UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

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

For the fiscal year ended December 31, 1997      Commission File Number 0-22787

                             FOUR OAKS FINCORP, INC.
             (Exact name of registrant as specified in its charter)

         North Carolina                               56-2028446
(State or other jurisdiction of               (IRS Employer Identification
 incorporation or organization)               Number)

                               6144 U S 301 South
                            Four Oaks, North Carolina
                    (Address of principal executive offices)

                                      27524
                                   (Zip Code)

Registrant's telephone number, including area code:  (919) 963-2177

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 $1.00 per share
                                (Title of Class)

Indicate by check mark 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: |X|YES |_| NO

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best  of  the  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment of this Form 10-K. |_|

                                   $23,696,192
(Aggregate market value of voting stock held by nonaffiliates of the registrant)

                                    884,958
         (Number of shares of Common Stock, par value $1.00 per share,
                        outstanding as of March 9, 1998)

Documents Incorporated by Reference                     Where Incorporated
(1)  Annual Report to Shareholders for                     Part II and IV
     Fiscal Year Ended December 31, 1997
(2)  Proxy Statement for the Annual                        Part  III
     Meeting of Shareholders to be held
     April 27, 1998.



<PAGE>


PART I

Item 1 - Business.

     On February 5, 1997, Four Oaks Bank & Trust Company (the "Bank") formed
Four Oaks Fincorp, Inc. ( the "Company") for  the  purpose  of  serving  as a
holding  company  for  the  Bank. Thereafter,  the Bank  caused  the  Company to
form a  wholly-owned  subsidiary interim North  Carolina  banking  corporation,
New Four Oaks Bank (the "Interim Bank"), to facilitate the reorganization.

     On July 1,  1997,  the  Interim  Bank  merged  with and into the Bank  (the
"Merger").  The Bank is the  survivor  of the Merger  and, as of the date of the
Merger,  the Interim Bank no longer exists. The effect of the Merger is that the
Company is a holding  company  for the Bank and is the sole  shareholder  of the
Bank. The Company has no significant  assets other than the capital stock of the
Bank.  The corporate  offices of the Company and the Bank are located at 6144 US
301 South, Four Oaks, North Carolina 27524.

     Pursuant to the Merger,  the Bank's  Common  Stock has been  converted on a
share-for-share  basis  into  Common  Stock of the  Company  that  have  rights,
privileges and  preferences  identical to those of the Bank. The Common Stock of
the Company is registered under Section 12(g) of the Securities  Exchange Act of
1934, as amended (the "1934 Act") pursuant to Rule 12g-3  promulgated  under the
1934 Act.

     Effective  July 1, 1997,  the Bank no longer files reports with the Federal
Deposit  Insurance  Corporation  pursuant  to  Section  12(i) of the  1934  Act.
Effective such date, the Company has been filing reports with the Securities and
Exchange Commission (the "Commission") pursuant to the 1934 Act.

     The Bank was incorporated  under the laws of the State of North Carolina in
1912. The Bank is not a member of the Federal Reserve System. In addition to the
main office, the Bank has a branch office in Four Oaks located at 111 North Main
Street,  one  in  Clayton,  North  Carolina  at 102  East  Main  Street,  two in
Smithfield, North Carolina at 128 North Second Street, and 403 South Bright Leaf
Boulevard,  one in Garner,  North  Carolina  at 200 Glen Road and one in Benson,
North Carolina at 200 E. Church Street.

     The Bank is a  community  bank  engaged in the general  commercial  banking
business in Johnston  County,  North  Carolina which is located in Eastern North
Carolina. Johnston County is contiguous to Wake, Wayne, Wilson, Harnett, Sampson
and Nash counties.

     As of December 31,  1997,  the Bank had assets of  $190,071,000,  net loans
outstanding of $138,099,000 and deposits of  $167,988,000.  The Bank has enjoyed
considerable  growth over the past five years as evidenced by the 107%  increase
in assets, the 129% increase in net loans outstanding,  and the 108% increase in
deposits since December 31, 1992.

     The Bank provides a full range of banking services, including such services
as checking  accounts,  savings accounts,  NOW accounts,  money market accounts,
certificates  of deposit,  a student  checking  and savings  program;  loans for
businesses,  agriculture,  real estate,  personal  uses,  home  improvement  and
automobiles;  equity  lines  of  credit;  credit  cards;  individual  retirement
accounts;  discount brokerage  services;  safe deposit boxes; bank money orders;
electronic funds transfer services, including wire transfers; traveler's checks;
and free notary services to all Bank customers.  In addition,  the Bank provides
automated  teller machine access to its customers for cash  withdrawals  through
the services of the HONOR and CIRRUS  networks which offer  customers  access to
automated teller machines nationwide.  At present, the Bank does not provide the
services of a trust department.

     The  majority  of  the  Bank's  customers  are  individuals  and  small  to
medium-size  businesses  located in Johnston County and surrounding  areas.  The
deposits  and loans are well  diversified  with no material  concentration  in a
single industry or group of related  industries.  There are no seasonal  factors
that would have any material adverse effect on the Bank's business, and the Bank
does not rely on foreign sources of funds or income.

     From its  headquarters  located in Four Oaks and its six offices located in
Four Oaks,  Clayton,  Smithfield,  Garner and  Benson,  the Bank  serves a major
portion of Johnston  County.  Johnston  County has a diverse  economy and is not
dependent on any one  particular  industry.  The leading  industries in the area
include  electronics,   pharmaceutical,  textile,  agriculture,  livestock,  and
poultry.

                                       2


<PAGE>


     Commercial banking in North Carolina is extremely  competitive due in large
part to statewide  branching.  The Bank competes in its market area with some of
the largest banking organizations in the state and other financial  institutions
such as federally and  state-chartered  savings and loan institutions and credit
unions as well as  consumer  finance  companies,  mortgage  companies  and other
lenders  engaged  in the  business  of  extending  credit.  Many  of the  Bank's
competitors have broader  geographic  markets and higher lending limits than the
Bank and are also able to provide  more  services  and make greater use of media
advertising.

     Interstate  banking in North  Carolina  and other  Southeastern  states has
greatly  increased  the  size  and  financial  resources  of some of the  Bank's
competitors.  In  addition,  as a result  of  interstate  banking,  out-of-state
commercial banks may compete in North Carolina by acquiring North Carolina banks
and thus increase the prospects for additional competition in North Carolina.
See "Holding Company Regulation" below.

     Despite the  competition  in its market area, the Bank believes that it has
certain  competitive  advantages which distinguish it from its competition.  The
Bank  believes  that its primary  competitive  advantages  are its strong  local
identity and  affiliation  with the  community and its emphasis on providing the
very best  service  possible at  reasonable  and  competitive  prices.  The Bank
believes that it offers  customers  modern,  high-tech  banking services without
forsaking  community values such as prompt,  personal service and  friendliness.
Amounts spent on research  activities relating to the development or improvement
of services have been immaterial over the past five years. At December 31, 1997,
the Bank employed 81 full time equivalent employees.

     The  following  table sets forth  certain  financial  data and ratios  with
respect to the Bank for the years ended December 31, 1997,  1996, and 1995. This
information  should be read in conjunction with and is qualified in its entirety
by reference to the more detailed audited financial statements and notes thereto
which accompany this report:

                                                 1997        1996         1995
                                                 ----        ----         ----
                                                  (In thousands, except ratios)

Net Income                                       $2,122      $1,821      $1,524
Average equity capital accounts                 $15,495     $13,580     $12,132
Ratio of net income to average equity
    capital accounts                             13.69%      13.41%      12.56%
Average daily total deposits                   $154,397    $129,775    $110,395
Ratio of net income to average daily
    total deposits                                1.37%       1.40%       1.38%
Average daily loans                            $130,376    $103,559     $85,223
Ratio of average daily loans to average
    daily total deposits                         84.44%      79.80%      77.20%

     Governmental Regulation

     Holding  companies,  banks  and  many  of  their  non-bank  affiliates  are
extensively regulated under both federal and state law. The following is a brief
summary of certain statutes, rules and regulations affecting the Company and the
Bank.  This summary is qualified in its entirety by reference to the  particular
statutory and regulatory  provisions referred to below and is not intended to be
an  exhaustive  description  of the statutes or  regulations  applicable  to the
Company's or the Bank's business. Supervision, regulation and examination of the
Company and the Bank by bank regulatory  agencies is intended  primarily for the
protection of the Bank's  depositors  rather than holders of the Common Stock of
the Company.

     Holding Company Regulation

     General.  The  Company is a holding  company  registered  with the  Federal
Reserve under the Bank Holding  Company Act of 1956 (the "BHCA").  As such,  the
Company and the Bank are subject to the  supervision,  examination and reporting
requirements  contained in the BHCA and the  regulation of the Federal  Reserve.
The BHCA requires that a bank holding  company  obtain the prior approval of the
Federal Reserve before (i) acquiring direct or indirect  ownership or control of
more than five percent of the voting shares of any bank,  (ii) taking any



                                       3


<PAGE>

action that causes a bank to become a  subsidiary  of the bank holding  company,
(iii) acquiring all or substantially  all of the assets of any bank or (iv)
merging or consolidating with any other bank holding company.



     The  BHCA  generally  prohibits  a  bank  holding  company,   with  certain
exceptions,  from  engaging in  activities  other than  banking,  or managing or
controlling  banks or other  permissible  subsidiaries,  and from  acquiring  or
retaining  direct or indirect  control of any company  engaged in any activities
other than those  activities  determined  by the  Federal  Reserve to be closely
related to banking, or managing or controlling banks, as to be a proper incident
thereto.  In  determining  whether a  particular  activity is  permissible,  the
Federal  Reserve must consider  whether the  performance of such an activity can
reasonably  be  expected  to produce  benefits  to the  public,  such as greater
convenience,  increased  competition  or  gains  in  efficiency,  that  outweigh
possible adverse effects, such as undue concentration of resources, decreased or
unfair  competition,  conflicts of interest or unsound  banking  practices.  For
example, banking, operating a thrift institution,  acquiring or servicing loans,
leasing personal property,  conducting discount securities brokerage activities,
performing  certain  data  processing  services,  acting  as agent or  broker in
selling credit life insurance and certain other types of insurance  underwriting
activities  have all been determined by regulations of the Federal Reserve to be
permissible activities.

     Pursuant to delegated  authority,  the Federal Reserve Bank of Richmond has
authority  to  approve  certain  activities  of  holding  companies  within  its
district,  including  the Company,  provided the nature of the activity has been
approved by the Federal Reserve. Despite prior approval, the Federal Reserve has
the  power to order a holding  company  or its  subsidiaries  to  terminate  any
activity or to terminate its ownership or control of any subsidiary  when it has
reasonable cause to believe that continuation of such activity or such ownership
or control  constitutes  a serious risk to the  financial  safety,  soundness or
stability of any bank subsidiary of that bank holding company.

     The  Riegle-Neal  Interstate  Banking and Branching  Efficiency Act of 1994
(the  "IBBEA")  permits  interstate  acquisitions  of  banks  and  bank  holding
companies without geographic  limitation,  subject to any state requirement that
the bank has been  organized  for a minimum  period of time,  not to exceed five
years, and the requirement that the bank holding company, prior to, or following
the proposed acquisition,  controls no more than ten percent of the total amount
of deposits of insured depository  institutions in the U.S. and no more than 30%
of such  deposits  in any state (or such  lesser or greater  amount set by state
law).

     In addition, the IBBEA permits a bank to merge with a bank in another state
as long as neither of the states has opted out of interstate  branching prior to
May 31, 1997.  The state of North  Carolina has "opted in" to such  legislation,
effective June 22, 1995. In addition, a bank may establish and operate a de novo
branch  in a state in which the bank does not  maintain  a branch if that  state
expressly permits de novo interstate branching.  As a result of North Carolina's
opt-in  law,  North  Carolina  law  permits  unrestricted   interstate  de  novo
branching.

     Subsidiary  banks  of  a  bank  holding  company  are  subject  to  certain
restrictions  imposed by the Federal  Reserve on any extensions of credit to the
bank holding  company or any of its  subsidiaries,  investments  in the stock or
securities  thereof and the acceptance of such stock or securities as collateral
for loans to any borrower.  A bank holding company and its subsidiaries are also
prevented from engaging in certain tie-in  arrangements  in connection  with any
extension of credit, lease or sale of property or furnishing of services.

     The Federal  Reserve may issue cease and desist orders against bank holding
companies  and  non-bank  subsidiaries  to stop  actions  believed  to present a
serious threat to a subsidiary bank. The Federal Reserve also regulates  certain
debt  obligations,  changes in control of bank  holding  companies  and  capital
requirements.

     Under the  provisions of the North  Carolina law, the Company is registered
with and subject to supervision by the North Carolina Commissioner of Banks (the
"Commissioner").

     Capital  Requirements.  The  Federal  Reserve  has  established  risk-based
capital  guidelines  for bank holding  companies and state member banks based on
the capital framework for international banking  organizations  developed by the
Basle Committee on Banking  Regulations and Supervisory  Practices.  The minimum
standard for the ratio of capital to risk-weighted assets (including certain off
balance sheet obligations,  such as standby letters of credit) is eight percent.
At least half of this capital must consist of common equity,  retained  earnings
and a limited amount of perpetual  preferred stock and minority interests in the
equity accounts


                                       4

<PAGE>

of consolidated subsidiaries, less certain goodwill items ("Tier 1  capital").
The  remainder  ("Tier  2  capital")  may  consist  of  mandatory convertible
debt  securities  and a limited  amount of other  preferred  stock, subordinated
debt and loan loss reserves.

     In addition,  the Federal  Reserve has established  minimum  leverage ratio
guidelines for bank holding  companies.  These guidelines  provide for a minimum
leverage  ratio of Tier 1 capital to  adjusted  average  quarterly  assets  less
certain  amounts  ("Leverage  Ratio")  equal to three  percent for bank  holding
companies that meet certain  specified  criteria,  including  having the highest
regulatory  rating.  All other bank holding companies will generally be required
to maintain a Leverage Ratio of between four percent and five percent.

     The  guidelines  also  provide  that bank  holding  companies  experiencing
internal  growth or making  acquisitions  will be expected  to  maintain  strong
capital positions  substantially  above the minimum  supervisory  levels without
significant reliance on intangible assets. Furthermore,  the guidelines indicate
that the Board of Governors of the Federal Reserve System (the "Federal  Reserve
Board") will continue to consider a "tangible Tier 1 Leverage Ratio"  (deducting
all  intangibles)  in evaluating  proposals  for expansion or new activity.  The
Federal  Reserve has not advised the Company of any  specific  minimum  Leverage
Ratio or tangible Tier 1 Leverage Ratio applicable to it.

     As of  December  31,  1997  the  Company  had Tier 1  risk-adjusted,  total
regulatory capital and leverage capital of approximately  11.7%, 12.9% and 8.5%,
respectively, all in excess of the minimum requirements.

     Bank Regulation

     The Bank is subject to numerous state and federal  statutes and regulations
that affect its business,  activities,  and  operations,  and is supervised  and
examined by the Commissioner  and the Federal  Reserve.  The Federal Reserve and
the  Commissioner  regularly  examine  the  operations  of banks over which they
exercise  jurisdiction.  They have the  authority to approve or  disapprove  the
establishment of branches, mergers, consolidations,  and other similar corporate
actions,  and to prevent the  continuance  or  development  of unsafe or unsound
banking  practices  and other  violations  of law.  The Federal  Reserve and the
Commissioner regulate and monitor all areas of the operations of banks and their
subsidiaries,  including  loans,  mortgages,  issuances of  securities,  capital
adequacy,  loss reserves,  and compliance with the Community Reinvestment Act of
1977 (the "CRA") as well as other laws and  regulations.  Interest  and  certain
other charges  collected and  contracted  for by banks are also subject to state
usury laws and certain federal laws concerning interest rates.

     The deposit  accounts of the Bank are  insured by the Bank  Insurance  Fund
(the "BIF") of the Federal Deposit  Insurance  Corporation  (the "FDIC") up to a
maximum of $100,000  per insured  depositor.  The FDIC  issues  regulations  and
conducts periodic  examinations,  requires the filing of reports,  and generally
supervises the operations of its insured banks.  This supervision and regulation
is intended primarily for the protection of depositors. Any insured bank that is
not  operated  in  accordance  with or does  not  conform  to FDIC  regulations,
policies, and directives may be sanctioned for noncompliance. Civil and criminal
proceedings may be instituted against any insured bank or any director, officer,
or employee of such bank for the violation of applicable  laws and  regulations,
breaches of fiduciary duties, or engaging in any unsafe or unsound practice. The
FDIC has the authority to terminate insurance of accounts pursuant to procedures
established for that purpose.

     Although  the  Company is not  subject to any  direct  legal or  regulatory
restrictions on dividends (other than the requirements  under the North Carolina
corporation  laws that a distribution  may not be made if after giving it effect
the  Company  would not be able to pay its debts as they become due in the usual
course  of  business  or the  Company's  total  assets  would  be less  than its
liabilities),  the Company's ability to pay cash dividends is dependent upon the
amount of  dividends  paid by its  subsidiary.  The  ability  of the Bank to pay
dividends to the Company is subject to statutory and regulatory  restrictions on
the  payment  of cash  dividends,  including  the  requirement  under  the North
Carolina banking laws that cash dividends be paid only out of undivided  profits
and only if the bank has surplus of a specified  level.  Federal bank regulatory
agencies also have the general  authority to limit the dividends paid by insured
banks and bank  holding  companies if such  payment is deemed to  constitute  an
unsafe and unsound practice.



                                       5


<PAGE>

     Like the Company,  the Bank is required by federal  regulations to maintain
certain minimum capital levels.  The levels required of the Bank are the same as
required  for the  Corporation.  At  December  31,  1997,  the  Bank  had Tier 1
risk-adjusted,  total  regulatory  capital and leverage capital of approximately
11.5%, 12.7% and 8.5%, respectively, all in excess of the minimum requirements.

     The Bank is subject to insurance assessments imposed by the FDIC. Effective
January 1, 1997, the FDIC adopted a risk-based assessment schedule providing for
annual  assessment  rates  ranging from 0% to .27% of an  institution's  average
assessment  base,  applicable  to  institutions  insured by both the BIF and the
Savings Association Insurance Fund ("SAIF"). The actual assessment to be paid by
each  insured  institution  is  based  on  the  institution's   assessment  risk
classification,  which is based on whether the  institution is considered  "well
capitalized," "adequately capitalized" or "under capitalized," as such terms are
defined in the applicable  federal  regulations,  and whether the institution is
considered  by  its  supervisory  agency  to be  financially  sound  or to  have
supervisory concerns.  The FDIC also is authorized to impose one or more special
assessments  in any  amount  deemed  necessary  to enable  repayment  of amounts
borrowed by the FDIC from the United States Treasury  Department and,  beginning
in 1997, all banks are required to pay additional annual assessments at the rate
of .013%.  Effective January 1, 1999, there will be a merger of the SAIF and the
BIF insurance  funds of the FDIC.


     Banks are also subject to the CRA, which requires the  appropriate  federal
bank regulatory  agency, in connection with its examination of a bank, to assess
such bank's record in meeting the credit needs of the  community  served by that
bank, including low and moderate-income  neighborhoods.  The regulatory agency's
assessment of the bank's record is made available to the public.  Further,  such
assessment  is  required of any bank which has applied to (i) charter a national
bank, (ii) obtain deposit insurance coverage for a newly chartered  institution,
(iii) establish a new branch office that will accept deposits,  (iv) relocate an
office or (v) merge or  consolidate  with,  or acquire  the assets or assume the
liabilities of, a federally  regulated financial  institution.  In the case of a
bank  holding  company  applying  for  approval  to acquire a bank or other bank
holding  company,  the Federal Reserve will assess the record of each subsidiary
bank of the applicant  bank holding  company,  and such records may be the basis
for denying the application.

     Monetary Policy and Economic Controls

     The Company and the Bank are directly affected by governmental policies and
regulatory  measures   affecting  the banking  industry  in  general. Of primary
importance is the Federal Reserve Board, whose actions directly affect the money
supply and,  in general,  affect  banks'  lending  abilities  by  increasing  or
decreasing  the cost and  availability  of funds to banks.  The Federal  Reserve
Board regulates the availability of bank credit in order to combat recession and
curb  inflationary  pressures in the economy by open market operations in United
States  government  securities,  changes  in the  discount  rate on member  bank
borrowings,   changes  in  reserve  requirements  against  bank  deposits,   and
limitations on interest rates that banks may pay on time and savings deposits.

     Deregulation  of interest  rates paid by banks on deposits and the types of
deposits  that  may  be  offered  by  banks  have  eliminated   minimum  balance
requirements  and rate ceilings on various types of time deposit  accounts.  The
effect of these specific  actions and, in general,  the  deregulation of deposit
interest rates has generally  increased banks' cost of funds and made them more
sensitive  to  fluctuations  in  money  market  rates.  In view of the  changing
conditions in the national  economy and money markets,  as well as the effect of
actions by monetary  and fiscal  authorities,  no  prediction  can be made as to
possible future changes in interest rates,  deposit levels,  loan demand, or the
business and earnings of the Bank or the Company. As a result, banks,  including
the Bank, are facing a significant challenge to maintain acceptable net interest
margins.


                                      6


<PAGE>


     Executive Officers of the Company.

     The  following  table  sets  forth  certain  information  with  respect  to
the executive officers of the Company:


                                   Positions and Offices with Company
                        Year first and business experience
  Name               Age  employed  during past five years
  ----               ---  --------  ----------------------

Ayden R. Lee, Jr.   49   1980      Chief Executive Officer, President and
                                   Director of the Company and the Bank

Clifton L. Painter  48   1986      Senior Executive Vice President, Chief
                                   Operating Officer of the Company and the
                                   Bank, City Executive of the Bank

Nancy S. Wise       42   1991      Senior Vice President, Chief Financial
                                   Officer of the Company and the Bank

W. Leon Hiatt, III  30   1994      Senior Vice President of the Company and the
                                   Bank, Loan Administrator of the Bank.  From
                                   March 1990 until joining the Bank, Mr. Hiatt
                                   served as a Financial Institutions Examiner
                                   for the FDIC

Item 2 - Properties.

     The Bank owns its main office which is located at 6144 U S 301 South,  Four
Oaks, North Carolina.  The main office which was constructed by the Bank in 1985
is a 12,000  square  foot  facility  on 1.64 acres of land.  The Bank  leases an
additional  branch office in downtown Four Oaks located at 111 North Main Street
from M.S. Canaday,  a director of the Company and the Bank. Under the terms of
the lease,  which the Bank  believes  to be  arms-length,  the Bank paid $780
per month in rent in 1997.  The term of the lease is currently five years
beginning  January 1, 1994 with annual  increases based on the Consumer Price
Index.  The Bank owns a 5,000 square foot facility renovated in 1992 on 1.15
acres of land located at 5987 U S 301 South,  Four Oaks,  North Carolina which
houses the training  center and the Bank's wide area network central link. In
addition, the Bank owns the following:

Location                 Year Built    Present Function         Square Feet
--------                 ----------    ----------------         -----------

102 East Main Street         1986      Branch Office              4,200
Clayton, North Carolina

200 E. Church Street         1987      Branch Office              2,000
Benson, North Carolina

128 North Second Street      1991      Branch Office              3,400
Smithfield, North Carolina

6365 U. S. 301 South          (1)      (1)                        1,202
Four Oaks, North Carolina

403 S. Bright Leaf Blvd.     1995(2)   Limited-Service Facility     720
Smithfield, North Carolina

200 Glen Road                1996      Branch Office              3,600
Garner, North Carolina

-----------------------------
(1)      This office was closed in 1995.
(2)      This building was remodeled in 1995.


                                       7

<PAGE>


Item 3 - Legal Proceedings.

     The  Company is not  involved  in any  material  legal  proceedings  at the
present time.

Item 4 - Submission of Matters to a Vote of Security Holders.

     None.

PART II

Item 5 - Market for Registrant's Common Equity and Related Stockholder Matters.

     This  information is  incorporated  by reference  from Page 31,  "Corporate
Information"  of the Company's  1997 Annual Report to  Shareholders  included as
Exhibit 13.1.

Item 6 - Selected Financial Data.

     This  information  is  incorporated  by  reference  from Page 5,  "Selected
Financial Data" of the Company's 1997 Annual Report to Shareholders  included as
Exhibit 13.1.

Item 7 - Management's Discussion and Analysis of Financial Condition and Results
of Operations.

     This   information   is   incorporated   by  reference   from  Pages  7-15,
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations"  of the  Company's  1997 Annual Report to  Shareholders  included as
Exhibit 13.1.

Item 8 - Financial Statements and Supplementary Data.

     This  information is  incorporated  by reference  from Pages 16-30,  of the
Company's 1997 Annual Report to Shareholders included as Exhibit 13.1.

Item 9 -  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure.

     None.


PART III

Item 10 - Directors and Executive Officers of the Registrant.

     Director  information  is  incorporated  by  reference  from Pages 4 and 5,
"Election of Directors" and Pages 7 and 8, "Section 16(a)  Beneficial  Ownership
Reporting Compliance" in the Company's Proxy Statement for the Annual Meeting of
Shareholders to be held April 27, 1998.  Information on the Company's  executive
officers is included  under the caption  "Executive  Officers of the Company" on
Page 7 of this report.

Item 11 - Executive Compensation and Transactions.

     This  information  is  incorporated  by  reference  from  Pages 6, 7 and 8,
"Executive Compensation" in the Company's Proxy Statement for the Annual Meeting
of Shareholders to be held April 27, 1998.

Item 12 - Security Ownership of Certain Beneficial Owners and Management.

     This information is incorporated by reference from Pages 2 and 3, "Security
Ownership of Management and Certain  Beneficial  Owners" in the Company's  Proxy
Statement for the Annual Meeting of Shareholders to be held April 27, 1998.


                                       8


<PAGE>


Item 13 - Certain Relationships and Related Transactions.

     This  information  is  incorporated  by reference  from Page 7,  "Executive
Compensation-Certain  Transactions"  in the  Company's  Proxy  Statement for the
Annual Meeting of Shareholders to be held April 27, 1998.


PART IV

Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(a)  Financial Statements and Schedules.

     1.   The following financial  statements are incorporated by reference
          herein from the Company's 1997 Annual  Report to  Shareholders
          included as Exhibit 13.1 to this Form 10-K.

                                                                     1997 Annual
                                                                     Report Page
                                                                     -----------

     (i)    Report of Independent Accountants.                              16

     (ii)   Consolidated Balance Sheets, December 31, 1997 and 1996.        17

     (iii)  Consolidated Statements of Operations for the years ended
            December 31, 1997, 1996 and 1995.                               18

     (iv)   Consolidated Changes in Shareholders' Equity for the years
            ended December 31, 1997, 1996 and 1995.                         19

     (v)    Consolidated Statements of Cash Flows for the years ended
            December 31, 1997, 1996 and 1995.                               20

     (vi)   Notes to Consolidated Financial Statements.                    21-30

     2.   Report of  predecessor  accountant,  Daniel G.  Matthews & Associates,
          Inc.  concerning  financial  statements  for  1995  presented  in  the
          Company's 1997 Annual Report to  Shareholders is filed as Exhibit 13.2
          to this report.

(b)  Reports on Form 8-K.  No reports on Form 8-K were filed  during the quarter
     ending December 31, 1997.

(c)  Exhibits.  The following  exhibits are filed as part of this annual report.
     Management  contracts or compensatory  plans or arrangements  are listed in
     Exhibits 10.1, 10.2, 10.3 and 10.4 below:

<TABLE>
<CAPTION>

     Exhibit No.            Description of Exhibit
     -----------           ----------------------
     <S>            <C>
     2(1)           Agreement and Plan of Reorganization and Merger by and
                    between the Bank and the Company dated February 24, 1997

     3.1(1)         Articles of Incorporation of the Company

     3.2(1)         Bylaws of the Company

     4(1)           Specimen of certificate for Company's Common Stock

     10.1(2)        Employment Agreement with Ayden R. Lee, Jr.

     10.2(2)        Severance Compensation Agreement with Ayden R. Lee, Jr.

     10.3(1)        Nonqualified Stock Option Plan



                                              9


<PAGE>
<CAPTION>

    <S>             <C>
     10.4(1)        Employee Stock Purchase and Bonus Plan

     10.5(1)        Dividend Reinvestment and Stock Purchase Plan

     13.1           Portions of the Annual Report to  Shareholders  for the
                    fiscal year ended December 31, 1997, which are incorporated
                    herein by reference.

     13.2           Report of Daniel G. Matthews & Associates, Inc. concerning
                    financial statements for 1995 presented in the 1997 Annual Report
                    to Shareholders

     21             Subsidiaries of the Company

     23.1           Consent of Coopers & Lybrand L.L.P.

     23.2           Consent of Daniel G. Matthews & Associates, Inc.

     27             Financial Data Schedule
</TABLE>

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

(1)  Filed as an exhibit to the Form 8-K12G3  filed with the SEC on July 1, 1997
     and incorporated herein by reference.

(2)  Filed as an  exhibit  to the  Quarterly  Report on Form 10-Q for the period
     ended June 30, 1997 and incorporated herein by reference.


                                       10


<PAGE>


                           FORWARD LOOKING INFORMATION

     Information  set forth in this Annual Report on Form 10-K under the caption
"Business" and incorporated by reference herein from the Company's Annual Report
to Shareholders contains various "forward looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
1934 Act,  which  statements  represent the Company's  judgment  concerning  the
future and are subject to risks and uncertainties that could cause the Company's
actual  operating  results and  financial  position to differ  materially.  Such
forward  looking  statements  can be  identified  by the use of forward  looking
terminology,  such as "may,"  "will,"  "expect,"  "anticipate,"  "estimate,"  or
"continue"  or the negative  thereof or other  variations  thereof or comparable
terminology.

     The Company cautions that any such forward looking statements are further
qualified by important factors that could cause the Company's actual operating
results to differ materially from those in the forward looking statements,
including, without limitation, the effects of future economic conditions,
governmental fiscal and monetary policies, legislative and regulatory changes,
the risks of changes in interest rates on the level and composition of deposits,
the effects of competition from other financial institutions, the failure of
assumptions underlying the establishment of the allowance for possible loan
losses, the low trading volume of the Common Stock, other considerations
described in connection with specific forward looking statements and other
cautionary elements specified in documents incorporated by reference in this
Annual Report on Form 10-K.

                                       11

<PAGE>



                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                             FOUR OAKS FINCORP, INC.

Date:  March 16, 1998       By:  /s/ Ayden R. Lee, Jr.
                                 ----------------------
                                 Ayden R. Lee, Jr.
                                 President and Chief Executive Officer

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates indicated.

Date:  March 16, 1998            /s/ Ayden R. Lee, Jr.
                                 ----------------------
                                 Ayden R. Lee, Jr.
                                 President, Chief Executive Officer and Director


Date:  March 16, 1998            /s/ Nancy S. Wise
                                ------------------
                                 Nancy S. Wise
                                 Senior Vice President and Chief Financial
                                 Officer


Date:  March 16, 1998            /s/ William J. Edwards
                                -----------------------
                                 William J. Edwards
                                 Director


Date:  March 16, 1998            /s/ Warren L. Grimes
                                ---------------------
                                 Warren L. Grimes
                                 Director


Date:  March 16, 1998            /s/ Harold J. Sturdivant
                                -------------------------
                                 Harold J. Sturdivant
                                 Director


Date:  March 16, 1998            /s/ Percy Y. Lee
                                -----------------
                                 Percy Y. Lee
                                 Director


Date:  March 16, 1998            /s/ Merwin S. Canaday
                                ----------------------
                                 Merwin S. Canaday
                                 Director


Date:  March 16, 1998            /s/ Paula C. Bowman
                                --------------------
                                 Paula C. Bowman
                                 Director


<PAGE>


                                  EXHIBIT INDEX

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

2(1)               Agreement and Plan of Reorganization and Merger by and
                   between the Bank and the Company dated February 24, 1997

3.1(1)             Articles of Incorporation of the Company

3.2(1)             Bylaws of the Company

4(1)               Specimen of certificate for Company's Common Stock

10.1(2)            Employment Agreement with Ayden R. Lee, Jr.

10.2(2)            Severance Compensation Agreement with Ayden R. Lee, Jr.

10.3(1)            Nonqualified Stock Option Plan

10.4(1)            Employee Stock Purchase and Bonus Plan

10.5(1)            Dividend Reinvestment and Stock Purchase Plan

13.1               Portions of the 1997 Annual Report to Shareholders  for the
                   fiscal year ended December 31,  1997, which are incorporated
                   herein by reference.

13.2               Report of Daniel G.  Matthews & Associates,  Inc.  concerning
                   financial  statements  for 1995  presented in the 1997 Annual
                   Report to Shareholders

21                 Subsidiaries of the Company

23.1               Consent of Coopers & Lybrand L.L.P.

23.2               Consent of Daniel G. Matthews & Associates, Inc.

27                 Financial Data Schedule

--------------
(1) Filed as an exhibit to the Form 8-K12G3 filed with the SEC on July 1, 1997
    and incorporated herein by reference.
(2) Filed as an exhibit to the Quarterly Report on Form 10-Q for the period
    ended June 30, 1997 and incorporated herein by reference.