<PAGE>
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                 FORM 10-KSB/A


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

     For the fiscal year ended December 31, 1996

                                       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
       EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

     For the transition period from                    to

          Commission file number:  33-23062

                EUFAULA BANCCORP, INC. (A DELAWARE CORPORATION)
                I.R.S. EMPLOYER IDENTIFICATION NUMBER 63-0989868
                  218-220 BROAD STREET, EUFAULA, ALABAMA 36027
                        TELEPHONE NUMBER: (334) 687-3581

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

Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]

The registrant's total revenues for the fiscal year ended December 31, 1996 were
$8,429,923.

As of March 1, 1997, registrant had outstanding 1,353,204 shares of common
stock, $1 par value per share, which is registrant's only class of common stock.
The aggregate market value of the voting stock held by nonaffiliates of the
registrant was approximately $14,126,000.

                      DOCUMENTS INCORPORATED BY REFERENCE

                                      None
<PAGE>
 
                                    PART I.
                                        
ITEM 1.   BUSINESS OF THE COMPANY AND SUBSIDIARY BANKS

     Eufaula BancCorp, Inc. ("Eufaula BancCorp" or the "Company") is a two-bank
holding company incorporated in Delaware in 1988 and headquartered in Eufaula,
Alabama. The Company has two subsidiary banks, Eufaula Bank and Trust Company
("Eufaula Bank"), located in Eufaula, Alabama, and First American Bank of Walton
County ("American Bank"), located in Santa Rosa Beach, Florida. The Company does
not engage in any substantial business other than the normal banking services
conducted by its two wholly-owned bank subsidiaries, which are sometimes
hereinafter collectively referred to as the "Banks".

EUFAULA BANK

     Eufaula Bank was incorporated as an Alabama Banking corporation in 1926 for
the purpose of conducting a commercial banking business in Eufaula, Alabama. The
Bank operates a full service commercial banking business in Barbour County, its
primary market area, providing such banking services as receipt of deposits,
personal and commercial loans, real estate mortgages, personal and commercial
checking, and other time deposits and related services.

     Eufaula is the largest city in Barbour County with a population of
approximately 15,000 persons. Barbour County has a population of approximately
26,000 persons. Eufaula Bank and another commercial bank are approximately the
same size and are considered the largest banks in Barbour County.

AMERICAN BANK

     American Bank was incorporated as a Florida corporation in 1987 for the
purpose of conducting a commercial banking business in South Walton County,
Florida. On September 1, 1991, the Company acquired American Bank. The Bank
operates as a full service commercial bank providing financial services in its
primary market area of South Walton County.

     South Walton County has a population of approximately 5,000 persons.
American Bank is one of five banks operating in the South Walton area.

PROPERTIES

     The Company's office and the main banking office of Eufaula Bank is located
at 218-220 E. Broad Street, Eufaula, Alabama. Eufaula Bank leases a portion of
the real estate upon which the building is situated. Eufaula Bank also operates
a branch office in Eufaula at 1121 South Eufaula Avenue. The land on which the
branch office is situated is leased.

     American Bank operates its office at the corner of Mack Bayou Road and U.
S. Highway 98, Santa Rosa Beach, Florida in South Walton County. The Bank's
premises are owned by the Bank.

                                       1
<PAGE>
 
                                   EMPLOYEES

     At December 31, 1996, Eufaula BancCorp and its subsidiaries employed 53
full-time employees and 6 part-time employees. Eufaula BancCorp considers its
relationship with its employees to be excellent.

     The Company provides a nonqualified Employee Stock Purchase Plan, including
employees of both subsidiary banks. The primary purpose is to enable employees
to participate in the ownership of the Company.   Also, each subsidiary bank has
a noncontributory profit-sharing plan covering all employees subject to certain
minimum age and service requirements.

         CERTAIN REGULATORY CONSIDERATIONS RELATING TO EUFAULA BANCCORP

General

      As a bank holding company, Eufaula BancCorp is subject to the regulation
and supervision of the Federal Reserve Board (the "FRB") and the State of
Alabama Department of Banking (the "ADB").  The Subsidiary Banks are subject to
supervision and examination by applicable state and Federal banking agencies,
including the FRB, the Federal Deposit Insurance Corporation (the "FDIC"), the
ADB and the State of Florida Department of Banking (the "FDB").  The Subsidiary
Banks are also subject to various requirements and restrictions under Federal
and state law, including requirements to maintain reserves against deposits,
restrictions on  the types and amounts of loans that may be granted and the
interest that may be charged thereon, and limitations on the types of
investments that may be made and the types of services that may be offered.
Various consumer laws and regulations also affect the operations of the
Subsidiary Banks.  In addition to the impact of regulation, commercial banks are
affected significantly by the actions of the FRB as it attempts to control the
money supply and credit availability in order to influence the economy.

      The Bank Holding Company Act requires every bank holding company to obtain
the prior approval of the FRB 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 FRB, 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 FRB has determined by regulation or order to be closely related to
banking are: (i) making or servicing loans and certain types of leases; (ii)
performing certain data processing services; (iii) acting as fiduciary or
investment or financial advisor; (iv) providing discount brokerage services; (v)
underwriting bank eligible securities; (vi) underwriting debt and equity
securities on a limited basis through separately capitalized subsidiaries; and
(vii) making investments in corporations or projects designed primarily to
promote community welfare.

 

                                       2
<PAGE>
 
      In addition, the ADB requires information with respect to the financial
condition, operations, management and intercompany relationships of Eufaula
BancCorp and the Subsidiary Banks and related matters.  The ADB may also require
such other information as is necessary to keep itself informed as to whether the
provisions of Alabama law and the regulations and orders issued thereunder by
the ADB have been complied with, and the ADB may examine Eufaula BancCorp.
Eufaula BancCorp is an "affiliate" of the Subsidiary Banks under the Federal
Reserve Act, which imposes certain restrictions on (i) loans by the Subsidiary
Banks to Eufaula BancCorp; (ii) investments in the stock or securities of
Eufaula BancCorp by the Subsidiary Banks; (iii) the Subsidiary Bank's taking the
stock or securities of an "affiliate" as collateral for loans by the Subsidiary
Banks to a borrower; and (iv) the purchase of assets from Eufaula BancCorp by
the Subsidiary Banks.  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 AND OTHER RESTRICTIONS

      Eufaula BancCorp is a legal entity separate and distinct from its
subsidiaries.  There are various legal and regulatory limitations under Federal
and state law on the extent to which Eufaula BancCorp's subsidiaries can pay
dividends or otherwise supply funds to Eufaula BancCorp.

      The principal source of Eufaula BancCorp's cash revenues is dividends from
its subsidiaries and there are certain limitations under Federal and state laws
on the payment of dividends by such subsidiaries.  The prior approval of the FRB
or the applicable state commissioner, as the case may be, is required if the
total of all dividends declared by any state member bank of the Federal Reserve
System in any calendar year exceeds the Bank's net income (as defined) for that
year combined with its retained net income for the preceding two calendar years,
less any required transfers to surplus or a fund for the retirement of any
preferred stock.  The relevant Federal and state regulatory agencies also have
authority to prohibit a state member bank or bank holding company, which would
include Eufaula BancCorp and the Subsidiary Banks from engaging in what, in the
opinion of such regulatory body, constitutes an unsafe or unsound practice in
conducting its business.  The payment of dividends could, depending upon the
financial condition of the subsidiary, be deemed to constitute such an unsafe or
unsound practice.

     Eufaula Bank is subject to supervision and regular examination by the ADB.
Under the Alabama Banking Code, a state bank may not declare or pay a dividend
in excess of 90% of the net earnings of such bank until the surplus of the bank
is equal to at least 20% of its capital, and thereafter the prior written
approval of the Superintendent of Banks is required if the total of all
dividends declared by the bank in any calendar year exceeds the total of its net
earnings for that year combined with its retained net earnings for the preceding
two years less any required transfers to surplus. No dividends, withdrawals or
transfers may be made from the bank's surplus without prior written approval of
the Superintendent of Banks.

     American Bank is subject to supervision and regulation by the State of
Florida Department of Banking ("Florida Department").  Under the Florida Banking
Code, a state bank may, after making certain chargeoffs, declare a dividend in
an amount not to exceed its aggregate net profits of the period combined with
its retained net profits of the preceding two years and, with the approval of
the Florida Department, may declare a dividend from retained net profits which
accrued prior to the preceding two years, provided that the Bank carried 20% of
its net profits for such preceding period to its surplus fund, until the same
shall at least equal the amount of its common and preferred stock then issued
and outstanding.

      Retained earnings of the Banks available for payment of cash dividends
under all applicable regulations without obtaining governmental approval were
approximately $1.89 million as of December 31, 1996.

                                       3
<PAGE>
 
      In addition, the Banks are subject to limitations under Section 23A of the
Federal Reserve Act with respect to extensions of credit to, investments in, and
certain other transactions with, Eufaula BancCorp.  Furthermore, loans and
extensions of credit are also subject to various collateral requirements.

CAPITAL ADEQUACY

      The FRB has adopted risk-based capital guidelines for bank holding
companies.  The minimum ratio of total capital ("Total Capital") to risk-
weighted assets (including certain off-balance sheet items, such as standby
letters of credit) is 8%.  At least half of the Total Capital is to be composed
of common stock, minority interests in the equity accounts of consolidated
subsidiaries, noncumulative perpetual preferred stock and a limited amount of
perpetual preferred stock, less goodwill ("Tier I Capital").  The remainder may
consist of subordinated debt, other preferred stock and a limited amount of loan
loss reserves.

      In addition, the FRB has established minimum leverage ratio guidelines for
bank holding companies.  These guidelines for a minimum ratio of Tier I Capital
to total assets, less goodwill (the "Leverage Ratio") of 3% for bank holding
companies that meet certain specified criteria, including those having the
highest regulatory rating.  All other bank holding companies generally are
required to maintain a Leverage Ratio of at least 3% plus an additional cushion
of 100 to 200 basis points.  The guidelines also provide that bank holding
companies experiencing internal growth or making acquisitions will be expected
to maintain strong capital positions substantially above the minimum supervisory
levels without significant reliance on intangible assets.  Furthermore, the FRB
has indicated that it will consider a "tangible Tier I capital leverage ratio"
(deducting all intangibles) and other indications of capital strength in
evaluating proposals for expansion or new activities.

      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 less amounts of capital.

      The FDIC 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: (i) a "well capitalized"
institution has a total risk-based capital ratio of at least 10%, a Tier I risk-
based ratio of at least 6% and a leverage ratio of at least 5%; (ii) an
"adequately capitalized" institution has a total risk-based capital ratio of at
least 8%, a Tier I risk-based ratio of at least 4% and a leverage ratio of at
least 4%; (iii) an "undercapitalized" institution has a total risk-based capital
ratio of under 8%, a Tier I risk-based ratio of under 4% or a leverage ratio of
under 4%; (iv) a "significantly undercapitalized" institution has a total risk-
based capital ratio of under 6%, a Tier I risk-based ratio of under 3% or a
leverage ratio of under 3%; and (v) 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 FDIC regulations also establish procedures
for "downgrading" an institution to a lower capital category based on
supervisory factors other than capital.

                                       4
<PAGE>
 
      The downgrading of an institution's category is automatic in two
situations: (i) whenever an otherwise well-capitalized institution is subject to
any written capital order or directive; and (ii) where an undercapitalized
institution fails to submit or implement a capital restoration plan or has its
plan disapproved.  The Federal banking agencies may treat institutions in the
well-capitalized, adequately capitalized and undercapitalized categories as if
they were in the next lower level based on safety and soundness considerations
relating to factors other than capital levels.

      All insured institutions regardless of their level of capitalization are
prohibited by the Federal Deposit Insurance Corporation Improvement Act of 1991
(the "FDIC Act") from paying any dividend or making any other kind of capital
distribution or paying any management fee to any controlling person if following
the payment or distribution the institution would be undercapitalized.  While
the prompt corrective action provisions of the FDIC Act contain no requirements
or restrictions aimed specifically at adequately capitalized institutions, other
provisions of the FDIC Act and the agencies' regulations relating to deposit
insurance assessments, brokered deposits and interbank liabilities treat
adequately capitalized institutions less favorably than those that are well-
capitalized.

      Under the FDIC's regulations, all of the Subsidiary Banks are "well
capitalized" institutions.

SUPPORT OF SUBSIDIARY BANKS

      Under the FRB policy, Eufaula BancCorp is expected to act as a source of
financial strength to, and to commit resources to support, each of the
Subsidiary Banks.  This support may be required at times when, absent such FRB
policy, Eufaula BancCorp may not be inclined to provide it.  In the event of a
bank holding company's bankruptcy, any commitment by the bank holding company to
a Federal bank regulatory agency to maintain the capital of a subsidiary bank
will be assumed by the bankruptcy trustee and entitled to a priority of payment.

      As a result of the enactment of Section 206 of the Financial Institutions
Reform, Recovery and Enforcement Act ("FIRREA") on August 9, 1989, a depository
institution insured by the FDIC can be held liable for any loss incurred by, or
reasonably expected to be incurred by, the FDIC after August 9, 1989 in
connection with (i) the default of a commonly controlled FDIC-insured depository
institution or (ii) any assistance provided by the FDIC to any commonly
controlled FDIC-insured depository institution "in danger of default", which is
defined generally as the existence of certain conditions indicating that a
default is likely to occur in the absence of regulator assistance.

FDIC INSURANCE ASSESSMENTS

      The Subsidiary Banks are subject to FDIC deposit insurance assessments for
the Bank Insurance Fund (the "BIF").  Since 1989, the annual FDIC deposit
insurance assessments increased from $.083 per $100 of deposits to a minimum
level of $.23 per $100, an increase of 177 percent.  The FDIC implemented a
risk-based assessment system whereby banks are assessed on a sliding scale
depending on their placement in nine separate supervisory categories, from $.23
per $100 of deposits for the healthiest banks (those with the highest capital,
best management and best overall condition) to as much as $.31 per $100 of
deposits for the less-healthy institutions, for an average $.259 per $100 of
deposits.

                                       5
<PAGE>
 
      On August 8, 1995, the FDIC lowered the BIF premium for "healthy" banks
83% from $.23 per $100 in deposits to $.04 per $100 in deposits, while retaining
the $.31 level for the riskiest banks.  The average assessment rate was
therefore reduced from $.232 to $.044 per $100 of deposits.  The new rate took
effect on September 29, 1995.  On November 14, 1995, the FDIC again lowered the
BIF premium for "healthy" banks from $.04 per $100 of deposits to zero for the
highest rated institutions (92% of the industry).  As a result, each of the
Subsidiary Banks pay only the legally required annual minimum payment for
insurance as of January 1997.

RECENT LEGISLATIVE AND REGULATORY ACTION

      On April 19,1995, the four Federal bank regulatory agencies adopted
revisions to the regulations promulgated pursuant to the Community Reinvestment
Act (the "CRA"), which are intended to set distinct assessment standards for
financial institutions.  The revised regulations contains three evaluation
tests: (i) a lending test which will compare the institution's market share of
loans in low- and moderate-income areas to its market share of loans in its
entire service area and the percentage of a bank's outstanding loans to low- and
moderate-income areas or individuals; (ii) a services test which will evaluate
the provisions of services that promote the availability of credit to low- and
moderate-income areas; and (iii) an investment test, which will evaluate an
institution's record of investments in organizations designed to foster
community development, small- and minority-owned businesses and affordable
housing lending, including state and local government housing or revenue bonds.
The regulation is designed to reduce some paperwork requirements of the current
regulations and provide regulators, institutions and community groups with a
more objective and predictable manner with which to evaluate the CRA performance
of financial institutions.  The rule became effective on January 1, 1996, at
which time evaluation under streamlined procedures were scheduled to begin for
institutions with assets of less than $250 million that are owned by a holding
company with total assets of less than $1 billion.  Until the regulators release
guidelines for examiners that interpret the rules, it is unclear what effect, if
any, these regulations will have on Eufaula BancCorp and the Subsidiary Banks.
Congress and various Federal agencies (including, in addition to the bank
regulatory agencies, the Department of Housing and Urban Development, the
Federal Trade Commission and the Department of Justice) (collectively, the
"Federal Agencies") responsible for implementing the nation's fair lending laws
have been increasingly concerned that prospective home buyers and other
borrowers are experiencing discrimination in their efforts to obtain loans.  In
recent years, the Department of Justice has filed suit against financial
institutions, which it determined had discriminated, seeking fines and
restitution for borrowers who allegedly suffered from discriminatory practices.
Most, if not all, of these suits have been settled (some for substantial sums)
without a full adjudication on the merits.

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

                                       6
<PAGE>
 
      On September 23, 1994, President Clinton signed the Reigle Community
Development and Regulatory Improvement Act of 1994 (the "Regulatory Improvement
Act").  The Regulatory Improvement Act contains funding for community
development projects through banks and community development financial
institutions and also numerous regulatory relief provisions designed to
eliminate certain duplicative regulations and paperwork requirements.  On
September 29, 1994, President Clinton signed the Reigle-Neal Interstate Banking
and Branching Efficiency Act of 1994 (the "Federal Interstate Bill") which
amended Federal law to permit bank holding companies to acquire existing banks
in any state effective September 29, 1995, and to permit any interstate bank
holding company to merge its various bank subsidiaries into a single bank with
interstate branches after May 31, 1997.  States have the authority to authorize
interstate branching prior to June 1, 1997, or, alternatively, to  opt out of
interstate branching prior to that date.

STATE REGULATIONS

     The geographical areas in which a bank holding company may engage in
business through bank subsidiaries are a function of the relationship between
the banking laws of the state in which the bank holding company maintains its
principal place of business and the Holding Company Act. Subject to certain
exceptions and in all cases prior regulatory approval, a banking holding company
maintaining its principal place of business in the State of Alabama may engage
in statewide banking by (i) establishing de novo banks or acquiring existing
                                         -- ----                            
banks in other counties in the State of Alabama, (ii) causing one or more of its
banking subsidiaries to merge across county lines, or (iii) causing its banking
subsidiaries to establish branches in one or more counties.

MONETARY POLICY

      The earnings of Eufaula BancCorp are affected by domestic and foreign
economic conditions, particularly by the monetary and fiscal policies of the
United States government and its agencies.

      The FRB has had, and will continue to have, an important impact on the
operating results of commercial banks through its power to implement national
monetary policy in order, among other things, to mitigate recessionary and
inflationary pressures by regulating the national money supply.  The techniques
used by the Federal Reserve Bank include setting the reserve requirements of
member banks and establishing the discount rate on member bank borrowings.  The
FRB also conducts open market transactions in United States government
securities.
 
FUTURE REQUIREMENTS

      Statutes and regulations are regularly introduced which contain wide-
ranging proposals for altering the structure, regulations and competitive
relationships of the nation's financial institutions.  It cannot be predicted
whether or in what form any proposed statute or regulation will be adopted or
the extent to which the business of Eufaula BancCorp or any of the Subsidiary
Banks may be affected by such statute or regulation.

                                       7
<PAGE>
 
ITEM 2.   PROPERTIES

     The principal properties of the Company consist of the properties of the
Banks. For a description of the properties of the Banks, See "Item 1 - Business
of the Company and Subsidiary Banks - Properties" included elsewhere in this
Report.

ITEM 3.   LEGAL PROCEEDINGS

     Neither the Company nor any of its subsidiary banks is a party to, nor is
any of their property the subject of, any material pending legal proceedings,
other than the ordinarily routine proceedings incidental to the business of the
Banks, nor to the knowledge of the management of the Company are any such
proceedings contemplated or threatened against it or its subsidiaries.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS

     At a called meeting of shareholders held on December 10, 1996, the
following items were unanimously approved by the shareholders:

     (1)    The following directors were elected for the terms indicated:

<TABLE>
<CAPTION>
                        DIRECTOR                       TERM
              ---------------------------       -----------------
              <S>             <C>                               
 
 
                Greg Faison                       One year
                Michael C. Dixon                  Two years
                Robert M. Dixon                   Two years
                James J. Jaxon, Jr.               Two years
                Janis R. Biggers                  Three years
                Thomas Harris                     Three years
                Frank McRight                     Three years
</TABLE>

     (2) Declaration of a two-for-one stock split on its outstanding shares of
         common stock, $1 par value, payable on December 20, 1996 to
         stockholders of record on December 13, 1996, and that this transaction
         be reflected on the Company's balance sheet as an increase of $676,602
         to reflect the issuance of 676,602 shares of stock with a corresponding
         decrease of $676,602 in capital surplus.

     (3) A resolution to amend the Certificate of Incorporation of Eufaula
         BancCorp to increase the number of shares of authorized common stock
         from two million shares of common stock, $1 par value, to five million
         shares of common stock, $1 par value.

     (4) A resolution to amend the stock option plan of 1994 to provide that
         members of the Board of Directors of the corporation are eligible to be
         granted stock options pursuant to the terms of said stock option plan
         together with selected key employees or others to be named pursuant to
         said plan, with the allocation of such stock options to be in such
         amount and pursuant to such terms as Board of Directors, in their sole
         and unlimited discretion, shall deem necessary or proper for the
         purpose of effectuating and carrying out the intent and purposes of the
         resolution.

                                       8
<PAGE>
 
                                    PART II

                                        
ITEM 5.   MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
          SECURITY HOLDER MATTERS

          (a)  In June 1996, the Company's common stock was approved for listing
               on the Nasdaq National Market System ("Nasdaq - NMS") under the
               symbol EUFA.

               Prior to the listing, quotations for the common stock were not
               reported on any market, and there was no established public
               trading market for the common stock.

               The following table sets forth: (a) the high and low bid prices
               for the common stock as quoted on Nasdaq-NMS during the periods
               since the common stock was listed; and (b) the amount of
               quarterly dividends declared on the common stock during the
               periods indicated.

<TABLE>
<CAPTION>
                                                                                           
                                                            BID PRICES                      CASH          
                 CALENDAR PERIOD              -----------------------------------        DIVIDENDS   
                       1996                           LOW                 HIGH            DECLARED
               -------------------            ---------------     ---------------     ----------------
               
               
               <S>                             <C>                 <C>                <C>  
               Second quarter                  $       9-1/4       $          10       $         0.05
               Third quarter                          10-1/2              11-1/2                 0.05
               Fourth quarter                             12              13-1/2                 0.05
</TABLE>

          (b)  As of March 1, 1997, there were approximately 306 holders of
               record of the Common Stock.

          (c)  The Company paid an annual dividend on its Common Stock of $.20
               and $.18 per share for fiscal years 1996 and 1995, respectively.

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

GENERAL

     The Company's principal asset is its ownership of the Banks.  Accordingly,
the Company's results of operations are primarily dependent upon the results of
operations of the Banks.  The Banks conduct a commercial banking business which
consists of attracting deposits from the general public and applying those funds
to the origination of commercial, consumer and real estate loans (including
commercial loans collateralized by real estate).  The Banks' profitability
depends primarily on net interest income, which is the difference between
interest income generated from interest-earning assets (i.e., loans and
investments) less the interest expense incurred on interest-bearing liabilities
(i.e., customer deposits and borrowed funds).  Net interest income is affected
by the relative amounts of interest-earning assets and interest-bearing
liabilities, and the interest rate paid and earned on these balances.  Net
interest income is dependent upon the Banks' interest rate spread, which is the
difference between the average yield earned on its interest-earning assets and
the average rate paid on its interest-bearing liabilities.  When interest-
earning assets approximates or exceeds interest-bearing liabilities, any
positive interest rate spread will generate interest income.  The interest rate
spread is impacted by interest rates, deposit flows and loan demand.
Additionally, and to a lesser extent, the Banks' profitability is affected by
such factors as the level of noninterest income and expenses, the provision for
loan losses and the effective tax rate.  Noninterest income consists primarily
of loan and other fees and income from the sale of investment securities.
Noninterest expenses consist of compensation and benefits, occupancy-related
expenses, deposit insurance premiums paid to the FDIC and other operating
expenses.

RESULTS OF OPERATIONS FOR YEARS ENDED DECEMBER 31, 1996 AND 1995

     The Company's results of operations are determined by its ability to
effectively manage interest income and expense, to minimize loan and investment
losses, to generate noninterest income and to control noninterest expense.
Since interest rates are determined by market forces and economic conditions
beyond the control of the Company, the ability to generate net interest income
is dependent upon the Bank's ability to obtain an adequate spread between the
rate earned on interest-earning assets and the rate paid on interest-bearing
liabilities.  Thus, the key performance measure for net interest income is the
interest margin or net yield, which is taxable-equivalent net interest income
divided by average earning assets.

     The primary component of consolidated earnings is net interest income, or
the difference between interest income on interest-earning assets and interest
paid on interest-bearing liabilities.  The net interest margin is net interest
income expressed as a percentage of average interest-earning assets.  Interest-
earning assets consist of loans, investment securities and Federal funds sold.
Interest-bearing liabilities consist of deposits and other short-term
borrowings.  A portion of interest income is earned on tax-exempt investments,
such as state and municipal bonds.  In an effort to state this tax-exempt income
and its resultant yield on a basis comparable to all other taxable investments,
an adjustment is made to analyze this income on a taxable-equivalent basis.

                                       10
<PAGE>
 
     The Company's net interest margin decreased 11 basis points or 2.00% to
5.39% in 1996 as compared to 5.50% in 1995.  The yield on average interest-
earning assets decreased to 8.76% in 1996 as compared to 9.00% in 1995.  The
interest rate paid on average interest-bearing liabilities decreased to 4.31% in
1996 as compared to 4.45% in 1995.  Net interest income on a taxable-equivalent
basis was $4,801,000 in 1996 as compared to $4,491,000 in 1995, representing an
increase of $310,000 or 6.90%.  The increase resulted from an increase of
$327,000 generated on increased volume and a reduction of $17,000 due to a
decrease in average yield.

     Average interest-earning assets increased $7,316,000 to $89,037,000 in 1996
from $81,721,000 in 1995, an increase of 8.95%.  Average loans increased
$2,892,000; average investments increased $4,347,000; and average Federal funds
sold increased $77,000.  The increase in average interest-earning assets was
funded by an increase of $7,826,000, or 9.90%, in average deposits to
$86,856,000 in 1996 from $79,030,000 in 1995.  Approximately 21% of the average
deposits were noninterest-bearing deposits in 1996 and 1995.

     The allowance for loan losses represents a reserve for potential losses in
the loan portfolio.  The adequacy of the allowance for loan losses is evaluated
periodically based on a review of all significant loans, with a particular
emphasis on nonaccruing, past due and other loans that management believes
require attention.

     The provision for loan losses is a charge to earnings in the current period
to replenish the allowance and maintain it at a level management has determined
to be adequate.  The provision for loan losses charged to earnings amounted to
$81,000  in 1996 and $86,000 in 1995, representing a decrease of 5.81% in the
provision.  The decrease in the provision was attributed to a decrease of 73.91%
in net loan charge-offs to average loans outstanding and was based upon
management's evaluation of the loan portfolios and the potential loan risk
associated with certain loans.  Net loan charge-offs amounted to approximately
$30,000 in 1996 as compared to net loan charge-offs of approximately $107,000 in
1995. The allowance for loan losses as a percentage of total loans outstanding
amounted to 1.26% at December 31, 1996 as compared to 1.25% at December 31,
1995.

     The determination of the amounts allocated for loan losses is based upon
management's judgment concerning factors affecting loan quality and assumptions
about the local and national economy.  Management considers the year-end
allowances adequate to cover potential losses in the loan portfolio.

     Noninterest income increased $86,000 to $874,000 in 1996 from $788,000 in
1995 due primarily to an increase of $62,000 in service charges on deposit
accounts. Net gains on sales of investment securities also increased $21,000.

     Noninterest expense increased $198,000 to $3,551,000 in 1996 from
$3,353,000 in 1995, due primarily to an increase in salaries and employee
benefits of $137,000.  The increase in salaries and employee benefits was
attributable to a normal increase in salaries and related benefits for
employees.

                                       11
<PAGE>
 
     Average total assets increased 7.60% to $99,145,000 in 1996 as compared to
$92,139,000 in 1995.  Average interest-earning assets increased 8.95% in 1996
over 1995.  Loan demand was slightly weaker in 1996 than in 1995 as evidenced by
a loan to deposit ratio of 58% in 1996 as compared to 60% in 1995.  As a result,
average investment securities increased 13.44% in 1996 over 1995 as compared to
an increase of only 3.38% in 1995 over 1994.  Average Federal funds sold
increased $77,000 to $2,059,000 in 1996 from $1,982,000 in 1995.

LIQUIDITY AND CAPITAL RESOURCES

     Liquidity management involves the matching of the cash flow requirements of
customers who may be either depositors desiring to withdraw funds or borrowers
needing assurance that sufficient funds will be available to meet their credit
needs and the ability of the Company and the Banks to meet those needs.  The
Company and the Banks seek to meet liquidity requirements primarily through
management of short-term investments (principally Federal funds sold)  and
monthly amortizing loans.  Another source of liquidity is the repayment of
maturing single payment loans.  Also, the Banks maintain relationships with
correspondent banks which could provide funds on short notice, if needed.

     The liquidity and capital resources of the Company and the Banks are
monitored on a periodic basis by state and Federal regulatory authorities. As
determined under guidelines established by these regulatory authorities, the
Banks' liquidity ratio at December 31, 1996 was considered satisfactory. At that
date, the Banks' short-term investments were adequate to cover any reasonable
anticipated immediate need for funds. The Company and the Banks were aware of no
events or trends likely to result in a material change in their liquidity.
During 1996, the Company increased its capital by retaining earnings of $958,000
after payment of dividends. After recording a reduction in capital of $191,000
for unrealized losses on securities, net of taxes, total capital increased
$767,000 to $10,715,000 from $9,948,000 at December 31, 1995.

     At December 31, 1996, the Company had binding commitments for capital
expenditures of $420,000 related to a new branch location of American Bank.

     In accordance with risk capital guidelines issued by the Federal Reserve
Board, Eufaula BancCorp is required to maintain a minimum standard of total
capital to weighted risk assets of 8%.  Additionally, all member banks must
maintain "core" or "Tier 1" capital of at least 4% of total assets ("leverage
ratio").  Member banks operating at or near the 4% capital level are expected to
have well-diversified risks, including no undue interest rate risk exposure,
excellent control systems, good earnings, high asset quality, and well managed
on- and off-balance sheet activities; and, in general, be considered strong
banking organizations with a composite 1 rating under the CAMEL rating system of
banks.  For all but the most highly rated banks meeting the above conditions,
the minimum leverage ratio is to be 4% plus an additional 100 to 200 basis
points.

                                       12
<PAGE>
 
  The following table summarizes the regulatory capital levels of the Company at
December 31, 1996.

<TABLE>
<CAPTION>
                                          ACTUAL                              REQUIRED                            EXCESS
                            --------------------------------     ---------------------------------    ----------------------------
                                  AMOUNT          PERCENT              AMOUNT          PERCENT              AMOUNT        PERCENT
                            --------------   ---------------     --------------   ----------------    ----------------------------
                                                               (DOLLARS IN THOUSANDS)
                            ------------------------------------------------------------------------------------------------------
                            <S>               <C>                 <C>               <C>                 <C>              <C>
Leverage capital           $  9,259                9.42%            $    3,995          4.00%           $     5,264          5.42% 
Risk-based capital:                                                                                                              
Core capital                  9,259               15.54                  2,383          4.00                  6,876         11.54
    Total capital             9,887               16.60                  4,766          8.00                  5,121          8.60 
</TABLE>

     Each Bank also met its individual regulatory capital requirements at
December 31, 1996.

AVERAGE BALANCES AND NET INCOME ANALYSIS

     The following table sets forth the amount of the Company's interest income
or interest expense for each category of interest-earning assets and interest-
bearing liabilities and the average interest rate for total interest-earning
assets and total interest-bearing liabilities, net interest spread and net yield
on average interest-earning assets. Federally tax-exempt income is presented on
a taxable-equivalent basis assuming a 34% Federal tax rate.
<TABLE>
<CAPTION>
                                                                      YEAR ENDED DECEMBER 31,
                                           ------------------------------------------------------------------------
                                                            1996                                 1995
                                           ------------------------------------    --------------------------------
                                                                     (DOLLARS IN THOUSANDS)
                                           ------------------------------------------------------------------------
                                                          INTEREST    AVERAGE                 INTEREST     AVERAGE
                                            AVERAGE       INCOME/     YIELD/       AVERAGE    INCOME/      YIELD/
                                            BALANCE       EXPENSE    RATE PAID     BALANCE    EXPENSE     RATE PAID
                                           ---------    ---------    ---------    --------    --------   ----------
<S>                                         <C>         <C>           <C>          <C>        <C>        <C> 
ASSETS
 Interest-earning assets:
   Loans, net of unearned interest           $50,298     $  5,175      10.29%     $ 47,406    $ 4 ,971     10.49%
   Investment securities:                                                                               
    Taxable                                   28,218        1,802       6.39        23,734      1,519       6.40
    Tax exempt                                 8,462          718       8.48         8,599        752       8.75
   Federal funds sold                          2,059          105       5.10         1,982        112       5.65
                                           ---------     --------                 --------    -------   
      Total interest-earning assets           89,037        7,800       8.76        81,721      7,354       9.00
                                           ---------     --------                 --------    -------
 
 Noninterest-earning assets:
   Cash                                        4,906                                 5,148
   Allowance for loan losses                    (637)                                 (610)
   Unrealized loss on available
    for sale securities                         (247)                                 (130)
   Other assets                                6,086                                 6,010
                                           ---------                              --------
     Total noninterest-earning assets         10,108                                10,418
                                           ---------                              --------
 
     Total assets                           $ 99,145                              $ 92,139
                                           =========                              ========
</TABLE>

                                       13
<PAGE>
 
<TABLE>
<CAPTION>
                                                                      YEAR ENDED DECEMBER 31,
                                           ------------------------------------------------------------------------
                                                            1996                                 1995
                                           ------------------------------------    --------------------------------
                                                                     (DOLLARS IN THOUSANDS)
                                           ------------------------------------------------------------------------
                                                          INTEREST    AVERAGE                 INTEREST     AVERAGE
                                            AVERAGE       INCOME/     YIELD/       AVERAGE    INCOME/      YIELD/
                                            BALANCE       EXPENSE    RATE PAID     BALANCE    EXPENSE     RATE PAID
                                           ---------    ---------    ---------    --------    --------   ----------
<S>                                         <C>         <C>           <C>          <C>        <C>        <C> 

LIABILITIES AND STOCKHOLDERS'
  EQUITY
  Interest-bearing liabilities:
   Savings and interest-bearing
     demand deposits                      $ 32,620       $  1,047      3.21  %   $  32,002    $  1,096       3.42 %
  Time deposits                             36,045          1,903      5.28         30,166       1,625       5.39
  Other borrowings                             872             49      5.62          2,105         142       6.75
                                          --------       --------                ---------    --------
    Total interest-bearing                  69,537          2,999      4.31         64,273       2,863       4.45
      liabilities
                                          --------       --------                ---------    --------
 
  Noninterest-bearing liabilities
   and stockholders' equity:
   Demand deposits                          18,191                                  16,862
   Other liabilities                         1,086                                   1,749
   Stockholders' equity                     10,331                                   9,255
                                          ---------                              ---------
    Total noninterest-bearing
      liabilities and stockholders'
      equity                                29,608                                  27,866
                                          --------                               ---------
 
Total liabilities and
  stockholders' equity                    $ 99,145                               $  92,139
                                          ========                               =========
 
Interest rate spread                                                   4.45  %                               4.55 %
                                                                       ====                                  ====
 
Net interest income                                      $  4,801                            $   4,491
                                                         ========                            =========
 
Net interest margin                                                    5.39  %                               5.50 %
                                                                       ====                                  ====
</TABLE>

                                       14
<PAGE>
 
RATE AND VOLUME ANALYSIS

     The following table reflects the changes in net interest income resulting
from changes in interest rates and from asset and liability volume. Federally
tax-exempt interest is presented on a taxable-equivalent basis assuming a 34%
Federal tax rate. The change in interest attributable to rate has been
determined by applying the change in rate between years to average balances
outstanding in the later year. The change in interest due to volume has been
determined by applying the rate from the earlier year to the change in average
balances outstanding between years. Thus, changes that are not solely due to
volume have been consistently attributed to rate.

<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31,
                                        -------------------------------------------------------------------------
                                                    1996 VS. 1995                         1995 VS. 1994
                                        -------------------------------------------------------------------------
                                                                 (DOLLARS IN THOUSANDS)
                                        -------------------------------------------------------------------------
                                                         CHANGES DUE TO                        CHANGES DUE TO
                                          INCREASE    --------------------     INCREASE    ---------------------
                                          (DECREASE      RATE       VOLUME     (DECREASE     RATE        VOLUME
                                        -------------------------------------------------------------------------
<S>                                      <C>          <C>          <C>          <C>          <C>         <C> 
Increase (decrease) in:
 Income from earning assets:
   Interest and fees on loans             $   204     $   (99)    $     303     $  1,065    $   584     $     481
   Interest on securities:
    Taxable                                   283          (4)          287          177        118            59
    Tax-exempt                                (34)        (22)          (12)          10          5             5
   Interest on Federal funds                   (7)        (11)            4           12         28           (16)
                                        ---------    --------     ---------    ---------    -------     ---------
       Total interest income                  446        (136)          582        1,264        735           529
                                        ---------    --------     ---------    ---------    -------     ---------

 
Expense from interest-bearing
 liabilities:
 Interest on savings and interest-
   bearing demand deposits                    (49)        (70)           21           98         97             1
 Interest on time deposits                    278         (39)          317          625        459           166
 Interest on other borrowings                 (93)        (10)          (83)           5         (4)            9
                                        ---------    --------     ---------    ---------    -------     ---------
       Total interest expense                 136        (119)          255          728        552           176
                                        ---------    --------     ---------    ---------    -------     ---------
 
       Net interest income                $   310     $   (17)    $     327     $    536    $   183     $     353
                                        =========     =======     =========    =========    =======     =========
</TABLE>

NONINTEREST INCOME

  Following is a comparison of noninterest income for 1996 and 1995.

<TABLE>
<CAPTION>
                                                                                   1996                1995
                                                                           ---------------     ---------------
 
          <S>                                                              <C>                 <C>
           Service charges on deposit accounts                               $     745,546       $     683,704
           Insurance commissions                                                     9,030              23,018
           Securities transactions, net                                             27,470               5,567
           Other                                                                    91,728              76,087
                                                                           ---------------     ---------------
                                                                             $     873,774       $     788,376
                                                                           ===============     ===============
</TABLE>

                                       15
<PAGE>
 
Noninterest Expense

  Following is a comparison of noninterest expense for 1996 and 1995.

<TABLE>
<CAPTION>
                                                                               1996                  1995
                                                                      -----------------     -----------------
 
           <S>                                                         <C>                   <C>
            Salaries and employee benefits                              $     2,019,949       $     1,882,907
            Equipment and occupancy expense                                     421,244               426,531
            Amortization of intangibles                                          78,745                78,746
            Accounting and legal                                                 93,714               124,142
            State and FDIC assessments                                           20,143               100,620
            Other expenses                                                      917,285               739,674
                                                                      -----------------     -----------------
                                                                        $     3,551,080       $     3,352,620
                                                                      =================     =================
</TABLE>
                                                                               
ASSET/LIABILITY MANAGEMENT

  A principal objective of the Company's asset/liability management strategy is
to minimize its exposure to changes in interest rates by matching the maturity
and repricing horizons of interest-earning assets and interest-bearing
liabilities. At Eufaula Bank, this strategy is overseen in part through the
direction of the Investment Committee which establishes policies and monitors
results to control interest rate sensitivity. At American Bank, the strategy is
overseen by the Board of Directors with the direction and strategy being
directed principally by the President of the Bank.

  As part of the Banks' interest rate risk management policy, the Investment
Committee or Board examines the extent to which its assets and liabilities are
"interest rate-sensitive" and monitors its interest rate-sensitivity "gap".  An
asset or liability is considered to be interest rate-sensitive if it will
reprice or mature within the time period analyzed, usually one year or less. The
interest rate-sensitivity gap is the difference between the interest-earning
assets and interest-bearing liabilities scheduled to mature or reprice within
such time period. A gap is considered positive when the amount of interest rate-
sensitive assets exceeds the amount of interest rate-sensitive liabilities. A
gap is considered negative when the amount of interest rate-sensitive
liabilities exceeds the interest rate-sensitive assets. During a period of
rising interest rates, a negative gap would tend to adversely affect net
interest income, while a positive gap would tend to result in an increase in net
interest income. Conversely, during a period of falling interest rates, a
negative gap would tend to result in an increase in net interest income, while a
positive gap would tend to adversely affect net interest income. If the
Company's assets and liabilities were equally flexible and moved concurrently,
the impact of any increase or decrease in interest rates on net interest income
would be minimal.

                                       16
<PAGE>
 
  A simple interest rate "gap" analysis by itself may not be an accurate
indicator of how net interest income will be affected by changes in interest
rates. Accordingly, the Investment Committee or Board also evaluates how the
repayment of particular assets and liabilities is impacted by changes in
interest rates. Income associated with interest-earning assets and costs
associated with interest-bearing liabilities may not be affected uniformly by
changes in interest rates. In addition, the magnitude and duration of changes in
interest rates may have a significant impact on net interest income.   For
example, although certain assets and liabilities may have similar maturities or
periods of repricing, they may react in different degrees to changes in market
interest rates. Interest rates on certain types of assets and liabilities
fluctuate in advance of changes in general market interest rates, while interest
rates on other types may lag behind changes in general market rates. In
addition, certain assets, such as adjustable rate mortgage loans, have features
((generally referred to as "interest rate caps") which limit changes in interest
rates on a short-term basis and over the life of the asset. In the event of a
change in interest rates, prepayment and early withdrawal levels also could
deviate significantly from those assumed in calculating the interest rate gap.
The ability of many borrowers to service their debts also may decrease in the
event of an interest rate increase.

  As of December 31, 1996, the Company's cumulative one-year interest rate
sensitivity gap ratio was 58%. This indicates that the Company's interest-
bearing liabilities will reprice during this period at a rate faster than the
Company's interest-earning assets. However, management believes that the type
and amount of the Company's interest rate-sensitive liabilities (a significant
portion of which are composed of money market, NOW and savings accounts whose
yields, to a certain extent, are subject to the discretion of management) may
reduce the potential impact that a rise in interest rates might have on the
Company's net interest income.   The Company has found that NOW checking
accounts and savings deposits are generally not sensitive to changes in interest
rates.  If such liabilities totaling $18,391,000 were included in "one to five
years maturity" rather than the "zero to three months maturity", cumulative
interest rate sensitivity gap ratio for the cumulative one-year period would be
79% rather than 58%.  In addition, the Company has borrowing agreements with
three correspondent banks and the Federal Home Loan Bank to provide temporary
liquidity as necessary.

  The following table sets forth the distribution of the repricing of the
Company's earning assets and interest-bearing liabilities as of December 31,
1996, the interest rate sensitivity gap (i.e., interest rate sensitive assets
less interest rate sensitive liabilities), the cumulative interest rate
sensitivity gap ratio (i.e., interest rate sensitive assets divided by interest
rate sensitivity liabilities) and the cumulative sensitivity gap ratio. The
table also sets forth the time periods in which earning assets and liabilities
will mature or may reprice in accordance with their contractual terms. However,
the table does not necessarily indicate the impact of general interest rate
movements on the net interest margin since the repricing of various categories
of assets and liabilities is subject to competitive pressures and the needs of
the Banks' customers. In addition, various assets and liabilities indicated as
repricing within the same period may in fact reprice at different times within
such period and at different rates.

                                       17
<PAGE>
 
<TABLE>
<CAPTION>
                                                                     AT DECEMBER 31, 1996
                                            ---------------------------------------------------------------------
                                                                 MATURING OR REPRICING WITHIN
                                            ---------------------------------------------------------------------
                                                ZERO TO         THREE         ONE TO         OVER
                                                 THREE        MONTHS TO        FIVE          FIVE
                                                MONTHS        ONE YEAR         YEARS         YEARS        TOTAL
                                            ---------------------------------------------------------------------
                                                                    (DOLLARS IN THOUSANDS)
                                            ---------------------------------------------------------------------
<S>                                           <C>            <C>             <C>           <C>           <C> 
EARNING ASSETS:                          
 Interest-bearing deposits                    $      750     $      --      $      --      $     --     $     750
 Federal funds sold                                1,375            --             --            --         1,375
 Investment securities                               416          3,504          6,603        26,373       36,896
 Loans                                            23,747          9,457         16,790         2,174       52,168
                                            ------------     ----------     ----------     ---------    ---------
                                                  26,288         12,961         23,393        28,547       91,189
                                            ------------     ----------     ----------     ---------    ---------
INTEREST-BEARING LIABILITIES:            
 Interest-bearing demand deposits                 26,412            --             --            --        26,412
 Savings                                           5,530            --             --            --         5,530
 Certificates less than $100,000                  11,843          8,771          5,265           --        25,879
 Certificates, $100,000 and over                   5,278          7,615            800           --        13,693
 Federal funds purchased and securities  
   sold under agreements to repurchase             2,675            --             --            --         2,675
                                            ------------     ----------     ----------     ---------    ---------
                                                  51,738         16,386          6,065           --        74,189
                                            ------------     ----------     ----------     ---------    ---------
                                         
INTEREST RATE SENSITIVITY GAP                 $  (25,450)    $   (3,425)    $   17,328     $  28,547    $  17,000
                                            ============     ==========     ==========     =========    =========
 
CUMULATIVE INTEREST RATE SENSITIVITY GAP      $  (25,450)    $  (28,875)    $  (11,547)    $  17,000
                                            ============     ==========     ==========     =========    
 
INTEREST RATE SENSITIVITY GAP RATIO                 0.51           0.79           3.86           N/A
                                            ============     ==========     ==========     =========    
 
CUMULATIVE INTEREST RATE SENSITIVITY GAP
   RATIO                                            0.51           0.58           0.84          1.23
                                            ============     ==========     ==========     =========    
</TABLE>
                                                                                
MATURITIES AND SENSITIVITY OF LOANS TO CHANGES IN INTEREST RATES

     The Company's loan portfolio, as of December 31, 1996, was made up
primarily of short-term fixed rate loans or variable rate loans. The average
contractual life on instalment loans is approximately three years, while
mortgages are generally variable over one-to five-year periods. Total loans as
of December 31, 1996 are shown in the following table according to maturity
classifications: (i) one year or less, (ii) after one year through five years,
and (iii) after five years.
<TABLE>
<CAPTION>
                                                             DECEMBER 31,
                                                                 1996
                                                              (Dollars in
                                                              Thousands)
                                                          -------------------
MATURITY:                                            
<S>                                                       <C>
   One year or less                                       $            33,204
   After one year through five years                                   16,790
   After five years                                                     2,174
                                                          -------------------
                                                          $            52,168
                                                          ===================
</TABLE>
                                                                                

                                       18
<PAGE>
 
     The following table summarizes loans at December 31, 1996 with the due
dates after one year which (i) have predetermined interest rates and (ii) have
floating or adjustable interest rates.

<TABLE>
<CAPTION>
                                                         DECEMBER 31,
                                                             1996
                                                          (Dollars in
                                                          Thousands)
                                                     -------------------
                                                     
<S>                                                    <C>
 Predetermined interest rates                          $          18,964
 Floating or adjustable interest rates                                 -
                                                     -------------------
                                                       $          18,964
                                                     ===================
</TABLE>

     Records were not available to present the above information on maturity or
repricing for each category listed in the loan portfolio below and could not be
reconstructed without undue burden.

LOAN PORTFOLIO

     The amount of loans outstanding at the indicated dates is shown in the
following table according to type of loans.
 
<TABLE>
<CAPTION>
                                                                                      DECEMBER 31,
                                                                         -----------------------------------
                                                                                 1996                1995
                                                                         ---------------     ---------------
                                                                                (DOLLARS IN THOUSANDS)
                                                                         -----------------------------------
<S>                                                                      <C>                  <C>   
 
      Commercial, financial and agricultural                               $      11,276       $       9,255
      Real estate - construction                                                   2,896               5,311
      Real estate - mortgage                                                      27,692              23,814
      Consumer instalment loans                                                   10,468              10,045
      Other                                                                           41                 231
                                                                         ---------------     ---------------
                                                                                  52,373              48,656
      Unearned discount                                                             (205)               (201)
      Allowance for loan losses                                                     (656)               (605)
                                                                         ---------------     ---------------
      Loans, net                                                           $      51,512       $      47,850
                                                                         ===============     ===============
</TABLE>

                                       19
<PAGE>
 
NONPERFORMING LOANS

    The following table presents, at the dates indicated, the aggregate of
nonperforming loans for the categories indicated.
<TABLE>
<CAPTION>
                                                                                      DECEMBER 31,
                                                                          ----------------------------------
                                                                                  1996               1995
                                                                          ---------------    ---------------
<S>                                                                       <C>                  <C>       
                                                                                 (DOLLARS IN THOUSANDS)
                                                                          ----------------------------------
 
      Loans accounted for on a nonaccrual basis                               $           -      $           1
 
      Instalment loans and term loans contractually past due ninety
        days or more as to interest or principal payments and still accruing             23              1,023
 
      Loans, the term of which have been renegotiated to provide a
        reduction or deferral of interest or principal because of
        deterioration in the financial position of the borrower                           -                  -
 
      Loans now current about which there are serious doubts as to
        the ability of the borrower to comply with present loan
        repayment terms                                                                   -                  -
</TABLE>
                                                                               

     In the opinion of management, any loans classified by regulatory
authorities as substandard or special mention that have not been disclosed above
do not (i) represent or result from trends or uncertainties which management
reasonably expects will materially impact future operating results, liquidity or
capital resources, nor (ii) represent material credits about which management is
aware of any information which causes management to have serious doubts as to
the ability of such borrowers to comply with the loan repayment terms. Any loans
classified by regulatory authorities as loss have been charged off.

SUMMARY OF LOAN LOSS EXPERIENCE

     The provision for possible loan losses is created by direct charges to
operations. Losses on loans are charged against the allowance in the period in
which such loans, in management's opinion, become uncollectible. Recoveries
during the period are credited to this allowance. The factors that influence
management's judgment in determining the amount charged to operating expense are
past loan experience, composition of the loan portfolio, evaluation of possible
future losses, current economic conditions and other relevant factors.   The
Company's allowance for loan losses was approximately $656,000 at December 31,
1996, representing 1.26% of year-end total loans outstanding compared with
approximately $605,000 at December 31, 1995, which represented 1.25% year end
total loans outstanding.

                                       20
<PAGE>
 
     The allowance for loan losses is reviewed quarterly based on management's
evaluation of current risk characteristics of the loan portfolio, as well as the
impact of prevailing and expected economic business conditions. Management
considers the allowance for loan losses adequate to cover possible loan losses
on each outstanding loan with particular emphasis on any problem loans.

ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES

     The following table sets forth the breakdown of the allowance for loan
losses by loan category for the periods indicated.  Management believes the
allowance can be allocated only on an approximate basis.  The allocation of the
allowance to each category is not necessarily indicative of future losses and
does not restrict the use of the allowance to absorb losses in any other
category.
<TABLE>
<CAPTION>
                                                                               AT DECEMBER 31,
                                                             ---------------------------------------------------
                                                                        1996                      1995
                                                             -------------------------   -----------------------
                                                                           PERCENT OF               PERCENT OF
                                                                            Loans in                Loans in
                                                                           Category to              Category to
                                                                Amount     Total Loans    Amount    Total Loans
                                                             ----------    -----------   --------   ------------
                                                                          (DOLLARS IN THOUSANDS)
                                                             ---------------------------------------------------
<S>                                                            <C>         <C>          <C>         <C>
Commercial, financial, industrial and agricultural             $    230         22%      $   212         19%
  Real estate                                                        98         58            91         60
  Consumer                                                          164         20           151         21
  Unallocated                                                       164          -           151          -
                                                             ----------     --------     -------      -----
                                                               $    656        100%      $   605        100%
                                                             ==========     ========     =======      =====
</TABLE>

     The following table presents an analysis of the Company's loan loss
experience for the periods indicated:
<TABLE>
<CAPTION>
                                                                                       DECEMBER 31,
                                                                          -----------------------------------
                                                                                  1996                1995
                                                                          ---------------     ---------------
<S>                                                                       <C>                 <C> 
                                                                                 (DOLLARS IN THOUSANDS)
                                                                          -----------------------------------
 
      Average amount of loans outstanding                                   $      50,298       $      47,406
                                                                          ===============     ===============
 
      Balance of reserve for possible loan losses at beginning of period              605                 626
                                                                          ---------------     ---------------
 
      Charge-offs:
        Commercial, financial and agricultural                                          6                  87
        Real estate                                                                     -                   -
        Consumer                                                                       40                  28
                                                                          ---------------     ---------------
                                                                                       46                 115
                                                                          ---------------     ---------------
      Recoveries:
        Commercial, financial and agricultural                                          9                   5
        Real estate                                                                     -                   1
        Consumer                                                                        7                   2
                                                                          ---------------     ---------------
                                                                                       16                   8
                                                                          ---------------     ---------------
      Net charge-offs                                                                  30                 107
                                                                          ---------------     ---------------
      Additions to reserve charged to operating expenses                               81                  86
                                                                          ---------------     ---------------
      Balance of reserve for possible loan losses                           $         656       $         605
                                                                          ===============     ===============
      Ratio on net loan charge-offs to average loans                                 0.23%               0.23%
                                                                          ===============     ===============
</TABLE>

                                       21
<PAGE>
 
INVESTMENT PORTFOLIO

     The Company manages the mix of asset and liability maturities in an effort
to control the effects of changes in the general level of interest rates on net
interest income. See " - Asset/Liability Management." Except for its effect on
the general level of interest rates, inflation does not have a material impact
on the Company due to the rate variability and short-term maturities of its
earnings assets.   In particular, approximately 64% of the loan portfolio is
comprised of loans which mature or reprice within one year or less. Mortgage
loans, primarily with five- to fifteen-year maturities, are also made on a
variable rate basis with rates being adjusted every one to five years.
Additionally, 7% of the investment portfolio matures within one year.

TYPES OF INVESTMENTS

     The amortized cost and fair value of securities are summarized as follows:

<TABLE>
<CAPTION>
                                                                           GROSS             GROSS
                                                       AMORTIZED         UNREALIZED        UNREALIZED          FAIR
                                                         COST              GAINS             LOSSES            VALUE
                                                 ----------------   ----------------  ---------------    ----------------
                  <S>                            <C>                   <C>               <C>                <C> 
                SECURITIES AVAILABLE FOR SALE
                  DECEMBER 31, 1996:
                    U. S. GOVERNMENT AND AGENCY
                      SECURITIES                   $   23,516,656     $      39,018    $     (204,262)     $   23,351,412
                  MORTGAGE-BACKED SECURITIES            3,002,140             6,672           (13,860)          2,994,952
                  OTHER SECURITIES                        469,633            18,417                 -             488,050
                                                 ----------------   ---------------  ----------------    ----------------
                                                   $   26,988,429     $      64,107    $     (218,122)     $   26,834,414
                                                 ================   ===============  ================    ================
 
 
                  December 31, 1995:
                    U. S. Government and agency
                      securities                   $   20,326,674     $     222,918    $      (93,445)     $   20,456,147
                  Mortgage-backed securities            3,115,904            18,503           (10,718)          3,123,689
                  Other securities                        462,657            27,693                 -             490,350
                                                 ----------------   ---------------  ----------------    ----------------
                                                   $   23,905,235     $     269,114    $     (104,163)     $   24,070,186
                                                 ================   ===============  ================    ================
</TABLE>

<TABLE>
<CAPTION>
                                                                            GROSS             GROSS
                                                        AMORTIZED         UNREALIZED        UNREALIZED          FAIR
                                                          COST              GAINS             LOSSES            VALUE
                                                  ----------------   ----------------   ---------------    ----------------
                   <S>                             <C>                <C>                 <C>             <C> 
                SECURITIES HELD TO MATURITY
                  DECEMBER 31, 1996:
                    U. S. GOVERNMENT AND AGENCY
                      SECURITIES                    $      750,000     $           -    $      (11,095)     $      738,905
                  STATE AND MUNICIPAL SECURITIES         8,707,202           436,566            (3,415)          9,140,353
                  MORTGAGE-BACKED SECURITIES               604,889             6,133            (5,891)            605,131
                                                  ----------------   ---------------   ----------------    ----------------
                                                    $   10,062,091     $     442,699    $      (20,401)     $   10,484,389
                                                  ================   ================  ===============    ================
 
 
                December 31, 1995:
                  U. S. Government and agency
                      securities                    $     750,000      $           -    $       (5,935)     $      744,065
                  State and municipal securities        8,413,513            324,481           (10,262)          8,727,732
                  Mortgage-backed securities              723,656              7,202            (6,600)            724,258
                                                  ----------------   ---------------  ----------------    ----------------
                                                    $   9,887,169      $     331,683    $      (22,797)     $   10,196,055
                                                  ================   ===============  ================    ================
</TABLE>

                                       22
<PAGE>
 
MATURITIES

  The amounts of investment securities in each category as of December 31, 1996
are shown in the following table according to contractual maturity
classifications (1) one year or less, (2) after one year through five years, (3)
after five years through ten years, and (4) after ten years.

<TABLE>
<CAPTION>
                                                   U.S. TREASURY AND
                                                OTHER U. S. GOVERNMENT                         STATE AND
                                               AGENCIES AND CORPORATIONS                POLITICAL SUBDIVISIONS
                                                                   YIELD                                   YIELD
                                             AMOUNT                 (1)                 AMOUNT             (1) (2)
                                        ---------------      ----------------      ---------------     ----------
                                                                  (DOLLARS IN THOUSANDS)
                                        -------------------------------------------------------------------------
<S>                                       <C>                 <C>                   <C>                <C>          
MATURITY:                             
 One year or less                         $       2,495            6.42%             $         100           7.50%
 After one year through five years                8,099            6.45                      2,745           8.06
 After five years through ten years              17,595            6.46                      5,110           8.03
 After ten years                                      -               -                        752           8.75
                                        ---------------      ----------------      ---------------     ----------
                                          $      28,189            6.45%             $       8,707           8.10%
                                        ===============      ================      ===============     ==========
</TABLE>

(1)  Yields were computed using coupon interest, adding discount accretion or
     subtracting premium amortization, as appropriate, on a ratable basis over
     the life of each security. The weighted average yield for each maturity
     range was computed using the acquisition price of each security in that
     range.

(2)  Yields on securities of state and political subdivisions are stated on a
     taxable equivalent basis using a tax rate of 34%.

                                       23
<PAGE>
 
DEPOSITS

  Average amount of deposits and average rate paid thereon, classified as to
noninterest-bearing demand deposits, interest-bearing demand and savings
deposits and time deposits for the periods indicated are presented below.
 
<TABLE>
<CAPTION>
                                                                              YEAR ENDED DECEMBER 31,
                                                   --------------------------------------------------------------------------
                                                                    1996                                   1995
                                                   -----------------------------------    -----------------------------------
                                                           AMOUNT             RATE                AMOUNT             RATE
                                                   -----------------   ---------------    -----------------   ---------------
<S>                                                  <C>                <C>                <C>                <C>
                                                                              (DOLLARS IN THOUSANDS)
                                                   --------------------------------------------------------------------------
                                               
Noninterest-bearing demand deposits                  $        18,191             -  %       $        16,862             -  %
Interest-bearing demand and savings deposits                  32,620          3.21                   32,002          3.42
Time deposits                                                 36,045          5.28                   30,166          5.39
                                                   -----------------                      -----------------
       Total deposits                                $        86,856                        $        79,030
                                                   =================                      =================
</TABLE>
                                                                               
    The Company has a large, stable base of time deposits, with little or no
dependence on volatile deposits of $100,000 or more. The time deposits are
principally certificates of deposit and individual retirement accounts obtained
from individual customers.

  The amounts of time certificates of deposit issued in amounts of $100,000 or
more as of December 31, 1996, are shown below by category, which is based on
time remaining until maturity of (i) three months or less, (ii) over three
through twelve months and (iii) over twelve months.

<TABLE>
<CAPTION>
                                                                DECEMBER 31, 1996
                                                                -----------------
                                                                   (DOLLARS IN
                                                                    THOUSANDS)
                                                               -----------------
 
            <S>                                                <C>             
            Three months or less                               $         5,278
            Over three through twelve months                             7,615
            Over twelve months                                             800
                                                               ---------------
                   Total                                       $        13,693
                                                               ===============
</TABLE>

                                       24
<PAGE>
 
RETURN ON ASSETS AND STOCKHOLDERS' EQUITY

  The following table shows return on assets (net income divided by average
total assets), return on equity (net income divided by average stockholders'
equity), dividend payout ratio (dividends declared per share divided by net
income per share) and stockholders' equity to asset ratio (average stockholders'
equity divided by average total assets) for the periods indicated.
 
<TABLE>
<CAPTION>
                                                   YEAR ENDED DECEMBER 31,
                                          ---------------------------------------
                                                   1996                  1995
                                          -------------------      --------------
                            
<S>                                         <C>                      <C>
Return on assets                                  1.24%                 1.21%
                            
Return on equity                                 11.90                 12.02
                            
Dividends payout                                 23.26                 22.22
                            
Equity to assets ratio                           10.42                 10.04
</TABLE>


COMMITMENTS AND LINES OF CREDITS

  In the ordinary course of business, the Banks have granted commitments to
extend credit to approved customers. Generally, these commitments to extend
credit have been granted on a temporary basis for seasonal or inventory
requirements and have been approved by each Bank's respective Board of
Directors. The Banks have also granted commitments to approved customers for
standby letters of credit. These commitments are recorded in the financial
statements when funds are disbursed or the financial instruments become payable.
The Banks use the same credit policies for these off-balance sheet commitments
as they do for financial instruments that are recorded in the consolidated
financial statements. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee.   Because many of the
commitment amounts expire without being drawn upon, the total commitment amounts
do not necessary represent future cash requirements.

  Following is a summary of the commitments outstanding at December 31, 1996 and
1995.

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                     ----------------------------------
                                                             1996               1995
                                                     ---------------    ---------------
                                                            (DOLLARS IN THOUSANDS)
                                                     ----------------------------------
         <S>                                           <C>                <C> 
         Loans sold with recourse                      $       1,909      $       1,466
         Commitments to extend credit                          7,972              8,770
         Standby letters of credit                             1,390              1,273
                                                     ---------------    ---------------
                                                       $      11,271      $      11,509
                                                     ===============    ===============
</TABLE>

                                       25
<PAGE>
 
IMPACT OF INFLATION

  The consolidated financial statements and related consolidated financial data
presented herein have been prepared in accordance with generally accepted
accounting principles and practices within the banking industry which require
the measurement of financial position and operating results in terms of
historical dollars without considering the changes in the relative purchasing
power of money over time due to inflation. Unlike most industrial companies,
virtually all the assets and liabilities of a financial institution are monetary
in nature. As a result, interest rates have a more significant impact on a
financial institution's performance than the effects of general levels of
inflation.


ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

  The following consolidated financial statements of the Company and its
subsidiaries are included on pages F-1 through F-28 of this Annual Report on
Form 10-KSB:

  Consolidated Balance Sheets - December 31, 1996 and 1995

  Consolidated Statements of Income - Years Ended December 31, 1996 and 1995

  Consolidated Statements of Stockholders' Equity - Years Ended December 31,
    1996 and 1995

  Consolidated Statements of Cash Flows - Years Ended December 31, 1996 and 1995

  Notes to Consolidated Financial Statements.

ITEM 8. DISAGREEMENT ON ACCOUNTING AND FINANCIAL DISCLOSURE

  During 1996 and 1995, the Company did not change its accountants and there was
no disagreement on any matter of accounting principles or practices for
financial statement disclosure that would have required the filing of a current
report on Form 8-K.

                                       26
<PAGE>
 
                                    PART III

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

  The following table sets forth certain information on the current directors
and executive officers of the Company.

<TABLE>
<CAPTION>
                                                            PRINCIPAL OCCUPATION OR                      DIRECTOR
               Name               Age                 EMPLOYMENT DURING LAST FIVE YEARS                   SINCE
------------------------------  ------    ----------------------------------------------------    ---------------
 
 
<S>                         <C>           <C>                                                     <C>
Michael C. Dixon                  55      Secretary-Treasurer, M. C. Dixon                                 1988
 (1)                                      Lumber Co., Inc.
                         
Robert M. Dixon                   64      President, M. C. Dixon Lumber Co., Inc.                          1988
 (1)                     
                         
Gregory B. Faison                 49      President and Chief Executive Officer of the                     1988
                                          Company and Eufaula Bank and Trust Company
                         
James J. Jaxon, Jr.               49      President, J. J. Jaxon Co., Inc.; General Partner,               1988
                                          Memory Gardens of Eufaula
                         
Janis Biggers                     45      Certified Public Accountant, Partner,                            1993
                                          Coates, McCallar and Biggers
                         
Thomas Harris                     49      Senior Managing Director of Merchant Capital                     1996
                         
Frank McRight                     58      Attorney, Partner, McRight, Jackson, Dorman,                     1996
                                          Myrick & Moore, L.L.C.
                         
Edward D. Garrison                44      Vice President; Vice President of                                   -
                                          Eufaula Bank and Trust Company
                         
Gloria A. Hagler                  55      Vice President; Vice President and Comptroller                      -
                                          of Eufaula Bank and Trust Company
                         
Charles R. Schaeffer              39      Chief Operating Officer of Eufaula Bank and                         -
                                          Trust Company
</TABLE>

(1)  Michael C. Dixon and Robert M. Dixon are brothers.

                                       27
<PAGE>
 
ITEM 10. EXECUTIVE COMPENSATION

  The following table sets forth information as to all cash and noncash
compensation paid or accrued during each of the last three fiscal years to the
Company's Chief Executive Officer. There were no other executive officers whose
compensation exceeded $100,000.

<TABLE>
<CAPTION>
                                        SUMMARY COMPENSATION TABLE
                                         ANNUAL COMPENSATION                   AWARDS          PAYOUTS
                          ----------------------------------------------
                                                                                                         ALL OTHER 
                                                                                                          ANNUAL  
     NAME AND                                              OTHER ANNUAL   RESTRICTED   OPTIONS    LTIP    COMPEN- 
 PRINCIPAL POSITION     YEAR      SALARY        BONUS      COMPENSATION   STOCK AWARD   SARs    PAYOUTS   SATION   
-------------------------------------------------------------------------------------------------------------------
<S>                   <C>      <C>           <C>         <C>              <C>         <C>      <C>     <C> 
Gregory B. Faison     1996    $  111,258    $  55,953    $       5,220    $     -         -      $   -    $    -
                      1995       105,960       52,779            4,756          -         -          -         -
                      1994       100,960       51,015            4,316          -         -          -         -
</TABLE>

Stock Option Exercises During 1996 and Stock Option Year-End Values

  The following table sets forth information with respect to options exercised
by the named executive officer in the last fiscal year and the number and value
of unexercised options and SARs held as of the end of the last fiscal for the
executive officer named in the Summary Compensation Table.

       AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION/SAR VALUES

<TABLE>
<CAPTION>
                                              NUMBER OF SECURITIES             VALUE OF UNEXERCISED IN-
                                             UNDERLYING UNEXERCISED            THE-MONEY OPTIONS/SAR AT
                       SHARES               OPTIONS/SARS AT FY-END (#)              FY-END ($) (1) 
                     ACQUIRED ON   VALUE    --------------------------      -------------------------------
      NAME            EXERCISE    REALIZED  EXERCISABLE  UNEXERCISABLE       EXERCISABLE     UNEXERCISABLE
------------------   -----------  --------  -----------  -------------      ------------    ---------------
<S>                  <C>          <C>       <C>           <C>                <C>            <C> 
 
Gregory B. Faison           -    $   -        28,000         80,000  (2)    $  357,000     $  1,020,000  (2)
</TABLE>

(1)  The fiscal-year end values are calculated based upon the last known sales
     price for the Common Stock on December 31, 1996.

(2)  This option was granted pursuant to the Company's 1994 Incentive Stock
     Option Plan for Mr. Faison at an exercise price of $6.00 per share.  The
     option first became exercisable in 1995 and vests at a rate of 10,000
     shares per year.

                                       28
<PAGE>
 
NON-QUALIFIED SUPPLEMENTAL RETIREMENT BENEFIT AGREEMENT

  The Company has entered into a non-qualified supplemental retirement benefit
agreement with Gregory B. Faison.  Pursuant to this agreement, which is fully
financed by life insurance, the Company has agreed to pay Mr. Faison a benefit
in the event of his retirement, death or termination of his service as a
director of the bank.  The benefit paid by the Company to the beneficiaries of
Mr. Faison by reason of his death shall be an amount equal to the value of his
liability reserve account, if any, at the time of his death.  The annual benefit
to be paid by reason of his retirement or termination of his service as a
director of the Bank shall commence at the time of his retirement or age 65
whichever occurs later and shall be an amount determined by a formula that
depends upon future events.  This benefit will be paid each year for the life of
Mr. Faison and is currently projected to be approximately $68,360.00 in the
first year with a small increase in that amount thereafter.

  Mr. Faison is also a party to an endorsement split dollar agreement that will
provide a life insurance benefit to his beneficiary in an amount that is
projected to be between $430,000 and $850,000 depending upon the time of his
death.  The Company is the owner and beneficiary of the life insurance policy
that is the subject of this agreement and has by endorsement given Mr. Faison
the right to designate the beneficiary of 80% of the net-at-risk life insurance
portion of that policy.  The net-at-risk life insurance portion of the policy is
defined as the difference between the total death benefit of the policy and the
policy's cash surrender value.

COMPENSATION OF DIRECTORS

  All outside directors receive a fee of $2,500 annually, $1,000 per quarter and
an additional $200 for each meeting attended.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

PRINCIPAL SHAREHOLDERS

     The following table sets forth certain information regarding the beneficial
ownership of the common stock as of December 31, 1996, by each person who is
known to the Board of Directors of the Company to own beneficially five percent
(5%) or more of the outstanding common stock.

<TABLE>
<CAPTION>
                                                                         NUMBER OF
                                                                         SHARES OF
                                                                       COMMON STOCK
                                                                       BENEFICIALLY           PERCENT OF
             NAME AND ADDRESS OF BENEFICIAL OWNER                           OWNED               CLASS (1)
-------------------------------------------------------------       -----------------      --------------
<S>                                                                   <C>                    <C>
Michael C. Dixon                                                          157,867               11.67%
Robert M. Dixon                                                           156,918               11.60%
Cede & Company                                                            264,662               19.56%
</TABLE>

                                       29
<PAGE>
 
SECURITY OWNERSHIP OF MANAGEMENT AND OTHERS

    The following table sets forth certain information with respect to the
beneficial ownership of the common stock, as of the record date, by directors,
nominees for election as directors, executive officers named in the Summary
Compensation Table and by all directors and executive officers as a group.

<TABLE>
<CAPTION>
                                                                                                  COMMON STOCK
                                                                                                 BENEFICIALLY
                                                                                                  OWNED AS OF
                                                            POSITION WITH                         DECEMBER 31,          PERCENT OF
      NAME OF BENEFICIAL OWNER                               THE COMPANY                              1996              CLASS (1)
-------------------------------------    -------------------------------------------------    ------------------    ---------------
<S>                                        <C>                                                  <C>                   <C>
Michael C. Dixon (2)                       Director                                                      157,862         11.67%
Robert M. Dixon (3)                        Director                                                      156,918         11.60%
Gregory B. Faison (4)                      President, Chief Executive Officer and Director                72,262          5.32%
James J. Jaxon, Jr. (5)                    Director                                                       13,075          0.97%
Janis Biggers                              Director                                                        1,773          0.13%
Thomas Harris                              Director                                                            -             -%
Frank McRight                              Director                                                            -             -%
All directors and executive                                                                              401,890         28.16%
  officers as a group (7 persons
  including those listed above)
</TABLE>

(1) Based on 1,353,204 shares of common stock outstanding and 74,000 exercisable
    stock options granted to officers of the Company. Except as otherwise
    specified, each individual has sole and direct beneficial ownership interest
    and voting rights with respect to all shares of common stock indicated.
 
(2) Includes 2,712 shares held for the estate of his deceased father ( 1/2
    interest) and 8,168 shares held as custodian for his children, but does not
    include 1,360 shares held by his wife.

(3) Includes 2,712 shares held for the estate of his deceased father ( 1/2
    interest), but does not include 3,192 shares owned by his wife.

(4) Includes options to purchase 26,000 shares and 400 shares held jointly with
    his wife as custodians for their children.

(5) Includes 8,502 shares held as custodian for his children.

                                       30
<PAGE>
 
ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Officers and directors of the Company and the Banks and their associates
are customers of and have transactions with the Banks in the ordinary course of
business, and may continue to do so in the future.   All outstanding loans and
commitments included in such transactions were made in the ordinary course of
business on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons, and did not involve more than normal risk of collectibility or
present other unfavorable features.

 

                                       31
<PAGE>
 
                                    PART IV
                                        
ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K.

(a)  Exhibits required by Item 601 of Regulation S-B.

 EXHIBIT
   NO.                              DESCRIPTION
 -------           ------------------------------------------------------------

   3.1             Articles of Incorporation of the Registrant, as amended
                   through April 30, 1993 (filed as Exhibit 3.1 to the
                   Registrant's Annual Report on Form 10-KSB (File Number 33-
                   23062), filed with the Commission on April 29, 1994 and
                   incorporated herein by reference.)
        
   3.1a            Certificate of Amendment of Certificate of Incorporation of
                   the Registrant effective December 24, 1996 (filed as Exhibit
                   3.1a to the Registrant's Annual Report on Form 10-KSB (file
                   number 33-23062), filed with the Commission on March 31, 1997
                   and incorporated herein by reference).
        
   3.2             Bylaws of the Registrant (filed as Exhibit 3.2 to the
                   Registrant's Annual Report on Form 10-KSB (File Number 33-
                   23062), filed with the Commission on April 29, 1994 and
                   incorporated herein by reference.)
        
   10.1            Eufaula Bank & Trust Company Employee Stock Purchase Plan
                   (filed as Exhibit 10.1 to the Registrant's Annual Report on
                   Form 10-KSB (File Number 33-23062), filed with the Commission
                   on April 29, 1994 and incorporated herein by reference.)
        
   10.2            Eufaula Bank & Trust Company Profit-Sharing Retirement Plan
                   (filed as Exhibit 10.2 to the Registrant's Annual Report on
                   Form 10-KSB (File Number 33-23062), filed with the Commission
                   on April 29, 1994 and incorporated herein by reference.)
        
   10.3            Registrant's Stock Option Agreement (filed as Exhibit 10.3 to
                   the Registrant's Annual Report on Form 10-KSB (File Number 
                   33-23062), filed with the Commission on April 29, 1994 and
                   incorporated herein by reference.)
                   
   10.4            Deferred Compensation Agreement between Eufaula Bank & Trust
                   Company and Director (Sample Form) )(filed as Exhibit 10.4 to
                   the Registrant's Annual Report on Form 10-KSB (File Number 
                   33-23062), filed with the Commission on April 29, 1994 and
                   incorporated herein by reference.)
        
   10.5            Deferred Compensation Agreement between Eufaula Bank & Trust
                   Company and Director (Sample Form) effective July 23, 1996
                   (filed as Exhibit 10.5 to the Registrant's Annual Report on
                   Form 10-KSB (File Number 33-23062), filed with the Commission
                   on March 31, 1997 and incorporated herein by reference.)
        
   21              Subsidiaries of the Registrant. (filed as Exhibit 21 to the
                   Registrant's Annual Report on Form 10-KSB (File Number 33-
                   23062), filed with the Commission on April 29, 1994 and
                   incorporated herein by reference.)
        
   24              Power of Attorney relating to this Annual Report on Form 10-
                   KSB is set forth on the signature pages to this Annual
                   Report.
        
   27              Financial Data Schedule

(b)  The Registrant did not file any reports on Form 8-K during the last quarter
     of the period covered by this Report.

                                       32
<PAGE>
 
                             EUFAULA BANCCORP, INC.
                                        
                  INDEX TO FINANCIAL STATEMENTS AND SCHEDULES


Consolidated financial statements:

  Independent Auditor's Report
  Consolidated Balance Sheets - December 31, 1996 and 1995
  Consolidated Statements of Income - Years ended December 31, 1996 and 1995
  Consolidated Statements of Stockholders' Equity - Years ended December 31,
    1996 and 1996
  Consolidated Statements of Cash Flows - Years ended December 31, 1996 and 1995
  Notes to Consolidated Financial Statements


All schedules are omitted as the required information is inapplicable or the
information is presented in the financial statements or related notes.

                                      F-1
<PAGE>
 
                              INDEPENDENT AUDITOR'S REPORT
--------------------------------------------------------------------------------

TO THE BOARD OF DIRECTORS
EUFAULA BANCCORP, INC.
EUFAULA, ALABAMA


          We have audited the accompanying consolidated balance sheets of
EUFAULA BANCCORP, INC. AND SUBSIDIARIES as of December 31, 1996 and 1995, and
the related consolidated statements of income, stockholders' equity and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our 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 financial statements referred to above present
fairly, in all material respects, the financial position of Eufaula BancCorp,
Inc. and subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for the years then ended, in conformity with
generally accepted accounting principles.



                                             /s/ Mauldin & Jenkins, LLC

Albany, Georgia
February 13, 1997

                                      F-2
<PAGE>
 
<TABLE> 
<CAPTION> 

                                                      EUFAULA BANCCORP, INC.
                                                         AND SUBSIDIARIES

                                                    CONSOLIDATED BALANCE SHEETS
                                                    DECEMBER 31, 1996 AND 1995
----------------------------------------------------------------------------------------------------------------------------------

                                      ASSETS                                               1996                     1995
                                      ------                                        ------------------        -----------------
<S>                                                                                 <C>                      <C>
Cash and due from banks                                                             $        7,320,627        $       7,215,042
Interest-bearing deposits in banks                                                             750,000                  250,000
Federal funds sold                                                                           1,375,000                  800,000
Securities available for sale, at fair value (Note 2)                                       26,834,414               24,070,186
Securities held to maturity, at cost (fair value
 $10,484,389 and $10,196,055) (Note 2)                                                      10,062,091                9,887,169
Loans (Note 3)                                                                              52,167,811               48,454,746
Less allowance for loan losses                                                                 656,256                  605,163
                                                                                    ------------------        -----------------
       Loans, net                                                                           51,511,555               47,849,583
                                                                                    ------------------        -----------------
Premises and equipment, net (Note 4)                                                         2,413,164                2,067,415
Other real estate                                                                              804,435                        -
Other assets                                                                                 3,744,747                3,179,220
                                                                                    ------------------        -----------------
                                                                                    $      104,816,033        $      95,318,615
                                                                                    ==================        =================
 
                       LIABILITIES AND STOCKHOLDERS' EQUITY
                       ------------------------------------
Deposits:
 Noninterest-bearing demand                                                         $       18,783,155        $      18,570,522
 Interest-bearing demand                                                                    26,412,239               26,282,705
 Savings                                                                                     5,530,097                4,757,333
 Time, $100,000 and over                                                                    13,692,689               11,693,517
 Other time                                                                                 25,879,298               22,310,155
                                                                                    ------------------        -----------------
       Total deposits                                                                       90,297,478               83,614,232
Federal funds purchased                                                                      1,200,000                  550,000
Securities sold under repurchase agreements                                                  1,475,000                        -
Other liabilities                                                                            1,128,704                1,206,599
                                                                                    ------------------        -----------------
                                                                                            94,101,182               85,370,831
                                                                                    ------------------        -----------------
 
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 9)

Stockholders' equity
 Preferred stock, par value $.10; 50,000 shares
   authorized, none issued
 Common stock, par value $1; 5,000,000 shares authorized,
   1,353,204 and 676,602 shares issued, respectively                                         1,353,204                  676,602
 Surplus                                                                                       232,587                  909,189
 Retained earnings                                                                           9,221,469                8,263,021
 Unrealized gains (losses) on securities available for sale,
   net of taxes                                                                                (92,409)                  98,972
                                                                                    ------------------        -----------------
       Total stockholders' equity                                                           10,714,851                9,947,784
                                                                                    ------------------        -----------------
       Total liabilities and stockholders' equity                                   $      104,816,033        $      95,318,615
                                                                                    ==================        =================
</TABLE>
                                                                               
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                      F-3
<PAGE>
 
<TABLE> 
<CAPTION> 
                                                      EUFAULA BANCCORP, INC.
                                                         AND SUBSIDIARIES
                                        
                                                 CONSOLIDATED STATEMENTS OF INCOME
                                              YEARS ENDED DECEMBER 31, 1996 AND 1995
----------------------------------------------------------------------------------------------------------------------------------
                                                                                            1996                   1995
                                                                                    ------------------     ------------------
INTEREST INCOME
<S>                                                                                   <C>                 <C>
 Interest and fees on loans                                                           $      5,175,472       $      4,970,628
 Interest on taxable securities                                                              1,776,018              1,495,560
 Interest on nontaxable securities                                                             473,567                495,656
 Interest on deposits in other banks                                                            26,085                 22,860
 Interest on Federal funds sold                                                                105,007                112,292
                                                                                    ------------------     ------------------
                                                                                             7,556,149              7,096,996
                                                                                    ------------------     ------------------
INTEREST EXPENSE
 Interest on deposits                                                                        2,950,361              2,720,989
 Interest on Federal funds purchased                                                            24,265                 40,548
 Interest on securities sold under repurchase agreements                                        24,650                      -
 Interest on other borrowings                                                                        -                101,455
                                                                                    ------------------     ------------------
                                                                                             2,999,276              2,862,992
                                                                                    ------------------     ------------------
       Net interest income                                                                   4,556,873              4,234,004
PROVISION FOR LOAN LOSSES (NOTE 3)                                                              81,000                 86,150
                                                                                    ------------------     ------------------
       Net interest income after provision for loan losses                                   4,475,873              4,147,854
                                                                                    ------------------     ------------------
OTHER INCOME
 Service charges on deposit accounts                                                           745,546                683,704
 Insurance commissions                                                                           9,030                 23,018
 Security transactions, net                                                                     27,470                  5,567
 Other                                                                                          91,728                 76,087
                                                                                    ------------------     ------------------
                                                                                               873,774                788,376
                                                                                    ------------------     ------------------
OTHER OPERATING EXPENSES
 Salaries and other employee benefits                                                        2,019,949              1,882,907
 Equipment and occupancy expense                                                               421,244                426,531
 Amortization of intangibles                                                                    78,745                 78,746
 Legal and professional expense                                                                 93,714                124,142
 State and FDIC assessments                                                                     20,143                100,620
 Other operating expense                                                                       917,285                739,674
                                                                                    ------------------     ------------------
                                                                                             3,551,080              3,352,620
                                                                                    ------------------     ------------------
       Income before income taxes                                                            1,798,567              1,583,610
APPLICABLE INCOME TAXES                                                                        569,478                471,325
                                                                                    ------------------     ------------------
       Net income                                                                     $      1,229,089       $      1,112,285
                                                                                    ==================     ==================
NET INCOME PER COMMON SHARE AND COMMON SHARE EQUIVALENT
 Primary                                                                              $           0.86       $           0.81
                                                                                    ==================     ==================
 Fully diluted                                                                        $           0.84       $           0.80
                                                                                    ==================     ==================
</TABLE>
                                                                               
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                      F-4
<PAGE>
 
<TABLE> 
<CAPTION> 
                                                      EUFAULA BANCCORP, INC.
                                                         AND SUBSIDIARIES
                                        
                                          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                              YEARS ENDED DECEMBER 31, 1996 AND 1995
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                      UNREALIZED
                                                                                                         GAINS
                                                                                                      (LOSSES) ON
                                                                                                      SECURITIES
                                             COMMON STOCK                                              AVAILABLE
                                     ---------------------------      CAPITAL         RETAINED         FOR SALE,
                                        SHARES       PAR VALUE        SURPLUS         EARNINGS       NET OF TAXES         TOTAL
                                     -----------    ------------    -----------     ------------     ------------     -------------
<S>                                  <C>            <C>             <C>             <C>              <C>              <C>
BALANCE, DECEMBER 31, 1994               676,602    $    676,602    $   909,189     $  7,387,547     $   (411,675)    $   8,561,663
 Net income                                    -               -              -        1,112,285                -         1,112,285
 Cash dividend declared,
   $.18 per share                              -               -              -         (236,811)               -          (236,811)

 Net change in unrealized gains
   on securities available-for-sale,
   net of tax                                  -               -              -                -          510,647           510,647
                                     -----------    ------------    -----------     ------------     ------------     -------------
BALANCE, DECEMBER 31, 1995               676,602         676,602        909,189        8,263,021           98,972         9,947,784
 Net income                                    -               -              -        1,229,089                -         1,229,089
 Cash dividend declared,
   $.20 per share                              -               -              -         (270,641)               -          (270,641)

 Net change in unrealized (losses)
   on securities available-for-sale,
   net of tax                                  -               -              -                -         (191,381)         (191,381)

 Two-for-one common stock
   split                                 676,602         676,602       (676,602)               -                -                 -
                                     -----------    ------------    -----------     ------------     ------------     -------------
BALANCE, DECEMBER 31, 1996             1,353,204    $  1,353,204    $   232,587     $  9,221,469     $    (92,409)    $  10,714,851
                                     ===========    ============    ===========     ============     ============     =============
</TABLE>


SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                      F-5
<PAGE>
 
<TABLE> 
<CAPTION> 
                                                      EUFAULA BANCCORP, INC.
                                                         AND SUBSIDIARIES
                                        
                                               CONSOLIDATED STATEMENTS OF CASH FLOWS
                                              YEARS ENDED DECEMBER 31, 1996 AND 1995

----------------------------------------------------------------------------------------------------------------------------------
                                                                                             1996                     1995
                                                                                      -----------------        -----------------
<S>                                                                                   <C>                      <C> 
CASH FLOWS FROM OPERATING ACTIVITIES
 Net income                                                                           $       1,229,089        $       1,112,285
                                                                                    -------------------      -------------------
 Adjustments to reconcile net income to net cash
   provided by operating activities:
   Depreciation                                                                                 184,564                  160,057
   Amortization                                                                                  78,745                   78,746
   Provision for loan losses                                                                     81,000                   86,150
   Provision for deferred taxes                                                                    (913)                 (10,813)
   Gain on sale of asset                                                                              -                   (1,028)
   Net realized gains on securities available for sale                                          (27,470)                  (5,567)
   Increase in interest receivable                                                              (44,025)                (372,004)
   Increase (decrease) in interest payable                                                       (5,939)                 152,951
   Increase (decrease) in taxes payable                                                         (58,413)                  67,862
   Other prepaids, deferrals and accruals, net                                                 (620,612)                  86,062
                                                                                      -----------------        -----------------
       Total adjustments                                                                       (413,063)                 242,416
                                                                                      -----------------        -----------------
       Net cash provided by operating activities                                                816,026                1,354,701
                                                                                      -----------------        -----------------
 
CASH FLOWS FROM INVESTING ACTIVITIES
 (Increase) decrease in interest-bearing deposits in banks                                     (500,000)                 550,867
 (Increase) decrease in Federal funds sold                                                     (575,000)               1,350,000
 Purchases of securities available for sale                                                 (13,110,890)             (14,166,167)
 Proceeds from sales of securities available for sale                                         6,809,250                5,791,864
 Proceeds from maturities of securities available for sale                                    3,245,913                4,849,563
 Purchases of securities held to maturity                                                      (997,428)                 (86,684)
 Proceeds from maturities of securities held to maturity                                        822,506                  305,548
 Increase in loans, net                                                                      (4,547,404)              (7,133,701)
 Proceeds from sale of assets                                                                         -                   19,949
 Purchase of premises and equipment                                                            (530,313)                 (94,465)
                                                                                      -----------------        -----------------
       Net cash used in investing activities                                                 (9,383,366)              (8,613,226)
                                                                                      -----------------        -----------------
</TABLE>

                                      F-6
<PAGE>
 
<TABLE> 
<CAPTION> 

                                                      EUFAULA BANCCORP, INC.
                                                         AND SUBSIDIARIES
                                        
                                               CONSOLIDATED STATEMENTS OF CASH FLOWS
                                              YEARS ENDED DECEMBER 31, 1996 AND 1995
----------------------------------------------------------------------------------------------------------------------------------
                                                                                             1996                     1995
                                                                                      -----------------        -----------------
<S>                                                                                   <C>                      <C>      
CASH FLOWS FROM FINANCING ACTIVITIES
 Increase in deposits                                                                 $       6,750,906        $      10,102,456
 Repayment of long-term debt                                                                          -               (1,285,714)
 Increase in securities sold under repurchase agreements                                      1,475,000                        -
 Increase in Federal funds purchased                                                            650,000                  200,000
 Dividends paid                                                                                (202,981)                (236,811)
                                                                                      -----------------        -----------------
       Net cash provided by financing activities                                              8,672,925                8,779,931
                                                                                      -----------------        -----------------
Net increase in cash and due from banks                                                         105,585                1,521,406
Cash and due from banks at beginning of year                                                  7,215,042                5,693,636
                                                                                      -----------------        -----------------
Cash and due from banks at end of year                                                $       7,320,627        $       7,215,042
                                                                                      =================        =================
 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
 INFORMATION
 Cash paid during the year for:
   Interest                                                                           $       3,017,826        $       2,721,665
   Income taxes                                                                       $         628,804        $         414,276
 
NONCASH TRANSACTIONS
 Unrealized gains (losses) on securities
   available for sale                                                                 $        (318,966)       $         851,078
 Transfer from loans to other real estate                                             $         804,432        $               -

</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                      F-7
<PAGE>
 
                             EUFAULA BANCCORP, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          NATURE OF BUSINESS

           Eufaula BancCorp, Inc. (the Company) is a bank holding company whose
           business is presently conducted by its wholly-owned subsidiaries,
           Eufaula Bank & Trust Company in Eufaula, Alabama and First American
           Bank of Walton County (First American Bank) in Santa Rosa Beach,
           Florida.  The Banks provide a full range of banking services to
           individual and corporate customers in the primary market areas
           described above.  The Banks are subject to the regulations of certain
           Federal and state agencies and are periodically examined by certain
           regulatory authorities.

          BASIS OF PRESENTATION

           The consolidated financial statements include the accounts of the
           Company and its subsidiaries.  Significant intercompany transactions
           and accounts are eliminated in consolidation.

           The accounting and reporting policies of the Company conform to
           generally accepted accounting principles and general practices within
           the financial services industry.  In preparing the financial
           statements, management is required to make estimates and assumptions
           that affect the reported amounts of assets and liabilities as of the
           date of the balance sheet and revenues and expenses for the period.
           Actual results could differ from those estimates.

          CASH AND CASH EQUIVALENTS

           Cash on hand, cash items in process of collection, and amounts due
           from banks are included in cash and cash equivalents.

           The Company maintains amounts due from banks which, at times, may
           exceed Federally insured limits.  The Company has not experienced any
           losses in such accounts.

                                      F-8
<PAGE>
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
                                        

NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

          SECURITIES

           Securities are classified based on management's intention on the date
           of purchase.  Securities which management has the intent and ability
           to hold to maturity are classified as held to maturity and reported
           at amortized cost.  All other debt securities are classified as
           available for sale and carried at fair value with net unrealized
           gains and losses included in stockholders' equity net of tax.
           Marketable equity securities are carried at fair value with net
           unrealized gains and losses included in stockholders' equity.

           Interest and dividends on securities, including amortization of
           premiums and accretion of discounts, are included in interest income.
           Realized gains and losses from the sales of securities are determined
           using the specific identification method.

          LOANS

           Loans are carried at their principal amounts outstanding less
           unearned income and the allowance for loan losses.  Interest income
           on loans is credited to income based on the principal amount
           outstanding.

           Loan origination fees and certain direct costs of most loans are
           recognized at the time the loan is recorded.  Because net origination
           loan fees and costs are not material, the results of operations are
           not materially different than the results which would be obtained by
           accounting for loan fees and costs in accordance with generally
           accepted accounting principles.

           The allowance for loan losses is maintained at a level that
           management believes to be adequate to absorb potential losses in the
           loan portfolio.  Management's determination of the adequacy of the
           allowance is based on an evaluation of the portfolio, past loan loss
           experience, current economic conditions, volume, growth, composition
           of the loan portfolio, and other risks inherent in the portfolio.  In
           addition, regulatory agencies, as an integral part of their
           examination process, periodically review the Company's allowance for
           loan losses, and may require the Company to record additions to the
           allowance based on their judgment about information available to them
           at the time of their examinations.

                                      F-9
<PAGE>
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------

NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

          LOANS (CONTINUED)

           The accrual of interest on impaired loans is discontinued when, in
           management's opinion, the borrower may be unable to meet payments as
           they become due.  Interest income is subsequently recognized only to
           the extent cash payments are received.

           A loan is impaired when it is probable the Company will be unable to
           collect all principal and interest payments due in accordance with
           the terms of the loan agreement.  Individually identified impaired
           loans are measured based on the present value of payments expected to
           be received, using the contractual loan rate as the discount rate.
           Alternatively, measurement may be based on observable market prices
           or, for loans that are solely dependent on the collateral for
           repayment, measurement may be based on the fair value of the
           collateral.  If the recorded investment in the impaired loan exceeds
           the measure of fair value, a valuation allowance is established as a
           component of the allowance for loan losses.  Changes to the valuation
           allowance are recorded as a component of the provision for loan
           losses.

          PREMISES AND EQUIPMENT

           Premises and equipment are stated at cost less accumulated
           depreciation.  Depreciation is computed principally by the straight-
           line method over the estimated useful lives of the assets.

          INTANGIBLE ASSETS

           Cost in excess of net assets acquired resulting from a bank
           acquisition accounted for as a purchase transaction is being
           amortized over twenty-five (25) years on a straight-line basis.

          OTHER REAL ESTATE OWNED

           Other real estate owned represents properties acquired through
           foreclosure.  Other real estate owned is held for sale and is carried
           at the lower of the recorded amount of the loan or fair value of the
           properties less estimated selling costs.  Any write-down to fair
           value at the time of transfer to other real estate owned is charged
           to the allowance for loan losses.  Subsequent gains or losses on sale
           and any subsequent adjustment to the value are recorded as other
           expenses.

                                      F-10
<PAGE>
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
                                        
NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
          PROFIT-SHARING PLAN

           Profit-sharing plan costs are funded as accrued and are based on a
           percentage of individual employee's salary, not to exceed the amount
           that can be deducted for Federal income tax purposes.

          INCOME TAXES

           Income tax expense consists of current and deferred taxes.  Current
           income tax provisions approximate taxes to be paid or refunded for
           the applicable year.  Deferred tax assets and liabilities are
           recognized on the temporary differences between the bases of assets
           and liabilities as measured by tax laws and their bases as reported
           in the financial statements.  Deferred tax expense or benefit is then
           recognized for the change in deferred tax assets or liabilities
           between periods.

           Recognition of deferred tax balance sheet amounts is based on
           management's belief that it is more likely than not that the tax
           benefit associated with certain temporary differences, tax operating
           loss carryforwards, and tax credits will be realized.

           The Company and its subsidiaries file a consolidated income tax
           return.  Each entity provides for income taxes based on its
           contribution to income taxes (benefits) of the consolidated group.

          EARNINGS PER COMMON SHARE

           Earnings per common share are computed by dividing net income by the
           weighted average number of shares of common stock and common stock
           equivalents outstanding.  All per share amounts for prior periods
           have been adjusted to reflect the 2-for-1 stock split effected in the
           form of a 100% stock dividend effective December 10, 1996.

                                      F-11
<PAGE>
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 2.    SECURITIES

          The amortized cost and fair value of securities are summarized as
          follows:

<TABLE>
<CAPTION>
                                                                         GROSS             GROSS
                                                    AMORTIZED         UNREALIZED        UNREALIZED            FAIR
                                                       COST              GAINS             LOSSES             VALUE
                                                 --------------     -------------    --------------      --------------
<S>                                              <C>                <C>              <C>                 <C>
           SECURITIES AVAILABLE FOR SALE
            DECEMBER 31, 1996:
              U. S. GOVERNMENT AND AGENCY
                SECURITIES                       $   23,516,656     $      39,018    $     (204,262)     $   23,351,412
              MORTGAGE-BACKED SECURITIES              3,002,140             6,672           (13,860)          2,994,952
              OTHER SECURITIES                          469,633            18,417                 -             488,050
                                                 --------------     -------------    --------------      --------------
                                                 $   26,988,429     $      64,107    $     (218,122)     $   26,834,414
                                                 ==============     =============    ==============      ==============
 
            December 31, 1995:
              U. S. Government and agency
                securities                       $   20,326,674     $     222,918    $      (93,445)     $   20,456,147
              Mortgage-backed securities              3,115,904            18,503           (10,718)          3,123,689
              Other securities                          462,657            27,693                 -             490,350
                                                 --------------     -------------    --------------      --------------
                                                 $   23,905,235     $     269,114    $     (104,163)     $   24,070,186
                                                 ==============     =============    ==============      ==============

                                                                         GROSS             GROSS
                                                    AMORTIZED         UNREALIZED        UNREALIZED            FAIR
                                                       COST              GAINS             LOSSES             VALUE
                                                 --------------     -------------    --------------      --------------

            SECURITIES HELD TO MATURITY
              DECEMBER 31, 1996:
                U. S. GOVERNMENT AND AGENCY
                  SECURITIES                     $      750,000     $           -    $      (11,095)     $      738,905
                STATE AND MUNICIPAL SECURITIES        8,707,202           436,566            (3,415)          9,140,353
                MORTGAGE-BACKED SECURITIES              604,889             6,133            (5,891)            605,131
                                                 --------------     -------------    --------------      --------------
                                                 $   10,062,091     $     442,699    $      (20,401)     $   10,484,389
                                                 ==============     =============    ==============      ==============
 
              December 31, 1995:
                U. S. Government and agency
                  securities                     $      750,000     $           -    $       (5,935)     $      744,065
                State and municipal securities        8,413,513           324,481           (10,262)          8,727,732
                Mortgage-backed securities              723,656             7,202            (6,600)            724,258
                                                 --------------     -------------    --------------      --------------
                                                 $    9,887,169     $     331,683    $      (22,797)     $   10,196,055
                                                 ==============     =============    ==============      ==============
</TABLE>

                                      F-12
<PAGE>
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
                                        
NOTE 2.   SECURITIES (CONTINUED)

          The amortized cost and fair value of securities as of December 31,
          1996 by contractual maturity are shown below.  Maturities may differ
          from contractual maturities in mortgage-backed securities because the
          mortgages underlying the securities may be called or prepaid without
          penalty.  Therefore, these securities are not included in the maturity
          categories in the following maturity summary.

<TABLE>
<CAPTION>
                                                  SECURITIES AVAILABLE FOR SALE         SECURITIES HELD TO MATURITY
                                              -----------------------------------   ----------------------------------
                                                    AMORTIZED            FAIR            AMORTIZED            FAIR
                                                      COST               VALUE              COST              VALUE
                                              ----------------   ----------------   ---------------   ----------------
 
<S>                                             <C>                <C>                <C>               <C>      
          Due in one year or less             $    2,013,341     $    2,007,112     $     100,220     $      100,125
          Due from one year to five years          4,257,122          4,249,668         2,995,236          3,087,897
          Due from five to ten years              17,246,193         17,094,632         5,610,003          5,898,662
          Due after ten years                              -                  -           751,743            792,574
          Mortgage-backed securities               3,002,140          2,994,952           604,889            605,131
          Marketable equity securities               469,633            488,050                 -                  -
                                            ----------------   ----------------   ---------------   ----------------
                                              $   26,988,429     $   26,834,414     $  10,062,091     $   10,484,389
                                            ================   ================   ===============   ================
</TABLE>

          Securities with a carrying value of $15,681,776 and $15,114,349 at
          December  31, 1996 and 1995, respectively, were pledged to secure
          public deposits and for other purposes.

          Gross realized gains and gross realized losses on sales of securities
          were:

<TABLE>
<CAPTION>
                                                                                       DECEMBER 31,
                                                                           -----------------------------------
                                                                                   1996                1995
                                                                           ---------------     ---------------
<S>                                                                        <C>                 <C>    
           Gross realized gains on sales of securities                     $      34,729       $      19,836
           Gross losses on sales of securities                                     7,259              14,269
                                                                         ---------------     ---------------
           Net realized gains on sales of securities available for sale    $      27,470       $       5,567
                                                                         ===============     ===============
</TABLE>

         Under special provisions adopted by the Financial Accounting Standards
         Board in October 1995, the Company transferred $1,794,640 from
         securities being held to maturity to securities available for sale on
         December 31, 1995, resulting in a net gain of $21,504 which was
         included in stockholders' equity at $12,902 net of related taxes of
         $8,602.

                                      F-13
<PAGE>
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 3.  LOANS AND ALLOWANCE FOR LOAN LOSSES

          The composition of loans is summarized as follows:

<TABLE>
<CAPTION>
                                                                            DECEMBER 31,
                                                              --------------------------------------
                                                                       1996                  1995
                                                              ----------------      ----------------
<S>                                                             <C>                   <C>    
           Commercial, financial and agricultural               $   11,276,143        $    9,254,947
           Real estate - construction                                2,896,148             5,310,786
           Real estate - mortgage                                   27,691,446            23,813,786
           Consumer                                                 10,468,374            10,044,503
           Other                                                        41,068               231,439
                                                              ----------------      ----------------
                                                                    52,373,179            48,655,461
           Unearned income                                            (205,368)             (200,715)
           Allowance for loan losses                                  (656,256)             (605,163)
                                                              ----------------      ----------------
           Loans, net                                           $   51,511,555        $   47,849,583
                                                              ================      ================
</TABLE>

          Changes in the allowance for loan losses for the years ended December
          31 are as follows:

<TABLE>
<CAPTION>
                                                                             DECEMBER 31,
                                                              ----------------------------------------
                                                                       1996                   1995
                                                              -----------------      -----------------
 
<S>                                                             <C>                    <C>   
           BALANCE, BEGINNING OF YEAR                           $       605,163        $       626,085
           Provision charged to operations                               81,000                 86,150
           Loans charged off                                            (45,786)              (114,799)
           Recoveries of loans previously charged off                    15,879                  7,727
                                                              -----------------      -----------------
           BALANCE, END OF YEAR                                 $       656,256        $       605,163
                                                              =================      =================
</TABLE>

                                      F-14
<PAGE>
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 3.  LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)

          The Company has granted loans to certain directors, executive
          officers, and related entities of the Company and the Banks.  The
          interest rates on these loans were substantially the same as rates
          prevailing at the time of the transaction and repayment terms are
          customary for the type of loan involved.  Changes in related party
          loans for the years ended December 31 were as follows:

<TABLE>
<CAPTION>
                                                                         1996                 1995
                                                                ----------------     -----------------
 
<S>                                                               <C>                  <C>   
           BALANCE, BEGINNING OF YEAR                             $    2,642,949       $     1,961,658
             Advances                                                  3,435,657             3,275,367
             Repayments                                               (3,447,878)           (2,594,076)
                                                                ----------------     -----------------
           BALANCE, END OF YEAR                                   $    2,630,728       $     2,642,949
                                                                ================     =================
</TABLE>

NOTE 4.  PREMISES AND EQUIPMENT

          Premises and equipment are summarized as follows:

<TABLE>
<CAPTION>
                                                                               DECEMBER 31,
                                                                 -------------------------------------
                                                                          1996                 1995
                                                                 ----------------     ----------------
<S>                                                                <C>                  <C>   
           Land and buildings                                      $    2,265,503       $    2,132,549
           Equipment                                                    1,159,753            1,056,713
           Construction in progress                                       205,207                    -
                                                                 ----------------     ----------------
                                                                        3,630,463            3,189,262
           Accumulated depreciation                                    (1,217,299)          (1,121,847)
                                                                 ----------------     ----------------
                                                                   $    2,413,164       $    2,067,415
                                                                 ================     ================
</TABLE>

                                      F-15
<PAGE>
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 5.  EMPLOYEE BENEFIT PLANS

          The subsidiary banks have noncontributory profit-sharing  plans
          covering all employees, subject to certain minimum age  and service
          requirements.  The contribution for the years ended December 31, 1996
          and 1995 was $72,383 and $67,700,  respectively.

          The Company provides a nonqualified Employee Stock Purchase Plan,
          including employees of both subsidiary banks.  The  primary purpose is
          to enable the employees to participate in  the ownership of the
          Company.  An employee who has been  employed on a full time basis for
          one year or more is eligible for the Plan.  Employees can contribute
          from five  to seven percent of their compensation, depending on years
          of  service.  The banks contribute an amount equal to 50% of the
          employee's contribution.  Contributions are used to purchase shares of
          Eufaula BancCorp, Inc. common stock since the Company adopted the Plan
          as part of the merger agreement.  The contribution for the years ended
          December 31, 1996 and 1995 was $14,813 and $13,187, respectively.

          The Company has a nonqualified Stock Purchase Plan for directors.  The
          primary purpose is to enable the directors to participate in the
          ownership of the Company.  All directors are eligible for the Plan.  A
          director can contribute in increments of $50 not to exceed $200 per
          month.  The Banks contribute an amount equal to 50 percent of the
          director's contribution.  Contributions to the Plan are used to
          purchase shares of Eufaula BancCorp, Inc. common stock.  The
          contributions for the years ended December 31, 1996 and 1995 were
          $16,800 and $5,400, respectively.


NOTE 6.  DEFERRED COMPENSATION PLAN

          During 1996, Eufaula Bank & Trust Company modified its indexed
          deferred compensation plan for certain executive officers and
          directors.  The Plan is designed to provide supplemental retirement
          benefits and supersedes the existing deferred compensation plan.  As a
          result of the modification, transactions resulted in a net decrease in
          expense of $32,636 in 1996.  In 1995, the Bank charged $48,823 to
          expense for the deferred compensation plan.

                                      F-16
<PAGE>
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 7.   INCOME TAXES

          The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
                                                                                 DECEMBER 31,
                                                                    ------------------------------------
                                                                            1996                 1995
                                                                    ---------------      ---------------
 
<S>                                                                   <C>                  <C>   
           Current                                                    $     570,391        $     482,138
           Deferred                                                            (913)             (10,813)
                                                                    ---------------      ---------------
             Provision for income taxes                               $     569,478        $     471,325
                                                                    ===============      ===============
</TABLE>

          The Company's provision for income taxes differs from the amounts
          computed by applying the Federal income tax statutory rates to income
          before income taxes.  A reconciliation of the differences is as
          follows:

<TABLE>
<CAPTION>
                                                                         DECEMBER 31,
                                            -------------------------------------------------------------------
                                                            1996                                1995
                                            ----------------------------------     ----------------------------
                                                  AMOUNT             PERCENT            Amount          Percent
                                            ---------------     --------------     --------------     ---------
<S>                                           <C>                 <C>                <C>                <C>
            Tax provision at statutory rate   $     611,513            34   %        $    538,427           34 %
            Tax-exempt interest                    (147,057)           (8)               (151,564)          (10)
            Amortization                             26,773             1                  26,773             2
            State income taxes                       51,454             3                  55,724             4
            Other items, net                         26,795             2                   1,875             -
                                            ---------------     --------------     --------------     ---------
              Provision for income taxes      $     569,478            32   %        $    471,235           30 %
                                            ===============     ==============     ==============     =========
</TABLE>

                                      F-17
<PAGE>
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 7.  INCOME TAXES (CONTINUED)

          The components of deferred income taxes are as follows:

<TABLE>
<CAPTION>
                                                                                DECEMBER 31,
                                                                    ----------------------------------
                                                                          1996                1995
                                                                    ---------------    ---------------
<S>                                                                   <C>                <C>   
           DEFERRED TAX ASSETS:
             Loan loss reserves                                       $      55,031      $      39,224
             Deferred compensation                                           76,576             79,308
             Accounting for other real estate                                 1,582              4,420
             Securities available for sale                                   61,607                  -
             Stock options                                                   17,095             17,095
                                                                    ---------------    ---------------
                                                                            211,891            140,047
                                                                    ---------------    ---------------
 
           DEFERRED TAX LIABILITIES:
             Depreciation and amortization                                   83,969             75,705
             Accretion                                                        4,002              2,942
             Securities available for sale                                        -             65,980
                                                                    ---------------    ---------------
                                                                             87,971            144,627
                                                                    ---------------    ---------------
 
           NET DEFERRED TAX ASSETS (LIABILITIES)                      $     123,920      $      (4,580)
                                                                    ===============    ===============
</TABLE>

                                      F-18
<PAGE>
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 8.  STOCK OPTIONS

          Prior to 1995, the Company entered into or assumed liability for
          various nonqualified stock option agreements with key employees.
          During 1994, the Company adopted the 1994 Stock Option Plan whereby
          the Company may grant options to certain key employees to purchase up
          to 400,000 shares of the Company's $1 par value common stock at an
          option price of $6 per share.  During 1996, the Plan was amended to
          include the directors of the Company.  As of December 31, 1996,
          options had been granted to five key employees to purchase a total of
          266,000 shares.

          A summary of information relating to the various stock option plans as
          of December 31, 1996 and 1995 follows:

<TABLE>
<CAPTION>
                                                                         AS OF DECEMBER 31, 1996
                                                         -----------------------------------------------------
                                                              1986               1988               1994
                                                           Option Plan       Option Plan         Option Plan
                                                         ---------------    ---------------    ---------------
<S>                                                        <C>                <C>                <C>    
           Under option, beginning of year                        12,000             14,000            240,000
             Granted                                                   -                  -                  -
             Exercised                                                 -                  -                  -
                                                         ---------------    ---------------    ---------------
           Under option, end of year                              12,000             14,000            240,000
                                                         ===============    ===============    ===============
           Options exercisable, end of year                       12,000             14,000             48,000
                                                         ===============    ===============    ===============
           Available for grant, end of year                            -                  -            160,000
                                                         ===============    ===============    ===============
           Option price per share *                        $        3.32      $        3.81      $        6.00
                                                         ===============    ===============    ===============
           Weighted-average remaining contractual life                 1                  2                  8
                                                         ===============    ===============    ===============

                                                                         AS OF DECEMBER 31, 1995
                                                         -----------------------------------------------------
                                                               1986               1988               1994
                                                           Option Plan       Option Plan         Option Plan
                                                         ---------------    ---------------    ---------------
           Under option, beginning of year                        12,000             14,000            240,000
             Granted                                                   -                  -                  -
             Exercised                                                 -                  -                  -
                                                         ---------------    ---------------    ---------------
           Under option, end of year                              12,000             14,000            240,000
                                                         ===============    ===============    ===============
           Options exercisable, end of year                       12,000             14,000             24,000
                                                         ===============    ===============    =============== 
           Available for grant, end of year                            -                  -            160,000
                                                         ===============    ===============    ===============
           Option price per share *                        $        3.32      $        3.81      $        6.00
                                                         ===============    ===============    ===============
           Weighted-average remaining contractual life                 2                  3                  9
                                                         ===============    ===============    ===============
</TABLE>

           * The option price represents the book value per share of the common
             stock at the date of grant.

                                      F-19
<PAGE>
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 9.  COMMITMENTS AND CONTINGENT LIABILITIES

          In the normal course of business, the Company has entered into off-
          balance-sheet financial instruments which are not reflected in the
          financial statements.  These financial instruments include commitments
          to extend credit and standby letters of credit.  Such financial
          instruments are included in the financial statements when funds are
          disbursed or the instruments become payable.  These instruments
          involve, to varying degrees, elements of credit risk in excess of the
          amount recognized in the balance sheet.

          The Company's exposure to credit loss in the event of nonperformance
          by the other party to the financial instrument for commitments to
          extend credit and standby letters of credit is represented by the
          contractual amount of those instruments.  A summary of the Company's
          commitments is as follows:

<TABLE>
<CAPTION>
                                                                            DECEMBER 31,
                                                              ---------------------------------------
                                                                       1996                  1995
                                                              -----------------     -----------------
<S>                                                             <C>                   <C>   
              Commitments to extend credit                      $     7,971,877       $     8,770,157
              Loans sold with recourse                                1,908,879             1,465,624
              Standby letters of credit                               1,390,239             1,273,460
                                                              -----------------     -----------------
                                                                $    11,270,995       $    11,509,241
                                                              =================     =================
</TABLE>

          Commitments to extend credit generally have fixed expiration dates or
          other termination clauses and may require payment of a fee.  Since
          many of the commitments are expected to expire without being drawn
          upon, the total commitment amounts do not necessarily represent future
          cash requirements.  The credit risk involved in issuing these
          financial instruments is essentially the same as that involved in
          extending loans to customers.  The Company evaluates each customer's
          creditworthiness 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 of the customer.
          Collateral held varies but may include real estate and improvements,
          crops, marketable securities, accounts receivable, inventory,
          equipment, and personal property.

                                      F-20
<PAGE>
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 9.  COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)

          Standby letters of credit are conditional commitments issued by the
          Company to guarantee the performance of a customer to a third party.
          Those guarantees are primarily issued to support public and private
          borrowing arrangements.  The credit risk involved in issuing letters
          of credit is essentially the same as that involved in extending loan
          facilities to customers.  Collateral held varies as specified above
          and is required in instances which the Company deems necessary.

          In the normal course of business, the Company is involved in various
          legal proceedings.  In the opinion of management of the Company, any
          liability resulting from such proceedings would not have a material
          effect on the Company's financial statements.

          Eufaula Bank & Trust Company leases a small tract of land from the
          Chairman of the Board and a relative.  The lease provides for a
          monthly rental of $2,154.  It was recomputed in 1996 and will be
          recomputed again in 2001 based on the change in the Consumer Price
          Index.  The lease is accounted for as an operating lease and the total
          rental expense included in the consolidated statements of income for
          each of the years ended December 31, 1996 and 1995 was $25,848.


NOTE 10. CONCENTRATIONS OF CREDIT

          The Company's subsidiaries make agricultural, agribusiness,
          commercial, residential and consumer loans to customers primarily in
          Eufaula, Alabama and Santa Rosa Beach, Florida.  A substantial portion
          of the Company's customers' abilities to honor their contracts is
          dependent on the business economy in the above areas.

          Fifty-eight percent (58%) of the Company's loan portfolio is
          concentrated in real estate loans, of which 9% consists of
          construction loans.  A substantial portion of these loans are secured
          by real estate in the Company's primary market area.  In addition, a
          substantial portion of the other real estate owned is located in those
          same markets.  Accordingly, the ultimate collectibility of the loan
          portfolio and the recovery of the carrying amount of other real estate
          owned are susceptible to changes in market conditions in the Company's
          primary market area.  The other significant concentrations of credit
          by type of loan are set forth in Note 3.

                                      F-21
<PAGE>
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
                                        
NOTE 11. REGULATORY MATTERS

          The Company is subject to certain restrictions on the amount of
          dividends that may be declared without prior regulatory approval.  At
          December 31, 1996, approximately $1,189,300 of retained earnings were
          available for dividend declaration without regulatory approval.

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

          Quantitative measures established by regulation to ensure capital
          adequacy require the Company and the Bank to maintain minimum amounts
          and ratios of total and Tier I capital to risk-weighted assets and of
          Tier I capital to average assets.  Management believes, as of December
          31, 1996, the Company and the Banks meet all capital adequacy
          requirements to which it is subject.

          As of December 31, 1996, the most recent notification from the FDIC
          categorized the Banks as well capitalized under the regulatory
          framework for prompt corrective action.  To be categorized as well
          capitalized, the Banks must maintain minimum total risk-based, Tier I
          risk-based, and Tier I leverage ratios as set forth in the following
          table.  There are no conditions or events since that notification that
          management believes have changed the Banks' category.

                                      F-22
<PAGE>
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 11. REGULATORY MATTERS (CONTINUED)

          The Company and Banks' actual capital amounts and ratios are presented
          in the following table.

<TABLE>
<CAPTION>
                                                                                                           TO BE WELL
                                                                           FOR CAPITAL                  CAPITALIZED UNDER
                                                                            ADEQUACY                    PROMPT CORRECTIVE
                                             ACTUAL                         PURPOSES                    ACTION PROVISIONS
                                -----------------------------    ----------------------------    ----------------------------
                                      AMOUNT           RATIO           AMOUNT          RATIO           AMOUNT          RATIO
                                ----------------   ----------    ----------------   ---------    ----------------   ---------
<S>                               <C>                <C>           <C>                <C>          <C>                <C>
    AS OF DECEMBER 31, 1996
       TOTAL CAPITAL
       (TO RISK WEIGHTED ASSETS):
       CONSOLIDATED               $    9,887,372        16.60%     $    4,765,970        8.00%     $    5,957,462       10.00%
       EUFAULA BANK & TRUST
        COMPANY                   $    7,276,250        17.64%     $    3,299,268        8.00%     $    4,124,086       10.00%
       FIRST  AMERICAN BANK       $    2,453,122        13.40%     $    1,464,864        8.00%     $    1,831,080       10.00%
       TIER I CAPITAL
       (TO RISK WEIGHTED ASSETS):
       CONSOLIDATED               $    9,258,607        15.54%     $    2,382,985        4.00%     $    3,574,477        6.00%
       EUFAULA BANK & TRUST
        COMPANY                   $    6,806,624        16.50%     $    1,649,634        4.00%     $    2,474,451        6.00%
       First  American Bank       $    2,293,983        12.53%     $      732,432        4.00%     $    1,098,648        6.00%
       TIER I CAPITAL
       (TO AVERAGE ASSETS):
       CONSOLIDATED               $    9,258,607         9.42%     $    3,995,359        4.00%     $    4,994,199        5.00%
       EUFAULA BANK & TRUST
        COMPANY                   $    6,806,624         9.21%     $    2,956,320        4.00%     $    3,695,400        5.00%
       First  American Bank       $    2,293,983         8.32%     $    1,102,560        4.00%     $    1,378,200        5.00%
</TABLE>

                                      F-23
<PAGE>
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
                                        
NOTE 12. FAIR VALUE OF FINANCIAL INSTRUMENTS

          The following methods and assumptions were used by the Company in
          estimating its fair value disclosures for financial instruments.  In
          cases where quoted market prices are not available, fair values are
          based on estimates using discounted cash flow methods.  Those methods
          are significantly affected by the assumptions used, including the
          discount rates and estimates of future cash flows.  In that regard,
          the derived fair value estimates cannot be substantiated by comparison
          to independent markets and, in many cases, could not be realized in
          immediate settlement of the instrument.  The use of different
          methodologies may have a material effect on the estimated fair value
          amounts.  Also, the fair value estimates presented herein are based on
          pertinent information available to management as of December 31, 1996
          and 1995.  Such amounts have not been revalued for purposes of these
          financial statements since those dates and, therefore, current
          estimates of fair value may differ significantly from the amounts
          presented herein.

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

         CASH, DUE FROM BANKS, AND FEDERAL FUNDS SOLD:

           The carrying amounts of cash, due from banks, and Federal funds sold
           approximate their fair value.

         AVAILABLE FOR SALE AND HELD TO MATURITY SECURITIES:

           Fair values for securities are based on quoted market prices.  The
           carrying values of equity securities with no readily determinable
           fair value approximate fair values.

         LOANS:

           For variable-rate loans that reprice frequently and have no
           significant change in credit risk, fair values are based on carrying
           values.  For other loans, the fair values are estimated using
           discounted cash flow methods, using interest rates currently being
           offered for loans with similar terms to borrowers of similar credit
           quality.  Fair values for impaired loans are estimated using
           discounted cash flow methods or underlying collateral values.

                                      F-24
<PAGE>
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
                                        
NOTE 12. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

         Deposits:

           The carrying amounts of demand deposits, savings deposits, and
           variable-rate certificates of deposit approximate their fair values.
           Fair values for fixed-rate certificates of deposit are estimated
           using discounted cash flow methods, using interest rates currently
           being offered on certificates.

         OTHER BORROWINGS:

           The carrying amounts of Federal funds purchased and securities sold
           under agreements to repurchase approximate their fair value.

         OFF-BALANCE SHEET INSTRUMENTS:

           Fair values of the Company's off-balance sheet financial instruments
           are based on fees charged to enter into similar agreements.  However,
           commitments to extend credit and standby letters of credit do not
           represent a significant value to the Company until such commitments
           are funded.  The Company has determined that these instruments do not
           have a distinguishable fair value and no fair value has been
           assigned.

           The estimated fair values of the Company's financial instruments were
           as follows:

<TABLE>
<CAPTION>
                                               DECEMBER 31, 1996                      DECEMBER 31, 1995
                                     -----------------------------------    -----------------------------------
                                          CARRYING             FAIR               CARRYING             FAIR
                                           AMOUNT             Value                AMOUNT              Value
                                     ----------------   ----------------    ----------------   ----------------
<S>                                    <C>                <C>                 <C>                <C>   
      Financial assets:
        Cash and due from banks,
         interest-bearing deposits with
         banks and Federal funds sold  $    9,445,627     $    9,445,627      $    8,265,042     $    8,265,042
        Securities available for sale      26,834,414         26,834,414          24,070,186         24,070,186
        Securities held to maturity        10,062,091         10,484,389           9,887,169         10,196,055
        Loans                              52,167,811         52,085,279          48,454,746         47,764,946
 
      Financial liabilities:
        Deposits                           90,495,197         89,059,793          83,648,725         82,007,183
        Federal funds purchased             1,200,000          1,200,000             550,000            550,000
        Securities sold under
         repurchase agreements              1,475,000          1,475,000                   -                  -
</TABLE>

                                      F-25
<PAGE>
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
                                        
NOTE 13. PARENT COMPANY FINANCIAL INFORMATION

          The following information presents the condensed balance sheets,
          statements of income and cash flows of Eufaula BancCorp, Inc. as of
          and for the years ended December 31, 1996 and 1995:

                            CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                 1996                1995
                                                          ----------------    ----------------
<S>                                                       <C>                 <C>      
          ASSETS
            Cash                                            $      197,719      $       34,493
            Investment in subsidiaries                           9,060,478           8,233,658
            Other assets                                         1,571,618           1,732,327
                                                          ----------------    ----------------
              Total assets                                  $   10,829,815      $   10,000,478
                                                          ================    ================
          LIABILITIES, other                                $      114,964      $       52,694
                                                          ----------------    ----------------
          SHAREHOLDERS' EQUITY                                  10,714,851           9,947,784
                                                          ----------------    ----------------
              Total liabilities and shareholders' equity    $   10,829,815      $   10,000,478
                                                          ================    ================
</TABLE>

                                      F-26
<PAGE>
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
                                        
NOTE 13. PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)

                         CONDENSED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                           1996                  1995
                                                                    -----------------     ----------------
<S>                                                                   <C>                   <C>   
          INCOME, dividends from subsidiaries                         $       452,700       $    1,694,000
                                                                    -----------------     ----------------
 
          EXPENSE
            Amortization                                                       78,745               78,746
            Interest expense                                                        -              101,455
            Other expense                                                     253,182              198,040
                                                                    -----------------     ----------------
              Total expense                                                   331,927              378,241
                                                                    -----------------     ----------------
 
              Income before income tax benefits and equity
                in undistributed income of subsidiaries                       120,773            1,315,759
 
          INCOME TAX BENEFITS                                                 (90,115)            (108,045)
                                                                    -----------------     ----------------
 
              Income before equity in undistributed
                income of subsidiaries                                        210,888            1,423,804
 
          EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES                    1,018,201             (311,519)
                                                                    -----------------     ----------------
 
              Net income                                             $     1,229,089       $    1,112,285
                                                                   =================     ================
</TABLE>

                                      F-27
<PAGE>
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
                                        
NOTE 13. PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)

                       CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                1996                  1995
                                                                       -----------------     -----------------
<S>                                                                      <C>                   <C>   
             CASH FLOWS FROM OPERATING ACTIVITIES
               Net income                                                $     1,229,089       $     1,112,285
                                                                       -----------------     -----------------
               Adjustments to reconcile net income to net
                cash provided by operating activities:
                Amortization                                                      78,745                78,746
                Undistributed income of subsidiaries                          (1,018,201)              311,519
                Increase (decrease) in taxes payable                              76,574              (201,254)
                                                                       -----------------     -----------------
                    Total adjustments                                           (862,882)              189,011
                                                                       -----------------     -----------------
 
                    Net cash provided by operating activities                    366,207             1,301,296
                                                                       -----------------     -----------------
 
             CASH FLOWS FROM FINANCING ACTIVITIES
               Repayments of long-term debt                                           -            (1,285,714)
               Dividends paid                                                   (202,981)             (236,811)
                                                                       -----------------     -----------------
 
                    Net cash used in financing activities                       (202,981)           (1,522,525)
                                                                       -----------------     -----------------
 
             Net increase (decrease) in cash                                     163,226              (221,229)
 
             Cash at beginning of year                                            34,493               255,722
                                                                       -----------------     -----------------
 
             Cash at end of year                                         $       197,719       $        34,493
                                                                       =================     =================
 
             SUPPLEMENTAL DISCLOSURE OF CASH
                FLOW INFORMATION
                Cash paid during the year for interest                   $             -       $       101,455
</TABLE>

                                      F-28
<PAGE>
 
                             EUFAULA BANCCORP, INC.
                                        
                                 EXHIBIT INDEX
 EXHIBIT
   NO.                        DESCRIPTION
 ------            -------------------------------------------------------

   3.1             Articles of Incorporation of the Registrant, as amended
                   through April 30, 1993 (filed as Exhibit 3.1 to the
                   Registrant's Annual Report on Form 10-KSB (File Number 33-
                   23062), filed with the Commission on April 29, 1994 and
                   incorporated herein by reference.)
         
   3.1a            Certificate of Amendment of Certificate of Incorporation of
                   the Registrant effective December 24, 1996 (filed as Exhibit
                   3.1a to the Registrant's Annual Report on Form 10-KSB (file
                   number 33-23062), filed with the Commission on March 31, 1997
                   and incorporated herein by reference).
         
   3.2             Bylaws of the Registrant (filed as Exhibit 3.2 to the
                   Registrant's Annual Report on Form 10-KSB (File Number 33-
                   23062), filed with the Commission on April 29, 1994 and
                   incorporated herein by reference.)
         
   10.1            Eufaula Bank & Trust Company Employee Stock Purchase Plan
                   (filed as Exhibit 10.1 to the Registrant's Annual Report on
                   Form 10-KSB (File Number 33-23062), filed with the Commission
                   on April 29, 1994 and incorporated herein by reference.)
         
   10.2            Eufaula Bank & Trust Company Profit-Sharing Retirement Plan
                   (filed as Exhibit 10.2 to the Registrant's Annual Report on
                   Form 10-KSB (File Number 33-23062), filed with the Commission
                   on April 29, 1994 and incorporated herein by reference.)
         
   10.3            Registrant's Stock Option Agreement (filed as Exhibit 10.3 to
                   the Registrant's Annual Report on Form 10-KSB (File Number 
                   33-23062), filed with the Commission on April 29, 1994 and
                   incorporated herein by reference.)
         
   10.4            Deferred Compensation Agreement between Eufaula Bank & Trust
                   Company and Director (Sample Form) )(filed as Exhibit 10.4 to
                   the Registrant's Annual Report on Form 10-KSB (File Number
                   33-23062), filed with the Commission on April 29, 1994 and
                   incorporated herein by reference.)
         
   10.5            Deferred Compensation Agreement between Eufaula Bank & Trust
                   Company and Director (Sample Form) effective July 23, 1996
                   (filed as Exhibit 10.5 to the Registrant's Annual Report on
                   Form 10-KSB (File Number 33-23062), filed with the Commission
                   on March 31, 1997 and incorporated herein by reference.)
         
   21              Subsidiaries of the Registrant (filed as Exhibit 21 to the
                   Registrant's Annual Report on Form 10-KSB (File Number 33-
                   23062), filed with the Commission on April 29, 1994 and
                   incorporated herein by reference.)
         
   24              Power of Attorney relating to this Annual Report on Form 10-
                   KSB is set forth on the signature pages to this Annual
                   Report.
         
   27              Financial Data Schedule
<PAGE>
 
                                  SIGNATURES

        Pursuant to the requirement of Section 13 or 15(d) of the Securities
Exchange Act of 1934 (the "Exchange Act"), the Registrant has duly caused this
Form 10-KSB to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                        EUFAULA BANCCORP, INC.

Date:                                   By: /s/ Gregory B. Faison
     -----------------------------         -------------------------------------
                                           Gregory B. Faison, President
                                           Chief Executive Officer and Director

                               POWER OF ATTORNEY

        KNOWN ALL MEN BY THESE PRESENTS, that each person whose signature 
appears below constitutes and appoints Gregory B. Faison as his 
attorney-in-fact, acting with full power of substitution for him in his name, 
place and stead, in any and all capacities, to sign any amendments to this Form 
10-KSB and to file the same, with exhibits thereto, and any other documents in 
connection therewith, with the Securities and Exchange Commission and hereby 
ratifies and confirms all that said attorney-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue thereof.

        Pursuant to the requirements of the Exchange Act, this Form 10-KSB has 
been signed by the following persons in the capacities and on the dates 
indicated.

Date:                                   /s/ Gregory B. Faison
     ---------------------------        ----------------------------------------
                                        Gregory B. Faison, President
                                        Chief Executive Officer and Director

Date:                                   /s/ Janis Biggers
     ---------------------------        ----------------------------------------
                                        Janis Biggers, Director

Date:                                   /s/ Michael C. Dixon
     ---------------------------        ----------------------------------------
                                        Michael C. Dixon, Director

Date:                                   /s/ Robert M. Dixon
     ---------------------------        ----------------------------------------
                                        Robert M. Dixon, Director

Date:                                   
     ---------------------------        ----------------------------------------
                                        Thomas Harris, Director

Date:                                   /s/ James J. Jaxon, Jr.
     ---------------------------        ----------------------------------------
                                        James J. Jaxon, Jr., Director

Date:                                   
     ---------------------------        ----------------------------------------
                                        Frank McRight, Director