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, 1997
                                       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. [ ]

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant as of February 28, 1998:

Common Stock $2.00 Par Value -- $1,969,986,000

The number of shares outstanding of the registrant's class of common stock as of
February 28, 1998:

Common Stock $2.00 Par Value -- 51,673,000.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the annual  shareholder report for the year ended December 31, 1997,
are  incorporated  by  reference  into Parts I and II and  portions of the Proxy
Statement of Keystone Financial,  Inc. for the 1998 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                                                    9

Item 3       Legal Proceedings                                             9

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                                      10

Item 6       Selected Financial Data                                      10

Item 7       Management's Discussion and Analysis of Financial
                 Condition and Results of Operations                      10

Item 7A      Quantitative and Qualitative Disclosures about Market Risk   10

Item 8       Financial Statements and Supplementary Data                  10

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          10

Item 11      Executive Compensation                                      10

Item 12      Security Ownership of Certain Beneficial Owners and         10
                 Management

Item 13      Certain Relationships and Related Transactions              10

PART IV
-----------

Item 14      Exhibits, Financial Statement Schedules and Reports         11
                  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.  With  assets  of $6.8  billion,
Keystone  is  the  fourth  largest  banking  corporation  headquartered  in  the
Commonwealth of Pennsylvania.

Keystone  is  the  parent  of  seven   community   banks  and  various   nonbank
subsidiaries.  The subsidiary banks, which consist of American Trust Bank, N.A.,
Financial Trust Company,  Keystone Bank, N.A., Keystone National Bank, Mid-State
Bank and Trust Company,  Northern Central Bank, and  Pennsylvania  National Bank
and Trust Company,  operate in thirty-one Pennsylvania counties,  three 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, 1997, Keystone and
its subsidiaries had 3,126 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 substantial  portion
of their loans and  investments  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 on the NASDAQ Stock Market (servicemark) under the
symbol of KSTN. During 1997,  Keystone completed its merger with Financial Trust
Corp, a bank holding company formerly  headquartered in Carlisle,  Pennsylvania,
and its acquisition of First Financial Corporation of Western Maryland, a thrift
holding company  formerly 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.

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.  Beginning in
1982,  amendments  to the  Pennsylvania  Banking  Code  provided  for the phased
elimination of geographical branching restrictions on Pennsylvania banks and for
the phased elimination of limitations on the number of Pennsylvania banks a bank
holding  company could own.  Amendments in 1986 further  provided for the phased
implementation  of interstate  banking.  Effective  March 4, 1990,  Pennsylvania
state-chartered  and national  banks could  establish or acquire  branch offices
anywhere  in the state,  there were no longer any  limitations  on the number of
Pennsylvania  banks a bank holding  company could own and a bank holding company
located in any state or the District of Columbia could, subject to a reciprocity
requirement, acquire a Pennsylvania bank or bank holding company.


                                        3

<PAGE>

The Federal Interstate Banking and Branching Efficiency Act of 1994 has extended
to a nationwide  basis the process of removing the legal  barriers to interstate
banking which formerly existed under various state laws. Effective September 29,
1995,  the Act  permits  bank  holding  companies  in any state to acquire  bank
holding  companies or banks located in any other state.  Effective June 1, 1997,
the Act  permits a bank in one state to merge  with a bank in  another  state as
long as neither  state had  enacted  legislation  prior to that date to prohibit
interstate branching.  A bank may establish a de novo branch in another state or
acquire a branch in another  state  without  acquiring  the entire  bank only if
expressly  permitted by the law of the state where the new or acquired branch is
located.  Pennsylvania  has  enacted  legislation  to permit de novo  interstate
branching, subject to a reciprocity requirement.

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 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

The business of Keystone and its subsidiaries is subject to extensive regulation
and supervision under federal and state banking laws and other federal and state
laws and  regulations.  In general,  these laws and regulations are intended for
the  protection of the customers and depositors of Keystone's  subsidiaries  and
not for the  protection  of  Keystone or its  shareholders.  Set forth below are
brief  descriptions of selected laws and regulations  applicable to Keystone and
its  subsidiaries.  These  descriptions  are not intended to be a  comprehensive
description of all laws and  regulations to which Keystone and its  subsidiaries
are  subject  or to  be  complete  descriptions  of  the  laws  and  regulations
discussed. The descriptions of statutory and regulatory provisions are qualified
in their  entirety by reference  to the  particular  statutes  and  regulations.
Changes in applicable  statutes,  regulations  or  regulatory  policy may have a
material effect on Keystone and its business.


                                        4

<PAGE>

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.

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, 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.

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
(Financial Trust Company,  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.,  Keystone Bank,  N.A.,  Keystone  National  Bank, and  Pennsylvania
National Bank and Trust Company). 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.  Deposits  in 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

                                        5
<PAGE>

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. 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
required depend upon several factors,  including whether the merged  institution
is a federally-insured state bank or thrift institution, a member of the Federal
Reserve System, a national bank or a federal savings bank.

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 regulate 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,
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.



                                        6

<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".


                                        7

<PAGE>



Executive Officers of the Corporation

Except  as  otherwise  noted,  each  executive  officer  has held  the  position
indicated  for at least  five  years,  serves  at the  pleasure  of the Board of
Directors and is not elected for any specific term of office.

Name                  Age      Office with Keystone and/or Subsidiary
----------------     -----     -------------------------------------------

Carl L. Campbell      54       President, Chief Executive Officer and Director

Mark L. Pulaski       44       Chief Operating Officer, Chief Financial Officer,
                               and Vice Chairman

                               From  1995 to  November  1997,  Mr.  Pulaski  was
                               Senior Executive Vice President,  Chief Financial
                               Officer  (CFO) and Chief  Administrative  Officer
                               (CAO) of the  Corporation;  and prior to 1995, he
                               served as Executive Vice  President,  CFO and CAO
                               of the Corporation.

Ben G. Rooke          48       Executive Vice President, Counsel and Secretary

Ray L. Wolfe          59       Chairman of the Board (term expires at the annual
                               meeting in the year 2000), President and Chief
                               Executive Officer of Financial Trust Company.

                               Prior to May 30, 1997, Mr. Wolfe was Chairman and
                               Chief Executive  Officer of Financial Trust Corp,
                               which was  acquired  by the  Corporation  on that
                               date.




                                        8

<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 twenty-five
community  offices of American Trust Bank, twenty are owned and five are leased.
American Trust Bank also owns the premises for KeyCall,  an automated  telephone
banking center, located at 12400 Willowbrook Road in Cumberland, Maryland.

Financial Trust Company owns its headquarters at 1415 Ritner Highway,  Carlisle,
Pennsylvania.  It also operates a total of thirty-six  offices,  thirty of which
are owned, with the remainder leased.

Keystone 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.   Keystone  Bank  operates  twenty-nine  banking
facilities  of which  twenty-two  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-one  of its  twenty-eight  banking  offices,  while the  remaining  seven
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 101  West  Third  Street,
Williamsport,  Pennsylvania,  in a leased building which contains  executive and
administrative offices. An operations center is also located in Williamsport and
is owned by Northern  Central Bank. The bank owns a total of twenty-eight of its
banking offices while the seven 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 the headquarters  facility,  the Bank operates  twenty-eight banking
offices of which twenty-one are owned by the Bank and seven are leased.

Of the nonbanking subsidiaries, Keystone Financial Leasing Corporation, Keystone
Financial  Mortgage  Corporation,  Martindale  Andres &  Company  and  MMC&P 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.


                                        9

<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 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following sections of Exhibit No. 13.1 are incorporated herein by reference:
"Financial  Review-Investments",  "Financial Review - Asset/Liability Management
and Market Risk",  "Summarized  Accounting Policies - Financial  Derivatives and
Other Hedging Activity", "Notes to Consolidated Financial Statements - Financial
Derivatives, Hedging Activity, and Commitments".

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  Information - Income  Performance"  are  incorporated  herein by
reference.


                                    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 Proxy
Statement for Keystone's 1998 Annual Meeting of Shareholders:

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

The other  information  appearing  in such Proxy  Statement,  including  without
limitation  that  information  appearing  under the  captions " Human  Resources
Committee 1997 Report on Executive  Compensation"  and "Stock Price  Performance
Graph", is not incorporated herein.



                                       10

<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 14 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 14 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,
1997, are incorporated by reference in Item 8:

  Report of independent auditors

  Consolidated statements of condition - December 31, 1997, and 1996

  Consolidated  statements of income - Years ended December 31, 1997 , 1996,
     and 1995

  Consolidated  statements of changes in  shareholders'  equity -Years ended
     December 31, 1997, 1996, and 1995

  Consolidated statements of cash flows - Years ended December 31, 1997, 1996,
     and 1995

  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.  The following  report of other
auditors  required  by Item  2-05  of  Regulation  S-X is  filed  herewith  as a
financial statement schedule: Report of Beard & Company, Inc.

Item 14(b)  Reports on Form 8-K

During the quarter ended December 31, 1997,  the registrant  filed the following
reports on Form 8-K:


 Date of Report         Item              Description
--------------------   ----------------------------------------------

October 17, 1997         5       Earnings release for the third quarter

October 28, 1997         5       Press release announcing management changes

November 21, 1997        5       Press release announcing increased dividend


                                       11

<PAGE>

                          INDEPENDENT AUDITOR'S REPORT

Board of Directors and Shareholders
Financial Trust Corp
Carlisle, Pennsylvania

      We have audited the consolidated balance sheet of Financial Trust Corp and
subsidiaries as of December 31, 1996, and the related consolidated statements of
income,  shareholders'  equity  and cash  flows  for the year  then  ended  (not
presented  herein).  These financial  statements are the  responsibility  of the
Corporation's  management.  Our responsibility is to express an opinion on these
financial statements based on our audit.

      We conducted  our audit in accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

      In our opinion,  the 1996 consolidated  financial  statements  referred to
above  present  fairly,  in all material  respects,  the  financial  position of
Financial  Trust Corp and  subsidiaries as of December 31, 1996, and the results
of its operations and its cash flows for the year then ended in conformity  with
generally accepted accounting principles.


                                           /s/ BEARD & COMPANY, INC.
                                           -------------------------

Reading, Pennsylvania
February 28, 1997

                                       12

<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:    /s/ Carl L. Campbell
                                                 ---------------------------
                                                 Chief Executive Officer

                                                 Date:   March 26, 1998

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed on March 26,  1998,  by the  following  persons on behalf of the
registrant and in the capacities indicated.

/s/ Carl L. Campbell          /s/ Mark L. Pulaski
--------------------          -------------------
President, Chief Executive    Vice Chairman and Chief Operating Officer
Officer & Director            & Director

/s/ Ray L. Wolfe              /s/ Donald F. Holt
--------------------          -------------------
Chairman                      Senior Vice President and Corporate Controller

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

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

/s/ Donald Devorris           /s/ Gerald E. Field
--------------------          -------------------
Director                      Director

/s/ Walter W. Grant           /s/ Philip C. Herr, II
--------------------          -------------------
Director                      Director

/s/ Allan W. Holman, Jr.      /s/ Richard G. King
--------------------          -------------------
Director                      Director

/s/ Uzal H. Martz, Jr.        /s/ Max A. Messenger
--------------------          -------------------
Director                      Director

/s/ William L. Miller         /s/ Don A. Rosini
--------------------          -------------------
Director                      Director

/s/ F. Dale Schoeneman        /s/ Ronald C. Unterberger
--------------------          -------------------
Director                      Director

/s/ G. William Ward
--------------------
Director


                                       13

<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 November 21, 1996,
        incorporated  by  reference  to  Exhibit 3 of Form 10-Q of  Keystone
        Financial, Inc. for the quarter ended September 30, 1997.

 4.1    Keystone  Financial,  Inc. Series A Junior  Participating  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.


                                       14

<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, 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.


                                       15

<PAGE>


Exhibit                  Description and Method
  No.                          of Filing
------- ------------------------------------------------------------------------
10.10*  Keystone Financial, Inc. 1992 Stock Incentive Plan, filed herewith.

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. 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.

10.13*  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.

10.14*  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.

10.15*  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 on March 10, 1997.

10.16*  Keystone Financial, Inc. 1997 Stock Incentive Plan, incorporated herein
        by reference to Exhibit 99.17 of Amendment No.2 to form S-4 of Keystone
        Financial, Inc. (No. 333-20283), filed on March 27, 1997.

10.17*  Separation Agreement and Release between Keystone Financial, Inc. and
        Executive Officer Groves dated November 21, 1997,  filed herewith.

10.18*  Employment agreement between Keystone Financial, Inc. and Officer Wolfe,
        incorporated herein by reference to Exhibit 99.9 of Form S-4 of Keystone
        Financial, Inc. (No. 333-20283), filed on January 23, 1997.

10.19*  Keystone Financial, Inc. Supplemental Deferred Compensation Plan, as
        originally filed as exhibit 10.11 of Form 10-K of Keystone Financial,
        Inc. for the year ended December 31, 1992, filed herewith.



                                       16

<PAGE>


Exhibit                  Description and Method
  No.                           of Filing
----- --------------------------------------------------------------------------
11.1  The statement  regarding  computation of per share earnings required
      by  this  exhibit  is  contained  in the  note  to the  consolidated
      financial statements captioned "Earnings Per Share," filed as a part
      of Exhibit 13.1.

13.1  Portions of the Annual Report to Shareholders of Keystone Financial,
      Inc., for the year ended December 31, 1997, filed herewith.

21.1  Subsidiaries of Registrant, filed herewith.

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

23.2  Consent of Beard & Company, Inc.,  independent auditors, filed herewith.

27.1  Financial Data Schedule, filed herewith.

99.1  Reconciliation of previously reported quarterly information, filed
      herewith.

*The exhibits marked by an asterisk (*) are management contracts or compensatory
plans or arrangements.
                                       17