SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    Form 8-K

                Current Report Pursuant to Section 13 or 15(d) of
                           The Securities Act of 1934


  Date of Report (Date of earliest event reported)................July 8, 1997


                        SOUTH BRANCH VALLEY BANCORP, INC.
             (Exact name of registrant as specified in its charter)



         West Virginia               0-16587                   55-0672148
        ---------------              -------                   ----------       
       (State of other             (Commission              (I.R.S. Employer
        jurisdiction                File Number)             Identification No.)
        of incorporation)




             310 North Main Street, Moorefield, West Virginia 26836
        ------------------------------------------------------------- 
         (Address of principal executive offices, including zip code)




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







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ITEM 5. OTHER EVENTS

     On July 8,  1997,  South  Branch  Valley  Bancorp,  Inc.  ("South  Branch")
executed a non- binding  letter of intent (the "Letter of Intent")  with Capital
State Bank, Inc. ("Capital State Bank"), a state banking  corporation located at
2402 Mountaineer  Boulevard,  South Charleston,  West Virginia 25309.  Under the
terms of the Letter of Intent, South Branch will exchange 3.95 shares of Capital
State Stock for one share of South  Branch  stock.  South Branch  anticipates  a
merger  transaction  whereby  Capital  State  will  constitute  a free  standing
subsidiary of South Branch.  The offer to exchange stock of South Branch for all
of the  issued  and  outstanding  shares  of  Capital  State is  subject  to the
negotiation,   execution  and  delivery  of  a  definitive   agreement  that  is
satisfactory  to each party and their  respective  legal counsel and approved by
the respective boards of each institution.

     The offer is subject to the following customary conditions:  (i) compliance
with  all  applicable   federal  and  state  banking  and  securities  laws  and
regulations  and  receipt  of all  required  approval  from  federal  and  state
regulatory authority;  (ii) the completion by both South Branch and Capital Sate
of full due diligence reviews to their individual satisfaction;  (ii) receipt of
a fairness opinion in a form reasonably  required by Capital State to the effect
that the proposed  transaction is fair from a financial point of view to Capital
State  and  its   shareholders;   (iv)   execution   of  mutually   agreed  upon
confidentiality  agreements; (v) approval of the transaction by the shareholders
of both South Branch and Capital  State;  (vi) there shall have been no material
adverse change in the business or financial  condition of Capital State or South
Branch from that shown on their March 31, 1997 unaudited financial  information;
(vii) approval of the proposal by South  Branch's  shareholders  to increase the
authorized  shares to accomplish  the proposed  transaction;  (viii)  subject to
approval by South  Branch,  Capital  State will be entitled to  designate  three
individuals  to serve on the Board of Directors of South Branch,  one in each of
the three classes of South Branch's staggered board; and (ix) in the event South
Branch forms an  executive  committee  or other  governing  body of the Board of
Directors  during  the  initial  terms of the  directors  appointed  or  elected
pursuant to (viii) above,  at least one Capital State Director shall be selected
by South  Branch's  Chairman of the Board to serve as a member of such executive
committee  or other  governing  body.  Nothing in the Letter of Intent  shall be
construed  to impose on South  Branch or the  Chairman of its Board of Directors
any duty to select a Capital  State  director so to serve after the initial term
of each of the three original Capital State directors on the South Branch Board.

     A definitive agreement must be executed no later than thirty (30) days from
the  date  of the  execution  of the  Letter  of  Intent  or the  offer  and any
acceptance thereof will be null and void.



                                          SOUTH BRANCH VALLEY BANCORP, INC.


         July 9, 1997                      /s/  H. Charles Maddy, III
      -------------------             ----------------------------------
             Date                          By:   H. Charles Maddy, III
                                           Its:   President

      The original  statement shall be signed by each person on whose behalf the
statement is filed on his authorized representative.  If the statement is signed
on behalf of a person by his authorized  representative (other than an executive
officer  or  general   partner  of  this   filing   person),   evidence  of  the
representative's  authority to sign on behalf of such person shall be filed with
the  statement,  provided,  however,  that a power of attorney  for this purpose
which is already on file with the Commission may be  incorporated  by reference.
The name and any title of each person who signs the statement  shall be typed or
printed beneath his signature.


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