61


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-KSB

                Annual Report Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934

For the fiscal year                                       Commission file number
ended December 31, 1997                                                  0-19228

                               EAGLE BANCORP, INC.
                 (Name of small business issuer in its charter)
       Georgia                                                        58-1860526
(State of Incorporation)                                        (I.R.S. Employer
                                                             Identification No.)
335 South Main Street
Statesboro, Georgia                                           30458
(Address of principal executive office)(Zip Code)
(912) 764-8900
(Issuer's telephone number, including area code)

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  Issuer (1) has filed all reports  required to be filed by Section
13 or 15(d) of the  Securities  Exchange  Act of 1934  during the  preceding  12
months (or for such shorter period that the Registrant was required to file such
reports),  and (2) has been subject to such filing  requirements for the past 90
days. Yes X No

Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained  herein, and no  disclosure  will be contained,  to the
best of Registrant's knowledge,  in  definitive  Proxy or Information Statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to 
this Form 10-KSB.  [X]

Issuer's revenues for its most recent fiscal year were $5,985,043.

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant at March 1, 1998 was  $13,108,125  based on private  trades at $15.00
per share, although there is no established trading market.

The number of shares  outstanding  of Issuer's  class of common stock at March 
1, 1998 was 873,875 shares of common stock.

Documents  Incorporated  By Reference:  Portions of the Proxy  Statement for the
1997 Annual Meeting of Shareholders to be filed with the Securities and Exchange
Commission within 120 days of the Registrant's  fiscal year end are incorporated
by reference into Part III.


                                  Page 1 of 59
                            Exhibit Index on Page 57



                                       1
<PAGE>



                                TABLE OF CONTENTS

                                      Page
                                     PART I

ITEM 1.           DESCRIPTION OF BUSINESS                                      3

ITEM 2.           DESCRIPTION OF PROPERTIES                                   12

ITEM 3.           LEGAL PROCEEDINGS                                           12

ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF
                  SECURITY HOLDERS                                            13

                                     PART II

ITEM 5.           MARKET FOR COMMON EQUITY AND
                  RELATED STOCKHOLDER MATTERS                                 13

ITEM 6.           MANAGEMENT'S DISCUSSION AND ANALYSIS
                  OR PLAN OF OPERATION                                        13

ITEM 7.           FINANCIAL STATEMENTS                                        32

ITEM 8.           CHANGES IN AND DISAGREEMENTS WITH
                  ACCOUNTANTS ON ACCOUNTING AND
                  FINANCIAL DISCLOSURE                                        55



                                    PART III

ITEM 9.           DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
                  CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a)
                  OF THE EXCHANGE ACT                                         55

ITEM 10.          EXECUTIVE COMPENSATION                                      55

ITEM 11.          SECURITY OWNERSHIP OF CERTAI5
                  BENEFICIAL OWNERS AND MANAGEMENT                            56

ITEM 12.          CERTAIN RELATIONSHIPS AND
                  RELATED TRANSACTIONS                                        56

ITEM 13.          EXHIBITS AND REPORTS ON FORM 8-K                            56

SIGNATURES                                                                    57




                                       2
<PAGE>



                                     PART I


ITEM 1.  DESCRIPTION OF BUSINESS

(a)      Business Development

Eagle Bancorp, Inc. (the "Company"),  Statesboro, Georgia, was incorporated as a
Georgia business  corporation on September 19, 1989, for the purpose of becoming
a bank holding  company by  acquiring  all of the common stock of Eagle Bank and
Trust,  Statesboro,  Georgia (the "Bank") upon its formation.  The Company filed
applications  to the Board of  Governors  of the  Federal  Reserve  System  (the
"Board") and the Georgia Department of Banking and Finance (the "DBF") for prior
approval to become a bank holding  company.  The Company received Board approval
on May 11,  1990,  and the DBF approval on March 5, 1990.  The Company  became a
bank holding  company within the meaning of the federal Bank Holding Company Act
(the "Act") and the Georgia bank holding  company law (the  "Georgia  Act") upon
the acquisition of all of the Common Stock of the Bank on September 7, 1990.

The Bank currently is the sole operating  subsidiary of the Company.  On January
5, 1990,  the Bank received the approval of its Articles of  Incorporation  from
the DBF and its permit to begin  business  was issued by the DBF on February 18,
1991.  The Bank opened for business on February  20,  1991.  The deposits at the
Bank are insured by the Federal Deposit Insurance Corporation (the "FDIC").

(b)      Business of Issuer

The Bank conducts a general  commercial  banking business in its primary service
area,  emphasizing  the banking needs of individuals  and small- to medium-sized
businesses.  The  Company  and the Bank  conduct  business  from the main office
located at 335 South Main Street, Statesboro, Georgia 30458, and from the Bank's
branch facility located at 726 Northside Drive East, Statesboro, Georgia 30458.

The  Company  is  authorized  to engage in any  activity  permitted  by law to a
corporation,  subject  to  applicable  Federal  regulatory  restrictions  on the
activities of bank holding companies.  The Company was formed for the purpose of
becoming  a holding  company to own 100% of the stock of the Bank.  The  holding
company structure  provides the Company with greater  flexibility than the Bank.
While the Company  has no present  plans to engage  actively  in any  nonbanking
business  activities,   management   anticipates  studying  the  feasibility  of
establishing or acquiring subsidiaries to engage in other business activities to
the extent permitted by law.

The principal  business of the Bank is to accept deposits from the public and to
make loans and other  investments in and around  Bulloch  County,  Georgia,  its
primary service area.

The Bank offers a full range of deposit  services that are  typically  available
from financial institutions,  including NOW accounts,  demand, savings and other
time deposits.  In addition,  retirement accounts such as Individual  Retirement
Accounts are available.  All deposit  accounts are insured by the FDIC up to the
maximum amount currently permitted by law.

                                       3
<PAGE>


The Bank offers a full range of commercial  and personal  loans.  The Bank makes
loans to  individuals  for purposes  such as home mortgage  financing,  personal
vehicles and various  consumer  purchases,  and other personal and family needs.
The Bank makes  commercial  loans to  businesses  predominantly  in the  primary
service area for purposes such as equipment and machinery purchases,  commercial
real estate purchases and working capital.

The Bank's lending  philosophy is to make loans,  taking into  consideration the
safety  of  the  Bank's  depositors'  funds,  the  preservation  of  the  Bank's
liquidity,  the interest of the Company's  shareholders,  and the welfare of the
community.  Interest income from the Bank's lending  operations is the principal
component of the Bank's income,  so therefore  prudent  lending is essential for
the prosperity of the Bank.

The Bank's loan portfolio at December 31, 1997, contains  approximately 12% real
estate construction loans, 57% real estate mortgage loans, 18% commercial loans,
3% agricultural  loans,  and 10% consumer loans.  The Bank's loan to deposit and
Federal  Home  Loan  Bank  match   funding   ratio  at  December  31,  1997  was
approximately  84% with  management's  goal to  maintain a loan to  deposit  and
Federal Home Loan Bank match funding ratio between 75% and 85%.

The principal  sources of income for the Bank are interest and fees collected on
loans,  interest  and  dividends  collected on other  investments,  and mortgage
brokerage  fees.  The  principal  expenses  of the  Bank  are  interest  paid on
deposits,  employee  compensation,  office  and  equipment  expenses,  and other
overhead expenses.

The  Bank's  business  plan  relies   principally  upon  local  advertising  and
promotional  activity and upon personal contacts by its directors,  officers and
shareholders to attract  business and to acquaint  potential  customers with the
Bank's personalized  services. The Bank emphasizes a high degree of personalized
client  service  to  provide  for each  customer's  banking  needs.  The  Bank's
marketing  approach  emphasizes the  advantages of dealing with an  independent,
locally-owned  and managed state chartered bank to meet the particular  needs of
individuals,   professionals  and  small-to-   medium-size   businesses  in  the
community.  All banking  services will be  continually  evaluated with regard to
their  profitability and efforts will be made to modify the Bank's business plan
if the plan does not prove  successful.  The Bank does not currently offer trust
or permissible securities services.

Supervision and Regulation

Regulation  of the Bank.  The  operations  of the Bank are  subject to state and
federal statutes  applicable to state chartered banks whose deposits are insured
by the FDIC and the  regulations  of the DBF and the  FDIC.  Such  statutes  and
regulations  relate to,  among other  things,  required  reserves,  investments,
loans, mergers and consolidations, issuance of securities, payment of dividends,
establishment of branches and other aspects of the Bank's operations.  Under the
provisions  of  the  Federal  Reserve  Act,  the  Bank  is  subject  to  certain
restrictions  on any  extensions  of  credit to the  Company  or,  with  certain
exceptions,  other affiliates,  and on the taking of such stock or securities as
collateral on loans to any borrower.  In addition,  the Bank is prohibited  from
engaging in certain  tie-in  arrangements  in  connection  with any extension of
credit or the providing of any property or service.

                                       4
<PAGE>


The Bank, as a state  chartered  bank, will be permitted to branch to the extent
that banks are  permitted to branch  under  Georgia  law. In January  1996,  the
Georgia  legislature  passed a bill  designed  to  eliminate  Georgia's  current
branching  restrictions.  The new legislation provides that effective after July
1, 1996,  banks in Georgia,  with prior approval of the DBF (and the appropriate
federal  regulatory  authority),  may  establish  up to three new branches to be
located in any county in the state.  Effective  July 1, 1998,  Georgia banks may
establish  an  unlimited  number of  branches  in any county in the state,  upon
receipt of appropriate regulatory approvals.

The FDIC adopted final risk-based  capital guidelines for all FDIC insured state
chartered  banks that are not members of the Federal  Reserve  System  effective
December 31, 1990.  All banks are required to maintain a minimum  ratio of total
capital to risk  weighted  assets of 8 percent (of which at least 4 percent must
consist of Tier 1 capital).  Tier 1 capital of state chartered banks (as defined
in  regulations)  generally  consists of (i) common  stockholders  equity;  (ii)
noncumulative  perpetual preferred stock and related surplus; and (iii) minority
interests in the equity accounts of consolidated subsidiaries.

In addition,  the FDIC adopted a minimum ratio of Tier 1 capital to total assets
of banks. This capital measure is generally  referred to as the leverage capital
ratio. The FDIC has established a minimum leverage capital ratio of 3 percent if
the FDIC  determines  that the  institution is not  anticipating or experiencing
significant growth and has  well-diversified  risk,  including no undue interest
rate exposure,  excellent asset quality,  high liquidity,  good earnings and, in
general,  is considered a strong banking  organization,  rated Composite 1 under
the Uniform Financial  Institutions Rating System. Other financial  institutions
are expected to maintain leverage capital at least 100 to 200 basis points above
the minimum level.

On December 19, 1991, the Federal Deposit Insurance Corporation  Improvement Act
of 1991 (the  "Improvement  Act") was  enacted  into law.  The  Improvement  Act
provides  for,  among other  matters,  addressing  the safety and  soundness  of
deposit insurance funds, prompt regulatory corrective action by federal agencies
when a bank begins to  experience  difficulties  that may  threaten  loss to the
FDIC,  revised  limitations on borrowings by insiders of banks,  the parent bank
holding   companies  and  their  affiliates,   limited   guarantees  of  capital
restoration  by  bank  holding  companies  of  their  subsidiary  banks  and new
provisions  for  depository  institution  conversions.   The  FDIC  has  adopted
regulations which, among other matters,  implement provisions of the Improvement
Act that require or permit the FDIC to take  specific  supervisory  actions when
FDIC-insured  institutions come within one of five specific capital  categories.
The  five  capital  categories  are  designated  as (1)  well  capitalized,  (2)
adequately    capitalized,     (3)    undercapitalized,     (4)    significantly
undercapitalized, and (5) critically undercapitalized. At December 31, 1996, the
Bank was categorized as "well  capitalized"  under provisions of the Improvement
Act. The full effects of the Improvement Act will only be known over time.

                                       5
<PAGE>


Regulation  of the  Company.  The Company is a bank holding  company  within the
meaning of the Act and the Georgia Act. As a bank holding  company,  the Company
is  required  to file  with  the  Board an  annual  report  and such  additional
information  as the Board may require  pursuant  to the Act.  The Board may also
make  examinations  of the Company and each of its  subsidiaries.  Bank  holding
companies  are  required by the Act to obtain  approval  from the Board prior to
acquiring,  directly or indirectly,  ownership or control of more than 5% of the
voting shares of a bank.  The Act also prohibits  bank holding  companies,  with
certain  exceptions,  from  acquiring  more than 5% of the voting  shares of any
company that is not a bank and from engaging in any business  other than banking
or managing or controlling banks and other subsidiaries authorized by the Act or
furnishing services to, or performing services for, its subsidiaries without the
prior  approval of the Board.  The Board is empowered to  differentiate  between
activities  that are initiated de novo by a bank holding company or a subsidiary
and activities  commenced by acquisition of a going concern.  The Company has no
present intention to engage in nonbanking activities.

Pursuant to Section 4 (j) of the Bank  Holding  Company  Act (12 U.S.C.  Section
1843 (j)),  a bank holding  company must submit a written  notice to the Federal
Reserve Board at least sixty days before engaging,  directly or indirectly, in a
non-banking activity authorized under Section 4(c)(8),  which authorizes holding
companies  to engage in  activities  that are  closely  related  to  banking  or
managing or controlling banks. The processing period begins to run form the date
the Federal Reserve Board receives a complete notice,  and may be extended under
certain  circumstances.  In acting on a notice  to  engage  in  Section  4(c)(8)
activities,  the Federal  Reserve  Board is required by certain  sections of the
Bank  Holding  Company Act to  consider  whether  the  benefits of the  proposed
activity  (such  as  greater  convenience,  increased  competition,  or gains in
efficiency)  outweigh the potential adverse effects (such as undue concentration
of resources, decreased or unfair competition, conflicts of interest, or unsound
banking  practices).  Section  4(c)(8) also requires that proposals to engage in
permissible  activities  are subject to public notice and an  opportunity  for a
hearing only in case of an acquisition of a savings association. Section 4(j) of
the Bank Holding  Company Act was amended by the Economic  Growth and Regulatory
Paperwork  Reduction Act of 1996, enacted as a part of the Omnibus  Consolidated
Appropriations  Act for  Fiscal  Year  1997 to  permit  a  well-capitalized  and
well-managed bank holding company, that controls predominantly  well-capitalized
and well-managed depository  institutions,  as defined by amendments to The Bank
Holding  Company Act, to engage de novo in any permissible  4(c)(8)  activity or
acquire any company  engaged in permissible  4(c)(8)  activities  (except for an
insured  depository  institution,  i.e., a savings  association) under expedited
procedures.  To be eligible for the expedited procedures,  the book value of the
assets acquired may not exceed 10% of the holding  company's  consolidated  risk
weighted  assets  and the  consideration  paid  may not  exceed  15% of Tier One
capital. The Federal Reserve Board may adjust these percentages. In addition, no
administrative  enforcement action may have been commenced or be pending nor may
any cease  and  desist  order  pursuant  to  Section 8 of the FDIC Act have been
issued or be  pending  against  the  holding  company  or any of its  depository
institution subsidiaries.

                                       6
<PAGE>


While all qualifying  holding companies  engaging in Section 4(c) (8) activities
under the expedited procedures must provide notice to the Federal Reserve Board,
the notice  provisions  differ.  First,  to engage de novo directly or through a
subsidiary in activities  that the Fed has already  approved by regulation,  the
bank holding  company must provide  notice within ten days after  commencing the
activity. Second, to engage in activities that the Fed has permitted by order or
to acquire the shares or assets of an existing company, the bank holding company
must  provide  notice at least  twelve  business  days prior to  commencing  the
activity during which time the Fed may require the full 60-day notice procedure.


As a bank holding company, the Company is subject to capital adequacy guidelines
as established by the Board. The Board established risk based capital guidelines
for bank holding companies  effective March 15, 1989.  Beginning on December 31,
1992,  the minimum  required  ratio for total  capital to risk  weighted  assets
became 8 percent (of which at least 4 percent  must  consist of Tier 1 capital).
Tier 1 capital (as defined in regulations  of the Board)  consists of common and
qualifying  preferred  stock  and  minority  interests  in  equity  accounts  of
consolidated subsidiaries, less goodwill and other intangible assets required to
be deducted under the Board's guidelines.

The Board's  guidelines apply on a consolidated  basis to bank holding companies
with  total  consolidated  assets  of $150  million  or more.  For bank  holding
companies with less than $150 million in total consolidated  assets (such as the
Company),  the guidelines will be applied on a bank only basis,  unless the bank
holding company is engaged in nonbanking activity involving significant leverage
or has  significant  amount  of debt  outstanding  that  is held by the  general
public.  The Board has  stated  that risk  based  capital  guidelines  establish
minimum  standards  and that bank holding  companies  generally  are expected to
operate well above the minimum standards.

The  Company is also a bank  holding  company  within the meaning of the Georgia
Act, which provides that,  without the prior approval of the DBF, it is unlawful
(i) for any bank  holding  company to acquire  direct or indirect  ownership  or
control  of more than 5% of the  voting  shares  of any bank,  (ii) for any bank
holding  company or  subsidiary  thereof,  other than a bank,  to acquire all or
substantially all of the assets of a bank, or (iii) for any bank holding company
to merge or consolidate with any other bank holding company.

It also is unlawful for any company to acquire  direct or indirect  ownership or
control of more than 5% of the voting shares of any bank in Georgia  unless such
bank has been in existence and continuously  operating or incorporated as a bank
for a period of five years or more prior to the date of  application  to the DBF
for  approval  of  such  acquisition.  Bank  holding  companies  themselves  are
prohibited  from  acquiring  another  bank  until the  initial  bank in the bank
holding company has been incorporated for a period of twenty-four months.

                                       7
<PAGE>


The  Riegle-Neal  Interstate  Banking and Branching  Efficiency Act of 1994 (the
"Interstate Banking Act") allows adequately capitalized and managed bank holding
companies to acquire existing banks across state lines without regard to whether
the acquisition is expressly  authorized under state law.  Certain  requirements
such as minimum age  restrictions  for banks to be acquired  will be  preserved.
Further, under the Interstate Banking Act, effective June 1, 1997 a bank holding
company may  consolidate its interstate  bank  subsidiaries  into branches and a
bank may merge with an  unaffiliated  bank across state lines to the extent that
the applicable states have not "opted out" of interstate branching prior to such
effective date. States may enact legislation to permit interstate  mergers prior
to June 1, 1997.  The  Interstate  Banking Act also permits de novo branching to
the  extent  that  a  particular  state  "opts  in" to  the  de  novo  branching
provisions.  The  Interstate  Banking  Act  generally  prohibits  an  interstate
acquisition (other than an initial entry into a state by a bank holding company)
which  would  result in  either  the  control  of more than (i) 10% of the total
amount of insured deposits in the United States or (ii) 30% of the total insured
deposits in the home state of the target  bank,  unless such 30%  limitation  is
waived  by the  home  state  on a basis  which  does  not  discriminate  against
out-of-state institutions.

The Riegle  Community  Development  and Regulatory  Improvement Act of 1994 (the
"Improvement  Act")  provides  for  the  creation  of  a  community  development
financial  institutions'  fund to promote economic  revitalization  in community
development.  Banks and thrift  institutions  are allowed to participate in such
community  development  banks.  The Improvement Act also contains (i) provisions
designed to enhance small business capital  formation and to enhance  disclosure
with regard to high cost  mortgages for the  protection  of consumers,  and (ii)
more  than 50  regulatory  relief  provisions  that  apply to banks  and  thrift
institutions,  including the  coordination  of  examinations  by various federal
agencies,  coordination of frequency and types of reports financial institutions
are  required  to file  and  reduction  of  examinations  for  well  capitalized
institutions.

Bank holding companies may be compelled by bank regulatory authorities to invest
additional capital in the event a subsidiary bank experiences either significant
loan losses or rapid growth of loans or deposits.  In addition,  the Company may
be required to provide additional capital to any additional banks it acquires as
a condition to obtaining the approvals and consents of regulatory authorities in
connection with such acquisitions.

The  Company is an  "affiliate"  of the Bank  within the  meaning of the Federal
Reserve Act, which imposes  restrictions  on loans to the Company by the Bank or
investments  by the Bank in  securities  of the  Company  and on the use of such
securities as collateral security for loans by the Bank to any borrower.

However,  recent  legislation  exempts from the insider lending  restrictions of
Section 22(h) of the Federal Reserve Act (12 U.S.C. Section 375(b)) company-wide
benefit or compensation plans that are widely available to employees of the Bank
and  that  did  not  give  preference  to any  officer,  director  or  principal
shareholder  (or any related  interest)  over other  employees  of the bank.  In
addition,  the  Federal  Reserve  Board  may  now  exempt,  by  regulation,  the
prohibition  on  preferential  loans to  executive  officers  and  directors  of
affiliates   who  do  not  have  the  authority  to  participate  in  the  major
policy-making  functions  of  the  Bank,  provided  that  the  assets  of  these
affiliates do not exceed 10% of the  consolidated  assets of the holding company
and the affiliate is not controlled by another company.

                                       8
<PAGE>


Recent Regulatory  Developments.  On September 3, 1996, President Clinton signed
the Omnibus Consolidated Appropriations Act for FY 1997. Subtitle G of Title Two
of that Act is  titled  the  "Deposit  Insurance  Funds  Act of  1996"  (Deposit
Insurance Funds Act), which among other things provides for the recapitalization
of the Savings  Association  Insurance  Fund  ("SAIF") as of October 1, 1996. To
accomplish this recapitalization,  the FDIC imposed a special assessment on each
insured depository  institution with deposits  assessable under the SAIF so that
SAIF would achieve its designated  reserve ratio (DRR) on the first business day
of the first month  after the date of the  enactment  of the  Deposit  Insurance
Funds Act.  Because the legislation was enacted as of September 30, 1996,  under
the  Deposit  Insurance  Funds  Act,  SAIF  achieved  its DRR and  became  fully
capitalized on October 1, 1996. For purposes of the SAIF special assessment, the
amount of SAIF-assessable  deposits is determined as of March 31, 1995. However,
the term  "SAIF-assessable  deposits"  includes deposits assumed after March 31,
1995 if the deposits were assumed from an institution  that is no longer insured
when the special  assessment to recapitalize SAIF is imposed under this section.
Therefore,  some institutions will be required to pay the special  assessment on
SAIF insured deposits that were assumed after March 31, 1995.

A major  part of the plan to  recapitalize  SAIF  involves  imposing  a one-time
special  assessment  on  SAIF-assessable  deposits  that  may  be  paid  in  two
installments under certain conditions. Subject to certain statutory adjustments,
the FDIC  has  discretion  to  determine  the  rates  of the  assessments  after
considering  certain  factors,  including the most recent SAIF balance,  data on
insured  deposits,  and any  other  factors  that  the FDIC  has  discretion  to
determine  the  rates of the  assessments  after  considering  certain  factors,
including the most recent SAIF balance, data on insured deposits,  and any other
factors that the FDIC deems  appropriate.  This one-time  special  assessment is
subject to  certain  exceptions,  and the FDIC has  discretion  to issue  orders
exempting weak institutions from paying this special assessment if the exemption
will reduce the risk to SAIF. The FDIC prescribed guidelines for issuing such an
exemption  within 30 days of enactment of the Deposit  Insurance  Funds Act. The
Act required FDIC to exempt from the special  assessment (1)  institutions  that
existed on October 1, 1995 and held no SAIF  assessable  deposits before January
1, 1993, (2) federal savings banks newly  established in April,  1994 to acquire
the deposits of savings  institutions  in default that received  assistance from
the RTC in connection  with the  transactions,  and (3) an SAIF insured  savings
association  that, before January 1, 1987, was a federal savings bank insured by
the FSLIC for the purpose of acquiring the assets or assuming the liabilities of
a national bank in a transaction  consummated  after July 1, 1986 and had assets
less than $150  million.  Exempt  institutions  generally  are  required  to pay
semi-annual  assessments  at former rates under the schedule  applicable to SAIF
fund members on June 30, 1995, with certain exceptions.

                                       9
<PAGE>


There are three statutory adjustments that the FDIC must consider in setting the
SAIF  recapitalization  rates. The first of these relates to Oakar transactions,
which are  generally  defined  to  include  bank  purchases  of  SAIF-assessable
deposits. Generally, Bank Insurance Fund (BIF) members acquiring SAIF-assessable
deposits in Oakar  transactions prior to March 31, 1995 (or after March 31, 1995
if the institution from which the deposits were acquired is no longer insured at
the time the special  assessment  is  imposed),  are subject to the SAIF special
assessment  but  the  amount  of  assessable   deposits   would,  as  a  general
proposition,  be  reduced  by 20% for  purposes  of the  assessment  if  certain
conditions  are  satisfied.  The 20% haircut  for these BIF members  applies for
purposes  of the  special  assessment  and for  purposes  of future  semi-annual
assessments  on  SAIF-assessable  deposits that were acquired prior to March 31,
1995.  To be eligible  for the 20% haircut,  a BIF member must  satisfy  certain
requirements  that are based on a suggested  attributable  deposit  amount as of
June 30, 1995.


The second statutory adjustment the FDIC must consider for purposes of computing
this special assessment  relates to "converted  associations," a term defined by
the Act. An  institution  meeting  one of the Act's  definitions  of  "converted
association" may also reduce by 20% the amount of deposits that are SAIF insured
as of  March  31,  1995  (or  after  March  31 1995 is  subject  to the  special
assessment  because the institution  from which the deposits were acquired is no
longer  insured at the time the special  assessment is imposed).  In addition to
"converted associations," Sasser banks - a savings association that converted to
a bank charter prior to SAIF reaching its DRR and as a result the resulting bank
was required to remain an SAIF member - may qualify under this second adjustment
under very limited criteria.

Third, if payment of the special  assessment  would pose a significant risk that
an insured depository institution or its holding company may default on payments
under debt  obligations or preferred stock, the institution may elect to pay the
special  assessment  under  extended  terms  that would  include a  supplemental
special assessment.

The SAIF was initially  capitalized  through the issuance of bond obligations by
the  Financing  Corporation  (FICO),  commonly  referred to as FICO  bonds.  The
Deposit  Insurance  Funds Act also addresses  repayment of the interest on those
bonds.   Beginning  with  the  semi-annual  periods  after  December  31,  1996,
assessments  to pay  approximately  $8 million in interest on FICO bonds will be
shared among all insured  depository  institutions,  including  insured national
banks,  instead of only SAIF members. For purposes of the assessments to pay the
interest on the FICO bonds,  BIF assessable  deposits will be assessed at a rate
of 20% of the  assessment  rate  applicable to  SAIF-assessable  deposits  until
December 31,  1999.  After the earlier of December 31, 1999 or the date the last
savings  association  ceases to exist, full pro rata sharing of FICO assessments
will begin.

For purposes of paying the interest on the FICO bonds, "BIF assessable deposits"
means   deposits   that  are  subject  to   assessments   under  BIF.  The  term
"SAIF-assessable  deposits"  means deposits that are  assessable  under SAIF and
includes  any  deposits  that were  assumed  after March 31, 1995 if the insured
institution  from which the deposits  were acquired is not insured when the SAIF
special assessment is imposed.

                                       10
<PAGE>


The Deposit  Insurance Funds Act also provides that, as of the date of enactment
and ending on the earlier of December 31, 1999 or the date that the last savings
association  ceases to exist, the federal banking agencies must take appropriate
action to prohibit  deposit  shifting  from SAIF to BIF,  including  enforcement
actions,  denial of  applications,  or imposing exit and interest fees as if the
transaction  qualified as a conversion.  The legislation  requires the Office of
the Comptroller of the Currency,  the FDIC, the Federal  Reserve Board,  and the
Office of Thrift  Supervision  to take  necessary  actions  to  prevent  insured
depository  institutions  and  depository  institution  holding  companies  from
facilitating  or encouraging  the shifting of deposits from  SAIF-assessable  to
BIF-assessable   for  the  purpose  of  evading  the   assessments   imposed  on
SAIF-assessable  deposits.  The FDIC may issue  regulations  to prevent  deposit
shifting.  It is a rule of  construction,  however,  that  this  portion  of the
Deposit  Insurance  Funds Act does not prohibit an institution  from engaging in
conduct or activity  that is part of the ordinary  course of business and is not
directed at depositors of an insured affiliated institution.

The Deposit  Insurance  Funds Act also  provides  for the merger of BIF and SAIF
into the  Deposit  Insurance  Fund  (DIF) on  January  1,  1999,  if no  insured
depository  institution is a "savings  association"  on that date. If an insured
savings association still exists on January 1, 1999, the Deposit Insurance Funds
Act does not make provision for the merger of the funds to occur on a subsequent
date. For purposes of the BIF/SAIF  merger,  the term "savings  association"  is
defined as having the same meaning as it does in section 3(b) of the FDI Act (12
U.S.C.  Section 1813 (b)),  and thus  includes  both  federal and state  savings
associations.

If  immediately  before the merger,  the SAIF reserve ratio exceeds the DRR, the
excess will be placed in DIF's special  reserve.  While the DIF special  reserve
will not be included for purposes of calculating the DIF DRR and the FDIC an not
refund any amount in the  special  reserve,  it can be drawn upon for  emergency
purposes if the reserve  ratio of the DIF should drop below 50% of its DRR for a
sustained  period of time.  This portion of the Deposit  Insurance Fund Act also
makes  conforming  changes  to the  FDI  Act  and  other  provisions  of the law
effective  on January  1, 1999 if the funds are so merged.  If the funds are not
merged, the Deposit Insurance Fund Act establishes an SAIF special reserve as of
January  1, 1999 that will  consist of the excess in the SAIF over the DRR as of
that  date.  While the  amount in the SAIF  special  reserve  can not be used to
calculate any future DRR and can not be used for refunds from the SAIF, it would
be available  for  emergency  purposes if the reserve  ratio of the SAIF is less
than 50% of its DRR for a sustained period of time.

The Deposit Insurance Funds Act also required the FDIC on such basis as it deems
appropriate to refund any amounts in excess of the DRR to BIF members and, after
it is established,  to DIF members.  There are no similar provisions for refunds
to  SAIF  members.  A  member  cannot,  however,  receive  any  refund  for  any
semi-annual  assessment  period  that  exceeds the  assessment  paid during that
period.  Institutions  that  are  not  "well-capitalized"  or  that  have  other
weaknesses are not eligible for refunds.  The refund provision becomes effective
as of the end of any semi-annual  assessment  period beginning after the date of
enactment of the Deposit Insurance Funds Act.

                                       11
<PAGE>


The  United  States  Congress  and the  Georgia  General  Assembly  periodically
consider and adopt  legislation  that results in, and could  further  result in,
deregulation,  among other matters,  of banks and other financial  institutions.
Such legislation could modify or eliminate geographic  restrictions on banks and
bank  holding   companies  and  current   prohibitions   with  other   financial
institutions,  including mutual funds,  securities  brokerage  firms,  insurance
companies,  banks from other states and investment  banking firms. The effect of
any such  legislation  on the  business  of the  Company  or the Bank  cannot be
accurately  predicted.  The Company  cannot  predict what  legislation  might be
enacted or what other implementing  regulations might be adopted, and if enacted
or adopted, the effect thereof.

Competition

The  banking  business  is highly  competitive.  The Bank  competes  with  other
commercial banks in its primary service area.

Banks generally  compete with other financial  institutions  through the banking
products and  services  offered,  the pricing of services,  the level of service
provided,  the  convenience  and  availability  of  services,  and the degree of
expertise  and the  personal  manner in which  services  are  offered.  The Bank
encounters  strong  competition  from most of the financial  institutions in the
Bank's  primary  service  area.  In the conduct of certain  areas of its banking
business, the Bank also competes with credit unions, consumer finance companies,
mortgage  companies,  insurance  companies,  money market mutual funds and other
financial  institutions,  some of which are not  subject  to the same  degree of
regulation and  restrictions  imposed upon the Bank.  Many of these  competitors
have  substantially  greater  resources and lending limits than the Bank has and
offer certain services,  such as trust services,  that the Bank does not provide
presently. Management believes that competitive pricing and personalized service
will  provide it with a method to compete  effectively  in the  primary  service
area.

Employees

As of  December  31,  1997,  the Bank  employed  30  full-time  employees  and 6
part-time employees.  Except for the officers of the Bank who presently serve as
officers of the Company,  the Company does not have any  employees.  Neither the
Company  nor the Bank is a party to any  collective  bargaining  agreement,  and
management believes the Bank enjoys satisfactory relations with its employees.

ITEM 2.  DESCRIPTION OF PROPERTIES

The  operations of the Company and the Bank are  conducted  from the Bank's main
office located at 335 South Main Street, Statesboro, Georgia and from the Bank's
branch facility located at 726 Northside Drive East,  Statesboro,  Georgia.  The
Bank owns both facilities  which contain  approximately  11,500 and 2,500 square
feet, respectively.

ITEM 3.  LEGAL PROCEEDINGS

Neither the Company  nor the Bank is a party to any pending  legal  proceedings,
other  than  routine  litigation  incidental  to  the  Bank's  business,   which
management  believes  would  have a  material  effect  upon  the  operations  or
financial condition of the Company or the Bank.


                                       12
<PAGE>




ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was  submitted  to a vote of  security  holders  during the  Company's
fourth quarter of the fiscal year ended December 31, 1997.

II

ITEM 5.  MARKET FOR ISSUER'S COMMON EQUITY AND
                  RELATED STOCKHOLDER MATTERS

As of December 31, 1997, there were  approximately 924 shareholders of record of
the Company's common stock.  Although there is no established trading market for
the Company's common stock, the Company is aware of 12 private trades during the
1997 fiscal year at prices  ranging from $13.00 to $15.00 per share.  On October
20, 1997,  the Company  declared a cash dividend in the amount of $.32 per share
payable January 15, 1998. Certain regulatory requirements restrict the amount of
dividends  that can be paid to the  Company by the Bank  without  obtaining  the
prior  approval  of the DBF.  No  assurance  can be given  that  dividends  will
continue to be declared,  or if declared, by the Company, what the amount of the
dividends will be.


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS
                  OR PLAN OF OPERATIONS

Introduction

The  Company is a one-bank  holding  company  providing  a full range of banking
services  to  individual  and  corporate  customers  in the  Bulloch  County and
surrounding areas through its wholly-owned  bank subsidiary,  the Bank. The Bank
operates under a state charter  granted by the DBF and serves its customers from
its two banking facilities in Statesboro,  Georgia.  The following discussion of
the Company's  financial  condition and results of operations  should be read in
conjunction  with the Company's  consolidated  financial  statements and related
notes presented in Item 7 of this Annual Report on Form 10-KSB.





                [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]



                                       13
<PAGE>



                             SELECTED FINANCIAL DATA

        The  following  selected  financial  data for Eagle  Bancorp,  Inc.  and
        subsidiary should be read in conjunction with the consolidated financial
        statements and related notes included in another  section of this Annual
        Report on Form 10-KSB.

<TABLE>
                                                                                   Years Ended December 31,
                                                                                   ------------------------
                                                                                1997        1996        1995
                                                                                ----        ----        ----
                                                                            (amounts in thousands, except per share
                                                                                 information and financial ratios)

        Income Statement data:
<S>                                                                             <C>        <C>         <C>    
         Interest income                                                        $ 5,238    $ 4,657     $ 4,236
         Interest expense                                                        (2,538)    (2,269)     (1,988)
                                                                                 ------     ------      ------ 
                  Net interest income                                             2,700      2,388       2,248

         Provision for possible loan losses                                        (116)      (108)        (75)

         Noninterest income                                                         747        642         490

         Noninterest expense                                                     (2,350)    (2,171)     (1,953)

         Income tax expense                                                        (307)      (250)       (210)
                                                                                   ----       ----        ---- 

         Net income                                                             $   674    $   502     $   500
                                                                                =======    =======     =======

        Balance sheet data:

         Loans, net of unearned income                                          $49,474    $42,639     $37,442
                                                                                =======    =======     =======

         Deposits                                                               $55,667    $52,465     $44,883
                                                                                =======    =======     =======

         Total assets                                                           $66,335    $60,730     $52,774
                                                                                =======    =======     =======

         Average shareholders' equity                                           $ 6,534    $ 6,336     $ 6,122
                                                                                =======    =======     =======
         Average assets                                                         $63,694    $56,045     $49,974
                                                                                =======    =======     =======

        Per share data:
         Net income
                Basic                                                           $     .78  $      .58  $     .58
                                                                                =========  ==========  =========
              Diluted                                                           $     .76  $      .57  $     .57
                                                                                =========  ==========  =========

         Book value                                                             $    7.73  $     7.25  $    7.19
                                                                                =========  ==========  =========
         Cash dividends declared                                                $     .32  $      .50  $     .25 
                                                                                =========  ==========  ========= 
        Financial ratios:
         Return on average assets                                                    1.06%        .90%      1.00%
                                                                                     ====         ===       ==== 
         Return on average shareholders' equity                                     10.31%       7.92%      8.17%
                                                                                    =====        ====       ==== 
         Dividend payout ratio                                                      44.21%      85.97%     43.12%
                                                                                    =====       =====      ===== 

         Average shareholders' equity to average assets                             10.26%      11.31%     12.25%
                                                                                    =====       =====      ===== 
</TABLE>

        Note: Per share data has been restated for all periods presented to 
        reflect a three-for-two stock split effected in May, 1995.

                                       14
<PAGE>


        RESULTS OF OPERATIONS

        The Company's net income and basic earnings per share for the year ended
        December  31,  1997 were  $673,941  or $0.78 per share  compared  to net
        income and basic earnings per share for the year ended December 31, 1996
        of $501,856 or $0.58 per share.  Net income and basic earnings per share
        for the year ended December 31, 1995 were $500,180 or $.58 per share.

        Increases  in net  interest  income of  approximately  $312,000 in 1997,
        $140,000  in 1996 and  $171,000  in 1995 and  increases  in  noninterest
        income of approximately  $104,000 in 1997,  $152,000 in 1996 and $95,000
        in 1995 are the primary reasons the Company  increased its profitability
        during  1997,  1996 and  1995.  The  Company's  total  assets  grew from
        approximately  $60.7  million at December  31, 1996 to $66.3  million at
        December 31, 1997 or  approximately  9.23%.  The Company's  total assets
        grew from  approximately  $52.8 million at December 31, 1995 to $60.7 at
        December 31, 1996 or approximately  15%. The decrease in the growth rate
        from  approximately  15% in 1996 to approximately  9.23% in 1997 was the
        result of the increase  competition within the local market area and the
        bank's  emphasis on  maintaining  its net interest  margin.  Noninterest
        expense  increased  approximately  $179,000 in 1997 and $218,000 in 1996
        primarily relating to increased salary and occupancy expense.

        The following  table  summarizes  the results of operations  and certain
        financial  ratios of the Company for each of the years in the three-year
        period ended December 31, 1997.

<TABLE>
                                                                       Years ended December 31,
                                                                       ------------------------
                                                                       1997        1996      1995
                                                                       ----        ----      ----
(amounts in thousands, except share and
        per share information and financial ratios


<S>                                                                    <C>      <C>       <C>    
        Interest income                                                $ 5,238  $ 4,657   $ 4,236
        Interest expense                                                (2,538)  (2,269)   (1,988)
                                                                        ------   ------    ------ 
        Net interest income                                              2,700    2,388     2,248
        Provision for possible loan losses                                (116)    (108)      (75)
        Noninterest income                                                 747      643       490
        Noninterest expense                                             (2,350)  (2,171)   (1,953)
        Income tax expense                                                 307)  (  250)   (  210)
                                                                       --------  -------    ------
        Net Income                                                     $   674  $   502   $   500
                                                                       =======   =======    ======

        Basic Earnings Per Share                                       $  0.78   $ 0.58   $  0.58
                                                                       =======   ======   =======
        Diluted Earnings Per Share                                     $  0.76   $ 0.57   $  0.57
                                                                       =======   ======   =======
</TABLE>

                                       15
<PAGE>


<TABLE>

                                                                            Years ended December 31,
                                                                            ------------------------
                                                                           1997        1996      1995
                                                                           ----        ----      ----
                                                                   (amounts in thousands, except share and
                                                                  pershare information and financial ratios)

<S>                                                                         <C>          <C>      <C>  
        Return on average assets                                            1.06%        .90%     1.00%
                                                                            ====         ===      ==== 

        Return on average shareholders' equity                             10.31%       7.92%     8.17%
                                                                           =====        ====      ==== 

        Dividend payout ratio                                              44.21%      85.97%    43.12%
                                                                           =====       =====     ===== 

        Average loans to average deposits                                  86.07%      82.96%    82.32%
                                                                           =====       =====     ===== 

        Loan to deposit ratio (period-end)                                 88.87%      81.27%    83.49%
                                                                           =====       =====     ===== 

        Average shareholders' equity to average assets                     10.26%      11.31%    12.25%
                                                                           =====       =====     ===== 

        Shareholders' equity to assets (period-end)                        10.18%      10.31%    11.74%
                                                                           =====       =====     ===== 
</TABLE>

        Note: Per share data has been restated for all periods presented to
        reflect a three-for-two stock split effected in May, 1995.

        Net Interest Income

        The Company's  net interest  income,  the  difference  between  interest
        income   on   interest-earning    assets   and   interest   expense   on
        interest-bearing  liabilities,  is the  Company's  principal  source  of
        income.  Interest-earning  assets for the Company include loans, federal
        funds sold,  investment  securities,  and  interest-earning  deposits in
        financial  institutions.   The  Company's  interest-bearing  liabilities
        include  its  interest-bearing   deposit   liabilities,   federal  funds
        purchased, and advances from the Federal Home Loan Bank.

        In 1997, net interest income was $2,700,000, representing an increase of
        $312,000 or 13.05% when  compared to 1996 of  $2,388,000.  Net  interest
        income for 1996 was  approximately  6.23%  higher than 1995 net interest
        income of  $2,248,000.  The average  yield  earned on  interest  earning
        assets was 9.00% in 1997,  9.19% in 1996 and 9.31% in 1995.  The average
        rate paid on  interest-bearing  liabilities was 5.00% in 1997,  5.13% in
        1996 and 5.07% in 1995. The Company's net interest  margin (net interest
        income  divided by average  interest-earning  assets)  equaled  4.64% in
        1997,  4.72% in 1996 and  4.94% in 1995.  The  decline  in net  interest
        margin is attributable to the intensely  competitive  market for quality
        loans in the Bank's market area.  The Company's  average loan to deposit
        ratio in 1997 was 86.1%,  1996 was 83.0% as  compared to 82.3% for 1995.
        The  Bank's   loan  to  deposit   ratio  at   December   31,   1997  was
        88.87%,December 31, 1996 was 81.27% and 83.49% at December 31, 1995.



                                       16
<PAGE>



        The  following  table  presents  average  balance  sheets,  yields,  and
        interest earned on  interest-earning  assets and rates and interest paid
        on  interest-bearing  liabilities  of the  Company  for the years  ended
        December 31, 1997 and 1996.
<TABLE>
                                                                 Years ended December 31,
                                                                 ------------------------
                                                              1997                      1996
                                                              ----                      ----
                                                     Average            Yields/ Average            Yields/
                                                     balances  Interest  rates  balances  Interest  rates
                                                     --------  --------  -----  --------  --------  -----
                                                       (amounts in thousands, except percentages and ratios)
        ASSETS
        Interest-earning assets:
        Interest-earning deposits in
<S>                                                   <C>          <C>    <C>       <C>        <C>      <C>  
           financial institutions                     $     0         0      0%   $    32         1     3.13%
        Federal funds sold                              1,190        65   5.38      1,084        59     5.44
        Investment securities                          11,160       660   5.91     10,222       580     5.67
        Loans, net (1)(2)                              45,874     4.513   9.84     39,403     4,024    10.21
                                                       ------     -----   ----     ------     -----    -----
          Total interest-earning assets               $58,224     5,238   9.00%    50,741     4,664     9.19%
                                                      =======     =====   ====     ======     =====     ==== 

        Noninterest-earning assets:
        Cash and due from banks                         2,008                       1,990
        Premises and equipment, net                     2,482                       2,509
        Other assets                                      980                         805
                                                          ---                         ---
         Total noninterest-earning assets               5,470                       5,304
                                                        -----                       -----

        TOTAL ASSETS                                  $63,694                     $56,045
                                                      =======                     =======

LIABILITIES AND SHAREHOLDERS' EQUITY
        Interest-bearing liabilities:
        Interest-bearing demand deposits              $ 6,967       179   2.57%     $ 6,706    175     2.61%                       
        Money market & savings accounts                 5,509       168   3.05        4,741    145     3.06
        Certificates of deposit                        32,909     1,878   5.71       29,268  1,733     5.92
        Individual retirement accounts                  3,239       194   5.99        2,823    179     6.34
        Other Borrowed Funds                            2,132       119   5.58          623     37     5.84
                                                        -----       ---   ----          ---     --     ----
          Total interest-bearing liabilities           50,756     2,538   5.00%      44,161  2,269     5.13%
                                                       ======     =====   ====       ======  =====     ==== 

        Noninterest-bearing liabilities and shareholders" equity:
        Noninterest-bearing demand deposits           $ 5,459                      $  4,681
        Other liabilities                                 944                           867
        Shareholders' equity                            6,535                         6,336
                                                        -----                         -----
          Total noninterest-bearing
            liabilities and shareholders'
                   equity                              12,938                        11,884
                                                       ------                        ------

        TOTAL LIABILITIES AND
        SHAREHOLDERS' EQUITY                          $63.694                      $ 56,045
                                                      =======                      ========
        INTEREST RATE DIFFERENTIAL (3)                                    4.00%                         4.06%
                                                                          ====                          ==== 
                                                              
        NET INTEREST INCOME                                      $ 2,700                     $ 2,395
                                                                 =======                     =======

        NET INTEREST MARGIN (4)                                           4.64%                         4.72%
                                                                          ====                          ==== 

        AVERAGE INTEREST-EARNING
        ASSETS TO AVERAGE TOTAL ASSETS                            91.41%                       90.54%
                                                                  =====                        ===== 

        AVERAGE LOANS TO AVERAGE DEPOSITS                         86.07%                       82.96%
                                                                  =====                        ===== 

                                       17
<PAGE>


</TABLE>

        (1)       Average loans are shown net of unearned  income/deferred  loan
                  cost and the allowance for possible loan losses. Nonperforming
                  loans are included.
        (2)       Interest income includes loan fees as follows 
                  (amounts in thousands): 1997 - $90, 1996 - $173, 1995 - $156
        (3)       Interest  rate  differential  is the average  yield  earned on
                  interest-earning   assets  less  the  average   rate  paid  on
                  interest-bearing liabilities.
        (4) Net  interest  margin is net  interest  income  divided  by  average
            interest-earning assets.

        The following  table  presents the changes in the Company's net interest
        income  as a  result  of  changes  in  the  volume  (changes  in  volume
        multiplied by prior rate) and rate (changes in rate  multiplied by prior
        volume) of its interest-earning assets and interest-bearing  liabilities
        from 1996 to 1997 and from 1995 to 1996.

<TABLE>
                                             1997 vs. 1996                      1996 vs. 1995
                                             -------------                      -------------
                                    Volume(1)  Rate(1)  Net Change     Volume (1) Rate(1) Net Change
                                    ---------  -------  ----------     ---------- ------- ----------
        Interest Income:
          Interest-earning deposits
<S>                                   <C>         <C>         <C>       <C>       <C>         <C>
          in financial institutions $   (0)       (0)         (0)     $    (3)    (2)         (5)
          Federal funds sold             6        (1)         (5)         (24)    (6)        (30)
          Investment securities         53        28          81          103     24         127
          Loans, including fees        634      (146)        488          402    (66)        336
                                       ---      ----         ---          ---    ---         ---
         Total interest income         693      (119)        574          478    (50)        428
                                       ===      ====         ===          ===    ===         ===
        Interest expense:
          Individual retirement
            accounts                    25       (10)         15           32     10          42
          Money Market and
            Savings Deposits            23        (0)         23           (3)   (15)        (18)
          Certificates of deposits     206       (61)        145          222     20         242
          Interest-bearing demand
            deposits                     7        (3)          4            3    (25)        (22)
         Other borrowed funds           84        (2)         82           37      0          37
                                        --        --          --           --      -          --

         Total interest expense        345       (76)        269          291    (10)        281
                                       ===       ===         ===          ===    ===         ===

         Net interest income        $  348       (43)        305      $   187    (40)        147
                                    ======       ===         ===      =======    ===         ===
</TABLE>

        (1) The  change  in  interest  due to both  rate  and  volume  has  been
        allocated  to the  volume  and  rate  components  in  proportion  to the
        relationship of the dollar amounts of the change in each.


        Allowance for Possible Loan Losses

        The Company  provides  for possible  loan losses based upon  information
        available at the end of each period.  By evaluating  the adequacy of the
        allowance for possible loan losses at the end of each period, management
        maintains the allowance for possible loan losses at a level  adequate to
        provide for losses that can reasonably be anticipated.  The level of the
        allowance  for possible  loan losses is based on  management's  periodic
        loan-by-loan evaluation of its loan portfolio, as well as its assessment
        of prevailing and anticipated economic conditions in Southeast Georgia.

                                       18
<PAGE>


        A substantial portion of the Company's loans are secured by real estate,
        including  real  estate  and other  collateral  in  Bulloch  County  and
        surrounding  counties.  Accordingly,  the ultimate  collectability  of a
        substantial  portion of the Company's  loan  portfolio is susceptible to
        changes in economic conditions in these market areas.

        The allowance for possible loan losses approximated 1.43% of outstanding
        loans at December  31, 1997 and 1.50% of  outstanding  loans at December
        31, 1996. The allowance  increased to $706,237 at December 31, 1997 from
        $639,500 at December 31, 1996.  This  increase in allowance for possible
        loan losses reflects  management's  evaluation as discussed  above,  the
        growth in loans,  and the Company's goal of maintaining an allowance for
        possible loan losses to outstanding loans at a target level of 1.40%.The
        Company experienced net charge-offs in 1997 of approximately  $50,000 as
        compared to net  charge-offs  of  approximately  $38,000 in 1996. As the
        Company continues to grow and as the Company's loan portfolio  continues
        to mature,  management  believes  that net  charge-offs  could  possibly
        increase  in 1998 and future  years.  While  management  uses  available
        information  to  recognize  losses on  loans,  future  additions  to the
        allowance may be necessary based on changes in economic  conditions.  In
        addition,  regulatory agencies, as an integral part of their examination
        process,  periodically  review the Company's allowance for possible loan
        losses.  Such agencies may require the Company to recognize additions to
        the allowance based on their judgments  about  information  available to
        them at the time of their examination.




                                       19
<PAGE>




        The following table summarizes the changes in the allowance for possible
        loan  losses  arising  from loans  charged off and  recoveries  on loans
        previously charged off during 1997, 1996, and 1995:

<TABLE>
                                                                           Years ended December 31,
                                                                           ------------------------
                                                                         1997        1996        1995
                                                                         ----        ----        ----
                                                                     (amounts in thousands, except ratios)

<S>                                                                   <C>         <C>        <C>    
        Average loans outstanding, net of unearned income, deferred
        costs and allowance for possible loan losses                  $ 45,874    $ 39,403   $ 35,542
                                                                      ========    ========   ========

        Allowance for possible loan losses at beginning of year             640         570        528
        Loans-Consumer installment(charged off)                           (  71)        (59)       (35)
        Recoveries of loans - Consumer installment
          previously charged off                                             21          21          2
                                                                             --          --          -
        Net loans (charged off) recovered                                 (  50)        (38)       (33)

        Additions to allowance for possible loan losses charged
          to income                                                         116         108         75
                                                                            ---         ---         --

        Allowance for possible loan losses at end of year              $    706    $    640    $   570
                                                                       ========    ========    =======

        Ratio of net loans charged off to average loans
          outstanding, net of unearned income                              0.11%       0.10%      0.09%
                                                                           ====        ====       ==== 

        Allowance for possible loan losses to loans,
          net of unearned income                                           1.43%       1.50%      1.52%
                                                                           ====        ====       ==== 
</TABLE>


        Nonperforming Loans, Nonperforming Assets, and Underperforming Loans

        Nonperforming  loans  include  loans  placed on  nonaccrual  status  and
        restructured loans.  Nonperforming  assets include  nonperforming loans,
        real  estate  acquired  through  foreclosure,  and  repossessed  assets.
        Underperforming  loans  consist of loans which are past due with respect
        to principal or interest  more than 90 days which are not  classified as
        nonaccrual loans.

        Interest on loans is recognized  using the simple  interest method based
        on  the  principal  balance  outstanding.  Interest  accruals  including
        accruals  of interest on  impaired  loans are  discontinued  when either
        principal or interest  becomes 90 days past due, or when in management's
        opinion,   after  considering   economic  and  business  conditions  and
        collection efforts,  the borrower's  financial condition is such that it
        is not  reasonable to expect such  interest will be collected.  Interest
        income is  subsequently  recognized only to the extent cash payments are
        received.

        Management is not aware of any loans classified for regulatory  purposes
        as loss,  doubtful,  substandard,  or special mention that have not been
        disclosed  which (1)  represent  or result from trends or  uncertainties
        which  management  reasonably  expects  will  materially  impact  future
        operating results,  liquidity,  or capital  resources,  or (2) represent
        material  credits  about which  management  is aware of any  information
        which causes  management  to have serious  doubts as to the abilities of
        such borrower to comply with the loan repayment terms. Potential problem
        loans  are  loans  classified  as  substandard,  doubtful,  or  loss  by
        management.

                                       20
<PAGE>


        Nonperforming  loans were  $48,000 at December  31, 1997 and $123,000 at
        December 31, 1966.  Nonperforming loans represented 0.09% of outstanding
        loans at December 31, 1997, as compared to 0.29% of outstanding loans at
        December 31, 1996. The Company has continued to emphasize  asset quality
        during 1997. The Company restructured one loan in the amount of $571,980
        in 1995  which  was  adequately  secured  by real  estate,  which if not
        included in the ratios,  would result in a  nonperforming  loan ratio of
        0.15% at December 31, 1995. The Company  received  payment of all unpaid
        principal and interest related to this loan in March, 1996.

        The  table  below  provides  information  concerning  nonperforming  and
        underperforming  loans and certain asset quality  ratios at December 31,
        1997, 1996 and 1995:




<TABLE>
                                                                                    December 31,
                                                                                    ------------
                                                                                1997    1996     1995
                                                                                ----    ----     ----
                                                                                (amounts in thousands,
                                                                                  except ratios)

<S>                                                                             <C>     <C>      <C>   
        Nonperforming loans                                                     $   48   $ 123    $  629

        Underperforming loans                                                   $    2  $    0    $    0

        Potential problem loans                                                 $  399  $  611    $  291

        Asset quality ratios:

          Nonperforming loans to total loans, net of unearned
         income                                                                   0.09%   0.29%     1.68%

          Underperforming loans to total loans, net of unearned
         income                                                                   0.00%   0.00%     0.00%

          Potential problem loans to total loans, net of unearned
         income                                                                   0.81%   1.43%     0.78%

          Nonperforming, underperforming and potential problem
         loans to total loans, net of unearned income                             0.91%   1.72%     2.46%

          Allowance for possible loan losses to nonperforming loans              14.71x   5.20x     0.91x

          Allowance for possible loan losses to nonperforming,
         underperforming, and potential problem loans                             1.57x   0.87x     0.62x

</TABLE>

                                       21
<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,
        adequacy  and  nature of  collateral,  and such  factors  which,  in the
        judgment of management,  deserve  recognition in estimating loan losses.
        Because the allocation is based on estimates and subjective judgment, it
        is not necessarily  indicative of specific amounts or loan categories in
        which charge-offs may occur.

        The amount of such  components of the allowance for possible loan losses
        and the ratio of each loan category to loans  outstanding  are presented
        below:

<TABLE>

                                                                     December 31,
                                                                     ------------
                                                         1997            1996             1995
                                                         ----            ----             ----
                                                     Allowance %(1)  Allowance %(1)    Allowance %(1)
                                                     --------- ----  --------- ----    --------- ----

<S>                                                  <C>        <C>  <C>        <C>    <C>        <C>
        Real estate                                  $ 402      56   $  378     61     $  380     62
        Real estate - construction                      85      12       45      7         46      8
        Commercial and agricultural                    148      22      147     22         63     19
        Consumer                                        71      10       70     10         79     11
                                                        --      --       --     --         --     --
         Total                                       $ 706     100   $  640    100     $  570    100
                                                     =====     ===   ======    ===     ======    ===
</TABLE>


        (1) Loan amount in each  category  expressed  as a  percentage  of total
            loans outstanding.


        Noninterest Income

        Noninterest income of $746,839 in 1997, $642,461 in 1996 and $490,534 in
        1995 is primarily  comprised of mortgage  loan  referral fees in 1997 of
        $233,734,  1996 of $245,897 and $113,289 in 1995 and service  charges on
        deposit  accounts.  The increase of $104,378 or 16.25% in 1997 from 1996
        in noninterest income is primarily attributable to the increase in a new
        accounts  receivable  financing  product  introduced in 1997 and service
        charges on deposit accounts.  The substantial portion of service charges
        on deposit accounts includes monthly transaction fees on demand accounts
        and fees for returned  checks.  The Company  continually  evaluates  the
        pricing of its demand  deposit  products to ensure such products  remain
        competitive in the marketplace,  while providing  appropriate  levels of
        noninterest  income to the Company to cover the costs of  servicing  and
        maintaining such accounts.

                                       22
<PAGE>


        Securities gains (losses),  net of $1,293 were recognized by the Company
        during  1997  compared  to  ($10,467)  in 1996  and  resulted  from  the
        Company's sale of investment securities to meet loan demand.


        Noninterest Expense

        Noninterest expense increased $179,138 or 8.25% in 1997 compared to 1996
        and increased  $218,073 or 11.17% in 1996 compared to 1995.  Noninterest
        expense for 1997 was $2,350,170,  for 1996 was $2,171,032,  and for 1995
        was $1,952,959 and represented  approximately  3.68%, 3.87% and 3.91% of
        average  assets  in  1997,  1996  and 1995  respectively.  Salaries  and
        employee  benefits  expense was the  largest  component  of  noninterest
        expense.  Salaries and employee benefits expense was $1,142,200 in 1997,
        $1,071,636  in 1996 and $953,836 in 1995 and  represented  approximately
        48.60%, 49.36% and 48.84% of non-interest expense in 1997, 1996 and 1995
        respectively.  These amounts include wages, payroll taxes, group medical
        insurance,  profit sharing plan contributions,  and all benefits paid to
        the Company's employees.  The increase in salaries and employee benefits
        expense  of  approximately  $70,565  is  attributable  to normal  salary
        increases and an increase in group medical insurance premiums. Occupancy
        and equipment  expenses of approximately  $307,272 in 1997,  $272,664 in
        1996 and $222,197 in 1995 also represented  approximately 13.07%, 12.56%
        and 11.37% of noninterest  expense in 1997, 1996 and 1995  respectively.
        All other expenses of approximately  $900,698 in 1997,  $826,732 in 1996
        and $776,926 in 1995 represented approximately 38.33%, 38.08% and 39.78%
        of  noninterest  expense  in  1997,  1996 and  1995  respectively.  FDIC
        insurance expense decreased by approximately $48,000 in 1996 and $40,000
        in 1995 due to decreased  assessments  from the Bank Insurance Fund. The
        more significant  components of other operating expenses for each of the
        last three years are shown as follows:

<TABLE>
                                                                         Years ended December 31,
                                                                         ------------------------
                                                                1997            1996              1995
                                                                ----            ----              ----

<S>                                                             <C>               <C>           <C>   
        Stationery and supplies                                 65,225            84,717        74,317
        Postage                                                 62,402            56,267        51,066
        Advertising and marketing                               59,862            52,366        51,605
        Professional fees - legal and accounting                85,590            74,864        54,471
        Data Processing    (1)                                 161,304           109,217        87,845
        Directors fees                                          58,900            53,300        55,400

</TABLE>


        (1) The bank  renewed its core data  processing  agreement  in February,
        1997 which resulted in this expense increasing.


                                       23
<PAGE>








        Income Taxes

        The Company  provided income tax expense of $306,600 for 1997,  $250,000
        for 1996 and  $210,000  for 1995  representing  effective  tax  rates of
        approximately 32%, 33% and 30% respectively. The Company's effective tax
        rate was lower in 1995  because  of the impact of the  reduction  of the
        valuation  allowance for deferred tax assets recorded in 1995.  Refer to
        note 10 to the consolidated  financial statements for further disclosure
        of income taxes. The Company believes its effective income tax rate will
        increase in 1998 to an effective rate of approximately  36%. The Company
        will  continue  to seek  appropriate  tax  planning  strategies  such as
        investing in tax-free  securities in an effort to minimize its effective
        tax rate.


        Net Income
        The Company  achieved net income of $673,941 or  approximately  0.78 per
        common share  outstanding for  1997,$501,856 or approximately  $0.58 per
        common  share   outstanding   for  1996,   net  income  of  $500,180  or
        approximately $0.58 per common share outstanding during 1995.



        Loan Portfolio

        The Company does not have any  concentrations  of loans exceeding 10% of
        total  loans of which  management  is aware and which are not  otherwise
        disclosed  as a  category  of loans  in the  table  below or in  another
        section of this annual report on Form 10-KSB.

        Average  loans were $46.0 million in 1997,  $40.0  million in 1996,  and
        $36.1  million  in  1995.  Average  loans  as a  percentage  of  average
        interest-earning  assets  were  78.8%,  77.7%,  and 79.4%  respectively.
        Average loans as a percentage of average total assets were 72.0%, 70.3%,
        and 72.2% respectively.

        The following two tables  present the  composition of the Company's loan
        portfolio  at  December  31,  1997,  1996 and  1995 and the  contractual
        maturities and interest rate sensitivity of certain  categories of loans
        as of December 31, 1997.



                                       24
<PAGE>

<TABLE>


                                                                             December 31,
                                                                             ------------
                                                                     1997         1996         1995
                                                                     ----         ----         ----
                                                                        (amounts in thousands)

<S>                                                                 <C>        <C>         <C>      
        Commercial, financial and agricultural                      $  32,072  $  29,312   $  24,806
        Real estate - construction                                      5,699      3,097       2,932
        Real estate - mortgage                                          6,705      6,538       6,221
        Consumer                                                        5,006      3,693       3,511
                                                                        -----      -----       -----
         Total loans                                                   49,482     42,640      37,470

        Less:
           Allowance for possible loan losses                            (706)      (640)       (570)
           Unearned income                                                 (8)        (1)        (28)
                                                                           --         --         --- 
           Loans , net                                              $  48,768  $  41,999    $ 36,872
                                                                    =========  =========    ========

</TABLE>


<TABLE>
                                                                                  Maturing
                                                                                  --------
                                                                                  After one
                                                                       Within    but within    After
                                                                      one year   five years  five years
                                                                      --------   ----------  ----------
                                                                          (amounts in thousands)

<S>                                                                   <C>         <C>        <C>     
        Commercial, financial and agricultural                        $ 11,398    $ 17,764   $  2,910
        Real estate - construction                                       5,699           0          0
        Real estate - mortgage                                           3,026       3,071        608
        Consumer                                                         2,259       2,293        454

        Summary of loans:
            Total fixed rate due after one year                                 $ 27,048 
            Total adjustable rate due after one year                                  52
                                                                                      --

         Total loans due after one year                                          $27,100
                                                                                 =======
</TABLE>


        Actual  repayments of loans may differ from the  contractual  maturities
        reflected  above  because   borrowers  may  have  the  right  to  prepay
        obligations  with or without  prepayment  penalties.  Additionally,  the
        refinancing  of such loans or the  potential  delinquency  of such loans
        could  also  cause  differences   between  the  contractual   maturities
        reflected above and the actual repayment of such loans.

        Investment Securities

        The Company's  investment  securities portfolio serves several essential
        functions,  such as providing a vehicle for the  investment of available
        funds,  furnishing  liquidity,  and  supplying  securities  to pledge as
        required for certain deposits.  Average investment  securities increased
        $.9  million or 9.17% in 1997 as  compared  to 1996 and  increased  $1.9
        million  or 22.7% in 1996  compared  to 1995.  The  increase  in average
        investment  securities results from the Company's growth in deposits and
        other  borrowings.   During  1997,  1996  and  1995  average  investment
        securities comprised 19.2, 20.1%, and 18.3% of average  interest-earning
        assets,  respectively,  and 17.5%,  18.2%,  and 16.7% of  average  total
        assets, respectively.

                                       25
<PAGE>


        The two tables below present the carrying  values and the composition of
        investment  securities  at the end of each of the past two years and the
        contractual  maturities and yields of investment  securities at December
        31, 1997.  Expected  maturities may differ from  contractual  maturities
        because issuers may have the right to call or prepay obligations with or
        without call or prepayment penalties.

<TABLE>

                                                                         December 31,
                                                                         ------------
                                                               1997                        1996
                                                               ----                        ----
                                                     Available     Held to        Available    Held to
                                                      for Sale     Maturity        for Sale    Maturity
                                                      --------     --------        --------    --------
                                                                   (amounts in thousands)

<S>                                                  <C>           <C>            <C>          <C>     
        U.S. Treasury                                $       0     $ 1,742        $   997      $  1,740
        U.S. Government Agencies                         3,403       2,800          2,887         2,050
        State, County and Municipal                      2,950           0          2,857             0
        Federal Home Loan Bank Stock                       244           0            158             0
                                                           ---           -            ---             -
            Total investment securities              $   6,597     $ 4,542        $ 6,899      $  3,790
                                                     =========     =======        =======      ========
</TABLE>
<TABLE>

                                                                          Maturing
                                                                          --------
                                                     within            after one but       after
                                                     one year          within five years   five years
                                                     Amount    Yield   Amount    Yield     Amount    Yield
                                                     ------    -----   ------    -----     ------    -----
                                                                         (amounts in thousands)
       
<S>                                                  <C>         <C>   <C>        <C>      <C>           <C>
        U.S. Treasury                                $      0      0%  $  1,742   6.47%    $    0        0%
        U.S. Government Agencies                          300   4.98      5,403   6.39        500     6.25
        State, County and Municipal                       790   3.81      1,696   3.94        464     5.81
        Federal Home Loan Bank                              0      0          0      0        244     7.25
                                                            -      -          -      -        ---     ----

         Total investment
             securities                              $  1,090   4.13%  $  8,841   5.89%    $1,208     6.28%
                                                     ========   ====   ========   ====     ======     ==== 
</TABLE>
<TABLE>

                                                                        December 31, 1997
                                                                        -----------------
                                                     Investment Securities             Investments Securities
                                                      Available for sale                   Held to maturity
                                                      ------------------                   ----------------
                                                      Amortized     Fair               Amortized         Fair
                                                        Cost       Value                  Cost          Value
                                                        ----       -----                  ----          -----

<S>                                                  <C>         <C>                    <C>         <C>      
        Due in one year                              $    790    $    790               $     300   $     300
        Due after one year through five years           5,087       5,099                   3,742       3,772
        Due after five years through ten years            705         708                     500         497
        Over ten years                                      0           0                       0           0
                                                            -           -                       -           -
                                                     $  6,582    $  6,597               $   4,542    $  4,569
                                                     ========    ========               =========    ========

</TABLE>

        Excluding obligations of the U.S. Treasury and U.S. Government agencies,
        the  Company  did not  have any  investment  which  exceeded  10% of the
        Company's shareholders' equity at December 31, 1997.


                                       26
<PAGE>






        Deposits

        Average  deposits  increased  $5.9 million to $54.1 million or 12.61% in
        1997,  $5.0  million  or 11.68%  from $48.2  million  during  1996.  The
        increase in average deposits represents growth in the Company's existing
        market and reflects the results of the  Company's  marketing  efforts in
        attracting new customers from competing financial institutions.


        The  average  deposits  by type,  their  relationship  to total  average
        deposits,  and the  average  rate paid on deposits by type for the years
        ended December 31, 1997 and 1996 are presented below.

<TABLE>

                                                                  December 31,
                                                                  ------------
                                                          1997                       1996
                                                          ----                       ----
                                                Amount     %     Rate         Amount     %     Rate
                                                ------     -     ----         ------     -     ----
                                               (amounts in thousands, except percentages and ratios)

<S>                                            <C>        <C>      <C>       <C>        <C>       <C>
        Noninterest-bearing demand deposits    $  5,459   10%        0       $ 4,681    10%         0
        Interest-bearing demand deposits          6,967   13      2.57         6,706    14       2.61
        Money Market and Savings accounts         5,509   10      3.05         4,741    10       3.06
        Certificates of deposit                  32,909   61      5.71        29,268    60       5.92
        Individual retirement accounts            3,239    6      5.99         2,823     6       6.34
                                                  -----    -      ----         -----     -       ----

         Total average deposits                $ 54,083  100%     4.97%      $48,219   100%      5.13%
                                               ========  ===      ====       =======   ===       ==== 
</TABLE>

        The maturities of  certificates  of deposits and  individual  retirement
        accounts  of  $100,000  or more as of  December  31,  1997  and 1996 are
        presented below.
<TABLE>

                                                                    December 31,
                                                                    ------------
                                                                1997            1996
                                                                ----            ----
                                                               (amounts in thousands)

<S>                                                            <C>               <C>    
        Three months or less                                   $ 3,984           $ 4,509
        Over three months through six months                     3,220             2,068
        Over six months through 12 months                        2,728             1,820
        Over 12 months                                           1,886             2,818
                                                                 -----             -----

          Total certificates of deposit and individual
             retirement accounts of $100,000 or more           $11,818           $11,215
                                                               =======           =======
</TABLE>

        The Company has analyzed the  composition of certificates of deposit and
        individual  retirement  accounts of $100,000 or more. The large deposits
        comprised  20.71% of average  deposits  during 1997 compared to 22.6% of
        average  deposits for 1996.  Total  deposits  included large deposits of
        $11,818,000 and $11,215,000 at December 31, 1997 and 1996,  representing
        21.23%  and  21.38%  of  total  deposits  at the end of  these  periods,
        respectively.  These large deposits are with governmental  bodies in the
        local  community  that the Company  serves or are with  individuals  who
        reside  in the local  area and to whom the  Company  has had  consistent
        deposit  relations since the Company's  inception.  There is no material
        reliance on brokered deposits as a source of large deposit funding.


                                       27
<PAGE>



Liquidity and Interest Rate Sensitivity

        Liquidity management involves the matching of the cash flow requirements
        of customers,  with depositors  withdrawing funds or borrowers requiring
        loans,  and the  ability  of the  Company  to meet  those  requirements.
        Management  monitors  and  maintains  appropriate  levels of assets  and
        liabilities  so that  maturities of assets are such that adequate  funds
        are provided to meet customer withdrawals and loan requests.

        The Company's liquidity position depends primarily upon the liquidity of
        its assets  relative  to its need to respond  to  short-term  demand for
        funds  caused by  withdrawals  from  deposit  accounts  and loan funding
        commitments.  Primary sources of liquidity are scheduled payments on the
        Company's  loans and  interest  on and  maturities  of its  investments.
        Occasionally,  the Company will sell investment securities in connection
        with the  management  of its interest  sensitivity  gap. The Company may
        also utilize its cash and due from banks,  interest-earning  deposits in
        financial   institutions  and  federal  funds  sold  to  meet  liquidity
        requirements as needed.

        The  Company  also has the  ability on a  short-term  basis to  purchase
        federal funds from other financial institutions.  Presently, the Company
        has made  arrangements  with commercial  banks for short-term  unsecured
        advances up to $5,000,000 and with the Federal Home Loan Bank,  Atlanta,
        Ga. for a secured credit line of $7,000,000.

        The relative  interest  rate  sensitivity  of the  Company's  assets and
        liabilities  indicates  the extent to which the  Company's  net interest
        income may be affected by interest rate movements. The Company's ability
        to reprice assets and  liabilities in the same dollar amounts and at the
        same time  minimizes  interest  rate risk.  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-sensitive   liabilities  from  interest-sensitive   assets,  as
        reflected  in  the  following  table.  Such   interest-sensitivity   gap
        represents the risk or  opportunity,  in repricing.  If more assets than
        liabilities  are repriced at a given time in a rising rate  environment,
        net interest  income  improves;  in a declining  rate  environment,  net
        interest  income  deteriorates.  Conversely,  if more  liabilities  than
        assets are repriced while interest rates are rising, net interest income
        deteriorates;  if  interest  rates  are  falling,  net  interest  income
        improves.  The Company's strategy in minimizing interest rate risk is to
        minimize the impact of  short-term  interest  rate  movements on its net
        interest  income  while  managing  its  middle  and  long-term  interest
        sensitivity  gap in light of overall  economic trends in interest rates.
        Because of continued  pressures of rising  rates and the  Company's  net
        liability  sensitive  position in the one year  horizon at December  31,
        1997, the Company believes  downward pressure on its net interest margin
        could have a negative impact on net interest income in 1998.

                                       28
<PAGE>


        The following table illustrates the relative  sensitivity of the Company
        to changing interest rates as of December 31, 1997.
<TABLE>

                                             0-90 days      91-365 days       One to five years        Over five years
                                             ---------      -----------       -----------------        ---------------
                                             Current    Current  Cumulative   Current   Cumulative     Current Cumulative
                                             -------    -------  ----------   -------   ----------     ------------------
                                                              (amounts in thousands, except ratios)

        Interest-sensitive assets:
<S>                                              <C>         <C>       <C>          <C>         <C>        <C>       <C>     
        Loans                                  $ 14,500    $ 10,835  $ 25,335     $ 21,233    $ 46,568   $ 2,914   $ 49,482
        Investment  securities                       90       1,000     1,090        8,841       9,931     1,208     11,139
        Federal Funds Sold                        1,280           0     1,280            0       1,280         0      1,280
                                                  -----           -     -----            -       -----         -      -----
          Total interest-sensitive assets        15,870      11,835    27,705       30,074      57,779     4,122     61,901
                                                 ======      ======    ======       ======      ======     =====     ======

        Interest-sensitive liabilities:
        NOW, Money Market,
         and savings accounts                    11,829           -    11,829            -      11,829         -     11,829
        Certificates of deposits and IRA's
         $100,000 or more                         3,984       5,948     9,932        1,886      11,818         -     11,818
        Other certificates of deposits and IRA's  6,421      14,164    20,585        5,259      25,844         -     25,844
        Other borrowed funds                         44       1,133     1,177          711       1,888       756      2,644
                                                     --       -----     -----          ---       -----       ---      -----
         Total interest sensitive liabilities  $ 22,278  $   21,245  $ 43,523      $ 7,856    $ 51,379   $   756   $ 52,135
                                               ========  ==========  ========      =======    ========   =======   ========

        Interest-sensitivity gap                $(6,408) $   (9,410) $(15,818)     $22,218    $  6,400   $ 3,366   $  9,766
                                                =======  ==========  ========      =======    ========   =======   ========

        Ratio to interest-sensitive assets       (10.35)%    (15.20)%  (25.55)%      35.89%      10.34%     5.44%     15.78%
                                                 ======      ======    ======        =====       =====      ====      ===== 
</TABLE>

        Management  believes  that the NOW,  Money  Market and savings  offers a
        degree of stability in interest rate sensitivity  which is not reflected
        in the above table.

        Eagle Bancorp, Inc. believes that cash on hand of approximately $338,431
        at December 31, 1997 should be  sufficient  to fund its holding  company
        annual  cash  requirements  for the  foreseeable  future  which  consist
        principally  of holding  company  annual cash expenses of  approximately
        $65,000 and the  funding of a $0.32 per share cash  dividend of $279,640
        which was paid on January 15, 1998.

        Capital Resources

        The Company continues to maintain a satisfactory  level of capital which
        exceeds  regulatory  requirements and is available for supporting future
        growth.  The  Company's  level of capital can be measured by its average
        shareholders'  equity to  average  assets  ratio of  10.26%,,11.31%  and
        12.25% during 1997, 1996 and 1995, respectively.

                                       29
<PAGE>


        At December 31, 1997 the Company's  regulatory  capital and the required
        minimum amounts under existing regulatory requirements are summarized as
        follows:

        Eagle Bancorp, Inc. and Subsidiary:
<TABLE>

                                                                Required
                                             Actual             Minimum              Excess
                                             ------             -------              ------
                                             %     Amount     %      Amount          %     Amount
                                             -     ------     -      ------          -     ------
                                                              (dollars in thousands)

<S>                                          <C>       <C>        <C>        <C>         <C>       <C>   
        Risk Based Capital                  13.95%    $7,376     8.00%      $4,055      5.95%     $3,321
        Tier 1 Capital                      12.70      6,742     8.00        4,055      4.70       2,687
        Leverage Capital Ratio              10.54      6,742     4.00        2,548      6.54       4,194

</TABLE>

        Eagle Bank and Trust:
<TABLE>

                                                                Required
                                              Actual            Minimum                Excess
                                              ------            -------                ------
                                              %       Amount      %        Amount      %         Amount
                                              -       ------      -        ------      -         ------
                                                              (dollars in thousands)

<S>                                          <C>       <C>        <C>       <C>        <C>        <C>   
        Risk Based Capital                  13.95%    $7,372     8.00%     $4,053     5.95%      $3,319
        Tier 1 Capital                      12.69      6,739     8.00       4,053     4.69        2,686
        Leverage Capital Ratio              10.58      6,739     4.00       2,547     6.58        4,192

</TABLE>


        The  Company  is  not  aware  of  any   recommendations   by  regulatory
        authorities which, if implemented would have a significant impact on its
        liquidity, capital resources, or operations.

        The  Georgia   Department   of  Banking  and   Finance   requires   that
        state-chartered banks in Georgia maintain a ratio of primary capital, as
        defined,  to total  assets of not less than 6%. The  Company  intends to
        maintain a satisfactory level of capital necessary to satisfy regulatory
        requirements and to accommodate expected growth patterns.

        Inflation

        Inflation impacts the growth in total assets in the banking industry and
        causes a need to increase  equity capital at higher than normal rates in
        order to meet regulatory  capital  requirements.  The Company copes with
        the effects of inflation through effectively  managing its interest rate
        sensitivity gap position and by periodically reviewing and adjusting the
        pricing of services to consider current costs.


                                       30
<PAGE>

Recent Accounting Pronouncements

In June 1997, the Financial  Accounting Standards Board (FASB) issued Statements
of  Financial  Accounting  Standards  (SFAS) No. 130  `'Reporting  Comprehensive
Income".  This  statement  established  standards for  reporting and  displaying
comprehensive  income  and  its  components  in a full  set  of  general-purpose
financial  statements.  This is  effective  for  fiscal  years  beginning  after
December  15,  1997.  The Company  does not expect any  material  changes to its
current reporting format in response to this statement.

Also, in June 1997, the Financial Accounting Standards Board issued SFAS No. 131
`'Disclosure  about  Segments of an Enterprise and Related  information"  and is
effective for fiscal years  beginning  after  December 15, 1997.  This statement
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 to  shareholders.  The adoption of this statement will have no effect on
the financial statements of the Company.


YEAR 2000 Computer Issue
The Company has developed  preliminary  plans to address the possible  exposures
related to the impact on its financial, informational and operational systems of
the Year 2000. The data processing  systems and software include those developed
and maintained by the Company's data processor  (Marshall & Isley)and  purchased
software  which  is  run on  in-house  computer  networks.  The  Company's  data
processor and those  vendors,  which have been  contacted,  have  indicated that
their hardware  and/or software will be Year 2000 ready by the end of 1998. This
will allow time for the testing for compliance  during 1999. While there will be
some capital  expenditures  (approximately  $200,000 to  $250,000)  during 1998,
expenses  incurred are not expected to have a material  effect on the  Company's
consolidated financial statements.



                                       31
<PAGE>


ITEM 7.  FINANCIAL STATEMENTS

The consolidated  financial statements,  notes thereto and independent auditors'
report  thereon  included  on the  following  pages are  incorporated  herein by
reference.

                                     Index to Consolidated Financial Statements


Independent Auditors' Report                                                  34

Consolidated Balance Sheets - December 31, 1997 and 1996.                     36

Consolidated Statements of Income for the
Years Ended December 31, 1997, 1996 and 1995                                  37

Consolidated Statements of Shareholders' Equity for the
Years Ended December 31, 1997, 1996 and 1995                                  38

Consolidated Statements of Cash Flows for the Years
Ended December 31, 1997, 1996 and 1995                                        39

Notes to Consolidated Financial Statements -                                  40







                                       32
<PAGE>















                       EAGLE BANCORP, INC. AND SUBSIDIARY

                        Consolidated Financial Statements

                           December 31, 1997 and 1996


                    With Independent Auditors' Report Thereon










                                       33
<PAGE>




                          INDEPENDENT AUDITOR'S REPORT


The Board of Directors and Shareholders
Eagle Bancorp, Inc.


We have audited the  accompanying  consolidated  balance sheet of Eagle Bancorp,
Inc.  and  subsidiary  as of December  31,  1997,  and the related  consolidated
statements  of income,  shareholders'  equity,  and cash flows for the year then
ended.  These  financial  statements  are the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audit. The financial  statements of Eagle Bancorp,  Inc.
and  subsidiary as of December 31, 1996 and 1995 were audited by other  auditors
whose report dated February 7, 1997,  expressed an unqualified  opinion on those
financial statements.

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 financial position of Eagle Bancorp, Inc.
and  subsidiary  at December  31, 1997 and the results of their  operations  and
their cash flows for the year then ended in conformity  with generally  accepted
accounting principles.




/s/Tiller, Stewart & Company, LLC
Savannah, Georgia
January  15, 1998






                                       34
<PAGE>



                              







                          Independent Auditors' Report


The Board of Directors
Eagle Bancorp, Inc.:

We have audited the  accompanying  consolidated  balance sheet of Eagle Bancorp,
Inc.  and  subsidiary  as of December  31,  1996,  and the related  consolidated
statements of income,  shareholders' equity and cash flows for each of the years
in the two-year  period ended December 31, 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 audits.

We  conducted  our  audits  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 audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the financial position of Eagle Bancorp, Inc.
and  subsidiary at December 31, 1996,  and the results of their  operations  and
their cash flows for each of the years in the two year period ended December 31,
1996 in conformity with generally accepted accounting principles.



                             KPMG PEAT MARWICK LLP

Atlanta, Georgia
February 7, 1997






                                       35
<PAGE>




<TABLE>



                                        EAGLE BANCORP, INC. AND SUBSIDIARY
                                            CONSOLIDATED BALANCE SHEETS
                                            DECEMBER 31, 1997 AND 1996

--------------------------------------------------------------------------------------------------------------------

                                                                  1997                               1996
                                                       ---------------------------         -------------------------

ASSETS
<S>                                                                    <C>                               <C>          
Cash and due from banks                                             $   1,677,651                     $   2,237,822
Federal funds sold                                                      1,280,000                         1,500,000
                                                                        ---------                         ---------
 Total cash and cash equivalents                                        2,957,651                         3,737,822
Interest-bearing deposits with other banks                                                                1,000,000
Investment securities available for sale                                6,597,422                         6,898,784
Investment securities held to maturity
 (estimated market value of $4,568,561
  in 1997 and $3,791,932 in 1996)                                       4,541,697                         3,790,335
Loans                                                                  49,474,280                        42,638,858
Less allowance for loan losses                                           (706,237)                         (639,500)
                                                                         --------                          -------- 
          Loans, net                                                   48,768,043                        41,999,358
Premises and equipment, net                                             2,437,122                         2,474,386
Other assets                                                            1,033,491                           829,308
                                                                        ---------                           -------
     Total assets                                                   $  66,335,426                      $ 60,729,993
                                                                    =============                      ============

LIABILITIES
Deposits:
  Noninterest-bearing                                               $   6,175,919                     $   5,184,539
  Interest-bearing                                                     49,491,445                        47,280,321
                                                                       ----------                        ----------
     Total deposits                                                    55,667,364                        52,464,860
Federal Home Loan Bank advances                                         2,643,507                           548,250
Federal funds purchased                                                                                     200,000
Other liabilities                                                       1,272,136                         1,257,832
                                                                        ---------                         ---------
     Total liabilities                                                 59,583,007                        54,470,942
                                                                       ----------                        ----------

SHAREHOLDERS' EQUITY
Common stock - par value $1 per share;
    authorized 10,000,000 shares;
    issued and outstanding 873,875 shares
    in 1997 and 862,845 shares in 1996                                    873,875                           862,845
Additional paid-in capital                                              4,887,567                         4,821,527
Retained earnings                                                         980,884                           586,583
Net unrealized gain (loss) on investment securities
    available for sale, net of deferred income taxes                       10,093                           (11,904)
                                                                           ------                           ------- 
     Total shareholders' equity                                         6,752,419                         6,259,051
                                                                        ---------                         ---------
     Total liabilities and shareholders' equity                     $  66,335,426                      $ 60,729,993
                                                                    =============                      ============

</TABLE>

See notes to consolidated financial statements

                                       36
<PAGE>


<TABLE>

                                           EAGLE BANCORP, INC, AND SUBSIDIARY
                                           CONSOLIDATED STATEMENTS OF INCOME
                                      YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

-------------------------------------------------------------------------------------------------------------------------

                                                                1997                   1996                  1995
                                                       ----------------------- ---------------------  -------------------

INTEREST INCOME
<S>                                                               <C>                   <C>                  <C>           
Loans                                                          $    4,512,884        $    4,017,584       $    3,687,797
 Investment securities:
    Taxable                                                           538,524               491,027              419,279
    Tax-exempt                                                        122,054                88,815               33,191
 Federal funds sold                                                    63,557                58,743               89,364
 Deposits in other banks                                                1,186                 1,055                6,429
                                                                        -----                 -----                -----
     Total interest income                                          5,238,205             4,657,224            4,236,060
                                                                    ---------             ---------            ---------

INTEREST EXPENSE
Deposits                                                            2,419,477             2,232,006            1,986,892
Federal Home Loan Bank advances                                        75,274                35,221
Other borrowed funds                                                   43,582                 1,728                1,060
                                                                       ------                 -----                -----
     Total interest expense                                         2,538,333             2,268,955            1,987,952
                                                                    ---------             ---------            ---------

NET INTEREST INCOME                                                 2,699,872             2,388,269            2,248,108
PROVISION FOR LOAN LOSSES                                             116,000                75,503              107,842
                                                                      -------                ------              -------
NET INTEREST INCOME AFTER
  PROVISION FOR LOAN LOSSES                                         2,583,872             2,280,427            2,172,605

NONINTEREST INCOME
Service charges on deposit accounts                                   122,221               116,391              105,786
Other service charges and fees                                        256,299               223,665              217,102
Net realized gain (loss) on sales of available
    for sale securities                                                 1,293               (10,467)              (4,531)
Other noninterest income                                              367,026               312,872              172,177
                                                                      -------               -------              -------
                                                                      746,839               642,461              490,534
                                                                      -------               -------              -------
NONINTEREST EXPENSES
Salaries and employee benefits                                      1,142,200             1,071,636              953,836
Occupancy                                                             307,272               272,664              222,197
Other noninterest expenses                                            900,698               826,732              776,926
                                                                      -------               -------              -------
                                                                    2,350,170             2,171,032            1,952,959
                                                                    ---------             ---------            ---------

INCOME BEFORE INCOME TAXES                                            980,541               751,856              710,180
PROVISION FOR INCOME TAXES                                            306,600               250,000              210,000
                                                                      -------               -------              -------
NET INCOME                                                    $       673,941     $         501,856         $    500,180
                                                              ===============     =================         ============

Basic earnings per share                                      $          0.78     $            0.58         $       0.58
                                                              ===============     =================         ============
Diluted earnings per share                                    $          0.76     $            0.57         $       0.57
                                                              ===============     =================         ============
See Notes to Consolidated Financial Statements
</TABLE>

                                       37
<PAGE>


<TABLE>

                       EAGLE BANCORP, INC. AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                  YEARS ENDED DECEMBER 31, 1997, 1996 and 1995

---------------------------------------------------------------------------------------------------------------------------------

                                                                                                      Net
                                                                                                   Unrealized
                                                                                                  Gain (Loss)
                                                                                                       on
                                                                                                   Investment
                                                                 Additional                        Securities
                                        Common Stock               Paid-In          Retained        Available
                                   Shares          Amount          Capital          Earnings        for Sale          Total
                                   ------          ------          -------          --------        --------          -----
<S>                                 <C>                 <C>            <C>          <C>               <C>                 <C>    
BALANCE - DECEMBER 31, 1994       $   862,755         862,755        4,820,841    $    (92,862)     5,822,393           231,659

  Net income                                                                                          500,180           500,180

  Cash paid in lieu of
  fractional shares
  In connection with stock
  split                                                                   (349)                                              (349)

  Cash dividends declared,
  $.25 per share                                                                      (215,689)                        (215,689)

  Net change in unrealized
  gain (loss) on
  investment securities                                                                                
  available for sale                                                                                   92,396            92,396
BALANCE - DECEMBER 31, 1995
                                     862,755         862,755        4,820,492           516,150          (466)        6,198,931
                                     -------         -------        ---------           -------          ----         ---------

  Net income                                                                                          501,856             501,856

  Issuance of stock                       90              90            1,035                                              1,125

  Cash dividends declared,
  $.50 per share                                                                        (431,423)                        (431,423)

  Net change in unrealized
  gain (loss) on
  investment securities
  available for sale                                                                                  (11,438)             (11,438)
BALANCE - DECEMBER 31, 1996           862,845         862,845        4,821,527           586,583      (11,904)            6,259,051
                                      -------         -------        ---------           -------      -------             ---------

  Net income                                                                             673,941                          673,941

  Issuance of stock                     11,030          11,030           66,040                                             77,070

  Cash dividends declared,
  $.32 per share                                                                        (279,640)                        (279,640)

  Net change in unrealized
  gain (loss) on
  investment securities
  available for sale                                                                                    21,997              21,997

BALANCE - DECEMBER 31, 1997         873,875    $    873,875      $    980,884           $ 10,093  $  4,887,567         $ 6,752,419
                                    =======    ============      ============           ========  ============         ===========
   See Notes to Statements Consolidated  Financial

</TABLE>


                                       38
<PAGE>



<TABLE>


                        EAGLE BANCORP, INC AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  YEARS ENDED DECEMBER 31, 1997, 1996 and 1995

----------------------------------------------------------------------------------------------------------------------------
                                                                              1997             1996              1995
                                                                         ---------------- ----------------  ----------------

OPERATING ACTIVITIES
<S>                                                                             <C>              <C>               <C>         
  Net income                                                                $    673,941     $    501,856      $    500,180
  Adjustments to reconcile net income
    to net cash provided by operating activities:
       Depreciation                                                              179,211          165,622           134,666
       Amortization and accretion, net                                           (22,024)         (20,593)           13,211
       Amortization of net deferred loan fees
                                                                                                   (4,977)              757
       Provision for loan losses                                                 116,000          107,842
                                                                                                                     75,503
       Net realized (gain) loss on available for sale securities
                                                                                  (1,293)          10,467             4,531
       Compensation expense under stock options
                                                                                                    1,125
       Changes in:
          Other assets                                                          (216,028)         (83,997)          (68,650)
          Other liabilities                                                      169,587          244,430            49,543
                                                                                 -------          -------            ------
              Net cash provided by operating activities                          899,394          726,888           904,628
                                                                                 -------          -------           -------
INVESTING ACTIVITIES
  Net (increase) decrease in time deposits in other banks                      1,000,000       (1,000,000)
  Proceeds from maturities of investment securities:
    Held to maturity securities                                                  500,000        1,050,000
    Available for sale securities                                                               2,143,333           550,000
  Proceeds from sales of available for sale securities                         1,895,484        1,739,405           992,938
  Purchase of investment securities:
    Held to maturity securities                                              (1,245,625)       (1,727,027)         (748,359)
    Available for sale securities                                            (1,542,700)       (1,613,872)       (4,250,098)
  Net increase in loans                                                      (6,884,685)       (5,229,898)       (3,994,395)
  Additions to premises and equipment                                          (141,947)          (91,313)         (618,177)
                                                                               --------           -------          -------- 
              Net cash used for investing activities                         (6,419,473)       (7,980,263)       (4,817,200)
                                                                             ----------        ----------        ---------- 
FINANCING ACTIVITIES
  Net increase in deposits                                                     3,202,504        7,582,171         4,179,869
  Federal Home Loan Bank advance proceeds                                      2,180,000          590,000
  Repayment of Federal Home Loan Bank advances                                  (84,743)         (41,750)
  Net  increase (decrease) in other borrowings                                 (200,000)        (500,000)           700,000
  Dividends paid                                                               (431,423)        (215,689)
  Cash paid in lieu of fractional shares
                                                                                                                      (349)
  Issuance of stock
                                                                                 73,570                0                 0  
                                                                                 ------                -                 -
              Net cash provided by financing activities                       4,739,908        7,414,732         4,879,520
                                                                              ---------        ---------         ---------
Increase (decrease) in cash and cash equivalents                               (780,171)         161,357           966,948
Cash and cash equivalents - beginning                                         3,737,822        3,576,465         2,609,517
                                                                              ---------        ---------         ---------
Cash and cash equivalents - ending                                          $ 2,957,651      $ 3,737,822       $ 3,576,465
                                                                            ===========      ===========       ===========
See notes to consolidated financial statements
</TABLE>


                                       39
<PAGE>



1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        Nature of Operations - Eagle Bancorp,  Inc. (the "Company")  through its
         wholly-owned subsidiary,  Eagle Bank And Trust (the "Bank"), provides a
         full  range  of  banking  services  from  its main  office  and  branch
         facilities  to  individuals   and  business   throughout   Bulloch  and
         surrounding counties.
        Basis of Presentation - The consolidated  financial  statements  include
         the  accounts  of the  Company  and its  wholly-owned  subsidiary.  All
         intercompany  balances  and  transactions  have  been  eliminated.  The
         accounting and reporting  policies and practices of the Company conform
         to generally  accepted  accounting  principles and to general  practice
         within the banking  industry.  The  following  is a summary of the more
         significant of such policies and practices.
        Use of Estimates - The preparation of financial statements in conformity
         with generally accepted  accounting  principles  requires management 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  relate to the  determination  of the allowance for loan losses.
         The  allowance  for loan  losses is  maintained  at a level  which,  in
         management's  judgment, is adequate to absorb credit losses inherent in
         the loan portfolio. Management's periodic evaluation of the adequacy of
         the  allowance is based on the Bank's past loss  experience,  known and
         inherent risks in the portfolio, adverse situations that may affect the
         borrower's  ability  to pay,  the  estimated  value  of the  underlying
         collateral,  current economic conditions,  and other pertinent factors.
         The  allowance  for loan losses is  increased  by charges to income and
         recoveries on loans previously charged off as uncollectable.  Decreases
         in the allowance occur as loans deemed uncollectable are charged to the
         allowance.
        Investment  Securities  Available  for  Sale  -  Investments  securities
         available for sale are carried at market value. The related  unrealized
         gain or loss,  net of tax,  is  included  as a  separate  component  of
         shareholders' equity. Premiums and discounts are amortized and accreted
         using a method which  approximates a level yield. Gains and losses from
         dispositions  are  based  on the net  proceeds  and  adjusted  carrying
         amounts  of the  securities  sold,  using the  specific  identification
         method.
        Investment  Securities Held to Maturity - Investment  securities held to
         maturity are stated at cost,  adjusted for amortization of premiums and
         accretion of discounts  which are recognized as adjustments to interest
         income. The Company has the intent and ability to hold these investment
         securities  to  maturity.  Premiums and  discounts  are  amortized  and
         accreted  using a method which  approximates  a level yield.  Gains and
         losses on  dispositions  are based on the net proceeds and the adjusted
         carrying   amounts   of  the   security   sold,   using  the   specific
         identification method.
        Loans -  Effective  January  1,  1995,  the Bank  adopted  Statement  of
         Financial  Accounting  Standards  No.  114  (as  amended  by No.  118),
         "Accounting   by  Creditors  for   Impairment  of  a  Loan."  SFAS  114
         establishes  the  accounting  by creditors  for  impairment of loans by
         specifying  how  allowances  for credit losses related to certain loans
         should be  determined.  This statement also addresses the accounting by
         creditors  for certain loans that are  restructured  in a troubled debt
         restructuring. When a loan is impaired, the amount of the impairment is
         measured  based on the  present  value of  expected  future  cash flows
         discounted at the loan's effective interest rate.


                                       40
<PAGE>



        For collateral dependent loans, impairment is measured based on a loan's
         observable market price or the fair value of the collateral.
        Loans  that  management  has the  intent  and  ability  to hold  for the
         foreseeable  future or until  maturity or pay-off are reported at their
         outstanding  principal  amounts  adjusted  for  any  charge-offs,   the
         allowance for possible loan losses, and any deferred fees or costs.
        Interest on loans is recognized  using the simple  interest method based
         on the  principal  balance  outstanding.  Interest  accruals  including
         accruals of interest on  impaired  loans are  discontinued  when either
         principal or interest becomes 90 days past due, or when in management's
         opinion,   after  considering  economic  and  business  conditions  and
         collection efforts,  the borrower's financial condition is such that it
         is not  reasonable to expect such interest will be collected.  Interest
         income is subsequently  recognized only to the extent cash payments are
         received.
        Loan fees, net of direct  origination  costs, are deferred and amortized
         over the terms of the loans using a method which  approximates  a level
         yield.
        Premises and  Equipment  - Property  is stated at cost less  accumulated
         depreciation.  Depreciation is computed using the straight-line  method
         over the estimated useful lives of such assets.
        Income  Taxes - The  provision  for income  taxes is based upon  amounts
         reported in the  statements of income (after  exclusion of  non-taxable
         income such as interest on state and municipal  securities) and consist
         of taxes  currently  due  plus  deferred  taxes  related  primarily  to
         temporary  differences  between  the  basis of the  allowance  for loan
         losses  and  accumulated  depreciation.  The  deferred  tax  assets and
         liabilities  represent  the  future tax  return  consequences  of those
         differences, which will either be taxable or deductible when the assets
         and  liabilities  are  recovered  or settled.  Deferred  tax assets and
         liabilities are reflected at income tax rates  applicable to the period
         in which the  temporary  differences  are  expected  to be  realized or
         settled.  As changes  in tax laws or rates are  enacted,  deferred  tax
         assets and  liabilities  are adjusted  through the provision for income
         taxes.
        Reclassifications  - Certain  amounts in the 1996 and 1995  consolidated
         financial  statements  have  been  reclassified  to  conform  with  the
         presentation  adopted in 1997. Cash and Cash Equivalents - For purposes
         of reporting cash flows, cash and cash equivalents include cash on hand
         and amounts due from banks and federal funds sold.

         Recent  Accounting   Pronouncements  -  In  June  1997,  the  Financial
         Accounting  Standards  Board  (FASB)  issued  Statements  of  Financial
         Accounting Standards (SFAS) No. 130 "Reporting  Comprehensive  Income".
         This  statement  established  standards for  reporting  and  displaying
         comprehensive   income   and   its   components   in  a  full   set  of
         general-purpose  financial  statements.  This is  effective  for fiscal
         years beginning after December 15, 1997.

                                       41
<PAGE>


         Also, in June 1997,  the Financial  Accounting  Standards  Board issued
         SFAS No. 131  "Disclosure  about  Segments of an Enterprise and Related
         Information" and is effective for fiscal years beginning after December
         15, 1997. This statement  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 to shareholders.  The
         adoption  of this  statement  will  have  no  effect  on the  financial
         statements of the Company.

2.       RESTRICTIONS ON CASH AND DUE FROM BANKS

         The Bank is required to maintain  certain reserve  balances in the form
         of vault cash. Such reserve requirements totaled approximately $199,000
         and $212,000 at December 31, 1997 and 1996, respectively.

3.       SECURITIES

         Debt  and  equity   securities  have  been   classified   according  to
         management's  intent.  The amortized cost,  estimated  market value and
         gross unrealized gains and losses on securities are as follows:

<TABLE>
<CAPTION>
                                                                        Available For Sale Securities
                                      -------------------------------------------------------------------------
                                                              Gross              Gross
                                         Amortized          Unrealized         Unrealized            Fair
                                           Costs              Gains              Losses              Value 
                                           -----              -----              ------              ----- 
December 31, 1997:
<S>                                       <C>                    <C>                <C>            <C>   
--------------------------------------
U.S. Government agencies                  $ 3,396,930            $ 9,806            $ 3,283        $ 3,403,453
State, county, and municipal
  securities                                2,940,664             10,636              1,631          2,949,669 
                                            ---------             ------              -----          --------- 
 Total debt securities                      6,337,594             20,442              4,914          6,353,122
Federal Home Loan Bank stock                  244,300                  0                  0            244,300 
                                              -------                  -                  -            ------- 
 Total                                  $   6,581,894           $ 20,442             $ 4,914       $ 6,597,422  
                                        =============           ========             =======       ===========  
December 31, 1996:
--------------------------------------
U.S. Treasury and
  U.S. Government agencies              $ 3,890,204             $ 11,989             $ 18,043)     $ 3,884,150
State, county, and municipal
  securities                              2,868,494                6,855              (19,115)       2,856,234 
                                          ---------                -----              -------        --------- 
Total debt securities                     6,758,698               18,844              (37,158)       6,740,384
Federal Home Loan Bank stock                158,400                    0                    0          158,400 
                                            -------                    -                    -          ------- 
Total                                   $ 6,917,098             $ 18,844            $ (37,158)     $ 6,898,784
                                        ===========             ========            =========      ===========

                                                             Held To Maturity Securities
                                      -------------------------------------------------------------------------
                                                              Gross              Gross
                                         Amortized          Unrealized         Unrealized            Fair
                                            Costs             Gains              Losses             Value
                                      ----------------   ----------------   ----------------   ----------------
December 31, 1997:
--------------------------------------
U.S. Treasury and
  U.S. Government agencies              $ 4,541,697         $ 33,795            $ 6,931         $ 4,568,561 
                                        -----------         --------            -------         ----------- 
                                        $ 4,541,697         $ 33,795            $ 6,931         $ 4,568,561 
                                        ===========         ========            =======         =========== 
December 31, 1996:
--------------------------------------
U.S. Treasury and
  U.S. Government agencies              $ 3,790,335         $ 36,868           $ (35,271)       $ 3,791,932
                                        -----------         --------           ---------        -----------
Total                                   $ 3,790,335         $ 36,868           $ (35,271)       $ 3,791,932
                                        ===========         ========           =========        ===========

</TABLE>
         Gross realized gains and gross  realized  losses on  available-for-sale
         securities  were  $4,500  and  $3,207,  respectively,  in  1997.  Gross
         realized losses on available-for-sale securities were $10,467 in 1996.

         The  amortized  cost and estimated  market value of debt  securities at
         December 31, 1997, by contractual maturity are as follows:

                                       42
<PAGE>


<TABLE>
                                     Available for sale                Held to maturity
                                 -----------------------------    -----------------------------
                                   Amortized       Market           Amortized       Market
                                     Cost          Value               Cost          Value
                                     ----          -----               ----          -----
<S>                                     <C>            <C>            <C>            <C>    
Due in one year or less              $ 790,000      $ 790,010         $ 299,672      $ 298,080
Due after one year through
  five years                         5,087,443      5,098,640         3,742,025      3,773,291
Due after five years through
  ten years                            460,151        464,472           500,000        497,190 
                                       -------        -------           -------        ------- 
                                   $ 6,337,594    $ 6,353,122       $ 4,541,697    $ 4,568,561 
                                   ===========    ===========       ===========    =========== 
</TABLE>

        Securities  with  a  carrying  amount  of  approximately  $4,797,000  at
         December  31, 1997 and  approximately  $2,500,000  at December 31, 1996
         were pledged to secure  deposits of public funds and for other purposes
         required or permitted by law.

4........LOANS

         Loans are summarized as follows:
<TABLE>

                                                  December 31,
                                       ------------------------------------
                                             1997               1996
                                       -----------------  -----------------
<S>                                       <C>                <C>         
Agricultural                              $ 1,699,641        $ 1,301,3141
Commercial                                    8,443,154          8,275,067
Commercial real estate                       21,655,639         19,194,293
Real estate construction                      5,699,007          3,097,285
Residential real estate                       6,705,326          6,538,226
Consumer                                      5,271,768          4,231,252 
                                              ---------          --------- 
                                             49,474,535         42,637,437
Net deferred loan fees (costs)                     (255)             1,421 
                                                   ----              ----- 
                                           $ 49,474,280       $ 42,638,858 
                                           ============       ============ 
</TABLE>



         An analysis of the allowance for loan losses follows:
<TABLE>

                                             1997               1996                1995
                                       -----------------  -----------------   -----------------
<S>                                           <C>                <C>                 <C>      
Balance, beginning of year                    $ 639,500          $ 570,000           $ 527,500
  Provision for loan losses                     116,000            107,842              75,503
  Loans charged off                             (70,498)           (59,423)            (35,179)
  Recoveries                                     21,235             21,081               2,176 
                                                 ------             ------               ----- 
Balance, end of year                          $ 706,237          $ 639,500           $ 570,000 
                                              =========          =========           ========= 
</TABLE>



         Loans having recorded investments of approximately  $48,000 at December
         31, 1997 and  approximately  $123,000  at  December  31, 1996 have been
         identified  as impaired in accordance  with the  provisions of FASB No.
         114.  The total  allowance  for possible  loan losses  related to these
         loans  was  $8,000  and  $18,000  at   December   31,  1997  and  1996,
         respectively.

                                       43
<PAGE>


         In the normal course of its lending activities,  the Company is a party
         to financial instruments with  off-balance-sheet  risk. These financial
         instruments include commitments to extend credit and standby letters of
         credit.  The  Company's  exposure  to  credit  loss  in  the  event  of
         non-performance  by the other  party of the  financial  instrument  for
         commitments  to  extend  credit  and  standby   letters  of  credit  is
         represented by  contractual  amount of those  instruments.  The Company
         uses the same credit  policies in making these  commitments  as it does
         for  on-balance-sheet  instruments and evaluates each customer's credit
         worthiness on a case-by-case  basis.  At December 31, 1997, the Company
         had  outstanding  loan  commitments  of  approximately  $6,136,000  and
         standby  letters  of credit of  approximately  $102,000.  The amount of
         collateral obtained, if deemed necessary,  for these commitments by the
         Company,  upon  extension of credit,  is based on  management's  credit
         evaluation of the  customer.  Collateral  held, if any,  varies but may
         include  inventory,  equipment,  real estate,  or other  property.  The
         Bank's loans are primarily  concentrated in its market area of the City
         of Statesboro, Georgia and surrounding Bulloch county.


5.       RELATED PARTY TRANSACTIONS

        In the  ordinary  course of  business,  the Bank has direct and indirect
         loans  outstanding  to  certain  directors,   executive  officers,  and
         principal shareholders, including their associates. Such loans are made
         on the  same  terms  as those  prevailing  at the  time for  comparable
         transactions with unaffiliated customers. The following is a summary of
         the activity of loans to directors,  executive officers,  and principal
         shareholders:
<TABLE>
                                                  December 31,
                                       ------------------------------------
                                             1997               1996
                                       -----------------  -----------------
<S>                                         <C>                <C>        
Balance, beginning of year                  $ 1,749,000        $ 1,850,000
Amounts advanced                              2,045,000          1,939,000
Repayments                                   (1,990,000)        (2,040,000)
                                             ----------         ---------- 
Balance, end of year                        $ 1,804,000        $ 1,749,000 
                                            ===========        =========== 
</TABLE>










                                       44
<PAGE>


6.       PREMISES AND EQUIPMENT

         Premises and equipment is summarized as follows:
<TABLE>
                                                   December 31,
                                       ------------------------------------
                                             1997               1996
                                       -----------------  -----------------
<S>                                         <C>                <C>        
Building and improvements                   $ 1,473,463        $ 1,469,358
Furniture and equipment                         927,150            813,653
Automobiles                                      58,142             33,798 
                                                 ------             ------ 
                                              2,458,755          2,316,809
Less accumulated depreciation                   826,614            647,404 
                                                -------            ------- 
                                              1,632,141          1,669,405
Land                                            804,981            804,981 
                                                -------            ------- 
                                            $ 2,437,122        $ 2,474,386 
                                            ===========        =========== 

</TABLE>




7.           INTEREST-BEARING DEPOSITS

        Interest-bearing deposits are summarized as follows:
<TABLE>
                                                  December 31,
                                       ------------------------------------
                                              1997              1996
                                       ------------------------------------
<S>                                         <C>                <C>        
NOW                                         $ 6,867,140        $ 7,420,192
Money market                                  2,137,149          3,077,437
Savings                                       2,824,983          2,586,187
Certificates of deposits,
   $100,000 or more                          11,817,762         10,319,613
Other time deposits                          25,844,411         23,876,892 
                                             ----------         ---------- 
                                           $ 49,491,445       $ 47,280,321 
                                           ============       ============ 
</TABLE>

      Scheduled   maturities  of  certificates  of  deposit  are  as follows:
<TABLE>

 Years Ended December 31,   
---------------------------
<S>             <C>            <C>         
                1998           $ 30,517,479
                1999              4,335,023
                2000              1,691,063
                2001              1,118,608 
                                  --------- 
                               $ 37,662,173 
                               ============ 

</TABLE>






                                       45
<PAGE>


8.       FEDERAL HOME LOAN BANK ADVANCES

         The Bank has an agreement  for advances with the Federal Home Loan Bank
         of  Atlanta.  These  advances  are secured by a blanket  floating  lien
         agreement which provides a security interest in all unencumbered  first
         mortgage residential loans and by stock in the Federal Home Loan Bank.

         Advances from the Federal Home Loan Bank are summarized as follows:

<TABLE>
                                                               December 31,
                                                 ----------------------------------------
                                                        1997                 1996
                                                 -------------------- -------------------
<S>                                                <C>                     <C>    
Advance payable -  interest payable monthly
 at 6.81%, monthly principal reductions
 of $2,417 through March 2006.                             $ 239,249           $ 268,250

Advance payable - interest payable monthly
 at 7.01%, monthly principal reductions
 of $2,500 through April 2006.                               250,000             280,000

Advance payable - interest payable monthly
 at 6.70%, monthly principal reductions
 of $3,167 through July 2007.                                360,981

Advance payable - interest payable monthly
 at 6.18%, monthly principal reductions
 of $6,667 through November 2007.                            793,277

Advance payable - interest payable monthly
 at 6.06%, principal due June 1998.                        1,000,000                   0 
                                                           ---------                   -
                                                         $ 2,643,507           $ 548,250 
                                                         ===========           ========= 
 Aggragate annual maturities of FHLB advances:
                   Years Ended December 31, 1998         $ 1,173,814
                                       1999                  177,000
                                       2000                  177,000
                                       2001                  177,000
                                       2002                  177,000
                                 thereafter                  761,693 
                                                             ------- 
                                                         $ 2,643,507 
                                                         =========== 
</TABLE>


9.       CREDIT ARRANGEMENTS

         At  December  31,  1997,  federal  funds  line of  credit  arrangements
         aggregating  $5,000,000  were available to the Bank from  corresponding
         banking  institutions.  There are no commitment  fees and  compensation
         balances are not  required.  The Bank also has a Blanket  Floating Lien
         Agreement  with the  Federal  Home Loan  Bank of  Atlanta.  Under  this
         agreement, the Bank has a credit line up to seventy-five percent of the
         book value of its one-to-four family first mortgage loans.



                                       46
<PAGE>


10.      INCOME TAXES

         The provision for income taxes is as follows:
<TABLE>
                                  Years Ended December 31,
                     ----------------------------------------------------
                          1997              1996              1995
                     ---------------   ----------------  ----------------
<S>                       <C>                <C>               <C>      
      Current             $ 340,600          $ 269,128         $ 272,760
      Deferred              (34,000)           (19,128)          (62,760)
                            -------            -------           ------- 
                          $ 306,600          $ 250,000         $ 210,000 
                          =========          =========         ========= 
</TABLE>


         The  provision  for income taxes is less than  computed by applying the
         statutory  federal income tax rate of 34% to income before income taxes
         as indicated by the following:
<TABLE>
                                                       Years Ended December 31,
                                          ---------------------------------------------------
                                               1997              1996              1995
                                          ---------------   ---------------   ---------------
<S>                                            <C>               <C>               <C>      
Income tax at statutory rate                   $ 333,384         $ 255,631         $ 241,461
Increase (decrease) in taxes:
  Tax-exempt interest                            (33,507)          (19,247)           (7,673)
   Valuation allowance for deferred tax assets                                       (29,718)
  Other                                            6,723            13,616             5,930 
                                                   -----            ------             ----- 
Provision for income taxes                     $ 306,600         $ 250,000         $ 210,000 
                                               =========         =========         ========= 
</TABLE>


         The components of net deferred tax assets are as follows:
<TABLE>
                                                 December 31,
                                       ----------------------------------
                                            1997              1996
                                       ----------------  ----------------
<S>                                           <C>              <C>   
Deferred tax assets:
  Allowance for loan losses                    262,000           203,000
  State tax credit carryforwards                 4,000            14,000
  Unrealized loss on investment securities                
    available for sale                               0             6,000 
                                                     -             ----- 
    Total deferred tax assets                  266,000           223,000 
                                               -------           ------- 
                                              
Deferred tax liabilities:
  Accumulated depreciation                      70,000            54,000
  Unrealized gain on investment securities
    available for sale                           5,000
  Other                                          6,000             4,000 
                                                 -----             ----- 
    Total deferred tax liabilities              81,000            58,000 
                                                ------            ------ 

Net deferred tax assets                        185,000           165,000 
                                               =======           ======= 
</TABLE>







                                       47
<PAGE>




         The Company  recognizes  deferred income tax assets and liabilities for
         differences  between the financial  statement  carrying amounts and the
         tax  bases of  assets  and  liabilities  which  will  result  in future
         deductible or taxable amounts and for net operating loss and tax credit
         carryforwards.  A valuation allowance is then established to reduce the
         deferred  income  tax  assets to the level at which it is "more  likely
         than not" that the tax benefits  will be realized.  Realization  of tax
         benefits of deductible temporary differences and operating loss and tax
         credit carryforwards depends on having sufficient taxable income within
         the carryback and carryforward periods.  Sources of taxable income that
         may allow for the realization of tax benefits include 1) taxable income
         in the current year or prior years that is available through carryback,
         2) future taxable income that will result from the reversal of existing
         taxable temporary  differences,  and 3) future taxable income generated
         by future  operations.  During the year ended  December 31,  1995,  the
         Company  decreased  its  valuation  allowance  for deferred  income tax
         assets by $29,718,  as accumulated  deficits were recovered and taxable
         income was generated.  Based on the availability of carrybacks to prior
         taxable periods, management believes that the Company, more likely than
         not, will realize the net deferred tax assets  recorded at December 31,
         1997.




11.      PROFIT SHARING PLAN

         The Eagle Bank Profit Sharing Plan (the "Plan")  provides  employees of
         the Bank a vehicle to save for retirement.  The Plan allows the Bank to
         make  annual  discretionary  contributions  for  the  benefit  of  plan
         participants.  All  employees of the Bank can  participate  in the Plan
         after they have met certain eligibility  requirements.  Under the terms
         of the plan employer contributions are allocated to participants in the
         same proportion that the participant's compensation,  as defined, bears
         to the total  compensation  of all  participants  for the year. For the
         years ended December 31, 1997,  1996 and 1995,  employer  contributions
         were $40,000, $30,000 and $25,000, respectively.


                                       48
<PAGE>



12.           SUPPLEMENTAL CASH FLOW INFORMATION

          Certain  supplemental  disclosure of cash flow information and noncash
          investing and financing activities follows:
                                                Years Ended December 31,
                                                ------------------------
                                        1997              1996              1995
                                        ----              ----              ----
<TABLE>
<S>                                      <C>                <C>            <C>    
Cash paid during the year for:
  Income taxes                           $ 260,542        $ 316,093         $ 379,699 
                                         =========        =========         ========= 
  Interest                             $ 2,489,244      $ 2,204,231       $ 1,609,873 
                                       ===========      ===========       =========== 
</TABLE>


13.    REGULATORY REQUIREMENTS
        The  approval  of the  Georgia  Department  of  Banking  and  Finance is
         required if  dividends  declared by the Bank to the Company in any year
         will exceed 50% of the net income of the Bank for the previous calendar
         year.  As of December 31, 1997,  the Bank could  declare  approximately
         $375,000 of dividends without prior approval.
        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  practices.  The Bank's capital  amounts and the
         classification  are  also  subject  to  qualitative  judgments  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 amounts and ratios (set
         forth  in the  table  below)  of  Tier 1  capital  (as  defined  in the
         regulations) to total average assets (as defined) and minimum ratios of
         Tier 1 and total  capital  (as  defined)  to  risk-weighted  assets (as
         defined).  Management believes,  as of December 31, 1997, that the Bank
         meets all capital adequacy  requirements to which it is subject.
       
         As of December  31,  1996,  the  most  recent   notification  from  the
         FDIC categorized the Bank as well capitalized under the regulatory
         framework for prompt corrective action. To be categorized as well
         capitalized the Bank must maintain  minimum total  risk-based,  Tier I
         risk-based,  and Tier  I  leverage  ratios  as set  forth  in the
         table.  There  are no conditions or events since that notification 
         that management  believes have changed the institution's category.
<TABLE>

                                                                          For Capital       Under Prompt Corrective
                                                     Actual           Adequacy Purposes      Action Provisions 
                                                 Amount       Ratio     Amount       Ratio     Amount       Ratio 
                                                 ------       -----     ------       -----     ------       ----- 
  
December 31, 1997:
Total Capital  ( to Risk Weighted Assets )
<S>                                              <C>             <C>    <C>              <C>   <C>             <C>
   Consolidated                                  $ 7,375,745     15%    $ 4,054,829      8%    $ 5,068,537     10%
   Bank                                          $ 7,372,581     15%    $ 4,053,885      8%    $ 5,067,356     10%
Tier 1 Capital  ( to Risk Weighted Assets )
   Consolidated                                  $ 6,742,326     13%    $ 2,027,415      4%    $ 3,041,122      6%
   Bank                                          $ 6,739,162     13%    $ 2,026,942      4%    $ 3,040,413      6%
Tier 1 Capital ( to Average Assets )
   Consolidated                                  $ 6,742,326     11%    $ 2,547,761      4%    $ 3,184,701      5%
   Bank                                          $ 6,739,162     11%    $ 2,547,297      4%    $ 3,184,121      5%
December 31, 1996:
Total Capital  ( to Risk Weighted Assets )
   Consolidated                                  $ 6,842,455     15%    $ 3,652,080      8%    $ 4,565,100     10%
   Bank                                          $ 6,561,517     14%    $ 3,652,080      8%    $ 4,565,100     10%
Tier 1 Capital  ( to Risk Weighted Assets )
   Consolidated                                  $ 6,270,955     14%    $ 1,826,040      4%    $ 2,739,060      6%
   Bank                                          $ 5,990,017     13%    $ 1,826,040      4%    $ 2,739,060      6%
Tier 1 Capital ( to Average Assets )
   Consolidated                                  $ 6,270,955     11%    $ 2,367,400      4%    $ 2,959,250      5%
   Bank                                          $ 5,990,017     10%    $ 2,367,400      4%    $ 2,959,250      5%
</TABLE>



                                       49
<PAGE>



14.      STOCK OPTIONS

         The Company has an  Incentive  Stock  Option  Plan which  provides  for
         granting of 120,000 stock options to officers and certain key employees
         of the Bank.  The exercise  price of these options is equal to the fair
         market value of the Company's  stock on the date of grant.  The maximum
         term of the  options is ten years and they vest and become  exercisable
         at such times and in such  installments as the Board of Directors shall
         provide in each  individual  stock option  agreement.  There are 55,882
         remaining stock options  authorized to be granted under this plan as of
         December 31, 1997.
<TABLE>
                                                       Shares        Exercise Price 
                                                       ------        -------------- 
<S>                            <C> <C>                     <C>            <C>  
Options outstanding - December 31, 1994                    44,118         $6.67
Options granted
Options exercised                                               0             0 
                                                                -             - 
Options outstanding - December 31, 1995                    44,118         $6.67
Options granted
Options exercised                                               0             0
                                                                -             -
Options outstanding - December 31, 1996                    44,118         $6.67
Options granted                                            20,000        $14.00
Options exercised                                         (11,030)        $6.67
                                                          -------         -----
Options outstanding - December 31, 1997                    53,088    $6.67 - $14.00
                                                           ======    =====   ======

</TABLE>

         As of December 31, 1997, the total  outstanding  options under the plan
         had a weighted  average  exercise price of $9.43 and a weighted average
         remaining contractual life of 2.75 years.

         The  Company  has  elected  not to  adopt  the  fair  value  method  of
         accounting  for employee  stock  options as  prescribed by Statement of
         Financial   Accounting   Standards   (SFAS)  No.  123  "Accounting  for
         Stock-Based  Compensation" issued by the Financial Accounting Standards
         Board.  Instead,  as permitted by SFAS No. 123, the Company has elected
         to  continue  to  apply  the  intrinsic   value  method  of  accounting
         prescribed   under  the  provisions  of  Accounting   Principles  Board
         Statement  No.  25,   "Accounting   for  Stock  Issued  to  Employees".
         Accordingly,  no  compensation  cost has been  recognized  for  options
         granted in 1997. Had compensation  cost been determined on the basis of
         fair value  pursuant to SFAS No. 123, net income and earnings per share
         would have been reduced to the Pro forma amounts as disclosed below:
<TABLE>
<S>                                 <C>            <C>                                
 Years Ended December 31, 1997       As reported        Proforma 
 -----------------------------       -----------        -------- 
 Net income:                          $ 673,941        $ 650,941 
 -----------                          =========        =========

 Earnings per share: 
 ------------------- 
 Basic                                   $ 0.78           $ 0.75 
                                         ======           ====== 
 Diluted                                 $ 0.76           $ 0.74 
                                         ======           ====== 
</TABLE>

         The fair value of each option  granted in 1997 is estimated on the date
         of  grant  using  the  Black  Scholes  option  pricing  model  with the
         following assumptions:  dividend yield of 2.5%; risk free interest rate
         of  5.89%;  expected  life  of  options  of  five  years  and  expected
         volatility of near 0%.


                                       50
<PAGE>





15.      EARNINGS PER SHARE

         Earnings  per  share  has  been   calculated  in  accordance  with  the
         provisions of Statement of Financial  Accounting  Standards  (SFAS) No.
         128 "Earnings Per Share" issued by the Financial  Accounting  Standards
         Board.  SFAS No. 128 requires  presentation  of earnings per share on a
         basic  computation  and a diluted  computation.  The basic  computation
         divides net income by only the weighted average number of common shares
         outstanding  for the year and the diluted  computation  gives effect to
         all diluted common shares that were outstanding during the year.

         Earnings per share amounts for 1996 and 1995 have been restated to give
         effect to the application of this new standard.

         The  following  data shows the amounts used in  computing  earnings per
         share and the  effect  on income  and the  weighted  average  number of
         shares of dilutive potential common stock.
<TABLE>

                                                              Years Ended December 31,
                                            ------------------------------------------------------------
                                                   1997                 1996                1995
                                            -------------------- ------------------- -------------------
Income available to common shareholders:
<S>                                                   <C>                 <C>                 <C>       
   Used in basic earnings per share                   $ 673,941           $ 501,856           $ 500,180 
                                                      =========           =========           ========= 
   Used in diluted earnings per share                 $ 673,941           $ 501,856           $ 500,180 
                                                      =========           =========           ========= 

Weighted average number of common
  shares used in basic earnings per share               865,143             862,845             862,755
Effect of dilutive securities:
   Stock options                                         17,324              22,353              20,577 
                                                         ------              ------              ------ 
Weighted average number of common
   and dilutive potential common shares
   used in diluted earnings per share                   882,467             885,198             883,332 
                                                        =======             =======             ======= 
</TABLE>


16.        FAIR VALUES OF FINANCIAL INSTRUMENTS

         The  following  disclosures  of the  estimated  fair value of financial
         instruments  is made in accordance  with  requirements  of Statement of
         Financial Standards No, 107, "Disclosures about Fair Value of Financial
         Instruments".  The estimated fair value amounts have been determined by
         the  Company  using  available   market   information  and  appropriate
         valuation methodologies.  However, considerable judgment is necessarily
         required to  interpret  market data to develop  the  estimates  of fair
         value. Accordingly,  the estimates presented herein are not necessarily
         indicative of the amounts the Company could realize in a current market
         exchange.  The use of different market  assumptions  and/or  estimation
         methodologies  may have a material  effect on the estimated  fair value
         amounts.

         The  following  methods  and  assumptions  were used by the  Company in
         estimating fair values of financial instruments:

         Cash  and  cash  equivalents  and  interest-bearing  deposits  in other
         financial   institutions  -  The  carrying   amounts  of  these  assets
         approximates fair value because of their short-term maturities.




                                       51
<PAGE>



         Investments  Securities  - Fair values for  investment  securities  are
         based on quoted market prices.

         Loans - For  variable-rate  loans that reprice  frequently  and have no
         significant  change in credit  risk,  fair values are based on 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.   The   carrying   value  of   off-balance-sheet   commitments
         approximates  fair value based on the fact that the  Company  generally
         does not offer  lending  commitments  to its customers for long periods
         and, the underlying rates of the commitments approximate market rates.

         Deposit  liabilities  - Fair  values of  certificates  of  deposit  are
         estimated  using  a  discounted  cash  flow  calculation  that  applies
         interest rates currently being offered on certificates of similar terms
         and remaining  maturities.  The carrying amounts of all other deposits,
         due to their nature, approximate their fair values.

         Federal Home Loan Bank advances - Fair value 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.

         Federal  funds  purchased  -  The  carrying  amount  of  federal  funds
         purchased approximates fair values.


          The  carrying  values  and  estimated  fair  values  of the  Company's
          financial instruments were as follows:
<TABLE>

                                          December 31, 1997                 December 31, 1996
                                   --------------------------------- ---------------------------------
                                      Carrying            Fair          Carrying            Fair
                                       Value             Value           Value             Value
                                   ---------------   --------------- ---------------   ---------------
Financial assets:
<S>                                       <C>               <C>              <C>              <C>    
  Cash and cash equivalents
    and interest-earning deposits     $ 2,957,651       $ 2,957,651     $ 4,737,822       $ 4,737,822
  Investment securities:
    Available for sale                  6,597,422         6,597,422       6,898,784         6,898,784
    Held to maturity                    4,541,697         4,568,561       3,790,335         3,791,932
  Loans, net                           48,768,043        49,477,938      41,999,358        41,951,522

Financial liabilities:
  Deposits                           $ 55,667,364      $ 55,893,556    $ 52,464,860      $ 52,624,058
  Federal Home Loan advances            2,643,507         2,685,613         548,250           554,724
  Other borrowed funds                                                      200,000           200,000
</TABLE>










                                       52
<PAGE>



17.      OTHER NONINTEREST EXPENSES

        The major components of other noninterest expenses are as follows:
<TABLE>
                                                             December 31,
                                          --------------------------------------------------
                                               1997              1996             1995
                                          ---------------   ---------------   --------------
<S>                                             <C>               <C>              <C>     
Postage                                         $ 62,402          $ 56,267         $ 51,605
Stationery and supplies                           61,205            84,717           74,317
Advertising and marketing                         58,824            52,366           51,605
Professional services                             85,589            74,864           54,471
Data processing                                  129,081           109,217           87,845
Director fees                                     58,900            53,300           55,400
Other                                            444,697           396,001          401,683 
                                                 -------           -------          ------- 
     Total                                     $ 900,698         $ 826,732        $ 776,926 
                                               =========         =========        ========= 
</TABLE>



18.      EAGLE BANCORP, INC.  (PARENT ONLY) FINANCIAL INFORMATION

         Eagle Bancorp, Inc. condensed  balance sheets and the related condensed
         statements of income and cash flows  follow:
<TABLE>

 Condensed Balance Sheets 
                                                                December 31,
                                                     ------------------------------------
                                                          1997                1996
                                                     ----------------    ----------------
Assets
<S>                                                        <C>                 <C>      
   Cash                                                    $ 338,431           $ 774,702
   Investment in Bank                                      6,749,255           5,978,113
   Other assets                                               11,809        
                                                              ------        
     Total assets                                        $ 7,099,495         $ 6,752,815 
                                                         ===========         =========== 
Liabilities
   Dividends payable                                       $ 279,640           $ 431,423
   Other liabilities                                          67,436              62,341 
                                                              ------              ------ 
      Total liabilities                                      347,076             493,764 
                                                             -------             ------- 

Shareholders' equity
   Common Stock                                              873,875             862,845
   Additional paid-in capital                              4,887,567           4,821,527
   Retained Earnings                                         980,884             586,583
   Net unrealized gain ( loss) on investment
     securities available for sale, net of taxes              10,093             (11,904)
                                                              ------             ------- 
      Total shareholders' equity                           6,752,419           6,259,051 
                                                           ---------           --------- 
      Total liabilities and shareholders' equity         $ 7,099,495         $ 6,752,815 
                                                         ===========         =========== 
</TABLE>





                                       53
<PAGE>




 Condensed  Statements of Income 
<TABLE>
                                                                    Years Ended December 31,
                                                     -------------------------------------------------------
                                                          1997               1996                1995
                                                     ----------------   ----------------    ----------------
<S>                                                         <C>               <C>                  <C>      
Noninterest expenses                                        $ 75,204          $ 113,778            $ 73,925 
                                                            --------          ---------            -------- 
Loss before equity in undistributed
  income of Bank                                             (75,204)          (113,778)            (73,925)
Equity in undistributed income of Bank                       749,145            615,634             574,105 
                                                             -------            -------             ------- 
Net income                                                 $ 673,941          $ 501,856           $ 500,180 
                                                           =========          =========           ========= 
</TABLE>

<TABLE>

 Condensed Statements of Cash Flows 
                                                                      Years Ended December 31,
                                                        ----------------------------------------------------
                                                             1997                1996             1995
                                                        ----------------    ---------------   --------------
Operating Activities
<S>                                                           <C>                <C>              <C>      
   Net income                                                 $ 673,941          $ 501,856        $ 500,180
   Adjustments to reconcile net income
    to net cash used for operating activities:
       Equity in undistributed income of Bank                  (749,145)          (615,634)        (574,105)
       Compensation expense under stock awards
          and options                                                                1,125
       Amortization of organization costs                                              382            4,584
       Decrease (increase) in other assets                      (11,809)                             28,420
       Increase (decrease) in other liabilities                   8,595             10,964          (28,105)
                                                                  -----             ------          ------- 
          Net cash used for operating activities                (78,418)          (101,307)         (69,026)
                                                                =======           ========          ======= 

Financing Activities
  Cash paid in lieu of fractional shares in
    connection with stock split                                                                        (349)
  Exercise of stock options                                      73,570
  Dividends paid                                               (431,423)          (215,689)               0
                                                               --------           --------                -
          Net cash used for financing activities               (357,853)          (215,689)            (349)
                                                               --------           --------             ---- 
Decrease in cash                                               (436,271)          (316,996)         (69,375)
Cash - beginning of year                                        774,702          1,091,698        1,161,073 
                                                                -------          ---------        --------- 
Cash - end of year                                            $ 338,431          $ 774,702      $ 1,091,698 
                                                              =========          =========      =========== 
</TABLE>






                                       54
<PAGE>


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

There are no changes in or  disagreements  with  accountants  on accounting  and
financial  disclosure  for the year ended December 31, 1997. On January 21, 1997
the Board of Directors of Eagle Bancorp, Inc. voted not to renew the appointment
of KPMG Peat  Marwick  LLP as the  Company's  independent  auditor  for the year
ending  December 31, 1997.  The engagement of Tiller,  Stewart and Company,  LLC
became  effective  March 31, 1997.  The decision to engage  Tiller,  Stewart and
Company, LLC was made because of lower professional fees.

On January  29, 1997 the Company  filed a Form 8-K,  SEC File Number  000-19228,
disclosing the foregoing change in principal accountants.  On February 10, 1997,
the Company filed an amendment to this Form 8-K as required. Both Form 8-K filed
January 29,  1997,  and Form 8-K/A filed  February 10,  1997,  are  incorporated
herein by reference as, respectively, Exhibits 99.1 16.1.

                                                      PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; 
         COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

The  information  set forth under the caption  "Election of Directors" and "Bank
Management"  in the  Proxy  Statement  to be  utilized  in  connection  with the
Company's 1998 Annual Shareholders Meeting is incorporated herein by reference.

ITEM 10. EXECUTIVE COMPENSATION

The information  contained under the caption "Compensation of Executive Officers
and  Directors"  in the Proxy  Statement to be utilized in  connection  with the
Company's 1998 Annual Shareholders Meeting is incorporated herein by reference.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
 .........         OWNERS AND MANAGEMENT

The information  contained  under the caption  "Principal  Shareholders"  in the
Proxy  Statement to be utilized in  connection  with the  Company's  1998 Annual
Shareholders Meeting is incorporated herein by reference.


                                       55
<PAGE>












ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information  contained under the caption "Certain  Relationships and Related
Transactions"  in the Proxy  Statement  to be  utilized in  connection  with the
Company's 1998 Annual Shareholders Meeting is incorporated herein by reference.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a)......1.  Financial Statements

         The consolidated  financial  statements,  notes thereto and independent
         auditors' report thereon, filed as part hereof, are listed in Item 7.

 .........2.  Financial Statement Schedules

 .........All schedules have been omitted as the required information is not
         applicable.

 .........3.  Exhibits

 .........Exhibit Numbers

         3.1*     Articles of Incorporation
 .........3.2*     Bylaws
 .........3.3*     Form of Stock Purchase Warrant
         10.1* Employment Contract between Andrew M. Williams III and Statesboro
         Financial  Partners 10.2* Employment  Agreement between Erskine Russell
         and Statesboro Financial Partners 10.3* 1990 Employee Stock Option Plan
         10.4* Amendment to Employment  Contract  between Andrew M. Williams III
         and Eagle Bank and Trust 10.5* 1996 Employment  Contract  between Eagle
         Bancorp, Inc., Eagle Bank & Trust and Andrew M.
                  Williams, III
         16.1**Letter on Change in Certifying Accountant
         22.1     Subsidiaries  of  the  Company.  The  sole  subsidiary  of the
                  Company is Eagle Bank and Trust, Statesboro, Georgia, which is
                  wholly-owned by the Company.
 .........27       Financial Data Schedule
         *Items 3.1 through 10.5, as listed above,  were previously filed by the
         Company  as  Exhibits  (with the same  respective  Exhibit  Numbers  as
         indicated herein) to the Company's Registration Statement (Registration
         No.   33-31490-A)  and  such  documents  are  incorporated   herein  by
         reference.
 .........
 .........**The letter required by Item 304(a)(3), stating whether the former
          accountants   agrees  or  disagreeswith statements made by the Company
 .........relating to its change in accountants, was filed with the Commission on
         February   10,   1997, on Form 8-K/A, and is incorporated herein by 
         reference.

(b) .....Reports on Form 8-K

         A Form 8-K was  filed on  January  29,  1997  regarding  the  change in
         Registrant's independent  accountants,  and an amendment thereto, filed
         February 10, 1997,  on Form 8-K/A,  included the letter from the former
         accountants required by Item 304 of Regulation S-B.








                                       56
<PAGE>





                                   SIGNATURES


Pursuant to the  requirements of 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 on March 18, 1997.

EAGLE BANCORP, INC.


By: /s/ Andrew M. Williams III
    Andrew M. Williams III
    President


Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities indicated on March 18, 1998.
<TABLE>

<S>                                       <C>                         <C>                        <C> 
 Signature                               Title                     Signature                     Title
 ---------                               -----                     ---------                     -----
                                     
 Andrew M. Williams III             President (Principal           Robert D. Coston              Director 
                                    Executive Officer), Director                   
 Lemuel A. Deal                     Director                       Julian B. Hodges, Jr.         Director

 Robert E. Lane                     Director                       James B. Lanier, Jr.          Director
 
 Betty K. Minick                    Director                       Thad J. Morris, Jr.           Director
                                                
 Paul E. Parker                     Director                       W. Dale Parker                Director and Secretary
                                                 
 Erskine Russell                    Director                       Marcus B. Seligman            Director
                                                
 Solly Trapnell                     Director                       Paul A. Whitlock, Jr.         Director
                                                 
 William Earl Green                 Principal Financial
                                    Officer and Principal
                                    Accounting Officer


                                       57
<PAGE>

</TABLE>