PEOPLES FINANCIAL SERVICES CORP/
10-12G, 1998-03-04
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               SECURITIES AND EXCHANGE COMMISSION
                     WASHINGTON, D.C. 20549

                             FORM 10
           GENERAL FORM FOR REGISTRATION OF SECURITIES
              PURSUANT TO SECTION 12(b) OR 12(g) OF
               THE SECURITIES EXCHANGE ACT OF 1934

                PEOPLES FINANCIAL SERVICES CORP.
     (Exact name of registrant as specified in its charter)


             Pennsylvania                    23-2391852
     (State or other jurisdiction of    (I.R.S. Employer
     Incorporation or Organization)     Identification Number)

     50 Main Street, Hallstead, Pennsylvania             18822
     (Address of Principal Executive Office)           (Zip Code)

Registrant's telephone number, including area code  (717)879-2175

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

     Title of Each Class      Name of Each Exchange on Which
     to be so Registered      Each Class is to be Registered

          None                          None

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

                    Common Stock, $5.00 par value
                         (Title of Class)
<PAGE>
Item 1.  Business

General

          Peoples Financial Services Corp. (the "Company") was
incorporated under the laws of the Commonwealth of Pennsylvania
on February 6, 1986 and is a one-bank holding company
headquartered in Hallstead, Pennsylvania.

          The Company is engaged primarily in commercial and
retail banking services and in businesses related to banking
services through its sole subsidiary,  Peoples National Bank of
Susquehanna County ("PNB" or the "Bank").  PNB was chartered in
Hallstead, Pennsylvania in 1905 under the name of The First
National Bank of Hallstead.  In 1965, the Hop Bottom National
Bank (chartered in 1910) merged with and into the First National
Bank of Hallstead to form PNB.  PNB is currently in its 93rd year
of operation. 

Market Areas

          The PNB market areas are in the northeastern part of
Pennsylvania with the primary focus being Susquehanna and Wyoming
Counties.  Since Susquehanna County borders the State of New
York, the southern portion of Broome County, New York is also
considered part of the market area of PNB.  In addition, parts of
Lackawanna, Wayne, and Bradford Counties in Pennsylvania that
border Susquehanna and Wyoming Counties are also considered part
of the PNB market area.

          The PNB market area is situated between the city of
Binghamton, Broome County, New York, located to the north and the
cities of Scranton, Lackawanna County, Pennsylvania, to the
south, and Wilkes Barre, Luzerne County, Pennsylvania to the
southwest.  Susquehanna County could best be described as a
bedroom county with a high percentage of its residents commuting
to work in Broome County, New York, or to the Scranton,
Pennsylvania area.  The southern part of Susquehanna County tends
to gravitate south for both employment and shopping while the
northern part of the county goes north to Broome County, New
York.  The western part of Susquehanna County gravitates south
and west to and through Wyoming County.  Wyoming County is home
to a Proctor & Gamble manufacturing facility which employs
approximately 3,000 people.  This is an economic stimulus to
Wyoming County and the surrounding areas.

          Both Susquehanna and Wyoming Counties would be
considered sparsely populated with many small towns and villages
in their makeup.  The latest population figures show Susquehanna
County at approximately 41,000 and Wyoming County at
approximately 30,000 residents.  Both counties are experiencing
growth, but not robust growth.  Interstate 81 runs north and
south through the eastern half of Susquehanna County and has
brought an influx of people from New Jersey and the Philadelphia
area.  These people have purchased homes and land to build homes
which are used as vacation/recreation retreats and, quite often,
become retirement homes.

          Farming is, although declining, still an important part
of the economies of both Wyoming and Susquehanna Counties. 
Northeastern Pennsylvania is the source of most of the bluestone
quarried in this country and this also is both an important
employer in the market area as well as an economic stimulus. 
Forest products are also a significant part of the economy with
many people employed in local sawmills and as independent
contractors supplying these mills with raw materials.  The
Proctor and Gamble plant located in Wyoming County is a paper
products plant which uses pulp wood in the process of making its
products.

          Although employment opportunities are available in the
PNB market areas, employment has always tended to lag both the
state and the nation. 

          Based on PNB's experience in real estate lending
transactions and the appraisals obtained for such transactions,
real estate values have declined somewhat over the last five
years in Susquehanna County but this trend appears to be slowing
and values are more stable.  PNB's presence in Wyoming County,
Pennsylvania has been limited to a de novo branch in Nicholson
which has been open for five years, and the recent (1997)
purchase of branches located in Tunkhannock and Meshoppen,
Pennsylvania which are west of Nicholson and closer to the
Proctor and Gamble plant.  Market values in the newest branch
areas are much higher than in the areas where the other branch
offices are located.

          PNB has four full-service banking offices in
Susquehanna County along with a limited services office located
in Springville, Pennsylvania which is operated as an adjunct to
PNB's office located in Montrose, Pennsylvania.  Other offices
are located in the borough of Susquehanna Depot, the Hallstead
Plaza, Great Bend Township; and the Borough of Hop Bottom; the
Montrose office is located in Bridgewater Township, just outside
the borough of Montrose boundary.  Montrose is the county seat of
Susquehanna County.  The Administrative/Operations office for the
Company and PNB is located in the Borough of Hallstead.  

          The Nicholson office in Wyoming County is located in
the Borough of Nicholson.  The Meshoppen Office is located in
Meshoppen Township, just east of the Meshoppen Borough. 
Tunkhannock Borough is the county seat of Wyoming County and also
is home to PNB's Tunkhannock office.

Lending and Deposit Activities

          Lending Activities.

          PNB provides a full range of retail and commercial
banking services designed to meet the borrowing and depository
needs of small and medium sized businesses and consumers in its
market areas.  Substantially all of PNB's loans are to customers
located within its service areas.  PNB has no foreign loans or
highly leveraged transaction loans, as defined by the Federal
Reserve Board ("FRB").  Substantially all of the loans in PNB's
portfolio have been originated by PNB.  Policies adopted by the
Board of Directors are the basis by which PNB conducts its
lending activities.  These loan policies grant individual lending
officers authority to make secured and unsecured loans in
specific dollar amounts; larger loans must be approved by senior
officers or various loan committees or by the Board of Directors. 
PNB's management information systems and loan review policies are
designed to monitor lending sufficiently to ensure adherence to
PNB's loan policies.

          The commercial loans offered by PNB include
(i) commercial real estate loans, (ii) working capital,
equipment, and other commercial loans, (iii) construction loans,
(iv) SBA guaranteed loans, and (v) agricultural loans.  PNB's
commercial real estate loans are used to provide permanent
financing for retail, manufacturing and farming operations.  They
are also used for multi-family housing units and churches. 
Commercial real estate secured loans are generally written for a
term of 15 years or less or amortized over a longer period with
balloon payments at shorter intervals.  Personal guarantees are
obtained on nearly all commercial loans.  Credit analyses, loan
review, and an effective collections process are also used to
minimize any potential losses.  PNB employs two full-time
commercial lending officers.  These two people are augmented by
branch managers who are authorized to make smaller, less complex,
commercial loans.  

          Consumer loans offered by PNB include (i) residential
real estate loans, (ii) automobile loans, (iii) manufactured
housing loans, (iv) personal installment loans secured and
unsecured for almost any purpose, (v) student loans, and
(vi) home equity loans (fixed-rate term and open ended revolving
lines of credit).

          Residential mortgage products include adjustable-rate
as well as conventional fixed-rate loans.  Terms vary from 1, 5,
7 and 10-year adjustable rate loans to 5, 10, 15, 20, and 30-year
fully amortized fixed rate loans.  Bi-weekly payment plans are
also available.  Up to this point all real estate loans have been
held in PNB's loan portfolio, but the longer term fixed rate
loans have been underwritten as conforming and may be sold to the
secondary market to reduce interest rate risk.  Personal secured
and unsecured revolving lines of credit with variable interest
rates and principal amounts ranging from $1,000 to $10,000 are
offered to credit-worthy customers.  The largest segment of PNB's
installment loan portfolio is fixed-rate loans.  Most are secured
either by automobiles, motorcycles, snowmobiles, boats or other
personal property or by liens filed against real estate. These
loans are generally available in terms of up to 15 years with
automobile loans having maturities of up to 60 months and real
estate loans having maturities up to 15 years.  Loans secured by
other collateral usually require a maturity of less than
60 months.  Home equity products include both fixed-rate term
products and also an open-end revolving line of credit with a
maximum loan-to-value ratio of 80% of current appraisal.  Credit
checks, credit scoring, and debt-to-income ratios within preset
parameters are used to qualify borrowers.

          Lending volume increased substantially in 1997 as our
presence in Wyoming County was expanded by the purchase of branch
offices in Tunkhannock and Meshoppen, Pennsylvania.  Loans were
not included in the assets purchased in these transactions.  A
great number of loan customers at the Tunkhannock and Meshoppen
branch offices desired to continue making payments at the same
offices so throughout the year loans were transferred via new
applications for credit at PNB.  At the same time, a general push
to increase the loan-to-deposit ratio of PNB as a whole was
initiated.  The general good economy and stable-to-lower interest
rate scenario allowed good growth in total loans which ended 1997
up over 18% from year-end 1996.  The highest percentage of growth
was in personal installment loans and in mortgages.  Industry
standard debt-to-income ratios and credit checks are used to
qualify borrowers on all consumer loans.  Managers, assistant
managers, and customer service officers have retail lending
authorities at each of the full-service branch office locations. 
PNB has centralized loan administration at its
operations/administrative offices where mortgage underwriting and
loan review and analysis takes place.  

          Loan Approval.

          Individual loan authorities are established by PNB's
Board of Directors upon recommendation by the senior lending
officer.  In establishing individual's loan authority the
experience of the lender is taken into consideration, as well as
the type of lending in which the individual is involved.  The
officers loan committee consists of the President of PNB and the
senior lending officer.  This committee has the authority to
approve loans up to $500,000.  The full Board of Directors
reviews on a monthly basis, all loans approved by individual
lenders and the officers loan committee.  All loan requests which
are either complex in nature or exceed $500,000 must be analyzed
and reviewed by loan administration and presented with
recommendation to the full Board of Directors for approval or
denial.

          PNB generally requires that loans secured by first
mortgages or real estate have loan-to-value ratios within
specified limits, ranging from 75% for loans secured by raw land
to 80% for improved property, with the exception of secondary
market programs which allow loan-to-value ratios as high as 95%. 
In addition, in some instances for qualified borrowers, private
mortgage insurance is available for purchase which allows loan-
to-value ratios to go as high as 95%.  PNB also makes loans
secured by second mortgages on real estate.  Adjustable rate
mortgage products, as well as conventional fixed-rate products,
are also available at PNB.

          PNB participates in various community development
programs and is an active lender in the Pennsylvania Housing
Finance Authority program in effort to meet its responsibilities
under the Community Reinvestment Act ("CRA").  PNB has
consistently been rated "outstanding" in meeting its obligations
under the CRA.

          Deposit Activities.

          PNB also offers a full range of deposit and personal
banking services insured by the Federal Deposit Insurance
Corporation ("FDIC"), including (i) commercial checking and small
business checking products, (ii) cash management services,
(iii) retirement accounts such as Individual Retirement Accounts
("IRA"), retail deposit services such as certificates of deposit,
money market accounts, saving accounts, a variety of checking
account products, automatic teller machines ("ATM's"), point of
sale and other electronic services such as automated clearing
house ("ACH") originations, and (iv) other personal miscellaneous
services such as safe deposit boxes, night depository services,
traveler's checks, merchant credit cards, direct deposit of
payroll and other checks, U.S. Savings Bonds, official bank
checks and money orders.  PNB offers credit cards as an agent
bank through another correspondent bank.

          The principal sources of funds for PNB are core
deposits (demand deposits, interest bearing transaction accounts,
money market accounts, savings deposits and certificate of
deposit).  These deposits are solicited from individuals,
businesses, non-profit entities, and government authorities. 
Substantially all of PNB's deposits are from the local market
areas surrounding each of its offices.  

Investment Portfolio and Activities

          PNB's investment portfolio has several objectives.  A
key objective is to provide a balance in PNB's asset mix of loans
and investments consistent with its liability structure, and to
assist in management of interest rate risk.  The investments
augment PNB's capital position in the risk-based capital formula,
providing the necessary liquidity to meet fluctuations in credit
demands of the community and also fluctuations in deposit levels. 
In addition, the portfolio provides collateral for pledging
against public funds, and a reasonable allowance for control of
tax liabilities.  Finally, the investment portfolio is designed
to provide income for PNB.  In view of the above objectives, the
portfolio is treated conservatively by management, and only
securities that pass that criteria are purchased.  

Competition

          PNB operates in a fairly competitive environment,
competing for deposits and loans with commercial banks, thrifts,
credit unions, and finance and  mortgage companies.  Some of
these competitors possess substantially greater financial
resources than those available to PNB.  Also, certain of these
institutions have significantly higher lending limits then PNB
and may provide various services for their customers, such as
trust services, mutual funds and annuities, which are not
presently available at PNB.

          PNB does not maintain data concerning its competitive
position within its market area and relies instead on data
produced by third parties such as the FDIC.  According to the
latest statistics available, June 30, 1996, PNB had a 34.3%
market share of deposits held by the Susquehanna County branches
of financial institutions.  On June 30, 1996, the Tunkhannock and
Meshoppen offices of PNB were branches of Mellon Bank.  Adding
those deposits to the deposits of the Nicholson office of PNB,
the total market share of deposits held in Wyoming County was
21.1%.  The relative position in Susquehanna County was number 2
of 6 commercial banks and in Wyoming County, the position was
number 3 of 5 commercial banks and other financial institutions. 

          Financial institutions generally compete on the basis
of rates and service.  PNB is subject to increasing competition
from credit unions, finance companies, and mortgage companies,
which may not be subject to the same regulatory restrictions and
taxations as commercial banks.  It is anticipated that recent
legislation such as the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 may increase those competitive
pressures by permitting additional entries into the existing
market.  

          While PNB will seek to remain competitive with interest
rates that it charges on its loans and offers on deposits, it
also believes that its success has been, and will continue to be,
due to its emphasis on community involvement, customer services,
and relationships.  With consolidation continuing in the
financial industry, and particularly in PNB's markets, smaller
profitable banks are gaining opportunities where larger
institutions exit markets that are only marginally profitable for
them.  It is the belief of the management of PNB that it can
profitably utilize  such opportunities to establish a local
community bank presence in those areas.

Seasonality

          Management does not feel that the deposits or the
business of PNB in general are seasonal in nature.  The deposits
may, however, vary with local and national economic conditions
but should not have a material effect on planning and policy
making.

Supervision and Regulation

          General.  Peoples Financial Services Corp. and its
subsidiary, Peoples National Bank of Susquehanna County, are
extensively regulated under federal and state law.  Generally,
these laws and regulations are intended to protect depositors,
not shareholders.  The following is a summary description of
certain provisions of certain laws which affect the regulation of
bank holding companies and banks.  This discussion is qualified
in its entirety by reference to applicable laws and regulations. 
Changes in such laws and regulations may have a material effect
on the business and prospects of the Company and PNB.

          The Company is a bank holding company within the
meaning of the Bank Holding Company Act of 1956, as amended, and
as such, it is subject to regulation, supervision, and
examination by the Federal Reserve Bank ("FRB").  The Company is
required to file annual and quarterly reports with the FRB and to
provide the FRB with such additional information as the FRB may
require.  The FRB also conducts examinations of the Company.

          With certain limited exceptions, the Company is
required to obtain prior approval from the FRB before acquiring
direct or indirect ownership or control of more than 5% of any
voting securities or substantially all of the assets of a bank or
bank holding company, or before merging or consolidating with
another bank holding company.  Additionally, with certain
exceptions, any person or entity proposing to acquire control
through direct or indirect ownership of 25% or more of any voting
securities of the Company is required to give 60 days written
notice of the acquisition to the FRB, which may prohibit the
transaction, and to publish notice to the public.

          Generally, a bank holding company may not engage in any
activities other than banking, managing or controlling its bank
and other authorized subsidiaries, and providing service to those
subsidiaries.  With prior approval of the FRB, the Company may
acquire more than 5% of the assets or outstanding shares of a
company engaging in non-bank activities determined by the FRB to
be closely related to the business of banking or of managing or
controlling banks.  The FRB provides expedited procedures for
expansion into approved categories of non-bank activities.  

          Subsidiary banks of a bank holding company are subject
to certain quantitative and qualitative restrictions on
extensions of credit to the bank holding company or its
subsidiaries, on investments in their securities and on the use
of their securities as collateral for loans to any borrower. 
These regulations and restrictions may limit the Company's
ability to obtain funds from PNB for its cash needs, including
funds for the payment of dividends, interest and operating
expenses.  Further, subject to certain exceptions, a bank holding
company and its subsidiaries are prohibited from engaging in
certain tie-in arrangements in connection with any extension of
credit, lease or sale of property or furnishing of services.  For
example, PNB may not generally require a customer to obtain other
services from itself or the Company, and may not require that a
customer promise not to obtain other services from a competitor
as a condition to an extension of credit to the customer.

          Under FRB policy, a bank holding company is expected to
act as a source of financial strength to its subsidiary banks and
to make capital injections into a troubled subsidiary bank, and
the FRB may charge the bank holding company with engaging in
unsafe and unsound practices for failure to commit resources to a
subsidiary bank when required.  A required capital injunction may
be called for at a time when the holding company does not have
the resources to provide it.  In addition, depository
institutions insured by the FDIC can be held liable for any
losses incurred by, or reasonably anticipated to be incurred by,
the FDIC in connection with the default of or assistance provided
to, a commonly controlled FDIC-insured depository institution. 
Accordingly, in the event that any insured subsidiary of the
Company causes a loss to the FDIC, other insured subsidiaries of
the Company could be required to compensate the FDIC by
reimbursing it for the estimated amount of such loss.  Such cross
guarantee liabilities generally are superior in priority to the
obligation of the depository institutions to its stockholders due
solely to their status as stockholders and obligations to other
affiliates.  

          As a Pennsylvania bank holding company, the Company is
subject to various restrictions on its activities as set forth in
Pennsylvania law, in addition to those restrictions set forth in
federal law.  See "Supervision and Regulation - Federal Bank
Holding Company Regulation and Structure."  Under Pennsylvania
law, a bank holding company that desires to acquire a bank or
bank holding company that has its principal place of business in
Pennsylvania must obtain permission from the Pennsylvania
Department of Banking.

          The Company's banking subsidiary is a federally-
chartered national banking association regulated by the Office of
the Comptroller of the Currency ("OCC").  The OCC may prohibit
the institution over which it has supervisory authority from
engaging in activities or investments that the agency believes
constitute unsafe or unsound banking practices.  Federal banking
regulators have extensive enforcement authority over the
institutions they regulate to prohibit or correct activities
which violate law, regulation or a regulatory agreement or which
are deemed to constitute unsafe or unsound practices.  

          Enforcement actions may include the appointment of a
conservator or receiver, the issuance of a cease and desist
order, the termination of deposit insurance, the imposition of
civil money penalties on the institution, its directors,
officers, employees and institution affiliated parties, the
issuance of directives to increase capital, the issuance of
formal and informal agreements, the removal of or restrictions on
directors, officers, employees and institution-affiliated
parties, and the enforcement of any such mechanisms through
restraining orders or any other court actions.

          PNB is subject to certain restrictions on extensions of
credit to executive officers, directors, principal shareholders
or any related interests of such persons which generally require
that such credit extensions be made on substantially the same
terms as are available to third persons dealing with PNB and not
involving more than the normal risk of repayment.  Other laws tie
the maximum amount which may be loaned to any one customer and
its related interests to capital levels of the bank.

          Under the Federal Deposit Insurance Corporation
Improvement Act of 1991, ("FDICIA"), each federal banking agency
is required to prescribe, by regulation, non-capital safety and
soundness standards for institutions under its authority.  The
federal banking agencies, including the OCC, have adopted
standards covering internal controls, information systems and
internal audit systems, loan documentation, credit underwriting,
interest rate exposure, asset growth, and compensation fees and
benefits.  Any institution which fails to meet these standards
may be required by the agency to develop a plan acceptable to the
agency, specifying the steps that the institutions will take to
meet the standards.  Failure to submit or implement such a plan
may subject the institution to regulatory sanctions.  The
Company, on behalf of PNB, believes that it meets substantially
all the standards which have been adopted.  FDICIA also imposed
new capital standards on insured depository institutions.  See
"Supervision and Regulation - Capital Requirements."

          Before establishing new branch offices, PNB must meet
certain minimum capital stock and surplus requirements and must
obtain OCC approval.

          Deposit Insurance.  As a FDIC member institution, PNB's
deposits are insured to a maximum of $100,000 per depositor
through the Bank Insurance Fund ("BIF"), administered by the
FDIC, and each institution is required to pay semi-annual deposit
insurance premium assessments to the FDIC.  The BIF assessment
rates have a range of zero cents to 27 cents for every $100 in
assessable deposits.  PNB is presently in the category of banks
that pay nothing for deposit insurance.

          While PNB presently pays no premiums for deposit
insurance, it is subject to assessments to pay the interest on
Financing Corporation ("FICO") bonds.  [FICO was created by
Congress to issue bonds to finance the resolution of failed
thrift institutions.  Prior to 1997, only thrift institutions
were subject to assessments to raise funds to pay the FICO bonds. 
On September 30, 1996, as part of the Omnibus Budget Act,
Congress enacted the Deposit Insurance Funds Act of 1996, which
recapitalized the Savings Association Insurance Fund ("SAIF") and
provided that BIF deposits would be subject to 1/5 of the
assessment to which SAIF deposits are subject for FICO bond
payments through 1999.  Beginning in 2000, BIF deposits and SAIF
deposits will be subject to the same assessment for FICO bonds.] 
The FICO assessment for PNB for 1998 is $.0126 for each $100 of
BIF deposits.

          Limitations on Dividends and Other Payments.  The
Company's current ability to pay dividends is largely dependent
upon the receipt of dividends from its banking subsidiary, PNB. 
Both federal and state laws impose restrictions on the ability of
the Company to pay dividends.  The FRB has issued a policy
statement which provides that, as a general matter, insured banks
and bank holding companies may pay dividends only out of prior
operating earnings.  Under the National Bank Act, a national
bank, such as PNB, may pay dividends only out of the current
year's net profits and the net profits of the last two years.  In
addition to these specific restrictions, bank regulatory
agencies, in general, also have the ability to prohibit proposed
dividends by a financial institution which would otherwise be
permitted under applicable regulations if the regulatory body
determines that such distribution would constitute an unsafe or
unsound practice.  

          Capital Requirements.  The federal banking regulators
have adopted certain risk-based capital guidelines to assist in
the assessment of the capital adequacy of a banking
organization's operations for both transactions reported on the
balance sheet as assets and transactions, such as letters of
credit, and recourse agreements, which are recorded as off
balance sheet items.  Under these guidelines, nominal dollar
amounts of assets and credit equivalent amounts of off balance
sheet items are multiplied by one of several risk adjustment
percentages, which range from 0% for assets with low credit risk,
such as certain US Treasury securities, to 100% for assets with
relatively high credit risk, such as business loans.  

          A banking organization's risk based capital ratios are
obtained by dividing its qualifying capital by its total risk
adjusted assets.  The regulators measure risk-adjusted assets,
which include off balance sheet items, against both total
qualifying capital (the sum of Tier 1 capital and limited amounts
of Tier 2 capital) and Tier 1 capital.  "Tier 1", or core
capital, includes common equity, perpetual preferred stock
(excluding auction rate issues) and minority interest in equity
accounts of consolidated subsidiaries, less goodwill and other
intangibles, subject to certain exceptions.  "Tier 2", or
supplementary capital, includes, among other things, limited life
preferred stock, hybrid capital instruments, mandatory
convertible securities, qualifying subordinated debt, and the
allowance for loan and lease losses, subject to certain
limitations and less restricted deductions.  The inclusion of
elements of Tier 2 capital is subject to certain other
requirements and limitations of the federal banking agencies. 
Banks and bank holding companies subject to the risk-based
capital guidelines are required to maintain a ratio of Tier 1
capital to risk-weighted assets of at least 4% and a ratio of
total capital to risk-weighted assets of at least 8%.  The
appropriate regulatory authority may set higher capital
requirements when particular circumstances warrant.  As of
December 31, 1997, PNB's ratio of Tier 1 capital to risk-weighted
assets stood at 16.57% and its ratio of total capital to risk-
weighted assets stood at 17.82%.  In addition to risk based
capital, banks and bank holding companies are required to
maintain a minimum amount of Tier 1 capital to total assets,
referred to as the leverage capital ratio, of at least 3%.  As of
December 31, 1997, PNB's leverage capital ratio was 9.20%.

          In August 1995 and May 1996, the federal banking
agencies adopted final regulations specifying that the agencies
will include, in their evaluations of a bank's capital adequacy,
an assessment of the bank's interest rate risk ("IRR") exposure. 
The standards for measuring the adequacy and effectiveness of a
banking organization's IRR management includes a measurement of
Board of Directors and senior management oversight, and a
determination of whether a banking organization's procedures for
comprehensive risk management are appropriate to the
circumstances of the specific banking organization.  PNB has
internal IRR models that are used to measure and monitor IRR.  In
addition, an outside source also assesses IRR using its model on
a quarterly basis.  Additionally, the regulatory agencies have
been assessing IRR on an informal basis for several years.  For
these reasons, the Company does not expect the addition of IRR
evaluation to the agencies' capital guidelines to result in
significant changes in capital requirements for PNB.  

          Failure to meet applicable capital guidelines could
subject a banking organization to a variety of enforcement
actions including limitations on its ability to pay dividends,
the issuance by the applicable regulatory authority of a capital
directive to increase capital and, in the case of depository
institutions, the termination of deposit insurance by the FDIC,
as well as to the measures described under "Federal Deposit
Insurance Corporation Improvement Act of 1991" below, as
applicable to under capitalized institutions.  In addition,
future changes in regulations or practices could further reduce
the amount of capital recognized for purposes of capital
adequacy.  Such a change could affect the ability of PNB to grow
and could restrict the amount of profits, if any, available for
the payment of dividends to the Company. 

          Federal Deposit Insurance Corporation Improvement Act
of 1991.  In December 1991, Congress enacted FDICIA, which
substantially revised the bank regulatory and funding provisions
of the Federal Deposit Insurance Act and made significant
revisions to several other federal banking statutes.  FDICIA
provides for, among other things, (i) publicly available annual
financial condition and management reports for financial
institutions, including audits by independent accountants,
(ii) the establishment of uniform accounting standards by federal
banking agencies, (iii) the establishment of a "prompt corrective
action" system of regulatory supervision and intervention, based
on capitalization levels, with more scrutiny and restrictions
placed on depository institutions with lower levels of capital,
(iv) additional grounds for the appointment of a conservator or
receiver, and (v) restrictions or prohibitions on accepting
brokered deposits, except for institutions which significantly
exceed minimum capital requirements.  FDICIA also provides for
increased funding of the FDIC insurance funds and the
implementation of risk based premiums.  

          A central feature of FDICIA is the requirement that the
federal banking agencies take "prompt corrective action" with
respect to depository institutions that do not meet minimum
capital requirements.  Pursuant to FDICIA, the federal bank
regulatory authorities have adopted regulations setting forth a
five-tiered system for measuring the capital adequacy of the
depository institutions that they supervise.  Under these
regulations, a depository institution is classified in one of the
following capital categories; "well capitalized," "adequately
capitalized," "under capitalized," "significantly
undercapitalized," and "critically undercapitalized."  PNB is
currently classified as "well capitalized."  An institution may
be deemed by the regulators to be in a capitalization category
that is lower than is indicated by its actual capital position
if, among other things, it receives an unsatisfactory examination
rating with respect to asset quality, management, earnings or
liquidity.

          FDICIA generally prohibits a depository institution
from making any capital distribution (including payment of a cash
dividend) or paying any management fees to its holding company if
the depository institution would thereafter be undercapitalized. 
Undercapitalized depository institutions are subject to growth
limitations and are required to submit capital restoration plans. 
If a depository fails to submit an acceptable plan, it is treated
as if it is significantly undercapitalized.  Significantly
undercapitalized depository institutions may be subject to a
number of other requirements and restrictions, including orders
to sell sufficient voting stock to become adequately capitalized,
requirements to reduce total assets and stop accepting deposits
from correspondent banks.  Critically undercapitalized
institutions are subject to the appointment of a receiver or
conservator, generally within 90 days of the date such
institution is determined to be critically under capitalized.

          FDICIA provides the federal banking agencies with
significantly expanded powers to take enforcement action against
institutions which fail to comply with capital or other
standards.  Such actions may include the termination of deposit
insurance by the FDIC or the appointment of a receiver or
conservator for the institution.  FDICIA also limits the
circumstances under which the FDIC is permitted to provide
financial assistance to an insured institution before appointment
of a conservator or receiver.

          Interstate Banking Legislation.  The Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 was
enacted into law on September 29, 1994.  The law provides that,
among other things, substantially all state law barriers to the
acquisition of banks by out-of-state bank holding companies were
eliminated effective September 29, 1995.  The law also permits
interstate branching by banks effective as of June 1, 1997,
subject to the ability of states to opt-out completely or to set
an earlier effective date.

          Monetary Policy.  The earnings of a bank holding
company are affected by the policies of regulatory authorities,
including the FRB, in connection with the FRB's regulation of the
money supply.  Various methods employed by the FRB are open
market operations in United States Government securities, changes
in the discount rate on member bank borrowings and changes in
reserve requirements against member bank deposits.  These methods
are used in varying combinations to influence overall growth and
distribution of bank loans, investments, and deposits, and their
use may also affect interest rates charged on loans or paid on
deposits.  The monetary policies of the FRB have had a
significant effect on the operating results of commercial banks
in the past and are expected to do so in the future.  

Employees

          As of December 31, 1997, PNB had the equivalent of 76
full-time employees.  None of its employees are represented by a
collective bargaining unit.  PNB considers relations with its
employees to be good.

Year 2000 Compliance

     Like any other company, advances and changes in available
technology can significantly impact the business and operations
of PNB.  For example, a challenging problem exists as many
computer systems worldwide do not have the capability of
recognizing the year 2000 or years thereafter.  PNB has conducted
a comprehensive review of its computer systems to identify the
systems that could be affected by the "Year 2000" issue.  PNB is
utilizing both internal and external resources to identify,
correct, and reprogram all systems for year 2000 compliance.  It
is anticipated that all critical applications will be tested by
December 31, 1998.  To date, confirmations have been received
from all of PNB's primary vendors and management presently does
not foresee any problems meeting the December 31 testing
deadline.  Management has assessed and budgeted the 1998 costs
for year 2000 compliance to be $2,000.00.
<PAGE>
Item 2.  Financial Information

          The following selected data are derived from should be
read in conjunction with the Company's consolidated financial
statements, related notes and other financial information
included herein and Management's Discussion and Analysis of
Financial Condition and Results of Operations included herein.

<TABLE>
<CAPTION>
                         SELECTED FINANCIAL DATA

(In thousands of dollars, except per-share data)

                                                                        Year Ended December 31,
                                                            1997       1996      1995      1994     1993
<S>                                                       <C>       <C>        <C>      <C>       <C>
RESULTS FROM OPERATIONS
Interest Income                                           $15,725    $13,446   $12,730  $11,271   $10,442
Interest expense                                            7,914      6,880     6,373    5,090     4,900

Net Interest Income                                         7,811      6,566     6,357    6,181     5,542
Provision for Loan Loss                                       130        220       450      265       270

Net Interest Income after Provision for Loan Loss           7,681      6,346     5,907    5,916     5,272
Non-Interest Income                                         1,138        824       712      590       665
Non-Interest Expense                                        4,994      3,603     3,293    3,415     3,249

Income Before Income Taxes                                  3,825      3,567     3,326    3,091     2,688
Applicable Income Taxes                                       814        851       838      764       613

Net Income before effect of accounting change               3,011      2,716     2,487    2,328     2,075
Effect of accounting change                                     0          0         0        0         0

Net Income                                                 $3,011     $2,716    $2,487   $2,328    $2,075
                                                          =======    =======   =======   ======    ======

FINANCIAL CONDITION
Total Assets                                             $228,720   $186,159  $170,181 $157,573  $144,044
Investment securities (including
  available for sale)                                      88,149     72,131    66,383   58,227    51,531
Loans, net of unearned income                             126,786    107,150    97,951   92,543    83,859
Allowance for loan losses                                   1,676      1,664     1,488    1,484     1,248
Deposits                                                  193,592    156,930   147,168  135,897   124,354
Stockholders' Equity                                       24,642     21,714    20,351   16,899    16,543

PER SHARE DATA
Net Income                                                  $3.44      $3.06     $2.79*   $2.61*    $2.33*
Dividends                                                     .84        .68       .50      .48       .43
Stockholder's Equity                                        28.16      24.46     22.84    18.97     18.57

PERFORMANCE RATIOS                             
Return on average assets                                     1.38%      1.52%     1.51%    1.48%     1.47%
Return on average equity                                    12.20      12.75     12.81    13.24     13.23
Net interest margin on average earning assets                4.19       4.16      4.26     4.30      4.23
Efficiency (non-interest expense/(net
  interest income + non-interest income))                   55.81      48.76     46.58    50.44     52.34

LIQUIDITY AND CAPITAL RATIOS
Stockholder                                                 10.77%     11.66%    11.96%   10.72%    11.48%
Risk based:
Tier 1 Capital                                              16.57      20.82     21.44    20.40     19.23
Total Capital                                               17.82      22.07     22.69    21.65     20.48
Dividends (% net income)                                    24.42      22.23     19.94    18.35     18.60
Loans to deposits                                           64.63      67.22     67.28    67.01     66.43

ASSET QUALITY RATIOS
Allowance for loan losses to total loans                     1.32%      1.55%     1.54%    1.60%     1.48%
Allowance for loan loses to non-performing loans           158.49      98.97    106.79   110.19     66.29
Net loan charge-offs to average loans                         .09        .04       .46      .03       .22
____________
</TABLE>

*    Restated to reflect the 3-for-2-stock split effected on
     May 31, 1995.
<PAGE>
             Management's Discussion and Analysis of
   Consolidated Financial Condition and Results of Operations

          The following discussion is should be read in
conjunction with the consolidated financial statements and notes
included herein.

Overview

          In the past six years, the Company has grown steadily
in total assets from $133,933,047 in 1992 to $228,719,915 at
year-end 1997, an increase of almost 71%.  In December 1992, a
branch office was established in Nicholson, Wyoming County which
was the first office of PNB to be located outside of Susquehanna
County.  In March 1997, PNB purchased the real estate, furniture
and equipment and most of the deposits of the Tunkhannock and
Meshoppen offices of Mellon Bank.  These offices are also located
in Wyoming County.  The premium of 10.125% of the deposits
purchased in this transaction amounted to nearly $4 million and
will be written off as an expense over 180 months.  

          Despite 1997 being a year in which deposits were
difficult to retain, the branch purchases caused assets to
increase almost 23% to end the year at $228,720,000.  The growth
from 1995 to 1996 was $15,978,000, or 9.4%.  Asset growth has
been steady and generally above that of peers.  The growth has
been attained even though the market area has not grown at the
same pace.  Growth was attained, in part, because of merger
activity which created changes in the local market.

          Loan growth accelerated in 1997 as market coverage area
increased and was up almost 19% over year-end 1996.  The loan
growth in 1996 was 10.8% over 1995.  Net income rose 10.9% in
1997 to $3,011,259 from $2,716,037 in 1996.  This increase is in
addition to an increase of 9.2% from 1995 to 1996.  Year-end 1995
net was $$2,487,220 compared to the December 31, 1996 net income
figure of $2,716,037.  Return on average assets was down in 1997
to 1.38%.  This was due to the branch purchases which raised
average assets significantly.  Return on average assets was 1.52%
for 1996 and 1995.  Return on equity remained steady in 1995 and
1996 at 12.81% and 12.75% respectively, and declined slightly in
1997 to 12.20%. 

          Dividends on common stock rose to $.84 in 1997 from
$.68 in 1996, an increase of 23.5%.  The increase of dividends
from 1995 to 1996 was 36.0% over the 1995 dividend rate of $.50
per share.  As a percent of income, dividends rose from 19.9% in
1995, to 22.2% in 1996, to 24.4% in 1997.  As of December 31,
1993, PNB adopted a change in accounting method, "Accounting for
Investment Securities" whereby certain security investments may
be designated "available for sale."  Any gain or loss in fair
market value must be shown as an adjustment to equity, net of
taxes.  Because of general market conditions at year-end in each
of the past three years, this accounting method caused the equity
to adjust to those conditions.  In 1995, the effect was negative
$82,890, in 1996 it was again negative $345,849, but at year-end
1997, there was a positive adjustment in the amount of $370,569. 
Except for this equity adjustment, retained earnings continue to
be the major source of increases in stockholders' equity.

Net Interest Income

          Net interest income is the chief component of the
Company's earnings, and it consists of the excess of interest
income from earning assets less the expense of interest bearing
liabilities.  Earning assets consist primarily of loans and
investments, while deposits and short-term borrowings represent
the major portion of interest bearing liabilities.  Changes in
the volume and mix of these assets and liabilities, as well as
changes in the yields earned and rates paid are determinants of
the changes in net interest income.  The net interest margin is
calculated as tax-equivalent net interest income (income plus the
tax savings from tax-exempt loans and investments) divided by
average earning assets and represents the Company's net yield on
its earning assets.

          Net interest income was $7,810,667 in 1997, $6,566,175
in 1996, and $6,356,861 in 1995.  These levels represent
increases of $1,244,492 over 1996, or 19%, and $209,314, or 3.3%,
over 1995.  On tax equivalent basis, the respective net interest
incomes for 1997, 1996 and 1995 were respectively $8,620,000,
$7,163,000 and $6,801,000.

          In 1997, the growth in net interest income accelerated
because of the growth in loans outstanding and in investments. 
With good economic conditions and the increase in market area
this trend is expected to continue.  Net interest margin,
however, has come under pressure because of a sustained flat
treasury yield curve and increased competition for loans.  Net
interest margin on a tax equivalent basis increased slightly to
4.19% in 1997 from 4.16% in 1996.  In 1995, the net interest
margin was 4.26%.

          Average earning assets were $205,994,000 in 1997, up
19.5% from $172,381,000 in 1996 which were up 8% from
$159,518,000 in 1995.  Earning assets made up 94.9% of average
assets in 1997 compared to 96.7% in 1996 and 97.1% in 1995. 
Total interest income on a tax equivalent basis, was $16,534,000
in 1997, up $2,491,000 or 17.7% from $14,043,000 in 1996 which
was up $869,000 or 6.67% over 1995.  Tax equivalent yields have
declined over the past two years from 8.26% in 1995, 8.15% in
1996, to 8.03% in 1997.

          Average interest bearing liabilities were $174,743,000
in 1997, up 22.6% from $142,583 in 1996 which were up 7.7% from
$132,390,000 in 1995.  These funds made up 80.0% of average
assets in 1997 compared to 80.1% in 1996 and 80.6% in 1995. 
Total interest expense was $7,914,000 in 1997 up $1,034,000 or
15% from $6,880,000 in 1996 which was 8% higher than the 1995
level.  

          During 1995, 1996, and 1997, certificates of deposit
were the major source of funds for the company, with money market
deposit accounts the next biggest source, followed by savings
accounts, non-interest bearing demand deposits and interest
bearing demand deposits.  Interest rates tend to determine the
structure as customers seeking higher returns deposit their
discretionary funds in those investments which pay the highest
rates.  Yields on interest bearing accounts have trended lower
the past three years with 1995 at 4.81%, 1996 at 4.83% and 1997
at 4.53%.  This pattern closely resembles US Treasury yields on
maturities of up to five years because that is generally the
manner in which deposit liabilities are priced.  The past three
years in particular have seen a tremendous amount of interest,
followed by investment in, the equity markets via mutual funds. 
Mutual funds have become significant competition for bank
deposits.  

          Tax equivalent interest income on loans increased by
941,000 in 1997 over 1996 or 10.2%, while average loans increased
$11,594,000 or 11.3%.  This reflects a slight decline in interest
rates which were economic and competitive in nature.  In
comparing 1996 to 1995 tax equivalent loan interest increased
$575,000 or 6.7%, while average loans increased $7,146,000 or
7.5% suggesting the trend mentioned earlier.  Tax equivalent
yields on loans mirror this trend.  In 1995, this yield was 9.05%
while it was 8.98% in 1996 and 8.90% in 1997.  

          The following table illustrates average balances of
assets, liabilities and stockholder equity as well as the related
income and expense for each item and the average yields and cost
for the years 1995 through 1997.

<TABLE>
<CAPTION>
                                     AVERAGE BALANCE SHEETS AND YIELD ANALYSIS
(In thousands)
                                      1997                             1996                          1995
                           Average             Yield/       Average            Yield/     Average             Yield/
                           Balance   Interest   Rate        Balance  Interest   Rate      Balance   Interest   Rate
<S>                       <C>        <C>       <C>          <C>       <C>      <C>        <C>
ASSETS
Loans:
Real Estate               $75,642    $6,595     8.72%       $67,887   $5,953    8.77%     $63,824    $5,593    8.76%
  Mortgage
  Construction
  Installment              18,303     1,746     9.54%        13,416    1,289    9.61%      12,146     1,116    9.19%
Commercial                 13,809     1,315     9.52%        13,943    1,419   10.18%      14,328     1,513   10.56%
Tax Exempt                  6,028       459     7.61%         6,911      524    7.58%       4,744       391    8.24%
Other Loans                   337        36    10.68%           378       25    6.61%         337        22    6.53%
                                                                 
Total Loans               114,119    10,151     8.90%       102,525    9,210    8.98%      95,379     8,635    9.05%

Investment securities
  available for sale:
Taxable                    64,978     4,316     6.64%        52,464    3,546    6.76%      51,073     3,547    6.94%
Non-taxable                24,753     1,947     7.87%        16,702    1,250    7.48%      12,025       932    7.75%
                                             
Total securities                             
  available for sale       89,731     6,263     6.98%        69,166    4,796    6.93%      63,098     4,479    7.10%
 
Investment securities
  held to maturity:
Taxable
Non-Taxable 
                                             
Total securities 
  held to maturity:
                                             
Time deposits with                           
  other banks                423        27      6.38%           22         1    4.55%         99          6    6.06%
Federal funds sold         1,721        93      5.40%          668        36    5.39%        942         54    5.73%

Total Earning Assets     205,994    16,534      8.03%      172,381    14,043    8.15%    159,518     13,174    8.26%
                                             
Less: Allowance for                          
  loan losses             (1,694)                           (1,575)                       (1,418)
Cash and due from banks    4,089                             2,915                         2,969
                               
Premises and Equipment,                      
  net                      3,459                             2,617                         1,813
Other Assets               5,320                             1,574                         1,360
                                             
Total Assets            $217,168                          $177,912                      $164,242
                        ========                          ========                      ========
LIABILITIES AND
STOCKHOLDERS EQUITY

Interest-bearing        
  demand deposits        $13,379       230      1.72%       $7,748       135     1.74%    $7,834        153    1.95% 
Regular savings 
  deposits                28,870       828      2.87%       23,154       648     2.80%    23,806        662    2.78%     

Money Market savings 
  deposits                40,529     1,760      4.34%       29,015     1,389     4.79%    23,611      1,215    5.15%
Time deposits             88,908     4,920      5.53%       80,965     4,627     5.71%    74,840      4,210    5.63%
                         
Total Interest-Bearing   171,686     7,738      4.51%      140,882     6,799     4.83%   130,091      6,240    4.80%
Deposits
Other borrowings           3,057       176      5.76%        1,701        81     4.76%     2,299        133    5.79%

Total Interest-Bearing   174,743     7,914      4.53%      142,583     6,880     4.83%   132,390      6,373    4.81%
                         
Liabilities              
Net Interest Spread                  8,620      3.50%                  7,163     3.32%                6,801    3.45%
                                     =====      ====                   =====     ====                 =====    ====

Non-interest bearing      
  demand deposits         18,735                            13,822                        12,176
Accrued expenses and  
  other liabilities          974                               994                           913           
Stockholders' Equity       22,716                           20,513                        18,763
                         
Total Liabilities and
  Stockholders' Equity   $217,168                         $177,912                      $164,242
                         ========                         ========                      ========

Net interest income/
  earning assets                                8.03%                            8.15%                         8.26%
Net interest expense/
  earning assets                                3.84%                            3.99%                         4.00%
assets                   
                                                                       
Net interest margin                             4.19%                            4.16%                         4.26%
                                                =====                            =====                         =====
</TABLE>

1.   Loan fee income is included in interest income for each loan
     category and yields are stated to include all income earned.
     
2.   Balances of non-accrual loans and related income have been
     included for computational purposes.

3.   Tax-exempt income has been converted to a tax equivalent
     basis by using an incremental rate of 34%.
<PAGE>
     The following table describes the impact comparison on net
interest income resulting from changes in average balances and
rates.

<TABLE>
<CAPTION>
RATE AND VOLUME ANALYSIS
(In thousands)
                                                          Years-ended December 31,
                                              1997 to 1996                        1996 to 1995

                                       Increase    Change    Due to         Increase    Change     Due to
                                      (Decrease)    Rate     Volume         (Decrease)   Rate      Volume
<S>                                   <C>          <C>       <C>            <C>         <C>        <C>
INTEREST INCOME:
Loans:
Real Estate                            $642         $(39)     $681           $360          $5        $355
Consumer                                457          (13)      470            173          56         117
Commercial                             (104)         (90)      (14)           (94)        (53)        (41)
Tax-exempt                              (65)           2       (67)           133         (46)        179

    Other Loans                          11           14        (3)             3           0           3
    Total Loans                         941         (126)    1,067                        (38)        613
     
Investment securities available
  for sale:
Taxable                                 770          (76)      846             (1)        (98)         97
Non-taxable                             697           94       603            318         (44)        362

Total securities available for sale   1,467           18     1,449            317        (142)        459

Total securities held to maturity         0            0         0              0           0           0

Time deposits with other banks           26            8        18             (5)         (0)         (5)
Federal Funds sold                       57            0        57            (18)         (2)        (16)

Total Interest Income                 2,491         (100)    2,591            869        (182)      1,051

INTEREST EXPENSE:
Interest-bearing demand deposits         95           (3)       98            (18)        (16)         (2)
Regular savings deposits                180           20       160            (14)          4         (18)
Money Market Savings deposits           371         (180)      551            174        (104)        278
Time deposits                           293         (161)      454            417          72         345

Total Interest-Bearing Deposits         939         (324)    1,263            559         (44)        603
Other borrowings                         95           30        65            (52)        (17)        (35)

Total Interest Expense                1,034         (294)    1,328            507         (61)        568

Net Interest Income                  $1,457         $194    $1,263           $362       $(121)       $483

</TABLE>

(1)  For the purpose of this report, the analyses includes
     non-accruing loans of average balances of $964,315 in 1997
     and $1,423,875 in 1996 in the Real Estate portfolio.

(2)  Loan fees are included in the above numbers.  In 1997, the
     loan fees collected totaled $196,992.  In 1996, the loan
     fees collected totaled $195,769.26.

(3)  Tax-exempt income has been converted to a tax-equivalent
     basis using an incremental rate of 34%.


Non-Interest Income

          Total non-interest income was $1,137,871 in 1997, which
was up 38.1% over the 1996 figure of $823,816.  Continuing the
trend from 1996 being up 15.7% or $111,617 from year-end 1995. 
Service charges and other customer service fees were the
significant contributors to growth in non-interest income the
past two years.  At $891,489 at year-end 1997, this number was up
$209,486 over the previous year or 30.0%.  Fees were increased in
1997 and volume was also increased because of the deposits
purchased in the Wyoming County acquisitions.  The trend was also
up in 1996 over 1995 with service charges on deposit accounts and
customer fees at $682,003 at year-end 1996 up $66,674, or 10.8%
over year-end 1995.  Another significant component to non-
interest income is gains on investment securities sold.  In 1997,
this figure was $217,104 compared to a gain of $119,913 in 1996
and a gain of $60,194 in 1995.

Non-Interest Expense

          Non-interest expense took a significant jump in 1997 as
expenses involved in branch purchases and expenses involved in
new computer software and hardware hit the income statement. 
Total non-interest expense in 1997 was $4,993,660 compared to
$3,603,126.  The increase of $1,390,534 was 38.6% higher than
year-end 1996.  In comparison year-end 1996 at $3,603,126 was
9.4% or $309,642 over 1995.

          The largest component by far in non-interest expense is
salaries and benefits.  At year-end 1997, this figure was
$2,282,412 which was up $491,932 or 27.5% over 1996.  This
increase is reflective of the increases in staff which came about
with the purchase of the two Wyoming County offices.  Another,
although less significant factor, was the increase in minimum
wage legislation.  Although the bank's entry levels were always
above the prevailing minimum wage, it was felt that increases
were necessary to keep those levels at approximately the same
percentage in excess of minimum as they were previously.  The
increase in salaries and benefits in 1996 over 1995 was 11.3% or
$491,932.  Growth in all areas of the bank and the commitment of
the bank to recognize employees for their efforts contributes to
the increases in salaries and benefits.  Average assets per
employee increased from 2,737,000 in 1995 to 2,870,000 in 1996
and decreased to 2,710,000 in 1997.

          Occupancy and equipment expenses also showed sharp
increases in 1997 over 1996 because of the purchases of the
Wyoming County offices, the computer and equipment purchases and
upgrades and the costs associated with the first full year of
operation in the expanded Administrative/Operations building. 
This figure was up almost 50% at $712,389 compared to year-end
1996 at $476,983.  Year-end 1995 was $394,660 so 1996 was 20.9%
over 1995.  Other operating expenses were $1,998,859 in 1997
compared to year-end 1996 at $1,335,663.  This is an increase of
$663,196 or 49.7%.  Professional fees, computer services and
supplies, advertising and promotional fees were up significantly
and the increases can generally be traced to the branch
acquisitions and to computer purchases and upgrades and the costs
associated with these changes.  In comparison, the difference
between 1995 and 1996 on other operating expenses was 3.5% or
only an increase of $45,217.  Although depreciation will remain
high because of the purchase of fixed assets it is expected that
non-interest expense should level off in the future because a
significant volume of expense in 1997 was one-time only. 

Income Taxes

          Income tax expense was $813,619 in 1997, $850,828 in
1996 and $838,356 in 1995.  The 1997 expense was $37,209 lower
than 1996 or 4.4% because of the significant increase in tax-free
income received in 1997.  The increase of $12,472 in income taxes
from 1995 to 1996 was less than 1.5%.  In the period 1995 through
1997, net income increased over $524,000 or 21%, while tax
expense actually decreased $24,737.  This is directly
attributable to the increased investment in tax-free securities. 

Securities Portfolio

          The following table presents the composition of the
securities portfolio for the periods indicated:

<TABLE>
<CAPTION>
           Investment Securities Portfolio Composition

(In thousands)                                     1997      1996      1995

<S>                                              <C>       <C>       <C>
US Government Treasury and Agency Obligations    $32,513   $22,192   $ 18,567
State and Municipal Obligations                   29,474    20,167     16,622
Mortgage-Backed Securities                        19,215    23,184     26,318
Other Securities                                   7,936*    6,588      4,778

Total Investment Securities                      $89,138   $72,131    $66,285
                                                 =======   =======    =======

Available For Sale (Fair Value)                  $89,138   $72,131    $66,285
Held to Maturity (Amortized Cost)                      0         0          0

Total Investment Securities                      $89,138   $72,131    $66,285
                                                 =======   =======    =======
<FN>
     *Includes CD's with other banks
</TABLE>

          Total balances in the investment portfolio at year-end
were $88,149,000 in 1997, $72,131,000 in 1996, and $66,285,000 in
1995.  The portfolio expanded by 22.2% in 1997 generally because
of the purchase of the deposit liabilities of the two new Wyoming
County branches.  while growing the loan portfolio was the
desired approach to utilize the new deposits, it was understood
that doing so would take some time.  In the meantime, use of
investments was the approach taken to provide maximum interest
rate spread opportunities.  Maturities were chosen to best fit
the anticipated growth in the loan portfolio.  Investments
purchased in the three years reflect the Company's strategic goal
of quality, liquidity, and income production.  Emphasizing this
strategy, the investment portfolio components showing growth are
US Government Treasury and agency obligations and State and
Municipal obligations.  US Treasuries and Agencies generally
supply the liquidity needs and states and municipal obligations
provide more of the tax equivalent income needs.  Rates have been
stable and the treasury yield curve flatter than normal in the
past three years as inflation fears have not been prevalent. 
During such times it is difficult to attain interest rate
spreads.  Yield gains by maturity extensions are not available as
well as ill advised given relatively short deposit maturities
which make up a significant part of liabilities.  Tax-free
investments have shown a greater tax-equivalent rate spread than
most other investments during this three-year period and because
of that, more of these investments have been purchased for the
portfolio.  Increased tax-free investment income has resulted in
less federal income taxes being paid in 1997 than in 1995.  There
has been a general decline in interest rates in 1997 which has a
positive effect on the market value of the investment portfolio
and at year-end, the portfolio showed an appreciation of
$561,468.  The total portfolio had an average maturity of
7.57 years on December 31, 1997 compared with 9.76 years on
December 31, 1996 and 8.93 years on December 31, 1995.  

          The Financial Accounting Standards Board issued
Statement of Financial Accounting Standard no. 115, "Accounting
for Certain Investments in Debt and Equity Securities" ("SFAS
115") in 1993, requiring securities to be classified according to
a bank's ability and intent to hold securities until maturity. 
Any instruments for which a company wishes to reserve the right
to sell prior to maturity must be classified as available for
sale, and their carrying values must be regularly adjusted to
fair value with an offsetting adjustment, net of taxes, to
stockholders' equity.  This change was implemented on
December 31, 1993.  In order to provide the maximum portfolio
flexibility, 100% of the portfolio has been designated as
available for sale for the years 1997, 1996, and 1995.  Many
factors influence interest rates and, in turn, the fair value or
market value of the portfolio.  These changes were reflected in
net of taxes adjustments to stockholders' equity on a quarterly
basis.  At year-end 1997, there was a positive adjustment of
$370,669 while year-end 1996 saw a negative adjustment of
$345,849 and there also was a negative adjustment of $82,890 at
year-end 1995.  

          For the types of investment purchases at PNB, interest
rate risk is considered to be moderate and price fluctuations can
be compared to US Treasury securities with similar weighted
average maturities.  There is an active and well-established
secondary market for all portfolio investments.  

          The following table sets forth the maturity
distribution and weighted average yields of the investment
portfolio as of December 31, 1997.  The weighted average yields
are calculated on the basis of carrying value of the securities
and their related interest income adjusted for the amortization
of premium and accretion of discount.  Yields on tax-exempt
securities have been computed on a tax equivalent basis assuming
a federal tax rate of 34%.

<TABLE>
<CAPTION>
             MATURITY OF THE INVESTMENT SECURITIES PORTFOLIO

                            1 Year or Less        1-5 Years        5-10 Years         Over 10 Years         Totals
(In thousands)                                 
                           Book     Average   Book    Average    Book    Average    Book     Average    Book    Average
                           Value     Yield    Value    Yield     Value    Yield     Value     Yield     Value    Yield

<S>                       <C>       <C>      <C>      <C>       <C>      <C>       <C>      <C>        <C>      <C>
HELD TO MATURITY     
US Government Treasury    $1,000     5.93%   $5,471    6.39%    $1,000    6.25%        $0       0%     $11,471   16.34%
US Government Agency           0        0%    8,395    6.58%     9,670    7.36%     2,812    7.27%      20,877    7.03%
State, County & Municipal
  Obligations              1,370     7.21%    6,976    7.93%     3,953    7.32%    16,592    7.92%      28,891    7.81%
Mortgage-backed 
  Securities                   0        0%    1,624    6.87%       550    6.23%    17,136    6.60%      19,310    6.61%
Equity Securities          1,853     6.22%      500    6.50%     1,998    6.39%     3.679    6.50%       8,030    6.41%
                          
Total Available for Sale  $4,223     6.47%  $26,966    6.88%   $17,171    7.14%   $40,219    7.18%     $88,579    7.05%
</TABLE>

Loan Portfolio

          Total loans outstanding on December 31, 1997 were
$126,786,000 compared with $107,150,000 on the same date in 1996
and $97,951,000 in 1995.  The loan portfolio represented 55.4% of
the total assets on December 31, 1997 compared with 57.6% on both
December 31, 1996 and December 31, 1995.  

          PNB's loan portfolio is composed of commercial loans,
residential loans, and consumer loans.  The commercial portfolio
represents 11.7% of the total portfolio and is comprised of lines
of credit, local municipal loans, equipment loans, and notes for
various purposes, including working capital.  A significant
portion of commercial loans are secured by real estate and are
carried in the real estate mortgage component of the portfolio. 
This combined component represents 75.9% of the total portfolio. 
Only a minimal number of mortgages have a loan to value ratio
greater than 80%.  Private mortgage insurance is required for
those loans with higher loan to value ratios.  At year-end 1997,
all mortgages were kept "in house" although a percentage of those
portfolio loans have been underwritten in anticipation of future
sale.  The consumer portfolio makes up the remaining 12.6% of the
portfolio.  Included in the consumer portfolio are direct
installment loans for purposes such as vehicle purchases, debt
consolidations, home improvements, and other personal needs. 
Home equity loans are also a part of the consumer portfolio.  PNB
does not engage in foreign lending nor does it engage in
speculative real estate and land development lending.  The
primary areas of lending are Susquehanna and Wyoming Counties,
Pennsylvania and these areas which border those counties yet
gravitate by trade to Susquehanna and Wyoming Counties.

          Some risk is involved in all types of lending.  PNB,
however, attempts to manage that risk to minimize potential
losses on its portfolio.  Concentration is considered minimal
with the exception of real estate mortgages which include
commercial real estate.  Although property values have declined
slightly, risk is not considered to be substantial unless there
were to be major economic crisis in the future.  Financial
analysis is used as a tool to identify potential risk in
commercial loans.  Residential loans are generally well secured. 
Standard debt to income ratios are adhered to, and loan to value
ratios greater than 80% require Private Mortgage Insurance again
reducing risk.  A large segment of the consumer portfolio is
secured by motor vehicles.  The use of debt to income ratios and
credit bureau reports assist in the approval process.  Delinquent
accounts are worked quickly to minimize losses in all components
in the loan portfolio.  

          The following table summarizes the composition of the
loan portfolio at the periods indicated:

<TABLE>
<CAPTION>
LOAN PORTFOLIO
                                                                                      December 31,  

(In thousands)                                        1997         1996       1995        1994        1993
<S>                                                 <C>          <C>        <C>          <C>         <C>
Commercial                                          $14,796      $9,787     $10,920      $9,795      $8,897
Real Estate-Construction                                  9           0           0           0           0
Real Estate-Mortgage                                 96,192      83,484      73,699      70,959      65,268
Installment                                          16,035      14,169      13,643      12,113       9,990

Total Loans                                         127,032     107,440      98,262      92,867      84,155
Deferred Loans                                         (246)       (290)       (311)       (324)       (296)

Total Loans (Net of deferred loans)                 126,786     107,150      97,951      92,543      83,859
Allowance for Loan Loss                              (1,676)     (1,664)     (1,488)     (1,484)     (1,248)

Net Loans                                          $125,110    $105,486     $96,463     $91,059     $82,611
                                                   ========    ========     =======     =======     ======= 
</TABLE>

          The table below details the maturity distribution as
well as the fixed and variable rate distribution of the loan
portfolio as of December 31, 1997:

<TABLE>
<CAPTION>
MATURITY SCHEDULE OF LOANS

                                        One Year      Over One, within       Over Five        Total
                                         or Less         Five Years            Years          Loans
<S>                                     <C>                 <C>              <C>            <C>
Commercial                               $16,374            $4,823              $741        $21,938
Real Estate-Construction                       9                 0                 0              9
Real Estate-Mortgage                       8,452            35,231            37,473         81,156
Installment                               11,023            10,194             2,712         23,929

Total                                    $35,858           $50,248           $40,926       $127,032
                                         =======           =======           =======       ========

Total Loans w/Predetermined Rates        $26,248           $28,908           $ 7,937       $ 63,093
Total Loans w/Variable Rates               9,610            21,340            32,989         63,939

Total                                    $35,858           $50,248           $40,926       $127,032
                                         =======           =======           =======       ========
</TABLE>

ALLOWANCE FOR CREDIT LOSSES AND MANAGEMENT OF CREDIT RISK

          A comparative analysis of the allowance for credit
losses, including charge-off activity, is presented below:

<TABLE>
<CAPTION>
ALLOWANCE FOR CREDIT LOSSES

                                                     1997           1996           1995          1994          1993
<S>                                             <C>            <C>             <C>           <C>           <C>
Average Total Loans                             $114,119,000   $102,525,000    $95,379,000   $87,148,000   $79,320,000
                                                ============   ============    ===========   ===========   ===========

Balance, beginning of period                       1,663,806      1,487,756      1,483,882     1,248,052     1,161,689

Less Charge-offs:
Commercial                                            37,791         20,031        301,000        21,522       193,389
Installment                                           50,197         26,030        122,857         7,835             0
Residential real Estate                               61,184         31,035         38,634        52,683        16,995

Total Charge-offs                                    149,172         77,096        462,491        82,040       210,384

Plus Recoveries:
Commercial                                             3,900         26,369          1,000        36,565        16,034
Installment                                           16,655            442              0         8,336             0
Residential Real Estate                               10,698          6,335         15,365         7,969        10,713

Total Recoveries                                      31,253         33,146         16,365        52,870        26,747

Net Charge-offs                                      117,919         43,950        446,126        29,170       183,637

Provision for Loan Losses                            130,000        220,000        450,000       265,000       270,000

Balance, End of Period                          $  1,675,867   $  1,663,806    $ 1,487,756   $ 1,483,882   $ 1,248,052   

Allowance for credit losses to                          1.32%          1.55%          1.54%         1.60%         1.49%
period-end total loans
Allowance for credit losses to                        163.19         107.80         110.29        118.05         72.85
non-accrual loans
Net charge-offs to average loans                        0.09           0.04           0.47          0.03          0.23
(annualized)

</TABLE>
          The following table reflects the allocation of the
allowance for credit losses by loan type.  The allowance has been
allocated to the various categories of loans.  The process
considers all "problem loans" including classified, criticized,
and monitored loans, and allocates a portion of the reserve to
each of these categories.  The excess allowances is then
considered the unallocated portion.  This allocation method is
not intended to limit the amount of the allowance available to
absorb losses from any specific type of loan and should not be
viewed as an indicator of the specific amount or specific
categories in which future charge-offs may ultimately occur.

<TABLE>
<CAPTION>
ALLOCATION OF ALLOWANCE FOR CREDIT LOSSES IN DOLLARS
                                                                         
                                                      1997         1996         1995          1994          1993
<S>                                              <C>           <C>           <C>           <C>           <C>
Commercial                                       $  321,064    $  687,640    $  733,507    $  495,889    $  368,391
Real Estate construction                                139           119             0             0             0
Real Estate mortgage                                342,980       197,032       165,479        55,227         5,242
Installment                                         129,383       117,876       183,721        17,783        19,248
Unallocated portion                                 882,321       661,139       405,049       914,983       855,171

Total allowance for credit losses                $1,675,887    $1,664,806    $1,487,756    $1,483,882    $1,248,052
                                                 ==========    ==========    ==========    ==========    ==========
</TABLE>

          The following table breaks down the loan portfolio by
category as a percentage of the whole:

<TABLE>
<CAPTION>
                 LOAN CATEGORIES BY PERCENTAGES

                             1997    1996      1995      1994     1993
<S>                          <C>     <C>       <C>       <C>      <C>
Commercial                    11%      9%       11%       11%      11%
Real Estate-Construction       1%      0%        0%        0%       0%
Real Estate-Mortgage          76%     78%       75%       76%      77%
Installment                   12%     13%       14%       13%      12%

Total                        100%    100%      100%      100%     100%
                             ====    ====      ====      ====     ====
</TABLE>

          Any increase in the level of the allowance is warranted
because of the increase in the size of the loan portfolio and the
risk factors of the loans.  Management uses detailed analyses of
the portfolio to determine the adequacy of the allowance for
credit losses.  Prior loss history along with current trends,
both nationally and locally, are taken into consideration: 
(i) specific reserves are established on all classified loans
where a loss seems imminent; (ii) a general reserve is
established on identified problem loans where specific potential
losses are not yet determined, but likely; (iii) smaller reserves
are also established on criticized loans that have identifiable
weaknesses but are not yet classified; and (iv) a general overall
reserve is calculated on the entire remainder of the portfolio by
loan type and included as an unallocated reserve allowance.  In
addition, it is the practice of the bank to manage the risk
elements of lending through rigorous credit evaluation of
prospective borrowers, continuous review of the portfolio,
diversification of the types of borrowers, and by maintaining a
well collateralized portfolio.

          The following table details information concerning non-
accrual and past-due loans, as well as foreclosed assets (other
Real Estate owned).  It is the policy of the bank to consider a
loan not in the process of collection when there is doubt to the
full repayment of the principal and interest or when the loan is
90 days past due.  When a loan is reclassified non-accrual any
previously accrued income is charged against income, and no
future income is accrued until performance is restored.  More
consistent and aggressive collection procedures as well as
consistent, yet fair, underwriting has resulted in a decline in
non-performing assets from 1993 and especially when comparing
1997 to 1996.  The economy in the market area also  has a
significant effect on non-performing assets.  Management believes
that the current levels of reserve is sufficient to cover non-
performing loans.  

          Consumer loans are not generally reclassified as non-
accrual at this stage but collection procedures are continued. 
These loans are generally charged off at 120 days past due.

<TABLE>
<CAPTION>
                          NON-PERFORMING ASSETS

                                                                            December 31,

                                                      1997         1996         1995          1994          1993
<S>                                              <C>           <C>           <C>           <C>           <C>
Nonaccrual loans                                 $1,026,625    $1,543,397    $1,348,877    $1,257,034    $1,713,796
Restructured loans                                        0             0             0             0             0
Loans past due 90 or more                                                                                          
  days accruing interest                             30,765       137,286        44,202        59,619       168,892

Total Non-performing loans                        1,057,390     1,681,183     1,393,079     1,346,653     1,882,688
Foreclosed Assets                                         0        99,000       429,680       100,244       168,740

Total Non-performing assets                      $1,057,390    $1,775,183    $1,822,759    $1,446,897    $2,051,428
                                                 ==========    ==========    ==========    ==========    ==========
Non-performing loans to
  total loans at period end                             .83%         1.56%         1.44%         1.46%         2.24%
Non-performing assets to
  period end total loans plus  
  foreclosed assets                                     .83%         1.65%         1.85%         1.56%         2.44%

</TABLE>

          The loans listed above as non-accruing are
significantly past due and are not considered to be in the
process of collection.  Income was recorded on these loans in
1997 in the amount of $24,900 compared to income anticipated
under the original loan agreements of $96,000.  In 1996, those
amounts were $30,700 and $163,000, respectively.  Once the
collection is deemed to be unlikely over the foreseeable future,
a loan is charged off.  Even though a loan is charged off, PNB
continues to work with a borrower to collect that loan wherever
possible.  While management does not anticipate any loss not
previously provided for these loans, economic conditions may be
such as to necessitate future modifications in the repayment
terms.  

Deposits

          PNB uses deposits as the primary source of funding of
its assets and has experienced continuous growth in all measured
components.  A variety of accounts are offered to individuals,
businesses, and non-profit organizations.  These accounts,
including checking, savings, money market, and certificates of
deposit, are obtained primarily from the communities and
surrounding areas which are serviced by PNB. 

          The following table details the average amount, the
average rate paid on, and the percent of the total of, the
following primary deposit categories for the past three years.

<TABLE>
<CAPTION>
                                     AVERAGE DEPOSIT COMPOSITION AND COST

(In thousands of dollars)
                                      1997                           1996                         1995
                           Average              % of       Average             % of     Average           % of   
                           Balance    Rate     Total       Balance   Rate     Total     Balance   Rate   Total

<S>                       <C>        <C>      <C>          <C>      <C>      <C>       <C>       <C>    <C>
Non-interest bearing
  demand deposits         $18,735               9.84%      $13,822             8.93%   $12,176            8.56%
  
Interest-bearing demand
  deposits                 13,379     1.72%     7.03%        7,748   1.71%    5.01%      7,834   1.95%    5.51%
Regular savings deposits   28,870     2.87%    15.16%       23,154   2.80%   14.97%     23,806   2.70%   16.73%  
Money market savings
  deposits                 40,529     4.34%    21.28%       29,015   4.79%   18.76%     23,611   5.15%   16.60% 
Time deposits              89,908     5.53%    46.69%       80,965   5.73%   52.33%     74,840   5.63%   52.60%
Total Interest-                                                                 
  Bearing Deposits        171,686     4.51%    90.16%      140,882   4.83%   91.07%    130,091   4.80%   91.44%

Total Deposits           $190,421     4.16%   100.00%     $154,704   4.45%  100.00%   $142,267   4.48%  100.00%
                         ========    =====    ======      ========   ====   ======    ========   ====   ======
</TABLE>

          Total deposits were $193,592,017 on December 31, 1997
as compared to $156,930,353 on December 31, 1996 and $147,168,282
on December 31, 1995.  A significant reason for growth in all
deposit components in 1997 was the purchase of the two branch
offices in Wyoming County.  At year-end 1997, non-interest
bearing deposits totaled $20,104,376 and interest bearing
deposits totaled $173,487,641.  The greatest portion of interest
bearing deposits was certificates of deposits with an average
balance for 1997 of $88,908,000 which was 51.8% of the average
total deposits for the year.  

          The following is a summary of the maturity distribution
of certificates of deposit in the amounts of $100,000 or more on
December 31, 1997:

<TABLE>
<CAPTION>

MATURITIES OR REPRICING OF CD'S OF $100,000 OR MORE ON DECEMBER 31, 1997

(In thousands of dollars)

                                             Amount          Percent
<S>                                         <C>              <C>
Three months or less                        $2,356            20.87%
Over three months through six months         3,631            32.16%
Over six months through twelve months        1,788            15.84%
Over twelve months                           3,514            31.13%

                                           $11,289           100.00%
                                           =======           ======
</TABLE>

Short-Term Borrowings

          Short-term borrowings consist of federal funds
purchased, repurchase agreements, and borrowings from the Federal
Home Loan Bank and the Federal Reserve Bank.  Because deposit and
loan growth occur at different times throughout the year, it is
necessary to have the flexibility to fund loan growth and
securities purchases by drawing on credit lines at the Federal
Home Loan Bank and by purchasing overnight federal funds from a
correspondent bank.

          Cash management became an important product for some
bank customers in 1997 and as a result, repurchase agreements
were introduced as a vehicle to sweep excess funds into each day. 
Repurchase agreements averaged $2,495,494 in 1997.  Federal funds
purchased was also used extensively and the average outstanding
in 1997 was $1,254,192 while in 1996 the average was $714,123 and
in 1995 it was $355,973.  An additional source of funds for
liquidity purposes was the Federal Home Loan Bank.  During 1997,
the average outstanding borrowings was $1,251,027 compared to
$555,724 in 1996 and $1,419,452 in 1995.  At year-end 1997,
repurchase agreements were $2,596,742.  There were no repurchase
agreements outstanding at year-end 1996 or 1995.  Borrowings from
the Federal Home Loan Bank at year-end 1997 were $5,675,000.  At
year-end 1996, the total was $6,175,000 compared to $1,000,000 at
year-end 1995. 

Liquidity

          Assuring adequate liquidity involves meeting future
cash flow needs.  This liquidity can be provided by reducing
asset balances and increasing deposits and short-term borrowing,
or a combination of both may be employed.  Traditionally, PNB has
maintained a strong liquidity position because of a concentration
of core deposits such as regular savings and checking accounts. 
A high percentage of money market accounts and certificates of
deposit can also be considered core deposits.  Federal funds sold
is the bank's most liquid earning asset.  Other sources include
money market instruments and securities classified as available
for sale.  In addition to these sources, the bank has credit
lines of $67.8 million available from correspondent and Federal
Home Loan Bank of Pittsburgh.

          On December 31, 1997, securities available for sale and
federal funds sold totaled $88,149,000 compared to $72,131,000 in
1996 and $66,285,000 in 1995.  These funds averaged $91,002,000
in 1997, $68,677,000 in 1996 and $62,898,000 in 1995.  In each
year, all investment securities were classified as available for
sale.  Asset liquidity is also provided by managing the
maturities of loans, securities, and certificates of deposits.

Interest Rate Sensitivity Analysis

          An important element of both earnings performance and
the maintenance of sufficient liquidity is maintaining an
appropriate balance between rate-sensitive assets and rate-
sensitive liabilities.  Interest rate sensitivity analysis is the
measure of the vulnerability of net interest income to changes in
the level of rates.  An interest rate sensitivity gap results
when assets and liabilities reprice at different intervals.  If
the gap is negative or liability sensitive, the impact on
earnings is negative if rates rise.  A positive or asset
sensitive gap implies the risk of lower earnings if rates
decline.  To attempt to offset this risk, PNB regularly forecasts
its exposure to rate changes and monitors its performance.  In
addition, the net interest margin is calculated monthly so that
interest rate changes and asset restructuring may be made as
needed.

          PNB's rate-sensitive position reflects a liability
sensitive or negative gap position on a cumulative basis through
one year, then shifts to a cumulative asset sensitive or positive
gap position beyond one year.  This analysis makes several
assumptions.  First that 10% of interest bearing demand deposit
accounts and 10% of regular savings accounts are rate sensitive. 
Also, it is assumed that the entire third tier (balances of
$50,000 or more) of money market deposits are rate sensitive.  In
addition, principal payments on mortgage backed securities are
projected at the average levels experienced over the past 12
months.  

          The following table illustrates the interest rate
sensitivity gap of the bank as of December 31, 1997.  This table
presents a position that existed at a particular point in time. 
Although that position can change continually, this position is
also similar to other times as well.


<TABLE>
<CAPTION>
             INTEREST RATE SENSITIVITY ANALYSIS(1) 
                                     
                                         Within 3      >3 mos       >6 mos      >1 year    5 years
                                          months     to 6 mos     to 1 year   to 5 years  and over
<S>                                      <C>         <C>          <C>         <C>         <C>
RATE SENSITIVE ASSETS

Loans                                     18,414       11,441       10,319      46,672      39,182
Securities                                24,595        4,469        4,725      41,556      11,411
Federal funds sold                             0            0            0           0           0
                       
Total rate sensitive assets               43,009       15,910       15,044      88,228      50,593
                                      
Cumulative rate sensitive assets          43,009       58,919       73,963     162,191     212,784
                                      
RATE SENSITIVE LIABILITIES            
Interest bearing checking                  1,358            0            0           0      12,226
Money market deposits                     23,716        2,608            0           0      13,037
Regular savings                            2,932           44          258           0      26,131
Certificates of deposits/IRA              17,803       18,470       23,739      29,102       2,064
Short-term borrowings                      9,275            0            0           0           0
                                      
Total rate sensitive liabilities          55,081       21,122       23,997      29,102      53,458
                                      
Cumulative rate sensitive liabilities    $55,081      $76,203     $100,200    $129,302    $182,760
                                      
Period gap                               (12,072)      (5,212)      (8,953)     59,126      (2,865)
Cumulative gap                           (12,072)     (17,284)     (26,237)     32,889      30,024
Cumulative rate sensitive assets to        78.08%       77.32%       73.82%     125.44%    116.43%
 rate sensitive liabilities
Cumulative gap to total assets             (5.48)%      (7.56)%     (11.47)%     14.38%     13.13%

</TABLE>

(1)  The following are assumptions that have been made in the
     foregoing model.  Non-interest bearing categories are shown
     to reprice 10% of balances in the "within 3 months" period
     (all repricing within the first month) and the remaining
     balances in the last period.  NOW accounts and regular
     Savings accounts also reprice 10% of balances in the "within
     3 months" period and the remaining balances in the last
     period.  Management can change these rates, but such changes
     are infrequent and incrementally small.  History has shown a
     strong core deposit relationship in these accounts and
     little or no run-off if rates change in these products. 
     Repayment of principal for mortgage backed securities are
     projected by expected cash flows as evidenced by recent
     history.  Repayment of principal for loan categories are
     projected at expected maturity (amortization) for fixed rate
     products and the next repricing date for variable rate
     products.

          Gap guidelines for PNB are that for the one year
interval, the cumulative rate sensitive assets to rate sensitive
liabilities ratio will be between 75% and 125%.  The Asset
Liability Committee (ALCO) and the Board of Directors reviews
this guideline monthly to insure compliance.  ALCO reviews their
assumptions monthly and determines if the GAP is correctly
predicting the net interest margin.  In determining risk exposure
limits, ALCO considers the nature of PNB's strategies and
activities, its past performance, the level of earnings and
capital available to absorb potential losses.  Historically,
PNB's performance has been within the guidelines set for GAP.  If
it appears that the guidelines may be breached, ALCO would
implement actions to be taken to prevent this breach.  Some of
the strategies used by banks to assure compliance with GAP
guidelines are controlling its interest rates, increasing or
decreasing the duration of the portfolio, raising additional
capital, selling assets to enhance liquidity, and/or implementing
hedging and interest rate swaps.

Off-Balance Sheet Risk

          In the normal course of business, the company enters
into financial commitments with off-balance sheet risk.  The
company's maximum exposure to accounting loss, based upon the
credit risk associated with unfunded loan commitments and letter
of credit outstanding is represented by the contract amount of
these items as of the dates indicated in the following table:

<TABLE>
<CAPTION>
                     OFF-BALANCE SHEET RISK

                                                December 31, 

(In thousands of dollars)                1997           1996          1995
<S>                                   <C>            <C>            <C>
Commitments to extend credit          $1,530,600     $1,304,700     $762,150
Standby letters of credit             $  249,915     $  272,515     $250,915

</TABLE>

          Many of such commitments to extend credit may expire
without being drawn upon and, therefore, the total commitment
amounts do not necessarily represent future cash flow
requirements.  In making the  commitments, the company applies
the same credit standards used in the lending process, and it
periodically reassesses the customer's credit worthiness through
ongoing credit reviews.  The risks associated with making these
commitments are also included in the overall credit risk in
determining the allowance for possible loan losses.

Capital Management

          Banking regulatory authorities have implemented strict
capital guidelines directly related to the credit risk associated
with an institutions assets.  Banks and bank holding companies
are required to maintain capital levels based on their "risk-
adjusted" assets so that categories of assets with higher defined
credit risks will require more capital support than assets with
lower risk.  Additionally, capital must be maintained to support
certain off-balance sheet instruments.

          Capital is classified Tier I capital (common
stockholders' equity less certain intangible assets) and total
capital (Tier I plus the allowance for credit losses).  Minimum
required levels must at least equal 4% for Tier I capital and 8 %
for total capital.  In addition, institutions must maintain a
minimum of a 3% leverage capital ratio (Tier I capital to average
total assets).

          The bank's and company's capital position is presented
in the following table:

<TABLE>
<CAPTION>
                                                December 31,        Regulatory 
                                           1997           1996     Requirement
<S>                                        <C>            <C>           <C>
Tier 1 capital to risk weighted assets     16.57%         20.82%        4.00%
Total capital to risk weighted assets      17.82%         22.07%        8.00%
Capital leverage ratio                      9.20%         11.99%        3.00%
</TABLE>

Fair Market Value

          The Financial Accounting Standards Board, through its
statement No. 107 ("FASB 107"), and the FDIC Improvement Act of
1991, require banks to disclose the fair value of all financial
instruments.  Approximately 90% of the total assets, 95% of total
liabilities, and almost all off-balance sheet financial contracts
in a depository institution come under the definition.  This
disclosure is required for banks with assets in excess of
$150 million beginning with the 1992 annual report.

          The fair market values of all financial instruments
held by PNB are disclosed in the footnotes to the financial
statements appearing elsewhere herein.  For those financial
instruments which are traded in active financial markets, the
fair value is the market price.  For loans and deposits with no
quoted prices, FASB 107 provides that the value be determined by
means of discounted present value models or option pricing
models.  The valuing technique employed for each group of
instruments is based upon the characteristics of each instrument.
<PAGE>
Item 3.  Properties

          The administrative/operations office of the Company and
PNB is located at 50 Main Street, Hallstead, Pennsylvania.  PNB's
commercial, mortgage and consumer lending operations, as well as
its executive offices, marketing department, human resources
office, deposit account support services, and data processing
department are located in the administrative/operations office. 
There are eight branch locations, five in Susquehanna County and
three in Wyoming County.  All offices are owned in fee title by
PNB with the exception of the Springville Office, the Hallstead
Plaza office and the Meshoppen office.  The Springville office,
which is located in a convenience store, is leased with
approximately 18 months remaining on a lease with renewal
options.  The Hallstead Plaza and Meshoppen offices are subject
to ground leases.  Each lease is either long-term or includes
renewal options.  Current lease payments range from $2,000 to
$12,000 annually.  Six of the eight offices provide drive-up
banking services and five offices have 24-hour ATM services.
<PAGE>
Item 4.   Security Ownership of Certain Beneficial Owners and
          Management

          The following table reflects the beneficial ownership
of the Company's Common Stock as of January 28, 1998 by
directors, executive officers, each person known to management to
own beneficially, directly or indirectly, more than 5% of the
Company's Common Stock, and all directors and executive officers
as a group.  Except as otherwise indicated, the persons or
entities listed below have sole voting and investment power with
respect to all shares shown as beneficially owned by them.  

5% Beneficial Owners

<TABLE>
<CAPTION>
                                    Amount and Nature
                                      of Beneficial
Beneficial Owners and Management        Ownership        Percent of Class
<S>                                 <C>                  <C>                <C>
DIRECTORS AND EXECUTIVE OFFICERS

Carl F. Pease                             12,000              1.37%          (1)
Gerald R. Pennay                           8,200                *            (2)
John W. Ord                               18,502              2.12%          (3)
Virginia M. Turner                        39,555              4.52%
Thomas F. Chamberlain                      1,652                *            (4)
Judith Ely Kelly                           3,780                *            (5)
Jack M. Norris                             2,835                *            (6)
George H. Stover, Jr.                     19,575              2.24%          (7)
William S. Crock                           1,100                *            (8)
Michael S. Karhnak**                       2,580                *            (9)
Debra E. Dissinger**                       2,696                *           (10)
All directors and executive officers
as a group (11 persons)                  101,407             11.60%
_______________
<FN>
* Less than 1%
** Executive officers only.
</TABLE>

(1)  All shares are held jointly with spouse.

(2)  Includes 4,055 shares held jointly with spouse.

(3)  All shares are held jointly with spouse.  Includes shares
     owned by the trustee of the Company's Employee Stock
     Ownership Plan ("ESOP") which have been allocated to
     Mr. Ord's account.

(4)  Includes 270 shares held jointly with spouse.

(5)  Includes 1,800 shares held jointly with husband and 30
     shares held in custodial account for each of three children.

(6)  All shares are held jointly with spouse.

(7)  All shares are held jointly with spouse.

(8)  All shares are held jointly with spouse.

(9)  All shares are held jointly with spouse.  Includes shares
     owned by the trustee of the Company's ESOP which have been
     allocated to Mr. Karhnak's account.

(10) All shares are held jointly with spouse.  Includes shares
     owned by the trustee of the Company's ESOP which have been
     allocated to Ms. Dissinger's account.
<PAGE>
Item 5.  Directors and Executive Officers

          The Company's Board of Directors presently consists of
9 members.  The Company's Board of Directors is divided into
three classes, one-third (as nearly equal in number as possible)
of whom are elected annually to serve for a term of three years.

          The following table sets forth the name, age and term
of office of each executive officer and director of the Company
and the principal occupations of such individuals during the past
five years.  The executive officers are appointed to their
respective offices annually.  All directors of the Company also
serve as directors of PNB.  Unless otherwise indicated, the
principal occupation listed for a person has been the person's
occupation for at least the past five years.  Because a majority
of persons listed served as officers or directors of PNB prior to
the formation of the Company in 1986, the table indicates the
earliest year a person became an officer or director for PNB or
the Company.

<TABLE>
<CAPTION>
                                                                            Year Term
Name, Age and                 Principal Occupations       Director or       as Director
Position with Company         During Past Five Years      Officer Since       Expires  
<S>                           <C>                         <C>               <C>
Carl F, Pease, 66             Retired Director of the          1985             2000
Director, Chairman of         Susquehanna County Planning
the Board                     Commission

Gerald R. Pennay, 62          Owner, Gerald R. Pennay &        1985             1998
Director, Vice Chairman       Son Auctioneers
of the Board

John W. Ord, 57               President & CEO of Peoples       1969             2000
Director, President &         National Bank
CEO

Virginia M. Turner, 62       Investor                          1981             1998
Director, Corporate
Secretary

Thomas F. Chamberlain, 49    Nationwide Insurance Agent        1994             1998
Director

Judith Ely Kelly, 49         State Farm Insurance Agent        1988             1999
Director

Jack M. Norris, 64           Retired Owner, B.K. Norris        1985             1999
Director                     Distributor (Beverage 
                             Distributorship)

George H. Stover, Jr., 51    Real Estate Appraiser             1992             1999
Director

William S. Crock, 51         President, W. S. Crock &          1992             2000
Director                     Sons, Inc. (Retail Store)

Michael S. Karhnak, 45       Executive Vice President of       1986             N/A
Vice Pres. & Treasurer       Peoples National Bank

Debra E. Dissinger, 43       Executive Vice President of       1985             N/A
Vice Pres. & Asst.           Peoples National Bank
Secretary                    (1997-Present), Senior Vice
                             President of Peoples National
                             Bank (1992-1996)
</TABLE>

          There are no family relationships among any of the
executive officers or directors of the Company.  Executive
officers of PNB are elected by the Board of Directors on an
annual basis and serve at the discretion of the Board of
Directors.  

Committees of the Board of Directors

          At present, the directors of the Company also serve as
directors of PNB.  There are presently no Board committees of the
Company's Board of Directors and committee functions are
performed by committees of PNB's Board of Directors.  

          PNB has an Executive Committee, an Audit Committee, an
Asset/Liability Committee, a Human Resources and Marketing
Committee, and a Loan Administration Committee.  

          The Executive Committee consists of John Ord, Carl
Pease, Gerald Pennay, and Jack Norris.  This committee may
exercise the authority of PNB's Board of Directors to the extent
permitted by law during intervals between meetings of the Board. 
This committee may also be assigned other duties by PNB's Board
of Directors.

          The Audit Committee consists of George Stover, Gerald
Pennay, Jack Norris and Judith Kelly.  This Committee supervises
the compliance and internal audit program of PNB and recommends
the appointment of, and serves as the principal liaison between,
the Board of Directors and the independent auditors.  This
committee also reports to the Board of Directors on the general
financial condition of PNB. 

          The Asset/Liability Committee consists of William
Crock, Carl Pease, Virginia Turner, and Thomas Chamberlain.  This
committee helps control PNB's risk position by recommending the
allocation of funds within guidelines for rate sensitivity, time
deposits, liquidity, Federal Funds borrowing, loans, investments,
dividends and tax position.  This committee is also responsible
for developing such guidelines, guiding PNB's investments, and
coordinating PNB's budget process.

          The Human Resources Committee consists of Gerald
Pennay, Jack Norris, George Stover, and Judith Kelly.  This
committee is responsible for sound human resources management
(e.g., in employment, compensation, and performance appraisals). 
This committee is also responsible for evaluation, planning and
supervision of the marketing of PNB's products and services and
also oversees community relations and other public relations
activities.

          The Loan Administration Committee consists of Jack
Norris, Gerald Pennay, George Stover, and Judith Kelly.  This
committee assists PNB's Board of Directors in discharging its
responsibility for the lending activities of PNB by reviewing
loans, lines of credit, and floor plans; and monitoring loan
review and compliance.  This committee recommends lending
authorizations and is responsible for assuring that PNB's loan
activities are carried out in accordance with loan policies. 
This committee is also responsible for ensuring the adequacy of
PNB's loan loss reserve.
<PAGE>
Item 6.  Executive Compensation

          The following table sets forth information concerning
the annual and long-term compensation for services in all
capacities to the Company and PNB for the fiscal years ended
December 31, 1997, 1996, and 1995 of the Chief Executive Officer
of the Company and PNB.  There were no other officers of the
Company or PNB who received compensation in excess of $100,000
during any fiscal year.

<TABLE>
<CAPTION>
                       Summary Compensation Table

                                            Annual Compensation         
                                                          Other Annual      All Other
Name                    Year      Salary        Bonus     Compensation    Compensation
<S>                     <C>     <C>            <C>        <C>             <C>
John W. Ord             1997    $103,500 (1)   $11,117          --         $24,825 (2)
President,
Chief Executive
Officer
                        1996    $ 89,000 (3)   $32,250          --         $31,879 (4)

                        1995    $ 89,000 (5)   $21,801          --         $28,293 (6)
</TABLE>
_______________

(1)  Includes Director's fees of $3,500.

(2)  Includes Peoples National Bank's contribution to 401 (k)
     plan of $2,999, ESOP contribution of $4,490, Split Dollar
     Life Insurance premium payment of $1,504 and Supplemental
     Employee Retirement Plan contribution of $15,832.

(3)  Includes Director's fees of $4,000.

(4)  Includes Peoples National Bank's contribution to 401 (k)
     plan of $1,634, ESOP contribution of $7,555, Split Dollar
     Life Insurance premium payment of $1,504, and Supplemental
     Employee Retirement Plan contribution of $21,185.

(5)  Includes Director's Fees of $4,000.

(6)  Includes Peoples National Bank's contribution to 401 (k)
     plan of $1,536, ESOP contribution of $6,010, Split Dollar
     Life Insurance premium payment of $1,504 and Supplemental
     Employee Retirement Plan contribution of $19,242.

Compensation of Directors

          Directors of the Company do not receive compensation in
such capacity.  Directors of PNB, however, receive compensation
for serving on the Board of Directors in the following amounts: 
(i) $200 per month for the Chairman of the Board, (ii) $250 per
Board meeting for all directors with a maximum of two meetings
missed and paid for between annual meetings, and (iii) $150 for
each director for each committee meeting and branch board meeting
that they attend.

Compensation Committee Interlocks and Insider Participation

          The Executive Committee of the Board of Directors of
PNB serves as the compensation committee of PNB.  The members of
this committee are John Ord, Carl Pease, Gerald Pennay, and Jack
Norris.  Mr. Ord is the current CEO and President of Peoples
National Bank.  While Mr. Ord was specifically excluded from any
Committee discussion concerning his own compensation, he does
participate in the Committee's discussion concerning other key
executive's compensation.

Management Committee Compensation Report

          The compensation of the CEO and other officers of PNB
is determined by the Executive Committee of the Board of
Directors of PNB.  This committee sets compensation guidelines
intended to provide suitable rewards for individual performance
and to tie such performance to increased stockholder value.  The
compensation paid is designed to attract, retain and reward
executive officers who are capable of leading the Company and PNB
in achieving its business objectives in an industry characterized
by complexity, competitiveness and constant change.  The
compensation of PNB's key executives is reviewed and approved by
the Board of Directors upon recommendation of PNB's Executive
Committee.

          Total compensation for PNB's Chief Executive Officer
and other key executive officers consists of base salary, short
and long-term incentives and perquisites.

          The guidelines and factors considered by the Committee
in determining compensation include corporate profitability
measured by return on assets, stock price, asset quality, loan
loss reserve levels, market-share, regulatory capital strength,
cost control, and regulatory examination.

          Annually, at year end, the Committee reviews the base
compensation and benefit levels of the CEO and other executive
officers.  Each officer's compensation is based on their
individual contribution to the Company and PNB, and their meeting
of the goals and objectives as set forth in the strategic plan of
the Company and PNB.  To ensure that the compensation and
benefits are reasonable and competitive, the Committee compares
the compensation awarded to executive officers of the Company and
PNB with those of executive officers of similarly sized and
situated banks and thrift institutions in the Mid-Atlantic
region.  

               Executive Committee
               
               John W. Ord, Carl F. Pease,
               Gerald R. Pennay, Jack M. Norris

Employment and Other Contracts

          In February 1997, the Company entered into an
employment agreement with John W. Ord, President and Chief
Executive Officer of the Company.  The agreement is for an
initial three-year term and is renewed annually for a three-year
term unless notice of nonrenewal is given by either party in
which case the agreement will expire at the end of the existing
term.

          The agreement provides for a base salary of $100,000
per year and for such incentive bonuses as may be awarded to the
executive under any incentive compensation plan which may be in
effect or otherwise in the discretion of the Board of Directors. 
If the executive's employment is terminated without "cause" (as
defined in the agreement) or the executive terminates his
employment for "good reason" (as defined in the agreement)
following a "change in control" of the Company, the executive
becomes entitled to severance benefits under the agreement. 
"Good reason" includes a reduction in title, responsibilities, or
authority, a reassignment which requires the executive to move
his principal residence, a reduction in salary, or a failure to
provide the executive with comparable benefits following a
"change in control."  If any such termination occurs following a
"change in control," the executive will be entitled generally to
a lump-sum payment equal to 2.0 times the sum of his highest
annual compensation in the prior three years plus certain pension
and welfare benefits received in the relevant year.

          Mr. Ord's agreement contains provisions restricting his
ability to compete with the Company under certain circumstances
following termination of his employment.

          In February 1997, the Company also entered in severance
agreements with two other executive officers of the Company,
Michael S. Karnhak, Vice President and Treasurer, and Debra E.
Dissinger, Vice President, which provided for certain severance
benefits in the event the executive's employment is terminated or
the executive resigns for specified reasons following a "change
in control" of the Company.  Under these agreements, the
executive would be entitled generally to a severance benefit
equal to 2.0 times the executive's average annual compensation
for the five years preceding the year of termination.  No
benefits are payable under these agreements in the event the
executive's employment is terminated for any reason prior to a
"change in control."  The specified reasons for termination under
these agreements are substantially similar to the events of "good
reason" contained in Mr. Ord's agreement.  

     PNB also maintains an excess benefit plan for Mr. Ord. 
Under this plan, which is a nonqualified plan, Mr. Ord will
receive a supplemental payment necessary to provide him with an
annual retirement benefit, together with payments received under
PNB's pension plan, employee stock ownership plan, and 401)k)
plan, equivalent to 90% of his average salary for the three years
prior to his retirement, subject to certain adjustments.  PNB has
obtained a life insurance policy (designating PNB as beneficiary)
on the life of Mr. Ord in an amount intended to cover PNB's
obligations under the plan, based on certain actuarial
assumptions relating to life expectancy.  The amount charged to
PNB's operations with respect to this plan for the years ended
December 31, 1997, 1996 and 1995 was $15,832, $21,185, and
$19,242, respectively.

Pension Plan

     PNB's Pension Plan is available to PNB employees who have
attained age 21, and have completed one year of service. 
Employees do not contribute to the plan.  Each year, PNB
contributes under the plan an actuarially determined amount for
distribution to eligible employees at their retirement.  Benefits
are payable at normal retirement (age 65) and early retirement
(age 55).  Disability benefits are payable at age 55 with vesting
at five years.  The following table shows the annual retirement
benefits payable at normal retirement (age 65) under PNB's plan
for a range of compensation levels and years of service.  The
amounts are based on an employee who became a participant in 1997
and will have the service and salary at normal retirement.

                        YEARS OF SERVICE

           Salary          10             20            30   

         $ 25,000        $2,000        $ 4,000       $ 6,000
         $ 50,000        $4,000        $ 8,000       $12,000
         $ 75,000        $6,000        $12,000       $18,000
         $100,000        $8,000        $16,000       $24,000
<PAGE>
Item 7.   Certain Relationships and Related Transactions

          Certain directors and officers of the Company or PNB,
and their respective associates, were customers of and had
transactions with PNB in the ordinary course of business during
the Company's fiscal year ended December 31, 1997.  Similar
transactions may be expected to take place in the future.  Such
transactions included deposit products and extensions of credit
in the ordinary course of business on substantially the same
terms, including interest rates and collateral, as those
prevailing  at the time for comparable transactions with other
persons and did not involve more than the normal risks of
collectability or present other unfavorable features.
<PAGE>
Item 8.   Legal Proceedings

          None.
<PAGE>
Item 9.   Market Price of and Dividends on the Registrant's
          Common Equity and Related Stockholder Matters 

          The Company's Common Stock is not listed on an exchange
or quoted on the National Association of Securities Dealers, Inc.
Automated Quotation system (NASDAQ).  The Company's Common Stock
is traded sporadically in the over-the-counter market and,
accordingly, there is no established public trading market at
this time.  The investment firm of Hopper Soliday and Co., Inc.,
Lancaster, Pennsylvania, makes a limited market in the Company's
Common Stock.  The following table reflects high bid and low
asked prices for shares of the Company's Common Stock to the
extent such information is available, and the dividends declared
with respect thereto during the preceding two years.

<TABLE>
<CAPTION>
                             1997                            1996
                  Price Range     Dividends         Price Range   Dividends
                  Low    High     Declared          Low    High   Declared
<S>              <C>     <C>        <C>            <C>     <C>       <C>
1st Qtr.         $32.00  $34.00     $.20           $28.50  $30.00    $.16
2nd Qtr.          34.00   36.00      .20            30.00   31.00     .16
3rd Qtr.          36.00   41.00      .20            31.00   32.00     .16
4th Qtr.          41.00   44.00      .24            32.00   32.00     .20

</TABLE>

          As of December 31, 1997, the approximate number of
holders of record of the Company's Common Stock was 570.  At such
date, 874,330 shares of Common Stock were outstanding.  

          The Company's Board of Directors of Directors reviews
its dividend policy at least annually.  The amount of dividends,
while in the sole discretion of the Board of Directors, depends,
in part, on earnings, capital requirements, federal and state
laws, regulations and policies and other factors, including the
performance of PNB.  The Company's ability to pay dividends is
also subject to the restrictions imposed by Pennsylvania law. 
Generally, under Pennsylvania law, a business corporation, such
as the Company, may pay dividends to the extent that the value of
its assets (determined by the Board of Directors) exceeds the
value of its liabilities.
<PAGE>
Item 10.  Recent Sales of Unregistered Securities

          None.
<PAGE>
Item 11.  Description of Registrant's Securities to be Registered

          The holders of the Company's Common Stock are entitled
to share ratably in dividends when and if declared by the
Company's Board of Directors from funds legally available
therefor.

          Each holder of the Company's Common Stock has one vote
for each share held of record on each matter presented for
consideration by Company's shareholders.  The Company's
shareholders are not entitled to cumulate votes in the election
of directors.

          The holders of the Company's Common Stock have no
preemptive rights to acquire any additional shares of the
Company.

          In the event of liquidation, dissolution or winding-up
of the Company, whether voluntary or involuntary, holders of the
Company's Common Stock will be entitled to share ratably in any
of its assets or funds that are available for distribution to its
shareholders after the satisfaction of its liabilities (or after
adequate provision is made therefor) and after payment of any
liquidation preferences of any outstanding preferred stock.

          The Bylaws of the Company provide for a "classified"
Board of Directors of between nine (9) and twenty-five (25)
members, which number is fixed by the Board of Directors, divided
into three classes, serving for terms of three years each.  In
the event of a Board vacancy, the Bylaws provide that the sole
power to fill such vacancy is vested in the Company's Board of
Directors, and any such new director shall serve out the full
term of the former director.  The election of directors for
staggered terms significantly extends the time required to make
any change in control of the Company's Board of Directors and may
tend to discourage any surprise and hostile takeover bid for
control of the Company.  The staggered terms also have the effect
of increasing the number of votes required to elect a director. 
Under the Company's Bylaws, it will take at least two annual
meetings for holders of a majority of the Company's voting
securities to make a change in control of the Company's Board
because only a minority (approximately one-third) of the
directors will be elected at such meeting.  In addition, because
certain actions require more than majority approval of the Board,
as described herein, it may take as many as three annual meetings
for a controlling block of the Company's shareholders to obtain
complete control of the Board, and thereby of the Company's
management.

          The Company's Articles of Incorporation provide that
any merger, consolidation, sale of assets or similar transaction
involving the Company and any other entity or person, and any
liquidation or dissolution of the Company, will require the
affirmative vote of holders of at least 75% of the Company's
outstanding voting stock.  The Company's Articles provide,
however, that any such transaction will require approval by the
affirmative vote of holders of a majority of the outstanding
voting stock of the Company if such transaction is approved in
advance by 66-2/3% of the Board of Directors of the Company. 
Thus, if a transaction is approved by 66-2/3% of the Board, a
majority vote of the shareholders is necessary to approve the
transaction, but if the Board does not approve the transaction, a
75% shareholder approval requirement will apply.  

          The Company's Bylaws vest the authority to make, alter,
amend, or repeal the Bylaws of the Company in the holders of 75%
of the Company's Common Stock or in the Board of Directors,
acting by a majority vote except with respect to alteration,
amendment or repeal of the By-law provision providing for a
"classified" Board of Directors which would require the vote of
at least 75% of the members of the Board of Directors.  The right
of the Board to make, alter, repeal or amend the Bylaws is always
subject to the right of holders of at least 75% of the Company's
voting stock to change such action.

          The Pennsylvania Business Corporation Law provides that
the Articles of Incorporation of a Pennsylvania corporation (such
as the Company) may be amended by the affirmative vote of a
majority of the votes cast at a meeting at which a quorum of
shareholders is present, except as otherwise provided by such
corporation's articles of incorporation.  The Company's Articles
of Incorporation, however, provide that the provisions requiring
a supermajority vote in the event of a proposed merger, sale of
assets, liquidation or other similar transaction and the
provision permitting the Board to consider noneconomic factors in
a tender or other acquisition offer for the Company's securities
can only be amended by an affirmative vote of holders of at least
75% of the outstanding voting stock of the Company unless
approved by the affirmative vote of 66-2/3% or more of the
members of the Board of Directors in which case only majority
shareholder approval is required.
<PAGE>
Item 12.  Indemnification of Directors and Officers

          The Bylaws of the Company provide for
(1) indemnification of directors, officers, employees and agents
of the Company and its subsidiaries and (2) the elimination of a
director's liability for monetary damages, each to the fullest
extent permitted by Pennsylvania law.  Pennsylvania law provides
that a Pennsylvania corporation may indemnify directors,
officers, employees and agents of the corporation against
liabilities they may incur in such capacities for any action
taken or any failure to act, whether or not the corporation would
have the power to indemnify the person under any provision of
law, unless such action or failure to act is determined by a
court to have constituted recklessness or willful misconduct. 
Pennsylvania law also permits the adoption of a Bylaw amendment,
approved by shareholders, providing for the elimination of a
director's liability for monetary damages for any action taken or
any failure to take any action unless (1) the director has
breached or failed to perform the duties of his office and
(2) the breach or failure to perform constitutes self-dealing,
willful misconduct or recklessness.  The Company's shareholders
approved Bylaw amendments adopting these provisions at the 1987
Annual Meeting of Shareholders.
<PAGE>
Item 13.  Financial Statements and Supplementary Data

                  INDEPENDENT AUDITOR'S REPORT



To the Board of Directors
Peoples Financial Services Corp.
And Subsidiary

          We have audited the accompanying consolidated balance
sheets of Peoples Financial Services Corp. and Subsidiary as of
December 31, 1997 and 1996, and the related consolidated
statements of income, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1997. 
These financial statements are the responsibility of the
Company's management.  Our responsibility is to express an
opinion on these 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 audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. 
We believe that our 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
financial position of Peoples Financial Services Corp. and
Subsidiary as of December 31, 1997 and 1996, and the results of
their operations and their cash flows for each of the three years
in the period ended December 31, 1997, in conformity with
generally accepted accounting principles.


February 11, 1998



/s/ Prociak and Associates

PROCIAK AND ASSOCIATES, L.L.C.
Wilkes-Barre, Pennsylvania
<PAGE>
                PEOPLES FINANCIAL SERVICES CORP.
                         AND SUBSIDIARY
                   CONSOLIDATED BALANCE SHEETS
                   DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
                                                December 31,    December 31,
                                                   1997            1996     
<S>                                             <C>             <C>
                             ASSETS
Cash and due from banks                         $  2,401,332    $  1,672,682
Interest-bearing deposits in other banks           3,147,371       1,395,892
Investment securities available for sale          88,149,054      72,131,211
Loans                                            126,852,708     107,265,269
   Less:  Unearned income                            (67,188)       (115,308)
          Allowance for loan losses               (1,675,887)     (1,663,806)
   Net loans                                     125,109,633     105,486,155

Premises and equipment                             3,756,300       2,972,312
Accrued interest receivable                        1,776,908       1,429,957
Other assets                                       4,379,317       1,070,891

       Total assets                             $228,719,915    $186,159,100

              LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
   Non-interest bearing                         $ 20,104,376    $ 13,780,637
   Interest bearing                              173,487,641     143,149,716
     Total deposits                              193,592,017     156,930,353

Short-term borrowings                              9,274,834       6,712,918
Accrued interest payable                             662,696         599,245
Other liabilities                                    546,445         203,006

       Total liabilities                         204,075,992     164,445,522

Stockholders' equity:
  Common stock, par value $5 per share,
    5,000,000 shares authorized; 874,330
    and 875,905 shares issued and
    outstanding at December 31,
    1997 and 1996, respectively                    4,455,000       4,455,000
   Surplus                                         4,455,000       4,455,000
   Undivided profits                              15,912,129      13,636,162
   Unrealized gain (loss) on securities
     available for sale, net of applicable
     deferred income taxes                           370,569        (345,849)
   Less:  treasury stock, at cost (16,670 in
     1997 and 15,095 in 1996)                       (548,775)       (486,735)
        Total stockholders' equity                24,643,923      21,713,578

        Total liabilities and stockholders'
          equity                                $228,719,915    $186,159,100

</TABLE>
                See notes to financial statements
<PAGE>
                PEOPLES FINANCIAL SERVICES CORP.
                         AND SUBSIDIARY
                CONSOLIDATED STATEMENTS OF INCOME
      FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

<TABLE>
<CAPTION>
                                              1997          1996         1995
<S>                                       <C>           <C>          <C>
Interest income:
   Interest and fees on loans             $ 9,995,843   $ 9,031,697  $ 8,501,984
   Interest and dividends on investments: 
     Taxable                                4,255,842     3,491,090    3,432,158
     Tax exempt                             1,285,145       824,995      614,807
     Dividends                                 60,533        55,257       44,622
   Interest on deposits in other banks         34,684         7,333       13,326
   Interest on trading account securities         -0-           -0-       68,625
   Interest on federal funds sold              92,678        35,367       54,554
       Total interest income               15,724,725    13,445,739   12,730,076

Interest expense:
   Interest on deposits                     7,737,668     6,798,796    6,240,687
   Interest on short-term borrowings          176,390        69,958       84,328
   Interest on long-term borrowings               -0-        10,810       48,200
       Total interest expense               7,914,058     6,879,564    6,373,215

       Net interest income                  7,810,667     6,566,175    6,356,861
Provision for loan losses                     130,000       220,000      450,000
       Net interest after provision
         for loan losses                    7,680,667     6,346,175    5,906,861

Other income:
   Service charges and customer
     service fees                             891,489       682,003      615,329
   Other income                                29,278        21,900       36,676
   Investment securities gains, net           217,104       119,913       60,194
       Total other income                   1,137,871       823,816      712,199

Other expenses:                                           
   Salaries and employee benefits           2,282,412     1,790,480    1,608,378
   Occupancy expense, net                     323,532       225,251      199,102
   Equipment expense                          388,857       251,732      195,558
   FDIC insurance and assessments              81,410        55,730      211,144
   Professional fees and outside services     192,530       182,974       80,515
   Computer service and supplies              359,024       223,917      205,066
   Taxes, other than payroll and income       203,719       183,332      167,786
   Other operating expenses                 1,162,176       689,710      625,935
       Total other expense                  4,993,660     3,603,126    3,293,484

Income before taxes                         3,824,878     3,566,865    3,325,576
Provision for income tax                      813,619       850,828      838,356
Net income                                 $3,011,259    $2,716,037   $2,487,220

Net income per share                       $     3.44    $     3.06   $     2.79
</TABLE>
                See notes to financial statements
<PAGE>
                PEOPLES FINANCIAL SERVICES CORP.
                         AND SUBSIDIARY
         CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
      FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
                                                                                         Unrealized
                                                                                         Gain (Loss)
                                                                                        on Securities
                                                                                       Available for Sale
                                                                                        Net of Applicable
                                                 Common                  Undivided       Deferred Income     Treasury
                                                 Stock       Surplus       Profits            Taxes            Stock       Total
<S>                                           <C>          <C>          <C>            <C>                  <C>         <C>
Balance, December 31, 1994                    $2,970,000   $2,970,000   $12,502,783       $(1,543,693)      $   -0-     $16,899,090

Net income, 1995                                                          2,487,220                                       2,487,220

Cash dividends paid, 1995 ($.56 per share)                                 (495,990)                                       (495,990)

Stock dividend                                 1,485,000    1,485,000    (2,970,000)                                         -0-   

Change in unrealized gain (loss) on
  securities available for sale, net
  of deferred income taxes of $752,535                                                     1,460,803                      1,460,803

Balance, December 31, 1995                     4,455,000    4,455,000    11,524,013          (82,890)           -0-      20,351,123

Net income, 1996                                                          2,716,037                                       2,716,037

Cash dividends paid, 1996 ($.68 per share)                                 (603,888)                                       (603,888)

Treasury stock purchase                                                                                     (486,735)      (486,735)

Change in unrealized gain (loss) on
  securities available for sale, net of
  deferred income taxes of $135,463                                                         (262,959)                      (262,959)

Balance, December 31, 1996                     4,455,000    4,455,000    13,636,162         (345,849)       (486,735)    21,713,578

Net income, 1997                                                          3,011,259                                       3,011,259

Cash dividends paid, 1997 ($.84 per share)                                 (735,292)                                       (735,292)

Treasury stock purchase                                                                                      (62,040)       (62,040)

Change in unrealized gain (loss) on
  securities available for sale, net
  of deferred income taxes of $369,063                                                       716,418                        716,418

Balance, December 31, 1997                    $4,455,000   $4,455,000   $15,912,129      $  (370,569)      $(548,775)   $24,643,923
                                              ==========   ==========   ===========      ===========       =========    ===========
</TABLE>
<PAGE>
                        PEOPLES FINANCIAL SERVICES CORP.
                                 AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
                                            1997           1996           1995
<S>                                     <C>             <C>            <C>
Cash flows from operating activities:                        
  Net income                            $  3,011,259    $  2,716,037    $  2,487,220

  Adjustments to reconcile net
    income to net cash provided
    by operating activities:                                

    Depreciation and amortization            639,526         262,387         211,614
    Provision for loan losses                130,000         220,000         450,000
    (Gain) loss on sale of equipment           4,229          (1,283)            -0-
    (Gain) loss on sale of other real
      estate                                   5,485          42,467             -0-
    Amortization of securities' premiums
      and accretion of Discounts             (58,454)         (4,270)         52,021
    Losses (gains) on sale of investment
      securities, net                       (217,104)       (119,913)       (106,619)
    Decrease in trading account
      securities                                 -0-             -0-         275,594
    Deferred income taxes (benefit)           21,630         (72,682)         16,973
    (Increase) in accrued interest
      receivable                            (346,951)       (183,700)        (81,073)
    (Increase) decrease in other assets     (113,755)         12,507         (99,919)
    Increase (decrease) in accrued
      interest payable                        63,451         (11,998)         76,358
    Increase (decrease) in other
      liabilities                            343,439        (128,431)        109,231

      Net cash provided by (used by)
        operating activities               3,482,755       2,731,121       3,391,400

Cash flows from investing activities:
  Proceeds from sale of available for
    sale securities                       16,552,440      21,945,795      33,795,336
  Proceeds from maturities of available
    for sale securities                   40,404,500       3,705,000             -0-
  Purchase of available for sale
    securities                           (73,639,832)    (34,223,967)    (46,943,586)
  Proceeds from maturities of held
    to maturity securities                       -0-             -0-       6,189,000 
  Purchase of held to maturity
    securities                             2,026,089       2,551,169       2,220,615
  Net increase in loans                  (19,753,478)     (9,201,875)     (5,854,428)
  Proceeds from sale of premises
    and equipment                              2,500           2,554             -0-
  Purchase of premises and equipment      (1,215,313)     (1,237,641)        (58,171)
  Additions to construction
    in progress                                  -0-             -0-        (330,617)
  Proceeds from sale of other real
    estate                                    69,251         213,052             -0-
  Purchase of intangible assets           (3,875,031)            -0-             -0-

    Net cash used in investing
      activities                         (39,428,874)    (16,245,913)    (12,407,116)

Cash flows from financing activities:
  Cash dividends paid                       (735,292)       (603,888)       (495,990)
  Increase in deposits                    36,661,664       9,762,071      11,270,988
  Net decrease in long-term borrowing            -0-      (1,025,000)        (25,000)
  Net increase (decrease) in short-
    term borrowing                         2,561,916       6,018,858      (2,275,036)
   Purchase of treasury stock                (62,040)       (486,735)            -0-

    Net cash provided by financing
      activities                          38,426,248      13,665,306       8,474,962

Net increase (decrease) in cash
  and cash equivalents                     2,480,129         150,514        (540,754)

Cash and cash equivalents, beginning
  of year                                  3,068,574      2,918,060        3,458,814

Cash and cash equivalents, end of
  year                                  $  5,548,703    $ 3,068,574     $  2,918,060
        
Supplemental disclosures of cash paid:

   Interest paid                        $  7,850,607    $ 6,867,566     $  6,296,857

   Income taxes paid                    $    838,000    $ 1,048,966     $    544,000

Non-cash investing and financing
  activities:

  Transfers from loans to real
    estate acquired through
    foreclosure                         $    164,854    $       -0-     $    438,207

  Proceeds from sales of foreclosed
    real estate financed through
    loans                               $    108,500    $    41,000     $        -0-

  Total increase (decrease) in
    unrealized gain (loss) on 
    securities available for sale       $ (1,085,481)   $   398,422     $ (2,213,338)

  Stock dividend                        $       -0-     $       -0-     $  2,970,000
</TABLE>
                See notes to financial statements
<PAGE>
         PEOPLES FINANCIAL SERVICES CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                DECEMBER 31, 1997, 1996 AND 1995

Note 1:

Summary of Significant Accounting Policies

          The accounting and reporting policies of Peoples
Financial Services Corp. and Subsidiary (the "Company") follow
generally accepted accounting principles and have been applied on
a consistent basis.  The more significant accounting policies are
summarized below.

Basis of Presentation

          The consolidated financial statements include the
accounts of Peoples Financial Services Corp. and its wholly owned
subsidiary, Peoples National Bank of Susquehanna County.  All
intercompany accounts and transactions have been eliminated in
consolidation.

Nature of Operations

          The Company provides a variety of financial services,
through the bank, to individuals, small businesses and
municipalities through its eight offices located in Hallstead,
Hop Bottom, Susquehanna, Montrose, Nicholson, Meshoppen,
Tunkhannock and Springville, which are small communities in a
rural setting.  The Bank's primary deposit products are checking
accounts, savings accounts, and certificates of deposit.  Its
primary lending products are single-family residential loans and
loans to small businesses.

Use of Estimates

          The preparation of financial statements in conformity
with generally accepted accounting principles 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.

Investment Securities

          Statement of Financial Accounting Standards ("SFAS")
No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," requires investments to be classified and accounted
for as either held to maturity, available for sale, or trading
account securities based on management's intent at the time of
acquisition.  Management is required to reassess the
appropriateness of such classifications at each reporting date.

          The Company classifies debt securities as held to
maturity when management has the positive intent and ability to
hold such securities to maturity.  Held to maturity securities
are stated at cost, adjusted for amortization of premium and
accretion of discount.

          Securities classified as available for sale are those
debt securities that the Corporation intends to hold for an 
indefinite period of time, but not necessarily to maturity.  Any
decision to sell a security classified as available for sale
would be based on various factors, including significant
movements in interest rates, changes in the maturity mix of the
Corporation's assets and liabilities, liquidity needs, regulatory
capital considerations, and other similar factors.  Securities
available for sale are carried at fair value.

          Unrealized gains or losses are reported as increases or
decreases in stockholders' equity, net of the related tax effect. 
Realized gains or losses, determined on the basis of the cost of
specific securities sold, are included in earnings.  Management
determines the appropriate classification of securities at the
time of purchase and re-evaluates the designations as of each
balance sheet date.  Equity securities consist primarily of
Federal Home Loan Bank and Federal Reserve Bank stock.

Loans

          Loans are stated at their outstanding unpaid principal
balances net of an allowance for loan losses and any deferred
fees or costs.  Interest income is accrued on the unpaid
principal balance.  Loan origination fees, net of certain direct
origination costs, are deferred and recognized over the
contractual life of the related loan as an adjustment to the
yield.

          A loan is generally considered impaired when it is
probable the Company will be unable to collect all contractual
principal and interest payments due in accordance with the terms
of the loan agreement.  The accrual of interest is discontinued
when the contractual payment of principal and interest has become
90 days past due or management has serious doubts about further
collectibility of principal or interest, even though the loan is
currently performing.  A loan may remain on accrual status if it
is in the process of collection and is either guaranteed or well
secured.  When a loan is placed on non-accrual status, unpaid
interest credited to income in the current year is reversed and
unpaid interest accrued in prior years is charged against the
allowance for loan losses.  Certain non-accrual loans may
continue to perform, that is, payments are still being received. 
Generally, the payments are applied to principal.  These loans
remain under constant scrutiny and if performance continues,
interest income may be recorded on a cash basis based on
management's judgment as to collectibility of principal.

Allowance for Loan Losses

          The allowance for loan losses is established through a
provision for loan losses which is charged to operations.  Loans,
determined to be uncollectible are charged against the allowance
account and subsequent recoveries, if any, are credited to the
account.

          The allowance for loan losses related to impaired
loans, that are identified for evaluation, is based on discounted
cash flows using the loans' initial effective interest rate or
the fair value, less selling costs, of the collateral for certain
collateral dependent loans.  By the time a loan becomes probable
of foreclosure, it has been charged down to fair value, less
estimated costs to sell.

          The allowance is maintained at a level believed by
management to be sufficient to absorb estimated potential credit
losses.  Management's determination of the adequacy of the
allowance is based on periodic evaluations of the credit
portfolio, the overall risk characteristics of the various
portfolio segments, past experience with losses, the impact of
economic conditions on borrowers, and other relevant factors. 
This evaluation is inherently subjective as it requires material
estimates, including the amounts and timing of expected future
cash flows on impaired loans, which may be susceptible to
significant change in the near term.

Premises and Equipment

          Premises and equipment are stated at cost less
accumulated depreciation.  Depreciation is computed using the
straight line and various accelerated methods based on estimated
useful lives.  Maintenance, repairs and minor replacements are
expensed when incurred.  Gains and losses on routine dispositions
are reflected in current operations.

Intangible Assets

          Intangible assets are included in other assets and are
being amortized over a period of fifteen years using the
straight-line method.  Amortization for 1997 was $214,931.

Foreclosed Assets Held for Sale

          Foreclosed assets held for sale is comprised of
property acquired through a foreclosure proceeding or acceptance
of a deed-in-lieu of foreclosure and loans classified as in-
substance foreclosure.  The Company includes such properties in
other assets.  A loan is classified as in-substance foreclosure
when the Company has taken possession of the collateral
regardless of whether formal foreclosure proceedings take place. 
Any excess of the loan balance over the recorded value is charged
to the allowance for loan losses.  Subsequent declines in the
recorded value of the property prior to its disposal and costs to
maintain the assets are included in other expense.  In addition,
any gain or loss realized upon disposal is included in other
income or expense.

Income Taxes

          The provision for income taxes is based on the current
and deferred tax consequences of all transactions that have been
recognized in the financial statements using the provisions of
the enacted tax laws.  Deferred income taxes are provided using
the liability method whereby deferred tax assets are recognized
for deductible temporary differences and deferred tax liabilities
are recognized for taxable temporary differences.  Temporary
differences are the differences between the reported amount of
assets and liabilities and their tax bases.

Advertising Costs

          The Company follows the policy of charging marketing
and advertising costs to expense as incurred.

Common Stock 

          Holders of Company Common Stock are entitled to one
vote for each share on all matters voted on by shareholders. 
Holders of Company Common Stock do not have cumulative voting
rights in the election of directors.

          Holders of Company Common Stock do not have preemptive
rights, or any subscription, redemption or conversion privileges. 
Holders of Company Common Stock are entitled to participate
ratably in dividends on the Company Common Stock as declared by
the Board of Directors, and are entitled to share ratably in all 
assets available for distribution to shareholders in the event of
liquidation or dissolution of the Company.

Earnings per Common Share

          During 1997, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 128, "Earnings
per Share (SFAS 128)."  SFAS 128 eliminates primary and fully
diluted earnings per share and requires presentation of basic and
diluted earnings per share in conjunction with the disclosure of
the methodology used in computing such earnings per share.  Basic
earnings per share exclude dilution and is computed by dividing
income available to common shareholders by the weighted-average
common shares outstanding during the period.  Diluted earnings
per share takes into account the potential dilution that could
occur if securities or other contracts to issue common stock were
exercised and converted into common stock.  Prior periods'
earnings per share calculations have been restated to reflect the
adoption of SFAS No. 128.

          SFAS No. 128 requires that, unless there are no
potential common shares outstanding, both basic and diluted EPS
must be presented including a reconciliation of the numerator and
denominator in the computation of basic EPS to the numerator and
denominator used for diluted EPS.  Since there are no potential
common shares outstanding at December 31, 1997, these disclosures
were not required.

          Earnings per common share are based on the weighted
average number of shares outstanding for the period after giving
retroactive effect to stock dividends.  The weighted average
number of shares outstanding was 875,312, 888,034 and 891,000 for
1997, 1996 and 1995, respectively.

Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities

          The Company adopted SFAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities."  SFAS No. 125 provides accounting and reporting
standards for transfers and servicing of financial assets and
extinguishments of liabilities.  Implementation guidance is
provided in SFAS No. 125 for assessing isolation of transferred
assets 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 and reverse-repurchase
agreements, dollar-roll transactions, wash sales, loan
syndications and participations, risk participations in banker's
acceptances, factoring arrangements, transfers of receivables
with recourse, and extinguishments of liabilities.  The
accounting and reporting standards of SFAS No. 125 are based on
consistent application of financial-components approach that
focuses on control.

          Under such approach, after a transfer of financial
assets, an enterprise recognizes the financial and servicing
assets it controls and the liabilities it has incurred,
derecognizes financial assets when control has been surrendered,
and derecognizes liabilities when extinguished.  SFAS No. 125
provides consistent standards for distinguishing transfers of
financial assets that are sales from transfers that are secured
borrowings.  The Statement is effective for transfers and
servicing of financial assets and extinguishments of liabilities
occurring after December 31, 1996, except as amended in SFAS No.
127, "Deferral of  the Effective Date of certain Provisions of
FASB Statement No. 125."  SFAS No. 125 is to be applied
prospectively with earlier or retroactive application prohibited. 
Specifically, the provisions identified as being deferred under
SFAS No. 127 include secured borrowings, collateralizations and
transfers of financial assets that are part of repurchase
agreements, dollar-rolls, securities lending and similar
transactions.  The adoption of SFAS No. 125 standards did not
have a material effect on operating results.  The standards
deferred by SFAS No. 127 until 1998 are not expected to have a
material effect on operating results or financial position.

Accounting Principles Issued and Not Yet Adopted

          In June 1997, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 130, "Reporting Comprehensive Income", which is effective for
years beginning after December 15, 1997.  SFAS No. 130 requires
entities presenting a complete set of financial statements to
include details of comprehensive income.  Comprehensive income
consists of net income or loss for the current period and income,
expenses, gains and losses that bypass the income statement and
are reported directly in a separate component of equity.  The
effect of adopting SFAS No. 130 is not expected to be material to
the Company's financial position or results of operations.

          In June 1997, the FASB issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related
Information", which is effective for all periods beginning after
December 15, 1997.  SFAS No. 131 requires that public business
enterprises report certain information about operating segments
in complete sets of financial statements of the enterprise and in
condensed financial statements of interim periods issued to
shareholders.  It also requires that public business enterprises
report certain information about their products and services, the
geographic areas in which they operate, and their major
customers.  Management is currently evaluating the disclosure
impact of SFAS No. 131 on its financial statements.

Cash Flows

          For the purpose of cash flow, cash and cash equivalents
include cash and due from banks, interest-bearing deposits in
other banks and federal funds sold.

Off-Balance Sheet Financial Instruments

          In the ordinary course of business, the Company has
entered into off-balance sheet financial instruments consisting
of commitments to extend credit and standby letters of credit. 
Such financial instruments are recorded in the financial
statements when they become payable.

Reclassifications

          Certain prior year amounts have been reclassified to
conform to the current year's classifications.

Note 2:

Restrictions on Cash and Due from Banks

          The Bank is required to maintain average reserve
balances with the Federal Reserve Bank based on a percentage of
deposits.  The required reserve balance at December 31, 1997 and
1996 was $1,005,000 and $588,000, respectively.

Note 3:

Investment Securities

          At December 31, 1997 and 1996, the amortized cost and
fair values of securities available for sale are as follows:

<TABLE>
<CAPTION>
                                                  Gross        Gross   
                                  Amortized    Unrealized   Unrealized       Fair
                                     Cost         Gain         Loss         Value   
<S>                              <C>           <C>          <C>          <C>
December 31, 1997
  U.S. Treasury securities       $11,470,890   $  166,301     $   -0-    $11,637,191
  U.S. Government corporate
    and agency obligations        20,876,825      120,812     121,375     20,876,262
  Obligations of state and
    political subdivisions        28,891,549      586,237       3,743     29,474,043
  Corporate debt securities        6,177,235       66,907     129,603      6,114,539
  Mortgage backed securities      19,339,387       81,942     206,010     19,215,319
  Equity securities                  831,700          -0-         -0-        831,700
                                 $87,587,586   $1,022,199    $460,731    $88,149,054

December 31, 1996
  U.S. Treasury securities       $ 2,899,624   $   22,553    $    113    $ 2,922,064
  U.S. Government corporate
    and energy obligations        19,553,795       29,033     312,713     19,270,115
  Obligations of state and
    political subdivisions        20,004,026      240,588      77,785     20,166,829
  Corporate debt securities        5,817,041       26,089     186,222      5,656,908
  Mortgage backed securities      23,449,838      116,618     382,061     23,184,395
  Equity securities                  930,900          -0-         -0-        930,900
                                 $72,655,224   $  434,881    $958,894    $72,131,211
</TABLE>

          The amortized cost and fair value of securities as of
December 31, 1997 by contractual maturity or call date, are shown
below.  Expected maturities will differ from contractual
maturities or call dates because borrowers may have the right to
prepay obligations with or without call or prepayment penalties,
or elect not to prepay the obligation at call date.

                                         Amortized        Fair
                                            Cost         Value

Due in one year or less                 $ 3,915,569   $ 3,921,743
Due after one year through five years    28,878,865    29,217,894
Due after five years through ten years   16,029,816    16,122,793
Due after ten years                      18,592,249    18,839,605
                                         67,416,499    68,102,035

Mortgage-backed securities               19,339,387    19,215,319
Equity securities                           831,700       831,700
                                        $87,587,586   $88,149,054

          Proceeds from sale of available for sale securities
during 1997, 1996 and 1995 were $16,552,440, $21,945,795, and
$33,795,336, respectively.  Gross gains realized on these sales
were $238,070, $251,687, and $191,722, respectively.  Gross
losses on these sales were $20,966, $131,774, and $85,103,
respectively.  Realized losses on trading securities amounting to
$46,425 were recognized in net income in 1995.  Net unrealized
gains (losses) on securities available for sale included as a
separate component of consolidated stockholders' equity net of
tax was $370,569 and $(345,849) in 1997 and 1996, respectively.

          On November 15, 1995 the Financial Accounting Standards
Board (FASB) published a special report, "A Guide to
Implementation of Statement No. 115 on Accounting for Certain
Investments in Debt and Equity Securities" (the "Report").  The
report included a provision that allowed banks a one-time
opportunity to reclassify (at fair value) held-to-maturity
securities without calling into question their intent to hold
other debt securities to maturity in the future.  The
reclassification had to be made in conjunction with
implementation of the supplemental guidance by December 31, 1995. 
The bank transferred debt securities with an amortized cost of
$18,349,070 from held-to-maturity to available for sale due to
management's reassessment of the classification of securities. 
The securities had an unrealized gain of approximately $229,400. 
Held-to-maturity securities were also sold for total proceeds of
$399,920 resulting in a realized gain of $4,080.

          Securities with a carrying value of $22,635,952 and
$21,744,599 at December 31, 1997 and 1996, respectively, were
pledged to secure public deposits and repurchase agreements as
required or permitted by law.

Note 4: Loans

          Loans are summarized as follows:

                                          1997           1996

Commercial                            $ 14,796,511   $  9,787,504
Real estate                             95,953,797     83,193,457
Consumer                                16,102,400     14,284,308
  Total loans                         $126,852,708   $107,265,269

          A summary of the transactions in the allowance for loan
losses is as follows:

                             1997          1996          1995
Balance at beginning of
  year                    $1,663,806    $1,487,757    $1,483,883
Provision charged to
  operating expenses         130,000       220,000       450,000
Recoveries                    31,253        33,146        16,365
Loan charge-offs            (149,172)      (77,097)     (462,491)
Balance at end of year    $1,675,887    $1,663,806    $1,487,757

          Information with respect to impaired loans as of and
for the years ended December 31, 1997 and 1996 are as follows:

                                              1997        1996

Loans receivable for which there is a
  related allowance for loan losses         $432,000   $  963,000
Loans receivable for which there is no
  related allowance for loan losses            -0-         82,000
    Total impaired loans                    $432,000   $1,045,000

Related allowance for loan losses           $ 89,000   $  386,000

Average recorded balance on these
  impaired loans                            $486,000   $1,100,000 

Interest income on these impaired loans     $  7,100   $  118,000 

          In addition, the Bank had other non-accrual loans of
approximately $595,000 and $647,000 at December 31, 1997 and
1996, respectively, for which impairment had not been recognized. 
Interest income on these loans, which is recorded when received,
amounted to $24,900 and $30,700 for the years ended December 31,
1997 and 1996, respectively.

          Interest income that would have been recorded under the
original terms of the loan agreements amounted to $96,000 and
$163,000 for the years ended December 31, 1997 and 1996,
respectively.

          The Bank has no commitments to loan additional funds to
borrowers with impaired or non-accrual loans.

Note 5: Premises and Equipment

          Premises and equipment at December 31, 1997 and 1996
are comprised of:

                                          1997           1996

Land                                  $   348,280    $   298,280
Building and improvements               3,408,074      3,027,282
Furniture, fixtures and equipment       2,713,521      2,107,570  
  Total                                 6,469,875      5,433,132
  Accumulated depreciation             (2,713,575)    (2,460,820)
  Net                                 $ 3,756,300    $ 2,972,312

Note 6:  Deposits

          The carrying amounts of deposits at December 31,
consisted of the following:

                                          1997           1996

Demand - non-interest bearing         $ 20,104,376   $ 13,780,637
Demand - interest bearing               52,945,190     40,896,069
Savings                                 29,034,158     21,776,181

Time - $100,000 and over                12,510,000     11,964,463
Time - less than $100,000               78,998,293     68,513,003
                                      $193,592,017   $156,930,353

          At December 31, 1997 and 1996 the time remaining to
maturity of time certificates of deposit of $100,000 or more was
as follows:

                                                          1997

Within 3 months                                       $ 2,356,000
3 to 12 months                                          5,419,000
One to three years                                      3,664,000
Over three years                                        1,071,000
  Total                                               $12,510,000

          Interest expense related to time deposits of $100,000
or more was $611,961 in 1997, $653,410 in 1996 and $605,910 in
1995.

Note 7: Short-term Borrowings

          Federal funds purchased, securities sold under
agreements to repurchase and Federal Home Loan Bank advances
generally represent overnight or less than 30-day borrowings. 
U.S. Treasury tax and loan notes for collections made by the Bank
are payable on demand.  Short-term borrowings consisted of the
following at December 31, 1997 and 1996:

<TABLE>
<CAPTION>
                                            1997                                              1996                    
                                                  Maximum                                           Maximum
                         Ending      Average     Month End    Average      Ending      Average     Month End   Average
                        Balance      Balance      Balance       Rate      Balance      Balance      Balance      Rate 
<S>                   <C>          <C>          <C>            <C>       <C>          <C>          <C>          <C>
Federal funds
  purchased and
  securities sold
  under agreements
  to repurchase       $2,596,742   $1,271,083   $ 4,900,000    5.65%     $   -0-      $  714,123   $1,800,000   5.51%
Federal Home Loan 
  Bank                 5,675,000    1,251,027     6,000,000    6.32%      6,175,000      555,724    6,175,000   3.20%  
 U.S. Treasury tax
  and loan notes       1,003,092      535,242     1,107,099    4.74%        537,918      424,301    1,116,693   4.05%

Total                 $9,274,834   $3,057,352   $12,007,099    5.77%     $6,712,918   $1,694,148   $9,091,693   4.49%
</TABLE>

          Advances on the flexible line of credit from the FHLB
at December 31, 1997 and 1996 were $3,775,000 and $6,175,000,
respectively.  All advances from FHLB are secured by qualifying
assets of the Bank.

          Securities sold under repurchase agreements were under
the Bank's control.

          The Bank has a line of credit for the sale of federal
funds with Atlantic Central Bankers Bank of which $-0- were
outstanding at December 31, 1997 and 1996, respectively.  These
borrowings are unsecured.

Note 8:  Income Taxes

          The components of the provision for income tax are as
follows:

                                    1997       1996        1995
Federal
  Currently payable               $791,989   $923,510    $821,383
  Deferred                          21,630    (72,682)     16,973

    Total provision for income
      tax                         $813,619   $850,828    $838,356

          The deferred tax assets and liabilities resulting from
temporary timing differences have been netted to reflect a net
deferred tax asset included in other assets in these consolidated
financial statements.  The components of the net deferred tax
assets at December 31, 1997, 1996, and 1995 are as follows:

                                              1997        1996
Deferred tax asset:
  Unrealized loss on available for sale
    securities                             $   -0-      $178,164
  Allowance for loan losses                  441,599     437,491
  Deferred loan fees                          83,680      98,565
  Deferred compensation                       61,873      56,490
                                             587,152     770,710
Deferred tax liability:                         
  Unrealized gain on available for sale
    securities                              (190,899)      -0-    
  Accretion                                  (51,746)    (44,190)
  Other                                      (20,129)    (11,449)
    Total                                   (262,774)    (55,639)

Net deferred tax asset                     $ 324,378    $715,071

          A reconciliation of the provision for income taxes and
the amount that would have been provided at statutory rates for
the years ended December 31, are as follows:

                             1997          1996          1995
Provision at statutory
  rate                    $1,300,459    $1,212,734    $1,130,695
Tax exempt interest         (561,156)     (425,385)     (351,586)
Non-deductible expenses       86,990        73,121        67,250
Other, net                   (12,674)       (9,642)       (8,003)
  Net provision for
    income taxes          $  813,619    $  850,828    $  838,356  

Note 9:  Pension Plan and Other Employee Benefit Plans

          The Bank has a noncontributory pension plan covering
eligible employees.  Benefits are based on the employee's
compensation and years of service.  The Bank's funding policy is
to contribute annually amounts not to exceed the maximum amount
deductible for federal income tax purposes.  Contributions are
intended to provide not only for benefits attributed to service
to date, but also for those expected to be earned in the future.

          The following table sets forth the plan's funded status
and amounts recognized in the Bank's statement of financial
position at December 31, 1997 and 1996.

                                             1997         1996
Actuarial present value of benefit
  obligation:

Accumulated benefit obligation
  (including vested benefits of
  $435,663 and $408,491 in 1997
  and 1996, respectively)                 $ 435,663    $ 413,812

Plan assets at fair value                   915,027      868,910

Projected benefit obligation for
  services rendered to date (Including
  vested benefits of $435,663 and
  $408,491 in 1997 and 1996,
  respectively)                            (499,036)    (458,277)

Plan assets in excess of projected
  benefit obligations                       415,991      410,633

Net (gain) loss from past experience
  different from that assumed and effects
  of changes in assumptions                 (76,836)     (84,716)

Prior service cost not yet recognized in
  net periodic pension cost                (214,025)    (223,144)

Net obligation (asset) being recognized
  over 20.89 years                          (80,710)     (86,792)

Prepaid pension cost included in other
  assets                                  $  44,420    $  15,981

          Net pension cost for the years ended December 31, 1997,
1996 and 1995 included the following components:

                                 1997        1996         1995
Service cost-benefits earned
  during the year              $ 21,665    $ 19,155    $  19,933  
Interest cost on projected
  benefit                        37,841      33,098       31,276
Actual return on plan assets    (66,638)    (96,036)    (142,693)
Net amortization and deferral    (6,082)     (6,082)      (6,082)
Prior service cost               (9,119)     (9,119)      (9,119)
Deferred gain (loss)             (6,106)     29,324       86,925
Net periodic pension cost      $(28,439)   $(29,660)   $ (19,760)

          The weighted average discount rate and rate on increase
in future compensation levels used in determining the actuarial
present value of the projected benefit obligation was 8.5% at
December 31, 1997 and 1996.  The expected long-rate of return on
plan assets was 8.5% in 1997, 1996 and 1995.

          The Bank has an employee stock ownership plan covering
substantially all employees.  Contributions to the plan are at
the discretion of the Board of Directors.  Employer contributions
are allocated to participant accounts based on their percentage
of total compensation for the plan year.  Shares of Bank stock
owned by the plan are included in the earnings per share
calculation and dividends on these shares are deducted from
undivided profits.  During 1997, 1996 and 1995, contributions to
the plan charged to operations were $65,416, $67,713 and $71,777,
respectively.

          The Bank also maintains a profit sharing plan under the
provisions of Section 401(k) of the Internal Revenue Code.  The
plan covers substantially all employees who have completed one
year of service.  Contributions to the plan by the Bank equal 50%
of the employee contribution up to a maximum of 6% of annual
salary.  During 1997, 1996 and 1995, employer contributions to
the plan charged to operations were $34,831, $21,252 and $21,139,
respectively.

          The Bank has an agreement with its chief executive
officer to establish an excess benefit retirement plan.  The plan
is a non-qualified Deferred Compensation Plan in which the Bank
is not required to establish a reserve. The Bank has obtained
life insurance (designating the Bank as the beneficiary) on the
life of the chief executive officer in an amount which is
intended to cover the Bank's obligations under the Deferred
Compensation Plan, based upon certain actuarial assumptions upon
the death of the officer.  The cost charged to operations was
$15,832, $21,185 and $19,242 for the years ended December 31,
1997, 1996 and 1995, respectively.

Note 10:  Commitments and Contingencies

          The Bank is obligated under non-cancelable lease
agreements for certain bank premises expiring in September 2028. 
The leases contains a renewal option and provides that the Bank
pay property taxes, insurance and maintenance costs.

          The following is a schedule by years of future minimum
lease payments required under this non-cancelable lease:

          Years ended December 31
                             1998              $ 13,440
                             1999                17,760
                             2000                17,760
                             2001                17,760
                             2002                17,760
                2003 through 2008               121,320
                                               $205,800

          Total rent expense was $12,000 for the years ended
December 31, 1997, 1996 and 1995.

Note 11:  Financial Instruments with Off-Balance Sheet Risk and
          Concentration of Credit Risk

          The Bank is a party to financial instruments with off-
balance sheet risk in the normal course of business to meet the
financing needs of its customers.  These financial instruments
include commitments to extend credit and standby letters of
credit.  Those instruments involve, to varying degrees, elements
of credit and interest rate risk in excess of the amount
recognized in the consolidated balance sheets.  The contract or
notional amounts of those instruments reflect the extent of
involvement the Company has in particular classes of financial
instruments.  Standby letters of credit commit the Bank to make
payments on behalf of customers when certain specified future
events occur.  Commitments to extend credit are agreements to
lend to the customer as long as there is no violation of any
condition established in the contract.  Commitments generally
have fixed expiration dates or other termination clauses.  Since
many of the commitments are expected to expire in one year or
less without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements.

          The Bank's exposure to credit loss is essentially the
same for these items as that involved in extending loans to
customers.  The Bank uses the same credit policies in making
commitments and conditional obligations as it does for on balance
sheet instruments.  Collateral is obtained based on management's
credit assessment of the particular customer.

          The contract or notional amounts at December 31, 1997
and 1996 were as follows:

                                             1997         1996

Commitments to extend credit              $6,450,413   $3,544,638 
Standby letters of credit                    250,500      272,515
                                          $6,700,913   $3,817,153

          The Bank grants commercial, consumer and residential
loans to customers in the Susquehanna/Wyoming County, PA and
Broome County, NY areas.  Of the total loan portfolio, 76% is for
real estate loans, principally residential.  It is the opinion of
management that this high concentration does not pose any adverse
credit risk.  Further, it is management's opinion that the
remainder of the loan portfolio is balanced and diversified to
the extent necessary to avoid any significant concentration of
credit.

Note 12:  Regulatory Matters

          The Bank is subject to the dividend restrictions set
forth by the Comptroller of the Currency.  Under such
restrictions, the Bank may not, without the prior approval of the
Comptroller of the Currency, declare dividends in excess of the
sum of the current year's earnings (as defined) plus the retained
earnings (as defined) from the prior two years.  Under this
restriction, the Bank, without prior regulatory approval, can
declare dividends to the Company totaling $4,575,000, plus an
additional amount equal to the net profit for 1998, up to the
date any such dividend is declared.

          Under Federal Reserve regulations, the Bank is limited
as to the amount it may lend to its affiliates, including the
Company, unless such loans are collateralized by specified
obligations.  At December 31, 1997, the maximum amount available
for transfer from the Bank to the Company in the form of loans
approximated 20% of capital stock and surplus.

          The Company 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 Company's financial statements.  Under capital
adequacy guidelines and the regulatory framework for prompt
corrective action, the Company and the Bank must meet specific
capital guidelines that involve quantitative measures of its
assets, liabilities and certain off-balance sheet items as
calculated under regulatory accounting practices.  The capital
amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings and
other factors.

          Quantitative measures established by regulation to
ensure capital adequacy require the maintenance of minimum
amounts and ratios (set forth in the table below) of total and
Tier 1 capital (as defined in the regulations) to risk-weighted
assets (as defined), and of Tier 1 capital to average assets (as
defined).  Management believes, as of December 31, 1997, that the
Company and Bank meet all capital adequacy requirements to which
they are subject.

          As of December 31, 1997, the most recent notification
from the Office of the Comptroller of the Currency 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 1 risk-
based, and Tier 1 leverage ratios as set forth in the table
below.  There are no conditions or events since that notification
that management believes have changed the Bank's category.

          The Company and Bank's actual capital ratios as of
December 31, and the minimum ratios required for capital adequacy
purposes and to be well capitalized under the prompt corrective
action provisions are as follows:

<TABLE>
<CAPTION>
                                                                            To Be Well Capital-
                                                                             ized Under Prompt
                                                          For Capital        Corrective Action
                                      Actual           Adequacy Purposes        Provisions     
                                  Amount      Ratio     Amount     Ratio      Amount      Ratio
<S>                            <C>           <C>      <C>          <C>     <C>           <C>
As of December 31, 1997:

Total capital (to risk
  weighted assets):
    Consolidated               $22,167,000   17.84%   $9,938,000   8.00%   $12,422,000   10.00%
    Peoples National Bank      $22,132,000   17.82%   $9,933,000   8.00%   $12,417,000   10.00%
Tier 1 capital (to risk
  weighted assets):
    Consolidated               $20,613,000   16.59%   $4,969,000   4.00%   $ 7,453,000    6.00%
    Peoples National Bank      $20,578,000   16.57%   $4,967,000   4.00%   $ 7,450,000    6.00%
Tier 1 capital (to average
  assets):
    Consolidated               $20,613,000    9.22%   $8,947,000   4.00%   $11,184,000    5.00%
    Peoples National Bank      $20,578,000    9.20%   $8,947,000   4.00%   $11,184,000    5.00%

As of December 31, 1996:

Total capital (to risk
  weighted assets):                                      
    Consolidated               $23,389,000   22.07%   $8,476,000   8.00%   $10,596,000   10.00%
    Peoples National Bank      $23,419,000   22.07%   $8,488,000   8.00%   $10,610,000   10.00%

Tier 1 capital (to risk
  weighted assets):
    Consolidated               $22,060,000   20.82%   $4,238,000   4.00%   $ 6,357,000    6.00%
    Peoples National Bank      $22,089,000   20.82%   $4,244,000   4.00%   $ 6,366,000    6.00%
Tier 1 capital (to average
  assets):
    Consolidated               $22,060,000   10.76%   $8,201,000   4.00%   $10,252,000    5.00%
    Peoples National Bank      $22,089,000   11.99%   $7,368,000   4.00%   $ 9,209,000    5.00%
</TABLE>

Note 13:  Related Parties

          The Bank has entered into transactions with its
directors, significant shareholders and their affiliates (related
parties).  Such transactions were made in the ordinary course of
business on substantially the same terms and conditions,
including interest rates and collateral, as those prevailing at
the same time for comparable transactions with other customers,
and did not, in the opinion of management, involve more than
normal credit risk or present other unfavorable features.  The
aggregate amount of loans to such related parties at December 31,
1997 and 1996 was $758,083 and $712,083, respectively.  During
1997, $262,106 of new loans and advances on lines of credit were
made, and repayments totaled $213,509.

Note 14:  Financial Instruments

          The following methods and assumptions were used by the
Company in estimating its fair value disclosures for financial
instruments:

          Cash and cash equivalents:  The carrying amounts
reported in the statement of financial condition for cash and
cash equivalents approximate those assets fair values.

          Investment securities (including trading account
securities and mortgage-backed securities):  Fair values for
investment securities are based on quoted market prices, where
available.  If quoted market prices are not available, fair
values are based on quoted market prices of comparable
instruments.

          Loans:  For variable-rate loans that reprice frequently
and with no significant change in credit risk, fair values are
based on carrying amounts.  The fair values for other loans are
estimated using discounted cash flow analysis, based on interest
rates currently being offered for loans with similar terms to
borrowers of similar credit quality.  Loan fair value estimates
include judgments regarding future expected loss experience and
risk characteristics.  The carrying amount of accrued interest
receivable approximates its fair value.

          Deposits:  The fair values disclosed for demand
deposits are, by definition, equal to the amount payable on
demand at the reporting date (that is, their carrying amounts). 
The fair values for certificates of deposit are estimated using a
discounted cash flow calculation that applies interest rates
currently being offered on certificates to a schedule of
aggregated contractual maturities on such time deposits.  The
carrying amount of accrued interest payable approximates fair
value.

          Short-term borrowings:  The carrying amounts of short-
term borrowings approximate their fair values.

          Long-term borrowings:  The fair values of the Bank's
long-term debt are estimated using discounted cash flow analyses
based on the Bank's current incremental borrowing rates for
similar types of borrowing arrangements.

          Commitments to extend credit and standby letters of
credit:  These financial instruments are generally not subject to
sale, and estimated fair values are not readily available.  The
carrying value, represented by the net deferred fee arising from
the unrecognized commitment or letter of credit, and the fair
value, determined by discounting the remaining contractual fee
over the term of the commitment using fees currently charged to
enter into similar agreements with similar risk, are not
considered material for disclosure.  The contractual amounts of
unfunded commitments and letters of credit are presented in
Note 11.

          The estimated fair values of the Bank's financial
instruments are as follows:

<TABLE>
<CAPTION>
                              December 31, 1997             December 31, 1996     
                           Carrying         Fair         Carrying         Fair
                            Amount          Value         Amount          Value   
<S>                      <C>            <C>            <C>            <C>         
Financial assets:
  Cash and due
    from banks           $  2,401,332   $  2,401,332   $  1,672,682   $  1,672,682
  Interest-bearing
    deposits in                                         
    other banks             3,147,371      3,147,371      1,395,892      1,395,892
  Investment
    securities             88,149,054     88,149,054     72,131,211     72,131,211
  Loans, net              125,109,633    128,853,451    105,486,155    106,330,931
  Accrued interest
    receivable              1,776,908      1,776,908      1,429,957      1,429,957

Financial liabilities:
  Deposits               $193,592,017   $193,621,446   $156,930,353   $156,962,830
  Short-term borrowings     9,274,834      9,274,834      6,712,918      6,712,918
  Accrued interest
    payable                   662,696        662,696        599,245        599,245
</TABLE>

          The carrying amounts in the preceding table are
included in the balance sheet under the applicable captions.

Note 15: Parent Company

          The following is financial information for Peoples
Financial Services Corp. (Parent Company only):

Balance Sheets

                                      December 31,   December 31,
                                          1997           1996    
Assets:
  Cash                                $   101,225    $    13,265
  Investment in bank subsidiary        24,608,305     21,743,285
      Total assets                     24,709,530     21,756,550

Liabilities:
  Due to subsidiary                        65,607         42,972
      Total liabilities                    65,607         42,972

Stockholders' equity:
  Common stock                          4,455,000      4,455,000
  Surplus                               4,455,000      4,455,000
  Undivided profits                    15,912,129     13,636,162
  Unrealized gain (loss) on
    securities available for sale,
    net of applicable income taxes        370,569       (345,849)
  Less:  Treasury stock                  (548,775)      (486,735)
      Total stockholders' equity       24,643,923     21,713,578

      Total liabilities and
        stockholders' equity          $24,709,530    $21,756,550

Statements of Income

                             1997          1996          1995
Dividends from bank
  subsidiary              $  885,292    $1,103,888    $  495,990
Other expenses                34,296         1,823           102

    Income before taxes
      and equity in
      undistributed
      income of
      subsidiary             850,996     1,102,065       495,888

Provision for income tax
  (benefit)                  (11,661)         (620)         (102)

    Income before equity
      in undistributed
      income of
      subsidiary             862,657     1,102,685       495,990

Equity in undistributed
  income of subsidiary     2,148,602     1,613,352     1,991,230

        Net income        $3,011,259    $2,716,037    $2,487,220


Statement of Cash Flows
<TABLE>
<CAPTION>
                                        1997           1996           1995
<S>                                 <C>            <C>            <C>
Cash flows from operating
  activities:               
    Net income                      $ 3,011,259    $ 2,716,037    $ 2,487,220
    Adjustments to reconcile net
      income to net cash provided
      by operating activities:                                  
        Undistributed earnings of
          subsidiary                 (2,148,602)    (1,613,352)    (1,991,230)
        Increase (decrease) in due
          to subsidiary                  22,635          1,203              0

      Net cash provided by
        operating activities            885,292      1,103,888        495,990

Cash flows from financing
  activities:
    Cash dividends paid                (735,292)      (603,888)      (495,990)

    Purchase of treasury stock          (62,040)      (486,735)             0

      Net cash used by financing
        activities                     (797,332)    (1,090,623)      (495,990) 

Net increase in cash and cash
  equivalents                            87,960         13,265              0

Cash and cash equivalents,
  beginning of year                      13,265              0              0

Cash and cash equivalents, end
  of year                           $   101,225    $    13,265    $         0  

Non-cash investing and financing                    
  activities:                                       
    Stock dividend                  $         0    $         0    $ 2,970,000
</TABLE>
<PAGE>
Item 14.  Changes in and Disagreements with Accountants on
          Accounting and Financial Disclosure.

          None.
<PAGE>
Item 15.  Financial Statements and Exhibits

          (a)  The following financial statements are being filed
as a part of this Registration Statement:

               (i)  Independent auditor's report;

               (ii)  Consolidated balance sheets as of
     December 31, 1997 and 1996;

               (iii)  Consolidated statements of income for the
     three years ended December 31, 1997, 1996 and 1995; and

               (iv)  Consolidated statements of cash flows for
     the three years ended December 31, 1997, 1996 nd 1995.

          (b)  The following exhibits are being filed as a part
of this Registration Statement:

               (3.1)  Articles of Incorporation of Peoples
     Financial Services Corp.

               (3.2)  Bylaws of Peoples Financial Services Corp.

               (10.1)  Agreement dated January 1, 1997 between
     John W. Ord and Peoples Financial Services Corp.

               (10.2)  Excess Benefit Plan, dated January 14,
     1992, for John W. Ord.

               (10.3)  Termination Agreement dated January 1,
     1997 between Michael S. Karhnak and Peoples Financial
     Services Corp.

               (10.4)  Termination Agreement dated January 1,
     1997 between Debra E. Dissinger and Peoples Financial
     Services Corp.

               (21)  Subsidiaries of Peoples Financial Services
     Corp.

               (23)  Consent of Independent Auditors.

               (27) Financial Data Schedule.
<PAGE>
                           Signatures

          Pursuant to the requirements of Section 12 of the
Securities Exchange Act of 1934, the Registrant has duly caused
this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized.

                              PEOPLES FINANCIAL SERVICES
                              CORPORATION

                              By /s/ John W. Ord                 
                                 John W. Ord, President and Chief
                                 Executive Officer

                              Date:  February 26, 1998


                                                  EXHIBIT 3.1


                    ARTICLES OF INCORPORATION
                               OF
                PEOPLES FINANCIAL SERVICES CORP.
                  (A PENNSYLVANIA CORPORATION) 

     1.   The name of the corporation is PEOPLES FINANCIAL
SERVICES CORP.

     2.   The registered address of the corporation is 50 Main
Street, Hallstead, Susquehanna County, PA 18822.

     3.   The corporation was incorporated on February 6, 1986
under the provisions of the Business Corporation Law of the
Commonwealth of Pennsylvania, Act of May 5, 1933.

     4.   The aggregate number of shares of capital stock which
the corporation shall have authority to issue is Five Million
(5,000,000) shares of common stock, $5.00 par value.

     5.   The term of the corporation's existence is perpetual.

     6.   The names of the incorporators are John W. Ord, Ward E.
Bailey, Robert F. Reddon, and Virginia M. Turner.

     7.   Except as set forth below, the affirmative vote of
shareholders entitled to cast at least 75% of the votes which all
shareholders of this corporation are entitled to cast shall be
required to approve any of the following transactions:

                    (i)  any merger or consolidation of this
     corporation with or into any other corporation;

                    (ii)  any share exchange in which a
     corporation, person or entity acquires the issued or
     outstanding shares of capital stock of this corporation
     pursuant to a vote of shareholders;

                    (iii)  any sale, lease, exchange or other
     transfer of all, or substantially all, of the assets of this
     corporation to any other corporation, person or entity;

                    (iv)  any complete liquidation or dissolution
     of this corporation; or

                    (v)  any transaction similar to, or having
     similar effect as, any of the foregoing transactions.

     The Board of Directors of this corporation shall have the
power and duty to determine, on the basis of information known to
the Board, if any transaction is similar to, or has a similar
effect as, any of the transactions identified above in this
Article 7.  Any such determinations shall be conclusive and
binding for all purposes of this Article 7.

     The provisions of this Article 7 shall not apply to any
transaction which is approved in advance at a meeting of the
Board duly called and held for such specific purpose, but only if
such transaction is approved at such meeting by at least 66-2/3%
of the members of the entire Board.  If such Board approval is
obtained, then the affirmative vote of shareholders entitled to
cast at least a majority of the votes which all shareholders of
this corporation are entitled to cast shall be required to
approve any such transaction.  An affirmative vote as provided in
this Article 7 shall be in addition to the vote of shareholders
otherwise required by law.

     The provisions of this Article 7 may not be repealed,
altered or amended, in any respect whatsoever, unless such
repeal, alteration or amendment is approved by either (a) the
affirmative vote of shareholders entitled to cast at least 75% of
the votes which all shareholders of this corporation are entitled
to cast or (b) the affirmative vote of at least 66-2/3% of the
members of the Board of Directors of this corporation and the
affirmative vote of shareholders entitled to cast at least a
majority of the votes which all shareholders of this corporation
are entitled to cast.

     8.   Cumulative voting rights shall not exist with respect
to the election of directors.

     9.   (a)  The Board of Directors of this corporation, when
evaluating any offer of another party to (i) make a tender or
exchange offer for any equity security of this corporation,
(ii) merge or consolidate this corporation with another
corporation, (iii) purchase or otherwise acquire all or
substantially all of the properties and assets of this
corporation or (iv) engage in any transaction similar to, or
having similar effects as, any of the foregoing transactions,
shall, in connection with the exercise of its judgment in
determining what is in the best interests of this corporation and
its shareholders, give due consideration to all relevant factors,
including without limitation the social and economic effects of
the proposed transaction on the depositors, employees, suppliers,
customers and other constituents of this corporation and its
subsidiaries and on the communities in which this corporation and
its subsidiaries operate or are located, the business reputation
of the other party, and the Board of Directors' evaluation of the
then value of this corporation in a freely negotiated sale and of
the future prospects of this corporation as an independent
entity.

               (b)  The provisions of this Article 9 may not be
repealed, altered or amended, in any respect whatsoever, unless
such repeal, alteration or amendment is approved by either
(i) the affirmative vote of shareholders entitled to cast at
least 75% of the votes which all shareholders of this corporation
are entitled to cast or (ii) the affirmative vote of at least
66-2/3% of the members of the Board of Directors of this
corporation and the affirmative vote of shareholders entitled to
cast at least a majority of the votes which all shareholders of
this corporation are entitled to cast.

     10.  The total number of shares of preferred stock that the
corporation shall have authority to issue is 500,000 shares,
without par value.  The preferred stock may be issued from time
to time as a class without series, or if so determined by the
Board of Directors of the corporation, either in whole or in part
in one or more series.  There is hereby expressly granted to and
vested in the Board of Directors of the corporation authority to
fix and determine (except as fixed and determined herein), by
resolution, the voting powers, fully or limited, or no voting
powers, and such designations, preferences and relative,
participating, optional or other special rights, if any, and the
qualifications, limitations or restrictions thereof, if any,
including specifically, but not limited to, the dividend rights,
conversion rights, redemption rights and liquidation preferences,
if any, of any wholly unissued series of preferred stock (or the
entire class of preferred stock if none of such shares have been
issued), the number of shares constituting any such series and
the terms and conditions of the issue thereof.  Prior to the
issuance of any shares of preferred stock, a statement setting
forth a copy of each such resolution or resolutions and the
number of shares of preferred stock of each such class or series
shall be executed and filed in accordance with the Pennsylvania
Business Corporation Law.  Unless otherwise provided in any such
resolution or resolutions, the number of shares of capital stock
of any such class or series so set forth in such resolution or
resolutions may thereafter be increased or decreased (but not
below the number of shares then outstanding), by a statement
likewise executed and filed setting forth a statement that a
specified increase or decrease therein had been authorized and
directed by a resolution or resolutions likewise adopted by the
Board of Directors of the corporation.  In case the number of
such shares shall be decreased, the number of shares so specified
in the statement shall resume the status they had prior to the
adoption of the first resolution or resolutions.


                                                  EXHIBIT 3.2


                             BY-LAWS
                               OF
                PEOPLES FINANCIAL SERVICES CORP.

                            ARTICLE 1

                       CORPORATION OFFICE

     Section 1.1.  The Corporation shall have and continuously
maintain in Pennsylvania a registered office which may, but need
not, be the same as its place of business and at an address to be
designated from time to time by the Board of Directors.

     Section 1.2.  The Corporation may also have offices at such
other places as the Board of Directors may from time to time
designate or the business of the Corporation may require.

                            ARTICLE 2

                     SHAREHOLDERS' MEETINGS

     Section 2.1.  All meetings of the shareholders shall be held
at such time and place as may be fixed from time to time by the
Board of Directors.

     Section 2.2.  The annual meeting of the shareholders shall
be held no later than the thirtieth day of April in each year,
when they shall elect a Board of Directors and transact such
other business as may properly be brought before the meeting.

     Section 2.3.  Special meetings of the shareholders may be
called at any time by the Chairman of the Board, the President,
the Executive Vice President, if any, a majority of the Board of
Directors or of its Executive Committee or by shareholders
entitled to cast at least twenty percent (20%) of the votes which
all shareholders are entitled to cast at the particular meeting. 
At any time, upon written request of any person or persons who
have duly called a special meeting, it shall be the duty of the
secretary to fix the date of the meeting, to be held not more
than 60 days after the receipt of the request and to give due
notice thereof.  If the secretary shall neglect or refuse to fix
the date of the meeting and give notice thereof, the person or
persons calling the meeting may do so.

     Section 2.4.  Written notice of all meetings, other than
adjourned meetings of shareholders, stating the place, date and
hour, and, in case of special meetings of shareholders, the
purpose thereof, shall be served upon, or mailed, postage
prepaid, or telegraphed, charges prepaid, at least ten days
before such meeting, unless a greater period of notice is
required by statute or by these By-Laws, to each shareholder
entitled to vote thereat at such address as appears on the
transfer books of the Corporation.

                            ARTICLE 3

                     QUORUM OF SHAREHOLDERS

     Section 3.1.  The presence, in person or by proxy, of
shareholders entitled to cast at least a majority of the votes
which all shareholders are entitled to cast on the particular
matter shall constitute a quorum for purposes of considering such
matter, and unless otherwise provided by statute the acts of such
shareholders at a duly organized meeting shall be the acts of the
shareholders.  If, however, any meeting of shareholders cannot be
organized because of lack of a quorum, those present, in person
or by proxy, shall have the power, except as otherwise provided
by statute, to adjourn the meeting to such time and place as they
may determine, without notice other than an announcement at the
meeting, until the requisite number of shareholders for a quorum
shall be present, in person or by proxy, except that in the case
of any meeting called for the election of directors such meeting
may be adjourned only for periods not exceeding 15 days as the
holders, present in person or by proxy, of shares entitled to
cast at least a majority of the votes which all shareholders are
entitled to cast, shall direct, and those who attend the second
of such adjourned meetings, although less than a quorum, shall
nevertheless constitute a quorum for the purpose of electing
directors.  At any adjourned meeting at which a quorum shall be
present or so represented, any business may be transacted which
might have been transacted at the original meeting if a quorum
had been present.  The shareholders present, in person or by
proxy, at a duly organized meeting can continue to do business
until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.

                            ARTICLE 4

                          VOTING RIGHTS

     Section 4.1.  Except as may be otherwise provided by statute
or by the Articles of Incorporation, at every shareholders'
meeting, every shareholder entitled to vote thereat shall have
the right to one vote for every share having voting power
standing in his name on the books of the Corporation on the
record dated fixed for the meeting.  No share shall be voted at
any meeting if any installment is due and unpaid thereon.

     Section 4.2.  When a quorum is present at any meeting, the
vote of the holders, present in person or by proxy, of shares
entitled to cast at least a majority of the votes which all
shareholders are entitled to cast, shall decide any question
brought before such meeting except as may be otherwise provided
by statute or by the Articles of Incorporation.

     Section 4.3.  Upon demand made by a shareholder entitled to
vote at any election for directors before the voting begins, the
election shall be by ballot.

                            ARTICLE 5

                             PROXIES

     Section 5.1.  Every shareholder entitled to vote at a
meeting of shareholders or to express consent or dissent to
corporate action in writing without a meeting may authorize
another person or persons to act for him by proxy.  Every proxy
shall be executed in writing by the shareholder or his duly
authorized attorney-in-fact and filed with the Secretary of the
Corporation.  A proxy, unless coupled with an interest, shall be
revocable at will, notwithstanding any other agreement or any
provision in the proxy to the contrary, but the revocation of a
proxy shall not be effective until notice thereof has been given
to the Secretary of the Corporation.  No unrevoked proxy shall be
valid after 11 months from the date of its execution, unless a
longer time is expressly provided therein, but in no event shall
a proxy, unless coupled with an interest, be voted after three
years from the date of its execution.  A proxy shall not be
revoked by the death or incapacity of the maker, unless before
the vote is counted or the authority is exercised, written notice
of such death or incapacity is given to the Secretary of the
Corporation.

                            ARTICLE 6

                           RECORD DATE

     Section 6.1.  The Board of Directors may fix a time, not
more than 90 days prior to the date of any meeting of
shareholders, or the date fixed for the payment of any dividend
or distribution, or the date for the allotment of rights, or the
date when any change or conversion or exchange of shares will be
made or go into effect, as a record date for the determination of
the shareholders entitled to notice of, and to vote at, any such
meeting, or entitled to receive payment of any such dividend or
distribution, or to receive any such allotment of rights, or to
exercise the rights in respect to any such change, conversion or
exchange of shares.  In such case, only such shareholders as
shall be shareholders of record on the date so fixed shall be
entitled to notice of, or to vote at, such meeting or to receive
payment of such dividend or to receive such allotment of rights
or to exercise such rights, as the case may be, notwithstanding
any transfer of any shares on the books of the Corporation after
any record date fixed as aforesaid.  The Board of Directors may
close the books of the corporation against transfers of shares
during the whole or any part of such period, and in such case
written or printed notice thereof shall be mailed at least ten
days before closing thereof to each shareholder of record at the
address appearing on the records of the Corporation or supplied
by him to the Corporation for the purpose of notice.  While the
stock transfer books of the Corporation are closed, no transfer
of shares shall be made thereon.  If no record date is fixed by
the Board of Directors for the determination of shareholders
entitled to receive notice of, and vote at, a shareholders'
meeting, transferees of shares which are transferred on the books
of the Corporation within ten days next preceding the date of
such meeting shall not be entitled to notice of or to vote at
such meeting.

                            ARTICLE 7

                          VOTING LISTS

     Section 7.1.  The officer or agent having charge of the
transfer books for shares of the Corporation shall make, at least
five days before each meeting of shareholders, a complete
alphabetical list of the shareholders entitled to vote at the
meeting, with their addresses and the number of shares held by
each, which list shall be kept on file at the registered office
or principal place of business of the Corporation and shall be
subject to inspection by any shareholder during the entire
meeting.  The original transfer books for shares of the
Corporation, or a duplicate thereof kept in this Commonwealth,
shall be prima facie evidence as to who are the shareholders
entitled to exercise the rights of a shareholder.

                            ARTICLE 8

                       JUDGES OF ELECTION

     Section 8.1.  In advance of any meeting of shareholders, the
Board of Directors may appoint judges of election, who need not
be shareholders, to act at such meeting or any adjournment
thereof.  If judges of election are not so appointed, the
Chairman of any such meeting may, and on the request of any
shareholder or his proxy shall, make such appointment at the
meeting.  The number of judges shall be one or three.  If
appointed at a meeting on the request of one or more shareholders
or proxies, the holders of shares, present in person or by proxy,
entitled to cast at least 9 votes which all shareholders are
entitled to cast shall determine whether one or three judges are
to be appointed.  No person who is a candidate for office shall
act as a judge.  The judges of election shall do all such acts as
may be proper to conduct the election or vote, and such other
duties as may be prescribed by statute, with fairness to all
shareholders, and if requested by the Chairman of the meeting or
any shareholder or his proxy, shall make a written report of any
matter determined by them and execute a certificate of any fact
found by them.  If there are three judges of election, the
decision, act or certificate of a majority shall be the decision,
act or certificate of all.

                            ARTICLE 9

           CONSENT OF SHAREHOLDERS IN LIEU OF MEETING

     Section 9.1.  Any action required to be taken at a meeting
of shareholders, or of a class of shareholders, may be taken
without a meeting, if a consent or consents in writing setting
forth the action so taken shall be signed by all of the
shareholders who would be entitled to vote at a meeting for such
purpose and shall be filed with the Secretary of the Corporation.

                           ARTICLE  10

                            DIRECTORS

     Section 10.1.  Any shareholder who intends to nominate or to
cause to have nominated any candidate for election to the Board
of Directors (other than any candidate proposed by the
Corporation's then existing Board of Directors) shall so notify
the Secretary of the Corporation in writing not less than 60 days
prior to the date of any meeting of shareholders called for the
election of directors.  Such notification shall contain the
following information to the extent known by the notifying
shareholder:

          (a)  the name and address of each proposed nominee;

          (b)  the age of each proposed nominee;

          (c)  the principal occupation of each proposed nominee;

          (d)  the number of shares of the Corporation owned by
               each proposed nominee;

          (e)  the total number of shares, to the knowledge of
               the notifying shareholder, which will be voted for
               each proposed nominee;

          (f)  the name and residence address of the notifying
               shareholder; and

          (g)  the number of shares of the Corporation owned by
               the notifying shareholder.

     Any nomination for director not made in accordance with this
section shall be disregarded by the chairman of the meeting, and
votes cast for each such nominee shall be disregarded by the
judges of election.  In the event that the same person is
nominated by more than one shareholder, if at least one
nomination for such person complies with this Section, the
nomination shall be honored and all votes cast for such nominee
shall be counted.

     Section 10.2.  The number of directors that shall constitute
the whole Board of Directors shall be not less than nine nor more
than twenty-five.  The Board of Directors shall be classified
into three classes, each class to be as nearly equal in number as
possible and each class to be elected for a term of three years. 
The terms of the respective classes shall expire in successive
years as provided in Section 10.3 hereof.  Within the foregoing
limits, the Board of Directors may from time to time fix the
number of directors and their respective classifications.

     Section 10.3.  At the 1987 annual meeting of shareholders of
the Corporation, the shareholders shall elect nine directors as
follows: three Class A directors to serve until the 1988 annual
meeting of shareholders, three Class B directors to serve until
the 1989 annual meeting of shareholders and three Class C
directors to serve until the 1990 annual meeting of shareholders. 
Each class shall be elected in a separate election.  At each
annual meeting of shareholders thereafter, successors to the
class of directors whose term shall then expire shall be elected
to hold office for a term of three years, so that the term of
office of one class of directors shall expire in each year.

     Section 10.4.  The Board of Directors may declare vacant the
office of a director if he is declared of unsound mind by an
order of court or convicted of a felony or for any other proper
cause or if, within 30 days after notice of election, he does not
accept such office either in writing or by attending a meeting of
the Board of Directors.

                           ARTICLE 11

                 VACANCIES ON BOARD OF DIRECTORS

     Article 11.1.  Vacancies on the Board of Directors,
including vacancies resulting from an increase in the number of
directors, shall be filled by a majority of the remaining members
of the Board of Directors, though less than a quorum, and each
person so appointed shall be a director until the expiration of
the term of office of the class of directors to which he was
appointed.

                           ARTICLE 12

                  POWERS OF BOARD OF DIRECTORS

     Section 12.1.  The business and affairs of the Corporation
shall be managed by its Board of Directors, which may exercise
all such powers of the Corporation and do all such lawful acts
and things as are not by statute or by the Articles of
Incorporation or by these By-laws directed or required to be
exercised and done by the shareholders.

     Section 12.2.  The Board of Directors shall have the power
and authority to appoint an Executive Committee and such other
committees as may be deemed necessary by the Board of Directors
for the efficient operation of the Corporation.  The Executive
Committee shall consist of the Chairman of the Board, if any, the
President and not less than two nor more than three other
directors (which other directors shall not be employees of the
Corporation or any of its subsidiaries).  The Executive Committee
shall meet at such time as may be fixed by the Board of
Directors, or upon call of the Chairman of the Board or the
President.  A majority of members of the Executive Committee
shall constitute a quorum.  The Executive Committee shall have
and exercise the authority of the Board of Directors in the
intervals between the meetings of the Board of Directors as far
as may be permitted by law.

                           ARTICLE 13

               MEETINGS OF THE BOARD OF DIRECTORS

     Section 13.1.  An organization meeting may be held
immediately following the annual shareholders' meeting without
the necessity of notice to the directors to constitute a legally
convened meeting, or the directors may meet at such time and
place as may be fixed by either a notice or waiver of notice or
consent signed by all of such directors.

     Section 13.2.  Regular meetings of the Board of Directors
shall be held not less often than semi-annually at a time and
place determined by the Board of Directors at the preceding
meeting.  One or more directors may participate in any meeting of
the Board of Directors, or of any committee thereof, by means of
a conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear
one another.

     Section 13.3.  Special meetings of the Board of Directors
may be called by the Chairman of the Board or the President on
one day's notice to each director, either personally or by mail,
telegram or telephone; special meetings shall be called by the
Chairman of the Board or the President in like manner and on like
notice upon the written request of three directors.

     Section 13.4.  At all meetings of the Board of Directors, a
majority of the directors shall constitute a quorum for the
transaction of business, and the acts of a majority of the
directors present at a meeting in person or by conference
telephone or similar communications equipment at which a quorum
is present in person or by such communications equipment shall be
the acts of the Board of Directors, except as may be otherwise
specifically provided by statute or by the Articles of
Incorporation or by these By-laws.  If a quorum shall not be
present in person or by communications equipment at any meeting
of the directors, the directors present may adjourn the meeting
from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or as permitted herein.

                           ARTICLE 14

            INFORMAL ACTION BY THE BOARD OF DIRECTORS

     Section 14.1.  If all the directors shall severally or
collectively consent in writing, including but not limited to
telegrams and radiograms, to any action to be taken by the
Corporation, such action shall be as valid corporate action as
though it had been authorized at a meeting of the Board of
Directors.

                           ARTICLE 15

                    COMPENSATION OF DIRECTORS

     Section 15.1.  Directors, as such, may receive a stated
salary for their services or a fixed sum and expenses for
attendance at regular and special meetings, or any combination of
the foregoing as may be determined from time to time by
resolution of the Board of Directors, and nothing contained
herein shall be construed to preclude any director from serving
the Corporation in any other capacity and receiving compensation
therefor.

                           ARTICLE 16

                            OFFICERS

     Section 16.1.  The officers of the corporation shall be
elected by the Board of Directors at its organization meeting and
shall be a President, a Secretary and a Treasurer.  At its
option, the Board of Directors may elect a Chairman of the Board. 
The Board of Directors may also elect one or more Vice Presidents
and such other officers and appoint such agents as it shall deem
necessary, who shall hold their offices for such terms, have such
authority and perform such duties as may from time to time be
prescribed by the Board of Directors.  Any two or more offices
may be held by the same person.

     Section 16.2.  The compensation of all officers of the
Corporation shall be fixed by the Board of Directors.

     Section 16.3.  The Board of Directors may remove any officer
or agent elected or appointed, at any time and within the period,
if any, for which such person was elected or employed whenever in
the Board of Directors' judgment it is in the best interests of
the Corporation, and all persons shall be elected and employed
subject to the provisions thereof.  If the office of any officer
becomes vacant for any reason, the vacancy may be filled by the
Board of Directors.

                           ARTICLE 17

                    THE CHAIRMAN OF THE BOARD

     Section 17.1.  The Chairman of the Board shall preside at
all meetings of shareholders and directors.  He shall supervise
the carrying out of the policies adopted or approved by the Board
of Directors.  He shall have general executive powers, as well as
the specific powers conferred by these By-laws.  He shall also
have and may exercise such further powers and duties as from time
to time may be conferred upon or assigned to him by the Board of
Directors.

                           ARTICLE 18

                          THE PRESIDENT

     Section 18.1.  The President shall be the chief executive
officer of the Corporation.  The President shall (1) have general
and active management of the business of the Corporation, (2) see
that orders and resolutions of the Board of Directors are put
into effect, subject, however, to the right of the Board of
Directors to delegate any specific powers, except such as may be
by statue exclusively conferred on the president, to any other
officer or officers of the Corporation and (3) execute bonds,
mortgages and other contracts requiring a seal under the seal of
the Corporation, except where required or permitted by law to be
otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the Corporation.  In
the absence or incapacity of the Chairman of the Board, the
President shall preside at meetings of the shareholders and
directors.   If there is no Chairman of the Board, the President
shall have and exercise all powers conferred by these By-laws or
otherwise on the Chairman of the Board.

                           ARTICLE 19

                       THE VICE PRESIDENT

     Section 19.1.  The Vice President or, if more than one, the
Vice Presidents in the order established by the Board of
Directors shall, in the absence or incapacity of the President,
exercise all powers and perform the duties of the President.  The
Vice Presidents, respectively, shall also have such other
authority and perform such other duties as may be provided in
these By-laws or as shall be determined by the Board of Directors
or the President.  Any Vice President may, in the discretion of
the Board of Directors, be designated as "executive," "senior,"
or by departmental or functional classification.

                           ARTICLE 20

                          THE SECRETARY

     Section 20.1.  The Secretary shall attend all meetings of
the shareholders and directors and keep accurate records thereof
in one or more minute books kept for that purpose and shall
perform the duties customarily performed by the secretary of a
corporation and such other duties as may be assigned to the
Secretary by the Board of Directors or the President.

                           ARTICLE 21

                          THE TREASURER

     Section 21.1.  The Treasurer shall (1) have the custody of
the corporate funds and securities, (2) keep full and accurate
accounts of receipts and disbursements in books belonging to the
Corporation and (3) perform such other duties as may be assigned
to him by the Board of Directors or the President.  He shall give
bond in such sum and with such surety as the Board of Directors
may from time to time direct.

                           ARTICLE 22

                       ASSISTANT OFFICERS

     Section 22.1.  Each assistant officer shall assist in the
performance of the duties of the officer to whom he is assistant
and shall perform such duties in the absence of the officer.   
He shall perform such additional duties as the Board of
Directors, the President or the officer to whom he is assistant
may from time to time assign.  Such officers may be given such
functional titles as the Board of Directors shall from time to
time determine.

                           ARTICLE 23

       LIMITATION OF DIRECTORS' LIABILITY; INDEMNIFICATION

     Section 23.1.  To the fullest extent permitted by the
Directors' Liability Act (42 Pa. C.S. Section 8361 et seq.) and the
Business Corporation Law of the Commonwealth of Pennsylvania, a
director of the Corporation shall not be personally liable to the
Corporation, its shareholders or others for monetary damages for
any action taken or any failure to take any action unless the
director has breached or failed to perform the duties of his or
her office, as set forth in the Directors' Liability Act, and
such breach or failure constitutes self-dealing, willful
misconduct or recklessness.  The provisions of this Article 23
shall not apply with respect to the responsibility or liability
of a director under any criminal statute or the liability of a
director for the payment of taxes pursuant to local, state or
federal law.

     Section 23.2.  (a)  The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party
to any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or
investigative by reason of the fact that such person is or was a
director, officer, employee, or agent of the Corporation, or is
or was serving at the request of the Corporation as a director,
officer, employee, or agent of another corporation, partnership,
joint venture, trust, or other enterprise, against expenses
(including attorneys' fees), amounts paid in settlement,
judgments, and fines actually and reasonably incurred by such
person in connection with such action, suit, or proceeding;
provided, however, that no indemnification shall be made in any
case where the act or failure to act giving rise to the claim for
indemnification is determined by a court to have constituted
willful misconduct or recklessness.

                    (b)  Expenses (including attorneys' fees)
incurred in defending a civil or criminal action, suit, or
proceeding shall be paid by the Corporation in advance of the
final disposition of such action, suit, or proceeding, upon
receipt of an undertaking by or on behalf of the director,
officer, employee, or agent to repay such amount if it shall be
ultimately determined that he or she is not entitled to be
indemnified by the Corporation as authorized in this Article 23.

                    (c)  The indemnification and advancement of
expenses provided by this Article 23 shall not be deemed
exclusive of any other right to which persons seeking
indemnification and advancement of expenses may be entitled under
any agreement, vote of shareholders or disinterested directors,
or otherwise, both as to actions in such persons' official
capacity and as to their actions in another capacity while
holding office, and shall continue as to a person who has ceased
to be a director, officer, employee, or agent and shall inure to
the benefit of the heirs, executors, and administrators of such
person.

                    (d)  The Corporation may purchase and
maintain insurance on behalf of any person, may enter into
contracts of indemnification with any person, may create a fund
of any nature (which may, but need not be, under the control of a
trustee) for the benefit of any person, and may otherwise secure
in any manner its obligations with respect to indemnification and
advancement of expenses, whether arising under this Article 23 or
otherwise, to or for the benefit of any person, whether or not
the Corporation would have the power to indemnify such person
against such liability under the provisions of this Article 23.

     Section 23.3.  The limitation of liability provided in
Section 23.1 of this Article 23 and the right to indemnification
provided in Section 23.2 of this Article 23 shall apply to any
action or any failure to take any action occurring on or after
January 27, 1987.

     Section 23.4.  Notwithstanding anything herein contained to
the contrary, this Article 23 may not be amended or repealed and
a provision inconsistent herewith may not be adopted, except by
the affirmative vote of 80% of the members of the entire Board of
Directors or by the affirmative vote of shareholders of the
Corporation entitled to cast at least 80% of the votes which all
shareholders of the Corporation are then entitled to cast, except
that if the Business Corporation Law or the Directors' Liability
Act is amended or any other statute is enacted so as to decrease
the exposure of directors to liability or to increase the
indemnification rights available to directors, officers or
others, then this Article 23 and any other provision of these
Bylaws inconsistent with such decreased exposure or increased
indemnification rights shall be amended, automatically and
without any further action on the part of shareholders or
directors, to reflect such decreased exposure or to include such
increased indemnification rights, unless such legislation
expressly requires otherwise.  Any repeal or modification of this
Article 23 by the shareholders of the Corporation shall be
prospective only, and shall not adversely affect any limitation
on the personal liability of a director of the Corporation or any
right to indemnification from the Corporation with respect to any
action or any failure to take any action occurring prior to the
time of such repeal or modification.

     Section 23.5.  If, for any reason, any provision of this
Article 23 shall be held invalid, such invalidity shall not
affect any other provision not held so invalid, and each such
other provision shall, to the full extent consistent with law,
continue in full force and effect.  If any provision of this
Article 23 shall be held invalid in part, such invalidity shall
in no way affect the remainder of such provision, and the
remainder of such provision, together with all other provisions
of this Article 23 shall, to the full extent consistent with law,
continue in full force and effect.

                           ARTICLE 24

                       SHARE CERTIFICATES

     Section 24.1.  The share certificates of the Corporation
shall be numbered and registered in a share register as they are
issued; shall bear the name of the registered holder, the number
and class of shares represented thereby, the par value of each
share or a statement that such shares are without par value, as
the case may be; shall be signed by the President or a Vice
President and the Secretary or the Treasurer or any other person
properly authorized by the Board of Directors, and shall bear the
corporate seal, which seal may be a facsimile engraved or
printed.  Where the certificate is signed by a transfer agent or
a registrar, the signature of any corporate officer on such
certificate may be a facsimile engraved or printed.  In case any
officer who has signed, or whose facsimile signature has been
placed upon, any share certificate shall have ceased to be such
officer because of death, resignation or otherwise before the
certificate is issued, it may be issued by the Corporation with
the same effect as if the officer had not ceased to be such at
the date of its issue.

                           ARTICLE 25

                       TRANSFER OF SHARES

     Section 25.1.  Upon surrender to the Corporation of a share
certificate duly endorsed by the person named in the certificate
or by attorney duly appointed in writing and accompanied where
necessary by proper evidence of succession, assignment or
authority to transfer, a new certificate shall be issued to the
person entitled thereto and the old certificate cancelled and the
transfer recorded upon the share register of the Corporation.  No
transfer shall be made if it would be inconsistent with the
provisions of Article 8 of the Pennsylvania Uniform Commercial
Code.

                           ARTICLE 26

                        LOST CERTIFICATES

     Section 26.1.  Where a shareholder of the Corporation
alleges the loss, theft or destruction of one or more
certificates for shares of the Corporation and requests the
issuance of a substitute certificate therefor, the Board of
Directors may direct a new certificate of the same tenor and for
the same number of shares to be issued to such person upon such
person's making of an affidavit in form satisfactory to the Board
of Directors setting forth the facts in connection therewith,
provided that prior to the receipt of such request the
Corporation shall not have either registered a transfer of such
certificate or received notice that such certificate has been
acquired by a bona fide purchaser.  When authorizing such issue
of a new certificate the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed certificate,
or his heirs or legal representatives, as the case may be, to
advertise the same in such manner as it shall require and/or give
the corporation a bond in such form and with surety or sureties,
with fixed or open penalty, as shall be satisfactory to the Board
of Directors, as indemnity for any liability or expense which it
may incur by reason of the original certificate remaining
outstanding.

                           ARTICLE 27

                            DIVIDENDS

     Section 27.1.  The Board of Directors may, from time to
time, at any duly convened regular or special meeting or by
unanimous consent in writing, declare and pay dividends upon the
outstanding shares of capital stock of the Corporation in cash,
property or shares of the Corporation, as long as any dividend
shall not be in violation of law or the Articles of
Incorporation.

     Section 27.2.  Before payment of any dividend, there may be
set aside out of any funds of the Corporation available for
dividends such sum or sums as the Board of Directors from time to
time, in their absolute discretion, think proper as a reserve
fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for
such other purposes as the Board of Directors shall believe to be
for the best interests of the Corporation, and the Board of
Directors may reduce or abolish any such reserve in the manner in
which it was created.

                           ARTICLE 28

                FINANCIAL REPORT TO SHAREHOLDERS

     Section 28.1.  The President and the Board of Directors
shall present at each annual meeting of the shareholders a full
and complete statement of the business and affairs of the
corporation for the preceding year.

                           ARTICLE 29

                           INSTRUMENTS

     Section 29.1.  All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers or
such other persons as the President or the Board of Directors may
from time to time designate.

     Section 29.2.  All agreements, indentures, mortgages, deeds,
conveyances, transfers, certificates, declarations, receipts,
discharges, releases, satisfactions, settlements, petitions,  
schedules, accounts, affidavits, bonds, undertakings, proxies and
other instruments and documents may be signed, executed,
acknowledged, verified, delivered or accepted, including those in
connection with the fiduciary powers of the Corporation, on
behalf of the Corporation by the President or other persons as
may be designated by him.

                           ARTICLE 30

                           FISCAL YEAR

     Section 30.1.  The fiscal year of the Corporation shall be
the calendar year.

                           ARTICLE 31

                              SEAL

     Section 31.1.  The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization
and the words "Corporate Seal, Pennsylvania."  Said seal may be
used by causing it or a facsimile thereof to be impressed or
affixed in any manner reproduced.

                           ARTICLE 32

                   NOTICES AND WAIVERS THEREOF

     Section 32.1.  Whenever, under the provisions of applicable
law or of the Articles of Incorporation or of these By-laws,
written notice is required to be given to any person, it may be
given to such person either personally or by sending a copy
thereof through the mail or by telegram, charges prepaid, to his
address appearing on the books of the Corporation or supplied by
him to the Corporation for the purpose of notice.  If the notice
is sent by mail or telegraph, it shall be deemed to have been
given to the person entitled thereto when deposited in the United
States mail or with a telegraph office for transmission to such
person.  Such notice shall specify the place, day and hour of the
meeting and, in the case of a special meeting of shareholders,
the general nature of the business to be transacted.

     Section 32.2.  Any written notice required to be given to
any person may be waived in writing signed by the person entitled
to such notice whether before or after the time stated therein. 
Attendance of any person entitled to notice whether in person or
by proxy, at any meeting shall constitute a waiver of notice of
such meeting, except where any person attends a meeting for the
express purpose of objecting to the transaction of any business
because the meeting was not lawfully called or convened.  Where
written notice is required of any meeting, the waiver thereof
must specify the purpose only if it is for a special meeting of
the shareholders.

                           ARTICLE 33

                           AMENDMENTS

     Section 33.1.  These By-laws may be altered, amended or
repealed by (1) the affirmative vote of the shareholders entitled
to cast at least seventy-five percent (75%) of the votes which
all shareholders are then entitled to cast at any regular or
special meeting duly convened after notice to the shareholders of
that purpose or (2) by the affirmative vote of a majority of the
members of the Board of Directors, with the exception of
Sections 10.2. and 10.3. of these By-laws which requires the
affirmative vote of seventy-five percent (75%) or more of the
members of the Board of Directors, at any regular or special
meeting thereof duly convened after notice to the directors of
that purpose, subject always to the power of the shareholders to
change such action of the Board of Directors by the affirmative
vote of the shareholders entitled to cast at least seventy-five
percent (75%) of the votes which all shareholders are then
entitled to cast.


                                                  EXHIBIT 10.1


                            AGREEMENT


          THIS AGREEMENT ("Agreement") made as of the 1st day of
January, 1997, between PEOPLES FINANCIAL SERVICES CORP., a
Pennsylvania corporation ("Peoples"), and JOHN W. ORD (the
"Executive").

                           WITNESSETH:

          WHEREAS, Peoples is engaged in the business of a bank
holding company and is the owner of all the issued and
outstanding capital stock of Peoples National Bank of Susquehanna
County (the "Bank"); and

          WHEREAS, Peoples and the Executive desire to enter into
an agreement regarding, among other things, the continued
employment of the Executive by Peoples.

                           AGREEMENT:

          NOW, THEREFORE, the parties hereto, intending to be
legally bound hereby, agree as follows:

          1.   Employment.  Peoples hereby employs the Executive,
and the Executive hereby accepts employment with Peoples, on the
terms and conditions set forth in this Agreement.

          2.   Duties of Executive.  The Executive shall perform
and discharge well and faithfully such duties as an executive
officer of Peoples as may be assigned to the Executive from time
to time by the Board of Directors of Peoples.  The Executive
shall be employed as President and Chief Executive Officer of
Peoples, and shall hold such additional titles as may be given to
him from time to time by the Board of Directors of Peoples, the
Bank, and any companies affiliated with Peoples.  The Executive
shall devote his full time, attention and energies to the
business of Peoples and its affiliated companies and shall not,
during the Employment Period (as defined in Section 3 hereof), be
employed or involved in any other business activity, whether or
not such activity is pursued for gain, profit or other pecuniary
advantage; provided, however, that this Section 2 shall not be
construed as preventing the Executive from (a) investing the
Executive's personal assets, (b) acting as a member of the Board
of Directors of any other corporation or as a member of the Board
of Trustees of any other organization, provided no such
corporation or organization is a direct or indirect competitor of
Peoples or any of its affiliated companies, or (c) being involved
in any other activity with the prior approval of the Board of
Directors of Peoples.  In the event of any reduction in title or
a reduction in the Executive's responsibilities or authority,
including such responsibilities and authority as the same may be
increased at any time during the term of this Agreement, or the
assignment to the Executive of duties inconsistent with the
Executive's status as President and Chief Executive Officer of
Peoples, then the Executive may resign at any time thereafter
during the term of this Agreement and prior to the occurrence of
a Change in Control, in which case Executive shall be entitled to
receive the amounts and benefits set forth in Section 7 hereof.

          3.   Term of Employment.  The Executive's employment
under this Agreement shall be for a period (the "Employment
Period") commencing upon the date of this Agreement and ending at
the end of the term of this Agreement pursuant to Section 17
hereof, unless the Executive's employment sooner terminates in
accordance with Section 5 hereof or one of the following
provisions:

               (a)  The Executive's employment under this
Agreement may be terminated at any time during the Employment
Period for "Cause" (as herein defined), by action of the Board of
Directors of Peoples, upon giving notice of such termination to
the Executive at least fifteen (15) days prior to the date upon
which such termination shall take effect.  As used in this
Agreement, "Cause" means any of the following events:

                    (i)  the Executive is convicted of or enters
     a plea of guilty or nolo contendere to a felony, a crime of
     falsehood, or a crime involving fraud or moral turpitude, or
     the actual incarceration of the Executive for a period of
     forty-five (45) consecutive days;

                    (ii)  the Executive willfully fails to follow
     the lawful, good faith instructions of the Board of
     Directors of Peoples after the Executive's receipt of
     written notice of such instructions, other than a failure
     resulting from the Executive's incapacity because of
     physical or mental illness; or

                    (iii)  any government regulatory agency
     orders that Peoples terminate the employment of the
     Executive or relieve him of his duties.

Notwithstanding the foregoing, the Executive's employment under
this Agreement shall not be deemed to have been terminated for
"Cause" under Section 3(a)(i) or 3(a)(ii) above if such
termination took place solely as a result of:

                    (i)  questionable judgment on the part of the
     Executive;

                    (ii)  any act or omission believed by the
     Executive, in good faith, to have been in, or not opposed
     to, the best interests of Peoples or its affiliated
     companies; or

                    (iii)  any act or omission in respect of
     which a determination could properly be made that the
     Executive met the applicable standard of conduct prescribed
     for indemnification or reimbursement or payment of expenses
     under the Charter or Bylaws of Peoples (or its affiliates)
     or the directors' and officers' liability insurance of
     Peoples (or its affiliates), in each case as in effect at
     the time of such act or omission.

If the Executive's employment is terminated under the provisions
of this Section 3(a), then all rights of the Executive under
Section 4 hereof shall cease as of the effective date of such
termination.

               (b)  The Executive's employment under this
Agreement may be terminated at any time during the Employment
Period without "Cause" (as defined in Section 3(a) hereof), by
action of the Board of Directors of Peoples, upon giving notice
of such termination to the Executive at least thirty (30) days
prior to the date upon which such termination shall take effect. 
If the Executive's employment is terminated under the provisions
of this Section 3(b), then the Executive shall be entitled to
receive the compensation and benefits set forth in Section 6 or
Section 7 hereof, whichever shall be applicable.

               (c)  If the Executive retires or dies, the
Executive's employment under this Agreement shall be deemed
terminated as of the date of the Executive's retirement or death,
and all rights of the Executive under Section 4 hereof shall
cease as of the date of such termination.  Any benefits
thereafter payable to the Executive shall be determined in
accordance with the retirement, insurance and benefit programs of
Peoples (and its affiliates) then in effect.  Notwithstanding the
preceding two sentences, if the Executive dies after a Notice of
Termination (as defined in Section 5(a) of this Agreement) is
delivered by the Executive, he shall be entitled to the
termination benefits otherwise provided herein, and the
provisions of Section 16(b) shall apply.

               (d)  If the Executive is incapacitated by
accident, sickness, or otherwise so as to render the Executive
mentally or physically incapable of performing the services
required of the Executive under Section 2 of this Agreement for a
continuous period of six (6) months, then, upon the expiration of
such period or at any time thereafter, by action of the Board of
Directors of Peoples, the Executive's employment under this
Agreement may be terminated immediately upon giving the Executive
notice to that effect.  If the Executive's employment is
terminated under the provisions of this Section 3(d), then all
rights of the Executive under Section 4 hereof shall cease as of
the last business day of the week in which such termination
occurs.  Any benefits thereafter payable to the Executive shall
be determined in accordance with the retirement, insurance and
benefit programs of Peoples (and its affiliates) then in effect.

          4.   Employment Period Compensation.

               (a)  Salary.  For services performed by the
Executive under this Agreement, Peoples shall pay (or cause to be
paid) to the Executive a salary, during the Employment Period, at
the rate of One Hundred Thousand Dollars ($100,000.00) per year,
payable at the same times as salaries are payable to other
executive employees of Peoples.  Peoples may, from time to time,
increase the Executive's salary, and any and all such increases
shall be deemed to constitute amendments to this Section 4(a) to
reflect the increased amounts, effective as of the dates
established for such increases by the Board of Directors of
Peoples in the resolutions authorizing such increases.

               (b)  Bonus.  For services performed by the
Executive under this Agreement, Peoples shall pay (or cause to be
paid) to the Executive a bonus, during the Employment Period, in
such amounts and at such times, annually, as is provided in such
executive incentive plan for the Executive as shall be approved
by the Board of Directors of Peoples and in effect from time to
time.  In addition, Peoples may, from time to time, pay such
other bonus or bonuses to the Executive as Peoples, in its sole
discretion, deems appropriate.  The payment of any such bonuses
shall not reduce or otherwise affect any other obligation of
Peoples to the Executive provided for in this Agreement.

               (c)  Other Benefits.  Peoples will provide (or
cause to be provided) the Executive, during the Employment
Period, with insurance, vacation, pension, and other fringe
benefits in the aggregate not less favorable than those received
by other executive employees of Peoples or the Bank.

               (d)  Salary Deferral.  The Executive may request
that the payment of any portion of his base salary for any
calendar year be deferred.  Such request must be made in writing
to Peoples before the beginning of such calendar year and must
include the period of deferral requested by the Executive (the
"Deferral Period").  If the Board of Directors of Peoples
approves such request, the Executive shall be entitled to
receive, at the end of the Deferral Period, the deferred portion
of his base salary plus interest, which interest shall be
computed by reference to an annual interest rate determined each
year by the Board of Directors of Peoples.  Any salary which is
deferred as described herein shall be credited to an account on
the books of Peoples established in the name of the Executive. 
However, this account need not be funded, and Peoples shall not
be deemed to be a trustee for the Executive with respect to any
deferred salary.  The liabilities of Peoples to the Executive
hereunder are those of a debtor pursuant to such contractual
obligations as are created by this Agreement.  No liabilities of
Peoples which arise under this Section 4(d) shall be deemed to be
secured by any pledge or other encumbrance on any property of
Peoples.  Peoples shall not be required to segregate any funds
representing such deferred salary, and nothing herein shall be
construed as providing for such segregation.

          5.   Resignation of the Executive for Good Reason.

               (a)  The Executive may resign for "Good Reason"
(as herein defined) during the three-year period following a
"Change in Control" (as defined in Section 5(b) hereof), as
hereinafter set forth.  As used in this Agreement, "Good Reason"
means any of the following:

                    (i)  any reduction in title or a reduction in
     the Executive's responsibilities or authority with respect
     to Peoples, including such responsibilities and authority as
     the same may be increased at any time during the term of
     this Agreement, or the assignment to the Executive of duties
     inconsistent with the Executive's status as President and
     Chief Executive Officer of Peoples;

                    (ii)  any reassignment of the Executive which
     requires the Executive to move his principal residence;

                    (iii)  any removal of the Executive from
     office or any adverse change in the terms and conditions of
     the Executive's employment, except for any termination of
     the Executive's employment under the provisions of
     Section 3(a) hereof;

                    (iv)  any reduction in the Executive's annual
     base salary as in effect on the date hereof or as the same
     may be increased from time to time;

                    (v)  any failure of Peoples to provide the
     Executive with benefits at least as favorable as those
     enjoyed by the Executive under any of the pension, life
     insurance, medical, health, accident, disability or other
     employee benefit plans of Peoples (or any affiliated
     company) in which the Executive participated at the time of
     the Change in Control, or the taking of any action that
     would materially reduce any of such benefits in effect at
     the time of the Change in Control, unless such reduction is
     part of a reduction applicable to all employees;

                    (vi)  any failure to obtain a satisfactory
     agreement from any successor to assume and agree to perform
     under this Agreement, as contemplated in Section 16(a)
     hereof;

                    (vii)  any material change in the legal
     relationship between Peoples and the Bank; or

                    (viii)  any material breach of this Agreement
     on the part of Peoples.

At the option of the Executive, exercisable by the Executive
within one hundred twenty (120) days after the occurrence of each
and every of the foregoing events of "Good Reason" (or within
ninety (90) days after the occurrence of a Change in Control if
such event occurs before such Change in Control), the Executive
may resign from employment under this Agreement by delivering a
notice in writing (the "Notice of Termination") to Peoples, and
the provisions of Section 6 hereof shall thereupon apply.

               (b)  As used in this Agreement, "Change in
Control" means a change of control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A
of Regulation 14A promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), as enacted and in force
on the date hereof, whether or not Peoples is then subject to
such reporting requirement; provided, however, that, without
limitation, such a Change in Control shall be deemed to have
occurred if:

                    (i)  any "person" (including a group acting
     in concert, as the term "person" is defined in Section 13(d)
     of the Exchange Act, as enacted and in force on the date
     hereof) becomes the "beneficial owner" (as that term is
     defined in Rule 13d-3, as enacted and in force on the date
     hereof, under the Exchange Act) of securities of Peoples
     representing more than 19.9% of the combined voting power of
     Peoples' securities then outstanding;

                    (ii)  there occurs a merger, consolidation or
     other business combination or reorganization to which
     Peoples or the Bank is a party, whether or not approved in
     advance by the Board of Directors of Peoples or the Bank (as
     the case may be) in which the members of the Board of
     Directors of Peoples or the Bank (as the case may be)
     immediately preceding the consummation of such transaction
     do not constitute a majority of the members of the Board of
     Directors of the resulting corporation and of any parent
     corporation thereof immediately after the consummation of
     such transaction;

                    (iii)  there occurs a sale, exchange,
     transfer, or other disposition of substantially all of the
     assets of Peoples or the Bank to another entity, which is
     not approved in advance by the Board of Directors of
     Peoples;

                    (iv)  there occurs a contested proxy
     solicitation of the stockholders of Peoples that results in
     the contesting party obtaining the ability to elect
     candidates to a majority of the positions on Peoples' Board
     of Directors next up for election; or

                    (v)  there occurs a tender offer for the
     shares of voting securities of Peoples that results in the
     tender offeror obtaining securities representing more than
     19.9% of the combined voting power of Peoples' securities
     then outstanding.

          6.   Rights in Event of Certain Termination of
Employment After Change in Control.  In the event that Executive
resigns from employment for Good Reason following a Change in
Control, by delivery of a Notice of Termination to Peoples, or
Executive's employment is involuntarily terminated by Peoples
without Cause after a Change in Control, Peoples shall pay (or
cause to be paid) to the Executive in cash, within twenty (20)
days following termination, an amount equal to 2.99 times his
"base amount" (within the meaning of Section 280G(b)(3) of the
Internal Revenue Code of 1986, as amended (the "Code")),
calculated as though the occurrence of the Change in Control were
an event described in Code Section 280G(b)(2)(A)(i). 
Notwithstanding the preceding sentence, in the event the lump sum
payment described in the preceding sentence, when added to all
other amounts or benefits provided to or on behalf of the
Executive in connection with his termination of employment, would
result in the imposition of an excise tax under Code Section
4999, such lump sum shall be reduced to the extent necessary to
avoid such imposition.

          7.   Rights in Event of Certain Termination of
Employment in Absence of Change in Control.  In the event that
Executive's employment is involuntarily terminated by Peoples
without Cause and no Change in Control shall have occurred at the
date of such termination, Peoples shall pay (or cause to be paid)
to the Executive in cash, within twenty (20) days following
termination, an amount equal to 2.0 times the highest sum of
(i) his taxable federal compensation reported on Form W-2 during
each of the immediately preceding three (3) calendar years, and
(ii) all amounts excluded from such compensation during the
relevant calendar year by reason of Section 4(d) hereof, Code
Section 125, and Code Section 401(k).  Notwithstanding the
preceding sentence, in the event the lump sum payment described
in the preceding sentence, when added to all other amounts or
benefits provided to or on behalf of the Executive in connection
with his termination of employment, would result in the
imposition of an excise tax under Code Section 4999, such lump
sum shall be reduced to the extent necessary to avoid such
imposition.  Notwithstanding anything herein to the contrary,
this section shall apply to the resignation of Executive by
reason of the occurrence of an event, described in the last
sentence of Section 2 hereof, more than three (3) years following
a Change in Control.

          8.   Covenant Not to Compete.

               (a)  The Executive hereby acknowledges and
recognizes the highly competitive nature of the business of
Peoples and the Bank and accordingly agrees that, during and for
the applicable period set forth in Section 8(c) hereof, the
Executive shall not:

                    (i)  Be engaged, directly or indirectly,
     either for his own account or as agent, consultant,
     employee, partner, officer, director, proprietor, investor
     (except as an investor owning less than 5% of the stock of a
     publicly owned company) or otherwise of any person, firm,
     corporation, or enterprise engaged, in (1) the banking
     (including bank holding company) or financial services
     industry, or (2) any other activity in which Peoples or any
     of its subsidiaries is engaged during the Employment Period,
     in any county in which, at any time during the Employment
     Period or at the date of termination of the Executive's
     employment, a branch, office or other facility of Peoples or
     any of its subsidiaries is located, or in any county
     contiguous to such a county, including contiguous counties
     located outside of the Commonwealth of Pennsylvania (the
     "Non-Competition Area"); or

                    (ii)  Provide financial or other assistance
     to any person, firm, corporation, or enterprise engaged in
     (1) the banking (including bank holding company) or
     financial services industry, or (2) any other activity in
     which Peoples or any of its subsidiaries is engaged during
     the Employment Period, in the Non-Competition Area.

               (b)  It is expressly understood and agreed that,
although the Executive and Peoples consider the restrictions
contained in Section 8(a) hereof reasonable for the purpose of
preserving for Peoples and its subsidiaries their good will and
other proprietary rights, if a final judicial determination is
made by a court having jurisdiction that the time or territory or
any other restriction contained in Section 8(a) hereof is an
unreasonable or otherwise unenforceable restriction against the
Executive, the provisions of Section 8(a) hereof shall not be
rendered void but shall be deemed amended to apply as to such
maximum time and territory and to such other extent as such court
may judicially determine or indicate to be reasonable.

               (c)  The provisions of this Section 8 shall be
applicable commencing on the date of this Agreement and ending on
one of the following dates, as applicable:

                    (i)  if the Executive's employment terminates
     in accordance with the provisions of Section 3 (other than
     Section 3(a)) or Section 17 hereof, the effective date of
     termination of employment;

                    (ii)  if the Executive's employment
     terminates in accordance with the provisions of Section 3(a)
     hereof or the Executive voluntarily terminates his
     employment other than in accordance with the provisions of
     Section 5 hereof (or the last sentence of Section 2 or
     Section 7), the first anniversary date of the effective date
     of termination of employment; or

                    (iii)  if the Executive voluntarily
     terminates his employment in accordance with the provisions
     of Section 5 hereof (or the last sentence of Section 2 or
     Section 7), the effective date of termination of employment.

          9.   Arbitration.  Peoples and the Executive recognize
that in the event a dispute should arise between them concerning
the interpretation or implementation of this Agreement, lengthy
and expensive litigation will not afford a practical resolution
of the issues within a reasonable period of time.  Consequently,
each party agrees that all disputes, disagreements and questions
of interpretation concerning this Agreement are to be submitted
for resolution to the American Arbitration Association (the
"Association") in Philadelphia, Pennsylvania.  Peoples, or the
Executive, may initiate an arbitration proceeding at any time by
giving notice to the other in accordance with the rules of the
Association.  The Association shall designate a single arbitrator
to conduct the proceeding, but Peoples, and the Executive, may,
as a matter of right, require the substitution of a different
arbitrator chosen by the Association.  Each such right of
substitution may be exercised only once.  The arbitrator shall
not be bound by the rules of evidence and procedure of the courts
of the Commonwealth of Pennsylvania but shall be bound by the
substantive law applicable to this Agreement.  The decision of
the arbitrator, absent fraud, duress, incompetence or gross and
obvious error of fact, shall be final and binding upon the
parties and shall be enforceable in courts of proper
jurisdiction.  Following written notice of a request for
arbitration, Peoples, and the Executive, shall be entitled to an
injunction restraining all further proceedings in any pending or
subsequently filed litigation concerning this Agreement, except
as otherwise provided herein.  Notwithstanding the preceding
provisions of this section, in the event any such provision is in
conflict with a rule or policy of the Association, the
arbitration proceeding shall be governed by such rule or policy.

          10.  Legal Expenses.  Peoples shall pay to the
Executive all reasonable legal fees and expenses incurred by the
Executive in seeking in good faith to obtain or enforce any right
or benefit provided by this Agreement, provided that any action
or proceeding is not summarily decided against the Executive.

          11.  Mitigation of Damages.  The Executive shall not be
required to mitigate the amount of any payment provided for in
Section 6 or Section 7 by seeking other employment or otherwise,
nor shall the amount of any payment or benefit provided for in
Section 6 or Section 7 be reduced by any compensation earned by
the Executive as the result of employment by another employer or
by reason of the Executive's receipt of or right to receive any
retirement or other benefits after the date of termination of
employment or otherwise; provided, however, that the payments
provided for in Section 6 or Section 7 shall be reduced by the
amount actually received by the Executive under any severance
policy of Peoples then in effect.

          12.  Notices.  Any notice required or permitted to be
given under this Agreement shall be deemed properly given if in
writing and if mailed by registered or certified mail, postage
prepaid with return receipt requested, to the residence of the
Executive, in the case of notices to the Executive, and to the
principal office of Peoples, in the case of notices to Peoples.

          13.  Waiver.  No provision of this Agreement may be
modified, waived, or discharged unless such waiver, modification,
or discharge is agreed to in writing and signed by the Executive
and an executive officer of Peoples specifically designated by
the Board of Directors of Peoples.  No waiver by any party hereto
at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time.

          14.  Assignment.  This Agreement shall not be
assignable by either party hereto, except by Peoples to any
successor in interest to the business of Peoples.

          15.  Entire Agreement.  This Agreement contains the
entire agreement of the parties relating to the subject matter of
this Agreement.

          16.  Successors, Binding Agreement.

               (a)  Peoples will require any successor (whether
direct or indirect, by purchase, merger, consolidation, or
otherwise) to all or substantially all of the business and/or
assets of Peoples to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that Peoples
would be required to perform it if no such succession had taken
place.  Failure by Peoples to obtain such assumption and
agreement prior to the effectiveness of any such succession shall
constitute a breach of this Agreement and the provisions of
Section 6 hereof shall apply.  As used in this Agreement,
"Peoples" shall mean Peoples as hereinbefore defined and any
successor to the respective business and/or assets of Peoples
which assumes and agrees to perform this Agreement by operation
of law or otherwise.

               (b)  This Agreement shall inure to the benefit of
and be enforceable by the Executive's personal or legal
representatives, executors, administrators, heirs, distributees,
devisees, and legatees.  If the Executive should die after a
Notice of Termination is delivered by the Executive and any
amounts would be payable to the Executive under this Agreement if
the Executive had continued to live, all such amounts shall be
paid in accordance with the terms of this Agreement to the
Executive's devisee, legatee, or other designee, or, if there is
none, to the Executive's estate.

          17.  Termination.

               (a)  Unless the Executive's employment terminates
pursuant to the provisions of Section 3 or Section 5 hereof (or
the last sentence of Section 2 or Section 7), the term of this
Agreement shall:

                    (i)  initially be a term commencing as of
     January 1, 1997, and ending on December 31, 1999; and

                    (ii)  be automatically extended to provide
     for a three (3) year term, annually, on January 1, 1998, and
     again on January 1 of each year thereafter, effective as of
     such respective dates, unless either (1) Peoples or (2) the
     Executive shall have given written notice of nonextension of
     the term of this Agreement to the other at least ninety
     (90) days before the date of any such extension.

               (b)  Any termination of the Executive's employment
under this Agreement or of this Agreement shall not affect the
provisions of Sections 6 or 7 hereof which shall survive any such
termination and remain in full force and effect in accordance
with their respective terms.

          18.  Validity.  The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.

          19.  Applicable Law.  This Agreement shall be governed
by and construed in accordance with the domestic laws (but not
the law of conflict of laws) of the Commonwealth of Pennsylvania.

          20.  Headings.  The headings of the sections of this
Agreement are for convenience only and shall not control or
affect the meaning or construction or limit the scope or intent
of any of the provisions of this Agreement.

          21.  Termination of Prior Agreements.  Upon the
execution and delivery of this Agreement by the parties hereto,
any prior agreement relating to the subject matter hereof shall
be automatically terminated and be of no further force or effect.

          IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.

                              PEOPLES FINANCIAL SERVICES CORP.

                              By_________________________________
                               (Executive/Senior) Vice President
(SEAL)

                              Attest:____________________________
                                         (Assistant) Secretary

                                             ("Peoples")

Witness:

__________________________    _____________________________(SEAL)
                              John W. Ord

                                             ("Executive")


                                                  EXHIBIT 10.2


                     PEOPLE'S NATIONAL BANK

                       EXCESS BENEFIT PLAN

                               FOR

                            JOHN ORD



          This sets forth the PEOPLE'S NATIONAL BANK EXCESS
BENEFIT PLAN FOR JOHN ORD (the "Plan"), established by PEOPLE'S
NATIONAL BANK, a general business corporation organized under the
laws of the Commonwealth of Pennsylvania, having its principal
place of business at Hallstead, Pennsylvania ("Employer"), for
the benefit of JOHN ORD, residing at R.D. #2, Box 38, Hallstead,
Pennsylvania, 18822 ("Employee").

                            RECITALS

          It is the intention of this Plan to create a reserve
and fund for a benefit for Employee in excess of the benefits
payable under Employer's qualified pension, profit sharing and
employee stock ownership plans, and to pay Employee and his
spouse the benefit so calculated, all as provided herein.

          NOW, THEREFORE, effective January 1, 1991 ("Effective
Date"), Employer hereby establishes the PEOPLE'S NATIONAL BANK
EXCESS BENEFIT PLAN FOR JOHN ORD (the "Plan") for the exclusive
benefit of Employee and his spouse, in accordance with the
following terms and conditions:
<PAGE>
                           ARTICLE I.

                           DEFINITIONS

          As used in this Plan, the following terms shall have
the following meanings, unless a different meaning is stated and
clearly indicated in the context where the term is used:

          1.01  "Actuarial Assumptions" of the Plan are as
follows:

     Mortality           (1)  Valuation - no mortality factor.

                         (2)  Post-retirement mortality
                              determined by reference to IAM-1983
                              tables.

     Discount Rate/      (1)  Present value (discount)
     Appreciation Rate        factor of 8.0% per year.

                         (2)  Future value (appreciation or
                              interest) factor of 8.0% per year.

                         (3)  Pre-retirement and post-retirement
                              interest assumption of 8.0% per
                              year.

     Age                 (1)  Where age is a determining factor,
                              it will be based on the nearest
                              birthday.

     Determination Date  (1)  The determination date for each
                              year shall be December 31.

     Service             (1)  Service (for this Plan only) shall
                              be deemed to commence October 31,
                              1960.

                              Service shall be determined for
                              full years of service only;
                              fractions of years will be
                              disregarded.

     Dates               (1)  Date of Birth - 05/19/40

                         (2)  Date of Hire - 10/31/60

                         (3)  Normal Retirement Date -
                              06/01/2005.

     Annual Benefit or        When the term "annual benefit" or
     Annual Payment           "annual payment" is used herein, it
                              shall mean 12 months of the
                              actuarially determined monthly
                              benefit or payment.

     Reserve Calculation      The value of the Reserve, as of a
                              particular Valuation Date, shall be
                              determined by calculating the
                              actuarial value of the amounts
                              needed, as of such date, to fully
                              fund for a hypothetical straight
                              life annuity payment to Employee in
                              the amount determined under this
                              Plan, such payment commencing as of
                              the Early, Normal or Late
                              Retirement Date.

          1.02  "Average Base Compensation" shall mean the
Employee's average Salary for the thirty-six month period ending
on the Determination Date coinciding with or next following the
date of separation from Service.  For purposes of determine
Average Base Compensation, if Employee's effective separation
from Service occurs other than on December 31 of any Plan Year,
his Salary for the year of separation shall be calculated by
annualizing for that year his Salary through the date of
separation.

          1.03  "Benefit" means Employee's annual benefit
determined under the Plan expressed in the form of an annuity
payable during the life of Employee, commencing at his Early,
Normal or Late Retirement Date or the date of his death, and paid
in the manner set forth in Paragraph 6.02 (in the case of
Employee's death before his Retirement Date) or in Article VII
(in all other cases).

          1.04  "Code" shall mean the Internal Revenue Code of
1986, as amended, and any successor provision thereto.

          1.05  "Date of Hire" shall mean October 31, 1960.

          1.06  "Determination Date" shall mean December 31 of
each Plan Year.

          1.07  "Early Retirement Date" shall be the first day of
the month coinciding with or next following the date on which
Employee separates from Service with Employer prior to Normal
Retirement Date under any of the circumstances described in
Paragraph 5.02.

          1.08  "Effective Date" shall be January 1, 1991.

          1.09  "Employee" shall mean JOHN ORD.

          1.10  "Employer" shall mean PEOPLE'S NATIONAL BANK.

          1.11  "401(K) Profit Sharing Plan" shall mean the
Employer's profit sharing plan qualified under Section 401(a) of
the Code that contains a feature allowing elective deferrals of
compensation that is governed under Section 401(k) of the Code.

          1.12  "Investment Manager" shall mean the comptroller's
office of Employer.

          1.13  "Late Retirement Date" shall mean the first day
of the month coinciding with or next following Employee's actual
retirement date after his Normal Retirement Date.

          1.14  "Normal Retirement Date" shall mean June 1, 2005.

          1.15  "Pension Plan" shall mean Employer's defined
benefit pension plan qualified under Code Section 401(a).

          1.16  "Plan" shall mean the excess benefit plan
established by the Employer as set forth in this document, and as
hereafter amended.

          1.17  "Plan Year" initially means the period beginning
with the Effective Date and ending on December 31, 1991. 
Thereafter, the Plan Year shall mean the twelve (12) month period
beginning on January 1.

          1.18  "Reserve" shall mean as of the Effective Date,
and as of any Valuation Date thereafter, the actuarial value of
the amounts needed as of such date (using the Actuarial
Assumptions of the Plan) to fully fund for a hypothetical
straight life annuity benefit to Employee providing the Benefit
payable to Employee under this Plan, such payment commencing as
of the Early, Normal or Late Retirement Date.  The Reserve shall
be calculated initially, and shall be redetermined annually,
assuming that Employee will retire at the Normal Retirement Date.

          1.19  "Retirement Annuity" shall mean the hypothetical
annual straight life annuity, payable to Employee until his death
which, if it were to commence as of the Early, Normal or Late
Retirement Date (whichever is applicable), would require (using
the Actuarial Assumptions of the Plan), as of the Valuation Date,
a fund equal to the value of the Reserve in order for full
funding of the Retirement Annuity to be achieved by the
applicable Retirement Date.

          1.20  "Retirement Date" shall mean the date Employee
separates from service with Employer on account of his Early,
Normal or Late Retirement, or on account of his death.

          1.21  "Salary" shall mean Employee's W-2 wages for
services rendered on behalf of Employer during the Plan Year, or
for periods prior to the Effective Date of the Plan, the twelve
month period corresponding to such Plan Year.  Such amount shall
be increased or decreased by the following amounts:

               (a)  There shall be added to Employee's W-2 wages
the amount of Employee's elective contributions for the Plan Year
to the Employer's 401(k) Profit Sharing Plan and to the
Employer's plan qualifying under Code Section 125, which
contributions are otherwise excludable from Employee's gross
income under Code Sections 402(a)(8) and 125, respectively.

               (b)  There shall be subtracted from Employee's W-2
wages the amount of any special program bonuses paid during the
Plan Year, but not Employee's annual bonus as historically paid
to Employee.

               (c)  Salary shall not include contributions made
by Employer under the Plan, payments made by Employer for group
life insurance, hospitalization or like benefits, nor
contributions made by Employer under any other employee benefit
plan it maintains.

          1.22  "Service" means any period of time Employee is in
the employ of Employer.  Employee shall be entitled to a credit
for all Service after his Date of Hire and continuing through the
date of Employee's separation from Service with Employer. 
Employee will be credited with full years of Service only. 
Fractions of years will be disregarded.

          1.23  "Trust" shall mean the PEOPLE'S NATIONAL BANK
EXCESS BENEFIT TRUST FOR THE BENEFIT OF JOHN ORD.

          1.24  "Trustee" shall mean the currently acting Trustee
of the Trust.

          1.25  "Valuation Date" shall mean any date on which an
actuarial valuation is to be made, including, without limitation,
each Determination Date, and the Early, Normal and Late
Retirement Dates.
<PAGE>
                           ARTICLE II.

               THE RESERVE ACCOUNT AND TRUST FUND

          2.01  The Reserve Account.  Employer shall establish an
account (the "Reserve Account") to which will be credited, as of
the Effective Date, an amount equal to the then value of the
Reserve.  The Reserve Account shall be restated as of each
subsequent Valuation Date to reflect the value of the Reserve as
of such date.

          2.02  The Trust Fund.  Employer shall establish a Trust
Fund to receive the contributions required under the Plan.  The
Trust Fund shall be managed by the Investment Manager, and shall
be held by the Trustee under the provisions of the Trust.

          2.03  Employer Contributions.  Employer shall, as of
the Effective Date, contribute to the Trust liquid and marketable
assets having a fair market value equal to the then value of the
Reserve.  As of each subsequent Determination Date, Employer
shall calculate and contribute an additional contribution to the
Trust equal to the difference between the value of the
hypothetical Retirement Annuity as of the Determination Date and
the balance in the Trust Fund.

          2.04  No Right to Trust Assets.  The assets of the
Trust Fund shall be held separate and apart from other funds of
Employer, and shall be used exclusively for the uses and purposes
set forth in this Plan.  However, neither Employee, any
Beneficiary, nor the Plan shall have any preferred claim on, or
any title to or beneficial ownership interest in, any assets of
the Trust Fund or Trust prior to the time such assets are paid as
Benefits under the Plan.  All rights created under the Plan and
Trust shall be mere unsecured contractual rights of Employee or
his Beneficiary against Employer.  The Plan is intended to
constitute an unfunded deferred compensation arrangement
maintained by Employer for the purpose of providing deferred
compensation for a key executive of Employer, and shall be
construed accordingly.
<PAGE>
                          ARTICLE III.

                        NORMAL RETIREMENT

          3.01  Normal Retirement Benefit.  Employee shall be
entitled to receive, if he retires as of his Normal Retirement
Date, a Normal Retirement Benefit in an amount equal to ninety
percent (90%) of Employee's Average Base Compensation, less the
sum of the following:

               (a)  An amount equal to the annual benefit to be
provided Employee by Employer's Pension Plan, determined as of
the Normal Retirement Date and converted (if necessary) to its
actuarial equivalent (using the Actuarial Assumptions for this
Plan) as a straight life annuity payable as an annual benefit
commencing as of his Normal Retirement Date;

               (b)  An amount equal to the annual benefit at
Normal Retirement Date that is provided Employee from Employee's
vested account balance in Employer's Employee Stock Ownership
Plan ("ESOP"), expressed in the form of a straight life annuity
(and calculated using the Actuarial Assumptions for this Plan),
payable during Employee's life and commencing as of his Normal
Retirement Date; and

               (c)  An amount equal to the annual benefit at
Normal Retirement Date that is provided Employee from the vested
portion of Employee's account balance in Employer's 401(k) Profit
Sharing Plan that is attributable to all Employer contributions
other than Employee's elective contribution as described in Code
Section 402(a)(8).  Such benefit shall be expressed in the form
of a straight life annuity (and calculated using the Actuarial
Assumptions for this Plan) payable during Employee's life and
commencing as of his Normal Retirement Date.

          3.02  Payment.  Employee's Normal Retirement Benefit
shall be paid in the manner set forth in Article VII.
<PAGE>
                           ARTICLE IV.

                         LATE RETIREMENT

          4.01  Late Retirement Benefit.  Employer and Employee
may agree to continue Employee's employment beyond the Normal
Retirement Date.  In such event, Employee shall be entitled to
receive, following his actual retirement, a Late Retirement
Benefit in an amount equal to the then actuarial equivalent
(determined by applying the Actuarial Assumptions for this Plan)
of Employee's Normal Retirement Benefit payable as of his Normal
Retirement Date.  The Late Retirement Benefit shall be expressed
in the form of a straight life annuity payable in annual amounts
commencing as of his Late Retirement Date, and shall be paid in
the manner set forth in Article VII.
<PAGE>
                           ARTICLE V.

                        EARLY RETIREMENT

          5.01  Early Retirement Benefit.  Employee shall be
entitled to receive, if he qualifies under Paragraph 5.02 and
retires from Service with the Employer, an Early Retirement
Benefit determined as follows:

               (a)  An amount equal to ninety percent (90%) of
Employee's Average Base Compensation, calculated as of his Early
Retirement Date, shall be determined.  This amount shall be
multiplied by a fraction, the numerator of which is Employee's
total years of Service as of his Early Retirement Date, and the
denominator of which is the total years of Service Employee would
have were he to continue in Service continuously through his
Normal Retirement Date.

               (b)  The amount determined under subparagraph (a)
above shall be reduced by the sum of the following "Subtraction
Entries" to arrive at Employee's Early Retirement Benefit:

                    (i)  An amount equal to the annual benefit
     that is provided by Employer's Pension Plan determined as of
     Employee's Early Retirement Date as if Employee were to
     retire on such date, and converted (if necessary) to its
     actuarial equivalent straight life annuity payable in annual
     amounts commencing as of the Early Retirement Date.  If
     Employee's Early Retirement Date hereunder precedes the
     earliest date under which retirement benefits may be paid to
     Employee under the Pension Plan, there shall be no reduction
     under this Paragraph 5.01(b)(i) in the Early Retirement
     Benefit payable to Employee during the time period preceding
     the payment of retirement benefits under the Pension Plan;
     however, upon commencement of payment of retirement benefits
     under the Pension Plan, the Early Retirement Benefit shall
     thereupon be recalculated and reduced for all future years
     (but not retroactively) by taking into account the reduction
     under this Paragraph 5.01(b)(i).

                    (ii)  An amount equal to the benefit at Early
     Retirement Date that would be provided Employee from
     Employee's then vested account balance in Employer's
     Employee Stock Ownership Plan, expressed in the form of a
     straight life annuity that is payable in annual amounts for
     the rest of Employee's life, commencing as of his Early
     Retirement Date; and

                    (iii)  An amount equal to the annual benefit
     at Early Retirement Date that would be provided Employee
     from the vested portion of Employee's account balance in
     Employer's 401(k) Profit Sharing Plan that is attributable
     to all Employer contributions other than Employee's elective
     contributions as described in Code Section 402(a)(8).  Such
     benefit shall be expressed in the form of a straight life
     annuity payable in annual amounts for the rest of Employee's
     life commencing as of his Early Retirement Date.

          5.02  Early Retirement.  Employee shall be entitled to
an Early Retirement Benefit if, prior to his Normal Retirement
Date, Employee separates from Service with Employer:

               (a)  upon mutual agreement between Employer and
Employee;

               (b)  by action of Employer other than "for cause." 
For purposes hereof, "for cause" shall mean termination by a
majority vote of Employer's Board of Directors upon its
determination that Employee has committed fraud against or
embezzled from Employer or is guilty of gross negligence that has
resulted in irreparable harm to Employer.  Pending Employer's
final determination concerning the issue, all payments scheduled
to be made to Employee hereunder shall be held by the Trustee in
escrow; or

               (c)  by reason of Employee's suffering a
disability, illness or injury which, in the sole opinion of
Employer's Board of Directors, prevents Employee from fulfilling
substantially all of his duties and responsibilities as President
and Chief Executive Officer of Employer (hereinafter,
"Disability").

          5.03  Payment.  The Early Retirement Benefit shall be
paid in the manner set forth in Article VII.
<PAGE>
                           ARTICLE VI.

                          DEATH BENEFIT

          6.01  Pre-Retirement Death Benefit.  Upon the death of
Employee while in the employ of Employer, or during an authorized
leave of absence, Employee's spouse shall be entitled to receive
a pre-retirement death Benefit expressed in the form of a life
annuity payable annually for the rest of the spouse's life, in an
amount equal to fifty percent (50%) of Employee's Average Base
Compensation as of the date of his death, reduced by the sum of
the following:

               (a)  an amount equal to the annual benefit that
would be provided the spouse under Employer's Pension Plan
commencing immediately following Employee's death if Employee had
separated from Service on the day immediately preceding his date
of death and had elected to receive a joint and 50% survivor
annuity for Employee and his spouse commencing on the date of his
death.  If Employee's date of death precedes the earliest date
under which retirement benefits could be paid to Employee under
the Pension Plan, there shall be no reduction under this
Paragraph 6.01(a) in the Benefit payable to Employee's spouse
during the time period preceding the payment of benefits to
Employee's spouse under the Pension Plan; however, upon
commencement of payment of benefits to the spouse under the
Pension Plan, the death Benefit payable under this Article shall
thereupon be reduced for all future years (but not retroactively)
by the amount prescribed in this Paragraph 6.01(a);

               (b)  An amount equal to the annual benefit that is
provided to Employee's spouse from Employee's then vested account
balance in Employer's Employee Stock Ownership Plan, expressed in
the form of a straight life annuity payable in annual amounts for
the rest of the spouse's life, commencing immediately following
Employee's death; plus

               (c)  An amount equal to the annual benefit that
would be provided the spouse from the vested portion of
Employee's account balance in Employer's 401(k) Profit Sharing
Plan that is attributable to all Employer contributions except
those described in Code Section 402(a)(8).  Such benefit shall be
expressed in the form of a straight life annuity payable in
annual amounts for the rest of the spouse's life, commencing
immediately following Employee's death.

          6.02  Payment.  Payment of the death Benefit under this
Article shall be paid in the form of a straight life annuity for
the benefit of Employee's spouse, commencing within thirty (30)
days following Employee's death.
<PAGE>
                          ARTICLE VII.

                       PAYMENT OF BENEFIT

          7.01  Normal Form of Payment.

               (a)  If Employee is not married at his Early,
Normal or Late Retirement Date, the normal form for payment of
his Retirement Benefit shall be a single life annuity providing
for equal monthly payments equal to one-twelfth (1/12th) of the
annual Retirement Benefit, with payments ceasing upon Employee's
death.

               (b)  If Employee is married at his Early, Normal
or Late Retirement Date, the normal form of his Retirement
Benefit shall be a joint and 50% survivor annuity that provides,
for Employee's life, an annual amount equal to the annual amount
that would be payable to Employee in accordance with
subparagraph (a) were Employee not married on his Retirement
Date.  Such annuity shall provide monthly payments to Employee
for the rest of his life and, if Employee's spouse survives him,
monthly payments to his spouse thereafter for the rest of her
life equal to fifty percent (50%) of the amount of the monthly
benefit paid to Employee.

          7.02  Optional Form of Payment.  At any time prior to
January 1 of the year in which the first installment of the
Benefit would otherwise be paid, Employee may elect to receive
his Benefit under one of the optional forms of distribution
listed below:

               (1)  A straight life annuity, payable no less
frequently than annually, with payment ending on Employee's
death.

               (2)  A joint and survivor annuity over the joint
life expectancies of Employee and his spouse, with the option in
Employee to set the survivor's annuity at any percentage of the
joint life annuity (not to exceed 100%).

          7.03  Acceleration of Deferred Payments.  In the
discretion of Employer, but only with Employee's or his spouse's
consent, the payment of any remaining Benefits to Employee or his
spouse as a deferred payment may be accelerated, or the unpaid
balance of such Benefits may be distributed to Employee or his
spouse in a lump sum.

          7.04  Commencement of Payment.  Employer shall commence
distribution of Employee's Benefit not later then thirty (30)
days after the applicable Retirement Date.

          7.05  Forfeiture.  Notwithstanding anything herein to
the contrary, no Benefit shall be paid to Employee or his spouse
and Employee shall forfeit, for himself and his spouse, all right
to receive Benefits hereunder if Employee's employment with
Employer is terminated "for cause".  For purposes of this
Paragraph, "for cause" shall have the same meaning as set forth
in Paragraph 5.02(b).
<PAGE>
                          ARTICLE VIII.

                    ADMINISTRATIVE PROVISIONS

          8.01  Payments to Persons Other Than Employee.  If the
Employer shall find that any person to whom any amount is payable
under the Plan is unable to care for his affairs because of
illness or accident, or is a minor, or has died, then any payment
due him or his estate (unless a prior claim therefor has been
made by a duly appointed legal representative), may, if Employer
so determines, be paid to his spouse, a child, a relative, an
institution maintaining or having custody of such person, or any
other person deemed by Employer to be a proper recipient on
behalf of such person otherwise entitled to payment.  Any such
payment shall be a complete discharge of the liability of
Employer therefor.

          8.02  No Alienation of Benefits.  Except insofar as may
otherwise be required by law, no amount payable at any time under
the Plan shall be subject in any manner to alienation by
anticipation, sale, transfer, assignment, bankruptcy, pledge,
attachment, charge, or encumbrance of any kind, nor in any manner
be subject to the debts or liabilities of any person, and any
attempt to so alienate or subject any such amount, whether
presently or thereafter payable, shall be void.  If any person
shall attempt to, or shall alienate, sell transfer, assign,
pledge, attach, charge or otherwise encumber any amount payable
under the Plan, or any part thereof, or if by reason of his
bankruptcy or other event happening at any such time such amount
would be made subject to his debts or liabilities or would
otherwise not be enjoyed by him, then Employer, if it so selects,
may direct that such amount be withheld and that the same or any
part thereof be paid or applied to or for the benefit of such
person, his spouse, children or other dependents, or any of them
in such manner and proportion as Employer may deem proper.

          8.03  Employment Status.  Nothing contained in this
Plan shall be construed to give Employee the right to be retained
as an Employee of Employer or to impair the right of Employer to
terminate the services of Employee.

          8.04  Administration Expense.  The entire expense of
administering this Plan shall be borne by Employer and shall not
be charged against the Trust Fund.

          8.05  Withholding.  Employer shall be entitled to
reduce any payment pursuant to this Plan by an amount which
Employer deems reasonably required to comply with any federal or
state withholding requirements.

          8.06  Successors.  The Plan shall be binding upon all
persons entitled to benefits under the Plan, their respective
heirs and legal representatives, upon the Employer, its
successors and assigns, and upon the Trustee, and its successors.

          8.07  Administration.  The Plan shall be administered
by Employer, which may appoint or employ any agents it deems
advisable to assist Employer in interpreting and administering
the Plan.  Employer, as Plan administrator, shall make all
determinations as to Employee's right to benefits hereunder, and
shall have complete discretion in making all decisions with
respect to the Plan.  All such decisions shall be final and bind
all parties.

          8.08  Claims Procedure.  Employer shall provide
adequate notice in writing to any Employee or to any Beneficiary
("Claimant") whose claim for benefits under the Plan has been
denied.  Employer's notice to the Claimant shall set forth:

               (a)  The specific reason for the denial;

               (b)  Specific references to pertinent Plan
provisions on which Employer based its denial;

               (c)  A description of any additional material and
information needed for the Claimant to perfect his claim and an
explanation of why the material or information is needed; and

               (d)  That any appeal the Claimant wishes to make
of the adverse determination must be in writing to Employer
within 75 days after receipt of Employer's notice of denial of
benefits.  The notice must further advise the Claimant that his
failure to appeal the action to Employer in writing within the 75
day period will render Employer's determination final, binding
and conclusive.

               If the Claimant should appeal to Employer, he, or
his duly authorized representative, may submit, in writing,
whatever issues and comments he, or his duly authorized
representative, feels are pertinent.  The Claimant, or his duly
authorized representative, may review pertinent Plan documents. 
Employer shall re-examine all facts related to the appeal and
make a final determination as to whether the denial of benefits
is justified under the circumstances.  Employer shall advise the
Claimant of its decision within 60 days of the Claimant's written
request for review, unless special circumstances (such as a
hearing) would make the rendering of a decision within the 60 day
limit unfeasible, but in no event shall Employer render a
decision respecting a denial of a claim for benefits later than
120 days after its receipt of a request for review.  If any
dispute remains after Employer renders its decision following
review, such dispute shall be settled by binding arbitration,
conducted in Scranton, Pennsylvania, in accordance with the rules
of the American Arbitration Association.

          8.09  Construction and Interpretation.  This Plan shall
be construed in accordance with and governed by the laws of the
Commonwealth of Pennsylvania, except to the extent superseded by
Federal law.  If any provision of the Plan shall be held illegal
or invalid for any reason, such determination shall not affect
the remaining provisions of the Plan, and it shall be construed
as if said illegal or invalid provision had never been included.

          8.10  Amendments.  No amendment of any of the
provisions of this Plan shall be effective unless in writing
signed by both Employer and Employee.

          IN WITNESS WHEREOF, this Plan has been executed this
14th day of January, 1992.


                              PEOPLE'S NATIONAL BANK

                              By:________________________________

                              Attest:____________________________
                                        Secretary


Agreed to this 14th day
of January, 1992.

_____________________________
John Ord, Employee


                                                  EXHIBIT 10.3


                      TERMINATION AGREEMENT

          THIS AGREEMENT ("Agreement") made as of this 1st day of
January 1997, by and between PEOPLES FINANCIAL SERVICES CORP., a
Pennsylvania corporation ("Peoples") and MICHAEL S. KARHNAK (the
"Executive").

                           WITNESSETH:

          WHEREAS, Peoples is engaged in the business of a bank
holding company and is the owner of all the issued and
outstanding capital stock of Peoples National Bank of Susquehanna
County (the "Bank"); and

          WHEREAS, the Executive is presently serving as
Executive Vice President and Secretary of Peoples and of the
Bank; and

          WHEREAS, Peoples considers the continued services of
the Executive to be in the best interests of Peoples and its
shareholders and desires to induce the Executive to remain in the
employ of Peoples on an impartial and objective basis in the
event of change in control of Peoples.

                            AGREEMENT

          NOW, THEREFORE, the parties hereto, intending to be
legally bound, hereby agree as follows:

          1.   Term of Agreement.

               (a)  The term of this Agreement shall:

                    (i)  initially be a term commencing as of
     January 1, 1997, and ending on December 31, 1998; and

                    (ii)  be automatically extended to provide
     for a two (2) year term, annually, on January 1, 1998, and
     again on January 1 of each year thereafter, effective as of
     such respective dates, unless either Peoples or the
     Executive shall have given written notice of nonextension of
     the term of this Agreement to the other at least ninety (90)
     days before the date of any such extension.

               (b)  Notwithstanding the provisions of
Section 1(a) of this Agreement, this Agreement shall terminate
automatically upon termination by Peoples of the Executive's
employment for Cause.  As used in this Agreement, "Cause" shall
mean the following:

                    (i)  the Executive is convicted of or enters
     a plea of guilty or nolo contendere to a felony, a crime of
     falsehood, or a crime involving fraud or moral turpitude, or
     the actual incarceration of the Executive for a period of
     forty-five (45) consecutive days;

                    (ii)  the Executive willfully fails to follow
     the lawful, good faith instructions of the Board of
     Directors of Peoples after the Executive's receipt of
     written notice of such instructions, other than a failure
     resulting from the Executive's incapacity because of
     physical or mental illness; or

                    (iii)  any government regulatory agency
     orders that Peoples terminate the employment of the
     Executive or relieve him of his duties.

Notwithstanding the foregoing, the Executive's employment under
this Agreement shall not be deemed to have been terminated for
"Cause" under Clause (i) or (ii) above if such termination took
place solely as a result of:

                    (i)  questionable judgment on the part of the
     Executive;

                    (ii)  any act or omission believed by the
     Executive, in good faith, to have been in, or not opposed
     to, the best interests of Peoples or its affiliated
     companies; or

                    (iii)  any act or omission in respect of
     which a determination could properly be made that the
     Executive met the applicable standard of conduct prescribed
     for indemnification or reimbursement or payment of expenses
     under the Charter or Bylaws of Peoples (or its affiliates)
     or the directors' and officers' liability insurance of
     Peoples (or its affiliates), in each case as in effect at
     the time of such act or omission.

If the Executive's employment is terminated for Cause, the
Executive's rights under this Agreement shall cease as of the
effective date of such termination.

               (c)  Notwithstanding the provisions of
Section 1(a) of this Agreement, this Agreement shall terminate
automatically upon termination of the Executive's employment as a
result of the Executive's voluntary termination (other than in
accordance with Section 2 of this Agreement), retirement at the
Executive's election, or death, and the Executive's rights under
this Agreement shall cease as of the date of such voluntary
termination, retirement at the Executive's election, or death;
provided, however, that if the Executive dies after a Notice of
Termination (as defined in Section 2(a) of this Agreement) is
delivered by the Executive, the provisions of Section 11(b) of
this Agreement shall apply.

               (d)  Notwithstanding the provisions of
Section 1(a) of this Agreement, this Agreement shall terminate
automatically upon termination of the Executive's employment as a
result of the Executive's disability and the Executive's rights
under this Agreement shall cease as of the date of such
termination.  For purposes of this Agreement, "disability" shall
mean the Executive's incapacitation by accident, sickness, or
otherwise that renders the Executive mentally or physically
incapable of performing the services therefore required of the
Executive for a continuous period of six (6) months.

          2.   Termination Following Change in Control.

               (a)  If a Change in Control (as defined in
Section 2(b) of this Agreement) shall occur and if thereafter, at
any time during the term of this Agreement, the Executive shall
be involuntarily terminated or there shall be:

                    (i)  any reduction in title or a reduction in
     the Executive's responsibilities or authority with respect
     to Peoples, including such responsibilities and authority as
     the same may be increased at any time during the term of
     this Agreement, or the assignment to the Executive of duties
     inconsistent with the Executive's prior status as an officer
     of Peoples;

                    (ii)  any reassignment of the Executive which
     requires the Executive to move his principal residence;

                    (iii)  any removal of the Executive from
     office or any adverse change in the terms and conditions of
     the Executive's employment, except for any termination of
     the Executive's employment under the provisions of
     Section 1(b) hereof;

                    (iv)  any reduction in the Executive's annual
     base salary as in effect on the date hereof or as the same
     may be increased from time to time;

                    (v)  any failure of Peoples to provide the
     Executive with benefits at least as favorable as those
     enjoyed by the Executive under any of the pension, life
     insurance, medical, health, accident, disability or other
     employee benefit plans of Peoples (or any affiliated
     company) in which the Executive participated at the time of
     the Change in Control, or the taking of any action that
     would materially reduce any of such benefits in effect at
     the time of the Change in Control, unless such reduction is
     part of a reduction applicable to all employees;

                    (vi)  any failure to obtain a satisfactory
     agreement from any successor to assume and agree to perform
     under this Agreement, as contemplated in Section 11(a)
     hereof;

                    (vii)  any material change in the legal
     relationship between Peoples and the Bank; or

                    (viii)  any material breach of this Agreement
     on the part of Peoples;

then, at the option of the Executive, exercisable by the
Executive within one hundred twenty (120) days of the occurrence
of each and every of the foregoing enumerated events, the
Executive may resign from employment with Peoples (or, if
involuntarily terminated, give notice of intention to collect
benefits under this Agreement) by delivering a notice in writing
(the "Notice of Termination") to Peoples, and the provisions of
Section 3 of this Agreement shall apply.

               (b)  As used in this Agreement, "Change in
Control" means a change of control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A
of Regulation 14A promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), as enacted and in force
on the date hereof, whether or not Peoples is then subject to
such reporting requirement; provided, however, that, without
limitation, such a Change in Control shall be deemed to have
occurred if:

                    (i)  any "person" (including a group acting
     in concert, as the term "person" is defined in Section 13(d)
     of the Exchange Act, as enacted and in force on the date
     hereof) becomes the "beneficial owner" (as that term is
     defined in Rule 13d-3, as enacted and in force on the date
     hereof, under the Exchange Act) of securities of Peoples
     representing more than 19.9% of the combined voting power of
     Peoples' securities then outstanding;

                    (ii)  there occurs a merger, consolidation or
     other business combination or reorganization to which
     Peoples or the Bank is a party, whether or not approved in
     advance by the Board of Directors of Peoples or the Bank (as
     the case may be) in which the members of the Board of
     Directors of Peoples or the Bank (as the case may be)
     immediately preceding the consummation of such transaction
     do not constitute a majority of the members of the Board of
     Directors of the resulting corporation and of any parent
     corporation thereof immediately after the consummation of
     such transaction;

                    (iii)  there occurs a sale, exchange,
     transfer, or other disposition of substantially all of the
     assets of Peoples or the Bank to another entity, which is
     not approved in advance by the Board of Directors of
     Peoples;

                    (iv)  there occurs a contested proxy
     solicitation of the stockholders of Peoples that results in
     the contesting party obtaining the ability to elect
     candidates to a majority of the positions on Peoples' Board
     of Directors next up for election; or

                    (v)  there occurs a tender offer for the
     shares of voting securities of Peoples that results in the
     tender offeror obtaining securities representing more than
     19.9% of the combined voting power of Peoples' securities
     then outstanding.

          3.   Rights in Event of Certain Termination of
Employment After Change in Control.  In the event that Executive
resigns from employment in accordance with the provisions of
Section 2(a), or Executive's employment is terminated by Peoples
without Cause after a Change in Control, Peoples shall pay (or
cause to be paid) to the Executive in cash, within twenty (20)
days following termination, an amount equal to 2.00 times his
"base amount" (within the meaning of Section 280G(b)(3) of the
Internal Revenue Code of 1986, as amended (the "Code")),
calculated as though the occurrence of the Change in Control were
an event described in Code Section 280G(b)(2)(A)(i). 
Notwithstanding the preceding sentence, in the event the lump sum
payment described in the preceding sentence, when added to all
other amounts or benefits provided to or on behalf of the
Executive in connection with his termination of employment, would
result in the imposition of an excise tax under Code Section
4999, such lump sum shall be reduced to the extent necessary to
avoid such imposition.

          4.   Legal Expenses.  Peoples shall pay to the
Executive all legal fees and expenses incurred by the Executive
in seeking in good faith to obtain or enforce any right or
benefit provided by the Agreement, provided that any action or
proceeding is not summarily decided against the Executive.

          5.   Arbitration.  Peoples and the Executive recognize
that in the event a dispute should arise between them concerning
the interpretation or implementation of this Agreement, lengthy
and expensive litigation will not afford a practical resolution
of the issues within a reasonable period of time.  Consequently,
each party agrees that all disputes, disagreements and questions
of interpretation concerning this Agreement are to be submitted
for resolution to the American Arbitration Association (the
"Association") in Philadelphia, Pennsylvania.  Peoples, or the
Executive, may initiate an arbitration proceeding at any time by
giving notice to the other in accordance with the rules of the
Association.  The Association shall designate a single arbitrator
to conduct the proceeding, but Peoples, and the Executive, may,
as a matter of right, require the substitution of a different
arbitrator chosen by the Association.  Each such right of
substitution may be exercised only once.  The arbitrator shall
not be bound by the rules of evidence and procedure of the courts
of the Commonwealth of Pennsylvania but shall be bound by the
substantive law applicable to this Agreement.  The decision of
the arbitrator, absent fraud, duress, incompetence or gross and
obvious error of fact, shall be final and binding upon the
parties and shall be enforceable in courts of proper
jurisdiction.  Following written notice of a request for
arbitration, Peoples, and the Executive, shall be entitled to an
injunction restraining all further proceedings in any pending or
subsequently filed litigation concerning this Agreement. 
Notwithstanding the preceding provisions of this section, in the
event any such provision is in conflict with a rule or policy of
the Association, the arbitration proceeding shall be governed by
such rule or policy.

          6.   Mitigation of Damages.  The Executive shall not be
required to mitigate the amount of any payment provided for in
Section 3 by seeking other employment or otherwise, nor shall the
amount of any payment or benefit provided for in Section 3 be
reduced by any compensation earned by the Executive as the result
of employment by another employer or by reason of the Executive's
receipt of or right to receive any retirement or other benefits
after the date of termination of employment or otherwise;
provided, however, that the payments provided for in Section 3
shall be reduced by the amount actually received by the Executive
under any severance policy of Peoples then in effect.

          7.   Notices.  Any notice required or permitted to be
given under this Agreement shall be deemed properly given if in
writing and if mailed by registered or certified mail, postage
prepaid with return receipt requested, to the residence of the
Executive, in the case of notices to the Executive, and to the
principal office of Peoples, in the case of notices to Peoples.

          8.   Waiver.  No provision of this Agreement may be
modified, waived, or discharged unless such waiver, modification,
or discharge is agreed to in writing and signed by the Executive
and an executive officer of Peoples specifically designated by
the Board of Directors of Peoples.  No waiver by either party
hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time.

          9.   Assignment.  This Agreement shall not be
assignable by either party, except by Peoples to any successor in
interest to the business of Peoples.

          10.  Entire Agreement.  This Agreement contains the
entire agreement of the parties relating to the subject matter of
this Agreement.

          11.  Successors; Binding Agreement.

               (a)  Peoples will require any successor (whether
direct or indirect, by purchase, merger, consolidation, or
otherwise) to all or substantially all of the business and/or
assets of Peoples to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that Peoples
would be required to perform it if no such succession had taken
place.  Failure by Peoples to obtain such assumption and
agreement prior to the effectiveness of any such succession shall
constitute a breach of this Agreement and the provisions of
Section 3 of this Agreement shall apply.  As used in this
Agreement, "Peoples" shall mean Peoples as hereinbefore defined
and any successor to the respective businesses and/or assets of
Peoples which assumes and agrees to perform this Agreement by
operation of law or otherwise.

               (b)  This Agreement shall inure to the benefit of
and be enforceable by the Executive's personal or legal
representatives, executors, administrators, heirs, distributees,
devisees, and legatees.  If the Executive should die after a
Notice of Termination is delivered by the Executive and any
amounts would be payable to the Executive under this Agreement if
the Executive had continued to live, all such amounts shall be
paid in accordance with the terms of this Agreement to the
Executive's devisee, legatee, or other designee, or, if there is
none, to the Executive's estate.

          12.  Validity.  The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.

          13.  Applicable Law.  This Agreement shall be governed
by and construed in accordance with the domestic laws (but not
the law of conflict of laws) of the Commonwealth of Pennsylvania.

          14.  Headings.  The headings of the sections of this
Agreement are for convenience only and shall not control or
affect the meaning or construction or limit the scope or intent
of any of the provisions of this Agreement.

          15.  Termination of Prior Agreements.  Upon the
execution and delivery of this Agreement by the parties hereto,
any prior agreement relating to the subject matter hereof shall
be automatically terminated and be of no further force or effect.

          IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.

                              PEOPLES FINANCIAL SERVICES CORP.

                              By_________________________________
                                        President
(SEAL)

                              Attest:____________________________
                                         (Assistant) Secretary

                                             ("Peoples")

Witness:

__________________________    _____________________________(SEAL)
                                   Michael S. Karhnak

                                             ("Executive")


                                                  EXHIBIT 10.4


                      TERMINATION AGREEMENT

          THIS AGREEMENT ("Agreement") made as of this 1st day of
January 1997, by and between PEOPLES FINANCIAL SERVICES CORP., a 
DEBRA E. DISSINGER (the "Executive").

                           WITNESSETH:

          WHEREAS, Peoples is engaged in the business of a bank
holding company and is the owner of all the issued and
outstanding capital stock of Peoples National Bank of Susquehanna
County (the "Bank"); and

          WHEREAS, the Executive is presently serving as Senior
Vice President and Cashier of Peoples and of the Bank; and

          WHEREAS, Peoples considers the continued services of
the Executive to be in the best interests of Peoples and its
shareholders and desires to induce the Executive to remain in the
employ of Peoples on an impartial and objective basis in the
event of change in control of Peoples.

                            AGREEMENT

          NOW, THEREFORE, the parties hereto, intending to be
legally bound, hereby agree as follows:

          1.   Term of Agreement.

               (a)  The term of this Agreement shall:

                    (i)  initially be a term commencing as of
     January 1, 1997, and ending on December 31, 1998; and

                    (ii)  be automatically extended to provide
     for a two (2) year term, annually, on January 1, 1998, and
     again on January 1 of each year thereafter, effective as of
     such respective dates, unless either Peoples or the
     Executive shall have given written notice of nonextension of
     the term of this Agreement to the other at least ninety (90)
     days before the date of any such extension.

               (b)  Notwithstanding the provisions of
Section 1(a) of this Agreement, this Agreement shall terminate
automatically upon termination by Peoples of the Executive's
employment for Cause.  As used in this Agreement, "Cause" shall
mean the following:

                    (i)  the Executive is convicted of or enters
     a plea of guilty or nolo contendere to a felony, a crime of
     falsehood, or a crime involving fraud or moral turpitude, or
     the actual incarceration of the Executive for a period of
     forty-five (45) consecutive days;

                    (ii)  the Executive willfully fails to follow
     the lawful, good faith instructions of the Board of
     Directors of Peoples after the Executive's receipt of
     written notice of such instructions, other than a failure
     resulting from the Executive's incapacity because of
     physical or mental illness; or

                    (iii)  any government regulatory agency
     orders that Peoples terminate the employment of the
     Executive or relieve him of his duties.

Notwithstanding the foregoing, the Executive's employment under
this Agreement shall not be deemed to have been terminated for
"Cause" under Clause (i) or (ii) above if such termination took
place solely as a result of:

                    (i)  questionable judgment on the part of the
     Executive;

                    (ii)  any act or omission believed by the
     Executive, in good faith, to have been in, or not opposed
     to, the best interests of Peoples or its affiliated
     companies; or

                    (iii)  any act or omission in respect of
     which a determination could properly be made that the
     Executive met the applicable standard of conduct prescribed
     for indemnification or reimbursement or payment of expenses
     under the Charter or Bylaws of Peoples (or its affiliates)
     or the directors' and officers' liability insurance of
     Peoples (or its affiliates), in each case as in effect at
     the time of such act or omission.

If the Executive's employment is terminated for Cause, the
Executive's rights under this Agreement shall cease as of the
effective date of such termination.

               (c)  Notwithstanding the provisions of
Section 1(a) of this Agreement, this Agreement shall terminate
automatically upon termination of the Executive's employment as a
result of the Executive's voluntary termination (other than in
accordance with Section 2 of this Agreement), retirement at the
Executive's election, or death, and the Executive's rights under
this Agreement shall cease as of the date of such voluntary
termination, retirement at the Executive's election, or death;
provided, however, that if the Executive dies after a Notice of
Termination (as defined in Section 2(a) of this Agreement) is
delivered by the Executive, the provisions of Section 11(b) of
this Agreement shall apply.

               (d)  Notwithstanding the provisions of
Section 1(a) of this Agreement, this Agreement shall terminate
automatically upon termination of the Executive's employment as a
result of the Executive's disability and the Executive's rights
under this Agreement shall cease as of the date of such
termination.  For purposes of this Agreement, "disability" shall
mean the Executive's incapacitation by accident, sickness, or
otherwise that renders the Executive mentally or physically
incapable of performing the services therefore required of the
Executive for a continuous period of six (6) months.

          2.   Termination Following Change in Control.

               (a)  If a Change in Control (as defined in
Section 2(b) of this Agreement) shall occur and if thereafter, at
any time during the term of this Agreement, the Executive shall
be involuntarily terminated or there shall be:

                    (i)  any reduction in title or a reduction in
     the Executive's responsibilities or authority with respect
     to Peoples, including such responsibilities and authority as
     the same may be increased at any time during the term of
     this Agreement, or the assignment to the Executive of duties
     inconsistent with the Executive's prior status as an officer
     of Peoples;

                    (ii)  any reassignment of the Executive which
     requires the Executive to move his principal residence;

                    (iii)  any removal of the Executive from
     office or any adverse change in the terms and conditions of
     the Executive's employment, except for any termination of
     the Executive's employment under the provisions of
     Section 1(b) hereof;

                    (iv)  any reduction in the Executive's annual
     base salary as in effect on the date hereof or as the same
     may be increased from time to time;

                    (v)  any failure of Peoples to provide the
     Executive with benefits at least as favorable as those
     enjoyed by the Executive under any of the pension, life
     insurance, medical, health, accident, disability or other
     employee benefit plans of Peoples (or any affiliated
     company) in which the Executive participated at the time of
     the Change in Control, or the taking of any action that
     would materially reduce any of such benefits in effect at
     the time of the Change in Control, unless such reduction is
     part of a reduction applicable to all employees;

                    (vi)  any failure to obtain a satisfactory
     agreement from any successor to assume and agree to perform
     under this Agreement, as contemplated in Section 11(a)
     hereof;

                    (vii)  any material change in the legal
     relationship between Peoples and the Bank; or

                    (viii)  any material breach of this Agreement
     on the part of Peoples;

then, at the option of the Executive, exercisable by the
Executive within one hundred twenty (120) days of the occurrence
of each and every of the foregoing enumerated events, the
Executive may resign from employment with Peoples (or, if
involuntarily terminated, give notice of intention to collect
benefits under this Agreement) by delivering a notice in writing
(the "Notice of Termination") to Peoples, and the provisions of
Section 3 of this Agreement shall apply.

               (b)  As used in this Agreement, "Change in
Control" means a change of control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A
of Regulation 14A promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), as enacted and in force
on the date hereof, whether or not Peoples is then subject to
such reporting requirement; provided, however, that, without
limitation, such a Change in Control shall be deemed to have
occurred if:

                    (i)  any "person" (including a group acting
     in concert, as the term "person" is defined in Section 13(d)
     of the Exchange Act, as enacted and in force on the date
     hereof) becomes the "beneficial owner" (as that term is
     defined in Rule 13d-3, as enacted and in force on the date
     hereof, under the Exchange Act) of securities of Peoples
     representing more than 19.9% of the combined voting power of
     Peoples' securities then outstanding;

                    (ii)  there occurs a merger, consolidation or
     other business combination or reorganization to which
     Peoples or the Bank is a party, whether or not approved in
     advance by the Board of Directors of Peoples or the Bank (as
     the case may be) in which the members of the Board of
     Directors of Peoples or the Bank (as the case may be)
     immediately preceding the consummation of such transaction
     do not constitute a majority of the members of the Board of
     Directors of the resulting corporation and of any parent
     corporation thereof immediately after the consummation of
     such transaction;

                    (iii)  there occurs a sale, exchange,
     transfer, or other disposition of substantially all of the
     assets of Peoples or the Bank to another entity, which is
     not approved in advance by the Board of Directors of
     Peoples;

                    (iv)  there occurs a contested proxy
     solicitation of the stockholders of Peoples that results in
     the contesting party obtaining the ability to elect
     candidates to a majority of the positions on Peoples' Board
     of Directors next up for election; or

                    (v)  there occurs a tender offer for the
     shares of voting securities of Peoples that results in the
     tender offeror obtaining securities representing more than
     19.9% of the combined voting power of Peoples' securities
     then outstanding.

          3.   Rights in Event of Certain Termination of
Employment After Change in Control.  In the event that Executive
resigns from employment in accordance with the provisions of
Section 2(a), or Executive's employment is terminated by Peoples
without Cause after a Change in Control, Peoples shall pay (or
cause to be paid) to the Executive in cash, within twenty (20)
days following termination, an amount equal to 2.00 times his
"base amount" (within the meaning of Section 280G(b)(3) of the
Internal Revenue Code of 1986, as amended (the "Code")),
calculated as though the occurrence of the Change in Control were
an event described in Code Section 280G(b)(2)(A)(i). 
Notwithstanding the preceding sentence, in the event the lump sum
payment described in the preceding sentence, when added to all
other amounts or benefits provided to or on behalf of the
Executive in connection with his termination of employment, would
result in the imposition of an excise tax under Code Section
4999, such lump sum shall be reduced to the extent necessary to
avoid such imposition.

          4.   Legal Expenses.  Peoples shall pay to the
Executive all legal fees and expenses incurred by the Executive
in seeking in good faith to obtain or enforce any right or
benefit provided by the Agreement, provided that any action or
proceeding is not summarily decided against the Executive.

          5.   Arbitration.  Peoples and the Executive recognize
that in the event a dispute should arise between them concerning
the interpretation or implementation of this Agreement, lengthy
and expensive litigation will not afford a practical resolution
of the issues within a reasonable period of time.  Consequently,
each party agrees that all disputes, disagreements and questions
of interpretation concerning this Agreement are to be submitted
for resolution to the American Arbitration Association (the
"Association") in Philadelphia, Pennsylvania.  Peoples, or the
Executive, may initiate an arbitration proceeding at any time by
giving notice to the other in accordance with the rules of the
Association.  The Association shall designate a single arbitrator
to conduct the proceeding, but Peoples, and the Executive, may,
as a matter of right, require the substitution of a different
arbitrator chosen by the Association.  Each such right of
substitution may be exercised only once.  The arbitrator shall
not be bound by the rules of evidence and procedure of the courts
of the Commonwealth of Pennsylvania but shall be bound by the
substantive law applicable to this Agreement.  The decision of
the arbitrator, absent fraud, duress, incompetence or gross and
obvious error of fact, shall be final and binding upon the
parties and shall be enforceable in courts of proper
jurisdiction.  Following written notice of a request for
arbitration, Peoples, and the Executive, shall be entitled to an
injunction restraining all further proceedings in any pending or
subsequently filed litigation concerning this Agreement. 
Notwithstanding the preceding provisions of this section, in the
event any such provision is in conflict with a rule or policy of
the Association, the arbitration proceeding shall be governed by
such rule or policy.

          6.   Mitigation of Damages.  The Executive shall not be
required to mitigate the amount of any payment provided for in
Section 3 by seeking other employment or otherwise, nor shall the
amount of any payment or benefit provided for in Section 3 be
reduced by any compensation earned by the Executive as the result
of employment by another employer or by reason of the Executive's
receipt of or right to receive any retirement or other benefits
after the date of termination of employment or otherwise;
provided, however, that the payments provided for in Section 3
shall be reduced by the amount actually received by the Executive
under any severance policy of Peoples then in effect.

          7.   Notices.  Any notice required or permitted to be
given under this Agreement shall be deemed properly given if in
writing and if mailed by registered or certified mail, postage
prepaid with return receipt requested, to the residence of the
Executive, in the case of notices to the Executive, and to the
principal office of Peoples, in the case of notices to Peoples.

          8.   Waiver.  No provision of this Agreement may be
modified, waived, or discharged unless such waiver, modification,
or discharge is agreed to in writing and signed by the Executive
and an executive officer of Peoples specifically designated by
the Board of Directors of Peoples.  No waiver by either party
hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time.

          9.   Assignment.  This Agreement shall not be
assignable by either party, except by Peoples to any successor in
interest to the business of Peoples.

          10.  Entire Agreement.  This Agreement contains the
entire agreement of the parties relating to the subject matter of
this Agreement.

          11.  Successors; Binding Agreement.

               (a)  Peoples will require any successor (whether
direct or indirect, by purchase, merger, consolidation, or
otherwise) to all or substantially all of the business and/or
assets of Peoples to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that Peoples
would be required to perform it if no such succession had taken
place.  Failure by Peoples to obtain such assumption and
agreement prior to the effectiveness of any such succession shall
constitute a breach of this Agreement and the provisions of
Section 3 of this Agreement shall apply.  As used in this
Agreement, "Peoples" shall mean Peoples as hereinbefore defined
and any successor to the respective businesses and/or assets of
Peoples which assumes and agrees to perform this Agreement by
operation of law or otherwise.

               (b)  This Agreement shall inure to the benefit of
and be enforceable by the Executive's personal or legal
representatives, executors, administrators, heirs, distributees,
devisees, and legatees.  If the Executive should die after a
Notice of Termination is delivered by the Executive and any
amounts would be payable to the Executive under this Agreement if
the Executive had continued to live, all such amounts shall be
paid in accordance with the terms of this Agreement to the
Executive's devisee, legatee, or other designee, or, if there is
none, to the Executive's estate.

          12.  Validity.  The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.

          13.  Applicable Law.  This Agreement shall be governed
by and construed in accordance with the domestic laws (but not
the law of conflict of laws) of the Commonwealth of Pennsylvania.

          14.  Headings.  The headings of the sections of this
Agreement are for convenience only and shall not control or
affect the meaning or construction or limit the scope or intent
of any of the provisions of this Agreement.

          15.  Termination of Prior Agreements.  Upon the
execution and delivery of this Agreement by the parties hereto,
any prior agreement relating to the subject matter hereof shall
be automatically terminated and be of no further force or effect.

          IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.

                              PEOPLES FINANCIAL SERVICES CORP.

                              By_________________________________
                                        President
(SEAL)

                              Attest:____________________________
                                         (Assistant) Secretary

                                             ("Peoples")

Witness:

__________________________    _____________________________(SEAL)
                                   Debra E. Dissinger

                                             ("Executive")


                                                  EXHIBIT 21


                 Subsidiaries of the Registrant


           Peoples National Bank of Susquehanna County


                                                  EXHIBIT 23


                 Consent of Independent Auditors


     We consent to the inclusion in the Form 10 Registration
Statement of Peoples Financial Services Corp. (the "Company")
relating to the registration of the common stock of the Company
under Section 12(g) of the Securities Exchange Act of 1934, as
amended, of our report dated February 11, 1998 relating to the
consolidated financial statements of the Company as of and for
the year ended December 31, 1997.


                              /s/ Prociak and Associates, L.L.C.


March 2, 1998
Wilkes-Barre, Pennsylvania


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<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          DEC-31-1997
<PERIOD-END>                               DEC-31-1997
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