SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996  Commission File No. 0-11255


Heritage Bankshares, Inc.
         Virginia                                               54-1234322
(State or other jurisdiction of	                 (IRS Employer incorporation
 incorporation or organization)					   	            identification number)


    200 East Plume Street
     Norfolk, Virginia                                  23514
(Address of principal executive offices)  		   	   			 (Zip Code)

		

Registrant's telephone number, including area code:          (804) 523-2600



Securities registered pursuant to Section 12(b) of the Act:

Common Stock, $5 par Value			Securities not registered on a stock exchange
     Title of Each Class

Indicate by a 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, 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 SB 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 the Form 10-KSB or any
amendment to this Form 10-KSB. [  ] 

State the aggregate market value of the voting stock held by non-affiliates
of the registrant as of March 21, 1997:    
$7,630,870*

Indicate the number of shares outstanding of each of the registrant's classes
of common stock as of March 21,1997: 
		Common Stock,     $5 Par Value - 786,450




----------------------------------------------
  In calculating the aggregate market value, we have used the most recent sales
 price of Common Stock known to the Company, which is $11.38 per share and
voting stock held by non-affiliates of the registrant at March 21, 1997 of
670,551 shares.

Part I

Item 1.  BUSINESS

GENERAL
	
	Heritage Bankshares, Inc. (the "Company") was incorporated under the laws of
the Commonwealth of Virginia in 1983.  In August of 1992, two wholly-owned
subsidiaries,  Princess Anne Bank and The Heritage Bank-McLean, were spun
off, and the Company has operated as a one bank holding company since that time.
The principal executive office of the Company is located at 200 East Plume
Street, Norfolk, Virginia.  The Company has three wholly-owned subsidiaries
including one bank:  Heritage Bank & Trust (the "Bank") with offices in 
Norfolk and Chesapeake, Virginia.  IBV Real Estate Holdings, Inc., a Virginia
corporation is the other subsidiary.  
The total consolidated assets of the Company on December 31, 1996 were
$76,846,000. 
THE BANK

	Heritage Bank & Trust is engaged in the general commercial and retail banking
business.  The cities of Norfolk and Chesapeake, Virginia, constitute the
primary service area of the Bank and to a lesser extent the Bank includes the
remaining areas of Hampton Roads in its market area.

	Heritage Bank & Trust is a state banking corporation.  The Bank was
incorporated as a Virginia corporation on September 19, 1975, and commenced
business at its main office at 841 North Military Highway in Norfolk,
Virginia on February 7, 1977.  On December 31, 1996, the Bank had assets of
$76,795,000, with loans of $45,259,000 and deposits of $68,427,000.

IBV REAL ESTATE HOLDINGS, INC.

	IBV Real Estate Holdings, Inc., is a corporation formed for the sole purpose
of owning additional real estate assets acquired by the Company or the Bank. 
Currently, IBV Real Estate Holdings, Inc. owns a 1% interest in IBV Partners,
LP, a Virginia limited partnership formed in December 1986.  IBV Real Estate
Holdings, Inc.,serves as the sole general partner of the partnership.  The
partnership's sole asset is a 17,200 square-foot office building located at
1450 South Military Highway, Chesapeake, Virginia.  Heritage Bank & Trust is
a major tenant in the property.

COMPETITION

	The banking business in the cities of Norfolk and Chesapeake, as well as all
of the Hampton Roads area is highly competitive.  All of the major commercial
banking institutions based in Virginia conduct business in the area.  The
Bank also encounters competition from local banks, savings and loan
associations, money market and mutual funds, small loan companies, credit unions
, brokerage firms and other financial institutions.

EMPLOYEES

	The Company and the Bank have 33 employees.  Of this total, 27 are full-time
 and 6 are part-time.  Management considers its employee relations to be
 excellent.

REGULATION AND SUPERVISION

THE BANK

Regulatory Matters

	The Bank is subject to state and federal banking laws and regulations which 
impose specific requirements or restrictions, and provide for general
regulatory oversight with respect to virtually all aspects of operations, 
including, but not limited to, maintenance of cash reserves, loans,
mortgages, maintenance of minimum capital, payment of dividends, and
establishment of branch offices.  As a state-chartered bank and a member of
the Federal Reserve System, the Bank is supervised and regularly examined by
representatives of the Board of Governors of the Federal Resreve System
("The Federal Reserve") and the Bureau of Financial Institutions of the
Commonwealth of Virginia.

	The Bank is a member of the Federal Reserve and Virginia Bureau of
Financial Institutions .  In addition to being affected by general economic
conditions, earnings of the Bank may be affected by the fiscal and monetary
policies of the Federal Reserve .  The techniques used by the Federal
Reserve include setting the reserve requirements of member banks and
establishing the discount rate on member banks's borrowing.  The impact of the
policies of the Federal Reserve, and other regulatory authorities
cannot be accurately predicted.                            
These policies can, however, materially affect the revenues and net income of
commercial banks because they have a direct effect on the amount of bank
loans and deposits and the interest rates charged and paid thereon.

	The Bank is also subject to restrictions under Section 23A of the Federal
Reserve Act ("The Act").  These restrictions limit the transfer of funds to
the Company and certain other affiliates, as defined in the Act, in the form 
of loans, extensions of credit, investments or purchase of assets.  Such
transfers by the Bank to the company are limited in amount to 10% of the
Bank's capital.  Furthermore, such loans and extensions of credit are also
subject to various collateral requirements.  See note 3 of the Consolidated
Financial Statemetns, which are incorporated herein by reference under Item
7-"Financial Statements".

	The Bank is also subject to restrictions on the payment of dividends under
Section 33 of the Federal Reserve Act.  Under this section, the approval of
the applicable Federal Reserve Bank is required if the total
of all dividends declared by the Bank during any calendar year exceeds the total
of its net profits (as defined by the Act) of that year combined with its net
profits of the preceding two years.

	The Federal Reserve Bank and the Bureau of Financial Institutions of Virginia
requires the Bank to maintain certain minimum capital ratios. The Bank and
the Company are required to maintain minimum risk-based capital to asset ratios,
as defined by the regulators, of 4.00% for the Tier 1 capital ratio and 8.00%
for the Tier 2 capital ratio.  Additionally, a leverage capital ratio, defined
as Tier 1 capital divided by average assets, must also be maintained by
financial institutions.  For financial institutions with the best regulatory
rating, a minimum leverage ratio of 5.00% must be maintained.  The Bank and
the Company met the minimum risk-based capital requirements at December 31,
1996.

Mergers and Acquisitions

The Bank Holding Company Act formerly prohibited the Federal Reserve from
approving an application from a bank holding company to acquire shares of a
bank located outside the state in which the operations of the holding
company's banking subsidiaries were principally conducted, unless such an
acquisition was specifically authorized by statute of the state in which the
bank whose shares were to be acquired was located.  However, under recently
enacted federal legislation, the restriction on interstate acquisitions was
abolished effective September 29, 1995, and bank holding companies from any
state may now acquire banks and bank holding companies located in any other
state.  Banks also will be able to branch across state lines effective June
1, 1997, provided certain conditions are met, including that applicable
state law must expressly permit such interstate branching.  Under Virginia
law, effective July 1, 1995, Virginia banks can branch across state lines in
those states with which Virginia has reciprocal agreements.  Although this
will have a significant impact on the banking industry, it is not possible
to determine, with any degree of certainty, its impact on individual
institutions.

Deposit Insurance

Section 38 of the Federal Deposit Insurance Act, as amended by the Federal
Deposit Insurance Corporation Improvement Act (FDICIA), requires that the
federal banking agencies establish five capital levels for insured depository
institutions - "well capitalized", "adequately capitalized",
"undercapitalized", significantly "undercapitalized" and, "critically
undercapitalized" and requires or permits such agencies to take certain 
supervisory actions as an insured institution's capital level falls.  The
Bank has been notified by the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board") that it is classified as a "well
capitalized" institution for this purpose.  An "adequately capitalized"
institution is restricted from accepting brokered deposits.  A "significantly
undercapitalized" institution must develop a capital restoration plan and is
subject to a number of mandatory and discretionary supervisory actions. 
These powers and authorities are in addition to the traditional powers of
the federal banking agencies to deal with undercapitalized institutions.  As
more fully disclosed in the following paragraph the FDIC deposit insurance
premiums required to be paid by institutions depend, in part, on their
capital levels, and "undercapitalized" institutions will be required to pay
significantly greater premiums than more highly capitalized institutions.

	The FDIC has implemented a risk-based deposit insurance assessment system under
which the assessment rate for an insured institution may vary according to
regulatory capital levels of the institution and other factors (including
supervisory evaluations).  Effective January 1, 1996, depository institutions
insured by the Bank Insurance Fund ("BIF"), ranked in the top risk
classification category of well capitalized, are required to pay only the
statutory minimum assessment of $2,000 annually for deposit insurance, while
all other banks are required to pay premiums ranging from .03% to .30% of
domestic deposits.  These rate schedules are subject to future adjustments by
the FDIC.  In addition, as more fully disclosed in the following paragraph,
the FDIC has authority to impose special assessments from time to time.

The Deposit Insurance Funds Act of 1996 ( the "Funds Act") was enacted on
September 30, 1996.  Among other provisions, the Funds Act: (1) requires that
certain depository institutions pay a one-time special assessment (65.7 cents
per $100 of SAIF-assessable deposits) to the FDIC to capitalize the Savings
Association Insurance Fund ("SAIF") at its statutorily required reserve
ratio of 1.25% of insurable deposits; (2) exempts certain depository 
institutions with SAIF assessable deposits that meet any of several specified
criteria from paying the special assessment, (3)authorizes the Financing
Corporation ("FICO") to impose periodic assessments on depository
institutions that are members of BIF, in addition to institutions that are
members of the SAIF, in order to spread the cost of the interest payments on
the outstanding FICO bonds over a larger number of institutions. Until this
change in the law, only SAIF-member institutions bore the cost of funding
these interest payments.  FICO assessment rates for the first semiannual
period of 1997 were set at 1.30% annually for BIF-assessable deposits and at
6.48% annually for SAIF-assessable deposits.  These rates may be adjusted
quarterly to reflect changes in assessment bases for the BIF and the SAIF.
By law, the FICO rate on BIF-assessable deposits must be one-fifth the rate
on SAIF assessable deposits until the insurance fiends are merged or until
January 1, 2000, whichever occurs first.

Regulations

On December 15, 1994, the Federal Reserve Board, the Office of Thrift
Supervision, the Office of the Controller of the Currency ("OCC"), and the
FDIC (collectively the "agencies") issued a final rule entitled, Risk-
Based Capital Standards: Concentration of Credit Risk and Risks of
Nontraditional Activities.  The final rule amends the risk-based capital
standards by explicitly identifying concentrations of credit risk and certain
risks arising from nontraditional activities, as well as an institution's
ability to manage these risks, as important factors in assessing an
institution's overall capital adequacy.  While no quantitative measure of
such risk is included in the final rule, to the extent appropriate, the
agencies will issue examination guidelines on new developments in
nontraditional activities or concentrations of credit to ensure that adequate
account is taken of the risks of these activities.  Moreover, the agencies
also believe that institutions identified though the examination process as 
having significant exposure to concentration of credit risk, or as not
adequately managing concentration risks, should hold capital in excess of the
regulatory minimums.  Therefore, due to the subjective nature of this final
rule, the Bank is unable to determine what effect, if any, this rule may have
on regulatory capital requirements.

On August 2, 1995, the OCC, the Federal Reserve Board, and the FDIC
(collectively the "banking agencies") issued a final rule entitled, Risk-
Based Capital Standards: Interest Rate Risk.  The final rule implements
minimum capital standards for interest rate risk exposures in a two-step
process.  The final rule implements the first step of that process by
revising the capital standards of the banking agencies to explicitly 
include a bank's exposure to declines in the economic value of its capital
due to changes in interest rates as a factor that the banking agencies will
consider in evaluating a bank's capital adequacy.  It is important to note
that the banking agencies intend to implement this rule on a case-by-case
basis during the examination process.  The second step of the banking
agencies' process will be to issue a proposed rule that would establish
an explicit minimum capital charge for interest rate risk, based on the level
of the bank's measured interest rate risk exposure.  
Due to the subjective nature of the first phase of this final rule, the Bank is
unable to determine what effect, if any, this rule may have on its regulatory
capital requirements On November 16, 1995, the Federal Reserve Board issued
guidelines entitled, Federal Reserve Guidelines for Rating Risk Management
at State Member Banks and Bank Holding Companies (the "Guidelines").  The 
Guidelines specify that principles of sound management should apply to the
entire spectrum of risks facing a banking institution including, but not
limited to, credit, market, liquidity, operational, legal, and reputational
risk and that, for state member banks, a single numerical rating for risk
management should be provided as part of the examination process.  The
Guidelines also specify that examination reports should make reference to the
types and nature of corrective actions that need to be taken by institutions
to address noted risk management and internal control deficiencies.  Where
appropriate, institutions should also be advised that the Federal Reserve
Board will initiate supervisory actions if the failure to separate critical
operational duties creates the potential for serious losses or if material
deficiencies or situations that threaten the safe and sound conduct of their
activities are not adequately addressed in a timely manner.  Due to the
subjective nature of the risk-management evaluation, the Bank is not able to
determine what effect, if any, this rule may have on the operation of the Bank.

On October 1, 1996, the banking agencies issued new guidelines amending the
Interagency Guidelines Establishing Standards for Safety and Soundness
(the "Guidelines") to include asset quality and earnings standards.  The
Guidelines were adopted pursuant to the requirements of Section 39 of the
Federal Deposit Insurance Act.  The Guidelines require financial
institutions to identify problem assets and estimate inherent losses.  In
order to comply with these Guidelines a financial institution shall: (1)
consider the size and potential risks of material concentrations of credit
risk; (2) compare the level of problem assets to the level of capital and 
establish reserves sufficient to absorb anticipated losses on those and
other assets, (3) take appropriate corrective action to resolve problem
assets, as appropriate; and (4) provide periodic asset quality reports
to the board of directors to assess the level of asset risk.  The earnings
standards specified by the Guidelines require an institution to compare its
earnings trends ( relative to equity, assets, and other common benchmarks)
with its historical experience and with the earnings trends of its peers.
The Guidelines, relative to the earnings standards, require the institution
to: (1) evaluate the adequacy of earnings with regard to the institution's
relative size and complexity, and the risk profile of the institution's
assets and operations; (2) assess the source, volatility, and sustainability
of earnings, (3) evaluate the effect of nonrecurring or extraordinary income
or expense; (4) take steps to ensure that earnings are sufficient to maintain
adequate capital and reserves after considering asset quality and the
institution's rate of growth; and (5) provide periodic reports with adequate
information for management and the board of directors to assess earnings
performance.  The Guidelines note that the complexity and sophistication of an 
institution's monitoring, reporting systems, and corrective actions should be
commensurate with the size, nature and scope of the institution's operations.
The Bank does not believe that these Guidelines will materially effect its 
operations or financial condition.

The Federal Financial Institutions Examination Council ("FFIEC") has approved
revisions to the reporting requirements for the Reports of Condition and Income
(Call Report) that will take effect as of March 31, 1997.  The revisions
 that are expected to have the greatest impact on most financial institutions
will be the adoption of generally accepted accounting principles ("GAAP") as 
the reporting basis for the balance sheet, income statement and related Call 
Report schedules.  This will involve the revision of Call Report instructions
that currently depart from GAAP, the addition of a small number of new items 
to meet supervisory data needs resulting from the adoption of GAAP, and the
modification of other existing Call Report items or instructions.  In the
March 31, 1997 Call Report, financial institutions are required to adopt the
provisions of Financial Accounting Standards Board ("FASB") Statement No. 125,
Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities, for transfers and servicing of assets occuring after December 31
1996.  As FASB 125 provides standards for distinguishing the transfer of
financial assets from secured borrowings and, therefore, the recognition and
derecognition of financial assets, regulatory capital calculations could be
significantly impacted.  The Bank is currently considering the relevant
provisions of FASB 125, and assessing the accounting treatment and legal
ramifications of modifying participation agreements.  Additional information
with respect to this pronouncement is included in "Management's Discussion
and Analysis of Financial Condition and Results of Operations" under Recent
 Accounting Pronouncements and is incorporated herein by reference thereto.

On December 20, 1996 the FDIC Board of Directors adopted the FFIEC's updated
statement of policy entitled Uniform Financial Institutions Rating System
("UFIRS").  The updated UFIRS replaces the previous rating system established
in the 1979 statement of policy, and is effective January 1, 1997.  Under the
existing UFIRS, each financial institution is assigned a composite rating
based on an evaluation and rating of five essential components of an
institution's financial condition and operations.  The five component areas
are Capital adequacy, Asset quality, Management, Earnings and Liquidity
("CAMEL").  The updated UFIRS includes the addition of a sixth component for
Sensitivity to market risk ("CAMELS").  The new sixth component addresses the
degree to which changes in interest rates, foreign exchange rates, commodity 
prices or equity prices can adversely affect a financial institution's
earnings or capital.  The new component focuses on an institution's ability
to monitor and manage its market risk, and will provide an institution's
management with a clearer and more focused indication of supervisory concerns
in this area.  The Bank does not believe that this statement of policy will
materially effect its operations.

THE COMPANY

	As a bank holding company, the Company is subject to regulation by the Federal
Reserve System in accordance with the provisions of the Bank Holding Company
Act of 1956, as amended, and the rules and regulations promulgated thereunder.

	A bank holding company is required to file with the Federal Reserve Board
annual reports and those of its subsidiaries.  It is also subject to
examination by the Federal Reserve Board and is required to obtain Federal 
Reserve Board approval prior to acquiring, directly or indirectly, ownership
or control of any voting shares of any bank if, after such acquisition, it
would own or control, directly or indirectly, more than 5.00% of the voting
stock of such bank.  Furthermore, a bank holding company is, with limited
exceptions, prohibited from acquiring direct or indirect ownership or 
control of more than 5.00% of any company which is not a bank or bank holding 
company, and must engage only in the business of banking or managing or 
controlling banks or furnishing services to or performing services for its 
subsidiary banks.  One of the exceptions to this prohibition is the ownership
of shares of a company, the activities of which the Federal Reserve Board 
has determined to be so closely related to banking or managing or controlling
banks as to be a proper incident thereto.

	The Federal Reserve Board has determined that numerous activities are closely
related to banking, and thus bank holding companies may apply to the Federal 
Reserve Board for permission to retain or acquire an interest in a company 
engaging in or proposing to engage in these activities.  The permitted 
non-banking activities include making loans that would be made by mortgage, 
finance, credit card or factoring companies; operating as an industrial bank;
servicing loans; performing the functions of a trust company; leasing 
personal property; making investments to promote community welfare; providing
bookkeeping or data processing services; acting as insurance agent or broker 
with respect to insurance that is directly related to the extension of credit 
or other financial services and acting as an underwriter for credit life 
insurance and credit health and accident insurance directly related to 
extensions of credit by the appraisal  activities.  Also, an application may 
be filed as to other activities, but the Federal Reserve Board will publish a 
notice of opportunity for hearing only if it believes there is a reasonable 
basis for concurring in the holding company's opinion that the activity 
applied for is closely related to banking.

	A bank holding company and its subsidiaries are prohibited from engaging in
certain tie-in arrangements in connection with the extension of credit or 
provision of any property or service.  Thus, an affiliate of a bank holding 
company may not extend credit, lease, sell property or furnish any services 
or fix or vary the consideration for these services on the condition that (a)
the customer must obtain or provide some additional credit, property, or 
services from or to its bank holding company or subsidiaries thereof, or (b) 
the customer may not obtain or provide some additional credit, property, or 
services from a competitor, except to the extent reasonable conditions are 
imposed to assure soundness of credit extended.

Item 2. PROPERTIES

	The bank owns two of its banking locations, 841 North Military Highway and 
200 East Plume Street, in Norfolk, Virginia.  Management believes these 
locations are in excellent condition.  A third banking location and 
the bank's operations center are located at 1450 South Military Highway in 
Chesapeake, Virginia.  See "IBV Real Estate Holdings, Inc." under Item 1 and 
"Certain Relationships and Related Transactions" under Item 2.  The 
Bank has purchased a parcel of land at 4807 Colley Avenue in Norfolk, 
Virginia to construct a branch office that is tentatively scheduled to open 
on December 1, 1997.

Item 3. LEGAL PROCEEDINGS

	The Company is subject to claims and lawsuits which arise primarily in the
 ordinary course of business. Based on information presently available to 
management and advice received from legal counsel, there are no 
meritorious claims involving the Company.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

	No matters were submitted to a vote of securities holders during the fourth 
quarter of 1996.


PART II

Item 5.  MARKET FOR  THE REGISTRANT'S COMMON STOCK AND RELATED
             STOCKHOLDER MATTERS

	
	There is a limited public market for the Company's common stock.  It is not 
listed for trading on a registered exchange.  There are no "market makers" 
for the stock.  Trades in the common stock occur on a local basis.  Scott & 
Stringfellow Inc., a Virginia brokerage firm, attempts to match orders to buy
and sell the common stock.  Accordingly, there is no established public 
trading market for shares of common stock, and quotations do not necessarily 
reflect the price that would be paid in an active, liquid market.  There can 
be no assurance an active trading market will develop in the future.  The 
following table sets forth the closing high and low sales price for 
the common stock by calendar quarters for the past two years as reported to 
the Company by Scott & Stringfellow 
Inc.

Calendar Quarter

1996

                   HIGH    LOW 
Fourth Quarter   $9.75   $ 9.25 
Third Quarter     9.00     8.50 
Second Quarter    8.63     8.50 
First Quarter     7.75     7.00 


1995

Fourth Quarter $ 6.38  $    5.88 
Third Quarter    6.75       5.50 
Second Quarter   5.00       4.50 
First Quarter    6.00       5.87 


	At March 21, 1997, there are 1,377 record holders of the 786,450 outstanding 
shares of common stock.

	As of March 21, 1997, the most recent sales price of common stock known to the 
Company was $11.38 per share.

	The Company's Board of Directors determines whether to declare dividends and 
the amount of such dividends.  Determinations by the Board take into account 
the Company's financial condition, results of operations, capital 
requirements, general business conditions and other relevant factors.  The 
Company's principal source of funds for cash dividends is the dividends paid 
to the Company by the Bank.  The Company declared and paid dividends of $.12 
and $.08 per share in 1996 and 1995, respectively.







Item 6.  SELECTED FINANCIAL DATA AND MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITION AND RESULTS OF OPERATIONS

	The following sets forth certain selected financial data with respect to the 
Company.  The data presented below for the years ended December 31, 1996 and 
1995, respectively, should be read in conjunction with the Consolidated
Financial Statements and notes thereto, which have been audited by Goodman & 
Company, L.L.P. independent accountants.  (The Consolidated Financial 
Statements and notes thereto for the years ended December 31, 1996 and 1995 
are filed herewith).  This data should also be read in conjunction with the 
discussion and analysis that follows.

Summary of Consolidated Financial Data



(Dollars in thousands, except per share data)

                                       1996    1995

FOR THE YEAR
Interest income $      5,380  $      4,919 
Interest expense       2,495         2,179 
Net interest income     2,885        2,740 
Provision for loan losses  93          193 
Noninterest income         246         234 
Noninterest expense       1,950      1,941 
Income taxes                21          95 
Net income                  870        745 

AT YEAR END

Assets                $    76,846 $     67,285 
Loans, net                 45,259       43,783 
Federal funds sold           5,92        5,720 
Securities                 20,197       13,003 
Deposits                   68,427       61,053 
Stockholders' equity        6,112        5,338 

AVERAGE BALANCES
Assets                $    70,968  $    62,807 
Loans, net                 42,970       40,025 
Federal funds sold          8,605        6,925 
Securities                 14,509       11,939 
Deposits                   64,519       57,058 
Stockholders' equity        5,686        4,935 


PER SHARE DATA

Earnings per common and
common equivalent share   $  1.09    $   0.94 
Cash dividends declared       0.12        0.08 
Book value at year end        7.79        6.80 
Shares outstanding at
year end                    784,150      784,150 
Weighted average shares
includes common stock
equivalents)                799,944      788,974 

RATIOS

Return on average assets     1.23%       1.19%
Return on average equity    15.30%      15.10%
Average equity to average
assets                        8.01%     7.86%
Allowance to year end loans   1.83%     1.74%
Net loans charged-off 
to average loans               0.03%     .17%



PERFORMANCE SUMMARY:

	In 1996, net income for Heritage Bankshares, Inc. totaled $870,000 compared to
$745,000 earned in 1995.  Heritage Bank & Trust's net income was $878,000 and 
net holding company expenses were $8,000.   In 1995, Heritage Bank & Trust's 
net income was $749,000 and net holding company expenses were $4,000.00.   
Earnings per common and common equivalent share in 1996 was $1.09 compared 
to $.94 in 1995.
The 1996 provision for loan losses was $93,000 compared to the 1995 provision 
of 
$193,000. Net interest income increased $146,000 in 1996 to $2,886,000, from 
2,793,000 in 1995.  

Total assets increased at the end of 1996 to $76,846,000. Total assets at the 
end of 1995 were $67,285,000.  Gross loans increased $2,240,000 from 
43,019,000 at the end of 1995 to $45,259,000 at the end of 1996.  Deposits 
increased from $61,053,000 at December 31, 1995 to $68,427,000 at December 
31, 1996.

LIQUIDITY:
          
Liquidity is the ability of the Company to efficiently fund depositors' 
withdrawals and extensions of credit to borrowers.  The Company and Heritage 
Bank & Trust must consider both immediate liquidity needs, as well as 
the long-term matching of maturing loans and investments with obligations to 
depositors.

The Company's Consolidated Statement of Cash Flows, found in the Consolidated 
Financial Statements, provides information as to cash provided and used from 
operating, investing and financing activities.  At December 31, 1996, cash 
and cash equivalents available to meet immediate liquidity needs and reserve 
requirements were $8,994,000.  The bank also has borrowing capacity of $5.9 
million, as a member of the Federal Home Loan Bank System. 

The Company's cash and cash equivalents increased by $50,000 in 1996.  Net cash
provided by financing activities was $8,692,000.  This was primarily due to 
growth in both time and demand deposits, which increased $8,723,000 by year-
end 1996.  This increase is largely due to the expansion of current customer 
relationships.  This was offset by net cash used by investing activities of 
$9,555,000, which is largely due to the $7,194,000 increase in investment 
securities and a $2,240,000 increase in gross loans.

Table 2: Selected Liquidity Statistics

For the Year Ended December 31,

                                  1996      1995
(Dollars in thousands)
Available short-term assets (1)   8,262 $   9,458 
Certificates of deposit $100,000
 and over                          6,728     7,750 

Net available short-term assets    1,534     1,708 


Ratio of available short-term assets to
certificates $100,000 and over         123%    122%
Ratio of loans to deposits              66%     72%
Ratio of certificates $100,000 and
over to total assets                    9%      12%


(1)As of December 31, 1996 available short-term assets include federal funds 
sold of $5,925,000 and held-to-maturity and available-for-sale securities 
maturing within one year of $547,000 and $1,790,000, respectively.
At December 31, 1995, available short-term assets included federal funds 
sold of $5,720,00 and held-to- maturity- and available-for-sale securities 
maturing within one year of $743,000 and $2,995,000 respectively.  


PARENT COMPANY LIQUIDITY:

The parent company incurred expenses for stockholder-related activities, stock 
transfer and other functions necessary for the administration of the Company.

See Note 3 of the Consolidated Financial Statements for the parent company's 
Cash Flow Statement for further information on cash provided or used by the 
parent for operating and investing activities.

CAPITAL:

Stockholders' equity at December 31, 1996 was $6,112,000 compared to $5,338,000 
at the end of the prior year.  Book value per share increased from $6.80 at 
December 31, 1995 to $7.79 at December 31, 1996.  
                                  the Year ended December 31, 
                                        1996    1995
(Dollars in thousands)
Risk-based capital:
Tier I Capital
Stockholders' equity
                                  $      6,081 $5,304 
Tier II Capital
Allowance for loan losses (limited)        569    534
Total                             $      6,681  $ 5,838 

Risk adjusted assets  $    45,230  $    42,717 

Risk-based capital ratios:
Tier I                        13.44%    12.42%
   Total                      14.70%    13.67%
Leverage ratio                 8.57%     8.44%

Primary capital ratio          8.91%     8.92%

RATE SENSITIVITY:

At December 31, 1996 the Company had, on a cumulative basis, $6,790,000 more in 
liabilities subject to repricing within one year than assets.  It is 
management's view that the Company is an asset-sensitive company.  
This view is based on the fact that historically the Company's earnings have 
been more favorable during periods of increasing interest rates. 

Table 4 provides an interest sensitivity analysis as of December 31, 1996.

Heritage Bankshares, Inc

Interest Sensitivity Analysis

December 31, 1996

              
                 Within  Over3 Over  Over   Over
                 1 month  thru  1 Yr  3 yr  5 thru   Total
                 thru 3   12   thru  thru    10      thru   Over
                 months   months 3    5      yrs    10 yrs  10yrs    Total
Earning assets:

Federal funds   $5,925  $-      $-    $-         $-   $5,92   $-        $5,925 
Investment
securities(2       500  1,837 11,395  4,702      676   19,110 1,041     20,151 
Loans           21,695  2,458  6,214  5,542    2,239   38,148 8,011     46,159 
Total Earning
Assets         $28,120 $4,295 $17,609 $10,244  $2,915  $63,183 $9,052  $72,235 


Interest and non-interest bearing liabilities:
Commercial DDA(3)$5,311 $-    $3,187 $2,124 $-    $10,622 $-   $10,622 
Personal DDA(3)      -  -     1,126    375   375   1,877  -     1,877 
TT&L Note           131  -     -          -     -     131  -        131 
Savings(3)            -   -    2,806    935    935  4,676  -      4,676 
Money Market(3)       - 2,455  2,455      -    -    4,910  -      4,910 
NOW(3)                - -      4,421   1,474  1,474 7,368  -      7,368 
Certificates      7,253 24,055 6,206   1,460     - 38,974 -       38,974 
Securities sold
Under agreements to 
repurchase         1,349 -      -       -        -  1,349 -       1,349
Total Interest and non interest 
bearing liabilities $14,044 $26,510 $20,200 $6,369 $2,784 $69,907 $- $69,907

Interest
sensitivity gap $14,076 $(22,215)$(2,591)$3,875 $131 $(6,724)$9,052 $2,328 

Cumulative gap   $14,076 $(8,139)$(10,730)$(6,855)$(6,724)

Ratio interest sensitive assets
to interest-sensitive
 liabilities       2.00 0.16 0.87 1.61 1.05 0.90 

Ratio of cumulative gap to 
total earning assets   19.49%-11.27%-14.85%-9.49%-9.31%

(1)Assets and liabilities are presented in the period they mature or reprice, 
whichever is earlier
(2)Presented on an amortized cost basis.
(3)Based on the proposed range of maturities for non-maturity deposits issued 
by the banking agencies.


NET INTEREST INCOME:
          
Net interest income is the difference between interest earned on loans, 
investment securities and short-term investments and interest paid on 
deposits, securities sold under agreements to repurchase and other short-term 
borrowing.  Material factors affecting net interest income included interest 
rates earned on loans and  investments and those paid on deposits, the mix 
and volume of earning assets and interest-bearing liabilities,and the level 
of noninterest-bearing liabilities.

Net interest income increased from $2,740,000 in 1995 to $2,886,000 in 1996, a 
$146,000 increase.  The increase is primarily attributable to the 55% increase 
in investment securities and to a lesser extent the 5% increase in gross loans.

Table 5 presents the components of net interest income. Table 6 allocates 
changes in volume and rate on net interest earnings.

Table 5:  Components of Net Interest Income

For the years ended December 31,


                          1995                   1996

Interest earning assets: (taxable equivalent basis (1))
 
Loans(net)(2)) $ 43,781  $  4,146  9.47% $  40,025  $3,939 9.84%
Investment
securities
taxable(4)      14,360        853  5.94%     11,939     653 5.47%

Investment
securities
non-taxable(1)4)   149          10 6.71%        -         -    -

Federal Funds      8,605       456 5.30%     6,925      407 5.88%

Total Interest
earning assets    66,895     5,465 8.17%    58,889    4,999 8.49%

Noninterest earning assets:

Cash and due
 from banks       2,525                      2,389 
Allowance for 
loan losses       (811)                       (733)
Other real
estate owned         503                        540 
Premises and 
equipment            603                        648  
Other assets        1,253                     1,074
                    4,073                     3,918

Total Assets        70,968                   62,807 

Liabilities and stockholders' equity

Interest bearing liabilities:
Money Market and
 NOW accounts      $ 14,235 $ 407 2.86%   $    12,981  $382  2.94%
Savings Deposits      4,718    158 3.35%       4,826    175  3.63%
Savings Certificates 28,065  1,599 5.70%      22,128  1,215  5.49%
Large denomination
 certificates        6,449     328 5.09%      6,626     404  6.10%
Securities sold under
agreements to
 repurchase             14       1   4.36%     -      -        -
Short-term borrowings   96       3   3.13%     99      3     3.03%
Total interest bearing 
liabilities          53,577    2,495 4.66%  46,660   2,179   4.67%
Noninterest bearing liabilities:
Demand deposits          11,051             10,497 
Other                       654                715 
Total Liabilities        65,282              57,872 
Stockholders' equity      5,686               4,935 

Total liabilities and stockholders'
equity                 $  70,968         $ 62,807 

Net interest earnings $    2,970         $  2,820 

Net interest yield margin on average interest earning
assets taxable equivalent basis
                              4.44%          4.79%
Less tax equivalent adjustment $ (85) $      (80)

Net interest income          $ 2,885     $   2,740 
Net interest spread (taxable
equivalent basis)
                                 3.51%         3.82%


(1) Tax equivalent adjustments (using 34% federal income tax rates) have been
 made in calculating the yields on tax-free loans and investments Virginia 
 banks are exempt from state income tax.
(2) For the purposes of these computations, nonaccruing loans are included in 
 the daily average loan amounts outstanding.
(3) Daily average balances are calculated using the aggregate daily average 
  balances on a monthly basis.
(4)The yield/rate of the investment securities is computed using the amortized 
cost basis.



Table 6:  Effect of Changes in Volume and Rate on Net Interest Earnings

For the years ended December 31, (1)

                       1996 / 1995       1995 / 1994
(Dollars in thousands)
                Increase (Decrease)    Increase (Decrease)
                 Due to Change In:      Due to Change In:
                Volume  Rate  Total     Volume  Rate  Total
Interest income (2):
Loans              $  346  $(139) $ 207  $  146    $  330    $476 
Taxable securities    140    60     200     (24)       81       57
Non-taxable securities 10    -      10        -          -       -
Federal funds sold     82  (33)     49       115       95      210
Total interest income 578  (112)   466       237      506      743 

Interest expense:
Money Market and NOW
accounts              35     (10)   25       (13)      26       13 
Savings              (4)     (13)  (17)     (149)      30     (119)
Certificates        336       47    383      302      182      484 
Certificates of
$100,000 or more    (11)     (65)   (76)      37      119       156 
Securities sold under 
agreements to 
repurchase            1        -      1        -       -         -
Short-term borrowings -        -      -        -       1         1 
Total interest 
expense               357     (41)   316      177     358       535 

Net change in interest 
earnings             $ 221   $(71) $  150  $   60  $  148  $    208 


(1) The change in interest due to both rate and volume has been allocated to 
volume and rate changes in proportion to the relationship of the absolute 
dollar of the changes in each.   
(2)Interest income includes taxable equivalent adjustments of $85,000 in 1996 
and $80,000 in 1995 used to adjust interest on tax exempt assets to a fully 
taxable basis.

ASSET QUALITY

PROVISION AND ALLOWANCE FOR LOAN LOSSES:

The provision for loan losses is charged to operations in an amount sufficient 
to maintain the allowance for loan losses at a level management considers 
adequate to provide for future loan losses inherent in the loan portfolio.  
Loans are charged against this allowance when management perceives the 
collection of the loan is unlikely.  The level of the allowance is based 
upon management's ongoing review of the loan portfolio and includes the 
present and prospective financial condition of borrowers, consideration of 
actual loan loss experience and projected economic conditions in general and 
for the Bank's service area.

In 1996, the provision for loan losses was $93,000, a 52% decrease compared to 
the $193,000 provision for loan losses in 1995.  Net loans charged-off in 1996 
were $14,000 compared to $68,000 in 1995.                              
Table 7 summarizes activity in the Allowance for Loan Losses and provides 
statistics on nonperforming 
assets and past due loans.  There were no restructured loans, as defined by 
applicable securities rules and regulations.

Table 7:  Summary of the Allowance For Loan Losses

 Nonperforming Assets and Past Due Loans
 and Selected Loan Loss Statistics
 
For The Years Ended
December 31, 
                              1996       1995
(Dollars in Thousands)
Allowance for Loan Losses:
Balance, December 31         $763  $   639 
Charge-offs:
Commercial                    36       110
Real estate                    0         8
Consumer                      48         23
Total loans charged-off       84        141
Recoveries:
Commercial                    42          9
Real estate                   18         61
Consumer                      11          2
Total recoveries              71         72
Net charge-offs               13         69
Provision for loan losses     93         193
Balance, December 31, 1996 $  843  $    763 
Ratio of net charge-offs to
average loans outstanding   0.03%       0.17%

Ratio of allowance for loan
losses to loans at period-end 1.83%     1.74%

Nonperforming Assets and Loans Past Due 90 Days 

Nonaccrual loans     $      13  $        18 
Other real estate owned     444         514
Total nonperforming assets $457  $      532 

Ratio of nonperforming
assets to total assets      0.59%      0.79%

Nonaccrual loans:
Interest income that
would have been recorded
under original terms         $ 2  $     2 

Interest income recorded
during the period          $  -    $    -   

Loans 90 days past due 
and still accruing         $ 15     $ 3 

A breakdown of the allowance is provided in Table 8; however, such a breakdown 
has not historically been maintained by the Company and management does not 
believe the allowance can be fragmented by category with any precision that 
would be useful to investors.  The entire amount of the allowance is 
available to absorb losses occurring in any category.  The allowance is 
allocated below based on the relative percent of loans in each category to 
total loans.


Table 8:  Allocation of the Allowance for Loan Losses

December 31,

                             1996       1995

Balance at End of Period Applicable to:
                              Percent          Percent      
                                 of               of
                       Amount  Total     Amount  Total
Commercial $            171    20%    $  148      19%
Real estate - mortgage  577    68%       515      68%
Real estate - construction 38   5%        45       6%
Consumer                   7    7%        55       7%

Total
             $            843 100%    $  763      100%

POTENTIAL PROBLEM LOANS:

At December 31, 1996 and December 31, 1995, loans on either nonaccrual status 
or loans past due 90 days or more and still accruing amounted to $28,000 and 
$21,000, respectively.  At December 31, 1996, the Company had approximately 
$668,000 of loans that have been internally classified, and $699,000 which 
require more than normal attention and are potential problem loans.  The 
Company has considered these loans in establishing the level of the allowance 
for loan losses.  At December 31, 1995, loans that had been internally 
classified or which required more than normal attention and were potential 
problem loans were $240,000 and $1,849,000, respectively. 

CREDIT RISK AND REGULATORY MATTERS:

Credit risk, the risk of loss from default, is inherent in lending.  While 
management uses available information to recognize losses on loans, future 
additions to the allowance may be necessary based on changes in economic 
conditions.  Management and the boards of directors of the Company believe 
the allowance is a reasonable estimate of potential loss exposure in the loan 
portfolio at year end, however, many factors affecting the ability of borrowers
to repay their loans, including economic factors beyond the control of the 
Company or the borrowers, will impact this estimate on an ongoing basis.

Reports of examinations furnished by state and federal banking authorities are 
also considered by management.  Regulatory agencies periodically review the 
allowance for loan losses as part of their examination process and may 
require the Bank to recognize additions to the allowance based on their 
judgment of information available to them at the time of their examination.  
During 1996 and 1995, regulators completed regular examinations of the 
Company and the Bank.  A federal examination was conducted in the fourth 
quarter of 1996 for the balance sheet dated September 30, 1996.  In the fourth 
quarter of 1995 a state examination was conducted for the balance sheet dated 
September 30, 1995.  No additions to the allowance for loan losses were 
recommended as a result of these examinations.

NONPERFORMING ASSETS:
Nonperforming assets consist of loans on nonaccrual status and other real 
estate owned.  Loans are placed on nonaccrual  status when they become over 
90 days past due unless such loans are fully collateralized and, 
in management's judgment, are collectible.  Other real estate owned consists 
of real estate acquired in settlement of loans.  These properties are carried 
at the lower of cost or estimated fair value.  Losses from the acquisition of 
other real estate owned in full or partial satisfaction of a loan are charged 
to the allowance for loan losses.  Subsequent declines in value or losses upon 
disposition are charged to noninterest expense.


Table 9  provides an analysis of the size, number and collateral composition of 
nonperforming assets at December 31, 1996.

Table 9:  Nonperforming Assets

 December 31, 1996
(Dollars in thousands)

Nonperforming assets by dollar amount:

                                                            Percent
                    Number                                    of
                    of items          Balances            Total Dollars
$400,000 and over     -                  -                  0%
$300,000 - $400,000   -                  -                  0%
$200,000 - $300,000
$100,000 - $200,000   4                  444               97%
$50,000 - $100,000
$50,000 and under    14                   13                3%

                     18                $  457              100%

Nonperforming assets by collateral composition:

                                                                  Percent

                        Number                                         Of
                      of Items            Balance               Total Dollars
1-4 Family residential          1            $131                    29%
Automobile, equipment and other 0              0                      0%
Commercial property             0              0                      0%
Land                            0              0                      0%
Multi-family residential        3             313                    68%
Uncollateralized               14              13                     3%
                               18             $457                  100%



LOAN PORTFOLIO:


The loan portfolio is the largest category of the Company's earning assets.  
Table 10 shows the type and maturity of loans outstanding as of December 31, 
1996.  Also provided are the amounts due after one year classified according 
to sensitivity to changes in interest rates.

Table 10:  Loan Maturities
 (Dollars in thousands)

 

                                          After 1       
                                       





eal estate - mortgage             6,214   13,543    11,536 
Real estate - construction         2,112       37       222 
Consumer                           1,442    1,780        36 
                                  $ 14,354 $18,973  $12,775 



Loans maturing
after 1 year with:
Fixed interest rates                   $    11,111  $    10,176 
Variable interest rates                       7,862       2,599 
                                        $    18,973 $    12,775 



Table 11 includes loans collateralized by real estate at December 31, 1996.  
Some of these loans are included in commercial loans for purposes of Table 10.

Table 11:  Loans Collateralized By Real Estate

                                                              Percentage
                                                                of total
                                                Amount        loan portfolio

(Dollars in thousands)
Construction and land development                 $ 2,371              7%
Collateralized by 1 - 4 family 
residential properties                             16,439             49%
Collateralized by multi-family 
residential properties                                794              2%
Collateralized by non-farm 
non-residential properties                         14,060             42%
                                           $       33,664            100%




INVESTMENT PORTFOLIO:

The company's investment portfolio is a source of liquidity and is the second 
largest category of earning assets.  The investment portfolio is used to 
provide liquidity in the event of the withdrawal of large deposits or to 
satisfy unusual loan demands, and consists primarily of U.S. Treasury and 
government agency securities.

Table 12 shows the maturities of investment securities at December 31, 1996, 
and the weighted average yields to maturity of such securities:



Table 12:  Investment Securities (1)
 December 31, 1996
 (Dollars in thousands)
                       1 Year        2-4          4-5 (2)     Over 5(3)         
                       or less       years        years         years

                    Amount  Yield  Amount  Yield  Amount  Yield Amount Yield
U.S. Treasury,
government agencies
state and political
subdivisions       $ 2,337 5.88% $ 13,793 6.09% $ 2,248  6.36% $1,516 5.98%
Other                   -    -         65 6.00%     -     -       202 7.25%

Total            $   2,337 5.88%  $13,858 6.05% $ 2,248 6.36% $1,718 6.62%
 

1) Presented on an amortized cost basis
(2) Includes $233,000 in tax free securities with a weighted average yield of 
4.30%
(3) Includes $258,000 in tax exempt securities with a weighted average yield of 
4.50%.



DEPOSITS:
The Company's deposit base includes large denomination certificates of deposit 
of $100,000 or more which represent approximately 10% of total deposits at 
December 31, 1996.  The Bank pays market rates for these funds.  Management 
of the Bank attempts to match large denomination certificates of deposit with 
rate-sensitive assets.  At December 31, 1996, available short-term assets 
totaled $8,262,000.                                                       

Table 13 presents remaining maturities of large denomination certificates 
($100,000 or more) at December 31, 1996.


Table 13: Remaining Maturities of Large Denomination Certificates

 December 31, 1996
(Dollars in thousands)
 
                                     Amount
Three Months or less            $    2,680 
Over three through six months         2,982 
Over six through twelve months          225 
Over twelve months                      841 
                          $           6,728 



NONINTEREST  INCOME:

Noninterest income increased $12,000 or 5% from 1995 to 1996 primarily due to 
an increase in charges on deposit accounts.  This reflects increased activity 
related to the bank's merchant credit card program.  Income from the discount 
rate on merchant credit card transactions increased by $11,000 in 1996 
compared to 1995.

A comparison of noninterest income may be found in Table 14.
Table 14:  Noninterest Income
(Dollars in thousands)
For the Years Ended December 31,

                           1996     1995       1996 over 1995

Service Charges     $      172  $    169          $  3 

Other Income                74        65             9
                 $         246 $      234         $  12 


NONINTEREST EXPENSE:
     
Noninterest expense increased $9,000 or .46% from 1995 to 1996.  This slight 
increase reflects management's continued success in controlling overhead and 
other non-interest related expenses.                                        


A comparison of noninterest expense may be found in Table 15.

Table 15: Noninterest Expense
(Dollars in thousands)
For the Years Ended December 31,

                                 1996         1995   1996 over 1995

Salaries and employee benefits $  1,046      $991     $  55 
Occupancy expenses                  174       169         5 
FDIC Insurance                        2        60       (58)
Furniture and equipment expense      96       125       (29)
Automated services                  103        91        12 
Accounting and audit                 40        40         -   
Stationery and supplies              47        43         4 
Director fees                        39        33         6 
Taxes & Licenses                     63        56         7 
Insurance expense                    37        31         6 
Marketing expense                    22        19         3 
Other                               281       283        (2)
                            $      1,950    1,941 $       9 



INCOME TAXES:     

For the year ended December 31, 1996, the Company recognized an expense of 
$218,000.  This represents a $123,000 increase from the $95,000 expense for 
1995.  The increase primarily reflects the utilization of net operating 
losses for tax return purposes in 1995.

RECENT ACCOUNTING PRONOUNCEMENTS:

In June 1996, the Financial Accounting Standards Board ("FASB") issued 
Statement No. 125, Accounting for Transfers and Servicing of Financial 
Assets and of Liabilities.  This Statement provides accounting and reporting 
standards for servicing of financial assets and extinguishments of liabilities, 
and provides s for distinguishing transfers of financial assets that are sales 
from transfers that secure borrowings.  
Except for certain provisions affecting repurchase agreements and other similar 
transactions, this Statement is effective for transfers and servicing of 
financial assets and extinguishments of liabilities occurring after December 
31, 1996, and is applied prospectively.  Earlier or retroactive application 
is not permitted.  The effective date of the provisions affecting repurchase 
agreements and similar transactions, including related transfers of collateral, 
is delayed for one year, to allow more time for accounting systems to be put 
in place to properly reflect the requirements and guidance of this Statement.

This Statement also provides implementation guidance for assessing isolation of 
transferred assets (one of the requirements for recognizing transfers), and for 
accounting for transfers of partial interests, servicing of financial assets, 
securitizations, transfers of sales-type and direct financing lease 
receivables, securities lending transactions, repurchase agreements including 
"dollar rolls","wash sales", loan syndications and participations, risk 
participations in banker's acceptances, factoring arrangements, transfers of 
receivables with recourse, and extinguishments of liabilities.  Except for the 
provisions affecting loan participations, the Statement is not expected 
to materially affect financial condition or results of operations.  However, 
pursuant to the Statement's provisions, if a loan participation agreement 
constrains the transferees (participating bank) from pledging or exchanging 
their participations, the transferor (originating bank) has not relinquished 
control over the loan and shall account for the transfer as a secured 
borrowing.  The Statement also provides that a transferor's right of first 
refusal on a bona fide offer from a third party, a requirement to obtain the 
transferor's permission that shall not be unreasonably withheld, or a 
prohibition on sale to the transferor's competitor is a limitation on the 
transferee's rights but presumptively does not constrain a transferee from 
exercising its right to pledge or exchange.  
The Company is currently considering these provisions, and assessing the 
accounting treatment and legal ramifications of modifying participation 
agreements.

On November 14, 1996, the Emerging Issues Task Force (EITF) of the FASB reached 
consensus on Issue No. 96-12 ( the Issue),Recognition of Interest Income and 
Balance Sheet Classification of Structured Notes.  Structured notes are debt 
instruments whose cash flows are linked to the movement in one or more indexes, 
interest rates, foreign exchange rates, commodities prices, prepayment rates, or
similar variables.  They are issued by U.S. government-sponsored enterprises, 
multilateral development banks, municipalities, and private corporations.  
The Issue addresses the accounting for certain structured notes that are in 
the form of debt securities.  The EITF reached a consensus that investors 
should use the retrospective interest method for recognizing income on 
structured note securities that are classified as available-for-sale and held-
to-maturity debt securities under FASB Statement No. 115, Accounting for 
Certain Investments in Debt and Equity Securities, and that meet certain 
conditions.  Under the retrospective interest approach, income on the 
structured notes for the current period is measured based on changes in 
estimates of future cash flows between periods, and cash receipts of interest
 income in the current period and, therefore, is different from recognizing 
income on the interest method of accounting for securities.  The EITF 
observed that changes in accounting for this Issue should be applied to all 
structured notes within the scope of this Issue either currently as a change in 
accounting principle, or prospectively to new securities acquired after November
 14, 1996.  Management believes the Bank does not hold securities within the 
scope of the Issue, and does not plan to investment in such securities in the 
foreseeable future.  Therefore, this EITF Issue is not expected to materially 
affect financial condition or results of operation in the foreseeable future.

	The Accounting Standards Executive Committee of the American Institute of 
Certified Public Accountants has issued Statement of Position (SOP) 96-1, 
Environmental Remediation Liabilities.  SOP 96-1 provides guidance on 
accounting for environmental remediation liabilities within the framework 
established by FASB Statement No. 5, Accounting for Contingencies.  
It includes benchmarks to aid in the determination of when environmental 
remediation liabilities should be recognized in accordance with FASB No. 5, 
and guidance on measurement, display, and disclosure of such liabilities.  
The SOP is effective for fiscal years beginning after December 15, 1996, with 
earlier application encouraged.  Management does not believe this SOP will 
materially affect financial condition or results of operation of the Company 
in the foreseeable future.

	
Item 7:  FINANCIAL STATEMENTS

The report of independent accountants and the Company's consolidated financial 
statements and footnotes for the years ended December 31, 1996 and 1995 are 
incorporated herein by reference.  The Annual Report on Form 10-KSB should 
be read in conjunction with the Company's consolidated financial statements 
and footnotes.

Item 8:  DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
 None.

PART III

Item 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

	On January 5, 1990, the Board of Directors voted to amend the by-laws to 
increase the size of the Board of Directors from 12 to 14 members.  As of 
December 31, 1996, there were 9 directors.


The following schedule sets forth certain information concerning the directors 
and executive officers of the Company.
Director's                               Term to               Positions With
Name                            Age       Expire                The Company

James A. Cummings               54         1998             Director
F. Dudley Fulton                48         1999             Director
Henry U. Harris, III            45         1997             Director and 
                                                    Vice-Chairman of the Board

Stephen A. Johnsen              51         1997             Director and 
                                                     Secretary of the Board
Robert J. Keogh                 48         1998             President; 
                                                           Director and 
                                                       President-Heritage
                                                            Bank & Trust

Peter M. Meredith, Jr.          45       1998             Director and 
                                                     Chairman of the Board

Gerald L .Parks                 63        1999            Director

Ross C. Reeves                  48        1999             Director

Harvey W. Roberts, III          52        1998             Director

	James A. Cummings was appointed director of the Company effective November 
1992, and has served as a director of Heritage Bank & Trust since April 1992.  
He currently serves as Vice President of Southern Atlantic Label Company.

F. Dudley Fulton was appointed director of the Company effective December 31, 
1991, and has served as a director of Heritage Bank & Trust since 1988.  He 
currently serves as President and Chief Executive Officer of Henderson and 
Phillips, Inc.

Henry U. Harris, III has been a director of the Company since November 1992 and 
has served as Vice-Chairman since January 1995.  He has been a director of 
Heritage Bank & Trust since September 1990.  He has served as Vice President 
of Virginia Investment Counselors for ten years.

Stephen A. Johnsen has been a director of the Company since 1988 and has served 
as Secretary since January 1995.  He has served as a director of Heritage Bank 
& Trust since 1984.  Mr. Johnsen has been the President of The Flagship Group 
since 1984.

Robert J. Keogh has been a director since 1989.  He has served as President and 
as a director of Heritage Bank & Trust since August 1988.  He previously was a 
Senior Vice President of First American Bank of Virginia from December 1983 to 
August 1988.

Peter M. Meredith, Jr. was elected as a director of the Company in November 
1992 and has served as Chairman since January 1995.  He has served as a 
director of Heritage Bank & Trust since September 1991.  He had been the 
President of Meredith Construction Company for several years and  currently 
serves as Chairman and Chief Executive Officer.
			
Gerald L. Parks has been a director of the Company since 1987 and has served as 
a director of Heritage Bank & Trust since its inception.  He had been President 
of Capes Shipping Agencies, Inc. for several years, and is now serving as 
Chairman  and Chief Executive Officer.

Ross C. Reeves was elected as a director of the Company in February 1995.  He 
has been a member of the law firm of Willcox & Savage, P.C. since 1982.

Harvey W. Roberts, III was elected as a director of the Company in January 
1993.  Mr. Roberts is a senior partner in the accounting firm of Roberts & 
Speece, CPA, P.L.C.

Item 10.  EXECUTIVE COMPENSATION

1.  CASH COMPENSATION:

	Set forth below is information concerning the compensation paid to the 
Company's executive officer.

Summary Compensation Table
Annual Compensation (1)
                                                         Director's

Name and Principal Position   Year    Salary     Bonus      Fees  Options(2)
Robert J. Keogh               1996 $  93,450  $23,700  $ 4,800     - 
President & Chief 
Executive Officer             1995 $  93,000  $14,000  $ 3,125     36,000 
                              1994 $ 89,000  $13,000  $ 2,400        - 


(1) No compensation earned in either year was deferred.
(2) During 1995 options were granted to purchase common stock of the Company at 
the option price ranging from $6.50 per share to $9.50 per share.  See 
"Compensation Pursuant to Plans".  No stock options or stock appreciation 
rights were exercised by Mr. Keogh in either year represented above.


2.  COMPENSATION PURSUANT TO PLANS:

EMPLOYEE STOCK OPTION PLAN

As of December 31, 1996, stock options for 110,750 shares are outstanding and, 
of these shares, 61,875 are exercisable.  Options are granted and are 
exercisable at option prices ranging from $4.60 to $9.50 per share.

DEFERRED COMPENSATION AND RETIREMENT ARRANGEMENTS

In 1985, Heritage Bank & Trust entered into deferred compensation and 
retirement arrangements with seven directors and one officer.  Each 
participant is fully vested.  The Company's policy is to accrue the estimated 
amounts to be paid under the contracts over the expected period of active 
service or employment.
	Upon reaching age 70, each participant will receive a retirement benefit 
ranging from $391 to $3,355 per month for each of the next 120 months.  If 
the participant dies prior to reaching age 70, his beneficiary will begin 
receiving the monthly retirement benefits.  The bank has purchased life 
insurance contracts in order to fund the expected liabilities under the 
deferred compensation arrangements.  As of December 31, 1996, Heritage Bank & 
Trust had accrued $227,860 to reflect the anticipated liability.

	In 1990, Robert J. Keogh, President of Heritage Bank & Trust, became a 
participant in the Heritage Bank & Trust Executive Security Plan.  In the 
event Mr. Keogh dies prior to age 65, his beneficiary will receive monthly 
payments of $4,167 for each of the next 180 months.  Upon his retirement at 
age 65, Mr. Keogh will receive $4,167 per month for each of the next 180 
months or until his death, and thereafter other beneficiaries will receive 
such retirement benefits.   Heritage Bank & Trust funds this obligation 
through a life insurance contract.  Heritage Bank & Trust had accrued $51,428 
as of December 31, 1996 to reflect the anticipated liability.

	Effective January 1, 1984, the Board of Directors adopted an Employee's 
Stock Bonus Plan and Trust (the "ESOP").  The ESOP covered substantially all 
employees, whereby funds contributed were used to purchase outstanding 
common stock of the Company.  Contributions were allocated to the participants 
based on the employee/participant's annual compensation.  Employee 
participants in the ESOP included all employees who have reached the age of 
21 and have completed one year of service (1,000 hours), beginning with the 
effective date of the ESOP.  Benefits were be payable upon separation from 
service or upon retirement, disability or death.  Employees are 30% vested 
with respect to the benefits under the ESOP in three years and the vested 
percentage was increased annually, reaching 100% after seven years.  
Participants were automatically 100% vested in the ESOP upon reaching age 65, 
death or disability.  Participants vote all shares allocated to their 
respective accounts and the trustees of the ESOP vote any unallocated shares.  
The Board of Directors of the Company has the right to amend or terminate the 
ESOP and trust at any time.  The Company made no contribution to the plan for 
years ending December 31, 1996 and 1995.  In October of 1995, the trustees of 
the ESOP voted to terminate the plan and the participants in the plan were 
notified of their options concerning distribution of their shares in the 
plan in accordance with the terms of the ESOP and applicable law.  At 
December 31, 1996, 25,490 of the 25,934 shares in the plan had been 
distributed.

Effective January 1, 1993, the Board of Directors adopted a Retirement Program 
(the "401K").  The Company may contribute cash to the 401K annually, as 
determined each year by the Board of Directors.  Contributions to the 401K 
are allocated to its participants based on the employee/participant's 
contributions to the plan.  Eligible participants in the 401K include all 
employees who have completed six months of service (500 hours) beginning 
with the effective date of the 401K.  Benefits will be payable upon 
separation from service or upon retirement, disability or death.  Employees 
are 20% vested with respect to the benefits under the 401K in two years and 
the vested percentage is increased annually, reaching 100% after six years.  
Participants are automatically 100% vested in the 401K upon reaching age 65, 
death or disability.  The Company has the right to amend or terminate the 
401K.  The Company accrued $28,000 and  $25,000 for a contribution to the 
plan as of December 31, 1996 and 1995, respectively.

COMPENSATION OF DIRECTORS:

Directors of the Company and Directors of Heritage Bank & Trust receive $400 
for each Board of Directors' meeting attended and $100 for each committee 
meeting attended 

ITEM 11:  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT


The following schedule sets forth information regarding the beneficial 
ownership of the Company's common stock as of March 10, 1997, of (i) each of 
the Company's directors; (ii) each person known by the Company to be the 
holder of 5% or more of the Company's outstanding common stock; and (iii) 
all of the Company's directors and executive officers as a group.

OWNERSHIP OF COMMON STOCK BY DIRECTORS AND EXECUTIVE OFFICERS

NAME OF INDIVIDUAL                                 PERCENT OF 
                                  SHARES               CLASS

James A.Cummings
2073 Thomas Bishop Lane
Virginia Beach, VA  23454 USA       5,138             0.65%

F. Dudley Fulton
5306 Lakeside Avenue
Virginia Beach, VA  23451 USA       2,100             0.27%

Henry U. Harris, III
1503 North Shore Road
Norfolk, VA  23505 USA             25,705 (1)         3.27%


Stephen A. Johnsen
401 College Place
Norfolk, VA  23510 USA              1,968             0.25%


Robert J. Keogh
6146 Sylvan Street
Norfolk, VA  23508 USA               7,495(2)        0.95%

Peter M. Meredith, Jr.
5320 Edgewater Drive
Norfolk, VA  23508 USA                36,950(3)      4.70%


Gerald L. Parks
27307 Evergreen Lane
Harborton, VA  23389  USA              5,147 (4)     0.65%

Ross C. Reeves
1068 Algonquin Road
Norfolk, VA  23505 USA                  4,142(5)     0.53%

Harvey W. Roberts, III
7612 North Shore Road
Norfolk, VA  23505 USA                   27,254(6)   3.47%


Directors and Executive Officers as 
a group (9 persons)                     115,899     14.74%

(1)    Includes 3,555 shares owned by his wife.  Also includes 4,249 shares 
held as custodian for  others.
(2)  Includes 1,335 shares owned jointly with his wife.  Also includes 1,998 
shares owned by Scott & Stringfellow as an IRA for Mr. Keogh.  Does not  
include 43,700 shares that may be acquired by Mr. Keogh pursuant to the 
Stock Option Plan for key employees of the Company.  See "Compensation 
Pursuant to Plans".  If such shares were included, Mr. Keogh would own 
6.80% of the outstanding shares.
(3)  Includes 10,960 shares held as Meredith Realty Company, L.L.C., 9,455 
shares held as Pomar Holding, L.L.C. and 3,000 shares held as Meredith Realty 
Associates.  Also includes 8,203 shares owned by Davenport & Company for 
Mr. Meredith.
(4)  Includes 4,556 shares owned jointly with his wife.
(5)  Includes 3,142 shares held as custodian for others.
(6)  Includes 15,455 shares owned by his wife and 3,000 shares owned jointly 
with his wife.  Also includes 287 shares owned by Scott & Stringfellow as an 
IRA for Roberts & Speece, CPA, P.L.C.


OWNERSHIP OF COMMON STOCK BY CERTAIN HOLDERS
NAME OF INDIVIDUAL


                                                              PERCENT OF 
                                      SHARES                     CLASS

L. Steven Gossett                   48,313 (1)                    6.14%
5225 Riverwood Road
Norfolk, VA  23502  USA

(1)  Mr. Gossett reports that he shares voting and dispositive power over 
31,094 shares of the Company's Common Stock with his wife Diane M. Gossett 
and his daughters Stephanie D. Gossett and Nancy Gossett Hance.

ITEM 12:  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS:

Many directors of the Company and Heritage Bank & Trust and their associates, 
including firms and corporations of which they are officers or directors or 
in which they and their immediate families have a substantial interest, are 
customers of Heritage Bank & Trust.  As such, they have had transactions 
with the bank, including loans made in the ordinary course of business on 
substantially the same terms, including interest rates, collateral 
and repayment terms, as those prevailing at the time for comparable loans to 
other parties.  Such loans have not involved more than the normal risk of 
collectibility or other unfavorable features.  At December 31, 1996, the 
total loans outstanding to officers and directors of the Company and 
Heritage Bank & Trust were $3,407,000.  Related party deposits amounted to 
approximately $5,500,000 and $5,300,000 at December 31, 1996 and 1995, 
respectively.

	Heritage Bank & Trust occupies 7,581 square feet of space in a building 
located at 1450 South Military Highway in Chesapeake, Virginia.  The building 
is owned by IBV Partners, L.P., a Virginia limited partnership which has as its 
sole general partner IBV Real Estate Holdings, Inc., a wholly-owned 
subsidiary of the Company.  Former and current directors of Heritage Bank & 
Trust own an aggregate of approximately 34% of the partnership 
interests.  IBV Partners, L.P. and Heritage Bank & Trust entered into a lease 
in December 1986 which was modified in December 1996.  Future minimum lease 
payments of $64,439 are required under the long-term non-cancellable lease 
agreement as of December 31, 1996, which expires in December 2,001.  Total 
lease expense was $75,810 for each of the years 1996 and 1995. See Notes 12 
& 13 of the Notes to Consolidated Financial Statements.

The Company and Heritage Bank & Trust purchase various types of business 
insurance through the Flagship Group, of which Stephen A. Johnsen is 
President.  Mr. Johnsen is a director and Secretary of the Company.  
Insurance premiums paid to the Flagship Group as agent for commercial 
insurance providers was $31,325 during 1996.  The Bank has also sold securities 
to the Flagship Group under agreements to repurchase.  See Note 9 of the 
Consolidated Financial Statements for additional information.

PART IV

Item 13:  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
          10-KSB

(A) (1)	The following consolidated financial statements of Heritage Bankshares, 
Inc. and its subsidiaries are incorporated herein by reference in Item 8:

Consolidated Balance Sheets - December 31, 1996 and 1995
Consolidated Statements of Income - Years ended December 31, 1996 and 1995
Consolidated Statements of Changes in Stockholders' Equity - Years ended
December 31, 1996 and 1995
Consolidated Statements of Cash Flows - Years ended December 31, 1996 and 1995
Notes to Consolidated Financial Statements
Reports of independent accountants
(A) (2)	Financial Statement Schedules:

	All other schedules provided for in the applicable regulation of the
 Securities and Exchange	Commission pertain to items which do not appear in 
the financial statements, to items which are insignificant, or to items as 
to which the required disclosures have been made elsewhere in the 	financial 
statements and notes thereto.  These schedules have therefore been omitted.

(A) (3)	Exhibits:

 3.1 Articles of Incorporation. (Incorporated herein by reference to the 
     Corporation's Form  10-K for 1983 filed March 29, 1984.)

3.2 Bylaws, as amended.
    
10.1 Stock Option Plan for Employees (Incorporated herein by reference to the 
     Corporation's Form 10-K for 1987 filed March 25, 1988.)

10.2 Employees Stock Option Plan. (Incorporated herein by reference to the 
     Corporation's Form 10-K for 1987 filed March 25, 1988.)

10.3 Employee Stock Ownership Plan (Incorporated herein by reference to the 
     Corporation's Form 10-K for 1984 filed April 12, 1985.)

10.4 Lease dated December 29, 1986, between IBV Partners, L.P. as landlord, and 
     Heritage Bank & Trust, as Tenant, for the lease of 7,581 square feet of 
     space in a building located at 1450 South Military Highway, Chesapeake, 
     Virginia. (Incorporated herein by reference to the Corporation's Form 10-K 
     for 1986 filed March 1987.)

10.5 Amended and restated January 1, 1989, Stock Ownership Plan, which provided 
     for certain changes required by IRS regulations including changes in 
     participant vesting schedules.  (Incorporated herein by reference to the 
     Corporation's Form 10-K for 1990 filed March 30, 1991.)

POWER OF ATTORNEY


Each person whose signature appears below under "SIGNATURES" hereby authorizes 
Robert J. Keogh and Peter M. Meredith, Jr. or either of them, to execute in 
the name of each such person, and to file any amendment to this report, and 
hereby appoints Robert J. Keogh and Peter M. Meredith, Jr. or either of them, 
as attorneys-in-fact to sign on his behalf, individually and in each capacity 
stated below, and to file any and all amendments to this report.

	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.

Heritage Bankshares, Inc.
(Registrant)

Date:  March 26,1997				by__________________________________	               
						   Robert J. Keogh, President and Chief 	
                      					   Executive Officer
                                                                     					
						by__________________________________
						   Peter M. Meredith, Jr., Chairman of the
						   Board of Directors

	Pursuant to the requirements of the Securities Exchange Act of 1934, this 
report has been signed below by 
the following persons on behalf of the Registrant and in the capacities 
indicated on March 27, 1996.

SIGNATURES

	
_____________________________________						
Peter M. Meredith, Jr.
Chairman of the Board of Directors
					
_____________________________________						
Robert J. Keogh
President and Chief Executive Officer & Director

_____________________________________						
Henry U. Harris, III
Vice-Chairman of the Board of Directors

_____________________________________						
Stephen A. Johnsen
Secretary of the Board of Directors

_____________________________________						
James A. Cummings
Director
				
_____________________________________						
F. Dudley Fulton
Director

_____________________________________						
Gerald L. Parks
Director

_____________________________________						
Ross C. Reeves
Director

_____________________________________						
Harvey W. Roberts, III
Director






19
	



Consolidated								
Financial Statements								
Years Ended December 31,								
1996 and 1995								
								
HERITAGE BANKSHARES, INC.								
								
REPORT OF INDEPENDENT ACCOUNTANTS								
								
The Stockholders and Board of Directors								
Heritage Bankshares, Inc								
Norfolk, Virginia								
								
								
We have audited the accompanying consolidated balance sheets of Heritage 
Bankshares,	Inc. and its subsidiaries at December 31, 1996 and 1995, and the 
related consolidated statements	of income, stockholders' equity and cash 
flows for the years then ended.  These consolidated financial statements are 
the responsibility of the Company's management.  Our responsibility is to						
express an opinion on these consolidated financial statements based on our 
audits.								
								
We conducted our audits in accordance with generally accepted auditing 
standards.  Those	standards require that we plan and perform the audits to 
obtain reasonable assurance about whether	the consolidated financial 
statements are free of material misstatement.  An audit includes examining,				
on a test basis, evidence supporting the amounts and disclosures in the 
consolidated financial	statements.  An audit also includes assessing the 
accounting principles used and significant estimates made by management, 
as well as evaluating the overall consolidated financial statement								
presentation.  We believe that our audits provide a reasonable basis for our 
opinion.								
								
In our opinion, the consolidated financial statements referred to above present 
fairly, in all	material respects, the consolidated financial position of 
Heritage Bankshares, Inc. and its	subsidiaries as of December 31, 1996 and 
1995, and the consolidated results of their operations and	their cash flows 
for the years then ended in conformity with generally accepted accounting 
principles.								
								
Goodman & Company
One Commercial Place								
Norfolk, Virginia								
28-Jan-97								
								
                                                       
								
								
Consolidated Balance Sheets
Heritage Bankshares, Inc.
December 31, 1996 and 1995
        1996    1995

Assets
Cash and due from banks        $3,068,651      $3,223,837
Federal funds sold              5,925,000       5,720,000
Securities available for sale   14,367,341      5,701,087
Securities held to maturity     5,829,535       7,302,230
Loans, net                      45,259,390     43,019,213
Accrued interest receivable      828,551          740,829
Other real estate owned          443,731          514,375
Premises and equipment           588,434          635,687
Other Assets                     535,172          427,657
                             $76,845,806        $67,284,915

Liabilities and Stockholders' Equity
Deposits:
Noninterest bearing deposits    $12,498,845     $12,663,061
Interest-bearing deposits       55,927,746      48,390,405
                                68,426,591      61,053,466
Securities sold under agreements
to repurchase                     1,349,091        -
Short term borrowings               130,552         66,427
Accrued interest payable            290,583        255,604
Other liabilities                   537,214        571,341
                                $70,734,031     61,946,838
Stockholders' equity:
Common stock, $5 par value - authorized
3,000,000 shares; issued and
outstanding 784,150 shares         3,920,750       3,920,750

Additional paid-in capital          (380,330)       (380,330)
Retained earnings                   2,539,941       1,763,581
Unrealized appreciation (depreciation)
on securities available for sale
                                       31,414          34,076
                                     6,111,775       5,338,077
                                   $76,845,806     $67,284,915

The notes to consolidated financial statements								
are an integral part of this statement.								
								
                               -2-								
								
HERITAGE BANKSHARES, INC.								
CONSOLIDATED STATEMENTS OF INCOME                                            
								
 CONSOLIDATED STATEMENTS OF INCOME

Heritage Bankshares, Inc. - Years Ended December 31, 1996 and 1995
                                        1996    1995

Interest income:
Interest and fees on loans       $4,064,107      $3,859,138
Interest on investment securities:
   Available-for-sale               507,245         268,119
   Held-to-maturity                 352,626         385,033
                                    859,871         653,152
Interest on federal funds sold      456,299         406,642
Total interest income             5,380,277       4,918,932
Interest expense:
Interest on deposits              2,491,616       2,175,706
Interest on short-term borrowings     3,104           3,333
     Total interest expense       2,494,720       2,179,039
     Net interest income          2,885,557       2,739,893
Provision for loan losses            92,935         193,000
Net interest income after 
provision for loan losses          2,792,622       2,546,893
Noninterest income:
  Services charges                   171,921         168,685
  Other                               73,642          65,131
                                     245,563         233,816
Noninterest expense:
                    Other            465,024         430,353
Salaries and employee benefits     1,045,502         991,232
Occupancy expenses                   174,276         169,443
Automated services                   103,265          91,400
Furniture and equipment expense       95,997         124,506
Taxes & licenses                      63,642          56,322
FDIC insurance                         2,000          60,416
                                    1,949,706       1,923,672

Income before income taxes           1,088,479        857,037
Income tax  (expense)                 (218,021)       (95,089)
Net income                            $870,458        $761,948
Net income per common and common 
equivalent share                         $1.09           $0.94
	
The notes to consolidated financial statements are an integral part of this 
statement								
								
Consolidated Statements of Stockholders' Equity								
Heritage Bankshares, Inc.								
December 31, 1996                                       Net
and 1995                         Additional          unrealized       
                 Common stock       paid-in    Retained Appr.
                 Shares   Amount     Capital     Earnings(Depr)
                                                            On Sec. Total

Bal, Dec. 31, 
1994           769,630 $3,848,150 $(374,667) $1,081,524 $(92,379) $4,462,628 
Stock  options
exercised
in 1995(14,520
sahres at $4.61
per share)         14,520     72,600    (5,663)                   66,937
Net changes in unrealized depreciation
on securities available-for-sale
net of applicable income taxes of $31,614                 126,455  126,45							
Net income 1995                                   744,789         744,78								
Less dividends paid in 1995					                  (62,732)         (62,732)  
Bal.Dec. 31,
1995         784,150 3,920,750  (380,330)1,763,581    34,076  5,338,077 								
Net changes in unrealized depeciation on
securities available-for-sale,net of
applicable income taxes of $1,371                                    (2,622)   
Net income 1996                              870,458      870,458     								
Less dividends paid 1996                      (94,098)								
Balance
Dec 31,1996  784,150 $3,920,750 $(380,330) $2,539,941 $31,414 $6,111,775								
                                                        
HERITAGE BANKSHARES, INC.								
								
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS								
								
DECEMBER 31,1996 AND 1995								
								
NOTE I - ORGANIZATION AND BUSINESS								
								
Heritage Bankshares, lnc- (the "Company") was organized under the laws of 
the Commonwealth of Virginia in 1983.  The Company has two wholly-owned 
subsidiaries, including one bank: Heritage Bank & Trust (the "Bank") with 
offices in Norfolk and Chesapeake, Virginia.  The								
Company's other subsidiary is IBV Real Estate Holdings, Inc., a Virginia 
corporation.  The Bank is	a state-chartered bank and a member of the Federal 
Reserve System.  The deposits of the Bank are	insured by the Federal Deposit 
Insurance Corporation (the "FDIC") to the extent and subject to the								
limitations set forth in the Federal Deposit Insurance Act, as amended.								
								
The Bank is a full-service bank conducting a general commercial and consumer 
banking	business with its customers located throughout the Hampton Roads 
area of Virginia.  Its principal banking activities include 
receiving demand,
 savings and time deposits for personal and commercial								
accounts; making commercial, real estate and consumer loans; acting as a 
United States tax								
depository facility; providing money transfer and cash management services; 
selling travelers checks,								
bank money orders; issuing letters of credit, and investing in U.S. Treasury 
securities and securities								
of other U.S. government agencies and corporations, and mortgage-backed and 
state and municipal								
securities.								
								
IBV Real Estate Holdings, Inc. was formed in December, 1986.  Presently, its 
only business is owning a 1% general partnership interest in IBV Partners, 
L.P., the lessor of office space to	Heritage Bank and Trust in Chesapeake, 
Virginia.								
								
								
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES								
								
Basis of Statement Presentation and Principles of Consolidation															

The accompanying consolidated financial statements include the accounts of 
Heritage	Bankshares, Inc- and its wholly-owned subsidiaries, Heritage Bank 
and Trust and IBV Real Estate	Holdings, Inc.  All significant intercompany 
balances and transactions have been eliminated in	consolidation.								
								
                               Cash Equivalents								
								
For purposes of reporting cash flows, cash and cash equivalents include cash on 
hand, amounts due from banks, interest bearing deposits with banks and federal 
funds sold.  Generally, federal funds are sold for one-day periods.								
								
								
								
(Notes continued on next page)								
                                         7 -								
								
The notes to consolidated financial statements								
are an integral part of this statement.								
								
6								
								
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)								
								
                               Securities								
								
Investments in debt securities that management has the positive intent and 
ability to hold to	maturity are classified as "held to maturity" and 
reflected at amortized cost.  Investments that are	purchased and held 
principally for the purpose of selling them in the near term, if any, are 
classified as "trading securities" and reflected at fair value, with 
unrealized gains and losses included in earnings.  Investments not classified
as either of the above are classified as "available for sale" and	reflected 
at fair value, with unrealized gains and losses excluded from operations and 
reported as a separate component of stockholders' equity.								
								
Premiums and discounts are recognized in interest income using the interest 
method over the period to maturity on held to-maturity and available-for
-sale securities.  Other-than-temporary	declines in the fair value of 
individual held-to-matudty and available-for-sale securities, if any, result
in write-downs of the individual securities to fair value.  Gains and losses 
are determined using the	specific-identification method.								
								
Loans								
								
Loans are reported at their principal outstanding balance net of charge-offs, 
deferred loan fees	and costs on originated loans, unearned income, and 
unamortized premiums or discounts, if any, on	purchased loans.  Interest 
income is generally recognized when income is earned using the interest								
method.  Loan origination fees and certain direct loan origination costs are 
deferred and the net	amounts are amortized as adjustments to the loans' 
yields.								
								
Allowance for Loan Losses								
								
The Bank adopted FASB Statement No. II 4, Accounting by Creditors for
Impairment of a	Loan, on January 1, 1995.  Under the standard, a loan is 
considered impaired, based on current information and events, if ft is probable 
that the Bank will be unable to collect the scheduled payments	of principal or 
interest when due according to the contractual terms of the loan agreement. 
The measurement of impaired loans is generally based on the present value of 
expected future cash flows	discounted at the historical effective interest 
rate, except that all collateral-dependent loans are	measured for impairment 
based on the fair value of the collateral.  The adoption of FASB Statement						
No. 1 14 did not result in an additional provision for loan losses.								
								
The adequacy of the allowance for loan losses is periodically evaluated by the 
Bank, in order	to maintain the allowance at a level that is sufficient to 
absorb probable credit losses.  Management's	evaluation of the adequacy of
the allowance is based on a review of the Bank's historical loss experience, 
known and inherent risks in the loan portfolio, including adverse 
circumstances that may affect the ability of the borrower to repay interest 
and/or principal, the estimated value of collateral,and an analysis of the 
levels and trends of delinquencies, charge-offs, and the risk ratings of 
the various loan categories.  Such factors as the level and trend of 
interest rates and the condition of the national and local economies are 
also considered.  In addition, various regulatory agencies, as an	integral 
part of their examination process, periodically review the Bank's allowance 
for losses on	loans- Such agencies may require the Bank to recognize 
additions to the allowance based on their	judgements of information 
available to them at the time of their examination.								
								
								
(Notes continued on next page)								
								
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)								
								
                               Allowance for Loan Losses (continued)								
								
The allowance for loan losses is established through charges to earnings in the 
form of a	provision for loan losses.  Increases and decreases in the allowance 
due to changes in the measurement of impaired loans, if applicable, are 
included in the provision for loan losses.  Loans continue to be classified 
as impaired unless they are brought fully current and the collection of								
scheduled interest and principal is considered probable.								
								
When a loan or portion of a loan is determined to be uncollectible, the portion 
deemed uncollectible is charged against the allowance and subsequent 
recoveries, if any, are credited to theallowance.								
								
Income Recognition on Impaired and Nonaccrual Loans								
								
Loans, including impaired loans, are generally classified as nonaccrual if they 
are past due as to maturity or payment of principal or interest for a period of 
more than 90 days, unless such loans	are well-secured and in the process of 
collection.  If a loan or a portion of a loan is classified as	doubtful, or 
is partially charged off, the loan is generally classified as nonaccrual.  
Loans that are on a current payment status or past due less than 90 days may 
also be classified as nonaccrual, if repayment in full of principal and/or 
interest is in doubt.								
								
Loans may be returned to accrual status when all principal and interest amounts 
contractually	due (including arrearages) are reasonably assured of repayment 
within an acceptable period of time,and there is a sustained period of 
repayment performance (generally a minimum of six months) by the borrower, 
in accordance with the contractual terms of interest and principal.								
								
While a loan is classified as nonaccrual and the future collectibility of the 
recorded loan balance is doubtful, collections of interest and principal are 
generally applied as a reduction to	principal outstanding.  When the future 
collectibility of the recorded loan balance is expected, interest	income may 
be recognized on a cash basis.  In the case where a nonaccrual loan had been 
partially charged off, recognition of interest on a cash basis is limited to 
that which would have been recognized on the recorded loan balance at the 
contractual interest rate.  Cash interest receipts in	excess of that amount 
are recorded as recoveries to the allowance for loan losses until prior 
charge- offs have been fully recovered.								
								
Other Real Estate Owned								
								
Other real estate owned is comprised of real estate and other assets acquired 
through foreclosure, acceptance of a deed in lieu of foreclosure, or loans in 
which the Bank receives physical possession of the debtor's assets.  Other 
real estate owned is carried at the lower of the recorded	investment in the 
loan or the fair value less estimated costs to sell.  Upon transfer of a loan 
to foreclosed status, an appraisal is obtained and any excess of the loan 
balance over the fair value less estimated costs to sell is charged against 
the provision for credit losses.  Revenues and expenses,and subsequent 
adjustments to fair value less estimated costs to sell are classified as an 
expense for other real estate owned.								
								
(Notes continued on next page)								
                                         9 -								
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)								
								
Restructured Loans								
								
Loans are considered troubled debt restructurings under FASB Statement No. 15, 
Accounting	by Debtors and Creditors for Troubled Debt Restructurings, if for 
economic or legal reasons, a	concession has been granted to the borrower 
related to the borrower's financial difficulties that the	Bank would not have 
otherwise considered.  The Bank has restructured certain loans in instances					
where a determination was made that greater economic value will be realized 
under new terms than	through foreclosure, liquidation, or other disposition.
The terms of the renegotiation generally involve	some or all of the following
characteristics: a reduction in the interest pay rate to reflect actual								
operating income, an extension of the loan matudty date to allow time for 
stabilization of operating	income, and partial forgiveness of principal and 
interest.								
								
The carrying value of a restructured loan is reduced by the fair value of any 
assets or equity interest received, if any.  Prior to demonstrating 
performance, the Bank generally classifies impaired	restructured loans, if 
any, as nonaccrual.  The accrual of interest resumes when such loans can								
demonstrate performance, generally evidenced by six months of pre- or 
post-restructuring payment performance in accordance with the restructured 
terms, or by the presence of other significant	factors.  In addition, at the 
time of restructuring, loans are generally classified as impaired.  A								
restructured loan that is not impaired, based on the restructured terms and 
that has a stated interest	rate greater than or equal to a market interest 
rate at the date of the restructuring, is reclassified as	unimpaired in the 
year immediately following the year it was disclosed as restructured.								
								
Premises and Equipment								
								
Premises and equipment are stated at cost less accumulated depreciation.  For 
financial	reporting purposes, assets are depreciated over their estimated 
useful lives using the straight-line method.  For income tax purposes, the 
accelerated cost recovery system and the modified	accelerated cost recovery 
system are used.								
								
Income Taxes								
								
The Company files a consolidated tax return.  Provisions for income taxes 
reflect tax expense	incurred as a consolidated group.  Tax expense is 
allocated among the members of the consolidated	group in accordance with an 
intercompany agreement for tax expense.  Income taxes are provided								
for the tax effects of the transactions reported in the financial statements 
and consist of taxes	currently due plus deferred taxes related primarily to 
differences between the basis of available-for sale securities, deferred 
loan fees, allowance for loan losses, allowance for losses on foreclosed 
real estate, accumulated depreciation and deferred compensation for financial
and income tax reporting.	The deferred tax assets and liabilities represent 
the future tax return consequences of those	differences, which will either 
be taxable or deductible when the assets and liabilities are recovered								
or settled.  Deferred taxes are also recognized for alternative minimum tax 
credit carryforwards that are available to offset future federal income 
taxes.								
								
								
								
(Notes continued on next page)								
                                         1 0 -								
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)								
								
Deferred Compensation Plans								
								
The Bank maintains deferred compensation and retirement arrangements with 
certain directors	and officers.  The Company's policy is to accrue the 
estimated amounts to be paid under the	contracts over the expected period of 
active employment.  The Bank purchased life insurance	contracts to fund the 
expected liabilities under the contracts.								
								
Off-Balance-Sheet Financial Instruments								
								
In the ordinary course of business, the Bank has entered into off-balance-sheet 
financial instruments consisting of commitments to extend credit, commitments 
under credit card arrangements, commercial letters of credit, standby letters 
of credit and financial guarantees written.	Such financial instruments are 
recorded in the financial statements when they become payable.								
								
Use of Estimates								
								
The preparation of financial statements requires Management to make estimates 
and assumptions that affect the reported amounts of assets and liabilities 
and disclosure of contingent	assets and liabilities at the date of the 
financial statements and the reported amounts of revenues	and expenses 
during the reporting period.  Actual results could differ from those 
estimates.								
								
Material estimates that are particularly susceptible to significant change 
relate to the determination of the allowance for losses on loans and the 
valuation of real estate acquired in connection with foreclosures or in 
satisfaction of loans.  In connection with the determination of the								
allowances for losses on loans and foreclosed real estate, management obtains 
independent appraisals for significant properties.  While management uses 
available information to recognize	losses on loans and foreclosed real 
estate, future additions to the allowances may be necessary								
based on changes in local economic conditions and other factors.								
								
Earnings per Share								
								
Earnings per common and common equivalent share is obtained by dividing net 
income by	the weighted average number of common shares outstanding, which 
includes, where applicable, the	dilutive effect of stock options computed
using the treasury stock method.  The weighted average	number of shares used 
in the computation of earnings per share was 799,944 and 788,974 for 1996							
and 1995, respectively.  Primary and fully diluted earnings per share do not 
materially differ.								
								
Reclassifications								
								
Certain reclassifications have been made to prior year financial statements to 
conform them	to the current years presentation.								
								
								
(Notes continued on next page)								
								
NOTE 3 - CONDENSED FINANCIAL INFORMATION OF HERITAGE BANKSHARES, INC.								
                               (PARENT COMPANY ONLY)								
								
The financial position, results of operations and cash flows of Heritage 
Bankshares, Inc. are	presented below on a parent company only basis for the 
years indicated								
								
Condensed Balance Sheets                 December 31,                        
Assets                                     1996       1995								
Cash on deposit with Heritage Bank and Trust     $8,615     67,340       
Investment in Heritage Bank and Trust           5,918,242   5,151,529    
Investment in non-banking subsidiaries         132,649    117,549          
Premises and equipment                         19,951     28,147								
Other assets                                 245,034    207,742								
                                            6,324,391  5,572,307          
Total assets                                                              
								
                                                      December 31,          
Liabilities and Stockholders' Equity                     1996         1995   
								
Due to IBV Real Estate Holdings                         110,000    110,000  
Other liabilities                                       102,616    124,230  
Common stock                                          3,920,750  3,920,750
Additional paid-in capital                               380,330   380,330 
Retained earnings                                        2,539,941 1,763,581
Unrealized appreciation
(depreciation) on securities available fo								
sale                                                        31,414   34,076
                                                    $ 6,324,391  $ 5,572,307  
Income:								
Dividends from subsidiary bank                    $ 109,098 $ 62,732           
Other                                                 12,000   12,292       
                                                      121,098   75,024       
Expenses:								
Other                                                  24,991   27,966      
								
Income before income taxes and equity in undistributed net income of								
Heritage Bank and Trust                                96,107   47,058          
Applicable income tax benefit                           4,976   11,711         
								
Income before equity in undistributed net income of Heritage Bank								
and Trust                                              101,083   58,769      
								
Equity in undistributed net inc                        769,375  686,020     
Bank & Trust								
                                                   $  870,458$    744,789  
  (Notes continued on next page)                                          
                                                        
                               -12-								
								
NOTE 3 - CONDENSED FINANCIAL INFORMATION OF HERITAGE BANKSHARES, INC.								
                               (PARENT COMPANY ONLY) (Continued)								
								
                                       Years Ended         December 31,								
Condensed Statements of Cash Flows            1996       1995								
								
Operating activities:								
Net income                               $    870,458$   744,789            
Adjustments to reconcile to net cash provided by operating activities:								
Depreciation                                 8,196      8,196								
Undistributed net income of Heritage Bank  769,375    686,020								
Changes in:								
Other assets                                37,292     65,761								
Other liabilities                           21,614      7,013								
Net cash provided by operating activities   50,373      8,217								
								
Investing activities:								
Investment in non-banking subsidiaries      15,000        -                 
								
Financing activities:								
Net proceeds from exercise of stock optio       -       66,937								
Cash dividends paid                            (94,098) (62,732)
								
Net cash provided by financing activities   94,098      4,205								
								
Not increase (decrease) in cash and cash    58,726     12,422								
								
Cash and cash equivalents at beginning of   67,340     54,918								
								
Cash and cash equivalents at end of year $   8,615$     67,340.00								
								
Certain restrictions exist regarding the ability of Heritage Bank and Trust to 
transfer funds to	Heritage Bankshares, Inc. in the form of cash dividends, 
loans or advances.  Pursuant to Federal	Regulations, dividends are generally 
restricted to net profits, as defined, for the current year, plus	retained 
net profits for the previous two years.  At December 31, 1996, dividends 
from the Bank to	the Company are limited to approximately $1,985,000 under 
these regulations.  The maximum	amount available for transfer from Heritage 
Bank and Trust to the Company in the form of loans and	advances is 10% of 
Heritage Bank and Trust's stockholders equity.  At December 31, 1996, such					
maximum amount available is approximately $592,000.								
								
								
								
								
								
								
(Notes continued on next page)								
                                         - 13 -								
NOTE 4 - RESTRICTIONS ON CASH AND DUE FROM BANK ACCOUNTS								
								
The Bank is required by the Federal Reserve Bank to maintain average reserve 
balances.  The	average amount of maintained reserve balances for the year 
ended December 31, 1996 was	approximately $661,000, with the average reserve 
requirement for the same period being	approximately $382,000.  On December 
31, 1996, the reserve balance was approximately $768,000.								
								
								
NOTE 5 - SECURITIES								
								
Securities at December 31, 1996 and 1995 are as follows:								
								
                                        Gross      Gross								
                        AmortizedUnrealized UnrealiEstimated
                               Cost     Gains      Losses Fair Value							
December 31, 1996:								
Securities available for sale:								
U.S. Treasury                 $10,495,374$ 29,182$  7,148   $10,517,408
U.S. government agencies        3,025,362     26,295  7,341  3,044,316								
Mortgage-backed securities        800,091      6,965  1,756    805,300								
								
                               $14,320,827   62,442   16,245  14,367,024								
								
								
Securities held to maturity:								
U.S. Treasury                $1,732,665   $ 3,039 $ 2,134 $ 1,733,570								
U.S. government agencies      1,999,226   $    5,362$  723$ 2,003,866								
Mortgage-backed securitie     1,340,585             $ 9,651$ 1,330,934								
States and political								
subdivisions                  $ 490,359$       197        $    490,556								
Other                         $ 266,700        -          $    266,700								
								                    $5,829,535 $    8,598  $12,508$ 5,825,625								
								
December 31, 1995:								
Securities available for sale								
U.S. Treasury                3,741,725 $      43,164$     564$ 3,784,325								
U.S. government agencies          1,300,000      1,110  3,720  1,297,390								
Mortgage-backed secuhties          616,768      6,180  3,576    619,372								
								
                                $5,658,493 $   50,454   7,860  5,701,087								
								
Securities held to maturity:								
U.S. Treasury                 $3,981,998 $   12,278 $10,285 $ 3,983,991								
U.S. government agencies       1,500,000      7,810  25,781  1,482,029								
Mortgage-backed securities       544,597   -          7,559    537,038
Other                          1,275,635            15,913  1,259,722								
								
                              $7,320,230 $  20,088 59,538  7,262,780								
								
                               (Notes continued on next page)								
                                         - 14 -								
								
NOTE 5 - SECURITIES (Continued)								
								
Investment securities having carrying values of $3,902,828 and $4,839,926 at 
December 31,1996 and 1995, respectively, are pledged to secure deposits of 
the U.S. Government and the	Commonwealth of Virginia.  The estimated fair 
values of these securities were $3,904,806 and $4,809,355 at December 31, 
1996 and 1995, respectively.								
								
The amoritized cost and fair value of securities by maturity date, including 
the contractual	maturities of mortgage-backed securities, at December 31, 
1996 are as follows:								
								
Securities Held to Maturity       Securities Available for Sale								
                                  AmortizedEstimated  AmortizEstimated								
                                Cost     Fair Value Cost   Fair Value								
Due in one year 
or less                     $ 547,245$  545,156 1,789,677 $1,793,403								
Due from one year
to five years                4,255,883 4,257,467  11,776,217  11,813,663								
Due from five 
years to ten years             322,712    322,804     418,252    423,889								
Due after ten years            703,695    700,198     336,681    336,069								
								
                            $5,829,53$  $5,825,625 $14,320,827 $  14,367,024
								
NOTE6-LOANS								
								
Loans consist of the following:								
December 31,								
                                              1996       1995								
Gross loans-								
Commercial                               $9,334,87$   8,510,867								
Real estate - mortgage                   31,551,38 29,559,276								
Real estate - construction               2,083,717  2,580,988								
Installment and consumer loans           3,132,132  3,131,400								
Total gross loans                        46,102,10 43,782,531								
								
Less - allowance for loan losses          -842,715   -763,318								
								
Loans,net                                45,259,39 43,019,213								
								
A summary of the activity in the allowance for loan losses account is as 
follows:								
								
                               Years Ended        December 31,								
								
                                     1996     1995								
								
Balance, beginning of year     $  763,318$    638,675								
Provision charged to operations    92,935  193,000								
Loans charged-off                 (84,239) (140,810)								
Recoveries                         70,702   72,453								
								
Balance, end of year           $ 842,715  $   763,318								
                               (Notes continued on next page)								
								
                               - 15 -								
								
NOTE 6 - LOANS (Continued)								
								
Loans on which the accrual of interest has been discontinued amount to $12,550 
and $18,26	at December 31, 1996 and 1995, respectively.  If interest on these 
loans had been accrued, such income would have approximated $2,000 and $1,720 
for 1996 and 1995, respectively.  No interest	income was recognized or 
received on these loans in 1996 and 1995.								
								
								
NOTE 7 - PREMISES AND EQUIPMENT								
								
Premises and equipment consist of the following:								
December								
                                     1996     1995								
								
Land and improvements          $      161,168 $    161,168								
Buildings                             673,631      649,626								
Leasehold improvements                  7,951        7,951								
Equipment, furniture and fixtures     1,018,562  1,011,476								

Less - accumulated depreciation      (1,272,878)(1,194,534)								
								
                               $     588,434        635,687								
								
Depreciation charged to operating expense for the years ended December 31, 
1996 and 1995 was $78,344 and $100,413, respectively.								
								
								
NOTE 8 - DEPOSITS								
Interest bearing deposits consist of the following:								
                               December 31,								
                                      1996             1995								
Money Market and NOW account deposits$ 12,278,300   11,997,470
Savings deposits                        4,675,568    4,957,616
Certificates of deposit $100,00         6,727,894    7,749,841								
Other time deposits                    32,246,984    23,685,478								
								
                                      $55,927,746    48,390,405
								
At December 31, 1996 and 1995, the scheduled maturities of time deposits are 
as follows:								
								
                                     1996     1995								
Maturing in less than one year $ 31,506,878  24,015,319						
Maturing in more than a year, 
but less than five years        7,467,000      7,420,000								
Maturing in more than five years         -          -								
                                 38,973,878   31,435,319							
								
								
                               (Notes continued on next page)								
								
                               - 16 -								
								
NOTE 9 - SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND SHORT-TERM								
BORROWINGS								
								
Securities sold under agreements to repurchase generally mature within one to 
four days from	the transaction date.  Information concerning securities sold 
under agreements to repurchase is	summarized as follows:								
								
December 31,								
								
                                              1996       1995								
Average balance during the year          $14,308.0-								
Average interest rate during the year        4.36%-								
Maximum month end balance during the year  1,349,0-								
								
Short-term borrowings consist of U.S. Treasury tax and loan deposit notes, 
which are payable on demand and fully collateralized by investment 
securities.								
								
During 1994, the Bank became a member of the Federal Home Loan Bank of 
Atlanta. One of the benefits of membership is a borrowing capacity of 
$5-9 million secured by a blanket floating lien on the unpaid principal 
balance of the Bank's one-to-four unit residential, real estate loans.  
As of December 31, 1996, the Bank had not drawn any amounts on this line of 
credit.								
								
								
NOTE 10 - STOCK COMPENSATION PLANS								
								
At December 31, 1996, the Bank has fixed stock compensation plans for its 
officers- The Bank applies Accounting Principles Board Opinion No. 25 
(APB 25), Accounting for Stock Issued to Employees, and related 
interpretations in accounting for its plans.  Accordingly, no compensation 
cost has been recognized for these plans against earnings.  For those companies 
applying APB 25, FASB Statement No. 123, Accounting for Stock-Based Compensation
, requires certain pro-forma	disclosures of net income and earnings per share.  
Net income and earnings per share computed	under FASB Statement No. 123 do not 
materially differ from the amounts reported.								
								
All options have ten year terms, vest and become fully exercisable in three 
years.  The option	exercise price equals or exceeds the market price of the 
stock as of the date the option was granted. The following is a summary of 
the banks stock option activity, and related information for the years ended 
December 31,:                     1996     1995         
                              Weighted-           Weighted-                  
                                Average             Average                 
                                Exercise            Exercise               
                    Options         Price    Options    Price                   
Outstanding								
Beginning of year   110,750        $7.39    57,520$       $5.64
Granted               -                     67,750         8.27								
Exercised                                  (14,520)        4.61								
Forfeited								
Outstanding -
End of year        110,750           7.39  110,750          7.39								
Exercisable 
 End of year        61,875           6.47  49,938         6.16  
1			
								
(Notes continued on next page)								
                                         - 17 -								
NOTE 11 - INCOME TAXES								
								
The principal components of income tax expense are as follows:								
								
Years Ended December 31,								
                                              1996       1995								
Federal income tax expense - current        222,599    (184,300)           			
Deferred federal income tax benefit (expense) related to								
temporary differences in reporting:								
Bad debt deduction                             (28,177)     (50,217)           
Premium amortization and discount accreti        (2,867)        8,776         
Depreciation                                     16,163       (4,021)           
Deferred compensation                          (14,633)       (6,162)           
Deferred loan fees                               11,076       10,169           
Employee benefits                                 (641)      (1,882)           
Other                                            4,326         8,495            
Utilization of minimum tax credit carryforward  10,175     115,147             
Utilization of contribution carryover             -           8,906            
                                                 (4,578)      89,211            
Income tax expense                             218,021   (95,089)               
								
								
Differences between income tax expense calculated at the statutory rate and 
that shown in the	statements of income are summarized as follows:								
								
								
                                     1996     1995								
Federal income tax expense - at    (370,083)(285,559)                          
Tax effect of-.								
Tax exempt interest                49,475      48,021                          
Change in valuation allowance      97,475      151,168                         
Other                               5,112       (8,719)                        
                                   (218,021)   (95,089)                         
								
(Notes continued on next page)								
                                         1 8 -								
NOTE 11 - INCOME TAXES (Continued)								
								
The Company has the following deferred tax assets and liabilities at December 
31, 1996 and 1995                                                         
								
                                  1996     1995								
Deferred tax assets:								
Deferred compensation             94,958      80,325                            
Bad debts                        195,588     167,411                           
Minimum tax credit carryforward   12,997      120,647                       
Other                               9,222      12,907                         
                                 312,765     381,290                          
Less - valuation allowance                    (97,475)                         
Total deferred tax asset         312,765     283,815                           
								
Deferred tax liabilities:								
Deferred loan fees             (14,383)        (3,307)                        
Discount accretion on securitie (11,723)      (14,590)                         
Net unrealized appreciation on available-for-								
sale securities                  (14,783)        (8,519)                       
Fixed assets                     (20,454)       (4,291)                        
                                  61,343        (30,707)                      
								
Net deferred tax asset           251,422       253,108                         
								
NOTE 12 - COMMITMENTS AND CONTINGENCIES								
								
The Company has entered into a long-term lease with a related party to provide 
space for one branch and the Bank's operations center.  This lease has been
classified as an operating lease for financial reporting purposes.  Future 
minimum lease payments of $64,439 are required each year for five years under 
the long-term non-cancellable lease agreement as of December 31, 1996, which				
expires in December, 2001.  Total lease expense was $75,810 for each of the 
years 1996 and 1995.								
								
								
NOTE 13 - RELATED PARTY TRANSACTIONS								
								
The Bank has loan and deposit transactions with its officers and directors, and 
with companies in which the officers and directors have a financial interest.  
Related party deposits amounted to approximately $5,500,000 and $5,300,000 at 
December 31, 1996 and 1995, respectively.  All securities sold under 
agreements to repurchase were transacted with a related party.  A summary						
of related party loan activity for Heritage Bank and Trust is as follows during 
1996:								
								
Balance, December 31, 1995      $ 3,217,295								
Originations - 1996               1,845,805								
Repayments - 1996                (1,655,754)								
								
Balance, December 31, 1996        3,407,346								
								
                               (Notes continued on next page)								
								
                               - 19 -								
								
NOTE 13 - RELATED PARTY TRANSACTIONS (Continued)								
								
In the opinion of Management, such loans are made in the ordinary course of 
business at normal credit terms, including interest rate and collateral 
requirements and do not represent more than normal credit risk.								
								
In the ordinary course of business, the Company has engaged in transactions 
with certain of its directors' companies for legal services and insurance.  
Additionally, lease expense under related party leases was $75,810 for each 
of the years 1996 and 1995.								
								
Commitments to extend credit and letters of credit to related parties amounted 
to $1,166,800 and $858,950 at December 31, 1996 and 1995, respectively.								
								
								
NOTE 14 - CREDIT COMMITMENTS AND CONCENTRATIONS OF CREDIT RISK								
								
The Bank has outstanding at any time a significant dollar amount of commitments 
to extend	credit.  To accommodate major customers, the Bank also provides 
standby letters of credit and guarantees to third parties.  Those 
arrangements are subject to strict credit control assessments.								
Guarantees and standby letters of credit specify limits to the Bank's 
obligations.  The amounts of loan commitments, guarantees and standby 
letters of credit are set out in the following table as of								
December 31, 1996 and 1995.  Because many commitments and almost all standby 
letters of credit	and guarantees expire without being funded in whole or in 
part, the contract amounts are not estimates of future cash flows.  The 
majority of commitments to extend credit have terms up to one								
year.  Interest rates on fixed-rate commitments range from 14% to 18%.								
								
                                   1996     1995								
                             Variable Rate FixedVariable Rate Fixed Rate								
                             Commitments CommitmCommitments Commitments								
								
Loan Commitments            $ 10,456,377$648,085  $   8,807,606 702,075        
								
Standby letters of credit and								
guarantees written              124,133   24,240      378,297   5,000          
								
All of the guarantees outstanding at December 31, 1996 expire during 1997.			
								
								
								
								
								
								
(Notes continued on next page)								
                                         - 20 -								
NOTE 14 - CREDIT COMMITMENTS AND CONCENTRATIONS OF CREDIT RISK (Continued)					
								
Loan commitments, standby letters of credit and guarantees written have off-
balance-sheet credit risk because only origination fees and accruals for 
probable losses, if any, are recognized in the statement of financial 
position, until the commitments are fulfilled or the standby letters of 
credit or guarantees expire.  Credit risk represents the accounting loss 
that would be recognized at the	reporting date if counterparties failed 
completely to perform as contracted.  The credit risk amounts are equal to 
the contractual amounts, assuming that the amounts are fully advanced and 
that, in accordance with the requirements of FASB Statement No. 105, 
Disclosure of Information about Financial Instruments with Off-Balance-Sheet 
Risk and Financial Instruments with Concentrations	of Credit Risk, collateral
or other security is of no value.  The Bank's policy is to require customers
to provide collateral prior to the disbursement of approved loans.  For 
retail loans, the Bank usually	retains a security interest in the property 
or products financed, which provides repossession rights in the event of 
default by the customer.  For business loans and financial guarantees, 
collateral is	usually in the form of inventory or marketable securities 
(held in trust) or property (notations on title).								
								
Concentrations of credit risk (whether on or off balance sheet) arising from 
financial instruments exist in relation to certain groups of customers.  A 
group concentration arises when a number of counterparties have similar 
economic characteristics that would cause their ability to meet	contractual 
obligations to be similarly affected by changes in economic or other 
conditions.  The Bank	does not have significant exposure to any individual 
customer or counterparty.  The major concentrations of credit risk for the 
Bank adse by customer loan type in relation to loans and credit commitments, 
as shown in the following table.  A geographic concentration arises because 
the Bank operates primarily in southeastern Virginia.								
								
                                    Installment								
              ResidentiCommercial Small  and                                  
            Property Property   Busines-Consumer       Total                   
                                                      
Loans and                                                       
receivables $19,711,926 14,060,583 $9,177,408 $3,152,188 $ 46,102,105         
Credit                                                     
commitment    2,918,911    424,489  4,831,137  3,077,897 11,3252,434          
            22,630,837  14,485,072 14,005,545  6,230,085  57,354,539
                                                    
							
The credit risk amounts represent the maximum accounting loss that would be 
recognized at the reporting date if counterparties failed completely to 
perform as contracted and any collateral orsecurity proved to be of no value.
The Bank has experienced little difficulty in accessing collateral when 
required.  The amounts of credit risk shown, therefore, greatly exceed 
expected losses, which	are included in the allowance for loan losses.								
								
								
								
								
								
(Notes continued on next page)								
                                         - 21 -								
NOTE 15 - REGULATORY MATTERS								
								
The Bank is subject to various regulatory capital requirements administered by 
the federal	banking agencies.  Failure to meet minimum capital requirements 
can initiate certain mandatory, and possibly additional discretionary, 
actions by regulators that, if undertaken, could have a direct material								
effect on the Bank's financial statements.  Under capital adequacy guidelines 
and the regulatory framework for prompt corrective action, the Bank must meet 
specific capital guidelines that involve quantitative measures of the Bank's 
assets, liabilities, and certain off-balance-sheet items as								
calculated under regulatory accounting practices.  The Bank's capital amounts 
and classification are also subject to qualitative judgments by the regulators 
about components, risk weighting, and other factors.								
								
Quantitative measures established by regulation to ensure capital adequacy 
require the Bank	to maintain minimum amounts and ratios (set forth in the 
table below) of total and Tier I capital (as defined in the regulations) to 
risk-weighted assets (as defined), and of Tier I capital (as defined) to								
average assets (as defined).  Management believes, as of December 31, 1996, 
the Bank meets all	capital adequacy requirements to which it is subject.								
								
As of September 30, 1996, the most recent notification from the Federal Reserve
Bank of Richmond categorized the Bank as well capitalized under the 
regulatory framework for prompt	corrective action.  To be categorized as 
well capitalized the Bank must maintain minimum total risk	based, Tier I 
risk-based, and Tier I leverage ratios as set forth in the table.  There are 
no conditions or events since that notification that management believes have
 changed the institution's category.								
								
The Bank's actual capital amounts and ratios are also presented in the table.	
							
								
                                                   To Be Well								
                                                        Capitalized under						
                                       For Capital       Prompt Corrective			
                       Amount    Ratio    Amount    Ratio   Amount   Ratio				
As of December 31, 1996:								
Total Capital								
(to Risk Weighted Assets)    $ 6,650 14.70% $3,618 8.00% $4,523 10.00%       
Tier 1 Capital								
to Risk Weighted Assets)    $ 6,081 13.44% $1,809 4.00% $2,714 6.00%           
Tier 1 Capital								
to Average Assets) $ 6,081    8.57% $2,839  4.00% $3,548 5.00%                 
								
								
There is no significant difference between the Banks actual ratios disclosed 
above, and the related actual ratios of the Company.								
								
								
								
								
								
(Notes continued on next page)								
                                         - 22 -								
NOTE 16 - FAIR VALUE OF FINANCIAL INSTRUMENTS								
								
The following table presents the carrying amounts and fair value of the Bank's 
financial	instruments at December 31, 1996 and 1995.  FASB Statement No. 107, 
Disclosures about Fair Value of Financial Instruments, defines the fair value 
of a financial instruments as the amount at which the instrument could be 
exchanged in a current transaction between willing parties, other than								
in a forced or liquidation sale.  The carrying amounts in the table are 
included in the balance sheet	under the indicated captions.								
								
								
                                     1996         1995								
                               Carrying  Fair     Carrying   Fair								
                               Amount    Value    Amount     Value								
Financial Assets                                         
Cash and cash equivalents   8,994      8,994     8,944        8,944          
Loans (net)                   45,259   45,719   43,014       42,906          
Investment securities         20,196   20,193   13,003       12,964            
Accrued interst receivable       535      535      428         428            
                                                      
								
Financial Liabilities:								
Deposit liabilities           68,427   68,427      61,160   61,160           
Accrued interest payable         291      291         254      254             
Short-term borrowings            131      131          66       66              
Securities sold under								
agreements to repurchase        1,349    1,349                                
								
                               Estimation of Fair Values								
								
The following notes summarize the major methods and assumptions used in 
estimating the fair value of financial instruments:								
								
Short-term financial instruments are valued at their carrying amounts 
included in the Bank's balance sheet, which are reasonable estimates of 
fair value due to the relatively short period to maturity of the instruments.
This approach applies to cash and cash equivalents, short-term borrowings, 
and securities sold under agreements to repurchase.								
								
Loans are valued on the basis of estimated future receipts of principal and 
interest, discounted at various rates.  Loan prepayments are assumed to 
occur at the same rate as in previous periods when interest rates were at 
levels similar to current levels.  Future cash flows for homogeneous								
categories of consumer loans, such as motor vehicle loans, are estimated on 
a portfolio basis and discounted at current rates offered for similar loan 
terms to new borrowers with similar credit profiles.	The fair value of 
nonaccrual loans also is estimated on a present value basis, using higher 
discount rates appropriate to the higher risk involved.								
								
Investment securities are valued at quoted market prices if available.  For 
unquoted securities, the fair value is estimated by the Bank on the basis of 
financial and other information.								
								
(Notes continued on next page)								
                                         - 23 -								
NOTE 16 - FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)								
Estimation of Fair Values (continued)								
The fair value of demand deposits and deposits with no defined maturity is 
taken to be the amount payable on demand at the reporting date.  The fair 
value of fixed - maturity deposits is estimated using rates currently offered
for deposits of similar remaining maturities.  The intangible value of long-
term relationships with depositors is not taken into account in estimating 
the fair values disclosed.								
								
The carrying amounts of accrued interest approximate fair value.								
								
It is not practicable to separately estimate the fair values for off-balance-
sheet credit	commitments, including standby letters of credit and guarantees 
wdften, due to the lack of cost effective reliable measurement methods for 
these instruments.								
								
								
								
								
								
								
								
								
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