<PAGE>

                                                                    EXHIBIT 13.1
 
                  PREMIER MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATION
 
BACKGROUND
 
  Premier was incorporated in 1988 under the laws of Georgia and is a bank
holding company registered under the regulations of the Federal Reserve, and a
registered thrift holding company under the regulations of the OTS. Premier's
bank subsidiary, First Alliance Bank is a commercial bank which opened for
business in 1984. On August 31, 1996, Premier acquired, through a pooling of
interests, Premier Bancshares, Inc., a thrift holding company. Premier
Bancshares, Inc. operated two 100% owned subsidiaries, Premier Lending and
Premier Bank. Premier also owns 80% of Alliance Finance.
 
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 Premier to meet those needs. Premier seeks to meet
liquidity requirements primarily through management of short-term investments
(principally Federal Funds sold and overnight funds), monthly amortizing loans,
repayment of single payment loans, periodic repayments of mortgage-backed
securities, and draws on lines of credit. In addition, at December 31, 1996,
First Alliance Bank and Premier Bank had $11,000,000 in approved Federal Funds
lines with correspondent banks which could provide funds on an immediate basis
if the need arose. Also, First Alliance Bank has access to various Certificate
of Deposit ("CD") networks which would allow it to raise deposits from credit
unions and other small banks for varying time periods at rates comparable to
the short-term U.S. Government Bond rate. These deposits are not brokered and
no fee outside of the market rate is paid.
 
  First Alliance Bank and Premier Bank are members of the Federal Home Loan
Bank system. At December 31, 1996, First Alliance Bank and Premier Bank had the
ability to borrow approximately $20 million by pledging qualifying loans and
securities as collateral.
 
  The liquidity and capital resources of, First Alliance Bank and Premier Bank
are monitored on a periodic basis by federal regulatory authorities. In
addition, management performs liquidity analyses in the same manner as the
federal regulatory agencies. As of December 31, 1996, the various liquidity
ratios were considered adequate by regulatory definitions. In management's
opinion, First Alliance Bank, and Premier Bank maintained liquidity that was
adequate to meet their respective needs.
 
  First Alliance Bank, and Premier Bank continue to be well-capitalized by both
industry and regulatory definitions. At December 31, 1996, Premier's
consolidated capital ratios were as follows:
 
<TABLE>
<CAPTION>
                                                        MINIMUM REGULATORY
                                                           REQUIREMENT
                                                      ---------------------
   <S>                                                <C>          <C>
   Leverage Capital Ratio............................  7.27%        5.00%
   Risk Based Capital Ratios:
     Tier 1 Capital..................................  9.69%        6.00%
     Total Capital................................... 10.79%       10.00%
</TABLE>
 
  A more detailed chart of regulatory capital ratios is included in Note 13 of
the Notes to Consolidated Financial Statements. Management is not aware of any
current recommendations of the regulatory authorities which, if they were
implemented, would have a material effect on Premier's liquidity, capital
resources, or operations.
 
  Premier regularly evaluates business combination opportunities and conducts
due diligence activities in connection with possible business combinations. As
a result, business combination discussions and, in some cases, negotiations
take place, and future business combinations involving cash, debt, or equity
securities may
 
                                       1
<PAGE>
 
be expected. Any future business combination or series of business
combinations that Premier might undertake may be material, in terms of assets
acquired or liabilities assumed, to Premier's financial condition.
 
ASSET/LIABILITY MANAGEMENT
 
  At December 31, 1996, Premier, utilizing a "static gap" view of interest
rate sensitivity, was positioned in an asset-sensitive position (1.44%) at
three months and a slightly asset-sensitive position (1.01%) at one year. This
"static gap" view of interest rate sensitivity at a point in time looks at the
volume of assets and liabilities that will mature or reprice within varying
time periods. Such a view 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 Premier's customers. It is also probable that
actual repricing may happen at different times than estimated and at different
rates than anticipated.
 
  Management also utilizes a forecasting model for First Alliance Bank and
Premier Bank which attempts to project the net interest margin in various
rising, flat, and falling interest rate scenarios. The model assumes that
First Alliance Bank and Premier Bank make no material changes in the
composition, maturity, or interest rate sensitivity of their earning assets
and interest-bearing liabilities as a result of a change in interest rate
cycles. The model projects that in the next 12 months, First Alliance Bank and
Premier Bank combined would earn approximately 4.93% more net interest income
in a 200 basis point rising rate environment and approximately 5.12% less in a
200 basis point falling rate environment. However, management will act to
change Premier's asset or liability composition and interest rate sensitivity
in response to a definitive change in the direction of interest rates.
Specifically, Premier actively manages the mix of asset and liability
maturities to control the effects of changes in the general level of interest
rates on net interest income. Except for its effect on the general level of
interest rates, inflation does not have a material impact on Premier due to
the rate variability and short-term maturities of its earning assets.
 
 Interest Rate Sensitivity
 
<TABLE>
<CAPTION>
                                         AFTER     AFTER
                                         THREE    ONE YEAR
                                         MONTHS     BUT
                                WITHIN    BUT      WITHIN
                                THREE    WITHIN     FIVE     AFTER
                                MONTHS  ONE YEAR   YEARS   FIVE YEARS  TOTAL
                               -------- --------  -------- ---------- --------
                                           (DOLLARS IN THOUSANDS)
<S>                            <C>      <C>       <C>      <C>        <C>
Earning assets:
  Interest bearing deposits... $  1,447 $    --   $   --    $   --    $  1,447
  Federal funds sold..........   21,680      --       --        --      21,680
  Securities..................    6,814    6,107   19,770     2,463      3,515
  Loans.......................  146,216   16,029   42,782     6,237    211,264
                               -------- --------  -------   -------   --------
    Total interest earning
     assets...................  176,157   22,136   62,552     8,700    269,545
                               -------- --------  -------   -------   --------
Interest bearing liabilities:
  Interest bearing demand
   deposits...................   57,562      --       --        --      57,562
  Savings.....................    8,302      --       --        --       8,302
  Time deposits, less than
   $100,000...................   23,273   52,842   29,465       --     105,580
  Time deposits, $100,000 and
   over.......................   10,476   17,712    6,916       --      35,104
  Other borrowings............   22,824    2,755    1,980     2,661     30,220
                               -------- --------  -------   -------   --------
    Total interest bearing
     liabilities..............  122,437   73,309   38,361     2,661    236,768
                               -------- --------  -------   -------   --------
Interest rate sensitivity
 gap.......................... $ 53,720 $(51,173)  24,191   $ 6,039   $ 32,777
                               ======== ========  =======   =======   ========
Cumulative interest rate sen-
 sitivity gap.................   53,720 $  2,547   26,738   $32,777
                               ======== ========  =======   =======
Interest rate sensitivity gap
 ratio........................     1.44     0.30     1.63      3.27
                               ======== ========  =======   =======
Cumulative interest rate sen-
 sitivity gap ratio...........     1.44     1.01     1.11      1.14
                               ======== ========  =======   =======
</TABLE>
 
                                       2
<PAGE>
 
CHANGES IN FINANCIAL CONDITION
 
 Cash and Short-term Assets
 
  Total assets as of December 31, 1996 increased $56,633,000 since December
31, 1995. Non-earning cash and due from banks increased $2,088,000 as of
December 31, 1996, from December 31, 1995. This change is representative of
normal daily fluctuations in cash and check clearings and an increase in
transaction account balances of $17,513,000. Interest-bearing deposits of
First Alliance Bank and Premier Bank decreased $8,501,000 to $1,447,000 at
December 31, 1996. This balance is primarily excess funds that are held at the
Federal Home Loan Bank and accrue interest at a rate approximately equal to
the Federal Funds rate. Federal Funds sold increased $19,150,000 from December
31, 1995 to $21,680,000 at December 31, 1996. The increase in Federal Funds is
the result of seasonal deposits placed in First Alliance Bank by a local
municipality and the movement of Premier Bank's excess cash from the Federal
Home Loan Bank to the Federal Funds market.
 
 Securities Portfolio
 
<TABLE>
<CAPTION>
                                                             DECEMBER 31,
                                                        -----------------------
                                                         1996    1995    1994
                                                        ------- ------- -------
                                                        (DOLLARS IN THOUSANDS)
<S>                                                     <C>     <C>     <C>
Types of Securities:
  U.S. Government and agency securities................ $19,577 $22,313 $12,092
  Municipal securities.................................     105     304     292
  Mortgage-backed securities...........................  13,693  21,767  19,033
  Equity securities....................................   1,779   1,412   1,089
                                                        ------- ------- -------
                                                        $35,154 $45,796 $32,506
                                                        ======= ======= =======
</TABLE>
--------
All securities are held as available-for-sale and are reported at their fair
values.
 
 Maturities
 
  The amounts of securities in each category as of December 31, 1996 are shown
in the following table according to contractual maturity classifications (i)
one year or less, (ii) after one year through five years, (iii) after five
years through ten years, and (iv) after ten years.
 
<TABLE>
<CAPTION>
                          U.S. GOVERNMENT AND
                           AGENCY SECURITIES
                          AND MORTGAGE-BACKED         MUNICIPAL            OTHER
                             SECURITIES(1)          SECURITIES(2)       SECURITIES
                          ----------------------- ----------------- -------------------
                            AMOUNT       YIELD(3)  AMOUNT  YIELD(3)   AMOUNT   YIELD(3)
                          -----------    -------- -------- -------- ---------- --------
<S>                       <C>            <C>      <C>      <C>      <C>        <C>
One year or less........  $       --        --    $    --     --    $  380,600   7.86%
After one year through
 five years.............   19,327,933      6.12%   104,691   8.60%         --     --
After five years through
 ten years..............    5,408,410      6.08%       --     --           --     --
After ten years.........    8,533,131      6.01%       --     --     1,398,876   6.40%
                          -----------             --------          ----------
  Total.................  $33,269,474(1)          $104,691          $1,779,476
                          ===========             ========          ==========
</TABLE>
--------
(1) Includes mortgage-backed securities based on their contractual maturity
    date.
(2) Yields on municipal securities have not been computed on a tax equivalent
    basis.
(3) 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 carrying value of each security in that
    range.
   
  Premier's investment portfolio consists of U.S. Government and agency
securities, municipal securities, various equity securities and Government
agency sponsored mortgage-backed securities. A mortgage-backed security relies
on the underlying mortgage pools of loans to provide a cash flow of principal
and interest. The actual maturities of these securities will differ from the
contractual maturities because these borrowers may have the right to prepay
obligations with or without prepayment penalties. Decreases in interest rates
will generally     
 
                                       3
<PAGE>
 
   
cause prepayments to accelerate. In a declining interest rate environment,
Premier may not be able to reinvest the proceeds from these prepayments in
assets which have comparable yields. However, because the majority of the
mortgage-backed securities have adjustable rates, the negative effects of
changes in interest rates on earnings and the carrying values of these
securities are mitigated. At December 31, 1996 Premier had $10,068,000 in
collateralized mortgage obligations ("CMOs") and $3,625,000 in mortgage-backed
pass-through securities, the majority of which are issued by or backed by
Federal agencies. At December 31, 1996, Premier did not have with any one
issuer, securities in aggregate in excess of ten percent of equity.     
 
 Changes in Securities Portfolio
 
  Securities available-for-sale on December 31, 1996 decreased $10,643,000
from December 31, 1995. In the first quarter of 1996, Premier sold
approximately $10,000,000 in securities from the available-for-sale portfolio.
These sales represented the termination of an arbitrage transaction made up of
these assets and various floating rate deposits and borrowings. These
securities were primarily floating rate collateralized mortgage obligations
and mortgage-backed passthroughs. The proceeds from the sale of securities
provided funding for the increase in loans.
 
LOAN PORTFOLIO
 
 Types of Loans
 
  Management realizes that Premier's loan portfolio is concentrated in loans
secured by real estate. Real estate loans include real estate mortgages, real
estate construction projects, and consumer home equity lines. The amount of
loans outstanding at the indicated dates are shown in the following table
according to the type of loan. The other concentration is in commercial and
financial loans which are made primarily to businesses in the Atlanta, Georgia
metropolitan area. The following table presents this major category of net
loans for each period, excluding the allowance for loan losses.
 
<TABLE>
<CAPTION>
                                                    DECEMBER 31,
                                      -----------------------------------------
                                        1996     1995    1994    1993    1992
                                      -------- -------- ------- ------- -------
                                               (DOLLARS IN THOUSANDS)
<S>                                   <C>      <C>      <C>     <C>     <C>
Real Estate:
  Secured by Mortgages............... $ 73,272 $ 58,463 $46,602 $46,278 $46,895
  Construction.......................   67,432   36,987  19,518  15,326   9,131
Consumer and other loans.............   17,553   15,242  10,656  15,983  17,825
Commercial and financial.............   28,599   22,182   6,275   7,833   9,773
                                      -------- -------- ------- ------- -------
                                      $186,856 $132,874 $83,051 $85,420 $83,624
                                      ======== ======== ======= ======= =======
</TABLE>
 
 Maturities and Sensitivity to Changes in Interest Rates
 
  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>
                                                          (DOLLARS IN THOUSANDS)
      <S>                                                 <C>
      Maturity:
        One year or less.................................        $ 74,368
        After one year through five years................         104,399
        After five years.................................           8,089
                                                                 --------
                                                                 $186,856
                                                                 ========
</TABLE>
 
  The following table summarizes loans at December 31, 1996 with due dates
after one year which have predetermined and floating or adjustable interest
rates.
 
<TABLE>
<CAPTION>
                                                          (DOLLARS IN THOUSANDS)
      <S>                                                 <C>
      Predetermined interest rates.......................        $ 42,032
      Floating or adjustable interest rates..............          70,456
                                                                 --------
                                                                 $112,488
                                                                 ========
</TABLE>
 
 
                                       4
<PAGE>
<PAGE>
 
 Changes in Loan Portfolio
 
  Loans held for sale decreased $1,504,000 from December 31, 1995 to December
31, 1996. These loans represent first mortgage loans which have been
originated by Premier Lending and have been sold to third party investors and
are waiting for funding from the investor. This balance fluctuates based on
time of month, new loan volumes, and length of investor closing periods. These
loans are sold servicing released and the investor commitment price is
obtained simultaneously with the closing of most loans; therefore, minimizing
the effect of interest rate fluctuation.
 
  Loans grew by $53,982,000 at December 31, 1996 from December 31, 1995. In
addition, at December 31, 1996, construction loans increased $30,445,000,
other loans secured by real estate increased $14,809,000, commercial loans
increased $6,417,000, and consumer loans increased $2,311,000 from December
31, 1995. The primary reason for these increases was the addition of five
experienced real estate and commercial loan officers. Loan officers at Premier
Lending generate loans that are specifically underwritten by First Alliance
Bank. In prior periods, the majority of these loans were sold to third party
financial institutions due to the former Premier Bancshares, Inc. group's not
having the capital to fund these loans.
 
DEPOSITS
 
  Deposits and the yield on those deposits classified as to noninterest-
bearing demand, interest-bearing demand, savings, and time deposits, for the
years indicated are presented below.
 
<TABLE>
<CAPTION>
                                        YEARS ENDED DECEMBER 31
                           --------------------------------------------------
                                 1996             1995             1994
                           ---------------- ---------------- ----------------
                            AMOUNT  PERCENT  AMOUNT  PERCENT  AMOUNT  PERCENT
                           -------- ------- -------- ------- -------- -------
                                         (DOLLARS IN THOUSANDS)
<S>                        <C>      <C>     <C>      <C>     <C>      <C>
Noninterest-bearing
 demand................... $ 29,472   -- %  $ 24,936   -- %  $ 21,652   -- %
Interest-bearing demand...   50,993  3.09     37,833  3.39     36,407  2.97
Savings...................    8,515  2.96     10,438  2.66     11,048  2.96
Time......................  114,961  5.95     78,736  5.72     53,551  4.41
                           --------         --------         --------
  Total deposits.......... $203,941         $151,943         $122,658
                           ========         ========         ========
</TABLE>
 
  The amount of time deposits 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
12 months, and (iii) over 12 months.
 
<TABLE>   
<CAPTION>
                                                          (DOLLARS IN THOUSANDS)
      <S>                                                 <C>
      Three months or less...............................        $10,477
      Over three through six months......................         10,996
      Over six through twelve months.....................          6,811
      Over twelve months.................................          6,820
                                                                 -------
        Total............................................        $35,104
                                                                 =======
</TABLE>    
 
 Changes in Deposits
 
  Total deposits grew $58,280,000 at December 31, 1996 from December 31, 1995.
Non-interest bearing demand deposits increased $889,000 at December 31, 1996
from December 31, 1995. Interest-bearing demand deposits were up $16,624,000
primarily due to a seasonal increase in the balances of a local municipal
depositor and growth in commercial money market accounts. Other time deposits
increased by $40,767,000 at December 31, 1996 from December 31, 1995 as both
First Alliance Bank and Premier Bank aggressively marketed for deposits in
several key submarkets in Premier's market area.
 
                                       5
<PAGE>
 
OTHER BORROWINGS
 
  The following table sets forth certain information regarding securities sold
under repurchase agreements, FHLB borrowings, and other borrowings.
 
<TABLE>
<CAPTION>
                                                         1996    1995    1994
                                                        ------- ------- -------
                                                        (DOLLARS IN THOUSANDS)
   <S>                                                  <C>     <C>     <C>
   Balance at December 31.............................. $30,221 $31,862 $14,429
   Weighted average interest rate at December 31.......    6.72    8.09    7.54
   Maximum month end balance during year...............  30,221  60,731  14,429
   Average amount outstanding during the year..........  38,600  32,715   5,371
   Weighted average interest rate during the year......    6.77    6.77    6.31
</TABLE>
 
  Federal Home Loan Bank advances were down $6,500,000 at December 31, 1996
compared to December 31, 1995 due to the sale of securities involved in an
arbitrage funded primarily by FHLB advances. Retail repurchase agreements
increased by $7,135,000 as First Alliance Bank received a $6,000,000
repurchase agreement from a corporate customer in the first quarter of 1996.
It is anticipated that this balance will remain in First Alliance Bank for the
foreseeable future. Other borrowings decreased by $2,276,000 at December 31,
1996 compared to December 31, 1995 due primarily to First Alliance Bank's and
Premier Bank's increasing their purchases of the mortgage loans from Premier
Lending by funding those purchases with increases in other time deposits.
 
  In addition to the above, Premier Lending and Alliance Finance also utilize
a combination of subordinated debentures and revolving lines of credit to fund
their mortgage, commercial, and consumer finance lending activities. Note 5 in
the Notes to Consolidated Financial Statements details the maturities, rates,
and terms of these instruments. Additionally, Premier owed $4 million at
December 31, 1996 in term debt which is an increase of $1 million from
December 31, 1995. This increase was used by Premier to inject additional
capital into Premier Bank for asset growth. The original $3 million was also
used as capital in the acquisition of Premier Bank in 1995.
 
CREDIT ANALYSIS
 
 Non-performing Loans
 
  Information with respect to impaired, past due, and restructured loans at
December 31, 1996 is as follows:
 
<TABLE>
<CAPTION>
                                                           DECEMBER 31,
                                                   ----------------------------
                                                    1996  1995 1994 1993  1992
                                                   ------ ---- ---- ---- ------
                                                      (DOLLARS IN THOUSANDS)
<S>                                                <C>    <C>  <C>  <C>  <C>
Impaired loans...................................  $1,224 $268 $604 $309 $2,892
Loans contractually past due ninety days or more
 as to interest or principal payments and still
 accruing........................................     --     1  --   127     10
Loans, the terms 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..............      60  --   --   --     700
Loans, now current, about which there are serious
 doubts as to the ability of the borrower to
 comply with present loan repayment terms........     --   --   --   --     --
Interest income that would have been recorded on
 impaired loans under original terms.............      92
Interest income that was recorded on impaired and
 restructured loans..............................      15
</TABLE>
   
  The increase in impaired loans from December 31, 1995 to December 31, 1996,
resulted from (i) loan growth, (ii) construction loans of $393,708 which
matured, and (iii) $470,199 of individual residential loans in bankruptcy
which were insured by either private mortgage insurance or FHA.     
   
  At December 31, 1996, three first mortgage loans totaling $464,000, made to
individuals who subsequently declared bankruptcy are included in impaired
loans. In addition, $641,000 related to one residential builder was also in
impaired loans. Of the $641,000, all but $70,000 has been paid out subsequent
to year end. As discussed above the increase in impaired loans is primarily
attributable to the four borrowers mentioned above.     
 
                                       6
<PAGE>
 
   
Management evaluates all problem loans and determines the collectibility of
the related interest and principal. In the event that full collection is
doubtful the loans are classified as impaired loans, although collection may
be probable through liquidation of the collateral. In the event that a builder
has demonstrated questionable performance or other financial concerns have
arisen, the entire line is subject to being classified as impaired based on
management's evaluation. The instances discussed above are isolated instances
and do not represent a current trend. Management expects no material losses on
the remaining balances.     
   
  In February 1992 and November 1993, Premier acquired separate financial
institutions; and, at the time of the acquisitions, significant problem loans
were identified. These problem loans and other unidentified problem loans
which were later identified in the two acquired institutions account for the
majority of the net charge-offs incurred for the years ended December 31,
1992, 1993 and 1994. The realization of these charge-offs, more conservative
underwriting, and an improving economy resulted in the decrease in the level
of charge-offs of outstanding loans over the last two years.     
 
  Accrual of interest income is discontinued on all loans when they become 90
days past due or, in the opinion of management, collection of interest becomes
doubtful. When a loan is determined to be impaired, all interest previously
accrued but not collected is reversed against current interest income. Accrual
of interest on such loans is resumed when, in management's judgment, the
collection of interest and principal becomes probable.
 
  In the opinion of management, any loans classified by regulatory authorities
as doubtful, substandard, or special mention that have not been included in
the table above do not represent or result from trends or uncertainties which
management reasonably expects will materially impact future operating results,
liquidity, or capital resources. These classified loans do not represent (i)
material credits about which management is aware or (ii) 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 are charged off at the time such loans are identified.
 
 Commitments and Lines of Credit
 
  Premier enters into residential construction and commercial loan commitments
in advance of closing to fund loans to its customers at locked-in interest
rates in the normal course of business. These instruments, to the extent they
are not covered by investor purchase commitments, involve credit and interest
rate risk in excess of the amount recognized in the financial statements.
 
  In the normal course of business, Premier 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.
 
  Premier's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for unfunded mortgage loan
commitments, residential construction, and commercial loan commitments to
extend credit and standby letters of credit is represented by the contractual
amount of those instruments. A summary of Premier's commitments is as follows:
 
<TABLE>
<CAPTION>
                                                            DECEMBER 31,
                                                       -----------------------
                                                          1996        1995
                                                       ----------- -----------
   <S>                                                 <C>         <C>
   Unfunded mortgage loan commitments................. $20,000,000 $31,968,000
   Residential construction and commercial loan com-
    mitments..........................................  27,277,198  18,526,425
   Commitments to extend credit.......................  49,987,828  20,387,000
   Standby letters of credit..........................     695,742   1,249,532
                                                       ----------- -----------
                                                       $97,960,768 $72,130,957
                                                       =========== ===========
</TABLE>
 
SUMMARY OF LOAN 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 the allowance. The factors that influence
management's judgment in determining the amount charged to operating expense
are past loan loss experience, composition of the loan
 
                                       7

<PAGE>
 
portfolio, evaluation of possible future losses, current economic conditions,
and other relevant facts. Premier's allowance for loan losses was
approximately $2,404,000 at December 31, 1996 compared with $1,802,000 at
December 31, 1995. The allowance for loan losses is reviewed regularly 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 loss adequate to cover
possible loan losses on the loans outstanding.
          
  Premier is a bank holding company that is the result of the acquisition of
five financial institutions acquired over the last five years. Each
institution utilized various methodologies to determine loan loss allowance
adequacy. The methodologies utilized by current management are, in the opinion
of that management group, appropriate for the allowance adequacy determination
at December 31, 1996. Considering the primary factor that the economy in
general and the Atlanta metropolitan market in specific is performing in an
outstanding manner, management realizes and provides for any deterioration of
the economy in the future. At this time, management expects charge-offs in
1997 to be consistent with 1996.     
   
  At December 31, 1996, the allowance for loan losses could be allocated in
the following manner:     
 
<TABLE>   
<CAPTION>
                                           ALLOCATION OF ALLOWANCE FOR LOAN
                                                        LOSSES
                                                     DECEMBER 31,
                                           ------------------------------------
                                               1996      1995  1994  1993  1992
                                           ------------  ----  ----  ----  ----
                                                (DOLLARS IN THOUSANDS)
                                           RESERVE %(1)  %(1)  %(1)  %(1)  %(1)
                                           ------- ----  ----  ----  ----  ----
<S>                                        <C>     <C>   <C>   <C>   <C>   <C>
Commercial................................ $  326   15%   17%    7%    9%   12%
Real estate...............................    539   40    44    56    54    56
Real estate--construction.................    521   36    28    24    18    11
Consumer..................................    174    9    11    13    19    21
Unallocated...............................    844  --    --    --    --    --
                                           ------  ---   ---   ---   ---   ---
                                           $2,404  100%  100%  100%  100%  100%
                                           ======  ===   ===   ===   ===   ===
</TABLE>    
--------
   
(1) Percent of loans in each category of total loans.     
 
  The following table summarizes average loan balances for each year, changes
in the allowance for loan losses arising from loans charged off, recoveries on
loans previously charged off, additions to the reserve which have been charged
to operating expense, and the rate of net charge-offs during the period to
average loans.
 
<TABLE>
<CAPTION>
                                   1996      1995     1994     1993     1992
                                 --------  --------  -------  -------  -------
                                          (DOLLARS IN THOUSANDS)
<S>                              <C>       <C>       <C>      <C>      <C>
Average amount of loans out-
 standing                        $183,367  $134,712  $90,640  $86,765  $83,905
Balance of allowance for loan
 losses at beginning of year...     1,802     1,301    1,581    1,403    1,478
Charge offs:
  Commercial and financial.....       (51)     (149)    (204)    (736)    (349)
  Real estate..................       (13)     (181)    (398)    (125)    (292)
  Consumer.....................       (88)      (59)    (132)    (176)    (421)
                                 --------  --------  -------  -------  -------
                                     (152)     (389)    (734)  (1,037)  (1,062)
                                 --------  --------  -------  -------  -------
Recoveries:
  Commercial and financial.....        78       132       80       67       21
  Real estate..................        34        83       32       28       20
  Consumer.....................        44        43       57      113       45
                                 --------  --------  -------  -------  -------
                                      156       258      169      208       86
                                 --------  --------  -------  -------  -------
Net (charge-offs), recoveries..         4      (131)    (565)    (829)    (976)
                                 --------  --------  -------  -------  -------
Allowance acquired in business
 combinations..................       --        294      --       --       460
                                 --------  --------  -------  -------  -------
Additions to allowance charged
 to operating expense during
 year..........................       598       338      285    1,007      441
                                 --------  --------  -------  -------  -------
Balance of allowance for loan
 losses at end of year.........  $  2,404  $  1,802  $ 1,301  $ 1,581  $ 1,403
                                 ========  ========  =======  =======  =======
Ratio of net loans charged off
 during the year to average
 loans outstanding.............       -- %     0.10%    0.62%    0.96%    1.16%
                                 ========  ========  =======  =======  =======
</TABLE>
 
 
                                       8
<PAGE>
<PAGE>
 
 Provision for Loan Loss
 
  The provision for loan losses was $598,000 in 1996 as compared to $338,000
in 1995. Premier had net recoveries of $4,000 in 1996. The ratio of net
charge-offs to average loans in 1996 was at its lowest level in the last five
years. The provision expense is primarily related to the growth in loans of
$53,982,000.
 
RESULTS OF OPERATIONS
 
  Premier reported record earnings of $2,540,000 for the year ended December
31, 1996. This amount was an increase of $551,000 or 28% from the previous
year's net income of $1,989,000. Year to date earnings include unusual
expenses of $1,036,000. This figure includes merger expenses, data processing
conversion expenses, severance expenses, as well as the special SAIF fund
recapitalization assessment. On an after tax basis, these unusual items
totaled $854,000. Fourth quarter 1996 net income was $1,002,000, exclusive of
any unusual expense or income items.
 
 Interest Income and Interest Expense
 
  The following table sets forth the amount of Premier's average balances,
interest income, and interest expense for each category of interest-earning
assets and interest-bearing liabilities, average interest rates for interest-
earning assets and interest yields for interest-bearing liabilities, net
interest spread, and net yield on average interest-earning assets.
 
 Distribution of Assets, Liabilities, and Stockholders' Equity Interest Rates
and Interest Differentials
 
<TABLE>
<CAPTION>
                                    1996                         1995                         1994
                         ---------------------------  ---------------------------  ---------------------------
                           AVERAGE                      AVERAGE                      AVERAGE
                           YIELDS/   INCOME OR          YIELDS/   INCOME OR          YIELDS/   INCOME OR
                         BALANCES(1) EXPENSES  RATES  BALANCES(1) EXPENSES  RATES  BALANCES(1) EXPENSES  RATES
                         ----------- --------- -----  ----------- --------- -----  ----------- --------- -----
                                                       (DOLLARS IN THOUSANDS)
<S>                      <C>         <C>       <C>    <C>         <C>       <C>    <C>         <C>       <C>
Interest-bearing depos-
 its in banks...........  $   7,716  $    381   4.94%  $   2,521   $   119   4.72%  $    523    $    18  3.44%
Taxable securities(4)...     37,185     2,284   6.14      41,683     2,735   6.56     34,020      1,743  5.12
Federal funds sold......     10,902       592   5.43       9,481       560   5.91      9,977        451  4.52
Loans(2)................    183,367    19,759  10.78     134,712    13,887  10.31     90,640      8,743  9.65
Allowance for loan
 losses.................     (2,122)                      (1,683)                     (1,509)
Cash and due from
 banks..................      7,982                       10,978                       5,689
Other assets............     13,477                       11,721                       7,955
                          ---------                    ---------                    --------
 Total..................  $ 258,507  $ 23,016          $ 209,413   $17,301          $147,295    $10,955
                          =========  ========          =========   =======          ========    =======  ====
Total interest-earning
 assets.................  $ 239,170             9.62%  $ 188,397             9.18%  $135,160             8.11%
                          =========            =====   =========            =====   ========             ====
Noninterest-bearing
 demand.................  $  29,472  $                 $  24,936   $                $ 21,652
Interest-bearing
 demand.................     50,993     1,577   3.09      37,833     1,283   3.39     36,407      1,082  2.97
Savings.................      8,515       252   2.96      10,438       278   2.66     11,048        327  2.96
Time....................    114,961     6,838   5.95      78,736     4,504   5.72     53,551      2,364  4.41
                          ---------  --------  -----   ---------   -------  -----   --------    -------  ----
 Total deposits.........    203,941     8,667            151,943     6,065           122,648      3,773
Borrowings..............     28,096     2,615   9.31      32,714     2,216   6.77      5,371        339  6.31
Other liabilities.......      3,220                        2,738                       1,195
Stockholders' equi-
 ty(3)..................     23,250                       22,018                      18,071
                          ---------  --------          ---------   -------          --------    -------
 Total..................  $ 258,507  $ 11,282          $ 209,413   $ 8,281          $147,295    $ 4,112
                          =========  ========          =========   =======          ========    =======
Total interest-bearing
 liabilities............  $ 202,565             5.57%  $ 159,721             5.18%  $106,377             3.87%
                          =========            =====   =========            =====   ========             ====
Net interest spread.....                        4.05%                        4.00%                       4.24%
                                               =====                        =====                        ====
Net yield on average
 interest- earning
 assets.................             $ 11,734   4.91%              $ 9,020   4.79%              $ 6,843  5.06%
                                     ========  =====               =======  =====               =======  ====
</TABLE>
-------
(1)Average balances were determined using the daily average balances.
(2)Average loans include impaired loans and are stated net of unearned income.
  Income on impaired loans is recognized on the cash basis.
(3)Average shareholders' equity is net of unrealized losses on securities
  available-for-sale, net of taxes
(4)Average taxable securities represent securities available-for-sale and are
  based on their fair values.
(5) Interest and fees on loans include $1,285,892, $902,787, and $685,034 of
    loan fee income for the years ended December 31, 1996, 1995, and 1994.
 
  Net interest income increased by $2,714,000 during fiscal 1996. The
following table reflects the changes in net interest income resulting from
changes in interest rates and from asset and liability volume. The change in
interest
 
                                       9
<PAGE>
 
attributable to rate has been determined by applying the change in rate
between years to average balances outstanding in the earlier year. The change
in interest due to volume has been determined by applying the rate from the
earlier year to change in average balances outstanding between years. Thus,
changes that are not solely due to rate or volume have been consistently
allocated between rate and volume.
 
<TABLE>
<CAPTION>
                               1995 TO 1996              1994 TO 1995
                           INCREASE (DECREASE)        INCREASE (DECREASE)
                             DUE TO CHANGE IN          DUE TO CHANGE IN
                          ------------------------  -------------------------
                           RATE   VOLUME    TOTAL    RATE    VOLUME    TOTAL
                          ------  -------  -------  -------  -------  -------
                                      (DOLLARS IN THOUSANDS)
<S>                       <C>     <C>      <C>      <C>      <C>      <C>
Income from interest-
 earning assets:
  Interest and fees on
   loans................. $  654  $ 5,218  $ 5,872  $   637  $ 4,507  $ 5,144
  Interest on taxable
   securities............   (168)    (283)    (451)     551      441      992
  Interest on Federal
   funds sold............    (50)      82       32      135      (26)     109
  Interest on deposits in
   banks.................      6      256      262        9       92      101
                          ------  -------  -------  -------  -------  -------
    Total interest
     income.............. $  442  $ 5,273  $ 5,715  $ 1,332  $ 5,014  $ 6,346
                          ======  =======  =======  =======  =======  =======
Expense from interest-
 bearing liabilities:
  Interest on interest-
   bearing deposits...... $ (116) $   410  $   294  $   158  $    43  $   201
  Interest on savings
   deposits..............     28      (54)     (26)     (32)     (17)     (49)
  Interest on time
   deposits..............    186    2,148    2,334      827    1,313    2,140
  Interest on other
   borrowings............    732     (333)     399       27    1,850    1,877
                          ------  -------  -------  -------  -------  -------
    Total interest
     expense............. $  830  $ 2,171  $ 3,001  $   980  $ 3,189  $ 4,169
                          ------  -------  -------  -------  -------  -------
    Net interest income.. $ (388) $ 3,102  $ 2,714  $   352  $ 1,825  $ 2,177
                          ======  =======  =======  =======  =======  =======
</TABLE>
 
 Non-Interest Income
 
  Total non-interest income increased $3,702,000 in fiscal 1996 over fiscal
1995. This was primarily due to the increase in mortgage loan activity
resulting in an increase in related income of $2,934,000. Commercial finance
maintenance fees were up $515,000 in fiscal 1996 from fiscal 1995. The
increase in income of these business lines is a continuation of a trend which
began in 1994. In 1995, mortgage origination fees were up $4,683,000 and
commercial finance fees were up $432,000 over fiscal 1994. Management expects
these income streams to continue to grow in 1997.
 
 Non-Interest Expense
 
  Total non-interest expense increased $5,675,000 in fiscal 1996 over fiscal
1995. As discussed above, unusual expenses related to merger, conversion, and
special SAIF fees totaled $1,036,000. In addition, Premier acquired Premier
Bank in a purchase accounting transaction in April of 1995. An estimate of the
increase in expense of twelve months in 1996 versus eight months since
acquisition in 1995 is $870,000. Salary and commission expense was up
$2,591,000 in Premier Lending due to increased volume and the addition of a
new origination office and staff. Expenses in Premier Bank were up an
estimated $400,000 due to a full year of one new branch and six months of an
additional branch.
 
  Non-interest expenses were up $5,036,000 in fiscal 1995 over fiscal 1994.
Salary and commission expense in Premier Lending was up $2,413,000 due
primarily to increases in volume. Premier Bank opened a new branch and Premier
Lending opened two additional offices in 1995.
 
 Income Taxes
 
  Consolidated income taxes decreased in 1996 by $69,000 as compared to 1995.
Premier was able to utilize net operating loss ("NOL") carryforwards of
$237,000 in Premier Bank and Premier Lending which had been incurred and not
utilized in 1994 and 1995. The effective tax rate is higher in 1996 versus
1995 due to the non-
 
                                      10
<PAGE>
 
deductibility of merger related expenses. A more complete discussion and
detailed schedule are contained in Note 10 of the Notes to Consolidated
Financial Statements.
 
RETURN ON EQUITY AND ASSETS
 
  The following rate of return information for the years indicated is
presented below.
 
<TABLE>
<CAPTION>
                                                     YEAR ENDED DECEMBER 31,
                                                     --------------------------
                                                      1996     1995      1994
                                                     -------  -------  --------
      <S>                                            <C>      <C>      <C>
      Return on assets(1)...........................     .98%     .95%      .20%
      Return on equity(2)...........................   10.92     9.03      1.61
      Cash dividend payout ratio(3).................   96.15     2.76    105.00
      Equity to assets ratio(4).....................    8.99    10.51     12.27
</TABLE>
--------
(1) Net income divided by average total assets
(2) Net income divided by average equity
(3) Cash dividends declared divided by net income
(4) Average equity divided by average total assets
 
  In 1996, a dividend related to 1995 earnings was declared and paid in
January 1996. An additional dividend related to 1996 earnings was declared in
December 1996 and paid in January 1997. In addition, Premier Bancshares, Inc.,
which was acquired by Premier in 1996, incurred net losses in 1994 and 1995,
and had never paid a common stock dividend.
 
QUARTERLY FINANCIAL DATA
 
<TABLE>
<CAPTION>
                                                1996
                           ---------------------------------------------------
                              FIRST       SECOND        THIRD       FOURTH
                             QUARTER      QUARTER      QUARTER      QUARTER
                           -----------  -----------  -----------  ------------
                            (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                        <C>          <C>          <C>          <C>
Interest income...........      $5,693       $5,787       $5,386        $6,150
Interest expense..........       2,706        2,668        2,766         3,141
                           -----------  -----------  -----------  ------------
Net interest income.......       2,987        3,119        2,620         3,009
Provision for loan
 losses...................         129          202          132           135
                           -----------  -----------  -----------  ------------
Net interest income after
 provision for loan
 losses...................       2,858        2,917        2,488         2,874
Noninterest income........       2,557        2,763        2,917         3,618
Noninterest expense.......       4,324        4,776        5,201         5,070
                           -----------  -----------  -----------  ------------
Income before income
 taxes....................       1,091          904          204         1,422
Income tax expense........         325          229           97           418
Minority interest in net
 income...................           3            3            4             2
                           -----------  -----------  -----------  ------------
Net income................ $       763  $       672  $       103  $      1,002
                           ===========  ===========  ===========  ============
Net income per share...... $      0.32  $      0.28  $      0.04  $       0.42
                           ===========  ===========  ===========  ============
</TABLE>
 
  The quarterly information reported on Forms 10-QSB by Premier for the
quarters ended March 30, 1996 and June 30, 1996 have been restated above to
reflect the business combination of First Alliance Bancorp, Inc. (predecessor
to Premier) with Premier Bancshares, Inc. which was consummated on August 31,
1996. The business combination was accounted for as a pooling of interests.
There were no other changes from previously reported amounts.
 
                                      11
<PAGE>
 

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

                           PREMIER BANCSHARES, INC.
                               AND SUBSIDIARIES

                         CONSOLIDATED FINANCIAL REPORT

                               DECEMBER 31, 1996

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

<PAGE>
 
                         INDEX TO FINANCIAL STATEMENTS
 
<TABLE>   
<S>                                                                         <C>
PREMIER BANCSHARES, INC.
  Independent Auditor's Report............................................. F-1
  Consolidated Balance Sheets.............................................. F-2
  Consolidated Statements of Income........................................ F-3
  Consolidated Statement of Stockholders' equity........................... F-4
  Consolidated Statements of Cash Flows.................................... F-5
  Notes to Consolidated Financial Statements............................... F-7
THE CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
  Report of Independent Certified Public Accountants.......................
  Consolidated Balance Sheets--December 31, 1996 and 1995..................
  Consolidated Statements of Earnings--Years ended December 31, 1996, 1995
   and 1994................................................................
  Consolidated Statements of Changes in Stockholders' Equity--Years ended
   December 31, 1996, 1995 and 1994........................................
  Consolidated Statements of Cash Flows--Years ended December 31, 1996,
   1995 and 1994...........................................................
  Notes to Consolidated Financial Statements...............................
</TABLE>    
<PAGE>
 

                           PREMIER BANCSHARES, INC.
                               AND SUBSIDIARIES

                         CONSOLIDATED FINANCIAL REPORT
                               DECEMBER 31, 1996

                               TABLE OF CONTENTS

<TABLE> 
<CAPTION> 
                                                                   PAGE
                                                             --------------
<S>                                                          <C> 
INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS......    F-1
FINANCIAL STATEMENTS
Consolidated balance sheets...................................    F-2
Consolidated statements of income.............................    F-3
Consolidated statements of stockholders' equity...............    F-4
Consolidated statements of cash flows......................... F-5 and F-6 
Notes to consolidated financial statements.................... F-7 and F-27 
INDEPENDENT AUDITOR'S REPORT ON THE SUPPLEMENTARY FORMATION...    F-28
</TABLE> 
<PAGE>
 
           INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS
 
To the Board of Directors 
Premier Bancshares, Inc. and Subsidiaries 
Atlanta, Georgia
 
  We have audited the accompanying consolidated balance sheets of Premier
Bancshares, Inc. and subsidiaries as of December 31, 1996 and 1995, and the
related statements of income, stockholders' equity and cash flows for each of
the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
 
  We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
 
  In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Premier
Bancshares, Inc. and subsidiaries as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
                                             
                                          Maudlin & Jenkins, L.L.P.     
 
Atlanta, Georgia
   
January 31, 1997, except for Note 16     
   
as to which the date is February 24, 1997     
 
<PAGE>
 
                   PREMIER BANCSHARES, INC. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1996 AND 1995
 
<TABLE>   
<CAPTION>
                                                         1996          1995
                                                     ------------  ------------
<S>                                                  <C>           <C>
                       ASSETS
Cash and due from banks............................. $ 11,633,707  $  9,545,638
Interest-bearing deposits in banks..................    1,447,173     9,947,819
Federal funds sold..................................   21,680,000     2,530,000
Securities available-for-sale.......................   35,153,641    45,796,237
Loans held for sale.................................   24,408,287    25,912,226
Loans...............................................  186,856,184   132,873,733
Less allowance for loan losses......................    2,404,189     1,801,917
                                                     ------------  ------------
    Loans, net......................................  184,451,995   131,071,816
Premises and equipment..............................    6,634,633     5,644,655
Other real estate owned.............................      603,489       313,117
Goodwill and other intangibles......................    2,276,728     2,686,233
Other assets........................................    5,868,826     4,077,242
                                                     ------------  ------------
    Total assets.................................... $294,158,479  $237,524,983
                                                     ============  ============
        LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
  Noninterest-bearing demand........................ $ 30,184,254  $ 29,295,271
  Interest-bearing demand...........................   57,562,280    40,938,564
  Savings...........................................    8,302,341     9,049,907
  Time, $100,000 and over...........................   35,103,940    31,003,923
  Other time........................................  105,580,365    68,165,694
                                                     ------------  ------------
    Total deposits..................................  236,733,180   178,453,359
Securities sold under repurchase agreements.........    8,443,316     1,308,634
Federal Home Loan Bank advances.....................    4,625,000    11,125,000
Other borrowings....................................   17,152,230    19,428,642
Other liabilities...................................    3,916,085     3,762,705
                                                     ------------  ------------
    Total liabilities...............................  270,869,811   214,078,340
                                                     ------------  ------------
Minority interest in subsidiary.....................       13,618        16,754
                                                     ------------  ------------
Commitments and contingent liabilities
Stockholders' equity
  Common stock, par value $1 at December 31, 1996;
   and $5 at December 31, 1995; 20,000,000 shares
   authorized; 4,249,748 and 2,351,529 issued and
   outstanding, respectively........................    4,249,748    11,757,645
  Capital surplus...................................   18,553,533    11,023,136
  Retained earnings.................................      640,485       542,730
  Unrealized gains (losses) on securities available-
   for-sale, net of tax.............................     (168,716)      106,378
                                                     ------------  ------------
    Total stockholders' equity......................   23,275,050    23,429,889
                                                     ------------  ------------
    Total liabilities and stockholders' equity...... $294,158,479  $237,524,983
                                                     ============  ============
</TABLE>    
 
 
                See Notes to Consolidated Financial Statements.
 
                                      F-2
<PAGE>
 
                   PREMIER BANCSHARES, INC. AND SUBSIDIARIES
 
                       CONSOLIDATED STATEMENTS OF INCOME
                  YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
 
<TABLE>   
<CAPTION>
                                            1996         1995         1994
                                        ------------ ------------  -----------
<S>                                     <C>          <C>           <C>
INTEREST INCOME
  Loans................................ $ 19,759,157 $ 13,886,775  $ 8,742,677
  Taxable securities...................    2,264,378    2,723,768    1,731,311
  Nontaxable securities................       20,237       11,261       11,265
  Deposits in banks....................      380,551      119,049       17,616
  Other short-term investments.........      591,458      559,739      450,891
                                        ------------ ------------  -----------
    Total interest income..............   23,015,781   17,300,592   10,953,760
                                        ------------ ------------  -----------
INTEREST EXPENSE
  Deposits.............................    8,666,641    6,064,829    3,772,280
  Other borrowings.....................    2,614,820    2,216,141      338,991
                                        ------------ ------------  -----------
    Total interest expense.............   11,281,461    8,280,970    4,111,271
                                        ------------ ------------  -----------
    Net interest income................   11,734,320    9,019,622    6,842,489
PROVISION FOR LOAN LOSSES..............      598,398      337,659      285,000
                                        ------------ ------------  -----------
    Net interest income after provision
     for loan losses...................   11,135,922    8,681,963    6,557,489
                                        ------------ ------------  -----------
OTHER INCOME
  Service charges on deposit accounts..      960,395      877,318      909,660
  Other service charges and fees.......    1,375,896      892,834      450,957
  Gain on mortgage loans held for
   sale................................    4,720,267    2,327,916       99,969
  Gain on sale of SBA loans............      279,061          --           --
  Mortgage loan fees...................    4,180,748    3,638,835    1,183,601
  Net realized gains (losses) on
   securities available-for-sale.......      135,295       52,841      (28,568)
  Net realized losses on securities
   held-to-maturity....................          --       (30,778)         --
  Other operating income...............      203,573      393,964      346,496
                                        ------------ ------------  -----------
    Total other income.................   11,855,235    8,152,930    2,962,115
                                        ------------ ------------  -----------
OTHER EXPENSES
  Salaries and employee benefits....... $ 11,870,099 $  8,183,327  $ 4,985,065
  Equipment expenses...................    1,110,368      681,966      568,654
  Occupancy expenses...................    1,297,448      958,622      607,859
  Advertising expenses.................      249,054      166,186      191,132
  Telephone expenses...................      353,892      190,316      159,672
  Merger related expenses..............      498,556       21,511          --
  Stationery and supplies..............      433,049      293,040      268,934
  Legal expenses.......................      202,243      254,915      168,802
  Director expenses....................      307,584      249,247      150,349
  Deposit insurance....................      327,708      212,447      247,874
  Collection expenses..................       91,886      144,763      146,073
  Goodwill amortization expense........      190,813      149,197          --
  Other operating expenses.............    2,438,357    2,190,127    1,165,461
                                        ------------ ------------  -----------
    Total other expenses...............   19,371,057   13,695,664    8,659,875
                                        ------------ ------------  -----------
    Income before income taxes and
     minority interest in net income of
     subsidiary........................    3,620,100    3,139,229      859,729
Income tax expense.....................    1,068,534    1,137,571      568,581
                                        ------------ ------------  -----------
    Net income before minority interest
     in net income of subsidiary.......    2,551,566    2,001,658      291,148
Minority interest in net income of
 subsidiary............................       11,850       12,709          --
                                        ------------ ------------  -----------
    Net income......................... $  2,539,716 $  1,988,949  $   291,148
                                        ============ ============  ===========
Net income per share of common stock... $        .59 $        .48  $       .08
                                        ============ ============  ===========
Weighted average shares outstanding....    4,306,835    4,136,260    3,570,450
                                        ============ ============  ===========
</TABLE>    
 
                See Notes to Consolidated Financial Statements.
 
                                      F-3
<PAGE>
 
                   PREMIER BANCSHARES, INC. AND SUBSIDIARIES
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                  YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
 
<TABLE>   
<CAPTION>
                                                                            UNREALIZED GAINS
                             COMMON STOCK                     RETAINED         (LOSSES) ON          TOTAL
                         ---------------------    CAPITAL     EARNINGS    SECURITIES AVAILABLE- STOCKHOLDERS'
                          SHARES    PAR VALUE     SURPLUS     (DEFICIT)   FOR-SALE, NET OF TAX     EQUITY
                         --------- -----------  -----------  -----------  --------------------- -------------
<S>                      <C>       <C>          <C>          <C>          <C>                   <C>
BALANCE, DECEMBER 31,
 1993................... 1,956,962 $ 9,784,810  $ 8,489,317  $  (414,329)      $       --       $ 17,859,798
  Net income............       --          --           --       291,148               --            291,148
  Cash dividends
   declared.............       --          --           --      (305,758)              --           (305,758)
  Stock issued..........    33,588     167,940      207,072          --                --            375,012
  Net change in
   unrealized gains
   (losses) on
   securities available-
   for-sale, net of
   tax..................       --          --           --        50,483          (716,247)         (665,764)
                         --------- -----------  -----------  -----------       -----------      ------------
BALANCE, DECEMBER 31,
 1994................... 1,990,550   9,952,750    8,696,389     (378,456)         (716,247)       17,554,436
  Net income............       --          --           --     1,988,949               --          1,988,949
  5% stock dividend.....    76,206     381,030      628,699   (1,012,822)              --             (3,093)
  Stock issued..........   284,773   1,423,865    1,698,048          --                --          3,121,913
  Cash dividends
   declared.............       --          --           --       (54,941)              --            (54,941)
  Net change in
   unrealized gains
   (losses) on
   securities available-
   for-sale, net of
   tax..................       --          --           --           --            822,625           822,625
                         --------- -----------  -----------  -----------       -----------      ------------
BALANCE, DECEMBER 31,
 1995................... 2,351,529  11,757,645   11,023,136      542,730           106,378        23,429,889
  Net income............       --          --           --     2,539,716               --          2,539,716
  Stock options
   exercised............     2,250       2,250       20,250          --                --             22,500
  Cash dividends
   declared.............       --          --           --    (2,441,961)              --         (2,441,961)
  Recapitalization......       --   (9,406,116)   9,406,116          --                --                --
  1.8055 stock split.... 1,895,969   1,895,969   (1,895,969)
  Net change in
   unrealized gains
   (losses) on
   securities available-
   for-sale, net of
   tax..................       --          --           --           --           (275,094)         (275,094)
                         --------- -----------  -----------  -----------       -----------      ------------
BALANCE, DECEMBER 31,
 1996................... 4,249,748 $ 4,249,748  $18,553,533  $   640,485       $ (168,716)       $23,275,050
                         ========= ===========  ===========  ===========       ===========      ============
</TABLE>    
 
 
                See Notes to Consolidated Financial Statements.
 
                                      F-4
<PAGE>
 
                   PREMIER BANCSHARES, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                  YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
 
<TABLE>
<CAPTION>
                                          1996          1995          1994
                                      ------------  ------------  ------------
<S>                                   <C>           <C>           <C>
OPERATING ACTIVITIES
  Net income before minority interest
   in net income of subsidiary....... $  2,551,566  $  2,001,658  $    291,148
  Adjustments to reconcile net income
   to net cash provided by (used in)
   operating activities:
    Depreciation.....................      798,761       522,115       484,319
    Amortization of intangibles......      190,813       149,197           --
    Provision for loan losses........      598,398       337,659       285,000
    Deferred income taxes............       11,752       107,200      (241,862)
    Net (increase) decrease in loans
     held for sale...................    1,672,026   (12,958,178)     (679,265)
    Net realized (gains) losses on
     securities available-for-sale...     (135,295)      (52,841)       28,568
    Net realized losses on securities
     held-to-maturity................          --         30,778           --
    (Increase) decrease in interest
     receivable......................     (111,054)     (552,809)       23,742
    Increase (decrease) in interest
     payable.........................      180,059       231,394        (4,658)
    Other operating activities.......   (2,891,833)    1,738,549     1,280,934
                                      ------------  ------------  ------------
      Net cash provided by (used in)
       operating activities..........    2,865,193    (8,445,278)    1,467,926
                                      ------------  ------------  ------------
INVESTING ACTIVITIES
  Purchases of securities available-
   for-sale..........................  (10,985,469)  (22,918,884)   (5,794,542)
  Proceeds from sales of securities
   available-for-sale................   11,534,120     8,831,030     2,702,013
  Proceeds from maturities of securi-
   ties available-for-sale...........    9,798,510     3,578,536       429,038
  Purchases of securities held-to-ma-
   turity............................          --     (6,590,781)   (9,302,235)
  Proceeds from sales of securities
   held-to-maturity..................          --      4,560,718           --
  Proceeds from maturities of securi-
   ties held-to-maturity.............          --      2,817,235     4,823,195
  Net (increase) decrease in Federal
   funds sold........................  (19,150,000)   16,580,000    (8,230,000)
  Net (increase) decrease in inter-
   est-bearing deposits in banks.....    8,500,646    (9,931,730)      (16,089)
  Net (increase) decrease in loans...  (54,207,952)  (13,452,625)    2,146,808
  Purchase of premises and equip-
   ment..............................   (1,788,739)     (788,429)     (349,537)
  Net cash acquired in business com-
   binations.........................          --        678,430           --
  Investment in subsidiary...........          --     (5,894,871)          --
                                      ------------  ------------  ------------
      Net cash used in investing ac-
       tivities......................  (56,298,884)  (22,531,371)  (13,591,349)
                                      ------------  ------------  ------------
</TABLE>
 
                See Notes to Consolidated Financial Statements.
 
                                      F-5
<PAGE>
 
                   PREMIER BANCSHARES, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                  YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
 
<TABLE>
<CAPTION>
                                           1996          1995         1994
                                        -----------  ------------  -----------
<S>                                     <C>          <C>           <C>
FINANCING ACTIVITIES
  Net increase in deposits............. $58,279,821  $ 29,256,260  $   843,283
  Net increase in repurchase agree-
   ments...............................   7,134,682     1,308,634            0
  Net increase (decrease) in other
   borrowings..........................  (2,276,412)    3,025,506   10,029,263
  Net decrease in Federal Home Loan
   Bank advances.......................  (6,500,000)   (2,059,990)           0
  Dividends paid.......................  (1,123,845)      (58,034)    (305,758)
  Dividends paid to minority sharehold-
   er..................................     (14,986)          --           --
  Proceeds from exercise of stock op-
   tions...............................      22,500           --           --
  Proceeds from common stock issued....         --      3,121,913      375,012
                                        -----------  ------------  -----------
    Net cash provided by financing ac-
     tivities..........................  55,521,760    34,594,289   10,941,800
                                        -----------  ------------  -----------
  Net increase (decrease) in cash and
   due from banks......................   2,088,069     3,617,640   (1,181,623)
  Cash and due from banks at beginning
   of year.............................   9,545,638     5,927,998    7,109,621
                                        -----------  ------------  -----------
  Cash and due from banks at end of
   year................................ $11,633,707  $  9,545,638  $ 5,927,998
                                        ===========  ============  ===========
SUPPLEMENTAL DISCLOSURES
  Cash paid for:
    Interest........................... $11,101,402  $  8,049,576  $ 4,115,929
    Income taxes....................... $ 1,257,556  $  1,272,504  $    98,322
BUSINESS COMBINATION
  Net cash acquired....................              $    678,430
                                                     ============
  Securities available-for-sale........              $  1,563,926
  Loans held for sale..................                 7,829,133
  Loan.................................                37,517,520
  Premises and equipment...............                 1,401,710
  Other assets.........................                 1,240,845
  Goodwill.............................                 2,547,828
  Deposits.............................               (31,031,023)
  Advances from Federal Home Loan
   Bank................................               (13,184,990)
  Subordinated debentures..............                (1,974,394)
  Other liabilities....................                  (694,114)
                                                     ------------
  Net assets acquired, net of cash and
   due from banks of $678,430..........              $  5,216,441
                                                     ============
NONCASH TRANSACTIONS
  Unrealized (gains) losses on securi-
   ties available-for-sale............. $   430,730  $ (1,263,607) $ 1,085,220
  Principal balances of loans trans-
   ferred to other real estate......... $   435,816  $    657,190  $   309,572
</TABLE>
 
                See Notes to Consolidated Financial Statements.
 
                                      F-6
<PAGE>
 
                   PREMIER BANCSHARES, INC. AND SUBSIDIARIES
 
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
NATURE OF BUSINESS
 
  Premier Bancshares, Inc., (the "Company" and formerly First Alliance/Premier
Bancshares, Inc.) is a bank and thrift holding company whose business is
conducted by its wholly-owned subsidiaries, First Alliance Bank (the "Bank")
located in Marietta, Georgia, Premier Bank (the "Thrift") located in Acworth,
Georgia, Premier Lending Corporation ("Lending") located in Atlanta, Georgia
and Interim Alliance Corporation d/b/a Alliance Finance located in Smyrna,
Georgia, an 80% owned subsidiary.
 
  The Company is not engaged in any substantial business other than the normal
financial services provided by its subsidiaries. However, the Company incurs
operating expenses in connection with evaluating and pursuing potential
business acquisitions.
 
  First Alliance Bank is a commercial bank with operations in Marietta and
Kennesaw, Georgia. The Bank provides a full range of banking services to
individual and corporate customers in its primary market area of Cobb County
and surrounding counties.
 
  Premier Bank was acquired by the Company during 1995 in a business
combination accounted for as a purchase. The Thrift provides a full range of
banking services to individual and corporate customers in its primary market
area of Cobb County and surrounding counties.
 
  Premier Lending Corporation, Inc. originates, processes, funds and sells
residential mortgage loans, construction loans and commercial finance loans
primarily in the metropolitan Atlanta area. The majority of the mortgage loans
are sold to independent third party investors with servicing released and a
significant portion of the construction and commercial finance loans are
participated to affiliated and non-affiliated financial institutions.
 
  Alliance Finance provides lending and financing services to consumer and
business enterprises. The Finance Company's primary activities consist of
origination of consumer loans including mortgage loans, retail sales financing
and related insurance products.
 
NAME CHANGE
 
  In January 1997, the Company changed its name from First Alliance/Premier
Bancshares, Inc. to Premier Bancshares, Inc.
 
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 DUE FROM BANKS
 
  Cash on hand, cash items in process of collection and amounts due from banks
are included in cash and due from banks.
 
                                      F-7
<PAGE>
 
                   PREMIER BANCSHARES, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
  The Company and its subsidiaries maintain amounts due from banks which, at
times, may exceed Federally insured limits. The Company has not experienced
any losses in such accounts.
 
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. Other
equity securities without a readily determinable fair value are carried at
cost.
 
  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 HELD FOR SALE
 
  Loans held for sale include primarily mortgage loans which are carried at
the lower of aggregate cost or fair value. The determination of fair value
includes consideration of outstanding commitments from investors, related
origination fees and costs, and commitment fees paid. Gains and losses are
recognized at settlement dates and are determined by the difference between
the selling price and the carrying value of the loans sold. The Company sells
all mortgage loans on a servicing released basis. The Company's practice is to
originate mortgage loans subject to existing purchase commitments from third
party investors.
 
LOANS
 
  Loans are carried at their principal amounts outstanding less unearned
income, net deferred loan fees and costs and the allowance for loan losses.
Interest income on most loans is credited to income based on the principal
amount outstanding. Interest on other loans is recognized on the sum-of-the-
months method, the results of which are not materially different from
generally accepted accounting principles.
 
  Loan origination fees and certain direct costs incurred in originating most
loans are deferred and recognized as income over the life of the loan. Fees
and costs incurred in origination of other loans are recognized at the time
the loan is recorded. The results of operations are not materially different
than the results which would be obtained by accounting for all 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.
 
  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. When accrual of interest is discontinued, all unpaid accrued
interest is reversed. Interest income is subsequently recognized only to the
extent cash payments are received.
   
  The Company adopted the provisions of Statement of Financial Accounting
Standard No. 114, "Accounting by Creditors for Impairment of a Loan" as
amended by Statement of Financial Accounting Standard No. 118, "Accounting by
Creditors for Impairment of a Loan--Income Recognition and Disclosures," on
January 1, 1995. 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
    
                                      F-8
<PAGE>
 
                   PREMIER BANCSHARES, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
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.
   
  The Company considers the following type loans to be impaired:     
     
    (1) all nonaccrual loans, (2) loans that have been restructured in a
  troubled debt restructuring provided that the restructured loan agreement
  specifies an interest rate that is less than the Company would be willing
  to accept at the time of the restructuring for a new loan with comparable
  risk or the loan becomes impaired based on the terms specified by the
  restructured loan agreement, and (3) any other loan in which management
  does not expect to collect all contractual principal and interest payments
  in accordance with the terms of the loan agreement.     
   
  The Company has not identified large groups of smaller-balance homogeneous
loans which are collectively evaluated for impairment. Any loan that meets the
characteristics as described above are considered to be impaired regardless of
loan type or balance.     
 
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.
 
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.
 
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 for 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. A valuation allowance is recorded for those deferred
tax items for which it is more likely than not that realization will not
occur.
 
  The Company and the 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.
 
NET INCOME PER COMMON SHARE
 
  Net income per common share is computed by dividing net income by the
weighted average number of shares of common stock and common stock equivalents
outstanding. Common stock equivalents consist of stock options and warrants.
 
                                      F-9
<PAGE>
 
                   PREMIER BANCSHARES, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
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........ $ 19,592,588 $  38,756  $  (53,968) $ 19,577,376
    State and municipal secu-
     rities...................      101,145     3,546         --        104,691
    Mortgage backed securi-
     ties.....................   13,909,362    39,378    (256,642)   13,692,098
    Equity securities.........    1,834,545       --      (55,069)    1,779,476
                               ------------ ---------  ----------  ------------
                               $ 35,437,640 $  81,680  $ (365,679) $ 35,153,641
                               ============ =========  ==========  ============
  December 31, 1995:
    U. S. Government and
     agency securities........ $ 22,226,156 $ 238,490  $ (151,542) $ 22,313,104
    State and municipal secu-
     rities...................      291,803    12,038         --        303,841
    Mortgage backed securi-
     ties.....................   21,691,002   260,327    (184,535)   21,766,794
    Equity securities.........    1,440,545       --      (28,047)    1,412,498
                               ------------ ---------  ----------  ------------
                               $ 45,649,506 $ 510,855  $ (364,124) $ 45,796,237
                               ============ =========  ==========  ============
</TABLE>
 
  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 with or without penalty. Therefore, these
securities and equity securities are not included in the maturity categories
in the following summary.
 
<TABLE>
<CAPTION>
                                                             SECURITIES
                                                      -------------------------
                                                       AMORTIZED       FAIR
                                                          COST        VALUE
                                                      ------------ ------------
   <S>                                                <C>          <C>
   Due from one year to five years................... $ 17,288,569 $ 17,280,585
   Due from five to ten years........................    2,026,196    2,018,440
   Due after ten years...............................      378,968      383,042
   Mortgage backed securities........................   13,909,362   13,692,098
   Equity securities.................................    1,834,545    1,779,476
                                                      ------------ ------------
                                                      $ 35,437,640 $ 35,153,641
                                                      ============ ============
</TABLE>
 
  Securities with a carrying value of approximately $31,452,000 and
$38,224,000 at December 31, 1996 and 1995, respectively, were pledged to
secure public deposits and for other purposes.
 
  Gains and losses on sales of securities consist of the following:
 
<TABLE>
<CAPTION>
                              HELD TO MATURITY      AVAILABLE FOR SALE
                              ---------------- -------------------------------
                                    1995         1996       1995       1994
                              ---------------- ---------  ---------  ---------
   <S>                        <C>              <C>        <C>        <C>
   Gross gains..............     $     725     $ 148,325  $ 130,926  $   1,431
   Gross losses.............       (31,503)      (13,030)   (78,085)   (29,999)
                                 ---------     ---------  ---------  ---------
   Net realized gains (loss-
    es).....................     $ (30,778)    $ 135,295  $  52,841  $ (28,568)
                                 =========     =========  =========  =========
</TABLE>
 
  The Company sold during the third quarter of 1995 securities classified as
held-to-maturity, with a carrying amount of $4,560,718, recognizing a net loss
of $30,778, in response to changes in the bond market and
 
                                     F-10
<PAGE>
 
                   PREMIER BANCSHARES, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
management's evaluation of the securities portfolio. The circumstances leading
to the sale of these securities were identified as an isolated instance based
on prudent business decisions. On December 15, 1995, the Company transferred
its remaining held-to-maturity portfolio totaling $20,103,806 to available-
for-sale, resulting in a net unrealized loss of $23,815 which was included in
stockholders' equity at $15,718 net of related taxes of $8,097.
 
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 and financial............................ $ 28,599,233  $ 22,182,076
Real estate--construction...........................   67,410,541    37,157,871
Real estate--mortgage                                  73,272,062    58,463,177
Consumer............................................   17,991,335    14,776,676
Other...............................................       81,094       912,432
                                                     ------------  ------------
                                                      187,354,265   133,492,232
Unearned income.....................................     (520,446)     (447,306)
Net deferred loan (fees) costs......................       22,365      (171,193)
Allowance for loan losses...........................   (2,404,189)   (1,801,917)
                                                     ------------  ------------
Loans, net.......................................... $184,451,995  $131,071,816
                                                     ============  ============
</TABLE>
 
  Changes in the allowance for loan losses for the years ended December 31,
1996, 1995 and 1994 were as follows:
 
<TABLE>
<CAPTION>
                                                1996        1995        1994
                                             ----------  ----------  ----------
<S>                                          <C>         <C>         <C>
BALANCE, BEGINNING OF YEAR.................. $1,801,917  $1,301,582  $1,581,532
  Allowance acquired in acquisitions........        --      294,309         --
  Provision for loan losses.................    598,398     337,659     285,000
  Loans charged off.........................   (152,326)   (389,570)   (735,324)
  Recoveries................................    156,200     257,937     170,374
                                             ----------  ----------  ----------
BALANCE, END OF YEAR........................ $2,404,189  $1,801,917  $1,301,582
                                             ==========  ==========  ==========
</TABLE>
 
  The total recorded investment in impaired loans was $1,223,510 and $268,463
at December 31, 1996 and 1995, respectively. None of these loans had a
specific allowance for loan losses at December 31, 1996 and 1995 determined in
accordance with generally accepted accounting principles. The average recorded
investment in impaired loans for 1996 and 1995 was $1,038,284 and $692,500,
respectively. Interest income on impaired loans of $14,085 and $10,155 was
recognized for cash payments received for the years ended 1996 and 1995,
respectively.
 
  The Company has granted loans to certain related parties including
directors, executive officers, and their related entities. 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 year ended December 31, 1996
are as follows:
 
<TABLE>
   <S>                                                               <C>
   BALANCE, BEGINNING OF YEAR....................................... $1,410,900
     Advances.......................................................    223,601
     Repayments.....................................................   (407,081)
                                                                     ----------
   BALANCE, END OF YEAR............................................. $1,227,420
                                                                     ==========
</TABLE>
 
                                     F-11
<PAGE>
 
                   PREMIER BANCSHARES, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE 4. PREMISES AND EQUIPMENT
 
  Premises and equipment are summarized as follows:
 
<TABLE>
<CAPTION>
                                                            DECEMBER 31,
                                                       ------------------------
                                                          1996         1995
                                                       -----------  -----------
   <S>                                                 <C>          <C>
   Land............................................... $ 1,132,414  $ 1,132,414
   Buildings..........................................   3,607,228    3,469,036
   Equipment..........................................   5,835,742    4,471,926
                                                       -----------  -----------
                                                        10,575,384    9,073,376
   Accumulated depreciation...........................  (3,940,751)  (3,428,721)
                                                       -----------  -----------
                                                       $ 6,634,633  $ 5,644,655
                                                       ===========  ===========
</TABLE>
 
NOTE 5. OTHER BORROWINGS
 
SECURITIES SOLD UNDER REPURCHASE AGREEMENTS
 
  The balance of securities sold under repurchase agreements was $8,443,316
and $1,308,634 at December 31, 1996 and 1995, respectively.
 
SUBORDINATED DEBENTURES
 
  Subordinated debt of Alliance Finance and Premier Lending consists of fixed
rate debentures which are payable on demand or mature at twelve, twenty-four
or thirty-six months after date of issue. The debentures have various
principal amounts and interest is payable monthly. The Company may repay the
debentures for a price equal to 100% of the principal plus any unpaid interest
to date of redemption without penalty. A summary of the outstanding debentures
by interest rate and maturity are as follows:
 
<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                          ---------------------
                                                             1996       1995
                                                          ---------- ----------
   <S>                                                    <C>        <C>
   7.50% due on demand................................... $4,236,971 $      --
   7.50% due in 1997.....................................     70,000        --
   7.50% due February 20, 1999...........................     70,000        --
   8.00% due on demand...................................  1,327,000  1,194,000
   8.00% due in 1998.....................................     35,000     35,000
   8.50% due on demand...................................     90,000        --
   10.0% due on demand...................................     25,000     25,000
                                                          ---------- ----------
                                                          $5,853,971 $1,254,000
                                                          ========== ==========
</TABLE>
 
                                     F-12
<PAGE>
 
                   PREMIER BANCSHARES, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
  Lines of credit at December 31, 1996 and 1995 consisted of:
 
<TABLE>
<CAPTION>
                                                            1996       1995
                                                         ---------- -----------
<S>                                                      <C>        <C>
Revolving line of credit of $4,000,000 with a
 nonaffiliated institution, bearing interest at prime
 less .50% (7.75% at December 31, 1996) due on October
 31, 1997. Line is secured by all commercial finance
 notes receivable, all stock of the Company's subsidi-
 aries and guaranteed by the Company...................  $2,320,000 $       --
Revolving line of credit of $4,000,000 with a
 nonaffiliated institution, bearing interest at prime
 less .50% (7.75% at December 31, 1996), due October
 31, 1997. Line is secured by all stock of the
 Company's subsidiaries and guaranteed by the Company..   3,675,000         --
Revolving line of credit of $3,000,000 with a
 nonaffiliated institution, bearing interest at prime
 less .50% (7.75% at December 31, 1996), due October
 31, 1997. Line is secured by accounts receivable of
 Alliance Finance, all stock of the Company's subsidi-
 aries and guaranteed by the Company...................     475,000         --
Treasury, tax and loan note option account with the
 Federal Reserve Bank of Atlanta, due on demand, bear-
 ing interest at 5.148% at December 31, 1996, collater-
 alized by securities..................................     828,259         --
Line of credit of $505,000 with a nonaffiliated insti-
 tution, bearing interest at prime plus 1% (9.25% at
 December 31, 1995), matured on August 14, 1996........         --      505,000
Revolving warehouse line of credit of $30,000,000 with
 a nonaffiliated institution, bearing interest at an
 annual rate varying from published rates on high-
 graded unsecured commercial paper plus 1.75% to plus
 3%, matured October 21, 1995..........................  $      --  $13,584,642
Revolving line of credit of $3,000,000 with a
 nonaffiliated institution, bearing interest at prime
 (8.50% at December 31, 1995) matured February 15,
 1996..................................................         --    1,085,000
                                                         ---------- -----------
                                                         $7,298,259 $15,174,642
                                                         ========== ===========
 
  Long-term debt at December 31, 1996 and 1995 consisted of:
 
<CAPTION>
                                                            1996       1995
                                                         ---------- -----------
<S>                                                      <C>        <C>
Note payable in the amount of $4,000,000, due in eight
 annual instalments of $500,000 beginning April 1, 1999
 with interest due quarterly at prime less .50% (7.75%
 at December 31, 1996), due April 1, 2006. Note payable
 is secured by all stock of the Company's subsidiaries
 and guaranteed by the Company.........................  $4,000,000 $       --
Note payable in the amount of $3,000,000, due in annual
 instalments of $300,000 with interest due quarterly at
 prime plus 1% (9.25% at December 31, 1995) to October
 28, 2006 collateralized by 320,000 shares of common
 stock of Premier Bank.................................         --    3,000,000
                                                         ---------- -----------
                                                         $4,000,000 $ 3,000,000
                                                         ========== ===========
</TABLE>
 
  In connection with the long-term debt, the Company has agreed, among other
covenants, to during the term of the loan: (1) maintain earnings at a level
equal to or above .60 percent of average assets; (2) maintain reserves for
possible loan losses at a level of not less than 1% of total gross loans,
excluding residential first mortgage loans on owner-occupied single family
dwellings, of the Banks; (3) maintain in aggregate a total risk based capital
ratio of no less than 10.0% and Tier 1 capital to average total assets of no
less than 6.0%; and (4) not permit its capital to be less than $20,000,000.
 
                                     F-13
<PAGE>
 
                   PREMIER BANCSHARES, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
  Aggregate maturities required on long-term debt at December 31, 1996 were as
follows:
 
<TABLE>
<S>                                                                  <C>
1999................................................................ $   500,000
2000................................................................     500,000
2001................................................................     500,000
Thereafter..........................................................   2,500,000
                                                                     -----------
                                                                     $ 4,000,000
                                                                     ===========
</TABLE>
 
NOTE 6. FEDERAL HOME LOAN BANK ADVANCES
 
  Federal Home Loan Bank advances consisted of the following at December 31,
1996 and 1995:
 
<TABLE>
<CAPTION>
                                                           1996         1995
                                                        ----------- ------------
<S>                                                     <C>         <C>
Advance from the Federal Home Loan Bank with interest
 at 6.79%, due on August 1, 2001. Interest is payable
 monthly..............................................  $ 1,000,000 $        --
Advance from the Federal Home Loan Bank with interest
 at 6.99%, due on September 15, 1997. Interest is pay-
 able monthly.........................................    1,000,000    1,000,000
Advance from the Federal Home Loan Bank with interest
 at 8.27%, due on December 8, 1997. Interest is pay-
 able monthly.........................................    1,750,000    1,750,000
Advance from the Federal Home Loan Bank with interest
 at 8.41%, due on December 8, 1999. Interest is pay-
 able monthly.........................................      875,000      875,000
Advance from the Federal Home Loan Bank with interest
 at the one month LIBOR rate plus 20 basis points
 (6.17% at December 31, 1995), due on
 May 31, 2005.........................................          --     5,000,000
Advance from the Federal Home Loan Bank with interest
 based on the Federal Home Loan Bank's cost of funds
 plus .25% (5.85% at December 31, 1995), matured on
 January 2, 1996......................................          --     1,000,000
Variable rate advances from the Federal Home Loan Bank
 with interest based on the Federal Home Loan Bank's
 cost of funds plus .25% (6.10% December 31, 1995),
 matured on October 12, 1996..........................  $       --  $  1,000,000
Variable rate advances from the Federal Home Loan Bank
 with interest based on the Federal Home Loan Bank's
 cost of funds plus .25% (6.10% at December 31, 1995),
 matured on November 3, 1996..........................          --       500,000
                                                        ----------- ------------
                                                        $ 4,625,000 $ 11,125,000
                                                        =========== ============
</TABLE>
 
  The advances from the Federal Home Loan Bank are collateralized by a blanket
floating lien on qualifying first mortgages and pledges of certain securities
and the Company's Federal Home Loan Bank stock.
 
NOTE 7. DEFERRED COMPENSATION PLANS
 
  First Alliance Bank has three deferred compensation plans providing for the
deferral of director fees and certain retirement benefits for the directors.
 
  The first retirement benefit plan was put in place in January, 1994. The
Bank accrues an amount equal to the present value of the estimated benefit to
be paid under the plan. The accrual recorded for the years ended December 31,
1996, 1995 and 1994 was $103,994, $89,303 and $50,601, respectively. The plan
was terminated effective December 31, 1996 and no additional benefits will be
accrued under this plan.
 
 
                                     F-14
<PAGE>
 
                   PREMIER BANCSHARES, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
  The Bank's other plans allow the directors to defer up to $500 per month of
their monthly director's fees. The first plan covers one current and one
former director. Under that plan, the monthly amount deferred is utilized to
purchase life insurance on those directors. The Bank's liability under that
plan is equal to the cash value of those policies. The second plan is similar
to the first except deferred fees are recorded in a liability account monthly
plus an interest amount based on the current market rate accrued annually.
During 1996, 1995 and 1994, an amount of $38,260, $31,322 and $21,200,
respectively, was deferred by the directors and recorded as a liability of the
Bank.
 
  In conjunction with these plans, several universal life insurance policies
were purchased by the Bank. The Bank is the owner of the policies which insure
the lives of certain directors. These policies may be used by the Bank as
funding vehicles for plan obligations. The directors are general creditors of
the Bank and have no specific claims on these assets.
 
NOTE 8. EMPLOYEE BENEFIT PLANS
 
PROFIT SHARING PLAN
 
  The Company has a 401(k) retirement plan covering all employees, subject to
certain minimum age requirements. Contributions to the plan charged to expense
were $73,252, $38,933 and $39,975 for the years ended December 31, 1996, 1995
and 1994, respectively.
 
  Premier Bank had a defined contribution 401(k) plan covering all full-time
employees, subject to certain minimum service requirements. This 401(k) plan
was terminated on January 30, 1996 with the individual participants' funds
being disbursed on that date. There were no contributions to the plan for the
year ended December 31, 1996 and the period from acquisition to December 31,
1995.
 
INCENTIVE STOCK OPTION PLANS
   
  The Company has an Employee Incentive Stock Option Plan. Under the Plan, the
Company can grant to key personnel options to purchase an aggregate of 270,825
shares of the Company's common stock at a price not less than the fair market
value of such shares on the date the option is granted. The option period will
not exceed ten years from date of grant.     
   
  The Company also has an employee and a director stock option plan whereby
72,220 and 58,679 shares, respectively, of common stock have been reserved for
stock options. Under the employee plan, the Company can grant to key personnel
options to purchase common stock at a price not less than the fair market
value of such shares on the date the option is granted. The option period will
not exceed ten years from date of grant.     
 
                                     F-15
<PAGE>
 
                   PREMIER BANCSHARES, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
   
  Under the director plan, each eligible director who attends at least 75% of
the meetings of the Company's Board and related committee meetings shall
receive an option to purchase 903 shares annually of common stock. The options
expire ten years from the date of grant. All options granted were exercisable
at December 31, 1996. Other pertinent information related to the options is as
follows:     
 
<TABLE>   
<CAPTION>
                                             DECEMBER 31,
                         ------------------------------------------------------
                               1996               1995               1994
                         ------------------ ------------------ ----------------
                                  WEIGHTED-          WEIGHTED-        WEIGHTED-
                                   AVERAGE            AVERAGE          AVERAGE
                                  EXERCISE           EXERCISE         EXERCISE
                         NUMBER     PRICE   NUMBER     PRICE   NUMBER   PRICE
                         -------  --------- -------  --------- ------ ---------
<S>                      <C>      <C>       <C>      <C>       <C>    <C>
Under option, beginning
 of year................ 124,580   $ 5.72    58,679   $ 5.54   46,040  $ 5.54
  Granted...............  18,055     8.86    74,026     5.84   12,639    5.54
  Exercised.............  (4,062)    5.54       --       --       --      --
  Expired...............    (903)    5.54    (8,125)    5.54      --      --
                         -------            -------            ------
Under option and exer-
 cisable, end of year... 137,670     6.14   124,580     5.72   58,679    5.54
                         =======            =======            ======
</TABLE>    
 
<TABLE>   
<CAPTION>
                                                                    WEIGHTED-
                                                                     AVERAGE
                                                         WEIGHTED-  REMAINING
                                                          AVERAGE  CONTRACTUAL
                                                         EXERCISE    LIFE IN
                                          NUMBER  PRICE    PRICE      YEARS
                                          ------- ------ --------- -----------
<S>                                       <C>     <C>    <C>       <C>
Options Outstanding and Exercisable, End
 of Year................................. 110,587 $ 5.54  $ 5.54       7.0
                                            9,028   8.03    8.03       8.0
                                           18,055   8.86    8.86      10.0
                                          -------
                                          137,670
                                          =======
</TABLE>    
 
  As permitted by Statement of Financial Accounting Standard No. 123,
"Accounting for Stock-Based Compensation" (SFAS No. 123), the Company
recognizes compensation cost for stock-based employee compensation awards in
accordance with APB Opinion No. 25, "Accounting for Stock Issued to
Employees". The Company recognized no compensation cost for stock-based
employee compensation awards for the years ended December 31, 1996 and 1995.
If the Company had recognized compensation cost in accordance with SFAS No.
123, net income and net income per share would have been reduced as follows:
 
<TABLE>   
<CAPTION>
                                                 DECEMBER 31,
                                  ---------------------------------------------
                                          1996                   1995
                                  ---------------------- ----------------------
                                              NET INCOME             NET INCOME
                                  NET INCOME  PER SHARE  NET INCOME  PER SHARE
                                  ----------  ---------- ----------  ----------
<S>                               <C>         <C>        <C>         <C>
As reported.....................  $2,539,716    $ .59    $1,988,949    $0.48
Stock based compensation, net of
 related tax effect.............     (25,782)   (0.01)      (69,691)   (0.02)
                                  ----------    -----    ----------    -----
As adjusted.....................  $2,513,934    $ .58    $1,919,258    $ .46
                                  ==========    =====    ==========    =====
</TABLE>    
   
  The per share weighted-average fair value of stock options granted during
1996 and 1995 was $2.17 and $1.42, respectively, using the Black Scholes
option-pricing model. The fair value of the options granted during the year
was based upon the discounted value of future cash flows of the options using
the following assumptions:     
 
<TABLE>
<S>                                                                 <C>
Risk free interest rate............................................       6.45%
Expected life of the options....................................... 7-10 Years
Expected dividends (as a percent of the fair value of the stock)...       2.68%
Volatility.........................................................       9.80%
</TABLE>
 
                                     F-16
<PAGE>
 
                   PREMIER BANCSHARES, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE 9. SEGMENT REPORTING
 
  The Company's operations include two primary business segments: banking and
mortgage banking activities. The Company, primarily through its subsidiary
banks, offers banking services including a full range of commercial and
corporate banking services. Mortgage banking activities are provided by
Lending and include the origination of residential mortgage loans for sale to
various investors and origination of construction and commercial finance loans
for participation with other financial institutions.
 
<TABLE>
<CAPTION>
                                               INDUSTRY SEGMENTS
                         ----------------------------------------------------------------
   FOR THE YEAR ENDED      HOLDING      BANKING     MORTGAGE
   DECEMBER 31, 1996       COMPANY    SUBSIDIARIES   BANKING   ELIMINATIONS  CONSOLIDATED
   ------------------    -----------  ------------ ----------- ------------  ------------
<S>                      <C>          <C>          <C>         <C>           <C>
Revenues from unaffili-
 ated customers......... $       --   $ 23,201,562 $11,669,454 $        --   $ 34,871,016
Revenues from affili-
 ates...................   3,164,034       236,953         --    (3,400,987)          --
                         -----------  ------------ ----------- ------------  ------------
  Total revenue......... $ 3,164,034  $ 23,438,515 $11,669,454 $ (3,400,987) $ 34,871,016
                         ===========  ============ =========== ============  ============
Income from continuing
 operations before in-
 come taxes............. $ 2,101,909  $  4,060,370 $   598,302 $ (3,140,481) $  3,620,100
                         ===========  ============ =========== ============  ============
Identifiable assets at
 December 31, 1996...... $28,690,340  $286,781,318 $13,052,684 $(34,365,863) $294,158,479
                         ===========  ============ =========== ============  ============
Depreciation expense.... $       --   $    606,405 $   192,356               $    798,761
                         ===========  ============ ===========               ============
Premises and equipment
 acquisitions........... $       --   $  1,006,195 $   782,544               $  1,788,739
                         ===========  ============ ===========               ============
<CAPTION>
                                               INDUSTRY SEGMENTS
                         ----------------------------------------------------------------
   FOR THE YEAR ENDED      HOLDING      BANKING     MORTGAGE
   DECEMBER 31, 1995       COMPANY    SUBSIDIARIES   BANKING   ELIMINATIONS  CONSOLIDATED
   ------------------    -----------  ------------ ----------- ------------  ------------
<S>                      <C>          <C>          <C>         <C>           <C>
Revenues from unaffili-
 ated customers......... $   848,513  $ 17,823,464 $ 6,781,545 $        --   $ 25,453,522
Revenues from affili-
 ates...................     823,052       197,878         --    (1,020,930)          --
                         -----------  ------------ ----------- ------------  ------------
  Total revenue......... $ 1,671,565  $ 18,021,342 $ 6,781,545 $ (1,020,930) $ 25,453,522
                         ===========  ============ =========== ============  ============
Income (loss) from con-
 tinuing operations be-
 fore income taxes...... $   (92,001) $  3,412,496 $   629,454 $   (810,720) $  3,139,229
                         ===========  ============ =========== ============  ============
Identifiable assets at
 December 31, 1995...... $26,648,602  $219,065,627 $21,690,588 $(29,879,834) $237,524,983
                         ===========  ============ =========== ============  ============
Depreciation expense.... $     7,030  $    424,898 $    90,187               $    522,115
                         ===========  ============ ===========               ============
Premises and equipment
 acquisitions........... $       --   $    669,462 $   118,967               $    788,429
                         ===========  ============ ===========               ============
</TABLE>
 
                                     F-17
<PAGE>
 
                   PREMIER BANCSHARES, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
<TABLE>
<CAPTION>
                                               INDUSTRY SEGMENTS
                         ----------------------------------------------------------------
   FOR THE YEAR ENDED      HOLDING     BANKING     MORTGAGE
   DECEMBER 31, 1994       COMPANY   SUBSIDIARIES   BANKING    ELIMINATIONS  CONSOLIDATED
   ------------------    ----------- ------------ -----------  ------------  ------------
<S>                      <C>         <C>          <C>          <C>           <C>
Revenues from unaffili-
 ated customers......... $       --  $ 11,989,288 $ 1,914,958  $        --   $ 13,915,875
Revenues from affili-
 ates...................   1,461,295          --          --     (1,461,295)          --
                         ----------- ------------ -----------  ------------  ------------
  Total revenue......... $ 1,461,295 $ 11,989,288 $ 1,914,958  $ (1,461,295) $ 13,915,875
                         =========== ============ ===========  ============  ============
Income (loss) from con-
 tinuing operations be-
 fore income taxes...... $ 1,272,260 $  2,088,861 $(1,040,097) $ (1,461,295) $    859,729
                         =========== ============ ===========  ============  ============
Identifiable assets at
 December 31, 1994...... $15,173,401 $143,555,410 $ 7,920,414  $(15,123,652) $151,525,573
                         =========== ============ ===========  ============  ============
Depreciation expense.... $    68,506 $    415,813 $       --                 $    484,319
                         =========== ============ ===========                ============
Premises and equipment
 acquisitions........... $   192,121 $    157,416 $       --                 $    349,537
                         =========== ============ ===========                ============
</TABLE>
 
NOTE 10. INCOME TAXES
 
  Income tax expense consists of the following:
 
<TABLE>
<CAPTION>
                                                      DECEMBER 31,
                                             --------------------------------
                                                1996        1995      1994
                                             ----------  ---------- ---------
   <S>                                       <C>         <C>        <C>
   Current.................................. $1,561,724  $1,030,371 $ 456,810
   Benefit of net operating loss
    carryforward............................   (236,575)        --        --
   Valuation allowance adjustment...........   (268,367)        --    353,633
   Deferred.................................     11,752     107,200  (241,862)
                                             ----------  ---------- ---------
     Income tax expense..................... $1,068,534  $1,137,571 $ 568,581
                                             ==========  ========== =========
</TABLE>
 
  The Company's income tax expense 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              1994
                         ------------------- ------------------ -----------------
                           AMOUNT    PERCENT   AMOUNT   PERCENT  AMOUNT   PERCENT
                         ----------  ------- ---------- ------- --------  -------
<S>                      <C>         <C>     <C>        <C>     <C>       <C>
Income taxes at statu-
 tory rate.............. $1,230,834     34%  $1,067,337    34%  $292,308     34%
  Disallowed merger ex-
   penses...............    142,021      4       36,462     1      6,257      1
  Valuation allowance
   adjustment...........   (268,367)    (7)         --     --    353,633     41
  Alternative minimum
   tax credit...........        --      --          --     --    (37,135)    (4)
  Other items, net......    (35,954)    (1)      33,772     1    (46,482)    (6)
                         ----------    ---   ----------   ---   --------    ---
Income tax expense...... $1,068,534     30%  $1,137,571    36%  $568,581     66%
                         ==========    ===   ==========   ===   ========    ===
</TABLE>
 
  The above reconciliation reflects the inability to utilize the net operating
losses generated by the Premier Bancshares, Inc. group prior to the business
combination with First Alliance Bancorp, Inc., as discussed in Note 15.
 
                                     F-18
<PAGE>
 
                   PREMIER BANCSHARES, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(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..................................... $  425,865  $ 209,729
  Deferred compensation..................................    150,896     97,215
  Other real estate......................................     16,038     10,377
  Securities available-for-sale..........................    115,283        --
  Write-down of mutual funds.............................     18,885     18,885
  Net operating loss carryforward........................    585,067    821,642
  Georgia tax credits....................................     72,423     72,423
  Other..................................................     44,824        --
  Valuation allowance....................................   (374,294)  (642,661)
                                                          ----------  ---------
                                                           1,054,987    587,610
                                                          ----------  ---------
Deferred tax liabilities:
  Depreciation and amortization..........................    273,439    273,568
  Deferred loan fees, net of cost........................    141,507     59,119
  Securities available-for-sale..........................        --      49,889
  Cash method accounting on certain receivables..........    144,250    131,030
                                                          ----------  ---------
                                                             559,196    513,606
                                                          ----------  ---------
Net deferred tax assets.................................. $  495,791  $  74,004
                                                          ==========  =========
</TABLE>
 
  At December 31, 1996, the Company has available net operating loss
carryforwards of approximately $1,379,000 for Federal income tax purposes. If
unused, the carryforwards will expire beginning in 2009. Utilization of the
net operating loss carryforwards is subject to the separate return limitations
and change of ownership rules of the Internal Revenue Code of 1996.
 
NOTE 11. COMMITMENTS AND CONTINGENT LIABILITIES
 
  The Company enters into firm commitments to sell mortgage loans which it has
originated at agreed upon prices. The sales price for the loans is set based
on market rates at the time the commitment is entered into. The Company
generally has ten days after a mortgage loan closes in which to provide the
investor with the loan documentation, at which time the investor will fund the
loan. The investor bears the interest rate risk on the loan from the time of
the commitment. The Company's risk is limited to specific recourse provisions
within the agreement with the investor and its ability to provide the required
loan documentation to the investor within the commitment period.
 
  The Company sells mortgage loans to investors under various blanket
agreements. Under the agreements, investors generally have a limited right of
recourse to the Company for normal representations and warranties and, in some
cases, for delinquencies within the first three to six months which lead to
loan default and foreclosure. Management believes that the risk of loss to the
Company as a result of these provisions is insignificant.
 
  The Company enters into residential construction and commercial loan
commitments in advance of closing to fund loans to its customers at locked-in
interest rates in the normal course of business. These instruments, to the
extent they are not covered by investor purchase commitments, involve credit
and interest rate risk in excess of the amount recognized in the financial
statements.
 
                                     F-19
<PAGE>
 
                   PREMIER BANCSHARES, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
  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 unfunded mortgage loan
commitments, residential construction and commercial loan commitments,
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>
Unfunded mortgage loan commitments.................... $20,000,000 $31,968,000
Residential construction and commercial loan commit-
 ments................................................  27,277,198  18,526,425
Commitments to extend credit..........................  49,987,828  20,387,000
Standby letters of credit.............................     695,742   1,249,532
                                                       ----------- -----------
                                                       $97,960,768 $72,130,957
                                                       =========== ===========
</TABLE>
 
  At December 31, 1996, the Company had agreements with unaffiliated
institutions allowing it to sell participations in loans at the Company's
option. The unused participation amount was $36,082,936 at December 31, 1996.
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, marketable
securities, accounts receivable, inventory, equipment and personal property.
 
  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 consolidated financial statements.
 
LEASE OBLIGATIONS:
 
  The Company leases ten office facilities and certain equipment under
noncancelable lease agreements.
 
                                     F-20
<PAGE>
 
                   PREMIER BANCSHARES, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
  The future minimum lease commitments at December 31, 1996 are summarized as
follows:
 
<TABLE>
     <S>                                                             <C>
     Years Ending December 31,
       1997......................................................... $  588,336
       1998.........................................................    580,444
       1999.........................................................    411,395
       2000.........................................................    253,157
       2001.........................................................    115,991
                                                                     ----------
                                                                     $1,949,323
                                                                     ==========
</TABLE>
 
  Rental expense for the years ended December 31, 1996, 1995 and 1994 was
$723,717, $116,583 and $58,777, respectively.
 
  The Bank leases the land on which its main office is located for $5,717 per
month for five years with renewal options up to forty years. Escalation
features include a 5% increase every five years plus an additional amount
added which shall be the average yearly amount for the Consumer Price Index
(CPI) for metropolitan Atlanta for the previous five years, not to exceed 8%
per year. At any time after the first five years, the Bank may exercise an
option to purchase the property for $1,000,000.
 
  The Company also leases various other equipment under short-term leases.
 
NOTE 12. CONCENTRATIONS OF CREDIT
 
  The Company originates primarily commercial, residential, and consumer loans
to customers in the metro Atlanta area, and surrounding counties. The ability
of the majority of the Company's customers to honor their contractual loan
obligations is dependent on the economy in the metro Atlanta area.
 
  Seventy-five percent (75%) of the Company's loan portfolio is concentrated
in loans secured by real estate of which 36% 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.
 
  The Bank and Thrift, as a matter of policy, do not generally extend credit
to any single borrower or group of related borrowers in excess of $3,305,000
and $930,000, respectively.
 
NOTE 13. REGULATORY MATTERS
 
  The Bank and Thrift are subject to certain restrictions on the amount of
dividends that may be declared without prior regulatory approval. At December
31, 1996, approximately $1,300,000 and $45,000, respectively, of retained
earnings were available for dividend declaration without supervisory 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
 
                                     F-21
<PAGE>
 
                   PREMIER BANCSHARES, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
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 Banks to maintain minimum amounts and ratios of
total and Tier I capital to risk-weighted assets and of Tier I capital to
average assets. Premier Bank must also have core capital equal to 3% of
adjusted total assets and tangible capital equal to 1.5% of adjusted total
assets. These additional requirements are in accordance with the Office of
Thrift Supervision, their primary regulator. Management believes, as of
December 31, 1996, the Company and Banks meet all capital adequacy
requirements to which they are subject.
 
  As of December 31, 1996 and 1995, notification from the FDIC categorized
First Alliance Bank and Premier Bank as well capitalized and adequately
capitalized, respectively, under the regulatory framework for prompt
corrective action. To be categorized as adequately 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.
 
  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
                                ------- -----  ------- ----- ------------------
                                           (DOLLARS IN THOUSANDS)
<S>                             <C>     <C>    <C>     <C>   <C>       <C>
As of December 31, 1996
  Total Capital (to Risk
   Weighted Assets):
    Consolidated............... $23,526 10.79% $17,443    8% $   21,804     10%
    First Alliance Bank........ $18,716 14.02% $10,680    8% $   13,350     10%
    Premier Bank............... $ 6,221  8.57% $ 5,807    8% $    7,259     10%
  Tier I Capital (to Risk
   Weighted Assets):
    Consolidated............... $21,122  9.69% $ 8,719    4% $   13,079      6%
    First Alliance Bank........ $17,044 12.74% $ 5,351    4% $    8,027      6%
    Premier Bank............... $ 5,819  8.02% $ 2,902    4% $    4,353      6%
  Tier I Capital (to Average
   Assets):
    Consolidated............... $21,122  7.27% $11,621    4% $   14,527      5%
    First Alliance Bank........ $17,044  8.89% $ 7,669    4% $    9,586      5%
    Premier Bank............... $ 5,819  6.86% $ 3,393    4% $    4,241      5%
  Core Capital
    Premier Bank............... $ 5,819  5.85% $ 2,984    3%
  Tangible Capital
    Premier Bank............... $ 5,819  5.85% $ 1,492  1.5%
</TABLE>
 
NOTE 14. 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.
 
                                     F-22
<PAGE>
 
                   PREMIER BANCSHARES, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
  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.
 
SECURITIES AVAILABLE-FOR-SALE:
 
  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.
The carrying amount of loans held for sale approximates fair value.
 
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.
 
SECURITIES SOLD UNDER REPURCHASE AGREEMENTS, FEDERAL HOME LOAN BANK ADVANCES
AND OTHER BORROWINGS:
 
  The fair values of Federal Home Loan Bank advances and other borrowings are
estimated using discounted cash flow methods based on the Company's current
incremental borrowing rates for similar types of borrowing arrangements. The
fair value of variable-rate other borrowings and securities sold under
repurchase agreements approximate the carrying value.
 
ACCRUED INTEREST:
 
  The carrying amounts of accrued interest approximate their fair values.
 
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 do not represent a significant value to the Company until
such commitments are funded or closed. The Company has determined that these
instruments do not have a distinguishable fair value and no fair value has
been assigned.
 
                                     F-23
<PAGE>
 
                   PREMIER BANCSHARES, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
  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, due from banks, in-
   terest-bearing deposits
   in banks and Federal
   funds sold.............. $ 34,760,880 $ 34,760,880 $ 22,023,457 $ 22,023,457
  Securities available-for-
   sale....................   35,153,641   35,153,641   45,796,237   45,796,237
  Loans....................  208,860,282  211,261,541  156,984,042  158,862,597
  Accrued interest receiv-
   able....................    1,742,269    1,742,269    1,631,215    1,631,215
Financial liabilities:
  Deposits................. $236,733,180 $237,523,181 $178,453,359 $178,152,367
  Securities sold under re-
   purchase agreements.....    8,443,316    8,443,316    1,308,634    1,308,634
  Federal Home Loan Bank
   advances................    4,625,000    4,722,254   11,125,000   11,292,000
  Other borrowings.........   17,152,230   17,154,380   19,428,642   20,595,808
  Accrued interest pay-
   able....................    1,062,978    1,062,978      882,918      882,918
</TABLE>
 
NOTE 15. BUSINESS COMBINATIONS
 
  On February 3, 1997, the Company entered into an Agreement and Plan of
Reorganization with Central and Southern Holding Company ("Central and
Southern") of Milledgeville, Georgia. Under this agreement, Central and
Southern will merge with and into the Company. Upon consummation of the
merger, each share of Central and Southern's common stock issued and
outstanding will be converted into and exchanged for the right to receive one
share of the Company's common stock. Consummation of the merger is subject to
certain conditions, including approval of the agreement by the Boards of
Directors and the shareholders of both the Company and Central and Southern
and approval of the merger by various regulatory agencies.
 
  On August 31, 1996, First Alliance Bancorp, Inc. effected a business
combination with Premier Bancshares, Inc. by exchanging 746,530 shares of its
common stock for all the outstanding common and preferred stock of Premier
Bancshares, Inc. Premier Bancshares, Inc. is a thrift holding company whose
business is conducted by its wholly-owned subsidiaries, Premier Bank and
Premier Lending, as discussed in Note 1. Subsequent to the business
combination, the combined holding company changed its name to Premier
Bancshares, Inc. The combination was accounted for as a pooling of interest
and, accordingly, all prior financial statements have been restated to include
Premier Bancshares, Inc. The results of operations of the separate companies
for the periods prior to the combination are summarized as follows:
 
<TABLE>
<CAPTION>
                                                          REVENUES   NET INCOME
                                                         ----------- ----------
<S>                                                      <C>         <C>
Eight months ended August 31, 1996
  First Alliance Bancorp, Inc........................... $10,800,000 $1,501,000
  Premier Bancshares, Inc. .............................  11,707,000    115,000
                                                         ----------- ----------
                                                         $22,507,000 $1,616,000
                                                         =========== ==========
Year ended December 31, 1995
  First Alliance Bancorp, Inc........................... $14,244,000 $1,850,000
  Premier Bancshares, Inc. .............................  11,209,000    139,000
                                                         ----------- ----------
                                                         $25,453,000 $1,989,000
                                                         =========== ==========
</TABLE>
 
                                     F-24
<PAGE>
 
                   PREMIER BANCSHARES, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
  On May 1, 1995, Premier Bancshares, Inc. acquired all of the stock of
Allatoona Federal Savings Bank for $5,496,458, including expenses related to
the merger totaling $339,973. The purchase price was funded through the sale
of preferred stock and a loan obtained from a third party financial
institution in the amount of $3 million. The excess of the total acquisition
cost over the fair value of the net assets acquired of $2,779,772 is being
amortized over a period of fifteen years. The acquisition was accounted for as
a purchase and the results of operations of Allatoona Federal Savings Banks
since the date of acquisition are included in the consolidated financial
statements.
 
  The consolidated statement of income for the year ended December 31, 1995
includes the combined operations of the Company and Allatoona since
acquisition. Allatoona's results of operations included are for the period
from April 28, 1995 through December 31, 1995. The net loss for the month
ended April 28, 1995 was $123,395, as summarized below:
 
<TABLE>
   <S>                                                               <C>
   Interest income.................................................. $ 330,556
   Interest expense.................................................   193,925
                                                                     ---------
     Net interest income............................................   136,631
   Plus noninterest income..........................................   215,090
   Less noninterest expense.........................................   475,116
                                                                     ---------
     Net loss....................................................... $(123,395)
                                                                     =========
</TABLE>
 
  Upon the acquisition of Allatoona, the mortgage operations of Allatoona were
combined with the mortgage operations of Premier Lending Corporation. The
commercial banking operations continued to operate as Premier Bank.
 
  On January 31, 1995, First Alliance Bancorp, Inc. acquired Interim Alliance
Corporation (d/b/a Alliance Finance) in exchange for 80% of the outstanding
common stock owned personally by the President of First Alliance Bancorp, Inc.
The price paid for the stock was $28,000, which represents $25,000 for the
initial capitalization of the Company plus $3,000 of incidental expenses. The
acquisition was accounted for as a purchase.
 
NOTE 16. COMMON STOCK SPLIT
   
  On February 24, 1997, the Company declared a 1.8055 stock split for shares
of record as of March 6, 1997. All share and per share data reflect the split.
The effect of the split is presented retroactively within stockholders' equity
at December 31, 1996 by transferring from capital surplus to common stock the
additional shares times the par value.     
 
                                     F-25
<PAGE>
 
                   PREMIER BANCSHARES, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE 17. PARENT COMPANY FINANCIAL INFORMATION
 
  The following information presents the condensed balance sheets of Premier
Bancshares, Inc. at December 31, 1996 and 1995 and the statements of income
and cash flows for the years ended December 31, 1996, 1995 and 1994:
 
                           CONDENSED BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                           1996        1995
                                                        ----------- -----------
<S>                                                     <C>         <C>
ASSETS
  Cash................................................. $ 1,196,494 $   323,428
  Investment in subsidiaries...........................  27,074,523  24,915,754
  Other assets.........................................     419,323   1,409,420
                                                        ----------- -----------
    Total assets....................................... $28,690,340 $26,648,602
                                                        =========== ===========
LIABILITIES
  Other borrowings..................................... $ 4,000,000 $ 3,000,000
  Other liabilities....................................      97,174     218,713
                                                        ----------- -----------
                                                          4,097,174   3,218,713
                                                        ----------- -----------
STOCKHOLDERS' EQUITY...................................  24,593,166  23,429,889
                                                        ----------- -----------
    Total liabilities and stockholders' equity......... $28,690,340 $26,648,602
                                                        =========== ===========
</TABLE>
 
                        CONDENSED STATEMENTS OF INCOME
 
<TABLE>
<CAPTION>
                                               1996        1995        1994
                                            ----------  ----------  ----------
<S>                                         <C>         <C>         <C>
INCOME
  Interest on deposits..................... $   23,553  $   50,713  $      --
  Interest and fees on loans...............        --      424,137     652,652
  Dividends from subsidiaries..............  2,390,263     780,648     409,694
  Other income.............................        --      385,995   1,262,306
                                            ----------  ----------  ----------
                                             2,413,816   1,641,493   2,324,652
                                            ----------  ----------  ----------
EXPENSES
  Salaries and employee benefits...........     55,742     910,896   1,939,227
  Interest.................................    293,673     331,514     333,511
  Merger related expenses..................    468,449         --          --
  Legal and professional...................     42,212      79,672     159,467
  Other expenses...........................    202,049     441,484     711,885
                                            ----------  ----------  ----------
    Total expenses.........................  1,062,125   1,763,566   3,144,090
                                            ----------  ----------  ----------
    Income (loss) before income tax
     benefits and equity in undistributed
     income of subsidiary and minority
     interest in net income of subsidiary..  1,351,691    (122,073)   (819,438)
INCOME TAX BENEFITS........................   (449,657)   (286,992)    (58,985)
                                            ----------  ----------  ----------
    Income (loss) before equity in
     undistributed income of subsidiary and
     minority interest in net income of
     subsidiary............................  1,801,348     164,919    (760,453)
EQUITY IN UNDISTRIBUTED INCOME OF
 SUBSIDIARY................................    750,218   1,836,739   1,051,601
                                            ----------  ----------  ----------
    Income before minority interest in net
     income of subsidiary..................  2,551,566   2,001,658     291,148
MINORITY INTEREST IN NET INCOME OF
 SUBSIDIARY................................     11,850      12,709         --
                                            ----------  ----------  ----------
    Net income............................. $2,539,716  $1,988,949  $  291,148
                                            ==========  ==========  ==========
</TABLE>
 
                                     F-26
<PAGE>
 
                   PREMIER BANCSHARES, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
                       CONDENSED STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                            1996         1995         1994
                                         -----------  -----------  -----------
<S>                                      <C>          <C>          <C>
OPERATING ACTIVITIES
  Net income before minority interest in
   net income of subsidiary............. $ 2,551,566  $ 2,001,658  $   291,148
  Adjustments to reconcile net income to
   net cash provided by (used in) oper-
   ating activities:
    Depreciation........................         --         7,030       68,506
    Amortization........................      23,148       22,557       20,585
    Undistributed income of subsidiar-
     ies................................    (750,218)  (1,836,739)  (1,051,601)
    Net increase in loans held for
     sale...............................         --      (456,640)    (679,265)
    Other operating activities..........     833,561      468,816     (220,417)
                                         -----------  -----------  -----------
      Net cash provided by (used in) op-
       erating activities...............   2,658,057      206,682   (1,571,044)
                                         -----------  -----------  -----------
INVESTING ACTIVITIES
  Net increase in loans.................         --    (1,646,888)    (810,759)
  Purchase of premises and equipment....         --           --      (192,121)
  Investment in subsidiaries............  (1,683,646)  (7,739,452)         --
  Proceeds from sale of premises and
   equipment............................         --        19,893          --
                                         -----------  -----------  -----------
      Net cash used in investing activi-
       ties.............................  (1,683,646)  (9,366,447)  (1,002,880)
                                         -----------  -----------  -----------
FINANCING ACTIVITIES
  Net increase in borrowings............   1,000,000    5,438,566      879,263
  Dividends paid........................  (1,123,845)     (58,034)    (305,758)
  Proceeds from exercise of stock op-
   tions................................      22,500          --           --
  Proceeds from common stock issued.....         --     3,121,913      375,012
  Proceeds from redemption of subsidiary
   common stock.........................         --           --     2,000,000
                                         -----------  -----------  -----------
      Net cash provided by (used in) fi-
       nancing activities...............    (101,345)   8,502,445    2,948,517
                                         -----------  -----------  -----------
Net increase (decrease) in cash.........     873,066     (657,320)     374,593
Cash at beginning of year...............     323,428      980,748      606,155
                                         -----------  -----------  -----------
Cash at end of year..................... $ 1,196,494  $   323,428  $   980,748
                                         ===========  ===========  ===========
</TABLE>
 
                                      F-27