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  2-71249

                        SOUTH BANKING COMPANY
      (Exact name of registrant as specified in its charter)

          Georgia                                58-1418696
(State or other jurisdiction of        (I.R.S. Employer Identification
 incorporation or organization)         Number)

 104 North Dixon Street, Alma, Georgia                   31510
(Address of principal executive offices)               (Zip Code)

Registrant's telephone number, including area code:    (912) 632-8631

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:  None

     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.

   Yes     X          No

     Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation 5-K is not contained herein and will not be
contained to the best of registrant's knowledge in definitive proxy on
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. (X)

     State the aggregate market value of the voting stock held by
nonaffiliates of the registrant:  There is no established market for the
outstanding common stock of the registrant.

     Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the most recent practicable date.

             Class                    Outstanding at February 28, 1998
Common stock $1.00 par value per                 399,500
 share
                   DOCUMENTS INCORPORATED BY REFERENCE

     List hereunder the following documents if incorporated by reference
and the part of the Form 10-K into which the documents are incorporated:
(1) any annual reports to security holders; (2) any prospectus filed
pursuant to Rule 424(b) or (c) under the Securities Act of 1933.  None

                                PART 1.

Item 1.  Business

     South Banking Company (the "Registrant") is a business corporation
organized at the direction of Alma Exchange Bank & Trust ("Alma Bank")
and Citizens State Bank ("Citizens Bank") (collectively, the "Banks") in
1980 under the Georgia Business Corporation Code.  It was formed to
obtain all the issued and outstanding shares of Common Stock of the
Banks.  Pursuant to the terms and provisions of a Plan of Reorganization
and Agreement of Merger, dated as of January 13, 1981 and approved by
the shareholders of the Banks on June 24, 1981, the Banks were
reorganized into a holding company structure by merging the Banks with
wholly-owned subsidiaries of the Registrant, which transaction was
consummated on July 28, 1981.  In connection with those mergers, the
outstanding shares of Common Stock of the Banks were converted into
shares of the Registrant at specified ratios and the Banks became
wholly-owned subsidiaries of the Registrant.  Pursuant to the terms and
provision of an agreement of merger dated June 12, 1989 between South
Banking and Georgia Peoples Bankshares, Inc. and approved by
shareholders of  Georgia Peoples on February 26, 1990, Georgia Peoples
Bankshares and its subsidiary, Peoples State Bank, were merged into
South Banking Company.  In connection with the merger, the outstanding
shares of Georgia Peoples Bankshares were converted into shares of the
Registrant at specified ratios.  During 1993, South Banking Company
formed Banker's Data Services, Inc. ("Banker's Data") for the purpose of
handling all the computer functions of the banks.  Operations began in
April, 1994.  South Banking entered into an agreement in October of 1995
to acquire all the stock of Pineland State Bank ("Pineland Bank") in
Metter, Georgia.  On January 11, 1996, the transaction was completed.


The Banks

     The Banks operate full service banking business in Bacon, Appling,
Candler and Camden Counties, Georgia, providing such customary banking
services as checking and savings accounts, various other types of time
deposits, safe deposit facilities and money transfers.  The Banks also
finance commercial and agricultural transactions, make secured and
unsecured loans, and provide other financial services to its customers.
The Banks do not conduct trust activities.  On December 31, 1996, Alma
Bank and Peoples Bank ranked, on the basis of total deposits, as the
smaller of the two banks in Bacon and Appling Counties and the 253rd and
276nd largest banks among 344 banks in Georgia, Citizens Bank, one of
five banking operations in Camden County, ranked the 333rd largest bank
among 344 banks in Georgia and Pineland Bank, one of three banking
operations in Metter, Georgia ranked the 316th largest bank among 344
banks in Georgia, Sheshunoff's Banks of Georgia (1996 edition).

     The Banks make and service both secured and unsecured loans to
individuals, firms and corporations.  Commercial lending operations
include various types of credit for the Banks' customers.  The Banks'
installment loan departments make direct loans to individuals and, to a
limited extent, purchase installment obligations from retailers both
with and without recourse.  The Banks make a variety of residential,
industrial, commercial and agricultural loans secured by real estate,
including interim construction financing.  Each bank has established
desired mixes of real estate, commercial, agricultural and consumer
lending depending upon activities within the local area.  The ratios are
established in accordance with risk diversification goals.  All banks
are located in small rural areas with low to moderate income levels.
The banks primarily look to real estate lending as a major portion of
portfolio.  Real estate values have remained fairly stable over the past
few years to give stability to lending activities.  Loan to value ratios
are maintained in the 60% to 80% level for various real estate lending.
Loan to value ratio of non real estate loans vary from 50% for the
inventory or receivables to 90% for vehicles and other consumer lending.
The economy of the area remains fairly constant without great
fluctuation.  The national economy will effect the area primarily in the
timber and other agricultural products; however, the movement is not as
wide locally as national movement indicates.  Citizens Bank, Pineland
Bank and Peoples Bank act as agents for another bank in offering "Master
Card" and "VISA" credit cards to its customers and does not assume the
credit risk on these transactions.  Alma Bank offers "Master Card"
credit cards to its customers.

     At December 31, 1997, the Banks had correspondent relationships
with 17 other commercial banks.  These correspondent banks provide
certain services to the banks such as processing checks and other items,
buying and selling federal funds, handling money transfers and
exchanges, shipping coins and currency, providing security and
safekeeping of funds or other valuable items and furnishing limited
management information and advice.  As compensation for the services,
the Banks maintain certain balances with its correspondents in
noninterest bearing accounts.

Employees

     On December 31, 1997, the Registrant and its subsidiaries had 81
full-time and 17 part-time employees.  The Registrant is not a party to
any collective bargaining agreement and employee relations are deemed to
be good.

Competition

     The Banking business is highly competitive.  The Banks compete
primarily with other commercial banks operating in Bacon, Camden,
Appling and Candler Counties.  In addition, the Banks compete with other
financial institutions, including savings and loan associations, credit
unions and finance companies and, to a lesser extent, insurance
companies and certain governmental agencies.  The banking industry is
also experiencing increased competition for deposits from less
traditional sources such as money-market mutual funds.

Monetary Policies

     The results of operations of the Banks, and therefore of the
Registrant, are affected by credit policies of monetary authorities,
particularly the Board of Governors of the Federal Reserve System (the
"Board of Governors"), even though the Banks are not members of the
Federal Reserve.

     The instruments of monetary policy employed by the Federal Reserve
include open market operations in U. S. Government securities and
changes in the discount rate on member bank borrowing changes in reserve
requirements against member bank deposits.  In view of changing
conditions in the national economy and in the money markets, as well as
the effect of action by monetary and fiscal authorities, including the
Federal Reserve System, no prediction can be made as to possible future
changes in interest rates, deposit levels, loan demand or the business
and earnings of the Banks.

Supervision and Regulations

     The Registrant is a bank holding company within the meaning of the
Bank Holding Company Act of 1956, as amended (the "Act"), and is
required to register as such with the Board of Governors.  The
Registrant is required to file with the Board of Governors an annual
report and such other information as may be required to keep the Board
of Governors informed with respect to the Registrant's compliance with
the provisions of the Act.  The Board of Governors may also make
examinations of the Registrant and its subsidiaries from time to time.

     The Act requires every bank holding company to obtain the prior
approval of the Board of Governors before it may acquire substantially
all the assets of any bank or ownership or control of any voting shares
of any bank, if, after such acquisition, it would own or control,
directly or indirectly, more than five percent of the voting shares of
such bank.  In no case, however, may the Board of Governors approve the
acquisition by the Registrant of the voting shares of any bank located
outside Georgia, unless such acquisition is specifically authorized by
the laws of the state in which the bank to be acquired is located.

     In addition, a bank holding company is generally prohibited from
engaging in or acquiring direct or indirect control of voting shares of
any company engaged in nonbanking activities.  One of the principal
exceptions to this prohibition is for activities found by the Board of
Governors, by order or regulation, to be so closely related to banking,
managing or controlling banks as to be a proper incident thereto.  Some
of the activities that the Board of Governors has determined by
regulation to be closely related to banking are:  making or servicing
loans and certain types of leases; performing certain data processing
services; acting as fiduciary, investment or financial advisor; making
investments in corporations or projects designed primarily to promote
community welfare.

     In January, 1989, the Board of Governors issued final regulations
which implement risk-based rules for assessing bank and bank holding

company capital adequacy.  The regulations revise the definition of
capital and establish minimum capital standards in relation to assets
and off-balance sheet exposures, as adjusted for credit risk.

Payment of Dividends and Other Restrictions

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

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

     Under Georgia law, the prior approval of the DBF is required before
any cash dividends may be paid by a state bank if: (i) total classified
assets at the most recent examination of such bank exceed 80% of the
equity capital (as defined, which includes the reserve for loan losses)
of such bank; (ii) the aggregate amount of dividends declared or
anticipated to be declared in the calendar year exceeds 50% of the net
profits (as defined) for the previous calendar year; or (iii) the ratio
of equity capital to adjusted total assets is less than 6%.

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

Capital Adequacy

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

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

     Effective December 19, 1992, a new Section 38 to the Federal
Deposit Insurance Act implemented the prompt corrective action
provisions that Congress enacted as a part of the Federal Deposit
Insurance Corporation Improvement Act of 1991 (the "1991 Act").  The
"prompt corrective action" provisions set forth five regulatory zones in
which all banks are placed largely based on their capital positions.
Regulators are permitted to take increasingly harsh action as a Bank's
financial condition declines.  Regulators are also empowered to place in
receivership or require the sale of a bank to another depository
institution when a bank's capital leverage ratio reaches two percent.
Better capitalized institutions are generally subject to less onerous
regulation and supervision than banks with less amounts of capital.

     The FDIC has adopted regulations implementing the prompt corrective
action provisions of the 1991 Act, which place financial institutions in
the following five categories based upon capitalization ratios: (i) a
"well capitalized" institution has a total risk-based capital ratio of
at least 10%, a Tier I risk-based ratio of at least 6% and a leverage
ratio of at least 5%; (ii) an "adequately capitalized" institution has
a total risk-based capital ratio of at least 8%, a Tier I risk-based
ratio of at least 4% and a leverage ratio of at least 4%, (iii) an
"undercapitalized" institution has a total risk-based capital ratio of
under 8%, a Tier I risk-based ratio of under 4% or a leverage ratio of
under 4%; (iv) a "significantly undercapitalized" institution has a
total risk-based capital ratio of under 6%, a Tier I risk-based ratio of
under 3% or a leverage ratio of under 3%; and (v) a "critically
undercapitalized" institution has a leverage ratio of 2% or less.
Institutions in any of the three undercapitalized categories would be
prohibited from declaring dividends or making capital distributions.
The FDIC regulations also establish procedures for "downgrading" an
institution to a lower capital category based on supervisory factors
other than capital.

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

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

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

     The written policies of the Georgia Department of Banking and
Finance (the "DBF") require that state banks in Georgia generally
maintain a minimum ratio of primary capital to total assets of 6.0%.  At
December 31, 1997, the Banks were in compliance with these requirements.
In addition, the DBF is likely to compute capital obligations in
accordance with the risk-based capital rules while continuing to require
a minimum absolute level of capital.

     It is not anticipated that such minimum capital requirements will
affect the business operations of the Banks.  However, the Board, in
connection with granting approval for bank holding companies to acquire
other banks and bank holding companies or to engage in non-banking
activities, requires bank holding companies to maintain tangible capital
ratios at approximate peer group levels.  This requirement can result in
a bank holding company maintaining more capital than it would otherwise
maintain.  At the present time, South Banking Company's tangible primary
capital ratios are equal or above their peer group level.

     The laws of Georgia require annual registration with the DBF by all
Georgia bank holding companies.  Such registration includes information
with respect to the financial condition, operations and management of
intercompany relationships of the bank holding company and its
subsidiaries and related matters.  The DBF may also require such other
information as is necessary to keep informed as to whether the
provisions of Georgia law and the regulations  and orders issued
thereunder by the DBF have been in compliance with and the DBF may make
examinations of the bank holding company and each bank subsidiary
thereof.

     The banks are also subject to examination by the DBF and the FDIC.
The DBF regulates and monitors all areas of the operations of the banks,
including reserves, loans, mortgages, issuances of securities, payment
of dividends, interest rates and establishment of branches.  Interest
and certain other charges collected or contracted for by the Banks are
also subject to state usury laws and certain federal laws concerning
interest rates.  The Banks' deposits are insured by the FDIC up to the
maximum permitted by law.

     Current legislation has passed that would allow banks to branch
statewide subject to certain restriction.  This law became effective
July 1, 1996.

     Georgia banking laws permit bank holding companies to own more than
one bank, subject to the prior approval of the Georgia Department of
Banking and Finance; thereby, in effect, permitting statewide banking
organizations.  Such banks may be acquired as subsidiaries of the
Registrant or merged into its existing bank subsidiaries.


Support of Subsidiary Bank

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

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

FDIC Insurance Assessments

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

     On August 8, 1995, the FDIC lowered the BIF premium for "healthy"
banks 83% from $.23 per $100 in deposits to $.04 per $100 in deposits,
while retaining the $.31 level for the riskiest banks.  The average
assessment rate was therefore reduced from $.232 to $.044 per $100 of
deposits.  The new rate took effect on September 29, 1995.  On November
14, 1995, the FDIC again lowered the BIF premium for "healthy" banks
from $.04 per $100 of deposits to zero for the highest rated
institutions (92% of the industry).  All of the Subsidiary Banks are
insured under the BIF fund and it is expected that they will be required
to pay only the legally required annual minimum payments during 1998.

Recent Legislative and Regulatory Action

     On April 19, 1995, the four Federal bank regulatory agencies
adopted revisions to the regulations promulgated pursuant to the
Community Reinvestment Act (the "CRA"), which are intended to set
distinct assessment standards for financial institutions.  The revised
regulations contains three evaluation tests: (i) a lending test which
will compare the institution's market share of loans in low- and
moderate-income areas to its market share of loans in its entire service
area and the  percentage of a bank's outstanding loans to low- and
moderate-income areas or individuals; (ii) a services test which will
evaluate the provisions of services that promote the availability of
credit to low- and moderate-income areas; and (iii) an investment test,
which will evaluate an institution's record of investments in
organizations designed to  foster community development, small- and
minority-owned businesses and affordable housing lending, including
state and local government housing or revenue bonds.  The regulation is
designed to reduce some paperwork requirements of the current
regulations and provide regulators, institutions and community groups
with a more objective and predictable manner with which to evaluate the
CRA performance of financial institutions.  The rule became effective on
January 1, 1996, at which time evaluation under streamlined procedures
were scheduled to begin for institutions with assets of less than $250
million.

     It is unclear what effect, if any, these regulations will have on
South and the Subsidiary Banks.  Congress and various Federal agencies
(including Housing and Urban Development, the Federal Trade Commission
and the Department of Justice) (collectively, the "Federal Agencies")
responsible for implementing the nation's fair lending laws have been
increasingly concerned that prospective home buyers and other borrowers
are experiencing discrimination in their efforts to obtain loans.  In
recent years, the Department of Justice has filed suit against financial
institutions, which it determined had discriminated, seeking fines and
restitution for borrowers who allegedly suffered from discriminatory
practices.  Most, if not all, of these suits have been settled (some for
substantial sums) without a full adjudication on the merits.

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

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

     In February 1996, the Georgia legislature adopted the "Georgia
Interstate Branching Act," which permitted Georgia-based banks and bank
holding companies owning or acquiring banks outside of Georgia and all
non-Georgia banks and bank holding companies owning or acquiring banks
in Georgia the right to merge any lawfully acquired bank into an
interstate branch network.  The Georgia Interstate Branching Act also
allows banks to establish de novo branch banks on a limited basis
beginning July 1, 1996.  Beginning July 1, 1998, the number of de novo
bank branches which may be established will no longer be limited.

Monetary Policy

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

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

The Tax Reform Act of 1986

     The Tax Reform Act of 1986 (the "TRA") contains several provisions
affecting banks and financial institutions, including new provisions
governing tax rates, depreciation, investment tax credits, bad debt
reserves, interest expense allocable to tax-exempt obligations, net
operating losses and a new alternative minimum tax ("AMT").  The TRA
reduced the maximum corporate income tax rate from 46% to 34% in 1988
when the provision was fully effective.  A surcharge of 5% will also
apply to income in excess of $100,000, up to a maximum surcharge of
$11,750.

     For tax years beginning after 1986, the TRA imposes an AMT on
corporations.  The tax is computed by applying a 20% tax rate to the sum
of (1) taxable income, (2) certain preference items and (3) 50% of the
excess of book income before taxes over the sum of (1) and (2).  For a
financial institution, the principal preference items result from bad
debt deductions, accelerated depreciation and interest on certain
private purpose tax exempt bonds.  The taxpayer is then required to pay
the greater of its regular tax or the AMT.  South does not expect to
incur an alternative minimum tax liability  based on its current
profitability and investment portfolio.  If the AMT is incurred as a
result of deferral preferences, a credit is generated which may be used
against regular tax in subsequent years.

     The TRA provides for disallowances of 100% of any otherwise
allowable interest expense deduction that is deemed allocable to tax-
exempt obligations acquired after August 7, 1986, except for certain
small municipal issuers.  As a result, the Banks expect to primarily
invest in taxable investment securities.

     Financial institutions with assets in excess of $500 million are no
longer permitted to use the reserve method for accounting for loan
losses for tax purposes.  South does not exceed this asset size and,
accordingly, can continue to use the reserve method.

     The TRA also eliminated investment tax credits after December 31,
1985.  As investment in premises and equipment is not significant to the
assets of South, the elimination of investment tax credits is not
perceived to materially affect the tax provision expense of South.

     The foregoing is only a summary of certain Federal income tax
changes caused by the TRA and is qualified in its entirety by reference
to the TRA.  It does not include all aspects of the TRA as it relates to
financial institutions or state, local or other tax laws.

Omnibus Budget Reconciliation Act of 1993

     The Omnibus Budget Reconciliation Act of 1993 (the "Tax Act")
continues the recent legislation affecting banks and financial
institution.  The Tax Act was designed as a deficit reduction with
similarities to the 1990 Act which was also designed to slice $500
billion from the deficit.

     Generally the Tax Act affects all corporations as to a new 35% tax
rate for income in excess of 10 million and the maximum corporate
capital gains rate was increased to 35%.  The Registrant currently will
not be affected by the change due to the income level of the Registrant.
Various other provisions would restrict certain deductions and/or change
the treatment of certain transactions.

     Provisions that especially affect financial institutions included
market to market Accounting for Securities.  The Tax Act requires that
securities that are inventory in the hands of a dealer be inventoried at
fair market value (market to market).  For the purposes of these rules,
"securities" and a "dealer" are defined more broadly than under prior
law.  A "dealer" is any person who either regularly purchases securities
from or sells securities to customers in the ordinary course of business
or regularly offers to enter into, assume, offset, assign or otherwise
terminate positions in securities with customers in the ordinary course
of a trade or business.  Banks have been determined to qualify as a
dealer under the new definitions.  Unless securities are properly
identified as held for investment, all inventory will be required to be
market to market.

     A second item affecting financial institutions is the treatment of
tax-free FSLIC Assistance that was credited on or after March 4, 1991 in
connection with the disposition of "covered" assets.  Financial
institutions are required to treat that assistance as compensation for
any losses claimed on dispositions or charge-offs of these assets,
effectively denying them any tax loss for those assets.  This provision
should not have any effect on the Registrant.

     The third item affecting financial institutions is the amortization
of intangible assets effective for purchase after the enactment (August
10, 1993).  Taxpayers are required to amortize most intangibles
(including goodwill, core deposits, going concern value and covenant not
to compete) used in a trade or business over a 15 year period.
Exception to this rule includes mortgage service rights.  The provision
will have significant impact on any future purchases the holding company
may decide to undertake.

     Some of the other provisions such as eliminating deductions for
lobbying expense and club dues will impact the taxes payable by the
Registrant.

Recent and Proposed Changes in Accounting Rules

     The Financial Accounting Standards Board ("FASB") recently adopted
or issued proposals and guidelines which may have a significant impact
on the accounting practices of commercial enterprises in general and
financial institutions in particular.

     Effective for years beginning after December 15, 1993 the
Registrant was required to implement FASB 115 "Accounting for Certain
Investments in Debt and Equity Securities".  This FASB requires
securities to be classified in one of three categories:

     (1)  Held to maturity
     (2)  Trading securities
     (3)  Securities available for sale

     The Banks were required to classify all securities into one of the
three categories.  The Banks currently do not have trading accounts and
do not anticipate classifying any securities into this category.  Once
the securities are classified, FASB 115 restricts the transfer between
classification except under rare circumstances.  The affect on the banks
will primarily be in securities classified available for sale.  FASB 115
requires these securities to be market to market with unrealized gains
and losses reported as a separate amount in stockholders equity section
and excluded from earnings until realized.  Deferred taxes will be
provided in accordance with FASB 109 on the unrealized gains and losses.

     FASB 114 became effective for years beginning after December 15,
1994.  FASB 114 "Accounting by Creditors for Impairment of a Loan"
specifies how allowance for credit losses related to certain loans
should be determined.  When the FASB became effective, the Banks were
required to modify the treatment of impaired loans to discount expected
cash flows and record a valuation allowance.  The Banks did not have any
material change as a result of this FASB.


Selected Statistical Information

     The tables and schedules on the following pages set forth certain
significant statistical data with respect to:  (i) the distribution of
assets, liabilities and shareholders' equity and the interest rates and
interest differentials experienced by, the Registrant and its
subsidiaries;  (ii) the investment portfolio of the Registrant and its
subsidiaries;  (iii) the loan portfolio of the Registrant and its
subsidiaries, including types of loans, maturities and sensitivity to
changes in interest rates and information on nonperforming loans; (iv)
summary of the loan loss experience and reserves for loan losses of the
Registrant and its subsidiaries; (v) types of deposits of the Registrant
and its subsidiaries; and (vi) the return on assets and equity for the
Registrant and its subsidiaries.

I.  DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY;
    INTEREST RATES AND INTEREST DIFFERENTIALS

A.  The condensed average balance sheets for the periods indicated are
    presented below.
                               Year Ended    Year Ended    Year Ended
                               December 31,  December 31,  December 31,
                               1997          1996          1995
                                             (In Thousands)
ASSETS
Cash and due from banks        $     8,723   $     5,421   $     4,348
Cash in bank - interest
 bearing                             1,412         2,138           827
Taxable investment securities       12,026        14,598         8,518
Nontaxable investment securities     1,833         1,947         1,055
Others                                 833           556           273
Federal funds sold and
 securities purchased under
 agreements to resell                7,202         9,593         8,023
Loans - net                         96,657        84,023        60,641
Other assets                         7,944         7,523         5,968

Total Assets                   $   136,630   $   125,799   $    89,653
                               Year Ended    Year Ended    Year Ended
                               December 31,  December 31,  December 31,
                               1997          1996          1995
                                             (In Thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits: Demand - non-interest
           bearing             $    18,052   $    17,379   $    13,446
     Demand - interest bearing      21,118        20,380        15,211
     Savings                         8,327         7,903         6,675
     Time                           72,070        64,401        42,838
Total Deposits                 $   119,567   $   110,063   $    78,170
Federal funds purchased                507           343             7
Other borrowed funds                 3,614         3,741         1,545
Other liabilities                    1,102           888           408

Total Liabilities              $   124,790   $   115,035   $    80,130
Shareholders' equity                11,840        10,764         9,523

Total Liabilities and
 Shareholders' Equity          $   136,630   $   125,799   $    89,653

B.  Interest Rates.  The tables below show for the periods indicated the
average amount outstanding for major categories of interest earning
assets and interest bearing liabilities; the average interest rates
earned or paid; the interest income and expense earned or paid thereon;
net interest earnings and the net yield on interest-earning assets. (1)

                                    Year Ended December 31, 1997
                               Average        Yield/
                               Balance        Interest       Rate
ASSETS                                    (In Thousands)
Cash in banks - interest
 bearing                       $     1,412    $       92          6.50%
Loans                               96,657        10,770         11.14
Taxable investments                 12,026           941          7.82
Non-taxable investments              1,833            90          4.91
Other                                  833            42          5.04
Federal funds sold and
 securities purchased
 under agreements to resell          7,202           393          5.54

Total Interest-bearing assets  $   119,963   $    12,328         10.28%

LIABILITIES
Demand - interest bearing      $    21,118   $       720          3.41%
Savings deposits                     8,327           258          3.10
Other time deposits                 72,070         4,074          5.65
Other borrowing                      3,614           305          8.44
Federal funds purchased                507            30          5.91

Total Interest-Bearing
 Liabilities                   $   105,636   $     5,387          5.10%

Net interest earnings                        $     6,941

Net yield on interest earning assets                              5.18%

                                    Year Ended December 31, 1996
                               Average        Yield/
                               Balance        Interest       Rate
ASSETS                                    (In Thousands)
Cash in banks - interest
 bearing                       $     2,138    $      119          5.57%
Loans                               84,023         9,479         11.28
Taxable investments                 14,598           879          6.02
Non-taxable investments              1,947            95          4.88
Other                                  556            28          5.04
Federal funds sold and
 securities purchased
 under agreements to resell          9,593           506          5.27

Total Interest-bearing assets  $   112,855   $    11,106          9.84%

LIABILITIES
Demand - interest bearing      $    20,380   $       579          2.84%
Savings deposits                     7,903           231          2.92
Other time deposits                 64,401         3,703          5.75
Other short term borrowing           3,741           292          7.81
Federal funds purchased                343            18          5.25

Total Interest-Bearing
 Liabilities                   $    96,768   $     4,823          4.98%

Net interest earnings                        $     6,283
Net yield on interest earning assets                              4.86%

                                     Year Ended December 31, 1995
                               Average        Yield/
                               Balance        Interest       Rate
ASSETS                                    (In Thousands)
Cash in banks - interest
 bearing                       $       827    $       41          4.96%
Loans                               60,641         6,996         11.54
Taxable investments                  8,518           513          6.02
Non-taxable investments              1,055            59          5.59
Other                                  273            10          3.66
Federal funds sold and
 securities purchased
 under agreements to resell          8,023           472          5.88

Total Interest-bearing assets  $    79,337   $     8,091         10.20%

LIABILITIES
Demand - interest bearing      $    15,211   $       407          2.68%
Savings deposits                     6,675           182          2.73
Other time deposits                 42,838         2,580          6.02
Other short term borrowing           1,545           144          9.32
Federal funds purchased                  7             1           N/A

Total Interest-Bearing
 Liabilities                   $    66,276   $     3,314          5.00%

Net interest earnings                        $     4,777
Net yield on interest earning assets                              5.20%

(1) Note: Loan fees are included for rate calculation purposes.  Loan fees
included in interest amounted to approximately $732,852 in 1997, $723,885
in 1996 and $464,456 in 1995.  Non accrual loans have been included in the
average balances.

C.  Interest Differentials.  The following tables set forth for the
periods indicated a summary of the changes in interest earned and interest
paid resulting from changes in volume and changes in rates.

1997 compared to 1996
                                    Increase (Decrease) Due to (1)
                               Volume        Rate          Change
Interest earned on:                       (In Thousands)
Cash in banks - interest
 bearing                       $(       40)  $        13   $(       27)
Loans                                1,426    (      135)        1,291
Taxable investments             (      155)          217            62
Nontaxable investments          (        6)            1     (       5)
Other                                   14             -            14
Federal funds sold and
 securities purchased under
 agreement to resell            (      126)           13     (     113)

Total Interest-Earning Assets  $     1,113   $       109   $     1,222

Interest paid on:
 NOW deposits                  $        22   $       119   $       141
 Savings deposits                       12            15            27
 Other time deposits                   443    (       72)          371
 Other borrowing                (       10)           23            13
 Federal funds purchased                 9             3            12

Total Interest-bearing
 Liabilities                   $       476   $        88   $       564

Net Interest Earnings          $       637   $        21   $       658

(1)  The change in interest due to volume has been determined by applying
the rate from the earlier year to the change in average balances
outstanding from one year to the next.  The change in interest due to rate
has been determined by applying the change in rate from one year to the
next to average balances outstanding in the later year.

1996 compared to 1995
                                    Increase (Decrease) Due to (1)
                               Volume        Rate          Change
Interest earned on:                       (In Thousands)
Cash in banks - interest
 bearing                       $        65   $        13   $        78
Loans                                2,698    (      215)        2,483
Taxable investments                    366             -           366
Nontaxable investments                  50    (       14))          36

1996 compared to 1995 (con't)
                                    Increase (Decrease) Due to (1)
                               Volume        Rate          Change
                                            (In Thousands)
Other                          $        10   $         8   $        18
Federal funds sold and
 securities purchased under
 agreement to resell                    92    (       58)           34

Total Interest-Earning Assets  $     3,281   $(      266)  $     3,015

Interest paid on:
 NOW deposits                  $       139   $        33   $       172
 Savings deposits                       34            15            49
 Other time deposits                 1,298    (      175)        1,123
 Other borrowing                       205    (       57)          148
 Federal funds purchased                17             -            17

Total Interest-bearing
 Liabilities                   $     1,693   $(      184)  $     1,509

Net Interest Earnings          $     1,588   $(       82)  $     1,506

(1)  The change in interest due to volume has been determined by applying
the rate from the earlier year to the change in average balances
outstanding from one year to the next.  The change in interest due to rate
has been determined by applying the change in rate from one year to the
next to average balances outstanding in the later year.

1995 compared to 1994
                                    Increase (Decrease) Due to (1)
                               Volume        Rate          Change
Interest earned on:                       (In Thousands)
Cash in banks - interest
 bearing                       $(       30)  $         6  $(       24)
Loans                                  690           640         1,330
Taxable investments                     16            60            76
Nontaxable investments          (       33)   (        2)   (       35)
Other                                   10             -            10
Federal funds sold and
 securities purchased under
 agreement to resell                     6           160           166

Total Interest-Earning Assets  $       659   $       864   $     1,523

Interest paid on:
 NOW deposits                  $(       61)  $(       24)  $(       85)
 Savings deposits               (       13)   (        2)   (       15)
 Other time deposits                   349           756         1,105
 Other borrowing                        30            13            43
 Federal funds purchased        (        3)            -    (        3)

Total Interest-bearing
 Liabilities                   $       302   $       743   $     1,045

Net Interest Earnings          $       357   $       121   $       478

(1)  The change in interest due to volume has been determined by applying
the rate from the earlier year to the change in average balances
outstanding from one year to the next.  The change in interest due to rate
has been determined by applying the change in rate from one year to the
next to average balances outstanding in the later year.

II.  INVESTMENT PORTFOLIO

A.  Types of Investments  The carrying amounts of investment securities
at the dates indicated are summarized as follows:

                               Year Ended    Year Ended    Year Ended
                               December 31,  December 31,  December 31,
                               1997          1996          1995
                                           (In Thousands)
U. S. Treasury and other
 U. S. government agencies
 and corporations              $    13,892   $    12,381   $     7,634
State and political
 subdivisions (domestic)             1,976         1,888         1,921
Mortgage backed securities           1,080         1,544         1,897

Totals                         $    16,948   $    15,813   $    11,452

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

                    U. S. Treasury
                    and Other U. S.
                    Government        State
                    Agencies and      and Political     Mortgage Backed
                    Corporations      Subdivisions      Securities
                             Average           Average
                             Yield             Yield             Average
                    Amount   (1)      Amount   (1)(2)   Amount   Yield
Maturity:
One year or less    $ 1,797     5.27% $    35    10.64% $    43     8.37
After one year
 through five years  10,991     6.16      896     6.48      707     6.10
After five years
 through ten years    1,091     6.76      400     7.62        -        -
After ten years           -        -      599     7.43      320     7.03

Totals              $13,879     6.09% $ 1,930     7.09% $ 1,070     6.46%

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

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

III.  Loan Portfolio

  A.  Types of Loans  The amount of loans outstanding at the indicated
dates are shown in the following table according to type of loan.

                               Year Ended    Year Ended    Year Ended
                               December 31,  December 31,  December 31,
                               1997          1996          1995
                                    (In Thousands)
Commercial, financial and
 agricultural                  $    29,728   $    19,565   $    14,592
Real estate - mortgage              52,544        53,813        36,426
Real estate - construction           6,968         3,798         1,767
Installments                        17,285        11,870         8,932
                               $   106,525   $    89,046   $    61,717
Less - unearned income                 149           150            82
       Reserve for possible
        losses                       1,822         1,781           994

Total Loans                    $   104,554   $    87,115   $    60,641

B.  Maturities and Sensitivity to Changes in Interest Rates  The amount
of total loans by category outstanding as of December 31, 1997 which,
based on remaining repayments of principal, are due in (1) one year or
less, (2) more than one year but less than five and (3) more than five
years are shown in the following table.  The amounts due after one year
are classified according to the sensitivity to changes in interest
rates.
                                  Maturity Classification
                                 Over One
                   One Year      Through       Over
                   or Less       Five Years    Five Years    Total
                                      (In Thousands)
Types of Loans
Commercial,
 financial and
 agricultural      $    18,857   $    10,871   $         -   $   29,728
Real estate
 mortgage               38,005         6,872         7,667       52,544
Real estate
 construction            6,968             -             -        6,968
Installment              6,164        11,121             -       17,285

Total loans due
 after one year
 with:
 Predetermined
  interest rate                       27,545
 Floating interest
  rate                         Not available

C.  Nonperforming Loans  The following table presents, at the dates
indicated, the aggregate amounts of nonperforming loans for the
categories indicated.
                               Year Ended    Year Ended    Year Ended
                               December 31,  December 31,  December 31,
                               1997          1996          1995
                                     (In Thousands)
Loans accounted for on a
 non-accrual basis             $       311   $       553   $        46

Loans contractually past
 due ninety days or more
 as to interest or principal
 payments                              760           226           276

Loans, the terms of which
 have been renegotiated to
 provide a reduction or
 deferral of interest or
 principal because of a
 deterioration in the financial
 position of the borrower               36            35             -

Loans now current about which
 there are serious doubts as
 to the ability of the borrower
 to comply with present loan
 repayment terms                         -             -             -

     Loans are placed on non-accrual basis when loans are past due
ninety days or more.  Management can elect not to place loans on non-
accrual status if net realizable value of collateral is sufficient to
cover the balance and accrued interest.

D.  Commitments and Lines of Credit  The banks provide commitments and
lines of credits to their most credit worthy customers only.
Commitments are for short terms, usually not exceeding 30 days, and are
provided for a fee of 1% of the amount committed.  Lines of credit are
for periods extending up to one year.  No fee is usually charged with
respect to the unused portion of a line of credit.  Interest rates on
loans made pursuant to commitments or under lines of credit are deter-
mined at the time that the commitment is made or line is established.

E.  Rate Sensitivity Analysis
                              SOUTH BANKING COMPANY
                                DECEMBER 31, 1997

                                       +------Interest Sensitive-----+
                                       0 -        91 -       181 -
                                       90 Days    180 Days   365 Days
                                     (Thousands of Dollars)
Earning Assets:
 Loans                                 $  56,590  $   5,068  $   8,361
 Investment securities                     1,485         42        410
 Interest bearing deposits                   785         99        297
 Federal funds sold and
  securities purchased under
  agreement to resell                      9,890          -          -

Total Earning Assets                   $  68,750  $   5,209  $   9,068

Supporting Sources of Fund
 Savings                               $   8,669  $       -  $       -
 Money market and NOW                     21,997          -          -
 Other time deposits                      20,858     10,428     26,594
 CD's - $100,000 or more                   3,698      5,315      7,008
 Other borrowings                          3,347          -          -

Total Interest Bearing
 Deposits                              $  58,569  $  15,743  $  33,602

Demand deposits and other funds
 supporting earning assets -
 non interest earning                  $       -  $       -  $       -

Total Supporting Sources
 of funds                              $  58,569  $  15,743  $  33,602

Interest Sensitive - interest
 earning assets less interest
 bearing liabilities                   $  10,181  $( 10,534) $( 24,534)

Cumulative interest rate sensitivity
 gap                                   $  10,181  $(    353) $( 24,887)

Interest rate sensitivity gap ratio         1.17        .33        .27

Cumulative interest rate sensitivity
 gap ratio                                  1.17        .99        .77

     5 Years                Total


     $  28,864              $ 106,525
        12,878                 16,947
            99                  1,280


             -                  9,890

     $  41,841              $ 134,642


     $       -              $   8,669
             -                 21,997
         2,005                 62,685
         1,000                 17,021
             -                  3,347


     $   3,005              $ 113,719



     $       -              $  22,230


     $   3,005              $ 135,949



     $  38,836              $(  1,307)


     $  13,949              $(  1,307)


        1392.3                    .99


          1.12                    .99


     The rate sensitivity analysis table is designed to demonstrate
South's sensitivity to changes in interest rates by setting forth in
comparative form the repricing maturities of South's assets and
liabilities for the period shown.  A ratio of greater than 1.0 times
interest earnings assets to interest bearing liabilities indicates that
an increase in interest rates will generally result in an increase in
net income for South and a decrease in interest rates will result in a
decrease in net income.  A ratio of less than 1.0 times earnings assets
to interest-bearing liabilities indicates that a decrease in interest
rates will generally result in a increase in net income for South and an
increase in interest rates will result in an decrease in net income.

IV.  Summary of Loan Loss Experience

     The following table summarizes loan balances at the end of each
period and average balances during the year for each category; changes
in the reverse for possible loan losses arising from loans charged off
and recoveries on loans previously charged off; additions to the reserve
which have been charged to operating expense; and the ratio of net
charge-offs during the period to average loans.

                               Year Ended    Year Ended    Year Ended
                               December 31,  December 31,  December 31,
                               1997          1996          1995
                                          (In Thousands)
A.  Average amount of loans
     outstanding               $    96,657   $    84,023   $    60,641
B.  Balance of reserve for
     possible loan losses at
     beginning of period       $     1,781   $       994   $       975
C.  Loans charged off:
     Commercial, financial
      and agricultural         $        44   $        57   $        45
     Real estate - mortgage            123            30             -
     Installments                       97           172           144

                               $       264   $       259   $       189
D.  Recoveries of loans
     previously charged off:
     Commercial, financial
      and agricultural         $        34   $       161   $         7
     Real estate                         8            68            46
     Installment                        83            45            93

                               $       125   $       274   $       146
E.  Net loans charged off
     during period             $       139   $(       15)  $        43
    Additions to reserve
     charged to operating
     expense during period (1) $       180   $       201   $        62
    Addition from bank
     acquisition                         -           571             -

                               $       180   $       772   $        62
F.  Balance of reserve for
     possible loan losses at
     end of period             $     1,822   $     1,781   $       994
G.  Ratio of net loans charged
     off during the period to
     average loans outstanding        .014    (     .002)         .070

(1)  Although the provisions exceeded the minimum provision required by
regulatory authorities, the Board of Directors believe that the
provision has not been in excess of the amount required to maintain the
reserve at a sufficient level to cover potential losses.  The amount
charged to operations and the related balance in the reserve for loan
losses is based upon periodic evaluations by management of the loan
portfolio.  These evaluations consider several factors including, but
not limited to, general economic conditions, loan portfolio composition,
prior loan loss experience and management's estimation of future
potential losses.

(2)  Management's review of the loan portfolio did not allocate reserves
by category due to the portfolio's small size.  The reserves were
allocated on the basis of a review of the entire portfolio.  The
anticipated loan losses for the coming year are expected to be less than
prior years.  The portfolio does not contain excessive concentrations in
any industry or loan category that might expose South to significant
risk.

V.  Deposits

A.  Average deposits, classified as demand deposits, savings deposits
and time certificates of deposit for the periods indicated are presented
below:
                               Year Ended    Year Ended    Year Ended
                               December 31,  December 31,  December 31,
                               1997          1996          1995
                                           (In Thousands)
Demand deposits                $    18,052   $    17,379   $    13,446
NOW deposits                        21,118        20,380        15,211
Savings deposits                     8,327         7,903         6,675
Time certificates of deposits       72,070        64,401        42,838

Total Deposits                 $   119,567   $   110,063   $    78,170

B.  The amounts of time certificates of deposit issued in amounts of
$100,000 or more as of December 31, 1997 are shown below by category,
which is based on time remaining until maturity of (1) three months or
less, (2) over three through six months, (3) over six through twelve
months and (4) over twelve months.

Three months or less                                       $     3,968
Over three through six months                                    5,045
Over six through twelve months                                   7,008
Over twelve months                                               1,000

Total                                                      $    17,021

VI.  Return on Assets and Shareholders' Equity

     The following rate of return information for the periods indicated
is presented below:
                               Year Ended    Year Ended    Year Ended
                               December 31,  December 31,  December 31,
                               1997          1996          1995
Return on assets (1)                  1.13%         1.14%         1.28%
Return on equity (2)                 13.06         13.29         12.08
Dividend payout ratio (3)            15.54         15.54         19.37
Equity to assets ratio (4)            8.67          8.56         10.62

(1)  Net income divided by average total assets.
(2)  Net income divided by average equity.
(3)  Dividends declared per share divided by net income per share.
(4)  Average equity divided by average total assets.

Item 2.  Properties

     Alma Bank's main banking office and the Registrant's principal
executive offices are located at 104 North Dixon Street, Alma, Georgia
31510.  The building, containing approximately 13,040 square feet of
usable office and banking space, and the land, approximately 1.2 acres,
are owned by Alma Bank.  Alma Bank also has a separate drive-in banking
facility located at 505 South Pierce Street, Alma, Georgia.  The
building, containing 510 square feet, in which the branch is located and
the land, approximately .4 acres, on which it is located are owned by
Alma Bank.

     Citizens Bank's main banking office is located at 205 East King
Street, Kingsland, Georgia 31548.  The building, containing
approximately 6,600 square feet of usable office and banking space, and
the land, approximately 2 acres, are owned by Citizens Bank.

     Peoples Bank's main banking office is located at Comas and E.
Parker Streets, Baxley, Georgia 31513.  The building, containing
approximately 7,800 square feet of usable office and banking space, and
the land, approximately 2.5 acres, are owned by the Peoples Bank.  The
Bank does not have branches.

     Pineland Bank's main banking office is located at 257 North Broad
Street, Metter, Georgia 30439.  The building, containing approximately
10,000 square feet of usable office and banking space, and the land,
approximately 1 acre, are owned by the Pineland Bank.  The Bank does not
have branches currently but is in the process of constructing a bank on
leased property.

Item 3. Legal Proceedings

     Neither the Registrant or its subsidiaries are parties to, nor is
any of their property the subject of, any material pending legal
proceedings, other than ordinary routine proceedings incidental to the
business of the Banks, nor to the knowledge of the management of the
Registrant are any such proceedings contemplated or threatened against
it or its subsidiaries.

Item 4.  Submission of Matters to a vote of Security Holders

     Note applicable.

Part II.

Item 5.  Market for the Registrant's Common Stock and Related Security
         Holder Matters

(a)  There currently is no public market for the common stock of the
Registrant.

(b)  As of March 1, 1998, there were approximately 480 holders of record
of the Registrant's common stock.

(c)  The Registrant paid an annual dividend on its common stock of $.60
per share for a total of $239,681 for fiscal 1997.

Item 6.  Selected Financial Data

                                 Years Ended December 31,
                  1997       1996       1995       1994       1993
                                     (In Thousands)

Total Assets      $ 149,895  $ 132,291  $  97,175  $  84,477  $  78,911

Operations:
 Interest income  $  12,328  $  11,107  $   8,090  $   6,568  $   5,982
 Interest expense     5,387      4,823      3,314      2,269      2,135

Net Interest
 Income           $   6,941  $   6,284  $   4,776  $   4,299  $   3,847
Provision for
 loan losses            179        202         62         53        118
Net interest
 income after
 provision for
 loan losses      $   6,762  $   6,082  $   4,714  $   4,246  $   3,729
Other income      $   1,569  $   1,596  $   1,371  $   1,264  $   1,251
Other expenses    $   6,017  $   5,586  $   4,345  $   4,116  $   3,765
Income before
 income taxes     $   2,314  $   2,092  $   1,740  $   1,394  $   1,215
Federal Income
 taxes            $     768  $     662  $     590  $     405  $     287
Net income before
 extraordinary
 items            $   1,546  $   1,430  $   1,150  $     989  $     928
Extraordinary
 items            $       -  $       -  $       -  $       -  $       -

Net income        $   1,546  $   1,430  $   1,150  $     989  $     928

Per Share Data:
 Income after
  extraordinary
  items           $    3.86  $    3.54  $    2.84  $    2.44  $    2.27
 Net income       $    3.86  $    3.54  $    2.84  $    2.44  $    2.27
 Dividends
  Declared        $     .60  $     .55  $     .55  $     .55  $     .55
 Book value       $   31.28  $   27.72  $   24.79  $   22.20  $   20.50

Profitability Ratios
 Net income to
 average total
 assets                1.13%      1.14%      1.28%      1.19%      1.16%
Net income to average
 stockholders'
 equity           $   13.06  $   13.29  $   12.08  $   11.22  $   11.66
Net interest
 margin           $    5.18  $    4.86  $    5.20  $    5.21  $    4.99

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

     The purpose of this discussion is to focus on information about
South Banking Company's financial condition and results of operations
which is not otherwise apparent from the consolidated financial
statement included in this report.  Reference should be made to those
statements and the selected financial data presented elsewhere in this
report for an understanding of the following discussion and analysis.

Financial Condition and Liquidity

Financial Condition

     South functions as a financial institution and as such its
financial condition should be examined in terms of trends in its sources
and uses of funds.  A comparison of daily average balances indicate how
South has managed its sources and uses of funds.  Included in the
selected statistical information, the comparison of daily average
balance in the business portion of the filing indicated how South has
managed its sources and uses of funds.  South used its funds primarily
to support its lending activities.

     South's total assets increased to $149,894,560 at year end 1997
from $132,290,583 at year end 1996.  This growth represents a 13.30%
increase in 1997 compared to 5.67% increase in 1996.  The increase is
attributable to normal growth within the banking area with limited entry
into competitive situations for large deposits.  South was able to
maintain rates at a level which minimizes net interest margin decline.
South continues to be aggressive in the markets it operates for good
core deposits.  Loan demand continues to be strong with loans increasing
$17,478,696 in 1997.  Loan demand continues to be strong as evidenced by
the 19.6% internal growth in loans.  The banks continue to look for good
quality loans as loans represent the highest yielding asset on the
bank's books.  The rural economy of the bank's market area has been
stable for the past three years allowing the bank to place good quality
loans on the books.  Classified loans for regulatory purposes remain at
low levels and do not represent any trends or uncertainties which
management reasonably expects will materially impact future operating
results, liquidity on capital resources or represents material credits
about which management is aware of any information which causes
management to have serious doubts as to the ability of such borrowers to
comply with the loan payment terms.

     South's investment portfolio, including certificate of deposits in
other banks, increased to $18,227,557 from $17,699,032.  The small
increase of $528,525 from operation is an indication of the loan demand
of the banks and the desire of the banks to utilize the assets of South
in the highest yielding manner available to the banks without creating
liquidity problems.  South has maintained adequate federal funds sold
and investments available for sale to sufficiently maintain adequate
liquidity.  South's securities are primarily short term of three years
or less in maturity enabling South to better monitor the rate
sensitivity of these assets.  Unrealized gain and losses on this
portfolio is not material to the statement as South maintains a slight
unrealized gain of $43,781.

     As the primary source of funds, aggregate deposits increased by
$15,908,509 in 1997 compared to $32,148,126 in 1996.  The 1996 increase
includes $25,055,325 acquired in the Pineland State Bank acquisition and
an operational increase of $7,092,801.  This represents a 13.63%
increase for the year compared to a 6.47% increase in 1996.  This
illustrates the efforts of the banks to maintain good core deposit
growth and reach the higher paying time certificates.  Rates have not
fluctuated much during the year as most of the bank's market has helped
the bank remain competitive without drastically reducing the net
interest margin.  One of the markets will experience new competition in
1998 which could have some impact on time certificate rates; however,
management does not anticipate any major shifting of deposits.

Liquidity

     The primary function of asset/liability management is to assure
adequate liquidity and maintain an appropriate balance between interest
sensitive earning assets and interest bearing liabilities.  Liquidity
management involves the ability to meet the cash flow requirements of
customers who may be either depositors desiring to withdraw funds or
borrowers requiring assurance that sufficient funds will be available to
meet their credit needs.  Interest rate sensitivity management seeks to
avoid fluctuating net interest margins and to enhance consistent growth
of net interest income through periods of changing interest rates.

     Marketable investment securities, particularly those of shorter
maturities, and federal funds sold are the principal sources of asset
liquidity.  Securities maturing in one year or less amounted to
$1,875,596  and federal funds sold with daily maturities amounted to
$10,040,000 at year end 1997, a decrease from prior years as the loan
demand continues.  Maturing loans and certificates of deposits in other
banks are other sources of liquidity.

     The overall liquidity of South has been enhanced by a significant
aggregate amount of core deposits.  These core deposits have remained
constant during this period.  South has utilized less stable short-term
funding sources to enhance liquidity such as large denomination time
deposits and money market certificates within its current customer base,
but has not attempted to acquire these type of accounts from non-core
deposit customers.  South has utilized its core deposit base to help
insure it maintains adequate liquidity.

     Historically, the trend in cash flows as represented in the
statement of cash flows shows a steady increase in cash generated by
operations from the last three years.  This is a result of increasing
net income for each year.  While income is not predictable, it is
anticipated that liquidity will continue to be enhanced by the
operations of the bank.  Operations activity, however, generate only a
small portion of the cash flow activities of the bank.  Primary cash
flow comes from investing activities such as sales and/or maturity of
investment securities and in the financing activity through an increase
in deposits.  The primary use of cash flow includes the purchase of
securities and making new loans as investing activities.  The history of
the bank's cash flow indicates a nonrepeating source such as proceeds
from borrowing utilized as sources of cash for the purpose of
acquisition or expansion.  South's overall cash flows indicate the
relative stability and manageable growth of the bank's assets.  South
utilized deposit growth as its primary source of funds to handle growth.
South's liquidity is maintained at levels determined by management to be
sufficient to handle the cash needs that might arise at any given date.
Outside sources are maintained, but South looks to these sources only on
a very short term basis.  South's long term liquidity plans include
utilizing internally generated deposits as its primary source of cash
flows and utilizing the shifting of the make up of assets to handle
short term demands on cash.

     Interest rate sensitivity varies with different types of interest-
earning assets and interest bearing liabilities.  Overnight federal
funds on which rates change daily and loans which are tied to prime
differ considerably from long-term investment and fixed rate loans.
Similarly, time deposits over $100,000 and money market accounts are
much more interest sensitive than passbook savings and long-term capital
notes.  The shorter-term interest rate sensitivities are key to
measuring the interest sensitivity gap, or excess interest-sensitive
earning assets over interest-bearing liabilities.  An interest rate
sensitivity table is included elsewhere in document, and it shows the
interest sensitivity gaps for different time intervals as of December
31, 1997.  The first 30 days there is an excess of interest-bearing
assets over interest-bearing liabilities.  South becomes more sensitive
to interest rate fluctuations on a short time period.  While the
cumulative gap declines with each time interval, South remains with a
manageable position.

Capital Resources

     South does not presently have commitments for significant capital
expenditures.  However, there are regulatory constraints placed on
South's capital.

     In January 1989, the Federal Reserve Board released new standards
for measuring capital adequacy for U. S. banking organizations.  These
standards are based on the original risk-based capital requirements
first proposed in early 1986 by U. S. bank regulators and then developed
jointly by authorities from the twelve leading industrial countries.  As
a result, the standards are designed to not only provide more risk-
responsive capital guidelines for financial institutions in the U. S.,
but also incorporate a consistent framework for use by financial
institutions operating in the major international financial markets.

    In general, the standards require banks and bank holding companies
to maintain capital based on "risk-adjusted" assets so that categories
of assets with potentially higher credit risk will require more capital
backing than assets with lower risk.  In addition, banks and bank
holding companies are required to maintain capital to support, on a
risk-adjusted basis, certain off-balance sheet activities such as loan
commitments and interest rate swaps.

     The Federal Reserve Board standards classify capital into two
tiers, referred to as Tier 1 and Tier 2.  Tier 1 capital consists of
common shareholders' equity, noncumulative and cumulative (BHCs only)
perpetual preferred stock and minority interest less goodwill.  Tier 2

capital consists of allowance for loan and lease losses, perpetual
preferred stock (not included in Tier 1), hybrid capital instruments,
term subordinated debt and intermediate-term preferred stock.  By
December 31, 1992, all banks were required to meet a minimum ratio of 8%
of qualifying total capital to risk-adjusted total assets with at least
4% Tier 1 capital.  Capital that qualifies as Tier 2 capital is limited
to 100% of Tier 1 capital.

Results of Operations
                         1997 Compared to 1996

     Net interest income remains an effective measurement of how well
management has balanced the South's interest rate sensitive assets and
liabilities.  Net interest income increased by $657,643.  The increase
of 10.46% compared to a 7.8% increase in 1996.  The primary determinants
of the increase were loans and time deposits.  As loan demand increased,
funds were channeled into higher yielding loans.  Management continues
its policy of not soliciting high interest deposits and was able to
maintain stable cost of funds.  The shifting of assets and liabilities
was necessary to maintain level of net interest income as net interest
yield increased to 5.20% from 4.96%.  With the low interest rate
currently in the market and South's current interest rate gap, South
will continue its efforts to channel funds into higher yielding assets.
Due to the rate sensitivity gap, South will attempt to improve its
current position with a controlled attempt to lengthen its maturity of
interest rate sensitive liabilities although this is difficult without
rate adjustments upward.

     The provision for loan loss was $1,821,680 in 1997 compared to
$1,781,013 in 1996.  The provision for loan losses has been sufficient
to increase the allowance for loan losses each year.  During the year
1997, loan loss were held to low levels as management continues to work
its loan portfolio to minimize charge-offs and place maximum efforts to
collect previously charged off.

     Other income, decreased slightly from the prior year.  Service
charges increased in 1997 compared to 1996.  Additionally, a small loss
on securities occurred in 1997 on early calls.  A loss on sale of
equipment from the computer center during a conversion accounts for the
decline in other income in 1997.

     Operating cost grew at a rate of 7.72%.  The increases are
primarily personnel related as bank works hard at controlling cost.
Decrease in FDIC fees and increased data processing efficiency help
maintain cost levels.

     Income tax expense was $767,811 in 1997 or 33.1% of net income
compared to $662,078 in 1996 or 31.6% of net income.  The nondeductible
cost attributable to the 1996 acquisition of Pineland Bank accounts for
the higher tax rate.

     Results of operations can be measured by various ratio analysis.
Two widely recognized performance indicators are the return on average
equity and the returns on average assets.  South's return on equity


increased from 11.66% to 13.06%.  The return on assets decreased from
1.16% to 1.13%.  These levels are within peer group ranges of some other
bank holding companies, management believes that 1998 can obtain
comparable ratios despite increased competition.

                         1996 Compared to 1995

     Net interest income is an effective measurement of how well
management has balanced the South's interest rate sensitive assets and
liabilities.  Net interest income increased by $1,507,250 of which
$1,134,158 was a result of Pineland State Bank acquisition.  The
increase, excluding bank acquisition was $373,092 or 7.8% compared to a
11.1% increase in 1995.  The primary determinants of the increase were
loans and time deposits.  As loan demand increased, funds were channeled
into higher yielding loans.  Management did not solicit high interest
deposits and was able to maintain stable cost of funds.  The shifting of
assets and liabilities was necessary to maintain level of net interest
income as net interest yield decreased to 4.96% from 4.99%.  With the
low interest rate currently in the market and South's current interest
rate gap, South will continue its efforts to channel funds into higher
yielding assets.  Due to the rate sensitivity gap, South will attempt to
improve its current position with a controlled attempt to lengthen its
maturity of interest rate sensitive liabilities.

     The provision for loan loss was $1,781,013 in 1996 of which
$603,299 came from the Pineland State Bank acquisition compared to
$994,027 in 1995.  The provision for loan losses has been sufficient to
increase the allowance for loan losses each year.  During the year 1996,
loan loss recoveries exceeded the loan charged off as management
continues to work its loan portfolio to minimize charge-offs and place
maximum efforts to collect previously charged off.

     Other income, excluding bank acquired, increased slightly from the
prior year.  Service charges increased in 1996 compared to 1995.
Additionally, a small loss on securities occurred in 1996 as early calls
and a small number of sales resulted in a small loss.

     Operating cost, excluding bank acquired, grew at a rate of 1.68%.
The increases are primarily personnel related as bank works hard at
controlling cost.  Decrease in FDIC fees and increased data processing
efficiency help maintain cost levels.

     Income tax expense was $662,078 in 1996 or 31.6% of net income
compared to $589,746 in 1995 or 33.9% of net income.  During the year
1993, FASB 109 was adopted by South with no material effect on its
financial statements; however, some adjustments were required.

     Results of operations can be measured by various ratio analysis.
Two widely recognized performance indicators are the return on average
equity and the returns on average assets.  South's return on equity
increased from 11.19% to 11.66%.  The return on assets increased from
1.03% to 1.16%.
                         1995 Compared to 1994

     Net interest income is an effective measurement of how well
management has balanced the South's interest rate sensitive assets and
liabilities.  Net interest income increased by $477,147 or 11.1% in 1995
and $452,609 or 11.7% in 1994.  The primary determinants of the increase
were loans and time deposits.  As loan demand increased, funds were
channeled into higher yielding loans.  The increase in loan demand
continue to be sufficient to offset the higher paying deposit growth.
The shifting of asset and liabilities was necessary to maintain level of
net interest income as net interest yield remain constant at 5.20%.
With the interest rate currently in the market and South's current
interest rate gap, South will continue its efforts to channel funds into
higher yielding assets.  Due to the rate sensitivity gap, South will
continue to attempt to improve its current position with a controlled
attempt to lengthen its maturity of interest rate sensitive liabilities.

     The provision for loan loss was $994,027 in 1995 compared to
$974,866 in 1994.  The provision for loan losses has been sufficient to
increase the allowance for loan losses each year.  Management continues
to work its loan portfolio to minimize charge-offs and place maximum
efforts to collect previously charged off.

     Other income increased slightly from the prior year.  Service
charges decreased slightly in 1995 compared to 1994.  This is an
indication of the higher balance being maintained by customers as the
economy has started to improve.  Additionally, a small gain on
securities occurred in 1994 as a small number of sales resulted in a
small gain.  Operations from data center increased as 1995 was the first
full operational year.  Sales are for one bank not owned by South.

     Operating cost grew at a rate of 5.84%.  The increases are
primarily personnel and equipment related.  Increased demands by
regulatory agencies have required some additional personnel time and
other cost continue to increase.  The start up of the data processing
center in 1995 contributed to the increased operating cost.  1995 was
the first full year of data processing center operation and costs are
becoming more manageable than in the prior year of inception.
Management expects the center to become more efficient as its operation
matures.

     Income tax expense was $589,746 in 1995 or 33.89% of net income
compared to $405,023 in 1994 or 29.04% of net income.  The reduction in
tax free municipal bond interest in 1995, as bonds matured or were
called, also raised the effective tax rate of South.  During the year
1993, FASB 109 was adopted by South with no material effect on its
financial statements; however, some adjustments were required.

     Results of operations can be measured by various ratio analysis.
Two widely recognized performance indicators are the return on average
equity and the returns on average assets.  South's return on equity
increased from 11.22% to 12.08%.  The return on assets increased from
1.19% to 1.28%.

Nonperforming Assets

     Nonperforming assets include nonaccrual loans, accruing loans past
due 90 days or more and other real estate, which include foreclosures,
deeds in lieu of foreclosure and in-substance foreclosures.

     A loan is generally classified as nonaccrual when full
collectibility of principal or interest is doubtful or a loan becomes 90
days past due as to principal or interest, unless management determines
that the estimated net realizable value of the collateral is sufficient
to cover the principal balance and accrued interest.  When interest
accruals are discontinued, unpaid interest credited to income in the
current year is reversed and unpaid interest accrued in prior years is
charged to the allowance for loan losses.  Nonperforming loans are
returned to performing status when the loan is brought current and has
performed in accordance with contract terms for a period of time.

Distribution of Nonperforming Assets
                                        1997       1996       1995
                                                (In Thousands)
Non accrual loans                       $    311   $    553   $     66
Past due 90 days still accruing              760        226        276
Other real estate (ORE)                      122        346        283

                                        $  1,193   $  1,125   $    625
Nonperforming loans to year
 end loans                                  1.00%       .87%       .54%
Nonperforming assets to year
 end loan and ORE                           1.11%      1.26%      1.00%

     The ratio of nonperforming assets has increased since 1994.  A
slight increase occurred as ORE sales declined and a subsequent
foreclosure has increased the ORE in 1994 and 1996. This increase is
attributed to management's early review system to grasp problems before
they become unmanageable.  Management continues to work on nonperforming
assets to further reduce this ratio.

Regulatory Matters

     During the year 1997, federal and state regulatory agencies
completed asset quality examinations at the South's subsidiary banks.
The South's level and classification of identified potential problem
loans was not revised significantly as a result of this regulatory
examination process.

     Examination procedures require individual judgments about a
borrower's ability to repay loans, sufficiency of collateral values and
the effects of changing economic circumstances.  These procedures are
similar to those employed by South in determining the adequacy of the
allowance for loan losses and in classifying loans.  Judgments made by
regulatory examiners may differ from those made by management.

     Management and the boards of directors of South and affiliates
evaluate existing practices and procedures on an ongoing basis.  In
addition, regulators often make recommendations during the course of
their examinations that relate to the operations of South and its
affiliates.  As a matter of practice, management and the boards of
directors of South and its subsidiaries consider such recommendations
promptly.

Impact of Inflation and Changing Prices

     The majority of assets and liability of a financial institution are
monetary in nature; therefore, differ greatly from most commercial and
industrial companies that have significant investments in fixed assets
or inventories.  However, inflation does have an important impact on the
growth of total assets in the banking industry and the resulting need to
increase equity capital at higher than normal rates in order to maintain
an appropriate equity-to-assets ratio.  An important effect of this has
been the reduction of asset growth to maintain appropriate levels.
Another significant effect of inflation is on other expenses, which tend
to rise during periods of general inflation.

     Management believes the most significant impact on financial
results is South's ability to react to changes in interest rates.  As
discussed previously, management is attempting to maintain an
essentially balanced position between interest sensitive assets and
liabilities in order to protect against wide interest rate fluctuations.

Impact of Recently Issued Accounting Standards

     In June 1996, the FASB issued Statement of Financial Accounting
Standard No 125 relating to transfers and servicing of financial assets
as well as for extinguishment of liabilities.  This standard is based on
the consistent application of the financial components approach which
focuses on control.  Under such an approval after a transfer of
financial assets an entity:

       Recognized the financial and servicing assets it controls and
        the liabilities it has occurred.

       Derecognizes financial assets when control is surrendered.

       Derecognizes liabilities when extinguished.

     This FASB is effective for statement issued on or after December
31, 1996 except for selected provision.  This FASB does not affect South
Banking Company materially in any fashion as South, with minimum
exceptions, does not transfer assets to others or retain any service
rights.

     In October 1995, the FASB issued Statement of Financial Accounting
Standard No. 124 relating to accounting standards for stock based
employer compensation plans.  This FASB is effective for the 1996 year;
however, South does not have any stock based compensation plans and does
not have any plans to enact such a plan in the future.

Item 8.  Financial Statements and Supplementary Data

     The following consolidated financial statements of the Registrant
and its subsidiaries are included on pages F-1 through F-37 of this
Annual report on Form 10-K.

     Consolidated Balance Sheets - December 31, 1997 and 1996

     Consolidated Statements of Income - Years ended December 31, 1997,
       1996 and 1995

     Consolidated Statements of Changes in Stockholders' Equity - Years
       ended December 31, 1997, 1996 and 1995

     Consolidated Statement of Cash Flow - Year ended December 31, 1997,
      1996 and 1995

     Notes to Consolidated Financial Statements


Item 9.  Disagreement on Accounting and Financial Disclosures

     Not applicable.

Part III.

Item 10. Directors and Executive Officers of the Registrant

     The Directors and Executive Officers of the Registrant and their
respective ages, positions with the Registrant, principal occupation and
Common Stock of the Registrant beneficially owned as of March 1, 1998
are as follows:
                                               Director
                                              (Officer) of  # of shares
                           Position with       Registrator  Owned
                           Registrant          of one of    Beneficiary
                           & Principal         the Banks    (Percent of
Name (Age)                 Occupation          Since        Class)

Paul T. Bennett (42)       President,           1978(1)(2)       18,543
                            Treasurer and              (3)    (  4.64%)
                            Director; Vice             (4)
                            Chairman and Director,
                            Citizens Bank; Vice
                            Chairman and Director,
                            Peoples State Bank &
                            Trust, Baxley, Georgia;
                            President Peoples Bank,
                            Lyons, Georgia; Director,
                            Banker's Data Services;
                            Director, Alma Exchange
                            Bank and Trust

Item 10. Directors and Executive Officers of the Registrant (con't)

                                               Director
                                              (Officer) of  # of shares
                           Position with       Registrator  Owned
                           Registrant          of one of    Beneficiary
                           & Principal         the Banks    (Percent of
Name (Age)                 Occupation          Since        Class)

Olivia Bennett (78)        Executive Vice       1969(1)(2)      186,493
                            President, Secretary       (3)   (  46.68%)
                            and Director; Chairman
                            and Director, Alma
                            Bank; Director,
                            Banker's Data Services;
                            Chairman of Board,
                            President, Citizens Bank;
                            Director, Peoples Bank

Lawrence Bennett (50)      President and        1987(1)(2)       11,897
                            Director, Alma             (4)    (  2.98%)
                            Bank; Director,
                            Banker's Data Services;
                            Director, Peoples
                            Bank, Baxley; Director
                            Peoples Bank, Lyons

Charles Stuckey (50)       Director; Executive    1990(3)           358
                            Vice President,                    (   .1%)
                            Peoples Bank; Director,
                            Banker's Data
                            Services

James W. Whiddon (53)      Director; Executive     1989(2)           66
                            Vice President and                 (    -%)
                            Director, Citizens
                            Bank; Director,
                            Banker's Data Services

Kenneth F. Wade (55)       Director; Executive     1980(1)        4,779
                            Vice President, Director           ( 1.19%)
                            and Cashier, Alma Bank;
                            Director, Banker's
                            Data Services

John Rogers (50)           Director, Executive     1996(4)            -
                            Vice President, Pineland
                            State Bank; Director;
                            Banker's Data Service
(1) Director of Alma Bank
(2) Director of Citizens Bank
(3) Director of Peoples Bank
(4) Director of Pineland State Bank

     Included in shares owned by Olivia Bennett are 175,501 shares owned
by Estate of Valene Bennett of which she is the Executrix.

     None of the directors are a director of a publicly-held corporation
which is required to file reports with the Securities and Exchange
Commission.

     Each of the Directors and Executive Officers have been engaged in
his or her present principal occupation for at least five years.  Olivia
Bennett is the mother of Paul T. Bennett and Lawrence Bennett.  There
are no other family relationships between any other Director or
Executive Officer.  Directors serve until the next annual meeting of
shareholders or until their successors are elected and qualified.
Officers serve at the pleasure of the Board of Directors.

Item 11.  Management Renumeration and Transactions

     The following information is given as to the cash and cash
equivalent forms of renumeration received by South's CEO.

                                                Long-Term Compensation
                   Annual Compensation          Awards           Payouts

(A)       (B)  (C)      (D)     (E)       (F)        (G)     (H)     (I)
                                Other                                All
Name and                        Annual    Restricted                 Other
Principal                       Compen-    Stock    Options/ LTIP    Compen-
Position  Year Salary   Bonus   sation (2) Award     SARS #  Payouts sation
Valene
Bennett
CEO       1997 $      - $     -  $       - $       - $     - $     - $    -
          1996        -       -          -         -       -       -      -
          1995   72,486       -      8,985         -       -       -      -
          1994   83,582       -     11,795         -       -       -      -
          1993   80,346       -     11,900         -       -       -      -

Paul T.
Bennett
CEO       1997 $125,138 $     -   $ 20,235 $       - $     - $     - $    -
          1996  109,480       -     22,940         -       -       -      -
          1995   87,566       -     15,310         -       -       -      -
          1994   79,472       -     15,115         -       -       -      -
          1993   76,504       -     13,685         -       -       -      -

Olivia
Bennett
Secretary 1997 $182,936 $     -   $ 15,135 $       - $     - $     - $    -
          1996  168,748       -     15,295         -       -       -      -
          1995  100,857       -     12,200         -       -       -      -
          1994   84,223       -     12,200         -       -       -      -
          1993   79,414       -     10,975         -       -       -      -

(1)  Does not include fees and dues for clubs and fraternal and civic
organizations paid by the Banks to certain officers for business related
purposes.  Also, does not include any amounts for use of an automobile.

(2)  Other compensation consists of director fees from registrant and
subsidiary banks.

Transactions with Management

Item 12.  Security Ownership of Certain Beneficial Owners and Management

     The following table sets forth, as of March 1, 1998, the beneficial
ownership of Common Stock of Registrant by the Only "person" (as that
term is defined by the Securities and Exchange Commission), who owns of
record or is known by the Registrant to own beneficially 5% or more of
the outstanding shares of Common Stock of the Registrant and by all
Executive Officers and Directors of the Registrant as a group.

                                              Number of     Percent of
                                              Shares Owned  Outstanding
Name                                          Beneficially  Shares
Estate of Valene Bennett
Route 4
Alma, Georgia 31510                                175,501        43.93%

Olivia Bennett
Route 4
Alma, Georgia 31510                                 10,992         2.75%

All Executive Officers and Directors
 as a group (7 persons)                            222,136         55.6%

Item 13.  Certain Relationships and Related Transactions

     The Banks have had, and expect to have in the future, banking
transactions in the ordinary course of business with Directors and
Officers of the Banks and their associates, including corporations,
partnerships and other organizations in which such Directors and
Officers have an interest, on substantially the same terms (including
interest rates and collateral) as those prevailing at the time for
comparable transactions with unrelated parties.  Such transactions have
not involved more than the normal risk of collectibility or presented
other unfavorable features.

Item 14.  Exhibits, Financial Statement Schedule and Reports on Form 8-K
Item 14(a)  1. and 3. and Item 14(d)

     (a)  The following documents are filed as part of this report:

          1.  Financial Statements

          (a)  South Banking Company and Subsidiaries:
          (i  ) Consolidated Balance sheet - December 31, 1997 and 1996
          (ii ) Consolidated Statement of Income - Year ended December
                 31, 1997, 1996 and 1995
          (iii) Consolidated Statement of Stockholders' Equity - Years
                 ended December 31, 1997, 1996 and 1995
          (iv ) Consolidated Statement of Cash Flow - Year ended
                 December 31, 1997, 1996 and 1995

Item 14.  Exhibits, Financial Statement Schedule and Reports on Form 8-K
          (con't)

          (b)  South Banking Company (Parent Corporation Only):
          (i  ) Balance sheet - December 31, 1997 and 1996
          (ii ) Statement of Income - period ended December 31, 1997,
                 1996 and 1995
          (iii) Statement of Stockholders' Equity - Period ended
                 December 31, 1997, 1996 and 1995
          (iv ) Statement of Cash Flow - Year ended December 31, 1997,
                 1996 and 1995

          3.  Exhibits required by Item 7 of regulation S-K:

          (3)  Articles of Incorporation and By-Laws (included as
          Exhibits 3(a) and (b), respectively, to Appendix II to
          Registrant's Registration Statement on Form S-14, File No. 2-
          71249, previously filed with the Commission and incorporated
          herein by reference).

          (13)  1997 Annual Report to Shareholders of South Banking
          Company (not deemed filed except to the extent that sections
          thereof are specifically incorporated into this report on Form
          10-K by reference).

          (22)  List of the Registrant's subsidiaries:

          (1)   Alma Exchange Bank & Trust
          (2)   Citizens State Bank
          (3)   Peoples State Bank & Trust
          (4)   Bankers' Data Services, Inc.
          (5)   Pineland State Bank

     All of the Registrant's subsidiaries were incorporated under the
laws of the State of Georgia and are doing business in Georgia under the
above names.

          (b)  The registrant has not filed a Form 8-K during the last
          quarter of the period.

          (c)  The response to this Item 14(c) is included in item
          14(a).

          (d)  Financial Statements Schedules - None.

                           POWER OF ATTORNEY

     Know all men by these present, that each person whose signature
appears below constitutes and appoints Paul T. Bennett, his attorney-in-
fact, to sign any amendments to this Report, and to file the same, with
exhibits thereto, and other documents in connection therewith.  The
Securities and Exchange Commission hereby ratifying and confirming all
that said attorney-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.

     Pursuant to the requirements of Section 13 or 15(d) 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 26, 1998                Paul T. Bennett
                                         Paul T. Bennett
                                         Principal Executive, Financial
                                         and Accounting Officer and
                                         Director

Date:      March 26, 1998                Olivia Bennett
                                         Olivia Bennett
                                         Executive Vice President and
                                         Director

Date:      March 26, 1998                Charles Stuckey
                                         Charles Stuckey
                                         Director

Date:      March 26, 1998                James W. Whiddon
                                         James W. Whiddon
                                         Director

Date:      March 26, 1998                Kenneth F. Wade
                                         Kenneth F. Wade
                                         Director

Date:      March 26, 1998                Lawrence Bennett
                                         Lawrence Bennett
                                         Director

Date:      March 26, 1998                John Rogers
                                         John Rogers
                                         Director

                              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.
                                         SOUTH BANKING COMPANY

Date:      March 26, 1998             By:  Paul T. Bennett
                                           Paul T. Bennett
                                           President, Treasurer and
                                           Director


                       SUPPLEMENTAL INFORMATION


     The following supplemental information has not been sent to the
Registrant's shareholders, but will be sent subsequent to the filing of
this Annual Report on Form 10-K:

     (1)  1997 annual report to shareholders.

     (2)  Proxy statement for 1998 annual meeting of shareholders.

     The foregoing  materials will be furnished to the Commission when
they are sent to the shareholders since the Registrant does not have
securities registered pursuant to Section 12 of the Securities Exchange
Act of 1934.  The foregoing materials shall not be deemed to be "filed"
with the Commission or otherwise subject to the liabilities of Section
18 of that Act.

                         SOUTH BANKING COMPANY

                           ALMA,     GEORGIA

                         FINANCIAL STATEMENTS

                           DECEMBER 31, 1997


                   REPORT OF INDEPENDENT ACCOUNTANTS

Board of Directors
South Banking Company
Alma, Georgia 31510

     We have audited the accompanying consolidated balance sheets of
South Banking Company as of December 31, 1997 and 1996 and the related
consolidated statements of income, cash flows and shareholders' equity
for each of the three years in the period ended December 31, 1997.
These financial statements are the responsibility of the Company's
management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

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

     In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
South Banking Company at December 31, 1997 and 1996 and the consolidated
results of its operations, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles.

                                  Respectfully submitted,

                                  H. H. BURNET & COMPANY, P. C.

Waycross, Georgia
February 11, 1998
                          SOUTH BANKING COMPANY
                            ALMA,     GEORGIA
                       CONSOLIDATED BALANCE SHEETS


                                           December 31,   December 31,
                                           1997           1996

                                 ASSETS

Cash and due from banks                    $  8,128,444   $  6,863,559

Deposits in other banks -
 interest bearing                          $  1,280,000   $  1,886,000

Investment securities
 Available for sale                        $ 15,341,990   $ 13,449,288
 Held to maturity - market value
  of $1,614,474 in 1997 and
  $2,365,832 in 1996                       $  1,605,567   $  2,363,744

Georgia Bankers stock                      $    547,283   $    547,283

Federal Home Loan Bank stock               $    344,500   $    247,600

Federal funds sold                         $ 10,040,000   $ 11,983,000

Loans                                      $106,525,222   $ 89,046,526
Less: Unearned discount                     (   149,418)   (   150,457)
Reserve for loan losses                     ( 1,821,680)   ( 1,781,013))))

                                           $104,554,124   $ 87,115,056

Bank premises and equipment                $  4,078,502   $  3,995,385

Goodwill                                   $    315,514   $    364,983

Other assets                               $  3,658,636   $  3,474,685


Total Assets                               $149,894,560   $132,290,583

The accompanying notes are an integral part of these financial statements.

                          SOUTH BANKING COMPANY
                            ALMA,     GEORGIA
                   CONSOLIDATED BALANCE SHEETS (con't)


                                            December 31,   December 31,
                                            1997           1996

                  LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities
Deposits:  Demand - non-interest
                     bearing               $ 22,230,080   $ 21,451,527
           Demand - interest bearing         21,996,765     20,440,276
           Savings                            8,668,639      7,917,814
           Time                              79,706,608     66,883,966
                                           $132,602,092   $116,693,583
Borrowing                                     3,347,322      3,507,279
Accrued expenses and other
 liabilities                                  1,299,188        905,472
Federal funds purchased                         150,000              -

Total Liabilities                          $137,398,602   $121,106,334


Stockholder's Equity
Common stock $1 par value; shares
 authorized - 1,000,000,  shares
 issued and outstanding -
 1997 and 1996 - 399,500
 and 403,500, respectively                 $    399,500   $    403,500
Surplus                                       3,070,831      3,116,581
Undivided profits                             8,981,846      7,675,216
Unrealized gain (loss) on
 securities                                      43,781    (    11,048)

Total Stockholders' Equity                 $ 12,495,958   $ 11,184,249


Total Liabilities and
 Stockholders' Equity                      $149,894,560   $132,290,583

The accompanying notes are an integral part of these financial statements.

                          SOUTH BANKING COMPANY
                            ALMA,     GEORGIA
                    CONSOLIDATED STATEMENTS OF INCOME


                            Year Ended     Year Ended     Year Ended
                            December 31,   December 31,   December 31,
                            1997           1996           1995

Interest Income
Interest and other
 fees on loans              $ 10,769,564   $  9,479,255   $  6,995,954
Interest on deposits -
 interest bearing                 92,506        119,366         40,904
Interest on federal
 funds sold                      393,317        506,525        472,289
Interest on investment
 securities:
 U. S. Treasury                  202,516        186,697         99,131
 U. S. Government agencies       655,440        541,881        273,579
 Mortgage backed securities       83,951        150,011        140,159
 State and municipal
  subdivisions                    89,615         95,350         58,584
Other securities                  41,412         27,623          9,893

Total Interest Income       $ 12,328,321   $ 11,106,708   $  8,090,493


Interest Expense
Interest on deposits        $  5,052,525   $  4,512,373   $  3,167,719
Interest - other borrowing       334,531        310,713        146,402

Total Interest Expense      $  5,387,056   $  4,823,086   $  3,314,121

Net interest income         $  6,941,265   $  6,283,622   $  4,776,372
Provision for loan losses        179,500        201,589         62,200

Net interest income after
 provision for loan losses  $  6,761,765   $  6,082,033   $  4,714,172


Other Operating Income
Service charge on deposits  $  1,191,927   $  1,163,935   $    955,791
Commission on insurance          108,277         84,843         63,154
Other income                     264,480        231,602        161,926
Securities gains (losses)            246    (    15,708)        21,591
Data processing fees             153,811        146,598        167,267
Loss on sale of fixed assets (   149,206)   (    14,957)         1,657

Total Other Operating
 Income                     $  1,569,535   $  1,596,313   $  1,371,386


The accompanying notes are an integral part of these financial statements.

                          SOUTH BANKING COMPANY
                            ALMA,     GEORGIA
                CONSOLIDATED STATEMENTS OF INCOME (Con't)


                            Year Ended     Year Ended     Year Ended
                            December 31,   December 31,   December 31,
                            1997           1996           1995

Other Operating Expenses
Salaries                    $  2,416,589   $  2,148,626   $  1,558,381
Profit sharing and other
 personnel expenses              648,124        518,962        355,822
Occupancy expense of bank
 premises                        383,268        368,854        269,909
Furniture and equipment
 expense                         661,994        559,194        422,129
Stationery and supplies          182,727        165,697        136,568
Data processing                  178,838        393,791        428,979
Director fees                    137,586        143,040        103,436
Other real estate expenses        15,781         31,751         30,856
Other expenses                 1,392,271      1,256,029      1,039,355

Total Other Operating
 Expenses                   $  6,017,178   $  5,585,944   $  4,345,435

Income before income taxes  $  2,314,122   $  2,092,402   $  1,740,123
Applicable income taxes          767,811        662,078        589,746


Net Income                  $  1,546,311   $  1,430,324   $  1,150,377

Per share earnings based
 on weighted average
 outstanding shares:

 Weighted average
  outstanding shares             400,501        403,811        405,283

Net income before
 extraordinary items        $       3.86   $       3.54   $       2.84


Net Income Per Share        $       3.86   $       3.54   $       2.84


The accompanying notes are an integral part of these financial statements.

                          SOUTH BANKING COMPANY
                            ALMA,     GEORGIA
                    STATEMENT OF STOCKHOLDERS' EQUITY

                                                                Unrealized
                                                                Gain

                                                                (Loss) on

                                                                Securities
                        Total
                         Common                      Undivided  Available
                        Stockholders             '
                         Stock         Surplus       Profits    for Sale
                        Equity
Balance,
 December 31, 1994       $   405,283   $ 3,136,238   $ 5,537,253$(
80,997)                  $ 8,997,777
 Net income                        -             -     1,150,377-1,150,377
 Cash dividends                    -             -    (  222,889)-(
222,889                            )
 Unrealized gain
  (loss) on securities
  available for sale               -             -             -
123,588                      123,588

Balance,
 December 31, 1995       $   405,283   $ 3,136,238   $ 6,464,741$
42,591                   $10,048,853
 Net income                        -             -     1,430,324-1,430,324
 Cash dividends                    -             -    (  219,849)-(
219,849                            )
 Unrealized gain
  (loss) on securities
  available for sale               -             -             -(
53,639)                   (   53,639             )
 Redemption of shares     (    1,783)   (   19,657)            -
-                         (   21,440             )

Balance,
 December 31, 1996       $   403,500   $ 3,116,581   $ 7,675,216$(
11,048)                  $11,184,249
 Net income                        -             -     1,546,311-1,546,311
 Cash dividends                    -             -    (  239,681-)(
239,681)
 Unrealized gain
  (loss) on securities
  available for sale               -             -             -54,829
54,829
 Redemption of shares     (    4,000)   (   45,750)            -
-                         (   49,750)

Balance,
 December 31, 1997       $   399,500   $ 3,070,831   $ 8,981,846$
43,781                   $12,495,958

The accompanying note is an integral part of these financial statements.

                          SOUTH BANKING COMPANY
                            ALMA,     GEORGIA
                  CONSOLIDATED STATEMENT OF CASH FLOWS

                            Year Ended     Year Ended     Year Ended
                            December 31,   December 31,   December 31,
                            1997           1996           1995
Cash Flows From Operating
 Activities:
 Net income                 $  1,546,311   $  1,430,324   $  1,150,377
 Add expenses not
  requiring cash:
  Provision for depreciation
   and amortization              599,366        462,180        420,747
  Provision for loan losses      179,500        201,589         62,200
  Provision for loss on ORE        7,000         41,044         28,110
 Bond portfolio losses
  (gains)                     (      265)        15,734    (    21,827)
 (Gain ) loss on sale of
  premises & equipment           153,151         14,957    (     1,657)
 Gain on sale of other
  real estate owned           (   19,071)   (     5,342)   (    17,718)
 Increase (decrease) in
  taxes payable               (  125,505)   (    16,610)   (   123,457)
 Increase (decrease) in
  interest payable               139,213         57,433        287,865
 Increase (decrease) in
  other liabilities                1,156         49,749         36,870
 (Increase) decrease in
  interest receivable         (  192,363)   (   272,411)   (    73,925)
 Decrease (increase) in
  prepaid expenses            (   22,924)        48,322         53,186
 (Increase) decrease in
  other assets                   134,274    (   119,537)   (   224,305)
 Recognition of unearned
  loan income                 (    1,039)        29,180         21,887

Net Cash Provided From
 Operating Activities        $ 2,398,804   $  1,936,612   $  1,598,353

Cash Flows From Investing
 Activities:
 Proceeds from sales of
  investment securities -
  available for sale         $         -   $  4,506,015   $    979,156
 Proceeds from maturities
  of securities held to
  maturity                     1,056,813      1,635,361      2,533,844


The accompanying notes are an integral part of these financial statements.

                          SOUTH BANKING COMPANY
                            ALMA,     GEORGIA
              CONSOLIDATED STATEMENT OF CASH FLOWS (con't)


                            Year Ended     Year Ended     Year Ended
                            December 31,   December 31,   December 31,
                            1997           1996           1995
Cash Flows From Investing
 Activities: (con't)
 Purchase of securities
  held to maturity          $(   398,399)  $(   498,738)  $( 1,596,546)
 Proceeds from maturity of
  securities available for
  sale                         5,209,008      3,302,652        786,703
 Net loans to customers      (17,755,789)   (13,911,298)   ( 4,694,955)
 Purchase of securities
  available for sale         ( 6,892,671)   ( 9,479,898)   ( 4,849,104)
 Purchase of premises and
  equipment                  (   814,681)   (   423,377)   (   273,546)
 Proceeds from sale of
  premises and equipment          19,986         18,850          4,911
 Proceeds from sale of
  other real estate owned        379,997        258,140        385,215
 Purchase of Pineland
  Bank stock                           -    ( 1,839,937)   (   975,141)
 Purchase of FHLB stock      (    96,900)   (   147,700)   (    99,900)
 Cash and cash equivalents
  received in bank
  acquisition                          -      8,773,744              -

Net Cash Provided from
 Investing Activities       $(19,292,636)  $( 7,806,186)  $( 7,799,363)

Cash Flows From Financing
 Activities:
 Net increase (decrease) in
  demand deposits, NOW and
  money markets             $  2,335,042   $  2,858,872   $  1,141,372
 Net increase in savings
  and time deposits           13,574,063      4,334,112      9,620,328
 Proceeds from borrowing         320,043      2,000,000        825,000
 Payments on borrowing       (   480,000)   (   469,126)   (   140,833)
 Dividends paid              (   239,681)   (   219,849)   (   222,889)
 Payments to retire stock    (    49,750)   (    21,440)             -
 Increase in federal funds
  purchased                      150,000              -              -

Net Cash Provided From
 Financing Activities       $ 15,609,717   $  8,482,569   $ 11,222,978


The accompanying notes are an integral part of these financial statements.

                          SOUTH BANKING COMPANY
                            ALMA,     GEORGIA
              CONSOLIDATED STATEMENT OF CASH FLOWS (con't)


                            Year Ended     Year Ended     Year Ended
                            December 31,   December 31,   December 31,
                            1997           1996           1995
Net increase (decrease) in
 cash and cash equivalents  $( 1,284,115)  $  2,612,995   $  5,021,968

Cash and Cash Equivalents
 at Beginning of Year         20,732,559     18,119,564     13,097,596

Cash and Cash Equivalents
 at End of Year             $ 19,448,444   $ 20,732,559   $ 18,119,564


The accompanying notes are an integral part of these financial statements.

                         SOUTH BANKING COMPANY
                           ALMA,     GEORGIA
                     NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1997

Note 1.  Significant Accounting Policies

              The accounting and reporting policies of South Banking
         Company, Inc. and its subsidiaries conform with generally
         accepted accounting principles and with practices within the
         banking industry.

         (a)  Basis of Presentation

              During 1996, Pineland State Bank was acquired by South
         Banking Company.  The transaction was accounted for using the
         purchase method.

         (b)  Principles of Consolidation

              The consolidated financial statements include the accounts
         of South Banking Company, Alma, Georgia (The Bank) and its
         wholly owned bank subsidiaries, Alma Exchange Bank, Alma,
         Georgia; Peoples State Bank, Baxley, Georgia; Citizens State
         Bank, Kingsland, Georgia and Pineland State Bank, Metter,
         Georgia; and its wholly owned computer center, Bankers' Data
         Services, Inc., Alma, Georgia.  All significant intercompany
         transactions and balances have been eliminated in
         consolidation.

         (c)  Nature of Operations:

              The Banks provide a variety of banking services to
         individuals and businesses through its offices in Alma,
         Georgia; Kingsland, Georgia; Baxley, Georgia; and Metter,
         Georgia.  Its primary source of revenue is loans to customers
         who are primarily low to middle income individuals and small to
         mid size businesses.

         (d)  Use of Estimates:

              The preparation of financial statements 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.

                         SOUTH BANKING COMPANY
                           ALMA,     GEORGIA
                     NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1997


Note 1.  Significant Accounting Policies (con't)

         (d)  Use of Estimates (con't)

              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 Bank 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.

         (e)  Securities:

              The Bank adopted FASB 115 effective January 1, 1994.  The
         Bank's investments in securities are classified in two
         categories and accounted for as follows.

           Securities to be Held to Maturity.  Bonds, notes and
            debentures for which the Bank has the positive intent and
            ability to hold to maturity are reported at cost, adjusted
            for amortization of premiums and accretion of discounts
            which are recognized in interest income using the interest
            method over the period to maturity.

           Securities Available for Sale.  Securities available for
            sale consist of bonds, notes, debentures and certain equity
            securities not classified as trading securities or as
            securities to be held to maturity.

              Declines in fair value of individual held-to-maturity and
         available-for-sale securities below their cost that are other
         than temporary have resulted in write-downs of the individual
         securities to their fair value.  The related write-downs have
         been included in earnings as realized losses.

              Unrealized holding gains and losses, net of tax, on
         securities available for sale are reported as a net amount in
         a separate component of shareholders' equity until realized.

              Gains and losses on the sale of securities available-for-
         sale are determined using the specific-identification method.

                         SOUTH BANKING COMPANY
                           ALMA,     GEORGIA
                     NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1997


Note 1.  Significant Accounting Policies (con't)

         f. Loans Receivable:

              Loans receivable that management has the intent and
         ability to hold for the foreseeable future or until maturity or
         pay-off are reported at their outstanding principal adjusted
         for any charge-offs, the allowance for loan losses, and any
         deferred fees or costs on originated loans and unamortized
         premiums or discounts on purchased loans.

              Loan origination fees and certain direct origination costs
         are capitalized and recognized as an adjustment of the yield of
         the related loan.

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

         (g)  Allowances for Loan Losses:

              The allowance for loan losses is increased by charges to
         income and decreased by charge-offs (net of recoveries).
         Management's periodic evaluation of the adequacy of the
         allowance is based on the Bank's past loan loss experience,
         known and inherent risks in the portfolio, adverse situations
         that may affect the borrower's ability to repay, the estimated
         value of any underlying collateral, and current economic
         conditions.

         (h)  Premises and Equipment:

              Premises and equipment are stated at cost, less
         accumulated depreciation and amortization.  The provision for
         depreciation and amortization is computed generally by the
         straight-line method.

         (i)  Other Real Estate (ORE)

              Real estate acquired in satisfaction of a loan and in-
         substance foreclosures are reported in other assets.  In-
         substance foreclosures are properties in which a borrower with
         little or no equity in the collateral, effectively abandons
         control of the property or has no economic interest to continue
         involvement in the property.  The borrower's ability to rebuild
         equity based on current financial conditions also is considered
         doubtful.  Properties acquired by foreclosure or deed in lieu

                         SOUTH BANKING COMPANY
                           ALMA,     GEORGIA
                     NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1997


Note 1.  Significant Accounting Policies (con't)

         (i)  Other Real Estate (ORE) (con't)

         of foreclosure and properties classified as in-substance
         foreclosures are transferred to ORE and recorded at the lower
         of cost or fair market value based on appraised value at the
         date actually or constructively received.  Loan losses arising
         from the acquisition of such property are charged against the
         allowance for loan losses.  Losses on ORE due to subsequent
         valuation adjustments are recorded on a specific property
         basis.

         (j)  Income Taxes

              Deferred tax assets and liabilities are reflected at
         currently enacted income tax rates applicable to the period in
         which the deferred tax assets or liabilities are expected to be
         realized or settled.  As changes in tax laws or rates are
         enacted, deferred tax assets and liabilities are adjusted
         through the provision for income taxes.  The FASB recently
         issued pronouncement on accounting for income taxes which
         require a change to the liabilities method for accounting for
         deferred taxes.  The statement includes several other
         provisions that may affect the bank's accounting for income
         taxes and allows restatement of as many years as deemed
         appropriate.  The bank adopted the new statement which required
         a cumulative effect adjustment of $97,693 in 1993.

              The bank files a consolidated federal income tax return
         with its subsidiaries.  Each subsidiary provides for income
         taxes on a separate return basis and remits to the parent
         company amounts determined to be currently payable.

         (k)  Intangibles

              The intangibles (Goodwill) recorded by the Company in the
         acquisition of Pineland State Bank are being amortized on a
         straight line basis over a eight year period.

         (l)  Earnings Per Share

              Earnings per share are based on the weighted average
         number of shares outstanding.

                         SOUTH BANKING COMPANY
                           ALMA,     GEORGIA
                     NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1997


Note 1.  Significant Accounting Policies (con't)

         (m)  Cash Flow Information

              For purposes of the statements of cash flows, the Company
         considers cash, federal funds sold and due from banks as cash
         and cash equivalents.  Cash paid during the years ended
         December 31, 1997, 1996 and 1995 for interest was $5,526,269,
         $4,765,653 and $3,026,256, respectively.  Total income tax
         payments during 1997, 1996 and 1995 were $893,316, $727,000 and
         $666,401, respectively.

Note 2.  Investment Securities

              The amortized cost and estimated market values of
         investments in debt securities are as follows:

                                 Gross        Gross
                     Amortized   Unrealized   Unrealized    Fair
                     Cost        Gains        Losses        Value
Securities available
 for sale -

December 31, 1997:

 U.S. Government
  and agency
  securities        $12,480,161  $    46,263  $    27,628  $12,498,796
 State and municipal
  securities          1,748,433       39,839            3    1,788,269
 Mortgage backed
  securities          1,044,885       13,181        3,141    1,054,925

Totals              $15,273,479  $    99,283  $    30,772  $15,341,990

December 31, 1996:

 U.S. Government
  and agency
  securities        $10,411,873  $    27,035  $    57,721  $10,381,187
 State and municipal
  securities          1,575,173       16,883          734    1,591,322
 Mortgage backed
  securities          1,478,983        3,945        6,149    1,476,779

Totals              $13,466,029  $    47,863  $    64,604  $13,449,288

                          SOUTH BANKING COMPANY
                            ALMA,     GEORGIA
                      NOTES TO FINANCIAL STATEMENTS
                            DECEMBER 31, 1997


Note 2.  Investment Securities (con't)

                                 Gross        Gross
                     Amortized   Unrealized   Unrealized    Fair
                     Cost        Gains        Losses        Value
Securities to be
 held to maturity -

December 31, 1997:

 U.S. Government
  and agency
  securities         $1,398,742  $     3,132  $     1,156   $1,400,718
 State and municipal
  securities            181,692        6,555            -      188,247
 Mortgage backed
  securities             25,133          326            -       25,459

Totals               $1,605,567  $    10,013  $     1,156   $1,614,424

December 31, 1996:

 U.S. Government
  and agency
  securities        $ 2,000,103  $     2,081  $     5,726  $ 1,996,458
 State and municipal
  securities            296,420        5,104            -      301,524
 Mortgage backed
  securities             67,221          680           51       67,850

Totals              $ 2,363,744  $     7,865  $     5,777  $ 2,365,832

              Gross realized gains on sales and losses of available-for-
         sale securities were $-0- and $-0- in 1997, respectively and
         $9,941 and $25,677, respectively  for 1996 and $21,483 and
         $344, respectively in 1995.

              Assets, principally securities carried at approximately
         $10,425,725 at December 31, 1997 and $6,833,268 at December 31,
         1996, were pledged to secure public deposits and for other
         purposes required or permitted by law.

              The scheduled contractual maturities of securities to be
         held to maturity and securities available for sale at December
         31, 1997 were as follows:

                           SOUTH BANKING COMPANY
                             ALMA,     GEORGIA
                       NOTES TO FINANCIAL STATEMENTS
                             DECEMBER 31, 1997

Note 2.  Investment Securities (con't)

                       Securities to be        Securities
                       Held to Maturity        Available for Sale
                       Amortized               Amortized
                       Cost        Fair Value  Cost         Fair Value
     Due in one year
      or less          $1,159,718  $1,160,145  $   715,618  $   715,878
     Due from one year
      to five years       399,152     403,652   12,444,904   12,479,282
     Due from five
      years to ten
      years                     -           -    1,241,330    1,241,770
     Due after ten
      years                46,697      50,627      871,627      905,060

                       $1,605,567  $1,614,424  $15,273,479  $15,341,990

          The market value of State and Other Political Subdivision
     Obligations is established with the assistance of an outside bond
     department and is based on available market data which often
     reflects transactions of relatively small size and is not
     necessarily indicative of prices at which large amounts of
     particular issues could readily be sold or purchased.

         Expected maturities will differ from contractual maturities
     because issuers may have the right to call on prepay obligations
     with or without call on prepayment penalties.

Note 3.  Loans

          The composition of the bank's portfolio was as follows:

                                            1997          1996
         Commercial, financial and
          agricultural                      $ 29,727,607  $ 19,565,455
         Real estate - mortgage               52,544,224    53,813,217
         Real estate - construction            6,967,737     3,798,037
         Installment and consumer             17,285,654    11,869,817
           Total Loans                      $106,525,222  $ 89,046,526
         Less: Unearned discount             (   149,418)  (   150,457))
               Reserve for loan losses       ( 1,821,680)  ( 1,781,013))

         Loans, net                         $104,554,121  $ 87,115,056

                          SOUTH BANKING COMPANY
                            ALMA,     GEORGIA
                      NOTES TO FINANCIAL STATEMENTS
                            DECEMBER 31, 1997

Note 3.  Loans (con't)

              The Company and its subsidiaries have granted loans to the
         officers and directors of the Company, its subsidiaries and to
         their associates.  Related party loans are made on
         substantially the same terms, including interest rates and
         collateral, as those prevailing at the time for comparable
         transactions with unrelated persons and do not involve more
         than normal risk of collectibility.  The aggregate dollar
         amount of these loans was $586,758 and $789,805 at December 31,
         1997 and 1996.  During 1997, $402,886 of new loans were made,
         and repayments totaled $605,933.

Note 4.  Reserve for Loan Losses

              Transactions in the reserve for loan losses are summarized
         as follows:
                               Year Ended    Year Ended    Year Ended
                               December 31,  December 31,  December 31,
                               1997          1996          1995
         Balance at beginning
          of period            $ 1,781,013   $   994,027   $   974,866
         Additions:  Provision
          charged to operating
          expenses             $   179,500   $   201,589   $    62,200
         Balance from bank
          acquisition                    -       570,707             -

                               $   179,500   $   772,296   $    62,200
         Deductions: Loans
          charged off          $   263,945   $   259,264   $   189,371
          Less: recoveries         125,112       273,954       146,332

                               $   138,833   $(   14,690)  $    43,039
         Balance at end of
          period               $ 1,821,680   $ 1,781,013   $   994,027

              Additions to the reserve for loan losses are based on
         management's evaluation of the loan portfolio under current
         economic conditions, past loan loss experience and such other
         factors which, in management's judgment, deserve recognition in
         estimating loan losses.  Loans are charged off when, in the
         opinion of management, such loans are deemed to be
         uncollectible.  Recognized losses are charged to the reserve
         and subsequent recoveries added.

                         SOUTH BANKING COMPANY
                           ALMA,     GEORGIA
                     NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1997


Note 4.  Reserve for Loan Losses (con't)

              Loans having carrying values of $138,261 and $185,865 were
         transferred to foreclosed real estate in 1997 and 1996,
         respectively.

              The bank is not committed to lend additional funds to
         debtors whose loans have been modified.

Note 5.  Deposits

              The aggregate amount of short-term jumbo CDs, each with a
         minimum denomination of $100,000, was approximately $16,735,532
         in 1997 and $13,545,611 in 1996.

              At December 31, 1997, the scheduled maturities of CDs are
         as follows:
                    1998                     $72,670,608
                    1999 and 2000              5,501,100
                    2001 and 2002              1,534,900
                    2003 and thereafter                -

                                             $80,706,608
Note 6.  Premises and Equipment

          A summary of the account:
                                             Year Ended    Year Ended
                                             December 31,  December 31,
                                             1997          1996
     Land                                    $   448,149   $   448,149
     Buildings                                 3,199,752     2,914,115
     Furniture and equipment                   3,776,721     3,581,514
                                             $ 7,424,622   $ 6,943,778
     Less:  Accumulated depreciation           3,346,120     2,948,393

                                             $ 4,078,502   $ 3,995,385

          Depreciation expense was $547,940 in 1997, $516,629 in 1996
     and $418,618 in 1995.

                         SOUTH BANKING COMPANY
                           ALMA,     GEORGIA
                     NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1997

Note 7.  Borrowings

          Data relating to borrowing is as follows:

                                             Year Ended    Year ended
                                             December 31,  December 31,
                                             1997          1996
     Parent company -

      Note payable in 10 annual payments
       of $350,000.  Interest is payable
       quarterly and accrues at prime rate
       and is secured by subsidiary bank
       stock.                               $  2,800,000  $  3,150,000

     Subsidiary - Bankers Data Services,
      Inc.

     Note payable in 60 monthly principal
      amount of $10,833.33 plus interest.
      Interest accrues at prime rate basis.
      Computer equipment is pledged as
      collateral for loan.                             -       357,279

     Note payable in 72 monthly principal
      payments of $8,205. Interest accrues
      at prime rate minus one half and
      is payable monthly.  Computer
      equipment is pledged as collateral.        547,322             -

          Following are maturities of long term debt for each of the
     next five years.

                    1998                    $    448,460
                    1999                         448,460
                    2000                         448,460
                    2001                         448,460
                    2002                         448,460


Note 8.  Income Taxes

          Income tax expense (benefit) was $767,811 for 1997, (an
     effective rate of 33.2%), $662,078 for 1996 (an effective rate of
     31.6%) and $509,746 for 1995 (an effective rate of 33.9%). The
     actual expense for 1997, 1996 and 1995 differs from the "expected"
     tax expense for those years (computed by applying the federal
     corporate rate of 34% as follows:


                          SOUTH BANKING COMPANY
                            ALMA,     GEORGIA
                      NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1997


Note 8.  Income Taxes (con't)

                               1997          1996          1995
     Computed "expected"
      tax expenses             $   786,801   $   711,417   $   591,642
     Alternative minimum tax             -             -             -
     Decrease resulting from:
      Surtax exemption                   -             -             -
     Tax exempt interest
      on securities and loans   (   65,118)   (   63,613)   (   39,927)
     Other, net                     46,128        14,274        38,031

                               $   767,811   $   662,078   $   589,746

          The current and deferred amounts of these tax provisions were
     as follows:
                               1997          1996          1995

         Current               $   793,779   $   764,797   $   481,329
         Deferred               (   25,968)   (  102,719)      108,417

                               $   767,811   $   662,078   $   589,746

              The tax effects of each type of income and expense item
         that gave rise to deferred taxes are:

                                             December 31   December 31,,
                                             1997          1996
         Net unrealized appreciation on
          securities available for sale      $(   22,553)  $     5,691
         Depreciation                         (  227,204)   (  256,484)
         Deferred loan fees                       50,801        51,203
         Allowance for credit losses             334,555       321,666
         Other                                     7,125        15,926
         Purchase accounting treatment        (   59,297)   (   59,297)

         Net deferred tax asset (liability)  $    83,427   $    78,705

Note 9.  Employee Benefit Plans

              The Company maintains a 401K deferred compensation plan
         for all subsidiaries effective January 1, 1993.  The Company
         elected to match 75% of employee contributions for 1997 and 50%
         of employee contributions for 1996 and 1995.  The expense to
         the Company for 1997, 1996 and 1995 was $89,746, $37,009, and
         $32,256, respectively.

                         SOUTH BANKING COMPANY
                           ALMA,     GEORGIA
                     NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1997

Note 10. Leases

              The Pineland State Bank leases 5.35 acres of land in
         Candler County under an operating lease expiring December 31,
         2054 with an option to lease the land for an additional 75
         years.

              Minimum future rental payments under non-cancelable
         operating lease having remaining term in excess of 1 year as of
         December 31, 1997 for each of the next 5 years and in the
         aggregate is:

                    Year Ended
                    1998                     $     4,000
                    1999                           4,000
                    2000                           4,000
                    2001                           4,000
                    2002                           4,000
                    Subsequent to 2002           208,000

                    Total minimum future
                     rental payments         $   228,000

              In June, 1997, the parties amended the lease to allow
         Pineland State Bank to sublet part of the property and in
         consideration, the landlord will receive 50% of gross rental
         under the sublease in addition to the minimum amount above.

Note 11. Liabilities

         Standby Letters of Credit.  These transactions are used by the
         Company's customers as a means of improving their credit
         standing in their dealings with others.  Under these
         agreements, the Company agrees to honor certain financial
         commitments in the event that its customers are unable to do
         so.  As of December 31, 1997 the Company had $722,000 in
         outstanding standby letters of credit.

         Loan Commitments.  As of December 31, 1997, the Company had
         commitments outstanding to extend credit totaling $14,736,785.
         These commitments generally require the customers to maintain
         certain credit standards.  Management does not anticipate any
         material losses as a result of these commitments.


                         SOUTH BANKING COMPANY
                           ALMA,     GEORGIA
                     NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1997


Note 12.  Financial Instruments

              The Bank is a party to financial instruments with off-
         balance-sheet risk in the normal course of business to meet the
         financing needs of its customers and to reduce its own exposure
         to fluctuations in interest rates.  These financial instruments
         include commitments to extend credit and standby letters of
         credit and financial guarantees.  Those instruments involve, to
         varying degrees, elements of credit and interest-rate risk in
         excess of the amount recognized in the consolidated statements
         of financial condition.  The contract or notional amounts of
         those instruments reflect the extent of the Bank's involvement
         in particular classes of financial instruments.

              The Bank's exposure to credit loss in the event of
         nonperformance by the other party to the financial instrument
         for commitments to extend credit, standby letters of credit,
         and financial guarantees written is represented by the
         contractual notional amount of those instruments.  The Bank
         uses the same credit policies in making commitments and
         conditional obligations as it does for on-balance-sheet
         instruments.

         Commitments to Extend Credit and Financial Guarantees.

              Commitments to extend credit are agreements to lend to a
         customer as long as there is no violation of any condition
         established in the contract.  Commitments generally have fixed
         expiration dates or other termination clauses and may require
         payment of a fee.  Since many of the commitments are expected
         to expire without being drawn upon, the total commitment
         amounts do not necessarily represent future cash requirements.
         The Bank evaluates each customer's credit worthiness on a case-
         by-case basis.  The amount of collateral obtained, if it is
         deemed necessary by the Bank upon extension of credit, is based
         on management's credit evaluation of the counterparty.
         Collateral held varies but may include accounts receivable;
         inventory, property, plant and equipment; and income-producing
         commercial properties.

              Standby letters of credit and financial guarantees written
         are conditional commitments issued by the Bank to guarantee the
         performance of a customer to a third party.  Those guarantees
         are primarily issued to support private borrowing arrangements,
         including commercial paper and similar transactions.  The
         credit risk involved in issuing letters of credit is
         essentially the same as that involved in extending loan
         facilities to customers.  The Bank holds various assets as
         collateral supporting those commitments for which collateral is
         deemed necessary.

                         SOUTH BANKING COMPANY
                           ALMA,     GEORGIA
                     NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1997


Note 12.  Financial Instruments (con't)

              The Bank has not been required to perform on any financial
         guarantees during the past two years.  The Bank has not
         incurred any losses on its commitments in 1997, 1996 or 1995.

Note 13. Restrictions on Subsidiary Dividends, Loans or Advances

              Dividends are paid by the Company from its assets which
         are mainly provided by dividends from the Banks. However,
         certain restrictions exist regarding the ability of the Banks
         to transfer funds to the Company in the form of cash dividends,
         loans or advances.  The approval of the Georgia Department of
         Banking is required to pay dividends in excess of 50% of the
         Bank's net profits for the prior year.

              Under Federal Reserve regulation, the Bank also is limited
         as to the amount it may loan to its affiliates, including the
         Company, unless such loans are collateralized by specified
         obligations.  At December 31, 1997, the maximum amount
         available for transfer from the Bank to the Company in the form
         of loans approximated 20% of consolidated net equity.

Note 14.  Restrictions on Cash and Due from Banks

              The bank is required to maintain reserve balances with the
         Federal Reserve Bank.  The average amount of those reserve
         balances for the year ended December 31, 1997 was approximately
         $-0-.

Note 15.  Related Party Transactions

              The Company has entered into a split dollar life insurance
         arrangement with a director and substantial shareholder.  The
         Company and director's trust each contribute toward the payment
         of premium for life insurance policy.  The Company records its
         contribution at the present value of anticipated future return
         or total cash surrender value of policy whichever is higher;
         however, the carrying amount cannot exceed the amount of
         premiums paid by the Company.  The Company will receive all
         reimbursement from anticipated withdrawal of cash surrender
         value or from the proceeds of policy in the event of the death
         of the director.  All cash surrender value of the policy
         accrues to the benefit of the Company until such time as the
         cash surrender value exceeds advances made by the Company.  As
         of December 31, 1997, $1,130,596 is carried in other assets
         related to this arrangement.

                         SOUTH BANKING COMPANY
                           ALMA,     GEORGIA
                     NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1997



Note 16.  Fair Value of Financial Instruments

              The following table shows the estimated fair value and the
         related carrying values of South Banking Company's financial
         instruments at December 31, 1997 and 1996.  Items which are not
         financial instruments are not included.

                                                        1997
                                              Carrying     Estimated
                                              Amount       Fair Value
        Cash and due from financial
         institutions                         $ 8,128,444  $ 8,128,444
        Interest earning balances with
         financial institutions                 1,280,000    1,280,000
        Federal funds                          10,040,000   10,040,000
        Securities available for sale          15,341,990   15,341,990
        Securities held to maturity             1,605,567    1,614,474
        Federal Home Loan Bank stock              344,500      344,500
        Georgia Bankers Bank - stock              547,283      716,480
        Loans - net of allowances             104,554,124  105,099,123
        Demand and savings deposits            52,895,484   52,895,484
        Time deposits                          79,706,608   80,635,252

                                                        1996
                                              Carrying     Estimated
                                              Amount       Fair Value
        Cash and due from financial
         institutions                         $ 6,863,559  $ 6,863,559
        Interest earning balances with
         financial institutions                 1,886,000    1,886,000
        Federal funds                          11,983,000   11,983,000
        Securities available for sale          13,449,288   13,449,288
        Securities held to maturity             2,363,744    2,365,832
        Federal Home Loan Bank stock              247,600            -
        Georgia Bankers Bank - stock              547,283            -
        Loans - net of allowances              87,115,056   86,967,948
        Demand and savings deposits            42,683,587   42,683,587
        Time deposits                          66,883,966   67,045,456

             For purposes of the above disclosures of estimated fair
        value, the following assumptions were used as of December 31,
        1997 and 1996.  The estimated fair value for cash and due from
        financial institutions and federal funds sold are considered to
        approximate cost.  The estimated fair value for interest-earning
        balances with financial institutions, securities available-for-
        sale, securities held-to-maturity and Georgia Bankers Bank stock
        are based on quoted market values for the individual securities
        or for equivalent securities.  The estimated fair value for

                         SOUTH BANKING COMPANY
                           ALMA,     GEORGIA
                     NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1997

Note 16.  Fair Value of Financial Instruments (con't)

        commercial loans is based on estimates of the difference in
        interest rates the Company would charge the borrowers for
        similar such loans with similar maturities made at December 31,
        1997 and 1996, applied for an estimated time period until the
        loan is assumed to reprice or be paid.  The estimated fair value
        for other loans is based on estimates of the rate the Company
        would charge for similar such loans at December 31, 1997 and
        1996, applied for the time period until estimated repayment.
        The estimated fair value for individual retirement account
        deposits and time deposits is based on estimates of the rate the
        Company would pay on such deposits or borrowings at December 31,
        1997 and 1996, applied for the time period until maturity.  The
        estimated fair value for other financial instruments and off-
        balance-sheet loan commitments are considered to approximate
        cost at December 31, 1997 and 1996.

             While these estimates of fair value are based on
        management's  judgment of the most appropriate factors, there is
        no assurance that were the Company to have disposed of such
        items at December 31, 1997 and 1996, the estimated fair values
        would necessarily have been achieved at that date, since market
        values may differ depending on various circumstances.  The
        estimated fair values at December 31, 1997 and 1996 should not
        necessarily be considered to apply at subsequent dates.

             In addition, other assets and liabilities of the Company
        that are not defined as financial instruments are not included
        in the above disclosures, such as property and equipment.  Also,
        non-financial instruments typically not recognized in the
        financial statements nevertheless may have value but are not
        included in the above disclosures.  These include among other
        items, the estimated earnings power of core deposit accounts,
        the earnings potential of loan servicing rights, the trained
        work force, customer goodwill and similar items.

Note 17.  Regulatory Matters

             The Company and its subsidiaries are subject to various
        regulatory capital requirements administered by the federal
        banking agencies.  Failure to meet minimum capital requirements
        can initiate certain mandatory - and possibly additional
        discretionary - actions by regulators that, if undertaken, could
        have a direct material effect on the Company's financial
        statements.  Under capital adequacy guidelines and the
        regulatory framework for prompt corrective action, the Company
        must meet specific capital guidelines that involve quantitative
        measures of the Company's assets, liabilities and certain off-

                         SOUTH BANKING COMPANY
                           ALMA,     GEORGIA
                     NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1997


Note 17. Regulatory Matters (con't)

        balance-sheet items as calculated under regulatory accounting
        practices.  The Company's capital amounts and classification are
        also subject to qualitative judgments by the regulators about
        components, risk weightings and other factors.

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

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

             The Company and its subsidiaries' actual capital amounts
        and ratios are also presented in the table.

                                                    To Be Well
                                                    Capitalized Under
                                 For Capital        Prompt Corrective
                    Actual       Adequacy Purposes  Action Provisions:
               Amount    Ratio   Amount      Ratio  Amount       Ratio
As of December 31, 1997:

Total Capital
 (to Risk
 Weighted
 Assets)
 Consolidated  $ 13,580  12.0%   $    9,052  8.0%    $     N/A   N/A%
 Subsidiary -
  Alma            5,720  13.9         3,336  8.0         4,170  10.0
 Subsidiary -
  Baxley          5,036  15.1         2,669  8.0         3,337  10.0
 Subsidiary -
  Kingsland       1,989  14.7         1,080  8.0         1,350  10.0
 Subsidiary -
  Metter          2,845  11.0         2,069  8.0         2,586 10.0


                          SOUTH BANKING COMPANY
                            ALMA,     GEORGIA
                      NOTES TO FINANCIAL STATEMENTS
                            DECEMBER 31, 1997


Note 17. Regulatory Matters (con't)
                                                    To Be Well
                                                    Capitalized Under
                                 For Capital        Prompt Corrective
                    Actual       Adequacy Purposes  Action Provisions:
               Amount    Ratio   Amount      Ratio  Amount       Ratio
As of December 31, 1997 (con't):

Tier I Capital
 (to Risk Weighted
  Assets)
 Consolidated  $ 12,137  10.7%    $  4,526  4.0%    $     N/A    N/A%
 Subsidiary -
  Alma            5,208  12.6         1,668  4.0         2,502   6.0
 Subsidiary -
  Baxley          4,603  13.8         1,335  4.0         2,002   6.0
 Subsidiary -
  Kingsland       1,817  13.5           540  4.0           810   6.0
 Subsidiary -
  Metter          2,519   9.7         1,199  4.0         1,552   6.0

Tier I
 Capital (to
  Average Assets)
 Consolidated  $ 12,137   8.4%     $  5,743  4.0%     $    N/A    N/A%
 Subsidiary -
  Alma            5,208   9.5         2,188  4.0         2,736   5.0
 Subsidiary -
  Baxley          4,603  10.9         1,694  4.0         2,118   5.0
 Subsidiary -
  Kingsland       1,817  11.0           660  4.0           825   5.0
 Subsidiary -
  Metter          2,519   8.4         1,199  4.0         1,499   5.0

As of December 31, 1996:

Total Capital
 (to Risk Weighted
 Assets)
 Consolidated  $ 11,955  12.4%   $    7,714  8.0%    $     N/A    N/A%
 Subsidiary -
  Alma            5,262  15.7         2,685  8.0         3,357  10.0
 Subsidiary -
  Baxley          4,542  14.1         2,574  8.0         3,217 10.0
 Subsidiary -
  Kingsland       1,873  16.3           918  8.0         1,147  10.0
 Subsidiary -
  Metter          2,626  14.2         1,483  8.0         1,854 10.0

                          SOUTH BANKING COMPANY
                            ALMA,     GEORGIA
                      NOTES TO FINANCIAL STATEMENTS
                            DECEMBER 31, 1997


Note 17. Regulatory Matters (con't)
                                                    To Be Well
                                                    Capitalized Under
                                 For Capital        Prompt Corrective
                    Actual       Adequacy Purposes  Action Provisions:
               Amount    Ratio   Amount      Ratio  Amount       Ratio
As of December 31, 1996(con't):

Tier I Capital
 (to Risk
  Weighted
  Assets)
 Consolidated  $ 10,763  11.2%    $  3,857  4.0%    $     N/A    N/A%
 Subsidiary -
  Alma            4,841  14.4         1,342  4.0         2,014   6.0
 Subsidiary -
  Baxley          4,138  12.9         1,287  4.0         1,930  6.0
 Subsidiary -
  Kingsland       1,742  15.2           459  4.0           688   6.0
 Subsidiary -
  Metter          2,390  12.9           741  4.0         1,113   6.0

Tier I
 Capital (to
  Average Assets)
 Consolidated  $ 10,763   8.3%     $  4,305  4.0%     $    N/A    N/A%
 Subsidiary -
  Alma            4,841  10.0         1,929  4.0         2,411   5.0
 Subsidiary -
  Baxley          4,138  10.6         1,557  4.0         1,946   5.0
 Subsidiary -
  Kingsland       1,742  12.2           569  4.0           711   5.0
 Subsidiary -
  Metter          2,390   8.8         1,082  4.0         1,352   5.0

Note 18. Acquisitions

               On January 11, 1996, South Banking Company consummated an
          agreement to acquire the stock of Pineland State Bank for
          cash.  The total acquisition cost was $2,745,716.  Funding for
          the acquisition was through a loan from Georgia Bankers Bank.


                      SOUTH BANKING COMPANY
                    (PARENT CORPORATION ONLY)

                        ALMA,     GEORGIA

                      FINANCIAL STATEMENTS

                        DECEMBER 31, 1997


                   REPORT OF INDEPENDENT ACCOUNTANTS


Board of Directors
South Banking Company
Alma, Georgia 31510

     Under date of February 2, 1998, we reported on the consolidated
balance sheets of South Banking Company, as of December 31, 1997 and
1996, and the related statements of income, cash flows and
stockholders' equity for the three years in the period ended December
31, 1997.

     In connection with our examination of the aforementioned
consolidated financial statements, we also audited the accompanying
balance sheets (Parent Corporation Only) as of December 31, 1997 and
1996 and the related statements of income, cash flows and stockholders'
equity for each of the three years in the period ended December 31,
1997.  These financial statements are the responsibility of the
company's management.  Our responsibility is to express an opinion on
the financial statements based on our audit.

     We conducted our audit in accordance with generally accepted
auditing standards.  Those standards require that we plan and perform
the audit 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 financial statements referred to above present
fairly, in all material respects, the financial position of South
Banking Company (Parent Corporation Only) as of December 31, 1997 and
1996, and the results of its operations, stockholders' equity and its
cash flows for the three years then ended in conformity with generally
accepted accounting principles.

                                  Respectfully submitted,

                                  H. H. BURNET & COMPANY, P. C.
February 2, 1998
                          SOUTH BANKING COMPANY
                        (PARENT CORPORATION ONLY)
                            ALMA,     GEORGIA
                             BALANCE SHEETS

                                             December 31,  December 31,
                                             1997          1996

                                 ASSETS
Cash and due from banks
 Interest bearing                            $   414,399   $   418,716
 Non-interest bearing                             16,789        12,761
Investment in bank's subsidiaries             14,506,089    13,536,590
Investment in nonbank subsidiaries               181,759       226,431
Investment - Pineland State Bank - at cost             -             -
Other assets                                      60,428        98,449
Costs in excess of book value                          -         1,896
Prepaid income taxes                             180,411        54,905

Total Assets                                 $15,359,875   $14,349,748

                  LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable                             $       186   $       186
Other liabilities                                      -             -
Accrued income taxes                                   -             -
Notes payable                                  2,800,000     3,150,000
Due to subsidiaries                               63,731        15,313

Total Liabilities                            $ 2,863,917   $ 3,165,499

Stockholders' Equity
Common stock of $1 par value;
 authorized 1,000,000 shares;
 issued and outstanding, 1997 and 1996
 $399,500 and 403,500, respectively          $   399,500   $   403,500
Surplus                                        3,070,831     3,116,581
Undivided profits                              8,981,846     7,675,216
Unrealized gain (loss) on securities
 available for sale (net)                         43,781    (   11,048)

Total Stockholders' Equity                   $12,495,958   $11,184,249

Total Liabilities and Stockholders' Equity   $15,359,875   $14,349,748

The accompanying note is an integral part of these financial statements.

                          SOUTH BANKING COMPANY
                        (PARENT CORPORATION ONLY)
                            ALMA,     GEORGIA
                           STATEMENT OF INCOME


                               Year Ended    Year Ended    Year Ended
                               December 31   December 31,  December 31,,
                               1997          1996          1995
Income
Dividends from bank
 subsidiaries                  $   893,272   $   854,987   $   773,430
Miscellaneous income                   500           845             -
Interest income                     19,276        32,841        11,692
Management fees                    101,500       101,000        79,400

Total Income                   $ 1,014,548   $   989,673   $   864,522

Expenses
Salaries                       $    73,157   $    65,000   $    73,163
Amortization                        15,421        24,346         6,726
Interest                           260,532       256,725        87,051
Professional fees                   15,358        15,150        46,079
Other                               84,542        67,014        49,527

Total Expenses                 $   449,010   $   428,235   $   262,546

Income before income taxes
 and equity in undistributed
 income (loss) of subsidiaries $   565,538   $   561,438   $   601,976
Provision (credit) for
 income taxes                   (  110,776)   (   99,798)   (   57,665))

Income before equity in
 undistributed income in
 subsidiaries                  $   676,314   $   661,236   $   659,641

Equity in undistributed
 income of bank subsidiaries   $   914,669   $   720,064   $   440,715
Equity in undistributed
 income (loss) of nonbank
 subsidiaries                   (   44,672)       49,024        50,021

                               $   869,997   $   769,088   $   490,736

Net Income                     $ 1,546,311   $ 1,430,324   $ 1,150,377


The accompanying note is an integral part of these financial statements.

                          SOUTH BANKING COMPANY
                            ALMA,     GEORGIA
                    STATEMENT OF STOCKHOLDERS' EQUITY


                         Common                      Undivided
                         Stock         Surplus       Profits
Balance,
 December 31, 1994       $   405,283   $ 3,136,238   $ 5,537,253
 Net income                        -             -     1,150,377
 Cash dividends                    -             -    (  222,889)
 Unrealized gain
  (loss) on securities
  available for sale               -             -             -

Balance,
 December 31, 1995       $   405,283   $ 3,136,238   $ 6,464,741
 Net income                        -             -     1,430,324
 Cash dividends                    -             -    (  219,849)
 Unrealized gain
  (loss) on securities
  available for sale               -             -             -
 Redemption of shares     (    1,783)   (   19,657)            -

Balance,
 December 31, 1996       $   403,500   $ 3,116,581   $ 7,675,216
 Net income                        -             -     1,546,311
 Cash dividends                    -             -    (  239,681)
 Unrealized gain
  (loss) on securities
  available for sale               -             -             -
 Redemption of shares     (    4,000)   (   45,750)            -

Balance,
 December 31, 1997       $   399,500   $ 3,070,831   $ 8,981,846


    Unrealized
    Gain
    (Loss) on
    Securities        Total
    Available         Stockholders
    for Sale          Equity

    $(   80,997)       $ 8,997,777
              -          1,150,377
              -        (   222,889)


        123,588            123,588


    $    42,591        $10,048,853
              -          1,430,324
              -         (  219,849)


     (   53,639)        (   53,639)
              -         (   21,440)


    $(   11,048)       $11,184,249
              -          1,546,311
              -         (  239,681)


         54,829             54,829
              -         (   49,750)


    $    43,781        $12,495,958

The accompanying note is an integral part of these financial statements.

                          SOUTH BANKING COMPANY
                        (PARENT CORPORATION ONLY)
                            ALMA,     GEORGIA
                         STATEMENT OF CASH FLOWS


                               Year Ended    Year Ended    Year Ended
                               December 31,  December 31,  December 31,
                               1997          1996          1995
Cash Flow From Financing
 Activities:
 Payments on note payable
  bank                         $(  350,000)  $(  350,000)  $         -
 Proceeds from notes payable
  to banks                               -     2,000,000       825,000
 Dividends paid                 (  239,681)   (  219,849)   (  222,889)
 Increase (decrease) in due
  to subsidiaries                        -             -
 Redemption of common stock     (   49,750)   (   21,440)            -

Net Cash Provided (Used)
 from Financing Activities     $(  639,431)  $ 1,408,711   $   602,111
Net increase (decrease) in
 cash and cash equivalents     $(      289)  $(  160,745)  $   314,108
Cash and cash equivalents at
 beginning of year                 431,477       592,222       278,114

Cash and Cash Equivalents
 at End of Year                $   431,188   $   431,477   $   592,222

 The accompanying note is an integral part of these financial statements.

                         SOUTH BANKING COMPANY
                       (PARENT CORPORATION ONLY)
                           ALMA,     GEORGIA
                     NOTES TO FINANCIAL STATEMENTS


(A)  Summary of Significant Accounting Policies

     General - The following notes to the financial statements of South
               Banking Corporation, formed on July 28, 1981, (parent
               corporation only) (the corporation) includes only that
               information which is in addition to information presented
               in the consolidated financial statements and notes to
               consolidated financial statements.

     Investment in subsidiaries - The corporation reports its investment
               in the common stock of its subsidiaries at its equity in
               the net assets of the subsidiaries.

     Organization costs - Organization costs have been deferred and are
               being amortized on a straight-line basis over a period of
               five years.