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, 1996                                           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 $5,299,684.

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant at March 1, 1997 was  $11,648,408  based on private  trades at $13.50
per share, although there is no established trading market.

The number of shares  outstanding  of Issuer's class of common stock at March 1,
1997 was 862,845 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 65
                           Exhibit Index on Page 62





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                               TABLE OF CONTENTS

                                                                          Page
                                    PART I

ITEM 1.     DESCRIPTION OF BUSINESS                                          3

ITEM 2.     DESCRIPTION OF PROPERTIES                                       13

ITEM 3.     LEGAL PROCEEDINGS                                               13

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

                                    PART II

ITEM 5.     MARKET FOR COMMON EQUITY AND
            RELATED STOCKHOLDER MATTERS                                     14

ITEM 6.     MANAGEMENT'S DISCUSSION AND ANALYSIS
            OR PLAN OF OPERATION                                            14

ITEM 7.     FINANCIAL STATEMENTS                                            32

ITEM 8.     CHANGES IN AND DISAGREEMENTS WITH
            ACCOUNTANTS ON ACCOUNTING AND
            FINANCIAL DISCLOSURE                                            61



                                   PART III

ITEM 9.     DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
            CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a)
            OF THE EXCHANGE ACT                                             61

ITEM 10.    EXECUTIVE COMPENSATION                                          61

ITEM 11.    SECURITY OWNERSHIP OF CERTAIN
            BENEFICIAL OWNERS AND MANAGEMENT                                61

ITEM 12.    CERTAIN RELATIONSHIPS AND
            RELATED TRANSACTIONS                                            62

ITEM 13.    EXHIBITS AND REPORTS ON FORM 8-K                                62

SIGNATURES                                                                  64






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<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






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<PAGE>

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.

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, 1996,  contains  approximately 7% real
estate construction loans, 62% real estate mortgage loans, 19% commercial loans,
3% agricultural  loans,  and 9% consumer loans. The Bank's loan to deposit ratio
at December 31, 1996 was  approximately 81% with management's goal to maintain a
loan to deposit 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,   issuances  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


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<PAGE>


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.

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


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<PAGE>


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.

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.

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<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


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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.

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.

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<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


                                       10
<PAGE>

institution  from which the deposits  were acquired is not insured when the SAIF
special assessment is imposed.

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  can  not,  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


                                       11
<PAGE>

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.

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.



                                       12
<PAGE>



Employees

As of  December  31,  1996,  the Bank  employed  31  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.

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, 1996.



                                       13
<PAGE>



                                    PART II

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

As of December 31, 1996, there were  approximately 927 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 25 private trades during the
1996 fiscal year at prices  ranging from $12.74 to $13.50 per share.  On October
15, 1996,  the Company  declared a cash dividend in the amount of $.50 per share
payable  January 15, 1997.  This was declared as an annual  dividend of $.30 per
share and a special  one time  dividend  of $.20 per share.  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 Company and the Bank were
formed in September 1989 and were a  developmental  stage  enterprise  until the
Bank began  operations  on February 20, 1991.  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]



                                       14
<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>
<CAPTION>
                                                Years Ended December 31,
                                                1996       1995        1994
                                               (amounts in thousands, except
                                                per share information and
                                                financial ratios)
<S>                                           <C>        <C>        <C>
 Income Statement data:
   Interest income ........................... $ 4,664    $ 4,236    $  3,495
   Interest expense ..........................  (2,269)    (1,988)     (1,418)
                                               -------    -------    --------
            Net interest income ..............   2,395      2,248       2,077

   Provision for possible loan losses .........   (108)       (75)        (88)

   Noninterest income ..........................   636        490         395

   Noninterest expense ........................ (2,171)    (1,953)     (1,815)

   Income tax expense ........................    (250)      (210)       (140)
                                                -------    -------    --------

   Net income ..............................   $   502    $   500    $    429
                                               =======    =======    ========
 Balance sheet data:

   Loans, net of unearned income ...........    $42,639    $37,442    $ 33,482
                                                =======    =======    ========

   Deposits ...............................     $52,465    $44,883    $ 40,703
                                                =======    =======    ========

   Total assets .............................   $60,730    $52,774    $ 47,058
                                                =======    =======    ========

   Average shareholders' equity .............   $ 6,336    $ 6,122    $  5,659
                                                =======    =======    ========

   Average assets ...........................   $56,045    $49,974    $ 46,224
                                                =======    =======    ========
 Per share data:
   Net income ..............................    $   .57    $   .57    $    .49
                                                 =======    =======    ========

   Book value ..............................    $  7.25    $  7.19    $   6.70
                                                =======    =======    ========

   Cash dividends declared .................    $   .50    $   .25    $    .00
                                                =======    =======    ========
 Financial ratios:
   Return on average assets ................        .90%      1.00%       0.93%
                                                =======    =======    ========

   Return on average shareholders' equity ..       7.92%      8.17%       7.58%
                                                =======    =======    ========

   Dividend payout ratio ...................      85.97%     43.12%          0%
                                                =======    =======    ========
   Average shareholders' equity to average
                                    assets .      11.31%     12.25%      12.24%
                                                =======    =======    ========
     Note: Per share data has been restated for all periods presented to reflect
           a three-for-two stock split effected in May, 1995.
</TABLE>
     RESULTS OF OPERATIONS

     The  Company's  net  income  and net  income  per share for the year  ended
     December 31, 1996 were $501,856 or $0.57 per share on a fully diluted basis
     compared to net income and net income per share for the year ended December
     31,  1995 of  $500,180  or $0.57 per  share.  Net income and net income per
     share for the year ended December 31, 1994 were $428,671 or $.49 per share.

                                       15
<PAGE>

     Increases  in net  interest  income of  approximately  $147,000 in 1996 and
     $171,000  in 1995 and  increases  in  noninterest  income of  approximately
     $146,000 in 1996 and  $95,000 in 1995 are the  primary  reasons the Company
     increased  its  profitability  during 1996 and 1995.  The  Company's  total
     assets grew from approximately  $52.8 million at December 31, 1995 to $60.7
     million at December  31, 1996 or  approximately  15%. The  Company's  total
     assets grew from approximately  $47.1 million at December 31, 1994 to $52.8
     at December 31, 1995 or approximately  12%. The increase in the growth rate
     from  approximately 12% in 1995 to approximately 15% in 1996 was the result
     of the emphasis on customer service,  marketing efforts, and the opening of
     the Company's first branch facility in October,  1995.  Noninterest expense
     increased  approximately  $218,000 in 1996 and  $137,000 in 1995  primarily
     relating to the new branch.

     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, 1996.

<TABLE>
<CAPTION>

                                                       Years ended December 31,
                                                     1996       1995       1994
                                                   amounts in thousands, except
                                                       share and per share
                                                information and financial ratios

<S>                                            <C>            <C>         <C>
Interest income .............................. $   4,664   $   4,236     $   3,495
Interest expense .............................    (2,269)     (1,988)       (1,418)
                                                ---------   ---------     ---------
Net interest income ..........................     2,395       2,248         2,077

Provision for possible loan losses ...........      (108)        (75)          (88)
Noninterest income ...........................       636         490           395
Noninterest expense ..........................    (2,171)     (1,953)       (1,815)
Income tax expense ...........................   (   250)       (210)         (140)
                                                 ---------   ---------     ---------
Net Income ...................................  $    502   $     500     $     429
                                                 =========   =========     =========


Net income per common share and common share
      equivalent                                $   0.57   $    0.57     $    0.49
                                                =========   =========     =========

Weighted average number of common share and
     common share equivalents ...............    885,198     883,332       876,088
                                                =========   =========     =========

Return on average assets ....................        .90%       1.00%         0.93%
                                                =========   =========     =========

Return on average shareholders' equity ......       7.92%       8.17%         7.58%
                                                 =========   =========     =========

Dividend payout ratio ........................     85.97%      43.12%            0%
                                                =========   =========     =========

Average loans to average deposits ............     82.96%      82.32%        75.98%
                                                =========   =========     =========

Loan to deposit ratio (period-end) ...........     81.27%      83.49%        82.26%
                                                =========   =========     =========

Average shareholders' equity to average assets .   11.31%      12.25%        12.24%
                                                =========   =========     =========

Shareholders' equity to assets (period-end) ...    10.31%      11.74%        12.37%
                                                =========   =========     =========

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

</TABLE>

                                       16
<PAGE>



     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 1996, net interest  income was  $2,395,000,  representing an increase of
     $147,000 or 6.54% when compared to 1995 of $2,248,000.  Net interest income
     for 1995 was  approximately  8.23% higher than 1994 net interest  income of
     $2,077,000.  The average yield earned on interest  earning assets was 9.19%
     in  1996   compared  to  9.31%  in  1995  and  the  average  rate  paid  on
     interest-bearing  liabilities  was 5.13% in 1996 compared to 5.07% in 1995.
     The average yield earned on interest-earning  assets for 1994 was 8.29% and
     the average rate paid on interest  bearing  liabilities was 3.89% for 1994.
     The Company's net interest  margin (net interest  income divided by average
     interest-earning  assets)  equaled 4.72% in 1996 compared to 4.94% in 1995.
     The decline in net interest margin in 1996 is attributable to the
     intensely  competitive  market for quality loans in the Bank's market area.
     The Company's net interest margin for 1994 was 4.93%. The Company's average
     loan to deposit  ratio in 1996 of 83.00% as  compared to 82.3% for 1995 and
     76.0% for 1994.  The Bank's loan to deposit  ratio at December 31, 1996 was
     81.27% as compared to 83.49% at December 31, 1995.





















                                       17
<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, 1996 and 1995.
<TABLE>
<CAPTION>
                                                        Years ended December 31,
                                                    1996                              1995
                                           Average             Yields/     Average          Yields/
                                           balances  Interest  rates       balances Interest rates
                                             (amounts in thousands, except percentages and ratios)
<S>                                       <C>        <C>    <C>          <C>     <C>      <C>
 ASSETS
 Interest-earning assets:
 Interest-earning deposits in
    financial institutions ...........   $    32          1     3.13%$         99       6       6.06%
 Federal funds sold ..................     1,084         59     5.44        1,504      89       5.92
 Investment securities ...............    10,222        580     5.67        8,334     453       5.44
 Loans, net (1)(2) ...................    39,403      4,024    10.21       35,542   3,600      10.38
                                         -------    -------    -----      -------   -----      -----
   Total interest-earning assets .....    50,741      4,664     9.19%      45,479   4,236       9.31%
                                         =======    =======    =====      =======   =====      =====
 Noninterest-earning assets:
 Cash and due from banks .............     1,990                            1,620
 Premises and equipment, net .........     2,509                            2,168
 Other assets ........................       805                              707
                                           -----                            -----
   Total noninterest-earning assets ..     5,304                            4,495
                                           -----                            -----
 TOTAL ASSETS ........................   $56,045                          $49,974
                                         =======                          =======
 LIABILITIES AND SHAREHOLDERS' EQUITY
 Interest-bearing liabilities:
 Interest-bearing demand deposits ....   $ 6,706        175      2.61%    $ 6,580     197      2.99%
 Money market & savings accounts .....     4,741        145      3.06       4,838     163      3.37
 Certificates of deposit .............    29,268      1,733      5.92      25,472   1,491      5.85
 Individual retirement accounts ......     2,823        179      6.34       2,291     137      5.98
 Other Borrowed Funds ................       703         37      5.84           0       0         0
                                         -------    -------     -----     -------   -----     -----
   Total interest-bearing liabilities     44,241      2,269      5.13%     39,181   1,988      5.07%
                                         -------    -------     -----     -------   -----     -----
 Noninterest-bearing liabilities and
   shareholders" equity:
 Noninterest-bearing demand deposits $     4,681                        $ 3,996
 Other liabilities ...................       867                            675
 Shareholders' equity ................     6,336                          6,122
                                           -----                          -----
   Total noninterest-bearing
      liabilities and shareholders'
             equity ..................    11,804                         10,793
                                          ------                        -------
 TOTAL LIABILITIES AND
 SHAREHOLDERS' EQUITY ................   $56,045                        $49,974
                                          ======                         ======
 INTEREST RATE DIFFERENTIAL (3) ......                         4.06%                           4.24%
                                                               =====                          =====
 NET INTEREST INCOME .................            $ 2,395                        $ 2,248
                                                    =====                          =====
 NET INTEREST MARGIN (4) .............                         4.72%                           4.94%
                                                              =====                           =====
 AVERAGE INTEREST-EARNING
 ASSETS TO AVERAGE TOTAL ASSETS ......     90.54%                         91.01%
                                           =====                          =====

AVERAGE LOANS TO AVERAGE DEPOSITS ...      82.96%                         82.32%
                                           =====                          =====
</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):     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.

                                       18
<PAGE>



     The  following  table  presents the changes in the  Company's  net interest
     income  as  a  result  of   changes   in  the   volume   and  rate  of  its
     interest-earning assets and interest-bearing  liabilities from 1995 to 1996
     and from 1994 to 1995.
<TABLE>
<CAPTION>


                                            1996 vs. 1995                     1995 vs. 1994
                                   ---------------------------    -------------------------
                                   Volume(1)  Rate(1)     Net      Volume   (1) Rate(1) Net
                                                        Change                         Change

<S>                                <C>         <C>         <C>      <C>          <C>    <C>
Interest Income:
   Interest-earning deposits
   in financial institutions     $  (3)          (2)      (5)      $   0         3        3
   Federal funds sold ........     (24)          (6)     (30)          4        25       29
   Investment securities .....     103           24      127         (95)       23      (72)
   Loans, including fees .....     402          (66)     336         448       334      782
                                 -----          ---     ----       -----       ---     ----

   Total interest income .....     478          (50)     428         357       385      742
                                 =====          ===     ====       =====       ===     ====

 Interest expense:
   Individual retirement
     accounts ................      32           10       42         (83)        12     (71)
   Money Market and
     Savings Deposits ........      (3)         (15)     (18)         21         20      41
   Certificates of deposits ..     222           20      242         229        308     537
   Interest-bearing demand
     deposits ................       3          (25)     (22)         21         42     (63)
   Other borrowed funds ......      37            0       37           0          0       0
                                 -----          ---     ----       -----        ---    ----

   Total interest expense ....     291          (10)     281         188        382     570
                                 =====          ===     ====       =====        ===    ====

   Net interest income .......   $ 187          (40)     147         169          3     172
                                 =====          ===     ====       =====        ===    ====
</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.

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

                                       19
<PAGE>

     The allowance for possible loan losses  approximated  1.50% of  outstanding
     loans at December 31, 1996 and 1.52% of  outstanding  loans at December 31,
     1995.  The  allowance  increased  to  $639,500  at  December  31, 1996 from
     $570,000 at December 31, 1995. The increase in the Company's  provision for
     possible  loan  losses from  $75,503 in 1995 to  $107,842 in 1996  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 1.50%.

     The Company  experienced  net charge offs in 1996 of $38,000 as compared to
     net charge offs of $33,000 in 1995. As the Company continues to grow and as
     the Company's loan portfolio continues to mature,  management believes that
     net  loans  charged  off will  increase  in 1997 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.

     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 1996, 1995, and 1994:
<TABLE>
<CAPTION>

                                                                           Years ended December 31,
                                                                       1996         1995        1994
                                                                       (amounts in thousands, except ratios)

<S>                                                                 <C>          <C>          <C>
 Average loans outstanding, net of unearned income, deferred
   costs and allowance for possible loan losses ............        $ 39,403     $ 35,542     $ 30,536
                                                                    ========     ========     ========

 Allowance for possible loan losses at beginning of year ...            570          528          436
 Loans-Consumer installment(charged off) ...................            (59)         (35)          (6)
 Recoveries of loans - Consumer installment
    previously charged off .................................             21            2           10
                                                                   --------     --------     --------
 Net loans (charged off) recovered .........................            (38)         (33)           4

 Additions to allowance for possible loan losses charged
   to income ...............................................            108           75           88
                                                                   --------     --------     --------

 Allowance for possible loan losses at end of year .........       $    640     $    570     $    528
                                                                   ========     ========     ========

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

 Allowance for possible loan losses to loans,
   net of unearned income ..................................           1.50%        1.52%        1.58%
                                                                   ========     ========     ========

</TABLE>

     Nonperforming Loans, Nonperforming Assets, and Underperforming
     Loans

     Nonperforming   loans  include  loans  placed  on  nonaccrual   status  and
     restructured  loans. The Company has  restructured  only one loan since its
     inception.  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.

                                       20
<PAGE>

     Accrual of interest on loans is discontinued  when reasonable  doubt exists
     as to the full,  timely  collection of interest or principal or they become
     contractually  in  default  for 90 days or more as to  either  interest  or
     principal  unless  they  are  both  well  secured  and  in the  process  of
     collection.  When a loan is placed on nonaccrual status, previously accrued
     and  uncollected  interest  of the year in  which  the  loan is  placed  on
     nonaccrual status is charged to interest income on loans.

     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.

     Nonperforming  loans were  $123,000  at December  31, 1996 and  $629,000 at
     December 31, 1995.  Nonperforming  loans  represented  0.29% of outstanding
     loans at December 31, 1996,  as compared to 1.68% of  outstanding  loans at
     December 31, 1995.  The Company has  continued to emphasize  asset  quality
     during 1996. 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,
     1996, 1995 and 1994:
<TABLE>
<CAPTION>


                                                                  December 31,
                                                                1996     1995      1994
                                                             amounts in thousands,
                                                                except ratios)

<S>                                                          <C>        <C>        <C>

 Nonperforming loans .....................................   $   123    $   629    $     3

 Underperforming loans ...................................   $     0    $     0    $     0

 Potential problem loans .................................   $   611    $   291    $   100

 Asset quality ratios:

   Nonperforming loans to total loans, net of unearned
   income ................................................      0.29%      1.68%      0.01%

   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 ................................................      1.43%      0.78%      0.30%

   Nonperforming, underperforming and potential problem
   loans to total loans, net of unearned income ..........      1.72%      2.46%      0.31%

   Allowance for possible loan losses to nonperforming
   loans .................................................      5.20x      0.91x     176.0x

   Allowance for possible loan losses to nonperforming,
   underperforming, and potential problem loans ..........      0.87x      0.62x      5.13x
</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>
<CAPTION>

                                                 December 31,
                                             ----------------------------
                                        1996             1995             1994
                                       ----             ----             ----
                                      Allowance %     Allowance %       Allowance %

<S>                                   <C>      <C>     <C>    <C>         <C>     <C>
       Real estate ...............      $423    68      $428    70         $359    72
       Commercial and agricultural       147    22        63    19          116    18
       Consumer ..................        70    10        79    11           53    10
                                        ----   ---      ----   ---         ----   ---
         Total ...................      $640   100      $570   100         $528   100
                                        ====   ===      ====   ===         ====   ===

</TABLE>

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


    Noninterest Income

     Noninterest  income of $635,199 in 1996 and  $490,534 in 1995 is  primarily
     comprised of mortgage  loan  referral fees in 1996 of $245,897 and $113,289
     in 1995 and service charges on deposit  accounts.  The increase of $144,665
     or 29.49% in 1996 from 1995 in noninterest income is primarily attributable
     to the  increase  in mortgage  loan  referral  fees 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.

     Securities gains (losses),  net of ($10,467) were recognized by the Company
     during 1996  compared to ($4,531) in 1995 and resulted  from the  Company's
     sale of investment securities to meet loan demand. There were no investment
     security sales in 1994.


                                       22
<PAGE>


     Noninterest Expense

     Noninterest  expense increased  $218,071 or 11.17% in 1996 compared to 1995
     and  increased  $137,105  or 7.55% in 1995  compared  to 1994.  Noninterest
     expense for 1996 was $2,170,030,  for 1995 was $1,952,959, and for 1994 was
     $1,815,854 and represented  approximately 3.87%, 3.91% and 3.93% of average
     assets in 1996, 1995 and 1994 respectively.  Salaries and employee benefits
     expense was the largest  component  of  noninterest  expense.  Salaries and
     employee  benefits  expense was  $1,071,635  in 1996,  $953,836 in 1995 and
     $814,323 in 1994 and represented approximately 49.36%, 48.84% and 44.85% of
     non-interest  expense in 1996,  1995 and 1994  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
     $117,799 is attributable to increased employees with the new branch, normal
     salary increases and an increase in group medical insurance  premiums.  Net
     occupancy  and  equipment  expenses  of  approximately  $280,089  in  1996,
     $222,197  in 1995  and  $240,127  in 1994  also  represented  approximately
     12.90%,  11.37% and 13.22% of  noninterest  expense in 1996,  1995 and 1994
     respectively.  All  other  expenses  of  approximately  $819,306  in  1996,
     $776,926 in 1995 and  $761,404 in 1994  represented  approximately  37.74%,
     39.78%  and  41.93%  of  noninterest   expense  in  1996,   1995  and  1994
     respectively.  Both salaries and occupancy and equipment  expense increases
     reflect the first full year of expenses  associated with the branch opening
     which  occurred  in October  1995.  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  Company  began  paying
     directors  fees in 1994 to compensate  these  individuals  consistent  with
     other bank holding  companies.  The more  significant  components  of other
     operating expenses for each of the last three years are shown as follows:

<TABLE>
<CAPTION>

                                                Years ended December 31,
                                              1996       1995      1994

<S>                                         <C>        <C>      <C>

 Stationery and supplies ................   $ 84,717     74,317    66,051
 Insurance ..............................     27,289     30,378    27,627
 Data Processing ........................(1) 109,217     87,845    41,183
 Advertising and marketing ..............     52,366     51,605    51,301
 Amortization of organizational cost ....      4,895     17,959    21,095
 FDIC insurance premiums ................     14,498     62,520   102,353
 Travel, meals and education ............     31,773     21,906    26,806
 Postage ................................     56,267     51,066    44,049
 Other taxes and licenses ...............     37,540     27,693    24,987
 Telephone ..............................     19,345     12,716    10,865
 Dues and memberships ...................     23,559     13,453    11,132
 ATM transaction fees ...................     23,872     45,387    54,580
 Correspondent bank services ............     29,385     27,106    28,477
 Customers checks .......................     13,329     23,467    22,642
 Professional fees - legal and accounting     74,864     54,471    55,531
 Director fees ..........................     53,300     55,400    23,375
 Consulting fees ........................     42,284          0         0
</TABLE>


          (1) The bank out  sourced  item  processing  in  November,  1994 which
              resulted in this expense  increasing;  however,  decreases in
              depreciation, maintenance and salary expenses also resulted from
              this out sourcing.

                                       23
<PAGE>

     Income Taxes

     The Company  provided  income tax expense of $250,000 for 1996 and $210,000
     for 1995  representing  effective  tax rates of  approximately  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 8 to the  consolidated  financial
     statements for further disclosure of income taxes. The Company believes its
     effective  income tax rate will  increase in 1997 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 $501,856  or  approximately  $0.57 per
     common share and common share  equivalent  for 1996, net income of $500,180
     or approximately  $0.57 per common share and common share equivalent during
     1995 and net  income  of  $428,671  or $0.49  pershare  during  1994.  This
     leveling  of income from 1995 to 1996 was a result of  additional  expenses
     associated  with the branch  opening in October 1995 which  reduced  income
     before taxes by approximately $238,000.

     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 $40.0 million in 1996,  $36.1 million in 1995, and $30.5
     million in 1994. Average loans as a percentage of average  interest-earning
     assets  were  78.8%,  79.4%  and  72.3%  respectively.  Average  loans as a
     percentage  of  average   total  assets  were  71.37%,   72.24%  and  66.0%
     respectively.


                                       24
<PAGE>



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

<TABLE>
<CAPTION>


                                                                           December 31,
                                                                     1996              1995
                                                                      (amounts in thousands)

<S>                                                                <C>              <C>
Commercial, financial and agricultural                             $ 29,309         $24,531
Real estate - construction ...........                                3,097           2,932
Real estate - mortgage ...............                                6,538           6,221
Consumer .............................                                3,693           3,511
                                                                   --------         -------
  Total loans ........................                               42,637          37,470

Less:
   Allowance for possible loan losses                                   640             570
   Unearned income ...................                                   (1)             28
                                                                   --------         -------
   Loans , net .......................                             $ 41,999         $36,872
                                                                   ========         =======
</TABLE>
<TABLE>
<CAPTION>


                                                                              Maturing
                                                                                After one
                                                                     Within     but within   After
                                                                     one year  five years  five years
                                                                        (amounts in thousands)

<S>                                                                <C>         <C>       <C>

     Commercial, financial and agricultural .....                   $14,039     $13,810        $1,460
     Real estate - construction .................                     3,097           0             0
     Real estate - mortgage .....................                     3,242       3,029           267
     Consumer ...................................                     2,118       1,489            86

          Summary of loans:
     Total fixed rate due after one year ....                                   $16,531
     Total adjustable rate due after one year                                     3,610
                                                                                 ------

  Total loans due after one year ...........                                    $20,141
                                                                                 ======

</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 $1.9 million
     or 22.7% in 1996 as compared to 1995 and decreased $1.8 million or 17.5% in
     1995 as compared to 1994.  The  increase in average  investment  securities
     results from the Company's growth in deposits and other borrowings.  During
     1996, 1995 and 1994 average  investment  securities  comprised 20.1%, 18.3%
     and 24.0% of  average  interest-earning  assets,  respectively,  and 18.2%,
     16.7% and 21.9% of average total assets, respectively.

                                       25
<PAGE>
     The two tables below present the amortized cost or 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,  1996.   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>
<CAPTION>

                                                               December 31,
                                                    -----------------------
                                                        1996                           1995
                                                    -----------                   ---------
                                           Available     Held to              Available    Held to
                                            for Sale     Maturity             for Sale     Maturity
                                                               (amounts in thousands)

<S>                                       <C>              <C>              <C>             <C>

U.S. Treasury .................            $  997          $1,740               $  756         $1,737
U.S. Government Agencies ......             2,887           2,050                2,556          2,350
State, County and Municipal ...             2,857               0                1,484              0
Federal Home Loan Bank Stock ..               158               0                  149              0
                                           ------          ------               ------         ------
    Total investment securities            $6,899           3,790               $4,945         $4,087
                                           ======          ======               ======         ======
</TABLE>

<TABLE>
<CAPTION>

                                                    Maturing         Maturing         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 .............                $  746      5.03%  $ 1,991      6.42%     $    0      0%
U.S. Government Agencies ..                   334      6.02     4,103      6.60         500   6.51
State, County and Municipal                   170      3.67     2,459      4.15         228   5.02
Federal Home Loan Bank ....                     0         0         0         0         158   7.25
                                           ------      ----    ------      ----       -----   ----

  Total investment
      securities ..........                 1,250      5.34%   $8,533      5.67%     $  886   6.45%
                                           ======      ====    ======      ====       ======  ====

</TABLE>

<TABLE>
<CAPTION>

                                                                     December 31, 1996
                                                    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                              $ 1,258       $ 1,258     $     0          $     0
       Due after one year through five years          5,276         5,263       3,290            3,307
       Due after five years through ten years           125           125         500              485
       Over ten years                                   255           261            0               0
                                                      -----         -----        -----           -----
                                                    $ 6,917       $ 6,899       $3,790         $ 3,792
                                                      =====         =====       ======           =====
</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, 1995.

                                       26
<PAGE>

     Deposits

     Average  deposits  increased $5.0 million or 11.68% to $48.2 million during
     1996 from $43.2  million  during  1995.  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, 1996 and 1995 are presented below.
<TABLE>
<CAPTION>


                                                                 December 31,
                                                         1996                      1995
                                        Amount        %      Rate   Amount     %         Rate
                                       (amounts in thousands, except percentages and ratios)

<S>                                   <C>          <C>       <C>    <C>          <C>   <C>

Noninterest-bearing demand deposits   $ 4,681        10%       --   $ 3,996         9%      --
Interest-bearing demand deposits ..     6,706        14       2.61    6,580        15     2.99
Money Market and Savings accounts .     4,741        10       3.06    4,838        11     3.37
Certificates of deposit ...........    29,268        60       5.92   25,472        59     5.85
Individual retirement accounts ....     2,823         6       6.34    2,291         6     5.98
                                      -------   -------       ----  -------   -------     ----

  Total average deposits ..........   $48,219       100%      5.13% $43,177       100     5.07%
                                      =======   =======       ====  =======   =======     ====
</TABLE>

       The  maturities of  certificates  of deposits and  individual  retirement
       accounts  of  $100,000  or more as of  December  31,  1996  and  1995 are
       presented below.

<TABLE>
<CAPTION>

                                                                         December 31,
                                                                     1996             1995
                                                                     (amounts in thousands)

      <S>                                                           <C>             <C>
       Three months or less                                          $ 4,509          $ 1,750
       Over three months through six months                            2,068              905
       Over six months through 12 months                               1,820            2,388
       Over 12 months                                                  2,818            1,412
                                                                      ------           ------

         Total certificates of deposit and individual retirement
            accounts of $100,000 or more                             $11,215          $ 6,455
                                                                      ======           ======

</TABLE>


     The Company has analyzed the  composition  of  certificates  of deposit and
     individual  retirement  accounts of $100,000  or more.  The large  deposits
     comprised  22.6% of  average  deposits  during  1996  compared  to 14.9% of
     average  deposits  for 1995.  Total  deposits  included  large  deposits of
     $10,906,000  and  $6,455,000  at December  31, 1996 and 1995,  representing
     20.8%  and  14.4%  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
     $2,500,000 and with the Federal Home Loan Bank, Atlanta,  Ga. for a secured
     credit line of $5,000,000.

     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, 1996,
     the Company  believes  downward  pressure on its net interest  margin could
     have a negative impact on net interest income in 1997.


                                       28
<PAGE>
     The following table illustrates the relative  sensitivity of the Company to
     changing interest rates as of December 31, 1996.
<TABLE>
<CAPTION>

                          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)
<S>                   <C>           <C>      <C>          <C>      <C>           <C>     <C>
Interest-sensitive
   assets:
Loans ..............   $  6,849     $ 19,217    $ 26,066     $ 15,194     $ 41,260    $  1,379    $ 42,639
Interest earning
  deposits in other
     banks .........      1,000         --         1,000         --          1,000        --         1,000
Investment
  securities .......       --          1,250       1,250        8,553        9,503         886      10,689
  Federal Funds Sold      1,500         --         1,500         --          1,500        --         1,500
                       --------     --------     --------    --------     --------    --------    --------
  Total interest-
  sensitive assets .      9,349       20,467      29,816       23,747       53,563       2,265      55,828
                       ========     ========     ========    ========     ========    ========    ========

Interest-sensitive
    liabilities:
NOW, Money Market,
 and savings
   accounts ........     13,084         --        13,084         --         13,084        --        13,084
Certificates of
deposits and IRA's
 $100,000 or more ..      4,509        3,888       8,397        2,818       11,215        --        11,215
Other certificates
 of deposits and
  IRA's ............      6,524       11,957      18,481        4,501       22,982        --        22,982

Federal Funds
   Purchased .......        200         --           200         --            200        --           200
Other borrowed
   funds ...........         15           45          60          236          296         252         548
                       --------     --------     --------    --------     --------    --------    --------
 Total interest
  sensitive
    liabilities ....   $ 24,332     $ 15,890    $ 40,022  $     7,555 $     47,777    $    252    $ 48,029
                       ========     ========     ========     ========    ========    ========    ========

Interest-
sensitivity gap ....   $(14,983)   $  4,577     $(10,406)  $    16,192 $     5,786    $  2,013    $  7,799
                       ========     ========     ========     ========    ========    ========    ========

Ratio to
interest-
sensitive assets ...    (26.84)%       8.20%      (18.64)%       29.00%      10.36%        3.61%     13.97%
                       ========     ========      ========    ========    ========     ========   ========

</TABLE>


     Eagle Bancorp, Inc. believes that cash on hand of approximately $774,702 at
     December 31, 1996 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  $70,000 and the
     funding of a $0.50 per share cash  dividend of  $431,423  which was paid on
     January 15, 1997.

     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 11.31% and 12.25%  during
     1996 and 1995, respectively.  At December 31, 1996 the Company's regulatory
     capital  and  the  required  minimum  amounts  under  existing   regulatory
     requirements are summarized as follows:


                                       29
<PAGE>






       Eagle Bancorp, Inc. and Subsidiary:

<TABLE>
<CAPTION>

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

<S>                                       <C>      <C>       <C>      <C>         <C>     <C>

Risk Based Capital ...                     14.99% $6,842      8.00%   $3,652      6.99%   $3,190
Tier 1 Capital .......                     13.71   6,259      8.00     3,652      5.71     2,607
Leverage Capital Ratio                     10.60   6,271      4.00     2,367      6.60     3,904

</TABLE>

       Eagle Bank and Trust:
<TABLE>
<CAPTION>

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

<S>                                       <C>      <C>       <C>      <C>        <C>     <C>

Risk Based Capital ...                     14.37%  $6,561      8.00%    $3,652     6.37%  $2,909
Tier 1 Capital .......                     13.12    5,978      4.00      3,652     5.12    2,326
Leverage Capital Ratio                     10.12    5,990      4.00      2,367     6.12    2,623

</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

     On January 1, 1996, the Company adopted SFAS 123 which requires entities to
     recognize  as expense  over the vesting  period the fair value of all stock
     based awards  measured at the date of grant.  Alternatively,  SFAS 123 also
     allows  entities to continue to apply the  provisions of APB Opinion 25 and
     provide proforma net income and proforma earnings per share disclosures for
     employee  stock  option  grants made in 1995 and later years as if the fair
     value-based  method  defined in SFAS 123 had been applied.  The Company has
     elected to continue to apply the provisions of APB Opinion 25. The proforma
     and fair value  disclosures  required by SFAS 123 are not  provided  herein
     because there have been no grants in 1996 or 1995.

     The provisions of Statement of Financial Accounting Standards No. 122,
     "Accounting for Mortgage Servicing Rights": did not have an impact on the
     Company as it does not service loans for others.































                                       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
                                                                          Page


Independent Auditors' Report                                                34

Consolidated Balance Sheets - December 31, 1996 and 1995.                   35

Consolidated Statements of Income for the
Years Ended December 31, 1996, 1995 and 1994                                36

Consolidated Statements of Shareholders' Equity for the
Years Ended December 31, 1996, 1995 and 1994                                37

Consolidated Statements of Cash Flows for the Years
Ended December 31, 1996, 1995 and 1994                                      38

Notes to Consolidated Financial Statements -
December 31, 1996, 1995 and 1994                                            40






















                                       32
<PAGE>




                      EAGLE BANCORP, INC. AND SUBSIDIARY

                      Consolidated Financial Statements

                          December 31, 1996 and 1995


                  With Independent Auditors' Report Thereon



                                       33
<PAGE>



                         Independent Auditors' Report


The Board of Directors and Shareholders
Eagle Bancorp, Inc.:


We have audited the accompanying  consolidated  balance sheets of Eagle Bancorp,
Inc.  and  subsidiary  as of  December  31,  1996  and  1995,  and  the  related
consolidated statements of income, shareholders' equity, and cash flows for each
of  the  years  in  the  three-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  consolidated  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  1995,  and the  results  of their
operations and their cash flows for each of the years in the  three-year  period
ended  December  31,  1996 in  conformity  with  generally  accepted  accounting
principles.

As discussed in note 1 to the  consolidated  financial  statements,  the Company
changed its method of accounting for investment  securities in 1994 to adopt the
provisions of Statement of Financial  Accounting  Standards No. 115,  Accounting
for Certain Investments in Debt and Equity Securities.



                                              KPMG PEAT MARWICK LLP



February 7, 1997

Atlanta, Georgia









                                       34
<PAGE>



                      EAGLE BANCORP, INC. AND SUBSIDIARY

                         Consolidated Balance Sheets

                          December 31, 1996 and 1995

<TABLE>
<CAPTION>

                           Assets                                1996         1995
                           ------                                ----         ----
<S>                                                        <C>             <C>
Cash and due from banks (note 2)                            $  2,237,822    2,316,465
Federal funds sold                                             1,500,000    1,260,000
Interest-earning deposits in other banks                       1,000,000           -
Investment securities available for sale (note 3)              6,898,784    4,945,680
Investment securities held to maturity (approximate
   fair value of $3,791,932  in 1996 and $4,156,000
   in 1995) - (note 3)                                         3,790,335    4,087,345

Loans, net of unearned income (note 4)                        42,638,858   37,442,325
   Less allowance for possible loan losses                       639,500      570,000
                                                              ----------   ----------
         Loans, net                                           41,999,358   36,872,325
                                                              ----------   ----------

Premises and equipment, net (note 5)                           2,474,386    2,548,695
Other assets                                                     829,308      743,665
                                                              ----------   ----------

                                                            $ 60,729,993   52,774,175
                                                              ==========   ==========

            Liabilities and Shareholders' Equity

Liabilities:
   Deposits:
     Noninterest-bearing deposits                           $  5,184,539    4,253,543
     Interest-bearing deposits (note 6)                       47,280,321   40,629,146
                                                              ----------   ----------
         Total deposits                                       52,464,860   44,882,689

   Federal funds purchased                                       200,000      700,000
   Federal Home Loan Bank advances (note 7)                      548,250           -
   Accrued expenses and other liabilities                      1,257,832      992,555
                                                              ----------   ----------
         Total liabilities                                    54,470,942   46,575,244
                                                              ----------   ----------

Shareholders' equity (notes 9, 11, and 14):
   Common stock, $1 par value.  Authorized 10,000,000
     shares; issued and outstanding 862,845 shares in 1996
     and 862,755 shares in 1995                                  862,845      862,755
   Additional paid-in capital                                  4,821,527    4,820,492
   Retained earnings                                             586,583      516,150
   Net unrealized holding losses on investment securities
     available for sale, net of deferred income taxes            (11,904)        (466)
                                                              ----------   ----------
         Total shareholders' equity                            6,259,051    6,198,931

Commitments (notes 4 and 10)

                                                            $ 60,729,993   52,774,175
                                                              ==========   ==========

</TABLE>

See accompanying notes to consolidated financial statements.

                                       35
<PAGE>

                          EAGLE BANCORP, INC. AND SUBSIDIARY

                           Consolidated Statements of Income

                     Years ended December 31, 1996, 1995, and 1994
<TABLE>
<CAPTION>



                                                           1996      1995       1994
                                                           ----      ----       ----
<S>                                                   <C>        <C>       <C>
Interest income:
   Loans, including fees                               $4,024,844 3,687,797 2,906,210
   Federal funds sold                                      58,743    89,364    59,602
   Interest-earning deposits in
     financial institutions                                 1,055     6,429     3,118
   Investment securities:
     Taxable                                              491,027   419,279   498,290
     Nontaxable                                            88,815    33,191    27,565
                                                          -------   -------   -------
         Total interest income                          4,664,484 4,236,060 3,494,785
                                                        --------- --------- ---------

Interest expense:
   Deposits (note 6)                                    2,232,006 1,987,952 1,417,831
   Borrowed funds                                          36,949        -         -
                                                          -------   -------   ------
         Total interest expense                         2,268,955 1,987,952 1,417,831
                                                        --------- --------- ---------

         Net interest income                            2,395,529 2,248,108 2,076,954

Provision for possible loan losses (note 4)               107,842    75,503    87,906
                                                          -------   -------   -------
         Net interest income after provision for
           possible loan losses                         2,287,687 2,172,605 1,989,048
                                                        --------- --------- ---------

Noninterest income:
   Service charges on deposit accounts                    346,052   322,888   296,422
   Securities losses, net (note 3)                        (10,467)   (4,531)       -
   Other operating income                                 299,614   172,177    99,055
                                                          -------   -------   -------
         Total noninterest income                         635,199   490,534   395,477
                                                          -------   -------   -------

Noninterest expense:
   Salaries and employee benefits (note 10)             1,071,635   953,836   814,323
   Net occupancy and equipment expense                    280,089   222,197   240,127
   Other operating expenses (note 13)                     819,306   776,926   761,404
                                                          -------   -------   -------
         Total noninterest expense                      2,171,030 1,952,959 1,815,854
                                                        --------- --------- ---------

         Income before income tax expense                 751,856   710,180   568,671

Income tax expense (note 8)                               250,000   210,000   140,000
                                                          -------   -------   -------

         Net income                                    $  501,856   500,180   428,671
                                                          =======   =======   =======


Net income per common share and common share equivalent    $  .57       .57       .49
                                                              ===       ===       ===

Weighted average number of common shares and common
   share equivalents outstanding                          885,198   883,332   876,088
                                                          =======   =======   =======

</TABLE>

See accompanying notes to consolidated financial statements.



                                       36
<PAGE>




                         EAGLE BANCORP, INC. AND SUBSIDIARY

                  Consolidated Statements of Shareholders' Equity

                   Years ended December 31, 1996, 1995, and 1994
<TABLE>
<CAPTION>

                                                                                                  Net
                                                                                               unrealized
                                                                                              holding gains
                                                                                              (losses) on
                                                                                    Retained   investment
                                                                    Additional      earnings   securities      Total
                                              Common stock           paid-in      (accumulated  available     shareholders'
                                           Shares         Amount     capital         deficit)    for sale      equity

<S>                                      <C>     <C>              <C>             <C>            <C>         <C>

Balance at December 31, 1993 .........    735,405 $      735,405    4,099,191      (197,012)         --       4,637,584
Cumulative effect of change in
   accounting method - net
   unrealized holding gains (losses)
   on investment securities available
   for sale on January 1, 1994 .......         --           --           --            --          51,542        51,542
Exercise of warrants (note 9(c)) .....      127,350      127,350      721,650          --            --         849,000
Net income ...........................         --           --           --         428,671          --         428,671
Change in net unrealized holding gains
   (losses) on investment securities
   available for sale ................         --           --           --            --        (144,404)     (144,404)
                                         ----------   ----------   ----------    ----------    ----------    ----------
Balance at December 31, 1994 .........      862,755      862,755    4,820,841       231,659       (92,862)    5,822,393

Cash paid in lieu of fractional shares
   in connection with stock split
   (note 9(a)) .......................         --           --           (349)         --            --            (349)
Net income ...........................         --           --           --         500,180          --         500,180
Cash dividends declared, $.25 per
 share ...............................         --           --           --        (215,689)         --        (215,689)
Change in net unrealized holding gains
   (losses) on investment securities
   available for sale ................         --           --           --            --          92,396        92,396
                                         ----------   ----------   ----------    ----------    ----------    ----------
Balance at December 31, 1995 .........      862,755      862,755    4,820,492       516,150          (466)    6,198,931

Net income ...........................         --           --           --         501,856          --         501,856
Cash dividends declared, $.50 per
    share ............................         --           --           --        (431,423)         --        (431,423)
Issuance of shares for employee
   compensation ......................           90           90        1,035          --            --           1,125
Change in net unrealized holding gains
   (losses) on investment securities
   available for sale ................         --           --           --            --         (11,438)      (11,438)
                                         ----------   ----------   ----------    ----------    ----------    ----------

Balance at December 31, 1996 .........    862,845 $      862,845    4,821,527       586,583       (11,904)    6,259,051
                                         ==========   ==========   ==========    ==========    ==========    ==========

</TABLE>

See accompanying notes to consolidated financial statements.


                                       37
<PAGE>


                                EAGLE BANCORP, INC. AND SUBSIDIARY

                              Consolidated Statements of Cash Flows

                            Years ended December 31, 1996, 1995, and 1994

<TABLE>
<CAPTION>


                                                                  1996            1995         1994
                                                                  ----            ----         ----
<S>                                                         <C>                <C>
Cash flows from operating activities:
   Net income                                                $    501,856         500,180      428,671
   Adjustments to reconcile net income to net cash provided
      by operating activities:
       Provision for possible loan losses                         107,842          75,503       87,906
       Depreciation                                               165,622         134,666      133,672
       Securities losses, net                                      10,467           4,531           -
       Amortization of organizational costs                         4,513          17,959       21,095
       Compensation expense under stock awards and options          1,125              -        14,471
       Amortization and (accretion), net                          (25,106)         (4,748)     (21,300)
       Accretion of deferred loan fees                            (50,120)        (34,978)     (38,606)
       Loan fees deferred                                          45,143          35,735       32,015
       Deferred income tax benefit                                (19,128)        (62,760)     (69,500)
       Increase in other assets                                   (64,869)         (5,890)     (43,723)
       Increase in other liabilities                               49,543         244,430      228,068
                                                                ---------       ---------    ---------
         Net cash provided by operating activities                726,888         904,628      772,769
                                                                ---------       ---------    ---------

Cash flows from investing activities:
   Increase in loans, net                                      (5,229,898)     (3,994,395)  (5,111,487)
   Investment in interest-earning deposits
      in financial institutions                                (1,000,000)             -            -
   Purchases of investment securities available for sale       (4,250,098)     (1,613,872)  (6,277,389)
   Purchases of investment securities held to maturity           (748,359)     (1,727,027)    (561,547)
   Additions to premises and equipment                            (91,313)       (618,177)    (108,769)
   Proceeds from sales of investment securities
      available for sale                                        1,739,405         992,938           -
   Proceeds from maturates of interest-earning deposits
     in financial institutions                                         -               -       595,000
   Proceeds from maturities or calls of investment securities
     held to maturity                                           1,050,000              -       140,000
   Proceeds from maturities of investment securities available
     for sale                                                     550,000       2,143,333    6,016,918
                                                                ---------       ---------    ---------
         Net cash used in investing activities                 (7,980,263)     (4,817,200)  (5,307,274)
                                                                ---------       ---------    ---------

Cash flows from financing activities:
   Increase in deposits, net                                    7,582,171       4,179,869    2,101,945
   (Decrease) increase in federal funds purchased                (500,000)        700,000           -
   Proceeds from exercise of warrants                                  -               -       849,000
   Cash paid in lieu of fractional shares                              -             (349)          -
   Dividends paid                                                (215,689)             -            -
   Federal Home Loan Bank advances                                548,250              -            -
                                                                ---------       ---------    --------
         Net cash provided by financing activities              7,414,732       4,879,520    2,950,945
                                                                ---------       ---------    ---------

         Net increase (decrease) in cash and cash equivalents,
           carried forward                                   $    161,357         966,948   (1,583,560)
                                                                =========       =========    =========

</TABLE>

                                       38
<PAGE>



                                                             (Continued)
                                EAGLE BANCORP, INC. AND SUBSIDIARY

                              Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>


                                                                 1996          1995            1994
                                                                 ----          ----            ----
        <S>                                                 <C>              <C>            <C>
         Net increase (decrease) in cash and cash equivalents,
           brought forward                                  $     161,357         966,948   (1,583,560)

Cash and cash equivalents at beginning of year                  3,576,465       2,609,517    4,193,077
                                                                ---------       ---------    ---------

Cash and cash equivalents at end of year                     $  3,737,822       3,576,465    2,609,517
                                                                =========       =========    =========

Supplemental disclosures of cash paid during year for:
   Interest                                                  $  2,204,231       1,609,873    1,369,270
                                                                =========       =========    =========

   Income taxes                                              $    316,093         379,699       20,713
                                                                =========       =========    =========

</TABLE>

See accompanying notes to consolidated financial statements.




                                       39
<PAGE>



                      EAGLE BANCORP, INC. AND SUBSIDIARY

                  Notes to Consolidated Financial Statements

                      December 31, 1996, 1995, and 1994


(1)  Summary of Significant Accounting Policies

     The accounting and reporting policies of Eagle Bancorp, Inc. and subsidiary
     (the "Company") conform to generally accepted accounting  principles and to
     general  practices  within  the  banking  industry.   The  following  is  a
     description of the more significant of those policies.

        Business

        Eagle Bancorp, Inc. was incorporated as a Georgia corporation, primarily
        to serve as a bank  holding  company  for  Eagle  Bank  and  Trust  (the
        "Bank").  The  Bank  provides  a  full  range  of  banking  services  to
        individual  and  corporate  customers  from its main  office  and branch
        facilities in Statesboro,  Georgia. The Company and the Bank are subject
        to competition  from other  financial  institutions,  are subject to the
        regulations of certain Federal and state agencies,  and undergo periodic
        examinations by those regulatory agencies.

        Basis of Financial Statement Presentation

        The consolidated  financial  statements have been prepared in conformity
        with  generally  accepted  accounting   principles.   In  preparing  the
        consolidated  financial  statements,  management  is  required  to  make
        estimates and assumptions that affect the reported amounts of assets and
        liabilities as of the date of the consolidated  balance sheet and income
        and expenses for the period.  Actual results could differ  significantly
        from  those  estimates.   A  material   estimate  that  is  particularly
        susceptible  to  significant  change  in the near  term  relates  to the
        determination of the allowance for possible loan losses.

        The  consolidated  financial  statements  include the  accounts of Eagle
        Bancorp, Inc. and its wholly owned subsidiary, Eagle Bank and Trust. All
        significant  intercompany accounts and transactions have been eliminated
        in consolidation.

        Cash and Cash Equivalents

        Cash equivalents include cash and due from banks and federal funds sold.
        Generally, federal funds are sold for periods of less than 90 days.



                                       40
<PAGE>


                      EAGLE BANCORP, INC. AND SUBSIDIARY

                  Notes to Consolidated Financial Statements


        Investment Securities

        The Company adopted the provisions of Statement of Financial  Accounting
        Standards No. 115, Accounting for Certain Investments in Debt and Equity
        Securities   ("SFAS  115")  on  January  1,  1994.   SFAS  115  requires
        investments  to be classified in three  categories:  securities  held to
        maturity reported at amortized cost, trading securities reported at fair
        value,  and  securities  available  for  sale  reported  at fair  value.
        Unrealized  gains or  losses  on  trading  securities  are  included  in
        earnings while unrealized  gains and losses on securities  available for
        sale are excluded from earnings and reported as a separate  component of
        shareholders' equity.

        On January 1, 1994, the Company transferred  investment  securities with
        an aggregate  amortized  cost of  $6,161,382  to  investment  securities
        available for sale. Such investment securities available for sale had an
        aggregate fair value of $6,244,515 at January 1, 1994, which resulted in
        an increase in shareholders'  equity at January 1, 1994 of $51,542,  net
        of deferred income taxes amounting to $31,591.

        Premiums and discounts  are amortized and accreted  using a method which
        approximates  a level  yield.  Gains and  losses on sales of  investment
        securities are recognized upon  disposition,  based on the adjusted cost
        of the specific security.

        A decline in the market value of any security  below cost that is deemed
        other than temporary is charged to income resulting in the establishment
        of a new cost basis for the security.

        Loans, Interest Income, and Fee Income

        Loans are reported at  principal  amounts  outstanding,  net of unearned
        income and less the allowance for possible loan losses.  Interest income
        on loans is recognized on a level-yield basis.

        Loan fees, net of certain  direct  origination  costs,  are deferred and
        amortized over the terms of the loans using a method which  approximates
        a level yield.

        Loans on which  the  accrual  of  interest  has  been  discontinued  are
        designated  as  nonaccrual  loans.  Accrual  of  interest  on  loans  is
        discontinued  when  reasonable  doubt  exists  as to  the  full,  timely
        collection of interest or principal or when they become contractually in
        default for 90 days or more as to either  interest or principal,  unless
        they are both well secured and in process of collection.  When a loan is
        placed on nonaccrual status, previously accrued and
                                       41
<PAGE>

                      EAGLE BANCORP, INC. AND SUBSIDIARY

                  Notes to Consolidated Financial Statements

        uncollected  interest  for the  year in  which  the  loan is  placed  on
        nonaccrual status is charged to interest income on loans.

        The  Company  adopted the  provisions  of SFAS No.  114,  Accounting  by
        Creditors  for  Impairment  of a  Loan,  as  amended  by SFAS  No.  118,
        Accounting  by Creditors for  Impairment of a Loan - Income  Recognition
        and Disclosures on January 1, 1995. Under the provisions of SFAS No. 114
        and SFAS No. 118, management  considers a loan to be impaired when it is
        probable  that the  Company  will be unable to collect  all  amounts due
        according to the contractual terms of the note agreement. When a loan is
        considered  impaired,  the amount of impairment is measured based on the
        present  value of expected  future cash flows,  discounted at the loan's
        effective interest rate. If the loan is  collateral-dependent,  the fair
        value of the  collateral is used to determine the amount of  impairment.
        Impairment losses are included in the allowance for possible loan losses
        through the provision for possible loan losses. Loans are charged to the
        allowance  when,  in the  opinion of  management,  such loans are deemed
        uncollectible. Subsequent recoveries are added to the reserve.

        When a loan is considered impaired,  cash receipts are applied under the
        contractual terms of the loan agreement,  first to principal and then to
        interest income. Once the recorded principal balance has been reduced to
        zero, future cash receipts are applied to interest income, to the extent
        that any interest  has not been  recognized.  Additionally,  future cash
        receipts are recorded as  recoveries  of any amount  previously  charged
        off.

        A loan is also  considered  impaired  if its  terms  are  modified  in a
        troubled debt  restructuring  after January 1, 1995.  For these accruing
        impaired  loans,  cash receipts are  typically  applied to principal and
        interest  receivable  in accordance  with the terms of the  restructured
        loan  agreement.  Interest income is recognized on these loans using the
        accrual method of accounting.

        The  adoption  of SFAS 114 and  SFAS 118  required  no  increase  to the
        allowance  for possible  loan losses and had no impact on net income for
        the year ended  December 31, 1995. At December 31, 1996, the Company had
        no impaired loans other than those classified as nonaccrual.

        Allowance for Possible Loan Losses

        The  allowance  for  possible  loan  losses  is  based  on  management's
        evaluation  of the loan  portfolio  under current  economic  conditions,
        adequacy of collateral,  and such other factors which,  in  management's
        judgment,  deserve  recognition  in  estimating  loan losses.  Loans are
        charged against the allowance when, in the opinion of management, such

                                       42
<PAGE>

                      EAGLE BANCORP, INC. AND SUBSIDIARY

                  Notes to Consolidated Financial Statements

        loans are deemed to be  uncollectible  and  subsequent  recoveries are
        added to the allowance.

        A substantial portion of the Company's loan portfolio is secured by real
        estate and other collateral in Bulloch County and surrounding
        areas of Southeast Georgia.  Accordingly, the ultimate collectibility
        of a substantial  portion of the Company's loan portfolio is susceptible
        to changes in economic conditions in these markets.

        Management  believes  that the  allowance  for  possible  loan losses is
        adequate.  While  management  uses  available  information  to recognize
        losses on loans,  future  additions  to the  allowance  may be necessary
        based on changes in economic conditions,  particularly in Bulloch County
        and surrounding areas. In addition,  regulatory agencies, as an integral
        part of their examination  process,  periodically review the adequacy of
        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.

        Premises and Equipment

        Premises and equipment are stated at cost, less accumulated depreciation
        and amortization,  which is computed using the straight-line method over
        the estimated useful lives of the related assets.

        Organizational Costs

        Organizational  costs incurred  during the  development  stage have been
        capitalized and are being amortized using the straight-line  method over
        a five-year period. All  organizational  costs have been fully amortized
        as of December 31, 1996.

        Income Taxes

        The Company  accounts for income taxes  according to the  provisions  of
        Statement  of  Financial  Accounting  Standards  No. 109  ("SFAS  109"),
        Accounting  for Income Taxes.  SFAS 109 utilizes the asset and liability
        method of  accounting  for income  taxes.  Under the asset and liability
        method of SFAS 109,  deferred  income  tax assets  and  liabilities  are
        recognized for the future tax  consequences  attributable to differences
        between the financial  statement carrying amounts of existing assets and
        liabilities and their respective tax bases, including operating loss and
        tax credit carryforwards. Deferred income tax assets and liabilities are
        measured  using enacted tax rates expected to apply to taxable income in
        the  years in which  those  temporary  differences  are  expected  to be
        recovered or settled.  Under SFAS 109, the effect on deferred income tax
        assets and

                                       43
<PAGE>

                      EAGLE BANCORP, INC. AND SUBSIDIARY

                  Notes to Consolidated Financial Statements

        liabilities  of a change  in tax  rates is  recognized  in income in the
        period that includes the enactment date.

        Stock-Based Compensation

        The Company  accounts for its stock option plan in  accordance  with the
        provisions of Accounting Principles Board Opinion No. 25, Accounting for
        Stock   Issued  to   Employees   ("APB   Opinion   25"),   and   related
        interpretations.  As such,  compensation expense is recorded only to the
        extent  that the  market  price of the  underlying  stock at the date of
        grant  exceeds  the  exercise  price.  In  October  1995,  Statement  of
        Financial  Accounting  Standards  No. 123,  Accounting  for  Stock-Based
        Compensation  ("SFAS  123"),  was  issued.  SFAS 123 allows  entities to
        continue  to apply the  provisions  of APB  Opinion  25 for  recognizing
        stock-based  compensation  expense  in the basic  financial  statements.
        However, companies are encouraged to adopt a new accounting method based
        on the estimated fair value of stock-based compensation.  Companies that
        do not follow the new fair  value-based  method are  required to provide
        expanded disclosures in the notes to consolidated  financial statements.
        SFAS 123 is effective for the fiscal year ended  December 31, 1996.  The
        Company has elected to continue to apply the  provisions  of APB Opinion
        25 and, to the extent material, follow the disclosure provisions of SFAS
        123.

        Net Income Per Common Share

        Net income per common share and common share  equivalent is based on the
        weighted  average number of common shares  outstanding  and common share
        equivalents  derived from dilutive stock options.  Net income per common
        share and common share  equivalent  computed on a fully diluted basis is
        reflected in the accompanying consolidated statements of income.

        Reclassifications

        Certain  reclassifications have been made to the 1995 and 1994 financial
        statements to conform to the presentation adopted in 1996.

(2)  Restricted Cash

        Aggregate  reserves (in the form of vault cash) of  approximately
        $212,000 and $183,000 were maintained to satisfy regulatory
        requirements at December 31, 1996 and 1995, respectively.




                                       44
<PAGE>




                      EAGLE BANCORP, INC. AND SUBSIDIARY

                  Notes to Consolidated Financial Statements



(3)  Investment Securities

     Investment securities available for sale consisted of the following:
<TABLE>
<CAPTION>

                                                                 December 31, 1996
                                                Amortized  Unrealized   Unrealized    Approximate
                                                  cost        gains       losses      fair value

<S>                                        <C>             <C>          <C>          <C>

      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
      Federal Home Loan Bank stock                 158,400        -            -         158,400
                                               -----------   -------       ------     ----------

                                            $    6,917,098    18,844      (37,158)     6,898,784
                                                 =========    ======       ======      =========

                                                                 December 31, 1995
                                                Amortized  Unrealized   Unrealized    Approximate
                                                  cost        gains       losses      fair value

      U.S. Treasury and U.S.
         Government agencies                $    3,307,120    6,069           -        3,313,189
      State, county, and municipal
         securities                              1,490,477       -        (6,786)      1,483,691
      Federal Home Loan Bank stock                 148,800       -            -          148,800
                                               -----------   ------        -----      ----------

                                            $    4,946,397    6,069       (6,786)      4,945,680
                                                 =========    =====        =====       =========

     The carrying and approximate market values of investment securities held to
     maturity are summarized as follows:

                                                               December 31, 1996
                                              Carrying    Unrealized   Unrealized    Approximate
                                                value        gains       losses      fair value
      U.S. Treasury and U.S.
         Government agencies               $   3,790,335     36,868      (35,271)     3,791,932
                                               =========     ======       ======      =========

                                                               December 31, 1995
                                              Carrying    Unrealized   Unrealized    Approximate
                                                value        gains       losses      fair value
      U.S. Treasury and U.S.
         Government agencies               $   4,087,345     68,655           -       4,156,000
                                               =========     ======       ======      =========
</TABLE>

     Proceeds from sales of investment  securities  during 1996 were  $1,739,405
     and resulted in securities losses realized of $10,467.  Proceeds from sales
     of  investment  securities  during  1995  were  $992,938  and  resulted  in
     securities gains realized of $628 and securities losses realized of $5,159.
     The Company did not sell any investment securities during 1994.

                                       45
<PAGE>


                      EAGLE BANCORP, INC. AND SUBSIDIARY

                  Notes to Consolidated Financial Statements

     The amortized cost and fair values of investment securities at December 31,
     1996, by contractual  maturity,  are shown below.  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>
<CAPTION>


                                                   Investment securities    Investment securities
                                                    available for sale        held to maturity
                                                   Amortized  Approximate  Amortized  Approximate
                                                     cost     fair value     cost     fair value

     <S>                                      <C>            <C>          <C>         <C>

      Due in one year or less                  $   1,258,059   1,250,129          -           -
      Due after one year through five years        5,275,639   5,263,255   3,290,335   3,306,462
      Due after five years through ten years         125,000     125,000     500,000     485,470
      Due after ten years                            100,000     102,000          -           -
      Equity securities                              158,400     158,400          -           -
                                                  ----------  ----------   ---------   --------

                                               $   6,917,098   6,898,784   3,790,335   3,791,932
                                                   =========   =========   =========   =========
</TABLE>

     Securities with an aggregate carrying value of approximately $2,500,000 and
     $1,300,000  at December  31, 1996 and 1995,  respectively,  were pledged to
     secure public funds on deposit and for other purposes as required by law.


(4)  Loans

     Loans outstanding, by classification, are summarized as follows:
<TABLE>
<CAPTION>


                                                            December 31,
                                                          1996        1995

     <S>                                             <C>         <C>

     Agricultural                                     $ 1,301,314   1,079,205
     Commercial                                         8,275,067   6,085,631
     Real estate - commercial                          19,194,293  17,211,187
     Real estate - commercial construction              2,760,089   1,902,436
     Real estate - residential construction               337,196   1,029,534
     Real estate  - residential                         6,538,226   6,220,862
     Consumer                                           3,581,595   3,510,242
     Home equity                                          649,657     431,284
                                                        ---------   ---------
                                                       42,637,437  37,470,381
     Deferred loan costs (fees)                             1,421     (28,056)
                                                        ---------   ---------

                                                      $42,638,858  37,442,325
                                                      ===========  ==========
</TABLE>


                                       46
<PAGE>






                      EAGLE BANCORP, INC. AND SUBSIDIARY

                  Notes to Consolidated Financial Statements



     Transactions  in the allowance  for possible loan losses are  summarized as
     follows:
<TABLE>
<CAPTION>


                                                             Year ended December 31,
                                                            1996      1995      1994
                                                             ----      ----      ----

       <S>                                     <C>          <C>      <C>

        Balance at beginning of year                    $ 570,000   527,500  436,000
        Provision charged to operating expense            107,842    75,503   87,906
        Recoveries on loans (consumer) previously
           charged off                                     21,081     2,176   10,277
        Loans charged off (consumer)                      (59,423)  (35,179)  (6,683)
                                                          -------   -------  -------

        Balance at end of year                          $ 639,500   570,000  527,500
                                                          =======   =======  =======
</TABLE>

     At December 31, 1996,  outstanding loan commitments included commitments to
     fund commercial,  agricultural, real estate - construction, and home equity
     loans of  approximately  $2,163,000,  $678,000,  $2,377,000,  and $738,000,
     respectively.  It is the opinion of management that such commitments do not
     involve more than the normal risk of loss.

     Nonaccrual loans were  approximately  $123,000 and $629,080 at December 31,
     1996 and 1995, respectively,  and interest income on nonaccrual loans which
     would have been reported for the years ended  December 31, 1996,  1995, and
     1994 was not  significantly  different  from the interest  income  actually
     included in the  accompanying  consolidated  statements of income for 1996,
     1995, and 1994 relating to such loans.


     In the  ordinary  course of  business,  the Company has direct and indirect
     loans outstanding to certain executive officers,  directors,  and principal
     holders of equity securities  (including their associates).  Such loans are
     made  substantially  on  the  same  terms,   including  interest  rate  and
     collateral,  as those  prevailing at the time for  comparable  transactions
     with unaffiliated customers.  The following is a summary of activity during
     1996 with respect to the  aggregate  loans to these  individuals  and their
     associates:
<TABLE>
       <S>                                                  <C>

        Balances at December 31, 1995                         $1,850,000
        New loans                                              1,539,000
        Repayments                                            (2,040,000)
                                                               ---------

        Balances at December 31, 1996                         $1,349,000
                                                               =========
</TABLE>




                                       47
<PAGE>



                      EAGLE BANCORP, INC. AND SUBSIDIARY

                  Notes to Consolidated Financial Statements




(5)  Premises and Equipment

     Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>


                                                         December 31,
                                                       1996       1995

       <S>                                       <C>         <C>

        Land                                       $   804,981   804,981
        Building and improvements                    1,469,358 1,438,634
        Furniture, fixtures, and equipment             813,653   753,064
        Automobiles                                     33,798    33,798
                                                      --------  --------
                                                     3,121,790 3,030,477
        Less accumulated depreciation
           and amortization                            647,404   481,782
                                                      --------  --------

                                                   $ 2,474,386 2,548,695
                                                   =========== =========
</TABLE>
 (6)  Interest-Bearing Deposits

      The following is a summary of interest-bearing deposits:

<TABLE>
<CAPTION>

                                                        December 31,
                                                      1996        1995

       <S>                                     <C>         <C>

        NOW accounts                             $ 7,420,192   6,137,518
        Money market accounts                      3,077,437   2,096,008
        Savings accounts                           2,586,187   2,650,107
        Individual retirement accounts             2,958,922   2,762,189
        Certificates of deposit
            of $100,000 or more                   10,319,613   5,953,410
        Other certificates of deposit             20,917,970  21,029,914
                                                  ----------  ----------

                                                 $47,280,321  40,629,146
                                                 ===========  ==========
</TABLE>

     Interest  expense  on  certificates  of  deposit  of  $100,000  or more was
     approximately $525,000, $370,000, and $273,000 for the years ended December
     31, 1996, 1995, and 1994, respectively.




                                       48
<PAGE>







                      EAGLE BANCORP, INC. AND SUBSIDIARY

                  Notes to Consolidated Financial Statements


(7)Federal Home Loan Bank Advances

    Federal Home Loan Bank  advances at  December  31, 1996  consist of secured,
    term loans with  principal  payable at maturity  and  interest  due monthly
    based on fixed rates, as follows:
<TABLE>
     <S>                                            <C>

     6.81% maturing March 11, 2006                   $ 268,250
     7.01% maturing April 1, 2006                      280,000
                                                       -------
                                                     $ 548,250
                                                       =======
</TABLE>

(8)Income Taxes

   The provision for income tax expense includes income taxes currently payable,
   income  taxes  deferred  because  of  temporary   differences  between  the
   financial  statement  and tax  bases of  assets  and  liabilities,  and any
   increase or decrease in the  valuation  allowance  for deferred  income tax
   assets.

    Income tax expense (benefit) consists of:
<TABLE>
<CAPTION>


                                             Current    Deferred   Total

       <S>                              <C>           <C>       <C>

        Year ended December 31, 1996:
          U.S. Federal                    $ 269,128    (16,268)  252,860
          State                                  -      (2,860)   (2,860)
                                             ------     ------    ------

                                          $ 269,128    (19,128)  250,000
                                            =======     ======   =======
        Year ended December 31, 1995:
          U.S. Federal                    $ 272,760    (52,851)  219,909
          State                                  -      (9,909)   (9,909)
                                             ------     ------    ------

                                          $ 272,760    (62,760)  210,000
                                            =======     ======   =======

        Year ended December 31, 1994:
          U.S. Federal                    $ 209,500    (54,500)  155,000
          State                                  -     (15,000)  (15,000)
                                             ------     ------    -------

                                          $ 209,500    (69,500)  140,000
                                            =======     ======   =======
</TABLE>



                                       49
<PAGE>








                      EAGLE BANCORP, INC. AND SUBSIDIARY

                  Notes to Consolidated Financial Statements


   Income tax  expense  differed  from the  amounts  computed  by  applying  the
   statutory  U.S.  Federal income tax rate of 34% to income before income tax
   expense as a result of the following:

<TABLE>
<CAPTION>

                                                          1996      1995       1994
                                                          ----      ----       ----

    <S>                                               <C>          <C>       <C>

     Computed "expected" income tax expense            $  255,631   241,461   193,348
     Increase (reduction) in income tax expense
        resulting from:
          Tax-exempt interest                             (19,247)   (7,673)   (7,758)
          Increase (decrease) in valuation allowance
           for deferred income tax assets                      -    (29,718)  (76,755)
          Other, net                                       13,616     5,930    31,165
                                                          -------   -------    ------

                                                       $  250,000   210,000   140,000
                                                          =======   =======   =======
</TABLE>

     The tax effects of  temporary  differences  that give rise to the  deferred
     income  tax  assets  and  liabilities  at  December  31,  1996 and 1995 are
     presented below:
<TABLE>
<CAPTION>


                                                          1996      1995

       <S>                                          <C>          <C>

        Deferred income tax assets:
          Allowance for possible loan losses          $ 202,781    147,338
          Preopening costs                                   -       2,623
          State operating loss and credit carryforwards  14,138     22,860
          Unrealized holding losses on investment
            securities available for sale                 6,410        251
                                                         ------    -------
              Total deferred income tax assets          223,329    173,072

          Less valuation allowance                           -          -
                                                         ------    ------
              Deferred income tax assets, net of
                valuation allowance                     223,329    173,072
                                                        -------    -------

        Deferred income tax liabilities:
          Depreciation                                   54,017     33,174
          Other                                           4,127         -
                                                         ------    ------
              Total deferred income tax liabilities      58,144     33,174

              Net deferred income tax asset, included
               within other assets in the accompanying
               consolidated balance sheets            $ 165,185    139,898
                                                        =======    =======
</TABLE>

                                       50
<PAGE>




                      EAGLE BANCORP, INC. AND SUBSIDIARY

                  Notes to Consolidated Financial Statements


     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 years ended  December 31, 1995 and 1994,  the Company  decreased
     its  valuation  allowance  for  deferred  income tax assets by $29,718  and
     $76,555,  respectively,  as accumulated deficits were recovered and taxable
     income was generated. The Company believes that the realization of deferred
     income tax assets  recorded  at  December  31, 1996 is more likely than not
     because of carryback availability.

     The Company has available state business  license tax credit  carryforwards
     of  approximately  $21,500 for state  income tax  reporting  purposes as of
     December 31, 1996 which can be used to reduce future state  taxable  income
     of the Company.

(9) Shareholders' Equity

    (a) Stock Split

        On  May  23,  1995,  the  Company's   Board  of  Directors   declared  a
        three-for-two stock split of the Company's common stock in the form of a
        stock dividend.  All share, per share, and shareholders'  equity amounts
        included herein have been retroactively restated to reflect the split.



                                       51
<PAGE>







                      EAGLE BANCORP, INC. AND SUBSIDIARY

                  Notes to Consolidated Financial Statements


    (b)Stock Options

        The Company  maintains a stock option plan under which 120,000 shares of
        common stock are reserved to retain the services of certain key
        employees  and  encourage   stock   ownership  by  them.   The  vesting,
        expiration,  and exercise price of options granted are determined within
        the provisions of the Company's Board of Directors.  All options granted
        under the terms of the plan shall  have an  exercise  price  equal to or
        greater than the fair market value of the Company's  common stock on the
        date of grant and shall  expire  ten years  from the date of grant.  The
        following  table  summarizes  plan activity for the years ended December
        31, 1996, 1995, and 1994:

<TABLE>
<CAPTION>

                                                             Exercise price
                                                     Shares     per share

          <S>                                      <C>        <C>

           Options outstanding at December 31, 1993  44,118     $ 6.67
             Granted                                     -
             Exercised or canceled                       -
                                                     -----
           Options outstanding at December 31, 1994  44,118       6.67
             Granted                                     -
             Exercised or canceled                       -
                                                     -----
           Options outstanding at December 31, 1995  44,118       6.67
             Granted                                     -
             Exercised or canceled                       -
                                                     -----

           Options outstanding at December 31, 1996  44,118     $ 6.67
                                                     ======
</TABLE>

        As of December 31, 1996,  options to acquire  44,118  shares were earned
        and were exercisable.  The Company has recorded  compensation expense of
        $14,471 to reflect the  compensatory  component  of the  options  earned
        during 1994. Options expire beginning in March 1998 through August 2000.

        As discussed in note 1, on January 1, 1996, the Company adopted SFAS 123
        which requires  entities to recognize as expense over the vesting period
        the fair value of all stock-based  awards measured at the date of grant.
        Alternatively,  SFAS 123 also  allows  entities to continue to apply the
        provisions  of APB  Opinion 25 and  provide pro forma net income and pro
        forma  earnings per share  disclosures  for employee stock option grants
        made in 1995 and later years as if the fair  value-based  method defined
        in SFAS 123 had been  applied.  The  Company  has elected to continue to
        apply the  provisions  of APB  Opinion  25. The pro forma and fair value
        disclosures  required by SFAS 123 are not provided  herein because there
        have been no grants in 1996 or 1995.


                                       52
<PAGE>


                      EAGLE BANCORP, INC. AND SUBSIDIARY

                  Notes to Consolidated Financial Statements


    (c) Warrants

        Upon  formation  of the  Company  and  Bank,  organizers  were  granted
        warrants to acquire  151,650  shares of the  Company's  common  stock in
        recognition of the efforts and risks undertaken by the organizers in the
        formation  of the  Company  and Bank.  On January 5, 1994,  warrants  to
        acquire  127,350  shares of the  Company's  common stock were  exercised
        resulting  in proceeds to the Company of  $849,000.  Warrants to acquire
        24,300 shares expired on that same date.

(10) Commitments

    (a)Credit Facilities

       The Company maintains  short-term  unsecured  federal funds  arrangements
       with other  banks.  Subject  to  certain  conditions,  the  Company  has
       borrowing availability totaling $7.5 million at prevailing market rates.

    (b)Letters of Credit

      Inthe normal course of business,  the Company has outstanding  commitments
      to  extend   credit  which  are  not   reflected  in  the   accompanying
      consolidated  financial  statements,  including  approximately  $149,000
      under standby  letters of credit at December 31, 1996. It is the opinion
      of management that such  commitments do not involve more than the normal
      risk of loss.

    (c)Employee Benefit Plan

       Effective January 1, 1994, the Company  established the Eagle Bank Profit
       Sharing  Plan  (the  "Plan")  to  provide a  vehicle  for the  Company's
       employees  to save for  retirement.  The Plan allows the Company to make
       annual discretionary contributions for the benefit of Plan participants.
       All  employees are eligible to  participate  in the Plan after they meet
       certain  eligibility  requirements.  Under the  terms of the  Plan,  the
       Company's   contribution  is  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. The Company has
       provided  compensation  expense of $30,000 in 1996, $25,000 in 1995, and
       $25,000 in 1994 to reflect the Company's contributions to the Plan.



                                       53
<PAGE>

                      EAGLE BANCORP, INC. AND SUBSIDIARY

                  Notes to Consolidated Financial Statements


(11)  Condensed Financial Information of Eagle Bancorp, Inc. (Parent Only)

        The following represents parent company only condensed financial
        information of Eagle Bancorp, Inc.


                                     Condensed Balance Sheets

                                    December 31, 1996 and 1995
<TABLE>
<CAPTION>

                               Assets                                      1996         1995
                               ------                                      ----         ----
     <S>                                                            <C>              <C>
      Cash                                                            $     774,702    1,091,698
      Investment in bank subsidiary, at equity                            5,978,113    5,373,917
      Other assets                                                               -           382
                                                                         ----------   ----------

                                                                      $   6,752,815    6,465,997
                                                                          =========    =========

                Liabilities and Shareholders' Equity

      Liabilities:
         Dividends payable                                            $     431,423      215,689
         Other liabilities                                                   62,341       51,377
                                                                         ----------   ----------
              Total liabilities                                             493,764      267,066
                                                                         ----------   ----------

      Shareholders' equity:
         Common stock                                                       862,845      862,755
         Additional paid-in capital                                       4,821,527    4,820,492
         Retained earnings                                                  586,583      516,150
         Net unrealized holding losses on investment
           securities available for sale                                    (11,904)        (466)
                                                                         ----------   ----------
              Total shareholders' equity                                  6,259,051    6,198,931
                                                                          ---------    ---------

                                                                      $   6,752,815    6,465,997
                                                                          =========    =========
</TABLE>
                                  Condensed Statements of Income

                          Years ended December 31, 1996, 1995, and 1994
<TABLE>
<CAPTION>
                                                               1996         1995         1994
                                                               ----         ----         ----
     <S>                                                  <C>             <C>          <C>
      Operating expenses                                   $   113,778       73,925       94,068
                                                               -------     --------     --------

              Loss before income taxes and equity
                in income of bank subsidiary                  (113,778)     (73,925)     (94,068)

      Income tax benefit allocated from consolidated
         income tax return                                          -            -            -
                                                             ---------    ---------     -------
              Loss before equity in income of
                bank subsidiary                               (113,778)     (73,925)     (94,068)

      Equity in income of bank subsidiary                      615,634      574,105      522,739
                                                               -------      -------      -------

              Net income                                   $   501,856      500,180      428,671
                                                               =======      =======      =======
</TABLE>

                                       54
<PAGE>



                      EAGLE BANCORP, INC. AND SUBSIDIARY

                  Notes to Consolidated Financial Statements



                      Condensed Statements of Cash Flows

                Years ended December 31, 1996, 1995, and 1994
<TABLE>
<CAPTION>

                                                                1996         1995         1994
                                                                ----         ----         ----

     <S>                                                  <C>             <C>            <C>

      Cash flows from operating activities:
         Net income                                        $     501,856      500,180     428,671
         Adjustments to reconcile net income to net
           cash used in operating activities:
             Equity in income of bank subsidiary                (615,634)    (574,105)   (522,739)
             Amortization of organizational costs                    382        4,584       4,584
             Compensation expense under stock
              awards and options                                   1,125           -       14,471
             Decrease (increase) in other assets                      -        28,420     (10,142)
             Increase (decrease) in other liabilities             10,964      (28,105)      7,585
                                                             -----------   ----------  ----------
                Net cash used in operating activities           (101,307)     (69,026)    (77,570)
                                                             -----------   ----------  ----------

      Cash flows from financing activities:
         Dividends paid                                         (215,689)          -           -
         Proceeds from exercise of warrants                           -            -      849,000
         Cash paid in lieu of fractional shares in
           connection with stock split                                -          (349)         -
                                                             -----------   ----------  ---------
                Net cash provided by (used in)
                  financing activities                          (215,689)        (349)    849,000
                                                             -----------   ----------  ----------

                Net increase (decrease) in cash and cash
                   equivalents                                  (316,996)     (69,375)    771,430

      Cash and cash equivalents at beginning of year           1,091,698    1,161,073     389,643
                                                               ---------    ---------    ---------

      Cash and cash equivalents at end of year             $     774,702    1,091,698   1,161,073
                                                             ===========    =========   =========

      Supplemental disclosure of cash paid during
         the year for income taxes                         $     316,093      379,699      20,713
                                                             ===========   ==========  ==========

      Supplemental disclosure of significant noncash
         transaction - contribution of land to Eagle Bank  $          -       216,753          -
                                                             ===========   ==========  =========
</TABLE>

    The amount of  dividends  payable to the Company from the Bank is limited by
    regulatory agencies.  State-chartered  banks meeting the minimum regulatory
    capital  requirements  are restricted in the payment of dividends,  without
    prior regulatory  approval,  to an amount no greater than 50% of net income
    of the  previous  year.  As a  result  of this  regulatory  limitation,  at
    December  31,  1996,   $5,670,296  of  the  Company's  investment  in  Bank
    subsidiary of $5,978,113  was  restricted  from transfer by the Bank to the
    Company in the form of cash dividends.




                                       55
<PAGE>





                      EAGLE BANCORP, INC. AND SUBSIDIARY

                  Notes to Consolidated Financial Statements


      (12)Fair Value of Financial Instruments

          Statement of Financial  Accounting Standards No. 107, Disclosure about
          Fair Value of Financial  Instruments  ("SFAS 107"),  requires that the
          Company disclose  estimated fair value for its financial  instruments.
          Fair value estimates, methods, and assumptions are set forth below for
          the Company's financial instruments.

      (a) Cash and Cash Equivalents, Interest-Earning Deposits
          in Other Banks, and Federal Funds Sold and Purchased

          The  carrying  amount of these  instruments  approximates  fair  value
          because of the short-term maturities of these instruments.

      (b)Investment Securities

          The fair value of  investment  securities,  except  certain  state and
          municipal securities,is estimated based on published bid prices or bid
          quotations received from securities dealers. The fair value of certain
          state and municipal securities is not readily available through market
          sources  other than dealer  quotations,  so fair value  estimates  are
          based on quoted  market  prices of similar  instruments,  adjusted for
          differences  between the quoted  instruments and the instruments being
          valued. In the aggregate,  the fair value of investment  securities at
          December   31,  1996  and  1995  was   $10,690,716   and   $9,101,680,
          respectively,  as compared to their carrying value of $10,689,119  and
          $9,033,025,  respectively.  Refer to note 3 for further  disclosure of
          the estimated fair values of investment securities.

      (c) Loans

          Fair values are estimated for portfolios of loans with similar
          financial characteristics.  The fair value of loans is calculated by
          discounting scheduled cash flows through the estimated maturity using
          estimated market discount rates that reflect the credit and interest
          rate risks inherent in the loans.  The estimate of maturity is based
          on the Company's historical experience with repayments for each loan
          classification, modified, as required, by an estimate of the effect
          of the current economic and lending conditions.


                                       56
<PAGE>



                      EAGLE BANCORP, INC. AND SUBSIDIARY

                  Notes to Consolidated Financial Statements

         The following table presents information on the fair value of loans:
<TABLE>
<CAPTION>

                                                     December 31, 1996     December 31, 1995
                                                   Carrying    Estimated   Carrying    Estimated
                                                    amount    fair value    amount    fair value

               <S>                            <C>           <C>          <C>         <C>

               Loans, net                      $  41,999,358  41,951,522  36,872,325  36,844,465
                                                  ==========  ==========  ==========  ==========
</TABLE>


      (d)Deposit Liabilities

          Under SFAS 107,  the fair value of deposits  with no stated  maturity,
          such as  noninterest-bearing  demand  deposits,  NOW  accounts,  money
          market accounts,  and savings accounts, is equal to the amount payable
          on demand.  The fair value of  certificates  of deposit and individual
          retirement accounts with stated maturities are based on the discounted
          value of contractual  cash flows. The discount rate is estimated using
          the rates  offered for  deposits of similar  remaining  maturities  at
          December 31, 1996 and 1995.

<TABLE>
<CAPTION>

                                                           December 31, 1996           December 31, 1995
                                                    Carrying   Estimated   Carrying        Estimated
                                                     amount   fair value    amount        fair value

            <S>                                            <C>           <C>          <C>

Noninterest-bearing demand deposits ............   $5,184,539    5,184,539    4,253,543    4,253,543
NOW accounts ...................................    7,420,192    7,420,192    6,137,518    6,137,518
Money market accounts ..........................    3,077,437    3,077,437    2,096,008    2,096,008
Savings accounts ...............................    2,586,187    2,586,187    2,650,107    2,650,107
Certificates of deposit and individual
  retirement accounts:
   Maturing within six months or less ..........     21,178,449 21,220,261   15,782,674   15,899,333
   Maturing between seven and 12 months ........    5,699,912    5,722,173    7,202,910    7,599,616
   Maturing between one and three years ........    6,677,510    6,763,895    6,057,427    5,716,365
   Maturing beyond three years .................      640,634      649,374      702,502      723,540
                                                   ----------   ----------   ----------   ----------
                                               $     52,464,860 52,624,058   44,882,689   45,076,030
                                                   ==========   ==========   ==========   ==========
</TABLE>

      (e)Federal Home Loan Bank Advances

          The fair value of the  Company's  Federal  Home Loan Bank  advances is
          estimated based on the discounted value of contractual cash flows. The
          discount rate is estimated  using rates quoted for the same or similar
          issues.  At December 31, 1996, the fair value of the Federal Home Loan
          Bank  advances is $554,724  as  compared  to their  carrying  value of
          $548,250.

      (f)Commitments

            The fair  value of  commitments  to extend  credit is equal to their
            cost at December 31, 1996 and 1995. The Company generally does
            not offer lending commitments to its customers for long periods and,

                                       57
<PAGE>

                      EAGLE BANCORP, INC. AND SUBSIDIARY

                  Notes to Consolidated Financial Statements

         therefore,  the  underlying  rates  of  the  commitments  approximate
         market rates.

      (g)Limitations

          Fair value  estimates are made at a specific  point in time,  based on
          relevant  market  information  and  information  about  the  financial
          instrument.  These  estimates  do not  reflect any premium or discount
          that could  result from  offering  for sale at one time the  Company's
          entire  holdings  of a  particular  financial  instrument.  Because no
          market  exists for a significant  portion of the  Company's  financial
          instruments,  fair value  estimates  are based on judgments  regarding
          future expected loss  experience,  current economic  conditions,  risk
          characteristics of various financial  instruments,  and other factors.
          These estimates are subjective in nature and involve uncertainties and
          matters of significant  judgment and, therefore,  cannot be determined
          with precision.  Changes in assumptions could significantly affect the
          estimates.

          Fair value estimates are based on existing on- and  off-balance  sheet
          financial  instruments  without  attempting  to estimate  the value of
          anticipated  future  business and the value of assets and  liabilities
          that  are not  considered  financial  instruments.  Other  significant
          assets that are not considered financial  instruments include deferred
          income tax assets and premises  and  equipment.  In addition,  the tax
          ramifications  related to the realization of the unrealized  gains and
          losses on financial  instruments can have a significant effect on fair
          value estimates and have not been considered in any of the estimates.

(13)Supplementary Income Statement Information

     Components of other operating  expenses in excess of 1% of total income for
     each of the respective years are as follows:
<TABLE>
<CAPTION>

                                                    1996     1995     1994
                                                    ----     ----     ----

        <S>                                    <C>         <C>     <C>
        Stationery and supplies                  $ 84,717   74,317   66,051
        Data processing                           109,217   87,845   41,183
        Advertising and marketing                  52,366   51,605   51,301
        FDIC insurance premiums                    14,498   62,520  102,353
        Postage                                    56,267   51,066   44,049
        ATM transaction fees                       23,872   45,387   54,580
        Professional fees - legal and accounting   74,864   54,471   55,531
        Director fees                              53,300   55,400   23,375

</TABLE>



                                       58
<PAGE>



                      EAGLE BANCORP, INC. AND SUBSIDIARY

                  Notes to Consolidated Financial Statements


(14)Regulatory Matters

     The  Company  is  subject  to  various   regulatory   capital requirements
     administered  by the  federal  banking  agencies.  Failure to meet  minimum
     capital   requirements  can  initiate  certain  mandatory  -  and  possibly
     additional discretionary - actions by regulators that,if undertaken,  could
     have a direct material effect on the Company'sfinancial  statements.  Under
     capital  adequacy  guidelines  and  the  regulatory   framework  of  prompt
     corrective  action,  the Company must meet specific capital guidelines that
     involve  quantitative  measures of the Company's assets,  liabilities,  and
     certain  off-balance-sheet  items as calculated under regulatory accounting
     practices.  The  Company's  capital  amounts  and  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 Company to maintain minimum amounts and ratios
     (set forth in the table below) of total and Tier I capital (as defined) to
     average assets(as  defined).  Management  believes,  as of December  31,
     1996,  that the Company meets all capital adequacy requirements to which
     it is subject.

     As of December  31,  1996,  the most recent  notification  from the Federal
     Deposit  Insurance  Corporation  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 below.  There are no conditions or events since that notification
     that management believes have changed the Bank's capital category.















                                       59
<PAGE>



                      EAGLE BANCORP, INC. AND SUBSIDIARY

                  Notes to Consolidated Financial Statements


    The Bank's actual capital amounts and ratios are also presented in the table
    below:

<TABLE>
<CAPTION>

                                                                             Minimum to be well
                                                                             capitalized under
                                                        Minimum for capital  prompt corrective
                                            Actual      adequacy purposes    action provisions
                                         Amount  Ratio    Amount    Ratio     Amount     Ratio

     <S>                           <C>         <C>     <C>           <C>   <C>          <C>

As of December 31, 1996:
   Total capital - risk-based
     (to risk-weighted assets)     $ 6,561,517     14%   $3,652,080    8%   $4,565,100     10%
   Tier I capital - risk-based
     (to risk-weighted assets)       5,990,017     13%    1,826,040    4%    2,739,060      6%
   Tier I capital - leverage
     (to average assets)             5,990,017     10%    2,367,400    4%    2,959,250      5%

As of December 31, 1995:
   Total capital - risk-based
     (to risk-weighted assets)     $ 5,832,000     16%   $2,942,000    8%   $3,677,500     10%
   Tier I capital - risk-based
     (to risk-weighted assets)       5,374,000     15%    1,471,000    4%    2,206,500      6%
   Tier I capital - leverage
     (to average assets)             5,374,000     10%    2,085,000    4%    2,606,000      5%


</TABLE>

















                                       60
<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, 1996. 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
will become 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 1997 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 1997 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  1997 Annual
Shareholders Meeting is incorporated herein by reference.











                                       61
<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 1997 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
      11.1  Computation of Earnings per Common Share
      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  disagrees   with   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.








                                       62
<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:
    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, 1997.

 Signature                   Title         Signature           Title
                         President
                        (Principal                             Director
Andrew M. Williams III  Executive          Robert D. Coston
                        Officer) and
                        Director
                             Director                          Director
 Lemuel A. Deal                            Julian B. Hodges,
                                           Jr.
                             Director                          Director
 Robert E. Lane                            James B. Lanier,
                                           Jr.
                             Director                          Director
 Betty K. Minick                           Thad J. Morris,
                                           Jr.
                             Director                          Director and
 Paul E. Parker                            W. Dale Parker      Secretary


                             Director                          Director
 Erskine Russell                           Marcus B. Seligman

                        Director                               Director
 Solly Trapnell                            Paul A. Whitlock,
                                           Jr.

                                       63
<PAGE>

                        Principal
William Earl Green      Financial Officer
                        and Principal
                        Accounting Officer


ATL1-104085.4




































                                             64
<PAGE>