FORM 10-QSB


                    U.S. SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

Form 10-KSB

(Mark One)
[ X ]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT OF 1934
         (FEE REQUIRED)

For the fiscal year ended    September 30, 1998
                            --------------------
[   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934
         (NO FEE REQUIRED)

For the transition period  _____________   to _____________

Commission file number:     0-16657

                            FIRST GEORGIA HOLDING, INC.
                            ---------------------------
                          (Name of Small Business Issuer)

 Georgia                                                       58-1781773
--------------------------------------------------------------------------------
(State or other jurisdiction of incorporation       (IRS Employer Identification
 or organization)                                    Number)

                  1703 Gloucester Street, Brunswick, GA 31521
                 -----------------------------------------------
                   (Address of principal executive offices)

Registrant's telephone number, including area code:              (912) 267-7283
Securities registered pursuant to Section 12(b) of the Act:      None
Securities registered pursuant to Section 12(g) of the Act:      Common Stock,
                                                                 par value $1.00

     Check whether the issuer (1) has filed all reports  required to be filed by
section 12 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 60 days. Yes [
X ] No [ ] Check if there is no disclosure  of delinquent  filers in response to
Item 405 of  Regulation  S-B contained in this form,  and no disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statement  incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-K. [ X ] State  issuer's  revenues for its most
recent fiscal year  $17,074,848  State the aggregate  market value of the voting
stock held by non-affiliates of the registrant as of December 1, 1998: 4,798,972
Shares of Common Stock,  $1.00 par value -- $40,791,262  based upon  approximate
market value of $8.50 per share at December 1, 1998.  State the number of shares
outstanding of each of the issuer's  classes of common stock,  as of December 1,
1998: Common Stock, $1.00 par value --4,798,972 shares

DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Company's Proxy  Statement (the "Proxy  Statement") for the
Annual  Meeting  of  Shareholders  scheduled  to be held  January  19,  1999 are
incorporated  by reference  into Part I and Part III.  Portions of the Company's
Annual Report (the "Annual Report") to Shareholders for the year ended September
30, 1998 are incorporated by reference into Part I, Part II and Part III.
<PAGE>

FIRST GEORGIA HOLDING, INC.

FORM 10-KSB

INDEX

Part I                                                               PAGE

Item 1. Business ...............................................       3
Item 2. Description of Properties ..............................      34
Item 3. Legal Proceedings ......................................      35
Item 4. Submission of Matters to a Vote of
          Security Holders .....................................      35

Part II

Item 5. Market for Common Equity and Related
          Stockholder Matters ..................................      35
Item 6. Management's Discussion and Analysis or Plan ...........      35
Item 7. Financial Statements ...................................      35
Item 8. Changes in and Disagreements with Accountants
          on Accounting and Financial Disclosure ...............      35

Part III

Item 9. Directors, Executive Officers, Promoters and
          Control Persons;  Compliance with
          Section 16(a) of the Exchange Act ....................      36

Item 10.Executive Compensation..................................      36
Item 11.Security Ownership of Certain
          Beneficial Owners and Management .....................      36
Item 12.Certain Relationships and Related
          Transactions .........................................      36

Item 13.Exhibits and Reports on Form 8-K                              36

Signatures .....................................................      38
Exhibit Index ..................................................      40

<PAGE>



PART I

Item 1.  DESCRIPTION OF BUSINESS

Business of the Company

     First Georgia  Holding,  Inc. (the Company),  was incorporated as a Georgia
corporation on December 16, 1987, for the purpose of acquiring all of the issued
and outstanding  shares of First Georgia Bank,  F.S.B.  (formerly known as First
Georgia Savings Bank,  F.S.B.)(the  Bank) pursuant to a plan of  reorganization.
The reorganization of the Bank into a holding company structure became effective
on April 30, 1988, and the Bank is now a wholly-owned subsidiary of the Company.

Besides its  ownership of the Bank,  the Company has not engaged in any material
operations  to date and  management  of the  Company has no  immediate  plans to
engage in any non-banking activities.

     The holding  company  structure  provides  the Company  with the ability to
expand and diversify  its  financial  services  beyond those  currently  offered
through the Bank. As a holding company, the Company has greater flexibility than
the Bank to diversify its business activities,  through existing or newly-formed
subsidiaries,  or through an acquisition or merger.  Commencement of non-banking
operations by  subsidiaries,  if they are  organized,  will be  contingent  upon
approval by the Board of Directors of the Company and by regulatory  authorities
as  appropriate.  While the Company has no plans,  arrangements,  agreements  or
understandings  regarding  diversification through acquisition or development of
other  businesses,  the Board of  Directors  believes  that the holding  company
structure offers significant advantages.

     The Company may, in the future,  enter into a management  agreement for the
purpose of rendering  certain  services to the Bank. No proposal and no terms of
such agreement, however, have been considered as yet and it has not been decided
that  such  an  agreement  will  be  made.  Certain  restrictions  on the  total
compensation  under  management  and similar  agreements  are imposed by federal
regulation  and,  under  certain  circumstances,   regulatory  approval  may  be
required. Except for the officers of the Bank who presently serve as officers of
the Company, the Company does not have any employees.

     The  Company's  executive  office is  located  at 1703  Gloucester  Street,
Brunswick,  Georgia  31520.  At the present  time the Company  does not have any
plans to establish additional offices.

Business of the Bank

     The Bank is a  federal  stock  savings  bank  headquartered  in  Brunswick,
Georgia.  It was  chartered  in 1983 and opened for business on January 31, 1984
with approximately $8.6 million of acquired deposits. <PAGE>


     The Bank's business consists  primarily of residential and consumer lending
and retail  banking.  To a lesser  extent the Bank  engages in  commercial  real
estate lending and construction lending.

     The Bank's retail  banking  operation  consists of attracting  deposits and
making  commercial and consumer loans.  It attracts  deposits by offering a wide
array of banking services,  including checking accounts,  overdraft  protection,
various savings programs,  IRAs, and four automated teller machines.  Similarly,
the Bank offers a full range of commercial loans, including short-term loans for
working capital purposes,  seasonal loans, lines of credit,  accounts receivable
loans and inventory loans, as well as a full range of consumer loans,  including
automobile, boat, home improvement and other similar loans.

     Commercial real estate and construction  lending includes  construction and
permanent loans on multi-family  apartment buildings,  shopping centers,  office
buildings and other income  producing  properties  located  mainly in the Bank's
primary market area.

     The principal  executive offices of the Bank are located at 1703 Gloucester
Street,  Brunswick,  Georgia 31520 and the  telephone  number at that address is
(912) 267-7283.

Summary of Financial Results

     First Georgia Holding,  Inc.  reported net income of $2,014,402 in 1998, an
increase of  $420,737 over 1997.  Net  interest  income  after  provision  for 
loan losses increased a total of $1,704,464, and other income increased by a 
total of $354,415, and other expenses increased $1,258,764 over 1997.

Return on Average Assets and Equity

     Return on average assets for the year ended September 30, 1998 was 1.21% as
compared  to 1.04% for the year  ended  September  30,  1997.  Return on average
equity for the year ended  September 30, 1998 was 14.60%  compared to 12.55% for
the year ended  September  30, 1997.  These  increases  were due primarily to an
increase in loan volumes and deposit balances.

SELECTED STATISTICAL INFORMATION

     The following tables set forth certain  statistical  information and should
be read in conjunction with the consolidated financial statements of the Company
and Bank.


                                 Years Ended September 30,

                                           --------------------------
                                            1998                1997
                                           --------------------------
Return on Average Assets                    1.21%               1.04%

Return on Average Equity                   14.60%              12.55%

Average Equity to Average Assets            8.29%               8.28%

Dividend Payout Ratio                      15.88%              10.22%

<PAGE>



SELECTED STATISTICAL INFORMATION (Cont'd)


                          AVERAGE BALANCE SHEET
                                                      September 30,
                                             -----------------------------------
                                                   1998                1997
                                             -----------------------------------

Cash and due from banks                    $     1,584,680           3,524,884
Federal funds sold                               2,548,582                   -
Interest-bearing deposits in other banks           117,717           3,618,065

Investment securities held to maturity          10,191,649          10,585,567
Loans receivable, net                          148,704,293         127,953,987
Real estate owned                                  524,438             249,500
Federal Home Loan Bank stock                     1,160,300           1,160,300
Premises and equipment, net                      3,761,644           3,190,698
Intangible assets, net                             969,200           1,104,133
Accrued interest receivable                      1,049,348             916,855
Other assets                                     5,765,138           1,089,037
                                               -----------         -----------
                                               176,376,989         153,393,026
                                               ===========         ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
    Deposits                                   145,008,705         124,790,096
    Federal Home Loan Bank advances             12,620,310          12,491,666
    Other borrowed money                           659,201              88,333
    Accrued expenses and other liabilities       3,750,244           3,319,512
                                               -----------         -----------
                                               162,038,460         140,689,607
Stockholders' equity                            14,338,529          12,703,419
                                               -----------         -----------
 Total liabilities and stockholders equity     176,376,989         153,393,026
                                               ===========         ===========
<PAGE>

                                                   Years Ended September 30,
                                               --------------------------------
                                                    1998             1997
                                               --------------------------------

Interest earned on:

Loans                                       $      14,234,483       11,975,499
Investment securities                                 699,616          610,423
Other                                                 143,615          198,010
                                               --------------------------------
     Total interest income                         15,077,714       12,783,932
                                               --------------------------------
Interest paid on:
Deposits                                            7,021,354        6,175,696
Federal Home Loan Bank advances
and other borrowings                                  810,335          763,159
                                               --------------------------------
      Total Interest expense                        7,831,689        6,938,855
                                               --------------------------------
NET INTEREST EARNED                         $       7,246,025        5,845,077
                                               ================================


Average percentage earned on:
Loans                                                    9.57%            9.36%
Taxable investment securities                            6.84%            5.76%
Other                                                    5.39%            5.47%
     Total interest earning assets                       9.33%            8.99%

Average percentage paid on:
Deposits                                                 5.04%            4.95%
Federal Home Loan Bank advances
  and other borrowings                                   6.10%            6.07%
      Total interest bearing liabilities                 5.13%            5.05%

NET YIELD ON INTEREST EARNING ASSETS                     4.48%            4.11%
                                               ================================

     "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Yields  Earned and Rates Paid" in the  Company's  Annual  Report is
incorporated by reference herein.

<PAGE>


Lending Activities

General

     Thrift  institutions are permitted to invest up to 400% of their capital in
commercial real estate loans.  Thrift  institutions are also permitted to invest
up to 10% of  their  assets  in  secured  or  unsecured  loans  for  commercial,
corporate, business or agricultural purposes. Institutions may also invest up to
35% of their assets in consumer  loans and up to 10% of their assets in tangible
personal property in order to engage in personal property leasing.

Loan Portfolio Analysis

     The  Bank's  net  loan  portfolio  totaled  approximately  $151,253,000  at
September 30, 1998, representing  approximately 79% of its total assets. On that
date, approximately 68% of its total outstanding loans were secured by mortgages
on residential  property.  The balance of the Bank's  outstanding  loans at that
date consisted of commercial  real estate loans,  construction  loans,  consumer
loans and commercial loans.

     The Bank  extends  credit to  customers  throughout  its market area with a
concentration  in real estate mortgage loans.  The real estate loan portfolio is
substantially  secured  by  properties  located  throughout  Southeast  Georgia.
Although the Bank has a diversified loan portfolio, a substantial portion of its
borrowers'  ability  to repay such loans is  dependent  upon the  economy in the
Bank's market area.

     Set forth on the next page is selected data relating to the  composition of
the Bank's  loan  portfolio  by type of loan and type of  security  on the dates
indicated. <PAGE>


LOAN ANALYSIS

                                                      September 30,
                                           ------------------------------------
                                                1998                 1997
                                           ------------------------------------
Loans by Type of Security:                           (In Thousands)

Real Estate Loans:
  Residential:
    One-four family:
      Conventional                $        88,002   36.48%    77,272     56.05%
      FHA-VA                                  245    0.10%       253      0.18%
      Multi-family conventional             1,761    0.73%       462      0.33%
                                        ----------------------------------------
         Total residential                 90,008   37.31%    77,987     56.56%

Commercial property                        24,492   10.15%    24,431     17.72%
Land development and other                 15,438    6.40%    16,997     12.33%
Less loans held for sale                        -    0.00%         -      0.00%
                                        ----------------------------------------
    Total real estate loans               129,938   53.86%   119,415     86.61%

Non-real estate loans                      22,423    9.29%    19,522     14.16%
Unearned interest income                      (56)  -0.02%       (73)    -0.05%
Allowances for loan losses                   (969)  -0.40%    (1,012)    -0.73%
Deferred loan (fees) cost                     (83)  -0.03%        13      0.01%
                                        ----------------------------------------
   Total                          $       241,261  100.00%   215,852    100.00%
                                        ========================================
<PAGE>




LOAN ANALYSIS (Continued)

                                                 September 30,
                                       -----------------------------------------
                                               1998                   1997
                                       -----------------------------------------
Loans by Type of Loan:                  Thousands)

Real Estate Loans:
   Loans on existing property:
     Fixed rate                          $25,996    17.19%      21,713    15.75%
    One year ARM and variable rate(1)     76,005    50.25%      79,137    57.40%
    Three year ARM                           828     0.55%       1,568     1.13%
Construction loans                        27,109    17.92%      16,997    12.33%
Less loans held for sale                       -     0.00%           -     0.00%
                                       -----------------------------------------
  Total real estate loans                129,938    85.91%     119,415    86.61%

Consumer loans                            11,830     7.82%      10,384     7.53%
Commercial and other loans                10,593     7.00%       9,138     6.63%
Unearned interest income                     (56)   -0.04%         (73)   -0.05%
Allowance for loan losses                   (969)   -0.64%      (1,012)   -0.73%
Deferred loan (fees) cost                    (83)   -0.05%          13     0.01%
                                       -----------------------------------------
Total                                    151,253   100.00%     137,865   100.00%
                                       =========================================
(1) An ARM is an adjustable rate mortgage
<PAGE>


LOAN MATURITY SCHEDULE

     The following  table sets forth certain  information  at September 30, 1998
regarding the dollar amounts of loans maturing in the Bank's  portfolio based on
their  contractual  terms to  maturity.  Demand  loans,  loans  having no stated
schedule of repayments and no stated maturity , and overdrafts,  are reported as
due in one year or less.  This table does not consider the repricing of loans to
be maturities. Interest rate sensitivity is incorprated herein by reference from
the Management's  Discussion and Analysis of Financial  Condition and Results of
Operations - Asset/Liability Management in the Annual Report to Shareholders for
1998.


Maturities during year   Real Estate    Real Estate            Commercial
ended September 30,      Mortgage      Construction   Consumer  and other  Total
--------------------------------------------------------------------------------
                                         (In Thousands)

   1999            $     23,192        18,665         4,962      4,725   51,544
   2000                   7,407         8,444         1,970      2,298   20,119
   2001                   3,354             -         1,972        895    6,221
   2002                   2,404             -         1,852        818    5,074
 2003-2007                8,408             -           815      1,527   10,750
 2008-2012               13,397             -           200        330   13,927
After 2012               44,667             -            59          -   44,726
                     ----------------------------------------------------------
   Total           $    102,829        27,109        11,830     10,593  152,361
                     ==========================================================
                             Less: Unearned interest income                 (56)
                                   Allowance for Loan losses               (969)
                                   Deferred Loan Fees                       (83)
                                                                  --------------
                                                                $       151,253
                                                                  ==============


     The next table sets forth the dollar  amount of all loans due more than one
year after September 30, 1998 which have predetermined  interest rates and which
have floating or adjustable interest rates.

                                                                Commercial
                              Real Estate  Real Estate             and
                               Mortgage   Construction  Consumer  Other   Total
                             ---------------------------------------------------
                                                (In Thousands)
Predetermined rates      $   25,910          129        7,910     3,939   37,888

Floating or adjustable
   rates                     60,260       26,839        1,179     4,810   93,088
                             ---------------------------------------------------
                         $   86,170       26,968        9,089     8,749  130,976
                             =========== =======================================
<PAGE>


Lending Policies

     Federal  regulations  limit the amount  which  federally  chartered  thrift
institutions  may lend in  relation  to the  appraised  value of the real estate
securing  the  loan,  as  determined  by  an  appraisal  at  the  time  of  loan
origination.  Those regulations permit a maximum loan-to-value ratio of 100% for
real estate  loans.  The Bank's  lending  policies  generally  limit the maximum
loan-to-value  ratio on  residential  mortgage loans to 95% of the lesser of the
appraised value or purchase price.  Multi-family residential and commercial real
estate loans and  unimproved  real estate  loans  generally do not exceed 90% of
value. The loan-to-value ratio,  maturity and other provisions of the loans made
by the Bank  generally  reflect the policy of making less than the maximum  loan
permissible  under  applicable  regulations  in  accordance  with sound  lending
practices, market conditions and underwriting standards established by the Bank.

     In an effort to keep the yields on its loan portfolio and investments  more
interest  rate  sensitive,  the  Bank  has  implemented  a  number  of  measures
including:  (a) generally  originating  long-term  fixed rate mortgage loans for
brokerage to other financial  institutions;  (b) emphasizing origination of ARMs
on residential and commercial  properties  when market  conditions  permit;  (c)
originating construction loans secured by residential properties generally for a
12-month  period at interest  rates  determined by reference to the Bank's prime
rate; and (d) originating consumer and commercial loans having either adjustable
rates or relatively short maturities.

Single Family Residential Loans

     One of the  lending  activities  of the Bank has  been the  origination  of
single family residential loans through its mortgage lending operation.  Through
an   arrangement   with  another   financial   institution,   the  Bank  brokers
substantially all of its fixed rate single family residential loans. This allows
the  Bank to  offer a  broader  base of  financing  alternatives  than  would be
possible  if the Bank were  structuring  all of its loans to sell to the Federal
Home  Loan  Mortgage  Corporation  (FHLMC)  or  the  Federal  National  Mortgage
Association (FNMA).

     Federally  chartered thrift  institutions are authorized to make home loans
on which the interest rate,  loan balance or maturity may be adjusted,  provided
that the adjustments  are tied to specified  indices.  The rate  adjustments are
determined by reference to cost of funds and Treasury securities indices and are
limited  generally to 1.5-2.0% per  adjustment  period and 5-6% over the life of
the loan.

Commercial Real Estate Loans

     Current  regulations  permit federal  institutions  to invest up to 400% of
their capital in commercial  real estate loans.  At September 30, 1998, the Bank
had 168% of its capital invested in commercial real estate loans. The commercial
real estate loans  originated by the Bank are primarily  secured by multi-family
apartment   buildings,    shopping   centers,   office   buildings   and   other
income-producing  properties. The interest rates on commercial real estate loans
presently  offered by the Bank  generally  adjust every one to three years.  The
rate is generally  determined  by reference to money center  banks' prime rates.
The Bank's  commercial  real estate loans have various terms,  with the payments
based on a 15 to 25 year amortization schedule, and have balloon maturities of 5
to 7 years.  The Bank  generally  requires  that such loans have a minimum  debt
service coverage of 1.15 and a loan-to-value ratio of not more than 90%.


     Commercial  real  estate  lending  entails  significant   additional  risks
compared to residential lending.  Commercial real estate loans typically involve
large loan  balances to single  borrowers  or groups of related  borrowers.  The
payment experience of such loans typically depends upon the successful operation
of the real estate project.  These risks can be significantly affected by supply
and  demand  conditions  in the  market  for  office  and  retail  space and for
apartments,  and as such may be subject,  to a greater  extent than  residential
real estate loans, to adverse  conditions in the economy.  In dealing with these
risk  factors,  the Bank  generally  limits itself to a real estate market or to
borrowers with which it is familiar and sells a portion of its  commercial  real
estate loans. The Bank concentrates on originating  commercial real estate loans
secured by properties generally located within its primary market area, although
the Bank will continue,  on a limited basis, to originate commercial real estate
loans  secured  by  properties  located in other  parts of Georgia  and in other
states. 
<PAGE>


Construction Loans

     The Bank originates  construction loans on single family  residences.  Such
construction  loans  generally  have a term of 12 months or less.  The  interest
rates charged by the Bank on  construction  loans are determined by reference to
the prime rate charged by money center banks and vary depending upon the type of
property,  the loan amount and the credit  worthiness of the borrower.  The Bank
generally  requires  personal  guarantees of payment from the  principals of the
borrowing  entities for the full amount of the loan, and it is the policy of the
Bank to enforce guarantees in the event of non- payment of the loan.

     The Bank also originates  construction loans on multi-family and commercial
real estate.  The interest rates on such loans presently offered by the Bank are
also  determined  by reference to the prime rate charged by money center  banks.
Multi-family and commercial real estate construction financing generally exposes
the  lender to a greater  risk of loss than  long-term  financing  on  improved,
occupied real estate, due in part to the fact that the loans are underwritten on
projected rather than historical  income and rental results.  The Bank's risk of
loss on such loans depends largely upon the accuracy of the initial appraisal of
the  property's  value at completion  of  construction  and the  estimated  cost
(including  interest)  of  completion.  If either  estimate  proves to have been
inadequate  and the borrower is unable to provide  additional  funds pursuant to
his or her  guarantee,  the Bank either may be required to advance  funds beyond
the amount  originally  committed to permit  completion of the development or be
confronted  at  the  maturity  of  the  loan  with  a  project  whose  value  is
insufficient to assure full repayment.

     The Bank's  underwriting  criteria are designed to evaluate and to minimize
the risks of each commercial real estate  construction  loan. The Bank considers
evidence of the financial  stability and reputation of both the borrower and the
contractor, the amount of the borrower's cash equity in the project, independent
evaluation  and  review  of  the  building  costs,   local  market   conditions,
pre-construction  sales and leasing information based upon evaluation of similar
projects,  the  use of  independent  engineers  to  examine  plans  and  monitor
construction and the borrower's cash flow projections upon completion.  The Bank
may require a performance bond in the amount of the construction  contract based
on  management's  evaluation  of the project and the  financial  strength of the
contractor and also requires personal guaranties of payment by the principals of
any borrowing  entity. At September 30, 1998,  approximately  $27,109,000 of the
Bank's loan portfolio consisted of construction loans.


Consumer Loans

     Current regulations permit federal savings institutions to invest up to 35%
of their assets in consumer loans.  The Bank currently  offers a wide variety of
consumer  loans  including  secured and unsecured  personal  loans (such as home
improvement loans and loans secured by savings accounts),  automobile,  boat and
other loans.  Total  consumer  loans  amounted to  approximately  $11,830,000 at
September 30, 1998.


     The Bank markets  consumer loans in order to provide a full range of retail
banking  services to its  customers and because of the shorter term and normally
higher  interest  rates on such loans.  The Bank's  underwriting  standards  for
consumer loans include a  determination  of the  applicant's  payment history on
other debts and an assessment of his or her ability to meet existing obligations
and to make payments on the proposed loan.  Loan-to-value,  cash equity and debt
service-to-income  ratios are also generally  considered.  Risks associated with
consumer  loans  include,  but  are  not  limited  to,  fraud,  deteriorated  or
non-existing  collateral,  general  economic  downturn,  and customer  financial
problems.

Commercial Loans

     Current  regulations  authorize federal thrift institutions to make secured
and  unsecured  loans  for  commercial,  corporate,  business  and  agricultural
purposes,  including  issuing  letters of credit.  The aggregate  amount of such
loans outstanding generally may not exceed 10% of the institution's assets.

     The Bank makes commercial loans primarily on a secured basis. Substantially
all of such loans to date have  interest  rates which adjust with changes in the
prime rate charged by money center banks. The Bank's commercial loans <PAGE>

     primarily  consist  of  short-term  loans  for  working  capital  purposes,
seasonal loans, lines of credit,  accounts receivable loans and inventory loans.
The Bank customarily  requires personal  guaranties of payment by the principals
of any  borrowing  entity and reviews the  financial  statements  and income tax
returns of the guarantors  generally on an annual basis.  At September 30, 1998,
the Bank had approximately  $8,964,000  outstanding in commercial  loans.  Risks
associated  with these  loans can be  significant.  Risks  include,  but are not
limited to, fraud, bankruptcy,  deteriorated or non-existing collateral, general
economic downturn, and changes in interest rates.

Loan Solicitation and Processing

     The  Bank  actively  solicits  mortgage  loan  applications  from  existing
customers,  walk-ins,  referrals,  builders and real estate brokers.  Commercial
real estate loan applications are also obtained through direct solicitation.

     Detailed loan applications are obtained to determine the borrower's ability
to repay,  and the more  significant  items on these  applications  are verified
through the use of credit reports, financial statements and confirmations. After
analysis of the loan applications and property or collateral involved, including
an appraisal of the property by  independent  appraisers  approved by the Bank's
management,  the lending  decision is made in accordance  with the  underwriting
guidelines of the Bank. With respect to commercial  loans, the Bank also reviews
the capital  adequacy of the business,  the ability of the borrower to repay the
loan and  honor  its  other  obligations,  and  general  economic  and  industry
conditions.  All  applications  for loans  greater  than  $250,000 but less than
$500,000  require the approval of the Bank's Loan  Committee,  which consists of
the Bank's  president  and three outside  directors.  All loan  applications  in
excess of $500,000 must be approved by the full Board of Directors.

     Loan applicants are promptly notified of the decision of the Bank, together
with the terms and conditions of the decision. In this regard, the Bank seeks to
handle loan processing and origination faster than its competition. If approved,
these terms and conditions include the amount of the loan,  interest rate basis,
amortization term, a brief description of the real estate to be mortgaged to the
Bank,  notification  that  insurance  coverage must be maintained to protect the
Bank's interest and any other special conditions. 
<PAGE>


     It is the Bank's policy to obtain a title  insurance  policy  insuring that
the  Bank has a valid  first  lien on the  mortgaged  real  estate  and that the
property  is free of  encumbrances.  Borrowers  are also to obtain  paid  hazard
insurance  policies  prior to closing and, when the property is in a flood plain
as designated by the  Department  of Housing and Urban  Development,  paid flood
insurance  policies.  It is the Bank's policy to require flood insurance for the
full  insurable  value  of the  improvements  for any  such  loan  located  in a
designated  flood hazard area.  In certain  coastal  areas,  however,  there are
limits on the amount of insurance  available.  Substantially  all  borrowers are
also required to advance funds on a monthly basis, together with each payment of
principal and interest,  to a mortgage  escrow account from which the Bank makes
disbursements for items such as real estate taxes, hazard insurance premiums and
private mortgage insurance premiums.


Loan Originations, Sales and Purchases

     It is a policy of the Bank not to originate  for its own portfolio any long
term fixed rate mortgage loans. The Bank instead originates long term fixed rate
mortgages to be brokered out to various mortgage lenders.  The Bank may sell its
commercial real estate and construction loans,  generally retaining a percentage
of the loans in its own  portfolio.  Loan  sales  provide  additional  funds for
lending,  generate income for the Bank and generally reduce exposure to interest
rate risk.  The Bank  generally  continues to collect  payments on the loans and
otherwise to service the loans sold.  The Bank retains a portion of the interest
paid by the borrower on these loans as  consideration  for its  servicing  loans
sold to others.  At September 30, 1998, the Bank was servicing  loans for others
of approximately $9,050,000.

     The Bank has  purchased  a number  of loans in the  past,  and  intends  to
consider  future  purchases of residential  mortgage loans as market  conditions
warrant. The Bank has also sold loans as discussed above and, similarly, intends
to consider future sales as conditions warrant.

     It is the current intention of management to continue offering  residential
fixed rate mortgage loans through the Bank's brokerage  lending  arrangement and
to  continue  offering  adjustable  rate  instruments  to be held in the  Bank's
portfolio.

Loan Commitments

Upon  loan  approval,  short-term  commitments  of 45  days  are  issued  to the
applicant and in most cases provide for the loan to be closed at the  prevailing
rate of interest as of the date of approval.  At September 30, 1998 the Bank had
loan commitments outstanding of approximately $702,000 excluding the undisbursed
portion of loans in process.

Loan Origination Fees

The Bank defers and  amortizes  loan  origination  fees,  net of certain  direct
origination  costs  incurred,  and  recognizes  such  fees  over the life of the
related loan as a yield adjustment.

The Bank also receives  other fees and charges  relating to existing loans along
with late charges and fees collected in connection  with a change in borrower or
other loan modifications.

Delinquencies and Asset Classifications

The Bank's collection  procedures  provide that when a loan is 15 days past due,
the borrower will be contacted by mail and payment requested. If the delinquency
continues,  subsequent efforts will be made to contact the delinquent  borrower.
In certain instances, the Bank may modify the loan or grant a limited moratorium
on loan  payments to enable the  borrower  to  reorganize  his or her  financial
affairs.  If the loan continues in a delinquent  status for 90 days or more, the
Bank  generally  will  initiate  foreclosure   proceedings,   but  there  is  no
requirement  that the Bank defer  foreclosure  proceedings or other  enforcement
action. Any property acquired as the result of foreclosure is classified as real
estate  acquired  in  settlement  of  loans  until  such  time  as it is sold or
otherwise disposed of by the Bank to recover its investment.
<PAGE>


As  a  measure  of  the  soundness  of a  thrift  institution's  loans,  federal
regulatory  authorities have developed the concept of asset  classification  and
have  established  four  categories  of  problem  assets:   "Special   Mention,"
"Substandard,"  "Doubtful" and "Loss".  Assets designated Special Mention do not
require that a bank take any specific action. For assets classified  Substandard
or Doubtful,  a bank's examiner is authorized to direct the  establishment  of a
general allowance for loan losses based on the assets classified and the overall
quality  of the  bank's  asset  portfolio.  This  valuation  allowance  must  be
established in accordance with generally  accepted  accounting  principles.  For
assets or  portions of assets  classified  Loss,  a bank is  required  either to
establish specific allowances of 100% of the amount so classified,  or to charge
off  such  amount.  These  specific  allowances  or  charge  offs  must  also be
established in accordance with generally accepted accounting principles.

The Bank is responsible for determining the valuation and  classification of its
assets, subject to review by regulatory authorities. Portions of an asset may be
classified in more than one category.

An  asset  will  be  designated  Special  Mention  if  it  does  not  justify  a
classification  of Substandard but does constitute undue and unwarranted  credit
risk to the Bank. An asset will be classified Substandard if it is determined to
involve  a  distinct  possibility  that  the  Bank  may  sustain  some  loss  if
deficiencies associated with the loan, such as inadequate documentation, are not
corrected.  An asset will be classified as Doubtful if full collection is highly
questionable  or  improbable.  An  asset  will  be  classified  as Loss if it is
considered  uncollectible,  even if a partial  recovery  may be  expected in the
future.

The Bank closely monitors its classified loans and actively  attempts to dispose
of real estate  acquired in settlement of loans.  Real estate  acquired  through
foreclosure  is appraised  when acquired and is recorded at the lower of cost or
fair market value.

At  September  30,  1998,  the  following  amounts of loans were  classified  as
follows:

Special Mention           $3,157,000
Substandard                3,008,000
Doubtful                        -
Loss                            -
                      ------------------
                          $6,165,000
                      ==================

Nonaccrual, Past Due and Restructured Loans

The Bank has approximately $2,364,000 of loans in nonaccrual status at September
30, 1998. The Bank had approximately $1,959,000 of loans in nonaccrual status at
September 30, 1997. The Bank has had no restructured loans.
 ("Management's  Discussion  and Analysis of Financial  Condition and Results of
Operations  -  Provision  for Loan  Losses" in the  Company's  Annual  Report is
incorporated  by reference  herein.) Had all  nonaccrual  loans at September 30,
1998 actually accrued interest for the full fiscal year,  approximately  $50,000
of additional interest income would have been added to fiscal 1998 earnings.

Accrual of interest is discontinued  when either principal or interest become 90
days past due unless, in management's  opinion,  the loan is well secured and in
the process of collection.

Allowance for Loan Losses

For  a  detailed  analysis  of  the  allowance  for  loan  losses,  Management's
Discussion  and  Analysis of  Financial  Condition  and Results of  Operations -
Provision for Loan Losses is incorporated by reference from the Annual Report to
Shareholders herein.
<PAGE>


   The Company has allocated the allowance for possible loan losses according to
the amount deemed to be reasonably  necessary to provide for the  possibility of
losses  being  incurred  within the  categories  of loans set forth in the table
below. This allocation is based on management's evaluation of the loan portfolio
under  current  economic  conditions,  past loan loss  experience,  adequacy and
nature of  collateral,  and such factors  which,  in the judgment of management,
deserve  recognition  in  estimating  loan losses.  Regulatory  agencies,  as an
integral part of their examination  process,  periodically  review the Company's
allowances  for  possible  losses  on loans  and real  estate  acquired  through
foreclosure  and other  nonperforming  assets.  Such  agencies  may  require the
Company  to make  additions  to the  allowance  based on their  judgments  about
information  available  to them at the time of their  examination.  Because  the
allocation is based on estimates and subjective judgment,  it is not necessarily
indicative of the specific  amounts or loan categories in which  charge-offs may
occur.

The  allocation  of the  allowance  for possible loan losses to the various loan
categories  and the ratio of each loan  category to total loans  outstanding  at
September 30, 1998 and 1997 are presented in the following table.

<TABLE>

                                                     September 30, 1998         September 30, 1997
                                                     -----------------------------------------------
                                                              Percent                     Percent
                                                              of loans                    of loans
                                                              in each                     in each
                                                     Amount   Category        Amount      Category
                                                     -----------------------------------------------
<S>                                              <C>          <C>            <C>          <C>  
(In Thousands)  
Balance at the end of the year applicable to:

   Commercial, financial, and agricultural       $    143       6.95%        $ 150          6.58%
   Real estate-construction                            34      17.79%           35         12.23%
   Real estate-mortgage                               287      67.49%          300         73.72%
   Consumer                                            38       7.77%           40          7.47%
   Unallocated                                        467        N/A           487          N/A
                                                     ----------------------------------------------
                                                 $    969     100.00%       $1,012        100.00%
                                                     ===============================================

</TABLE>

Loan Repayments

    In addition to regularly scheduled repayments, loans are prepaid in full as
properties are sold, or are refinanced by the Bank or other lenders, or are 
satisfied in full by the borrower.  Loan repayments constitute a major source
of funding for the Bank.


Other

The Company has no foreign operations and,  accordingly,  there are no assets or
liabilities attributed to foreign operations.

At September 30, 1998, the Company had no  concentration  of loans exceeding 10%
of total loans to borrowers engaged in any single industry.


Investment Activities

The Bank is required  under federal  regulations to maintain a minimum amount of
liquid  assets  and  is  also   permitted  to  make  certain  other   securities
investments.  It is the intention of management  to hold  securities  with short
maturities  in the Bank's  investment  portfolio  in order to enable the Bank to
match  more  closely  the  interest  rate   sensitivities   of  its  assets  and
liabilities.  All of the Bank's  investments  are subject to interest rate risk.
Since some  securities  have fixed  interest  rates,  as interest rates rise the
value of the  securities  falls and as rates  decline  the value  increases.  In
addition,  mortgage-backed  securities are subject to prepayment  risk. As rates
fall,  prepayments  increase and the amount of the  security  earning the coupon
rate declines.

Investment decisions are made by senior officers of the Bank. The actions of the
officers are within policies established by the Board of Directors. At September
30, 1998 the investment portfolio totaled approximately $11,565,000.
<PAGE>


The following table sets forth the amortized cost,  approximate  fair value, and
weighted average yield of the investment  portfolio.  The weighted average yield
with respect to maturities is also presented.

INVESTMENT SECURITIES ANALYSIS

                                                        Weighted
                                             Amortized   Average
                                               Cost      Yield    Fair Value
                                            ---------------------------------
September 30, 1998:
Investment securities:
   Mortgage-backed securities and SBA's  $  10,720,230   6.25%   10,908,217
   State and municipal bonds                   845,000   6.95%      859,349
                                            --------------------------------
                                         $  11,565,230   6.30%   11,767,566
                                            ================================

                                                         Weighted
                                              Amortized   Average
                                                Cost       Yield    Fair Value
                                            -----------------------------------
September 30, 1997:
Investment securities:
   U.S. Government agencies              $   1,500,000     3.80%    1,471,809
   Mortgage-backed securities and SBA's      7,314,453     6.93%    7,403,565
   State and municipal bonds                   570,000     4.12%      566,483
   Corporate bonds                             250,000     8.50%      250,000
                                            ----------------------------------
                                         $   9,634,453     6.32%    9,691,857
                                            ==================================

A summary of  investment  and  mortgage-backed  securities  by  maturities as of
September 30, 1998 follows:

                                                            Weighted
                                           Amortized         Average
                                              Cost            Yield   Fair Value
                                        ----------------------------------------
Investment Securities:
   Within 1 year                     $                 -         -             -
   After 1 year through 5 years                1,223,390      6.92%    1,242,008
   After 5 years through 10 years                244,798      7.43%      248,348
   After 10 years                             10,097,042      6.20%   10,277,210
                                        ----------------------------------------
                                     $        11,565,230      6.30%   11,767,566
                                        ========================================
<PAGE>




INTEREST DIFFERENTIAL

The  following  table  describes  the  extent  to which  changes  in  volume  of
interest-earning assets and interest-bearing liabilities and changes in interest
rates have affected the Bank's  interest  income and expense  during the periods
indicated.  For each  category of  interest-earning  asset and  interest-bearing
liability,  information  is  provided on changes  attributable  to (a) change in
volume (change in volume  multiplied by old rate) and (b) change in rate (change
in rate multiplied by old volume).  The net change  attributable to the combined
impact of volume and rate has been allocated to both components in proportion to
the relationship of the absolute dollar amounts of the change in each.

                                          Year Ended September 30, 1998 vs. Year
                                                 Ended September 30, 1997
                                             -----------------------------------
(In Thousands)                                Total         Rate         Volume

Interest income:
 Loans                                    $    2,259         275         1,984
 Investment securities                            89         112           (23)
 Interest-bearing deposits in other banks        (54)         (3)          (51)
                                             ----------------------------------
Total interest-earning assets                  2,294         384         1,910
                                             ----------------------------------

Interest expense:
 Deposits                                        846          85           761
 Federal Home Loan Bank advances and
  other borrowings                                47           4            43
                                             ----------------------------------
Total interest-bearing liabilities               893          89           804
                                             ----------------------------------
Net interest income                       $    1,401         295         1,106
                                             ==================================

                                          Year Ended September 30, 1997 vs. Year
                                                Ended September 30, 1996
                                          ------------------------------------
(In Thousands)                                 Total       Rate         Volume
Interest income:
 Loans                                       $   989         12          977
 Investment securities                           (89)      (162)          73
 Interest-bearing deposits in other banks         90         (8)          98
                                            ---------------------------------
Total interest-earning assets                    990       (158)       1,148
                                            ---------------------------------

Interest expense:
 Deposits                                        493       (115)         608
 Federal Home Loan Bank advances and
  other borrowings                              (104)       (78)         (26)
                                            ---------------------------------
Total interest-bearing liabilities               389       (193)         582
                                            ---------------------------------
Net interest income                          $   601         35          566
                                            =================================
<PAGE>

Retail Banking Activities and Sources of Funds

General

The Bank's retail banking activities  consist of attracting  deposits and making
consumer and commercial loans. A principal objective of the Bank is to establish
a total  banking  relationship,  including a deposit  relationship  as well as a
lending relationship, between the Bank and the customer.

Savings  accounts  and other types of deposits  generated  by the Bank's  retail
banking  division are the primary  source of the Bank's funds for use in lending
and for other general business  purposes.  In addition to savings accounts,  the
Bank derives funds from loan  repayments,  FHLB advances,  other  borrowings and
operations.  Loan  repayments  are a  relatively  stable  source of funds  while
deposit  inflows and  outflows  vary  widely and are  influenced  by  prevailing
interest  rates  and  money  market  conditions.  Borrowings  may be  used  on a
short-term basis to compensate for reductions in normal sources of funds such as
deposit  inflows at less than projected  levels and may be used on a longer-term
basis to support expanded lending  activities.  The Bank's sources of borrowings
have been advances  from the FHLB of Atlanta and  obligations  under  repurchase
agreements.

Deposits

Savings  deposits in the Bank at September 30, 1998 and 1997 were represented by
the various types of programs described as follows:
<PAGE>

<TABLE>

                                 DEPOSITS AT SEPTEMBER 30, 1998
                                                                                                    Balance
                                                                       Minimum       Weighted      (Dollars in   Percentage of
  Type of Account                    Term                              Amount      Average Rate     Thousands)   Total Deposits
--------------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>                   <C>       <C>                   <C>        <C>   
Easy Checking                                              $               -               -            4,320        2.65%
Commercial Checking                                                        -               -            8,689        5.33%
NOW Accounts                                                             750               1.25%       16,732       10.27%
Super NOW and MMDA                                                     1,000               2.30%        8,895        5.46%
Statement Savings                                                        100               2.35%        6,972        4.28%

Certificate of deposit accounts:
  Jumbo certificates:                30 days to 5 years              100,000               5.69%       20,874       12.81%
  Other time deposits:
    3 months                         3-5 months                        1,000               4.56%        2,757        1.69%
    6 months                         6-11 months                       1,000               5.55%       12,092        7.42%
    1 year                           12-17 months                        500               5.98%        3,554        2.18%
    1 years                          18-23 months                        500               5.98%       31,424       19.29%
    2 years                          24--29 months                       500               6.15%        1,176        0.72%
    2 years                          30-35 months                        500               6.15%       16,836       10.34%
    3 years                          36-41 months                        500               6.09%        2,583        1.59%
    3 years                          42-47 months                        500               6.09%           87        0.05%
    4 years                          48-59 months                        500               5.81%          772        0.47%
    5 years                          60 months                           500               6.39%        6,951        4.27%
  18 month IRA                       18 months                           500               6.14%       17,972       11.03%
   Other                             30 days               $             500               4.63%          204        0.13%
                                                                                     ---------------- --------------------
                                                                                           5.69%      162,890      100.00%
                                                                                     ================ ====================

</TABLE>


Deposits at September 30, 1997 are represented on the next page.
<PAGE>

<TABLE>
   DEPOSITS AT SEPTEMBER 30, 1997

                                                                                                    Balance
                                                                   Minimum            Weighted     (Dollars in   Percentage of
Type of Account                    Term                             Amount           Average Rate   Thousands)   Total Deposits
--------------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>                   <C>       <C>                   <C>        <C>        <C>
Easy Checking                                              $               -               -            1,937      1.49%
Commercial Checking                                                        -               -            4,055      3.12%
NOW Accounts                                                             750               1.25%       11,429      8.80%
Super NOW and MMDA                                                     1,000               2.30%        4,756      3.66%
Statement Savings                                                        100               2.35%        4,320      3.33%

Certificate of deposit accounts:
  Jumbo certificates:                30 days to 5 years              100,000               6.10%       18,900     14.55%
  Other time deposits:
    3 months                         3-5 months                        1,000               4.57%          358      0.28%
    6 months                         6-11 months                       1,000               5.26%        4,284      3.30%
    1 year                           12-17 months                        500               5.66%       37,863     29.15%
    1 years                          18-23 months                        500               6.21%          433      0.33%
    2 years                          24--29 months                       500               6.21%        6,196      4.77%
    2 years                          30-35 months                        500               5.91%        1,303      1.00%
    3 years                          36-41 months                        500               5.91%        6,067      4.67%
    3 years                          42-47 months                        500               6.10%          101      0.08%
    4 years                          48-59 months                        500               6.10%        1,514      1.17%
    5 years                          60 months                           500               6.10%        9,028      6.95%
  18 month IRA                       18 months                           500               5.94%       16,043     12.35%
   Other                             30 days               $             500               4.57%        1,303      1.00%
                                                                                 ----------------    --------------------
                                                                                           4.$7%      129,890    100.00%
                                                                                 ================    ====================
</TABLE>

The Bank has a number of different  programs designed to attract both short-term
and long-term  savings of the general public.  The programs  include  commercial
demand deposits (checking), NOW accounts, money market deposits accounts (MMDA),
traditional  passbook  savings,  time  deposits in a minimum  amount of $100,000
(Jumbo  Certificates),  other certificates of deposits and individual retirement
accounts (IRAs).

The  minimum  amount  required to open a  certificate  of deposit for other than
retirement  accounts  varies  from $500 to  $100,000,  depending  on the type of
deposit.  Rates on  certificates  of deposit are determined  weekly by the Bank,
based upon local market rates,  national money market rates and yields on assets
of the same maturity.

The variety of deposit  accounts offered by the Bank allows it to be competitive
in obtaining new funds,  although the threat of  disintermediation  (the flow of
funds away from the Bank into direct investment  vehicles,  such as mutual funds
and government and corporate  securities) still exists.  The ability of the Bank
to attract and retain  deposits and the Bank's cost of funds have been, and will
continue to be, significantly affected by capital and money market conditions.

The Bank  attempts to control  the flow of  deposits by pricing its  accounts to
remain  generally  competitive  with other financial  institutions in its market
area.

The Bank has  generated  Jumbo  Certificates  from both  local  individuals  and
businesses and from out-of-town  individuals and businesses who have ties to its
market area. In addition, the Bank accepts public deposits. The Bank responds to
requests for rate  information but does not accept deposits for which a broker's
commission must be paid. As with other deposits, rates on Jumbo Certificates are
set in a manner to be competitive in the Bank's market area.

<PAGE>

The following  table sets forth the composition of deposits,  excluding  accrued
interest payable, by type and interest rate at the dates indicated.

                                                 September 30,
                                                 -------------------------------
                                                   1998         1997     1996
                                                 -------------------------------
Access accounts:                              
 Commercial checking - 0.00%                  $   13,011       5,992     6,266
 NOW accounts - 1.25%                             16,732      11,429    11,599
 Money Market deposit account - varable rate       8,895       4,756     2,410
 Statement savings - 2.30%                         6,972       4,320     4,565

Certificates of deposits:
 2.75% - 5.00%                                     1,975       2,564     6,408
 5.01% - 7.00%                                   109,912      98,628    81,918
 7.01% - 9.00%                                     5,393       2,201     8,389
                                                -------------------------------
Subtotal                                         162,890     129,890   121,555
 Accrued interest                                    573         496       548
                                                -------------------------------
Total                                         $  163,463     130,386   122,103
                                                ===============================

<TABLE>
                         
                                                   TIME DEPOSIT MATURITIES
                                                  Balances at September 30,
----------------------------------------------------------------------------------------------------
   Interest Rates           1999        2000         2001        2002     Thereafter      Total
----------------------------------------------------------------------------------------------------
                                                       (In Thousands)
 <S>                 <C>      <C>         <C>           <C>         <C>         <C>         <C>
 2.75% - 5.00%       $             -           6            -           -          47            53
 5.01% - 7.00%                85,185      19,939        4,174       1,732       4,396       115,426
 7.01% - 9.00%                   519         880            -         201         203         1,803
 9.01% - 11.00%                    -           -            -           -           -             -
                         ---------------------------------------------------------------------------
                     $        85,704      20,825        4,174       1,933       4,646       117,282
                         ===========================================================================

<PAGE>

                         JUMBO CD MATURITIES
     Maturity                               September 30, 1998
     -----------                            --------------------
                                                (In Thousands)
Three months or less                            $       3,905
Three to six months                                     4,886
Six to twelve months                                    4,627
Over twelve months                                      7,456
                                                  ------------
       Total                                    $      20,874
                                                  ============

      AVERAGE DEPOSITS BY TYPE

                                   September 30, 1998        September 30, 1997
                                   ---------------------    --------------------
                                              Weighted                 Weighted
                                    Average   Average        Average    Average
                                    Balance    Rate          Balance     Rate
                                   ---------------------    --------------------
                                                    (In Thousands)
Non-interest bearing deposits    $    9,873    -              6,394      -
NOW's                                13,471    1.25%         11,633      1.25%
MMDA's                                6,894    2.35%          3,226      2.35%
Savings                               5,372    2.30%          4,384      2.30%
Time Deposits                       109,398    6.00%         99,153      5.94%
                                    -----------------       -------------------
   Total average deposits        $  145,008    5.04%        124,790      4.97%
                                    =================       ===================



<PAGE>

Borrowings

Savings  deposits  are the  primary  source of funds for the Bank's  lending and
investment  activities  and for its  general  business  purposes.  The Bank has,
however,  used  advances  from the  FHLB of  Atlanta  and  other  borrowings  to
supplement  its supply of lendable  funds.  Advances from the FHLB are typically
secured by a portion of the Bank's first mortgage loans. A summary of the Bank's
borrowings from the FHLB is set forth below:


                                       1998                             1997
                                 -----------------------------------------------
Due During Year Ending                       Weighted                Weighted
       September 30,               Amount   Average Rate   Amount   Average Rate
--------------------------------------------------------------------------------
            1998             $           -     -           7,750,000      5.90%
            1999                 2,100,000                 2,100,000      6.19%
            2000                 3,000,000     6.77%       3,000,000      6.77%
            2001                   500,000     7.90%         500,000      7.90%
            2002                 1,000,000     5.66%       1,000,000      5.66%
            2008                 2,000,000     5.51%               -      -
                                ------------------------------------------------
                             $   8,600,000     6.27%      14,350,000      5.79%
                                ================================================

The FHLB System functions as a central reserve bank providing credit for savings
institutions.  As a member of the FHLB of  Atlanta,  the Bank is required to own
capital  stock in the FHLB of Atlanta and is authorized to apply for advances on
the security of its home mortgage loans and other assets (primarily,  securities
which are  obligations  of, or are guaranteed  by, the United  States)  provided
certain standards related to creditworthiness have been met.

The FHLB offers  several  different  credit  programs each with its own interest
rate and term. It prescribes  the  acceptable  uses for advances as well as size
limitations. The FHLB periodically reviews its credit limitations and standards.
Under its  current  policies,  the FHLB  limits its  advances  based on a member
institution's   net  worth  or  the  FHLB's   assessment  of  the  institution's
creditworthiness.

The following table sets forth certain information  regarding  borrowings by the
Bank at the end of and during the periods indicated:

FEDERAL HOME LOAN BANK ADVANCES
                                                    At September 30,
                                 ----------------------------------------------
                                  1998              1997             1996
                                 ----------------------------------------------
Balance outstanding              $ 8,600,000         14,350,000     11,100,000
Weighted average rate                  6.27%              5.79%          6.44%
Maximum amount of short-term
 borrowings outstanding at any
 month end                       $11,600,000         10,150,000      5,198,000
Approximate average short-term
 borrowings outstanding          $ 7,688,427          7,100,000      4,092,000
Approximate weighted average
 paid on short-term borrowings(1)      4.98%              6.47%          7.27%
-------------------------------------------------------------------------------
(1) The average method used is the average end of month totals

<PAGE>

Employees

At September 30, 1998,  the Bank employed 101  full-time  equivalent  employees.
Management  considers  relations  with its employees to be  excellent.  The Bank
currently maintains a comprehensive  employee benefits program including,  among
other benefits,  hospitalization  and major medical  insurance,  life insurance,
dental  insurance,   long  term  disability,   a  401(k)  plan  and  educational
assistance. Management considers these benefits to be generally competitive with
those offered by competing financial institutions in its market area. The Bank's
employees are not represented by any collective bargaining group.

Competition

The Bank's primary market area is  southeastern  Georgia.  The Bank competes for
loans  primarily  through  referrals  and quality of the services it provides to
borrowers and home  builders.  It competes for savings by offering  depositors a
wide variety of savings accounts,  checking accounts,  NOW accounts,  convenient
office locations, tax-deferred retirement programs and other services.

Federal  deregulation of financial  institutions has contributed to the dramatic
increase in competition for savings dollars  between  savings  institutions  and
other types of investment  vehicles,  such as money market  mutual  funds,  U.S.
Treasury  securities and municipal  bonds, as well as an increase in competition
with commercial banks for loans,  checking accounts and other types of financial
services.  In addition,  large  conglomerates and investment  banking firms have
entered the market for financial  services.  Accordingly,  the Bank,  like other
institutions,  faces  increased  competition  in the  future in  attracting  and
retaining customers for the services it offers.

Forward Looking Statements

This Annual Report on Form 10-KSB,  other periodic  reports filed by the Company
under the Securities Exchange Act of 1934, as amended,  and any other written or
oral  statements  made by or behalf of the Company may include  forward  looking
statements  which  reflect the  Company's  current  views with respect to future
events and financial  performance.  Such forward looking statements are based on
general  assumptions and are subject to various risks,  uncertainties  and other
factors  that may cause  actual  results  to differ  materially  from the views,
beliefs and projections expressed in such statements. These risks, uncertainties
and other factors include, but are not limited to:

(a) Possible  changes in economic and  business  conditions  that may affect the
prevailing  interest rates,  the prevailing  rates of inflation or the amount of
growth,  stagnation  or recession  in the global,  U.S.  and  southeastern  U.S.
economies,   the  value  of  investments,   collectibility  of  loans,  and  the
profitability of business entities;

(b) Possible changes in monetary and fiscal policies, laws and regulations,  and
other activities of governments, agencies and similar organizations;

(c) The  effects of easing of  restrictions  on  participants  in the  financial
services industry,  such as banks,  securities  brokers and dealers,  investment
companies and finance  companies,  and attendant changes in patterns and effects
of competition in the financial services industry.

(d)  The  cost  and  other  effects  of  legal  and  administrative   cases  and
proceedings, claims, settlements and judgments;

(e) The ability of the Company to achieve the earnings  expectations  related to
the acquired operations of recently-completed  and pending  acquisitions,  which
depends on a variety of  factors,  including  (i) the  ability of the Company to
achieve the anticipated  cost savings and revenue  enhancements  with respect to
the acquired operations, (ii) the assimilation of the acquired operations to the
Company's  corporate  culture,  including  the ability to instill the  Company's
credit  practices and efficient  approach to the acquired  operation,  (iii) the
continued  growth of the markets in which the Company  operates  consistent with
recent historical experience, (iv) the absence of material contingencies related
to  the   acquired   operations,   including   asset   quality  and   litigation
contingencies,  and (v) the Company's  ability to expand into new markets and to
maintain profit margins in the fact of pricing pressures.

<PAGE>


The words "believe," "expect,"  "anticipate,"  "project" and similar expressions
signify  forward  looking  statements.  Readers are cautioned not to place undue
reliance on any forward looking  statements made by or on behalf of the Company.
Any such  statements  speak  only as of the date the  statement  was  made.  The
Company  undertakes  no  obligation  to  update or revise  any  forward  looking
statements.

SUPERVISION AND REGULATION

        Savings  and loan  holding  companies  and  federal  savings  banks  are
extensively regulated under both Federal and state law. The following is a brief
summary of certain statutes and rules and regulations that affect or will affect
the Company and the Bank. This summary is qualified in its entirety by reference
to the particular statute and regulatory  provision referred to below and is not
intended  to be  an  exhaustive  description  of  the  statutes  or  regulations
applicable to the business of the Company and the Bank. Supervision,  regulation
and  examination  of the Company  and the Bank by the  regulatory  agencies  are
intended  primarily for the protection of depositors rather than shareholders of
the Company. The terms savings association,  federal savings bank and thrift are
used interchangeably in this section.

Savings and Loan Holding Company Regulation

        The Company is a registered  holding  company under both the Savings and
Loan  Holding  Company  Act (the  "SLHCA")  set forth in  Section 10 of the Home
Owners  Loan  Act  ("HOLA")  and the  Financial  Institutions  Code  of  Georgia
("FICG").  The  Company  is  regulated  under  such acts by the Office of Thrift
Supervision  (the  "OTS") and by the  Department  of Banking  and  Finance  (the
"Georgia Department"),  respectively. As a savings and loan holding company, the
Company is  required to file with the OTS an annual  report and such  additional
information as the OTS may require  pursuant to the SLHCA. The OTS also conducts
examinations of the Company and each of its subsidiaries.

        Savings and loan holding companies and their subsidiaries are prohibited
from  engaging in any  activity or  rendering  any  services for or on behalf of
their  savings  institution  subsidiaries  for the purpose or with the effect of
evading any law or regulation applicable to the institution. This restriction is
designed to prevent the use of holding company  affiliates to evade requirements
of the  SLHCA  that are  designed  to  protect  the  holding  company's  savings
institution subsidiaries.  A unitary holding company, that is, a holding company
that owns only one insured  institution whose subsidiary  institution  satisfies
the qualified  thrift lender test  (discussed  below),  is not restricted to any
statutorily  prescribed  list of permissible  activities,  and the SLHCA and the
FICG impose no limits on direct or indirect non-savings  institution  subsidiary
operations.

        The  SLHCA  and the FICG  makes it  unlawful  for any  savings  and loan
holding company,  directly or indirectly, or through one or more subsidiaries or
one or more transactions,  to acquire control of another savings  association or
another savings and loan holding company without prior approval from the OTS and
the Georgia Department, respectively. An acquisition by merger, consolidation or
purchase of assets of such an institution or holding company or of substantially
all of the assets of such an institution or holding  company is also  prohibited
without  prior  OTS  or  Georgia  Department   approval.   When  considering  an
application  for such an  acquisition,  the OTS and the Georgia  Department take
into  consideration the financial and managerial  resources and future prospects
of the prospective acquiring company and the institution involved. This includes
consideration  of the  competence,  experience  and  integrity of the  officers,
directors  and  principal  shareholders  of the  acquiring  company  and savings
institution. In addition, the OTS and the Georgia Department consider the effect
of the  acquisition  on the  institution,  the  insurance  risk  to the  Savings
Association  Insurance  Fund  ("SAIF")  and the  convenience  and  needs  of the
community to be served.

        The OTS  may  not  approve  an  acquisition  that  would  result  in the
formation of certain types of interstate  holding company  networks.  The OTS is
precluded from approving an acquisition  that would result in the formation of a
multiple holding company controlling  institutions in more than one state unless
the  acquiring  company  or one  of  its  savings  institution  subsidiaries  is
authorized to acquire  control of an  institution or to operate an office in the
additional state pursuant to a supervisory  acquisition authorized under Section
13(k) of the Federal  Deposit  Insurance Act or unless the statutes of the state
in which the institution to be acquired is located permits such an acquisition.

        Savings and loan holding  companies  are allowed to acquire or to retain
as much as 5% of the voting shares of an  unaffiliated  savings  institution  or
savings and loan holding company without regulatory approval.

<PAGE>


Bank Regulation

        General.  The Bank is a federal savings bank organized under the laws of
the United States subject to examination by the OTS. The OTS regulates all areas
of the Bank's banking operations including reserves,  loans, mergers, payment of
dividends,  interest  rates,  establishment  of branches,  and other  aspects of
operations. OTS regulations generally provide that federal savings banks must be
examined no less  frequently  than every 12 months,  unless the federal  savings
bank (i) has assets of less than $250 million;  (ii) is well capitalized;  (iii)
was  found  to be well  managed  and its  composite  condition  was  found to be
outstanding  (or  good,  if the bank had  total  assets  of not more  than  $100
million)  during  its  last  examination;  (iv)  is  not  subject  to  a  formal
enforcement   proceeding  or  an  order  from  the  Federal  Deposit   Insurance
Corporation  ("FDIC") or another  banking  agency;  and (v) has not  undergone a
change of control during the previous  12-month  period.  Federal  savings banks
must be  examined  no less  frequently  than every 18  months.  The Bank also is
subject to assessments by the OTS to cover the costs of such examinations.

        The Bank is also insured and regulated by the FDIC. The major  functions
of the FDIC with  respect  to  insured  federal  savings  banks  include  paying
depositors to the extent  provided by law in the event an insured bank is closed
without  adequately  providing  for  payment  of the  claims of  depositors  and
preventing  the  continuance  or  development  of  unsound  and  unsafe  banking
practices.

        Subsidiary  institutions of a savings and loan holding company,  such as
the Bank, are subject to certain restrictions imposed by the Federal Reserve Act
on any extension of credit to the holding company or any of its subsidiaries, on
investment in the stock or other securities  thereof,  and on the taking of such
stock or  securities as collateral  for loans to any  borrower.  In addition,  a
holding  company and its  subsidiaries  are prohibited  from engaging in certain
tying  arrangements  in connection  with any extension of credit or provision of
any property or services.

        Capital Requirements. OTS regulations require that federal savings banks
maintain  (i)  "tangible  capital"  in an  amount of not less than 1.5% of total
assets, (ii) "core capital" in an amount not less than 4.0% of total assets, and
(iii) a level of risk-based capital equal to 8% of risk-weighted  assets.  Under
OTS regulations, the term "core capital" generally includes common stockholders'
equity,  noncumulative  perpetual  preferred  stock  and  related  surplus,  and
minority  interests in the equity  accounts of  consolidated  subsidiaries  less
unidentifiable  intangible  assets  (other than certain  amounts of  supervisory
goodwill) and certain  investments in certain  subsidiaries plus 90% of the fair
market value of readily marketable purchased mortgage servicing rights ("PMSRs")
and  purchased  credit  card  relationships  (subject  to  certain  conditions).
"Tangible  capital" generally is defined as core capital minus intangible assets
and investments in certain subsidiaries, except PMSRs.

        In determining total risk-weighted assets for purposes of the risk-based
requirement,  (i)  each  off-balance  sheet  asset  must  be  converted  to  its
on-balance sheet credit equivalent amount by multiplying the face amount of each
such item by a credit  conversion factor ranging from 0% to 100% (depending upon
the nature of the asset),  (ii) the credit equivalent amount of each off-balance
sheet asset and each on-balance  sheet asset must be multiplied by a risk factor
ranging from 0% to 200% (again depending upon the nature of the asset) and (iii)
the resulting  amounts are added  together and  constitute  total  risk-weighted
assets.  "Total  capital," for purposes of the  risk-based  capital  requirement
equals the sum of core capital plus  supplementary  capital (which,  as defined,
includes the sum of, among other items, perpetual preferred stock not counted as
core capital, limited life preferred stock,  subordinated debt, and general loan
and lease loss  allowances  up to 1.25% of  risk-weighted  assets)  less certain
deductions.  The amount of  supplementary  capital  that may be counted  towards
satisfaction  of the  total  capital  requirement  may not  exceed  100% of core
capital,  and OTS regulations require the maintenance of a minimum ratio of core
capital to total risk-weighted assets of 4%.

        OTS  regulations  also include an  interest-rate  risk in the risk-based
capital requirement. Under this regulation, an institution is considered to have
excess  interest  rate-risk  if,  based upon a 200-basis  point change in market
interest  rates,  the market value of an  institution's  capital changes by more
than 2%. This  requirement  does not have any material  effect on the ability of
the Bank to meet the risk-based  capital  requirement.  The OTS also revised its
risk-based capital standards to ensure that its standards provide adequately for
concentration  of credit risk,  risk from  nontraditional  activities and actual
performance and expected risk of loss on multi-family mortgages.

        Capital  requirements  higher  than  the  generally  applicable  minimum
requirement may be established for a particular  savings  association if the OTS
determines that the  institution's  capital was or may become inadequate in view
of its particular circumstances.

<PAGE>


        Additionally,  the Georgia  Department  requires  that  savings and loan
holding companies, such as the Company, must maintain a 5% Tier 1 leverage ratio
on a consolidated basis.

        Prompt  Corrective  Action.  The Federal Deposit  Insurance  Corporation
Improvement  Act of 1991 (the "FDIC  Act")  imposes a  regulatory  matrix  which
requires the federal  banking  agencies,  which  include the OTS, the FDIC,  the
Office of the  Comptroller  of Currency  (the  "OCC"),  and the Federal  Reserve
Board, to take prompt  corrective  action to deal with  depository  institutions
that fail to meet their  minimum  capital  requirements  or are  otherwise  in a
troubled   condition.   The  prompt   corrective   action   provisions   require
undercapitalized  institutions  to become subject to an  increasingly  stringent
array of restrictions,  requirements and  prohibitions,  as their capital levels
deteriorate and supervisory  problems mount.  Should these  corrective  measures
prove   unsuccessful  in  recapitalizing  the  institution  and  correcting  its
problems, the FDIC Act mandates that the institution be placed in receivership.

        Pursuant to regulations  promulgated  under the FDIC Act, the corrective
actions that the banking  agencies either must or may take are tied primarily to
an institution's capital levels. In accordance with the framework adopted by the
FDIC Act, the banking agencies have developed a classification system,  pursuant
to which all  banks and  thrifts  will be  placed  into one of five  categories:
well-capitalized    institutions,     adequately    capitalized    institutions,
undercapitalized  institutions,  significantly undercapitalized institutions and
critically undercapitalized institutions. The capital thresholds established for
each of the categories are as follows:


                                                        Tier 1
                       Tier 1           Risk-Based    Risk-Based
                       Capital           Capital       Capital         Other 
--------------------------------------------------------------------------------

Well capitalized        5% or more      10% or above  6% or above   Not subject
                                                                    to a capital
                                                                    directive
Adequately capitalized  4% or more       8% or above  4% or above      --

Undercapitalized        Less than 4%    Less than 8%  Less than 4%     --

Significantly
 undercapitalized       Less than 3%    Less than 6%  Less than 3%     --

Critically
 undercapitalized       2% or less           --             --         --
                        tangible equity


        The  undercapitalized,  significantly  undercapitalized  and  critically
undercapitalized  categories overlap;  therefore, a critically  undercapitalized
institution  would also be an  undercapitalized  institution and a significantly
undercapitalized  institution.  This  overlap  ensures  that  the  remedies  and
restrictions  prescribed for  undercapitalized  institutions  will also apply to
institutions in the lowest two categories.

        The  down-grading  of an  institution's  category  is  automatic  in two
situations: (i) whenever an otherwise well-capitalized institution is subject to
any  written  capital  order or  directive,  and (ii) where an  undercapitalized
institution  fails to submit or implement a capital  restoration plan or has its
plan  disapproved.  The federal banking  agencies may treat  institutions in the
well- capitalized,  adequately capitalized and undercapitalized categories as if
they  were in the next  lower  capital  level  based  on  safety  and  soundness
considerations relating to factors other than capital levels.

        The FDIC Act  prohibits  all insured  institutions  regardless  of their
level of  capitalization  from  paying any  dividend or making any other kind of
capital  distribution or paying any management fee to any controlling  person if
following the payment or distribution the institution would be undercapitalized.
While  the  prompt  corrective  action  provisions  of the FDIC Act  contain  no
requirements  or  restrictions  aimed  specifically  at  adequately  capitalized
institutions,  other  provisions of the FDIC Act and the  agencies'  regulations
relating to deposit  insurance  assessments,  brokered  deposits  and  interbank
liabilities treat adequately capitalized  institutions less favorably than those
that are well-capitalized.

<PAGE>


        A depository institution that is not well capitalized is prohibited from
accepting deposits through a deposit broker.  However, an adequately capitalized
institution  can apply for a waiver to accept  brokered  deposits.  Institutions
that  receive a waiver are subject to limits on the rates of  interest  they may
pay on brokered deposits.

        Capital  Distributions.  An OTS rule imposes  limitations on all capital
distributions by savings associations  (including  dividends,  stock repurchases
and  cash-out  mergers).  Under  the  current  rule,  a savings  association  is
classified based on its level of regulatory capital both before and after giving
effect to a proposed capital distribution.

        An   institution   that  both  before  and  after  a  proposed   capital
distribution  has net capital equal to or in excess of its capital  requirements
may, subject to any otherwise applicable statutory or regulatory requirements or
agreements entered into with the regulators,  make capital  distributions in any
calendar  year up to (i) 100% of its net income to date during the calendar year
plus the amount that would reduce by one-half its "surplus capital ratio" (i.e.,
the percentage by which the  association's  capital-to-assets  ratio exceeds the
ratio of its fully phased-in capital requirement to its assets) at the beginning
of the  calendar  year or (ii)  75% of its  net  income  over  the  most  recent
four-quarter  period.  No  regulatory  approval of the capital  distribution  is
required, but prior notice must be given to the OTS.

        An  institution   that  either  before  or  after  a  proposed   capital
distribution  fails to meet its then applicable  minimum capital  requirement or
that has been notified that it needs more than normal  supervision  may not make
any  capital  distributions  without the prior  written  approval of the OTS. In
addition,  the OTS may  prohibit a proposed  capital  distribution,  which would
otherwise  be  permitted  by the  regulation,  if the OTS  determines  that such
distribution would constitute an unsafe or unsound practice.

        Liquidity.  Under applicable federal  regulations,  savings associations
are required to maintain an average daily  balance of liquid  assets  (including
cash,  certain time deposits,  certain bankers'  acceptances,  certain corporate
debt securities and highly rated commercial paper,  securities of certain mutual
funds  and  specified  United  States   government,   state  or  federal  agency
obligations) equal to a monthly average of not less than a specified  percentage
of the average  daily  balance of the  savings  association's  net  withdrawable
deposits plus short-term borrowings.  Under HOLA, this liquidity requirement may
be changed from time to time by the OTS to any amount  within the range of 4% to
10%  depending  upon  economic  conditions  and  the  deposit  flows  of  member
institutions,  and currently is 4%.  Savings  institutions  also are required to
maintain an average  daily  balance of  short-term  liquid assets at a specified
percentage  (currently  1%) of the total of the average daily balance of its net
withdrawable deposits and short-term borrowings.

        Equity   Investments.   The  OTS  has  revised  its  risk-based  capital
regulation to modify the treatment of certain equity  investments and to clarify
the  treatment  of  other  equity  investments.   Equity  investments  that  are
permissible for both savings banks and national banks will no longer be deducted
from  savings  associations'  calculations  of total  capital  over a  five-year
period.  Instead,  permissible  equity  investments  will be  placed in the 100%
risk-weight  category,  mirroring  the capital  treatment  prescribed  for those
investments when made by national banks under the regulations of the OCC. Equity
investments held by savings  associations  that are not permissible for national
banks must still be deducted from assets and total capital.

        Qualified Thrift Lender Requirement. A federal savings bank is deemed to
be a  "qualified  thrift  lender"  ("QTL")  as  long  as its  "qualified  thrift
investments"  equal or exceed 65% of its "portfolio assets" on a monthly average
basis in nine out of every 12 months.  Qualified  thrift  investments  generally
consist  of  (i)  various  housing  related  loans  and  investments   (such  as
residential construction and mortgage loans, home improvement loans, mobile home
loans,  home  equity  loans  and  mortgage-backed   securities),   (ii)  certain
obligations  of the FDIC and (iii) shares of stock issued by any FHLB, the FHLMC
or the FNMA. In addition,  the following  assets may be categorized as qualified
thrift  investments in an amount not to exceed 20% in the aggregate of portfolio
assets:  (i) 50% of the dollar amount of residential  mortgage loans  originated
and sold within 90 days of  origination;  (ii)  investments  in  securities of a
service  corporation  that  derives at least 80% of its income from  residential
housing finance; (iii) 200% of loans and investments made to acquire, develop or
construct  starter  homes or homes in credit  needy  areas  (subject  to certain
conditions);  (iv) loans for the purchase or construction of churches,  schools,
nursing homes and  hospitals;  and (v) consumer loans (in an amount up to 20% of
portfolio  assets).  For purposes of the QTL test, the term  "portfolio  assets"
means the savings institution's total assets minus goodwill and other intangible
assets,  the value of property  used by the savings  institution  to conduct its
business,  and liquid assets held by the savings  institution in an amount up to
20% of its total assets.

<PAGE>


        OTS regulations  provide that any savings association that fails to meet
the  definition of a QTL must either convert to a national bank charter or limit
its future  investments  and  activities  (including  branching  and payments of
dividends) to those permitted for both savings  associations and national banks.
Further,  within  one year of the loss of QTL  status,  a holding  company  of a
savings  association  that does not convert to a bank charter must register as a
bank  holding  company and will be subject to all  statutes  applicable  to bank
holding  companies.  In  order to  exercise  the  powers  granted  to  federally
chartered  savings  associations and maintain full access to FHLB advances,  the
Bank must meet the definition of a QTL.

        Loans to One  Borrower  Limitations.  HOLA  generally  requires  savings
associations to comply with the loans to one borrower limitations  applicable to
national banks.  National banks generally may make loans to a single borrower in
amounts up to 15% of their  unimpaired  capital and surplus,  plus an additional
10% of capital and surplus for loans secured by readily  marketable  collateral.
HOLA provides exceptions under which a savings association may make loans to one
borrower in excess of the generally  applicable  national bank limits. A savings
association may make loans to one borrower in excess of such limits under one of
the following  circumstances:  (i) for any purpose,  in any amount not to exceed
$500,000;  or (ii) to develop domestic  residential  housing units, in an amount
not to exceed the  lesser of $30  million  or 30% of the  savings  association's
unimpaired  capital  and  unimpaired  surplus,  provided  other  conditions  are
satisfied.  The Federal  Institutions Reform,  Recovery,  and Enforcement Act of
1989  provided  that a savings  association  could make loans to one borrower to
finance the sale of real property  acquired in satisfaction of debts  previously
contracted  in good  faith in  amounts  up to 50% of the  savings  association's
unimpaired capital and unimpaired surplus.  The OTS, however,  has modified this
standard by limiting  loans to one borrower to finance the sale of real property
acquired in satisfaction of debts to 15% of unimpaired capital and surplus. That
rule  provides,  however,  that purchase money  mortgages  received by a savings
association to finance the sale of such real property do not constitute  "loans"
(provided no new funds are advanced and the savings association is not placed in
a more detrimental  position holding the note than holding the real estate) and,
therefore, are not subject to the loans to one borrower limitations.

        Commercial  Real Property  Loans.  HOLA limits the  aggregate  amount of
commercial real estate loans that a federal  savings  association may make to an
amount not in excess of 400% of the savings association's capital.

        Community Reinvestment. Under the Community Reinvestment Act (the "CRA")
and the implementing  OTS  regulations,  federal savings banks have a continuing
and affirmative obligation to help meet the credit needs of its local community,
including low and  moderate-income  neighborhoods,  consistent with the safe and
sound operation of the  institution.  The CRA requires the board of directors of
financial  institutions,  such as the Bank,  to adopt a CRA  statement  for each
assessment  area that,  among other  things,  describes its efforts to help meet
community  credit needs and the specific types of credit that the institution is
willing to extend.  Bank's CRA  performance  will be  assessed  pursuant  to the
following criteria:  (i) the Bank's loan to deposit ratio, adjusted for seasonal
variation and as  appropriate,  other related  lending  activities  such as loan
originations for sale to the secondary markets,  community  development loans or
qualified investments;  (ii) the percentage of loans and, as appropriate,  other
lending related  activities  located in the Bank's  assessment  area;  (iii) the
Bank's  record of lending to and,  as  appropriate,  engaging  in other  lending
related  activities for borrowers of different  income levels and businesses and
farms of different sizes; (iv) the geographic  distribution of the Bank's loans;
and (v) the Bank's  record of taking  action if warranted in response to written
complaints  about  its  performance  in  helping  to meet  credit  needs  in its
assessment area.

        Fair  Lending.  Congress and various  federal  agencies  (including,  in
addition to the bank  regulatory  agencies,  the Department of Housing and Urban
Development,  the  Federal  Trade  Commission  and the  Department  of  Justice)
(collectively the "Federal Agencies")  responsible for implementing the nation's
fair lending laws have been increasingly  concerned that prospective home buyers
and other borrowers are experiencing  discrimination  in their efforts to obtain
loans.  In recent  years,  the  Department  of Justice  has filed  suit  against
financial  institutions that it determined had discriminated,  seeking fines and
restitution for borrowers who allegedly suffered from discriminatory  practices.
Most, if not all, of these suits have been settled (some for  substantial  sums)
without a full adjudication on the merits.

        On March 8, 1994,  the Federal  Agencies,  in an effort to clarify  what
constitutes lending  discrimination and to specify the factors the agencies will
consider in  determining  if lending  discrimination  exists,  announced a joint
policy statement detailing specific  discriminatory  practices  prohibited under
the  Equal  Credit  Opportunity  Act and the Fair  Housing  Act.  In the  policy
statement,  three methods of proving lending discrimination were identified: (i)
overt evidence of  discrimination,  when a lender  blatantly  discriminates on a
prohibited  basis,  (ii) evidence of disparate  treatment,  when a lender treats
applicants  differently  based on a  prohibited  factor  even where  there is no
showing that the treatment  was motivated by prejudice or a conscious  intention
to discriminate against a person, and (iii) evidence of disparate impact, when a
lender applies a practice  uniformly to all  applicants,  but the practice has a
discriminatory  effect,  even where such practices are neutral on their face and
are  applied  equally,  unless the  practice  can be  justified  on the basis of
business necessity.

<PAGE>


        FDIC Insurance  Assessments.  Federal deposit  insurance is required for
all federally chartered savings  associations.  Deposits at the Bank are insured
to a maximum of $100,000  for each  depositor by Savings  Association  Insurance
Fund  (the  "SAIF").  As a  SAIF-insured  institution,  the Bank is  subject  to
regulation and  supervision  by the FDIC, to the extent deemed  necessary by the
FDIC to ensure the safety and  soundness  of the SAIF.  The FDIC is  entitled to
have  access  to  reports  of  examination  of the Bank  made by the OTS and all
reports of  condition  filed by the Bank with the OTS. The FDIC also may require
the Bank to file such  additional  reports as it  determines to be advisable for
insurance purposes.  Additionally, the FDIC may determine by regulation or order
that any specific  activity  poses a serious threat to the SAIF and that no SAIF
member may engage in the activity directly.

        Insurance  premiums  are  paid  in  semiannual   assessments.   Under  a
risk-based  assessment  system,  the FDIC is  required  to  calculate  a savings
association's  semiannual  assessment  based  on (i) the  probability  that  the
insurance  fund will incur a loss with respect to the  institution  (taking into
account the institution's asset and liability concentration), (ii) the potential
magnitude  of any such loss,  and (iii) the  revenue  and  reserve  needs of the
insurance  fund.  The  semiannual  assessment  imposed on the Bank may be higher
depending on the SAIF revenue and expense  levels,  and the risk  classification
applied to the Bank.

        The  deposit  insurance  assessment  rate  charged  to each  institution
depends on the  assessment  risk  classification  assigned to each  institution.
Under the  risk-classification  system,  each SAIF  member is assigned to one of
three capital groups:  "well  capitalized,"  "adequately  capitalized," or "less
than adequately  capitalized,"  as such terms are defined under the OTS's prompt
corrective  action  regulation   (discussed  above),   except  that  "less  than
adequately capitalized" includes any institution that is not well capitalized or
adequately capitalized.  Within each capital group, institutions are assigned to
one of three supervisory subgroups-"healthy"  (institutions that are financially
sound with only a few minor  weaknesses),  "supervisory  concern"  (institutions
with   weaknesses   which,   if  not  corrected   could  result  in  significant
deterioration of the institution and increased risk to the SAIF) or "substantial
supervisory concern"  (institutions that pose a substantial  probability of loss
to the SAIF  unless  corrective  action  is  taken).  The FDIC will  place  each
institution  into  one of nine  assessment  risk  classifications  based  on the
institution's capital group and supervisory subgroup classification.

        Historically,  SAIF premiums had been  equivalent  to deposit  insurance
premiums paid by banks on deposits to the Bank Insurance  Fund ("BIF").  Deposit
insurance  premiums were set to facilitate  each fund  achieving its  designated
reserve ratios. As each fund achieves its designated reserve ratio, however, the
FDIC has the authority to lower the premium  assessments for that fund to a rate
that would be sufficient to maintain the  designated  reserve  ratio.  In August
1995, the FDIC determined that the BIF had achieved its designated reserve ratio
and approved  lower BIF premium  rates for deposit  insurance by the BIF for all
but the riskiest  institutions.  On November 14, 1995, the FDIC  determined that
BIF  deposit  insurance  premiums  for well  capitalized  banks would be further
reduced  to the  then-statutory  minimum  of $2,000  per  institution  per year,
effective  January 1, 1996.  Because the SAIF remained  significantly  below its
designated  reserve ratio,  insurance premiums for assessable SAIF deposits were
not reduced in either FDIC action.

        The  financial  condition  of the SAIF  resulted in the  adoption of the
Deposit Insurance Funds Act of 1996 ("DIFA"), which was enacted on September 30,
1996 as part of the Omnibus  Consolidated  Appropriations  Act.  Under  DIFA,  a
special  one-time  assessment of 65.7 cents per $100 of assessable SAIF deposits
was collected on November 27, 1996 and applied retroactively to SAIF deposits as
of March 31, 1995. DIFA provides that special  assessments are deductible  under
Section 162 of the Internal  Revenue Code in the year in which the assessment is
paid.  After  collection  of the  special  assessment,  the  SAIF  achieved  its
designated  reserve  ratio and SAIF premium  rates became the same as BIF rates.
DIFA further provides that BIF and SAIF are to be merged,  creating the "Deposit
Insurance Fund," on January 1, 1999,  provided that bank and savings association
charters are combined by that date. The Treasury  Department  submitted a report
to Congress on the  development of a common  charter for all insured  depository
institutions.  However, no Congressional action has been taken. See "Supervision
and Regulation Elimination of Federal Savings Charter."

        DIFA further  assesses  premiums  for  Financing  Corporation  Bond debt
service  ("FICO").  Beginning  January 1, 1997,  FICO  premiums for BIF and SAIF
became 1.3 and 6.4 basis  points,  respectively.  Full pro rata  sharing of FICO
will begin no later than January 1, 2000.

        Effective  January  1,  1997,  SAIF  members  had  the  same  risk-based
assessment schedule as BIF members, which is 0 to 27 cents per $100 of deposits.
FICO  assessments  of 1.3  cents  for BIF  deposits  and 6.4  cents  per $100 of
deposits for SAIF  deposits  will be added to the  BIF-assessable  base and SAIF
assessable   base,   respectively,   until   December  31,   1999.   Thereafter,
approximately  2.4 cents  per $100 of  deposits  would be added to each  regular
assessment  for all insured  depositors,  thereby  achieving  full pro rata FICO
sharing.

<PAGE>

        Insurance  of deposits  may be  terminated  by the FDIC after notice and
hearing,  upon a finding by the FDIC that the savings association has engaged in
unsafe or unsound  practices,  is in an unsafe or unsound  condition to continue
operations,  or has violated any  applicable  law,  rule,  regulation,  order or
condition  imposed by, or written  agreement  with, the FDIC.  Additionally,  if
insurance  termination  proceedings are initiated against a savings association,
the FDIC may  temporarily  suspend  insurance  on new  deposits  received  by an
institution under certain circumstances.

        Federal Home Loan Bank System.  The FHLB System  consists of 12 regional
FHLBs, each subject to supervision and regulation by the Federal Housing Finance
Board (the  "FHFB").  The FHLBs  provide a central  credit  facility  for member
savings  associations.  The maximum amount that the FHLB of Atlanta will advance
fluctuates  from time to time in accordance with changes in policies of the FHFB
and the  FHLB of  Atlanta,  and the  maximum  amount  generally  is  reduced  by
borrowings from any other source. In addition,  the amount of FHLB advances that
a savings association may obtain will be restricted in the event the institution
fails to constitute a QTL.

        Federal   Reserve   System.   The  Federal  Reserve  Board  has  adopted
regulations that require savings  associations to maintain  nonearning  reserves
against  their  transaction   accounts   (primarily  NOW  and  regular  checking
accounts).  These reserves may be used to satisfy liquidity requirements imposed
by the OTS. Because required  reserves must be maintained in the form of cash or
a  non-interest-bearing  account at a Federal  Reserve Bank,  the effect of this
reserve  requirement  is to reduce  the  amount of the  Bank's  interest-earning
assets.

        Savings  institutions also have the authority to borrow from the Federal
Reserve "discount window." Federal Reserve Board regulations,  however,  require
savings associations to exhaust all FHLB sources before borrowing from a Federal
Reserve bank.

        Transactions with Affiliates Restrictions.  Transactions engaged in by a
savings  association or one of its  subsidiaries  with affiliates of the savings
association  generally  are subject to the  affiliate  transaction  restrictions
contained in Sections 23A and 23B of the Federal  Reserve Act in the same manner
and to the same extent as such restrictions apply to transactions  engaged in by
a member bank or one of its  subsidiaries  with  affiliates  of the member bank.
Section 23A of the Federal Reserve Act imposes both quantitative and qualitative
restrictions  on  transactions  engaged  in by a  member  bank  or  one  of  its
subsidiaries  with an affiliate,  while  Section 23B of the Federal  Reserve Act
requires,  among other things that all transactions  with affiliates be on terms
substantially  the same,  and at least as  favorable  to the member  bank or its
subsidiary,  as the  terms  that  would  apply  to,  or would be  offered  in, a
comparable transaction with an unaffiliated party.  Exemptions from, and waivers
of, the  provisions  of Sections  23A and 23B of the Federal  Reserve Act may be
granted  only by the  Federal  Reserve  Board.  The  HOLA  and  OTS  regulations
promulgated  thereunder  contain  other  restrictions  on loans and extension of
credit  to  affiliates,   and  the  OTS  is  authorized  to  impose   additional
restrictions on transactions  with affiliates if it determines such restrictions
are  necessary to ensure the safety and  soundness  of any savings  association.
Current  OTS  regulations  are  similar to  Sections  23A and 23B of the Federal
Reserve Act.

        Future  Requirements.  Statutes and regulations are regularly introduced
which contain  wide-ranging  proposals for altering the structures,  regulations
and competitive relationships of financial institutions.  It cannot be predicted
whether or what form any proposed  statute or regulation  will be adopted or the
extent to which the business of the Company and the Bank may be affected by such
statute or regulation.

Elimination of Federal Savings Association Charter

        Legislation  that would  eliminate  the federal  savings bank charter is
under discussion.  If such legislation is enacted, the Bank would be required to
convert its federal savings bank charter to either a national bank charter or to
a state depository  institution charter.  Various legislative proposals also may
result in the  restructuring of federal  regulatory  oversight,  including,  for
example,  consolidation  of the OTS into  another  agency,  or creation of a new
Federal  banking  agency to replace the various such  agencies  which  presently
exist.  The Bank is unable to predict whether such  legislation  will be enacted
or,  if  enacted,  whether  it will  contain  relief  as to bad debt  deductions
previously taken.

<PAGE>



Item 2. DESCRIPTION OF PROPERTIES

The  executive  office of the  Company  and Bank is located  at 1703  Gloucester
Street,  Brunswick,  Georgia 31520,  and its telephone  number at that office is
(912) 267-7283. The Bank also has six full-service branch offices. The following
table sets forth the  addresses of the  aforementioned  offices,  their net book
value and the expiration dates of the leases applicable to the offices not owned
by the Bank.

Office                                   Lease Expiration Date    Net Book Value

Executive Office

1703 Gloucester Street                              owned               $807,491
Brunswick, GA 31520

Full Service Offices

Altama Avenue Office
4510 Altama Avenue                                   7/28/98                  --
Brunswick, GA 31520

Demere Village
2461 Demere Road                                     owned              $242,975
St. Simons Island, GA 31522

North Brunswick Office
2001 Commercial Drive South                          owned              $533,496
Brunswick, GA 31525

Wal-Mart Supercenter
150 Altama Connector                                 10/10/98                 --
Brunswick, GA 31525

Waycross
1010 Plant Avenue                                    owned              $179,822
Waycross, GA 31501

Blackshear
129 Highway 82 East                                  owned              $ 21,872
Blackshear, GA 31516




Item 3. LEGAL PROCEEDINGS

Neither the Company nor the Bank is a party to, nor is any of their property the
subject of, any material pending legal proceedings,  other than ordinary routine
litigation incidental to their business, and no such proceedings are known to be
contemplated by governmental authorities.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
<PAGE>


Not applicable


PART II

Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Information  concerning common stock,  shareholders and dividends appears in the
Annual Report under the heading "Shareholder Information" and is incorporated by
reference herein.

Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Management's  discussion and analysis of the Company's  financial  condition and
its  results  of  operations  appears  in the Annual  Report  under the  heading
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" and is incorporated by reference herein.

Item 7. FINANCIAL STATEMENTS

The  consolidated  financial  statements  of the  Company  and  the  Bank  as of
September  30,  1998 and 1997 and for each of the years in the three year period
ended  September  30, 1998,  1997,  and 1996,  and the report issued on the 1998
financials by the Company's independent  certified public accountant,  appear in
the Annual Report and are incorporated herein by reference.

Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

     On May 21,  1997,  the  Company  filed a Form 8-K to  disclose  a change in
auditor for the Company. 

     On May 1, 1997,  the Company's  Board of Directors  elected to dismiss KPMG
Peat Marwick LLP as the independent auditors of the Company. On May 1, 1997, the
Company engaged Deloitte & Touche LLP to replace KPMG Peat Marwick LLP. Pursuant
to  Item  304 of  the  Regulation  S-B,  the  Company  discloses  the  following
information:

1.       KPMG Peat Marwick LLP was dismissed on May 1, 1997.

2.       The  report  prepared  by KPMG  Peat  Marwick  LLP on the  consolidated
financial  statements  of the Company for the fiscal years ended  September  30,
1996 and 1995 did not contain an adverse  opinion or disclaimer of opinion,  nor
was  the  report  qualified  or  modified  as to  uncertainty,  audit  scope  or
accounting  principles.  

3.       The  decision to dismiss  KPMG Peat  Marwick LLP was
recommended and approved by the Audit Committee of the Board of Directors.

4.       There were no disagreements with KPMG Peat Marwick LLP on any matter of
accounting  principles or practices,  financial statement  disclosure,  auditing
scope or procedure or any other matter requiring disclosure pursuant to Item 304
of Regulation S-B.


PART III

Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; 
        Compliance with Section 16(a) of the Exchange Act

Information  concerning  the  Company's  and the Bank's  Directors and Executive
Officers  appears  in  the  Proxy  Statement  under  the  heading  "Election  of
Directors",  "Executive  Officers",  "Ownership of Stock",  and "Compliance with
Section 16(a) of the  Securities  Exchange Act of 1934" and is  incorporated  by
reference herein.

Item 10.        EXECUTIVE COMPENSATION

Information  concerning  the  compensation  of  the  Company's  and  the  Bank's
Management   appears  in  the  Proxy  Statement  under  the  heading  "Executive
Compensation" and is incorporated by reference herein.

Item 11.        SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information concerning beneficial owners of more than 5% of the Company's common
stock  appears in the Proxy  Statement  under the heading  "Ownership of Stock -
Principal Holders of Stock" and is incorporated by reference herein.

Information  concerning  the  common  stock  owned by the  Company's  management
appears in the Proxy  Statement  under the heading  "Ownership  of Stock - Stock
Owned by Management" and is incorporated by reference herein.

Item 12.        CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

<PAGE>


Information concerning certain relationships and related transactions appears in
the Proxy  Statement under the heading  "Executive  Compensation - Certain Other
Transactions" and is incorporated by reference herein.

Item 13.        EXHIBITS AND REPORTS ON FORM 8-K


(a)     Exhibits

The list of documents  set forth on the Exhibit Index that  immediately  follows
the last signature  page hereof is  incorporated  herein by reference,  and such
documents are filed as exhibits to this report on Form 10-KSB.

(b)     Reports on Form 8-K:

No reports on Form 8-K were filed during the year ended September 30, 1998.

<PAGE>




SIGNATURES

In accordance  with Section 13 or 15(d) 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.



FIRST GEORGIA HOLDING, INC.
(Registrant)


BY:  HENRY S. BISHOP
    ----------------
     Henry S. Bishop
     President




Date: December 21, 1998


POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS,  that each person whose signature  appears below
constitutes and
appoints  Henry S. Bishop and G.F.  Coolidge III, and each of them, the person's
attorneys-in-fact,  each with full power of substitution,  for the person in his
or her name,  place and stead, in any and all capacities,  to sign any amendment
to this Report on form 10-KSB, and to file the same, with exhibits thereto,  and
other  documents  in  connection  therewith,  with the  Securities  and Exchange
Commission   and  hereby   ratifies   and   confirms   all  that  each  of  said
attorneys-in-fact,  or his or her substitute or substitutes,  may do or cause to
be done by virtue hereof.
<PAGE>



In accordance  with the  Securities  Exchange Act of 1934,  this report has been
signed by the following  persons on behalf of the  Registrant in the  capacities
and on the dates indicated.


        Signatures      Title   Date


HENRY S. BISHOP                      President and        December 21, 1998
---------------                      Director (principal
Henry S. Bishop                      executive officer)


B.W. BOWIE                           Director             December 21, 1998
--------------
B.W. Bowie


M. FRANK DELOACH III                 Director             December 21, 1998
-------------------
M. Frank Deloach III


TERRY DRIGGERS                       Director             December 21, 1998
---------------
Terry Driggers


ROY K. HODNETT                       Director             December 21, 1998
---------------
Roy K. Hodnett


E. RAYMOND MOCK                      Director             December 21, 1998
----------------
E. Raymond Mock


JAMES D. MOORE                       Director             December 21, 1998
---------------
James D. Moore


D. LAMONT SHELL                      Director             December 21, 1998
----------------
D. Lamont Shell


G.F. COOLIDGE III                    Chief Financial      December 21, 1998
-----------------                    Officer (principal
G.F. Coolidge III                    financial and 
                                     accounting officer)

<PAGE>


EXHIBIT INDEX




Exhibit No.                   Document                                   Page

3.(I)                 Articles of Incorporation of First 
                      Georgia Holding, Inc. incorporated by 
                      reference herein By reference to Appendix B
                      to the Proxy Statement and Prospectus 
                      included in the Registration statement on 
                      Form S-4 (SEC No. 33-19150), filed 
                      December 18, 1987 ("Form S-4"), as amended on
                      December 31, 1987 ("Amendment No. 1") 
                      First Georgia Savings Bank, F.S.B. is 
                      now known as First Georgia Bank, F.S.B.           N/A


3.(ii)                Amended By-Laws of First Georgia Holding, 
                      Inc.  incorporated by reference to Exhibit
                      3(ii) of the Form 10-KSB for the year
                      ended September 30, 1994 (the "1994 10-KSB")      N/A

*10.1                 First Georgia Holding, Inc. 1995 Stock
                      Incentive Plan incorporated by reference 
                      to Exhibit 10.1 of the Form 10-KSB for the year  
                      ended September 30, 1995 (the "1995 10-KSB")      N/A

*10.2                 First Georgia Holding, Inc.  Employee Stock 
                      Purchase Plan incorporated by reference to 
                      Exhibit 10.2 of the 1995 10-KSB                   N/A

*10.3                 Qualified 401 (k) Standardized Profit Sharing 
                      Plan,  Adoption  Agreement,  First Georgia 
                      Savings Bank, F.S.B.,  incorporated  herein 
                      by reference to Exhibit 10.3 of the Form 10-K 
                      for the year ended September 30, 1992 
                      (the "1992 10-K")                                 N/A

*10.4                 Qualified  Retirement  Plan,  Basic Plan 
                      Document,  First Georgia  Savings Bank,  
                      F.S.B., incorporated herein by reference to
                      Exhibit 10.4 of the 1992 10-K                     N/A

*10.5                 Amend ment to the First Georgia Holding, Inc. 
                      1995 Stock Incentive Plan.                         43

 13                   First Georgia Holding, Inc. 1998 Annual Report     45

<PAGE>

 21                   Subsidiaries of First Georgia Holding, Inc.
                      incorporated by reference to Exhibit 21.6 of
                      the Form 10-KSB for the year ended 
                      September 30, 1993 (the "1993 10-KSB)            N/A

 23                   Consent of Deloitte & Touche LLP                  41

 23.1                 Consent of KPMG Peat Marwick LLP                  42

 24                   A power of attorney is set forth on the 
                      signature pages to this Form 10-KSB               37

 99                   Independent auditors' report - 
                      KPMG Peat Marwick LLP                             46

<PAGE>



EXHIBIT 23
Consent of Deloitte & Touche LLP

INDEPENDENT ACCOUNTANTS' CONSENT


The Board of Directors
First Georgia Holding, Inc.

We  consent  to  incorporation  by  reference  in  the  registration  statements
(N0.33-62245 and No. 33-62249) on Form S-8 of First Georgia Holding, Inc. of our
report dated November 13, 1998,  relating to the  consolidated  balance sheet of
First Georgia  Holding,  Inc. and  subsidiary as of September 30, 1998 and 1997,
and the related consolidated statements of operations,  stockholders' equity and
cash flows for the years ended September 30, 1998 and 1997, which report appears
in the September 30, 1998 annual report on Form 10-KSB of first Georgia Holding,
Inc.



December 21, 1998

<PAGE>

EXHIBIT 23.1
Consent of KPMG Peat Marwick LLP

                  INDEPENDENT ACCOUNTANTS' CONSENT


The Board of Directors
First Georgia Holding, Inc.

     We consent to  incorporation  by reference in the  registration  statements
(N0.33-62245 and No. 33-62249) on Form S-8 of First Georgia Holding, Inc. of our
report  dated  November 1, 1996,  relating  to the  consolidated  statements  of
operations,  stockholders' equity and cash flows of First Georgia Holding,  Inc.
and subsidiary as of September 30, 1998 and 1997,  and the related  consolidated
statements of operations, stockholders' equity and cash flows for the year ended
September 30, 1996 which report  appears in the September 30, 1998 annual report
on Form 10-KSB of first Georgia Holding, Inc.


Atlanta, Georgia
December 28, 1998


<PAGE>

EXHIBIT 10.5
Amendment to the First Georgia Holding, Inc. Stock Incentive Plan


APPENDIX A

FIRST AMENDMENT TO THE FIRST GEORGIA HOLDING, INC.
1995 STOCK INCENTIVE PLAN


        THIS FIRST  AMENDMENT is made as of this 8th day of September,  1998, by
First Georgia Holding Inc., a corporation  organized and existing under the laws
of the State of Georgia (the "Company").

W I T N E S S E T H:
     WHEREAS,  the Company maintains the First Georgia Holding,  Inc. 1995 Stock
Incentive  Plan under an indenture  which was adopted as of July 17, 1995,  (the
"Plan");

     WHEREAS, the Company desires to amend the Plan to reflect an increase in
the number of shares authorized for issuance thereunder; and

     WHEREAS,  the Board of  Directors  of the  Company  has duly  approved  and
authorized this amendment to the Plan;


        NOW, THEREFORE,  the Company does hereby amend the Plan, effective as of
the date first set forth above, as follows:

1.      By deleting  Section 2.2 of the Plan in its entirety and by substituting
therefor the following new Plan Section 2.2:

"2.2 Stock Subject to the Plan. Subject to adjustment in accordance with Section
4.1,  688,750  shares of Stock (the `Maximum  Plan Shares') are hereby  reserved
exclusively for issuance pursuant to Options.  At no time shall the Company have
outstanding  Options and shares of Stock issued in respect of Options  under the
Plan in excess of the Maximum Plan Shares,  determined in  accordance  with Rule
16b-  3(a)(1) as  promulgated  under the  Securities  Exchange  Act of 1934,  as
amended from time to time."

2. Except as specifically  amended  hereby,  the Plan shall remain in full force
and effect as prior to the adoption of this First Amendment.

3.  Notwithstanding  the  foregoing,  the  adoption of this First  Amendment  is
subject to the approval of the stockholders of the Company and in the event that
the  stockholders  of the Company fail to approve such  adoption  within  twelve
months from the date first set forth above, the adoption of this First Amendment
shall be null and void.


<PAGE>



        IN WITNESS  WHEREOF,  the Company has caused this First  Amendment to be
executed on the day and year first above written.


                                                FIRST GEORGIA HOLDING, INC.


                                                By:     HENRY S. BISHOP
                                                      -----------------------
                                                Title:  Chairman and President
                                                      -------------------------


ATTEST:

By:    G. FRED COOLIDGE
    --------------------

Title: Secretary and Treasurer
      --------------------------


        (CORPORATE SEAL)

<PAGE>


EXHIBIT 13
First Georgia Holding, Inc. 1998 Annual Report

                                 ANNUAL REPORT
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
                                 First Georgia:
                            Its Mission and Markets
--------------------------------------------------------------------------------

First Georgia Holding, Inc. owns 100% of the stock of First Georgia Bank, F.S.B.
The Bank is federally  chartered and began  operations  in January  1984.  First
Georgia  develops and provides a full range of financial  services  encompassing
retail  banking,  real estate,  commercial and consumer  lending,  and a host of
related  financial  products.  The Bank  currently  operates  eight full service
offices in three Georgia counties.

First Georgia's  PRIMARY MISSION is to maximize  stockholder  value in a prudent
manner. We will concentrate on the following principles.

We will  maintain  high levels of asset  quality  through  conservative  lending
policies,  a  vigorous   comprehensive  credit   administration   system  and  a
diversified  portfolio of earning assets.  Interest rate risk will be thoroughly
evaluated and controlled.

Our  long-term  goals for return on equity  and assets  will be set at the upper
levels of peer bank  comparisons.  We will strive to  maintain a strong  capital
base supported by adequate loan loss reserves.

We will continue to attract and retain  exceptional  people. We will deliver the
best quality customer service available in the banking industry. This high level
of personal service is what separates us from our competitors.

Our officers and employees will be encouraged to provide  leadership and support
in civic and economic development activities.  We will also strive to assess and
serve the credit needs of each community in which we are located.

We are committed to the overall success of First Georgia.  The proper
implementation of these principles will continue to maximize the value of the
Company.
--------------------------------------------------------------------------------
<PAGE>

PRESIDENT'S MESSAGE
--------------------------------------------------------------------------------

Dear Stockholders:

I am  pleased to report the  results  of the best year in First  Georgia  Bank's
fourteen-year  history.  As you review the financial  highlights in this report,
you will  note that  Total  Assets  increased  $30,761,042  and  Total  Deposits
increased  $33,000,169.  Of  particular  importance,  Net Income of  $2,014,402,
represents a 26% increase over last year's earnings.

The financial climate in Coastal Georgia has changed  dramatically over the past
year. It is evident by our growth that our customers  appreciate  doing business
with a bank that  offers  the latest  financial  products,  combined  with local
banking decisions and outstanding personal service.

During the past year, we introduced new products such as the  MasterMoney  debit
card, First Line home equity line of credit, Check Imaging,  Free Checking,  and
Saturday  banking at our St.  Simons  Office.  In May,  we opened our  permanent
Highway 341 North  Office,  which  serves  that  growing  area of Glynn  County.
Additionally,  we installed a  state-of-the-art,  Y2K compliant  computer system
that allows our customers to enjoy the latest in banking technology.

First Georgia was recognized  this past year by several  organizations.  In May,
First Georgia Holding  Company was named to the Atlanta  Journal  Constitution's
Georgia Top 100 Best of Business,  First Georgia  Holding being the only company
headquartered  in Glynn  County to receive  this  honor.  This  summer,  we were
awarded  a  five-star  rating  for  strength,  performance  and  safety by Bauer
Financial Reports.

In November  of this year,  we were all  saddened by the death of our  long-time
Director and friend, Hubert Lang. He had served as Director of the First Georgia
Bank and First Georgia Holding Company since its  organization and was always an
enthusiastic  supporter of our Company.  His counsel and insight will be greatly
missed.

We look forward to the challenges of 1999 with great optimism and enthusiasm. As
always, we extend our sincere appreciation for your support.

Sincerely,

HENRY S. BISHOP

Henry S. Bishop
Chairman, President and CEO
<PAGE>


--------------------------------------------------------------------------------
                           FIRST GEORGIA HOLDING, INC.
--------------------------------------------------------------------------------
                             C O N S O L I D A T E D

                                F I N A N C I A L

                               S T A T E M E N T S
--------------------------------------------------------------------------------
     September 30, 1998 and 1997 (With Independent Auditors' Report Thereon)
--------------------------------------------------------------------------------
<PAGE>

CONSOLIDATED BALANCE SHEETS
-----------------------------
First Georgia Holding, Inc. and subsidiary


Assets                                                 September 30,
                                          -------------------------------------
                                                   1998             1997
                                          -------------------------------------


Cash and cash equivalents:
Cash and due from banks                           $ 4,433,585      $ 2,985,350
Federal funds sold                                 12,180,000            -
Interest bearing deposits in other banks            1,096,581        1,523,777
                                                   -----------      -----------
          Cash and cash equivalents                17,710,166        4,509,127
Investment securities held to maturity, fair
  value approximately $11,768,000 and
  $9,692,000 at September 30, 1998 and 1997,
  respectively (note 2)                            11,565,230        9,634,453
Loans receivable, net of allowance for loan
 loss of $968,632 and $1,012,322 at
 September 30, 1998 and 1997, respectively
 (notes 3 and 7)                                  151,252,636      137,864,633
Real estate owned                                     644,084          423,000
Federal Home Loan Bank stock, at cost (note 7)      1,160,300        1,160,300
Premises and equipment, net (note 4)                4,502,239        3,181,618
Accrued interest receivable (note 5)                1,052,830          960,160
Intangible assets, net                                917,995        1,029,715
Deferred income taxes (note 9)                                         157,004
Other assets                                        1,064,613          781,487
                                                --------------   --------------
     Total Assets                               $ 190,462,539    $ 159,701,497
                                                ==============   ==============

Liabilities and Stockholders' Equity

Liabilities:

  Deposits (note 6)                             $ 162,890,105    $ 129,889,936
  Federal Home Loan Bank advances (note 7)          8,600,000       14,350,000
  Accrued interest payable                            572,581          496,305
  Obligations under capital lease (note 10)           229,098          245,659
  Accrued expenses and other liabilities            2,489,543        1,372,327
                                                  ------------     ------------
     Total liabilities                            174,781,327      146,354,227
                                                  ============     ============

Commitments and contingencies (notes 3, 10
 and 16)


Stockholders' equity (notes 8 and 13):

  Common stock,  $1.00 par value;  10,000,000 shares  authorized;  4,798,972 and
  4,578,478 shares issued and outstanding at
  September 30, 1998 and 1997, respectively         4,798,972        4,578,478
  Additional paid-in capital                        3,116,021        2,697,038
  Retained earnings                                 7,766,219        6,071,754
                                                   -----------     ------------
     Total stockholders' equity                    15,681,212       13,347,270
                                                   -----------     ------------
 Total Liabilities and Stockholders' Equity      $190,462,539    $ 159,701,497
                                                  ============     ============

<FN>
See accompanying notes to consolidated financial statements.
</FN>
<PAGE>


CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------
First Georgia Holding, Inc. and subsidiary


                            Years Ended September 30,
                                         ---------------------------------------
                                              1998           1997         1996
                                         ------------   -----------   ----------

Interest Income:
  Loans                                  $ 14,234,483    11,975,499   10,986,155
  Mortgage-backed securities                  537,219       314,956      321,798
  Investment securities                       162,397       295,467      377,934
  Other                                       143,615       198,010      108,029
                                         ------------   -----------   ----------
    Total interest income                  15,077,714    12,783,932   11,793,916
                                         ------------   -----------   ----------
Interest Expense:
  Deposits (note 6)                         7,021,354     6,175,696    5,682,330
  Advances and other borrowings               810,335       763,159      867,052
                                         ------------   -----------   ----------
    Total interest expenses                 7,831,689     6,938,855    6,549,382
                                         ------------   -----------   ----------
    Net interest income                     7,246,025     5,845,077    5,244,534
Provisions for Loan Losses (note 3)             6,163       309,679       48,104
                                         ------------   -----------   ----------
  Net interest income after provisions
  for loan losses                           7,239,862     5,535,398    5,196,430
                                         ------------   -----------   ----------
Other Income:
  Loan fees                                   940,526       473,890      382,841
  Deposit service charges                     961,006       689,152      555,174
  Gain on sale of branch (note 11)                  -       433,760            -
  Other operating income                       95,602        45,917       65,882
                                         ------------   -----------   ----------
    Total other income                      1,997,134     1,642,719    1,003,897
                                         ------------   -----------   ----------
Other Expenses:
  Salaries and employee benefits            2,940,466     2,324,280    1,986,763
  Net occupancy expense                     1,234,569     1,064,499      952,724
  Data processing expenses                    172,184        13,744       10,572
  Office supplies                             176,128       106,899      114,241
  Amortization of intangibles                 111,720       119,625      131,736
  Federal insurance premiums                   82,971       111,267      254,944
  SAIF special assessment                           -             -      727,704
  Other operating expenses                  1,286,717     1,005,677      895,891
                                         ------------   -----------   ----------
    Total other expenses                    6,004,755     4,745,991    5,074,575
                                         ------------   -----------   ----------
    Income before income taxes              3,232,241     2,432,126    1,125,752
Income tax expense (note 9)                 1,217,839       838,461      364,386
                                         ------------   -----------   ----------
Net Income                                $ 2,014,402   $ 1,593,665    $ 761,366
                                         ============   ===========   ==========
Net Income per share:
  Basic                                        $ 0.42        $ 0.35       $ 0.17
                                         ============   ===========   ==========
  Diluted                                      $ 0.40        $ 0.33       $ 0.16
                                         ============   ===========   ==========
<PAGE>

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
-----------------------------------------------
First Georgia Holding, Inc. and subsidiary


</TABLE>
<TABLE>

                  Years Ended September 30, 1998, 1997 and 1996
                                   -------------------------------------------------------------
                                                       Additional      Retained
                                      Common Stock  Paid-in Capital    Earnings        Total
                                   ---------------  --------------- -------------   ------------
<S>                                 <C>             <C>             <C>             <C> 
Balance, September 30, 1995         $  2,984,819    $  4,128,689    $  4,012,181    $ 11,125,689
Three-for-two stock split in 1998      1,492,409      (1,492,409)           --              --
                                   ---------------  --------------- -------------   ------------
Balance, September 30, 1995,
as adjusted                            4,477,228       2,636,280       4,012,181      11,125,689

Exercise of stock options                101,250         (16,125)           --            85,125
Income tax benefit resulting from
exercise of stock options                   --            76,883            --            76,883
Net income                                  --              --           761,366         761,366
Cash dividends, $0.0290 per share           --              --          (132,664)       (132,664)
                                   ---------------  --------------- -------------   ------------
Balance, September 30, 1996            4,578,478       2,697,038       4,640,883      11,916,399
Net income                                  --              --         1,593,665       1,593,665
Cash dividends, $0.0353 per share           --              --          (162,794)       (162,794)
                                   ---------------  --------------- -------------   ------------
Balance, September 30, 1997            4,578,478       2,697,038       6,071,754      13,347,270
Exercise of stock options                220,549          19,115            --           239,664
Income tax benefit resulting from
exercise of stock options                   --           400,762            --           400,762
Net income                                  --              --         2,014,402       2,014,402
Cash dividends, $0.0667 per share           --              --          (319,937)       (319,937)
Fractional shares related to
stock split paid in cash                     (55)           (894)           --              (949)
                                   ---------------  --------------- -------------   ------------
Balance, September 30, 1998         $  4,798,972    $  3,116,021    $  7,766,219    $ 15,681,212
                                   ===============  =============== =============   ============
</TABLE>

[FN]
See accompanying notes to consolidated financial statements.
</FN>
<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
First Georgia Holding, Inc. and subsidiary

<TABLE>

                                                              Year Ended September 30,
                                                 ---------------------------------------------
                                                       1998            1997             1996
                                                 -------------    ------------    ------------
<S>                                               <C>             <C>             <C> 
Operating Activities
Net income                                        $  2,014,402    $  1,593,665    $    761,366
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses                                6,163         309,679          48,104
Depreciation and amortization, net of accretion        571,186         418,988         381,871
Amortization of intangibles                            111,720         119,625         131,736
Amortization of net deferred loan (fees) costs         (96,007)         (1,230)         24,672
Gain on sale of branch                                    --          (433,760)           --
Gain on sale of real estate owned                      (30,310)        (19,837)           (505)
Loss on sale of securities                               3,125            --              --
Deferred income tax (benefit) expense                  (34,682)         81,163        (287,279)
Increase in accrued interest receivable                (92,670)       (107,528)       (101,524)
(Increase) decrease in other assets                   (283,126)         93,992         154,407
Decrease in advance payments by borrowers for
property taxes and insurance                            (8,706)        (20,078)        (29,619)
Increase (decrease) in accrued expenses
and other liabilities                                1,185,639         (85,156)       (666,983)
                                                 -------------    ------------    ------------

Net cash provided by operating activities            3,346,734       1,949,523         416,246
                                                 -------------    ------------    ------------

Investing Activities
Principal payments received on mortgage-backed
securities                                           2,148,379         506,640         478,221
Maturities of investment securities                  1,600,000       4,300,000         100,000
Proceeds from sale of investment securities            246,875            --              --
Purchase of investment securities                   (5,956,881)     (4,114,829)     (1,721,563)
Loan originations, net of principal repayments     (14,143,152)    (16,277,228)    (12,375,532)
Purchase of premises and equipment                  (1,953,859)       (513,544)       (329,760)
Proceeds from sale of real estate owned                654,219         219,837         416,159
Proceeds from sale of premises and equipment            89,777            --              --
Proceeds from redemption of FHLB stock                    --           415,400            --
                                                 -------------    ------------    ------------

Net cash used in investing activities              (17,314,642)    (15,463,724)    (13,432,475)
                                                 -------------    ------------    ------------
</TABLE>
<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT'D)
First Georgia Holding, Inc. and subsidiary

<TABLE>
                                                                     Year Ended September 30,
                                                       ---------------------------------------------
                                                             1998            1997            1996
                                                       -------------    ------------    ------------
<S>                                                     <C>             <C>             <C> 
Financing Activities
Net increase in deposits                                $ 33,000,169    $ 14,690,319    $ 15,026,768
Net liabilities of branch assumed by purchaser,
net of gain                                                     --        (5,573,578)           --
Repayment of other borrowed money                               --           (92,000)       (100,000)
Proceeds from FHLB advances                               16,350,000      14,500,000      19,600,000
Repayment of FHLB advances                               (22,100,000)    (11,250,000)    (20,448,000)
Net proceeds from exercise of stock options                  239,664            --            85,125
Dividends and fractional shares                             (320,886)       (162,091)       (132,664)
                                                       -------------    ------------    ------------

Net cash provided by financing activities                 27,168,947      12,112,650      14,031,229
                                                       -------------    ------------    ------------

Increase (decrease) in cash and cash equivalents          13,201,039      (1,401,551)      1,015,000

Cash and cash equivalents at beginning of year             4,509,127       5,910,678       4,895,678
                                                       -------------    ------------    ------------

Cash and cash equivalents at end of year                $ 17,710,166    $  4,509,127    $  5,910,678
                                                       =============    ============    =============

Supplemental disclosure of cash paid during year for:

Interest                                                $  7,755,000    $  6,990,000    $  6,529,000
Income taxes                                            $  1,784,145    $    622,000    $    828,000

</TABLE>

Supplemental disclosure of non-cash activities:

Loans  receivable  of  approximately   $782,000,   $645,000  and  $478,000  were
transferred  to real estate  owned  during the years ended  September  30, 1998,
1997, and 1996, respectively.

Sales of real estate owned totaling  approximately  $12,500 and $173,000 for the
years ended  September  30, 1998 and 1996,  respectively,  were  financed by the
Bank. No sales of real estate owned were financed by the Bank for the year ended
September 30, 1997.


See accompanying notes to consolidated financial statements.

<PAGE>

NOTES TO CONSOLIDATED INCOME STATEMENTS
-------------------------------------------
First Georgia Holding, Inc. and subsidiary

     (1) Summary of Significant  Accounting Policies First Georgia Holding, Inc.
(the Company) was incorporated on December 16, 1987 for the purpose of acquiring
all of the issued and  outstanding  stock of First  Georgia  Bank,  F.S.B.  (the
Bank). The accounting and reporting policies of First Georgia Holding,  Inc. and
subsidiary conform to generally accepted accounting principles. The following is
a  description  of the more  significant  of those  policies  which the  Company
follows in preparing and presenting its consolidated financial statements.

(a)  Basis of Financial Statement Presentation
The  financial  statements  have been  prepared  in  conformity  with  generally
accepted  accounting   principles.   In  preparing  the  consolidated  financial
statements, management is required to make estimates and assumptions that affect
the reported  amounts 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 those estimates.

Material  estimates that are particularly  susceptible to significant  change in
the near term relate to the  determination  of the allowance for loan losses and
the valuation of real estate  acquired in  connection  with  foreclosures  or in
satisfaction of loans. In connection  with the  determination  of the allowances
for losses on loans and real estate  acquired  through  foreclosure,  management
obtains  independent  appraisals  and  reviews  available  market  data  such as
comparable  sales and recent market trends through  discussions  with local real
estate professionals.

The consolidated  financial  statements  include the accounts of the Company and
the Bank.  All  significant  intercompany  balances and  transactions  have been
eliminated in consolidation.

(b)  Investment Securities Held to Maturity
The Company has classified all its investments in securities as held to maturity
based upon positive intent and ability to hold those securities until maturity.

Held to maturity  securities are recorded at cost adjusted for the  amortization
or accretion of premiums and discounts.  Premiums and discounts are amortized or
accreted over the life of the related  investment  security using a method which
approximates  level yield.  Purchase  premiums and discounts on  mortgage-backed
securities  are amortized  and accreted to interest  income using a method which
approximates  the interest  method,  over the remaining  lives of the securities
taking into consideration assumed prepayment patterns.

(c)  Loans and the Allowance for Loan Losses
Loans are reported at principal  amounts  outstanding,  less unearned income and
the  allowance  for loan losses.  Interest  income on loans is  recognized  on a
level-yield basis.

Loans are placed on a nonaccrual  basis when  reasonable  doubt exists as to the
full, timely  collection of interest and principal or they become  contractually
in default for 90 days or more as to either  interest or  principal  unless they
are both well secured and in the process of collection.

Additions to the allowance for loan losses are charged to operations  based upon
management's  evaluation of the  potential  losses in its loan  portfolio.  This
evaluation  considers the estimated value of the underlying  collateral and such
other factors as, in management's  judgment,  deserve recognition under existing
economic  conditions.  While management uses the best  information  available to
make  evaluations,  future  adjustments  to the  allowance  may be  necessary if
conditions  differ  substantially  from  the  assumptions  used  in  making  the
evaluations.  In addition,  various regulatory agencies,  as an integral part of
their examination process,  periodically review the Bank's allowances for losses
on loans and real estate owned.  Such agencies may require the Bank to recognize
additions to the allowances based on their judgments of information available to
them at the time of their examination.
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
First Georgia Holding, Inc. and subsidiary

A loan is  considered  impaired  when it is probable  that the  Company  will be
unable to collect all amounts due according to the contractual terms of the loan
agreement.  The Bank's impaired loans include  nonaccrual  loans,  troubled debt
restructurings,  and large  loans  more than 90 days  delinquent  in which  full
payment of principal  and interest is not  expected.  Cash  receipts on impaired
loans are used to reduce principal  balances.  Impairment losses are included in
the allowance for loan losses through a charge to the provision for loan losses.
Impairment  losses are  measured  by the present  value of expected  future cash
flows discounted at the loan's effective  interest rate, or at either the loan's
observable  market  price or the fair  value of the  collateral.  Adjustment  to
impairment  losses  due to  changes  in the  fair  value of an  impaired  loan's
underlying collateral are included in the provision for losses. Upon disposition
of an impaired  loan,  any related  valuation  allowance  is reversed  through a
chargeoff to the allowance for loan losses.

The  Bank  extends  credit  to  customers  throughout  its  market  area  with a
concentration  in real estate mortgage loans.  The real estate loan portfolio is
substantially  secured  by  properties  located  throughout  Southeast  Georgia.
Although the Bank has a diversified loan portfolio, a substantial portion of its
borrowers'  ability  to repay such loans is  dependent  upon the  economy in the
Bank's market area.

(d)  Loan Origination and Commitment Fees
Loan origination fees, net of certain direct origination costs, are deferred and
amortized on a basis that approximates level yield over the contractual lives of
the  underlying  loans.  In  addition,  fees for a  commitment  to  originate or
purchase loans are offset against direct loan origination costs incurred to make
such  commitments.  The net  amounts are  deferred  and,  if the  commitment  is
exercised,  recognized  over the life of the related loan as a yield  adjustment
or, if the commitment expires unexercised,  recognized as income upon expiration
of the commitment.

(e)  Real Estate Owned
Real estate owned represents real estate acquired through foreclosure or deed in
lieu of foreclosure and is reported at lower of cost or fair value, adjusted for
estimated  selling  costs.  Fair  value is  determined  on the basis of  current
appraisals,  comparable sales, and other estimates of value obtained principally
from  independent  sources.  Any  excess  of the  loan  balance  at the  time of
foreclosure  over  the  fair  value of the real  estate  held as  collateral  is
recorded  as a loan  loss.  Gain or loss on sale  and any  subsequent  permanent
decline in fair value is recorded to operations.

(f)  Federal Home Loan Bank Stock
Investment  in stock of the  Federal  Home Loan Bank is  carried  at cost and is
required of those institutions who utilize its services.  No ready market exists
for the stock, and it has no quoted value.

(g)  Premises and Equipment
Premises  and  equipment  are  carried  at cost less  accumulated  depreciation.
Depreciation  is provided on a  straight-line  basis over the  estimated  useful
lives of the related assets.

(h)  Intangible Assets
Intangible  assets  consist of core  deposit  premiums and cost in excess of net
assets acquired  resulting from the Company's branch  acquisitions in 1987. Such
amounts are amortized using the straight-line method over the estimated life (19
years) of the customer  deposit  base.  The Company  writes off the  unamortized
balance of the intangible  assets upon the disposition of the related  branches.
Intangible  assets are reviewed  for  impairment  whenever  events or changes in
circumstances  indicate  that the  carrying  amount of any such asset may not be
recoverable.  In the  event  that  facts  and  circumstances  indicate  that the
carrying value of the intangible  asset may be impaired,  an evaluation of their
recoverability would be performed and any resulting impairment loss recorded.

(i)  Income Taxes
The Company files consolidated income tax returns with its subsidiary.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
First Georgia Holding, Inc. and subsidiary

Deferred tax assets and  liabilities  are recognized  for temporary  differences
between  the  financial  reporting  basis of assets  and  liabilities  and their
respective  tax bases.  Deferred tax assets and  liabilities  are measured using
enacted  tax rates  expected  to apply to  taxable  income in the years in which
those temporary  differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. A valuation  allowance is
established  for the portion of a deferred tax asset for which it is more likely
than not that a tax benefit will not be realized.

(j)  Cash and Cash Equivalents
For the  purposes of the  statements  of cash flows,  cash and cash  equivalents
include cash and due from banks,  interest  bearing  deposits in other banks and
Federal funds sold. Generally, Federal funds sold are held for one day.

(k)  Earnings Per Share
In  March  1997,  the  Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial  Accounting  Standards  ("SFAS") No. 128,  "Earnings  per
Share". SFAS No. 128 establishes standards for computing and presenting earnings
per share ("EPS") and applies to all entities with publicly held common stock or
potential common stock.  Basic EPS excludes dilution and is computed by dividing
earnings  available to common  stockholders  by the  weighted-average  number of
common  shares  outstanding  for the period.  Diluted EPS includes the potential
dilutive  securities  using the treasury stock method.  The Company  adopted the
requirements  of SFAS No. 128 in the year ended  September  30,  1998 (note 14).
Prior years EPS amounts have been restated to conform to SFAS 128.

(l)  Stock Options
The Company has elected to account  for its stock  options  under the  intrinsic
value based method with pro forma  disclosures  of net earnings and net earnings
per share,  as if the fair value based method of accounting  defined in SFAS No.
123,  "Accounting  for Stock Based  Compensation"  has been  applied.  Under the
intrinsic value based method,  compensation  cost is the excess,  if any, of the
quoted  market  price of the stock at the grant date or other  measurement  date
over the amount an employee must pay to acquire the stock.  Under the fair value
based method, compensation cost is measured at the grant date based on the value
of the award and is  recognized  over the service  period,  which is usually the
vesting period.

(m)  Reclassifications
Certain  reclassifications  have  been  made to the 1997  and 1996  consolidated
financial statements to conform with the presentation adopted in 1998.

(n)  Recent Accounting Pronouncements
SFAS No. 130,  "Reporting  Comprehensive  Income" was issued in June 1997 and is
effective for the Company for the fiscal year  beginning  October 1, 1998.  SFAS
No. 130 establishes standards for reporting and displaying  comprehensive income
and its components in a full set of general-purpose  financial  statements.  The
Company does not expect any material changes to its current  reporting format in
response to SFAS No. 130.

SFAS  No.  131,   "Disclosure  about  Segments  of  an  Enterprise  and  Related
information"  was issued in June 1997 and is  effective  for the Company for the
fiscal year beginning  October 1, 1998. SFAS No. 131  establishes  standards for
reporting operating segments by public business  enterprises in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports issued to shareholders. SFAS No.
131 also  establishes  standards  for related  disclosures  about  products  and
services, geographic areas, and major customers. The Company does not expect any
significant changes to its current reporting format in response to SFAS No. 131.
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
First Georgia Holding, Inc. and subsidiary

SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" was
issued in June 1998 and  establishes  accounting  and  reporting  standards  for
derivative  instruments and hedging  activities.  SFAS No. 133 will be effective
for the Company's  fiscal year ending  September 30, 2000.  The Company does not
currently  have  any  derivative  instruments  nor  is it  involved  in  hedging
activities.

In March 1998, the Accounting  Standards Executive Committee issued Statement of
Position  98-1,  "Accounting  for the Costs of Computer  Software  Developed  or
Obtained for Internal Use" (SOP 98-1) which provides guidance for the accounting
of such costs.  SOP 98-1 is effective for the Company for the fiscal year ending
September 30, 2000. This SOP is not expected to have a significant effect on the
Company.

In April 1998, the Accounting  Standards Executive Committee issued Statement of
Position 98-5,  "Reporting on the Costs of Start-Up Activities" (SOP 98-5) which
requires costs of start-up  activities and organization  costs to be expensed as
incurred. The adoption of SOP 98-5 will not have any effect on the Company.

(2)  Investment Securities Held to Maturity
Investment securities held to maturity consist of the following:
<TABLE>

                                            Amortized    Unrealized  Unrealized
                                                Cost        Gains      Losses      Fair Value
                                          ------------  -----------  -----------  ------------
<S>                                        <C>            <C>          <C>        <C>
September 30, 1998:

  Mortgage-backed securities and SBA's     $ 10,720,230   $ 192,453     $ 4,466   $ 10,908,217
  State and municipal                           845,000      14,349          -         859,349
                                           ------------  -----------  -----------  ------------
                                           $ 11,565,230   $ 206,802     $ 4,466   $ 11,767,566
                                          =============  ===========  ===========  ============
September 30, 1997:

  U.S. Government agencies                  $ 1,500,000         $ -    $ 28,191    $ 1,471,809
  Mortgage-backed securities and SBA's        7,314,453      89,112           -      7,403,565
  State and municipal                           570,000           -       3,517        566,483
  Corporate bonds                               250,000          -           -         250,000
                                           ------------  -----------  -----------  ------------
                                            $ 9,634,453    $ 89,112    $ 31,708    $ 9,691,857
                                          =============  ===========  ===========  ============
</TABLE>

A summary  of  investment  and  mortgage-backed  securities  by  maturity  as of
September   30,  1998  is  shown   below.   The  entire   principal   amount  of
mortgage-backed  securities  is  shown  in the  year  of  contractual  maturity.
Expected maturities will differ from the maturities shown because borrowers have
the right to prepay obligations without prepayment  penalties,  and principal is
paid down over the contractual life of the mortgage-backed securities.

                                       Amortized Cost             Fair Value
                                 --------------------    ---------------------

Due within 1 year                     $         --             $         --
Due after 1 year through 5 years         1,223,390                1,242,008
Due after 5 years through 10 years         244,798                  248,348
Due after 10 years                      10,097,042               10,277,210
                                 --------------------    ---------------------
                                      $ 11,565,230             $ 11,767,566
                                 ====================    =====================
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
First Georgia Holding, Inc. and subsidiary

During an  examination  of the Bank as of March 31,  1998,  the Office of Thrift
Supervision  (OTS)  determined  that one of the  Bank's  investment  securities,
classified as held to maturity, was not a permissible  investment.  Accordingly,
the Company  sold a corporate  bond having a par value of $250,000 at a net loss
of $3,125.  This change in  circumstances  resulting in the sale of this held to
maturity   investment  is  not   inconsistent   with  the   Company's   original
classification  as  prescribed  in  SFAS  115.  The  Company  did not  sell  any
investments during 1997 or 1996.

At September 30, 1998 and 1997, the Company had pledged approximately $9,793,000
and  $7,735,000,  respectively,  of its  securities to government  and municipal
depositors.

(3) Loans Receivable
Loans receivable at September 30, are summarized as follows:

                                             1998                 1997
                                       ------------------   ------------------
Real estate mortgage loans               $102,828,455         $102,419,019
Real estate construction loans             27,108,632           16,996,563
Consumer loans                             11,830,203           10,383,515
Commercial and other loans                 10,593,354            9,137,932
                                         -------------       --------------
                                          152,360,644          138,937,029

Less:
   Deferred loan fees and
     costs, net                                83,035              (12,921)
   Unearned interest income                    56,341               72,995
   Allowance for loan losses                  968,632            1,012,322
                                         -------------        -------------
                                         $151,252,636         $137,864,633
                                         =============        =============

An analysis of the activity in the allowance for loan losses is as follows:

                                      1998            1997          1996
                                 --------------- ---------------- --------------
Balance at beginning of year         $1,012,322       $ 955,288     $1,003,569
Provision for loan losses                 6,163         309,679         48,104
Recoveries                              193,904          95,571        112,901
Charge-offs                            (243,757)       (348,216)      (209,286)
                                    -------------   ------------    ------------
Balance at end of year                $ 968,632      $1,012,322      $ 955,288
                                    =============   ============    ============

As of September 30, 1998 and 1997,  outstanding loan  commitments,  exclusive of
the undisbursed portion of loans in process,  amounted to approximately $376,000
and $243,000,  respectively,  with  variable  interest  rates and  approximately
$326,000 and $316,000, respectively, with fixed interest rates. The Bank is also
committed  to extend  standby  letters  of  credit  amounting  to  approximately
$581,000  and  $636,000,  respectively,  at  September  30,  1998 and  1997.  In
addition,  customers  of the  Bank  have the  ability  to  borrow  approximately
$1,390,000  and $954,000,  respectively,  at September 30, 1998 and 1997,  under
existing  credit  card  agreements.  It is the opinion of  management  that such
commitments do not involve more than the normal risk of loss.
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
First Georgia Holding, Inc. and subsidiary

(3) Loans Receivable (Cont'd)
At  September  30,  1998 and 1997,  the Bank had  nonaccrual  loans  aggregating
approximately $2,364,000 and $1,959,000,  respectively.  The effects of carrying
nonaccrual loans during 1998, 1997, and 1996 resulted in a reduction of interest
income of approximately $50,000,  $49,000, and $93,000,  respectively.  Impaired
loans  totaled  approximately  $0 and $366,000 at  September  30, 1998 and 1997,
respectively.  Based upon the fair value of the related  collateral  there is no
specific  allowance  required  on these  impaired  loans.  The  interest  income
recognized on impaired loans for the years ended September 30, 1998 and 1997 was
approximately $0 and $8,000, which was recorded on a cash basis.

At September 30, 1998 and 1997, the Bank had no loans held for sale.

The Bank has direct and indirect  loans  outstanding  to certain  directors  and
executive  officers.  All of these  loans  were made in the  ordinary  course of
business  on  substantially  the  same  terms,   including   interest  rate  and
collateral,  as those  prevailing at the time for comparable  transactions  with
other  persons,  and did not involve more than the normal credit risk or present
other unfavorable features. The following is a summary of such loans outstanding
and the activity in these loans for 1998 and 1997:

                                               1998              1997
                                          ---------------   ---------------

Balance at beginning of year                  $5,039,532        $5,462,436
New borrowings                                 5,468,991         6,712,607
Repayments                                    (6,403,271)       (6,289,703)
                                          ---------------   ---------------
Balance at end of year                        $4,105,252        $5,039,532
                                          ===============   ===============

As of September  30, 1998,  1997,  and 1996,  the Bank was  servicing  loans for
others  aggregating  approximately  $9,050,000,   $2,308,000,   and  $2,003,000,
respectively.

(4)  Premises and Equipment
Premises and equipment at September 30 are summarized as follows:

                                                    1998               1997
                                              ---------------    ---------------
Land                                                $ 566,681          $ 641,681
Buildings and improvements                          2,533,916          2,008,109
Buildings under capital lease                         401,931            401,931
Leasehold improvements                                199,209            197,674
Construction in progress                                    -             86,427
Furniture, equipment, and automobiles               4,041,600          2,547,004
                                              ---------------    ---------------
                                                    7,743,337          5,882,826
Less accumulated depreciation
    and amortization                                3,241,098          2,701,208
                                              ---------------    ---------------
Premises and equipment, net                        $4,502,239         $3,181,618
                                              ===============    ===============

(5) Accrued Interest Receivable
Accrued interest receivable at September 30 is summarized as follows:

                                            1998              1997
                                       ---------------    -------------
Loans                                       $ 969,929         $887,325
Investment securities                          11,045           16,845
Mortgage-backed securities                     71,856           55,990
                                       ---------------    -------------
                                           $1,052,830         $960,160
                                       ===============    =============
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
First Georgia Holding, Inc. and subsidiary

(6)  Deposits
Deposits are summarized at September 30 as follows:

<TABLE>

                                                                1998                                 1997
                                                 ----------------------------------   ----------------------------------
                                                                        Weighted                             Weighted
                                                                         Average                              Average
                                                      Balance             Rate             Balance             Rate
                                                  ------------------    ------------   ------------------    ------------
<S>                                                   <C>                 <C>               <C>                <C>    
Non-interest demand deposits                          $ 13,008,516           -              $ 5,992,232           -
Negotiable orders of withdrawal                         16,731,634        1.25%              11,429,277        1.25%
Money market deposit accounts                            8,895,429        2.35%               4,756,047        2.35%
Savings deposits                                         6,972,235        2.30%               4,319,817        2.30%
Certificates of deposits:
   Certificates less than $100,000                      96,408,671        5.69%              84,492,890        5.90%
   Jumbo certificates                                   20,873,620        6.14%              18,899,673        6.10%
                                                 ------------------    ------------   ------------------    ------------
                                                      $162,890,105        5.04%            $129,889,936        4.97%
                                                 ==================    ============   ==================    ============
</TABLE>

Interest expense on deposits is summarized below:

                                         1998              1997            1996
                                    --------------- -------------  -------------
Negotiable orders of withdrawal          $ 164,909     $ 142,967      $ 219,520
Money market deposit accounts              173,482        73,629         60,966
Savings deposits                           118,948        96,646        108,398
Certificates of deposit:
   Certificates less than $100,000       5,276,408     4,837,654      4,382,380
   Jumbo certificates                    1,317,845     1,049,195        930,813
Less:
    Early withdrawal penalties              30,238        24,395         19,747
                                    --------------- -------------  -------------
   Total                                $7,021,354    $6,175,696     $5,682,330
                                    =============== =============  =============

At September 30, 1998, the rates on deposits were as follows:

Negotiable orders of withdrawal                 1.25%
Money market deposit accounts                   2.35
Savings deposits                                2.30
Certificates of deposits                        2.75 - 6.25

As of September 30, 1998, and 1997, the Bank had no brokered deposits.

The amount and maturities of  certificates of deposits at September 30, 1998 are
as follows:

               Year Ending September 30,              Amount
-----------------------------------------------  -----------------
                         1999                        $ 85,703,891
                         2000                          20,825,016
                         2001                           4,174,266
                         2002                           1,933,251
                         2003                           4,587,746
                      After 2003                           58,121
                                                     -------------
                                                     $117,282,291
                                                     =============
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
First Georgia Holding, Inc. and subsidiary

(7) Federal Home Loan Bank Advances
Advances form Federal Home Loan Bank at September 30 are summarized as follows:

                                   1998                            1997
                          --------------------------     -----------------------
 Due During Year Ending                  Weighted                     Weighted
     September 30,            Amount    Average Rate        Amount  Average Rate
------------------------  ---------------------------   ------------------------
              1998       $      --              --      $ 7,750,000     5.90%
              1999         2,100,000           6.19%      2,100,000     6.19%
              2000         3,000,000           6.77%      3,000,000     6.77%
              2001              --              --          500,000     7.90%
              2002         1,500,000           6.41%      1,000,000     5.66%
              2008         2,000,000           5.51%           --        --
                         -----------------------------------------------------
                         $ 8,600,000           6.27%    $14,350,000     5.79%
                         =====================================================

The Bank has the ability to borrow  additional  funds from the Federal Home Loan
Bank.  The  advances and any future  borrowings  are  collateralized  by certain
qualifying  real estate loans under a security  agreement  with the Federal Home
Loan Bank.  Additionally,  all stock of the Federal Home Loan Bank is pledged as
collateral for the advances.

(8)  Stockholders' Equity and Regulatory Matters
The Bank is subject to various regulatory capital  requirements  administered by
the federal banking agencies.  Failure to meet minimum capital  requirements can
initiate certain mandatory,  and possible additional  discretionary,  actions by
regulators  that,  if  undertaken,  could have a direct  material  effect on the
Bank's  financial   statements.   Under  capital  adequacy  guidelines  and  the
regulatory  framework for prompt corrective  action, the Bank must meet specific
capital  guidelines  that involve  quantitative  measures of the Bank's  assets,
liabilities,  and certain off-balance-sheet items as calculated under regulatory
accounting  practice.  The Bank's capital  amounts and  classification  are also
subject to  qualitative  judgements by the  regulators  about  components,  risk
weightings, and other factors.

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require the Bank to maintain  minimum  capital  amounts and ratios (set forth in
the table below).  The Bank's primary  regulatory  agency, the OTS, requires the
Bank  to  maintain  minimum  ratios  of  tangible  capital  (as  defined  in the
regulations)  of 1.5%,  core capital (as  defined) of 4%, and total  capital (as
defined)  of  8%.  The  Bank  is  also  subject  to  prompt   corrective  action
requirements set forth by the Federal Deposit  Insurance  Corporation  ("FDIC").
The FDIC  requires  the Bank to  maintain  minimum  total and Tier 1 capital (as
defined in the  regulations)  to  risk-weighted  assets (as  defined),  and core
capital (as defined).  Management  believes,  as of September 30, 1998, that the
Bank meets all capital adequacy requirements to which it is subject.

As of September 30, 1998,  the most recent  notification  date from the OTS, the
Bank was categorized as "Well  Capitalized"  under the regulatory  framework for
prompt corrective action. To be categorized as "Well Capitalized," the Bank must
maintain minimum tangible,  core, and risk-based  capital ratios of at least 6%,
5%,  and 10%,  respectively.  There  are no  conditions  or  events  since  that
notification that management  believes have changed the institution's  category.
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
First Georgia Holding, Inc. and subsidiary

(8)  Stockholders' Equity and Regulatory Matters (Cont'd)
<TABLE>

                                                                    For Capital Adequacy      To Be Categorized as "Well
                                                                        Purposes              Capitalized" Under Prompt
                                           Actual                   (For OTS Purposes)       Corrective Action Provisions
                                  ----------------------------  ---------------------------  -----------------------------
As of September 30, 1998          Amount          Ratio             Amount        Ratio         Amount        Ratio
                              --------------  ------------       ------------ -----------    ------------   --------
<S>                             <C>              <C>              <C>             <C>       <C>             <C>
Tangible Capital                $14,335,000       7.58%$           2,837,000      1.50%           N/A        N/A
(to tangible assets)
Core Capital                     15,253,000       8.03%            7,602,000      4.00%      9,503,000       5.00%
(to adjusted tangible assets)
Total capital                    16,222,000      10.22%           12,698,000      8.00%     15,872,000      10.00%
(to risk-weighted assets)
Tier 1 capital                   15,253,000       9.61%             N/A           N/A        9,523,000       6.00%
(to risk-weighted assets)

                                                                    For Capital Adequacy      To Be Categorized as "Well
                                                                        Purposes              Capitalized" Under Prompt
                                           Actual                   (For OTS Purposes)       Corrective Action Provisions
                                  ----------------------------  ---------------------------  -----------------------------
As of September 30, 1997          Amount          Ratio             Amount        Ratio         Amount        Ratio
                              --------------  ------------       ------------ -----------    ------------   --------

Tangible Capital                   $ 12,216,000      7.7%         $ 2,379,000     1.50%           N/A             N/A
(to tangible assets)
Core Capital                         13,246,000      8.3%           6,385,000     4.00%       $ 7,981,000         5.00%
(to adjusted tangible assets)
Total capital                        14,258,000     10.10%         11,295,000     8.00%        14,118,000        10.00%
(to risk-weighted assets)
Tier 1 leverage Capital
(to risk-weighted assets)            13,246,000      9.38%          N/A           N/A           8,471,000        6.00%

</TABLE>

The  following  is a  reconciliation  of capital  for the Bank  under  generally
accepted accounting principles (GAAP) to regulatory capital:
<TABLE>

                                              Tangible               Core               Risk-Based
As of September 30, 1998                      Capital               Capital              Capital
                                          -----------------     ----------------     -----------------
<S>                                            <C>                  <C>                   <C> 
GAAP capital                                   $15,253,000          $15,253,000           $15,253,000
General allowance for loan losses                        -                    -               969,000
Intangible assets                                 (918,000)                  -                     -
                                          -----------------     ----------------     -----------------
Regulatory capital                              14,335,000           15,253,000            16,222,000

Minimum capital requirement                      2,837,000            7,602,000            12,698,000
                                          -----------------     ----------------     -----------------
Regulatory capital excess                      $11,498,000          $ 7,651,000           $ 3,524,000
                                          =================     ================     =================
As of September 30, 1997

GAAP capital                                   $13,246,000          $13,246,000           $13,246,000
General allowance for loan losses                        -                    -             1,012,000
Intangible assets                               (1,030,000)                  -                     -
                                          -----------------     ----------------     -----------------
Regulatory capital                              12,216,000           13,246,000            14,258,000

Minimum capital requirement                      2,379,000            6,385,000            11,295,000
                                          -----------------     ----------------     -----------------
Regulatory capital excess                      $ 9,837,000          $ 6,861,000           $ 2,963,000
                                          =================     ================     =================
</TABLE>

<PAGE>

NOTES TO

(9)  Income Taxes
The components of income tax expense (benefit) are as follows:
<TABLE>


                                            1998              1997            1996
                                       ---------------    -------------   -------------
   <S>                                     <C>              <C>             <C>    
   Federal:  Current                       $1,119,135         $733,530        $651,665
                  Deferred                    (29,200)          68,334        (287,279)
                                      ---------------    -------------   -------------
                                            1,089,935          801,864         364,386

   State:  Current                            133,386           23,768               -
              Deferred                         (5,482)          12,829               -
                                      ---------------    -------------   -------------
                                              127,904           36,597               -
                                      ---------------    -------------   -------------
                                           $1,217,839         $838,461        $364,386
                                      ===============    =============   =============

The  difference  between the actual  provision for income taxes and income taxes
computed at the Federal statutory rate of 34% is as follows:

                                             1998              1997            1996
                                        ---------------    -------------   -------------
Federal taxes at statutory rate             $1,098,962         $826,923        $382,756
Increase (decrease) resulting from:
  State income taxes, net                       88,035           24,155               -
  Amortization of intangibles                    9,079            9,530          12,534
  Tax exempt income                             (8,471)          (7,328)         (7,957)
  Other, net                                    30,234          (14,819)        (22,947)
                                       ---------------    -------------   -------------
                                            $1,217,839         $838,461        $364,386
                                       ===============    =============   =============
</TABLE>

The tax effects of temporary  differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities as of September 30, 1998
and 1997 are presented below:

                                                      1998             1997
                                                  -------------    -------------
   Deferred tax assets:
      Allowance for loan losses                       $314,365         $295,143
      Deferred loan costs                               31,520                -
      Property cost basis differences                    4,458           32,239
      Accrued liability                                 29,486           26,572
      Stock option compensation
        deduction                                      400,762               -
                                                 -------------    -------------
         Total gross deferred tax assets               780,591          353,954
         Less valuation allowance                           -                -
                                                 -------------    -------------
         Net deferred tax assets                       780,591          353,954
                                                 -------------    -------------
   Deferred tax liabilities:
      Depreciation                                      11,137           15,037
      FHLB stock dividends                             177,008          177,008
      Deferred loan fees                                    -             4,905
                                                 -------------    -------------
         Total deferred tax liabilities                188,145          196,950
                                                 -------------    -------------
       Net deferred tax assets                        $592,446         $157,004
                                                 =============    =============
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
First Georgia Holding, Inc. and subsidiary


(9)  Income Taxes (Cont'd)
Prior to January 1, 1996, under the Internal Revenue Code ("Code"),  the Company
was allowed a special bad debt  deduction  related to  additions to tax bad debt
reserves  established for the purpose of absorbing losses. The provisions of the
Code  permitted  the Company to deduct from taxable  income an allowance for bad
debts  based on the  greater of a  percentage  of  taxable  income  before  such
deductions or actual loss  experience.  Retained  earnings at September 30, 1998
include  approximately  $248,000  for  which  no  deferred  Federal  income  tax
liability has been recognized. The amounts represent an allocation of income for
bad debt deductions for tax purposes only. Reduction of amounts so allocated for
purposes other than tax bad debt losses or  adjustments  arising from carry back
of net operating  losses would create income for tax purposes only,  which would
be subject to the then current corporate income tax rate.

(10)  Leases
On September  28, 1987,  the Bank  entered into a  sale-leaseback  of one of its
branches.  The  facility  has been  capitalized  and the related  obligation  is
recorded as a liability in the  accompanying  financial  statements based on the
present value of future  minimum lease  payments.  The lease term expires August
28, 2007.  Premises and equipment  includes  buildings  under capital  leases of
$403,466 and accumulated  amortization of $202,323 and $182,557 at September 30,
1998 and 1997, respectively.

The present value of future  minimum  capital lease payments as of September 30,
1998, are:

Year ending September 30,
1999                                                                  $ 39,348
2000                                                                    39,348
2001                                                                    39,348
2002                                                                    39,348
2003                                                                    39,348
2004 and later years                                                   157,392
                                                                      ---------
    Total minimum lease payments                                       354,132
    Less amount representing interest at 10%                           125,034
                                                                      ---------
    Present value of future minimum capital lease payments            $229,098
                                                                    ===========

The Bank is obligated under various  noncancelable  operating leases,  primarily
for  operating  facilities  that  expire  over the next four  years.  The future
minimum lease payments under these operating leases as of September 30, 1998 are
as follows:

Year ending September 30,
1999                                                $ 25,000
2000                                                  25,000
2001                                                  25,000
2002                                                     685
                                                   ----------
    Total minimum lease payments                    $ 75,685
                                                   ==========

Total rent  expense was  approximately  $94,000,  $109,000,  and $75,000 for the
years ended September 30, 1998, 1997, and 1996, respectively.

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fisrt Georgia Holding, Inc. and subsidiary

(11)  Sale of Branches
Effective  March 7, 1997, the Bank completed the sale of its Hinesville  branch,
which had deposits of  $6,354,840  and net  premises and  equipment of $162,099.
This transaction  resulted in a gain of $433,760 which is reported separately in
the accompanying consolidated statements of operations.  Effective September 30,
1998,  the Bank entered into an  agreement to sell its  Blackshear  branch ("the
Branch").  The  terms of the  agreement  provide  that the  Bank  will  sell the
deposits,  buildings and improvements,  and fixed assets of the Branch. Deposits
in the Branch were approximately $9.1 million at September 30, 1998. The sale is
expected to result in a gain.

(12)  Employee Benefit Plans
The  Company  has  a  401(k)  Profit   Sharing  Plan  (the  Plan)  which  covers
substantially  all  of its  employees.  The  Company  matches  50%  of  employee
contributions  to  the  Plan,  up to 3% of an  employee's  salary.  The  Company
contributed  $39,712,  $29,481, and $27,376 to the Plan in 1998, 1997, and 1996,
respectively.

Also, the Company has an Employee Stock Purchase Plan which covers substantially
all of its  employees.  Employees pay 85% of the price at which the Company buys
its stock in the open market.  During 1998 and 1997,  approximately 4,860 shares
and 5,710 shares, respectively, were purchased by employees. As a result of such
employee stock  purchases,  the Company  incurred  employee  benefits expense of
approximately  $12,000,  $9,000 and $11,000 for the years  ended  September  30,
1998, 1997 and 1996, respectively.

(13)  Stock Option Plan
During  1995,  the Company  adopted a  nonqualified  Stock Option Plan (the 1995
Option  Plan).  The  Company has  reserved  688,750  shares of common  stock for
issuance under the 1995 Option Plan.  The Company also has a nonqualified  Stock
Option  Plan (the Option  Plan)  adopted  prior to 1995.  The Company has 25,313
options outstanding under this plan.

If compensation  cost for stock option grants had been  determined  based on the
fair value at the grant dates for 1998, 1997 and 1996 consistent with the method
prescribed by SFAS No. 123, the Company's net earnings and earnings per share on
a diluted  basis  would have been  adjusted to the pro forma  amounts  indicated
below:

Outstanding options,  consisting of five-year  non-qualified stock options, vest
and  become  exercisable  over a five  year  period  from  date  of  grant.  The
outstanding  options expire five years from the date of grant or upon retirement
from the  Company,  and are  contingent  upon  continued  employment  during the
applicable five-year period.

Options for a total of 240,000 shares were granted on September 23, 1998.  Under
SFAS No. 123, for pro forma disclosure purposes,  the fair value of such options
of  $663,722 is to be expensed  over the vesting  period of five years.  As such
options  were  issued  at the end of fiscal  1998,  the  amount of  compensation
expense  for the year  ended  September  30,  1998 for pro  forma  purposes  was
insignificant. There were no stock options granted in 1997 or 1996. Accordingly,
the Company has omitted the pro forma financial statement  disclosures  required
by SFAS No. 123.

Under SFAS No. 123, the fair value of each option grant is estimated on the date
of  grant  using  the   Binomial   option-pricing   model  with  the   following
weighted-average  assumptions used for grants in 1998:  dividend yield of 1.50%,
expected  volatility of 33%,  risk-free  interest rate of 4.67%, and an expected
life of 5 years.

A summary  of the  status  of fixed  stock  option  grants  under the  Company's
stock-based  compensation  plans as of September  30, 1998,  1997 and 1996,  and
changes during the years ending on those dates is presented below:

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Georgia Holding, Inc., and subsidiary

(13)  Stock Option Plan (Cont'd)
Such amounts have been adjusted to reflect 50% stock dividends  accounted for as
3-for-2  stock splits in each of the years ended  September  30, 1998,  1997 and
1996.
<TABLE>

                                                1998                        1997                     1996
                                   ------------------------------ ----------------------------- ---------------------------------
                                                 Weighted Average              Weighted Average               Weighted Average
                                    Options       Exercise Price   Options      Exercise Price   Options       Exercise Price
                                   ---------     ---------------- --------    ----------------- ---------     ------------------
<S>                                <C>                  <C>       <C>                 <C>     <C>                    <C>
Outstanding - October 1             684,612             $ 1.72    684,612             $ 1.72    785,862              $ 1.60
Granted                             240,000               9.32          -               -             -                -
Exercised                          (220,549)              1.09          -               -      (101,250)               0.84
Cancelled                                -                -            -                -            -                 -
                                   ---------     ---------------- --------    ----------------- ---------     ------------------
Outstanding - September 30          704,063               4.50    684,612               1.72    684,612                1.72
                                   ---------     ---------------- --------    ----------------- ---------     ------------------
Options exercisable at year end     464,063             $ 2.01    684,612             $ 1.72    426,303              $ 1.50

Fair value of options granted
  during the year                 $ 663,722
</TABLE>


The following table summarizes information about fixed stock options outstanding
at September 30, 1998:

                          Exercise    Options         Options   Weighted Average
                            Price   Outstanding      Exercisable  Remaining Life
                       ------------ -----------      ----------- ---------------
                            0.99       25,313          25,313          3.63
                            1.93      101,250         101,250          1.79
                            2.12      337,500         337,500          1.79
                            8.88      120,000              --          4.98
                            9.76      120,000              --          4.98
                       ------------ -----------      ----------- ---------------
                                      704,063         464,063
                                    ===========      ==========


Remaining non-exercisable options as of September 30, 1998 become exercisable as
follows:

                             1999             30,000
                             2000             30,000
                             2001             70,000
                             2002             70,000
                             2003             40,000
                                            ---------
                                             240,000
                                            =========
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Georgia Holding, Inc. and subsidiary

(14)  Net Income Per Share
Following is a  reconciliation  of the  denominator  used in the  computation of
basic and diluted earnings per common share.

                                               Years Ended September 30,
                                             ----------------------------------
                                                1998        1997         1996
                                             ----------  ----------   ---------

Weighted average number of common shares
  outstanding - Basic                        4,742,213   4,578,478    4,529,284
Incremental shares from the assumed
  conversion of stock options                  249,630     268,418      205,694
                                             ----------  ----------   ---------
          Total - Diluted                    4,991,843   4,846,896    4,734,978
                                            ===========  ==========   =========

The  incremental  shares  from the  assumed  conversion  of stock  options  were
determined using the treasury stock method under which the assumed proceeds were
equal to the amount  that the Company  would  receive  upon the  exercise of the
options plus the amount of the tax benefit that would be credited to  additional
paid-in capital assuming exercise of the options.  The assumed proceeds are used
to purchase  outstanding  common  shares at the average  market price during the
period.

(15) Condensed  Financial  Information of First Georgia  Holding,  Inc.  (Parent
Only) First  Georgia  Holding,  Inc.,  was  organized  December  16,  1987.  The
following represents parent company only condensed financial information.

                                  September 30,
                                                -------------------------------
Condensed Balance Sheets                            1998              1997
                                                -------------    --------------

Assets
Cash                                            $     27,386    $     24,617
Other assets                                         400,762          76,883
Investment in subsidiary                          15,253,064      13,245,770
                                                -------------    --------------
Total assets                                    $ 15,681,212    $ 13,347,270
                                                =============    ==============
Liabilities and Stockholders' Equity

Stockholders' Equity
Common stock                                    $  4,798,972    $  4,578,478
Additional paid-in capital                         3,116,021       2,697,038
Retained earnings                                  7,766,219       6,071,754
                                                -------------    --------------
Total liabilities and stockholders' equity      $ 15,681,212    $ 13,347,270
                                                =============    ==============
<TABLE>


                                                                  Years Ended September 30,
                                                    -----------------------------------------------
Condensed Statements of Operations                           1998            1997            1996
                                                        ------------ ---------------   -------------
<S>                                                    <C>             <C>             <C>  
Dividends from Bank                                    $     85,000    $    260,222    $    194,000
Expenses                                                     (1,015)        (15,258)        (19,500)
                                                        ------------ ---------------   -------------
Income before equity in undistributed income of Bank         83,985         244,964         174,500
Equity in undistributed income of Bank                    2,007,300       1,348,701         586,866
Income tax expense                                           76,883               -               -
                                                        ------------ ---------------   -------------
Net Income                                             $  2,014,402    $  1,593,665    $    761,366
                                                        ============ ===============   =============
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
First Georgia Holding, Inc. and subsidiary

(15) Condensed Financial Information of First Georgia Holding, Inc. (Parent Only) (Cont'd)

</TABLE>
<TABLE>


                                                                                      Years Ended September 30,
                                                                        ---------------------------------------------------
Condensed Statements of Cash Flows                                           1998               1997              1996
                                                                        ---------------    ---------------    -------------
<S>                                                                     <C>                <C>                <C>   
Operating Activities:
   Net income                                                               $2,014,402         $1,593,665         $761,366
   Adjustments to reconcile net income to net
   cash provided by operating activities:
     Equity in undistributed income of Bank                                 (2,007,300)        (1,348,701)        (586,866)
      Decrease in other assets                                                  76,889                 -                -
                                                                        ---------------    ---------------    -------------
  Net cash provided by operating activities                                     83,991            244,964          174,500
                                                                        ---------------    ---------------    -------------
Financing Activities:
   Dividends paid on common stock                                             (319,937)          (162,794)        (132,664)
   Fractional shares related to stock split paid in cash                          (949)                 -                -
   Net proceeds from exercise of stock options                                 239,664                  -           85,125
   Repayments of other borrowed money                                               -             (92,000)        (100,000)
                                                                        ---------------    ---------------    -------------
  Net cash used in financing activities                                        (81,222)          (254,794)        (147,539)
                                                                        ---------------    ---------------    -------------
Increase (decrease) in cash and cash equivalents                                 2,769             (9,830)          26,961
Cash and cash equivalents at beginning of year                                  24,617             34,447            7,486
                                                                        ---------------    ---------------    -------------
Cash and cash equivalents at end of year                                      $ 27,386           $ 24,617         $ 34,447
                                                                        ===============    ===============    =============
</TABLE>


The  primary  source  of  funds  available  to the  Company  to pay  stockholder
dividends and other  expenses is dividends  from its Bank.  Regulatory  agencies
impose restrictions on the amounts of dividends that may be declared by the Bank
and requires  maintenance  of minimum  capital  amounts.  At September 30, 1998,
approximately  $2,263,000  of retained  earnings  were  available  for  dividend
declaration without prior regulatory approval.

(16)  Commitments and Contingencies
The Bank is involved in a claim arising in the ordinary  course of business.  In
the opinion of management, the ultimate disposition of this matter will not have
a material adverse effect on the Bank's or the Company's  financial  position or
results of operations.

(17)  Fair Value of Financial Instruments
SFAS No. 107, "Disclosures About Fair Value of Financial Instruments",  requires
disclosure of fair value of financial instruments,  whether or not recognized on
the face of the balance  sheet,  for which it is  practicable  to estimate  that
value.  In cases where quoted market prices are not  available,  fair values are
based on estimates  using present  value or other  valuation  techniques.  Those
techniques are  significantly  affected by the assumptions  used,  including the
discount  rate and estimates of future cash flows.  In that regard,  the derived
fair value  estimates  cannot be  substantiated  by  comparison  to  independent
markets and, in many cases, could not be realized in immediate settlement of the
instrument.  These estimates are subjective in nature and involve  uncertainties
and matters of significant  judgment and,  therefore,  cannot be determined with
precision. Changes in assumptions would significantly affect the estimates. SFAS
No. 107 excludes certain financial instruments and all nonfinancial  instruments
from its disclosure requirements.  Fair value estimates are based on existing on
and off-balance sheet financial  instruments  without attempting to estimate the
value of  anticipated  future  business and the value of assets and  liabilities
that  are  not  considered   financial   instruments.   In  addition,   the  tax
ramifications  related to the realization of the unrealized gains and losses can
have a significant  effect on fair value  estimates and have not been considered
in any of the estimates. Accordingly, the aggregate fair value amounts presented
do not represent the underlying value of the Company.

The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments.

<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
First Georgia Holding, Inc. and subsidiary

(17)  Fair Value of Financial Instruments (Cont'd)
Cash and due from banks, interest-bearing deposits in other banks, Federal funds
sold and accrued interest  receivable:  The carrying amounts  approximate  those
assets' fair values because of their short-terms to maturity.

Investment securities: Fair values for investment securities are based on quoted
market prices, where available. If quoted market prices are not available,  fair
values are based on quoted market prices of comparable instruments.

Loans  Receivable:  For variable-rate  loans that reprice  frequently and are of
normal credit risk, fair values are considered to approximate  carrying  values.
The fair values for all other loans are  estimated  using  discounted  cash flow
analyses,  using interest rates  currently  being offered for loans with similar
terms to borrowers of similar credit quality.

Off-balance sheet instruments:  Fair values for the Company's  off-balance sheet
instruments  are based on a comparison with terms,  including  interest rate and
commitment  periods currently being offered in similar  agreements,  taking into
account credit  worthiness of the counter parties.  The carrying and fair values
of  off-balance-sheet  instruments  at September 30, 1998, are the same based on
the fact that the Company  generally  does not offer lending  commitments to its
customers  for  long  periods  and,  therefore,  the  underlying  rates  of  the
commitments approximate market rates.

Deposits:  Fair values for  fixed-rate  certificates  of deposits are  estimated
using a discounted cash flow calculation that considers interest rates currently
being offered on certificates of similar terms to maturity. The carrying amounts
of all other deposits, due to their nature, approximate their fair value.

Federal Home Loan Bank advances:  Fair values for fixed-rate borrowings from the
Federal Home Loan Bank are estimated  using a discounted  cash flow  calculation
that  considers  interest rates  currently  being offered on advances of similar
terms to maturity.

The following is a summary of the Company's  Financial  instruments at September
30, 1998 and 1997:
<TABLE>

                                                              1998                                     1997
                                               -------------------------------------   -------------------------------------
                                               -------------------------------------   -------------------------------------
                                                   Carrying            Estimated           Carrying            Estimated
                                                    Value             Fair Value             Value            Fair Value
<S>                                            <C>                 <C>                 <C>                 <C>    
 Assets

 Cash and due from banks                           $ 4,434,000          $ 4,434,000         $ 2,985,000         $ 2,985,000
                                               ----------------    -----------------   -----------------   -----------------
                                               ----------------    -----------------   -----------------   -----------------
 Interest bearing deposits in other
  financial institutions                             1,097,000            1,097,000           1,524,000           1,524,000
                                               ----------------    -----------------   -----------------   -----------------
                                               ----------------    -----------------   -----------------   -----------------
 Federal funds sold                                 12,180,000           12,180,000                   -                   -
                                               ----------------    -----------------   -----------------   -----------------
                                               ----------------    -----------------   -----------------   -----------------
 Investment securities                              11,565,000           11,768,000           9,635,000           9,692,000
                                               ----------------    -----------------   -----------------   -----------------
                                               ----------------    -----------------   -----------------   -----------------
 Loans                                             151,253,000          150,353,000         137,865,000         137,315,000
                                               ----------------    -----------------   -----------------   -----------------
                                               ----------------    -----------------   -----------------   -----------------

 Liabilities

 Deposits:
    Non-interest bearing                            13,009,000           13,009,000           5,992,000           5,992,000
                                               ----------------    -----------------   -----------------   -----------------
                                               ----------------    -----------------   -----------------   -----------------
    Interest-bearing demand and savings             32,599,000           32,599,000          20,505,000          20,516,000
                                               ----------------    -----------------   -----------------   -----------------
                                               ----------------    -----------------   -----------------   -----------------
    Certificates of deposit                        117,282,000          119,092,000         103,393,000         103,997,000
                                               ----------------    -----------------   -----------------   -----------------
                                               ----------------    -----------------   -----------------   -----------------
 Federal Home Loan Bank advances                     8,600,000            8,556,000          14,350,000          14,431,000
                                               ----------------    -----------------   -----------------   -----------------
                                               ----------------    -----------------   -----------------   -----------------

</TABLE>

<PAGE>


INDEPENDENT AUDITORS' REPORT







The Board of Directors and Stockholders
First Georgia Holding, Inc.
Brunswick, Georgia


We have audited the  accompanying  consolidated  balance sheets of First Georgia
Holding,  Inc. and subsidiary as of September 30, 1998 and 1997, and the related
consolidated statements of operations,  stockholders' equity, and cash flows for
years then ended. These consolidated financial statements are the responsibility
of the  Company's  management.  Our  responsibility  is to express an opinion on
these  consolidated  financial  statements based on our audits. The consolidated
financial  statements of the Company for the year ended  September 30, 1996 were
audited by other  auditors whose report,  dated  November 1, 1996,  expressed an
unqualified opinion on those statements.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated  financial statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion,  the 1998 and 1997  consolidated  financial  statements  present
fairly,  in all  material  respects,  the  financial  position of First  Georgia
Holding,  Inc. and subsidiary at September 30, 1998 and 1997, and the results of
their  operations  and their cash  flows for the years then ended in  conformity
with generally accepted accounting principles.




Deloitte & Touche LLP

Jacksonville, Florida
November 13, 1998

<PAGE>

SELECTED FINANCIAL AND OTHER DATA
---------------------------------

Selected  consolidated  financial data is presented  below as of and for each of
the years in the five-year period ended September 30, 1998.


                                  (Dollars in thousands, except per share data)
                              --------------------------------------------------
                                                   September 30,
                              --------------------------------------------------
                                    1998     1997     1996      1995     1994
                              --------------------------------------------------
 Balance Sheet Data:
--------------------
 Total assets                   $  190,463  159,701   146,915  132,742  133,870

 Loans receivable, net          $  151,253  137,865   122,431  110,432  113,579

 Total investments              $   11,566    9,634    10,326    9,181    7,511

 Deposits                       $  162,890  129,890   121,554  106,528  103,407

 Borrowings                     $    8,600   14,350    11,192   12,140   17,988

 Stockholders' equity           $   15,681   13,347    11,916   11,125    9,927

 Book value per share           $     3.27     2.92      2.60     2.48     2.22

 Number of shares outstanding        4,799    4,578     4,578    4,477    4,477

                                                    Year Ended
                                                   September 30,
                                ------------------------------------------------
                                     1998     1997     1996      1995     1994
                                ------------------------------------------------
 Income Statement Data:

 Interest income                $   15,078   12,784    11,794   11,626   10,213
 Interest expense                    7,832    6,939     6,549    6,407    5,544
                                ------------------------------------------------
 Net interest income                 7,246    5,845     5,245    5,219    4,669
 Provision for loan losses               6      310        48      214       39
 Other income                        1,997    1,643     1,004    1,268    1,198
 Other expense                       6,005    4,746     4,347    4,224    4,241
 SAIF special assessment                 -        -       727        -        -
                                ------------------------------------------------
 Income before income taxes and
 cumulative change in accounting
 principle                           3,232    2,432     1,127    2,049    1,587

 Income tax expense                  1,218      838       364      772      525
                                ------------------------------------------------
 Income before cumulative
 effect of a change in accounting
 principle                           2,014    1,594       763    1,277    1,062

Cumulative effect of a change
in accounting principle                  -        -         -        -        -
                               -------------------------------------------------
 Net income                     $    2,014    1,594       763    1,277    1,062
                               =================================================
 Income per share before
 cumulative effect of a change
 in accounting pri$ciple              0.42     0.35      0.23     0.42     0.35

 Cumulative effect of a change in
 accounting principle                    -        -        -         -        -
                               -------------------------------------------------
 Net income per share           $     0.42     0.35      0.23     0.42     0.35
                               =================================================

                                                      At or For
                                                     Year Ended
                                                    September 30,
                                  ----------------------------------------------
                                    1998     1997      1996     1995     1994
                                  ----------------------------------------------
 Other Data:
 Net income to average assets       1.21%    1.04%     0.87%    0.95%    0.79%
 Net income to average equity      14.60%   12.55%    10.32%   11.88%   11.04%
 Average equity to average assets   8.29%    8.28%     8.40%    8.01%    7.41%
 Number of full-service offices        7        7         8        6        7

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
----------------------------------------------------------------------
First Georgia Holding, Inc. and subsidiary

General
First Georgia  Holding,  Inc. (the Company) was organized in 1987 to acquire the
outstanding  common  stock of First  Georgia  Bank,  F.S.B.  (the  Bank or First
Georgia). On April 30, 1988, the Company became the sole shareholder of the Bank
and issued its stock to the former Bank  shareholders.  Management's  Discussion
and Analysis which follows,  relates primarily to the Bank since the Company has
not had material operations since it was organized.

First Georgia's net income depends on (a) its net interest income,  which is the
difference  between  its  interest  income  from loans and  investments  and its
interest expense on deposits and borrowings,  (b) its non-interest income, which
consists  principally of fee income  generated by First Georgia's retail banking
operations,  and (c) its non-interest  expenses,  such as employee  salaries and
benefits.  Interest income on loans and investments (yield) is a function of the
average  balances  outstanding  during the period and the average  rates earned.
Interest expense (cost of funds) is a function of the average amount of deposits
and  borrowings  outstanding  during the period and  average  rates paid on such
deposits  and  borrowings.  Retail  banking  fee  income,  consisting  mainly of
recurring  fees  collected for  deposit-related  services  rendered by the Bank,
varies  with the  volume of the Bank's  retail  banking  business.  Non-interest
expenses vary  primarily  with the number of employees,  expansion of facilities
and inflation.

The  Company  has  begun  an  internal   evaluation  of  the  Companys  computer
information  systems and has identified  the systems which will require  program
modifications or new software installations in order to be Year 2000" compliant.
The  Company  expects to incur  costs over the next three  years as the  Company
addresses these problems.  Costs to modify  existing  information  systems to be
Year 2000  compliant  will be  expensed  as  incurred  and costs  related to new
software or hardware installation will be capitalized.

Capital Resources
The following is a  reconciliation  at September 30, 1998 of the Bank's  capital
under generally accepted accounting principles to regulatory capital.

First Georgia Bank
 Stockholder's equity        $   15,253,000
Less:
 Intangible assets                  918,000
                                 ----------
     Tangible Capital            14,335,000
                                 ----------
Plus:
 Qualifying intangible assets       918,000
                                 ----------
     Core capital                15,253,000
                                 ----------
Plus:
 General allowance for loan losses  969,000
                                 ----------
      Risk-based capital     $   16,222,000
                                 ==========


Current  regulations  require financial  institutions to have minimum regulatory
tangible  capital  equal to 1.5% of adjusted  assets,  minimum  core  capital to
adjusted  assets  of  4%  (the  leverage  ratio),   and  risk-based  capital  to
risk-adjusted  assets of 8.0%.  The minimum core capital or leverage  ratio also
may be  increased  by the  Office of Thrift  Supervision  (the OTS) based on its
assessment of the institution's risk management systems and the level of overall
risk in the  individual  institution.  At September  30,  1998,  the Bank was in
compliance with its minimum capital requirements.

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Cont'd)
----------------------------------------------------------------------
First Georgia Holding, Inc. and subsidiary


The Bank's regulatory capital and the required minimum amounts, at September 30,
1998, are summarized in the following table.

                          Bank                 Required            Excess
                         Capital             Minimum Amount      (Deficiency)
                    -------------------    ----------------- -------------------
                       %         $            %       $         %       $
                    -------------------    ----------------- -------------------

Tangible capital      7.58  14,335,000      1.50  2,837,000   6.08   11,498,000
Core capital          8.03  15,253,000      4.00  7,602,000   4.03    7,651,000
Risk-based capital   10.22  16,222,000      8.00 12,698,000   2.22    3,524,000



As of September  30, 1998,  the Bank exceeded all the required  minimum  capital
amounts as demonstrated by the chart above.  The Bank had strong earnings during
the year which helped to strengthen its capital position.

The Federal Deposit  Insurance  Corporation  Improvement  Act (FDICIA)  requires
Federal  banking  agencies to take  "prompt  corrective  action" with respect to
institutions that do not meet minimum capital  requirements.  In addition to the
ratios described above, FDICIA introduced an additional capital measurement, the
Tier 1 risk-  based  capital  ratio.  The Tier 1 ratio is the ratio of Tier 1 or
core capital to total  risk-adjusted  assets.  FDICIA  establishes  five capital
tiers:  "well  capitalized,"   "adequately   capitalized,"   "undercapitalized,"
"significantly  undercapitalized,"  and critically  undercapitalized."  The five
capital tiers established by FDICIA and the regulator's minimum requirements for
each are summarized below.

                          Total           Tier 1
                        Risk-Based      Risk-Based
                       Capital Ratio   Capital Ratio   Leverage Ratio
----------------------------------------------------------------------

Well capitalized        10% or above    6% or above     5% or above

Adequately capitalized  8% or above     4% or above     4% or above

Undercapitalized        Less than 8%    Less than 4%    Less than 4%

Significantly
 undercapitalized       Less than 6%    Less than 3%    Less than 3%

Critically
 undercapitalized             -             -           2% or less


An institution  may be deemed to be in a  capitalization  category lower than is
indicated by its capital  position based on safety and soundness  considerations
other than capital levels.

At September  30, 1998,  the Bank's total  risk-based  ratio,  tier 1 risk-based
ratio and leverage ratio were 8.03%,  10.22%, and 9.61%,  respectively,  placing
the Bank in the well capitalized category under FDICIA for each ratio.

Liquidity
First  Georgia has  traditionally  maintained  levels of  liquidity in excess of
levels required by regulatory authorities.  As a member of the Federal Home Loan
Bank system,  the Bank is required to maintain a daily  average  balance of cash
and eligible liquidity investments in an amount equal to a monthly average of 5%
of withdrawable  savings and short term  borrowings.  The Bank's liquidity level
was 6.58% and 4.38% at September 30, 1998 and 1997, respectively.

The  Bank's  operational  needs,  demand  for  loan  disbursements  and  savings
withdrawals can be met by loan principal and interest payments, new deposits and
excess  liquid  assets.  While  significant  loan  demand,  deposit  withdrawal,
increased  delinquencies  and increased  foreclosed  properties could alter this
condition,  the Bank has sufficient borrowing capacity through Federal Home Loan
Bank  advances  and other short term  borrowings  to manage such an  occurrence.
Management does not foresee any liquidity problems for fiscal 1999.

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Cont'd)
----------------------------------------------------------------------
First Georgia Holding, Inc. and subsidiary

Year 2000 Compliance Disclosure
As the year 2000 (Year 2000) approaches, an important business issue has emerged
regading  existing  software  programs and hardware.  Many existing  application
software products were designed to accommodate a two-digit year. For example, 98
is stored on the system and represents 1998 and 00 represents 1900. The Bank has
been working on this problem since fiscal 1997.  Management formed an Electronic
Data Processing  (EDP) committee (the Committee) in early fiscal 1997 to address
this and many other computer-related  issues that may arise. The Committee began
testing all hardware and software applications for Year 2000 readiness.  Several
of the Banks  computers  were  found to be  non-compliant  with Year  2000.  The
Committee  decided to replace  these  machines as they  implemented  a Bank wide
network to facilitate ease of information  dissemination.  With the installation
of the network, all computers now used in the Bank are Year 2000 compliant.

All software the Bank utilizes,  including the software for the new network,  is
in the process of being tested. All peripheral and specialized software has been
tested.  Where needed, all non-compliant  software has been updated to compliant
status or replaced.  During the testing,  the in-house  processing  software and
equipment  proved to be  non-compliant.  The  decision  was made to replace  the
mission  critical  software  rather than wait for the upgrade.  The Bank now has
installed  the new  system,  a product  of Jack  Henry and  Associates.  The new
software was tested to the satisfaction of the Office of Thrift Supervision (the
OTS), the Banks primary  regulator.  The Bank has joined with other users of the
software to perform user group testing of the mission  critical  software.  This
testing should be complete in early fiscal 1999 .

An  additional  area of concern  to the  Company,  the Bank,  and the OTS is the
effect of Year 2000 issues on its deposit and loan customers. Failure to address
Year 2000 issues could have  significant  implications on the ability of certain
customers to continue operations. Letters inquiring as to the readiness for Year
2000 were sent to all the Banks commercial customers.  Additional information is
provided  by each  branch to any  customer  who  wishes to learn more about Year
2000.  Although the Bank has taken several steps to address these issues,  there
can be no assurance that these customers will be Year 2000 compliant. Failure of
certain customers to adequately  address these issues could result in a negative
impact on the Companys earnings.

The Company  believes  the mission  critical  systems  are  currently  Year 2000
compliant. The Bank The EDP committee still meets regularly to discuss Year 2000
issues.  Outside sources have performed several audits of the system with little
or no exceptions to report.  Management  understands that certain infrastructure
failures  could  arise  due to  undetected  system  or  software  errors.  These
contingencies  could  adversely  affect the Bank.  The Bank is addressing  these
contingencies in its Disaster Recovery Plan.

The Bank has  experienced  most of its costs  associated with becoming Year 2000
compliant.  The  Company  spent  approximately  $1,000,000  to become  Year 2000
compliant. Nearly all of this expenditure was for new equipment and software, so
the cost will be capitalized rather than realized all in one period.  Management
forsees any future costs associated with Year 2000 to be insignificant.

Although the Bank has taken several measures to address Year 2000 issues,  there
can be no assurances  that all necessary  modifications  will be identified  and
corrected or that unforeseen  difficulties  or costs will not arise.  Therefore,
there can be no assurance  that the failure of the Banks  internal  systems will
not negatively impact the Banks operations.


Asset/Liability Management
First Georgia has implemented a program of  asset/liability  management to limit
the Bank's  vulnerability to material and prolonged  increases in interest rates
(interest  rate risk).  The principal  determinant of the exposure of the Bank's
earnings to interest rate risk is the  difference  in the time between  interest
rate  adjustments  or  maturities on  interest-earning  assets and interest rate
adjustments or maturities of interest-bearing  liabilities. If the maturities of
the Bank's assets and  liabilities  were  perfectly  matched and if the interest
rates earned on its assets and paid on its liabilities moved concurrently, which
is not the case, the

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Cont'd)
----------------------------------------------------------------------
First Georgia Holding, Inc. and subsidiary

impact on net interest  income of rapid increases or decreases in interest rates
would be  minimized.  The  Bank's  asset/liability  management  policy  seeks to
increase the  adjustability  of the interest rates earned on its assets and paid
on its  liabilities and to match the maturities of its  interest-earning  assets
and  interest-bearing  liabilities  so that the Bank will be able to restructure
and reprice its asset  portfolio in a relatively  short period to  correspond to
changes in its cost and flow of funds. The Bank's policy also seeks to encourage
the flow of  deposits  into  longer term  certificates  during  periods of lower
interest  rates and to emphasize  shorter term accounts  during  periods of high
rates.  During fiscal 1998, the Bank actively  managed its interest rate risk by
limiting its lending to short-term  fixed rate balloon notes or adjustable  rate
loans and shortening the maturity on its deposits.

It is a policy of First  Georgia not to originate for its own portfolio any long
term fixed rate  mortgage  loans.  This allows First Georgia to better match the
maturities of its assets and liabilities,  thereby limiting  interest rate risk.
Similarly,  the Bank emphasizes the origination of commercial real estate loans,
construction  loans,  consumer loans and commercial loans with either adjustable
rates or short maturities.

The interest rate  sensitivity of the Bank's assets and liabilities  provides an
indication of the extent to which the Bank's net interest income may be affected
by interest rate movements.  The concept of interest rate sensitivity recognizes
that certain  assets and  liabilities  have  interest  rates that are subject to
change prior to maturity.  One method of measuring  the impact of interest  rate
changes on net interest  income is to measure,  in a number of time frames,  the
interest sensitivity gap by subtracting interest rate sensitive liabilities from
interest rate sensitive assets. A gap is considered  positive when the amount of
interest rate  sensitive  assets  exceeds the amount of interest rate  sensitive
liabilities,  and is  considered  negative  when the  amount  of  interest  rate
sensitive  liabilities  exceeds the amount of interest  rate  sensitive  assets.
Generally,  during a period of  rising  interest  rates,  a  negative  gap would
adversely  affect net  interest  income  while a positive gap would result in an
increase in net interest  income,  while  conversely  during a period of falling
interest  rates,  a negative  gap would  result in an increase  in net  interest
income and a positive gap would negatively  affect net interest  income.  To the
extent that the gaps are close to zero, net interest income can be considered to
be  relatively  immune from interest rate  movements.  The following  table sets
forth the Bank's  interest-earning  assets and  interest-bearing  liabilities at
September 30, 1998. The information presented, however, may not be indicative of
actual future trends of net interest income in rising or declining interest rate
environments.

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Cont'd)
----------------------------------------------------------------------
First Georgia Holding, Inc. and subsidiary


                                                (in thousands)
                             Over One Over Five Over
                                          One Year   Through   Through    Ten
                                          or Less  Five Years Ten Years  Years
                               ------------------------------------------------
Interest-earning assets (IEA's):
Investments                            $         -    1,223      245    10,097
Interest earning deposits and
federal funds sold                          13,277        -        -         -
Loans                                      109,093   36,639    1,365     4,156
                                    ------------------------------------------
Total                                      122,370   37,862    1,610    14,253
                                    ------------------------------------------

Interest-bearing liabilities (IBL's):
Demand deposits                           $ 16,732        -        -         -
Savings deposits                            15,867        -        -         -
Other time deposits                         85,703   31,521       58         -
Debt                                         2,100    4,500    2,000         -
                                    ------------------------------------------
Total                                      120,402   36,021    2,058         -
                                    ------------------------------------------

Interest sensitivity gap $                   1,968    1,841     (448)   14,253
                                    ==========================================
Cumulative gap                            $  1,968    3,809    3,361    17,614
                                    ==========================================
Ratio of IEA's to IBL's                       1.02     1.05     0.78         -
                                    ==========================================
Cumulative ratio of IEA's to IBL's            1.02     1.02     1.02      1.11
                                    ==========================================

COMPARISON OF YEARS ENDED SEPTEMBER 30, 1998 AND 1997

Results of Operations

General
First Georgia Holding,  Inc.  reported net income of $2,014,402,  an increase of
$420,737.  This increase is due primarily to the increase in interest  income of
$2,293,782.  Net interest  income after  provision  for loan losses  increased a
total of  $1,704,464.  Other income  increased and other  expenses  increased by
$354,415  and  $1,258,764,  respectively.  Several  factors as  discussed  below
contributed the increases and decreases in these areas.

 Interest Income
Total interest  income  increased  $2,293,782 for the year, or 17.94%.  Interest
income on loans increased $2,258,984,  or 18.86%, which was the major factor for
this increase in interest  income.  Average loans for the year increased by more
than $20,000,000  during the year ended September 30, 1998,  resulting in higher
interest income.  The Bank increased its position in mortgage backed securities,
resulting in a $222,263,  or 70.57%  increase.  Investment  income  decreased by
$133,070 or 45.04% for the year ended September 30, 1998 as compared to the same
time last year.  As  investments  matured,  much of that money was shifted  into
either the increased loan demand or mortgage backed securities, which had higher
yields.  Because of increased  deposit growth,  the Bank maintained high Federal
funds sold balances.  These higher  balances  account for an $54,395,  or 27.47%
decrease in other interest income.

Interest Expense
Total  interest  expense  increased  $892,834,  or 12.87% for the year.  This is
attributable to an increase in average  deposits of over  $20,000,000.  The Bank
experienced substantial deposit growth over the year,

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Cont'd)
----------------------------------------------------------------------
First Georgia Holding, Inc. and subsidiary

which is attributable to the introduction of more competitive  deposit products.
While most of this  growth was in  interest  free  checking  accounts,  the Bank
concentrated  on  obtaining  customers'  total  banking  business,  resulting in
increased growth in interest bearing time deposits. Interest expense on advances
and other  borrowings  increased  $47,176,  or 6.18% in year ended September 30,
1998 as compared to the year ended  September 30, 1997. Most of this expense was
realized  early in the year  through the Banks  Federal  funds  purchased  line.
However,  as deposit  demand  increased,  the Bank began  selling  Federal funds
rather than  borrowing from the Federal funds line.  This trend should  continue
through the early part of fiscal 1999.

Yields Earned and Rates Paid
Net interest income is affected by (a) the difference  between rates of interest
earned on interest-earning assets and rates of interest paid on interest-bearing
liabilities   (interest   rate   spread)  and  (b)  the   relative   amounts  of
interest-earning assets and interest-bearing  liabilities. When interest-earning
assets approximate or exceed interest-bearing liabilities, any positive interest
rate spread will  generate  net interest  income.  Financial  institutions  have
traditionally  used interest  rate spreads as a measure of net interest  income.
Another  indication of an institution's net interest income is its "net yield on
interest-earning  assets"  which  is net  interest  income  divided  by  average
interest-  earning  assets.  The  following  table sets forth  information  with
respect to weighted average  contractual yields on loans,  yields on investments
and the cost of funds on deposits  and  borrowings  for and as of the end of the
periods indicated.

                                                                            At
                                                                       September
                                            Year Ended September 30,       30,
                                           --------------------------  ---------
                                                  (in percentages)
                                               1998    1997    1996         1998
                                           --------------------------  ---------
Weighted average yield on:
Loans                                          9.57    9.36    9.35         9.65

Investment securities                          6.86    7.11    7.35         6.30

Interest earning deposits in other banks       5.39    5.47    5.89         5.53
                                           --------------------------  ---------
Total weighted average yield on all
interest earning assets                        9.33    9.12    9.15         9.14
                                           --------------------------  ---------

Weighted average rate paid on:

Deposits                                       5.04    5.18    5.35         4.66

Other borrowings                               5.98    8.89    8.40           -

Federal Home Loan Bank advances

Short term advances                            4.98    6.30    7.27         6.19

Long term advances                             7.86    5.14    6.63         7.38
                                           --------------------------  ---------
Total weighted average rate paid on all
interest-bearing liabilities                   5.13    5.25    5.23         4.78
                                           --------------------------  ---------
Weighted  average interest rate spread (spread between weighted average yield on
all interest-earning assets and rate
paid on all interest-earning liabilities)      4.20    3.87    3.92         4.36
                                           ==========================  =========
Net yield on average interest-earning
assets
(net interest income as a percentage of
of average interest-earning assets)            4.48    4.11    4.07          N/A
                                           ==========================  =========
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Cont'd)
----------------------------------------------------------------------
First Georgia Holding, Inc. and subsidiary


Provision for Loan Losses
The  provision for loan losses is based on  management's  evaluation of the risk
elements inherent in the loan portfolio.  The elements include possible declines
in the value of collateral due to changing economic  conditions and depreciation
over  time,  size  and  composition  of the  loan  portfolio,  current  economic
conditions  that might  affect a borrower's  ability to pay,  review of impaired
loans,  findings and recommendations  from regulatory  examinations,  historical
charge-off  experience,  and  levels  of  non-performing  and  past  due  loans.
Management reviews these elements and determines the level of allowance for loan
losses needed.  When necessary,  management will take a provision from income to
apply  toward the loan loss  reserve.  Because of the level of reserves for loan
losses  coupled with the low loss  experience  throughout  the year,  management
recorded a loan loss provision of $6,163 for the year ended  September 30, 1998.
At  September  30, 1998,  the Bank  believes  its  allowance  for loan losses is
adequate  to  provide  for future  losses.  Table 1 sets  forth an  analysis  of
non-accruing  and past due loans as of  September  30, 1996  through  1998 while
Table  2  provides  an  analysis  of the  allowance  for  loan  losses,  showing
charge-offs  and  recoveries  by type of  loan  as well as the  addition  to the
allowance.

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Cont'd)
----------------------------------------------------------------------
First Georgia Holding, Inc. and subsidiary

ANALYSIS OF NON-ACCRUING AND PAST DUE LOANS

Table 1
                                            As of September 30,
                                    ---------------------------------------

                                       1998        1997          1996
                                    ---------------------------------------
Non-accruing Loans (1)
Real estate
   Construction                   $         -            -              -
   First mortgage                   2,225,603    1,832,123      1,766,929
   Second mortgage                    117,619       82,517         19,764
Consumer                               21,214       44,781        164,118
                                    ---------------------------------------
   Total non-accruing loans         2,364,436    1,959,421      1,950,811
                                    ---------------------------------------
Past due loans (2)
Real estate
   Construction                             -            -              -
   First mortgage                           -            -              -
   Second mortgage                          -            -              -
Consumer                                    -            -              -
                                    ---------------------------------------
   Total past due loans                     -            -              -
                                    ---------------------------------------
Total non-accruing and
 past due loans                   $ 2,364,436    1,959,421      1,950,811
                                    =======================================

Percentage of total loans                1.56%        1.42%          1.58%
                                    =======================================

Real estate acquired through
 foreclosure                      $   644,084      423,000         94,200
                                    =======================================

Total non-accruing and past due loans
and nonperforming assets.         $ 3,008,520    2,382,421      2,045,011
                                    =======================================
--------------------------------------------------------------------------------
(1) Non-accruing  loans are loans for which unpaid interest is not recognized in
income.

(2) Past due loans are 90 days or more  delinquent  for which  interest is still
accruing.

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Cont'd)
----------------------------------------------------------------------
First Georgia Holding, Inc. and subsidiary

ANALYSIS OF ALLOWANCE FOR LOAN LOSSES

Table 2
                                     Year Ended September 30,
                                    ----------------------------

                                      1998     1997      1996
                                    ----------------------------

Beginning balance                 $ 1,012,322  955,288 1,003,569
Loans charged-off:
   Real estate construction                -        -         -
   Real estate mortgage              179,995   185,696  152,684
   Consumer and other                 63,762   162,520   56,602
                                    ----------------------------
                                     243,757   348,216  209,286
                                    ----------------------------
Recoveries:
   Real estate construction                -        -         -
   Real estate mortgage               78,084    32,939   46,547
   Consumer and other                115,820    62,632   66,354
                                    ----------------------------
                                     193,904    95,571  112,901
                                    ----------------------------

Net charge-offs                       49,853   252,645   96,385

Provision charged to operations        6,163   309,679   48,104
                                    ----------------------------

Balance at end of period          $  968,632 1,012,322  955,288
                                    ============================

Ratio of net charge-offs to
 average loans outstanding              0.03%     0.20%    0.08%
                                    ============================

Ratio of allowance to total loans       0.64%     0.73%    0.77%
                                    ============================



Other Income
Other income  increased  $354,415,  or 21.57% for the year.  Loan fees increased
$466,636, or 98.47%, for the year as loan balances increased. This increased fee
income results in part from a restructuring of the loan fee structure, to obtain
an  alignment  with loan fee levels  currently  charged in the  market.  Deposit
service charges increased  $271,854,  or 39.45% for the year ended September 30,
1998. This increase is attributable to the immense  increase in deposit balances
for the year.  The  increase  in the number of  deposits  creates an increase in
service charges and non-sufficient funds fees.

Other Expenses
Other expenses increased  $1,258,764,  or 26.52% for the year. Personnel related
expenses had the largest increase,  growing by $616,186, or 26.51%, for the year
ended  September 30, 1998.  The Bank added more employees to maintain a superior
level of customer  service in response  to the banks  rapid  growth.  The hiring
trend  should  level off in fiscal 1999.  Occupancy  expense  also  increased by
$170,070,  or 15.98%,  for the year due to the opening of the permanent facility
for its North Brunswick office. Data Processing

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Cont'd)
----------------------------------------------------------------------
First Georgia Holding, Inc. and subsidiary

expense  increased  $158,440 for the year, a  significant  increase of 1,152.79%
over  last  year.  This  increase  in  a  usually  stable  expense  category  is
attributable to the installation of a new mainframe system. The Bank installed a
new graphical user interface  computer  technology  which is certified Year 2000
compliant.  The new system adds a new level of service to the customer,  such as
check  image  statements  and better  automatic  deposit  and  account  drafting
capabilities.

Income Tax Expense
The  Company  incurred  $1,217,839  in income tax  expense for the year based on
applicable income tax rates at September 30, 1998.


Financial Condition

Total assets of the Company  increased  $30,761,042  from  September 30, 1997 to
September 30, 1998.  Loans were the driving force behind this  increase,  as the
net balances grew $13,388,033,  or 9.71%. Loan demand remained strong throughout
fiscal  1998,  and  management   took  advantage  of  this  demand  by  offering
competitive loan products and exceptional service. The loan growth was primarily
funded by the increased deposit balances, which also increased the Banks Federal
funds sold to  $12,180,000.  Premises and equipment  increased,  $1,320,621,  or
41.51%,  for the year ended  September  30, 1998.  The Bank  completed its North
Brunswick  Branchs  permanent  facility  in  fiscal  1998  and  purchased  a new
mainframe  system which will enhance  customer service and provide the Bank with
Year 2000 compliance.

As mentioned previously,  total deposits increased $33,002,169,  or 25.41%. Much
of this increase was in non-interest  bearing  deposits,  as the Bank now offers
free checking to its customers. The Bank is well positioned to take advantage of
the growing  local market.  With the increase in deposits,  the Bank was able to
pay many FHLB advances, as evidenced by a $5,750,000, or 40.07% decrease for the
year ended September 30, 1998.

COMPARISON OF YEARS ENDED SEPTEMBER 30, 1997 AND 1996

Results of Operations

General
First Georgia Holding,  Inc.  reported net income of $1,593,665,  an increase of
$832,299.  This increase is due primarily to the increase in interest  income of
$990,016.  Net interest income after provision for loan losses increased a total
of $338,968.  Other income increased by a total of $638,822,  and other expenses
decreased  $328,584.  Several  factors as  discussed  below  contributed  to the
increases and decreases in these areas.

Interest Income
Total interest income increased $990,016 for the year, or 8.39%. Interest income
on loans  increased  $989,344,  or 9.01%,  which was the major  factor  for this
increase in interest  income.  Average loans for the year increased by more than
$10,000,000  during the year ended  September  30, 1997,  resulting in increased
interest income.  Investment  income decreased by $6,842,  or 2.13% for mortgage
backed  securities and $82,467,  or 21.82% for the year ended September 30, 1997
as compared to the same time last year.  As  investments  matured,  much of that
money was shifted into the increased loan demand.  Because of increased  deposit
balances  and the  need to fund  the  sale of the  Hinesville  branch,  the Bank
maintained high cash balances in its  interest-bearing  deposit accounts.  These
higher  balances  account for an $89,981,  or 83.29%  increase in other interest
income.

Interest Expense
Total  interest  expense  increased  $389,473,  or 5.95% for the  year.  This is
attributable to an increase in average  deposits of over  $12,000,000.  The Bank
experienced  substantial  deposit growth over the year, which is attributable to
the offering of competitive  interest rates and attractive  deposit products for
the  market  area.  Interest  expense  on  advances  and other  borrowings  fell
$103,893, or 11.98%, as several high-interest

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Cont'd)
----------------------------------------------------------------------
First Georgia Holding, Inc. and subsidiary

advances were paid off and replaced by much  lower-rate  advances.  The weighted
average  yield on  advances  dropped  by 65  basis  points  for the  year  ended
September 30, 1997 as compared to 1996.

Other Income
Other income  increased  $638,822,  or 63.63% for the year.  The main factor for
this  increase is the gain on the sale of the  Hinesville  branch,  which netted
$433,760.  Loan fees increased $91,049, or 23.78%, for the year as loan balances
increased.  Deposit service charges increased  $133,978,  or 24.13% for the year
ended  September  30,  1997.  This  increase is  attributable  to an emphasis by
management to collect  non-sufficient funds fees, which increased $123,359.  The
increase in deposit balances also contributed to the increase.

Other Expenses
Other expenses decreased  $328,584,  or 6.48% for the year. In 1996, all thrifts
had to pay a special  assessment to recapitalize  the national thrift  insurance
fund.  This  assessment  cost the Bank $727,704 in 1996.  Because of the special
assessment,  the Banks Federal insurance premiums were  significantly  lower for
the  year  ended  September  30,  1997.  Federal  insurance  premiums  decreased
$143,677,  or 56.36%,  not including the special  assessment.  Personnel expense
offset these notable  decreases because salary expense  increased  $337,517,  or
16.99%. An increased staff is necessary to handle the Banks rapid growth.
 Occupancy  expense also increased by $111,775,  or 11.73%,  for the year due to
the opening of the new Wal- Mart supercenter branch,  which has higher occupancy
costs than the Hinesville branch did at the time of its sale.

Income Tax Expense
The  Company  incurred  $838,461  in income  tax  expense  for the year based on
applicable income tax rates at September 30, 1997.

Financial Condition

Total assets of the Company  increased  $12,784,224  from  September 30, 1996 to
September 30, 1997.  Loans were the driving force behind this  increase,  as the
net balances grew $15,433,164, or 12.61%. Loan demand remained strong throughout
fiscal  1997,  and  management   took  advantage  of  this  demand  by  offering
competitive loan products and exceptional service.  Interest bearing deposits in
other banks decreased by $1,430,573,  or 48.42% for the year ended September 30,
1997 as compared to  September  30, 1996.  At the end of fiscal  1996,  the Bank
increased  its cash  balances  to help fund the sale of the  Hinesville  branch,
which was sold in March 1997.  Investments  decreased by  $691,084,  or 6.69% as
investments  matured  and the funds were used to fund loans.  Real estate  owned
increased  $328,800,  or 349.04% as of September 30, 1997.  The Bank was able to
foreclose on several  pieces of real estate which were in  nonaccrual  status in
the year ended  September 30, 1996.  The Federal Home Loan Bank (FHLB)  redeemed
$415,400,  or 26.36%, of the Banks FHLB stock during fiscal year ended September
30, 1997.

As mentioned  previously,  total deposits increased  $8,335,479,  or 6.86%. This
increase  represents  an increase in the local market for  deposits,  leading to
more attractive  rates for depositors.  With the increase in deposits,  the Bank
was able to pay off some high interest  FHLB  advances,  but due to  substantial
loan  demand,  the  Bank  had to  increase  its  outstanding  FHLB  advances  by
$3,250,000 or 29.28%.  These  advances carry a much lower interest rate than the
maturing  advances they replaced.  Other borrowed money decreased $92,000 during
the year as  Management  decided  to close a line of credit  held  with  another
institution.

Effect of Inflation and Changing Prices
First  Georgia's  consolidated  financial  statements and related data presented
herein have been  prepared in  accordance  with  generally  accepted  accounting
principles,  which require the  measurement of financial  position and operating
results  in terms of  historical  dollars,  without  considering  changes in the
relative purchasing power of money over time due to inflation. Unlike industrial
companies,   virtually  all  of  the  assets  and  liabilities  of  a  financial
institution  are  monetary in nature.  As a result,  interest  rates have a more
significant impact on a financial institution's  performance than the effects of
general levels of inflation.  Interest rates do not necessarily move in the same
direction  or in the  same  magnitude  as the  prices  of  goods  and  services.
Non-interest expenses, however, do reflect general levels of inflation.

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Cont'd)
----------------------------------------------------------------------
First Georgia Holding, Inc. and subsidiary


Shareholder Information
A limited  trading  market has developed in the Company's  common stock which is
quoted on the NASDAQ  (National  Association  of  Securities  Dealers  Automated
Quotation)  National  Market System under the symbol "FGHC." Set forth below are
the high and low  sales  prices  of the  Company's  common  stock  for each full
quarterly  period since October 1992. Such prices reflect  inter-dealer  prices,
without retail mark-up,  markdown,  or commission,  and may not represent actual
transactions.

Quarterly Period                High    Low

October 1-December 31, 1996    4 1/8   2 3/4
January 1- March 31, 1997*     5       3  1/2
April 1  June 30, 1997 5 1/2   4 7/8
July 1  September 30, 1997     6 1/3   4 2/3
October 1  December 31, 1997   6 1/3   5 1/3
January 1  March 31, 1998      8 7/16  5 7/8
April 1  June 30, 1998**       10 1/2  8
July 1  September 30, 1998     15 1/4  8 7/8





*On February 28, 1997, the Company  effected a 50% stock dividend in the form of
a 3 for 2 stock split.

**On June 15, 1998, the Company effected a 50% stock dividend in the form of a 3
for 2 stock split.

At November 1, 1997,  the Company had 257  shareholders  of record.  The Company
paid cash  dividends of $0.0667 per share in March 1998 and $0.0353 per share in
December  1996.  The  primary  source of funds  available  to the Company is the
payment  of  dividends  by the Bank.  Banking  regulations  limit the  amount of
dividends  that may be paid  without  prior  approval of the Bank's  regulators.
Approximately  $1,749,000  was  available to be paid as dividends by the Bank to
the Company at September 30, 1998 upon regulatory approval.

<PAGE>

------------------------------------------------------------------------------
                                     OFFICES
------------------------------------------------------------------------------

        1703 Gloucester Street                        4510 Altama Avenue
        Brunswick, Georgia 31520                   Brunswick, Georgia 31520
        912-267-7283                                     912-267-0010

        2461 Demere Road                            129 Highway 82, East
        St. Simons Island, Georgia 31522             Blackshear, Georgia
        912-638-7118                                     912-449-4711

        2001 Commercial Drive South                 Wal-Mart Supercenter
        Brunswick, Georgia 31525                    150 Altama Connector
        912-262-1500                              Brunswick, Georgia 31525
                                                        912-280-9020

        1010 Plant Avenue
        Waycross, Georgia 31501
        912-287-2265

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                               OTHER INFORMATION
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Transfer Agent:                               Independent Auditors:

First Georgia Bank                            Deloitte & Touche LLP
1703 Gloucester Street                        Suite 2801, Independent Square
Brunswick, Georgia 31520                      One Independent Drive
                                              Jacksonville, Florida 32202


Legal Counsel:                                Special Counsel:

James A. Bishop                               Powell, Goldstein, Frazer & Murphy
Suite 40                                      Sixteenth Floor
First Federal Plaza                           191 Peachtree Street, N.E.
Brunswick, Georgia 31520                      Atlanta, Georgia 30303

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                            DIRECTORS AND OFFICERS
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                          FIRST GEORGIA HOLDING, INC.
                          ---------------------------
                                   OFFICERS


HENRY S. BISHOP                                          G. FRED COOLIDGE III
Chairman and President,                                 Secretary and Treasurer
Chief Executive Officer
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                                    DIRECTORS

HENRY S. BISHOP                     B.W. BOWIE           M. FRANK DELOACH, III
Chairman of the Board,         Retired Senior Vice             President,
     President             President, General Manager,       Culver & Deloach
First Georgia Bank      and Director Federal Paper Board Co

TERRY DRIGGERS                     ROY K. HODNETT          E. RAYMOND MOCK
President, Driggers            President, T.H.E. Inc.      President, Mock
Construction Company           and The Island Inn          Enterprises, Inc.

JAMES D. MOORE                                             D. LAMONT SHELL
President, J.D. Moore, Inc.                 President, Glynn Electric Supply Co.

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                          FIRST GEORGIA BANK, BRUNSWICK
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HENRY S. BISHOP                                         G. FRED COOLIDGE III
Chairman and President                                 Executive Vice President,
                                                        Chief Financial Officer

CATHERINE BOYNE                    JUDY DIXON               LAURA D. FRIEND
Assistant Vice President      Assistant Vice President    Vice President, Data
                                                               Processing

SHERRYL JAMES                     GEORGE McMANUS            ELI D. MULLIS
Assistant Vice President           Loan Officer        Assistant Vice President

MILLEDGE SMITH                    ROBERT STRANGE             JODI TODD
Vice President                 Senior Vice President   Assistant Vice President,
                                                           Internal Auditor

JON TAHLIER                        DORIS THOMAS            SUSAN USSERY
Vice President                 Senior Vice President      Vice President

LINDSAY VINYARD                   MARK WESTBERRY          JAN WILDSMITH
Vice President                 Senior Vice President   Assistant Vice President

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FIRST GEORGIA BANK, ALTAMA
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ELZIE JACOBS                                            SUSAN STOWE
Vice President                                   Assistant Vice President
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FIRST GEORGIA BANK, ST. SIMONS ISLAND
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MEL BAXTER                   FELICIA SALTER               DIANE SHARPE
Senior Vice President   Assistant Vice President,          Loan Officer
                               Operations

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FIRST GEORGIA BANK, WAL-MART SHOPPING CENTER
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                             RITA BOATRIGHT
                         Assistant Vice President
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FIRST GEORGIA BANK, NORTH BRUNSWICK
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FRED ALEXANDER                                           CHINITA DAVIS
Vice President                                     Assistant Vice President

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FIRST GEORGIA BANK, WAYCROSS/BLACKSHEAR
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PAM TAYLOR                                              LINDA WALKER
Vice President                              Assistant Vice President, Operations

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EXHIBIT 99
Independent Auditors' Report

The Board of Directors and Stockholders
First Georgia Holding, Inc.
Brunswick, Georgia

We have audited the financial statements of operations,
stockholders' equity and cash flows of First Georgia Holding, Inc. and 
subsidiary for the year ended September 30, 1996.  These consolidated financial
statements are the responsibility of the Company's management.  Our 
responsibility is to express an opinion on these consolidated financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
First Georgia Holding, Inc. and subsidiary for the year ended September 30, 
1996, in conformity with generally accepted accounting principles.


                                               KPMG PEAT MARWICK LLP

Atlanta, Georgia
November 1, 1996
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