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

                                  FORM 10-KSB


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

     For the fiscal year ended December 31, 1997

                                      OR

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

     For the transition period from    to

          Commission file number: 33-23062

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

          Securities registered pursuant to Section 12(b) of the Act

                                     None

          Securities registered pursuant to Section 12(g) of the Act

                     Common Stock, par value $1 per share

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

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

The registrant's total revenues for the fiscal year ended December 31, 1997 were
$9,836,000.

As of March 1, 1998, registrant had outstanding 2,097,916 shares of common
stock, $1 par value per share, which is registrant's only class of common stock.
The aggregate market value of the voting stock held by nonaffiliates of the
registrant was approximately $22,639,800.

                      DOCUMENTS INCORPORATED BY REFERENCE

                                   Part III

Portions of the Company's Definitive Proxy Statement for its 1998 Annual Meeting
<PAGE>
 
                                    PART I.

ITEM 1.   BUSINESS OF THE COMPANY AND SUBSIDIARY BANKS

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

SOUTHERN BANK OF COMMERCE (FORMERLY EUFAULA BANK AND TRUST COMPANY)

     Southern Bank was incorporated as an Alabama Banking corporation in 1926
for the purpose of conducting a commercial banking business in Eufaula, Alabama.
In 1997, Eufaula Bank and Trust Company changed its name to Southern Bank of
Commerce. The Bank operates a full service commercial banking business in
Barbour County, its primary market area, providing such banking services as
receipt of deposits, personal and commercial loans, real estate mortgages,
personal and commercial checking, and other time deposits and related services.
Southern Bank also operates a full-service branch in Montgomery, Alabama.

     Eufaula is the largest city in Barbour County with a population of
approximately 13,000 persons. Barbour County has a population of approximately
26,000 persons. Southern Bank of Commerce and another commercial bank in Eufaula
are approximately the same size and are considered the largest banks in Barbour
County.

AMERICAN BANK

     American Bank was incorporated as a Florida corporation in 1987 for the
purpose of conducting a commercial banking business in Walton County, Florida.
On September 1, 1991, the Company acquired American Bank. The Bank operates as a
full service commercial bank providing financial services in its primary market
area of Walton County. Walton County has a population of approximately 33,600
persons.

PROPERTIES

     The Company's office and the main banking office of Southern Bank is
located at 218-220 E. Broad Street, Eufaula, Alabama, in a building consisting
of 15,629 square feet owned by Southern Bank. Southern Bank leases a portion of
the real estate upon which the building is situated. Southern Bank also operates
a branch office in Eufaula at 1121 South Eufaula Avenue. The land on which the
branch office is situated is leased. Southern Bank also operates a branch at
1406 I-85 Parkway in Montgomery, Alabama on leased facilities. Southern Bank
currently leases space for its existing branch in Montgomery, Alabama and has
purchased real estate at 4290 Carmichael Road in Montgomery on which branch
banking facilities are now under construction. Upon completion the branch will
be moved to this location. It is expected that the facilities will be available
for occupancy in August 1998.

     American Bank operates its main office at the corner of Mack Bayou Road and
U. S. Highway 98, Santa Rosa Beach, Florida in Walton County, in a building
consisting of 7,500 square feet. The American Bank's premises are owned by
American Bank. American Bank also operates branch offices at 16234 U. S. Highway
331 South in Freeport, Florida; at 151 East County Highway 38 in Grayton Beach,
Florida; and at 2851 Highway 77 in Panama City, Florida. The facilities in
Freeport and Grayton Beach are owned by American Bank. The facilities in Panama
City are leased.

                                       1
<PAGE>
 
                                   EMPLOYEES

     At December 31, 1997, Eufaula BancCorp and its subsidiaries employed 75
full-time employees and 6 part-time employees. Eufaula BancCorp considers its
relationship with its employees to be excellent.

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

                          SUPERVISION AND REGULATION

     Bank holding companies and banks are regulated extensively under both
Federal and State law. To the extent that the following information describes
statutory and regulatory provisions, it is qualified in its entirety by
reference to the particular statutory and regulatory provisions. Any change in
applicable law or regulation may have a material effect on the business of the
Company and the Banks.

THE COMPANY

     The Company is a bank holding company which is registered with, and subject
to supervision by, the Board of Governors of the Federal Reserve System (the
"Federal Reserve") under the Bank Holding Company Act of 1956, as amended (the
"BHC Act"). As a bank holding company, the Company is required to file periodic
reports and such additional information as the Federal Reserve may require
pursuant to the BHC Act. The Federal Reserve may examine the Company and the
Banks .

     The BHC Act requires prior Federal Reserve approval for, among other
things, the acquisition by a bank holding company of direct or indirect
ownership or control of more than 5% of the voting shares or substantially all
of the assets of any bank, or for a merger or consolidation of a bank holding
company with another bank holding company. With certain exceptions, the BHC Act
prohibits a bank holding company from acquiring direct or indirect ownership or
control of any voting shares of any company which is not a bank or bank holding
company and from engaging directly or indirectly in any activity other than
banking or managing or controlling banks or performing services for its
authorized subsidiaries. A bank holding company may, however, engage in or
acquire an interest in a company that engages in activities which the Federal
Reserve has determined, by regulation or order, to be so closely related to
banking or managing or controlling banks as to be properly incident thereto.

     The Company and the Banks are subject to the Federal Reserve Act, Section
23A, as amended by the Banking Affiliates Act of 1982. Section 23A defines
"covered transactions" to include extensions of credit and limits a bank's
covered transactions with any single affiliate to no more than 10% of a bank's
capital and surplus. Covered transactions with all affiliates combined are
limited to no more than 20% of a bank's capital and surplus. All covered and
exempt transactions between a bank and its affiliates must be on terms and
conditions consistent with safe and sound banking practices and a bank and its
subsidiaries are prohibited from purchasing low quality assets from the bank's
affiliates. Finally, Section 23A requires that all of a bank's extensions of
credit to an affiliate be appropriately secured by collateral. The Company and
the Banks are also subject to Federal Reserve Act, Section 23B, which further
limits transactions among affiliates.

                                       2
<PAGE>
 
     The Company's ability to pay dividends depends upon the earnings and
financial condition of the Banks and certain legal requirements. The Board of
Governors of the Federal Reserve System has stated that bank holding companies
should not pay dividends except out of current earnings and unless the
prospective rate of earnings retention by the Company appears consistent with
its capital needs, asset quality and overall financial conditions.

     The Banks may pay dividends to the Company provided that the payment is not
prohibited by the Bank's Articles of Incorporation and will not render the Banks
insolvent.

     In addition, Southern Bank is subject to supervision and regular
examination by the superintendent of the Alabama State Banking Department (the
"Superintendent"). Under the Alabama Banking Code, a state bank may not declare
or pay a dividend in excess of 90% of the net earnings of such bank until the
surplus of the bank is equal to at least 20% of its capital, and thereafter the
prior written approval of the Superintendent is required if the total of all
dividends declared by the bank in any calendar year exceeds the total of its net
earnings for that year combined with its retained net earnings for the preceding
two years less any required transfers to surplus. No dividends, withdrawals or
transfers may be made from the bank's surplus without prior written approval of
the Superintendent. American Bank is subject to supervision and regulation by
the Florida Department of Banking (the "Florida Department"). Under the Florida
Banking Code, a state bank may, after making certain charge-offs, declare a
dividend in an amount not to exceed its aggregate net profits of the period
combined with its retained net profits of the preceding two years and, with the
approval of the Florida Department, may declare a dividend from retained net
profits which accrued prior to the preceding two years, provided that the bank
carried 20% of its net profits for such preceding period to its surplus fund,
until the same shall at least equal the amount of its common and preferred stock
then issued and outstanding.

THE BANKS

     The Banks are state banks organized under the laws of the State of Alabama
(in the case of Southern Bank) and under the laws of the State of Florida (in
the case of American Bank) and their deposits are insured by the FDIC up to the
maximum amount permitted by law. The Banks are subject to regulation,
supervision and regular examination by the FDIC and by the Superintendent in the
case of Southern Bank and by the Florida Department in the case of American
Bank. Federal and state banking laws and regulations regulate, among other
things, the scope of the banking business conducted by the Banks, their loans
and investments, reserves against deposits, payment of interest on certain
deposits, mergers and acquisitions, borrowings, dividends, minimum capital
requirements, and the locations of branch offices and certain facilities.

     In September 1994, Congress enacted the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994. This legislation, among other things, amended
the BHC Act to permit bank holding companies, subject to certain limitations, to
acquire either control or substantial assets of a bank located in states other
than that banking holding company's home state regardless of state law
prohibitions. This legislation became effective on September 29, 1995. In
addition, this ligislation also amended the Federal Deposit Insurance Act to
permit, beginning on June 1, 1997 (or earlier where state legislatures provided
express authorization), the merger of insured banks with banks in other states.

                                       3
<PAGE>
 
     In August 1989, the Financial Institutions Reform, Recovery and Enforcement
Act of 1989 ("FIRREA") was enacted. FIRREA contains major regulatory reforms,
stronger capital standards for savings and loans and stronger civil and criminal
enforcement provisions. FIRREA allows the acquisition of healthy and failed
savings and loans by bank holding companies and imposes no interstate barriers
on such bank holding company acquisitions. With certain qualifications, FIRREA
also allows bank holding companies to merge acquired savings and loans into
their existing commercial bank subsidiaries. FIRREA also provides that a
depository institution insured by the FDIC can be held liable for any loss
incurred by, or reasonably expected to be incurred by, the FDIC after August 9,
1989, in connection with (i) the default of a commonly controlled FDIC-insured
depository institution or (ii) any assistance provided by the FDIC to a commonly
controlled FDIC-insured depository institution in danger of default.

     In December 1991, the President signed the Federal Deposit Insurance
Corporation Act of 1991 ("FDICIA") into law. This act recapitalizes the Bank
Insurance Fund ("BIF"), of which the Banks are members, substantially revises
bank regulations, including capital standards, restricts certain powers of state
banks, gives regulators the authority to limit officer and director compensation
and requires bank holding companies to guarantee the capital compliance of their
banks. In addition, the act grants to the FDIC authority to impose several
assessments on insured depository institutions to repay FDIC borrowings from the
Treasury or BIF members or "for any other purpose the FDIC may deem necessary"
and to assess risk-based insurance premiums upon banks. The FDIC has introduced
a risk-based assessment schedule with assessments to be paid by each BIF member
based on the institution's assessment risk classification, which is determined
based on whether the institution is considered "well capitalized", "adequately
capitalized", or "undercapitalized", as those terms have been defined in
applicable Federal regulations adopted to implement the prompt corrective action
provision of FDICIA, and whether such institution is considered by its
supervising agency to be financially sound or to have supervisory concerns. The
Banks are currently classified as "well-capitalized" under the FDIC risk based
assessment system. There can be no assurance that future regulations required by
this act and adjustments on deposit insurance assessment will not adversely
affect the banking industry or operations of the Company or the Banks.

     The various Federal bank regulators, including the Federal Reserve, have
adopted a risk-based capital requirement for assessing bank and bank holding
company capital adequacy. These standards significantly revise the current
definition of capital and establish minimum standards in relation to the
relative credit risk of assets and off-balance sheet exposures. Capital is
classified into two tiers. Tier I capital consists of common shareholders'
equity and perpetual preferred stock (subject to certain limitation) and is
reduced by goodwill and minority interests in the common equity accounts of
consolidated subsidiaries. Tier II capital consists of the allowance for
possible loan loses (subject to certain limitations), and certain subordinated
debt. The risk-based capital guidelines require financial institutions to
maintain specific defined credit risk factors (risk-adjusted assets). The
minimum Tier I and the combined Tier I and Tier II capital to risk-weighted
assets ratios are 4.0% and 8.0%, respectively. The Federal Reserve also has
adopted regulations which supplement the risk-based capital guidelines to
include a minimum leverage ratio of Tier I Capital to total assets of 3.0% to
5.0%. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - Liquidity and Capital Resources."

                                       4
<PAGE>
 
     The Federal Reserve's risk-based capital guidelines are applied to the
Company and the Banks on a consolidated basis. This will limit the Company's
ability to engage in acquisitions financed by debt. The FDIC has adopted similar
risk-based capital requirements that are applicable to the Banks. The Federal
Reserve, the FDIC, the Superintendent and the Florida Department have imposed
minimum capital (leverage) requirements. The Company's management believes that,
in view of the composition of the Company's assets and its present capital, such
capital rules do not have a material effect on the Company. However, those rules
may affect the future development of the Company's long-term business and
capital plans, and may affect its ability to acquire additional financial
institutions and other companies.

     The Community Reinvestment Act of 1977 (the "CRA") and the Regulations of
the FDIC and the Federal Reserve implementing that act are intended to
encourage regulated financial institutions to help meet the credit needs of
their local community or communities, including low and moderate income
neighborhoods, consistent with the safe and sound operation of such financial
institutions. Such regulations provide that the appropriate regulatory authority
will assess the records of regulated financial institutions in satisfying their
continuing and affirmative obligations to help meet the credit needs of their
local communities. The results of such examinations are made public and are
taken into consideration upon the filing of any application to establish a
branch, to merge or to acquire the assets or assume the liabilities of a bank.
The bank regulators are seeking public comment on an inter-agency proposal to
strengthen Federal enforcement of the CRA. The interagency proposal would
replace the subjective factors now being used to assess an institution's CRA
performance with three "tests" using objective, performance based standards. The
tests would apply differently to different types of institutions, depending on
their size or specialties. It cannot be predicted whether such proposal will be
adopted, and if adopted, how the regulation will affect the Company or the
Banks.

     Other legislative and regulatory proposals regarding changes in banking,
and the regulation of banks, thrifts and other financial institutions are
considered from time to time by the executive branch of the Federal government,
Congress and various state governments. Some of those proposals, if adopted,
could significantly change the regulations of banks and the financial services
industry. It cannot be predicted whether any proposals will be adopted, and, if
adopted, how these will affect the Company or the Banks.

     Banking is a business which depends on interest rate differentials. In
general, the difference between the interest paid by a bank on its deposits and
its other borrowings and the interest received by a bank on its loans to
customers and its securities holdings, constitutes the major portion of a bank's
earnings. Thus, the earnings and growth of the Company and the Banks will be
subject to the influence of economic conditions generally, both domestic and
foreign, and also to the monetary and fiscal policies of the United States and
its agencies, particularly the Federal Reserve. The Federal Reserve regulates
the supply of money through various means, including open-market dealings in
United States government securities, the discount rate at which members may
borrow, and reserve requirements on deposits and funds availability regulations.
These instruments are used in varying combinations to influence the overall
growth of bank loans, investments and deposits and also affect interest rates
charged on loans or paid on deposits. The policies of the Federal Reserve have
had a significant effect on the operating results of commercial banks in the
past and will continue to do so in the future. The nature and timing of any
future changes in Federal Reserve policies and their impact on the Company and
the Banks cannot be predicted.

                                       5
<PAGE>
 
ITEM 2.   PROPERTIES

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

ITEM 3.   LEGAL PROCEEDINGS

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

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS

     No matters were submitted to a vote of the Company's shareholders during
the fourth quarter of 1997.

                                       6
<PAGE>
 
                                    PART II


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

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

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

               The following table sets forth: (a) the low and high bid prices
               for the common stock as quoted on Nasdaq during the periods since
               the common stock was listed; and (b) the amount of quarterly
               dividends declared on the common stock during the periods
               indicated. On December 12, 1996, the Company undertook a two for
               one stock split effected through a stock dividend and on November
               15, 1997, the Company undertook a three for two stock split
               effected through a stock dividend. The share prices and dividends
               paid shown in the table below have been adjusted to reflect such
               stock splits. Over-the-counter and quotations reflect inter-
               dealer prices, without retail mark-up, mark-down or commission
               and may not represent actual transactions.

<TABLE>
<CAPTION>                                                                             
                                                                              CASH    
                 CALENDAR PERIOD                BID PRICES (A)              DIVIDENDS 
                                         ---------------------------                  
                       1997                   LOW           HIGH            DECLARED  
                 ---------------         ------------   ------------     -------------
                 <S>                     <C>            <C>              <C>          
                 First quarter           $     9           $  9-21/64       $   0.035
                 Second quarter                9-21/64       10-1/2             0.035
                 Third quarter                10-1/2         11                 0.035
                 Fourth quarter               11             17-5/8             0.035 

<CAPTION>                                                                            
                                                                              CASH                         
                 CALENDAR PERIOD                  BID PRICES                DIVIDENDS 
                                         ---------------------------                 
                       1996                   LOW           HIGH            DECLARED 
                 ---------------         ------------   ------------     -------------
                 <S>                     <C>            <C>              <C>          
                 First quarter            $   -          $  -             $    0.0325
                 Second quarter               6-3/16        6-11/16            0.0325
                 Third quarter                7             7-11/16            0.0325
                 Fourth quarter               8             9                  0.0325
</TABLE>

          (b)  As of March 1, 1998, there were approximately 270 holders of
               record of the Common Stock.

                                       7
<PAGE>
 
ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
          RESULTS OF OPERATIONS

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

     This annual report on Form 10-KSB, including this Item 6, contains forward-
looking statements in addition to historical information. The Company cautions
that there are various important factors that could cause actual results to
differ materially from those indicated in the forward-looking statements;
accordingly, there can be no assurance that such indicated results will be
realized. These factors include legislative and regulatory initiatives regarding
deregulation and restructuring of the banking industry; the extent and timing of
the entry of additional competition in the Company's markets; potential business
strategies, including acquisitions or dispositions of assets or internal
restructuring, that may be pursued by the Company; state and Federal banking
regulations; changes in or application of environmental and other laws and
regulations to which the Company is subject; political, legal and economic
conditions and developments; financial market conditions and the results of
financing efforts; changes in commodity prices and interest rates; weather,
natural disasters and other catastrophic events; and other factors discussed
herein. The words "believe", "expect", "anticipate", "project" and similar
expressions signify forward-looking statements. Readers are cautioned not to
place undue reliance on any forward-looking statements made by or on behalf of
the Company. Any such statement speaks only as of the date the statement was
made. The Company undertakes no obligation to update or revise any forward-
looking statements. Additional information with respect to factors that may
cause results to differ materially from those contemplated by such forward-
looking statements will be included in the Company's current and subsequent
filings with the Securities and Exchange Commission.

GENERAL

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

                                       8
<PAGE>
 
RESULTS OF OPERATIONS FOR YEARS ENDED DECEMBER 31, 1997 AND 1996

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

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

     The Company's net interest margin decreased slightly to 5.23% in 1997 as
compared to 5.27% in 1996. The yield on average interest-earning assets
increased 37 basis points or 4.28% to 9.01% in 1997 as compared to 8.64% in
1996. The interest rate paid on average interest-bearing liabilities increased
34 basis points to 4.65% in 1997 as compared to 4.31% in 1996. Net interest
income on a taxable-equivalent basis was $5,203,000 in 1997 as compared to
$4,691,000 in 1996, representing an increase of $512,000 or 10.91%. The increase
resulted from an increase of $680,000 generated on increased volume and a
reduction of $168,000 due primarily to an increase in average rate paid on
interest-bearing liabilities.

     Average interest-earning assets increased $10,421,000 to $99,458,000 in
1997 from $89,037,000 in 1996, an increase of 11.70%. Average loans increased
$15,937,000; average investments decreased $4,856,000; and average Federal funds
sold decreased $660,000. The increase in average interest-earning assets was
funded by an increase of $7,534,000, or 8.67%, in average deposits to
$94,390,000 in 1997 from $86,856,000 in 1996. Approximately 19% of the average
deposits were noninterest-bearing deposits in 1997; whereas approximately 21% of
the average deposits were noninterest-bearing deposits in 1996.

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

                                       9
<PAGE>
 
     The provision for loan losses is a charge to earnings in the current period
to replenish the allowance for loan losses and maintain it at a level management
has determined to be adequate. The provision for loan losses charged to earnings
amounted to $174,000 in 1997 and $81,000 in 1996, representing an increase of
$93,000 or 115% in the provision. The increase in the provision was attributed
to an increase in average loans of $15,937,000 in 1997 as compared to 1996. The
current year's provision for loan losses and the balance in the allowance for
loan losses at December 31, 1997 were based upon management's evaluation of the
loan portfolios and the potential loan risk associated with specific loans and
selected loan categories. Net loan charge-offs amounted to approximately $68,000
in 1997 as compared to net loan charge-offs of approximately $30,000 in 1996.
The allowance for loan losses as a percentage of total loans outstanding
amounted to .97% at December 31, 1997 as compared to 1.26% at December 31, 1996.
The allowance for loan losses as a percentage of total loans outstanding and
other real estate owned amounted to .96% at December 31, 1997 as compared to
1.24% at December 31, 1996. The decrease in this percentage at December 31,
1997, is the result of relatively high loan growth.

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

     Noninterest income increased $134,000 to $1,119,000 in 1997 from $985,000
in 1996 due primarily to an increase of $53,000 in service charges on deposit
accounts generated on an increase in total average deposits of $7,534,000 in
1997 and an increase of $61,000 in origination fees on mortgage loans. Net gains
on sales of investment securities decreased $8,000 and all other noninterest
income increased $28,000.

     Noninterest expense increased $ 922,000 to $4,473,000 in 1997 from
$3,551,000 in 1996, representing an increase of $415,000 in salaries and
employee benefits, an increase of $112,000 in equipment and occupancy expense
and an increase in all other noninterest expense of $395,000. The increase in
salaries and employee benefits was attributable to a normal increase in salaries
and related benefits for employees and the addition of 21 employees during the
year. The increase in equipment and occupancy expense was attributable to the
opening of four branches during 1997.

     Following is a summary of major items contributing to the increase in other
operating expenses:

<TABLE>
      <S>                                                           <C> 
      Increase in advertising and public relations expense 
        associated with the opening of new branches                 $   31,000
      Increase in legal and consulting fees associated
        with branch expansions and unsuccessful merger 
        negotiations                                                    98,000
      Increase in outside data processing and courier fees              42,000
      Professional fees paid for executive searches                     35,000
      Increase in telephone expense                                     20,000
      Net increase in other operating expenses                         169,000
                                                                    ----------
                                                                    $  395,000
                                                                    ==========
</TABLE>

                                       10
<PAGE>
 
     Average total assets increased $12,152,000 or 12.26% to $111,297,000 in
1997 as compared to $99,145,000 in 1996. Average interest-earning assets
increased 11.70% in 1997 over 1996. Loan demand was stronger in 1997 than in
1996 as evidenced by an average loan to deposit ratio of 70% in 1997 as compared
to 58% in 1996. Average loans increased $15,937,000 or 31.69% in 1997 as
compared to 1996 due primarily to the opening of a loan production office in
Montgomery, Alabama, which now operates as a branch of Southern Bank, and the
opening of three new branches for American Bank in Florida. The increase in
average loans was funded by an increase in average deposits of $7,534,000, an
increase in average other borrowings of $3,505,000 and a decrease in average
investments and Federal funds of $5,516,000.

LIQUIDITY AND CAPITAL RESOURCES

     Liquidity management involves the matching of the cash flow requirements of
customers who may be either depositors desiring to withdraw funds or borrowers
needing assurance that sufficient funds will be available to meet their credit
needs and the ability of the Company and the Banks to meet those needs. The
Company and the Banks seek to meet liquidity requirements primarily through
management of short-term investments (principally Federal funds sold) and
monthly amortizing loans. Another source of liquidity is the repayment of
maturing single payment loans. Also, the Banks maintain relationships with
correspondent banks, including a 3,000,000 line of credit for the Company, which
would provide funds on short notice, if needed.

     The liquidity and capital resources of the Company and the Banks are
monitored on a periodic basis by state and Federal regulatory authorities. As
determined under guidelines established by these regulatory authorities, the
Banks' liquidity ratio at December 31, 1997 was considered satisfactory. At that
date, the Banks' short-term investments were adequate to cover any reasonable
anticipated immediate need for funds. The Company and the Banks were aware of no
events or trends likely to result in a material change in their liquidity.
During 1997, the Company increased its capital by retaining earnings of $715,000
after payment of dividends. It also increased its capital by $253,000,
representing proceeds from the exercise of common stock options and by $168,000,
representing reduction in income taxes payable for exercise of non-qualified
stock options. After recording an increase in capital of $90,000 for unrealized
gains on securities, net of taxes, total capital increased $1,226,000 to
$11,941,000 from $10,715,000 at December 31, 1996.

     The Company estimates that approximately $1,115,000 will be required for
capital expenditures in 1998 for the purchase of land and the construction of
facilities for the branch in Montgomery.

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

                                       11
<PAGE>
 
     The following table summarizes the regulatory capital levels of the Company
at December 31, 1997.

<TABLE>
<CAPTION>
                                                ACTUAL                          REQUIRED                       EXCESS          
                                    ---------------------------    -----------------------------     ---------------------------  
                                       AMOUNT        PERCENT          AMOUNT          PERCENT            AMOUNT        PERCENT 
                                    ------------   ------------    ------------    -------------     --------------  -----------
                                                                      (DOLLARS IN THOUSANDS)                   
                                    --------------------------------------------------------------------------------------------  
      <S>                           <C>            <C>             <C>             <C>               <C>             <C> 
      Leverage capital              $   10,471         9.20%       $   4,612            4.00%          $ 5,859         5.20% 
      Risk-based capital:                                                                                             
        Core capital                    10,471        13.11            3,195            4.00             7,276         9.11  
        Total capital                   11,209        14.03            6,391            8.00             4,818         6.03   
</TABLE>

          Each Bank also met its individual regulatory capital requirements at
December 31, 1997.

YEAR 2000 ISSUE COSTS

     Like many companies, the Company relies on computers for the daily conduct 
of business and for data processing. There is general concern that on January 1,
2000 computers will be unable to "read" the new year and as a consequence there 
could be widespread computer malfunctions. The Company has implemented steps to 
address this issue by hiring a technology consultant to advise it on this issue.
Based on estimates by management of the Company, the Company expects to
incur approximately $25,000 to $50,000 to modify its information systems
appropriately to accurately process information in the year 2000 and beyond. The
Company continues to evaluate appropriate courses of corrective action,
including replacement of certain systems whose associated costs would be
recorded as assets and amortized. Management expects that the costs to convert
the Company's information systems to year 2000 compliance will not have a
material impact on the Company's consolidated financial statements. The Company
believes that it and its vendors have satisfactorily addressed the steps deemed
necessary by the Banks' regulators to adapt its data processing systems for the
Year 2000 and beyond.

                                       12
<PAGE>
 
AVERAGE BALANCES AND NET INCOME ANALYSIS

     The following table sets forth the amount of the Company's interest income
or interest expense for each category of interest-earning assets and interest-
bearing liabilities and the average interest rate for total interest-earning
assets and total interest-bearing liabilities, net interest spread and net yield
on average interest-earning assets. Federally tax-exempt income is presented on
a taxable-equivalent basis assuming a 34% Federal tax rate.

<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31,
                           --------------------------------------------------------------------------------------------------------
                                         1997                              1996                                  1995
                           ---------------------------------  ---------------------------------  ----------------------------------
                                                                   (DOLLARS IN THOUSANDS)
                           --------------------------------------------------------------------------------------------------------
                                       INTEREST    AVERAGE                INTEREST   AVERAGE                 INTEREST   AVERAGE 
                             AVERAGE   INCOME/      YIELD/      AVERAGE   INCOME/     YIELD/       AVERAGE   INCOME/     YIELD/
                             BALANCE   EXPENSE    RATE PAID     BALANCE   EXPENSE    RATE PAID     BALANCE   EXPENSE    RATE PAID
                           ---------- --------- ------------ ----------- ---------- ------------ ---------- ---------- ------------
<S>                        <C>        <C>       <C>          <C>         <C>        <C>          <C>        <C>        <C>
ASSETS
 Interest-earning assets:
  Loans, net of
   unearned interest       $   66,235  $  6,683     10.09%   $   50,298   $  5,065     10.07%    $  47,406   $  4,913     10.36%
  Investment securities:
   Taxable                     23,400     1,487      6.35        28,218      1,802      6.39        23,734      1,519      6.40
   Tax exempt                   8,424       708      8.40         8,462        718      8.48         8,599        752      8.75
  Federal funds sold            1,399        80      5.72         2,059        105      5.10         1,982        112      5.65
                           ---------- ---------              ----------- ----------              ---------- ----------
   Total interest-
    earning assets             99,458     8,958      9.01        89,037      7,690      8.64        81,721      7,296      8.93
                           ---------- ---------              ----------- ----------              ---------- ----------
 Noninterest-earning
  assets:
  Cash                          4,712                             4,906                              5,148            
  Allowance for loan                                                                                                  
   losses                        (690)                             (637)                              (610)           
  Unrealized gain (loss)                                                                                              
   on securities available                                                                                                       
   for sale                      (203)                             (247)                              (130)           
  Other assets                  8,020                             6,086                              6,010            
                           ----------                        -----------                         ----------           
   Total noninterest-                                                                                                 
    earning assets             11,839                            10,108                             10,418            
                           ----------                        -----------                         ----------           
   Total assets            $  111,297                        $   99,145                           $ 92,139            
                           ==========                        ===========                         ==========            
</TABLE>

                                       13
<PAGE>
 
<TABLE>
<CAPTION>
                                                               YEAR ENDED DECEMBER 31,
                        ----------------------------------------------------------------------------------------------------------
                                       1997                              1996                                  1995
                        --------------------------------- -----------------------------------  -----------------------------------
                                                                (DOLLARS IN THOUSANDS)
                        ----------------------------------------------------------------------------------------------------------
                                   INTEREST    AVERAGE                 INTEREST    AVERAGE                 INTEREST     AVERAGE
                         AVERAGE   INCOME/     YIELD/       AVERAGE    INCOME/      YIELD/      AVERAGE    INCOME/       YIELD/
                         BALANCE   EXPENSE    RATE PAID     BALANCE    EXPENSE    RATE PAID     BALANCE    EXPENSE     RATE PAID
                        --------- ---------- -----------   ---------  ---------- -----------  ----------  ----------  ------------
<S>                     <C>       <C>        <C>           <C>        <C>        <C>          <C>         <C>         <C>        
LIABILITIES AND
 STOCKHOLDERS'
 EQUITY
 Interest-bearing
  liabilities:
   Savings and
    interest-bearing
    demand deposits     $  33,701  $   1,114     3.31%     $  32,620   $  1,047     3.21%     $   32,002   $   1,096      3.42%
   Time deposits           42,645      2,388     5.60         36,045      1,903     5.28          30,166       1,625      5.39
   Other borrowings         4,377        253     5.78            872         49     5.62           2,105         142      6.75
                        ---------  ---------               ---------  ----------              ----------  ---------- 
   Total interest-
    bearing liabilities    80,723      3,755     4.65         69,537      2,999     4.31          64,273       2,863      4.45
                        ---------  ---------               ---------  ----------              ----------  ---------- 
Noninterest-bearing
   liabilities and
   stockholders' equity:
   Demand deposits         18,044                             18,191                              16,862
   Other liabilities        1,202                              1,086                               1,749
   Stockholders' equity    11,328                             10,331                               9,255
                        ---------                          ---------                          ----------  
   Total
    noninterest-bearing
    liabilities and
    stockholders' equity   30,574                             29,608                              27,866
                        ---------                          ---------                          ----------  
 
Total liabilities and
 stockholders'
 equity                 $ 111,297                          $  99,145                          $   92,139
                        =========                          =========                          ==========  
 
Interest rate spread                             4.36%                              4.33%                                 4.48%
                                             ===========                         ===========                          ============  

 
Net interest income                $   5,203                           $  4,691                            $   4,433
                                   =========                          ==========                          ========== 
 
Net interest margin                              5.23%                              5.27%                                 5.42%
                                             ===========                         ===========                          ============  

</TABLE>

                                       14
<PAGE>
 
RATE AND VOLUME ANALYSIS

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

<TABLE>
<CAPTION>
                                                               YEAR ENDED DECEMBER 31,
                              ----------------------------------------------------------------------------------------------------
                                              1997 VS. 1996                                          1996 VS. 1995
                              ------------------------------------------         --------------------------------------------------
                                                                (DOLLARS IN THOUSANDS)
                              -----------------------------------------------------------------------------------------------------
                                INCREASE            CHANGES DUE TO                INCREASE                    CHANGES DUE TO
                                                ------------------------                                 --------------------------
                                (DECREASE)        RATE        VOLUME              (DECREASE)                RATE          VOLUME
                              -------------     ---------  -------------      ------------------         ----------     ----------- 

<S>                           <C>               <C>        <C>                <C>                        <C>            <C> 
Increase (decrease) in:
 Income from earning assets:
  Interest and fees on loans  $     1,618       $    13    $    1,605         $         152              $   (148)      $   300
  Interest on securities:                                                                   
   Taxable                           (315)           (7)         (308)                  283                    (4)          287
   Tax-exempt                         (10)           (7)           (3)                  (34)                  (22)          (12)
  Interest on Federal funds           (25)            9           (34)                   (7)                  (11)            4
                              -------------     ---------  -------------      ------------------         ----------     -----------
     Total interest income          1,268             8         1,260                   394                  (185)          579
                              -------------     ---------  -------------      ------------------         ----------     -----------
 
Expense from interest-bearing
 liabilities:
  Interest on savings and
   interest-
    bearing demand deposits            67            32            35                   (49)                  (70)            21
  Interest on time deposits           485           137           348                   278                   (39)           317
  Interest on other borrowings        204             7           197                   (93)                  (10)           (83)
                              -------------     ---------  -------------      ------------------         ----------     -----------
     Total interest expense           756           176           580                   136                  (119)           255
                              -------------     ---------  -------------      ------------------         ----------     -----------
 
     Net interest income      $       512       $  (168)   $      680         $         258              $    (66)      $    324
                              =============     =========  =============      ==================         ==========     ===========
</TABLE>

NONINTEREST INCOME

     Following is a comparison of noninterest income for 1997 and 1996.

<TABLE>
<CAPTION>
                                                            1997             1996
                                                       --------------    ------------
 
         <S>                                           <C>               <C>
         Service charges on deposit accounts             $    744,000      $  691,000
         Securities transactions, net                          20,000          28,000
         Origination fees on mortgage loans                   172,000         111,000
         Other                                                183,000         155,000
                                                       --------------    ------------
                                                         $  1,119,000      $  985,000
                                                       ==============    ============
</TABLE>

                                       15
<PAGE>
 
NONINTEREST EXPENSE

     Following is a comparison of noninterest expense for 1997 and 1996.

<TABLE>
<CAPTION>
                                                        1997              1996
                                                   --------------    --------------
         <S>                                       <C>               <C>
         Salaries and employee benefits              $  2,435,000      $  2,020,000
         Equipment and occupancy expense                  600,000           488,000
         Amortization of intangibles                       79,000            79,000
         Legal and professional expense                   163,000            94,000
         Director fees                                     98,000            88,000
         Data processing expenses                         101,000            59,000
         Other expenses                                   997,000           723,000
                                                   --------------    --------------
                                                     $  4,473,000      $  3,551,000
                                                   ==============    ==============
</TABLE>
                                                                               
ASSET/LIABILITY MANAGEMENT

     A principal objective of the Company's asset/liability management strategy
is to minimize the exposure to changes in interest rates by matching the
maturity and repricing horizons of interest-earning assets and interest-bearing
liabilities. In order to assure that the objectives of the Company's asset/
liability policy are adhered to in a consistent manner, an Asset/Liability
Management Committee ("the ALCO") has been formed. The ALCO consists of senior
management and any directors as may be appointed by the Board of Directors and
has the authority to direct the Company's acquisition and allocation of funds.
The ALCO meets quarterly. Additional meetings may be held if necessary.

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

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

     The Company's asset/liability management policy provides a permissible
range for the one-year cumulative gap ratio (rate-sensitive assets divided by
rate-sensitive liabilities) of 90 percent to 120 percent. That is, rate-
sensitive assets should range from 90 percent to 120 percent of rate sensitive
liabilities. The policy also provides that the ALCO will allow the cumulative
gap ratio to fluctuate within a range of 20 percent above or below the unity
ratio of 100 percent, thus setting a range of 80 percent to 120 percent. As of
December 31, 1997, the Company's cumulative one-year interest rate sensitivity
gap ratio was 73 percent. This indicates that the Company's interest-bearing
liabilities will reprice during this period at a rate faster than the Company's
interest-earning assets. This ratio is below the target range established by the
ALCO. However, management believes that the type and amount of the Company's
interest rate-sensitive liabilities (a significant portion of which are composed
of money market, NOW and savings accounts whose yields, to a certain extent, are
subject to the discretion of management) may reduce the potential impact that a
rise in interest rates might have on the Company's net income.

     In the event that interest rates should rise 100 basis points within the
one-year time period, the Company believes that the reduction in interest income
would not materially impact net interest income or net income. For example, if
interest rates should rise 100 basis points immediately, the reduction in net
interest income resulting from the immediate shock would be approximately
$88,000 or 1.63 percent below the projection under stable rates, for the twelve
months and the reduction in net income would be approximately $58,000. Should
interest rates rise 200 basis points at the rate of 50 basis points per quarter,
the reduction in net interest income for the twelve months would be
approximately $94,000 or 1.73 percent below the projection under stable rates,
and the reduction in net income would be approximately $62,000. In the event
that interest rates rise immediately 200 basis points, which management
considers to be unlikely, the reduction in net interest income resulting from
the immediate shock would be approximately $206,000, or 3.8 percent below the
projection under stable rates, for the twelve months and the reduction in net
income would be approximately $136,000. These simulated computations should not
be relied upon as indicative of actual future results. Further, the
computations do not contemplate certain actions that management may undertake
in response to future changes in interest rates.

     The following table sets forth the distribution of the repricing of the
Company's earning assets and interest-bearing liabilities as of December 31,
1997, the interest rate sensitivity gap (i.e., interest rate sensitive assets
less interest rate sensitive liabilities), the cumulative interest rate
sensitivity gap ratio (i.e., interest rate sensitive assets divided by interest
rate sensitivity liabilities) and the cumulative sensitivity gap ratio. The
table also sets forth the time periods in which earning assets and liabilities
will mature or may reprice in accordance with their contractual terms. However,
the table does not necessarily indicate the impact of general interest rate
movements on the net interest margin since the repricing of various categories
of assets and liabilities is subject to competitive pressures and the needs of
the Banks' customers. In addition, various assets and liabilities indicated as
repricing within the same period may in fact reprice at different times within
such period and at different rates.

                                       17
<PAGE>
 
<TABLE>
<CAPTION>
                                                                            AT DECEMBER 31, 1997
                                        ------------------------------------------------------------------------------------------
                                                                        MATURING OR REPRICING WITHIN
                                        ------------------------------------------------------------------------------------------
                                            ZERO TO           THREE            ONE             OVER
                                             THREE          MONTHS TO         THREE           THREE
                                            MONTHS           ONE YEAR         YEARS           YEARS           TOTAL
                                        --------------    --------------   -----------     -----------   --------------
                                                                           (DOLLARS IN THOUSANDS)
                                        -------------------------------------------------------------------------------           
<S>                                     <C>               <C>              <C>             <C>           <C>    
EARNING ASSETS:
 Federal funds sold                       $  2,450         $        -       $       -       $        -    $     2,450
 Investment securities                         747              4,131           1,425           19,153         25,456
 Loans                                      31,652              9,533          14,271           23,148         78,604
                                        --------------    --------------   -----------     -----------   --------------          
                                            34,849             13,664          15,696           42,301        106,510
                                        --------------    --------------   -----------     -----------   --------------          
INTEREST-BEARING LIABILITIES:
 Interest-bearing demand deposits/(1)/      19,180                  -          12,602                -         31,782
 Savings/(1)/                                    -                  -           4,931                -          4,931
 Certificates less than $100,000             8,330             20,008           3,366              953         32,657
 Certificates, $100,000 and over             9,982              6,016             935                -         16,933
 Other borrowings                            3,100                  -               -                -          3,100
                                        --------------    --------------   -----------     -----------   --------------         
                                            40,592             26,024          21,834              953         89,403
                                        --------------    --------------   -----------     -----------   --------------          
 
INTEREST RATE SENSITIVITY GAP             $ (5,743)        $  (12,360)      $  (6,138)      $   41,348    $    17,107
                                        ==============    ==============   ============    ===========   ============== 
 
CUMULATIVE INTEREST RATE SENSITIVITY GAP  $ (5,743)        $  (18,103)      $ (24,241)      $   17,107
                                        ==============    ==============   ============    ===========
 
INTEREST RATE SENSITIVITY GAP RATIO           0.86               0.53            0.72            44.39
                                        ==============    ==============   ============    =========== 
 
CUMULATIVE INTEREST RATE SENSITIVITY          0.86               0.73            0.73             1.19
 GAP RATIO
                                        ==============    ==============   ============    =========== 
</TABLE>

/(1)/  The Company has found that NOW checking accounts and savings deposits are
       generally not sensitive to changes in interest rates and, therefore, it
       has placed such liabilities in the "One to Three Years" category.

                                       18
<PAGE>
 
MATURITIES AND SENSITIVITY OF LOANS TO CHANGES IN INTEREST RATES

     The Company's loan portfolio, as of December 31, 1997, was made up
primarily of short-term fixed rate loans or variable rate loans. The average
contractual life on instalment loans is approximately three years, while
mortgages are generally variable over one to five-year periods. Total loans as
of December 31, 1997 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>
                                               DUE IN       AFTER ONE        AFTER
                                                 ONE         THROUGH         FIVE
                                                YEAR        FIVE YEARS       YEARS         TOTAL
                                            -----------   --------------   ----------    ----------
                                                              (DOLLARS IN THOUSANDS)
                                            -------------------------------------------------------     
        <S>                                 <C>             <C>             <C>           <C>
        Commercial, financial and             $   8,324     $  12,084       $    401      $  20,809
        agricultural
        Real estate - construction                3,253             -              -          3,253
        Real estate - mortgage                   26,807         7,420          5,819         40,046
        Consumer instalment                       2,792        10,955            735         14,482
        Other                                         9             5              -             14
                                            -----------   --------------   ----------    ----------  
        Total                                 $  41,185     $  30,464       $  6,955      $  78,604
                                            ===========   ==============   ==========    ==========   
</TABLE>

     The following table summarizes loans at December 31, 1997 with the due
dates after one year which (i) have predetermined interest rates and (ii) have
floating or adjustable interest rates.
 
<TABLE>
<CAPTION>
                                                                               DECEMBER 31,
                                                                                   1997
                                                                               (DOLLARS IN
                                                                                THOUSANDS)
                                                                             --------------
  <S>                                                                        <C>
  Predetermined interest rates                                                $     37,419
  Floating or adjustable interest rates                                                  -
                                                                             --------------
                                                                               $     37,419
                                                                             ==============
</TABLE>

                                       19
<PAGE>
 
LOAN PORTFOLIO

     The amount of loans outstanding at the indicated dates is shown in the
following table according to type of loans.
 
<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                     ----------------------------
                                                            1997            1996
                                                     ------------    ------------
                                                         (DOLLARS IN THOUSANDS)
                                                     ----------------------------
     <S>                                             <C>             <C>   
     Commercial, financial and agricultural            $   20,809      $   11,276
     Real estate - construction                             3,253           2,896
     Real estate - mortgage                                40,046          27,692
     Consumer instalment loans                             14,694          10,468
     Other                                                     14              41
                                                     ------------    ------------
                                                           78,816          52,373
     Unearned discount                                       (213)           (205)
     Allowance for loan losses                               (762)           (656)
                                                     ------------    ------------
     Loans, net                                        $   77,841      $   51,512
                                                     ============    ============
</TABLE>

NONPERFORMING LOANS

    The following table presents, at the dates indicated, the aggregate of
nonperforming loans for the categories indicated.

<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                      ---------------------------
                                                            1997           1996
                                                      ------------   ------------
                                                         (DOLLARS IN THOUSANDS)
                                                      ---------------------------
     <S>                                              <C>            <C>  
     Loans accounted for on a nonaccrual basis          $       50     $        -
 
     Instalment loans and term loans contractually
     past due ninety days or more as to interest
     or principal payments and still accruing                   14             23                   
     
     Loans, the term of which have been renegotiated
     to provide a reduction or deferral of interest
     or principal because of deterioration in the
     financial position of the borrower                          -              -
     
     Loans now current about which there are serious            
     doubts as to the ability of the borrower to
     comply with present loan repayment terms                    -              -
     
</TABLE>

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

                                       20
<PAGE>
 
SUMMARY OF LOAN LOSS EXPERIENCE

     The provision for possible loan losses is created by direct charges to
operations. Losses on loans are charged against the allowance in the period in
which such loans, in management's opinion, become uncollectible. Recoveries
during the period are credited to this allowance. The factors that influence
management's judgment in determining the amount charged to operating expense are
past loan experience, composition of the loan portfolio, evaluation of possible
future losses, current economic conditions and other relevant factors.   The
Company's allowance for loan losses was approximately $762,000 at December 31,
1997, representing 0.97% of year-end total loans outstanding compared with
approximately $656,000 at December 31, 1996, which represented 1.26% year end
total loans outstanding.

     The allowance for loan losses is reviewed quarterly based on management's
evaluation of current risk characteristics of the loan portfolio, as well as the
impact of prevailing and expected economic business conditions. Management
considers the allowance for loan losses adequate to cover possible loan losses
on each outstanding loan with particular emphasis on any problem loans.  No
assurance can be given, however, that adverse economic circumstances will not
result in increased losses in the Bank's loan portfolio and require greater
provisions for loan losses in the future.

ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES

     The following table sets forth the breakdown of the allowance for loan
losses by loan category for the periods indicated.  Management believes the
allowance can be allocated only on an approximate basis.  The allocation of the
allowance to each category is not necessarily indicative of future losses and
does not restrict the use of the allowance to absorb losses in any other
category.

<TABLE>
<CAPTION>
                                                                           AT DECEMBER 31,
                                             ---------------------------------------------------------------------    
                                                          1997                                 1996
                                             --------------------------------    ---------------------------------        
                                                                PERCENT OF                           PERCENT OF
                                                                 LOANS IN                             LOANS IN  
                                                                CATEGORY TO                          CATEGORY TO          
                                                 AMOUNT         TOTAL LOANS          AMOUNT          TOTAL LOANS       
                                             --------------   ---------------    --------------    ---------------        
                                                                       (DOLLARS IN THOUSANDS)
                                             ---------------------------------------------------------------------     
<S>                                          <C>              <C>               <C>                <C>
Commercial, financial, industrial and           $       267         26%          $       230             22%
 agricultural
Real estate                                             114         55                   98              58
Consumer                                                191         19                  164              20
Unallocated                                             190          -                  164               -
                                             --------------   --------------     --------------    ---------------   
                                                $       762        100%           $     656             100%
                                             ==============   ==============     ==============    ===============   
</TABLE>

                                       21
<PAGE>
 
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES (CONTINUED)

     The following table presents an analysis of the Company's loan loss
experience for the periods indicated:

<TABLE>
<CAPTION>
                                                                                         DECEMBER 31,        
                                                                                ---------------------------- 
                                                                                    1997            1996     
                                                                                ------------    ------------ 
                                                                                   (DOLLARS IN THOUSANDS)    
                                                                                ---------------------------- 
     <S>                                                                        <C>             <C>     
     Average amount of loans outstanding                                        $     66,235    $     50,298 
                                                                                ============    ============ 
                                                                                                             
     Balance of reserve for possible loan losses at beginning of period                  656             605 
                                                                                ------------    ------------ 
                                                                                                             
     Charge-offs:                                                                                            
     Commercial, financial and agricultural                                               29               6 
     Consumer                                                                             52              40 
                                                                                ------------    ------------ 
                                                                                          81              46 
                                                                                ------------    ------------ 
                                                                                                             
     Recoveries:                                                                                             
     Commercial, financial and agricultural                                                -               9 
     Real estate                                                                           -               - 
     Consumer                                                                             13               7 
                                                                                ------------    ------------ 
                                                                                          13              16 
                                                                                ------------    ------------ 
                                                                                                             
     Net charge-offs                                                                      68              30 
                                                                                ------------    ------------ 
                                                                                                             
     Additions to reserve charged to operating expenses                                  174              81 
                                                                                ------------    ------------ 
                                                                                                             
     Balance of reserve for possible loan losses                                  $      762      $      656 
                                                                                ============    ============ 
                                                                                                             
     Ratio of net loan charge-offs to average loans                                     0.10%           0.06%
                                                                                ============    ============  
</TABLE>

                                       22
<PAGE>
 
INVESTMENT PORTFOLIO

     The Company manages the mix of asset and liability maturities in an effort
to control the effects of changes in the general level of interest rates on net
interest income. See " - Asset/Liability Management." Except for its effect on
the general level of interest rates, inflation does not have a material impact
on the Company due to the rate variability and short-term maturities of its
earnings assets.   In particular, approximately 52% of the loan portfolio is
comprised of loans which mature or reprice within one year or less. Mortgage
loans, primarily with five to fifteen-year maturities, are also made on a
variable rate basis with rates being adjusted every one to five years.
Additionally, 13% of the investment portfolios matures within one year.

TYPES OF INVESTMENTS

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

<TABLE>
<CAPTION>
                                                                               GROSS             GROSS                     
                                                            AMORTIZED        UNREALIZED       UNREALIZED           FAIR    
                                                               COST            GAINS            LOSSES            VALUE    
                                                       ---------------    -------------    -------------     -------------  
        <S>                                            <C>                <C>              <C>               <C>   
        SECURITIES AVAILABLE FOR SALE                                                                        
          DECEMBER 31, 1997:                                                                                               
           U. S. Government and agency securities        $  14,195,851    $      53,641    $     (61,814)    $  14,187,678 
           Mortgage-backed securities                        1,982,581            8,334           (4,067)        1,986,848 
                                                       ---------------    -------------    -------------     ------------- 
                                                         $  16,178,432    $      61,975    $     (65,881)    $  16,174,526 
                                                       ===============    =============    =============     ============= 
                                                                                                                           
        December 31, 1996:                                                                                               
          U. S. Government and agency                                                                        
            securities                                   $  23,516,656    $      39,018    $    (204,262)    $  23,351,412 
          Mortgage-backed securities                         3,002,140            6,672          (13,860)        2,994,952 
          Other securities                                     469,633           18,417                -           488,050 
                                                       ---------------    -------------    -------------     ------------- 
                                                         $  26,988,429    $      64,107    $    (218,122)    $  26,834,414 
                                                       ===============    =============    =============     ============= 
</TABLE> 

<TABLE> 
<CAPTION> 
                                                                                GROSS             GROSS                    
                                                            AMORTIZED        UNREALIZED       UNREALIZED           FAIR   
                                                               COST            GAINS            LOSSES            VALUE   
                                                          -------------    -------------    -------------     -------------  
          <S>                                             <C>              <C>              <C>               <C> 
          SECURITIES HELD TO MATURITY  
            DECEMBER 31, 1997:                                                                                               
              U. S. Government and agency securities      $     749,576    $         502    $      (3,380)    $     746,698
              State and municipal securities                  8,110,317          383,651                -         8,493,968
              Mortgage-backed securities                        421,848            6,235           (1,415)          426,668
                                                          -------------    -------------    -------------     -------------  
                                                          $   9,281,741    $     390,388    $      (4,795)    $   9,667,334
                                                          =============    =============    =============     =============  
                                                                                                                           
          December 31, 1996:                                                                                               
            U. S. Government and agency securities        $     750,000    $           -    $     (11,095)    $     738,905
            State and municipal securities                    8,707,202          436,566           (3,415)        9,140,353
            Mortgage-backed securities                          604,889            6,133           (5,891)          605,131
                                                          -------------    -------------    -------------     -------------  
                                                          $  10,062,091    $     442,699    $     (20,401)    $  10,484,389
                                                          =============    =============    =============     ============= 
</TABLE>

                                       23
<PAGE>
 
MATURITIES

     The amounts of investment securities in each category as of December 31,
1997 are shown in the following table according to contractual maturity
classifications (1) one year or less, (2) after one year through five years, (3)
after five years through ten years, and (4) after ten years.

<TABLE>
<CAPTION>
                                                              U.S. TREASURY AND                                             
                                                            OTHER U. S. GOVERNMENT                      STATE AND           
                                                          AGENCIES AND CORPORATIONS               POLITICAL SUBDIVISIONS    
                                                                              YIELD                                YIELD    
                                                           AMOUNT                (1)              AMOUNT         (1) (2)    
                                                        ------------     ----------------      ------------   -----------   
                                                                                (DOLLARS IN THOUSANDS)                      
                                                        -----------------------------------------------------------------   
<S>                                                     <C>              <C>                   <C>            <C>            
MATURITY:                                                                                                                   
    One year or less                                      $   3,753            6.21%              $    837             8.25%      
    After one year through five years                         8,621            6.47                  2,737             7.98     
    After five years through ten years                        4,972            4.20                  4,249             8.17     
    After ten years                                               -               -                    287             8.83     
                                                       ------------     -----------           ------------      -----------     
                                                          $  17,346            5.76%              $  8,110             8.14%    
                                                       ============     ===========           ============      ===========     
</TABLE>

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

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

                                       24
<PAGE>
 
DEPOSITS

     Average amount of deposits and average rate paid thereon, classified as to
noninterest-bearing demand deposits, interest-bearing demand and savings
deposits and time deposits for the periods indicated are presented below.
 
<TABLE>
<CAPTION>
                                                                      YEAR ENDED DECEMBER 31,
                                              ----------------------------------------------------------------
                                                         1997                               1996
                                              ----------------------------    --------------------------------
                                                  AMOUNT           RATE           AMOUNT            RATE
                                              --------------   -----------    --------------    --------------
                                                                      (DOLLARS IN THOUSANDS)
                                              ----------------------------------------------------------------
<S>                                           <C>              <C>            <C>                   <C>          
Noninterest-bearing demand deposits             $     18,044          -%        $     18,191               -%
Interest-bearing demand and savings deposits          33,701       3.31               32,620            3.21
Time deposits                                         42,645       5.60               36,045            5.28
                                                ------------                    ------------
Total deposits                                  $     94,390                    $     86,856
                                                ============                    ============
</TABLE>
                                                                               
    The Company has a large, stable base of time deposits, with little or no
dependence on volatile deposits of $100,000 or more. The time deposits are
principally certificates of deposit and individual retirement accounts obtained
from individual customers.

     The amounts of time certificates of deposit issued in amounts of $100,000
or more as of December 31, 1997, are shown below by category, which is based on
time remaining until maturity of (i) three months or less, (ii) over three
through twelve months and (iii) over twelve months.

<TABLE>
<CAPTION>
                                                                  DECEMBER
                                                                     31,
                                                                    1997
                                                               -------------
                                                                (DOLLARS IN
                                                                 THOUSANDS)
                                                               -------------
       <S>                                                     <C>      
       Three months or less                                      $     9,982
       Over three through twelve months                                6,016
       Over twelve months                                                935
                                                               -------------
                 Total                                           $    16,933
                                                               =============
</TABLE>

                                       25
<PAGE>
 
RETURN ON ASSETS AND STOCKHOLDERS' EQUITY

     The following table shows return on assets (net income divided by average
total assets), return on equity (net income divided by average stockholders'
equity), dividend payout ratio (dividends declared per share divided by net
income per share) and stockholders' equity to asset ratio (average stockholders'
equity divided by average total assets) for the periods indicated.
 
<TABLE>
<CAPTION>
                                                                       YEAR ENDED DECEMBER 31,
                                                                ---------------------------------
                                                                      1997              1996
                                                                --------------     -------------- 
<S>                                                             <C>                <C>        
Return on assets                                                      0.90  %            1.24%
 
Return on equity                                                      8.89              11.90
 
Dividends payout                                                     29.17              21.31
 
Equity to assets ratio                                               10.18              10.42
</TABLE>


COMMITMENTS AND LINES OF CREDITS

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

     Following is a summary of the commitments outstanding at December 31, 1997
and 1996.

<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                      -------------------------  
                                                          1997          1996
                                                      ------------   ----------  
                                                        (DOLLARS IN THOUSANDS)
                                                      -------------------------  
       <S>                                            <C>            <C> 
       Loans sold with recourse                       $    1,647     $    1,909
       Commitments to extend credit                       19,518          7,972
       Standby letters of credit                           1,353          1,390
                                                      ----------     ----------  
                                                      $   22,518     $   11,271
                                                      ==========     ==========  
</TABLE>

                                       26
<PAGE>
 
IMPACT OF INFLATION

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


ITEM 7.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The following consolidated financial statements of the Company and its
subsidiaries are included on pages F-1 through F-32 of this Annual Report on
Form 10-KSB:

     Consolidated Balance Sheets - December 31, 1997 and 1996

     Consolidated Statements of Income - Years Ended December 31, 1997 and 1996

     Consolidated Statements of Stockholders' Equity - Years Ended December 31,
1997 and 1996

     Consolidated Statements of Cash Flows - Years Ended December 31, 1997 and
1996

     Notes to Consolidated Financial Statements.


ITEM 8.   DISAGREEMENT ON ACCOUNTING AND FINANCIAL DISCLOSURE

     During 1997 and 1996, the Company did not change its accountants and there
was no disagreement on any matter of accounting principles or practices for
financial statement disclosure that would have required the filing of a current
report on Form 8-K.

                                       27
<PAGE>
 
                                    PART III

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

     The information required by this Item is incorporated by reference to the
Company's definitive Proxy Statement for its 1998 annual meeting under the
caption "Section 16(a) Beneficial Ownership Reporting Compliance" to be filed
with the Securities and Exchange Commission pursuant to Regulation 14A within
120 days after the end of fiscal year covered by this Annual Report ("the
Company's Proxy Statement").

NOTE 10.  EXECUTIVE COMPENSATION

     The information required by this Item is incorporated by reference to the
Company's Proxy Statement for its 1998 annual meeting under the caption
"Executive Compensation".

NOTE 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT

     The information required by this Item is incorporated by reference to the
Company's Proxy Statement for its 1998 annual meeting under the caption "Voting
securities and Principal Stockholders".

NOTE 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by this Item is incorporated by reference to the
Company's Proxy Statement for its 1998 annual meeting under the caption "Certain
Relationships and Related Transactions".

                                       28
<PAGE>
 
                                    PART IV

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

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

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

   3.1                   Restated Certificate of Incorporation of the
                         Registrant as of March 18, 1998.

   3.2                   Bylaws of the Registrant (amended and restated as of
                         March 18, 1998).

  10.1                   Eufaula Bank & Trust Company Employee Stock Purchase
                         Plan (filed as Exhibit 10.1 to the Registrant's Annual
                         Report on Form 10-KSB (File Number 33-23062), filed
                         with the Commission on April 29, 1994 and incorporated
                         herein by reference.)

  10.2                   Eufaula Bank & Trust Company Profit-Sharing Retirement
                         Plan (filed as Exhibit 10.2 to the Registrant's Annual
                         Report on Form 10-KSB (File Number 33-23062), filed
                         with the Commission on April 29, 1994 and incorporated
                         herein by reference.)

  10.3                   Registrant's Stock Option Agreement (filed as Exhibit
                         10.3 to the Registrant's Annual Report on Form 10-KSB
                         (File Number 33-23062), filed with the Commission on
                         April 29, 1994 and incorporated herein by reference.)

  10.4                   Director stock purchase plan.

  10.5                   Deferred Compensation Agreement between Eufaula Bank &
                         Trust Company and Director (Sample Form) effective July
                         23, 1996 (filed as Exhibit 10.5 to the Registrant's
                         Annual Report on Form 10-KSB (File Number 33-23062),
                         filed with the Commission on March 31, 1997 and
                         incorporated herein by reference.)

  21                     Subsidiaries of the Registrant. (filed as Exhibit 21 to
                         the Registrant's Annual Report on Form 10-KSB (File
                         Number 33-23062), filed with the Commission on April
                         29, 1994 and incorporated herein by reference.)

  24                     Power of Attorney relating to this Annual Report on
                         Form 10-KSB is set forth on the signature pages to this
                         Annual Report.

  27                     Financial Data Schedule

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

                                       29
<PAGE>
 
                                  SIGNATURES

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

                            EUFAULA BANCCORP, INC.

Date:____________________      By:______________________________________________
                               Gregory B. Faison, President, Chief Executive
                               Officer and Director


                               POWER OF ATTORNEY

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

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

Date:_________________     _____________________________________________________
                           Gregory B. Faison, President
                           Chief Executive Officer and Director
 
Date:_________________     _____________________________________________________
                           Janis Biggers, Director
 
Date:_________________     _____________________________________________________
                           Michael C. Dixon, Director
 
Date:_________________     _____________________________________________________
                           Robert M. Dixon, Director
 
Date:_________________     _____________________________________________________
                           Thomas Harris, Director
 
Date:_________________     _____________________________________________________
                           James J. Jaxon, Jr., Director
 
Date:_________________     _____________________________________________________
                           Frank McRight, Director

                                       30
<PAGE>
 
                            EUFAULA BANCCORP, INC.

                                 EXHIBIT INDEX

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

   3.1              Restated Certificate of Incorporation of the Registrant as
                    of March 18, 1998.

   3.2              Bylaws of the Registrant (amended and restated as of March
                    18, 1998).

  10.1              Eufaula Bank & Trust Company Employee Stock Purchase Plan
                    (filed as Exhibit 10.1 to the Registrant's Annual Report on
                    Form 10-KSB (File Number 33-23062), filed with the
                    Commission on April 29, 1994 and incorporated herein by
                    reference.)

  10.2              Eufaula Bank & Trust Company Profit-Sharing Retirement Plan
                    (filed as Exhibit 10.2 to the Registrant's Annual Report on
                    Form 10-KSB (File Number 33-23062), filed with the
                    Commission on April 29, 1994 and incorporated herein by
                    reference.)

  10.3              Registrant's Stock Option Agreement (filed as Exhibit 10.3
                    to the Registrant's Annual Report on Form 10-KSB (File
                    Number 33-23062), filed with the Commission on April 29,
                    1994 and incorporated herein by reference.)

  10.4              Director stock purchase plan.

  10.5              Deferred Compensation Agreement between Eufaula Bank & Trust
                    Company and Director (Sample Form) effective July 23, 1996
                    (filed as Exhibit 10.5 to the Registrant's Annual Report on
                    Form 10-KSB (File Number 33-23062), filed with the
                    Commission on March 31, 1997 and incorporated herein by
                    reference.)

  21                Subsidiaries of the Registrant. (filed as Exhibit 21 to the
                    Registrant's Annual Report on Form 10-KSB (File Number 33-
                    23062), filed with the Commission on April 29, 1994 and
                    incorporated herein by reference.)

  24                Power of Attorney relating to this Annual Report on Form 10-
                    KSB is set forth on the signature pages to this Annual
                    Report.

  27                Financial Data Schedule

                                       31
<PAGE>
 
                            EUFAULA BANCCORP, INC.

                  INDEX TO FINANCIAL STATEMENTS AND SCHEDULES


Consolidated financial statements:

  Independent Auditor's Report
  Consolidated Balance Sheets - December 31, 1997 and 1996
  Consolidated Statements of Income - Years ended December 31, 1997 and 1996
  Consolidated Statements of Stockholders' Equity - Years ended December 31,
   1997 and 1996
  Consolidated Statements of Cash Flows - Years ended December 31, 1997 and 1996
  Notes to Consolidated Financial Statements


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

                                      F-1
<PAGE>
 
                         INDEPENDENT AUDITOR'S REPORT


________________________________________________________________________________


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


          We have audited the accompanying consolidated balance sheets of
EUFAULA BANCCORP, INC. AND SUBSIDIARIES as of December 31, 1997 and 1996, and
the related consolidated statements of income, stockholders' equity and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.


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


          In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Eufaula BancCorp, Inc. and subsidiaries as of December 31, 1997 and 1996, and
the results of their operations and their cash flows for the years then ended,
in conformity with generally accepted accounting principles.



Albany, Georgia
February 4, 1998

                                      F-2
<PAGE>
 
                            EUFAULA BANCCORP, INC.
                               AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
                          DECEMBER 31, 1997 AND 1996

--------------------------------------------------------------------------------
 
<TABLE> 
<CAPTION> 
                   ASSETS                                              1997          1996     
                   ------                                        ------------  ------------    
<S>                                                              <C>           <C> 
Cash and due from banks                                          $  6,046,465  $  7,320,627   
Interest-bearing deposits in banks                                        -         750,000   
Federal funds sold                                                  2,450,000     1,375,000   
Securities available for sale, at fair value                       16,174,526    26,834,414   
Securities held to maturity, at cost (fair value                         
    $9,667,334 and $10,484,389)                                     9,281,741    10,062,091   
                                                                                              
Loans                                                              78,603,624    52,167,811   
Less allowance for loan losses                                        762,236       656,256   
                                                                 ------------  ------------
          Loans, net                                               77,841,388    51,511,555   
                                                                 ------------  ------------                           
Premises and equipment, net                                         3,664,429     2,413,164   
Other real estate                                                     804,435       804,435   
Other assets                                                        4,678,670     3,744,747   
                                                                 ------------  ------------   
                                                                 $120,941,654  $104,816,033
                                                                 ============  ============
   
    LIABILITIES AND STOCKHOLDERS' EQUITY
    ------------------------------------

Deposits                                                                                      
    Noninterest-bearing demand                                   $ 18,305,750  $ 18,783,155   
    Interest-bearing demand                                        31,782,198    26,412,239   
    Savings                                                         4,930,765     5,530,097   
    Time, $100,000 and over                                        16,932,656    13,692,689   
    Other time                                                     32,657,315    25,879,298   
                                                                 ------------  ------------   
              Total deposits                                      104,608,684    90,297,478   
    Federal funds purchased                                               -       1,200,000   
    Securities sold under repurchase agreement                            -       1,475,000   
    Other borrowings                                                3,100,000           -     
    Other liabilities                                               1,291,643     1,128,704   
                                                                 ------------  ------------   
              Total liabilities                                   109,000,327    94,101,182   
                                                                 ------------  ------------                             
COMMITMENTS AND CONTINGENT LIABILITIES                                                        
                                                                                              
STOCKHOLDERS' EQUITY                                                                          
    Preferred stock, par value $.10; 50,000 shares                       
        authorized, none issued                                           -             -     
    Common stock, par value $1; 5,000,000 shares authorized,             
        2,097,916 and 1,353,204 shares issued, respectively         2,097,916     1,353,204   
    Surplus                                                           107,779       232,587   
    Retained earnings                                               9,737,976     9,221,469   
    Unrealized (losses) on securities available                          
        for sale, net of taxes                                         (2,344)      (92,409)  
                                                                 ------------  ------------   
          Total stockholders' equity                               11,941,327    10,714,851   
                                                                 ------------  ------------
                                                                 $120,941,654  $104,816,033    
                                                                 ============  ============   
</TABLE> 

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                      F-3
<PAGE>
 
                            EUFAULA BANCCORP, INC.
                               AND SUBSIDIARIES
 
                       CONSOLIDATED STATEMENTS OF INCOME
                    YEARS ENDED DECEMBER 31, 1997 AND 1996

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

<TABLE> 
<CAPTION> 
                                                                           1997         1996   
                                                                      ----------   ----------  
<S>                                                                   <C>          <C> 
INTEREST INCOME                                                                                
    Interest and fees on loans                                        $6,683,278   $5,064,734  
    Interest on taxable securities                                     1,464,021    1,776,018  
    Interest on nontaxable securities                                    466,530      473,567  
    Interest on deposits in other banks                                   22,806       26,085  
    Interest on Federal funds sold                                        80,363      105,007  
                                                                      ----------   ----------  
                                                                       8,716,998    7,445,411  
                                                                      ----------   ----------  
                                                                                               
INTEREST EXPENSE                                                                               
    Interest on deposits                                               3,502,234    2,950,361  
    Interest on other borrowings                                         252,330       48,915  
                                                                      ----------   ----------  
                                                                       3,754,465    2,999,276  
                                                                      ----------   ----------   

       Net interest income                                             4,962,434    4,446,135  
Provision for loan losses                                                173,668       81,000  
                                                                      ----------   ----------   
       Net interest income after provision for loan losses             4,788,766    4,365,135 
                                                                      ----------   ----------   

OTHER INCOME                                                                                   
    Service charges on deposit accounts                                  744,254      690,746  
    Security transactions, net                                            19,697       27,470  
    Origination fees on mortgage loans                                   171,994      110,738  
    Other                                                                182,666      155,558  
                                                                      ----------   ----------   
                                                                       1,118,611      984,512  
                                                                      ----------   ----------   

OTHER EXPENSES                                                                                 
    Salaries and employee benefits                                     2,435,131    2,019,949 
    Equipment and occupancy expense                                      600,493      488,156  
    Amortization of intangibles                                           78,745       78,745  
    Legal and professional expense                                       162,549       93,714  
    Data processing expenses                                             101,064       58,859  
    Directors fees                                                        97,983       88,250  
    Other operating expense                                              997,085      723,407  
                                                                      ----------   ----------   
                                                                       4,473,050    3,551,080 
                                                                      ----------   ----------   

        Income before income taxes                                     1,434,327    1,798,567 
                                                                                               
APPLICABLE INCOME TAXES                                                  426,935      569,478  
                                                                      ----------   ----------   
        Net income                                                    $1,007,392   $1,229,089 
                                                                      ==========   ==========    

NET INCOME PER COMMON SHARE                                                                    
    Basic                                                             $     0.48   $     0.61  
                                                                      ==========   ==========    

    Diluted                                                           $     0.45   $     0.56   
                                                                      ==========   ==========    
</TABLE> 

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                      F-4
<PAGE>
 
                            EUFAULA BANCCORP, INC.                          
                               AND SUBSIDIARIES                             
                                                                            
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY             
                    YEARS ENDED DECEMBER 31, 1997 AND 1996                  
                                                                            
--------------------------------------------------------------------------------
 
<TABLE> 
<CAPTION> 
                                                                                    Unrealized    
                                                                                      Gains       
                                                                                    (Losses) on   
                                                                                    Securities    
                                                                                     Available    
                                      Common Stock        Capital     Retained       for Sale,    
                                 ---------------------
                                   Shares   Par Value     Surplus     Earnings        Net of         Total 
                                 --------- -----------  ----------- ------------  ---------------  ----------- 
<S>                              <C>        <C>         <C>         <C>           <C>              <C> 
BALANCE, DECEMBER 31,
   1995                            676,602  $ 676,602   $ 909,289   $ 8,263,021   $   98,972       $ 9,947,784     
   Net income                           -          -           -      1,229,089           -          1,229,089     
   Cash dividend declared,                                                                                         
       $.13 per                         -          -           -       (270,641)          -           (270,641)    
   Net change in unrealized                                                                                        
       (losses) on securities                                                                                      
       available-for-sale,                                                                                         
       net of tax                       -          -          -            -        (191,381)         (191,183)   
   Two-for-one common                                                                                              
      stock split                  676,602    676,602    (676,602)        -               -                 -      
                                 --------- -----------  ----------- ------------  ---------------  ----------- 
BALANCE, DECEMBER 31,                                                                                              
   1996                          1,353,204  1,253,204     232,587     9,221,469      (92,409)       10,714,851
   Net income                           -          -           -      1,007,392           -          1,007,392     
   Cash dividend declared,                                                                                         
       $.14 per                         -          -           -       (291,584)          -           (291,584)    
   Net change in unrealized                                                                                        
       (losses) on securities                                                                                      
       available-for-sale,                                                                                         
       net of tax                       -          -           -             -        90,065            90,065     
   Three-for-two common                                                                                            
       stock split                 699,301    699,301    (699,301)           -            -                 -      
   Proceeds from exercise                                                                                          
       of stock                     45,411     45,411     207,455            -            -           252,866
   Purchase of fractional                                                                                          
       shares                           -          -          (85)           -            -               (85)     
   Reduction in income                                                                                             
       taxes payable resulting                                                                                     
       from exercise of                                                                                            
       stock options                    -          -      167,822            -           -            167,822      
   Transfer to surplus                  -          -      199,301      (199,301)         -                 -       
                                 --------- -----------  ----------- ------------  ---------------  ----------- 
Balance, December 31, 1997       2,097,916 $ 2,097,916  $ (91,522)  $ 9,937,277   $   (2,344)      $11,941,327     
                                 ========= ===========  =========== ============  ===============  ===========
</TABLE> 

See Notes to Consolidated Financial Statements.

                                      F-5
<PAGE>
 
                            EUFAULA BANCCORP, INC.                              
                               AND SUBSIDIARIES                                 
                                                                                
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY                 
                    YEARS ENDED DECEMBER 31, 1997 AND 1996                      
                                                                                
--------------------------------------------------------------------------------

<TABLE> 
<CAPTION> 
                                                                                1997           1996      
                                                                           ------------   ------------  
<S>                                                                        <C>            <C>            
CASH FLOWS FROM OPERATING ACTIVITIES                                                                     
    Net income                                                             $  1,007,392   $  1,229,089   
                                                                           ------------   ------------ 
    Adjustments to reconcile net income to net cash                      
        provided by operating activities:                                                                
        Depreciation                                                            235,465        184,564   
        Amortization                                                             78,745         78,745   
        Provision for loan losses                                               173,668         81,000   
        Provision for deferred taxes                                            (25,438)          (913)  
        Net realized gains on securities available                              (19,697)       (27,470)  
        (Increase) decrease in interest receive                                 146,513        (44,025)  
        Increase (decrease) in interest payable                                 155,509         (5,939)  
        Increase (decrease) in taxes payable                                      9,257        (58,413)  
        Other prepaids, deferrals and accrual                                  (960,132)      (620,612)  
                                                                           ------------   ------------     
              Total adjustments                                                (206,110)      (413,063)  
                                                                           ------------   ------------    

              Net cash provided by operating                                    801,282        816,026   
                                                                           ------------   ------------     

CASH FLOWS FROM INVESTING ACTIVITIES                                                                     
    (Increase) decrease in interest-bearing deposits in banks                   750,000       (500,000)  
    Increase in Federal funds sold                                           (1,075,000)      (575,000)  
    Purchases of securities available for sale                               (5,820,234)   (13,110,890) 
    Proceeds from sales of securities available for sale                      6,798,070      6,809,250   
    Proceeds from maturities of securities available for sale                 9,851,858      3,245,913   
    Purchases of securities held to maturity                                        -         (997,428)  
    Proceeds from maturities of securities held to maturity                     780,350        822,506   
    Increase in loans, net                                                  (26,503,501)    (4,547,404)  
    Proceeds from sale of assets                                                 10,000            -     
    Purchase of premises and equipment                                       (1,496,730)      (530,313)  
                                                                           ------------   ------------     
              Net cash used in investing activities                         (16,705,187)    (9,383,366)   
                                                                           ------------   ------------     
 
</TABLE> 

                                      F-6
<PAGE>
 
                            EUFAULA BANCCORP, INC.
                               AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                    YEARS ENDED DECEMBER 31, 1997 AND 1996
                                                          
<TABLE> 
<CAPTION> 
                                                                                     1997         1996   
                                                                                ------------  -----------
<S>                                                                             <C>           <C>       
CASH FLOWS FROM FINANCING ACTIVITIES                                                                       
    Increase in deposits                                                        $ 14,243,546  $ 6,750,906  
    Proceeds from the exercise of stock option                                       252,866           -    
    Increase (decrease) in securities sold under                         
        repurchase agreements                                                     (1,475,000)   1,475,000  
    Increase (decrease) in Federal funds purchased                                (1,200,000)     650,000  
    Advances from Federal Home Loan Bank                                           3,100,000           -    
    Dividends paid                                                                  (291,584)    (202,981) 
    Purchase of fractional shares                                                        (85)          -    
                                                                                ------------  -----------   
          Net cash provided by financing activities                               14,629,743    8,672,925  
                                                                                ------------  -----------   

Net increase (decrease) in cash and due from bank                                 (1,274,162)     105,585  
                                                                                                           
Cash and due from banks at beginning of year                                       7,320,627    7,215,042  
                                                                                ------------  ------------   

Cash and due from banks at end of year                                          $  6,046,465  $ 7,320,627  
                                                                                ============  ============   
SUPPLEMENTAL DISCLOSURES OF CASH FLOW                                                                      
    INFORMATION                                                                                            
    Cash paid during the year for:                                                                         
        Interest                                                                $  3,599,055  $ 3,005,215  
                                                                                                           
        Income taxes                                                            $    443,116  $   628,804  
                                                                                                           
NONCASH TRANSACTIONS                                                                                       
    Unrealized (losses) on securities available for sale                        $   (150,109) $  (318,966) 
                                                                                                           
    Transfer from loans to other real estate                                    $       -     $   804,432   
 
 
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE> 

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


________________________________________________________________________________


NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          NATURE OF BUSINESS

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

          BASIS OF PRESENTATION

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

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

          CASH AND CASH EQUIVALENTS

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

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

                                      F-8
<PAGE>
 
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


________________________________________________________________________________


NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

          SECURITIES

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

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

          LOANS

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

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

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

                                      F-9
<PAGE>
 
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


________________________________________________________________________________


NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

          LOANS (CONTINUED)

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

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

          PREMISES AND EQUIPMENT

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

          INTANGIBLE ASSETS

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

          OTHER REAL ESTATE OWNED

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

                                     F-10
<PAGE>
 
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


________________________________________________________________________________


NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
          PROFIT-SHARING PLAN

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

          INCOME TAXES

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

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

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

          EARNINGS PER COMMON SHARE

          Basic earnings per share are calculated on the basis of the weighted
          average number of common shares outstanding. Diluted earnings per
          share are computed by dividing net income by the sum of the weighted
          average number of common shares outstanding and potential common
          shares. Earnings per common share for the prior periods have been
          restated to reflect the adoption of FASB 128. All per share data for
          prior years have been adjusted to reflect the three-for-two stock
          split effected in the form of a 50% stock dividend to shareholders of
          record as of November 15, 1997.

                                     F-11
<PAGE>
 
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


________________________________________________________________________________


NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

          CURRENT ACCOUNTING DEVELOPMENTS

          In June 1996, the Financial Accounting Standards Board (the "FASB")
          issued Statement of Financial Accounting Standards No. 125,
          "Accounting for Transfers and Servicing of Financial Assets and
          Extinguishments of Liabilities". ("SFAS No. 125"). This Statement
          provides standards for distinguishing transfers of financial assets
          that are sales from those that are secured borrowings, and provides
          guidance on the recognition and measurement of asset servicing
          contracts and on debt extinguishments. As issued, SFAS No. 125 is
          effective for transactions occurring after December 31, 1996. However,
          as a result of an amendment to SFAS No. 125 by the FASB in December
          1996, certain provisions of SFAS No. 125 are deferred for an
          additional year. Adoption of the new accounting standard is not
          expected to have a material impact on the Company's financial
          statements.

          In February 1997, the FASB issued SFAS No. 128, "Earnings per Share".
          This statement simplifies the standards for computing earnings per
          share previously set forth in APB Opinion No. 15, "Earnings per
          Share", and makes them comparable to international Earnings per Share
          ("EPS") standards. It replaces the presentation of primary EPS with a
          presentation of basic EPS. It also requires dual presentation of basic
          and diluted EPS on the face of the income statement for all entities
          with complex capital structures and requires a reconciliation of the
          numerator and denominator of the basic EPS computation to the
          numerator and denominator of the diluted EPS computation. Basic EPS
          excludes dilution and is computed by dividing income available to
          common stockholders by the weighted-average number of common shares
          outstanding for the period. Diluted EPS reflects the potential
          dilution that could occur if securities or other contracts to issue
          common stock were exercised or converted into common stock or resulted
          in the issuance of common stock that then shared in the earnings of
          the entity. Diluted EPS is computed similarly to fully diluted EPS
          pursuant to APB Opinion No. 15. This statement is effective for
          financial statements issued for periods ending after December 15,
          1997. The adoption of this statement did not have a material impact on
          the Company's financial statements.

                                     F-12
<PAGE>
 
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


________________________________________________________________________________


NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

          CURRENT ACCOUNTING DEVELOPMENTS (CONTINUED)

          In June 1997, the FASB issued SFAS No 130, "Reporting Comprehensive
          Income". This statement establishes standards for reporting and
          display of comprehensive income and its components (revenues,
          expenses, gains and losses) in a full set of general-purpose financial
          statements. This statement requires that all items that are required
          to be recognized under accounting standards as components of
          comprehensive income be reported in a financial statement that is
          displayed with the same prominence as other financial statements. This
          statement does not require a specific format for that financial
          statement but requires that an enterprise display an amount
          representing total comprehensive income for the period in that
          financial statement. This statement requires that an enterprise
          classify items of other comprehensive income by their nature in a
          financial statement and display the accumulated balance or other
          comprehensive income by their nature in a financial statement and
          display the accumulated balance or other comprehensive income
          separately from retained earnings and additional paid-in capital in
          the equity section of a statement of financial position. This
          statement is effective for fiscal years beginning after December 15,
          1997. The adoption of this statement is not expected to have a
          material impact on the Company's financial statements.

          In June 1997, The FASB issued SFAS No. 131, "Disclosures about
          Segments of an Enterprise and Related Information". This statement
          requires that a public business enterprise report financial and
          descriptive information about its reportable operating segments.
          Operating segments are components of an enterprise about which
          separate financial information is available that is evaluated
          regularly by the chief operating decision maker in deciding how to
          allocate resources and in assessing performance. Generally, financial
          information is required to be reported on the basis that it is used
          internally for evaluating segment performance and deciding how to
          allocate resources to segments. The statement requires that a business
          enterprise report a measure of segment profit or loss, certain
          specific revenue and expense items and segment assets. It requires
          reconciliations of total segment revenues, total segment profit or
          loss, total segment assets and other amounts disclosed for segments to
          corresponding amounts in the enterprise's general-purpose financial
          statements. It requires that the enterprise report information about
          the revenues derived from the enterprise's products or services, about
          the countries in which the enterprise earns revenues and hold assets
          and about major customers. This Statement is effective for financial
          Statements for periods beginning after December 15, 1997. The adoption
          of this statement is not expected to have a material impact on the
          Company's financial statements.

                                     F-13
<PAGE>
 
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


________________________________________________________________________________


NOTE 2.        SECURITIES

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

<TABLE>
<CAPTION>
                                                                                GROSS             GROSS
                                                            AMORTIZED         UNREALIZED        UNREALIZED          FAIR
                                                              COST              GAINS             LOSSES            VALUE
                                                        -------------      -------------    --------------   --------------
               <S>                                      <C>                <C>              <C>              <C> 
               SECURITIES AVAILABLE FOR SALE
                DECEMBER 31, 1997:
                 U.S. Government and agency
                  securities                            $  14,195,851      $     53,641     $    (61,814)    $  14,187,678
                 Mortgage-backed securities                 1,982,581             8,334           (4,067)        1,986,848
                                                        -------------      -------------    --------------   --------------
                                                        $  16,178,432      $     61,975     $    (65,881)    $  16,174,526
                                                        =============      ============     ==============   ==============
                 December 31, 1996:
                 U.S. Government and agency
                  securities                            $  23,516,656      $     39,018     $   (204,262)    $  23,351,412
                 Mortgage-backed securities                 3,002,140             6,672          (13,860)        2,994,952
                 Other securities                             469,633            18,417                -           488,050
                                                        -------------      -------------    --------------   --------------
                                                        $  26,988,429      $     64,107     $   (218,122)    $  26,834,414
                                                        =============      =============    ==============   ==============
</TABLE> 

<TABLE>
<CAPTION>
                                                                                GROSS             GROSS
                                                            AMORTIZED         UNREALIZED        UNREALIZED          FAIR
                                                              COST              GAINS             LOSSES            VALUE
                                                        -------------      -------------    --------------   -------------
               <S>                                      <C>                <C>              <C>              <C>  
               SECURITIES HELD TO MATURITY
                DECEMBER 31, 1997:
                 U.S. Government and agency
                  securities                            $     749,576      $        502     $     (3,380)    $     746,698
                 State and municipal securities             8,110,317           383,651                -         8,493,968
                 Mortgage-backed securities                   421,848             6,235           (1,415)          426,668
                                                        -------------      -------------    --------------   --------------
                                                        $   9,281,741      $    390,388     $     (4,795)    $   9,667,334
                                                        =============      =============    ==============   ==============
 
                December 31, 1996:
                 U.S. Government and agency
                  securities                            $     750,000      $          -     $    (11,095)    $     738,905
                 State and municipal securities             8,707,202           436,566           (3,415)        9,140,353
                 Mortgage-backed securities                   604,889             6,133           (5,891)          605,131
                                                        -------------      -------------    --------------   --------------
                                                        $  10,062,091      $    442,699     $    (20,401)    $  10,484,389
                                                        =============      =============    ==============   ==============
</TABLE> 

                                     F-14
<PAGE>
 
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


________________________________________________________________________________


NOTE 2.   SECURITIES (CONTINUED)

          The amortized cost and fair value of securities as of December 31,
          1997 by contractual maturity are shown below. Maturities may differ
          from contractual maturities in mortgage-backed securities because the
          mortgages underlying the securities may be called or prepaid without
          penalty. Therefore, these securities are not included in the maturity
          categories in the following maturity summary.

<TABLE>
<CAPTION>
                                                               SECURITIES AVAILABLE FOR SALE      SECURITIES HELD TO MATURITY   
                                                            ---------------------------------   --------------------------------
                                                                 AMORTIZED            FAIR           AMORTIZED           FAIR   
                                                                    COST             VALUE             COST             VALUE   
                                                            ---------------   ---------------   --------------   --------------- 
          <S>                                               <C>               <C>               <C>              <C> 
           Due in one year or less                          $   3,512,404     $   3,503,595     $   1,087,104    $   1,093,172
           Due from one year to five years                      5,659,953         5,712,425         3,236,884        3,328,435
           Due from five to ten years                           5,023,494         4,971,658         4,249,306        4,505,816
           Due after ten years                                          -                 -           286,599          313,243
           Mortgage-backed securities                           1,982,581         1,986,848           421,848          426,668
                                                            ---------------   ---------------   --------------   ---------------
                                                            $  16,178,432     $  16,174,526     $   9,281,741    $   9,667,334
                                                            ===============   ===============   ==============   ===============
</TABLE> 

          Securities with a carrying value of $11,787,849 and $15,681,776 at
          December 31, 1997 and 1996, respectively, were pledged to secure
          public deposits and for other purposes.

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

<TABLE>
<CAPTION>
                                                                                           DECEMBER 31,        
                                                                                -------------------------------
                                                                                       1997              1996  
                                                                                -------------     ------------- 
          <S>                                                                   <C>               <C> 
          Gross realized gains on sales of securities                           $    29,555       $    34,729
          Gross losses on sales of securities                                        (9,858)           (7,259)
                                                                                -------------     -------------
          Net realized gains on sales of securities available for sale          $    19,697       $    27,470
                                                                                =============     =============
</TABLE> 

                                     F-15
<PAGE>
 
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


________________________________________________________________________________


NOTE 3.   LOANS AND ALLOWANCE FOR LOAN LOSSES

          The composition of loans is summarized as follows:

<TABLE>
<CAPTION>
                                                                      DECEMBER 31,
                                                            -----------------------------------
                                                                 1997                1996
                                                            ---------------     ---------------
          <S>                                               <C>                 <C> 
          Commercial, financial and agricultural            $  20,809,399       $  11,276,143
          Real estate - construction                            3,253,356           2,896,148
          Real estate - mortgage                               40,046,125          27,691,446
          Consumer                                             14,694,075          10,468,374
          Other                                                    13,498              41,068
                                                            ---------------     ---------------
                                                               78,816,453          52,373,179
          Unearned income                                        (212,829)           (205,368)
          Allowance for loan losses                              (762,236)           (656,256)
                                                            ---------------     ---------------
          Loans, net                                        $  77,841,388       $  51,511,555
                                                            ===============     ===============
</TABLE> 

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

<TABLE>
<CAPTION>
                                                                        DECEMBER 31,         
                                                            ---------------------------------
                                                                    1997               1996  
                                                            --------------     -------------- 
          <S>                                               <C>                <C>  
          BALANCE, BEGINNING OF YEAR                        $    656,256       $    605,163
           Provision charged to operations                       173,668             81,000
           Loans charged off                                     (82,046)           (45,786)
           Recoveries of loans previously charged off             14,358             15,879
                                                            --------------     --------------
          BALANCE, END OF YEAR                              $    762,236       $    656,256
                                                            ==============     ==============
</TABLE>

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


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

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

<TABLE>
<CAPTION>
                                                                         1997                 1996
                                                                ----------------     -----------------
           <S>                                                  <C>                  <C>
           BALANCE, BEGINNING OF YEAR                             $    2,630,728       $     2,642,949
             Advances                                                  3,649,877             3,435,657
             Repayments                                               (2,397,799)           (3,447,878)
                                                                ----------------     -----------------
           BALANCE, END OF YEAR                                   $    3,882,806       $     2,630,728
                                                                ================     =================
</TABLE>


NOTE 4.   PREMISES AND EQUIPMENT

          Premises and equipment are summarized as follows:

<TABLE>
<CAPTION>
                                                                               DECEMBER 31,
                                                                 -------------------------------------
                                                                          1997                 1996
                                                                 ----------------     ----------------
           <S>                                                   <C>                 <C>
           Land and buildings                                      $    3,027,225       $    2,265,503
           Equipment                                                    1,676,093            1,159,753
           Construction in progress                                       336,089              205,207
                                                                 ----------------     ----------------
                                                                        5,039,407            3,630,463
           Accumulated depreciation                                    (1,374,978)          (1,217,299)
                                                                 ----------------     ----------------
                                                                   $    3,664,429       $    2,413,164
                                                                 ================     ================
</TABLE>

          Depreciation expense for the years ended December 31, 1997 and 1996
          was $235,465 and $184,564, respectively.

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


NOTE 5.   EMPLOYEE BENEFIT PLANS

          The subsidiary banks have noncontributory profit-sharing plans
          covering all employees, subject to certain minimum age and service
          requirements. The contribution for the years ended December 31, 1997
          and 1996 was $68,000 and $72,383, respectively.

          The Company provides a nonqualified Employee Stock Purchase Plan,
          including employees of both subsidiary banks. The primary purpose is
          to enable the employees to participate in the ownership of the
          Company. An employee who has been employed on a full time basis for
          one year or more is eligible for the Plan. Employees can contribute
          from five to seven percent of their compensation, depending on years
          of service. The banks contribute an amount equal to 50% of the
          employee's contribution. Contributions are used to purchase shares of
          Eufaula BancCorp, Inc. common stock. The contribution for the years
          ended December 31, 1997 and 1996 was $13,732 and $14,813,
          respectively.

          The Company has a nonqualified Stock Purchase Plan for directors.  The
          primary purpose is to enable the directors to participate in the
          ownership of the Company.  All directors are eligible for the Plan.  A
          director can contribute in increments of $50 not to exceed $200 per
          month.  The Banks contribute an amount equal to 50 percent of the
          director's contribution.  Contributions to the Plan are used to
          purchase shares of Eufaula BancCorp, Inc. common stock.  The
          contributions for the years ended December 31, 1997 and 1996 were
          $19,300 and $16,800, respectively.


NOTE 6.   DEFERRED COMPENSATION PLAN

          During 1996, Southern Bank of Commerce modified its indexed deferred
          compensation plan for certain executive officers and directors.  The
          Plan is designed to provide supplemental retirement benefits and
          supersedes the existing deferred compensation plan.  As a result of
          the modification, transactions resulted in an expense of $16,517 for
          1997 and a net decrease in expense of $32,636 in 1996.

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

 
NOTE 7.   OTHER BORROWINGS

          Other borrowings consist of the following:

<TABLE>
<CAPTION>
                                                                                       DECEMBER 31,
                                                                           -----------------------------------
                                                                                   1997                1996
                                                                           ---------------     ---------------
                  <S>                                                      <C>                 <C>
                  Advances from Federal Home Loan Bank with interest at a    $   2,500,000       $           -
                    fixed rate of 6.58% due on March 14, 1999.
                  Advances from Federal Home Loan Bank with interest at            600,000                   -
                    adjustable rates (currently at 6.50% at December 31,
                    1997) due on September 23,  1998.
                                                                           ---------------     ---------------
                                                                             $   3,100,000       $           -
                                                                           ===============     ===============
</TABLE>

          The advances from the Federal Home Loan Bank are collateralized by the
          pledging of first mortgage loans on one to four family residences.

 
NOTE 8.   INCOME TAXES

          The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
                                                                                 DECEMBER 31,
                                                                    ------------------------------------
                                                                            1997                 1996
                                                                    ---------------      ---------------
           <S>                                                      <C>                  <C>
           Current                                                    $     284,551        $     570,391
           Benefit from exercise of stock options                           167,822                    -
           Deferred                                                         (25,438)                (913)
                                                                    ---------------      ---------------
             Provision for income taxes                               $     426,935        $     569,478
                                                                    ===============      ===============
</TABLE>

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


NOTE 8.   INCOME TAXES (CONTINUED)

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

<TABLE>
<CAPTION>
                                                                         DECEMBER 31,
                                            -------------------------------------------------------------------
                                                            1997                                1996
                                            ----------------------------------     ----------------------------
                                                  AMOUNT             PERCENT            Amount          Percent
                                            ---------------     --------------     --------------     ---------
            <S>                             <C>                 <C>                <C>                <C>
            Tax provision at statutory rate   $     487,670            34   %        $    611,513          34 %
            Tax-exempt interest                    (136,615)          (10)               (147,057)         (8)
            Amortization                             26,773             2                  26,773           1
            State income taxes                       45,748             3                  51,454           3
            Other items, net                          3,359             1                  26,795           2
                                            ---------------     --------------     --------------     ---------
              Provision for income taxes      $     426,935            30   %        $    569,478          32 %
                                            ===============     ==============     ==============     =========
</TABLE>

            The components of deferred income taxes are as follows:

<TABLE>
<CAPTION>
                                                                                DECEMBER 31,
                                                                    ----------------------------------
                                                                          1997               1996
                                                                    ---------------    ---------------
           DEFERRED TAX ASSETS:
           <S>                                                      <C>                <C>
           Loan loss reserves                                         $     101,886      $      55,031
           Deferred compensation                                             93,989             76,576
           Accounting for other real estate                                   1,582              1,582
           Unrealized losses on securities available for sale                 1,563             61,607
           Stock options                                                      5,574             17,095
                                                                    ---------------    ---------------
                                                                            204,594            211,891
                                                                    ---------------    ---------------
 
           DEFERRED TAX LIABILITIES:
           Depreciation and amortization                                    110,116             83,969
           Accretion                                                          5,164              4,002
                                                                    ---------------    ---------------
                                                                            115,280             87,971
                                                                    ---------------    ---------------
 
           NET DEFERRED TAX ASSETS                                    $      89,314      $     123,920
                                                                    ===============    ===============
</TABLE>

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


NOTE 9.   STOCK OPTIONS

          Prior to 1995, the Company entered into or assumed liability for
          various nonqualified stock option agreements with key employees.
          During 1995, the Company adopted the 1994 Stock Option Plan whereby
          the Company may grant options to certain key employees to purchase up
          to 600,000 shares of the Company's $1 par value common stock at an
          option price of $4 per share.  During 1996, the Plan was amended to
          include the directors of the Company.  As of December 31, 1997,
          options that had been granted to five key employees to purchase a
          total of 297,000 shares of common stock were outstanding.

          A summary of information relating to the stock option plans at
          December 31, 1997 and 1996 and changes during the years ended on those
          dates is as follows:

<TABLE>
<CAPTION>
                                                                                     DECEMBER 31,
                                                       ----------------------------------------------------------------------
                                                                       1997                                 1996
                                                       ----------------------------------     -------------------------------
                                                                               WEIGHTED-                           WEIGHTED-
                                                                                AVERAGE                             AVERAGE
                                                                               EXERCISE                            EXERCISE
                                                             NUMBER              PRICE             NUMBER            PRICE
                                                       ---------------      -------------     --------------    -------------
                  <S>                                  <C>                  <C>               <C>               <C> 
                  Under option, beginning of year              402,000        $      3.83            402,000      $      3.83
                    Granted                                     75,000               9.27                  -                -
                    Exercise                                   (68,117)              3.27                  -                -
                    Forfeited                                 (111,883)              4.00                  -                -
                                                       ---------------                        --------------
                  Under option, end of year                    297,000               5.27            402,000             3.83
                                                       ===============                        ==============
 
                  Exercisable at end of year                    84,000                               114,000
                                                       ===============                        ==============
 
                  Available for grant at end of year           165,000                               240,000
                                                       ===============                        ==============
 
                  Weighted average fair value per
                  option
                    of options granted during the year           $3.38                              $      -
                                                       ===============                        ==============
</TABLE>

                                     F-21
<PAGE>
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                        
                                        
________________________________________________________________________________


NOTE 9.   STOCK OPTIONS (CONTINUED)

          Additional information about options outstanding at December 31, 1997
          is as follows:

<TABLE>
<CAPTION>
                                          OPTIONS OUTSTANDING                                   OPTIONS EXERCISABLE
                 --------------------------------------------------------------------    --------------------------------
                                                        WEIGHTED-         WEIGHTED-                           WEIGHTED-
                     RANGE OF                            AVERAGE           AVERAGE                             AVERAGE
                     EXERCISE           NUMBER         CONTRACTUAL        EXERCISE           NUMBER           EXERCISE
                      PRICES          OUTSTANDING     LIFE IN YEARS        PRICE          OUTSTANDING          PRICE
                 ---------------    -------------    -------------    ---------------    -------------    ---------------
                 <S>                <C>              <C>              <C>                <C>              <C>              
                   $        2.54           12,000              0.5      $        2.54           12,000      $        2.54
                            4.00          120,000              5.0               4.00           45,000               4.00
                            4.00           90,000              7.0               4.00           27,000               4.00
                            9.00           45,000             10.0               9.00                -                  -
                            9.67           30,000             10.0               9.67                -                  -
                                    -------------                                        -------------
                                          297,000             6.69               5.27           84,000               3.79
                                    =============                                        =============
</TABLE>


NOTE 10.  EARNINGS PER COMMON SHARE

          The following is a reconciliation of net income (the numerator) and
          the weighted average shares outstanding (the denominator) used in
          determining basic and diluted earnings per share:

<TABLE>
<CAPTION>
                                                                          YEAR ENDED DECEMBER 31, 1997
                                                            ------------------------------------------------------
                                                                 INCOME              SHARES            PER SHARE
                                                            ---------------    -----------------    --------------
                  <S>                                       <C>                <C>                  <C>
                  BASIC EARNINGS PER SHARE
 
                    NET INCOME                                $   1,007,392            2,082,715      $       0.48
                                                                                                    ==============
  
                  EFFECT OF DILUTIVE SECURITIES
 
                    STOCK OPTIONS                                         -              158,464
                                                            ---------------    -----------------
 
                  DILUTIVE EARNINGS PER SHARE
 
                    NET INCOME                                $   1,007,392            2,241,179      $       0.45
                                                            ===============    =================    ==============
</TABLE>

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


NOTE 10.  EARNINGS PER COMMON SHARE (CONTINUED)

<TABLE>
<CAPTION>
                                                                          YEAR ENDED DECEMBER 31, 1996
                                                            ------------------------------------------------------
                                                                 INCOME              SHARES            PER SHARE
                                                            ---------------    -----------------    --------------
                  <S>                                       <C>                <C>                  <C> 
                  Basic earnings per share

                    Net income                                $   1,229,089            2,029,806      $       0.61
                                                                                                    ==============
 
                  Effect of dilutive securities
 
                    Stock options                                         -              181,714
                                                            ---------------    -----------------
 
                  Dilutive earnings per share
 
                    Net income                                $   1,229,089            2,211,520      $       0.56
                                                            ===============    =================    ==============
</TABLE>


NOTE 11.  COMMITMENTS AND CONTINGENT LIABILITIES

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

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

<TABLE>
<CAPTION>
                                                                            DECEMBER 31,
                                                              ---------------------------------------
                                                                       1997                  1996
                                                              -----------------     -----------------
          <S>                                                 <C>                   <C>
          Commitments to extend credit                          $    19,518,373       $     7,971,877
          Loans sold with recourse                                    1,646,904             1,908,879
          Standby letters of credit                                   1,352,889             1,390,239
                                                              -----------------     -----------------
                                                                $    22,518,166       $    11,270,995
                                                              =================     =================
</TABLE>

                                     F-23
<PAGE>
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                        
                                        
________________________________________________________________________________


NOTE 11.  COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)

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

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

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

          Southern Bank of Commerce leases a small tract of land from the family
          of the former Chairman of the Board.  The lease provides for a monthly
          rental of $2,154.  It was recomputed in 1996 and will be recomputed
          again in 2001 based on the change in the Consumer Price Index.  The
          lease is accounted for as an operating lease and the total rental
          expense included in the consolidated statements of income for each of
          the years ended December 31, 1997 and 1996 was $25,848.

                                     F-24
<PAGE>
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                        
                                        
________________________________________________________________________________


NOTE 12.  CONCENTRATIONS OF CREDIT

          The Company's subsidiaries make agricultural, agribusiness,
          commercial, residential and consumer loans to customers primarily in
          the market areas described in Note 1.  A substantial portion of the
          Company's customers' abilities to honor their contracts is dependent
          on the business economy in the above areas.

          Fifty-five percent (55%) of the Company's loan portfolio is
          concentrated in real estate loans, of which 4% 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.


NOTE 13.  REGULATORY MATTERS

          The Company is subject to certain restrictions on the amount of
          dividends that may be declared without prior regulatory approval.  At
          December 31, 1997, approximately $1,233,722 of retained earnings were
          available for dividend declaration without regulatory approval.

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

          Quantitative measures established by regulation to ensure capital
          adequacy require the Company and the Bank to maintain minimum amounts
          and ratios of total and Tier I capital to risk-weighted assets and of
          Tier I capital to average assets.  Management believes, as of December
          31, 1997, the Company and the Banks meet all capital adequacy
          requirements to which it is subject.

                                     F-25
<PAGE>
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                        
                                        
________________________________________________________________________________


NOTE 13.  REGULATORY MATTERS (CONTINUED)

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

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

<TABLE>
<CAPTION>
                                                                                                           TO BE WELL
                                                                          FOR CAPITAL                  CAPITALIZED UNDER
                                                                            ADEQUACY                   PROMPT CORRECTIVE
                                             ACTUAL                         PURPOSES                   ACTION PROVISIONS
                                -----------------------------    ---------------------------    -----------------------------
                                      AMOUNT           RATIO          AMOUNT          RATIO           AMOUNT           RATIO
                                ----------------   ----------    ---------------   ---------    ----------------   ----------
    <S>                         <C>                <C>           <C>               <C>          <C>               <C>         
    AS OF DECEMBER 31, 1997
       TOTAL CAPITAL
       (TO RISK WEIGHTED ASSETS):
       CONSOLIDATED               $   11,208,977        14.03%     $   6,390,898        8.00%     $    7,988,623        10.00%
       SOUTHERN BANK OF
         COMMERCE                 $    7,848,969        13.91%     $   4,513,819        8.00%     $    5,642,274        10.00%
       FIRST AMERICAN BANK        $    2,985,802        12.76%     $   1,871,420        8.00%     $    2,339,274        10.00%
       TIER I CAPITAL
       (TO RISK WEIGHTED ASSETS):
       CONSOLIDATED               $   10,471,419        13.11%     $   3,195,449        4.00%     $    4,793,174         6.00%
       SOUTHERN BANK OF
         COMMERCE                 $    7,289,534        12.92%     $   2,256,910        4.00%     $    3,385,364         6.00%
       FIRST AMERICAN BANK        $    2,807,679        12.00%     $     935,710        4.00%     $    1,403,565         6.00%
       TIER I CAPITAL
       (TO AVERAGE ASSETS):
       CONSOLIDATED               $   10,471,419         9.20%     $   4,611,564        4.00%     $    5,764,455         5.00%
       SOUTHERN BANK OF
         COMMERCE                 $    7,289,534         8.73%     $   3,339,680        4.00%     $    4,174,600         5.00%
       FIRST AMERICAN BANK        $    2,807,679         8.44%     $   1,330,680        4.00%     $    1,663,350         5.00%
</TABLE>

                                     F-26
<PAGE>
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                        
                                        
________________________________________________________________________________


NOTE 13.   REGULATORY MATTERS (CONTINUED)

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

                                     F-27
<PAGE>
 
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

________________________________________________________________________________


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, 1997
          and 1996. Such amounts have not been revalued for purposes of these
          financial statements since those dates and, therefore, current
          estimates of fair value may differ significantly from the amounts
          presented herein.

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

          CASH, DUE FROM BANKS, AND FEDERAL FUNDS SOLD:

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

          AVAILABLE FOR SALE AND HELD TO MATURITY SECURITIES:

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

          LOANS:

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

                                      F-28
<PAGE>
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

________________________________________________________________________________


NOTE 14.  FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

          DEPOSITS:

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

          OTHER BORROWINGS:

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

          OFF-BALANCE SHEET INSTRUMENTS:

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

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

<TABLE>
<CAPTION>
                                                         DECEMBER 31, 1997                       DECEMBER 31, 1996         
                                                ---------------------------------------------------------------------------
                                                     CARRYING             FAIR            CARRYING              FAIR       
                                                       VALUE             VALUE              VALUE              VALUE
                                                -----------------   ---------------   ---------------  --------------------
           <S>                                  <C>                 <C>               <C>              <C> 
           Financial assets:                                                                                               
             Cash and due from banks, 
               interest-bearing deposits with
               banks and Federal funds sold       $    8,496,465    $    8,496,465    $   9,445,627    $          9,445,627
             Securities available for sale            16,174,526        16,174,526       26,834,414              26,834,414
             Securities held to maturity               9,281,741         9,667,334       10,062,091              10,484,389
             Loans                                    77,841,388        78,280,325       52,167,811              52,085,279
                                                                                                                           
           Financial liabilities:  
             Deposits                                104,608,684       105,192,522       90,495,197              89,059,793
             Securities sold under                                                                                           
               repurchase agreements                           -                 -        1,475,000               1,475,000
             Other borrowings                          3,100,000         3,100,000        1,200,000               1,200,000 
</TABLE>

                                      F-29
<PAGE>
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

________________________________________________________________________________


NOTE 15.  PARENT COMPANY FINANCIAL INFORMATION

          The following information presents the condensed balance sheets,
          statements of income and cash flows of Eufaula BancCorp, Inc. as of
          and for the years ended December 31, 1997 and 1996:

                           CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                         1997              1996    
                                                                 ---------------   ---------------
        <S>                                                      <C>               <C>            
        ASSETS                                                                                    
            Cash                                                 $       114,799   $       197,719
            Investment in subsidiaries                                10,092,538         9,060,478
            Other assets                                               1,823,937         1,571,618
                                                                 ---------------   ---------------
                                                                                                  
                 Total assets                                    $    12,031,274   $    10,829,815
                                                                 ===============   =============== 
                                                                                                  
        LIABILITIES, other                                       $        89,947   $       114,964
                                                                 ---------------   ---------------
                                                                                                  
        SHAREHOLDERS' EQUITY                                          11,941,327        10,714,851
                                                                 ---------------   ---------------
                                                                                                  
                 Total liabilities and shareholders' equity      $    12,031,274   $    10,829,815
                                                                 ===============   =============== 
</TABLE>

                                      F-30
<PAGE>
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

________________________________________________________________________________


NOTE 15.  PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)

                        CONDENSED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                                  1997             1996    
                                                                           --------------   --------------
            <S>                                                            <C>              <C>           
            INCOME, dividends from subsidiaries                              $    690,000     $    452,700
                                                                           --------------   --------------
                                                                                                          
            EXPENSE                                                                                       
               Amortization                                                        78,745           78,745
               Other expense                                                      465,998          253,182
                                                                           --------------   --------------
                    Total expense                                                 544,743          331,927
                                                                           --------------   --------------
                                                                                                          
                    Income before income tax benefits and equity
                      in undistributed income of subsidiaries                     145,257          120,773
                                                                                                          
            INCOME TAX BENEFITS                                                   170,141           90,115
                                                                           --------------   --------------
                                                                                                          
                    Income before equity in undistributed                                                 
                      income of subsidiaries                                      315,398          210,888
                                                                                                          
            EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES                        691,994        1,018,201
                                                                           --------------   --------------
                                                                                                          
                    Net income                                               $  1,007,392     $  1,229,089
                                                                           ==============   ============== 
</TABLE>

                                      F-31
<PAGE>
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

________________________________________________________________________________

NOTE 15.  PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)

                      CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                        1997              1996   
                                                                                --------------    ---------------
             <S>                                                                <C>               <C> 
             CASH FLOWS FROM OPERATING ACTIVITIES                                                                
              Net income                                                          $  1,007,392      $   1,229,089
                                                                                --------------    ---------------
              Adjustments to reconcile net income to net   
                cash provided by operating activities:                                                           
                Amortization                                                            78,745             78,745
                Undistributed income of subsidiaries                                  (691,994)        (1,018,201)
                Increase (decrease) in taxes payable                                  (166,763)            76,574
                Provision for deferred taxes                                            11,521                  -
                Other prepaids, deferrals and                                          (33,018)                 -
                accruals, net                                                                                    
                                                                                --------------    ---------------
                    Total adjustments                                                 (801,509)          (862,882)
                                                                                --------------    ---------------
                                                                                                                 
                    Net cash provided by operating activities                          205,883            366,207
                                                                                --------------    ---------------
                                                                                                                 
            CASH FLOWS FROM INVESTING ACTIVITIES                                                                 
             Contribution of capital to subsidiary bank                               (250,000)                 -
                                                                                --------------    ---------------
                                                                                                                 
                    Net cash used in investing activities                             (250,000)                 -
                                                                                --------------    ---------------
                                                                                                                 
            CASH FLOWS FROM FINANCING ACTIVITIES                                                                 
             Proceeds from exercise of stock options                                   252,866                  -
             Purchase of fractional shares                                                 (85)                 -
             Dividends paid                                                           (291,584)          (202,981)
                                                                                --------------    ---------------
                                                                                                                 
                    Net cash used in financing activities                              (38,803)          (202,981)
                                                                                --------------    ---------------
                                                                                                                 
            Net increase (decrease) in cash                                            (82,920)           163,226
                                                                                                                 
            Cash at beginning of year                                                  197,719             34,493
                                                                                --------------    ---------------
                                                                                                                 
            Cash at end of year                                                   $    114,799      $     197,719
                                                                                ==============    =============== 
</TABLE>

                                      F-32