[.tx]1-21

                                   FORM 10-K
                       SECURITIES AND EXCHANGE COMMISSION 
                             WASHINGTON, D.C. 20549

(X)    Annual  report  pursuant  to  Section  13 or 15(d) of the  Securities
       Exchange Act of 1934 for the fiscal year ended December 31, 1996
                                   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 0-11460
                        KEYSTONE FINANCIAL, INC.
                        Pennsylvania 23-2289209
             (State of Incorporation) (IRS Employer ID No.)
                             P.O. Box 3660
                           One Keystone Plaza
                        Front and Market Streets
                       Harrisburg, PA 17105-3660
                       Telephone: (717) 233-1555
--------------------------------------------------------------------------------
Securities  registered pursuant to section 12(g) of the Act: Common Stock, $2.00
par value.

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_____

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not 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-K or any amendment to this
Form 10-K. [X]

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant as of February 28, 1997:

Common Stock $2.00 Par Value -- $931,078,000.

The number of shares outstanding of the registrant's class of common stock as of
February 28, 1997:

Common Stock $2.00 Par Value -- 37,329,000.

                   DOCUMENTS INCORPORATED BY REFERENCE

Portions of the annual  shareholder report for the year ended December 31, 1996,
are  incorporated  by  reference  into Parts I and II and  portions of the Joint
Proxy  Statement/Prospectus  of  Keystone  Financial,  Inc.  for the 1997 annual
shareholders meeting are incorporated by reference into Part III.
                                   1
<PAGE>
                             FORM 10-K INDEX

PART I                                                            PAGE
-------                                                          -------
Item 1      Business                                                3

Item 2      Properties                                             11

Item 3      Legal Proceedings                                      12

Item 4      Submission of Matters to a Vote of Security
            Holders                                               Not
                                                                Applicable
PART II
-------
Item 5      Market for Registrant's Common Equity and
            Related Stockholder Matters                            13

Item 6      Selected Financial Data                                13

Item 7      Management's Discussion and Analysis of Financial
            Condition and Results of Operations                    13

Item 8      Financial Statements and Supplementary Data            13

Item 9      Changes in and Disagreements with Accountants on       Not
            Accounting and Financial Disclosure                 Applicable

PART III
--------

Item 10     Directors and Executive Officers of the Registrant     14

Item 11     Executive Compensation                                 14

Item 12     Security Ownership of Certain Beneficial Owners and    14
            Management

Item 13     Certain Relationships and Related Transactions         14

PART IV
-------

Item 14     Exhibits, Financial Statement Schedules and Reports    15
            on Form 8-K

                                   2

<PAGE>

                                 PART I
ITEM 1 - BUSINESS

Introduction

Keystone  Financial,  Inc.  (Keystone) was formed in 1984 as a result of mergers
between predecessor bank holding companies.  Today, with assets of $5.2 billion,
Keystone  is  the  fifth  largest  banking  corporation   headquartered  in  the
commonwealth of Pennsylvania.

Keystone is the parent of six community banks and various nonbank  subsidiaries.
The  subsidiary  banks,  which consist of American Trust Bank,  N.A.,  Frankford
Bank, N.A., Keystone National Bank,  Mid-State Bank and Trust Company,  Northern
Central  Bank,  and   Pennsylvania   National  Bank,   operate  in  twenty-seven
Pennsylvania counties, two Maryland counties and one county in West Virginia.

Nonbank  subsidiaries  offer a variety of financial  services including discount
brokerage  services,  sales of mutual funds and annuities,  asset management and
investment  advisory services,  reinsurance,  small equipment leasing,  mortgage
banking, and community development.  None of the nonbank subsidiaries constitute
a significant portion of Keystone's business. At December 31, 1996, Keystone and
its subsidiaries had 2,444 full-time equivalent employees.

Keystone  and its  subsidiaries  do not  have  any  portion  of  their  business
dependent  upon a single or a limited  number  of  customers,  the loss of which
would  have a material  adverse  effect on their  business;  no portion of their
assets are concentrated within a single industry or group of related industries.
The businesses of Keystone are not seasonal in nature. For a further description
of the nature of Keystone's  business,  refer to the section entitled "Nature of
Operations" contained within Exhibit 13.1.

Keystone's  stock is traded in the  over-the-counter  market under the symbol of
KSTN and is included in the National Market System of NASDAQ.

During 1996,  Keystone  announced the signing of definitive  agreements to merge
with Financial Trust Corporation,  a financial  institution with $1.2 billion of
assets headquartered in Carlisle,  Pennsylvania,  and to acquire First Financial
Corporation,  a thrift  holding  company  with assets of $361  million  based in
Cumberland,  Maryland.  Refer to the Notes to the Financial  Statements  section
under the caption "Mergers and Acquisitions"  within Exhibit 13.1 for additional
information.

                                   3

<PAGE>

Legislation and Competition

Changes  in  banking  legislation  since  1982 have  increased  the  competition
experienced by banks and bank holding  companies and expanded the  opportunities
to grow geographically and offer new types of financial services.  Amendments to
the  Pennsylvania  Banking Code in 1982 provided for the phased  elimination  of
geographical  branching  restrictions for Pennsylvania  banks and for the phased
elimination of limitations  on the number of  Pennsylvania  banks a bank holding
company could own. In 1986, the Pennsylvania Banking Code was further amended to
provide for the phased implementation of reciprocal interstate banking,  limited
initially  to an  eight-state  region.  Effective  March 4,  1990,  Pennsylvania
state-chartered  and  national  banks  may,  subject  to  regulatory  approvals,
establish  or acquire  branch  offices  anywhere  in the state,  and there is no
numerical limit on the number of  Pennsylvania  banks a bank holding company may
own. Also effective  March 4, 1990, a bank holding  company located in any state
or the District of Columbia  could acquire a  Pennsylvania  bank or bank holding
company.  Prior  to the  September  29,  1995  effective  date  of  the  federal
Riegle-Neal  Interstate  Banking and Branching  Efficiency Act discussed  below,
this latter provision was subject to a reciprocity requirement.

The  federal  Interstate  Banking  and  Branching  Efficiency  Act of 1994  (the
"Interstate  Act") can be  expected  to provide  further  impetus to  interstate
mergers and acquisitions of banking organizations. Effective September 29, 1995,
the Interstate  Act permits bank holding  companies in any state to acquire bank
holding companies or banks located in any other state. States may not opt out of
this  provision but may prohibit the  acquisition  of banks less than five years
old.  Effective June 1, 1997,  banks located in different  states may merge, and
bank holding  companies with  subsidiary  banks in more than one state may merge
them to form  interstate  branch  networks.  States may permit  interstate  bank
mergers prior to this date or may opt out of this provision altogether. They may
also  prohibit  de novo  interstate  branching  or  interstate  acquisitions  of
branches without acquiring the entire bank. In July 1995,  Pennsylvania  enacted
amendments to the Pennsylvania Banking Code intended,  effective immediately, to
permit   Pennsylvania  banks  to  engage  in  interstate   mergers,   to  permit
Pennsylvania banks to establish de novo branches in other states and, subject to
a reciprocity  requirement,  to permit  out-of-state  banks to establish de novo
branches in  Pennsylvania.  At least until June 1, 1997,  an  interstate  merger
involving a Pennsylvania bank and interstate branching by a Pennsylvania bank or
by  an  out-of-state  bank  into  Pennsylvania  will  also  require  authorizing
legislation  by the state in which the  out-of-state  bank or branch is located.
The Interstate Act will necessitate some further  adjustments and clarifications
in the state  banking laws of  Pennsylvania  and other states,  particularly  as
regards the powers,  examination and supervision of  state-chartered  banks with
interstate branches.
                                   4
<PAGE>

The result of these developments has been an increased volume of merger activity
involving  Pennsylvania  banks and bank  holding  companies  since 1982;  larger
banking   organizations  have  sought  to  position  themselves  to  enter  into
state-wide and inter-state banking; smaller banking organizations have sought to
increase their size in order to remain  competitive on a regional  basis. At the
same time,  deregulation of the banking industry has increased the opportunities
to offer  new  types of  financial  services  and  enhanced  the  potential  for
competition from savings and loan associations,  insurance companies,  brokerage
firms, and other nonbank financial institutions.

The  market in which  Keystone's  banking  subsidiaries  operate  is  considered
competitive. Banks and bank holding companies with significant operations in the
Keystone  market  areas  range in size from less than $100  million  to over $50
billion in assets.

In addition to commercial  banks,  competitors  for loans,  deposits,  and other
services include savings and loan  associations,  insurance  companies,  finance
companies,  credit unions, brokerage houses, direct lending by federal and state
governments, and a proliferation of other types of financial institutions.

Keystone  differentiates  itself from its financial  institution  competitors by
focusing on the  customers  and  delivering  products  customized  to meet their
financial  needs.  The operating  banks of Keystone  maintain  local  management
presence  to ensure  close  personal  service and local  decision-making  on the
issues which  directly  affect the customer.  At the same time,  this  structure
allows   Keystone  to  standardize   products  and  services  and  centralize  a
significant  portion of operations,  data processing,  and other functions which
are less directly related to customer contact. This approach enables Keystone to
effect  improved  cost  management  through  economies  of  scale  derived  from
standardization  and  centralization  of these functions.  In summary,  Keystone
believes that it derives a competitive advantage from this approach by providing
personal, localized service in a cost efficient manner.

Although  Keystone  expects that  competition  will  increase as a result of the
factors  described  herein,  the effects  thereof,  if any, on Keystone  are not
readily ascertainable.

Regulation and Supervision of Bank Holding Companies

Keystone is subject to regulation  under the Bank Holding Company Act of 1956. A
bank holding  company is required to file annual  reports and other  information
concerning its business  operations and those of its subsidiaries with the Board
of Governors of the Federal  Reserve  System  (Federal  Reserve  Board).  A bank
holding company and each of its  subsidiaries are also subject to examination by
the Federal Reserve Board.

                                   5

<PAGE>

The Bank Holding  Company Act requires the prior approval of the Federal Reserve
Board in any case where a bank  holding  company  proposes to acquire  direct or
indirect  ownership or control of more than 5% of the voting  shares of any bank
(unless it already owns a majority of such bank's  voting  shares),  to merge or
consolidate   with  any  other  bank  holding  company  or  to  acquire  all  or
substantially  all of the assets of any bank. The Act further  provides that the
Federal Reserve Board shall not approve any such acquisition of voting shares or
assets or any such merger or consolidation:  (I) that would result in a monopoly
or would be in  furtherance  of any  combination  or conspiracy to monopolize or
attempt to  monopolize  the business of banking in any part of the United States
or (ii) the effect of which may be  substantially  to lessen  competition  or to
tend to create a monopoly  in any section of the  country,  or that in any other
manner would be in restraint of trade, unless the anticompetitive effects of the
proposed  transaction  are  clearly  outweighed  in the public  interest  by the
probable  effect of the  transaction in meeting the convenience and needs of the
community to be served.

The Bank Holding  Company Act prohibits a bank holding company from engaging in,
or from acquiring direct or indirect ownership or control of more than 5% of the
voting  shares  of, any  company  engaged in  nonbanking  activities  unless the
Federal Reserve Board,  by order or regulation,  has found such activities to be
so closely  related to banking or to  managing or  controlling  banks as to be a
proper incident thereto. The Federal Reserve Board has by regulation  determined
that  certain  activities  are so closely  related to banking or to  managing or
controlling  banks as to permit bank holding  companies and subsidiaries  formed
for the  purpose  to engage in such  activities,  subject to Board  approval  in
certain cases. These activities include operating a mortgage,  consumer finance,
credit card,  or factoring  company;  servicing  loans and other  extensions  of
credit;  providing  certain  investment and financial  advice;  leasing personal
property;  providing certain bookkeeping or financially-oriented data processing
services;  acting as an  insurance  agent for  certain  types of credit  related
insurance, and discount brokerage.

Keystone Financial, Inc., is an affiliate of each of its subsidiary banks within
the  meaning of the  Federal  Reserve Act (Act).  As an  affiliate,  Keystone is
subject to certain  restrictions  imposed by the Act on  extensions of credit by
the  banks to  Keystone,  on  investment  in the  stock or other  securities  of
Keystone  by the  banks  and on the  taking  of  such  stock  or  securities  as
collateral for loans to any borrower.  Further,  under the Bank Holding  Company
Act and the regulations of the Federal Reserve Board, a bank holding company and
its subsidiaries are prohibited from engaging in certain tie-in  arrangements in
connection  with any  extension of credit,  lease or sale of any property or the
furnishing of services.
                                  6
<PAGE>

The Federal Reserve Board has adopted capital adequacy guidelines under which it
assesses  the adequacy of capital in examining  and  supervising  a bank holding
company and in analyzing applications filed with the Board. In 1989, the Federal
Reserve Board issued new risk-based capital adequacy  guidelines that were fully
phased-in  at the end of 1992.  Keystone  is in  compliance  with  all  existing
capital  adequacy  guidelines,   including  the  risk-based  guidelines.  For  a
discussion of these capital adequacy guidelines and Keystone's capital position,
reference is made to the caption  "Shareholders'  Equity",  contained within the
Financial Review section of Exhibit No. 13.1 .

Regulation and Supervision of Banks

The banking  subsidiaries of Keystone include both  state-chartered  banks (Mid-
State Bank and Trust  Company and  Northern  Central  Bank) and banks  chartered
under the laws of the United States (American Trust Bank, N.A.,  Frankford Bank,
N.A.,  Keystone  National  Bank, and  Pennsylvania  National  Bank).  Keystone's
state-chartered  banks are under the supervision of the Pennsylvania  Department
of Banking  and the  Federal  Deposit  Insurance  Corporation  (FDIC)  while the
federally-chartered  banks are  supervised by the Office of the  Comptroller  of
Currency (OCC).  The supervisory  agencies  conduct regular  examinations of the
banks. All of the Keystone banking  subsidiaries  are  federally-insured  by the
FDIC.  In  addition,  the  banks  are  subject,  in  certain  instances,  to the
regulation of the Federal  Reserve  Board.  The areas of operation of Keystone's
subsidiary  banks  which are  subject to  regulation  by federal and state laws,
regulations  and  regulatory  agencies  include,  among other  things,  reserves
against  deposits,  maximum  interest  rates  for  specific  classes  of  loans,
truth-in-lending disclosure,  permissible types of loans and investments,  trust
operations,  issuance of securities,  and payment of dividends. In addition, the
FDIC  and  OCC  have  issued  to  state  nonmember  banks  and  national  banks,
respectively,  capital  adequacy and risk-based  capital  guidelines  similar to
those  adopted  by the  Federal  Reserve  Board for bank  holding  companies, as
referred to above.  Keystone's  subsidiary banks are in compliance with all such
guidelines.

As  federally-insured  banks, the state-chartered  banks of Keystone must obtain
the prior approval of the Pennsylvania Department of Banking and the FDIC before
establishing any new branch banking office. The  federally-chartered  banks must
obtain approval of the OCC and, to a limited extent, the Pennsylvania Department
of Banking.  Mergers of banks or thrifts located in Pennsylvania,  Maryland, and
West Virginia are subject to the prior approval of one or more of the following:
The applicable state department of banking, the FDIC, the Federal Reserve Board,
the OCC, or the Office of Thrift Supervision.  The approvals depend upon several
factors,  including whether the merged institution is a federally-insured  state
bank,  a member of the  Federal  Reserve  System,  a national  bank or a federal
savings bank.
                                   7
<PAGE>

As  affiliates  of Keystone,  the banks are subject to provisions of the Federal
Reserve Act which  restrict the ability of banks to extend credit to affiliates,
to  invest  in the  stock  or  securities  thereof,  or to take  such  stock  or
securities as collateral for loans to any borrower.

The business and earnings of the banks are affected by the monetary  policies of
the Federal Reserve Board which regulates the money supply in order to influence
rates of inflation and economic  growth.  Among the techniques used to implement
these   objectives  are  open  market  dealings  in  United  States   Government
securities,  changes in the discount rate for bank  borrowings  from the Federal
Reserve Banks and changes in the reserve  requirements against bank deposits and
borrowings.  Changes in these policies can influence to a significant degree the
overall growth and  distribution of bank loans,  investments  and deposits,  the
interest  rates  charged  by banks on loans  and the cost to banks of  obtaining
funds,  as well as the  ability of banks to compete for loans and for funds with
other types of financial institutions.

The Financial  Institutions Reform,  Recovery,  and Enforcement Act (FIRREA) was
signed into law in 1989.  FIRREA  primarily  affects the  regulation  of savings
associations  (thrifts) and savings and loan holding companies,  rather than the
regulation of commercial banks and bank holding companies.  However, FIRREA does
contain a number of provisions affecting banks and bank holding companies,  such
as provisions  affecting thrift  acquisitions,  liability of commonly controlled
depository institutions, receivership and conservatorship rights and procedures,
increased deposit insurance premiums and substantially  increased  penalties for
violation of banking statutes, regulations and orders.

In 1991, Congress enacted the Federal Deposit Insurance Corporation  Improvement
Act (FDICIA).  This law has  established  a new  framework for the  relationship
between insured depository institutions and the various regulatory bodies. For a
discussion  of  FDICIA  and  associated  regulations,  reference  is made to the
caption "Regulatory  Matters",  contained within the Financial Review section of
Exhibit No. 13.1.

In 1994,  Congress  enacted  the Riegle  Community  Development  and  Regulatory
Improvement Act ("CDRIA"),  a broad-based law primarily focused on ensuring that
banks  deliver  services  to  financially  underserved   communities.   In  that
connection,  CDRIA  established  a fund to award  financial  grants to community
development  financial  institutions and to promote their partnering with banks.
Beyond community development,  CDRIA made numerous changes to many provisions of
federal  banking  law,  for  example,  streamlining  the  bank  holding  company
application  process,  liberalizing  the  makeup  of  national  bank  boards  of
directors, simplifying the establishment of bank service corporations, modifying
management interlock rules, and tightening currency transaction  reporting under
the Bank Secrecy Act. CDRIA also amended an array of consumer  protection  laws,
including the Truth in Lending Act, the Real Estate  Settlement  Procedures Act,
The Fair Credit  Reporting Act, the Consumer Leasing Act, and the Flood Disaster
Protection Act.


                                   8
<PAGE>

Late in 1996,  Congress  enacted the Economic  Growth and  Regulatory  Paperwork
Reduction Act (EGARPRA),  which, like CDRIA,  amended a variety of banking laws,
by relieving  certain  regulatory  burdens on banks and bank holding  companies.
Among other things,  EGARPRA  eliminated  per branch  capital  requirements  for
national banks,  eliminated  branch  applications for automated teller machines,
expedited  procedures  for bank  holding  companies  to engage  in  permissible
nonbanking  activities,  modified  rules for  qualification  of bank  directors,
liberalized  standards  for loans to bank  insiders,  and  streamlined  the bank
examination process. In addition,  EGARPRA recapitalized the Savings Association
Insurance  Fund  of  FDIC  through  special  assessments  on  banks  and  thrift
institutions  and prepared for the  development of a common bank charter for all
insured depository institutions.  EGARPRA also amended the Fair Credit Reporting
Act and the Home Mortgage  Disclosure Act and freed banks from  liability  under
certain  circumstances  for  environmental  cleanup of real estate taken as loan
collateral.

Changing conditions in the economy and in the financial industry can be expected
to continue to result in changes in legislation  and  regulatory  policies which
will affect the business of banks and competition  between banks and among banks
and other types of financial institutions.

Statistical Disclosure

The consolidated  statistical  disclosures  found in the sections of Exhibit No.
13.1 entitled,  "Selected Financial Data", "Financial Review", and "Supplemental
Financial Information", are incorporated herein by reference. Also incorporated
herein by  reference  are the  following  consolidated  statistical  disclosures
appearing in the Notes to Consolidated  Financial  Statements section of Exhibit
No. 13.1: the  discussion of "Interest and Fees on Loans"  appearing in the note
captioned "Summarized  Accounting Policies",  the note captioned  "Investments",
and the table of total  nonaccrual  and  restructured  loan balances and related
annual interest data appearing in the note captioned "Loans and Leases".

                                   9
<PAGE>

Executive Officers of the Corporation

Each executive officer has held the position indicated for at least five years.

Name             Age    Office with Keystone
---------------- ---    ----------------------
Carl L. Campbell  53    President, Chief Executive Officer and Director

George H. Groves  52    Senior Executive Vice President and Chief
                        Banking Officer

Mark L. Pulaski   43    Senior Executive Vice President, Chief
                        Administrative Officer, and Chief Financial Officer

Ben G. Rooke      47    Executive Vice President, Counsel and Secretary

The officers of Keystone Financial,  Inc., serve at the pleasure of the Board of
Directors and are not elected for any specified term of office.

                                   10
<PAGE>

ITEM 2 - PROPERTIES

The headquarters of Keystone Financial,  Inc., is located at One Keystone Plaza,
Harrisburg,  Pennsylvania.  This  office  space is  leased  under  an  agreement
scheduled to expire in 2002 with three consecutive renewal options each for five
years.

The main office of American Trust Bank,  N.A. is located at 81 Baltimore  Street
in  Cumberland,  Maryland and is owned by American  Trust Bank.  Of the fourteen
community offices of American Trust Bank, nine are owned and five are leased.

Frankford Bank, N.A. is headquartered at 601 Dresher Road, Horsham, Pennsylvania
in a  facility  which  contains  executive  and  administrative  offices  and  a
full-service banking center.  Frankford operates twenty-eight banking facilities
of  which  twenty-one  are  leased,  and  seven  are  owned.  Six of the  leased
facilities  are owned by and  leased  from Key  Trust  Company,  a  wholly-owned
subsidiary of Keystone.

Keystone  National  Bank is  headquartered  at,  and  conducts  limited  banking
operations   from,   its  leased   facility  at  2270  Erin  Court,   Lancaster,
Pennsylvania.  This  facility  is  also  utilized  as  the  headquarters  of its
wholly-owned subsidiary, Keystone Financial Mortgage Corporation.

Mid-State  Bank and Trust Co.  owns its  headquarters  located  at 1130  Twelfth
Avenue,  Altoona,  Pennsylvania.  The  five-story  building  contains  executive
offices  as well as a  full-service  banking  facility.  The bank  also  owns an
operations  center,  which  houses the  primary  data  processing  facility  for
Keystone,  and  is  located  in  Bellwood,  Pennsylvania.  Mid-State  Bank  owns
twenty-three of its thirty-two banking offices, while the remaining nine offices
are leased.  In addition,  Keystone and Mid-State lease office space for various
administrative  and  back-office   functions  in  three  buildings  in  Altoona,
including a building  owned by a partnership in which a Keystone board member is
a partner.

The  headquarters  for  Northern  Central  Bank is at 102  West  Fourth  Street,
Williamsport,  Pennsylvania,  in a three-story building which contains executive
offices  and a  full-service  banking  facility.  An  operations  center is also
located in Williamsport  and both facilities are owned by Northern Central Bank.
The bank owns a total of thirty of its banking  offices  while the six remaining
offices are leased.

Pennsylvania  National  Bank and Trust  Company  is  headquartered  at One South
Centre  Street  in  Pottsville,  Pennsylvania,  in  a  facility  which  contains
executive and administrative  offices as well as a full-service  banking center.
The Bank also owns an operations center located in St. Clair,  Pennsylvania.  In
addition to
                                   11

<PAGE>

the headquarters  facility,  the Bank operates  thirty banking offices of which 
twenty-three are owned by the Bank and seven are leased.

Of the nonbanking subsidiaries, Keystone Financial Leasing Corporation, Keystone
Financial   Mortgage   Corporation,   and   Martindale   Andres  &  Company  are
headquartered in leased facilities in Pennsylvania.

All of the above-mentioned facilities are in good and usable condition.

ITEM 3 - LEGAL PROCEEDINGS

Keystone  and its  subsidiaries  are  involved  as  plaintiff  or  defendant  in
litigation  matters that arise in the ordinary course of their business.  In the
opinion of management,  none of the pending litigation matters,  individually or
in the aggregate,  would have a material adverse effect on Keystone's results of
operations.
                                   12
<PAGE>
                                 PART II

ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

Information for this item is incorporated  herein by reference to the section of
Exhibit No. 13.1 entitled "Market Prices and Dividends".

ITEM 6 - SELECTED FINANCIAL DATA

The  section  entitled  "Selected   Financial  Data"  of  Exhibit  No.  13.1  is
incorporated herein by reference.

ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION

The section  entitled  "Financial  Review" of Exhibit  No. 13.1 is  incorporated
herein by reference.

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The  sections  of  Exhibit  No.  13.1  entitled  "Report  of Ernst & Young  LLP,
Independent Auditors",  "Consolidated Financial Statements",  and notes thereto,
and "Quarterly Statements of Income" are incorporated herein by reference.

                                   13
<PAGE>
                                PART III

ITEM 10     - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

ITEM 11     - EXECUTIVE COMPENSATION

ITEM 12     - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

ITEM 13     - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information  required by Part III, Items 10 - 13, is incorporated  herein by
reference  to the  information  appearing  under the  following  captions in the
definitive Joint Proxy Statement/Prospectus for Keystone's 1997 Annual Meeting
of Shareholders:

-- Introduction - Trust Department Shares
-- Other Proposals for Keystone Shareholders-Election of Keystone Directors
-- Information Concerning Keystone-Keystone Executive Compensation
-- Information Concerning Keystone-Other Information Concerning Keystone
   Directors and Executive Officers
-- Information Concerning Keystone-5% Beneficial Owners of Keystone Common Stock

The  other  information  appearing  in such  Joint  Proxy/Statement  Prospectus,
including   without   limitation   that  appearing  under  the  captions  "Other
Information Concerning Keystone - Keystone Human Resources Committee 1996 Report
on Executive  Compensation" and "Other Information Concerning Keystone- Keystone
Stock Price Performance Graph" is not incorporated herein.

                                   14
<PAGE>
                                 PART IV

ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K

(a)(1)(2)   The response  to this portion of Item 14 is listed below.
(a)(3)      Listing of Exhibits - The exhibits are listed on the Exhibit Index
            beginning on page 18 of this Form 10-K.
(b)         Reports on Form 8-K are listed below.
(c)         Exhibits - The  exhibits  listed on the Exhibit  Index  beginning on
            page 18 of this Form 10-K are filed  herewith or are  incorporated
            by reference.
(d)         Schedules - listed under Item 14 (a)(1)(2) below.

Item 14(a)(1)(2) List of Financial Statements and Financial Statement
Schedules

The  following  consolidated  financial  statements  and  report of  independent
auditors of Keystone  Financial,  Inc. and subsidiaries,  included in the annual
report of the  registrant to its  shareholders  for the year ended  December 31,
1996, are incorporated by reference in Item 8:

      Report of independent auditors

      Consolidated statements of condition - December 31, 1996, and 1995

      Consolidated statements of income - Years ended December 31, 1996,
      1995, and 1994

      Consolidated  statements of changes in  shareholders'  equity -Years ended
      December 31, 1996, 1995, and 1994

      Consolidated  statements  of cash flows - Years ended  December  31, 1996,
      1995, and 1994

      Notes to consolidated financial statements

Schedules  to  the  consolidated  financial  statements  as  per  Article  9  of
Regulation  S-X  are  not  required  under  the  related   instructions  or  are
inapplicable, and therefore have been omitted.

                                   15

<PAGE>

Item 14(b)  Reports on Form 8-K

During the quarter ended December 31, 1996,  the registrant  filed the following
reports on Form 8-K:


 Date of Report            Item           Description
--------------------      -----   ----------------------------------------------
September 30, 1996          5     Earnings release for the third quarter

November 26, 1996           5     Press release regarding First Financial
                                  Corporation of Western Maryland

December 20, 1996           5     Press release regarding Financial Trust
                                  Corp.

                                   16
<PAGE>

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.

                              (Registrant)Keystone Financial, Inc.




                              By:   Carl L. Campbell         
                                    --------------------------------
                                    Chief Executive Officer

                              Date: March 7, 1997

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been  signed on March 7,  1997,  by the  following  persons on behalf of the
registrant and in the capacities indicated.


Carl L. Campbell                        Mark L. Pulaski
------------------------------------    ----------------------------------------
President, Chief Executive Officer,     Senior Executive Vice President, Chief
& Director                              Administrative Officer, and Chief 
                                        Financial Officer
Donald F. Holt
------------------------------------
Senior Vice President, Controller, 
and Principal Accounting Officer


A. Joseph Antanavage, Jr.               June B. Barry
------------------------------------    ----------------------------------------
Director                                Director

J. Glenn Beall, Jr.                     Paul I. Detwiler, Jr.
------------------------------------    ----------------------------------------
Director                                Director

Donald Devorris                         Richard W. DeWald
------------------------------------    ----------------------------------------
Director                                Director

Gerald E. Field                         Walter W. Grant
------------------------------------    ----------------------------------------
Director                                Director

Philip C. Herr, II                      Uzal H. Martz, Jr.
------------------------------------    ----------------------------------------
Director                                Director

Max A. Messenger                        William L. Miller
------------------------------------    ----------------------------------------
Director                                Director

Don A. Rosini                           F. Dale Schoeneman
------------------------------------    ----------------------------------------
Director                                Director

Ronald C. Unterberger                   G. William Ward
------------------------------------    ----------------------------------------
Director                                Director

                                      17

<PAGE>

                                 EXHIBIT INDEX
                   (Pursuant to Item 601 of Regulation S-K)

================================================================================
  Exhibit                  Description and Method
    No.                          of Filing
================================================================================
    3.1     Restated Articles of Incorporation of Keystone
            Financial, Inc., as amended through July 29, 1996,
            incorporated by reference to Exhibit 4.1 of Form
            S-4 of Keystone Financial, Inc. (No. 333-20283)
            filed on January 23, 1997.

    3.2     By-Laws of Keystone  Financial,  Inc.,  as amended
            to May 14, 1992, incorporated by reference to
            Exhibit 3.2 of Form 10-K of Keystone Financial, Inc.
            for the year ended December 31, 1992.

    4.1     Keystone Financial, Inc. Series A Junior Partici-
            pating Preferred Stock Purchase Rights Agreement
            dated January 25, 1990, incorporated by reference to
            Exhibit 1 to Form 8-A filed on February 9, 1990.

    4.2     Amendment No. 1 to Series A Junior Participating
            Preferred Stock Purchase  Rights  Agreement dated
            December 20, 1990, incorporated by reference to
            Exhibit 2 to the Form 8 Amendment dated December
            20, 1990.

            The registrant hereby agrees to furnish to the
            Commission upon request copies of the instruments
            defining the rights of the holders of the long-term
            debt of the registrant and its consolidated
            subsidiaries.

   10.1*    Keystone Financial, Inc., Corporate Directors Deferred
            Compensation Plans, incorporated herein by reference
            to Exhibit 10.1 of Form 10-K of Keystone Financial, Inc.
            for the year ended December 31, 1994.

   10.2*    Keystone Financial, Inc. 1988 Stock Incentive Plan,
            incorporated herein by reference to Exhibit 10.2 of
            Form 10-K of Keystone Financial, Inc., for the year
            ended December 31, 1993.

                                      18
<PAGE>

================================================================================
  Exhibit                  Description and Method
    No.                          of Filing
================================================================================

  10.3*     Keystone Financial, Inc. Management Incentive
            Compensation Plan as amended and restated,
            incorporated herein by reference to Exhibit 10.3
            of Form 10-K of Keystone Financial, Inc., for the
            year ended December 31, 1993.

  10.4*     Form of employment agreement between Keystone
            Financial, Inc. and Executive Officer Campbell,
            incorporated herein by reference to Exhibit 10.4 of
            Form 10-K of Keystone Financial, Inc. for the year
            ended December 31, 1993.

  10.5*     Form of employment agreement between Keystone
            Financial,  Inc. and Executive Officers Groves, Pulaski,
            and Rooke, incorporated herein by reference to Exhibit
            10.5 of Form 10-K of Keystone Financial, Inc. for the
            year ended December 31, 1993.

  10.6*     Keystone Financial, Inc. 1995 Management Stock
            Purchase Plan, incorporated herein by reference to
            Exhibit C of the Proxy Statement of Keystone Financial,
            Inc., dated April 7, 1995.

  10.7*     Keystone Financial, Inc. Savings Restoration Plan,
            as amended and restated effective January 1, 1994,
            and as corrected on June 14, 1994, incorporated herein
            by reference to Exhibit 10.7 of Form 10-K of Keystone
            Financial, Inc., for the year ended December 31, 1994.

  10.8*     Keystone  Financial, Inc. Supplemental Retirement Income
            Plan, incorporated herein by reference to Exhibit 10.7
            of Form 10-K of Keystone Financial, Inc., for the year
            ended December 31, 1993.

  10.9*     Keystone Financial, Inc.1990 Non-Employee Directors'
            Stock Option Plan, as amended,  incorporated  herein by
            reference to Exhibit 10.8 of Form 10-K of Keystone
            Financial, Inc. for the year ended December 31, 1993.


                                      19

<PAGE>
================================================================================
  Exhibit                  Description and Method
    No.                          of Filing
================================================================================
  10.10*      Keystone Financial, Inc. 1992 Stock Incentive Plan,
              incorporated herein by reference to Exhibit A of the
              Proxy Statement of Keystone Financial, Inc., dated
              April 2, 1992.

  10.11*      Keystone Financial,  Inc. 1992 Director Fee Plan, as
              amended, incorporated herein by reference to Exhibit
              10.11 of Form 10-K of Keystone Financial, Inc. for the
              year ended December 31, 1994.

  10.12*      Keystone Financial, Inc. Supplemental Deferred
              Compensation Plan, incorporated herein by reference
              to Exhibit 10.11 of Form  10-K of  Keystone  Financial,
              Inc.,  for  the  year  ended December 31, 1992.

  10.13*      Keystone Financial, Inc. form of Executive Split Dollar
              Agreements, Form A and Form B, incorporated herein
              by reference to Exhibit 10.1 of Form 10-K of Keystone
              Financial, Inc., for the year ended December 31, 1993.

  10.14*      Keystone Financial, Inc. 1995 Non-Employee Directors'
              Stock Option Plan, incorporated herein by reference to
              Exhibit B of the Proxy Statement of Keystone Financial,
              Inc., dated April 7, 1995.

  10.15*      Keystone Financial, Inc. Management Stock Ownership
              Program, incorporated herein by reference to Exhibit
              10.15 of Form 10-K of Keystone Financial, Inc., for the
              year ended December 31, 1995.

  10.16*      Keystone Financial, Inc. 1996 Performance Unit Plan,
              incorporated herein by reference to Exhibit 99.16 of
              Amendment No. 1 to Form S-4 of Keystone Financial,
              Inc. (No. 333-20283), filed contemporaneously
              herewith.

                                      20
<PAGE>

================================================================================
  Exhibit                  Description and Method
    No.                          of Filing
================================================================================
  10.17      Agreement and Plan of Reorganization dated as of
             December 19, 1996 between Keystone Financial, Inc.
             and Financial Trust Corp and Agreement and Plan of
             Merger dated as of December 19, 1996 between
             Keystone Financial, Inc. and Financial Trust Corp.
             incorporated herein by reference to Exhibit 2.1 of 
             Form S-4 of Keystone Financial, Inc. (No. 333-20283)
             filed on January 23, 1997.

  10.18      Agreement and Plan of Reorganization dated as of
             November 26, 1996 between Keystone Financial, Inc.
             and First Financial Corporation of Western Maryland
             incorporated herein by reference to Exhibit 2 to the
             Current Report on Form 8-K of First Financial
             Corporation of Western Maryland dated December 2,
             1996.

   13.1      Portions of the Annual Report to Shareholders of
             Keystone Financial, Inc., for the year ended December
             31, 1996, filed herewith.

   22.1      Subsidiaries of Registrant, filed herewith.

   23.1      Consent of Ernst & Young LLP, independent auditors,
             filed herewith.

   27.1      Financial Data Schedule, filed herewith.

--------------------------------------------------------------------------------
*The exhibits marked by an asterisk (*) are management contracts or compensatory
plans or arrangements.
                                      21

<PAGE>