SECURITIES AND EXCHANGE COMMISSION
                        Washington, D.C. 20549

                              FORM 10-KSB

    X   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                           EXCHANGE ACT OF 1934

                 For the fiscal year ended December 31, 1998

           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                       SECURITIES EXCHANGE ACT OF 1934

                         Commission File No. 2-94292


                             FNB Banking Company
      -----------------------------------------------------------------
      (Exact name of Small Business Issuer as specified in its charter)

          Georgia                                        58-1479370
        ----------------------------------------------------------------
      (State or other jurisdiction                   (I.R.S. Employer
     of incorporation or organization)             Identification Number)

      318 South Hill Street, P.O. Drawer F, Griffin, Georgia       30224
    ----------------------------------------------------------------------
     (Address of principal executive offices)                    (Zip Code)

                  Issuer's telephone number:  (770) 227-2251

Securities registered pursuant to Section 12(b) of the Act:   None.

Securities registered pursuant to Section 12(g) of the Act:   None.

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

Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B not contained in this form, 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.  Not Applicable.
Registrant is not required to be registered under the Securities Exchange
Act of 1934.   /  /

State the Issuer's revenue for its most recent fiscal year:  $20,086,967.

State the aggregate market value of the voting stock held by non-affiliates:
as of March 22, 1999, 807,800 shares of common stock, $1.00 par value (the 
"Common Stock"), with an aggregate value of $21,271,800 (based upon
approximate market value of $40.00/share) (the last sale price known to the
Registrant for the Common Stock, for which there is no established trading
market).

State the number of shares outstanding of each of the issuer's classes
of Common Stock as of the latest practicable date:  As of  March 22,
1999, there were 807,800 shares outstanding of the Registrant's Common
Stock.<PAGE>

                                         INDEX

                                                                            PAGE

    PART I     . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1

    Item 1.   DESCRIPTION OF BUSINESS.   . . . . . . . . . . . . . . . . . .  1
    Item 2.   DESCRIPTION OF PROPERTY  . . . . . . . . . . . . . . . . . . .  8
    Item 3.   LEGAL PROCEEDINGS    . . . . . . . . . . . . . . . . . . . . .  9
    Item 4.   SUBMISSION OF MATTERS TO A VOTE OF
              SECURITY HOLDERS . . . . . . . . . . . . . . . . . . . . . . .  9
    
    PART II    . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  9
    
    Item 5.   MARKET FOR COMMON EQUITY AND RELATED
              STOCKHOLDER MATTERS  . . . . . . . . . . . . . . . . . . . . .  9
    Item 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR
              PLAN OF OPERATION  . . . . . . . . . . . . . . . . . . . . . . 10
    Item 7.   FINANCIAL STATEMENTS   . . . . . . . . . . . . . . . . . . . . 23
    Item 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
              ON ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . . . 23
    
    PART III   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
    
    Item 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
              CONTROL PERSONS; COMPLIANCE WITH SECTION
              16(a) OF THE EXCHANGE ACT. . . . . . . . . . . . . . . . . . . 24
    Item 10.  EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . 25
    Item 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
              OWNERS AND MANAGEMENT. . . . . . . . . . . . . . . . . . . . . 25
    Item 12.  CERTAIN RELATIONSHIPS AND RELATED 
              TRANSACTIONS . . . . . . . . . . . . .   . . . . . . . . . . . 27
    Item 13.  EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . 27





                                       -i-
<PAGE>
                                    PART I

                      ITEM 1.  DESCRIPTION OF BUSINESS

THE REGISTRANT

     FNB Banking Company, a Georgia corporation, (the "Company" or
"FNB") was organized on July 13, 1982.  Effective on March 1, 1983,
FNB Banking Company acquired all of the 200,000 issued and outstanding
shares of  Common Stock of First National Bank of Griffin (the
"Bank").  As a result of this transaction, the former shareholders of
the Bank became the shareholders of the Company, and the Bank became
the wholly-owned subsidiary of the Company.

     Certain statements included or incorporated by reference in this
Form 10-KSB are forward-looking (as such term is defined in the
Securities Exchange Act of 1934, as amended).  Such statements may
relate to the Company or the Bank's operations, performance, and
financial condition.  These statements are based upon a number of
assumptions and estimates that are inherently subject to significant
uncertainties, many of which are beyond the control of the Company and
the Bank.  Actual results may differ materially from those expressed
or implied by such forward-looking statements.

     The Company operates a full-service commercial banking business
based in Griffin, Georgia, providing such customary banking services
as checking and savings accounts, various types of time deposits, safe
deposit facilities, money transfers and individual retirement
accounts.  The Company also finances commercial transactions, makes
secured and unsecured loans, and provides other financial services to
its customers.  The Company performs corporate, pension and personal
trust services through the Bank.  Through its subsidiary, Griffin
Loans, Inc., a consumer finance company, the Bank engages in the
business of small making loans to individuals under the trade name
"First Credit."

SERVICES

     The Bank is community oriented, with an emphasis on retail
banking, and offers such customary banking services as consumer and
commercial checking accounts, NOW accounts, savings accounts,
certificates of deposit, lines of credit, Mastercard and Visa accounts
and money transfers.  The Bank finances commercial and consumer
transactions, makes secured and unsecured loans, and provides a
variety of other banking services.

DEPOSITS

     The Bank offers a full range of depository accounts and services
to both consumers and businesses.  At December 31, 1998 the Bank's
deposit base, totaling approximately $175 million, consisted of
approximately $29 million in non-interest bearing demand deposits (17%
of total deposits), approximately $39 million in interest bearing
demand deposits (including money market accounts) (22% of total
deposits), approximately $17 million in savings deposits (10% of total
deposits), approximately $60 million in time deposits in amounts less
than $100,000 (34% of total deposits), and approximately $30 million
in time deposits of $100,000 or more (17% of total deposits). 
Management of the Bank is of the opinion that its time deposits of
$100,000 or more are customer relationship-oriented and represent a
reasonably stable source of funds.


                                     -1-<PAGE>
LOANS

     The Bank makes both secured and unsecured loans to individuals,
firms and corporations, and both its consumer and commercial lending
operations include various types of credit for the Bank's customers. 
Secured loans include first and second real estate mortgage loans. 
The Bank also makes direct installment loans to consumers on both a
secured and unsecured basis.  At December 31, 1998, consumer, real
estate (including mortgage and construction loans) and commercial
loans represented approximately 20%, 33%, and 47%, respectively, of
the Bank's total loan portfolio.  On October 13, 1994, the Bank
purchased the assets of Griffin Loans, Inc., a consumer finance
company, and on January 17, 1996, Griffin Loans, Inc. purchased
substantially all of the assets of another consumer finance company,
Zebulon Finance Corporation.  Most loans made by the finance company
are for less than $1,000, but Griffin Loans, Inc. also makes real
estate loans for larger amounts.

LENDING POLICY

     The current lending strategy of the Bank is to make loans only to
persons who reside, work or own property in its primary trade area
which consists of Spalding and Henry County, Georgia.  On February 25,
1997, the Bank opened a branch in Henry County and began to serve that
market.  Unsecured loans normally are made only to persons who
maintain depository relationships with the Bank.  Secured loans are
made to persons who are well established and have net worth,
collateral and cash flow to support the loan.  Real estate loans are
normally made when such loans are secured by real property located in
the Bank's primary trade area.

     The Bank provides each lending officer with written guidelines
for lending activities.  Lending authority is delegated by the Board
of Directors of the Bank to loan officers, each of whom is limited in
the amount of secured and unsecured loans which they can make to a
single borrower or related group of borrowers.  All unsecured loans in
excess of $50,000 must have the approval of the loan committee. 

     Making loans to businesses to fund working capital is a
traditional function of commercial banks.  Such loans are expected to
be repaid out of the cash flow of the commercial entity, and the
ability of the borrower to service its debt is dependent upon the
success of the commercial enterprise.  It is the Bank's policy to
secure these loans with collateral.  Many of the Bank's commercial
loans are secured by real estate collateral because such collateral is
superior to other types of collateral available to small businesses. 
Loans secured by commercial real estate, however, particularly if
collateral dependent, are subject to certain inherent risks. 
Commercial real estate may be substantially illiquid, and commercial
real estate values are difficult to ascertain and subject to wide
fluctuation depending upon economic conditions.

     On March 19, 1993, inter-agency guidelines adopted by federal
bank regulators, including the Office of the Comptroller of the
Currency (the "OCC"), went into effect and mandated that  financial
institutions establish real estate lending policies and establish
certain minimum real estate loan-to-value standards.  The Bank has
adopted these federal standards as its minimum standards.  These
standards require maximum loan-to-value ratios for various types of
real estate loans as set forth below. However, the Bank may make
exceptions to the minimum standards, which exceptions must be accounted
for and tracked.


                                     -2-<PAGE>
                                                Loan-to-
                                               Value Limit
     Loan category                              (percent)
     -------------                             -----------

     Raw land                                       65
     Land development                               75
     Construction:
     Commercial, multifamily <F1> and
        other nonresidential                        80
     1- to 4-family residential                     85
     Improved Property                              85
     Owner-occupied 1- to 4-family and
     home equity                                   <F2>
_______________________
[FN]
<F1> Multifamily construction includes condominiums and cooperatives.
<F2> A loan-to-value limit has not been established for permanent
mortgage or home equity loans on owner-occupied, 1-to 4-family
residential property.  However, for any such loan with a loan-to-value
ratio that equals or exceeds 90 percent at origination, appropriate
credit enhancement in the form of either mortgage insurance or readily
marketable collateral is required.
</FN>

LOAN REVIEW AND NON-PERFORMING ASSETS

     The loan review officer of the Company reviews the Bank's loan
portfolio to determine deficiencies and corrective action to be taken. 
The results of the reviews by the loan review officer are presented to
the President of the Bank and the Executive Committee of the Bank.  On
at least an annual basis, reviews are conducted for all loans over
$50,000.  Past due loans are reviewed at least weekly by lending
officers and by the chief credit officer, and a summary report is
reviewed monthly by the Board of Directors.  The Board of Directors
reviews all new loans over $25,000 whether current or past due each
month.

ASSET/LIABILITY MANAGEMENT

     A committee composed of officers of the Bank is charged with
managing the Bank's assets and liabilities.  The committee attempts to
manage asset growth, liquidity, and capital to maximize income and
reduce interest rate risk.  The committee directs the  Bank's overall
acquisition and allocation of funds.  At monthly meetings, the
committee reviews and discusses the monthly asset and liability funds
budget in relation to the actual flow of funds, as well as peer group
comparisons; the ratio of the amount of rate-sensitive assets to the
amount of rate-sensitive liabilities; the ratio of the allowance for
loan losses to outstanding and non-performing loans; and other
variables, such as expected loan demand, investment opportunities,
core deposit growth within specified categories, regulatory changes,
monetary policy adjustments, and the overall state of the economy.

COMPETITION

     The banking business is highly competitive.  The Company's
primary market area consists of Spalding County, Georgia.  On February 25,
1997, the Company opened a branch in the town of Hampton, Henry County,
Georgia.  The Company competes in Spalding County with 5 other commercial
banks and no thrift institutions and in Henry County with 10 commercial
banks and 1 thrift institution.  The deposit range of its competitors in
Spalding County is $32 million to $130 million and $3 million to $308
million in Henry County.  The Bank is the largest bank in Spalding County
in terms of assets and deposit size, with assets and deposits at December 31,
1998 of approximately $203 million and $175 million, respectively, and the
third smallest in Henry County in terms of deposits located in that county.


                               -3-<PAGE>
     In addition to the Company's competitors in Spalding and Henry
County, the Company competes with commercial banks, thrifts, various
other financial institutions and brokerage houses located outside the
market area.  To a lesser extent, the Company also competes for loans
with insurance companies, regulated small loan companies, credit
unions, and certain governmental agencies.  In addition, the Company
and any non- banking subsidiaries it may establish in the future
compete and will compete with numerous other companies and financial
institutions engaged in similar lines of business, such as other bank
holding companies, leasing companies, and insurance companies.

YEAR 2000 COMPLIANCE

     The "year 2000 issue" arises from the widespread use of computer
programs that rely on two-digit codes to perform computations or
decision-making functions.  Many of these programs may fail due to an
inability to properly interpret date codes beginning January 1, 2000
("Y2K").  For example, such programs may misinterpret "00" as the year
1900 rather than 2000.  In addition, some equipment, being controlled
by microprocessor chips, may not deal appropriately with the year
"00". The Company is evaluating its computer systems to determine
which modifications and expenditures will be necessary to make its
systems compatible with Y2K requirements.  The Company believes that
their systems will be Y2K-compliant upon implementation of such
modifications.

     Management estimates that total costs incurred to date with
respect to Y2K compliance are $750,000.  The Company estimates that
the direct costs of such modifications will not be material to the
consolidated results of operations.  However, there can be no
assurance that all necessary modifications will be identified and
corrected or that unforeseen  difficulties or costs will not arise. 
In addition, there can be no assurance that the systems of other
companies on which the Company depends will be modified on a timely
basis, or that the failure by another company to properly modify its
systems will not negatively impact the systems or operations of the
Company.

EMPLOYEES

     As of December 31, 1998, the Company and the Bank had 113 full-
time and 20 part-time employees.  The Company is not a party to any
collective bargaining agreement.  Management believes that the Company
has satisfactory relations with its employees.

SUPERVISION AND REGULATION

     GENERAL.  The Company is a registered bank holding company
subject to regulation by the Board of Governors of the Federal Reserve
(the "Federal Reserve") under the Bank Holding Company Act of 1956, as
amended (the "Act").  The Company is required to file financial
information with the Federal Reserve periodically and is subject to
periodic examination by the Federal Reserve. 

     The Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before (i) it may acquire direct or
indirect ownership or control of more than 5% of the voting shares of
any bank that it does not already control; (ii) it or any of its
subsidiaries, other than a bank, may acquire all or substantially all
of the assets of a bank; and (iii) it may merge or consolidate with
any other bank holding company.  In addition, a bank holding company
is generally prohibited from engaging in, or acquiring, direct or
indirect control of the voting shares of any company engaged in non-
banking activities.  This prohibition does not apply to activities
found by the Federal Reserve, by order or regulation, to be so closely
related to banking or managing or controlling banks as to be a proper
incident thereto.  Some of the activities that the Federal Reserve has
determined by regulation or order to be closely related to banking
are:  making or servicing loans and certain types of leases;
performing certain data processing services; acting as fiduciary or
investment or financial advisor; providing discount brokerage
services; underwriting bank eligible securities; underwriting debt and
equity securities on a limited basis through separately capitalized
subsidiaries; and making investments in corporations or projects
designed primarily to promote community welfare.


                                     -4-
<PAGE>
     The laws of Georgia require annual registration with the
Department of Banking and Finance (the "DBF") by all Georgia bank
holding companies.  Such registration includes information with
respect to the financial condition, operations, management and
intercompany relationships of a bank holding company and its
subsidiaries and related matters.  The DBF may also require such other
information as is necessary to keep itself informed as to whether the
provisions of Georgia law and the regulations and orders issued
thereunder by the DBF have been complied with. The DBF may make
examinations of each bank holding company and each bank subsidiary
thereof, other than a national bank.

     The Bank is a national bank chartered under the National Bank Act
and is subject to the supervision of, and is regularly examined by,
the OCC.  The OCC regulates or monitors all areas of the Bank's
operations and activities, including reserves, loans, mergers,
issuance of securities, payments of dividends, interest rates and
establishment of branches.  Interest and certain other charges
collected or contracted for by the Bank are also subject to state
usury laws or certain federal laws concerning interest rates.

     The Bank is insured by the Federal Deposit Insurance Corporation
(the "FDIC").  The major functions of the FDIC with respect to insured
banks include paying depositors to the extent provided by law if an
insured bank is closed without adequate provisions having been made to
pay claims of depositors, acting as a receiver of state banks placed
in receivership when appointed receiver by state authorities and
preventing the development or continuance of unsound and unsafe
banking practices.

     The Company is an "affiliate" of the Bank under the Federal
Reserve Act, which imposes certain restrictions on (i) loans by the
Bank to the Company, (ii) investments in the stock or securities of
the Company by the Bank, (iii) the Bank's taking the stock or
securities of an "affiliate" as collateral for loans by the Bank to a
borrower and (iv) the purchase of assets from the Company by the Bank. 
Further, a bank holding company and its subsidiaries are prohibited
from engaging in certain tie-in arrangements in connection with any
extension of credit, lease or sale of property or furnishing of
services.

     PAYMENT OF DIVIDENDS.  The Company is a legal entity separate and
distinct from the Bank.  Most of the revenues of the Company result
from dividends paid to it by the Bank.  There are statutory and
regulatory requirements applicable to the payment of dividends by the
Bank, as well as by the Company to its shareholders.

     As a national bank, the Bank is required by federal law to obtain
the prior approval of the OCC for payments of dividends if the total
of all dividends declared by the Board of Directors in any year will
exceed (i) the total of the Bank's net profits (as defined and
interpreted by regulation) for that year, plus (ii) the Bank's
retained net profits (as defined and interpreted by regulation) of the
preceding two years, less any required transfers to surplus.

     The payment of dividends by the Company and the Bank may also be
affected or limited by other factors, such as the requirement to
maintain adequate capital above regulatory guidelines.  In addition,
if, in the opinion of the applicable regulatory authority, a bank
under its jurisdiction is engaged in or is about to engage in an
unsafe or unsound practice (which, depending upon the financial
condition of a bank, could include the payment of dividends), such
authority may require, after notice and hearing, that such bank cease
and desist from such practice.  The FDIC and the OCC have issued
policy statements providing that insured banks should generally only
pay dividends out of current operating earnings.  At December 31,
1998, the Bank's retained earnings from which dividends could be paid
totaled approximately $21,752,798.  For 1998, the Company's cash
dividend payout to stockholders was 35% of net income.

     MONETARY POLICY.  The results of operations of the Bank, and
therefore the Company, are affected by credit policies of monetary
authorities, particularly the Federal Reserve.  The instruments of
monetary policy employed by the Federal Reserve include open market
operations in U.S. government securities, changes in the discount rate
on bank borrowings and changes in reserve requirements against bank
deposits.  In view of changing conditions in the national economy and
in the money markets, as well as the effect of actions by monetary and
fiscal authorities, including the Federal Reserve, no prediction can
be made as to possible future changes in interest rates, deposit
levels, loan demand or the business and earnings of the Bank.


                                     -5-
<PAGE>
     CAPITAL ADEQUACY.  The Federal Reserve and the OCC have
implemented substantially identical risk-based rules for assessing
bank and bank holding company capital adequacy.  These regulations
establish minimum capital standards in relation to assets and off-
balance sheet exposures as adjusted for credit risk.  Banks and bank
holding companies are required to have (1) a minimum level of total
capital (as defined) to risk-weighted assets of eight percent (8%);
(2) a minimum  Tier One Capital (as defined) to risk-weighted assets
of four percent (4%); and (3) a Tier One Capital to average assets of
four percent (4%).  In addition, the Federal Reserve and the OCC have
established a minimum three  percent (3%) leverage ratio of Tier One
Capital to total assets for the most highly-rated banks and bank
holding companies.  "Tier One Capital" generally consists of common
equity not including unrecognized gains and losses on securities,
minority interests in equity accounts of consolidated subsidiaries,
and certain perpetual preferred stock less certain intangibles.  The
Federal Reserve and the OCC will require a bank holding company and a
bank, respectively, to maintain a leverage ratio greater than three
percent (3%) if either is experiencing or anticipating significant
growth or is operating with less than well-diversified risks in the
opinion of the Federal Reserve.  The Federal Reserve and the OCC use
the  leverage ratio in tandem with the risk-based ratio to assess the 
capital adequacy of banks and bank holding companies.  The FDIC, the
OCC and the Federal Reserve amended effective January 1, 1997 the
capital adequacy standards to provide for the consideration of
interest rate risk in the overall determination of a bank's capital
ratio, requiring banks with greater interest rate risk to maintain
adequate capital for the risk.  The revised standards have not had and
are not expected to have a significant effect on the Company's capital
requirements.

     In addition, effective December 19, 1992, a new Section 38 to the
Federal Deposit Insurance Act implemented the prompt corrective action
provisions that Congress enacted as a part of the Federal Deposit
Insurance Corporation Improvement Act of 1991 (the "1991 Act").  The
"prompt corrective action" provisions set forth five regulatory zones
in which all banks are placed largely based on their capital positions.
Regulators are permitted to take increasingly harsh action as a bank's
financial condition declines.  Regulators are also empowered to place
in receivership or require the sale of a bank to another depository
institution when a bank's capital leverage ratio reaches two percent.
Better capitalized institutions are generally subject to less onerous
regulation and supervision than banks with lesser amounts of capital.

     The OCC has adopted regulations implementing the prompt corrective
action provisions of the 1991 Act, which place financial institutions
in the following five categories based upon capitalization ratios: (1)
a "well capitalized" institution has a total risk-based capital ratio
of at least 10%, a Tier One risk-based ratio of at least 6% and a
leverage ratio of at least 5%; (2) an "adequately capitalized" institution
has a total risk- based capital ratio of at least 8%, a Tier One risk-
based ratio of at least 4% and a leverage ratio of at least 4%; (3) an 
"undercapitalized" institution has a total risk-based capital ratio of
under 8%, a Tier One risk-based ratio of under 4% or a leverage ratio
of under 4%; (4) a "significantly undercapitalized" institution has a
total risk-based capital ratio of under 6%, a Tier One risk-based ratio
of under 3% or a leverage ratio of under 3%; and (5) a "critically
undercapitalized" institution has a leverage ratio of 2% or less.
Institutions in any of the three undercapitalized categories would be
prohibited from declaring dividends or making capital distributions.
The OCC regulations also establish procedures for "downgrading" an
institution to a lower capital category based on supervisory factors
other than capital.  Under the OCC's regulations, the Bank was a "well
capitalized" institution at December 31, 1998.

                                     -6-<PAGE>
CAPITAL ADEQUACY

Set forth below are pertinent capital ratios for FNB and the Bank as
of December 31, 1998.


MINIMUM CAPITAL REQUIREMENTS                FNB              BANK
----------------------------                ---              ----

Tier 1 Capital to Risk-based                15.4%            14.0% <F1>
   Assets:  4.00%
Total Capital to Risk-based                 16.6%            15.1% <F2>
   Assets:  8.00%

Leverage Ratio (Tier 1 Capital              11.4%            11.1% <F3>
   to Average Assets): 4.00%
______________________
[FN]
<F1> Minimum for "Well Capitalized" Banks = 6%
<F2> Minimum for "Well Capitalized" Banks = 10%
<F3> Minimum for "Well Capitalized" Banks = 5%
[FN]


     In 1996, the Georgia legislature adopted a bill (the "Georgia
Intrastate Bill") to permit, effective July 1, 1996, any bank located
in Georgia or group of affiliated banks under one holding company to
establish new or additional branch banks in up to three additional
counties anywhere within the State of Georgia where a bank does not
currently have operations.  After July 1, 1998, all restrictions on
state-wide branching was removed. Prior to adoption of the Georgia
Intrastate Bill, Georgia only permitted branching of banks within a
county, via merger or consolidation with an existing bank or in
certain other limited circumstances.

     The Bank paid no premium for deposit insurance in 1998 and FICO
bond assessments of $19,131.  It is not estimated that the Bank will
pay any premium for deposit insurance in 1999 and will pay FICO bond
assessments of $19,397.


ITEM 2.  DESCRIPTION OF PROPERTY

     The Company's main office is located at 318 South Hill Street,
Griffin, Georgia, 30224, and its telephone number at that office is
(770) 227-2251.

     The Company distributes its services through four full-service
banking offices and one limited-service banking office as follows:

          MAIN OFFICE
          -----------

          318 South Hill Street
          Griffin, Georgia 30224

          NORTHSIDE BANK BRANCH
          ---------------------

          1475 West McIntosh Road
          Griffin, Georgia  30223


                                     -8-
<PAGE>
          SOUTHSIDE BANK BRANCH
          ---------------------

          1103 Zebulon Road
          Griffin, Georgia  30224

          KROGER GRIFFIN BRANCH
          LIMITED SERVICE OFFICE
          ----------------------

          100 Spalding Village
          Griffin, Georgia  30223

          HENRY COUNTY BRANCH
          -------------------

          996 Bear Creek Boulevard
          Hampton, Georgia 30228

     The executive offices of the Company and the main office of the
Bank are located in a 33,000 square-foot facility, 318 South Hill
Street, Griffin, Georgia.  The Company's main office is subject to a
mortgage in the principal amount of $444,446 at December 31, 1998. 
None of the other properties of the Company are subject to
encumbrances.  The Company owns a building adjacent to its main office
in Griffin which is used for storage of bulk supplies and to house the
offices of Griffin Loans, Inc.  The Company or the Bank owns these
properties, except the Kroger Griffin Branch Limited Office, which is
leased.  The Bank owns the Henry County Branch property.  During 1990,
the Bank acquired property at 1453 West McIntosh Road, adjacent to its
Northside Branch.  The property was acquired for possible expansion
purposes.

ITEM 3.  LEGAL PROCEEDINGS

     The Company is not aware of any material pending legal
proceedings to which the Company or the Bank is a party or to which
any of their property is subject.

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

     No matters were submitted to a vote of security holders of the
Company during the fourth quarter of its fiscal year.


                              PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     STOCK.  There is no established public trading market for the
Common Stock.  As of March 22, 1999, the Company had 422 shareholders
of record.

     DIVIDENDS.  In 1997 and 1998, the Company declared cash dividends
of $888,580 ($1.10 per share) and $1,009,750 ($1.25 per share),
respectively.  The Company intends to continue paying cash dividends
on a semi-annual basis.  However, the amount and frequency of
dividends will be determined by the Company's Board of Directors in
light of earnings, capital requirements and the financial condition of
the Company, and no assurances can be given that dividends will be
paid in the future.  Information on restrictions on the amount of
dividends payable by the Company appears in Note 10 to the Company's
consolidated financial statements set forth in Item 7 hereof.

                                     -9-<PAGE>
ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

     This discussion contains forward-looking statements under the
private Securities Litigation Reform Act of 1995 that involve risks
and uncertainties.  Although the Company believes that the assumptions
underlying the forward-looking statements contained in the discussion
are reasonable, any of the assumptions could be inaccurate, and
therefore, no assurance can be made that any of the forward-looking
statements included in this discussion will be accurate.  Factors that
could cause actual results to differ from results discussed in
forward-looking statements include, but are not limited to:  economic
conditions (both generally and in the markets where the Company
operates); competition from other providers of financial services
offered by the Company; government regulation and legislation; changes
in interest rates; material unforeseen changes in the financial
stability and liquidity of the Company's credit customers; material
unforeseen complications related to the Year 2000 issues for the
Company, its suppliers, customers, and governmental agencies, all of
which are difficult to predict and which may be beyond the control of
the Company.  The Company undertakes no obligation to revise forward-
looking statements to reflect events or changes after the date of this
discussion or to reflect the occurrence of unanticipated events.

GENERAL 

     The Company is a one bank holding company registered under the Bank
Holding Company Act of 1956 and was incorporated under the laws of the
state of Georgia in 1983.  All of the Company's activities are currently
conducted by its wholly owned subsidiary, First National Bank of Griffin,
Georgia (the "Bank").  The Bank owns a consumer finance company, Griffin
Loans, Inc., which engages in the business of making small loans to
individuals.  Griffin Loans, Inc. operates under the trade name of First
Credit in Griffin and Zebulon, Georgia.

     The Company's subsidiary bank was most recently examined by its
primary regulatory authority in January of 1998. There were no
recommendations by the regulatory authority that, in management's
opinion, will have material effects on the Company's liquidity,
capital resources, or operations.

     The following discussion is intended to provide insight into the
financial condition and results of operations of the Company and
should be read in conjunction with the consolidated financial
statements and accompanying notes.

STATEMENTS OF EARNINGS REVIEW

     Net earnings were $2.92 million in 1998, an increase of 3.3% from
the $2.83 million earned in 1997.  Net earnings per share were $3.62 for
1998, compared with $3.50 reported in 1997, an increase of 3.4%.
Return on average assets and return on average stockholders equity
for 1998 were 1.49% and 12.90%, respectively, compared with 1.56% and
14.75%, respectively, for 1997.  Net earnings were $2.83 million in
1997, an increase of  3.5% from the $2.73 million earned by the
Company in 1996.  Net earnings per share were $3.50 in 1997, compared
with the $3.38 reported in 1996, an increase of 3.6%.  Return on
average assets and return on average stockholders equity for 1996
were 1.72% and 15.87%, respectively.

    Net interest income increased by $669 thousand or 6.3% in 1998. 
Net interest income at December 31, 1998, was $11.35 million compared
to $10.68 million in 1997. Net yield (tax equivalent) on interest
earning assets (6.58% in 1998 and 6.57% in 1997) increased slightly in
1998 over 1997.  Net interest income increased by $1.28 million or 14%
in 1997. Net interest income at December 31, 1997, was $10.68 million
compared to $9.40 million in 1996. Net yield (tax equivalent) on
interest earning assets (6.57% in 1997 and 6.48% in 1996) increased
approximately 1.4% in 1997 over 1996.

     The Company's operational results primarily depend on the
earnings of the Bank. Its earnings depend to a large degree on net
interest income, which is the difference between the interest income
received from its investments (such as loans, investment securities,
federal funds sold, etc.) and the interest expense which is paid on
deposits and other liabilities.


                                     -10-
<PAGE>
     The banking industry uses two key ratios to measure relative
profitability of net interest income. The net interest rate spread
measures the difference between the average yield on interest earning
assets and the average rate paid on interest bearing liabilities. The
interest rate spread eliminates the impact of non-interest bearing
deposits and gives a direct perspective on the effect of market
interest rate movements. The net interest margin is defined as net
interest income as a percent of average total interest earning assets
and takes into account the positive impact of investing noninterest-
bearing deposits.

     The net interest spread was 5.65% in 1998, 5.68% in 1997 and
5.51% in 1996, while the net interest margin (on a tax-equivalent
basis) was 6.58% in 1998, 6.57% in 1997 and 6.48% in 1996.  The
increase in the margin and the spread are primarily due to an increase
in loan pricing, which produced a 40 basis point increase in the
average yield from 1997 to 1998. The average cost of interest bearing
liabilities for 1998 was 4.58%, an increase of 15 basis points from
1997. 

     The following table shows, for the past three years, the
relationship between interest income and interest expense and the
average balances of interest earning assets and interest bearing
liabilities. 


                                     -11-
<PAGE>
TABLE 1

AVERAGE CONSOLIDATED BALANCE SHEETS AND NET INTEREST ANALYSIS
<TABLE>
<CAPTION>
                                                               For the Years Ended December 31,
                                                                        (in thousands)
                                                  1998                          1997                            1996
                                    --------------------------------------------------------------------------------------------
                                      Average              Yield/    Average              Yield/   Average                Yield/
                                      Balance   Interest    Rate     Balance  Interest     Rate    Balance    Interest     Rate
                                    --------------------------------------------------------------------------------------------
<S>                                  <C>        <C>       <C>        <C>      <C>         <C>      <C>        <C>         <C>
Assets:
Interest earnings assets:
  Loans (including loan fees)        $ 142,404  15,704    11.03%     140,193   14,904     10.63%   120,356     12,543     10.42%
  Investment securities:
    Taxable                             20,647   1,352     6.55%      15,101    1,041      6.89%    15,957      1,101      6.90%
    Tax exempt                           6,366     542     8.51%       6,919      600      8.67%     7,822        692      8.85%
  Federal funds sold                     5,834     328     5.62%       3,532      207      5.86%     4,505        258      5.73%
                                       -------  ------               -------  -------              -------    -------

Total interest earning assets          175,251  17,926    10.23%     165,745   16,752     10.11%   148,640     14,594      9.82%
Other non-interest earnings assets      20,604                        15,686                        10,656
                                        ------                       -------                       -------

      Total assets                   $ 195,855                       181,431                       159,296
                                       =======                       =======                       =======

Liabilities and stockholders' equity:
Interest-bearing liabilities:
  Deposits:
  Interest-bearing demand
    and savings                      $  55,789   1,362     2.44%      53,653    1,361      2.54%    50,517      1,299      2.57%
  Time                                  81,946   4,903     5.98%      72,852    4,118      5.65%    60,438      3,441      5.69%
  FHLB advances                          1,344      89     6.62%       5,153      332      6.44%     3,108        145      4.67%
  Long-term debt                           527      38     7.21%         688       50      7.27%       840         62      7.38%
  Federal funds purchased and
    securities sold under repurchase
    agreements                              67       3     4.48%         145        9      6.21%       212         13      6.13%
                                       -------  ------               -------  -------              -------    -------
    Total interest-bearing liabilities 139,673   6,395     4.58%     132,491    5,870      4.43%   115,115      4,960      4.31%
                                       -------  ------               -------  -------              -------     ------
Non-interest bearing deposits           28,727                        26,474                        24,152
Other liabilities                        4,815                         3,298                         2,825
Stockholders' equity                    22,640                        19,168                        17,204
                                       -------                       -------                       -------
      Total liabilities and
         stockholders' equity        $ 195,855                       181,431                       159,296
                                       =======                       =======                       =======
Excess of interest-earning assets
  over interest-bearing liabilities  $  35,578                        33,254                        33,525
                                       =======                       =======                       =======
Ratio of interest-earning assets to
  interest-bearing liabilities          125.55%                       125.10%                       129.12%
Net interest income                             11,531                         10,882                           9,634
Net interest spread                                        5.65%                           5.68%                           5.51%
Net interest yield on interest
  earning assets                                           6.58%                           6.57%                           6.48%
</TABLE>

Non-accrual loans and the interest income that was recorded on these
loans, if any, are included in the yield calculation for loans in all
periods reported.

Tax exempt interest income is calculated on a tax equivalent basis.
                                     -12-<PAGE>
     The following table shows the relative impact on net interest income
     of changes in the average outstanding balances (volume) of interest
     earning assets and interest bearing liabilities and the rates earned
     and paid by the Company on such assets and liabilities.  Variances
     resulting from a combination of changes in rate and volume are
     allocated in proportion to the absolute dollar amounts of the change
     in each category.

TABLE 2
CHANGES IN INTEREST INCOME AND EXPENSE ON A TAX EQUIVALENT BASIS
(in thousands)
<TABLE>
<CAPTION>
                                                                Increase (decrease) due to changes in:
                                                                -------------------------------------
                                                            1998 over 1997                   1997 over 1996
                                                            --------------                   --------------
                                                       Volume     Rate   Total          Volume      Rate    Total
                                                       ------     ----   -----          ------      ----    -----
<S>                                                <C>            <C>   <C>             <C>          <C>    <C>
Interest income on:
  Loans (including loan fees)                      $    236        564     800          2,104        257    2,361
  Investment securities:
    Taxable                                             359        (48)     311           (58)        (2)     (60)
    Tax exempt                                          (47)       (11)    (58)           (78)       (14)     (92)
  Federal funds sold                                    129         (8)     121           (57)         6      (51)
                                                        ---        ---   -----          -----        ---    -----

       Total interest earning assets                    677        497   1,174          1,911        247    2,158
                                                        ---        ---   -----          -----        ---    -----
Interest expense on:
  Deposits:
    Interest-bearing demand and savings                  90        (89)      1             76        (14)      62
    Time                                                535        250     785            701        (24)     677
  FHLB advances                                        (253)        10    (243)           119         68      187
  Long-term debt                                        (12)         -     (12)           (11)        (1)     (12)
  Federal funds purchased                                (4)        (2)     (6)            (4)         -       (4)
                                                        ---        ---     ---          -----        ---    -----

       Total interest-bearing liabilities               356        169     525            881         29      910
                                                        ---        ---     ---          -----        ---    -----

Increase (decrease) in net interest income         $    321        328     649          1,030        218    1,248
                                                        ===        ===     ===          =====        ===    =====
</TABLE>

Other operating income in 1998 of $2.35 million increased over 1997 by
$87 thousand or 3.8%. The increase is primarily attributable to an
increase in gains on mortgage loans sold during 1998 of $79 thousand
over 1997.  Other operating expenses increased $831 thousands (10%) in
1998 over 1997 principally due to the increase in employee costs of
approximately $346 thousand related to an increase in the number of
employees necessary to handle the asset growth. Also, the increase in
other operating expenses relates to an increase of $88 thousand in
equipment and software maintenance and security costs associated with
a new branch in Henry County, Georgia and a special contribution to
Habitat for Humanity of $40 thousand. Income taxes expressed as a
percentage of earnings before income taxes remained relatively stable
at  34% in 1997 and 33% in 1998. 

Other operating income in 1997 of $2.26 million increased over 1996 by
$29 thousand or 1.3%. Other operating expenses increased $704 thousand
(9.7 %) in 1997 over 1996 principally due to the increase in personnel
and occupancy expenses associated with opening of the Henry County
branch. Income taxes expressed as a percentage of earnings before
income taxes increased from 32% in 1996 to 34% in 1997. The increase
relates to the decrease in tax-exempt income as a percentage of
earnings before income taxes.

BALANCE SHEETS REVIEW

During 1998, average total assets increased $14.42 million (8.0%) over
1997. Average deposits increased $13.48 million (8.8%) in 1998 over
1997. Average loans increased $2.21 million (1.6%) in 1998 over 1997.
During 1997, average total assets increased $22.14 million (13.9%)
over 1996. Average deposits increased $17.87 million (13.2%) in 1997
over 1996. Average loans increased $19.84 million (16.5%) in 1997 over
1996.

Total assets at December 31, 1998, were $202.78 million, representing
a $9.96 million (5.2%) increase from December 1, 1997.  Total deposits
increased $6.83 million (4.1%) from 1997 to 1998 while total gross


                                     -13-
<PAGE>
loans increased $8.14 million (5.8%) during 1998. Time deposits
increased $6.18 million from 1997 to 1998 while all other deposit
accounts increased $648 thousand in 1998. As the local economy remains
strong, loan demand increased and the Bank showed increases in each
lending category at year end except real estate. These loan increases
were funded principally with increases in deposit accounts. 

Total assets at December 31, 1997, were $192.82 million, representing
a $22.04 million (12.9%) increase from December 31, 1996. Total
deposits increased $21.91 million (15.0%) from 1996 to 1997 while
total gross loans increased $12.76 million (10.0%) during 1997. Time
deposits increased $16.21 millions from 1996 to 1997 while all other
deposit accounts increased $5.71 million in 1997. 

INVESTMENTS

The investment portfolio consists of debt securities and to a lesser
extent equity securities, which provide the Company with a source of
liquidity and a long-term, relatively stable source of income.
Additionally, the investment portfolio provides a balance to interest
rate and credit risk in other categories of the balance sheet while
providing a vehicle for the investment of available funds, furnishing
liquidity, and supplying securities to pledge as required collateral
for certain deposits.

TABLE 3
INVESTMENT PORTFOLIO

The following table shows the carrying value of the Company's securities,
by security type, as of December 31, 1998, 1997 and 1996: 

<TABLE>
<CAPTION>
                                                              (in thousands)

HELD TO MATURITY                                     1998           1997           1996
                                                     ----           ----           ----
<S>                                               <C>
United States treasuries and agencies             $     500          1,488          2,779
State, county and municipal                           6,019          6,281          7,344
Mortgage-backed securities                              560          1,624          2,074
                                                     ------         ------         ------

      Totals                                      $   7,079          9,393         12,197
                                                     ======         ======         ======

Available for Sale

United States treasuries and agencies             $  10,583          3,156          4,530
State, county and municipal                             800          7,865          5,481
Mortgage-backed securities                            8,182              -              -
Equity securities                                     2,006          1,660              -
                                                     ------         ------         ------

                                                  $  21,571         12,681         10,011
                                                     ======         ======         ======

Other investments                                 $     826            826          1,155
                                                     ======         ======         ======
</TABLE>

Other investments include Federal Reserve Bank stock and Federal Home
Loan Bank stock and for 1996, common stock in two companies for which
no readily determinable market value existed.  These securities are
not included in the maturity analysis above.  During 1997, certain
equity securities held by the Company which had previously been
included in other investments were transferred to available for sale
as these began being traded on a national exchange.  The transfer of
these securities to available for sale resulted in an increase in
stockholders  equity of $703 thousand after consideration for the tax
effects of the unrealized gain on these securities. 

The following table presents the expected maturity of the total
securities by maturity date and average yields based on amortized cost
(for all obligations on a fully taxable basis, assuming a 34% tax
rate) at December 31, 1998. The composition and maturity/repricing
distribution of the securities portfolio is subject to change
depending on rate sensitivity, capital, and liquidity needs.



                                     -14-
<PAGE>
TABLE 4
EXPECTED MATURITY OF SECURITIES
(in thousands)
<TABLE>
<CAPTION>
                                 United States                                            Weighted
Maturities at                   Treasuries and         Mortgage-        State, County     Average
December 31, 1998                  Agencies        Backed Securities    and Municipal      Yields
-----------------                  --------        -----------------    -------------      ------
<S>                              <C>                    <C>               <C>               <C>
Within 1 year                    $       -                455                769            8.69%

After 1 through 5 years              5,523              1,004              2,094            6.91%

After 5 through 10 years             5,560              5,754              3,156            7.11%

After 10 years                           -              1,529                800            6.05%
                                    ------              -----              -----

          Totals                 $  11,083              8,742              6,819
                                    ======              =====              =====
</TABLE>

Mortgage backed securities are included in the maturities categories
in which they are anticipated to be repaid based on scheduled
maturities and yields on tax exempt securities are calculated on a tax
equivalent basis.


TABLE 5
LOAN PORTFOLIO

The following table presents loans by type at the end of each of the
last five years.
<TABLE>
<CAPTION>
                                                    December 31,
                                                    ------------
                                        1998      1997     1996      1995     1994
                                        ----      ----     ----      ----     ----
                                                    (in thousands)
<S>                                 <C>         <C>      <C>       <C>       <C>
Commercial, financial
  and agricultural                  $  69,821    63,182   52,437    35,761    36,950
Real estate - construction              5,005     5,634    3,604     2,334     2,136
Real estate - mortgage                 44,170    45,794   44,688    45,273    40,692
Installment loans to
 individuals                           29,937    26,179   27,302    24,887    21,507
                                      -------   -------  -------   -------   -------
                                      148,933   140,789  128,031   108,255   101,285

Less:  Unearned interest and fees        (361)     (304)    (330)     (287)     (180)
       Allowance for loan losses       (1,708)   (2,013)  (1,422)   (1,273)   (1,245)
                                      -------   -------  -------   -------   -------
         Loans, net                 $ 146,864   138,472  126,279   106,695    99,860
                                      =======   =======  =======   =======   =======
</TABLE>

The following table sets forth the maturity distribution of real
estate construction and commercial, financial and agricultural loans,
including the interest rate sensitivity for loans maturing in greater
than one year, as of December 31, 1998. (in thousands)

                                     -15-
<PAGE>
TABLE 6
LOAN PORTFOLIO MATURITY

<TABLE>
<CAPTION>
                                                      Commercial,             Real
                                                     Financial and           Estate
      Maturity                                        Agricultural         Construction         Total
      --------                                        ------------         ------------         -----
  <S>                                                 <C>                    <C>               <C>
      Within 1 year                                   $  26,056              4,368             30,424
      1 to 5 years                                       41,596                637             42,233
      After 5 years                                       2,169                  -              2,169
                                                         ------              -----             ------

           Totals                                     $  69,821              5,005             74,826
                                                         ======              =====             ======

                                                         Fixed               Variable
                                                        Interest             Interest
                                                         Rates                Rates             Total
                                                        --------             --------           -----

  Commercial, financial and agricultural:
      1 to 5 years                                    $  36,959              4,637              41,596
      After 5 years                                          68              2,101               2,169
                                                         ------              -----              ------

                                                      $  37,027              6,738              43,765
                                                         ======              =====              ======
  Real estate - construction
      1 to 5 years                                    $     218                419                 637
                                                            ===                ===                 ===
</TABLE>

The provision for loan losses in 1998 was $530 thousand compared to $718
thousand in 1997.  The significant decrease in the provision for loan losses
was primarily attributable to the decline in the rate of loan growth during
1998 compared to 1997 and due to the significant decrease in nonperforming
assets during 1998.  The provision for loan losses continues to reflect
management's estimate of potential loan losses inherent in the portfolio and
the creation of an allowance for loan losses adequate to absorb such losses.
The allowance for loan losses represented approximately 1.2% and 1.4% of
total loans outstanding at December 31, 1998 and 1997, respectively. Net
charge-offs were $835 thousand and $128 thousand during 1998 and 1997,
respectively.  Management believes that these levels of allowance are
appropriate based upon the Company's loan portfolio and the current
economic conditions.

The provision for loan losses in 1997 was $718 thousand compared to $365
thousand in 1996. The significant increase in the provision for loan losses
was primarily attributable to the increase in the loan portfolio and an
increase in non-accrual loans as compared to 1996.  The allowance for loan
losses represented approximately 1.4% and 1.1% of total loans outstanding at
December 31, 1997 and 1996, respectively.  Net charge-offs were $128 thousand
and $216 thousand during 1997 and 1996, respectively.

The Company has a dedicated loan review function.  All loans $50 thousand or
more are reviewed annually and placed into various loan grading categories
which assist in developing lists of potential problem loans.  These loans are
constantly monitored by the loan review function to ensure early
identification of repayment problems so that adequate allowances can be made
through the provision for loan losses.  The formal allowance for loss
adequacy test is performed the month end before each calendar quarter end.
Specific amounts of loss are estimated on problem loans and historical loss
percentages are applied to the balance of the portfolio using certain
portfolio stratifications. Additionally, the evaluation takes into
consideration such factors as changes in the nature and volume of the loan
portfolio, current economic conditions, regulatory examination results, and
the existence of loan concentrations.

Management's judgement in determining the adequacy of the allowance is based
on evaluations of the collectibility of loans.  These evaluations take into
consideration such factors as changes in the nature and volume of the loan
portfolio, current economic conditions that may affect the borrower's
ability to pay, overall portfolio quality, and review of specific problem


                                     -16-
<PAGE>
loans.  In determining the adequacy of the allowance for loan losses,
management uses a loan grading system that rates loans in six different
categories.  Grades four though six are assigned allocations of loss based
on management's estimate of potential loss which is generally based on
discounted, collateral deficiencies.  Loans graded one through three are
stratified by type and allocated loss ranges based on historical loss
experience for the strata.  The combination of these results are compared
quarterly to the recorded allowance for loan losses and material differences
are adjusted by increasing or decreasing the provision for loan losses. 
Management uses a devoted internal loan reviewer who is independent of the
lending function to challenge and corroborate the loan grading system and
provide additional analysis in determining the adequacy of the allowance for
loan losses and the future provisions for estimated loan losses.

Management believes that the allowance for 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.  In addition, regulators, as an integral part of their
examination process, periodically review the Company's allowance for loan
losses.  Such regulators may require the Company to recognize additions to
the allowance based on their judgements of information available to them at
the time of their examination.

The Company does not allocate the allowance for loan losses to various loan
categories.  The entire allowance is available to absorb losses from any and
all loans.  Management anticipates gross charge-offs for 1999 to approximate
$750-thousand, of which $450-thousand would be associated with loans
classified as commercial and the balance with consumer type loans. 
Anticipated charge-offs are an estimate based on historical experience and
other judgmental factors and may be more or less than those that ultimately
occur.

The following table presents a summary of changes in the allowance for loan
losses for each of the past five years.

TABLE 7
ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
                                                                        December 31,
                                                                        ------------
                                                   1998         1997        1996        1995         1994
                                                   ----         ----        ----        ----         ----
                                                                        (in thousands)
<S>                                             <C>             <C>         <C>         <C>          <C>
Balance at beginning of year                    $  2,013        1,422       1,273       1,245        1,442
Charge-offs:
  Commercial, financial and agricultural             663           55          67          62           81
  Real estate-construction                             -            -           -           -            -
  Real estate-mortgage                                53            8          64           -            -
  Installment loans to individuals                   315          331         342         348          371
                                                   -----        -----       -----       -----        -----

                                                   1,031          394         473         410          452
                                                   -----        -----       -----       -----        -----
Recoveries:
  Commercial, financial and agricultural              19           78          96         223           97
  Real estate-construction                             -            -           -           -            -
  Real estate-mortgage                                23            -           7           -            -
  Installment loans to individuals                   154          188         154         184           73
                                                   -----        -----       -----       -----        -----

                                                     196          266         257         407          170
                                                   -----        -----       -----       -----        -----

  Net charge-offs                                    835          128         216           3          282

  Additions charged to operations                    530          719         365          31           85
                                                   -----        -----       -----       -----        -----

  Balance at end of year                        $  1,708        2,013       1,422       1,273        1,245
                                                   =====        =====       =====       =====        =====
Ratio of net charge-offs during the period
  to average loans outstanding during
  the period                                        .59%         .09%        .18%        .00%         .28%
                                                    ===          ===         ===         ===          ===
</TABLE>


                                     -17-
<PAGE>
Non-performing assets at December 31, 1998 were $1,548,000 compared to
$2,813,000 at December 31, 1997.  The majority of the decrease is
attributable to charge-offs of a non-accrual loan of $625,000 during 1998.
There were no related party loans that were considered nonperforming at
December 31, 1998.

Non-performing assets at December 31, 1997 were $2,813,000 compared to
$783,000 at December 31, 1996.  The majority of the increase is attributable
to an increase of non-accrual loans.

The following table summarizes past due and non-accrual loans, other real
estate and repossessions, and income that would have been reported on
non-accrual loans as of December 31, 1998, 1997, 1996, 1995, and 1994 (in
thousands):

TABLE 8
NON-PERFORMING ASSETS
<TABLE>
<CAPTION>
                                                             December 31,
                                                             ------------
                                             1998     1997     1996      1995      1994
                                             ---      ----     ----      ----      ----
<S>                                      <C>         <C>        <C>       <C>     <C>
Other real estate and repossessions      $    33         -       90         -         -
Accruing loans 90 days or more
   past due                                  256       275      216       148       144
Non-accrual loans                          1,259     2,538      477       677     1,640
Interest on non-accrual loans which
   would have been reported                  209       187       38        67       158
</TABLE>

While there may be additional loans in the portfolio that may become
classified as conditions indicate, management is not aware of any potential
problem or restructured loans that are not disclosed in the table above.

A loan is placed on non-accrual status when, in management's judgment, the
collection of interest appears doubtful. As a result of management's ongoing
review of the loan portfolio, loans are classified as non-accrual generally
when they are past due in principal or interest payments for more than 90
days or it is otherwise not reasonable to expect collection of principal and
interest under the original terms.  Exceptions are allowed for 90 day past
due loans when such loans are well secured and in process of collection.
Generally, payments received on non-accrual loans are applied directly to
principal.

DEPOSITS

Time deposits of $100 thousand and greater totaled $30.4 million at December 31,
1998, compared with $29.0 million at year-end 1997.  The following table
sets forth the scheduled maturities of time deposits of $100 thousand and
greater at December 31, 1998.

TABLE 9
DEPOSITS
(in thousands)

     Within 3 months                        $  5,302
     After 3 through 6 months                  5,306
     After 6 through 12 months                10,356
     After 12 months                           9,421
                                              ------

            Total                           $ 30,385
                                              ======
                                     -18-<PAGE>
LIQUIDITY

The Bank must maintain, on a daily basis, sufficient funds to cover the
withdrawals from depositors' accounts and to supply new borrowers with
funds.  To meet these obligations, the Bank keeps cash on hand, maintains
account balances with its correspondent banks, and purchases and sells
federal funds and other short term investments.  Asset and liability
maturities are monitored in an attempt to match these to meet liquidity
needs.  It is the policy of the Bank to monitor its liquidity to meet
regulatory requirements and local funding requirements.

The Bank maintains relationships with correspondent banks that can provide
funds to it on short notice, if needed.  Presently, the Bank has arrangements
with a commercial bank for short term unsecured advances up to $5.0 million.

Cash and cash equivalents decreased $8.56 million to a total $13.22 million
at December 31, 1998 as cash flows increases generated from financing and
operating activities were outpaced by amounts used by investing activities.
Cash inflows from operations totaled $1.85 million in 1998, while inflows
from financing activities totaled $6.66 million, most of which were net
deposit increases during 1998 of $6.83 million and FHLB advances of $1.25
million.  Included in financing activities were note payable repayments of
$167 thousand, FHLB advance repayments of $286 thousand and dividends paid
to stockholders of $969 thousand.

Investing activities used $17.06 million of cash and cash equivalents,
principally composed of net advances of loans to customers of $9.10 million
during 1998 and investment security purchases, net of sales, calls, and
paydowns of $6.16 million. 

See the consolidated financial statements for a more complete analysis of
cash flows.

CAPITAL RESOURCES

The Company continues to maintain adequate capital ratios. The following
tables present the Company's regulatory capital position at December 31,
1998.

TABLE 10
CAPITAL RATIOS

                                               Actual as of December 31, 1998
                                               ------------------------------

      Tier 1 Capital                                      15.42%
      Tier 1 Capital minimum requirement                   4.00%
                                                          -----

      Excess                                              11.42%
                                                          =====

      Total Capital                                       16.59%
      Total Capital minimum requirement                    8.00%
                                                          -----

      Excess                                               8.59%
                                                          =====

                           LEVERAGE RATIO

                                               As of December 31, 1998
      Tier 1 Capital to adjusted total assets
        ("Leverage Ratio")                                11.41%
      Minimum leverage requirement                         4.00%
                                                          -----

      Excess                                               7.41%
                                                          =====

For a more complete discussion of the actual and required ratios of the
Company and its Bank subsidiary, see Note 15 to the consolidated financial
statements.


                                     -19-
<PAGE>
Average equity to average assets were 11.56% in 1998, 10.56% in 1997 and
10.80% during 1996.  The ratio of dividends declared to net earnings was
34.58% during 1998, compared with 31.43% and 29.59% in 1997 and 1996,
respectively.

ASSET/LIABILITY MANAGEMENT

It is the Company's objective to manage assets and liabilities to provide a
satisfactory, consistent level of profitability within the framework of
established cash, loan, investment, borrowing and capital policies.  Certain
officers are charged with the responsibility for monitoring policies and
procedures that are designed to ensure acceptable composition of the
asset/liability mix.  It is the overall philosophy of management to support
asset growth primarily through growth of core deposits, which include
deposits of all categories made by local individuals, partnerships and
corporations.  The objective of the policy is to control interest sensitive
assets and liabilities so as to minimize the impact of substantial movements
in interest rates on earnings.

The asset/liability mix is monitored on a regular basis.  A report reflecting
the interest sensitive assets and interest sensitive liabilities is prepared
and presented to the Board of Directors on at least a quarterly basis.  One
method to measure a bank's interest rate exposure is through its repricing
gap.  The gap is calculated by taking all assets that reprice or mature within
a given timeframe and subtracting all liabilities that reprice or mature within
that timeframe.  The difference between these two amounts is called the "gap",
the amount of either liabilities or assets that will reprice without a
corresponding asset or liability repricing.

A negative gap (more liabilities repricing than assets) generally indicates
that the bank's net interest income will decrease if interest rates rise and
will increase if interest rates fall.  A positive gap generally indicates
that the bank's net interest income will decrease if rates fall and will
increase if rates rise.

The following table summarizes the amounts of interest-earning assets and
interest-bearing liabilities outstanding at December 31, 1998 that are
expected to mature, prepay or reprice in each of the future time periods
shown.  Except as stated below, the amount of assets or liabilities that
mature or reprice during a particular period was determined in accordance
with the contractual terms of the asset or liability.  Adjustable rate loans
are included in the period in which interest rates are next scheduled to
adjust rather than in the period in which they are due, and fixed rate loans
and mortgage-backed securities are included in the periods in which they are
anticipated to be repaid based on scheduled maturities.  The Company's
savings accounts and interest-bearing demand accounts (NOW and money market
deposit accounts), which are generally subject to immediate withdrawal, are
included in the "Three Months or Less" category, although historical
experience has proven these deposits to be more stable over the course of a
year.


                                     -20-

<PAGE>
TABLE 11
INTEREST RATE GAP SENSITIVITY
<TABLE>
<CAPTION>
                                                               At December 31, 1998
                                                             Maturing or Repricing in
                                                             ------------------------
                                                                (in thousands)

                                        Three        Four
                                      Months or      Months to         1 to 5          Over 5
                                         Less        12 Months          Years           Years            Total
                                      ---------      ---------         ------          ------            -----
<S>                                 <C>               <C>               <C>             <C>             <C>
Interest-earning assets:
  Interest-bearing deposits with
    other banks                     $     500                -               -               -              500
  Federal funds sold                      216                -               -               -              216
  Investment securities                 1,682            2,891          10,851          13,226           28,650
  Mortgage loans held for sale          2,549                -               -               -            2,549
  Loans                                28,637           20,147          83,963          16,186          148,933
  Other investments                         -                -               -             826              826
                                      -------          -------          ------          ------          -------

Total interest-bearing assets       $  33,584           23,038          94,814          30,238          181,674
                                      =======          =======          ======          ======          =======
Interest-bearing liabilities:
  Deposits:
    Demand and savings              $  55,621                -               -               -           55,621
    Time deposits                      26,448           43,227          20,136             176           89,987
  FHLB advances                            35              425           1,127             806            2,393
  Notes payable                           444                -               -               -              444
                                      -------          -------          ------          ------          -------

Total interest-bearing liabilities  $  82,548          43,652           21,263             982          148,445
                                      =======          ======           ======          ======          =======
Interest sensitive difference
  per period                        $ (48,964)        (20,614)          73,551          29,256           33,229
                                      =======          ======           ======          ======          =======
Cumulative interest sensitivity
  difference                        $ (48,964)        (69,578)           3,973          33,229
                                      =======          ======           ======          ======
Cumulative difference to total
  assets                                (24)%            (34%)              2%             16%
                                         ==               ==                =              ==
</TABLE>

At December 31, 1998, the difference between the Company's liabilities
and assets repricing or maturing within one year was $69.58 million.
Due to an excess of liabilities repricing or maturing within one year,
a rise in interest rates would cause the Company's net interest income
to decline.

Certain shortcomings are inherent in the method of analysis presented
in the foregoing table. For example, although certain assets and
liabilities may have similar maturities or periods to repricing, they
may react in different degrees or at different points in time to
changes in market interest rates. Additionally, certain assets, such
as adjustable-rate mortgages, have features that restrict changes in
interest rates, both on a short-term basis and over the life of the
asset. Changes in interest rates, prepayment rates, early withdrawal
levels and the ability of borrowers to service their debt, among other
factors, may change significantly from the assumptions made in the
table.



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 to meet capital adequacy requirements. The Company copes with
the effects of inflation through the management of its interest rate
sensitivity gap position, by periodically reviewing and adjusting its


                                     -21-
<PAGE>
pricing of services to consider current costs, and through managing
its level of net income relative to its dividend payout policy.

YEAR 2000 PREPAREDNESS

The use of computer software that relies on a two digit number to
define the applicable year may cause processing problems for computer
controlled systems when the Year 2000 arrives.  Malfunction could occur
at several other noted dates as well, such as September 9, 1999.  In
view of the potential adverse impact of the Year 2000 problem on the
Company and the Bank, its customers and its ability to continue to
operate as a business, careful planning must be undertaken to ensure
minimal disruption.  The Company has established a centralized function
to implement a process to this end.

The Bank performs most of its data processing in-house using purchased
banking software and hardware for its main applications, such as loans
and deposits.  Included in these in-house operations are a teller
processing system, a check sorter system, a check imaging system, and a
trust processing system.  Besides its main applications, the Bank has a
number of ancillary systems connected to various vendors to process
specific work, such as automated teller machines, credit cards, accounts
receivable and accounts payable, mortgage loans, payroll, and the like.
In addition, the Bank uses several non-information systems that are vital
to its operation.  These include vault and alarm systems, communications,
postal services, utilities, and such.

The Bank is also aware of the potential exposure it has to its
viability as a business based on the Year 2000 preparedness of third
parties such as its customers and correspondent banking relationships
including the Federal Reserve Bank.

THE BANK'S STATE OF READINESS

The Bank is under the authority of the Office of the Comptroller of
the Currency (the "OCC"), which has released an Interagency Statement
under which guidance the Bank is managing the Year 2000 project.  This
Statement describes five phases:  Awareness, Assessment, Renovation,
Validation and Implementation, and establishes timelines for completion
of each phase.  The Bank believes its mission critical applications are
within those guidelines. The Bank believes that all necessary
remediations were completed prior to December 31, 1998.

The Bank established a credit risk management program and a liquidity
risk program to review its business relationships for Year 2000
readiness and determine any potential risks or exposure.  This program
includes letters and questionnaires to major deposit and loan
customers, certain suppliers and vendors.  The Bank believes that any
issues that may arise due to customer or vendor risk will be
manageable.

COSTS ASSOCIATED WITH THE BANK'S YEAR 2000 ISSUES

To date, the Bank has spent approximately $500 thousand on upgrading
hardware and software. It has spent at least $100 thousand on testing,
including costs for outside reviews and consultants.  Soft costs
including employee time and other resources are estimated to reach
$150 thousand.  Many of the upgrades would have occurred in the normal
course of business over the next several years, but were accelerated
due to the Year 2000 issue.

RISK OF THE BANK'S YEAR 2000 ISSUES

All the Bank's major systems have been remediated and tested.  Testing
is nearly complete for all other systems and review of the testing
documentation is underway.  While the Bank believes it will be
adequately prepared, no assurances can be given that it will not be
exposed to potential losses resulting from problems with its internal
systems associated with the century date change.


                                     -22-
<PAGE>
Further, the impact of non-compliance by outside parties cannot be
accurately determined. The Year 2000 issue may have a material impact
on the financial condition of the Bank if borrowers of the Bank become
insolvent and are unable to repay loans.

The Bank and others are reliant on the Federal Reserve Bank to process
much of its work.  While some functions, such as wire transfers, could
continue by telephone if the Federal Reserve's automated system does not
perform as expected, certain applications, such as check processing and
automated clearing house transactions are critical to the operation of
the Bank, and if disrupted, would seriously impact the Bank's ability
to serve its customers.  The Bank believes the Federal Reserve Bank
is aggressively pursuing a Year 2000 compliance strategy and that the
risk of its non-compliance is slight, but it is beyond the control of
the Bank and must be considered.

Other third parties whose non-compliance could severely impact the Bank
include the local power provider and telephone companies.

THE BANK'S CONTINGENCY PLANS

The Bank has a Business Disruption Contingency Plan that would be
implemented in the event of any internal or external system failure. 
The Plan calls for switching to PC or manual processing, depending on
the system and the nature of the failure.  The Bank is continually
reviewing and refining its Plan.  The Bank believes it could continue
to operate regardless of the failure.  It has plans to make loans and
process deposits, receive and disperse cash, and update account
balances.

ITEM 7.  FINANCIAL STATEMENTS

The financial statements and the report of independent public
accountants are included in this report beginning at page F-1.

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

For the year ended December 31, 1998, the accounting firm of Porter
Keadle Moore, LLP was the principal accountant for the Company.  The
Company had no disagreements with its accountants on any matters of
accounting principle or practices or financial statement disclosure.



                                     -23-
<PAGE>
                                   PART III

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

     THE BOARD OF DIRECTORS

     The following table sets forth for each director of the Company
as of January 25, 1999 (a) the person's name, (b) his age at December 31,
1998, (c) the year he was first elected as a director of the Company and
(d) his positions with the Company and the Bank, other than as a director,
and his principal occupation and business experience for the past five years.

<TABLE>
<CAPTION>
                                            Year First        Position with Company; Principal
         Name                    Age          Elected         Occupation; Business Experience
         ----                    ---        ----------        --------------------------------
<S>                               <C>           <C>           <S>
J. Henry Cheatham, III            48            1994          Director; Vice President of Textiles, Inc.

Ernest F. Carlisle, III           67            1997          Director; President and Chief Executive
                                                              Officer of Carlisle & Company

James G. Cheatham                 46            1998          Director; Senior Chairman and Senior Vice
                                                              President of the 1888 Group

C. A. Knowles                     66            1982          Director; President, Chief Executive Officer,
                                                              and Treasurer of the Company and President
                                                              of the Bank

James A. Mankin                   72            1982          Director; Retired; Merchant and Real Estate
                                                              Developer

David G. Newton                   51             1990         Director; Real Estate Developer

John T. Newton, Jr.               52            1993          Chairman of the Board of the Company;
                                                              Chairman of the Board of the Bank; Attorney,
                                                              Newton & Howell, P.C.
</TABLE>

     Directors are elected at each annual meeting of shareholders and
hold office until the next annual meeting and until their successors
are elected and qualified.  John T. Newton, Jr. and David G. Newton
are brothers and are first cousins of J. Henry Cheatham, III and James
G. Cheatham, who are also brothers.  There are no other family
relationships among directors and executive officers of the Company.

EXECUTIVE OFFICERS

     The following table sets forth for each executive officer of the
Company (a) the person's name, (b) his age at December 31, 1998, (c)
the year he was first elected as an executive officer of the Company
and (d) his positions with the Company and the Bank.

<TABLE>
<CAPTION>
                                      Year First     Principal Occupation;
        Name              Age          Elected       Business Experience
        ----              ---         ----------     ---------------------
<S>                        <C>          <C>          <S>
C. A. Knowles              66           1982         President, Chief Executive Officer and Treasurer
                                                     of the Company and President of the Bank.

William K. Holmes          48           1974         Assistant Treasurer since 1993, Senior Vice President
                                                     of the Bank since 1974, Principal Accounting and
                                                     Financial Officer.
</TABLE>



                                     -24-
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION

     The following table sets forth the annual term compensation paid by the
Company and the Bank to C. A. Knowles, the Company's Chief Executive Officer,
the Company's only executive officer as of December 31, 1998 whose cash
compensation, including salary and bonus, exceeded $100,000.

                          SUMMARY COMPENSATION TABLE

                                              Annual Compensation
                                     --------------------------------------
Name and Principal Position          Year    Salary<F1>     Bonus     Other
                                     ----    ---------     -------    -----
C. A. Knowles                        1998    $193,343      $20,400     <F2>
   President, Chief Executive        1997    $193,793      $27,500     <F2>
Officer and Treasurer                1996    $193,043      $32,519     <F2>

_____________________
[FN]
<F1> Includes Director's fees
<F2> Does not meet Securities and Exchange Commission threshold for disclosure.
</FN>


DIRECTOR COMPENSATION

     Each director of the Company receives a $1,600 annual retainer plus
$300 per meeting attended for their service as a director of the Company.
Each director of the Bank receives an annual retainer of $3,000 plus $300
per meeting attended for their service as a director of the Bank and $150
for each Board committee meeting they attend.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT

PRINCIPAL HOLDERS OF STOCK

     The following table provides for each person who, to the best
information and knowledge of the Company, beneficially owned 5% or more of
the outstanding shares of Common Stock on January 25, 1999, the following
information: (a) the owner's name and address, (b) the number of shares of
Common Stock owned, and (c) the  percentage such number represents of the
outstanding shares of Common Stock.  Unless otherwise indicated, the listed
owners are the record owners of, and have sole voting and investment powers
over, their shares.
________________________________________________________________________________
|                                  |                     |                     |
|                                  |  Number of Shares   |                     |
|     Name and Address             | Beneficially Owned  | Percentage of Total |
|__________________________________|_____________________|_____________________|
|                                  |                     |                     |
| 435 Associates, Ltd.             |      49,920 <F1>    |        6.18%        |
| P.O. Box 440668                  |                     |                     |
| Kennesaw, GA 30144-9512          |                     |                     |
|__________________________________|_____________________|_____________________|
|                                  |                     |                     |
| Newton Family Partnership        |     171,904 <F2>    |       21.28%        |
| P.O. Drawer F                    |                     |                     |
| Griffin, Georgia  30224          |                     |                     |
|__________________________________|_____________________|_____________________|
|                                  |                     |                     |
| John T. Newton, Sr.              |     194,529 <F3>    |       24.08%        |
| 1076 Maple Drive                 |                     |                     |
| Griffin, Georgia  30223          |                     |                     |
|__________________________________|_____________________|_____________________|
                                     -25-<PAGE>
|                                  |                     |                     |
| Harvey M. Cheatham               |      71,920 <F4>    |        8.90%        |
| 2260 Peachtree Road, N.W.        |                     |                     |
| B-2                              |                     |                     |
| Atlanta, Georgia  30309          |                     |                     |
|__________________________________|_____________________|_____________________|
|                                  |                     |                     |
| John Henry Cheatham, III         |      43,452 <F5>    |        5.38%        |
| 2773 Hwy. 16 West                |                     |                     |
| Griffin,Georgia  30223           |                     |                     |
|__________________________________|_____________________|_____________________|
|                                  |                     |                     |
| EMC Investments Ltd. Partnership |      42,000 <F6>    |        5.20%        |
| 5101 North Casablanca Road, #6   |                     |                     |
| Scottsdale, AS  85253            |                     |                     |
|__________________________________|_____________________|_____________________|
|                                  |                     |                     |
| James G. Cheatham                |      48,552 <F7>    |        6.01%        |
| P.O.Box 506                      |                     |                     |
| Griffin, Georgia  30224          |                     |                     |
|__________________________________|_____________________|_____________________|
|                                  |                     |                     |
| Lelia Cheatham Von Stein         |      48,152 <F8>    |        5.96%        |
| 623 Probart Street               |                     |                     |
| Brevard, North Carolina  28712   |                     |                     |
|__________________________________|_____________________|_____________________|

______________________________
[FN]
<F1> Harvey M. Cheatham has sole voting and investment power over the
shares owned by the record by the partnership under the terms of the
partnership agreement.

<F2> John t. Newton, Sr. has sole voting and investment power over the
shares owned of record by the partnership under the terms of the
partnership agreement.

<F3> Of the indicated shares, 171,904 shares are owned of record by
the Newton Family Partnership, and Mr. Newton has sole voting and
investment power with respect to these shares.  Includes 7,932 shares
owned by the Estate of Virginia Cheatham Newton.

<F4> Of the indicated shares, 16,000 shares are subject to voting and
investment power by Mr. Cheatham as general partner for Club
Associates, L.P., the record owner of such shares, and 49,920 are
subject to voting and investment power by Mr. Cheatham as general
partner of 435 Associates, Ltd., the record owner of such shares.

<F5> Of the indicated shares, Mr. Cheatham owns 35,152 shares and
8,300 shares are owned by his children.

<F6> Elizabeth M. Cheatham is the sole owner of EMC Investments Ltd.
Partnership.

<F7> Of the indicated shares, Mr. Cheatham owns 35,152 shares and
13,400 shares are owned by his children.

<F8> Of the indicated shares, Ms. Von Stein owns 35,452 shares and
12,700 shares are owned by her children.
</FN>

<PAGE>
STOCK OWNED BY MANAGEMENT

     The following table provides for each director of the Company,
the named executive officer, and for all directors and officers of the
Company as a group, as of January 25, 1999, the following information:
(a) the name of the director or the number of persons in the group;
(b) the number of shares of Company Stock beneficially owned by the
director or the group; and (c) the percentage such number represents
of the outstanding shares of Company Stock.  Unless otherwise
indicated, the listed person is the record owner of, and has sole
voting and investment powers over, his shares.


                                     -26-
<PAGE>
                                   Number of Shares
Name and Address                  Beneficially Owned        Percentage of Total
----------------                  ------------------        -------------------
Ernest F. Carlisle, III                       705                      *

J. Henry Cheatham, III                     43,452 <F1>              5.38%

C. A. Knowles                                 920                      *

James A. Mankin                             1,646 <F2>                 *

David G. Newton                            17,824 <F3>              2.21%

James G. Cheatham                          48,552 <F4>              6.01%


John T. Newton, Jr.                        11,993 <F5>              1.48%

All directors and executive officers
as a group (9 persons)                     79,722 <F1><F2><F3>      9.87%
                                                  <F4><F5>
________________________
[FN]
*    Indicates less than one percent.

<F1> Includes 8,000 shares held by Mr. Cheatham as custodian for his
     children.

<F2> Does not include 1,591 shares owned by Mr. Mankin's wife; 294
     shares held by his son; 294 shares held by his daughter; 294
     shares held in trust for his daughter and 4,222 shares held in
     trust for his grandchildren, for which Mr. Mankin disclaims
     beneficial ownership.

<F3> Includes 6,905 shares are held by Mr. Newton as trustee for his
     niece and nephew.

<F4> Includes 13,400 shares held by his children.

<F5> Includes 5,760 shares held by Mr. Newton as trustee for his
     niece and nephew.
</FN>


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The Company's directors and officers and certain companies and
individuals associated with them have been customers of, and have had 
banking transactions with, the Bank and are expected to continue such 
relationships in the future.  Pursuant to such transactions, the Company's
directors and officers from time to time have borrowed funds from the Bank
for various business and personal reasons.  In the opinion of the management
of the Company, the extensions of credit made by the Bank to its directors
and officers since January 1, 1998 (a) were made in the ordinary course of
business, (b) were made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with other persons and (c) did not involve more than a normal
risk of collectibility or present other unfavorable features.  See Note 12
under Notes to Consolidated Financial Statements in Item 7 hereof.
<PAGE>

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits:

     The Company submits herewith as exhibits to this report on Form 10-KSB
the exhibits required by Item 601 of Regulation S-B, subject to Rule 12b-32
under the Securities Exchange Act of 1934.


                                     -27-

<PAGE>
Exhibit
  No.                     Document
-------                   --------

3.1        Articles of Incorporation of FNB Banking Company, as amended.
           (Included as Exhibit 3.1 to the Company's 1992 annual report on
           Form 10-K.) 

3.2        Bylaws of FNB Banking Company, as amended.  (Included as Exhibit
           3.2 to the Company's 1992 annual report on Form 10-K.)

4.1        See Exhibits 3.1 and 3.2 for provisions of Articles of Incorporation
           and Bylaws, as amended, which define the rights of the holders of
           Common Stock of FNB Banking Company.

21.0       Subsidiaries of FNB Banking Company.

24.0       A Power of Attorney is set forth on the signature page to this
           Form 10-KSB.

27.0       Financial Data Schedule (for SEC use only)


(b)  Reports on Form 8-K:

None.


                                     -28-

<PAGE>
                          FNB BANKING COMPANY AND SUBSIDIARY


                          CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 1998, 1997 AND 1996

                   (WITH INDEPENDENT ACCOUNTANTS' REPORT THEREON)




                                                                           PAGE
                                                                           ----


Report of Independent Certified Public Accountants . . . . . . . . . . . . F-1

Consolidated Balance Sheets (December 31, 1998 and 1997) . . . . . . . . . F-2

Consolidated Statements of Earnings (For the Years Ended
    December 31, 1998, 1997 and 1996). . . . . . . . . . . . . . . . . . . F-3

Consolidated Statements of Changes in Stockholders' Equity
    (For the Years Ended December 31, 1998, 1997 and 1996) . . . . . . . . F-4

Consolidated Statements of Comprehensive Income (For the
    Years Ended December 31, 1998, 1997 and 1996). . . . . . . . . . . . . F-5

Consolidated Statements of Cash Flows (For the Years
    Ended December 31, 1998, 1997 and 1996). . . . . . . . . . . . . . . . F-6

Notes to consolidated Financial Statements . . . . . . . . . . . . . . . . F-8

<PAGE>



           REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


To the Board of Directors and Stockholders
FNB Banking Company and Subsidiary


We have audited the accompanying consolidated balance sheets of FNB Banking
Company and subsidiary as of December 31, 1998 and 1997, and the related
statements of earnings, changes in stockholders' equity, comprehensive
income and cash flows for each of the three years in the period ended
December 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of FNB
Banking Company and subsidiary as of December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1998, in conformity with generally accepted
accounting principles.



                                          /s/ Porter Keadle Moore, LLP
                                              PORTER KEADLE MOORE, LLP

/s/ Porter Keadle Moore, LLP
PORTER KEADLE MOORE, LLP


Atlanta, Georgia
January 15, 1999





                                     F-1
<PAGE>
                     FNB BANKING COMPANY AND SUBSIDIARY

                         CONSOLIDATED BALANCE SHEETS

                         DECEMBER 31, 1998 AND 1997

                                   Assets
                                   ------
<TABLE>
<CAPTION>
                                                                      1998          1997
                                                                      ----          ----
<S>                                                             <C>              <C>
 Cash and due from banks, including reserve requirements of
  $2,104,000 and $1,340,000                                     $  13,000,934     13,578,133
 Federal funds sold                                                   215,700      8,197,365
                                                                  -----------    -----------

     Cash and cash equivalents                                     13,216,634     21,775,498
                                                                  -----------    -----------

 Interest-bearing deposits with other banks                           500,000        500,000
 Investment securities available for sale                          21,571,333     12,681,186
 Investment securities held to maturity (market value,
  $7,439,648 and $9,779,012)                                        7,078,893      9,392,953
 
 Other investments                                                    825,700        825,700
 Mortgage loans held for sale                                       2,549,425        650,350
 Loans, net                                                       146,864,199    138,472,205
 Premises and equipment, net                                        8,271,551      6,866,681
 Accrued interest receivable and other assets                       1,904,180      1,654,010
                                                                  -----------    -----------

                                                                $ 202,781,915    192,818,583
                                                                  ===========    ===========

                    Liabilities and Stockholders' Equity
                    ------------------------------------

 Deposits:
  Demand                                                        $  28,935,817     27,318,977
  Interest-bearing demand                                          38,966,906     41,233,435
  Savings                                                          16,654,317     15,356,322
  Time                                                             89,987,361     83,808,834
                                                                  -----------    -----------

     Total deposits                                               174,544,401    167,717,568

 FHLB advances                                                      2,392,857      1,428,571
 Note payable                                                         444,446        611,112
 Accrued interest payable and accrued liabilities                   1,842,081      1,681,760
                                                                  -----------    -----------

     Total liabilities                                            179,223,785    171,439,011
                                                                  -----------    -----------

 Commitments
 
 Stockholders' equity: 
  Common stock, par value $1; 5,000,000 shares authorized;
    807,800 shares issued and outstanding                             807,800        807,800
  Retained earnings                                                21,752,798     19,842,089
  Accumulated other comprehensive income                              997,532        729,683
                                                                  -----------    -----------
 
     Total stockholders' equity                                    23,558,130     21,379,572
                                                                  -----------    -----------
 
                                                                $ 202,781,915    192,818,583
                                                                  ===========    ===========
</TABLE>

        See accompanying notes to consolidated financial statements.



                                     F-2
<PAGE>
                     FNB BANKING COMPANY AND SUBSIDIARY
                     CONSOLIDATED STATEMENTS OF EARNINGS

            FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

<TABLE>
<CAPTION>
                                                                     1998         1997          1996
                                                                     ----         ----          ----
 <S>                                                            <C>             <C>           <C>
 Interest income:
  Interest and fees on loans                                    $ 15,703,957    14,904,480    12,543,160
  Interest on federal funds sold                                     327,739       206,824       257,845
  Interest-bearing deposits in other banks                            72,279        20,283         5,696
  Interest on investment securities:
   Tax-exempt                                                        357,792       395,958       457,159
   Taxable                                                         1,181,120       943,775     1,036,878
  Dividends on other investments                                      98,801        76,634        57,993
                                                                  ----------    ----------    ----------

       Total interest income                                      17,741,688    16,547,954    14,358,731
                                                                  ----------    ----------    ----------
  Interest expense:
   Deposits                                                        6,264,309     5,479,025     4,740,619
   Notes payable                                                      38,488        50,419        61,784
   Other                                                              92,041       340,882       157,958
                                                                  ----------    ----------    ----------

       Total interest expense                                      6,394,838     5,870,326     4,960,361
                                                                  ----------    ----------    ----------

       Net interest income                                        11,346,850    10,677,628     9,398,370
 Provision for loan losses                                           530,075       718,450       365,240
                                                                  ----------    ----------    ----------

       Net interest income after provision for loan losses        10,816,775     9,959,178     9,033,130
                                                                  ----------    ----------    ----------
 Other operating income:
  Service charges                                                  1,459,869     1,533,384     1,507,821
  Fees for trust services                                            195,000       180,000       180,000
  Securities gains, net                                               11,535         8,171       104,183
  Other                                                              678,875       537,169       437,453
                                                                  ----------    ----------    ----------

       Total other operating income                                2,345,279     2,258,724     2,229,457
                                                                  ----------    ----------    ----------
 Other operating expenses:
  Salaries and employee benefits                                   4,948,279     4,602,151     4,179,287
  Occupancy and equipment                                          1,546,527     1,297,615     1,128,910
  Miscellaneous                                                    2,281,255     2,045,722     1,933,462
                                                                  ----------    ----------    ----------

       Total other operating expenses                              8,776,061     7,945,488     7,241,659
                                                                  ----------    ----------    ----------
        Earnings before income taxes                               4,385,993     4,272,414     4,020,928
 Income taxes                                                      1,465,534     1,445,679     1,290,761
                                                                  ----------    ----------    ----------

       Net earnings                                             $  2,920,459     2,826,735     2,730,167
                                                                  ==========    ==========    ==========

       Net earnings per share                                   $       3.62          3.50          3.38
                                                                  ==========    ==========    ==========
</TABLE>




        See accompanying notes to consolidated financial statements.






                                     F-3
<PAGE>
                     FNB BANKING COMPANY AND SUBSIDIARY

         CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

            FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

<TABLE>
<CAPTION>
                                                                                  Accumulated
                                                                                     Other
                                                       Common      Retained      Comprehensive
                                                        Stock      Earnings          Income           Total
                                                       ------      --------      --------------       -----
 <S>                                                 <C>          <C>                <C>            <C>
 Balance, December 31, 1995                          $ 807,800    15,981,567         (15,311)       16,774,056
 
 Net earnings                                                -     2,730,167               -         2,730,167
 
 Cash dividends declared of $1.00 per share                  -      (807,800)              -          (807,800)
 
 Change in accumulated other comprehensive
  income                                                     -             -         (17,993)          (17,993)
                                                       -------    ----------        --------        ----------

 Balance, December 31, 1996                            807,800    17,903,934         (33,304)       18,678,430
 
 Net earnings                                                -     2,826,735               -         2,826,735
 
 Cash dividends declared of $1.10 per share                  -      (888,580)              -          (888,580)
 
 Change in accumulated other comprehensive
  income                                                     -             -         762,987           762,987
                                                       -------    ----------        --------        ----------

 Balance, December 31, 1997                            807,800    19,842,089         729,683        21,379,572
 
 Net earnings                                                -     2,920,459               -         2,920,459
 
 Cash dividends declared of $1.25 per share                  -    (1,009,750)              -        (1,009,750)
 
 Change in accumulated other comprehensive
  income                                                     -             -         267,849           267,849
                                                       -------    ----------         -------        ----------
 
 Balance, December 31, 1998                          $ 807,800    21,752,798         997,532        23,558,130
                                                       =======    ==========         =======        ==========
</TABLE>





        See accompanying notes to consolidated financial statements.




                                     F-4-
<PAGE>
                     FNB BANKING COMPANY AND SUBSIDIARY

               CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

            FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

<TABLE>
<CAPTION>
                                                                               1998         1997         1996
                                                                               ----         ----         ----
  <S>                                                                     <C>            <C>          <C>
  Net earnings                                                            $ 2,920,459    2,826,735    2,730,167

  Other comprehensive income, net of tax:
   Unrealized gains (losses) on securities available for sale:
    Holding gains (losses) arising during period, net of tax
     of $168,549, $470,743 and $21,930                                        275,000      768,053       46,600
    Reclassification adjustment for gains included
     in net earnings, net of tax of $4,384, $3,105 and $39,590                 (7,151)      (5,066)     (64,593)
                                                                            ---------    ---------    ---------

    Total other comprehensive income                                          267,849      762,987      (17,993)
                                                                            ---------    ---------    ---------
 
    Comprehensive income                                                  $ 3,188,308    3,589,722    2,712,174
                                                                            =========    =========    =========
</TABLE>






        See accompanying notes to consolidated financial statements.







                                     F-5
<PAGE>
                     FNB BANKING COMPANY AND SUBSIDIARY

                    CONSOLIDATED STATEMENTS OF CASH FLOWS

            FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

<TABLE>
<CAPTION>
                                                                               1998         1997         1996
                                                                               ----         ----         ----
 <S>                                                                    <C>             <C>           <C>

 Cash flows from operating activities:
  Net earnings                                                          $   2,920,459     2,826,735     2,730,167
  Adjustments to reconcile net earnings
   to net cash provided by operating activities:
    Depreciation, amortization and accretion                                  556,408       441,298       345,094
    Provision for loan losses                                                 530,075       718,450       365,240
    Provision for losses on sales of other real estate
       owned and repossessed collateral                                             -           193         3,798
    Provision for deferred income taxes                                       191,748      (282,482)      (47,032)
    Gains on investment securities                                            (11,535)       (8,171)     (104,183)
    (Gains) losses on disposals of premises and equipment                      35,073        10,800        (3,150)
    Gain on sale of other real estate and repossessed collateral                    -       (15,925)            -
    Change in:
     Mortgage loans held for sale                                          (1,899,075)      321,926      (972,276)
     Interest receivable                                                      (45,116)      (32,297)      (69,901)
     Interest payable                                                         (11,006)      117,378           530
     Other, net                                                              (421,329)       49,958       230,870
                                                                          -----------   -----------   -----------
 
       Net cash provided by operating activities                            1,845,702     4,147,863     2,479,157
                                                                          -----------   -----------   -----------
 
 Cash flows from investing activities:
  Change in interest-bearing deposits with other banks                              -      (500,000)            -
  Proceeds from sales of investment securities
   available for sale                                                       1,942,216     3,084,938       990,000
  Proceeds from calls and maturities of investment securities
   held to maturity                                                         2,328,080     2,837,125     3,597,249
  Proceeds from calls and maturities of investment securities
   available for sale                                                       4,599,952     2,054,715     1,561,897
  Purchase of investment securities available for sale                    (15,030,084)   (6,088,269)   (5,543,379)
  Purchase of other investments                                                     -      (196,800)      (34,400)
  Net change in loans                                                      (9,096,458)  (12,924,571)  (19,983,675)
  Proceeds from disposals of premises and equipment                            10,123         3,260         3,150
  Additions to premises and equipment                                      (1,954,813)   (1,235,115)     (605,205)
  Proceeds from sales of other real estate and
   repossessed collateral                                                     141,325        59,170             -
                                                                          -----------   -----------   -----------

       Net cash used by investing activities                            $ (17,059,659)  (12,905,547)  (20,014,363)
                                                                          -----------   -----------   -----------
</TABLE>







                                     F-6
<PAGE>
                     FNB BANKING COMPANY AND SUBSIDIARY

              CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED

            FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
                                                                             1998          1997          1996
                                                                             ----          ----          ----
<S>                                                                 <C>              <C>           <C>

 Cash flows from financing activities:
  Net change in demand and savings deposits                         $     648,306     5,705,056     5,177,522
  Net change in time deposits                                           6,178,527    16,207,228    10,946,397
  Proceeds from FHLB advances                                           1,250,000     4,000,000     2,500,000
  Repayments of FHLB advances                                            (285,714)   (6,785,715)     (285,714)
  Repayments of notes payable                                            (166,666)     (166,667)     (166,666)
  Payment of cash dividends                                              (969,360)     (888,580)     (807,800)
                                                                       ----------    ----------    ----------

    Net cash provided by financing activities                           6,655,093    18,071,322    17,363,739
                                                                       ----------    ----------    ----------
 
 Net increase (decrease) in cash and cash equivalents                  (8,558,864)    9,313,638      (171,467)
 
 Cash and cash equivalents at beginning of year                        21,775,498    12,461,860    12,633,327
                                                                       ----------    ----------    ----------
 
 Cash and cash equivalents at end of year                           $  13,216,634    21,775,498    12,461,860
                                                                       ==========    ==========    ==========
 
 Supplemental disclosures of cash flow information:
  Cash paid during the year for:
   Interest                                                         $   6,405,844     5,752,948     4,959,831
   Income taxes                                                     $   1,488,000     1,645,000     1,222,500
 
 Noncash investing and financing activities:
  Transfers of other investment securities at cost
   upon application of SFAS 115                                     $           -       526,010             -
  Change in net unrealized (gains) losses on
   investment securities available for sale,
   net of tax                                                       $    (267,849)     (762,987)       17,993
  Transfers of loans to other real estate                           $     208,372        12,437       128,176
  Financed sales of other real estate                               $      33,983             -        93,378
  Change in dividends payable                                       $      40,390             -             -
</TABLE>







        See accompanying notes to consolidated financial statements.




                                     F-7
<PAGE>
                     FNB BANKING COMPANY AND SUBSIDIARY

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     The accounting and reporting policies of FNB Banking Company (the
     "Company") and subsidiary, and the methods of applying those principles,
     conform with generally accepted accounting principles (GAAP) and with
     general practice within the banking industry. The following is a summary
     of the significant policies and procedures.

     Basis of Presentation
     ---------------------
     The consolidated financial statements include the accounts of the Company
     and its wholly-owned subsidiary, First National Bank of Griffin (the
     "Bank"). All significant intercompany accounts and transactions have been
     eliminated in consolidation.

     The Bank commenced business in 1933 upon receipt of its charter from the
     Georgia Department of Banking and Finance. This state charter was
     converted to a national charter in 1965. The Bank is primarily regulated
     by the Office of the Comptroller of the Currency ("OCC") and the Company
     is regulated by the Federal Reserve System and both undergo periodic
     examinations by these regulatory authorities. The Bank provides a full
     range of customary banking services throughout Spalding and other
     surrounding counties in Georgia. 

     In preparing financial statements in conformity with GAAP, management is
     required to make estimates and assumptions that affect the reported
     amounts in the financial statements. Actual results could differ
     significantly from these estimates. Material estimates common to the
     banking industry that are particularly susceptible to significant change
     in the near term include, but are not limited to, the determination of
     the allowance for loan losses, the valuation of real estate acquired in
     connection with or in lieu of foreclosure on loans, and valuation
     allowances associated with the realization of deferred tax assets which
     are based on future taxable income.

     Investment Securities
     ---------------------
     The Company classifies its securities in one of three categories:
     trading, available for sale, or held to maturity. Trading securities are
     bought and held principally for the purpose of selling them in the near
     term. Held to maturity securities are those securities for which the
     Company has the ability and intent to hold the security until maturity.
     All other securities not included in trading or held to maturity are
     classified as available for sale. At December 31, 1998 and 1997 the
     Company had no trading securities.

     Available for sale securities are recorded at fair value. Held to
     maturity securities are recorded at cost, adjusted for the amortization
     or accretion of premiums or discounts. Unrealized holding gains and
     losses, net of the related tax effect, on securities available for sale
     are excluded from earnings and are reported as a separate component of
     stockholders' equity until realized. Transfers of securities between
     categories are recorded at fair value at the date of transfer. Unrealized
     holding gains or losses associated with transfers of securities from held
     to maturity to available for sale are recorded as a separate component of
     stockholders' equity. The unrealized holding gains or losses included in
     the separate component of stockholders' equity for securities transferred
     from available for sale to held to maturity are maintained and amortized
     into earnings over the remaining life of the security as an adjustment to
     yield in a manner consistent with the amortization or accretion of
     premium or discount on the associated security.

     A decline in the market value of any available for sale or held to
     maturity investment below cost that is deemed other than temporary is
     charged to earnings and establishes a new cost basis for the security.


     Premiums and discounts are amortized or accreted over the life of the
     related security as an adjustment to the yield. Realized gains and losses
     for securities classified as available for sale and held to maturity are
     included in earnings and are derived using the specific identification
     method for determining the cost of securities sold.

     Other Investments
     -----------------
     Other investments include equity securities with no readily determinable
     fair value. These investment securities are carried at cost. During 1997,
     certain equity securities previously included in other investments were
     transferred to available for sale as these securities began trading on a
     national exchange.









                                     F-8
<PAGE>
                     FNB BANKING COMPANY AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
     Mortgage Loans Held for Sale
     ----------------------------
     Mortgage loans held for sale are carried at the lower of aggregate cost
     or market value. The amount by which cost exceeds market value is
     accounted for as a valuation allowance. Changes in the valuation
     allowance are included in the determination of net earnings of the
     period in which the change occurs.

     Loans, Loan Fees and Interest Income
     ------------------------------------
     Loans are stated at principal amount outstanding, net of the allowance
     for loan losses. Interest on loans is calculated by using the simple
     interest method on daily balances of the principal amount outstanding.

     Accrual of interest is discontinued on a loan when management believes,
     after considering economic and business conditions and collection
     efforts, that the borrower's financial condition is such that collection
     of interest is doubtful. When a loan is placed on nonaccrual status,
     previously accrued and uncollected interest is charged to interest income
     on loans. Generally, payments on nonaccrual loans are applied to
     principal.

     Loan fees, net of certain origination costs, have been deferred and are
     being amortized over the lives of the respective loans.

     Allowance For Loan Losses
     -------------------------
     The allowance for loan losses is established through a provision for loan
     losses charged to expense. Loans are charged against the allowance for
     loan losses when management believes that the collectibility of the
     principal is unlikely. The allowance represents an amount which, in
     management's judgement, will be adequate to absorb probable losses on
     existing loans that may become uncollectible.

     Management's judgement in determining the adequacy of the allowance is
     based on evaluations of the collectibility of loans. These evaluations
     take into consideration such factors as changes in the nature and volume
     of the loan portfolio, current economic conditions that may affect the
     borrower's ability to pay, overall portfolio quality, and review of
     specific problem loans.  In determining the adequacy of the allowance for
     loan losses, management uses a loan grading system that rates loans in
     six different categories.  Grades four though six are assigned
     allocations of loss based on management's estimate of potential loss
     which is generally based on discounted, collateral deficiencies.  Loans
     graded one through three are stratified by type and allocated loss ranges
     based on historical loss experience for the strata.  The combination of
     these results are compared quarterly to the recorded allowance for loan
     losses and material differences are adjusted by increasing or decreasing
     the provision for loan losses.  Management uses a devoted internal loan
     reviewer who is independent of the lending function to challenge and
     corroborate the loan grading system and provide additional analysis in
     determining the adequacy of the allowance for loan losses and the future
     provisions for estimated loan losses.

     Management believes that the allowance for 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. In addition, regulators, as an integral part of
     their examination process, periodically review the Company's allowance
     for loan losses. Such regulators may require the Company to recognize

     additions to the allowance based on their judgements of information
     available to them at the time of their examination.

     Impaired loans are measured based on the present value of expected future
     cash flows discounted at the loan's effective interest rate, or at the
     loan's observable market price, or at the fair value of the collateral of
     the loan if the loan is collateral dependent. A loan is impaired when,
     based on current information and events, it is probable that all amounts
     due according to the contractual terms of the loan agreement will not be
     collected. The Bank had no material amounts of impaired loans at 
     December 31, 1998 and 1997.






                                     F-9
<PAGE>
                     FNB BANKING COMPANY AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
     Premises and Equipment
     ----------------------
     Premises and equipment are stated at cost less accumulated depreciation.
     Depreciation is computed using the straight-line method over the
     estimated useful lives of the assets. When assets are retired or
     otherwise disposed of, the cost and related accumulated depreciation are
     removed from the accounts, and any gain or loss is reflected in income
     for the period. Costs incurred for maintenance and repairs are expensed
     currently. The range of estimated useful lives for premises and equipment
     are:

                Buildings and improvements          10 - 40 Years
                Furniture and equipment              3 - 10 Years

     Income Taxes
     ------------
     The Company accounts for income taxes using the asset and liability
     method and recognizes deferred tax assets and liabilities for the future
     tax consequences attributable to differences between the financial
     statement carrying amounts of existing assets and liabilities and their
     respective tax basis. Additionally, future tax benefits, such as net
     operating loss carryforwards, are recognized to the extent that
     realization of such benefits is more likely than not. Deferred tax assets
     and liabilities are measured using enacted tax rates expected to apply to
     taxable income in the years in which the assets and liabilities are
     expected to be recovered or settled. The effect on deferred tax assets
     and liabilities of a change in tax rates is recognized in income tax
     expense in the period that includes the enactment date.

     In the event the future tax consequences of differences between the
     financial reporting bases and the tax bases of the Company's assets and
     liabilities results in deferred tax assets, an evaluation of the
     probability of being able to realize the future benefits indicated by
     such asset is required. A valuation allowance is provided for the portion
     of the deferred tax asset when it is more likely than not that some
     portion or all of the deferred tax asset will not be realized. In
     assessing the realizability of the deferred tax assets, management
     considers the scheduled reversals of deferred tax liabilities, projected
     future taxable income, and tax planning strategies.

     Net Earnings Per Common Share
     -----------------------------
     Statement of Financial Accounting Standards (SFAS) No. 128 "Earnings Per
     Share" became effective for the Company for the year ended December 31,
     1997. This standard specifies the computation, presentation and
     disclosure requirements for earnings per share and is designed to
     simplify previous earnings per share standards and to make domestic and
     international practices more compatible. Earnings per common share are
     based on the weighted average number of common shares outstanding during
     the period while the effects of potential common shares outstanding
     during the period such as options, convertible securities and warrants
     are included in diluted earnings per share. The Company has no potential
     common shares and correspondingly, earnings per share amounts for all
     years presented are based on 807,800 shares, the weighted average number
     of common shares outstanding.

     Other
     -----
     Property (other than cash deposits) held by the Bank in a fiduciary or
     agency capacity for customers is not included in the balance sheets since
     such items are not assets of the Bank.


     Comprehensive Income
     --------------------
     In 1997, the Financial Accounting Standards Board issued Statement of
     Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
     ("SFAS 130"). SFAS 130 established standards for the reporting and
     display of comprehensive income and its components in a full set of
     general-purpose financial statements. The Company has elected to present
     comprehensive income in a separate consolidated statement of
     comprehensive income. Accumulated other comprehensive income is solely
     related to the net of tax effect of unrealized gains on securities
     available for sale.







                                        F-10
<PAGE>
                     FNB BANKING COMPANY AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
     Recent Accounting Pronouncements
     --------------------------------
     In 1998, the Financial Accounting Standards Board issued Statement of
     Financial Accounting Standards No. 133 ("SFAS No. 133"), "Accounting for
     Derivative Instruments and Hedging Activities". SFAS No. 133 establishes
     accounting and reporting standards for hedging derivatives and for
     derivative instruments including derivative instruments embedded in other
     contracts. It requires the fair value recognition of derivatives as
     assets or liabilities in the financial statements. The accounting for the
     changes in the fair value of a derivative depends on the intended use of
     the derivative instrument at inception. Instruments used as fair value
     hedges account for the change in fair value in the earnings of the period
     simultaneous with accounting for the fair value change of the item being
     hedged. Cash flow hedges account for the change in fair value of the
     effective portion in comprehensive income rather than earnings and
     foreign currency hedges are accounted for in comprehensive income as part
     of the translation adjustment. Derivative instruments that are not
     intended as a hedge account for the change in fair value in the earnings
     of the period of the change. SFAS No. 133 is effective for all fiscal
     quarters for all fiscal years beginning after June 15, 1999, but initial
     application of the Statement must be made as of the beginning of the
     quarter. At the date of initial application, an entity may transfer any
     held to maturity security into the available for sale or trading
     categories without calling into question the entity's intent to hold
     other securities to maturity in the future. The Bank believes the
     adoption of SFAS No. 133 will not have a material impact on its financial
     position, results of operations or liquidity.

(2)  INVESTMENT SECURITIES
     Investment securities at December 31, 1998 and 1997 are as follows:

<TABLE>
<CAPTION>
                                                               December 31, 1998
     SECURITIES HELD TO MATURITY:                             Gross          Gross        Estimated
                                           Amortized        Unrealized    Unrealized        Fair
                                              Cost             Gains        Losses          Value
                                           ---------        ----------    ----------      ---------
     <S>                                 <C>                 <C>             <C>          <C>
     U.S. Government agencies            $    500,000           10,780            -          510,780
     State, county and municipal            6,018,613          343,217            -        6,361,830
     Mortgage-backed securities               560,280            6,758            -          567,038
                                            ---------          -------       ------        ---------

       Total                             $  7,078,893          360,755            -        7,439,648
                                            =========          =======       ======        =========


                                                               December 31, 1997
                                                              Gross          Gross        Estimated
                                           Amortized        Unrealized    Unrealized        Fair
                                              Cost             Gains        Losses          Value
                                           ---------        ----------    ----------      ---------

     U.S. Government agencies            $  1,487,968           15,787            -        1,503,755
     State, county and municipal            6,281,208          332,250          442        6,613,016
     Mortgage-backed securities             1,623,777           38,464            -        1,662,241
                                            ---------          -------          ---        ---------
        Total                            $  9,392,953          386,501          442        9,779,012
                                            =========          =======          ===        =========


                                                               December 31, 1998
     SECURITIES AVAILABLE FOR SALE:                           Gross          Gross        Estimated
                                           Amortized        Unrealized    Unrealized        Fair
                                              Cost             Gains        Losses          Value
                                           ---------        ----------    ----------      ---------

    U.S. Government agencies             $ 10,498,769           84,426            -       10,583,195
    State, county and municipal               795,000            4,736            -          799,736
    Equity securities                         526,010        1,480,259            -        2,006,269
    Mortgage-backed securities              8,142,632           51,562       12,061        8,182,133
                                           ----------        ---------       ------       ----------
        Total                            $ 19,962,411        1,620,983       12,061       21,571,333
                                           ==========        =========       ======       ==========
</TABLE>



                                     F-11
<PAGE>
                     FNB BANKING COMPANY AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(2)       INVESTMENT SECURITIES, CONTINUED

   SECURITIES AVAILABLE FOR SALE (CONTINUED):
<TABLE>
<CAPTION>
                                                               December 31, 1997
                                                              Gross          Gross        Estimated
                                           Amortized        Unrealized    Unrealized        Fair
                                              Cost             Gains        Losses          Value
                                           ---------        ----------    ----------      ---------
     <S>                                 <C>                 <C>            <C>          <C>
     U.S. Government agencies            $  3,128,304           28,204         452        3,156,056
     Equity securities                        526,010        1,133,812           -        1,659,822
     Mortgage-backed securities             7,849,965           41,904      26,561        7,865,308
                                           ----------        ---------      ------       ----------

        Total                            $ 11,504,279        1,203,920      27,013       12,681,186
                                          ===========        =========      ======       ==========
</TABLE>

     The amortized cost and fair value of investment securities at December 31,
     1998, by contractual maturity, are shown below.  Expected maturities will
     differ from contractual maturities because borrowers have the right to call
     or prepay obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
                                                           Securities Held             Securities Available
                                                             to Maturity                     for Sale
                                                             -----------                     --------
                                                        Amortized     Estimated        Amortized    Estimated
                                                          Cost        Fair Value         Cost       Fair Value
                                                          ----        ----------         ----       ----------
     <S>                                               <C>            <C>             <C>          <C>
     U.S Government agencies:
        1 to 5 years                                   $   500,000       510,780       4,995,806     5,023,500
        5 to 10 years                                        -             -           5,502,963     5,559,695
                                                        ----------       -------       ---------     ---------
 
                                                           500,000       510,780      10,498,769    10,583,195
                                                        ==========       =======      ==========    ==========
 
     State, county and municipal:
        Within 1 year                                      768,930       780,551               -             -
        1 to 5 years                                     2,094,272     2,186,153               -             -
        5 to 10 years                                    3,155,411     3,395,126               -             -
        More than 10 years                                     -             -           795,000       799,736
                                                        ----------     ---------      ----------     ---------
                                                         6,018,613     6,361,830         795,000       799,736
                                                        ==========     =========      ==========     =========

     Total securities other than mortgage-
      backed securities:
        Within 1 year                                      768,930       780,551               -             -
        1 to 5 years                                     2,594,272     2,696,933       4,995,806     5,023,500
        5 to 10 years                                    3,155,411     3,395,126       5,502,963     5,559,695
        More than 10 years                                       -             -         795,000       799,736
 
     Mortgage-backed securities                            560,280       567,038       8,142,632     8,182,133
 
     Equity securities                                         -            -            526,010     2,006,269
                                                        ----------     ---------       ---------     ---------

                                                       $ 7,078,893     7,439,648      19,962,411    21,571,333
                                                        ==========     =========      ==========    ==========
</TABLE>

   Call premiums amounting to $26,762 were received on three called
securities during 1998 and are included with securities gains in the 1998
statement of earnings. There were no sales of investment securities held to
maturity during 1998, 1997 and 1996.


                                     F-12
<PAGE>
                     FNB BANKING COMPANY AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(2)  INVESTMENT SECURITIES, CONTINUED
     Proceeds from sales of securities available for sale during 1998, 1997
     and 1996 were $1,942,216, $3,084,938 and $990,000, respectively.  Gross
     losses of $15,227, $13,729 and $3,317 for 1998, 1997 and 1996, 
     respectively, were realized on those sales.

     Certain investment securities were written down to their estimated
     realizable values because, in the opinion of management, the decline in
     value was considered other than temporary. During 1997 and 1996, the
     Company received $21,900 and $17,500, respectively, on an investment 
     security that was in default and written down prior to 1992.  The amounts
     received in excess of the remaining cost basis resulted in recoveries of
     $21,900 and $17,500 in 1997 and 1996, respectively. During 1996, the 
     Company received $250,000 on another investment security that was written
     down in 1993 which resulted in a recovery of $90,000.  These recoveries
     are included with securities gains in the statements of earnings.

     Securities with a carrying value of $19,127,000 and $17,414,000 at
     December 31, 1998 and 1997, respectively, were pledged to secure public
     deposits as required by law.

(3)  LOANS
     Major classifications of loans at December 31, 1998 and 1997 are
     summarized as follows:

                                                     1998           1997
                                                     ----           ----

     Commercial, financial and agricultural    $  69,820,797     63,182,064
     Real estate - construction                    5,005,340      5,633,712
     Real estate - mortgage                       44,170,013     45,793,633
     Consumer                                     29,936,839     26,179,196
                                                 -----------    -----------

          Total loans                            148,932,989    140,788,605

          Less:  Allowance for loan losses         1,707,913      2,012,795
                 Unearned interest and fees          360,877        303,605
                                                 -----------    -----------

              Net loans                        $ 146,864,199    138,472,205
                                                 ===========    ===========

   The Company grants loans and extensions of credit to individuals and a
   variety of firms and corporations located in its trade area, primarily
   Spalding County, Georgia and surrounding counties. Although the Company
   has a diversified loan portfolio, a substantial portion of the loan
   portfolio is collateralized by improved and unimproved real estate and is
   dependent upon the real estate market in this geographical area.

   Changes in the allowance for loan losses are summarized as follows:
<TABLE>
<CAPTION>
                                                                 1998         1997         1996
                                                                 ----         ----         ----
      <S>                                                  <C>             <C>          <C>
      Balance at beginning of year                         $  2,012,795    1,422,603    1,273,267
      Amounts charged off                                    (1,031,039)    (394,245)    (473,420)
      Recoveries on amounts previously charged off              196,082      265,987      257,516
      Provision charged to operating expenses                   530,075      718,450      365,240
                                                              ---------    ---------    ---------

      Balance at end of year                               $  1,707,913    2,012,795    1,422,603
                                                              =========    =========    =========
</TABLE>


The Company was servicing approximately $19,200,000 and $26,600,000 of
mortgage loans for the Federal Home Loan Mortgage Corporation at
December 31, 1998 and 1997, respectively.







                                     F-13
<PAGE>
                     FNB BANKING COMPANY AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(4)  PREMISES AND EQUIPMENT
     Premises and equipment at December 31, 1998 and 1997, are summarized as
     follows:

                                                 1998               1997
                                                 ----               ----
     Land and improvements                   $  1,385,125        1,385,125
     Buildings and improvements                 6,839,981        5,816,633
     Furniture and equipment                    4,246,150        3,364,070
     Construction in progress                     504,173          706,594
                                               ----------       ----------

                                               12,975,429       11,272,422
     Less:  Accumulated depreciation            4,703,878        4,405,741
                                               ----------       ----------

                                             $  8,271,551        6,866,681
                                               ==========       ==========

     Depreciation expense was $504,747, $434,316 and $397,020 for the years
     ended December 31, 1998, 1997 and 1996, respectively.

(5)  DEPOSITS
     The aggregate amount of time deposit accounts with a minimum denomination
     of $100,000 was approximately $30,385,000 and $28,962,600 at December 31,
     1998 and 1997, respectively. Deposits from related parties totaled
     approximately $2,637,000 and $2,635,000 at December 31, 1998 and 1997,
     respectively. 

     At December 31, 1998, the scheduled maturities of time deposits were as
     follows:

          1999                               $ 70,039,808
          2000                                 10,899,619
          2001                                  2,240,740
          2002                                  2,563,549
          2003 and thereafter                   4,243,645
                                               ----------
                                             $ 89,987,361
                                               ==========

(6)  NOTE PAYABLE
     Note payable at December 31, 1998 and 1997, consisted of the following:

                                                                1998     1997
                                                                ----     ----
        Note payable, due in monthly installments of $13,889
          plus interest at 70% of the prime interest rate
          through August 1, 2001, collateralized by certain
          land and buildings.                                $ 444,446  611,112
 
     Aggregate maturities required on the note payable at December 31, 1998,
     were as follows:

          1999                                               $ 166,668
          2000                                                 166,668
          2001                                                 111,110
                                                               -------

                                                             $ 444,446
                                                               =======
                                     F-14<PAGE>
                     FNB BANKING COMPANY AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(7)  FEDERAL HOME LOAN BANK ADVANCES
     The Bank has an agreement with the Federal Home Loan Bank (FHLB) whereby
     the FHLB agreed to provide the Bank credit facilities under the Agreement
     for Advances and Security Agreement. Any amounts advanced by the FHLB are
     secured under a Blanket Floating Lien covered by all of the Bank's 1-4
     family first mortgage loans. The Bank may draw advances up to 75% of the
     outstanding balance of these loans based on the agreement with the FHLB.

     At December 31, 1998, the Bank has an advance payable of $1,142,857 with
     a fixed interest rate of 6.72% and interest payable monthly with equal
     principal payments due semi-annually until maturity in 2002. The Bank has
     an advance payable of $1,250,000 with a fixed interest rate of 5.50% and
     interest payable monthly with equal principal payments due quarterly
     until maturity in 2008.

(8)  EMPLOYEE BENEFIT PLANS
     The Company had a noncontributory defined benefit plan covering
     substantially all of its employees who have completed one year of
     service. Effective September 1, 1997, the plan was terminated. All
     participants as of September 1, 1997, became fully vested and no new
     participants were allowed to be admitted to the plan. No further
     contributions were made to the plan except payments necessary to attain
     full funding of the liabilities under the plan. As a result of the
     curtailment of benefits, the Company recognized a curtailment gain of
     $76,700. During 1998, the Company made a payment of $50,191 to attain
     full funding of the liabilities under the plan. Subsequent to this
     payment, the assets of the plan were distributed to the participants as
     per their election and the plan is terminated and has no assets as of
     December 31, 1998.

     The following table sets forth the Plan's status and amounts recognized
     in the balance sheet at December 31, 1997. Plan assets are stated at fair
     value and consist of cash, certificates of deposit, equity securities and
     government securities.

                                                                     1997
          Actuarial present value of benefit obligations:
             Vested                                              $  3,447,488
             Nonvested                                                      -
                                                                    ---------
               Total accumulated benefit obligations             $  3,447,488
                                                                    =========

          Projected benefit obligations for services rendered 
            to date                                              $  3,447,488
          Plan assets at fair value                                 3,397,500
                                                                    ---------

          Assets less than projected benefit obligation               (49,988)
 
          Unamortized net asset existing at date of 
            adoption of SFAS 87                                             -
          Unamortized net gain from past experience
            different from that assumed and effects of
            changes in assumptions                                    (74,936)
                                                                    ---------
               Prepaid (accrued) pension cost included in 
                 other liabilities                                $  (124,924)
                                                                    =========


   The components of net pension cost for the years ended December 31, 1997
   and 1996, were as follows:

                                                      1997             1996
                                                      ----             ----

         Service cost for benefits earned       $  177,324          143,364
          Interest cost on projected benefit
           obligations                             239,764          222,170
          Actual return on plan assets            (379,899)        (282,114)
          Net amortization and deferral            126,335           42,580
                                                  --------         --------
          Net pension cost                      $  163,524          126,000
                                                  ========         ========





                                     F-15
<PAGE>
                     FNB BANKING COMPANY AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(8)  EMPLOYEE BENEFIT PLANS, CONTINUED
     The following assumptions were used in determining the actuarial present
     value of the projected benefit obligations at December 31, 1997:

          Discount rate                                    7.0%
          Rate of increase in future compensation levels     -
          Expected long-term rate of return on assets      8.25%

     The Company has a profit sharing plan covering substantially all
     employees. Effective January 1, 1995, the Company amended the plan to
     comply with the requirements of Section 401(k) of the Internal Revenue
     Code. The plan covers substantially all employees, subject to certain
     minimum service requirements. The Company will match up to 6% of the
     participants' before tax contributions. The Company's matching
     contributions amounted to $297,000, $205,000 and $130,000 in 1998, 1997
     and 1996, respectively.

(9)  COMMITMENTS
     The Company is a party to financial instruments with off-balance-sheet
     risk in the normal course of business to meet the financing needs of its
     customers. These financial instruments include commitments to extend
     credit, standby letters of credit and financial guarantees. Those
     instruments involve, to varying degrees, elements of credit risk in
     excess of the amount recognized in the balance sheet. The contract
     amounts of those instruments reflect the extent of involvement the
     Company has in particular classes of financial instruments.

     The Company's exposure to credit loss in the event of nonperformance by
     the other party for commitments to extend credit, standby letters of
     credit and financial guarantees written is represented by the contractual
     amount of those instruments. The Company uses the same credit policies in
     making commitments and conditional obligations as it does for on-balance-
     sheet instruments.

     In some cases, the Company does require collateral or other security to
     support financial instruments with credit risk.


                                                              Approximate
                                                              Contractual
                                                                Amount
                                                                ------

                                                          1998          1997
          Financial instruments whose contract            ----          ----
           amounts represent credit risk:
             Commitments to extend credit           $  25,500,000    16,650,000
             Standby letters of credit and 
                financial guarantees written        $     873,000       467,000

     Commitments to extend credit are agreements to lend to a customer as long
     as there is no violation of any condition established in the contract.
     Commitments generally have fixed expiration dates or other termination
     clauses and may require payment of a fee. Since many of the commitments
     may expire without being drawn upon, the total commitment amounts do not
     necessarily represent future cash requirements. The Company evaluates
     each customer's credit worthiness on a case-by-case basis. The amount of
     collateral obtained, if deemed necessary by the Company, upon extension
     of credit is based on management's credit evaluation. Collateral held
     varies but may include unimproved and improved real estate, certificates
     of deposit, or personal property.

     Standby letters of credit and financial guarantees written are conditional
     commitments issued by the Company to guarantee the performance of a
     customer to a third party. The credit risk involved in issuing letters of
     credit is essentially the same as that involved in extending loan
     facilities to customers. Letters of credit at December 31, 1998 are
     approximately 74% collateralized.







                                     F-16
<PAGE>
                     FNB BANKING COMPANY AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(10) DIVIDEND LIMITATIONS
     Dividends paid by the Bank are the primary source of funds available to
     the Company. Banking regulations limit the amount of dividends that may
     be paid without prior approval of the regulatory authorities. The amount
     of dividends the Bank may pay in 1999 without prior approval is
     approximately $3,861,000 plus 1999 earnings of the Bank.

(11) INCOME TAXES
     The components of income tax expense for the years ended December 31,
     1998, 1997 and 1996 are as follows:

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

          Current                          $ 1,273,786   1,728,161    1,337,793
          Deferred                             191,748    (282,482)     (47,032)
                                             ---------   ---------    ---------

                                           $ 1,465,534   1,445,679    1,290,761
                                             =========   =========    =========

     The differences between the provision for income taxes and the amount
     computed by applying the statutory federal income tax rate to earnings
     before taxes are as follows:

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

       Pretax income at statutory rates    $ 1,491,238   1,452,620    1,367,116
          Add (deduct):
           Tax-exempt interest income         (130,297)   (139,939)    (155,070)
           Nondeductible interest expense       14,539      15,024       16,273
           Other                                90,054     117,974       62,442
                                             ---------   ---------    ---------

                                           $ 1,465,534   1,445,679    1,290,761
                                             =========   =========    =========

   The following summarizes the sources and expected tax consequences of
   future taxable deductions (income) which comprise the net deferred tax
   asset (liability). At December 31, 1998 and 1997, the Company's net
   deferred tax liability is included as a component of other liabilities.


                                                             1998        1997
                                                             ----        ----
       Deferred income tax assets:
          Allowance for loan losses                     $   464,807     572,074
          Reserve for pension contributions                       -      47,420
          Other                                              92,540      86,676
                                                         ----------   ---------

            Total gross deferred income tax assets          557,347     706,170
                                                         ----------   ---------

       Deferred income tax liabilities:
          Net unrealized gain on investment securities     (611,391)   (447,225)
          Premises and equipment                           (601,382)   (558,457)
                                                         ----------  ----------
            Total gross deferred income tax liabilities  (1,212,773) (1,005,682)
                                                         ----------  ----------
       Net deferred income tax liability                $  (655,426)   (299,512)
                                                         ==========  ==========



                                     F-17
<PAGE>
                     FNB BANKING COMPANY AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(12) RELATED PARTY TRANSACTIONS
     The Company conducts transactions with directors and officers, including
     companies in which they have beneficial interest, in the normal course of
     business. It is the policy of the Company that loan transactions with
     directors and officers be made on substantially the same terms as those
     prevailing at the time for comparable loans to other persons. The
     following is a summary of activity for related party loans for 1998:

          Beginning balance                     $  5,721,630
           Loans advanced                          3,012,204
           Repayments                             (2,488,421)
                                                  ----------

          Ending balance                        $  6,245,413
                                                  ==========

(13) MISCELLANEOUS OPERATING EXPENSES
     Components of other operating expenses which are greater than 1% of
     interest income and other operating income are as follows:

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

          Stationery and supplies           $ 250,151     257,523    279,814
          Postage                           $ 184,230     186,379    179,591
          Directors fees                    $ 157,650     163,575    154,400
          Data processing                   $ 284,322     337,270    321,540

(14) FAIR VALUE OF FINANCIAL INSTRUMENTS
     SFAS No. 107, "Disclosures about Fair Value of Financial Instruments",
     requires disclosure of fair value information about financial instruments,
     whether or not recognized on the face of the balance sheet, for which it
     is practicable to estimate that value.  The assumptions used in the
     estimation of the fair value of the Company's financial instruments are
     detailed below.  Where quoted prices are not available, fair values are
     based on estimates using discounted cash flows and other valuation
     techniques. The use of discounted cash flows can be significantly affected
     by the assumptions used, including the discount rate and estimates of
     future cash flows.  The following disclosures should not be considered a
     surrogate of the liquidation value of the Company, but rather a good-faith
     estimate of the increase or decrease in value of financial instruments
     held by the Company since purchase, origination, or issuance.

     Cash and Cash Equivalents
     -------------------------
     For cash and due from banks and federal funds sold, the carrying
     amount is a reasonable estimate of fair value.

     Interest-bearing Deposits with Other Banks
     ------------------------------------------
     The carrying value of interest-bearing deposits with other banks is a
     reasonable estimate of fair value.

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

     Other Investments
     -----------------
     The carrying value of other investments approximates fair value.


     Loans and Mortgage Loans Held for Sale
     --------------------------------------
     The fair value of fixed rate loans is estimated by discounting the
     future cash flows using the current rates at which similar loans would
     be made to borrowers with similar credit ratings. For variable rate
     loans, the carrying amount is a reasonable estimate of fair value.

     Deposits
     --------
     The fair value of demand deposits, savings accounts, NOW accounts and
     certain money market deposits is the amount payable on demand at the
     reporting date. The fair value of fixed maturity certificates of
     deposit is estimated by discounting the future cash flows.





                                     F-18
<PAGE>
                     FNB BANKING COMPANY AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(14) FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED
        FHLB Advances
        -------------
        The fair value of the FHLB fixed rate borrowings are estimated using
        discounted cash flows, based on the current incremental borrowing
        rates for similar types of borrowing arrangements.

        Note Payable
        ------------
        The Company's note payable bears interest based on a percentage of
        the prime rate and as such, the carrying amount approximates the fair
        value.

        Commitments to Extend Credit, Standby Letters of Credit and Financial
        ---------------------------------------------------------------------
        Guarantees Written
        ------------------
        Because commitments to extend credit and standby letters of credit are
        made using variable rates, the contract value is a reasonable estimate
        of fair value.

     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 many judgements. These estimates are
     subjective in nature and involve uncertainties and matters of significant
     judgement 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. Significant assets and
     liabilities that are not considered financial instruments include the
     mortgage banking operation, deferred income taxes and premises and
     equipment. In addition, the tax ramifications related to the realization
     of the unrealized gains and losses can have a significant effect on fair
     value estimates and have not been considered in the estimates.

     The carrying amount and estimated fair values of the Company's financial
     instruments at December 31, 1998 and 1997 are as follows:

<TABLE>
<CAPTION>
                                                          1998                               1997
                                                          ----                               ----
                                              Carrying          Estimated         Carrying         Estimated
                                               Amount           Fair Value         Amount          Fair Value
                                               ------           ----------         ------          ----------
   <S>                                      <C>                <C>               <C>              <C>
   Assets:
     Cash and cash equivalents              $  13,216,634        13,216,634       21,775,498        21,775,498
     Interest -bearing deposits with
       other banks                                500,000           500,000          500,000           500,000
     Investment securities                     28,650,226        29,010,981       22,074,139        22,460,198
     Other investments                            825,700           825,700          825,700           825,700
     Loans and mortgage loans held
       for sale                               149,413,624       148,308,428       139,022,555      137,402,363

    Liabilities:
     Deposits                                 174,544,401       175,220,065       167,717,568      168,104,529
     FHLB advances                              2,392,857         2,432,455         1,428,571        1,446,785
     Notes payable                                444,446           444,446           611,112          611,112

     Unrecognized financial instruments:
     Commitments to extend credit              25,500,000        25,500,000        16,650,000       16,650,000
     Standby letters of credit              $     873,000          873,000            467,000          467,000
</TABLE>



                                     F-19
<PAGE>
                     FNB BANKING COMPANY AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

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

     Quantitative measures established by regulation to ensure capital
     adequacy require the Bank to maintain minimum amounts and ratios (set
     forth in the table below) of total and Tier I capital (as defined) to
     average risk-weighted assets (as defined) and of Tier I capital (as
     defined) to average assets (as defined). Management believes, as of
     December 31, 1998, that the Bank meets all capital adequacy requirements
     to which it is subject.

     As of December 31, 1998 and 1997, the most recent notification from the
     Office of the Comptroller of the Currency categorized the Bank as well
     capitalized under the regulatory framework for prompt corrective action.
     To be categorized as well capitalized the Bank must maintain minimum
     total risk-based, Tier I risk-based, and Tier I leverage ratios as set
     forth in the table. There are no conditions or events since that
     notification that management believes have changed the institution's
     category.

     The consolidated and bank only actual capital amounts and ratios for 1998
     and 1997 are also presented in the table.

<TABLE>
<CAPTION>
                                                                                                    To Be Well
                                                                                                 Capitalized Under
                                                                           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, 1998
  Total Risk-Based Capital (to Risk
   Weighted Assets):
    Consolidated                                $ 24,268,215    16.6%   11,695,525   > 8.0%           N/A     N/A
                                                                                     -
    FNB Griffin                                 $ 23,432,413    15.1%   12,414,523   > 8.0%    15,518,154     > 10.0%
                                                                                     -                        -
  Tier I Capital (to Risk Weighted Assets):
    Consolidated                                $ 22,560,598    15.4%    5,859,896   > 4.0%           N/A     N/A
                                                                                     -
    FNB Griffin                                 $ 21,724,795    14.0%    6,207,084   > 4.0%     9,310,626     >  6.0%
                                                                                     -                        -
  Tier 1 Capital (to Average Assets):
    Consolidated                                $ 22,560,598    11.4%    7,915,999   > 4.0%           N/A     N/A
                                                                               -
    FNB Griffin                                 $ 21,724,795    11.1%    7,828,755   > 4.0%     9,785,944     >  5.0%
                                                                                     -                        -
 
 AS OF DECEMBER 31, 1997
  Total Risk-Based Capital (to Risk 
   Weighted Assets):
    Consolidated                                $ 22,448,925    15.4%   11,661,779   > 8.0%           N/A     N/A
                                                                                     -
    FNB Griffin                                 $ 21,545,269    15.1%   11,414,712   > 8.0%    14,268,390     > 10.0%
                                                                                     -                        -
  Tier I Capital (to Risk Weighted Assets):
    Consolidated                                $ 20,625,527    14.1%    5,851,213   > 4.0%           N/A     N/A
                                                                               -
    FNB Griffin                                 $ 19,765,753    13.9%    5,687,986   > 4.0%     8,531,980     >  6.0%
                                                                                     -                        -
  Tier 1 Capital (to Average Assets):
    Consolidated                                $ 20,625,527    11.3%    7,301,072   > 4.0%           N/A     N/A
                                                                                     -
    FNB Griffin                                 $ 19,765,753    10.9%    7,253,487   > 4.0%     9,066,859     >  5.0%
                                                                                     -                        -
</TABLE>





                                     F-20
<PAGE>
                     FNB BANKING COMPANY AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(16) FNB BANKING COMPANY (PARENT COMPANY ONLY) FINANCIAL INFORMATION

                               Balance Sheets
                         December 31, 1998 and 1997

                                   Assets
                                   ------
<TABLE>
<CAPTION>
                                                                                           1998          1997
                                                                                           ----          ----
<S>                                                                     <C>            <C>            <C>
Cash                                                                                   $    368,728      359,257
Investment in First National Bank of Griffin                                             21,804,566   19,816,834
Investment securities available for sale                                                  2,006,270    1,659,822
Other assets                                                                                467,842      537,290
                                                                                         ----------   ----------
                                                                                       $ 24,647,406   22,373,203
                                                                                         ==========   ==========


                    Liabilities and Stockholders' Equity
                    ------------------------------------

Other liabilities                                                                      $    564,206      508,951
Dividends payable                                                                           525,070      484,680
Stockholders' equity                                                                     23,558,130   21,379,572
                                                                                         ----------   ----------
                                                                                       $ 24,647,406   22,373,203
                                                                                         ==========   ==========


                           Statements of Earnings
                           ----------------------

             For the Years Ended December 31, 1998, 1997 and 1996

                                                                            1998           1997           1996
                                                                            ----           ----           ----
Income:
  Interest and dividends                                                $    45,658         31,514        17,796
  Other                                                                     129,912        220,148       240,879
  Dividends from subsidiary                                               1,009,750        888,580       807,800
                                                                          ---------      ---------     ---------

                                                                          1,185,320      1,140,242     1,066,475
                                                                          ---------      ---------     ---------
 
Other operating expenses                                                    214,209        239,510       178,203
                                                                          ---------      ---------     ---------

  Earnings before income taxes and equity in undistributed
   earnings of bank subsidiary                                              971,111        900,732       888,272
 
Income tax benefit (expense)                                                 14,667            -         (27,361)
                                                                           --------      ---------     ---------
 
   Earnings before equity in undistributed earnings of
    bank subsidiary                                                         985,778        900,732       860,911
 
Equity in undistributed earnings of bank subsidiary                       1,934,681      1,926,003     1,869,256
                                                                          ---------      ---------     ---------
 
   Net earnings                                                         $ 2,920,459      2,826,735     2,730,167
                                                                          =========      =========     =========
</TABLE>





                                     F-21
<PAGE>
                     FNB BANKING COMPANY AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


(16) FNB BANKING COMPANY (PARENT COMPANY ONLY) FINANCIAL INFORMATION,
     CONTINUED

                          Statements of Cash Flows

            For the Years Ended December 31, 1998, 1997 and 1996

<TABLE>
<CAPTION>
                                                                            1998           1997           1996
                                                                            ----           ----           ----
<S>                                                                    <C>              <C>           <C>
Cash flows from operating activities:
    Net earnings                                                       $  2,920,459      2,826,735     2,730,167
    Adjustments to reconcile net earnings
      to net cash provided by operating activities:
      Equity in undistributed earnings of bank subsidiary                (1,934,681)    (1,926,003)   (1,869,256)
      Depreciation                                                           17,537         35,073        35,073
      Change in other assets and liabilities, net                           (24,484)        50,421        23,336
                                                                         ----------      ---------     ---------

    Net cash provided by operating activities                               978,831        986,226       919,320
                                                                         ----------      ---------     ---------
 
 
Cash flows from financing activities - dividends paid                      (969,360)      (888,580)     (807,800)
                                                                         ----------      ---------     ---------

Net increase (decrease) in cash                                               9,471         97,646       111,520

Cash at beginning of the period                                             359,257        261,611       150,091
                                                                          ---------      ---------     ---------

Cash at end of the period                                              $    368,728        359,257       261,611
                                                                          =========      =========     =========

Supplemental disclosure of cash flow information:
 
    Net unrealized (gain) loss on investment securities
     available for sale, net of tax                                    $   (267,849)      (762,987)       17,993

    Change in dividends receivable from subsidiary                     $     40,390              -             -
</TABLE>





                                     F-22
<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.

                                   FNB BANKING COMPANY
                                        (Registrant)


                                   By: /s/ C.A. Knowles
                                         C.A. Knowles
                                         President

Dated:  March 30, 1999


                       POWER OF ATTORNEY AND SIGNATURES

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints C.A. Knowles and John T. Newton,
Jr., or each of them, his attorney-in-fact, each with full power of
substitution, for him in his name, place and stead, in any and all
capacities, to sign any amendments to this Report on Form 10-KSB, and to
file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, and hereby ratifies
and confirms all that each of said attorneys-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue hereof.  Pursuant to the
requirements of the Securities Exchange Act of 1934, this Report has been
signed by the following persons on behalf of the Registrant in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
        Signature                          Title                             Date
        ---------                          -----                             ----
<S>                             <S>                                         <C>
 /s/ John T. Newton, Jr.        Chairman of the Board of Directors          3/30/99
John T. Newton, Jr.

 /s/ C.A. Knowles               President, Treasurer, and                   3/30/99
C.A. Knowles                    Director (principal executive officer)

 /s/ William K. Holmes          Assistant Treasurer (principal              3/30/99
William K. Holmes               accounting and financial officer)

 /s/ James A. Mankin            Director and Secretary                      3/30/99
James A. Mankin

___________________________     Director                                    _______
Ernest F. Carlisle, III

 /s/ Henry Cheatham, III        Director                                    3/30/99
J. Henry Cheatham, III

 /s/ James G. Cheatham          Director                                    3/30/99
James G. Cheatham

 /s/ David G. Newton            Director                                    3/30/99
David G. Newton
</TABLE>


                                     -29-<PAGE>
                                  EXHIBIT INDEX



Exhibit No.              Description of Exhibit
-----------              ----------------------

   21.0                  Subsidiaries of FNB Banking Company.

   24.0                  A Power of Attorney is set forth on the signature
                         page to this Form 10-KSB.

   27.0                  Financial Data Schedule (for SEC use only)