FIRST SOUTHERN BANCSHARES, INC.
                          And Subsidiaries

                             ANNUAL REPORT

                                1996
<PAGE>

Management Discussion and Analysis

Overview

First Southern Bancshares, Inc. (the "Company") is a bank holding
company  which wholly owns First Southern Bank (the  "Bank")  and
FSB   Mortgage   Services,  Inc.  ("Mortgage  Services").    This
financial  overview provides insight into the financial condition
of  the  Company  and  addresses the factors that  have  affected
earnings.   The  Company's consolidated financial statements  and
accompanying  notes  which follow are an integral  part  of  this
overview and should be read in conjunction with it.

The  First  Southern  Bank  is  a full  service  commercial  bank
chartered in the State of Georgia.  The Bank is a community  bank
which operates three retail locations in south DeKalb County  and
focuses  on  small  to  medium size businesses,  individuals  and
professionals. On July 19, 1996, the Bank began operations of its
new  Rockbridge  Plaza Branch.  The branch  is located  in  Stone
Mountain,  Georgia and has three drive through bays, a  drive  up
ATM,  as  well  as a state of the art electronic  message  board.
This  facility  was  constructed by  the  bank  after  a  careful
demographic  analysis  of the entire metropolitan  Atlanta  area.
This  analysis included not only potential undeveloped  locations
but  also a large list of local bank branches that were available
due the to mergers and acquisitions of several major banks.

On  September  9, 1996, the Company purchased the assets  of  and
employed  the  personnel  of American  Financial  Mortgage  Corp.
("AFM").  The resulting company, FSB Mortgage Services Inc., is a
mortgage  company licensed by the State of Georgia Department  of
Banking and Finance and has received approval from the Department
of  Housing  and  Urban  Development, FHA,  Fannie  Mae  and  the
Veterans Administration.

The  Company's principal business activities are affected by many
factors, including general economic and financial conditions, the
level  and  volatility of interest rates, currency  and  security
valuations,  competitive  conditions,  transactional  volume  and
market  liquidity.   As a result, revenues and profitability  are
subject  to fluctuations reflecting the impact of these  factors.
During  1996,  interest rates and macro-economic growth  remained
stable,  therefore, inflation did not have a material  impact  on
the Company.


Results of Operations

The  Company reported after tax earnings of $301,843 for the year
ended  December 31, 1996, as compared to $309,674  for  the  same
period  in  1995.  While the 1996 results of operations  remained
virtually   unchanged  when  compared  to  1995.    The   Company
experienced higher levels of interest income and interest expense
proportionate to its increase in asset size.  Net interest income
before  provision for loan losses was $2,240,957 at December  31,
1996  as  compared to $1,896,677 at year end 1995.  During  1996,
the Company increased its provision for loan losses by $45,000 to
reflect the growth in the Company's loan portfolio.  During 1996,
net loans increased by 44.37 percent.

Net Interest Income

Net   interest  income,  the  primary  source  of  the  Company's
earnings,  is the amount by which interest and fees generated  by
earning  assets  (principally loans  and  investment  securities)
exceeds  the total interest costs of the funds (mainly  deposits)
obtained to carry them.  Net interest income rose by $344,280  or
18.15 percent for the period ending December 31, 1996 as compared
with   the  same  period  in 1995.  Strong  growth  in  interest-
earnings  assets,  primarily loans, accounted  for  the  earnings
gain.   During  1996  gross loans grew by $43.52  percent,  while
total interest bearing deposits grew by 20.02 percent.

STATEMENT OF CONDITION

Liquidity

The Bank primarily manages its liquidity position through federal
funds  sold.   At December 31, 1996, the Bank had  $1,300,000  in
federal  fund  sold.   This is a $4,400,000  decrease  from  1995
levels  and   resulted from increase loan demand  and  management
efforts to improve the interest yields the Company earns  on  its
assets.   Management  feels this level  is  significant  to  meet
immediate  deposit withdrawal demands at the end of December  31,
1996.  Additional sources of liquidity include cash and due  form
banks,  federal  funds  line from correspondent  banks,  maturing
investment   securities   and   payments   on   commercial    and
installments.

At December, 31,1996. The Bank's liquid assets (cash and due form
banks, investment securities, and federal funds sold) represented
30.57  percent   of  total assets compared to  40.91  percent  at
December 31, 1995.


Investment Securities

The  Bank invests a portion of its assets in U.S. treasury  bills
and  notes, U.S. government sponsored agency securities, as  well
as,  mortgage backed bonds.  At December 31, 1996 and  1995,  the
Bank's  investment securities portfolio represented approximately
22.60  percent  of  total assets, respectively.   The  investment
portfolio,  based on amortized cost,  increased by $2,293,000  or
24.17 percent during 1996.

At  December  31,  1996,  the  Bank's  securities  portfolio  was
invested in the following types of securities:

                      Available for Sale     Held for Maturity
U.S. Treasuries                 -%                  19%
U.S. Agencies                  93                   24
Mortgage Backed                 7                   20
Municipals                      -                   37
                              ____                 ____
                              100%                 100%
                              ====                 ====

The  fair value of the Bank's total investment portfolio was less
than its book value by $22,492 at year-end.

Provision for Losses on Loans

The  provision for losses on loans, which decreased 5.52  percent
or  $21,330 in 1996 compared to 1995, is the charge to  operating
earnings  that  management  feels is necessary  to  maintain  the
reserve  for  possible  loan losses at an  adequate  level.   The
allowance  is  based on management's assessment of the  Company's
risk  of  possible  loan  defaults.  Management  determines   the
adequacy  of  the allowance by considering the dollar  amount  of
loans  outstanding,  individual  evaluations  of  problem  loans,
current  economic conditions, the underlying collateral value  of
the loan and prior loan loss experience.

At  December  31, 1996, the allowance for loan losses represented
1.12  percent of gross loans compared to 1.70 percent at December
31,  1995.   Management believes that this level  of  reserve  is
adequate  to  absorb  possible loan  losses  on  existing  loans,
including  non-accrual loans of $184,000 at  December  31,  1996,
that  may be uncollectible.  Non-accrual loans were approximately
$240,000 at the end of 1995.

Premises and Equipment

First   Southern   operates  three  retail   commercial   banking
operations in DeKalb County, Georgia.  The Company's main  office
is  located in Lithonia, Georgia, the South DeKalb Mall Branch is
located in Decatur and the Company's Rockbridge Branch is located
in  Stone Mountain, Georgia.  On July 19, 1996, the Company began
operating the Rockbridge Plaza Branch after an extensive study of
metropolitan Atlanta designed to determine the best location  for
a  new  branch.   After  five  months of  operation,  the  branch
maintains  over  $2,500,000 in deposits and now rivals  the  main
office  in  new  account openings.  The Company also  utilizes  a
building  in  Decatur, Georgia as its Operations  Center  and  to
house its mortgage company.

The Company maintains a wide area network ("WAN").  The Company's
WAN  enables it to communicate to locations efficiently, as  well
as  process  customer information.  The Company believes  leading
edge  technology  will further enhance the Company's  ability  to
remain competitive with major banks.  The Company's investment in
premises  and  equipment  at December  31,  1996  was  $2,909,751
compared to $2,055,975 at December 31, 1995.

Deposits

The  Company  held total deposits of $45,535,324 at December  31,
1996  compared to $36,383,055 for the same period in 1995.   This
represents  an increase of 25.16 percent and is attributed  to  a
47.65 percent increase in non-interest bearing demand accounts, a
40.88 percent increase in interest-bearing demand accounts, and a
71.67 percent increase in $100,000 and over time deposits. During
the  period  time deposits less than $100,000 decreased  by  6.30
percent.

Stockholder's Equity

Stockholder's  equity  increased by 6.09 percent  of  which  5.70
percent resulted from 1996 earnings.  The unrealized gain or loss
from  securities is the difference between the fair market  value
and  the  book  value  of  the  Company's  investment  securities
portfolio that was held in the available for sale category.   The
net  unrealized loss on the investment portfolio was $10,937  for
December 31, 1996.  This amount had a negligible effect on  total
equity.   Total  stockholders equity for December  31,  1996  was
$5,627,789  compared to $5,304,787 for the same period  in  1995.
The Company maintained total retained earnings of $357,581.

Income Taxes

For  the  year ended December 31, 1996, the Company had estimated
income  taxes  of  $76,703 compared to $125,600 at  December  31,
1995.   The decrease in income taxes is attributed to the  bank's
investment  in  tax  free  municipal bonds.   This  strategy  has
enabled management to reduce its income tax liability.


<PAGE>

                  INDEPENDENT AUDITORS' REPORT


To the Board of Directors
First Southern Bancshares, Inc.
Lithonia, Georgia:


We  have audited the accompanying consolidated balance sheets  of
First  Southern Bancshares, Inc. (the "Company") and subsidiaries
as  of  December 31, 1996 and 1995, and the related  consolidated
statements of income, stockholders' equity and cash flows for the
three  years ended December 31, 1996.  These financial statements
are   the  responsibility  of  the  Company's  management.    Our
responsibility  is  to express an opinion on  these  consolidated
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 audits to obtain reasonable assurance about  whether
the  consolidated  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  First  Southern Bancshares and subsidiaries  as  of
December 31, 1996 and 1995, and the results of its operations and
its  cash flows for the three  years ended December 31, 1996,  in
conformity with generally accepted accounting principles.

As  discussed in Note 1 to the consolidated financial statements,
under  a  Plan  of Reorganization First Southern  Bancshares  was
created  as  a  holding  company through the  conversion  of  all
outstanding  shares  of  First Southern Bank  to  shares  of  the
Company.  The financial statements presented herein represent the
consolidated entity.



February 13, 1996.

<PAGE>

<TABLE>
        FIRST SOUTHERN BANCSHARES, INC. AND SUBSIDIARIES
                  Consolidated Balance Sheets
                   December 31, 1996 and 1995

                    ASSETS
<CAPTION>
                                                  1996           1995

<S>                                           <C>            <C>
Cash and due from banks                       $ 2,858,625    $ 2,046,906
Federal Funds Sold                              1,300,000      5,700,000
Securities available for sale,
 at fair value (Note 2)                         4,301,985      3,887,888
Securities held to maturity
 (fair value of $7,456,739 in 1996
 and $5,662,808 in 1995) (Note 2)               7,480,583      5,644,389

Loans (Notes 3 and 10)                         32,691,757     22,778,100
Less allowance for loan losses (Note 3)          (365,231)      (386,561)

Loans, net                                     32,326,526     22,391,539

Premises and equipment, net (Note 6)            2,909,751      2,055,975
Foreclosed real estate, net of
allowance of $47,121 (Note 4)                     378,690              -
Other assets                                      588,478        504,064

TOTAL ASSETS                                  $52,144,638    $42,230,761


   LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits
  Noninterest-bearing demand                  $ 9,979,254    $ 6,758,903
  Interest-bearing demand                       5,601,021      3,975,759
  Savings                                       3,298,627      3,037,360
  Time, $100,000 and over                      12,042,080      7,014,753
  Other time                                   14,614,342     15,596,280

     Total Deposits                            45,535,324     36,383,055

Note payable (Note 9)                             400,000         80,000
Other liabilities                                 564,970        462,919
Obligation under capital
 lease (Note 10)                                   16,555              -

     Total Liabilities                         46,516,849     36,925,974

Stockholders' Equity:
  Common stock, par value $5,
    10,000,000 shares authorized,
    528,958 shares issued, 528,958
    and 526,312 shares outstanding
    in 1996 and 1995, respectively              2,644,790      2,631,560
  Paid in capital                               2,647,268      2,631,560
  Treasury stock                                  (10,913)       (45,647)
  Retained earnings (Deficit)                     357,581         81,817
  Net unrealized gain (Loss) on
   securities, net of deferred taxes              (10,937)         5,497

     Total Stockholders' Equity                 5,627,789      5,304,787

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY    $52,144,638    $42,230,761

The accompanying notes are an integral part of the consolidated
financial statements.

</TABLE>

<PAGE>

<TABLE>
        FIRST SOUTHERN BANCSHARES, INC. AND SUBSIDIARIES
               Consolidated Statements of Income
      For the Years Ended December 31, 1996, 1995 and 1994

<CAPTION>
                                         1996         1995           1994

<S>                                   <C>           <C>           <C>
Interest income
  Interest and fees on loans          $3,103,798    $2,585,428    $1,994,104
  Interest on investments                702,336       382,454       307,723
  Interest on Federal funds sold         205,566       201,431        95,500

  Total Interest Income                4,011,700     3,169,313     2,397,327

Interest expense
  Interest paid on deposits            1,749,666     1,269,480       816,080
  Interest on notes payable               21,077         3,156             -

  Total interest expense               1,770,743     1,272,636       816,080

Net interest income                    2,240,957     1,896,677     1,581,247

Provision for loan losses (Note 3)      (140,000)      (95,000)     (113,000)

   Net interest income after
     provision for loan losses         2,100,957     1,801,677     1,468,247

Other income
  Service charges on deposit accounts    823,167       764,994       723,927
  Other service charges, commissions
    and fees                             605,181       189,617       156,772
  Net realized gains on sales
    of securities available for sale      14,124             -             -
  Other operating income                  64,447        30,078        12,229

  Total Other Income                   1,506,919       984,689       892,928

Other expenses
  Salaries and employee benefits       1,577,478     1,068,805     1,019,585
  Equipment expense                      343,021       279,430       217,977
  Occupancy expense                      249,682       193,424       141,295
  Loss on foreclosed real estate               -        25,077             -
  Other operating expenses             1,059,149       784,356       636,273

  Total Other Expenses                 3,229,330     2,351,092     2,015,130

Income before income taxes               378,546       435,274       346,045

Income tax expense                        76,703       125,600         6,220

NET INCOME                            $  301,843    $  309,674    $  339,825

NET INCOME PER COMMON AND
 COMMON EQUIVALENT SHARE              $      .57    $      .59    $      .65

DIVIDENDS PER COMMON SHARE            $      .05    $        -    $        -

The accompanying notes are an integral part of the consolidated
financial statements.
</TABLE>


<PAGE>

<TABLE>
              FIRST SOUTHERN BANCSHARES, INC. AND SUBSIDIARIES
              Consolidated Statements of Stockholders' Equity
            For the Years Ended December 31, 1996, 1995 and 1994


<CAPTION>

                                                                                               Net
                                                                                               Unrealized
                                                                                   Retained    Gain
                                                Common                             Treasury    (Loss) on
                                                Stock                              Stock       Earnings     Investment
       Shares                      Par Value    Surplus      Shares       Amount   (Deficit)   Securities   Total

<S>                                   <C>       <C>          <C>          <C>      <C>         <C>          <C>        <C>
Balance, December 31, 1994            526,312   $2,631,560   $2,631,560        -   $      -    $(227,857)   $(69,715)  $4,965,548

Purchase of treasury stock                  -            -            -   (4,750)   (45,647)           -           -      (45,647)

Net Income                                  -            -            -        -          -      309,674           -      309,674

Net change in unrealized gain on
 available for sale securities,
 net of deferred taxes                      -            -            -        -          -            -      75,212       75,212

Balance, December 31, 1995            526,312    2,631,560    2,631,560   (4,750)   (45,647)      81,817       5,497    5,304,787

Stock Sold                              2,646       13,230       13,230        -          -            -           -       26,460

Purchase of Treasury Stock                  -            -            -   (1,705)   (12,788)           -           -      (12,788)

Sale of Treasury Stock                      -            -        2,478    5,000     47,522            -           -       50,000

Net Income                                  -            -            -        -          -      301,843           -      301,843

Dividends Declared
 ($.05 per share)                           -            -            -        -          -      (26,079)          -      (26,079)

Net change in unrealized gain on
 available for sale securities,
 net of deferred taxes                      -            -            -        -          -            -     (16,434)     (16,434)

Balance, December 31, 1996            528,958   $2,644,790   $2,647,268   (1,455)  $(10,913)    $357,581    $(10,937)  $5,627,789




The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>

<PAGE>
<TABLE>
             FIRST SOUTHERN BANCSHARES, INC. AND SUBSIDIARIES
                  Consolidated Statements of Cash Flows
           For the Years Ended December 31, 1996, 1995 and 1994
<CAPTION>

                                                            1996         1995           1994
<S>                                                     <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income                                            $  301,843    $  309,674    $   339,825
  Adjustments to reconcile net income to net
   cash provided by operating activities:
     Depreciation                                          294,229       244,134        205,394
    Premium accretion, net of discount amortization          4,824        29,456         33,330
    Provision for loan losses                               92,879        95,000        113,000
    Provision for losses on foreclosed real estate          47,121        19,000         11,900
    Deferred income taxes                                   (2,372)       38,746        (46,318)
    Increase in interest receivable                        (38,011)      (83,305)       (61,811)
    Increase (decrease) in interest payable                119,328       136,038         42,760
    Other prepaids, deferrals and accruals, net            (82,222)        8,819       (126,997)

  Total adjustments                                        435,776       487,888        171,258

  Net cash provided by operating activities                737,619       797,562        511,083

CASH FLOWS FROM INVESTING ACTIVITIES
  Net decrease (increase) in Federal funds sold          4,400,000    (3,100,000)      (200,000)
  Purchase of securities available for sale             (2,997,623)   (2,086,411)    (2,966,451)
  Proceeds from the sale of securities available
    for sale                                             1,012,892             -              -
  Proceeds from the sale of securities held
    to maturity                                            199,828             -              -
  Proceeds from maturities of securities
    available for sale                                   1,243,522       201,684        424,487
  Purchase of securities held to maturity               (4,987,012)   (3,251,857)             -
  Proceeds from maturities of securities
    held to maturity                                     3,268,598     2,386,064              -
  Increase in Foreclosed Real Estate                      (425,811)            -              -
  Net increase in loans                                (10,027,866)   (2,401,229)    (2,594,418)
  Proceeds from sales of foreclosed real estate                  -        72,232              -
  Purchases of premises and equipment                   (1,148,005)     (440,269)      (447,477)

  Net cash used in investing activities                 (9,461,477)   (8,619,786)    (5,783,859)

CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from line of credit                             336,555        80,000              -
  Sale of common stock                                      13,230             -              -
  Dividends paid                                           (16,919)            -              -
  Sale of treasury stock                                    47,522             -              -
  Paid capital                                              15,708             -              -
  Purchase of treasury stock                               (12,788)      (45,647)             -
  Net increase in deposits                               9,152,269     5,316,179      7,389,193

  Net cash provided by financing activities              9,535,577     5,350,532      7,389,193

Net increase (decrease) in cash and due from banks         811,719    (2,471,692)     2,116,417

Cash and due from banks, beginning of year               2,046,906     4,518,598      2,402,181

CASH AND DUE FROM BANKS, END OF YEAR                    $2,858,625    $2,046,906    $ 4,518,598

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

  Cash Paid During the Year for Interest                $1,651,415    $1,010,141    $   773,320

  Cash Paid During the Year for Income Taxes            $   84,453    $  119,750    $         -

The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>

<PAGE>

           FIRST SOUTHERN BANCSHARES AND SUBSIDIARIES
         Notes to the Consolidated Financial Statements
                   December 31, 1996 and 1995


Note 1 - Summary of Significant Accounting Policies

Nature of Business:  Effective July 3, 1995, First Southern
Bancshares, Inc. (the "Company") was created out of a
reorganization of First Southern Bank (the "Bank").  The Bank is
now a wholly-owned subsidiary of the Company.  The reorganization
was effected pursuant to a Plan of Reorganization (the "Plan"),
dated as of February 16, 1995.  Pursuant to the Plan, each share
of the Bank common stock outstanding was converted into one share
of the Company common stock.

First Southern Bank is a state chartered bank operating in the
State of Georgia.  The Bank provides a variety of financial
services to individuals, small and medium-sized business and
professionals in communities located in and around Dekalb County
and metropolitan Atlanta, Georgia.

Use of Estimates:  The preparation of financial statement in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period.  Actual results could differ from
those estimates.

Material estimates that are particularly susceptible to
significant change relate to the determination of the allowance
for losses on loans and the valuation of foreclosed real estate.
In connection with the determination of the estimated losses on
loans and foreclosed real estate management obtains independent
appraisals for significant properties.

While management uses available information to recognize losses
on loans and foreclosed real estate, further reductions in the
carrying amounts of loans and foreclosed assets may be necessary
based on changes in local economic conditions.  In addition,
regulatory agencies, as an integral part of their examination
process, periodically review the estimated losses on loans and
foreclosed real estate.  Such agencies may require the
Association to recognize additional losses based on their
judgments about information available to them at the time of
their examination.  Because of these factors, it is reasonably
possible that the estimated losses on loans and foreclosed real
estate may change materially in the near term.  However, the
amount of the change that is reasonably possible cannot be
estimated.

Principles of Consolidation:  The consolidated financial
statements include the accounts of the Company and its wholly
owned subsidiaries First Southern Bank (the "Bank") and FSB
Mortgage Services ("FSB Mortgage").  All significant intercompany
transactions and balances have been eliminated in the
consolidation.

FSB Mortgage Services, Inc.:  On May 22, 1996, FSB Mortgage
Services, Inc. was created as a wholly-owned subsidiary of First
Southern Bancshares, Inc. (the "Parent").  FSB Mortgage was
formed to provide mortgage related services to communities in and
around Dekalb County, as well as, the entire metropolitan
Atlanta, Georgia area.

On June 17, 1996, 30,000 shares of the Company's common stock
were issued at a price of $10 per share for a total of $300,000.

On May 23, 1996, FSB Mortgage entered into an asset purchase
agreement to purchase the assets of an existing business which
provides residential mortgage lending and mortgage brokerage
services.  The purchase price for the purchased assets totaled
$225,000.  The purchase price was paid as $175,000 in cash and
5,000 shares of the Parent's common stock valued at $50,000.
This agreement was consummated on September 6, 1996.

<PAGE>

   Notes to the Consolidated Financial Statements, Continued

Note 1 - Summary of Significant Accounting Policies, continued

Basis of Presentation:  The accounting and reporting policies of
the Company and its subsidiary conform to generally accepted
accounting principles and with general practices within the
banking industry.  Assets held by the Bank in a fiduciary or
agency capacity are not assets of the Bank and are not included
in the financial statements.

Investment Securities:  The Bank's investments in securities are
classified in the following two categories:

     Securities Held to Maturity:  Securities held to maturity
     are those securities which the Bank has the ability and
     intent to hold to maturity.  These securities are stated at
     cost adjusted for amortization of premium and accretion of
     discount, which are recognized in interest income using the
     interest method.  Realized gains and losses on the sale of
     investment securities are computed on the basis of specific
     identification of the amortized cost of each security and
     included in earnings.

     Securities Available for Sale:  Securities classified as
     available for sale are those debt securities that the Bank
     intends to hold for an indefinite period of time but not
     necessarily to maturity. Any decision to sell a security
     classified as available for sale would be based on various
     factors, including significant movements in interest rates,
     changes in the maturity mix of the Bank's assets and
     liabilities, liquidity needs, regulatory capital
     considerations and other similar factors.  Realized gains or
     losses on the sale of investment securities available for
     sale are computed on the basis of specific identification of
     the amortized cost of each security and included in
     earnings.

Securities available for sale are carried at fair value with
unrealized holding gains and losses, net of deferred taxes,
reported as a net amount in a separate component of stockholders'
equity until realized.

Loans:  Loans that management has the intent and ability to hold
for the foreseeable future or until maturity or payoff are stated
at the amount of unpaid principal, reduced by unearned discount.
Interest on commercial and real estate loans is credited to
income on a daily basis based upon the principal amount
outstanding.  Most interest on installment loans is credited to
income on a daily basis based upon the principal amount
outstanding.  The remaining interest on installment loans is
credited to income based on the sum-of-the-months-digits method,
the results of which are not materially different from generally
accepted accounting principles.

Accrual of interest income is discontinued on impaired loans
when, in the opinion of management, collection of such interest
income becomes doubtful.  When a loan is placed on nonaccrual
status, all interest previously accrued but not collected is
reversed against current interest income.  Accrual of interest on
such loans is resumed when, in management's judgment, the
collection of interest and principal amounts become probable.

Allowance for Loan Losses:  The allowance for loan losses is
established through a provision for loan losses charged to
expenses.  Loans are charged against the allowance for loan
losses when management believes that the collectibility of the
principal is unlikely.  The allowance is an amount that
management believes will be adequate to absorb possible losses on
existing loans that may become uncollectible and is based on
evaluations of the collectibility of loans, prior loan loss
experience, the estimated value of any underlying collateral and
current economic conditions.

Loan Fees and Costs:  Fees on loans and costs incurred in
origination of loans are recognized at the time the loan is
recorded on the books.  Because loan fees are not significant and
the majority of the related loans have maturities of one year of
less, the results on 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 as set forth in Statement of Financial Accounting
Standards No. 91.

<PAGE>

     Notes to the Consolidated Financial Statements, Continued

Note 1 - Summary of Significant Accounting Policies, continued

The Bank and FSB Mortgage have adopted SFAS 122 "Accounting for
Mortgage Servicing Rights". SFAS 122 requires that a mortgage
banking enterprise recognize as separate assets, rights to
service mortgage loans for others,
however, those servicing rights are acquired.

Foreclosed Real Estate:  Real estate properties acquired through,
or in lieu of, loan foreclosure are to be sold and are initially
recorded at fair value at the date of foreclosure, establishing a
new cost basis.  After foreclosure, valuations are periodically
performed by management and the real estate is carried at the
lower of carrying amount or fair value less cost to sell.
Revenues and expenses from operations and changes in the
valuation allowance are included in loss on foreclosed real
estate.

 Premises and Equipment:  Premises and equipment are stated at
cost less accumulated depreciation.  Depreciation is computed
principally by the straight-line method over the following
estimated useful lives:
                                                Years
               Buildings and Improvements       10-40
               Equipment                         5-10

The Bank has adopted SFAS 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of".
SFAS 121 requires that long-lived assets such as premises and
equipment be reviewed for impairment when events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable. In performing the review for recoverability,
the entity should estimate the future cash flows expected to
result from the use of the assets and its eventual disposition.
If the sum of the expected future cash flows (undiscounted and
without interest charges) is less than the carrying amount of the
asset, an impairment loss is recognized. Otherwise, an impairment
loss is not recognized.  Measurement of an impairment loss for
long-lived assets and identifiable intangibles that an entity
expects to hold and use should be based on the fair value of the
asset.  The adoption of SFAS 121 had no material effect on the
Company's financial statements.

Income Taxes:  The Bank adopted Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes".  SFAS
No. 109 requires a balance sheet approach to accounting for
income taxes and requires that deferred tax assets and
liabilities be adjusted in the period of enactment for the effect
of an enacted change in tax laws or rates.  The adoption of SFAS
No. 109 had no material effect on the consolidated financial
statements.

Earnings Per Share:  Net income per common and common equivalent
share was computed by dividing net income by the weighted average
number of shares of common stock and common stock equivalents
outstanding during each year.  Common stock equivalent shares
represent outstanding stock options.

Statement of Cash Flows:  For purposes of reporting cash flows,
cash and due from banks includes cash on hand and amounts due
from banks (including cash items in process of clearing).  Cash
flows from loans originated by the Bank, deposits,
interest-bearing deposits and Federal funds purchased and sold
are reported net.

Current Accounting Developments:  The Financial Accounting
Standards Board has issued SFAS 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishment of
Liabilities", which becomes effective for years beginning after
December 31, 1996.

SFAS 125 provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishment of
liabilities.  The statement generally requires that servicing
assets and liabilities be subsequently measured by (a)
amortization in proportion to and over the period of estimated
servicing income or loss and (b) assessment for asset impairment
or increased obligation based on their fair values.  The Bank is
currently assessing the potential future impact of the
application of this statement.

Reclassifications:  Certain amounts for 1995 and 1994 have been
reclassified to conform to the 1996 presentation.

<PAGE>
            Notes to the Consolidated Financial Statements, Continued

Note 2 - Investment Securities

Securities Held to Maturity:  The amortized cost and estimated fair value of
securities held to maturity are as follows:
<TABLE>
<CAPTION>

                                                    December 31, 1996
                                                   Gross       Gross      Estimated
                                 Amortized      Unrealized   Unrealized      Fair
                                   Cost            Gains      Losses         Value

<S>                               <C>            <C>         <C>           <C>
U.S. Government and
 agencies securities              $3,241,082     $17,515     $(17,200)     $3,241,397

State and municipal
 securities                        2,743,068       5,532      (13,572)      2,735,028

Mortgage-backed securities         1,496,433       2,081      (18,200)      1,480,314

                                  $7,480,583     $25,128     $(48,972)     $7,456,739


<CAPTION>
                                                     December 31, 1995
                                                  Gross       Gross       Estimated
                                  Amortized    Unrealized   Unrealized      Fair
                                    Cost          Gains       Losses       Value

<S>                               <C>            <C>         <C>           <C>
U.S. Government and
 agencies securities              $4,080,862     $12,631     $ (1,456)     $4,092,037

State and municipal
 securities                        1,160,000       3,651       (4,498)      1,159,153

Mortgage-backed securities           403,527       8,091            -         411,618

                                  $5,644,389     $24,373     $ (5,954)     $5,662,808


Securities Available for Sale:  The amortized cost and estimated fair value of
securities available for sale are as follows:
<CAPTION>
                                                     December 31, 1996
                                                   Gross      Gross         Estimated
                                 Amortized      Unrealized  Unrealized        Fair
                                     Cost          Gains      Losses         Value

<S>                               <C>            <C>         <C>           <C>
U.S. Government and
 agencies securities              $3,987,178     $  16,029   $(19,615)     $3,983,592

Mortgage-backed securities           313,455         5,128       (190)        318,393

                                  $4,300,633     $  21,157   $(19,805)     $4,301,985
</TABLE>

<PAGE>
            Notes to the Consolidated Financial Statements, Continued

Note 2 - Investment Securities, continued

<TABLE>
<CAPTION>
                                                      December 31, 1995
                                                   Gross       Gross      Estimated
                                  Amortized      Unrealized  Unrealized      Fair
                                     Cost          Gains      Losses         Value

<S>                               <C>            <C>         <C>           <C>
U.S. Government and
 agencies securities              $3,785,982     $  47,720   $ (3,407)     $3,830,295

Mortgage-backed securities            57,663             -        (70)         57,593

                                  $3,843,645     $  47,720   $ (3,477)     $3,887,888
</TABLE>

The amortized cost and estimated fair value of securities available for sale and
held  for  maturity  at December 31, 1996, by contractual  maturity,  are  shown
below.   Expected  maturities  will differ from contractual  maturities  because
borrowers may have the right to call or prepay obligations with or without  call
or prepayment penalties.

<TABLE>
<CAPTION>
                                  Available for Sale Securities     Held to Maturity Securities

                                  Amortized      Fair               Amortized     Fair
                                  Cost           Value              Cost          Value

<S>                               <C>            <C>                <C>           <C>
Due in one year                   $    34,883    $   36,853         $  504,314    $  503,856
Due from one year to five years       598,974       596,520          3,570,029     3,558,603
Due from five to ten years          3,666,776     3,668,612          3,406,240     3,394,280

                                   $4,300,633    $4,301,985         $7,480,583    $7,456,739

</TABLE>

In December 1995, the Bank implemented the Financial Accounting
Standards Board (FASB) Special Report "A Guide to Implementation
of Statement No. 115 on Accounting for Certain Investments in
Debt and Equity Securities".  In conjunction with the issuance of
the Special Report, FASB permitted a one-time reassessment of
securities classifications and allowed reclassification of
securities in the "held to maturity" category without calling
into question management's intention to hold other securities to
maturity in the future.  In accordance with the implementation of
the Special Report, the Bank transferred securities with an
amortized cost of $1,957,864 from  "held to maturity" to
"available for sale".   The securities had an unrealized gain of
approximately $13,000 on the date of transfer.

During April 1994, the Bank transferred all securities classified
as "available for sale" to the "held to maturity" category.   The
unrealized loss on the date of transfer continues to be reported
as a separate component of stockholders' equity and amortized
over the security remaining life as an adjustment of interest
yield.  The Bank had a net change in unrealized loss of $16,434
net of deferred taxes of $2,372 for 1996 and had a net change in
unrealized gain of $75,212, net of deferred taxes of $38,746 for
1995.

Proceeds from sales of investment securities during 1996 were
$1,212,720.  Gross gains of $14,125 and no losses were realized on
those sales.  There were no sales of investment securities during
1995 and 1994.

Investment securities carried at approximately $4,736,084 and
$2,949,000  at December 31, 1996 and 1995, respectively, were
pledged to secure public deposits as required or permitted by
law.

<PAGE>

    Notes to the Consolidated Financial Statements, Continued

Note 3 - Loans and Allowance for Loan Losses

The composition of loans is summarized as follows:

                                        1996           1995
    Commercial, financial and
      agricultural                  $19,552,000    $10,468,000
    Real estate-construction          3,117,000      2,239,000
    Real estate-mortgage              6,345,000      7,430,000
    Consumer installment loans        1,457,000      1,754,000
    Other                             2,220,757        887,100
                                     32,691,757     22,778,100
    Allowance for loan losses          (365,231)      (386,561)

    LOANS, NET                      $32,326,526    $22,391,539

Changes in the allowance for loan losses are as follows:

                                      1996        1995        1994
    Balance, beginning of year      $386,561    $400,219    $401,835
    Provision charged to
     operations                       92,879      95,000     113,000
    Loans charged off               (163,645)   (125,141)   (176,684)
    Recoveries                        49,436      16,483      62,068

    BALANCE, END OF YEAR            $365,231    $386,561    $400,219

As required by FASB No. 114 "Accounting by Creditors for Impairment
of a Loan" (as amended by FASB No. 118 "Accounting by Creditors for
Impairment of a Loan-Income Recognition and Disclosures"), the Bank
has loans amounting to approximately $482,042 and $305,334 that were
specifically classified as impaired at December 31, 1996 and December
31, 1995, respectively.  The total allowance for loan losses related
to these loans was $142,290 at December 31, 1996 and $98,875 at
December 31, 1995.  Interest income on impaired loans of $73,408
and $19,949 was recognized in 1996 and 1995, respectively.

Note 4 - Foreclosed Real Estate

Activity in the allowance for losses for foreclosed real estate
was as follows:

                                            1996         1995
    Balance, beginning of year           $      -      $ 11,900
    Provision charged to income           (47,121)       19,000
    Charge-offs, net of recoveries              -       (30,900)

    BALANCE, END OF YEAR                 $(47,121)     $      -

The loss on foreclosed real estate included net expenses of
$6,077 in 1995 resulted from the operation of foreclosed real
estate.

Note 5 - Related Parties

In the normal course of business, the Bank has made loans at
prevailing interest rates and terms to directors and executive
officers of the Company and its subsidiary.  The aggregate dollar
was $3,310,950 at December 31, 1996 and $2,435,637 at December
31, 1995.  During 1996, $638,296 of new loans were made and
principal repayments totaled $374,970.


<PAGE>

    Notes to the Consolidated Financial Statements, Continued


Note 6 - Premises and Equipment

Major classifications of these assets are summarized as follows:

                                       1996           1995

     Land                          $  459,622     $  258,000
     Buildings                      1,595,947      1,274,534
     Leasehold Improvements           144,600        144,600
     Equipment                      1,841,801      1,254,702

                                    4,041,970      2,931,836

     Accumulated depreciation      (1,132,219)      (875,861)

                                   $2,909,751     $2,055,975

Depreciation expense for the years ended December 31, 1996, 1995,
and 1994 was $294,229, $244,134, and $205,394, respectively.

Note 7 - Operating Leases

The Bank leases a facility and ATM space under various operating
leases.  The Bank facility lease contains an additional renewal
option for seven years.  Rental expense was $52,547 in 1996,
$46,351 in 1995 and $26,030 in 1994.  Future minimum rental
commitments under the leases are:

          1997                             36,292
          1998                             39,174
          1999                             39,657
          2000                             38,532
          2001                             16,055

                                         $169,710

Contingent lease payments are applicable to the leases and are
based on the Bank's proportionate share of the landlord's
operating costs.


Note 8 - Income Taxes

The consolidated provision for income taxes consisted of the
following:

                                   1996        1995        1994

Currently Payable               $76,703     $125,600     $ 6,220
Deferred                              -            -           -

                                $76,703     $125,600     $ 6,220

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:

<PAGE>

            Notes to the Consolidated Financial Statements, Continued

Note 8 - Income Taxes, continued

<TABLE>
<CAPTION>
                                    December 31, 1996       December 31, 1995     December 31, 1994
                                    Amount      Percent     Amount     Percent    Amount     Percent

<S>                                 <C>         <C>         <C>        <C>        <C>         <C>
Tax provision at
 statutory rate                     $128,706    34.0%       $147,993   34.0%      $ 117,655   34.0%
Effect of tax exempt
 income                              (29,746)   (7.0)         (2,582)   (.6)              -      -
Nondeductible expenses                 1,442      .5           1,937     .4           1,657     .5
 Benefit of net
  operating loss
  carryforward                             -       -               -      -        (119,418) (34.5)
Other items, net                     (23,699)   (6.0)        (21,748)  (5.0)          6,326    1.8

PROVISION FOR INCOME
 TAXES                              $ 76,703    21.5%       $125,600   28.8%      $   6,220    1.8%

</TABLE>

Deferred income taxes (benefits) arising from temporary differences between
the  tax  basis and the reported amounts in the consolidated financial
statements are as follows:


                                              December 31,
                                    __________________________________
                                        1996       1995        1994

Provision for loan losses            $   5,072    $14,778    $    (481)
Depreciation                             4,223     22,378       33,489
Preopening expenses                          -          -       11,745
Contributions                                -          -        5,901

                                     $   9,295    $37,156    $  50,654

Net deferred income tax liabilities of $460 at December 31, 1996 are
included in other liabilities.  Pursuant to SFAS No. 109, the
components of deferred income taxes at December 31, 1996 are as
follows:

 Deferred tax assets:
   Loan loss reserves                   $ 79,718
   Valuation allowance                   (18,097)
                                          61,621

 Deferred tax liabilities:
   Unrealized gain on securities            (460)
   Depreciation                          (61,621)

 Net deferred tax liability             $   (460)

At December 31, 1995, the Company had no remaining operating loss
carryforwards available to offset future taxable income.

<PAGE>

    Notes to the Consolidated Financial Statements, Continued


Note 9 - Note Payable

Consolidated notes payable are summarized below:

                                                   1996         1995

A $450,000 line of credit arrangement, due
on demand and expiring on June 30, 1997.
The note bears interest at the bank's prime
rate and is payable at maturity.                   $400,000     $80,000


Note 10 - Obligation Under Capital Lease

Under the terms of the purchase asset agreement entered into with
the seller Company, FSB Mortgage Services, Inc. assumed a Capital
Lease  Agreement  for the purchase of equipment.   In  accordance
with   the  agreement,  lease  payments  of  $1,063.61  including
interest at 16.689% are payable monthly.  The Company expects  to
exercise the residual buy-out option of $3,120 in November, 1997.
The  present  value  of the remaining lease payments  is  $16,555
including the buy-out option.

Note 11 - Commitments and Contingent Liabilities

Judgments  and Claims:  The Bank is a defendant in certain  legal
proceedings  in  connection with its normal business  activities.
It  is the best judgment of management and its legal counsel that
none of these matters, when resolved, will have a material effect
on the consolidated financial position of the Company.

Commitments  to  Extend  Credit:   In  the  ordinary  course   of
business,  the Bank has entered into off balance sheet  financial
instruments which are not reflected in the consolidated financial
statements.   These  instruments include  commitments  to  extend
credit,  standby  letters of credit, and  commercial  letters  of
credit.  Such financial instruments are recorded in the financial
statements  when  funds are disbursed or the  instruments  become
payable.   The Bank uses the same credit policies for  these  off
balance  sheet  financial instruments as it does for  instruments
that are recorded in the financial statements.

Following  is  an  analysis  of  significant  off  balance  sheet
financial instruments.


                                             December 31,
                                          1996          1995

    Commitments to extend credit      $14,351,489     $10,201,461
    Standby letters of credit                   -          30,000

                                      $14,351,489     $10,231,461

Commitments  to  extend  credit generally have  fixed  expiration
dates or other termination clauses and may require payment  of  a
fee.   Since many of the commitment amounts 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  amount  of
collateral  obtained,  if  deemed necessary  by  the  Bank,  upon
extension  of credit, is based on management's credit  evaluation
of  the  customer.  Collateral held varies but may  include  real
estate   and   improvements,  marketable   securities,   accounts
receivable, inventory, equipment and personal property.

<PAGE>

    Notes to the Consolidated Financial Statements, Continued


Note 11 - Commitments and Contingent Liabilities, continued

The  Bank does not anticipate any material losses as a result  of
these commitments.


Note 12 - Concentrations of Credit

Most  of  the  Bank's loans, commitments and standby  letters  of
credit have been granted to customers in the Bank's market  area.
The  concentrations of credit by type of loan are  set  forth  in
Note  3.   Standby  letters of credit are  granted  primarily  to
commercial borrowers of the Bank.

The Bank, as a matter of policy, does not generally extend credit
to any single borrower or group of related borrowers in excess of
25%  of  the  lesser  of the Bank's combined  capital  stock  and
capital  surplus accounts or the Bank's net assets which amounted
to  approximately $1,406,335 and $1,351,000 at December 31,  1996
and 1995, respectively.


Note 13 - Stock Options

The  Bank  has  issued to the president of the Bank,  options  to
purchase  a  total of 5,000 shares of common stock at $10.00  per
share.   These options, each of which will be exercisable  for  a
period  of five (5) years from the date of grant, will be granted
at  the  rate of 1,000 shares per year, beginning on the date  of
the  president's employment.  Each subsequent 1,000 share  option
will  be  granted  on  the four successive anniversaries  of  the
president's  employment.  All of these options must be  exercised
no  later  than  five (5) years from the date of  grant.   As  of
December  31,  1995,  none  of  the  options  granted  had   been
exercised.  The exercise of outstanding stock options  would  not
have a dilutive effect on earnings.


Note 14 - Employee Benefit Plan

The  Bank  has a defined contribution pension plan in effect  for
substantially  all  full-time employees.  Salaries  and  employee
benefits  expense includes $3,955 in 1996, $4,745  in  1995,  and
$2,709 in 1994, for such plans.  Employer contributions under the
defined contribution plan are made at the discretion of the Board
of Directors.


Note 15 - Regulatory Matters

Banking  regulations require the Bank to maintain minimum capital
levels  in  relation to Bank assets.  At December 31,  1996,  the
Bank's   capital  ratios  were  considered  adequate   based   on
regulatory  minimum  capital requirements.  The  minimum  capital
requirements  and  the  actual capital ratios  for  the  Bank  at
December 31, 1996 were as follows:

                                                    Regulatory
                                      Actual        Requirement

 Leverage capital ratio                  12%           4.00%
 Risk based capital ratios:
   Core capital                          16%           4.00%
   Total capital                         17%           8.00%