ITEM 1 - BUSINESS 	 SUN BANCORP, INC. (SUN) is a holding company incorporated under the laws of Pennsylvania and registered under the Bank Holding Company Act of 1956, as amended, on November 26, 1982. SUN acquired the Snyder County Trust Company in June 1983 and The Watsontown National Bank in November 1987. On December 1, 1993, the two banks merged into one bank under the legal title of Sun Bank (Bank). The banks continue to do business as Snyder County Trust Company, Incorporated as Sun Bank and Watsontown Bank, Incorporated as Sun Bank. SUN also owns the Pennsylvania SUN Life Insurance Company, a credit life and disability insurance company formed in 1993. SUN is a limited partner in two partnerships for the purpose of building, owning and operating an affordable elderly apartment complex in SUN's market area. As part of the agreement, SUN is able to recognize tax credits from this economic development project. On June 30, 1997, SUN acquired Bucktail Bank and Trust Company (Bucktail) from FNB Corporation. Concurrently, Bucktail was merged into Sun Bank. Five branches of Bucktail located in Lycoming County were renamed and doing business under the name Central Pennsylvania Bank, Incorporated as Sun Bank. The remaining branches in Elk and Cameron Counties continue under the name Bucktail Bank and Trust Company, Incorporated as Sun Bank. 		 	 Sun Bank, a state-chartered bank regulated by Pennsylvania Banking Law, provides full service commercial and retail banking services primarily in central Pennsylvania. Sun Bank operates fourteen banking offices and one trust services office serving Snyder, Union, Northumberland, Lycoming, Cameron and Elk Counties. At December 31, 1997, Sun Bank had total assets of $506,901,000 and total shareholders' equity of $61,985,000. Net income for 1997 was $7,577,000. 	 	The Bank offers a wide range of services including demand deposit accounts, savings accounts, Christmas and all-purpose clubs, time certificates of deposit, and individual retirement accounts, as well as commercial loans, consumer loans, mortgage loans, and safe deposit services. The Bank also operates a trust department that provides full fiduciary services. Also, nineteen Automated Teller Machines (ATMs) and cash dispensing units throughout the service area provide 24-hour banking service. Sun Bank's activities are such that the loss of one single customer or a few customers would not have a material adverse effect on its operations. Additionally, the Bank's business is not seasonal in nature and does not engage in foreign transactions. The majority of the loan portfolio is comprised of residential real estate loans and consumer loans (predominately automobiles). The Bank's deposits are insured by the Federal Deposit Insurance Corporation (FDIC) in the amount allowed by law.
	The Pennsylvania SUN Life Insurance Company (SUN Life) provides credit life and disability insurance to Sun Bank's credit customers. SUN Life is subject to supervision and regulation by the Arizona Department of Insurance, the Insurance Department of the Commonwealth of Pennsylvania, and the Board of Governors of the Federal Reserve Bank. At December 31, 1997, Pennsylvania SUN Life had total assets of $672,000 and total shareholders' equity of $293,000. Net income for 1997 was $9,000.
	Competition continues to heighten in the financial services industry not only among banks but with savings and loan associations, credit unions, discount brokerage firms, insurance companies, and other nonbank financial service providers. Changing regulatory and economic conditions affect SUN's ability to compete effectively in its market area. Most of the competition is centered around the setting of interest rates to be charged on loans and rates paid on deposits, fees on deposit accounts and customer service. SUN's management feels it competes effectively in its market area.
	SUN is subject to regulation and supervision by the Board of Governors of the Federal Reserve Bank and the Pennsylvania Department of Banking. SUN files quarterly and annual reports with the Federal Reserve Bank (FRB) of Philadelphia and periodic on-site exams of SUN are done by the FRB. Regular examinations of the Bank are conducted by the FDIC and the Pennsylvania Department of Banking. 	 SUN and the Pennsylvania SUN Life Insurance Company do not have any employees. At December 31, 1997, the Bank employed 213 persons. The Bank offers a variety of benefit programs and feels its relationship with its employees is good.
ITEM 2
ITEM 2 - PROPERTIES
	SUN's corporate office is located in Sun Bank's main banking office. SUN owns all of its properties with the exception of an off-site ATM, Item 8 listed below, which is rented from Weis Markets, Inc., Sunbury, Pennsylvania. In 1995, SUN purchased parcels of land in Liverpool for the purpose of building a branch in the future. In 1997, SUN completed the sale of its former Shamokin Dam office located on Routes 11-15. Also, SUN completed the renovation and relocation to our new Shamokin Dam branch (Item 2), which was purchased from Swineford National Bank in 1996. On June 30, 1997, SUN completed its acquisition of Bucktail Bank and Trust Company. This acquisition added eight additional locations. Johnsonburg (Item 13), Pine Street (Item 16) and the Operations Center (Item 19) are leased properties. All properties are in good condition and adequate for the bank's purposes. The following is a list of the banking offices, the addresses, and a brief description of each office.
	 Office	 			 Address		 Description -------- --------- -------------
1. Main 	 	 	2-16 South Market Street				 Brick structure 				 Selinsgrove, Pennsylvania 17870
2. Shamokin Dam 	200 S. Susquehanna Trail			 	Brick structure 				 Shamokin Dam, Pennsylvania 17876			 				 3. New Berlin 		Market & Plum Streets 				Brick structure 				 New Berlin, Pennsylvania 17855
4. Sunbury 			11 South Second Street 				Brick structure 				 Sunbury, Pennsylvania 17801
5. Middleburg 		Route 522 & Dock Hill Road 				Brick structure 				 Middleburg, Pennsylvania 17842
6. Trust Division 		100 West Pine Street		 			Brick structure 				Selinsgrove, Pennsylvania 17870
7. Automated Teller 108 West Pine Street 					Brick structure Machine 			Selinsgrove, Pennsylvania 17870		
8. Automated Teller 	700 North Broad Street 				Brick structure Machine 	 		Selinsgrove, Pennsylvania 17870
9. Watsontown 		300 Main Street 					Brick structure 				 Watsontown, Pennsylvania 17777
10. Northumberland 	 	96 Duke Street	 				Brick structure 				 Northumberland, Pennsylvania 17857
11. Liverpool 		Rts. 11 & 15 South 					Land 				Liverpool, Pennsylvania 17045
12. Emporium	 	2 East Fourth Street		 			Brick structure 				 Emporium, PA 15834
13. Johnsonburg	 	 RR 2 Box 1A 						Brick structure 		 		Johnsonburg, PA 15845
14. Hughesville 		2 South Main Street 					Brick structure 				Hughesville, PA 17737
15. Newberry	 		2131 W. Fourth Street 					Brick structure 				 Williamsport, PA 17701
16. Pine Street 	 	330 Pine Street 					Brick structure 				Williamsport, PA 17701
17. Montoursville 		301 Broad Street		 			Brick structure 				Montoursville, PA 17754
18. Squire Hays		 3155 Lycoming Creek Road			 	Stone and frame 		Williamsport, PA 17701	 structure
19. Operations Center	210 Market Street	 				Brick structure 				 Williamsport, PA 17701	
ITEM 3
ITEM 3 - LEGAL PROCEEDINGS
	Various legal actions arise against the Corporation in the normal course of business. In the opinion of management and counsel, when such actions currently pending or threatened have been resolved, they should not have a material adverse effect on the business or financial condition of the Corporation.
ITEM 4
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
	Not applicable
PART II ---------
ITEM 5
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED 	 	 	 SHAREHOLDER MATTERS
	In April 1993, the common stock of SUN BANCORP, INC. began trading publicly on the NASDAQ national market system under the symbol SUBI. Prior to this date, the stock was not traded on an established stock exchange; however, it was traded on the over-the-counter market. As of March 5, 1998, SUN had approximately 1,940 holders of its common stock. SUN offers its shareholders a Dividend Reinvestment Plan whereby holders of stock may have their quarterly cash dividends automatically invested in additional shares of common stock of SUN.
	The payment of dividends by SUN is at the discretion of the Board of Directors and to the extent funds are legally available for that purpose. SUN may not pay dividends in any year in excess of the total of the current year's net income and the retained net income of the prior two years without the approval of the Federal Reserve Bank. Additionally, bank regulations limit the amount of dividends that may be paid to SUN by the subsidiary bank without prior approval from the regulatory agencies.
	Additional stock information is incorporated by reference to Shareholder Information found on page 44 of the 1997 Annual Report to Shareholders.
ITEM 6
ITEM 6 - SELECTED FINANCIAL DATA
	This item is incorporated by reference to information under the heading Five Year Financial Highlights on page 28 of the 1997 Annual Report to Shareholders.
ITEM 7
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	This item is incorporated by reference to Management's Discussion and Analysis on pages 29 through 43 of the 1997 Annual Report to Shareholders.
ITEM 7A
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	This item is incorporated by reference to Management's Discussion and Analysis on pages 40 through 42 of the 1997 Annual Report of Shareholders.
ITEM 8
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
	This item is incorporated by reference to the Consolidated Financial Statements, Notes to Consolidated Financial Statements and Independent Auditors' Report set forth on pages 6 through 27 of the 1997 Annual Report to Shareholders.
ITEM 9
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
	None
PART III ----------
ITEM 10
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
	Information concerning directors and executive officers of the Registrant is incorporated herein by reference to Board of Directors on page 6 of the Corporation's 1998 Proxy Statement.
	Information regarding disclosure of delinquent filers pursuant to Item 405 of Regulation 5-K is incorporated herein by reference to Compliance with Securities and Exchange Act on page 19 of the Corporation's 1998 Proxy Statement.
ITEM 11
ITEM 11 - EXECUTIVE COMPENSATION
	Information relating to management remuneration and compensation is incorporated herein by reference to Executive Compensation and Other Information on page 13 of the 1998 Proxy Statement.
ITEM 12
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
	This information is incorporated by reference to Security Ownership of Directors and Executive Officers of the Corporation on page 10 of the 1998 Proxy Statement.
ITEM 13
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
	This information is incorporated by reference to footnote 14 on page 21 of the 1997 Annual Report to Shareholders and under the heading of Transactions with Management on page 19 of the 1998 Proxy Statement.
PART IV ---------
ITEM 14
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) The following consolidated financial statements and independent auditors' report of SUN BANCORP, INC. and subsidiaries included in the Annual Report to Shareholders for the year ended December 31, 1997 are incorporated by reference in Part II, Item 8:
	 Consolidated Balance Sheets - December 31, 1997 and 1996
	 Consolidated Statements of Income - Years Ended December 31, 1997, 1996 and 1995	
	 Consolidated Statements of Shareholders' Equity - Years Ended December 31, 1997, 1996 and 1995
	 Consolidated Statements of Cash Flows - Years Ended December 31, 1997, 1996 and 1995
	 Notes to Consolidated Financial Statements
	 Independent Auditors' Report
(2) All schedules applicable to the Registrant are shown in the respective financial statements or the notes thereto. Financial statement schedules not included are omitted because the information is not required under the related instructions or it is inapplicable.
(3) Exhibits
	 3(i) The Articles of Incorporation of the Corporation are incorporated herein by reference to Exhibit 3 to the Corporation's Annual Report on Form 10-K for the year ended December 31, 1993 (Commission File Number 0-14745).
3(ii) The By-Laws, as amended and restated, are incorporated herein by reference to Exhibit 3 to the Corporation's Annual Report on Form 10-K for the year ended December 31, 1993 (Commission File Number 0-14745).
13 Annual Report to Shareholders of SUN BANCORP, INC. for the year ended December 31, 1997 is filed herewith. Such report, except for those portions thereof which are expressly incorporated by reference herein, is furnished for information of the Securities and Exchange Commission only and it is not considered "filed" as part of the Form 10-K filing.
21 Subsidiaries of the Registrant are filed herewith.
22 Published Report Regarding Matters Submitted To Vote Of Shareholders is filed herewith, the 1998 Proxy Statement of SUN BANCORP, INC.
23 Consent of Independent Auditors
(b) 	No reports on Form 8-K were required to be filed during the fourth quarter of 1997.
(c) 	Exhibits - the required exhibits are included under Item 14(a) (3) of the Form 10-K.
(d) 	Financial statement schedules are omitted because the required information is not applicable or is included elsewhere herein.
SIGNATURES ------------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, SUN BANCORP, INC. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
							 SUN BANCORP, INC. 					 ------------------- (Registrant)
Date 3/26/98 				By: 	/s/ Fred W. Kelly, Jr. ------------- -------------------------------- 				Fred W. Kelly, Jr. 				President & Chief Executive Officer (Principal Executive Officer)
		 By: /s/ Jeffrey E. Hoyt --------------------------------
Executive Vice President and Chief Operating Officer and Secretary (Principal Financial Officer and Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed on behalf of the Registrant and in the capacities and on the dates indicated.
		 Name							 Date ------ ------
/s/ Fred W. Kelly, Jr. 3/26/98 - ------------------------------------- -------------- Fred W. Kelly, Jr. President, Chief Executive Officer and Director
/s/ Jeffrey E. Hoyt 3/26/98 - ------------------------------------ -------------- Jeffrey E. Hoyt Executive Vice President, Secretary and Chief Operating Officer
/s/ Max E. Bingaman 3/26/98 - ------------------------------------ -------------- Max E. Bingaman, Director
/s/ David R. Dieck 	 3/26/98 - ------------------------------------ -------------- David R. Dieck, Director
/s/ Louis A. Eaton 3/26/98 	 - ------------------------------------ -------------- Louis A. Eaton, Director
/s/ Dr. Robert E. Funk 3/26/98 	 - ------------------------------------ -------------- Dr. Robert E. Funk, Director		
3/26/98 	 - ------------------------------------ -------------- Stephen J. Gurgovits, Director
/s/ Thomas B. Hebble 3/26/98 	 - ------------------------------------ -------------- Thomas B. Hebble, Director 	 /s/ Robert A. Hormell 3/26/98		 - ------------------------------------ -------------- Robert A. Hormell, Director
	 3/26/98		 - ------------------------------------ -------------- Paul R. John, Director
/s/ George F. Keller 3/26/98		 - ------------------------------------ -------------- George F. Keller, Director	
/s/ Lehman B. Mengel 3/26/98 		 - ------------------------------------ -------------- Lehman B. Mengel, Director
	 3/26/98		 - ------------------------------------ -------------- Howard H. Schnure, Director
/s/ Marlin T. Sierer 	 3/26/98		 - ------------------------------------ -------------- Marlin T. Sierer, Director
/s/ Jerry A. Soper 	 3/26/98		 - ------------------------------------ -------------- Jerry A. Soper, Director
/s/ Dennis J. Van 	 3/26/98 - ------------------------------------ -------------- Dennis J. Van, Director