UNITED STATES
       	SECURITIES AND EXCHANGE COMMISSION
               	Washington, D.C. 20549

                     	FORM 10-KSB

       	ANNUAL REPORT UNDER TO SECTION 13 OR 15(d)
        	OF THE SECURITIES EXCHANGE ACT OF 1934

        	For the fiscal year ended December 31, 1996

            	Commission File Number:  33-77568

               	VALLEY FINANCIAL CORPORATION

VIRGINIA	                          			 54-1702380		
(State of Incorporation)	           			(I.R.S. Employer 
                                       Identification Number)
                   36 Church Avenue, S.W.
                  Roanoke, Virginia 24011
       (Address of principal executive offices)

                      (540) 342-2265
 	(Issuer's telephone number, including area code)

 	Securities registered under Section 12(b) of the Act:  None
 	Securities registered under Section 12(g) of the Act: 
                                           Common Stock, No Par Value

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

Check if there is no disclosure of delinquent filers in response to 
Item 405 of Regulation S-B contained in this form, and no disclosure will
be contained, to the best of registrant's knowledge, in definitive 
proxy or information statements incorporated by reference in Part III 
of this Form 10-KSB or any amendment to this Form 10-KSB.  [ ]

The issuer's revenues for its most recent fiscal year were $2,703,724.

The aggregate market value of the voting stock held by non-affiliates 
of the Company (554,959 shares based on the $10.25 per share last trade 
price quoted by the OTC Bulletin Board on March 17, 1997, was $5,688,330. 
At March 17, 1997, 964,040 shares of the registrant's common stock 
were issued and outstanding.

           Documents incorporated by reference:  
 
The issuer's Proxy Statement dated March 11, 1997 is incorporated 
by reference into Form 10-KSB Part III, Items 9, 10, 11 and 12.

Transitional Small Business Disclosure Format (check one):  Yes    No X



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             	VALLEY FINANCIAL CORPORATION
                    	FORM 10-KSB
                  	December 31, 1996

                        INDEX

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PART I.

          Item 1.	     Description of Business.					 3
          Item 2.	     Description of Property. 			  12
          Item 3.	     Legal Proceedings.	           13
          Item 4.      Submission of Matters to a 
                        Vote of Security Holders.    13

PART II.
          Item 5.      Market for Common Equity 
                        and Related	Stockholder 
                        Matters.          						     13
          Item 6.      Management's Discussion 
                        and Analysis or Plan 		         
                        of Operation.                14
          Item 7.      Financial Statements.				 	   16
          Item 8.      Changes in and Disagreements 
                        With Accountants on
                        Accounting and Financial 
                        Disclosure.				              45

PART III.
          Item 9.      Directors, Executive Officers, 
                        Promoters and Control	
                        Persons; Compliance with 
                        Section 16(a) of the 
                        Exchange Act.                45
          Item 10.      Executive Compensation.	     45
          Item 11.	     Security Ownership of Certain 
                         Beneficial Owners and 
                         Management.							          45
          Item 12.      Certain Relationships and
                         Related Transactions.       45
          Item 13.	     Exhibits and Reports on 
                         Form 8-K.                   46					

SIGNATURES                                										 48

EXHIBIT INDEX                             								
 
                                 2

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Item 13.  Exhibits and Reports on Form 8-K.

(a)     The following documents are filed as part of this Report:

        1.     Financial Statements:

               Independent Auditors' Report.

               Consolidated Balance Sheets as of December 31, 1996 and 1995.

               Consolidated Statements of Loss for the Years Ended December
                   31, 1996 and 1995.

               Consolidated Statements of Shareholders' Equity for the Years
                   Ended December 31, 1996 and 1995.

               Consolidated Statements of Cash Flows for the Years Ended
                   December 31, 1996 and 1995.

               Notes to Consolidated Financial Statements.

        2.     Financial Statement Schedules:

               All schedules are omitted as the required information is 
               inapplicable or the information is presented in the Financial
               Statements or related notes.

        3.     Exhibits:

               3.1    Articles of Incorporation (incorporated herein by 
                      reference to Exhibit No. 3.1 of Registration Statement
                      No. 33-77568, on form S-1, as amended).

               3.2    Bylaws (incorporated herein by reference to Exhibit
                      No. 3.2 of Registration Statement No. 33-77568, on
                      form S-1, as amended).

             *10.1    Employment Agreement dated April 8, 1994, by and 
                      between the Company and Guy W. Byrd, Jr. (incorporated
                      herein by reference to Exhibit No. 10.1 of Registration
                      Statement No. 33-77568, on Form S-1, as amended).

             *10.2    Employment Agreement dated April 8, 1994, by and 
                      between the Company and A. Wayne Lewis (incorporated
                      herein by reference to Exhibit No. 10.2 of Registration
                      Statement No. 33-77568, on Form S-1, as amended).

             *10.3    Severance Agreement dated December 19, 1996, by and
                      between the Company and Ellis L. Gutshall.

             *10.4    Stock Option Agreement dated December 19, 1996, by and
                      between the Company and Ellis L. Gutshall.

              10.5    Office Lease dated February 28, 1994, by and between
                      First Federal Building, L.C. and Valley Financial
                      Enterprises, L.C. (incorporated herein by reference
                      to Exhibit No. 10.5 of Registration Statement 
                      No. 33-77568, on Form S-1, as amended).

              10.10   First amendment dated August 5, 1994, to the Office 
                      Lease dated February 28, 1994, by and between First
                      Federal Building, L.C. and Valley Financial 
                      Enterprises, L.C. (incorporated herein by reference
                      to Exhibit No. 10.10 of Form 10-K filed March 30,
                      1995, File No. 33-77568).

              10.12   Second amendment dated December 14, 1994, to the Office
                      Lease dated February 28, 1994, by and between First
                      Federal Building, L.C. and Valley Financial 
                      Enterprises, L.C. (incorporated herein by reference
                      to Exhibit No. 10.12 of Form 10-K filed March 30,
                      1995, File No. 33-77568).

              10.13   Office Lease dated September 20, 1996, by and between
                      Valley Bank, N.A. and Betty J. Burrows.

              21.     Subsidiaries of the Company.

              24.     Power of Attorney.

              27.     Financial Data Schedule.

____________
*Management contract or compensatory plan or agreement required to be filed
as an Exhibit to this Form 10-KSB pursuant to Item 13(a).

(b)    Reports on Form 8-K filed during the last quarter of the period
       covered by this report:

       None.

                                   47

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                                   SIGNATURES


       Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be 
signed on its behalf by the undersigned thereunto duly authorized on
March 25, 1997.


                                       Valley Financial Corporation


                                       By:______________________
                                          Ellis L. Gutshall
                                          President and Chief
                                          Executive Officer


        Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
following persons in the capacities indicated as of March 25, 1997.


      Signature                            Title

     ___________________            President, Chief Executive Officer
     (Ellis L. Gutshall)               and Director (Chief Executive Officer)


     ___________________            Executive Vice President, Chief
     (A. Wayne Lewis)                  Operating Officer and Director


     ___________________            Chief Financial Officer
     (A. Wayne Lewis)                  (Principal Financial Officer and
                                        Principal Accounting Officer)


     ___________________            Director
     (Abney S. Boxley, III)


                                   48

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     ___________________*           Director
     (W. Jackson Burrows)


     ___________________*           Director
     (William D. Elliot)


     ___________________*           Director
     (Lawrence H. Hamlar)


     ___________________*           Director
     (Eddie F. Hearp) 


     ___________________*           Director
     (Anna L. Lawson)


     ___________________            Director
     (Barbara B. Lemon)


     ___________________*           Director
     (George W. Logan)


     ___________________*           Director
     (Dr. John W. Starr)


     __________________             Director
     (Dr. Ward W. Stevens)


     __________________*            Director
     (Maury L. Strauss)


     __________________*            Director
     (Michael E. Warner)



*By ___________________
    A. Wayne Lewis
    (Attorney in Fact)

                                   49

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