U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, DC 20549

                                 FORM 10 - QSB

              QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934

                        For Quarter Ended June 30, 1997
                                          -------------

                        Commission File Number 0-16587
                                               ----------

                       South Branch Valley Bancorp, Inc.
               ------------------------------------------------
                     (Exact name of small business issuer as
                            specified in its charter)

       West Virginia                                      55-0672148
     ------------------------------------------------------------------------
      (State or other jurisdiction of                   (IRS Employer
       incorporation or organization)                    Identification No.)

                              310 North Main Street
                        Moorefield, West Virginia          26836
          -------------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                                 (304) 538-2353
            ---------------------------------------------------------
                (Issuer's telephone number, including area code)

Check  whether the issuer:  (1) has filed all reports  required by Section 13 or
15(d) of the Exchange Act of 1934 during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days. Yes  X     No
                                                              ----      -----
   
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.

412,827 common shares were outstanding as of August 11, 1997.

Transitional Small Business Disclosure Format (Check one):
Yes           No    X
    -------      -------

This report contains 20 pages.

               SOUTH BRANCH VALLEY BANCORP, INC. AND SUBSIDIARY

                                     INDEX

                                                                        Page

      I.    FINANCIAL INFORMATION

            Item 1.  Financial Statements

              Condensed consolidated balance sheets
               June 30, 1997 (unaudited) and
               December 31, 1996                                             3

              Condensed consolidated statements of
               income for the three months and six
               months ended June 30, 1997, and
               1996 (unaudited)                                              4

              Condensed consolidated statements of
               cash flows for the six months ended
               June 30, 1997 and 1996 (unaudited)                          5-6

              Condensed consolidated statements of
               shareholders' equity for the three
               months and six months ended June 30,
               1997 and 1996 (unaudited)                                     7

              Notes to condensed consolidated financial
               statements (unaudited)                                     8-10

            Item 2.  Management's Discussion and Analysis
                      of Financial Condition and Results
                      of Operations                                      11-17

      II.   OTHER INFORMATION

            Item 6.  Exhibits and Reports on Form 8-K                       18

            Signatures                                                      19

                                       2

                   SOUTH BRANCH VALLEY BANCORP, INC., AND SUBSIDIARY

                         CONDENSED CONSOLIDATED BALANCE SHEETS

                                                June 30,            December 31,
                                                  1997                  1996
ASSETS                                        (Unaudited)                 *
                                             --------------       ----------------
                                                                         
Cash and due from banks                          $3,109,149             $3,162,552
Interest bearing deposits with other banks        1,553,000              1,553,000
Federal funds sold                                  184,359                723,734
Securities available for sale                    30,139,999             29,351,998
Marketable equity securities                      5,188,905                     --
Loans, net                                       89,165,594             82,414,205
Bank premises and equipment, net                  3,156,334              3,121,892
Accrued interest receivable                         935,929                928,642
Other assets                                        294,468                857,582
                                             --------------       ----------------
          Total Assets                         $133,727,737           $122,113,605
                                             ==============       ================

LIABILITIES
Non-interest bearing deposits                    $9,380,448             $9,075,059
Interest bearing deposits                        95,253,128             91,866,353
                                             --------------       ----------------
    Total deposits                              104,633,576            100,941,412

Short-term borrowings                             5,432,468              4,377,397
Long-term borrowings                              8,471,236              3,514,652
Other liabilities                                   876,403                976,351
                                             --------------       ----------------
          Total Liabilities                     119,413,683            109,809,812
                                             --------------       ----------------

SHAREHOLDERS' EQUITY
Common stock, $2.50 par value, authorized
   600,000 shares, issued 1997, 416,942 shares;
   and 1996, 382,625 shares                       1,042,355                956,562
Surplus                                           2,089,709                685,534
Net unrealized gain (loss) on securities             83,653                117,199
Less cost of shares acquired for the
  treasury 1997, 4,115; and 1996, 4,115            (166,970)              (166,970)
Retained earnings                                11,265,307             10,711,468
                                             --------------       ----------------
          Total Shareholders' Equity             14,314,054             12,303,793
                                             --------------       ----------------
TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY                       $133,727,737           $122,113,605
                                             ==============       ================

          * December 31, 1996  financial  information  has been  extracted  from
          audited financial statement.
          See Notes to Condensed Consolidated Financial Statements

                                       3

SOUTH BRANCH VALLEY BANCORP, INC., AND SUBSIDIARY
  CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Three Months and Six Months ended June 30, 1997 and 1996
                             (Unaudited)

                                         Three Months Ended              Six Months Ended
                                        June 30,      June 30,        June 30,      June 30,
                                          1997          1996            1997          1996
                                     -------------   ----------     -----------   -----------
Interest income:
                                                                              
   Interest and fees on loans           $2,130,325   $1,836,100      $4,141,345    $3,633,917
   Interest on securities:
     Taxable                               424,128      481,174         836,084       953,152
     Tax-exempt                             81,874       61,434         156,409       109,218
   Interest on federal funds sold           14,862       12,534          28,166        35,791
                                     -------------   ----------     -----------   -----------
     Total interest income               2,651,189    2,391,242       5,162,004     4,732,078
                                     -------------   ----------     -----------   -----------
Interest expense:
   Interest on deposits                  1,133,228    1,159,445       2,233,631     2,300,068
Interest on short-term borrowings           90,578        1,346         132,746         1,596
Interest on long-term borrowings           131,547       25,910         234,794        46,885
                                     -------------   ----------     -----------   -----------
     Total interest expense              1,355,353    1,186,701       2,601,171     2,348,549
                                     -------------   ----------     -----------   -----------
       Net interest income               1,295,836    1,204,541       2,560,833     2,383,529
   Provision for loan losses                35,000       15,000          65,000        25,000
                                     -------------   ----------     -----------   -----------
     Net interest income after
       provision for loan losses         1,260,836    1,189,541       2,495,833     2,358,529
                                     -------------   ----------     -----------   -----------
Non-interest income:
   Insurance commissions                    25,387       26,161          35,309        48,724
   Trust department income                     ---          ---             ---            (8)
   Service fee income                       66,237       59,240         123,241       109,145
   Securities gains (losses)                   ---          ---             ---        33,912
   Other income                              9,318       11,331          38,677        26,068
                                     -------------   ----------     -----------    ----------
     Total other income                    100,942       96,732         197,227       217,841
                                     -------------   ----------     -----------   -----------
Non-interest expense:
   Salaries and employee benefits          427,984      422,276         875,861       865,973
   Net occupancy expense of premises        49,129       47,261          91,771       100,587
   Equipment expense                        74,931       52,236         142,834       141,717
   FDIC insurance premiums                   3,220          500           6,000         1,500
   Other expenses                          280,512      264,196         540,954       490,434
                                     -------------   ----------     -----------   -----------
      Total other expense                  835,776      786,469       1,657,420     1,600,211
                                     -------------   ----------     -----------   -----------

Income before income tax expense           526,002      499,804       1,035,640       976,159

   Income tax expense                      155,555      163,635         326,612       328,805
                                     -------------   ----------     -----------   -----------

Net Income                                $370,447     $336,169        $709,028      $647,354
                                     =============   ==========     ===========   ===========

Earnings per common share (Note 2)           $0.97        $0.89           $1.86         $1.71
                                     =============   ==========     ===========   ===========
Dividends per common share                   $0.41        $0.38           $0.41         $0.38
                                     =============   ==========     ===========   ===========

     See Notes to Condensed Consolidated Financial Statements

                                       4

SOUTH BRANCH VALLEY BANCORP, INC., AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Six Months Ended June 30, 1997 and 1996
 (Unaudited)

                                                                       Six Months Ended
                                                                   June 30,        June 30,
                                                                     1997            1996
                                                               -------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
                                                                                     
     Net income                                                       $709,028        $647,354
     Adjustments to reconcile net earnings to net
     cash provided by operating activities:
       Depreciation                                                    114,466         112,204
       Provision for loan losses                                        65,000          25,000
       Securities (gains) losses                                            --         (33,911)
       Provision for deferred income tax expense                        45,881              70
       (Increase) in accrued income receivable                          (7,287)        (60,666)
       Amortization of security premiums and
         (accretion of discounts), net                                   5,631          32,521
       Decrease  in other assets                                       528,992          57,122
        (Decrease)  in other liabilities                               (78,947)        (37,675)

        (Gain) on sale of other assets                                 (12,459)             --

                                                               -------------------------------
       Net cash provided by operating activities                     1,370,305         742,019
                                                               -------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
       Proceeds from sales of securities available for sale                 --       2,209,305
       Proceeds from maturities of securities available for sale     1,283,700       2,800,000
       Purchases of securities available for sale                   (3,004,774)     (6,982,712)
       Purchase of non-subsidiary bank stock                        (5,188,905)             --
       Principal payments received on securities available for sale    872,895         299,345
       Decrease in Federal funds sold, net                             539,375       2,100,968
       Principal collected on (loans to customers), net             (6,838,589)     (4,552,596)
       Proceeds form interest bearing deposits with other banks             --         185,919
       Purchase of Bank premises and equipment                        (148,908)        (62,717)
       Proceeds sales of other assets                                   22,900              --
                                                               -------------------------------
         Net cash provided by (used in) investing activities       (12,462,306)     (4,002,488)
                                                               -------------------------------

Continued
See Notes to Condensed Consolidated Financial Statements

                                       5

SOUTH  BRANCH  VALLEY  BANCORP,  INC.,  AND  SUBSIDIARY  CONDENSED  CONSOLIDATED
STATEMENTS  OF CASH FLOWS - Continued For the Six Months Ended June 30, 1997 and 1996
 (Unaudited)

                                                                       Six Months Ended
                                                                       June 30,    June 30,
                                                                        1997          1996
                                                                    ---------------------------  
CASH FLOWS FROM FINANCING ACTIVITIES
      Net increase (decrease)  in demand deposits, NOW and savings
                                                                                      
      accounts                                                         319,037      (1,337,761)
      Proceeds from sales of  time deposits, net                     3,373,127       1,349,827
      Net increase in short-term borrowings                          1,055,071       2,211,926
      Proceeds from long-term borrowings                             5,500,000       1,000,000
      Repayments of long-term borrowings                              (543,416)        (24,618)
      Net proceeds from common stock sold                            1,489,968             ---
      Dividends paid                                                  (155,189)       (143,834)
                                                               -------------------------------
      Net cash provided by (used in) financing activities           11,038,598       3,055,540
                                                               -------------------------------
      Increase (decrease) in cash and due from banks                  (53,403)       (204,929)

      Cash and due from banks:
            Beginning                                                3,162,552       2,191,647
                                                               -------------------------------

            Ending                                                  $3,109,149      $1,986,718
                                                                ===============    ============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
       Cash payments for:
          Interest paid to depositors                               $2,222,602      $2,280,320
                                                                ===============    ============
          Income taxes                                                $200,271        $243,063
                                                                ===============     ===========

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
        AND FINANCING ACTIVITIES
       Other real estate acquired in settlement of loans               $22,200              $0
                                                                ===============    ============
     See Notes to Condensed Consolidated Financial Statements

                                       6

                SOUTH BRANCH VALLEY BANCORP, INC., AND SUBSIDIARY
        CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY For the
            Three Months and Six Months ended June 30, 1997 and 1996
                                    (Unaudited)

                                                      Three Months Ended
                                           ---------------------------------------
                                               June 30,               June 30,
                                                 1997                   1996
                                           ----------------       ----------------

Balance, beginning of period                    $12,472,859            $11,401,205

  Net income                                        370,447                336,169

  Cash dividends declared, $.41 and $.38
     per share respectively                        (155,189)              (143,834)

  Net proceeds from the issuance of 34,317 shares of
     $2.50 par value common stock during June 1997
     at $43.50 per share                          1,489,968                     --

  Change in net unrealized gain (loss)
     on securities                                  135,969               (293,387)
                                             --------------       ----------------

Balance, June 30                                $14,314,054            $11,300,153
                                             ==============       ================

                                                       Six Months Ended
                                           ---------------------------------------
                                               June 30,               June 30,
                                                 1997                   1996
                                           ----------------       ----------------

Balance, beginning of period                    $12,303,793            $11,328,660

  Net income                                        709,028                647,354

  Cash dividends declared, $.41 and $.38           (155,189)              (143,834)
     per share respectively

  Net proceeds from the issuance of 34,317 shares of
     $2.50 par value common stock during June 1997
     at $43.50 per share                          1,489,968                     --

  Change in net unrealized gain (loss)
     on securities                                  (33,546)              (532,027)
                                           ----------------       ----------------

Balance, June 30                                $14,314,054            $11,300,153
                                           ================       ================

          See Notes to Condensed Consolidated Financial Statements

                                       7

                SOUTH BRANCH VALLEY BANCORP, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                   (Unaudited)

Note 1.   Basis of Presentation

          The financial information included herein is unaudited;  however, such
          information  reflects  all  adjustments  (consisting  solely of normal
          recurring  adjustments)  which  are,  in the  opinion  of  management,
          necessary for a fair statement of results for the interim periods.

          The presentation of financial  statements in conformity with generally
          accepted  accounting  principles requires management to make estimates
          and  assumptions  that  effect  the  reported  amount  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 the estimates.

          The results of operations for the six month period ended June 30, 1997
          are not  necessarily  indicative of the results to be expected for the
          full year. The Condensed  Consolidated  Financial Statements and notes
          included herein should be read in conjunction  with the Company's 1996
          audited financial statements and Form 10-KSB.

          Certain accounts in the consolidated  financial statements for 1996 as
          previously presented have been reclassified to conform to current year
          classifications.

Note 2.   Earnings Per Share

          Earnings per common share are computed based upon the weighted average
          shares  outstanding.  The weighted  average  shares  outstanding  were
          381,164 at June 30, 1997 and 378,510 at June 30,  1996.  The  weighted
          average  shares for the  quarters  ended  June 30,  1997 and 1996 were
          383,790, and 378,510 respectfully.

Note 3.   Investment in Marketable Equity Securities and Proposed Acquisition

          During the first quarter of 1997, the Company  acquired  approximately
          4.2% of the common stock of Capital State Bank, Inc.(Capital State), a
          state  banking  corporation.  On June 17, 1997,  the Company  received
          approval from  regulatory  authorities  and acquired  35.4% of Capital
          State's  outstanding  stock bringing the total investment to 39.6%. At
          June 30, 1997,  the  Company's  total  investment  in Capital State of
          $5,188,905,  is  recorded  as  Marketable  Equity  Securities  in  the
          accompanying condensed

                                       8

          consolidated  financial  statements.  As a  result  of  the  Company's
          increase  in  control  of  Capital  State's  voting  shares,  and  the
          insignificiance  of the results of  operations of Capital  State,  the
          Company  changed it's method of accounting from the cost method to the
          equity  method,  effective  July  1,  1997.  Additionally,  due to the
          insignificance of the results of operations of Capital State since the
          Company's  investment  in Capital  State,  this  change in  accounting
          method was insignificant.

          A summary of significant captions of Capital State's unaudited balance
          sheet and  results of  operations  as of and for the six month  period
          ended June 30, 1997, in thousands of dollars, is as follows:

                        Total assets                  $34,777
                        Net loans                     $20,331
                        Total deposits                $23,262
                        Total shareholders' equity    $11,205
                        Total interest income         $ 1,094
                        Net interest income           $   597
                        Net income                    $    (3)

          Reference can be made to Forms 8-K filed by the Company on January 15,
          1997,  February 7, 1997,  March 27, 1997,  June 17, 1997, July 8, 1997
          and August 8, 1997 for further  information  related to the  Company's
          planned  investment in Capital State. These documents are incorporated
          herein by reference in their entirety.

Note 4.   Long-term borrowings

          On February  18, 1997 and March 14,  1997,  the Company  obtained  two
          long-term  borrowings from two separate financial  institutions in the
          amounts of $3,000,000 and $500,000 respectively,  to fund a portion of
          it's  investment  in Capital  State (see Note 3).  Each of these loans
          bear an interest  rate of prime minus .25%,  adjusted  annually,  with
          interest  payments due  quarterly.  Annual  principal  payments in the
          amount of $600,000 are due on the  $3,000,000  loan,  while  quarterly
          principal  payments in the amount of $20,833  are due on the  $500,000
          loan.

          The  $3,000,000  loan is  collateralized  by 291,410 shares of Capital
          State stock that the Company  owns.  An  additional  48,500  shares of
          Capital State stock  presently  owned is pledged as collateral for the
          $500,000 loan.

          The  subsidiary  bank also had long-term  borrowings of $5,447,000 and
          $1,725,000 as of June 30, 1997 and June 30, 1996, respectively,  which
          consisted of advances from the Federal Home Loan Bank of Pittsburgh to
          fund local mortgage loan growth.

          The Company's total long-term borrowings bear an average interest rate
          of 7.16% as of June 30, 1997 and mature in varying amounts through the
          year 2010. A summary of the maturities of all long

                                       9

          term borrowings for the next five years and thereafter is as follows:

                        1998                     $        0
                        1999                        340,000
                        2000                              0
                        2001                        500,000
                        2002                      5,310,000
                        Thereafter                2,321,236
                                                 ----------
                        Total                    $8,471,236
                                                 ==========

Note 5.   Stock Issuance and Related Party Transaction

          On June 17, 1997,  the Company issued and sold 34,317 shares of common
          stock to seven directors of the Company in a limited stock offering at
          $43.50 per share, the estimated  current market value of the Company's
          common  stock  as of the  sale  date.  The  proceeds  from  the  sale,
          $1,489,968,  net of $2,822 in issuance  costs,  were used to partially
          fund the Company's investment in Capital State common stock.

          The following  represents certain unaduited proforma information as if
          the  issuance of common  stock would have  occurred as of January 1 of
          each period presented.

                                      June 30, 1997

                                             As Reported              Proforma

            Earnings per Share                   $1.86                   $1.72
            Book Value per Share                $34.67                  $34.67

                                      June 30, 1996

                                             As Reported             Proforma

            Earnings per Share                   $1.71                   $1.57
            Book Value per Share                $29.85                  $27.37

                                    December 31, 1996

                                             As Reported            Proforma

            Earnings per Share                   $3.94                   $3.61
            Book Value per Share                $32.51                  $29.80

                                       10

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                            INTRODUCTION AND SUMMARY

      The  following is  Management's  discussion  and analysis of the financial
condition and financial  results of operations for South Branch Valley  Bancorp,
Inc.(hereafter  referred to as the  Company)  and its wholly  owned  subsidiary,
South Branch Valley  National  Bank,  (hereafter  referred to as the Bank) as of
June 30, 1997. This discussion may contain forward looking  statements  based on
management's  expectations and actual results may differ  materially.  Since the
primary business  activities of South Branch Valley Bancorp,  Inc. are conducted
through its wholly owned subsidiary (the Bank), the following discussion focuses
primarily on the financial condition and operations of the Bank. All amounts and
percentages have been rounded for this discussion.

Earnings Summary
- ----------------

      Net income for the first six months of 1997 totaled $709,000, a $62,000 or
a 9.6% increase from the $647,000 earned during the same period of 1996. For the
six months ended June 30, 1997,  the  Company's  only  subsidiary,  South Branch
Valley  National  Bank,  had an increase in net income of $145,000,  or 22.0% to
$804,000 as compared with $659,000 for the same period ended June 30, 1996.

      Annualized return on average assets at June 30, 1997 was 1.10% as compared
to 1.13% at June 30, 1996 a decrease of 5.3%.  Earnings per share  totaled $1.86
at June  30,  1997  compared  to $1.71 at June  30,  1996  representing  an 8.8%
increase.

                              RESULTS OF OPERATIONS

Net Interest Income
- --------------------

     For purposes of this discussion,  the "taxable equivalent basis" adjustment
has been  included in interest  income to reflect the level of income had income
on state and municipal  obligations exempt from Federal income tax been taxable,
assuming  a Federal  tax rate of 34% in both 1997 and 1996.  The  amounts of tax
equivalent adjustments were $40,000 in 1997 and $25,000 in 1996.

      For the six months ended June 30, 1997, the Company's net interest income,
as  adjusted,  increased  $193,000  or  8.0%  to  $2,601,000  as  compared  with
$2,408,000  for the six months ended June 30, 1996.  However,  the Company's net
interest yield on earning assets (net interest margin)  decreased 9 basis points
from  4.44% at June 30,  1996 to 4.35% for the six months  ended June 30,  1997.
Management  feels that this  decrease is due  primarily to a  competitive  local
market for loans and  deposits  which has caused a general  lowering of rates on
loans while deposit rates exceed those of national average. Pressures on the net
interest yield remain a concern.

                                       11

A detailed  analysis of the net interest yield by component is shown on Table I.
No  significant  fluctuations  were  noted and the  Company  does not expect any
significant change in the Company's net yield during the remainder of 1997 given
no  significant  changes in the present  interest rate  environment.  Management
continues  to monitor the net interest  margin  through GAP analysis to minimize
the potential for any significant negative impact.

Provision for Loan Losses and Loan Quality
- ------------------------------------------

      An allowance  for loan losses is  maintained  by the Company and is funded
through  the  provision  for loan  losses as a charge to current  earnings.  The
allowance  for loan  losses is reviewed by  management  on a quarterly  basis to
determine  that  it is  maintained  at  levels  considered  necessary  to  cover
potential  losses  associated  with  the  Bank's  current  loan  portfolio.  The
Company's  provision  for loan  losses  for the  first  six  months of this year
totaled $65,000 compared to $25,000 for the six months ended June 30, 1996. This
increase was primarily to provide for potential losses inherent in the Company's
loan portfolio due to its continued growth in net loans outstanding.

      Net loan  charge-offs  for the first six months of 1997 were  $101,000  as
compared to $33,000 for the first six months of 1996.  Expressed as a percentage
of loans (net of unearned interest),  net charge-offs (recoveries) were .11% for
the first six months of 1997 compared to .04% for the comparable period of 1996.

                                       12

South Branch Valley Bancorp, Inc. and Subsidiary
- ------------------------------------------------------------------------

Table I - Average Distribution Of Assets, Liabilities And Shareholders'
  Equity, Interest Earnings & Expenses, And Average Rates
  (In thousands of dollars)
                                  June 30, 1997                        June 30, 1996
                       --------------------------------     ---------------------- ----------
                        AVERAGE     EARNINGS/   YIELD/       AVERAGE     EARNINGS/    YIELD/
                        BALANCES      EXPENSE     RATE       BALANCES     EXPENSE      RATE
                       --------------------------------     ---------------------------------
        ASSETS
Interest earning assets
  Loans, net of unearned
                                                                        
    interest             $86,693        $4,141    9.55%        $73,444      $3,634      9.90%
  Securities
    Taxable               24,510           784    6.40%         27,603         884      6.41%
    Tax-exempt             5,979           197    6.59%          4,061         134      6.60%
Interest bearing
deposits with other banks  1,553            52    6.70%          2,052          69      6.73%
Federal Funds sold           893            28    6.27%          1,318          36      5.46%
                       ---------   -----------  -------     ----------   ---------   --------
Total interest
    earning assets       119,628         5,202    8.70%        108,478       4,757      8.77%

Noninterest earning
    assets                 9,033                                 5,956
                       ---------                            ----------
    Total assets        $128,661                              $114,434
                       =========                            ==========

 LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities 
Interest bearing liabilities
  Interest bearing
    demand deposits      $19,188          $297    3.10%        $19,489        $331      3.40%
  Regular savings         13,755           216    3.14%         15,972         285      3.57%
  Time savings            59,888         1,720    5.74%         57,024       1,684      5.91%
  Short-term borrowings    5,791           133    4.59%             68           2      5.88%
  Long-term borrowings     6,561           235    7.16%          1,573          47      5.98%
                           -----          ----    -----        -------       -----      -----                    
                         105,183         2,601    4.95%         94,126       2,349      4.99%

Noninterest bearing liabilities
  Demand deposits          9,131                                 8,191
  Other liabilities        1,772                                   866
                       ---------                            ----------
    Total liabilities    116,086                               103,183

Shareholders' equity      12,575                                11,251
                       ---------                            ----------
 Total liabilities and
   shareholders'equity  $128,661                              $114,434
                       =========                            ==========

NET INTEREST EARNINGS                   $2,601                              $2,408
                                   ===========                           =========

NET INTEREST YIELD ON EARNING ASSETS              4.35%                                 4.44%
                                                =======                              ========

                                       13

      The total of non-performing  assets and loans past due 90 days or more and
still  accruing  interest  has  remained  relatively  stable  during the past 12
months,  and  management  has no knowledge  that would lead them to believe that
such assets will increase substantially during the remainder of 1997.

                    Summary of Past Due Loans and Non-Performing Assets
                              (in thousands of dollars)

                                   June 30           December 31
                                ----------------    ------------
                                  1997     1996        1996
   
Loans contractually past due
90 days or more and still        $ 157     $ 159       $ 324
                                 =====     =====       =====
accruing interest

Non-performing assets:
  Non-accruing Loans             $ 125     $ 450       $ 343

  Other Repossessed Assets          31        --          40
  Other Real Estate Owned           40        40          29
                                 -----      ----       -----

                                 $ 196     $ 490       $ 412
                                 =====     =====       =====

      The level of non-performing  assets has decreased during the past year due
to  management's  continuing  efforts to improve  the  quality of the  Company's
assets.  Total  loans past due 90 days or more plus  non-performing  assets have
decreased  approximately $296,000 or 45.6% from the same period last year. Loans
contractually  past due 90 days or more  plus  non-performing  assets  decreased
approximately 52.0% or $383,000 since December 31, 1996. While there may be some
loans or portions of loans identified as potential problem credits which are not
specifically  identified as either  non-accrual or accruing loans past due 90 or
more days, they are considered by management to be  insignificant to the overall
disclosure and are therefore not specifically quantified within the Management's
Discussion and Analysis.

      Impaired  loans  totaled  approximately  $384,000  at June  30,  1997  and
December 31, 1996. A loan is impaired  when,  based on current  information  and
events,  it is probable that all amounts due will not be collected in accordance
with the contractual terms of the specific loan agreement. Impaired loans, other
than  certain  large  groups  of  smaller-balance  homogeneous  loans  that  are
collectively  evaluated  for  impairment,  are reported at the present  value of
expected  future  cash  flows  discounted  using the loan's  original  effective
interest rate or,  alternatively,  at the loan's  observable market price, or at
the fair value of the loan's collateral if the loan is collateral dependent.

      At June 30, 1997, the allowance for loan losses totaled $822,000 or .9% of
net  loans  compared  to  $852,000  or 1.1% of net loans at June 30,  1996,  and
$858,000  or 1.0% of net  loans at  December  31,  1996.  Based on  management's
quarterly loan review procedures, management believes the recorded allowance for
loan losses is adequate to cover potential losses  identified or inherent in the
loan portfolio as of each of the dates presented.

                                       14

Non-interest Income
- -------------------

      Total other  income  decreased  approximately  $21,000 or 9.6% to $197,000
during  the first six  months of 1997,  as  compared  to the first six months of
1996. A detailed discussion of non-interest income components follows.

      Insurance commissions decreased  approximately $14,000 to $35,000 or 28.6%
for the six months ended June 30, 1997 compared to the six months ended June 30,
1996.  Management  recognizes  that this revenue can be sporadic but does expect
the  remainder of the year's  insurance  earnings to be more  comparable to last
year's based on expected loan growth.

      Service  fee income  increased  $14,000  from  approximately  $109,000  to
$123,000 or 12.8%.  Management  believes  the  Company  will be able to maintain
levels of service fee income similar to this throughout the remainder of
1997.

      No sales of securities  were  originated  during the six months ended June
30, 1997. For the six months ended June 30, 1996,  certain  securities were sold
to reinvest in similar  securities  with more favorable  rates and terms,  which
resulted in an approximate $34,000 gain on sales of investment securities.

Non-interest Expense
- --------------------

      Total  non-interest  expense  increased  approximately  $57,000 or 3.6% to
$1,657,000  during  the first six  months of 1997 as  compared  to the first six
months  of 1996.  This  slight  increase  is a result  of  management's  planned
emphasis on  controlling  non-interest  expense.  An  increase of  approximately
$10,000  or  1.2%  in  salaries  and   employee   benefits,   which   represents
approximately 53% of total non-interest  expense, can be attributed to a general
increase in salaries and a slight  increase in insurance  costs.  Other  expense
increased  approximately  $51,000 or 10.4% from $490,000 to $541,000  during the
first six months of 1997  compared to 1996.  The major factors  contributing  to
this increase are as follows:

   **     Other insurance  expense increased  approximately  $13,000 or 59.1%
          from  $22,000 to $35,000  for the first six months of 1997 as compared
          to the first six months of 1996.  This increase is due to revisions to
          existing policies and additional coverage purchased in 1997.

   **     Legal, accounting,  and asset/liability  consulting services increased
          approximately  $29,000  or 52.7%  from  $55,000  at June  30,  1996 to
          $84,000 at June 30, 1997.

Liquidity
- ---------

      Liquidity in  commercial  banking can be defined as the ability to satisfy
customer loan demand and meet deposit  withdrawals while maximizing net interest
income.  The Company's  primary  sources of funds are deposits and principal and
interest payments on loans. Additional funds are provided by

                                       15

maturities of securities. The Company uses ratio analysis to monitor the changes
in its  sources  and uses of funds so that an  adequate  liquidity  position  is
maintained.  At June 30, 1997 the loan to deposit ratio was 85.2% as compared to
75.1% at June 30, 1996.  Cash and due from banks coupled with Federal funds sold
totaled  $3,294,000  or 2.5%  of  total  assets.  Additionally,  securities  and
interest bearing deposits with other banks maturing within one year approximated
$1,708,000  or 1.3% of total assets.  Management  believes that the liquidity of
the  Company is  adequate  and  foresees  no demands  or  conditions  that would
adversely affect it.

                               FINANCIAL CONDITION

Total Assets
- ------------

      The  Company's  total assets have  increased  approximately  9.5% or $11.6
million from December 31, 1996. The overall  composition of the Company's assets
has not  changed  significantly  since year end 1996  except  for the  Company's
investment  in  marketable  equity  securities  which  increased   approximately
$5,189,000.  This increase was due to the Company's investment in Capital State,
which was substantially  funded through borrowings and proceeds received for the
issuance  of  additional  common  stock  as  discussed  in  Notes 3 and 5 to the
condensed consolidated financial statements.

Investment in Capital State Bank, Inc.
- --------------------------------------

      The Company has signed a letter of intent with the board of  directors  of
Capital  State  to  acquire  100% of  Capital  States  outstanding  stock.  This
acquisition  will enable the Company to expand into a larger and rapidly growing
market area.  For futher  discussion  of the  Company's  current  investment  in
Capital State, see Note 3 to the condensed consolidated financial statement.

Liabilities
- -----------

      Total deposits increased  approximately 3.7% or $3.7 million from December
31, 1996,  to  $104,634,000  with no  significant  fluctuation  in the Company's
deposit mix.

      The Company's  long term  borrowings  increased  approximately  $4,956,000
since  December 31, 1996 to partially  fund the purchase of Capital  State stock
and to fund local mortgage loan growth. See Note 4 to the condensed consolidated
financial  statements for additional  information  related to the Company's long
term borrowings.

       Short term  borrowings have increased  approximately  $1,055,000 and have
been used to fund additional loan growth.

Shareholders' Equity
- --------------------

      The  Company's  total  shareholders'  equity has  increased  approximately
$1,990,000  or 16.2%  since  December  31,  1996.  This is the net  result of an
increase in retained earnings of $531,000 from net income, net of the

                                       16

$115,000  cash  dividend paid to  shareholders  in June 1997,  $1,489,968 in net
proceeds  from the  issuance  of 34,317 new shares of common  stock  during June
1997, and a decrease of $34,000 in net unrealized gains on securities  available
for sale.  See Note 5 to the condensed  consolidated  financial  statements  for
additional  information  related to the  issuance of this stock.  The  Company's
equity to total  assets  ratio was 10.7% at June 30,  1997 and 10.1% at December
31, 1996. The Company's  subsidiary bank's total risk weighted capital ratio was
approximately  14.0% at June  30,  1997 and is well  within  Federal  regulatory
minimum  guidelines of 8.0%. The Company is not aware of any pending  regulation
which  would have a material  negative  impact on its  operations  or  financial
condition.

                                       17

                                     PART II

Item 6 - Exhibits and Reports on Form 8-K
- ------------------------------------------

A.    Exhibit  -  Financial  Data  Schedule  required  by  Part  I  Item  601 of
      Regulation S-B.

B.    Reports on Form 8-K.

      On June 17, 1997 the Registrant filed Form 8-K related to the consummation
      of the  previously  reported  proposed  purchase of 424,680  shares of the
      common stock of Capital  State Bank,  Inc.,  2402  Mountaineer  Boulevard,
      South  Charleston,  West  Virginia.  On  June  17,  1997,  the  Registrant
      consummated its acquisition of the shares.

      On July 8, 1997, the Registrant  filed a form 8-K related to the execution
      of a non-binding  letter of intent with Capital State Bank, Inc. Under the
      terms of the Letter of Intent, the Registrant will exchange 3.95 shares of
      Capital  State stock for one share of South Branch  Valley  Bancorp,  Inc.
      stock.  The Registrant  anticipates a merger  transaction  whereby Capital
      State will  constitute a free standing  subsidiary of South Branch.  These
      documents are incorporated herein by reference in their entirety.

      On August 8,  1997,  the  Company  filed  Form 8-K  related  to the signed
      definitive  agreement  with  Capital  State  Bank.  Under the terms of the
      agreement,  the Company will  exchange one share of South Branch stock for
      3.95  shares of Capital  State  stock.  The Company  anticipates  a merger
      transaction  whereby Capital State will become a free standing  subsidiary
      of the  Company.  The  offer to  exchange  stock of  South  Branch  Valley
      Bancorp,  Inc.  for all of the  issued and  outstanding  shares of Capital
      State is  subject  to  approval  by the  respective  shareholders  of each
      institution and is also subject to regulatory  approval.  This document is
      incorporated herein by reference in it's entirety.

                                       18

                                    SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                    South Branch Valley Bancorp, Inc.
                                    (registrant)

                                    By: /s/ H. Charles Maddy, III
                                    ------------------------------------
                                    H. Charles Maddy, III, President and
                                    Chief Financial Officer

                                    By: /s/ Russell F. Ratliff, Jr.
                                    ------------------------------------   
                                    Russell F. Ratliff, Jr.
                                    Treasurer

Date:      August 13, 1997
- --------------------------

                                       19

                                      9
                                 0000811808
   SOUTH BRANCH VALLEY NATIONAL BANK

                        6-MOS
                    DEC-31-1997
                       JAN-01-1997
                         JUN-30-1997
                                 3,109,149
                 1,553,000
                         184,359
                               0
           35,328,904
                         0
                           0
                               89,165,594
                             (822,401)
                       133,727,737
                           104,633,576
                           5,432,468
                      876,403
                            8,471,236
                          0
                                    0
                               1,042,355
                            13,271,699
       133,727,737
                        4,141,345
                        992,493
                          28,166
                       5,162,004
                     2,233,631
                     2,601,171
                  2,560,833
                             65,000
                             0
                        1,657,420
                        1,035,640
               709,028
                                0
                                      0
                             709,028
                               1.86
                               1.86
                              4.40
                              125,114
                             156,575
                          54,987
                        1,352,040
                         858,423
                            132,039
                              31,017
                        822,401
                     822,401
                            0
                        0