LAKE ARIEL BANCORP INC
DEF 14A, 1997-04-04
NATIONAL COMMERCIAL BANKS
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                     LAKE ARIEL BANCORP, INC.
                              PROXY
     ANNUAL MEETING OF SHAREHOLDERS TO BE HELD 
APRIL 29,1997
   THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS


          The undersigned hereby constitutes and appoints
Kerry Nix and Joseph Collins and each and any of them,
proxies of the undersigned, with full power of substitution,
to vote all of the shares of Lake Ariel Bancorp,
Inc. (the "Corporation") that the undersigned may be
entitled to vote at the Annual Meeting of Shareholders of
the Corporation to be held at The Waterfront
Banquet and Conference Center at Ehrhardt's, Hawley,
Pennsylvania 18428, on Tuesday, April 29, 1997 at 11:00
a.m., prevailing time, and at any adjournment or
postponement thereof as follows:

1.   ELECTION OF CLASS 2 DIRECTORS

[    ] For all nominees listed   [    ] WITHHOLD AUTHORITY
       below (except as marked          to vote on all 
         to the contrary below)        nominees listed below

     (INSTRUCTIONS:  TO WITHHOLD AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE, WRITE THAT NOMINEE'S NAME ON THE SPACE
PROVIDED BELOW.)

                Bruce D. Howe and Peter O. Clauss
  
___________________________________________________________

2.   Ratification of the Corporation's 1997 Stock Option
Plan.

               [    ]    FOR            [    ]    AGAINST

3.   Ratification of the selection of Parente, Randolph,
Orlando, Carey & Associates, Certified
Public Accountants, as the independent auditors of the
Corporation for the fiscal year ending December 31, 1997.

               [    ]    FOR            [    ]    AGAINST

4.   In their discretion, the proxies are authorized to vote
upon such other business as may properly come before  the
meeting and any adjournment or postponement thereof.


          THIS PROXY, WHEN PROPERLY SIGNED, WILL BE VOTED IN
THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. 
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL
NOMINEES LISTED ABOVE AND FOR PROPOSALS 2 AND 3.

   Dated ____________________________, 1997

                                  
_______________________________________

                                  
_______________________________________
Signature(s)

Number of Shares Held of
Record on March 18, 1997:                          


          THIS PROXY MUST BE DATED, SIGNED BY THE
SHAREHOLDER AND RETURNED PROMPTLY TO THE CORPORATION IN THE
ENCLOSED ENVELOPE.  WHEN SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE
FULL TITLE. IF MORE THAN ONE TRUSTEE, ALL SHOULD SIGN.  IF
STOCK IS HELD JOINTLY, EACH OWNER MUST SIGN.


[PROXY STATEMENT]
[LOGO]

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS



TO THE SHAREHOLDERS OF LAKE ARIEL BANCORP, INC.:

          Notice is hereby given that the Annual Meeting of
Shareholders of Lake Ariel Bancorp, Inc. (the "Corporation")
will be held at 11:00 a.m., prevailing time, on Tuesday,
April29, 1997, at The Waterfront Banquet and Conference
Center at Ehrhardt's, Hawley, Pennsylvania 18428, for the
following purposes:  

          1.   To elect two Class 2 directors to serve for a
three-year term and until their successors are duly elected
and qualified;

          2.   To approve the Corporation's 1997 Stock
Option Plan;

          3.   To ratify the selection of Parente, Randolph,
Orlando, Carey & Associates, Certified Public Accountants of
Scranton, Pennsylvania as the independent auditors of the
Corporation for the fiscal year ending December31, 1997; and

          4.   To transact such other business as may
properly come before the Annual Meeting and any adjournment
or postponement thereof.  


          Only those shareholders of record at the close of
business, at 5:00 p.m., on Tuesday, March18, 1997, will be
entitled to notice of and to vote at the Annual Meeting.

          A copy of the Corporation's Annual Report for the
fiscal year ended December31, 1996, is being mailed with
this notice.

          You are urged to mark, sign, date and promptly
return your proxy in the enclosed envelope so that your
shares may be voted in accordance with your wishes and in
order that the presence of a quorum may be assured.  The
prompt return of your signed proxy, regardless of the
number of shares you hold, will aid the Corporation in
reducing the expense of additional proxy
solicitation.  The giving of such proxy does not affect your
right to vote in person if you attend the meeting.  

By Order of the Board of Directors



Bruce D. Howe, President

March 27, 1997
     

[LOGO]

PROXY STATEMENT FOR THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD APRIL29, 1997


GENERAL


Introduction, Date, Place and Time of Meeting

     This Proxy Statement is being furnished for the
solicitation by the Board of Directors of Lake Ariel
Bancorp, Inc. (the "Corporation"), a Pennsylvania
business corporation, of proxies to be voted at the Annual
Meeting of Shareholders of the Corporation to be held at The
Waterfront Banquet and Conference Center at Ehrhardt's,
Hawley, Pennsylvania 18428, on Tuesday, April29, 1997, at
11:00 a.m., prevailing time, or at any adjournment or
postponement of the Annual Meeting.  

     The main office of the Corporation is located at LA
Bank, N.A., Route 191, Lake Ariel, Pennsylvania 18436.  The
telephone number for the Corporation is (717) 698-5695.  All
inquiries should be directed to Louis M. Martarano, Vice
President of the Corporation.  This Proxy Statement and the
enclosed form of proxy (the "Proxy") are first being sent to
shareholders of the Corporation on March27, 1997.


Solicitation

     Shares represented by proxies on the accompanying
Proxy, if properly signed and returned, will be voted in
accordance with the specifications made thereon by the
shareholders. Any Proxy not specifying to the contrary will
be voted for the election of the two nominees for
Class 2 director named below, for the approval of the
Corporation's 1997 Stock Option Plan, and for the approval
of Parente, Randolph, Orlando, Carey & Associates, Certified
Public Accountants, as the independent auditors for the
fiscal year ending December31, 1997.  Execution and return
of the enclosed Proxy will not affect a shareholder's right
to attend the Annual Meeting and vote in person.

     The cost of preparing, assembling, mailing and
soliciting proxies will be borne by the Corporation.  In
addition to the use of the mails, certain directors,
officers and employees of the Corporation intend to solicit
proxies personally, by telephone and by telefacsimile. 
Arrangements will be made with brokerage houses and other
custodians, nominees and fiduciaries to forward proxy
solicitation material to the beneficial owners of stock held
of record by these persons, and, upon request therefor, the
Corporation will reimburse them for their reasonable
forwarding expenses.


Right of Revocation

     A shareholder who returns a Proxy may revoke it at any
time before it is voted by: (1)delivering written notice of
revocation to Louis M. Martarano, Vice President and
Assistant Secretary, Lake Ariel Bancorp, Inc., Post Office
Box 67, Route 191, Lake Ariel, Pennsylvania 18436,
telephone:  (717)698-5695; (2) executing a later-dated Proxy
and giving written notice thereof to the Assistant Secretary
of the Corporation or (3) voting in person after given
written notice to the Assistant Secretary of the
Corporation.  


Voting Securities, Record Date and Quorum

     At the close of business on March18, 1997, the
Corporation had outstanding 1,771,328 shares of common
stock, $.42 par value per share.  No shares of preferred
stock, $1.25 par value per share, were issued and
outstanding.  A majority of the outstanding shares of the
common stock will constitute a quorum at the Annual Meeting. 


     Only holders of common stock of record at the close of
business on March18, 1997, will be entitled to notice of and
to vote at the Annual Meeting.  Cumulative voting rights do
not exist with respect to the election of directors.  On all
matters to come before the Annual Meeting, each share of
common stock is entitled to one vote.

     Under Pennsylvania law, the presence of a quorum is
required for each matter to be acted upon at the Annual
Meeting.  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 shall
constitute a quorum for the transaction of business at the
Annual Meeting.  Votes withheld and abstentions
will be counted in determining the presence of a quorum for
the particular matter.  Broker non-votes will not be counted
in determining the presence of a quorum for the particular
matter as to which the broker withheld authority.

     Assuming the presence of a quorum, the two nominees for
director receiving the highest number of votes cast by
shareholders entitled to vote for the election of directors
shall be elected. Votes withheld from a nominee and broker
non-votes will not be cast for such nominee.

     Assuming the presence of a quorum, the affirmative vote
of a majority of all votes cast by shareholders is required
for the approval of the Corporation's 1997 Stock Option Plan
and the ratification of the selection of independent
auditors.  Abstentions and broker non-votes are not
votes cast and therefore do not count either for or against
such respective approval and ratification.  Abstentions and
broker non-votes, however, have the practical effect of
reducing the number of affirmative votes required to achieve
a majority for each such matter by reducing the
total number of shares voted from which the required
majority is calculated.


PRINCIPAL BENEFICIAL OWNERS OF THE CORPORATION'S STOCK


Principal Owners

     The following table sets forth, as of March18, 1997,
the name and address of each person who owns of record or
who is known by the Board of Directors to be the beneficial
owner of more than five percent (5%) of the Corporation's
outstanding Common Stock, the number of shares beneficially
owned by such person and the percentage of the Corporation's
outstanding Common Stock so owned.

                                     Percent of Outstanding
                 Shares Beneficially Common Stock
Name and Address     Owned (1)       Beneficially Owned

Bruce D. Howe(4)(11)     179,253        10.1%
R.D. #6, Box 6332
Lake Ariel, PA 18436

John G. Martines(5)(13)  102,401        5.6%
R.D. #1 Newton Lake
824 Sunset Avenue
Carbondale, PA 18407

Beneficial Ownership by 
Officers, Directors and Nominees

          The following table sets forth as of March18,
1997, the amount and percentage of the Common Stock of the
Corporation beneficially owned by each director, each
nominee, each executive officer, and all officers and
directors of the Corporation as a group.

Name of Individual  Amount and Nature of       Percent
or Identity of Group Beneficial Ownership(1)(2) of Class

Donald E. Chapman(3)(6)             59,753       3.4%
Peter O. Clauss(4)(7)               25,632       1.4%
Arthur M. Davis(3)(8)               35,319       2.0%
Joseph J. Earyes(9)                 17,917       1.0%
William C. Gumble(3)(10)            53,740       3.0%
Bruce D. Howe(4)(11)               179,253      10.1%
Louis M. Martarano(12)              37,902       2.1%
John G. Martines(5)(13)            102,401       5.6%
Harry F. Schoenagel(5)(14)          43,201       2.4%

All Officers and Directors
 as a Group (7 directors,
 5 officers, 9 persons in total)   555,118      29.6%

________________
(1)  The securities "beneficially owned" by an individual
are determined in accordance with the definitions of
"beneficial ownership" set forth in  the General Rules and
Regulations of the Securities and Exchange Commission
("SEC") and may include securities owned by or for the
individual's spouse and minor children and any other
relative who has the same home, as well as securities to
which the individual has or shares voting or investment
power or has the right to acquire beneficial ownership
within 60 days after March18, 1997.  Beneficial ownership
may be disclaimed as to certain of the securities.
(2)  Information furnished by the directors and the
Corporation.
(3)  A Class 1 Director Whose Term Expires in 1998
(4)  Nominees for Class 2 Director Whose Term Will Expire in
2000 and current Class 2 Directors Whose Term Expires in
1997.
(5)  A Class 3 Director Whose Term Expires in 1999.
(6)  Of the 59,753 shares beneficially owned by Donald E.
Chapman, 17,281 are owned by him individually;  37,902 are
owned jointly with his spouse; 2,754 are held individually
by his spouse; 1,168 are held jointly with his son; and 648
shares are held individually by his son who has the same
home.
(7)  Of the 25,632 shares beneficially owned by Peter O.
Clauss, 9,075 are held by him individually, 12,947 are owned
jointly with his wife; and 3,610 are owned individually by
his spouse.
(8)  Of the 35,319 shares beneficially owned by Arthur M.
Davis, 15,965 are owned by him individually; 17,817 are
owned jointly with his wife; and 1,537 are owned by Lake
Ariel Hardware & Supply Co., Inc., of which Mr. Davis is
President.
(9)  Of the 17,917 shares beneficially owned by Joseph J.
Earyes, 6,116  are owned by him individually, 1,301 are held
jointly with his spouse; and 10,500 shares may be acquired
at any time by the exercise of stock options.
(10) All shares are held individually.
(11) Of the 179,253 shares beneficially owned by Bruce D.
Howe, 160,433 are owned by him individually; 17,005 are
owned jointly with his spouse; and 1,815 are owned
individually by his spouse.
(12) Of the 37,902 shares beneficially owned by Louis M.
Martarano, 1,182 are owned by him individually;   8,367 are
owned jointly with his wife; 1,402 shares held as custodian
for his two sons; 701 shares as custodian for his daughter;
and 26,250 shares may be acquired at any time by the
exercise of stock options.
(13) Of the 102,401 shares beneficially owned by John G.
Martines, 7,755 are owned by him individually; 20,000  are
held jointly with his spouse; 6,396 are held individually by
his spouse; and 68,250 shares may be acquired at any time by
the exercise of stock options.
(14) Of the 43,201 shares beneficially owned by Harry F.
Schoenagel, 16,912 are owned by him individually; 3,150 are
owned jointly with his spouse; and 23,139 are owned by his
spouse individually.


Section 16(a) Beneficial Ownership Reporting Compliance 

     Section 16(a) of the Securities Exchange Act of 1934
requires the Corporation's officers and directors, and
persons who own more than ten percent of a registered class
of the Corporation's equity securities (in this case the
Corporation's Common Stock), to file reports of
ownership and changes in ownership with the SEC.  Officers,
directors and greater than ten-percent shareholders are
required by SEC regulation to furnish the Corporation with
copies of all Section 16(a) forms that they file.

     Based solely on its review of the copies of such forms
received by it, or written representations from certain
reporting persons that no Forms 5 were required for those
persons, the Corporation believes that, during the period
January1, 1996 through December31, 1996, all filing
requirements applicable to its officers, directors and
greater than ten-percent shareholders were complied with.


ELECTION OF DIRECTORS
(ITEM 1)


     The Corporation has a classified Board of Directors
with staggered three-year terms of office.  In a classified
board, the directors are generally divided into separate
classes of equal number.  The terms of the separate classes
expire in successive years.  Thus, at each Annual Meeting of
Shareholders 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.  

     In addition, there is no cumulative voting for the
election of directors.  Each share of common stock is
entitled to cast only one vote for each nominee.  For
example, if a shareholder owns 100 shares of common stock,
he or she may cast up to 100 votes for each of the nominees
for director in the class to be elected.  

     Unless otherwise instructed, the proxy holders will
vote the proxies received by them for the election of the
two nominees for Class 2 Director named below.  If any
nominee should become unavailable for any reason, proxies
will be voted in favor of a substitute nominee as the
Board of Directors of the Corporation shall determine.  The
Board of Directors has no reason to believe the nominees
named will be unable to serve if elected.  Any vacancy
occurring on the Board of Directors of the Corporation for
any reason may be filled by a majority of the directors
then in office until the expiration of the term of vacancy. 
Election of a nominee to the office of director will require
an affirmative vote of a majority of the shares of Common
Stock represented at the Annual Meeting.


INFORMATION AS TO NOMINEES,
DIRECTORS AND EXECUTIVE OFFICERS

          The following table contains certain information
with respect to the nominees and the directors whose terms
of office expire in 1997, 1998 and 1999, respectively.

                            
                   Principal Occupation      Director Since
Name           Age for Past Five Years     
                   Corporation/Bank

Nominees for Class 2 Directors Whose Term Will Expire in
2000 and Current Class 2 Directors Whose Term Expires In
1997

Bruce D. Howe 65 President of John T. Howe, Inc.   1983/1977
(3)(4)(5)        (a company that operates local
                 fuel and heating oil companies,
                 a motel and an interstate truck
                 stop) and President of Howe's           
                 Twin Rocks, Inc. (a local restaurant).


Peter O. Clauss  67   Retired; Former President of 1988/1988
(1)(2)                C & D Builders Inc.
                      (construction of residential and
                      light commercial buildings)


Class 1 Directors Whose Term Expires In 1998

Donald E. Chapman 60 Self-employed insurance broker1983/1972
(1)(2)(4)(6)(7)      and real estate developer


Arthur M. Davis   69  President of Lake Ariel  1983/1969
(3)(5)(7)             Hardware & Supply Co., Inc.

William C. Gumble 59  Retired Attorney-at-law  1985/1985
(3)(4)(5)(6)(7)


Class 3 Directors Whose Term Expires in 1999

John G. Martines 50  President of the Bank and     1983/1979
(1)(3)(5)(7)         Chief Executive Officer of
                     the Corporation

Harry F. Schoenagel 61Partner of Schoenagel and   1985/1985
(1)(2)(6)(7)          Schoenagel (general civil
                      engineering and surveying)
               
_____________________________
(1)  Member of the Loan Review Committee of the Bank.  This
committee reviews past due and classified loans and actions
to be taken.  Moreover, this committee determines the
adequacy of the loan loss reserve and the amount to be
charged for the provision of loan losses. The
committee met four (4) times in 1996.
(2)  Member of the Audit Committee of the Bank.  This
committee reviews the reports of the auditors and the
results of examinations by the Federal Reserve System and
Comptroller of the Currency.  This committee makes
recommendations to the Board based upon a review of the
reports and regulatory examinations.  This committee met
four (4) times in 1996.
(3)  Member of the Asset/Liability Management Committee of
the Bank.  This committee reviews quarterly the
asset/liability management report and the investment
portfolio.  In addition, this committee reviews strategies
for GAP analysis, liquidity, tax position and various
profitability ratios.  Moreover, this committee determines
product pricing and development.  This committee met four
(4) times in 1996.
(4)  Member of the Executive Committee of the Bank.  This
committee reviews annually the profit sharing and benefit
plans of the Bank as well as salaries and promotions.  The
committee makes recommendations to the Board of Directors of
the Bank on changes in the employee benefit plans,
compensation, promotions and the contribution to the profit
sharing plan.  This committee also reviews non-personnel
matters such as bank expansion and profitability.  This
committee met two (2) times in 1996.
(5)  Member of the Loan Committee of the Bank.  This
committee meets to consider and recommend approval of loans
in the principal amount of $100,000 or more.  Directors
receive no additional compensation for attendance at
meetings of this committee.  This committee met
twenty-four (24) times in 1996.
(6)  Member of Benefit/Compensation Committee of the Bank. 
This committee meets to perform on annual review of
executive salary increases and executive stock option
grants.  This committee met two (2) times in 1995.
(7)  Member of 401(k) Committee of the Bank.  This committee
meets to review semi-annual investment results of plan
funds, makes recommendations and changes to available
investment options, reviews IRS and DOL legal participation,
discrimination and other issues, and recommends annual Bank
contributions to plan.  This committee met two (2) times in
1996.

     During 1996, the Board of Directors of the Corporation
held six (6) meetings.  Directors received no additional
remuneration for attendance at meetings of the Board of
Directors of the Corporation.

     Each of the Directors attended at least 75% of the
combined total number of meetings of the Corporation's and
Bank's Board of Directors and of the committees on which
they serve.

     The Board of Directors of the Corporation has at
present no standing committees.  The Corporation does not
have a nominating committee.  A shareholder who desires to
propose an individual for consideration by the Board of
Directors as a nominee for director should submit a
proposal in writing to the Secretary of the Corporation in
accordance with Section 202 of the Corporation's By-laws.


Executive Compensation

     The following table sets forth the total compensation
for services in all capacities paid by the Corporation and
the Bank (1)during 1996, 1995, and 1994, to the
Corporation's Chief Executive Officer and the Bank's
President, (2) during 1996, 1995 and 1994, to the
Corporation's Vice President and the Bank's Senior Vice
President and Chief Operating Officer, and (3) during
1996 and 1995, to the Corporation's Vice President and the
Bank's Senior Vice President and Chief Financial Officer. 
No other executive officer's annual salary and bonus
exceeded $100,000 for the years presented and therefore is
not required to be presented.







SUMMARY COMPENSATION TABLE

           Annual Compensation
                                              Securities
Name and                        Other Annual  Underlying   AllOther
Principal   Fiscal  Salary  Bonus Compensation Options/Compensation
             Year    ($)     ($)      ($)       SARs(#)    ($)
John G. Martines 
(President of 1996  157,972  44,000 25,564 (1)   -(2)     22,612(3)
the Bank and Chief 
Executive     1995  138,007  35,000 26,108 (4)  42,000(2) 19,498(5)
Officer of the 
Corporation) 1994  130,005   30,000 19,811(6)  26,250(2) 21,435 (7)
     
Louis M. Martarano 
(Senior Vice  1996 109,056   20,000     4,260(8)  -(2)    19,602(9)
President and 
Chief 
Operating     1995  97,154   13,500   8,796(10) 15,750(2)15,013(11)
Officer of the 
Bank and Vice 1994  91,750   12,500   3,452(12) 10,500(2)15,903(13)
President of 
the Corporation)                          

Joseph J.Earyes 
(Senior Vice  1996  87,521   16,000     6,147(14)  -(2)  16,225(15)
President and 
Chief 
Financial     1995  70,207     6,500   4,345(16)10,500(2)11,398(17)
Officer of the
Bank and Vice 
President and 
Treasurer of the 
Corporation)
     
1)   Includes $6,825 paid on behalf of Mr. Martines for
periodic club dues; $12,000 paid to Mr. Martines for
directors' fees; $3,440 paid pursuant to the Salary
Continuation Plan; and $3,299 representing the personal use
value of a company-owned automobile.
(2)  For further information on these stock options, see
"Stock Option Plan" below.
(3)  Of the $22,612 paid to Mr. Martines in 1996 as All
Other Compensation, $2,632 and $3,230 was for life and
medical insurance premiums, respectively; and $16,750 was
accrued by the Corporation for the benefit of Mr. Martines
pursuant to a profit-sharing/401(k) plan.
(4)  Includes $6,148 paid on behalf of Mr. Martines for
initial and periodic club dues; $12,000
paid to Mr. Martines for directors' fees; $4,791 paid
pursuant to the Salary Continuation Plan;
and $3,169 representing the personal use value of a
company-owned automobile.
(5)  Of the $19,498 paid to Mr. Martines in 1995 as All
Other Compensation, $2,098 and $3,888 was for life and
medical insurance premiums, respectively; and $13,512 was
accrued by the Corporation for the benefit of Mr. Martines
pursuant to a profit-sharing/401(k) plan.
(6)  Includes $3,405 paid on behalf of Mr. Martines for
periodic club dues; $13,350 paid to Mr. Martines for
directors' fees; $1,128 paid pursuant to the Salary
Continuation Plan; and $1,928 representing the personal use
value of a company-owned automobile.
(7)  Of the $21,435 paid to Mr. Martines in 1994 as All
Other Compensation, $2,073 and $4,362 was for life and
medical insurance premiums, respectively; and $15,000 was
accrued by the Corporation for the benefit of Mr. Martines
pursuant to a profit-sharing retirement plan.
(8)  Includes $1,852 paid on behalf of Mr. Martarano for
periodic club dues and $2,408 representing the personal use
value of a company-owned automobile.
(9)  Of the $19,602 paid to Mr. Martarano in 1996 as All
Other Compensation, $1,448  and $3,886 was for life and
medical insurance premiums, respectively; and $14,268 was
accrued by the Corporation for the benefit of Mr. Martarano
pursuant to a profit-sharing/401(k) plan.
(10) Includes $6,500 paid on behalf of Mr. Martarano for
initial and periodic club dues and $2,296 representing the
personal use value of a company-owned automobile.
(11) Of the $15,013 paid to Mr. Martarano in 1995 as All
Other Compensation, $1,022 and $4,281 was for life and
medical insurance premiums, respectively; and $9,710 was
accrued by the Corporation for the benefit of Mr. Martarano
pursuant to a profit-sharing/401(k) plan.
(12) Includes $1,510 paid on behalf of Mr. Martarano for
periodic club dues and $1,942 representing the personal use
value of a company-owned automobile.
(13) Of the $15,903 paid to Mr. Martarano in 1994 as All
Other Compensation, $1,050 and $4,428 was for life and
medical insurance premiums, respectively; and $10,425 was
accrued by the Corporation for the benefit of Mr. Martarano
pursuant to a profit-sharing retirement plan.
(14) Includes $4,317 paid on behalf of Mr. Earyes for
periodic club dues and $1,830 representing the personal use
value of a company-owned automobile.
(15) Of the $16,225 paid to Mr. Earyes in 1996 as All Other
Compensation, $747 and $4,036 was for life and medical
insurance premiums, respectively; and $11,442 was accrued by
the Corporation for the benefit of Mr. Earyes pursuant to a
profit-sharing/401(k) plan.
(16) Includes $3,580 paid on behalf of Mr. Earyes for
periodic club dues and $765 representing the personal use
value of a company-owned automobile.
(17) Of the $11,398 paid to Mr. Earyes in 1995 as All Other
Compensation, $406 and $4,280 was for life and medical
insurance premiums, respectively; and $6,712 was accrued by
the Corporation for the benefit of Mr. Earyes pursuant to a
profit-sharing/401(k) plan.


Report of the Benefit/Compensation Committee on Executive
Compensation

     The Benefit/Compensation Committee ("Committee"), as
directed by the Corporation's Board of Directors, is
responsible for all matters pertaining to executive
compensation.  The Committee is entirely composed of
directors of the Corporation.  The members of the Committee
have compiled the following report and presented the same to
the entire Board of Directors for their approval.

     Through the Bank, defined compensation policies have
been implemented to properly analyze, describe and evaluate
various positions in the Corporation and the Bank for the
determination of their relative worth.  This basis is used
to establish a salary structure for executive officers and
senior management that is both internally equitable and
externally competitive.  The Committee takes into
consideration the following ten factors in making
recommendations to the Board of Directors, on an annual
basis, as to base salary for the Chief Executive Officer and
other members of senior management:

 1.  Return on assets
 2.  Return on equity
 3.  Earnings
 4.  Growth in deposits
 5.  Current economic climate
 6.  Familiarity with market area
 7.  Length of service, experience and age
 8.  Comparison with peer and core groups -- currently the
     committee relies upon an independent study to determine
     these comparisons and it is contemplated that these
     studies will continue.
 9.  Number of branches
 10. Any other factors deemed by the Committee to be
     beneficial to the Corporation.


     No set numerical figure has been fixed to any of the
factors so as to allow the greatest flexibility to adjust to
changing economic conditions.

     The Committee meets without the Chief Executive
Officer's presence to evaluate his performance and reports
on the evaluation to the outside Directors of the Board of
Directors.

     The Board of Directors in January, 1997 approved an
incentive bonus plan for the Chief Executive Officer and
other members of senior management.  This plan, which
includes at-risk compensation payable in cash and stock
options, was approved and recommended by the
Benefit/Compensation Committee.  At-Risk compensation is
determined on an annual basis by analyzing specific goals
that are established at the beginning of the year.  The
at-risk compensation for the Chief Executive Officer and
other members of senior management is based on the
performance of the Corporation and its success in attaining
specific strategic goals.  The at-risk compensation plan
includes both short-term and long-term incentives.  The
short-term incentives are accomplished through potential
payment of the annual cash bonus.  Equity ownership,
representing long-term incentive compensation, is achieved
through the stock options.

     The bank must maintain a current CAMELS rating of "2"
before any at-risk compensation is considered.  Performance
targets are established for certain strategic performance
factors.  The targets integrate commonly-accepted industry
standards with specific goals established for LA Bank.  In
addition, the strategic performance factors are weighted to
reflect the relative importance of each, as established by
the Board of Directors.

     The potential payout under the Incentive Plan is based
upon the combined actual performance against the established
performance targets for the Bank.

Submitted by the members of the Benefit/Compensation
Committee:



Harry F. Schoenagel, William C. Gumble, and Donald E.
Chapman


Directors' Compensation

     During 1996, the Bank's Board of Directors met on a
monthly basis; Directors received $1,000 per month and were
allowed one paid absence per year; and Bruce D. Howe, the
Chairman, received $500 in addition to his monthly
Directors' fee of $1,000 or $1,500 per month
in the aggregate.  Mr. Howe was also allowed one paid
absence per year from a meeting of the Bank's Board of
Directors.  During 1996, the Board of Directors of the
Corporation held six (6) meetings.  Directors received no
remuneration for attendance at meetings of the Board of
Directors of the Corporation in excess of remuneration each
of them received for attendance at meetings of the Board of
Directors of the Bank.



Salary Continuation Plan for Directors

     The Bank has entered into an agreement with its
directors to establish a non-qualified salary continuation
plan (the "Salary Continuation Plan").  If such director
continues to serve as a director of the Corporation until he
attains sixty-five (65) years of age, the Corporation agrees
to pay him a guaranteed annual payment in each of ten years
on the first day of the month following such director's 65th
birthday.  Each director's guaranteed annual payment is
based upon the future value of the life insurance purchased
with the funds which would otherwise be used to pay the
directors' compensation.  If such director attains
sixty-five (65) years of age, but dies before
receiving ten annual payments, then the Corporation will
continue to make these payments to such director's
designated beneficiary or to the representative of his
estate.  In the event that such director dies while serving
as a director but prior to the attainment of sixty-five (65)
years of age, then the Corporation shall remit a guaranteed
annual payment for a period of ten years to such
director's designated beneficiary or to the representative
of his estate.  The Bank has obtained life insurance
(designating the Bank as the beneficiary) on each
participating director in an amount which will cover the
Bank's obligations under the Salary Continuation Plan.  This
plan is based upon certain actuarial assumptions in seeking
funding through life insurance policies.  In 1996,
the Bank accrued $80,490 as an expense for the Salary
Continuation Plan, of which approximately $3,440 was
allocated to Mr. Martines.

     The salary continuation plan for Messrs. Martines,
Howe, Chapman and Davis was established in July, 1987; for
Messrs. Gumble and Schoenagel in July, 1990; and for Mr.
Clauss, in July, 1993.

Employment Agreement with Mr. Martines

     The Corporation and the Bank entered into a 5-year
employment agreement with Mr.Martines, the Chief Executive
Officer of the Corporation and the President and Chief
Executive Officer of the Bank.  Mr. Martines' annual base
salary at September1, 1993, the date of commencement of the
agreement, was $125,000.  His salary will increase each year
in accordance with a merit review by the Board of Directors. 
Under the agreement, his salary is increased each year by
not less than the minimum average increase of other senior
executive personnel.  Mr. Martines receives the employee
fringe benefits that are received by all personnel
of the Bank as well as standard perquisites that are given
to officers of comparable financial institutions in similar
capacities.  Mr. Martines has agreed to serve as the Chief
Executive Officer of the Corporation without any additional
compensation.  At the end of the first year of the term
of the agreement, the term is automatically extended for one
additional year; therefore, there is a constant 5-year term
in effect on the first day of September of each year.

     Mr. Martines may unilaterally terminate his employment
with the Corporation and the Bank if:  (1)his health should
become impaired to an extent that it makes continued
performance of his duties hazardous to his physical or
mental health or his life; (2)without his consent, any
assignment of duties or limitation of powers is made that is
not contemplated by the agreement;
(3)he is removed or is not re-elected to any of the
positions that he holds currently (except if
terminated for cause); (4)a reduction in the rate of
compensation is made; (5)without his consent,
the current fringe benefits and perquisites are modified or
terminated; and (6)there is a "change in control."

     For purposes of the agreement, a "change in control"
means:  (1)the acquisition of the beneficial ownership of at
least twenty-five percent (25%) of the Corporation's voting
securities or all or substantially all of the assets of the
Corporation or the Bank or both by a single person or
entity or a group of affiliated persons or entities; (2)the
merger, consolidation or combination of the Corporation or
the Bank or both with an unaffiliated corporation in which
the directors of the Corporation or the Bank or both,
immediately prior to such merger, consolidation or
combination constitute less than a majority of the board of
directors of the surviving, new or combined entity;
or (3)during any period of two consecutive years during the
term of the agreement, persons who at the beginning of such
period constitute the Board of Directors of the Corporation
cease for any reason to constitute at least a majority
thereof.  The date of a change in control shall mean the
earlier of:  (1)the first date on which a person, entity, or
group of affiliated persons or entities, acquire the
beneficial ownership of twenty-five percent (25%) or more of
the Corporation's voting securities; (2)the date of the
transfer of all or substantially all of the Corporation's or
the Bank's assets; (3)the date on which a merger,
consolidation or combination is consummated; or (4)the date
on which persons who formerly constituted a majority of the
Board of Directors of the Corporation ceased to be a
majority.

     Upon termination of employment by Mr. Martines for the
above reasons, the Bank shall pay to him, no later than 30
days after the date of termination and for a period of three
years, annual compensation prorated into monthly payments
equal to his annual base salary on the date of termination
or on the date six months prior to the date of termination,
whichever is greater.  In the event of termination as a
result of a change in control, Mr. Martines may, at his
option, elect to receive in one lump sum the aggregate
present value of the above termination payments. 
The present value shall be determined by the federal
discount rate published under Section 1274(d) of
the Internal Revenue Code of 1986, as amended, then in
effect, and compounded semi-annually.


Employment Agreement with Louis M. Martarano

     The Corporation and the Bank entered into a 5-year
employment agreement with Louis M. Martarano, the Vice
President and Assistant Secretary of the Corporation and the
Senior Vice President of the Bank.  Mr. Martarano's annual
base salary at September1, 1993, the date of commencement of
the agreement, was $87,500.  His salary will increase each
year in accordance with the terms of the agreement.  Under
the agreement, his salary is increased each year by not
less than the minimum average increase of other senior
executive personnel.  Mr. Martarano receives the employee
fringe benefits that are received by all personnel of the
Bank, as well as standard perquisites that are given to
officers of comparable financial institutions in similar
capacities.  Mr. Martarano has agreed to serve as Vice
President and Assistant Secretary of the Corporation without
any additional compensation.  At the end of the first year
of the term of the agreement, the term is automatically
extended for one additional year; therefore, there is a
constant 5-year term in effect on the first day of September
of each year.

     The agreement with Mr. Martarano has the same terms and
conditions as described above, with respect to the agreement
with Mr. Martines relating to voluntary termination by Mr.
Martarano, to a change in control of the Corporation and to
termination payments.


RATIFICATION OF CORPORATION'S 1997 STOCK OPTION PLAN
(ITEM 2)

General

     The Corporation's shareholders are also being requested
to approve the Corporation's 1997 Stock Option Plan (the
"Option Plan") adopted by the Board of Directors of the
Corporation on February 11, 1997, subject to shareholder
approval.  The following is a summary of the major
provisions of the Option Plan and is qualified in its
entirety by reference to the Option Plan which is attached
hereto, marked Exhibit A and incorporated by reference in
its entirety into this Proxy Statement.

     The Plan constitutes an element of the 1997 At-Risk
Compensation Plan of the Corporation.  Each year's cash
bonus is determined by the extent to which financial targets
for the year are achieved by the Corporation.  Each
participant in the At-Risk Compensation Plan will receive an
option with an aggregate exercise price equal to the amount
of cash bonus for the year payable to the participant.  


Purpose and Eligible Participants

     The Option Plan is intended to secure for the
Corporation and its shareholders the benefits arising from
share ownership by those officers and key employees of the
Corporation and  the Bank who will be responsible for the
Corporation's future growth and continued success. 
The Option Plan is intended to provide an incentive to
officers and key employees by providing them with an
opportunity to acquire an equity interest or increase an
existing equity interest in the Corporation, thereby
increasing their personal stake in its continued success and
progress. The Option Plan is also intended to enable the
Corporation to obtain and retain the services of
officers and key employees by providing them with an
opportunity to acquire shares under the terms and conditions
of the Option Plan.  Directors who are not officers or key
employees are not eligible for awards under the Option Plan.


Shares Available

     The number of shares of the Common Stock which may be
issued pursuant to the Option Plan shall not exceed in the
aggregate 50,000 shares.  If an outstanding option for any
reason expires or is terminated without the issuance of
shares (whether or not cash or other consideration is paid
with respect to such shares), such shares not issued as a
result may again be subject to an option under the Option
Plan.  In addition, the number of shares available under the
Option Plan is subject to adjustment in the event of stock
dividends, stock splits, merger and other similar events.


Administration of the Option Plan

     The Option Plan is administered in the
Benefits/Compensation Committee of the Board of Directors of
the Corporation (the "Committee") currently consisting of
three outside directors, all of whom are "non-employee
directors" within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934, as amended.  The
Committee shall at all times consist of at least two
directors, each of whom shall not be an employee or officer
of the Corporation or of its subsidiary, receive
compensation directly or indirectly in an amount required to
be disclosed under Item 404(a) of Securities and Exchange
Commission Regulation S-K or have an interest in a
transaction requiring disclosure thereunder, or be engaged
in a business relationship requiring disclosure under Item
404(a) thereof. 

     The Committee shall have authority to interpret the
provisions of the Option Plan, to construe the terms of any
option, to prescribe, amend and rescind rules and
regulations relating to the Option Plan, to determine the
terms and provisions of options granted thereunder, and to
make all other determinations in the judgment of the
Committee necessary or desirable for the administration of
the Option Plan.  The Committee may correct any defect or
supply any omission or reconcile any inconsistency in the
Option Plan or in any option in the manner and to
the extent it shall deem expedient to effectuate the
purposes and intent of the Option Plan and shall be the sole
and final judge of such expediency.

     Any power granted to the Committee either in the Option
Plan or by the Board of Directors may at any time be
exercised by the Board of Directors, and any determination
by the Committee shall be subject to review and reversal or
modification by the Board of Directors on its own motion,
except that the Board of Directors may not impair the rights
of optionees under options previously granted.


Form and Provision of Awards

     The option price of stock options and the period during
which such option can be exercised is fixed by the
Committee, but in no case can the exercise price be less
than 100% of the fair market value (as determined under the
Option Plan) of the shares at the time the option is
granted or awarded.  Each option and all rights thereunder
shall expire and the option shall no longer be exercisable
on a date not later than ten years from the date such option
was granted or awarded.  An option can generally be
exercised only by the optionee, and only while he is
employed by the Corporation.  However, an option can be
exercised up to one year after the optionee's death,
disability or retirement, up to 30 days after involuntary
termination of employment, and up to 90 days after any
termination of employment at the discretion of the
Committee, but only to the extent the option was exercisable
at termination of employment and would have otherwise
remained exercisable.  Transfer of employment between the
Corporation and a subsidiary or between two subsidiaries
does not constitute termination of employment for
this purpose.


Term of Option Plan; Amendments; Termination

     The Option Plan became effective on February 11, 1997,
subject to shareholder approval and, if so approved, will
terminate on February 11, 2007.  No grants or awards may be
made under the Option Plan after its expiration date, but
grants or awards made prior thereto may extend beyond the
termination date.  The Board of Directors may at any time
and from time to time terminate or modify or amend the
Option Plan in any respect, except that, without
shareholder approval, the Board may not: (a) materially
increase the benefits accruing to participants under the
Option Plan, (b) increase the number of shares of the Common
Stock which may be issued under the Option Plan or (c)
modify the requirements as to eligibility for participation
under the Option Plan.  The termination or modification or
amendment of the Option Plan cannot, without the consent of
an optionee, affect his or her rights under an option
previously granted or awarded to him or her.  With the
consent of the optionee, the Board of Directors may amend an
outstanding option in a manner not inconsistent with the
Option Plan.


Federal Income Tax Consequences

     The grant of a non-qualified stock option (which is the
type of option to be granted or awarded under the Option
Plan) does not result in taxable income for the optionee or
in a deduction for the Corporation.  However, the exercise
of a non-qualified stock option results in ordinary income
for the optionee and a deduction for the Corporation
measured by the difference between the exercise price and
the fair market value of the shares received at the time of
exercise.  The Corporation's income tax withholding
obligation can be satisfied by either payment of cash
by the optionee, or authorization to withhold Common Stock
having a fair market value equal to the withholding amount,
at the choice of the optionee.  A sale of shares more than
one year after their receipt will result in long-term
capital gain or loss to the holder.


Required Vote

     Approval of the Corporation's 1997 Stock Option Plan
requires the affirmative vote of a majority of the shares of
the Common Stock represented at the Annual Meeting.  The
Board of Directors recommends that the shareholders vote FOR
approval of the Corporation's 1997 Stock Option Plan.


1994 Stock Option Plan

     The Option Plan is intended to secure for the
Corporation and its shareholders the benefits arising from
share ownership by those officers and key employees of the
Corporation and the Bank who will be responsible for the
Corporation's future growth and continued success. 
The following table presents the grants that were made in
1995 and 1994 to the persons so indicated, which represents
all of the options approved under the plan.


STOCK OPTION GRANTS
                                       Potential Realizable Value
                                       at Assumed Annual Rates
                                       of Stock Price
                                       Appreciation for
          Individual Grants(1)         Option Term

             Number of % of Total                    
             Securities  Options             
             Underlying  Granted to    Exercise or    
             Options     Employees in  Base Price Expiration
Name         Granted (2) Fiscal Year   ($/Sh) (2)  Date 5%($)10%($)

John G. Martines 42,000    62%     $13.80   August 8, $22.50 $35.80
(President of the (Granted-                 2005
Bank and Chief   August 8, 1995)
Executive Officer 
of the Corporation)26,250  71%     $14.40   August 7, $23.50 $37.35
                  (Granted-                 2004
                 August 7, 1994)

      
Louis M. Martarano 15,750  23%     $13.80   August 8, $22.50 $35.80
(Senior Vice      (Granted-                 2005
President and Chief August 8, 1995)
Operating Officer 
of the Bank and    10,500  29%     $14.40   August 7, $23.50 $37.35
Vice President of  (Granted-                2004
the Corporation)   August 7, 1994)


Joseph J. Earyes   10,500  15%     $13.80   August 8, $22.50 $35.80
(Senior Vice Pres- (Granted-                2005
ident and           August 8, 1995)
Chief Financial 
Officer of the Bank 
and Vice President 
and Treasurer of 
the Corporation)    
____________________________
(1)  No options have been exercised by Messrs. Martines,
Martarano, and Earyes as of March18, 1997.
(2)  Pursuant to Section 13 of the Lake Ariel Bancorp, Inc.
1994 Stock Option Plan, all outstanding options are adjusted
to reflect the 5% dividend payable in Common Stock on
October 1, 1996.



Stock Performance Graph and Table

     The following graph and table compare the cumulative
total shareholder return on the Corporation's Common Stock
during the period December 31, 1991, through and including
December 31, 1996, with (i) the cumulative total return on
the SNL Securities Corporate Performance Index (1) for 35
publicly-traded banks with less than $500 million in total
assets in the Middle Atlantic area (2), and (ii) the
cumulative total return for all United States stocks
traded on the NASDAQ Stock Market.  The comparison assumes
$100 was invested on December 31, 1991, in the Corporation's
Common Stock and in each of the below indices and
assumes further the reinvestment of dividends into the
applicable securities.  The shareholder return shown on the
graph and table below is not necessarily indicative of
future performance.





[GRAPH]


                                       Period Ended          
                 
Index   12/31/91  12/31/92  12/31/93  12/31/94  12/31/95  12/31/96

SNL <$500M Bank Index
         100.00   122.97    158.05    170.09    221.11    278.29
Nasdaq Total Return
         100.00   116.38    133.59    130.59    184.67    227.16
Lake Ariel Bancorp, Inc.     
         100.00   103.06    133.23    163.73    146.90    241.11
_________________________________                            
  
(1)  SNL Securities is a research and publishing firm
specializing in the collection and dissemination of data on
the banking, thrift and financial services industries.
(2)  The Middle Atlantic area comprises the states of
Delaware, Pennsylvania, Maryland, New Jersey, New York, the
District of Columbia and Puerto Rico.

Certain Relationships and Related Transactions

     There have been no material transactions since
January1, 1996, nor are any such transactions currently
proposed, to which the Corporation or the Bank was or is to
be a party and in which any director or executive officer of
the Corporation, or any beneficial owner of more
than 5% of the Common Stock of the Corporation (or any
associate thereof, respectively), had or will have a
material interest.  The Corporation and the Bank
have had and intend to continue to have banking and
financial transactions in the ordinary course of business
with directors and executive officers of the Corporation and
the Bank and their respective associates on comparable
terms and with similar interest rates as those prevailing
from time to time for other non-affiliated customers of the
Corporation and the Bank.  Total loans outstanding from the
Corporation and the Bank, at December31, 1996, to the
Corporation's and the Bank's officers and directors as a
group and members of their immediate families and companies
in which they had an ownership interest of 10% or more was
$1.184 million or 5.59% of the Bank's total equity capital
accounts. 
The largest amount of indebtedness outstanding at any time
during fiscal year 1996 to the above identified group was
$1.640 million or 7.75% of the Bank's total equity capital
accounts.  Such loans do not involve more than the normal
risk of collectibility nor do they present other
unfavorable features.

Principal Officers of the Corporation

     The following table sets forth selected information
about the principal officers of the Corporation, each of
whom is selected by the Board of Directors and each of whom
holds office at the discretion of the Board of Directors:

                         Bank
                    Held Employee  Number of Shares Age as of
Name                Since Since    Beneficially    March18,1997
                                   Owned(1)
Bruce D. Howe, President 1983 (2)  179,253         65

John G. Martines, 
Chief                    1983 (3)  102,401         50
Executive Officer

Donald E. Chapman, 
Secretary                1983 (2)  59,753          60

Louis M. Martarano, Vice 1989 (3)  37,902          46
President and Assistant 
Secretary

Joseph J. Earyes, Vice 
President                1995 (3)  17,917          40
and Treasurer
____________________________
(1)  See notes under the caption "Beneficial Ownership by
Officers, Directors and Nominees" for shareholdings of these
officers.
(2)  Messrs. Howe, Chapman and Davis are not employees of
the Corporation.
(3)  Messrs. Martines, Martarano, and Earyes are full-time
salaried employees of the Bank.

Principal Officers of the Bank

     The following table sets forth selected information
about the principal officers of the Bank, each of whom is
elected by the Board of Directors of the Bank and each of
whom holds office at the discretion of the Board of
Directors of the Bank:

                                        Bank  Number   Age as of
                                 Held Employeeof Shares March18,
Name    Office/Position with BankSince  Since  Owned    1997 

Bruce D. Howe  
Chairman of the Board            1986    (1)  179,253(2)  65

John G. Martines    
President and CEO                1986    1979 102,401(2)  50

Louis M. Martarano  
Senior Vice President and        1990    1981  37,902(2)  46
Chief Operating Officer

Joseph J. Earyes    
Senior Vice President and        1995    1995  17,917(2)  40
Chief Financial Officer

Kathleen L. Enslin  
Vice President and              1992    1975     3,106    38
Cashier

Cynthia A. Smaniotto     
Vice President                  1992    1974     1,353    38

Karen T. Pasternak  
Vice President                  1992    1987       614    50

Gregory G. Gula     
Vice President                  1992    1990       280    33

William R. Kerstetter    
Vice President                  1992    1992        21    44

Theodore G. Daniels 
Vice President                  1993    1993       336    65

John P. Foley  
Vice President                  1995    1995        -0-   52
____________________________
(1)  Mr. Howe is not an employee of the Bank.
(2)  See notes under the caption "Beneficial Ownership by
Officers, Directors and Nominees" for shareholdings of these
officers.


RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
(ITEM 3)

     Unless instructed to the contrary, it is intended that
votes will be cast pursuant to the proxies for the
ratification of the selection of Parente, Randolph, Orlando,
Carey & Associates, Certified Public Accountants, of
Scranton, Pennsylvania ("Parente Randolph"), as the
Corporation's independent public accountants for its fiscal
year ending December31, 1997.  The Corporation has been
advised by Parente Randolph that none of its members has any
financial interest in the Corporation.  Ratification of
Parente Randolph will require an affirmative vote of a
majority of the shares of Common Stock represented at the
Annual Meeting.  Parente Randolph served as the
Corporation's independent public accountants for the
Corporation's 1996 fiscal year.

     In addition to performing customary audit services,
Parente Randolph assisted the Corporation with the
preparation of its federal and state tax returns, and
provided assistance in connection with regulatory matters,
charging the Corporation for such services at its customary
hourly billing rates.  These non-audit services were
approved by the Corporation's and the Bank's Board of
Directors, after due consideration of the effect of
the performance thereof on the independence of the
accountants and after the conclusion by the Corporation's
and the Bank's Board of Directors that there was no effect
on the independence of the accountants.

     In the event that the shareholders do not ratify the
selection of Parente Randolph as the Corporation's
independent public accountants for the 1997 fiscal year,
another accounting firm will be chosen to provide
independent public accountant audit services for the 1997
fiscal year. 
The Board of Directors recommends that the shareholders vote
FOR the ratification of the selection of Parente Randolph as
the auditors for the Corporation for the year ending
December31, 1997.

     It is understood that even if the selection of Parente
Randolph is ratified, the Board of Directors, in its
discretion, may direct the appointment of a new independent
auditing firm at any time during the year if the Board of
Directors determines that such a change would be in the best
interests of the Corporation and its shareholders.


LEGAL PROCEEDINGS
General

     The nature of the Corporation's and the Bank's business
generates a certain amount of litigation involving matters
arising in the ordinary course of business.  However, in the
opinion of management of the Corporation and the Bank, there
are no proceedings pending to which the Corporation and the
Bank is a party or to which their property is subject,
which, if determined adversely to the Corporation and the
Bank, would be material in relation to the Corporation's and
the Bank's undivided profits or financial condition, nor are
there any proceedings pending other than ordinary routine
litigation incident to the business of the Corporation and
the Bank,  In addition, no material proceedings are pending
or are known to be threatened or contemplated against the
Corporation and the Bank by government authorities or
others.

Environmental Issues

     There are several federal and state statutes that
govern the obligations of financial institutions with
respect to environmental issues.  Besides being responsible
under such statutes for its own conduct, a bank also may be
held liable under certain circumstances for actions of
borrowers or other third parties on properties that
collateralize loans held by the bank.  Such
potential liability may far exceed the original amount of
the loan made by the bank.  Currently, the Bank is not a
party to any pending legal proceedings under any
environmental statute nor is the Bank aware of any
circumstances that may give rise to liability of the Bank
under any such statute.


ANNUAL REPORT

     A copy of the Corporation's Annual Report for its
fiscal year ended December31, 1996, is being mailed with
this Proxy Statement.  A representative of Parente Randolph,
the accounting firm which examined the financial statements
in the Annual Report, will attend the Annual Meeting.  This
representative of Parente Randolph will have the opportunity
to make a statement, if he or she desires to do so, and will
be available to respond to any appropriate questions
presented by shareholders at the Annual Meeting.  


SHAREHOLDER PROPOSALS

     Any shareholder who, in accordance with and subject to
the provisions of the proxy rules of the SEC, wishes to
submit a proposal for inclusion in the Corporation's proxy
statement for its 1998 Annual Meeting of Shareholders must
deliver such proposal in writing to the Secretary of
Lake Ariel Bancorp, Inc. at the principal executive offices
of the Corporation on Route 191, Post Office Box 67, Lake
Ariel, Pennsylvania 18436, not later than Wednesday,
November 26, 1997.


OTHER MATTERS

     The Board of Directors does not know of any matters to
be presented for consideration other than the matters
described in the Notice of Annual Meeting of Shareholders,
but if any matters are properly presented, it is the
intention of the persons named in the accompanying
Proxy to vote on such matters in accordance with their
judgment.  


ADDITIONAL INFORMATION

     Upon written request of any shareholder, a copy of the
Corporation's report on Form 10-K for its fiscal year ended
December 31, 1996, including the financial statements and
the schedules thereto, required to be filed with the SEC,
may be obtained, without charge, from Joseph J.Earyes, CPA,
Vice President, Lake Ariel Bancorp, Inc., Post Office Box
67, Route 191, Lake Ariel, Pennsylvania 18436, telephone: 
(717) 698-5695.

     In addition, a copy of the Annual Disclosure Statement
of LA Bank, N.A. may be also obtained, without charge, from
Joseph J. Earyes, CPA, Chief Financial Officer of the Bank.

EXHIBIT A


LAKE ARIEL BANCORP, INC.
1997 STOCK OPTION PLAN


     1.   Definitions

          As used in this Plan, the following definitions
apply to the terms indicated below:

          A.   "Board" means the Board of Directors of the
Company.

          B.   "Committee" means the Benefits/Compensation
Committee of the Board. The Committee shall consist of two
or more directors of the Company each of whom shall not be
an employee or officer of the Company or of its Parent or
Subsidiary, receive compensation directly or indirectly in
an amount required to be disclosed under Item 404(a) of
Securities and Exchange Commission Regulation S-K or have an
interest in a transaction requiring disclosure
thereunder, or be engaged in a business relationship
requiring disclosure under Item 404(b) thereof.

          C.   "Company" means Lake Ariel Bancorp, Inc., a
Pennsylvania corporation.

          D.   "Fair Market Value" of a Share on a given day
means 

               (i)  if the Shares are listed on a national
securities exchange or traded in the over-the-counter market
and sales prices are regularly reported for the Shares, the
average of the closing or last prices of the Shares on the
Composite Tape or other comparable reporting system for the
10 consecutive trading days immediately preceding such date;

               (ii)  if the Shares are traded on the
over-the-counter market, but sales prices are not regularly
reported for the Shares for the 10 days referred to in (a)
above, and if bid and asked prices for the Shares are
regularly reported, the average of the mean between the bid
and the asked price for the Shares at the close of trading
in the over-the-counter market for such 10 days; and

               (iii)  if the Shares are neither listed on a
national securities exchange nor traded on the
over-the-counter market, such value as the Committee, in
good faith, shall determine.

          E.   "Option" means a right to purchase Shares
under the terms and conditions of this Plan as evidenced by
an option certificate or agreement for Shares in such form,
not inconsistent with this Plan, as the Committee may adopt
for general use or for specific cases from time to time. 
Options shall not be incentive stock options within the
meaning of Section 422 of the Internal Revenue Code.

          F.   "Optionee" means a person to whom an option
has been granted under this Plan.

          G.   "Parent" means any corporation (other than
the Company) in an unbroken chain of corporations ending
with the Company if, at the time of granting an Option, each
of the corporations in the unbroken chain (other than the
Company) owns stock possessing fifty percent
(50%) or more of the total combined voting power of all
classes of stock in one of the other
corporations in the chain.

          H.   "Plan" means this Lake Ariel Bancorp, Inc.
1997 Stock Option Plan, including any amendments to the
Plan.

          I.   "Share" means a share of the Company's Common
Stock, par value $.42 per share, either now or hereafter
owned by the Company as treasury stock or authorized but
unissued.  
          J.   "Subsidiary" means any corporation (other
than the Company) in an unbroken chain of corporations
beginning with the Company if, at the time of granting an
Option, each of the corporations in the unbroken chain
(other than the last corporation in the chain) owns stock
possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock in one of the other
corporations in the chain.

          K.   Options shall be deemed "granted" under this
Plan on the date on which the Committee, by appropriate
action, approves the grant of an Option hereunder or on such
subsequent date as the Committee may designate.

          L.   As used herein, the masculine includes the
feminine, the plural includes the singular, and the singular
includes the plural.


     2.   Purpose

          The purposes of the Plan are as follows.

          A.   To secure for the Company and its
stockholders the benefits arising from share ownership by
those officers and key  employees of the Company and its
Subsidiaries who will be responsible for the Company's
future growth and continued success.  The Plan is intended
to provide an incentive to officers and key employees by
providing them with an opportunity to acquire an equity
interest or increase an existing equity interest in the
Company, thereby increasing their personal stake in its
continued success and progress.

          B.   To enable the Company and its Subsidiaries to
obtain and retain the services of key employees, by
providing such key employees with an opportunity to acquire
Shares under the terms and conditions and in the manner
contemplated by this Plan.



     3.   Plan Adoption and Term

          A.   This Plan shall become effective upon its
adoption by the Board, and Options may be issued upon such
adoption and from time to time thereafter; provided,
however, that the Plan shall be submitted to the Company's
stockholders for their approval at the next annual meeting
of stockholders.  If the Plan is not approved by the
affirmative vote of the holders of a majority of all
securities present in person or by proxy and entitled to
vote at a duly called stockholders' meeting at which a
quorum representing a majority of all such securities is
present and voting on this Plan, then this Plan and all
Options then outstanding under it shall forthwith
automatically terminate and be of no force and effect.

          B.   Subject to the provisions hereinafter
contained relating to amendment or discontinuance, this Plan
shall continue to be in effect for ten (10) years from the
date of adoption of this Plan by the Board.  No Options may
be granted hereunder except within such period of ten (10)
years.


     4.   Administration of Plan

          A.   This Plan shall be administered by the
Committee.  Except as otherwise expressly provided in this
Plan, the Committee shall have authority to interpret the
provisions of the Plan, to construe the terms of any Option,
to prescribe, amend and rescind rules and regulations
relating to the Plan, to determine the terms and
provisions of Options granted hereunder, and to make all
other determinations in the judgment of the Committee
necessary or desirable for the administration of the Plan. 
The Committee may correct any defect or supply any omission
or reconcile any inconsistency in the Plan or in any Option
in the manner and to the extent it shall deem expedient to
effectuate the purposes and intent of the Plan and shall be
the sole and final judge of such expediency.
          B.   The Plan constitutes an element of the 1997
Incentive Bonus Plan of the Corporation.  Each year's cash
bonus is determined by the extent to which financial targets
for the year are achieved by the Company.  The Committee
shall grant to each participant in the Incentive Bonus Plan
an Option with an aggregate exercise price equal to the
amount of cash bonus for the year payable to the
participant.  

          C.   No member of the Committee or the Board shall
be liable for any action taken or omitted or any
determination made by him in good faith relating to the
Plan, and the Company shall indemnify and hold harmless each
member of the Committee and each other director or employee
of the Company to whom any duty or power relating to the
administration or interpretation of the Plan has been
delegated against any cost or expense (including counsel
fees) or liability (including any sum paid in settlement of
a claim with the approval of the Committee) arising out of
any act or omission in connection with the Plan, unless
arising out of such person's own fault or bad faith.

          D.   Any power granted to the Committee either in
this Plan or by the Board, may at any time be exercised by
the Board, and any determination by the Committee shall be
subject to review and reversal or modification by the Board
on its own motion, except that the Board may not impair the
rights of Optionees under Options previously granted.


     5.   Eligibility

          Officers and key employees of the Company and its
Subsidiaries shall be eligible for selection by the
Committee to be granted Options.  An employee who has been
granted an Option may, if he is otherwise eligible, be
granted an additional Option or Options if the
Committee shall so determine.


     6.   Maximum Number of Shares

          Subject to adjustment as provided in Paragraph13
hereof, Options may be granted pursuant to the Plan for the
purchase of not more than 50,000 Shares; provided, however,
that if prior to the termination of the Plan, an Option
shall expire or terminate for any reason without
having been exercised in full, the unpurchased Shares
subject thereto shall again be available for the purposes of
the Plan.


     7.   Option Price

          The purchase price for each Share deliverable upon
the exercise of an Option shall be determined by the
Committee, but shall not be less than 100% of the Fair
Market Value of such Share on the date the Option is
granted. 


     8.   Duration of Options

          Each Option and all rights thereunder shall expire
and the Option shall no longer be exercisable on a date not
later than ten (10) years from the date such Option was
granted.  Options may expire and cease to be exercisable on
such earlier date as the Committee may determine at the time
of grant.  Options shall be subject to termination before
their expiration date as provided herein.


     9.   Conditions Relating to Exercise of Options

          A.   Except as otherwise provided in paragraph10
hereof, the Shares subject to any Option may be purchased at
any time during the term of the Option, unless, at the time
an  Option is granted, the Committee 

shall have fixed a specific period or periods in which
exercise must take place.  To the extent an Option is not
exercised when it becomes initially exercisable, or is
exercised only in part, the Option or remaining part thereof
shall not expire but shall be carried forward and shall be
exercisable until the expiration or termination of the
Option.  Partial exercise as to whole Shares is permitted
from time to time, provided that no partial exercise of an
Option shall be for a number of Shares having a purchase
price of less than $1000.

          B.   No Option shall be transferable by the
Optionee other than by will or by the laws of descent and
distribution, and Options shall be exercisable during the
lifetime of an Optionee only by such Optionee or by his
guardian or legal representative.

          C.   Certificates for Shares purchased upon
exercise of Options shall be issued either in the name of
the Optionee or in the name of the Optionee and another
person jointly with the right of survivorship.  Such
certificates shall be delivered as soon as practical
following the date the Option is exercised.

          D.   An Option shall be exercised by the delivery
to the Company at its principal office, to the attention of
its Secretary, of written notice of the number of Shares
with respect to which the Option is being exercised, and of
the name or names in which the certificate for the Shares is
to be issued, and by paying the purchase price for the
Shares and any withholding tax required to be paid pursuant
to paragraph14 hereof.  The purchase price shall be
paid in cash or by certified check or bank cashier's check. 
Alternatively, to the extent permitted by the Committee at
or prior to the time of exercise and in its sole discretion,
the purchase price may be paid by delivering to the Company
Shares (in proper form for transfer and accompanied
by all requisite stock transfer tax stamps or cash in lieu
thereof) owned by the Optionee having a Fair Market Value
equal to the purchase price.

          E.   Notwithstanding any other provision in this
Plan, no Option may be exercised unless and until (i) this
Plan has been approved by the stockholders of the Company,
and (ii) the Shares to be issued upon the exercise thereof
have been registered under the Securities Act of 1933 and
applicable state securities laws,or are, in the opinion of
counsel to the Company, exempt from such registration.  The
Company shall not be under any obligation to register under
applicable Federal or state securities laws any Shares to be
issued upon the exercise of an Option granted hereunder, or
to comply with an appropriate exemption from registration
under such laws in order to permit the exercise of an Option
or the issuance and sale of Shares subject to such Option. 
If the Company chooses to comply with such an exemption
from registration, the certificates for Shares issued under
the Plan may, at the direction of the Committee, bear an
appropriate restrictive legend restricting the transfer or
pledge of the Shares represented thereby, and the Committee
may also give appropriate stop-transfer instructions to
the transfer agent of the Company.

          F.   Any person exercising an Option or
transferring or receiving Shares shall comply with all
regulations and requirements of any governmental authority
having jurisdiction over the issuance, transfer or sale of
securities of the Company or over the extension of credit
for the purposes of purchasing or carrying any margin
securities, or the requirements of any stock exchange on
which the Shares may be listed, and as a condition to
receiving any Shares, shall execute all such instruments as
the Committee in its sole discretion may deem necessary or
advisable.

          G.   Each Option shall be subject to the
requirement that if the Committee shall determine that the
listing, registration or qualification of the Shares subject
to such Option upon any securities exchange or under any
state or Federal law, or the consent or approval of any
governmental or regulatory body, is necessary or desirable
as a condition of, or in connection with, the granting of
such Option or the issuance or purchase of Shares
thereunder, such Option may not be exercised in whole or in
part unless such listing, registration, qualification,
consent or approval shall have been effective or obtained
free of any conditions not acceptable to the Committee.


     10.  Effect of Termination of Employment or Death

          A.   In the event of termination of an Optionee's
employment by reason of such Optionee's death, disability,
or retirement  with the consent of the Board or in
accordance with an applicable retirement plan, any
outstanding Option held by such Optionee shall remain
exercisable, only to the extent such Option was exercisable
immediately prior to such termination of employment, at any
time prior to its expiration date or, if earlier, the first
anniversary of such termination of the Optionee's
employment.

          B.   If the Company terminates an Optionee's
employment, any outstanding Option held by such Optionee
shall remain exercisable, only to the extent such Option was
exercisable immediately prior to such termination of
employment, at any time prior to its expiration date or, if
earlier, thirty(30) days after such termination of the
Optionee's employment by the Company, except that the
Committee may, in its discretion, elect to permit exercise
for a period ending on the earlier of the expiration date of
the Option and a date ninety(90) days after such termination
of the Optionee's employment by the Company as to the total
number of Shares purchasable under the Option as of the date
of termination.

          C.   In the event that an Optionee's employment
ceases for any reason other than death, disability,
retirement with the consent of the Board or in accordance
with an applicable retirement plan or termination by the
Company, all rights of any kind under any outstanding Option
held by such Optionee shall immediately lapse and terminate,
except that the Committee may, in its discretion, elect to
permit exercise for a period ending on the earlier of the
expiration date of the Option and a date ninety(90) days
after the termination of employment as to the total number
of Shares purchasable under the Option as of the date of
termination.

          D.   Whether an authorized leave of absence or
absence in military or government service shall constitute
termination of employment shall be determined by the
Committee.  Transfer of employment between the Company and a
Subsidiary corporation or between one Subsidiary corporation
and another shall not constitute termination of employment.


     11.  No Special Employment Rights

          Nothing contained in the Plan or in any Option
shall confer upon any Optionee any right with respect to the
continuation of his or her employment by the Company or a
Subsidiary or interfere in any way with the right of the
Company or a Subsidiary, subject to the terms of any
separate employment agreement to the contrary,
at any time to terminate such employment or to increase or
decrease the compensation of the Optionee from the rate in
existence at the time of the grant of an Option.


     12.  Rights as a Shareholder

          An Optionee shall have no rights as a shareholder
with respect to any Shares covered by an Option until the
date of issuance of a certificate to him for such Shares. 
Except as otherwise expressly provided in the Plan, no
adjustment shall be made for dividends or other
rights for which the record date occurs prior to the date of
issuance of such certificate.


     13.  Anti-Dilution Provisions

          A.   In case the Company shall (i) declare a
dividend or dividends on its Shares payable in shares of its
capital stock, (ii) subdivide its outstanding Shares, (iii)
combine its outstanding Shares into a smaller number of
Shares, or (iv) issue any shares of capital stock by
reclassification of its Shares (including any such
reclassification in connection with a consolidation or
merger in which the Company is the continuing corporation),
the number of Shares authorized under the Plan will be
adjusted proportionately.  Similarly, in any such event,
the Committee may make such adjustments in the number of
Shares subject to unexercised Options and the option prices
as it deems equitable.

          B.   Each Optionee will be notified of any such
adjustment and any such adjustment, or the failure to make
such adjustment, shall be binding on the Optionee.

     14.  Withholding Taxes

          Whenever an Option is to be exercised under the
Plan, the Company shall have the right to require the
Optionee, as a  condition of exercise of the Option, to
remit to the Company an amount sufficient to satisfy the
Company's (or a Subsidiary's) Federal, state and
local withholding tax obligation, if any, that will, in the
sole opinion of the Committee, result from the exercise.  In
addition, the Company shall, at the election of the
Optionee, satisfy any such withholding tax obligation by
retention of Shares issuable upon such exercise having a
Fair Market Value on the date of exercise equal to the
amount to be withheld.


     15.  Amendment of the Plan

          The Board may at any time and from time to time
terminate or modify or amend the Plan in any respect, except
that, without shareholder approval, the Board may not (a)
materially increase the benefits accruing to participants
under the Plan, (b) increase the number of Shares which may
be issued under the Plan, or (c)modify the requirements as
to eligibility for participation under the Plan.  The
termination or modification or amendment of the Plan shall
not, without the consent of an Optionee, affect his rights
under an Option previously granted to him.  With the consent
of the Optionee, the Board may amend an outstanding Option
in a manner not inconsistent with the Plan.


     16.  Miscellaneous

          A.   It is expressly understood that this Plan
grants powers to the Committee but does not require their
exercise; nor  shall any person, by reason of the adoption
of this Plan, be deemed to be entitled to the grant of any
Option; nor shall any rights begin to accrue under the
Plan except as Options may be granted hereunder.

          B.   All expenses of the Plan, including the cost
of maintaining records, shall be borne by the Company.


     17.  Governing Law

          This Plan and all rights hereunder shall be
governed by and interpreted in accordance with the laws of
the Commonwealth of Pennsylvania.



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