<PAGE>

                                                                     EXHIBIT 4.2

                               GUARANTEE AGREEMENT

                       CITIZENS EFFINGHAM BANCSHARES, INC.

                           Dated as of March 29, 2005

(10) Austin\156530

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                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                     PAGE
                                                                                     ----
                                    ARTICLE I
                         DEFINITIONS AND INTERPRETATION
<S>                                                                                  <C>
SECTION 1.1.    Definitions and Interpretation..................................       1

                                   ARTICLE II
               POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE

SECTION 2.1.    Powers and Duties of the Guarantee Trustee......................       4

SECTION 2.2.    Certain Rights of the Guarantee Trustee.........................       5

SECTION 2.3.    Not Responsible for Recitals or Issuance of Guarantee...........       7

SECTION 2.4.    Events of Default; Waiver.......................................       7

SECTION 2.5.    Events of Default; Notice.......................................       8

                                   ARTICLE III
                              THE GUARANTEE TRUSTEE

SECTION 3.1.    The Guarantee Trustee; Eligibility..............................       8

SECTION 3.2.    Appointment, Removal and Resignation of the Guarantee Trustee...       9

                                   ARTICLE IV
                                    GUARANTEE

SECTION 4.1.    Guarantee.......................................................       9

SECTION 4.2.    Waiver of Notice and Demand.....................................      10

SECTION 4.3.    Obligations Not Affected........................................      10

SECTION 4.4.    Rights of Holders...............................................      11

SECTION 4.5.    Guarantee of Payment............................................      11

SECTION 4.6.    Subrogation.....................................................      11

SECTION 4.7.    Independent Obligations.........................................      12

SECTION 4.8.    Enforcement.....................................................      12
</TABLE>

                                        i
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                               TABLE OF CONTENTS
                                  (continued)

<TABLE>
                                    ARTICLE V
                    LIMITATION OF TRANSACTIONS; SUBORDINATION
                                                                                      PAGA
                                                                                      ----
<S>                                                                                   <C>
SECTION 5.1.    Limitation of Transactions......................................      12

SECTION 5.2.    Ranking.........................................................      13

                                   ARTICLE VI
                                   TERMINATION

SECTION 6.1.    Termination.....................................................      13

                                   ARTICLE VII
                                 INDEMNIFICATION

SECTION 7.1.    Exculpation.....................................................      14

SECTION 7.2.    Indemnification.................................................      14

SECTION 7.3.    Compensation; Reimbursement of Expenses.........................      15

                                  ARTICLE VIII
                                  MISCELLANEOUS

SECTION 8.1.    Successors and Assigns..........................................      16

SECTION 8.2.    Amendments......................................................      16

SECTION 8.3.    Notices.........................................................      16

SECTION 8.4.    Benefit.........................................................      17

SECTION 8.5.    Governing Law...................................................      17

SECTION 8.6.    Counterparts....................................................      17
</TABLE>

                                       ii
<PAGE>

                               GUARANTEE AGREEMENT

            This GUARANTEE AGREEMENT (the "Guarantee"), dated as of March 29,
2005, is executed and delivered by CITIZENS EFFINGHAM BANCSHARES, INC.,
incorporated in Georgia (the "Guarantor"), and JPMorgan Chase Bank, National
Association, as trustee (the "Guarantee Trustee"), for the benefit of the
Holders (as defined herein) from time to time of the Capital Securities (as
defined herein) of Citizens Effingham Trust I, a Delaware statutory trust (the
"Issuer").

            WHEREAS, pursuant to an Amended and Restated Declaration of Trust
(the "Declaration"), dated as of March 29, 2005, among the trustees named
therein of the Issuer, CITIZENS EFFINGHAM BANCSHARES, INC., as sponsor, and the
Holders from time to time of undivided beneficial interests in the assets of the
Issuer, the Issuer is issuing on the date hereof securities, having an aggregate
liquidation amount of up to $3,000,000, designated the TP Securities (the
"Capital Securities"); and

            WHEREAS, as incentive for the Holders to purchase the Capital
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Guarantee, to pay to the Holders of Capital
Securities the Guarantee Payments (as defined herein) and to make certain other
payments on the terms and conditions set forth herein.

            NOW, THEREFORE, in consideration of the purchase by each Holder of
the Capital Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Guarantee for the
benefit of the Holders.

                                   ARTICLE I
                         DEFINITIONS AND INTERPRETATION

SECTION 1.1 Definitions and Interpretation.

            In this Guarantee, unless the context otherwise requires:

            (a) capitalized terms used in this Guarantee but not defined in the
      preamble above have the respective meanings assigned to them in this
      Section 1.1;

            (b) a term defined anywhere in this Guarantee has the same meaning
      throughout;

            (c) all references to "the Guarantee" or "this Guarantee" are to
      this Guarantee as modified, supplemented or amended from time to time;

            (d) all references in this Guarantee to Articles and Sections are to
      Articles and Sections of this Guarantee, unless otherwise specified;

            (e) terms defined in the Declaration as of the date of execution of
      this Guarantee have the same meanings when used in this Guarantee, unless
      otherwise defined in this Guarantee or unless the context otherwise
      requires; and

<PAGE>

            (f) a reference to the singular includes the plural and vice versa.

            "Beneficiaries" means any Person to whom the Issuer is or hereafter
becomes indebted or liable.

            "Corporate Trust Office" means the office of the Guarantee Trustee
at which the corporate trust business of the Guarantee Trustee shall, at any
particular time, be principally administered.

            "Covered Person" means any Holder of Capital Securities.

            "Debentures" means the junior subordinated debentures of CITIZENS
EFFINGHAM BANCSHARES, INC., designated the Junior Subordinated Debt Securities
due 2035, held by the Institutional Trustee (as defined in the Declaration) of
the Issuer.

            "Event of Default" has the meaning set forth in Section 2.4.

            "Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Capital Securities, to the extent not
paid or made by the Issuer: (i) any accrued and unpaid Distributions (as defined
in the Declaration) which are required to be paid on such Capital Securities to
the extent the Issuer has funds available in the Property Account (as defined in
the Declaration) therefor at such time, (ii) the Redemption Price (as defined in
the Indenture) to the extent the Issuer has funds available in the Property
Account therefor at such time, with respect to any Capital Securities called for
redemption by the Issuer, (iii) the Special Redemption Price (as defined in the
Indenture) to the extent the Issuer has funds available in the Property Account
therefor at such time, with respect to Capital Securities called for redemption
upon the occurrence of a Special Event (as defined in the Indenture), and (iv)
upon a voluntary or involuntary liquidation, dissolution, winding-up or
termination of the Issuer (other than in connection with the distribution of
Debentures to the Holders of the Capital Securities in exchange therefor as
provided in the Declaration), the lesser of (a) the aggregate of the liquidation
amount and all accrued and unpaid Distributions on the Capital Securities to the
date of payment, to the extent the Issuer has funds available in the Property
Account therefor at such time, and (b) the amount of assets of the Issuer
remaining available for distribution to Holders in liquidation of the Issuer
after satisfaction of liabilities to creditors of the Issuer as required by
applicable law (in either case, the "Liquidation Distribution").

            "Guarantee Trustee" means JPMorgan Chase Bank, National Association,
until a Successor Guarantee Trustee has been appointed and has accepted such
appointment pursuant to the terms of this Guarantee and thereafter means each
such Successor Guarantee Trustee.

            "Holder" means any holder, as registered on the books and records of
the Issuer, of any Capital Securities; provided, however, that, in determining
whether the holders of the requisite percentage of Capital Securities have given
any request, notice, consent or waiver hereunder, "Holder" shall not include the
Guarantor or any Affiliate of the Guarantor.

            "Indemnified Person" means the Guarantee Trustee (including in its
individual capacity), any Affiliate of the Guarantee Trustee, or any officers,
directors, shareholders,

                                      -2-
<PAGE>

members, partners, employees, representatives, nominees, custodians or agents of
the Guarantee Trustee.

            "Indenture" means the Indenture, dated as of March 29, 2005, between
the Guarantor and JPMorgan Chase Bank, National Association, not in its
individual capacity but solely as trustee, and any indenture supplemental
thereto pursuant to which the Debentures are to be issued to the Institutional
Trustee of the Issuer.

            "Liquidation Distribution" has the meaning set forth in the
definition of "Guarantee Payments" herein.

            "Majority in liquidation amount of the Capital Securities" means
Holder(s) of outstanding Capital Securities, voting together as a class, but
separately from the holders of Common Securities, of more than 50% of the
aggregate liquidation amount (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accrued and unpaid Distributions to,
but excluding, the date upon which the voting percentages are determined) of all
Capital Securities then outstanding.

            "Obligations" means any costs, expenses or liabilities (but not
including liabilities related to taxes) of the Issuer, other than obligations of
the Issuer to pay to holders of any Trust Securities the amounts due such
holders pursuant to the terms of the Trust Securities.

            "Officer's Certificate" means, with respect to any Person, a
certificate signed by one Authorized Officer of such Person. Any Officer's
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Guarantee shall include:

            (a) a statement that each officer signing the Officer's Certificate
      has read the covenant or condition and the definitions relating thereto;

            (b) a brief statement of the nature and scope of the examination or
      investigation undertaken by each officer in rendering the Officer's
      Certificate;

            (c) a statement that each such officer has made such examination or
      investigation as, in such officer's opinion, is necessary to enable such
      officer to express an informed opinion as to whether or not such covenant
      or condition has been complied with; and

            (d) a statement as to whether, in the opinion of each such officer,
      such condition or covenant has been complied with.

            "Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.

            "Responsible Officer" means, with respect to the Guarantee Trustee,
any officer within the Corporate Trust Office of the Guarantee Trustee with
direct responsibility for the administration of any matters relating to this
Guarantee, including any vice president, any

                                      -3-
<PAGE>

assistant vice president, any secretary, any assistant secretary, the treasurer,
any assistant treasurer, any trust officer or other officer of the Corporate
Trust Office of the Guarantee Trustee customarily performing functions similar
to those performed by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of that officer's knowledge of and familiarity with
the particular subject.

            "Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 3.1.

            "Trust Securities" means the Common Securities and the Capital
Securities.

                                   ARTICLE II
               POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE

SECTION 2.1. Powers and Duties of the Guarantee Trustee.

            (a) This Guarantee shall be held by the Guarantee Trustee for the
      benefit of the Holders of the Capital Securities, and the Guarantee
      Trustee shall not transfer this Guarantee to any Person except a Holder of
      Capital Securities exercising his or her rights pursuant to Section 4.4(b)
      or to a Successor Guarantee Trustee on acceptance by such Successor
      Guarantee Trustee of its appointment to act as Successor Guarantee
      Trustee. The right, title and interest of the Guarantee Trustee shall
      automatically vest in any Successor Guarantee Trustee, and such vesting
      and cessation of title shall be effective whether or not conveyancing
      documents have been executed and delivered pursuant to the appointment of
      such Successor Guarantee Trustee.

            (b) If an Event of Default actually known to a Responsible Officer
      of the Guarantee Trustee has occurred and is continuing, the Guarantee
      Trustee shall enforce this Guarantee for the benefit of the Holders of the
      Capital Securities.

            (c) The Guarantee Trustee, before the occurrence of any Event of
      Default and after the curing or waiving of all Events of Default that may
      have occurred, shall undertake to perform only such duties as are
      specifically set forth in this Guarantee, and no implied covenants shall
      be read into this Guarantee against the Guarantee Trustee. In case an
      Event of Default has occurred (that has not been cured or waived pursuant
      to Section 2.4(b)) and is actually known to a Responsible Officer of the
      Guarantee Trustee, the Guarantee Trustee shall exercise such of the rights
      and powers vested in it by this Guarantee, and use the same degree of care
      and skill in its exercise thereof, as a prudent person would exercise or
      use under the circumstances in the conduct of his or her own affairs.

            (d) No provision of this Guarantee shall be construed to relieve the
      Guarantee Trustee from liability for its own negligent action, its own
      negligent failure to act, or its own willful misconduct, except that:

                  (i) prior to the occurrence of any Event of Default and after
            the curing or waiving of all Events of Default that may have
            occurred:

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<PAGE>

                        (A) the duties and obligations of the Guarantee Trustee
                  shall be determined solely by the express provisions of this
                  Guarantee, and the Guarantee Trustee shall not be liable
                  except for the performance of such duties and obligations as
                  are specifically set forth in this Guarantee, and no implied
                  covenants or obligations shall be read into this Guarantee
                  against the Guarantee Trustee; and

                        (B) in the absence of bad faith on the part of the
                  Guarantee Trustee, the Guarantee Trustee may conclusively
                  rely, as to the truth of the statements and the correctness of
                  the opinions expressed therein, upon any certificates or
                  opinions furnished to the Guarantee Trustee and conforming to
                  the requirements of this Guarantee; but in the case of any
                  such certificates or opinions furnished to the Guarantee
                  Trustee, the Guarantee Trustee shall be under a duty to
                  examine the same to determine whether or not on their face
                  they conform to the requirements of this Guarantee;

                  (ii) the Guarantee Trustee shall not be liable for any error
            of judgment made in good faith by a Responsible Officer of the
            Guarantee Trustee, unless it shall be proved that such Responsible
            Officer of the Guarantee Trustee or the Guarantee Trustee was
            negligent in ascertaining the pertinent facts upon which such
            judgment was made;

                  (iii) the Guarantee Trustee shall not be liable with respect
            to any action taken or omitted to be taken by it in good faith in
            accordance with the written direction of the Holders of not less
            than a Majority in liquidation amount of the Capital Securities
            relating to the time, method and place of conducting any proceeding
            for any remedy available to the Guarantee Trustee, or exercising any
            trust or power conferred upon the Guarantee Trustee under this
            Guarantee; and

                  (iv) no provision of this Guarantee shall require the
            Guarantee Trustee to expend or risk its own funds or otherwise incur
            personal financial liability in the performance of any of its duties
            or in the exercise of any of its rights or powers, if the Guarantee
            Trustee shall have reasonable grounds for believing that the
            repayment of such funds is not reasonably assured to it under the
            terms of this Guarantee, or security and indemnity, reasonably
            satisfactory to the Guarantee Trustee, against such risk or
            liability is not reasonably assured to it.

SECTION 2.2. Certain Rights of the Guarantee Trustee.

            (a) Subject to the provisions of Section 2.1:

                  (i) The Guarantee Trustee may conclusively rely, and shall be
            fully protected in acting or refraining from acting upon, any
            resolution, certificate, statement, instrument, opinion, report,
            notice, request, direction, consent, order, bond, debenture, note,
            other evidence of indebtedness or other paper or document believed
            by it to be genuine and to have been signed, sent or presented by
            the proper party or parties.

                                      -5-
<PAGE>

                  (ii) Any direction or act of the Guarantor contemplated by
            this Guarantee shall be sufficiently evidenced by an Officer's
            Certificate.

                  (iii) Whenever, in the administration of this Guarantee, the
            Guarantee Trustee shall deem it desirable that a matter be proved or
            established before taking, suffering or omitting any action
            hereunder, the Guarantee Trustee (unless other evidence is herein
            specifically prescribed) may, in the absence of bad faith on its
            part, request and conclusively rely upon an Officer's Certificate of
            the Guarantor which, upon receipt of such request, shall be promptly
            delivered by the Guarantor.

                  (iv) The Guarantee Trustee shall have no duty to see to any
            recording, filing or registration of any instrument or other writing
            (or any rerecording, refiling or reregistration thereof).

                  (v) The Guarantee Trustee may consult with counsel of its
            selection, and the advice or opinion of such counsel with respect to
            legal matters shall be full and complete authorization and
            protection in respect of any action taken, suffered or omitted by it
            hereunder in good faith and in accordance with such advice or
            opinion. Such counsel may be counsel to the Guarantor or any of its
            Affiliates and may include any of its employees. The Guarantee
            Trustee shall have the right at any time to seek instructions
            concerning the administration of this Guarantee from any court of
            competent jurisdiction.

                  (vi) The Guarantee Trustee shall be under no obligation to
            exercise any of the rights or powers vested in it by this Guarantee
            at the request or direction of any Holder, unless such Holder shall
            have provided to the Guarantee Trustee such security and indemnity,
            reasonably satisfactory to the Guarantee Trustee, against the costs,
            expenses (including attorneys' fees and expenses and the expenses of
            the Guarantee Trustee's agents, nominees or custodians) and
            liabilities that might be incurred by it in complying with such
            request or direction, including such reasonable advances as may be
            requested by the Guarantee Trustee; provided, however, that nothing
            contained in this Section 2.2(a)(vi) shall be taken to relieve the
            Guarantee Trustee, upon the occurrence of an Event of Default, of
            its obligation to exercise the rights and powers vested in it by
            this Guarantee.

                  (vii) The Guarantee Trustee shall not be bound to make any
            investigation into the facts or matters stated in any resolution,
            certificate, statement, instrument, opinion, report, notice,
            request, direction, consent, order, bond, debenture, note, other
            evidence of indebtedness or other paper or document, but the
            Guarantee Trustee, in its discretion, may make such further inquiry
            or investigation into such facts or matters as it may see fit.

                  (viii) The Guarantee Trustee may execute any of the trusts or
            powers hereunder or perform any duties hereunder either directly or
            by or through agents, nominees, custodians or attorneys, and the
            Guarantee Trustee shall not be

                                      -6-
<PAGE>

            responsible for any misconduct or negligence on the part of any
            agent or attorney appointed with due care by it hereunder.

                  (ix) Any action taken by the Guarantee Trustee or its agents
            hereunder shall bind the Holders of the Capital Securities, and the
            signature of the Guarantee Trustee or its agents alone shall be
            sufficient and effective to perform any such action. No third party
            shall be required to inquire as to the authority of the Guarantee
            Trustee to so act or as to its compliance with any of the terms and
            provisions of this Guarantee, both of which shall be conclusively
            evidenced by the Guarantee Trustee's or its agent's taking such
            action.

                  (x) Whenever in the administration of this Guarantee the
            Guarantee Trustee shall deem it desirable to receive instructions
            with respect to enforcing any remedy or right or taking any other
            action hereunder, the Guarantee Trustee (A) may request instructions
            from the Holders of a Majority in liquidation amount of the Capital
            Securities, (B) may refrain from enforcing such remedy or right or
            taking such other action until such instructions are received and
            (C) shall be protected in conclusively relying on or acting in
            accordance with such instructions.

                  (xi) The Guarantee Trustee shall not be liable for any action
            taken, suffered, or omitted to be taken by it in good faith and
            reasonably believed by it to be authorized or within the discretion
            or rights or powers conferred upon it by this Guarantee.

            (b) No provision of this Guarantee shall be deemed to impose any
      duty or obligation on the Guarantee Trustee to perform any act or acts or
      exercise any right, power, duty or obligation conferred or imposed on it,
      in any jurisdiction in which it shall be illegal or in which the Guarantee
      Trustee shall be unqualified or incompetent in accordance with applicable
      law to perform any such act or acts or to exercise any such right, power,
      duty or obligation. No permissive power or authority available to the
      Guarantee Trustee shall be construed to be a duty.

SECTION 2.3. Not Responsible for Recitals or Issuance of Guarantee.

            The recitals contained in this Guarantee shall be taken as the
statements of the Guarantor, and the Guarantee Trustee does not assume any
responsibility for their correctness. The Guarantee Trustee makes no
representation as to the validity or sufficiency of this Guarantee.

SECTION 2.4. Events of Default; Waiver.

            (a) An Event of Default under this Guarantee will occur upon the
      failure of the Guarantor to perform any of its payment or other
      obligations hereunder.

            (b) The Holders of a Majority in liquidation amount of the Capital
      Securities may, voting or consenting as a class, on behalf of the Holders
      of all of the Capital Securities, waive any past Event of Default and its
      consequences. Upon such waiver, any

                                      -7-
<PAGE>

      such Event of Default shall cease to exist, and shall be deemed to have
      been cured, for every purpose of this Guarantee, but no such waiver shall
      extend to any subsequent or other default or Event of Default or impair
      any right consequent thereon.

SECTION 2.5. Events of Default; Notice.

            (a) The Guarantee Trustee shall, within 90 days after the occurrence
      of an Event of Default, transmit by mail, first class postage prepaid, to
      the Holders of the Capital Securities, notices of all Events of Default
      actually known to a Responsible Officer of the Guarantee Trustee, unless
      such defaults have been cured before the giving of such notice; provided,
      however, that the Guarantee Trustee shall be protected in withholding such
      notice if and so long as a Responsible Officer of the Guarantee Trustee in
      good faith determines that the withholding of such notice is in the
      interests of the Holders of the Capital Securities.

            (b) The Guarantee Trustee shall not be charged with knowledge of any
      Event of Default unless the Guarantee Trustee shall have received written
      notice thereof from the Guarantor or a Holder of the Capital Securities,
      or a Responsible Officer of the Guarantee Trustee charged with the
      administration of this Guarantee shall have actual knowledge thereof.

                                  ARTICLE III
                              THE GUARANTEE TRUSTEE

SECTION 3.1. The Guarantee Trustee; Eligibility.

            (a) There shall at all times be a Guarantee Trustee which shall:

                  (i) not be an Affiliate of the Guarantor; and

                  (ii) be a corporation or national association organized and
            doing business under the laws of the United States of America or any
            state or territory thereof or of the District of Columbia, or Person
            authorized under such laws to exercise corporate trust powers,
            having a combined capital and surplus of at least Fifty Million U.S.
            Dollars ($50,000,000), and subject to supervision or examination by
            federal, state, territorial or District of Columbia authority. If
            such corporation or national association publishes reports of
            condition at least annually, pursuant to law or to the requirements
            of the supervising or examining authority referred to above, then,
            for the purposes of this Section 3.1(a)(ii), the combined capital
            and surplus of such corporation or national association shall be
            deemed to be its combined capital and surplus as set forth in its
            most recent report of condition so published.

            (b) If at any time the Guarantee Trustee shall cease to be eligible
      to so act under Section 3.1(a), the Guarantee Trustee shall immediately
      resign in the manner and with the effect set forth in Section 3.2(c).

                                      -8-
<PAGE>

            (c) If the Guarantee Trustee has or shall acquire any "conflicting
      interest' within the meaning of Section 310(b) of the Trust Indenture Act,
      the Guarantee Trustee shall either eliminate such interest or resign to
      the extent and in the manner provided by, and subject to, this Guarantee.

SECTION 3.2. Appointment, Removal and Resignation of the Guarantee Trustee.

            (a) Subject to Section 3.2(b), the Guarantee Trustee may be
      appointed or removed without cause at any time by the Guarantor except
      during an Event of Default.

            (b) The Guarantee Trustee shall not be removed in accordance with
      Section 3.2(a) until a Successor Guarantee Trustee has been appointed and
      has accepted such appointment by written instrument executed by such
      Successor Guarantee Trustee and delivered to the Guarantor.

            (c) The Guarantee Trustee appointed to office shall hold office
      until a Successor Guarantee Trustee shall have been appointed or until its
      removal or resignation. The Guarantee Trustee may resign from office
      (without need for prior or subsequent accounting) by an instrument in
      writing executed by the Guarantee Trustee and delivered to the Guarantor,
      which resignation shall not take effect until a Successor Guarantee
      Trustee has been appointed and has accepted such appointment by an
      instrument in writing executed by such Successor Guarantee Trustee and
      delivered to the Guarantor and the resigning Guarantee Trustee.

            (d) If no Successor Guarantee Trustee shall have been appointed and
      accepted appointment as provided in this Section 3.2 within 60 days after
      delivery of an instrument of removal or resignation, the Guarantee Trustee
      resigning or being removed may petition any court of competent
      jurisdiction for appointment of a Successor Guarantee Trustee. Such court
      may thereupon, after prescribing such notice, if any, as it may deem
      proper, appoint a Successor Guarantee Trustee.

            (e) No Guarantee Trustee shall be liable for the acts or omissions
      to act of any Successor Guarantee Trustee.

            (f) Upon termination of this Guarantee or removal or resignation of
      the Guarantee Trustee pursuant to this Section 3.2, the Guarantor shall
      pay to the Guarantee Trustee all amounts owing to the Guarantee Trustee
      under Sections 7.2 and 7.3 accrued to the date of such termination,
      removal or resignation.

                                   ARTICLE IV
                                    GUARANTEE

SECTION 4.1. Guarantee.

            (a) The Guarantor irrevocably and unconditionally agrees to pay in
      full to the Holders the Guarantee Payments (without duplication of amounts
      theretofore paid by the Issuer), as and when due, regardless of any
      defense (except as defense of payment by the Issuer), right of set-off or
      counterclaim that the Issuer may have or assert. The

                                      -9-
<PAGE>

      Guarantor's obligation to make a Guarantee Payment may be satisfied by
      direct payment of the required amounts by the Guarantor to the Holders or
      by causing the Issuer to pay such amounts to the Holders.

            (b) The Guarantor hereby also agrees to assume any and all
      Obligations of the Issuer and in the event any such Obligation is not so
      assumed, subject to the terms and conditions hereof, the Guarantor hereby
      irrevocably and unconditionally guarantees to each Beneficiary the full
      payment, when and as due, of any and all Obligations to such
      Beneficiaries. This Guarantee is intended to be for the Beneficiaries who
      have received notice hereof.

SECTION 4.2. Waiver of Notice and Demand.

            The Guarantor hereby waives notice of acceptance of this Guarantee
and of any liability to which it applies or may apply, presentment, demand for
payment, any right to require a proceeding first against the Issuer or any other
Person before proceeding against the Guarantor, protest, notice of nonpayment,
notice of dishonor, notice of redemption and all other notices and demands.

SECTION 4.3. Obligations Not Affected.

            The obligations, covenants, agreements and duties of the Guarantor
under this Guarantee shall in no way be affected or impaired by reason of the
happening from time to time of any of the following:

            (a) the release or waiver, by operation of law or otherwise, of the
      performance or observance by the Issuer of any express or implied
      agreement, covenant, term or condition relating to the Capital Securities
      to be performed or observed by the Issuer;

            (b) the extension of time for the payment by the Issuer of all or
      any portion of the Distributions, Redemption Price, Special Redemption
      Price, Liquidation Distribution or any other sums payable under the terms
      of the Capital Securities or the extension of time for the performance of
      any other obligation under, arising out of, or in connection with, the
      Capital Securities (other than an extension of time for the payment of the
      Distributions, Redemption Price, Special Redemption Price, Liquidation
      Distribution or other sums payable that results from the extension of any
      interest payment period on the Debentures or any extension of the maturity
      date of the Debentures permitted by the Indenture);

            (c) any failure, omission, delay or lack of diligence on the part of
      the Holders to enforce, assert or exercise any right, privilege, power or
      remedy conferred on the Holders pursuant to the terms of the Capital
      Securities, or any action on the part of the Issuer granting indulgence or
      extension of any kind;

            (d) the voluntary or involuntary liquidation, dissolution, sale of
      any collateral, receivership, insolvency, bankruptcy, assignment for the
      benefit of creditors, reorganization, arrangement, composition or
      readjustment of debt of, or other similar proceedings affecting, the
      Issuer or any of the assets of the Issuer;

                                      -10-
<PAGE>

            (e) any invalidity of, or defect or deficiency in, the Capital
      Securities;

            (f) the settlement or compromise of any obligation guaranteed hereby
      or hereby incurred; or

            (g) any other circumstance whatsoever that might otherwise
      constitute a legal or equitable discharge or defense of a guarantor, it
      being the intent of this Section 4.3 that the obligations of the Guarantor
      hereunder shall be absolute and unconditional under any and all
      circumstances.

            There shall be no obligation of the Holders to give notice to, or
obtain consent of, the Guarantor with respect to the happening of any of the
foregoing.

SECTION 4.4. Rights of Holders.

            (a) The Holders of a Majority in liquidation amount of the Capital
      Securities have the right to direct the time, method and place of
      conducting any proceeding for any remedy available to the Guarantee
      Trustee in respect of this Guarantee or to direct the exercise of any
      trust or power conferred upon the Guarantee Trustee under this Guarantee;
      provided, however, that (subject to Sections 2.1 and -------- ------- 2.2)
      the Guarantee Trustee shall have the right to decline to follow any such
      direction if the Guarantee Trustee shall determine that the actions so
      directed would be unjustly prejudicial to the Holders not taking part in
      such direction or if the Guarantee Trustee being advised by legal counsel
      determines that the action or proceeding so directed may not lawfully be
      taken or if the Guarantee Trustee in good faith by its board of directors
      or trustees, executive committee or a trust committee of directors or
      trustees and/or Responsible Officers shall determine that the action or
      proceeding so directed would involve the Guarantee Trustee in personal
      liability.

            (b) Any Holder of Capital Securities may institute a legal
      proceeding directly against the Guarantor to enforce the Guarantee
      Trustee's rights under this Guarantee, without first instituting a legal
      proceeding against the Issuer, the Guarantee Trustee or any other Person.
      The Guarantor waives any right or remedy to require that any such action
      be brought first against the Issuer, the Guarantee Trustee or any other
      Person before so proceeding directly against the Guarantor.

SECTION 4.5. Guarantee of Payment.

            This Guarantee creates a guarantee of payment and not of collection.

SECTION 4.6. Subrogation.

            The Guarantor shall be subrogated to all (if any) rights of the
Holders of Capital Securities against the Issuer in respect of any amounts paid
to such Holders by the Guarantor under this Guarantee; provided, however, that
the Guarantor shall not (except to the extent required by applicable provisions
of law) be entitled to enforce or exercise any right that it may acquire by way
of subrogation or any indemnity, reimbursement or other agreement, in all cases
as a result of payment under this Guarantee, if, after giving effect to any such
payment, any

                                      -11-
<PAGE>

amounts are due and unpaid under this Guarantee. If any amount shall be paid to
the Guarantor in violation of the preceding sentence, the Guarantor agrees to
hold such amount in trust for the Holders and to pay over such amount to the
Holders.

SECTION 4.7. Independent Obligations.

            The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Capital
Securities and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Guarantee
notwithstanding the occurrence of any event referred to in subsections (a)
through (g), inclusive, of Section 4.3 hereof.

SECTION 4.8. Enforcement.

            A Beneficiary may enforce the Obligations of the Guarantor contained
in Section 4.1(b) directly against the Guarantor, and the Guarantor waives any
right or remedy to require that any action be brought against the Issuer or any
other person or entity before proceeding against the Guarantor.

            The Guarantor shall be subrogated to all rights (if any) of any
Beneficiary against the Issuer in respect of any amounts paid to the
Beneficiaries by the Guarantor under this Guarantee; provided, however, that the
Guarantor shall not (except to the extent required by applicable provisions of
law) be entitled to enforce or exercise any rights that it may acquire by way of
subrogation or any indemnity, reimbursement or other agreement, in all cases as
a result of payment under this Guarantee, if, after giving effect to such
payment, any amounts are due and unpaid under this Guarantee.

                                   ARTICLE V
                    LIMITATION OF TRANSACTIONS; SUBORDINATION

SECTION 5.1. Limitation of Transactions.

            So long as any Capital Securities remain outstanding, if (a) there
shall have occurred and be continuing an Event of Default or (b) the Guarantor
shall have selected an Extension Period as provided in the Declaration and such
period, or any extension thereof, shall have commenced and be continuing, then
the Guarantor may not (x) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any of
the Guarantor's capital stock or (y) make any payment of principal of or
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Guarantor that rank pari passu in all respects with or junior
in interest to the Debentures (other than (i) payments under this Guarantee,
(ii) repurchases, redemptions or other acquisitions of shares of capital stock
of the Guarantor (A) in connection with any employment contract, benefit plan or
other similar arrangement with or for the benefit of one or more employees,
officers, directors, or consultants, (B) in connection with a dividend
reinvestment or stockholder stock purchase plan or (C) in connection with the
issuance of capital stock of the Guarantor (or securities convertible into or
exercisable for such capital stock), as consideration in an acquisition
transaction entered into prior to the occurrence of the Event of Default or the
applicable Extension Period, (iii) as a result of any exchange,
reclassification, combination or

                                      -12-
<PAGE>

conversion of any class or series of the Guarantor's capital stock (or any
capital stock of a subsidiary of the Guarantor) for any class or series of the
Guarantor's capital stock or of any class or series of the Guarantor's
indebtedness for any class or series of the Guarantor's capital stock, (iv) the
purchase of fractional interests in shares of the Guarantor's capital stock
pursuant to the conversion or exchange provisions of such capital stock or the
security being converted or exchanged, (v) any declaration of a dividend in
connection with any stockholder's rights plan, or the issuance of rights, stock
or other property under any stockholder's rights plan, or the redemption or
repurchase of rights pursuant thereto, or (vi) any dividend in the form of
stock, warrants, options or other rights where the dividend stock or the stock
issuable upon exercise of such warrants, options or other rights is the same
stock as that on which the dividend is being paid or ranks pari passu with or
junior to such stock).

SECTION 5.2. Ranking.

            This Guarantee will constitute an unsecured obligation of the
Guarantor and will rank subordinate and junior in right of payment to all
present and future Senior Indebtedness (as defined in the Indenture) of the
Guarantor. By their acceptance thereof, each Holder of Capital Securities agrees
to the foregoing provisions of this Guarantee and the other terms set forth
herein.

            The right of the Guarantor to participate in any distribution of
assets of any of its subsidiaries upon any such subsidiary's liquidation or
reorganization or otherwise is subject to the prior claims of creditors of that
subsidiary, except to the extent the Guarantor may itself be recognized as a
creditor of that subsidiary. Accordingly, the Guarantor's obligations under this
Guarantee will be effectively subordinated to all existing and future
liabilities of the Guarantor's subsidiaries, and claimants should look only to
the assets of the Guarantor for payments thereunder. This Guarantee does not
limit the incurrence or issuance of other secured or unsecured debt of the
Guarantor, including Senior Indebtedness of the Guarantor, under any indenture
or agreement that the Guarantor may enter into in the future or otherwise.

                                   ARTICLE VI
                                   TERMINATION

SECTION 6.1. Termination.

            This Guarantee shall terminate as to the Capital Securities (i) upon
full payment of the Redemption Price or the Special Redemption Price, as the
case may be, of all Capital Securities then outstanding, (ii) upon the
distribution of all of the Debentures to the Holders of all of the Capital
Securities or (iii) upon full payment of the amounts payable in accordance with
the Declaration upon dissolution of the Issuer. This Guarantee will continue to
be effective or will be reinstated, as the case may be, if at any time any
Holder of Capital Securities must restore payment of any sums paid under the
Capital Securities or under this Guarantee.

                                      -13-
<PAGE>

                                   ARTICLE VII
                                 INDEMNIFICATION

SECTION 7.1. Exculpation.

            (a) No Indemnified Person shall be liable, responsible or
      accountable in damages or otherwise to the Guarantor or any Covered Person
      for any loss, damage or claim incurred by reason of any act or omission of
      such Indemnified Person in good faith in accordance with this Guarantee
      and in a manner that such Indemnified Person reasonably believed to be
      within the scope of the authority conferred on such Indemnified Person by
      this Guarantee or by law, except that an Indemnified Person shall be
      liable for any such loss, damage or claim incurred by reason of such
      Indemnified Person's negligence or willful misconduct with respect to such
      acts or omissions.

            (b) An Indemnified Person shall be fully protected in relying in
      good faith upon the records of the Issuer or the Guarantor and upon such
      information, opinions, reports or statements presented to the Issuer or
      the Guarantor by any Person as to matters the Indemnified Person
      reasonably believes are within such other Person's professional or expert
      competence and who, if selected by such Indemnified Person, has been
      selected with reasonable care by such Indemnified Person, including
      information, opinions, reports or statements as to the value and amount of
      the assets, liabilities, profits, losses, or any other facts pertinent to
      the existence and amount of assets from which Distributions to Holders of
      Capital Securities might properly be paid.

SECTION 7.2. Indemnification.

            (a) The Guarantor agrees to indemnify each Indemnified Person for,
      and to hold each Indemnified Person harmless against, any and all loss,
      liability, damage, claim or expense incurred without negligence or willful
      misconduct on the part of the Indemnified Person, arising out of or in
      connection with the acceptance or administration of the trust or trusts
      hereunder, including but not limited to the costs and expenses (including
      reasonable legal fees and expenses) of the Indemnified Person defending
      itself against, or investigating, any claim or liability in connection
      with the exercise or performance of any of the Indemnified Person's powers
      or duties hereunder. The obligation to indemnify as set forth in this
      Section 7.2 shall survive the resignation or removal of the Guarantee
      Trustee and the termination of this Guarantee.

            (b) Promptly after receipt by an Indemnified Person under this
      Section 7.2 of notice of the commencement of any action, such Indemnified
      Person will, if a claim in respect thereof is to be made against the
      Guarantor under this Section 7.2, notify the Guarantor in writing of the
      commencement thereof; but the failure so to notify the Guarantor (i) will
      not relieve the Guarantor from liability under paragraph (a) above unless
      and to the extent that the Guarantor did not otherwise learn of such
      action and such failure results in the forfeiture by the Guarantor of
      substantial rights and defenses and (ii) will not, in any event, relieve
      the Guarantor from any obligations to any Indemnified Person other than
      the indemnification obligation provided in paragraph (a) above. The
      Guarantor shall be entitled to appoint counsel of the Guarantor's choice
      at the Guarantor's

                                      -14-
<PAGE>

      expense to represent the Indemnified Person in any action for which
      indemnification is sought (in which case the Guarantor shall not
      thereafter be responsible for the fees and expenses of any separate
      counsel retained by the Indemnified Person or Persons except as set forth
      below); provided, however, that such counsel shall be satisfactory to the
      Indemnified Person. Notwithstanding the Guarantor's election to appoint
      counsel to represent the Indemnified Person in any action, the Indemnified
      Person shall have the right to employ separate counsel (including local
      counsel), and the Guarantor shall bear the reasonable fees, costs and
      expenses of such separate counsel (and local counsel), if (i) the use of
      counsel chosen by the Guarantor to represent the Indemnified Person would
      present such counsel with a conflict of interest, (ii) the actual or
      potential defendants in, or targets of, any such action include both the
      Indemnified Person and the Guarantor and the Indemnified Person shall have
      reasonably concluded that there may be legal defenses available to it
      and/or other Indemnified Persons which are different from or additional to
      those available to the Guarantor, (iii) the Guarantor shall not have
      employed counsel satisfactory to the Indemnified Person to represent the
      Indemnified Person within a reasonable time after notice of the
      institution of such action or (iv) the Guarantor shall authorize the
      Indemnified Person to employ separate counsel at the expense of the
      Guarantor. The Guarantor will not, without the prior written consent of
      the Indemnified Persons, settle or compromise or consent to the entry of
      any judgment with respect to any pending or threatened claim, action, suit
      or proceeding in respect of which indemnification or contribution may be
      sought hereunder (whether or not the Indemnified Persons are actual or
      potential parties to such claim or action) unless such settlement,
      compromise or consent includes an unconditional release of each
      Indemnified Person from all liability arising out of such claim, action,
      suit or proceeding.

SECTION 7.3. Compensation; Reimbursement of Expenses.

            Other than as provided in the Fee Agreement of even date herewith
between Cohen Bros. & Company, the Guarantee Trustee and Delaware Trustee (as
defined in the Declaration), the Guarantor agrees:

            (a) to pay to the Guarantee Trustee from time to time such
      compensation for all services rendered by it hereunder as the parties
      shall agree to from time to time (which compensation shall not be limited
      by any provision of law in regard to the compensation of a trustee of an
      express trust); and

            (b) except as otherwise expressly provided herein, to reimburse the
      Guarantee Trustee upon request for all reasonable expenses, disbursements
      and advances incurred or made by it in accordance with any provision of
      this Guarantee (including the reasonable compensation and the expenses and
      disbursements of its agents and counsel), except any such expense,
      disbursement or advance as may be attributable to its negligence or
      willful misconduct.

            The provisions of this Section 7.3 shall survive the resignation or
removal of the Guarantee Trustee and the termination of this Guarantee.

                                      -15-
<PAGE>

                                  ARTICLE VIII
                                  MISCELLANEOUS

SECTION 8.1. Successors and Assigns.

            All guarantees and agreements contained in this Guarantee shall bind
the successors, assigns, receivers, trustees and representatives of the
Guarantor and shall inure to the benefit of the Holders of the Capital
Securities then outstanding. Except in connection with any merger or
consolidation of the Guarantor with or into another entity or any sale, transfer
or lease of the Guarantor's assets or capital stock to another entity, in each
case to the extent permitted under the Indenture, the Guarantor may not assign
its rights or delegate its obligations under this Guarantee without the prior
approval of the Holders of not less than a Majority in liquidation amount of the
Capital Securities.

SECTION 8.2. Amendments.

            Except with respect to any changes that do not adversely affect the
rights of Holders of the Capital Securities in any material respect (in which
case no consent of Holders will be required), this Guarantee may be amended only
with the prior approval of the Holders of not less than a Majority in
liquidation amount of the Capital Securities. The provisions of the Declaration
with respect to amendments thereof shall apply equally with respect to
amendments of the Guarantee.

SECTION 8.3. Notices.

            All notices provided for in this Guarantee shall be in writing, duly
signed by the party giving such notice, and shall be delivered, telecopied or
mailed by first class mail, as follows:

            (a)   If given to the Guarantee Trustee, at the Guarantee Trustee's
      mailing address set forth below (or such other address as the Guarantee
      Trustee may give notice of to the Holders of the Capital Securities):

                  JPMorgan Chase Bank, National Association
                  600 Travis Street, 50th Floor
                  Houston, Texas 77002
                  Attention:  Institutional Trust Services
                  Citizens Effingham Trust I
                  Telecopy:  (713) 216-2101
                  Telephone: (713) 216-4181

            (b)   If given to the Guarantor, at the Guarantor's mailing address
      set forth below (or such other address as the Guarantor may give notice of
      to the Holders of the Capital Securities and to the Guarantee Trustee):

                                      -16-
<PAGE>

                  CITIZENS EFFINGHAM BANCSHARES, INC.
                  802 South Laruel Street
                  Springfield, Georgia 31329
                  Attention: Harry H. Shearouse
                  Telecopy: (912) 754-1398
                  Telephone: (912) 754-0754

            (c)   If given to any Holder of the Capital Securities, at the
      address set forth on the books and records of the Issuer.

            All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid, except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.

SECTION 8.4. Benefit.

            This Guarantee is solely for the benefit of the Holders of the
Capital Securities and, subject to Section 2.1(a), is not separately
transferable from the Capital Securities.

SECTION 8.5. Governing Law.

            THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS
PRINCIPLES THEREOF.

SECTION 8.6. Counterparts.

            This Guarantee may contain more than one counterpart of the
signature page and this Guarantee may be executed by the affixing of the
signature of the Guarantor and the Guarantee Trustee to any of such counterpart
signature pages. All of such counterpart signature pages shall be read as though
one, and they shall have the same force and effect as though all of the signers
had signed a single signature page.

                                      -17-
<PAGE>

          THIS GUARANTEE is executed as of the day and year first above written.

                                      CITIZENS EFFINGHAM BANCSHARES, INC.,
                                      AS GUARANTOR

                                      By: /s/ Harry H. Shearouse
                                          ----------------------
                                      Name: Harry H. Shearouse
                                      Title: President & Chief Executive Officer

                                      JPMORGAN CHASE BANK, NATIONAL
                                      ASSOCIATION, AS GUARANTEE TRUSTEE

                                      By: /s/ Maria D. Calzado
                                          --------------------
                                      Name: Maria D. Calzado
                                      Title: Vice President

(10) Austin\156530

                                      -18-