984        14,716 
  Capitalization of Mortgage Servicing Rights              (252)         (130)
  Losses (gains) on sale of fixed assets                     25             -   
  Losses (gains) on sale of loans                           (94)          (47)
  Losses (gains), including write-downs, on real
   estate acquired through foreclosure, net                   -            23 
  Changes in:
    Interest receivable                                    (417)         (568)
    Income taxes refundable                                   -            66 
    Other assets                                            (34)          (69)
    Interest payable                                        119           633 
    Income taxes payable                                    285           112 
    Other liabilities                                      (416)           66 
      Net cash provided by operating activities      $    6,828    $    3,797 
Cash Flows From Investing Activities
  Purchases of securities available for sale         $  (19,266)   $  (17,053)
  Proceeds from sales of securities available for sale    5,544        13,336 
  Proceeds from principal payments, maturities and
   calls of securities available for sale                26,606        15,309 
  Purchase of securities held to maturity                (2,375)         (785)
  Proceeds from sales, principal payments, maturities
   and calls of securities held to maturity                 833         1,431 
  Net change in loans                                   (18,217)      (20,870)
  Purchases of bank premises and equipment               (1,136)       (1,095)
  Proceeds from the sale of bank premises and equipment     105             -   
  Proceeds from sales of real estate acquired through
    foreclosure                                               -            56 
    Net cash provided by investing activities        $   (7,906)   $   (9,671)
Cash Flows From Financing Activities:
  Net change in deposits                             $    9,793    $    4,214 
  Net change in securities sold under agreements to
   repurchase and federal funds purchased                (3,709)          417 
  Advances from Federal Home Loan Bank                    4,000             -   
  Payments on Federal Home Loan Bank advances            (4,460)         (229)
  Net change in other borrowed funds                     (1,465)        2,578 
  Proceeds from note payable                                  -           450 
  Payment on note payable                                     -          (450)
  Repurchase of common stock                                  -          (602)
  Proceeds from issuance of common stock                    142            32 
  Dividends paid                                           (841)         (754)
    Net cash provided by financing activities        $    3,460    $    5,656 
Net increase (decrease) in cash and cash equivalents $    2,382    $     (218)
Cash and cash equivalents at beginning of period         12,275         9,191 
Cash and cash equivalents at end of period           $   14,657    $    8,973 

<PAGE>

BOURBON BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS  (unaudited)
(thousands)                                              Three Months Ending 
                                                        9/30/98       9/30/97
Cash Flows From Operating Activities
  Net Income                                         $      930    $      881 
  Adjustments to reconcile net income to
   net cash provided by operating activities:
  Depreciation                                              143           131 
  Amortization                                              121           106 
  Investment securities (accretion) amortization, net       (10)            8 
  Provision for loan losses                                 163           131 
  Deferred Income Taxes                                     (14)          (83)
  Investment securities losses (gains), net                  (7)            5 
  Originations of loans held for sale                    (6,195)       (7,232)
  Proceeds from sale of loans                             6,023         7,101 
  Capitalization of Mortgage Servicing Rights               (64)          (52)
  Losses (gains) on sale of loans                           (54)          (15)
  Changes in:
    Interest receivable                                    (184)         (398)
    Income taxes refundable                                  57            19 
    Other assets                                            (55)         (103)
    Interest payable                                        (10)          255 
    Income taxes payable                                    285           112 
    Other liabilities                                       130           194 
      Net cash provided by operating activities      $    1,259    $    1,060 
Cash Flows From Investing Activities
  Purchases of securities available for sale         $   (8,088)   $   (5,999)
  Proceeds from sales of securities available for sale    2,002         5,833 
  Proceeds from principal payments, maturities and
   calls of securities available for sale                 7,662         3,443 
  Purchase of securities held to maturity                (1,385)            -   
  Proceeds from sales, principal payments, maturities
   and calls of securities held to maturity                  50           540 
  Net change in loans                                    (7,556)      (10,517)
  Purchases of bank premises and equipment                 (345)         (452)
    Net cash provided by investing activities        $   (7,660)   $   (7,152)
Cash Flows From Financing Activities:
  Net change in deposits                             $   15,171    $    3,219 
  Net change in securities sold under agreements to
   repurchase and federal funds purchased                   149           439 
  Payments on Federal Home Loan Bank advances             1,929           (96)
  Net change in other borrowed funds                     (5,308)        2,141 
  Payment on note payable                                     -          (100)
  Proceeds from issuance of common stock                     56             4 
  Dividends paid                                           (281)         (251)
    Net cash provided by financing activities        $   11,716    $    5,356 
Net increase (decrease) in cash and cash equivalents $    5,315    $     (736)
Cash and cash equivalents at beginning of period          9,342         9,709 
Cash and cash equivalents at end of period           $   14,657    $    8,973 

<PAGE>

BOURBON BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. In Management's opinion, the financial information, which is 
unaudited, reflects all adjustments, (consisting solely of normal 
recurring adjustments) necessary for a fair presentation of the 
financial information as of and for the nine month and three month 
periods ended September 30, 1998 and September 30, 1997 in conformity 
with generally accepted accounting principles.  These financial 
statements should be read in conjunction with Bourbon Bancshares, 
Inc. (Company) Annual Report on Form 10-K.
2. The Financial Accounting Standards Board has issued Statement of 
Financial Accounting Standards No. 130, "Reporting Comprehensive 
Income".  The requirements are disclosure related and its 
implementation will have no impact on the Company's financial 
condition or results of operations.  Prior period financial 
statements have been restated to meet this reporting format.
3. Recently, the Financial Accounting Standards Board issued Statement 
128, "Earnings Per Share", under which basic and diluted earnings per 
share are computed.  Prior amounts have been restated to be 
comparable.  Basic earnings per share is based on net income divided 
by the weighted average number of shares outstanding during the 
period.  Diluted earnings per share shows the dilutive effect of 
additional common shares issuable under stock options.
4. Dividends per share paid for the quarter ended September 30, 1998 was 
$0.20 compared to $0.18 on September 30, 1997.  The third quarter 
dividends were the same amounts as were paid during the first and 
second quarters of the respective years.

<PAGE>

Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
RESULTS OF OPERATIONS

Summary

Bourbon Bancshares, Inc. recorded net income of $2,739 thousand, or 
$1.96 per share and $1.91 per share assuming dilution for the first nine 
months ended September 30, 1998 compared to $2,573 thousand, or $1.84 
per share and $1.81 per share assuming dilution for September 30, 1997.  
The first nine months' reflects an increase in earnings of 7%.  The 
third quarter earnings of 1998 were $931 thousand, or $0.67 per share 
and $0.65 per share assuming dilution compared to $881 thousand, or 
$0.63 per share and $0.62 per share assuming dilution in 1997.  This 
represents a 6% increase in earnings.

Return on average assets was 1.27% for the first nine months ended 
September 30, 1998 compared to 1.25% for the same time period in 1997.  
Third quarter numbers were 1.28% and 1.26% for 1998 and 1997, 
respectively.  Return on average equity was 13.2% and 13.7% for the nine 
months ended September 30, 1998 and 1997, respectively.  Third quarter 
numbers were 13.2% in 1998 compared to 13.7% in 1997.  The return on 
assets was up 2% for the first nine months and up 2% for the third 
quarter.  The return on equity for the first nine months was down 4% and 
down 4% for the third quarter.

Net Interest Income

Net interest income was $8,497 thousand for the nine months ended 
September 30, 1998 compared to $7,902 thousand in 1997, resulting in an 
increase of $595 thousand or 7.5%.  For the third quarter, net interest 
income was $2,867 thousand in 1998 and $2,670 thousand in 1997, an 
increase of $197 thousand or 7.4%.  Loan volume continues to improve.  
Year to date average loans are up nearly $21 million, or nearly 13% from 
1997 to 1998 resulting in an improvement in interest income of $913 
thousand for the first nine months and $205 thousand for the quarter.  
Average deposits also increased from 1997 to 1998, up nearly $11 
million, or 5%.  The increased volume resulted in higher interest 
expense of $318 thousand for the first nine months and $8 thousand for 
the quarter.

Non-Interest Income

Non-interest income increased for the nine-month period ended September 
30 from $1,693 thousand in 1997 to $2,028 thousand in 1998.  The third 
quarter reflected an increase from $572 thousand in 1997 to $724 
thousand in 1998.  For the year, an increase of $201 thousand in service 
charges from 1997 to 1998 is mainly attributable to an improvement in 
overdraft charges of $141 thousand.  Service charges increased $71 
thousand for the third quarter with overdraft charges accounting for $42 
thousand.  Servicing income from loans sold is up $19 thousand from 
1997.  Securities gains were up $33 thousand for the first nine months 
and $13 thousand for the third quarter.  Trust income accounts for $39 
thousand of the $101 thousand increase in other income for the first 
nine months. 

<PAGE>

Non-Interest Expense

The explanations for the increase of $282 thousand in non-interest 
expenses from $5,817 thousand for the nine months ended September 30, 
1997 to $6,320 thousand for the same period in 1998 and the increase of 
$248 thousand for the third quarter of 1998 compared to 1997 follows.  
Salaries and benefits increased $217 thousand for the first nine months 
of 1998 compared to 1997, an increase of 6.9%.  The increase for the 
third quarter was $75 thousand.  In 1998, bonuses were earned by 
employees totaling $70 thousand compared to $54 thousand in 1997.  The 
increase in salaries of 6% is mainly attributable to salary increases 
and the adding of staffing in Georgetown for the new branch and Clark 
County for the opportunity existing with two banks in town changing 
ownership.

Occupancy expense increased $81 thousand for the first nine months of 
1998 compared to 1997 and $35 thousand for the third quarter.  
Depreciation was up $44 thousand for the year and $11 thousand for the 
third quarter.  Building maintenance was $16 thousand higher for the 
first nine months of 1998.  These changes are mainly attributable to the 
newly constructed Versailles location and the leased building no longer 
being needed, and the newly constructed Georgetown Branch.  

Other expenses for the first nine months of 1998 compared to 1997 
increased $205 thousand, from $1,890 thousand to $2,095 thousand.  Of 
this increase $138 thousand occurred during the third quarter.  
Telephone expenses are up $18 thousand for the year.  The Company has 
placed more emphasis on education and training during 1998 and these 
expenses are $34 thousand higher in 1998 than in 1997.  With the selling 
of mortgage loans, the amortization of mortgage servicing rights 
increased $39 thousand from 1997 to 1998.  During 1998 the legal and 
professional expenses are $23 thousand higher in 1998 as compared to 
1997.

Income Taxes

The tax equivalent rate for the nine months ended September 30 was 26% 
for 1998 and 25% for 1997.  The quarterly rates were 26% and 26% for 
1998 and 1997, respectively.  These rates being less than the statutory 
rate is a result of the tax-free securities and loans held by the 
Company.

<PAGE>

Liquidity and Funding

The cash flow statements provide a useful analysis of liquidity.  This 
report reveals an increase of cash and cash equivalents for the first 
nine months of 1998 of $2,382 thousand and a decrease of $218 thousand 
for the same period in 1997.  The third quarter reflects an increase of 
cash and cash equivalents of $5,315 thousand in 1998 and a decrease of 
$736 in 1997.  In 1998, proceeds from the sale of loans were nearly $28 
million compared to nearly $15 million in 1997.  The third quarter 
reveals over $6 million from the sale of loans in 1998 compared to $7 
million in 1997.  Originations of loans held for sale were also greater 
in 1998, amounting to over $24 million compared to $15 million in 1997.  
The third quarter numbers were $6 million and $7 million for 1998 and 
1997, respectively.  The lower rates have created higher volume of loans 
originated and have allowed management to sale lower coupon loans.

During 1998, proceeds from security transactions have exceeded purchases 
by over $11 million compared to nearly $12 million in 1997.  Third 
quarter proceeds exceeded purchases by $0.2 million in 1998 and $4 
million in 1997.  Of this change, principal payments on securities have 
amounted to over $10 million in 1998 ($3 million in third quarter) and 
over $7 million for the same period in 1997 ($3 million in third 
quarter).  Management has made a concerted effort to improve loan demand 
over the past two years.  In 1998, net loans have increased $18 million 
compared to $21 million in 1997.

Deposits for 1998 have increased $10 million.  However, during 1997 
deposits increased over $4 million during the first nine months.  During 
1998, other borrowing has dropped $6 million however it increased $3 
million in 1997.  The above-mentioned activity in 1998 with deposits, 
loans and securities has allowed these borrowed funds to be paid down. 

Management believes there is sufficient liquidity to meet all reasonable 
borrower, depositor and creditor needs in the present economic 
environment.

<PAGE>

Non-Performing Assets

As of September 30, 1998, the Company's non-performing assets totaled 
$931 thousand or 0.5% of loans compared to $679 thousand or 0.4% of 
loans in 1997.  (See table below)  Real estate loans composed 65% and 
68% of the non-performing loans as of September 30, 1998 and 1997, 
respectively.  Lost interest income on the non-accrual loans for both 
1998 and 1997 is immaterial.

Nonperforming Assets
                                                September 30
(in thousands)                               1998          1997

Non-accrual Loans                             227           225 
Accruing Loans which are
  Contractually past due
  90 days or more                             555           291 
Restructured Loans                            149           163 
Total Nonperforming and Restructured          931           679 
Other Real Estate                               -             -   
Total Nonperforming and Restructured
 Loans and Other Real Estate                  931           679 
Nonperforming and Restructured Loans
 as a Percentage of Net Loans                0.47%         0.38%
Nonperforming and Restructured Loans
 and Other Real Estate as a Percentage
 of Total Assets                             0.31%         0.24%


Provision and Reserve for Possible Loan Losses

The 1998 nine-month provision for loan losses of $488 thousand is higher 
than the 1997 number of $343 thousand.  The third quarter provision was 
$163 thousand for 1998 and $131 thousand for 1997.  Loan growth has 
required management to increase the provision in order to maintain a 
reserve ratio that is adequate and indicative of the quality of loans 
currently in the portfolio.  The quality of the loans, in management's 
opinion, is still strong as is presented earlier in non-performing 
loans.   As depicted in the table below, the loan loss reserve to total 
loans was 1.31% on September 30, 1997 and 1.32% on September 30, 1998.  
Net charge-offs for the periods mentioned above have been relatively 
insignificant.  Management feels the current loan loss reserve is 
sufficient to meet future loan problems.

<PAGE>

Loan Losses
                                      Nine Months Ended September 30
(in thousands)                             1998          1997
Balance at Beginning of Period            2,322         2,101 
Amounts Charged-off:
  Commercial                                  3             -   
  Real Estate Construction                    -             -   
  Real Estate Mortgage                       11             -   
  Agricultural                               15            14 
  Consumer                                  205           116 
Total Charged-off Loans                     234           130 
Recoveries on Amounts
 Previously Charged-off:
  Commercial                                  3             2 
  Real Estate Construction                    -             -   
  Real Estate Mortgage                        8             1 
  Agricultural                                1            11 
  Consumer                                   48            32 
Total Recoveries                             60            46 
Net Charge-offs                             174            84 
Provision for Loan Losses                   488           343 
Balance at End of Period                  2,636         2,360 
Total Loans, Net of Unearned Income
  Average                               188,707       167,169 
  At September 30                       199,529       180,402 
As a Percentage of Average Loans:
  Net Charge-offs                          0.09%         0.05%
  Provision for Loan Losses                0.26%         0.21%
Allowance as a Percentage of
 Period-end Net Loans                      1.32%         1.31%
Allowance as a Multiple of
 Net Charge-offs                           15.1          28.1 


<PAGE>

Loan Losses

                                     Quarter Ended September 30
(in thousands)                            1998          1997
Balance at Beginning of Period           2,542         2,261 
Amounts Charged-off:   
  Commercial                                 -             -   
  Real Estate Construction                   -             -   
  Real Estate Mortgage                       -             -   
  Agricultural                              15             -   
  Consumer                                  83            43 
Total Charged-off Loans                     98            43 
Recoveries on Amounts
 Previously Charged-off:
  Commercial                                 1             -   
  Real Estate Construction                   -             -   
  Real Estate Mortgage                       7             -   
  Agricultural                               -             1 
  Consumer                                  21            10 
Total Recoveries                            29            11 
Net Charge-offs                             69            32 
Provision for Loan Losses                  163           131 
Balance at End of Period                 2,636         2,360 
Total Loans, Net of Unearned Income
  Average                              187,368       165,277 
  At September 30                      199,529       180,402 
As a Percentage of Average Loans:
  Net Charge-offs                         0.04%         0.02%
  Provision for Loan Losses               0.09%         0.08%
Allowance as a Percentage of
 Period-end Net Loans                     1.32%         1.31%
Allowance as a Multiple of
 Net Charge-offs                          38.2          73.8 


Year 2000

Management has completed its assessment phase for the Year 2000 and 
continues its renovation phase (replacing equipment and upgrading 
software) and testing phase as needed to be compliant.  Current 
estimates for this project are under $150 thousand, with the majority of 
this being for equipment and software.  Management believes the effect 
of the Year 2000 issues will not have a material effect on the Company's 
business, results of operation or financial condition.

<PAGE>

Item 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Asset/Liability management control is designed to ensure safety and 
soundness, maintain liquidity and regulatory capital standards, and 
achieve acceptable net interest income.  Management considers interest 
rate risk to be the most significant market risk.  The Company's 
exposure to market risk is reviewed on a regular basis by the 
Asset/Liability Committee.  Interest rate risk is the potential of 
economic losses due to future interest rate changes.  These economic 
losses can be reflected as a loss of future net interest income and/or a 
loss of current fair market values.  The objective is to measure the 
effect on net interest income and to adjust the balance sheet to 
minimize the inherent risk while at the same time maximize income.  
Management realizes certain risks are inherent and that the goal is to 
identify and minimize the risks.  Tools used by management include the 
standard GAP report and an interest rate shock simulation report.  The 
Bank has no market risk sensitive instruments held for trading purposes.  
The following table depicts the change in net interest income resulting 
from 100 to 300 basis point changes in rates.  The projections are based 
on balance sheet growth assumptions and repricing opportunities for new, 
maturing and adjustable rate amounts.  In addition, the projected 
percentage changes from level rates are outlined below with the Board of 
Directors specified limits.  As of September 30, 1998 the projected 
percentage changes are within the Board limits and the Company's 
interest rate risk appears reasonable.  The projected net interest 
income report summarizing the Bank's interest rate sensitivity as of 
September 30, 1998 is as follows:

<PAGE>
<TABLE>
<CAPTION>

(in thousands)

PROJECTED NET INTEREST INCOME
                                                            Level
Rate Change:                     - 300    - 200    - 100    Rates    + 100    + 200    + 300
<S>                             <C>      <C>      <C>      <C>      <C>      <C>     <C>
Year One  (10/1/98 -  9/30/99)
   Interest Income              19,810   20,835   21,867   22,904   23,941   24,978  26,016 
   Interest Expense              7,680    8,638    9,596   10,553   11,511   12,468  13,426 
       Net Interest Income      12,130   12,197   12,271   12,351   12,430   12,510  12,590 

Year Two  (10/1/99 -  9/30/2000)
   Interest Income              18,444   20,328   22,228   24,141   26,055   27,968   29,881 
   Interest Expense              5,687    7,433    9,180   10,926   12,672   14,419   16,165 
       Net Interest Income      12,757   12,895   13,048   13,215   13,383   13,549   13,716 

PROJECTED DOLLAR INCREASE (DECREASE) FROM "LEVEL RATES"
Year One  (10/1/98   9/30/99)
   Interest Income              (3,094)  (2,069)  (1,037)    N/A     1,037    2,074    3,112 
   Interest Expense             (2,873)  (1,915)    (958)    N/A       958    1,915    2,873 
       Net Interest Income        (221)    (154)     (79)    N/A        79      159      239 

Year Two  (10/1/99 -  9/30/2000)
   Interest Income              (5,698)  (3,814)  (1,913)    N/A     1,913    3,827    5,740 
   Interest Expense             (5,239)  (3,493)  (1,746)    N/A     1,746    3,493    5,239 
       Net Interest Income        (459)    (321)    (167)    N/A       167      334      501 

PROJECTED PERCENTAGE INCREASE (DECREASE) FROM "LEVEL RATES"

Year One  (10/1/98 -  9/30/99)
   Interest Income               -13.5%    -9.0%    -4.5%    N/A       4.5%     9.1%    13.6%
   Interest Expense              -27.2%   -18.1%    -9.1%    N/A       9.1%    18.1%    27.2%
       Net Interest Income        -1.8%    -1.2%    -0.6%    N/A       0.6%     1.3%     1.9%

   Limitation on % Change       >-10.0%   >-7.0%   >-4.0%    N/A     >-4.0%   >-7.0%  >-10.0%

Year Two  (10/1/99 -  9/30/2000)
   Interest Income               -23.6%   -15.8%    -7.9%    N/A       7.9%    15.9%    23.8%
   Interest Expense              -48.0%   -32.0%   -16.0%    N/A      16.0%    32.0%    48.0%
       Net Interest Income        -3.5%    -2.4%    -1.3%    N/A       1.3%     2.5%     3.8%

   Limitation on % Change       >-20.0%  >-14.0%   >-8.0%    N/A     >-8.0%   >-14.0% >-20.0%

</TABLE>
<PAGE>

Management measures the Bank's interest rate risk by computing estimated 
changes in net interest income in the event of a range of assumed 
changes in market interest rates.  The Company's exposure to interest 
rates is reviewed on a monthly basis by senior management and quarterly 
with the Board of Directors.  Exposure to interest rate risk is measured 
with the use of interest rate sensitivity analysis to determine the 
change in net interest income in the event of hypothetical changes in 
interest rates, while interest rate sensitivity gap analysis is used to 
determine the repricing characteristics of the Bank's assets and 
liabilities.  If estimated changes to net interest income are not within 
the limits established by the Board, the Board may direct management to 
adjust the Bank's asset and liability mix to bring interest rate risk 
within Board approved limits.

In addition, the Bank uses interest rate sensitivity gap analysis to 
monitor the relationship between the maturity and repricing of its 
interest-earning assets and interest-bearing liabilities, while 
maintaining an acceptable interest rate spread. Interest rate 
sensitivity gap is defined as the difference between the amount of 
interest-earning assets maturing or repricing within a specific time 
period and the amount of interest-bearing liabilities maturing or 
repricing within that time period.  A gap is considered positive when 
the amount of interest-rate-sensitive assets exceeds the amount of 
interest-sensitive-liabilities, and is considered negative when the 
amount of interest-rate-sensitive liabilities exceeds the amount of 
interest-rate-sensitive assets.  Generally, during a period of rising 
interest rates, a negative gap would adversely affect net interest 
income, while a positive gap would result in an increase in net interest 
income.  Conversely, during a period of falling interest rates, a 
negative gap would result in an increase in net interest income, while a 
positive gap would negatively affect net interest income.  The Bank's 
goal is to maintain a reasonable balance between exposure to interest 
rate fluctuations and earnings.

The interest rate sensitivity analysis as of September 30, 1998 shown 
below depicts amounts based on the earliest period in which they can 
normally be expected to reprice.  The chart reveals that assets and 
liabilities are fairly well matched for the early periods specified 
below.  The decay rates used for Demand deposits, NOW's, Savings and 
Money Market Savings are 5%, 30%, 20% and 30%, respectively.

<PAGE>
<TABLE>
<CAPTION>

(in thousands)
                                          Total    1 Year   2 Years  3 Years  4 Years  5 Years >5 Years 
ASSETS      
<S>                                      <C>      <C>      <C>      <C>      <C>      <C>      <C>
Cash & Due From Banks                     11,575      -        -        -        -        -     11,575 
Fed Funds & Int-Earning Due from Banks     3,082    3,082      -        -        -        -        -   
Variable Rate Investment                  21,250   21,250      -        -        -        -        -   
Fixed Rate Investment                     52,068   25,522    4,112    2,155    3,625    4,327   12,327 
Variable Rate Loans                       68,475   61,489    2,817    1,141    1,571    1,457      -   
Fixed Rate Loans                         131,054   37,889   19,323   19,123   24,553   27,154    3,012 
Others Assets                              9,334      -        -        -        -        -      9,334 

 Total Assets / Repricing Asset          296,838  149,232   26,252   22,419   29,749   32,938   36,248 
 Repricing Assets - Accumulated          149,232  175,484  197,903  227,652  260,590  296,838 
   % of Current Balance                    50.3%     8.8%     7.6%    10.0%    11.1%    12.2%
% of Current Balance - Accumulated         50.3%    59.1%    66.7%    76.7%    87.8%   100.0%

LIABILITIES     

Demand Deposit Accounts                   36,921    1,846    1,754    1,666    1,583    1,504   28,569 
NOW Accounts                              53,792   16,137   11,296    7,908    5,536    3,875    9,040 
Savings Accounts                          12,644    2,568    2,015    1,612    1,290    1,032    4,127 
Money Market Savings                       9,776    2,933    2,053    1,437    1,006      704    1,643 
   Subtotal Deposit Accounts             113,133   23,484   17,118   12,623    9,415    7,115   43,379 
Other Variable Deposits                    6,105    6,084      -        -        -        -         21 
Fixed Rate Deposits                      131,880  113,037   13,986    2,598      636    1,071      552
Variable Rate Other Liabilities            3,534    3,284      250      -        -        -        -   
Fixed Rate Other Liabilities              10,526    3,036      311    1,177      244    4,237    1,521 
Other Liabilities                          2,908      -        -        -        -        -      2,908 
Total Captial                             28,752      -        -        -        -        -     28,752 

 Total Liabilities / Repricing Liab      296,838  148,925   31,665   16,398   10,295   12,423   77,133 
Repricing Liabilities - Accumulated      148,925  180,590  196,988  207,283  219,705  296,838 
   % of Current Balance                    50.2%    10.7%     5.5%     3.5%     4.2%    26.0%
   % of Current Balance - Accum            50.2%    60.8%    66.4%    69.8%    74.0%   100.0%

SUMMARY   

Total Repricing Assets                   149,232   26,252   22,419   29,749   32,938   36,248 
Total Repricing Liabilities              148,925   31,665   16,398   10,295   12,423   77,133 

Total Repricing Gap (by Bucket)              307   (5,413)   6,021   19,454   20,515  (40,885)

Total Repricing Assets - Cumulative      274,555  149,232  175,484  197,903  227,652  260,590  296,838 
Total Repricing Liabilities - 
 Cumulative                              265,464  148,925  180,590  196,988  207,283  219,705  296,838 

Repricing Gap - Cumulative                 9,091      307   (5,106)     915   20,369   40,885      -   

Gap/Total Assets (by Bucket)               0.10%   -1.82%    2.03%    6.55%    6.91%  -13.77%
Cumulative Gap/Total Assets                0.10%   -1.72%    0.31%    6.86%   13.77%    0.00%

</TABLE>
<PAGE>

Part II - Other Information

Item 1.     Legal Proceedings

	The Company is not a party to any material legal proceedings.

Item 2.     Changes in Securities

	None

Item 3.     Defaults upon Senior Securities

	None

Item 4.     Submission of Matters to a Vote of Security Holders

	None

Item 5.     Other Information

	None

Item 6.     Exhibits and Reports on Form 8-K

	1.	Exhibits as required by Item 601 of Regulation S-B.

		27	Financial Data Schedule

	2.	No reports on Form 8-K have been filed during the quarter 
for which this report is filed.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant 
caused the report to be signed on its behalf by the undersigned, 
thereunto duly authorized.

					Bourbon Bancshares, Inc.

Date  __________________	_________________________________
					Buckner Woodford, President and C.E.O.

Date  __________________	_________________________________
					Gregory J. Dawson, Chief Financial Office


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