8-K

                 SECURITIES AND EXCHANGE COMMISSION

                      WASHINGTON, D.C.  20549

                             FORM 8-K

                          CURRENT REPORT
                  PURSUANT TO SECTION 13 OR 15(D)
              OF THE SECURITIES EXCHANGE ACT OF 1934



                         OCTOBER 18, 1996
                 (Date of earliest event reported)


                     ISB FINANCIAL CORPORATION

        (Exact name of registrant as specified in its charter)


    LOUISIANA                   0-25756                    72-1280718
(State or other         (Commission File Number)         (IRS Employer
jurisdiction                                          Identification No.)
of incorporation)


1101 EAST ADMIRAL DOYLE DRIVE, NEW IBERIA, LOUISIANA           70560
(Address of principal executive offices)                     (Zip Code)


(318) 365-2361
(Registrant's telephone number, including area code)

NOT APPLICABLE
(Former name or former address, if changed since last report)


ITEM 2.   ACQUISITION OR DISPOSITION OF ASSETS

     (a)  On October 18, 1996, ISB Financial Corporation (the "Company")
consummated the acquisition of all of the issued and outstanding common
stock, $.01 par value per share, of Jefferson Bancorp, Inc., a Louisiana
corporation ("Jefferson"), pursuant to an Agreement and Plan of Merger and
Reorganization ("Agreement") by and among the Company, Iberia Savings Bank,
a Louisiana-chartered savings bank and wholly-owned subsidiary of the
Company, Jefferson, and Jefferson Federal Savings Bank, a federally-
chartered savings bank and wholly-owned subsidiary of Jefferson ("Jefferson
Savings Bank").  The acquisition was effected by means of a merger of a
newly formed interim subsidiary of the Company, ISB Acquisition Corp., with
and into Jefferson (the "Merger").  Subsequent to the Merger, Jefferson, as
the surviving corporation of the Merger, was merged with, and liquidated
into, the Company.  Immediately prior to the Merger, Jefferson Savings Bank
converted from a federally-chartered savings bank to a Louisiana-chartered
savings bank under the name "Jefferson Bank."  Jefferson Bank continues to
operate as a separate, wholly-owned subsidiary of the Company.

     Upon consummation of the Merger, each share of Jefferson Common Stock
was converted into the right to receive from the Company $23.00 in cash
(the "Merger Consideration").   In addition, each outstanding option to
purchase Jefferson Common Stock (other than pursuant to the Stock Option
Agreement by and between Jefferson and the Company dated March 29, 1996)
issued by Jefferson was cancelled, and each holder of any such option,
whether or not then vested or exercisable, became entitled to receive an
amount determined by multiplying (i) the excess of the Merger Consideration
over the applicable exercise price per share of the stock option by  (ii)
the number of shares of Jefferson Common Stock subject to such Jefferson
Option.  The source of funds for the Merger Consideration will be the
Company's working capital.

     (b)  The physical property acquired in connection with the acquisition
of Jefferson was used by Jefferson in the conduct of its business as a
thrift holding company.  The Company intends to continue such use.

     For additional information, reference is made to Item 7 below:

ITEM 7.  FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS

     (a)  The following consolidated audited financial statements of
Jefferson are incorporated by reference to the Report on Form 10-K for the
year ended December 31, 1995 filed by Jefferson with the Securities and
Exchange Commission:

     Independent Auditors' Report

     Consolidated Statements of Financial Condition at December 31, 1995
     and 1994

     Consolidated Statements of Income for the Years ended December 31,
     1995, 1994 and 1993

     Consolidated Statements of Changes in Stockholders' Equity for the
     Years ended December 31, 1995, 1994 and 1993






     Consolidated Statements of Cash Flows for the Years ended December 31,
     1995, 1994 and 1993

     Notes to Consolidated Financial Statements

     The following unaudited, consolidated interim financial statements of
Jefferson are incorporated by reference to the Report on Form 10-Q for the
quarter ended June 30, 1996 filed by Jefferson with the Securities and
Exchange Commission:

     Consolidated Statements of Financial Condition at June 30, 1996
     (Unaudited) and December 31, 1995

     Consolidated Statements of Income (Unaudited) for the Three Months and
     Six Months Ended June 30, 1996 and 1995

     Consolidated Statements of Cash Flows (Unaudited) for the Six Months
     Ended June 30, 1996 and 1995

     Notes to Consolidated Financial Statements

     (b)  Pro forma financial information is not available as of the date
of this report on Form 8-K.  Pro forma financial information will be filed
by amendment as soon as practicable, but in no event later than 60 days
after this report for Form 8-K must be filed.

     (c)  The following exhibit is filed with this report.

Exhibit Number                                      Description
- --------------                                      -----------
    99                               Press Release, issued on October 21, 1996 
                                     with respect to the consummation of the 
                                     Merger



                            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.

                              ISB FINANCIAL CORPORATION



Date:  October 31, 1996       By:  /S/ LARREY G. MOUTON
                                   -------------------- 
                                   Larrey G. Mouton
                                   President and Chief Executive Officer

EX-99

             
                               
                               
                               
                               
                               
                               
                               
                               
                               Exhibit 99

                    Press Release, dated October 21, 1996

             
             
             [LETTERHEAD OF ISB FINANCIAL CORPORATION]


                       FOR IMMEDIATE RELEASE


                         October 21, 1996


For further information contact:
Larrey G. Mouton
President & Chief Financial Officer
(318) 365-2361


       ISB Financial Completes Jefferson Bancorp Acquisition
                        NASDAQ/NMS: "ISBF"


    New Iberia, Louisiana--ISB Financial Corporation ("ISBF), the holding
company for Iberia Savings Bank, announced today that, subsequent to the
close of business on October 18, 1996, it completed the acquisition of
Jefferson Bancorp Inc ("JEBC"), the holding company for Jefferson Federal
Savings Bank.

    Under the terms of the acquisition agreement, overwhelmingly approved
by JEBC's stockholders, each shareholder of JEBC will receive a cash
payment of $23.00 for each share surrendered.  JEBC shareholders will
receive correspondence from Register & Transfer Company, ISBF's exchange
agent, containing complete instructions on how to surrender JEBC stock
certificates.

    Larrey G. Mouton, ISBF's president and chief executive officer
remarked, "We look forward to providing Jefferson customers with the same
high level of service they have enjoyed in the past.  Additionally,
customers will benefit from new services including debit cards, over-draft
protection services, expanded ATM services and a broad range of mortgage,
consumer and commercial services."

    At September 30, 1996, Iberia Savings Bank's assets totaled $685.8
million and JEBC's assets totalled $263.9 million.

    Upon consummation of the sale, Jefferson Federal Savings bank converted
to a Louisiana savings bank under the name  "Jefferson Bank"  and will
operate as a separate subsidiary of ISBF.  Boyd R. Boudreaux, former Senior
Vice President at Iberia Savings Bank, has been named president and chief
executive officer at Jefferson Bank.  Former Jefferson President and Chief
Executive Officer Karen L. Knight will continue as a director of Jefferson
Bank and has been added to the board of directors of ISBF.


                               MORE



                                                ISBF Completes JEBC Acquisiton
                                                October 21, 1996
                                                Page 2 of 2




    Iberia Savings Bank, in its 109th year of service, is a community-
oriented bank which presently operates a network of 18 full-service offices
located in New Iberia, Lafayette, Jeanerette, Franklin, Morgan City, St.
Martinville, Abbeville, Kaplan, Crowley and Rayne.

    Established in 1954, Jefferson Bank operates seven full-service offices
located in Gretna, Metairie, River Ridge, Algiers, Terrytown and Marrero.

    Iberia Savings Bank and Jefferson Bank are member FDIC institutions.
                               ####