<PAGE>

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                    U. S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB
                                   (Mark One)

/X/      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934           (FEE REQUIRED)

         For the fiscal year ended December 31, 1997
                                   -----------------

/ /      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934                (NO FEE REQUIRED)

         For the transition period from             to
                                        -----------    -------------------

                        Commission file number: 000-25128

                           FIRST STERLING BANKS, INC.
                 ----------------------------------------------
                 (Name of Small Business Issuer in Its Charter)

      Georgia                                                  58-2104977
-------------------------------                           ------------------
(State or Other Jurisdiction of                            (I.R.S. Employer
Incorporation or Organization)                            Identification No.)

  1200 Barrett Parkway, Kennesaw, GA                             30144
----------------------------------------                       ---------
(Address of Principal Executive Offices)                       (Zip Code)

     770-499-2265
------------------------------------------------
(Issuer's Telephone Number, Including Area Code)

Securities registered under Section 12(b) of the Exchange Act:        None

Securities registered under Section 12(g) of the Exchange Act:  Common Stock

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

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's  knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. / /

State issuer's revenues for the most recent fiscal year. $14,346,052
                                                          ------------

As of March 1, 1998, registrant had outstanding 2,625,830 shares of common
stock. The aggregate market value of the voting stock held by nonaffiliates of
the registrant is approximately $44,474,995.


                       DOCUMENTS INCORPORATED BY REFERENCE
                                      None


                                        1

<PAGE>



                                     PART I
                                     ------

ITEM 1.     DESCRIPTION OF BUSINESS

         First Sterling Banks, Inc. (the "Company") is a two-bank holding
company which engages through its subsidiaries, The Westside Bank & Trust
Company and The Eastside Bank and Trust Company (the "Banks"), in providing full
banking services to customers of the Banks. The Company's executive offices are
located at 1200 Barrett Parkway, Kennesaw, Georgia 30144, and its telephone
number is 770/499-2265.

         The Company was incorporated on March 16, 1994 as a Georgia business
corporation. On August 31, 1994, the Company purchased all of the shares of
common stock of The Westside Bank & Trust Company.

         On December 21, 1995, the Boards of Directors of Eastside Holding
Corporation, the only shareholder of The Eastside Bank & Trust Company, and
Westside Financial Corporation, the only shareholder of The Westside Bank &
Trust Company, executed a definitive agreement to merge the two holding
companies, with Westside Financial Corporation surviving. The merger was
consummated on July 31, 1996, at which time Westside Financial Corporation
changed its name to First Sterling Banks, Inc. Each bank retained its Board of
Directors, management and trade name. The merger was accounted for as a pooling
of interests and was subject to approval by federal and state bank holding
company regulators and a majority of the shareholders of Eastside Holding
Corporation. The merger was approved by Eastside shareholders on July 16, 1996.
Eastside Financial Services Inc. (EFS), commenced operations in 1994 as a wholly
owned subsidiary of Eastside Bank. The purpose and business of EFS is to provide
assistance to the Bank and other community banks in the closing, sale on the
secondary market, and servicing of loans guaranteed by the Small Business
Administration.

         Because of its ownership of all of the issued and outstanding shares of
the capital stock of The Westside Bank & Trust Company and The Eastside Bank and
Trust Company, the Company is a "Bank Holding Company" as that term is defined
under Federal law in the Bank Holding Company Act of 1956 (the "Act"), as
amended, and under the Bank Holding Company laws of the State of Georgia (the
"Georgia Act"). As a "Bank Holding Company", the Company is subject to the
applicable provisions of the Act and the Georgia Act, as well as to supervision
by the Board of Governors of the Federal Reserve System (the "Federal Reserve")
and the State of Georgia Department of Banking and Finance (the "Department").
The Company's subsidiary banks provide a full range of commercial banking
services to its customers, except for trust services. The Banks are organized
under the laws of the State of Georgia.

Market Area and Competition

         The Banks encounter vigorous competition from other commercial banks,
savings  and loan  associations  and other  financial  institutions  and
intermediaries in the Bank's primary service area--North Cobb County, Georgia
and South Gwinnett County, Georgia.

         The Banks compete with other banks in their primary service area in
obtaining new deposits and accounts, making loans, obtaining branch banking
locations and providing other banking services. The Banks also compete with
savings and loan associations and credit unions for savings and transaction
deposits, certificates of deposit and various types of loans.


                                        2

<PAGE>




         Competition  for  loans  is also  offered  by  other  financial
intermediaries, including savings and loan associations, mortgage banking firms
and real estate investment trusts, small loan and finance companies, insurance
companies, credit unions, leasing companies, and certain government agencies.
Competition for time deposits and, to a more limited extent, demand and
transaction  deposits is also  offered by a number of other  financial
intermediaries and investment alternatives, including "money market" mutual
funds, brokerage firms, government and corporate bonds and other securities.

         Competition for banking services in the State of Georgia is not limited
to institutions headquartered in the State. A number of large out-of-state
banks,  bank holding  companies,  and other financial  institutions  and
intermediaries have established,  or announced plans to establish,  loan
production offices, small loan companies, and other offices and affiliates in
the State of Georgia. Many of these out-of-state financial organizations that
compete in the Georgia market engage in regional, national or international
operations and have greater assets and personnel than the Banks.

         Since July 1, 1985, numerous interstate acquisitions involving Georgia
based financial institutions have been announced or consummated.  Though
interstate banking has resulted in significant changes in the structure of
financial institutions in the southeastern region, including the Bank's primary
service area, management does not feel that such changes have had or will have a
significant impact upon its operations or the results therefrom.

         Each Bank's marketing strategy  emphasizes its local nature and
involvement in the communities located in its' primary service area.

         Management expects that competition will remain intense in the future
due to state and Federal laws and regulations, and the entry of additional bank
and nonbank competitors.

Properties

         The Company and Westside Bank's main office are located at 1200 Barrett
Parkway, Kennesaw, Georgia. In 1989, Westside Bank purchased an approximate
1.156 acre tract of land in North Cobb County, Georgia (the "Property"). The
purchase price of the property was approximately $485,000. Improvements consist
of a one-story brick building of approximately 6,000 square feet. The total cost
of the offices, including all furnishings, site preparation, landscaping,
paving, security equipment and automatic teller machine, was approximately
$2,103,895.

         In January 1996, Westside purchased a parcel of land and branch office
in Marietta, Georgia from another financial institution for $325,000. The
building was constructed in 1974 and contains approximately 2,600 square feet.
Improvements including, a new roof, new furnishings, landscaping, paving,
security equipment and automatic teller machine totaled approximately $550,000.

         In December 1997, Westside Bank signed a contract to purchase a tract
of land containing approximately 1.3542 acres at the intersection of Chastain
Road and Town Green Boulevard in North Cobb County. The bank will construct a
two story facility containing approximately 12,000 square feet to accommodate a
branch facility and the

                                        3

<PAGE>



company's corporate headquarters. It is anticipated that only half of the space
will be built out initially, with the remaining space to be used for future
growth.

         Eastside Bank is located at 2019 Scenic Highway, Snellville, Georgia,
30278. In 1989, Eastside purchased an approximately 1.76 acre tract of land in
Snellville, Georgia. The purchase price of the property was approximately
$800,000.

         Eastside's principal offices are located in a building of approximately
17,200 square feet. The total cost of the facility, including all furnishings,
site preparation, landscaping, paving, security equipment and automatic teller
machine, was approximately $2,700,000.

Patents, trademarks, etc.

         Westside Bank holds a registration for a service mark issued by the
State of Georgia on September 4, 1990 for the mark "Westside Bank" (and its
design logo). Eastside Bank holds a registration for a service mark issued by
the State of Georgia on September 4, 1990 for the mark "Eastside Bank" (and its
design logo). Both service marks are good for an initial period of ten years and
application may be made for a renewal period of ten years. The Banks do not hold
a federal registration for its service mark. Other than their Georgia service
mark, the banks hold no patents, trademarks, licenses (other than licenses
required to be obtained from appropriate  banking regulatory  agencies),
franchises, or concessions.

Employees

         As of March 1, 1998, the Westside Bank had a total of 22 full-time and
16 part-time employees. Eastside Bank had a total of 26 full-time and 12
part-time employees. These employees are provided with fringe benefits in
varying combinations, including health, accident, disability and life insurance
plans. In the opinion of management, the Banks enjoy excellent relations with
their employees.

                           Supervision and Regulation

The Company

         As a bank holding company, the Company is required to file with the
Federal Reserve an annual report and such additional information as the Federal
Reserve may require pursuant to the Federal Bank Holding Company Act. The
Federal Reserve may also conduct examinations of the Company and each of its
subsidiaries.

         The Georgia Financial Institutions Code requires annual registration
with the Georgia Department of Banking and Finance by all Georgia bank holding
companies. Such registration includes information with respect to the financial
condition, operations, management of intercompany relationships of the bank and
such other information as is necessary to keep itself informed as to whether the
institution is in compliance with the provisions of Georgia law and the
regulations and orders issued thereunder by The Department.

The Banks

         The Banks operate as banks organized under the laws of the State of
Georgia subject to examination by The Department. The Department regulates all
areas of each

                                        4

<PAGE>



Bank's commercial banking operations including reserves, loans, mergers, payment
of dividends, interest rates, establishment of branches and other aspects of
operations.

         The Banks are also insured and regulated by the FDIC. The major
functions of the FDIC with respect to insured banks include paying depositors to
the extent provided by law in the event an insured bank is closed without
adequately providing for payment of the claims of depositors, acting as a
receiver of state banks placed in receivership when so appointed by state
authorities, and preventing the continuance or development of unsound and unsafe
banking practices. In addition, the FDIC is authorized to examine insured banks
which are not members of the Federal Reserve to determine the condition of such
banks for insurance purposes. The FDIC also approves conversions, mergers,
consolidations and assumption of deposit liability transactions between insured
banks and noninsured banks or institutions to prevent capital or surplus
diminution in such transactions where the resulting, continued or assumed bank
is an insured nonmember state bank.

         Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by the Federal Bank Holding Company Act on any extension of
credit to the bank holding company or any of its subsidiaries, on investment in
the stock or other securities thereof and on the taking of such stock or
securities as collateral for loans to any borrower. In addition, a bank holding
company and its  subsidiaries  are prohibited  from engaging in certain
tie-in-arrangements in connection with any extension of credit or provision of
any property or services.

Capital Requirements

         Regulatory agencies measure capital adequacy with a framework that
makes capital requirements sensitive to the risk profile of the individual
banking institutions. The guidelines define capital as either Tier 1 (primarily
shareholder equity) or Tier 2 (certain debt instruments and a portion of the
allowance for loan losses). There are two measures of capital adequacy for bank
holding companies and their subsidiary banks, the leverage ratio and the
risk-based capital requirements. Bank holding companies and their subsidiary
banks must maintain a minimum Tier 1 leverage ratio of 4%. In addition, Tier 1
capital must equal 4% of risk-weighted assets and total capital (Tier 1 plus
Tier 2) must equal 8% of risk-weighted assets. These are minimum requirements,
however, and institutions experiencing internal growth or making acquisitions as
well as institutions with supervisory or operational weakness will be expected
to maintain capital positions well above these minimum levels.

         Failure to meet capital guidelines could subject a bank to a variety of
enforcement remedies, including issuance of a capital directive, the termination
of deposit insurance by the FDIC, a prohibition on the taking of brokered
deposits, and certain other restrictions on its business.





                                        5

<PAGE>



         The following table reflects the Company and the banks' compliance with
regulatory capital requirements at December 31, 1997:

<TABLE>
<CAPTION>

                                   Actual                        Required                 Excess
                              Amount        %             Amount            %        Amount       %
                            ----------    ----           ---------        ---      ---------    ----
<S>                         <C>           <C>            <C>              <C>      <C>          <C>
Leverage capital
  Consolidated              16,013,000    6.52%          9,824,000        4.00%    6,189,000    3.86%
  Westside Bank              8,684,000    5.03           6,903,000        4.00     1,781,000    3.20
  Eastside Bank              7,033,000    9.63           2,921,000        4.00     4,112,000    5.85

Risk-based core capital:
  Consolidated              16,013,000   12.80%          5,005,000        4.00%   11,008,000    6.87%
  Westside Bank              8,684,000   12.73           2,730,000        4.00     5,954,000    6.86
  Eastside Bank              7,033,000   12.38           2,273,000        4.00     4,760,000    6.77

Risk-based total capital:
  Consolidated              17,393,000   13.90%         10,009,000        8.00%    7,384,000    4.25%
  Westside Bank              9,501,000   13.92           5,460,000        8.00     4,041,000    4.25
  Eastside Bank              7,596,000   13.37           4,546,000        8.00     3,050,000    4.02
</TABLE>

Monetary Policy

         Banking is a business that depends on interest rate differentials. In
general, the difference between the interest rates paid by the Banks on its
deposits and other borrowings and the interest rate received on loans extended
to customers and on securities held in its portfolio comprises the major portion
of the Bank's earnings.

         The earnings and growth of the Banks and the Company are affected not
only by general economic conditions, both domestic and foreign, but also by the
monetary and fiscal policies of the United States and its agencies, particularly
the Federal Reserve. The Federal Reserve can and does implement national
monetary policy, such as seeking to curb inflation or combat recession, by its
open market operations in United States government securities, limitations upon
savings and time deposit interest rates, adjustment in the amount of industry
reserves that banks and other financial institutions are required to maintain
and adjustments to the discount rates applicable to borrowings by banks from the
Federal Reserve System. The actions of the Federal Reserve in these areas
influence the growth of bank loans, investments and deposits and also affect
interest rates charged and paid on deposits. The nature and impact of any future
changes in monetary policies cannot be predicted with certainty.

FDIC Insurance Assessments

         Pursuant to FDICIA, the FDIC adopted a new risk-based assessment system
for insured  depository  institutions that takes into account the risks
attributable to different  categories and  concentrations  of assets and
liabilities. The new system, which went into effect on January 1, 1994, assigns
an institution to one of three capital categories: (a) well capitalized; (b)
adequately capitalized; and (c) undercapitalized. An institution is also
assigned by the FDIC to one of three supervisory subgroups within each capital
group. The supervisory subgroup to which an institution is assigned is based on
a supervisory evaluation provided to the FDIC by the institution's primary
federal regulator and information which the FDIC determines to be relevant to
the institution's financial condition and the risk posed to the deposit
insurance funds (which may include, if applicable, information provided by the

                                       6

<PAGE>



institution's state supervisor). An institution's insurance assessment rate is
then determined based on the capital category and supervisory category to which
it is assigned. Under the final risk-based assessment system, as well as the
prior transitional system, there are nine assessment risk classifications (i.e.,
combinations of capital groups and supervisory subgroups) to which different
assessment rates are applied. Assessment rates for members of both the Bank
Insurance Fund ("BIF") and the Savings Association Insurance Fund ("SAIF") for
the first half of 1995, as they had during 1994, ranged from 23 basis points
(0.23% of deposits for an institution in the highest category (i.e., "well
capitalized" and "healthy") to 31 basis points (0.32% of deposits) for an
institution in the lowest category (i.e., "undercapitalized" and "substantial
supervisory concern"). These rates were established for both funds to achieve a
designated ratio of reserves to insured deposits (i.e., 1.25%) within a
specified period of time.

         Once the designated ratio for the BIF was reached in May 1995, the FDIC
reduced the assessment rate applicable to BIF deposits in two stages, so that,
beginning 1996, the deposit insurance premiums for 92% of all BIF members in the
highest capital and supervisory categories were set at $2,000 per year,
regardless of deposit size. The FDIC elected to retain the existing assessment
rate range of 23 to 31 basis points for SAIF members for the foreseeable future
given the undercapitalized nature of that insurance fund.

         Recognizing that the disparity between the SAIF and BIF premium rates
had adverse consequences for SAIF-insured institutions and other banks with SAIF
assessed deposits, including reduced earnings and an impaired ability to raise
funds in capital markets and to attract deposits, on July 28, 1995, the FDIC,
the Treasury Department,  and the Office of Thrift Supervision released
statements outlining a proposed plan to recapitalize the SAIF, the principal
feature of which was a special one-time assessment on depository institutions
holding SAIF-insured deposits, which was intended to recapitalize the SAIF at a
reserve ratio of 1.25%. This proposal contemplated elimination of the disparity
between the assessment rates on BIF and SAIF deposits following recapitalization
of the SAIF.

         A variation of this proposal designated the Deposit Insurance Funds Act
of 1996 (the "Funds Act") was enacted by Congress as part of the omnibus budget
legislation and signed into law on September 30, 1996. As directed by the Funds
Act, the FDIC implemented a special one-time assessment of approximately 65.7
basis points (0.657%) on a depository institution's SAIF-insured deposits held
as of March 31, 1995 (or approximately 52.6 basis points on SAIF deposits
acquired by banks in certain qualifying transactions).

         In addition, the FDIC proposed a revision in the SAIF assessment rate
schedule that effected, as of October 1, 1996 (a) a widening in the assessment
rate spread among institutions in the different capital and risk assessment
categories, (b) an overall reduction of the assessment rate range assessable on
SAIF deposits of from 0 to 27 basis points, and (c)a special interim assessment
rate range for the last quarter of 1996 from 18 to 27 basis points on
institutions subject to FICO assessments. Effective January 1, 1997, FICO
assessments will be imposed on both BIF and SAIF insured deposits in annual
amounts presently estimated at 1.29 basis points and 6.44 basis points,
respectively. Beginning in January 2000 BIF and SAIF insured institutions will
share the FICO interest costs at equal rates currently estimated 2.43 basis
points. The Funds Act further provides that BIF and SAIF are to be merged,

                                        7

<PAGE>



creating the "Deposit Insurance Fund," on January 1, 1999, provided that bank
and savings association charters are combined on that date.

         Under the FDIA, insurance of deposits may be terminated by the FDIC
upon a finding that the institution has engaged in unsafe and unsound practices,
is in an unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, rule, order, or condition imposed by the FDIC.


The Riegle-Neal Interstate Banking and Branching Efficiency Act

         In September 1994, the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "Interstate Banking Act") became law. The Interstate
Banking Act has two major provisions regarding the merger, acquisition and
operation of banks across state lines. First it provides that effective
September 29, 1995, adequately capitalized and managed bank holding companies
will be permitted to acquire banks in any state. In addition, the Interstate
Banking Act provides that as of June 1, 1997, adequately capitalized and managed
banks will be able to engage in interstate branching by merging banks in
different states. The State of Georgia has enacted legislation in connection
with the Interstate Banking Act which requires that a bank located within the
State must be in existence for a period of five (5) years before it may be
acquired by an out-of-State institution. This State legislation also requires
out-of-State institutions to purchase an existing bank or branch in the State
rather than starting a de novo bank.

         The Interstate Banking Act was amended on July 3, 1997, for the purpose
of ensuring that state banks are competitive with national banks under the new
interstate banking laws. The amendment provides that state law of the host state
applies to an out-of-state, state-chartered bank that branches in the host state
to the same extent that it applies to a national bank operating a branch in the
host state. The law also provides that bank branches operating in the host state
and chartered in another state may exercise powers they have under their
home-state charters if host state-chartered banks or national banks may exercise
those powers.

Georgia Interstate Branching Act

         In February 1996, the Georgia  Legislature adopted the "Georgia
Interstate Branching Act" effective June 1, 1997. The Georgia Interstate
Branching Act will permit 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 to merge any lawfully acquired
bank into an Interstate branch network. The Georgia Interstate Branching Act
also allows banks to establish de novo branches on a limited basis beginning
July 1, 1996. Beginning July 1, 1998, the number of de novo branches which may
be established will no longer be limited.

Proposed Legislation

         Bills are regularly introduced in the United States Congress that
contain wide-ranging proposals for altering the structures, regulations and
competitive relationships of the nation's financial institutions. It cannot be
predicted whether or what form any proposed legislation will be adopted or the
extent to which the business of the Company and the Bank may be affected
thereby.


                                        8

<PAGE>



Year 2000 Project

         First Sterling Banks and its subsidiaries rely heavily upon computers
for the daily conduct of their business. First Sterling will commit all
resources necessary to achieve a satisfactory and timely solution to computer
based problems related to the year 2000 and beyond. The project is receiving
full support and attention from senior management of both Eastside Bank and
Westside Bank. A comprehensive plan which addresses all aspects of the project
is in place and work on the project is well underway. The project is on schedule
and the timetable will allow for an adequate period of thorough testing well in
advance of the year change. With the inventory and assessment phase of the
project completed management has determined that the total expense is not
expected to have a material effect on earnings in any one year.

Officers

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

<TABLE>
<CAPTION>

         Name                                                      Officer
         (Age)                     Position with the Registrant     Since
        ------                     ----------------------------    -------
<S>                                <C>                              <C>
         Edward C. Milligan        Chairman, President & CEO        1994
           (53)

         Barbara J. Bond                    Secretary               1994
           (49)
</TABLE>

ITEM 2.           DESCRIPTION OF PROPERTY

         The principal properties of the Registrant consist of the properties of
the Banks. For a description of the properties , see "Item 1--Description of
Business" included elsewhere in this Annual Report.

ITEM 3.           LEGAL PROCEEDINGS

         Neither the registrant nor its subsidiary banks are a party 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

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

                                                             PART II

ITEM 5.           MARKET FOR THE COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

  (a) Prior to August 1995, there was no public market for the registrants
common stock.

           In 1995, the Board of Directors voted to allow J. C. Bradford &
Company to be

                                        9

<PAGE>



the principal market maker for the Company's common stock. Sterne, Agee & Leach
and Knox Wall are also market makers for the Company's common stock. The
Company's common stock is traded on the Nasdaq National Market under the symbol
FSLB. The following table lists the high and low stock price for each quarter in
1997:

<TABLE>
<CAPTION>

                                High                      Low
------------------------------------------------------------------
<S>                             <C>                       <C>
Fiscal year 1997
First quarter                   $ 9.00                    $ 8.125
Second quarter                    9.00                      7.75
Third quarter                     9.625                     8.50
Fourth quarter                   12.50                      9.3125
------------------------------------------------------------------

</TABLE>

  (b) As of March 16, 1998, there were  approximately 921 shareholders of record
of the registrant's common stock.

 (c) During 1997  dividends  of $ 0.0375 per share were paid in the first fiscal
quarter and  dividends  of $ 0.045 per share were paid in the second,  third and
fourth fiscal quarters. The Company currently intends to continue paying regular
cash dividends on a quarterly basis.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

<TABLE>
<CAPTION>

                                                                For the Year Ended December 31
                                                  -----------------------------------------------------------
Selected Income Statement Data                      1997       1996      1995            1994            1993
                                                  -------    --------  --------        -------         ------
                                                               (In thousands, except per share data)

<S>                                               <C>        <C>       <C>           <C>             <C>
Total interest income                             $13,307    $10,432   $ 9,705       $ 7,491         $ 6,007

Total interest expense                              5,562      4,393     4,087         2,916           2,678
Net interest income                                 7,745      6,039     5,618         4,575           3,329
Provision for loan losses                             444        137       256           257             134
Net interest income after
 provision for loan losses                          7,301      5,902     5,362         4,318           3,195
Other operating income                              1,040        760       571           513             538
Net income                                          2,167      1,509     1,616         1,209             854
Net income per share (basic)                          .83        .57       .59           .50             .36

Dividends per share                                   .17       0.13       .075          .05             --

Selected Balance Sheet Data

Total loans                                      $106,730    $ 83,726  $ 73,148      $ 63,897         $52,333
Total assets                                      169,041     136,706   121,172       100,860          92,937
Total deposits                                    151,323     120,540   106,466        88,172          81,410
Shareholders' equity                               16,120      14,742    13,591        12,160          11,246
</TABLE>


All share and per share data have been adjusted to reflect a two for one stock
split announced on February 25, 1998.


                                       10

<PAGE>



General

         On December 21, 1995, the Boards of Directors of Eastside Holding
Corporation, the only shareholder of The Eastside Bank & Trust Company, and
Westside Financial Corporation, the only shareholder of The Westside Bank &
Trust Company, executed a definitive agreement to merge the two holding
companies, with Westside Financial Corporation surviving. The merger was
consummated on July 31, 1996, at which time Westside Financial Corporation
changed its name to First Sterling Banks, Inc. Each bank retained its Board of
Directors, management and trade name. The proposed merger was approved by
federal and state bank holding company regulators and a majority of the
shareholders of Eastside Holding Corporation. Eastside Bank began operations on
January 22, 1990, Westside Bank began operations on May 14, 1990.

Results of Operations

         The Company's results of operations are determined by its ability to
effectively manage interest income and expense, to minimize loan and securities
losses, to generate non-interest income and to control non-interest expense.
Interest rates are determined by general economic conditions and competition.
Net interest income is determined by the Bank's ability to obtain an adequate
spread between the rate earned on earning assets and the rate paid on
interest-bearing liabilities.

         The major component of consolidated earnings is net interest income, or
the difference between interest income on earning assets and interest paid on
interest bearing liabilities. The key performance measure for net interest
income is the net interest margin. Net interest margin is net interest income
expressed as a percentage of average earning assets.

         Net interest income for the year ended December 31, 1997 was $7,744,983
an increase of $1,705,600 or 28.24% compared to December 31, 1996. The increase
in net interest income is primarily attributable to an increase in average
earning assets over 1996.

         The Banks' average cost of funds was 4.27% in 1997 as compared to 4.71%
in 1996. Average earning assets increased $38,131,004 or 33.50% over 1996.
Average interest bearing liabilities increased $36,914,368 or 39.56% over 1996.
As in previous years, the increase in interest bearing liabilities and average
earning assets was significantly affected by fourth quarter seasonal deposits at
Westside Bank. Seasonal deposits have been maintained at the bank since its
opening in 1990, and the bank has no reason to believe that this will change.
However, it would be impossible to project the future balances of seasonal
deposits as they have fluctuated significantly in the past. Average non-interest
bearing deposits increased $2,542,614 or 14.67% over 1996.

         The allowance for loan losses represents a reserve for potential losses
in the loan portfolio. The provision for loan losses is a charge to earnings in
the current period to replenish the allowance and maintain it at a level
management has determined to be adequate based upon the growth of the loan
portfolio and management's desire to provide adequately for inherent risk in the
loan portfolio.

         The provision for loan losses charged to earnings amounted to $444,342
in 1997 an increase of $306,842 over 1996. The banks continue to experience only
minimal losses, net chargeoffs in 1997 were of .17% of average loans compared
to .07% in 1996.

                                       11

<PAGE>

The increase in provision is a reflection of the strong growth in the loan
portfolio experienced by both banks in 1997, along with an increase of $102,000
in net chargeoffs over 1996. The allowance for loan losses as a percentage of
total loans outstanding at December 31, 1997 and 1996 amounted to 1.29% and
1.31% respectively.

         Bank  management  closely  monitors the loan  portfolio and the
underwriting of loans and considers the allowance for loan losses to be
conservative yet reasonable given the nature of each Bank's loan portfolio. An
independent third party performs periodic reviews of the loan portfolio, at
least semi-annually. Management intends to continue maintaining an adequate
allowance for loan losses in relation to loans outstanding in the future based
on management's evaluation of the loan portfolio under prevailing economic
conditions, underlying collateral value securing loans and such other factors as
management deems appropriate.

Following is a comparison of non-interest income for 1997 and 1996:

<TABLE>
<CAPTION>
                                                   1997             1996
                                                   ----            ----
<S>                                             <C>              <C>
         Service charges on deposit
           accounts                             $ 389,948        $371,211
         Gain on sale of loans                    279,002         237,247
         Other income                             371,157         155,353
         Net realized losses on securities          (600)         (4,157)
                                               ----------       ---------
                                               $1,039,507        $759,654
                                               ----------       ---------
                                               ----------       ---------
</TABLE>

         Non-interest income consists primarily of service charges on deposit
accounts, gains on the sale of SBA (Small Business Administration) loans into
the secondary market, fees on participation loans, mortgage origination fees,
customer service fees, gains (losses) on investment securities transactions and
miscellaneous other income. Other income is up $215,804 over 1996. This increase
is largely the result of increased, fees on participation loans and mortgage
origination fees.

         Following is an analysis of non-interest expense for 1997 and 1996:

<TABLE>
<CAPTION>

                                                      1997            1996
                                                      ----            ----
<S>                                               <C>             <C>
         Salaries and employee benefits           $2,993,762      $ 2,250,272
         Occupancy and equipment expense             628,523          525,897
         Deposit insurance premiums                   13,909            4,000
         Data processing fees                        212,179          197,125
         Directors Fees                              182,400          140,225
         Merger expenses                                --            131,632
         Other expense                             1,022,514        1,031,323
                                                  ------------    -----------
                                                  $5,053,287      $ 4,280,474
                                                  ------------    -----------
                                                  ------------    -----------
</TABLE>

         Non-interest  expense  increased  $772,813  or 18.05% over 1996.
Non-interest expense consists primarily of salaries and other employee benefits,
occupancy expense, and other operating costs. In the fourth quarter of 1996,
management salaries, bonuses and directors fees were reviewed by an independent
third party consultant and adjustments made where appropriate. Directors of
Eastside and Westside are paid for each board meeting attended and outside
directors are paid for each committee meeting attended. Directors on the First
Sterling board are paid a quarterly fee for all services. Directors fees
increased $42,175 or 30% over 1996. Personnel expense

                                       12

<PAGE>



increased $743,490 over 1996. This increase is primarily attributable to the
addition of staff at both banks and the first full year of operation for
Westside's Whitlock branch. At December 31, 1997, the company employed 46
full-time employees and 25 part-time employees. It is the intention of
management and the boards to attract and maintain quality people by offering
salaries and other benefits competitive in the marketplace, and to reward
individuals based on the performance of the Bank. Occupancy expense increased $
102,626 or 19.51% over 1996. This increase can also be attributed primarily to
Westside's first full year of operating the Whitlock branch.

         Net income after tax increased $657,689 or 43.59% from 1996. While the
average rate on earning assets declined 4.47% the increase in average earning
assets resulted in an increase in interest income of $2,874,218 or 27.55% over
1996. Although average interest bearing liabilities increased 39.56%, the
effective rate declined 9.34% and total interest expense increased only 26.60%.
While all deposit categories increased over 1996 the majority of the increase
was in lower rate interest bearing demand deposits.

         The following tables set forth the amount of the Company's average
earning assets and interest-bearing liabilities, together with related interest
income and expense and average rates for 1997 and 1996:

Average Balances and Net Income Analysis

         The condensed average balance sheets for the period indicated are
presented below:

<TABLE>
<CAPTION>

                                                For the year ended December 31,
                                                1997               1996
<S>                                              <C>               <C>
         ASSETS
Cash and due from banks                          $   7,648,021     $   5,952,464
Interest-bearing deposits in banks                     100,000            48,361
Taxable Securities                                  19,097,717        19,872,073
Nontaxable Securities                                4,138,479         2,229,505
Federal funds sold                                  12,403,296        10,200,182
Securities purchased under agreement to resell      21,578,817         2,333,880
Loans (1)                                           94,627,687        79,130,991
Reserve for loan losses                             (1,147,135)       (1,064 977)
Other assets                                         7,730,105         6,884,343
                                                 -------------     -------------
         Total Assets                            $ 166,176,987     $ 125,586,822
                                                 -------------     -------------
                                                 -------------     -------------
Total earning assets                             $ 151,945,996     $ 113,814,992
                                                 -------------     -------------
                                                 -------------     -------------

         LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
  Noninterest-bearing demand                     $  19,870,565     $  17,327,951
Interest-bearing demand and savings                 64,243,825        35,704,589
  Time                                              65,623,174        57,398,208
                                                 -------------     -------------
         Total deposits                            149,737,564       110,430,748
Federal funds purchased and securities
  sold under agreement to repurchase                   360,150           209,984
Other liabilities                                    1,107,972           956,068
                                                 -------------     -------------
         Total liabilities                       $ 151,205,686       111,596,800
                                                 -------------     -------------

Stockholders' equity                             $  14,971,301     $  13,990,022
                                                 -------------     -------------

         Total Liabilities and
           Stockholders' equity                  $ 166,176,987       125,586,822
                                                 -------------     -------------
                                                 -------------     -------------

Total interest-bearing liabilities               $ 130,227,149     $  93,312,781
                                                 -------------     -------------
                                                 -------------     -------------
</TABLE>

(1) Average loans include non-accrual loans, if any.



                                       13

<PAGE>



Interest Income and Interest Expense
<TABLE>
<CAPTION>
                                               For the year ended December 31,
                                                 1997             1996
                                                    Average            Average
                                         Interest    Rate   Interest     Rate
                                                 (Dollars in thousands)

<S>                                      <C>         <C>      <C>       <C>
INTEREST INCOME:
  Interest and fees on loans (1)         $10,027     10.60%   $ 8,439   10.66%
  Interest on investment securities:
     Taxable Securities                    1,234      6.46      1,229    6.18
     Nontaxable Securities                   184      4.45        108    4.84
  Interest on Federal funds sold             676      5.45        538    5.27
  Interest on securities purchased
    under agreement to resell              1,180      5.46        115    4.93
  Interest on deposits in banks                6      5.90          3    6.25
                                         -------      ----     -------    ----
  Total interest income                  $13,307      8.76     $10,432    9.17
                                         -------      ----     -------    ----

INTEREST EXPENSE:
  Interest on savings and interest-
    bearing demand deposits              $ 1,734      2.70%   $ 1,031    2.89
  Interest on time deposits                3,810      5.80%     3,352    5.84
  Interest on Federal funds purchased
    and securities sold under
    agreement to repurchase                   18      5.09         10    4.76
                                         -------      ----     -------    ----
   Total interest expense                 $ 5,562      4.27    $ 4,393    4.71
                                         -------      ----    -------    ----

NET INTEREST INCOME                      $ 7,745              $ 6,039
                                         -------              -------
                                         -------              -------
  Net interest spread                                 4.49%             4.46%
                                                      ----              ----
                                                      ----              ----

  Net yield on average interest-
    earning assets                                    5.10%             5.31%
                                                      ----              ----
                                                      ----              ----

</TABLE>

(1)      In computing yields on earning assets, the average balances of
         non-accruing loans are included in the average balances, and loan fees
         of $749,210 and $728,761 for the years ended December 31, 1997 and
         1996, respectively, are included in interest income.

Rate and Volume Analysis

         The following table reflects the changes in net interest income
resulting from changes in interest rates and from asset and liability volume.
The change in interest attributable to rate has been determined by applying the
change in rate between years to average balances outstanding in the later year.
The change in interest due to volume has been determined by applying the rate
from the earlier year to the change in average balances outstanding between
years. Thus, changes that are not solely due to volume have been consistently
attributable to rate. Changes reflected herein may differ slightly from actual
changes due to rounding.


                                       14

<PAGE>

<TABLE>
<CAPTION>
                                              Year ended December 31,
                                                  1997 V.s. 1996
                                            Increase     Changes Due to
                                           (Decrease)      Rate    Volume
                                               (Dollars in Thousands)
<S>                                          <C>        <C>         <C>
Increase (decrease) in:
Income from earning assets:
    Interest and fees on loans               $ 1,588    $   (65)    $ 1,653
Interest on investment securities:
    Taxable                                        5         53         (48)
    Nontaxable                                    76        (16)         92
Interest on Federal funds sold                   138         22         116
Interest on securities purchased
    under agreement to resell                  1,065        114         951
  Interest on deposits in other banks              3       --             3
                                             -------    -------     -------
         Total interest income               $ 2,875    $   108     $ 2,767
                                             -------    -------     -------

Expense from interest-bearing liabilities
Interest on interest-bearing
  demand and savings deposits                $   703    $  (121)    $   824
Interest on time deposits                        458        (22)        480
Interest on Federal funds purchased
  and securities sold under agreement
  to repurchase                                    8          1           7
                                             -------    -------     -------
         Total interest expense              $ 1,169    $  (142)    $ 1,311

         Net interest income                 $ 1,706    $   250     $ 1,456
                                             -------    -------     -------
                                             -------    -------     -------

</TABLE>

<TABLE>
<CAPTION>
                                                  Year ended December 31,
                                                      1996 v.s. 1995
                                            Increase        Changes Due to
                                           (Decrease)        Rate    Volume
                                                 (Dollars in Thousands)
<S>                                             <C>         <C>         <C>
Increase (decrease) in:
  Income from earning assets:
    Interest and fees on loans                  $ 1,090     $  (153)    $ 1,243
  Interest on investment securities:
    Taxable                                         (11)        (14)          3
    Nontaxable                                       56           2          54
 Interest on deposits in other banks                  3        --             3
 Interest on Federal funds sold                    (161)        (53)       (108)
  Interest on securities purchased under
    agreement to resell                            (250)        (15)       (235)
                                                -------     -------     -------
         Total interest income                  $   727     $  (233)    $   960
                                                -------     -------     -------

  Expense from interest-bearing liabilities
    Interest on interest-bearing
     demand and savings deposits                $   (29)    $    19     $   (48)
    Interest on time deposits                       325          16         309
    Interest on Federal funds purchased
         and securities sold under agreement
         to repurchase                               10        --            10
                                                -------     -------     -------
         Total interest expense                 $   306     $    35     $   271
                                                -------     -------     -------

         Net interest income                    $   421     $  (268)    $   689
                                                -------     -------     -------
                                                -------     -------     -------
</TABLE>

                                       15

<PAGE>


Liquidity and Capital Resources

         Liquidity is the ability of the company to meet the cash flow
requirements of customers and fund its commitments. The Company's primary
sources of funds are increases in deposits, loan repayments, sales and
maturities of investments and net income. The Company actively manages its
liquidity position by matching maturities and interest rate sensitivity in asset
and liability portfolios. Further, the Banks maintain relationships with
correspondent banks which could provide funds to them on short notice, if
needed. In January 1996, Westside Bank joined the Federal Home Loan Bank of
Atlanta which will also provide an alternative source of funding.

         The liquidity and capital resources of the Company and the Bank are
monitored on a periodic basis by state and federal regulatory authorities. As
determined under guidelines established by those regulatory authorities, the
Bank's liquidity ratios at December 31, 1997 were considered satisfactory. At
December 31, 1997, investment securities with a book value of $2,572,246 were
scheduled to mature within one year. These investments, along with federal funds
sold and securities purchased under agreement to resell of $27,485,000 as of
December 31, 1997, will provide a ready source of funds. At December 31, 1997,
the Company's and the Bank's capital asset ratios were considered adequate based
on guidelines established by the regulatory authorities. During 1997, the
Company increased its capital by retaining net earnings of $1,718,745 after
dividend payments of $447,922. At December 31, 1997, total capital of the
Company amounted to $16,120,410.

         On September 20, 1995, the Board of Directors of Westside Financial
unanimously approved a stock redemption plan to redeem up to 120,000 shares of
its common stock. A total of 50,000 shares were repurchased for $415,000 prior
to the termination of the repurchase plan which occurred before the execution of
a letter of intent in regard to the proposed merger. On February 26, 1997 the
Board of Directors of First Sterling Banks, Inc. approved a stock redemption
plan to redeem up to 70,000 shares of its common stock at a price not to exceed
$9.00 per share. A total of 70,000 shares were repurchased for $618,875, an
average price of $8.84 per share.

         On February 25, 1998, the Board of Directors unanimously approved a two
for one stock split, payable March 30, 1998 to shareholders of record March 16,
1998.

         Management is not aware of any current  recommendations by the
regulatory authorities which, if they were to be implemented, would have a
material effect on the Company's liquidity, capital resources or operations.


                                       16

<PAGE>


Maturities

         The following  table sets forth the maturity  distribution by amortized
cost, of securities according to type of security and contractual maturity:

                       MATURITY DISTRIBUTION OF SECURITIES
                                     DECEMBER 31, 1997
<TABLE>
<CAPTION>

                                Available for sale        Held to Maturity                Weighted
                                 Amortized        Fair    Amortized    Fair                Average
                                   Cost          Value    Cost         Value               Yield
                                                             (Dollars in Thousands)

<S>                                 <C>        <C>        <C>        <C>                <C>
Due in one year or less             $ 2,572    $ 2,575    $   2,249    $   2,238          5.443%
Due from one year to five years       5,658      5,704         --           --            5.926
Due from five to ten years            2,143      2,209         --           --            5.555
Due after ten years                     623        654         --           --            5.097
Mortgage-backed securities            7,492      7,505         --           --            6.218
Equity securities                       313        313         --           --            5.097
                                    -------    -------    ---------    ----------------

                                    $18,801    $18,963    $   2,249    $   2,238          5.889%
                                    -------    -------    ---------    ----------------
                                    -------    -------    ---------    ----------------

</TABLE>

Securities with a carrying value of $15,437,000 and $12,027,000 at December 31,
1997 and 1996, respectively, were pledged to secure public deposits and for
other purposes.


         The following table represents the composition of the Bank's loan
portfolio according to the purpose of the loan and/or repayment terms:

<TABLE>
<CAPTION>

                                                 December 31,      December 31,
                                                     1997              1996

<S>                                            <C>               <C>
Commercial, financial and agricultural         $  24,768,799     $  19,853,352
Real estate--construction and land
  development                                     35,840,760        21,791,259
Real estate--mortgage                             39,560,475        34,224,333
Installment and other consumer                     6,946,810         8,223,197
                                               -------------     -------------
                                                 107,116,844        84,092,141
Net deferred loan fees                              (387,074)         (366,402)
                                               -------------     -------------
                                                 106,729,770        83,725,739
                                               -------------     -------------
Less reserve for possible loan losses             (1,379,678)       (1,094,621)
                                               -------------     -------------

         Net loans                             $ 105,350,092     $  82,631,118
                                               -------------     -------------
                                               -------------     -------------

</TABLE>




                                       17

<PAGE>



                                     SUPPLEMENTAL MATURITY SCHEDULE OF LOANS
                                              DECEMBER 31, 1997
<TABLE>
<CAPTION>

                                               Over One
                                  One Year     Through         Over
                                   or Less    Five Years     Five Years       Total
                               -----------    -----------    -----------    -----------
<S>                            <C>            <C>            <C>            <C>
Commercial and
  industrial                   $10,796,624    $ 6,535,136    $ 7,437,039    $24,768,799
Real estate--
  construction and
  land development              30,385,616      3,722,768      1,732,376     35,840,760
Real estate--mortgage            9,483,109     16,314,420     13,762,946     39,560,475
Installment and other
  consumer                       2,492,475      4,023,886        430,449      6,946,810

</TABLE>

Non-performing Loans

         There were $41,501 in non-accrual loans at December 31, 1997 and
$322,992 at December 31, 1996. Accrual of interest is discontinued when
management believes after considering economic and business conditions and
collection efforts, that the ultimate collection of interest is doubtful.

DEPOSITS

         The following table represents the composition of the Bank's deposit
accounts, for the periods indicated:

<TABLE>
<CAPTION>

                                                 Year Ended December 31,
                                             1997                 1996
                                     Average     Average    Average    Average
                                      Amount      Rate        Amount    Rate
                                                 (Dollars in Thousands)

<S>                                  <C>                   <C>
Noninterest-bearing deposits         $19,871        --%    $17,328      --%
Interest-bearing demand and
  savings deposits                    64,244       2.70     35,705     2.89
Time deposits                         65,623       5.80     57,398     5.84

</TABLE>


                                       18

<PAGE>

                MATURITY SCHEDULE OF TIME DEPOSITS OVER $100,000
                                December 31, 1997

<TABLE>
<S>                            <C>
Three months or less           $ 6,962,922
Three months to six months       4,221,425
Six months to twelve months      6,733,828
Over twelve months               3,603,325
                               -----------
Total                          $21,521,500
                               -----------
                               -----------
</TABLE>

                         SUMMARY OF LOAN LOSS EXPERIENCE

         The provision for possible loan losses is based upon the growth of the
loan portfolio and management's desire to provide adequately for inherent risk
in the loan portfolio.

         Both banks have an internal rating system used for calculating the
required reserve based on the type of loan and the assigned risk code. For loans
which are classified "sub-standard" or lower, a portion of the Allowance for
Loan Losses is allocated to them dependent upon the amount of estimated
exposure.

         The provision for loan losses charged to operations was $444,342 during
the year ended December 31, 1997, compared to $137,500 in 1996. During 1997, the
Bank had net charge-offs of $159,285. There were net charge-offs of $57,938 in
1996. An analysis of the allowance for loan losses follows:

<TABLE>
<CAPTION>
                                                  Year Ended December 31,
                                                     1997            1996

<S>                                              <C>             <C>
Average amount of loans outstanding              $94,627,687     $79,130,991
                                                 -----------     -----------
                                                 -----------     -----------
Balance of reserve for possible loan
  losses at beginning of period                  $ 1,094,621     $ 1,015,059
Provision charged to operating expense               444,342         137,500

Recoveries:
  Commercial, financial and agricultural                --             2,825
  Real estate--construction and
    land development                                   9,817          13,737
  Real estate--mortgage                                --              --
  Installment and other consumer                      19,018           5,798
                                                 -----------     -----------
     Total recoveries                            $    28,835     $    22,360
                                                 -----------     -----------
Less chargeoffs:
  Commercial, financial and agricultural              16,296          24,709
  Real estate--construction and
    land development                                  52,130           5,722
  Real estate--mortgage                                --              --
    Installment and other consumer                   119,694          49,867
                                                 -----------     -----------
     Total chargeoffs                            $   188,120     $    80,298
                                                 -----------     -----------
Net chargeoffs                                   $   159,285     $    57,938
                                                 -----------     -----------
Balance of reserve for possible loan losses
  at end of period                               $ 1,379,678     $ 1,094,621
                                                 -----------     -----------
                                                 -----------     -----------
Ratio of net loan chargeoffs to average loans            .17%            .07%
                                                 -----------     -----------
                                                 -----------     -----------
</TABLE>

                                           19

<PAGE>



Commitments and Lines of Credit

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

The Banks had outstanding unfunded commitments at December 31, 1997, as follows:

<TABLE>
<S>                                      <C>
Commercial, financial and agricultural   $  7,277,748
Real estate--construction and land
  development                              20,674,676
Real estate--mortgage                      4,681,550
Installment and other consumer              2,383,078
Standby letters of credit                     384,298
                                          -----------
                                          $35,401,350
                                          -----------
                                          -----------
</TABLE>


Asset/Liability Management

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

         The objective of interest rate sensitivity management is to minimize
the effect of interest rate changes on net interest margins while maintaining
net interest income at acceptable levels. The major factors that are used to
manage interest rate risk include the mix of fixed and floating interest rates,
pricing and maturity patterns for all asset and liability accounts.


                                       20

<PAGE>

<TABLE>
<CAPTION>

                                                     After Three   After One
                                                      Months But    Year But
                                           Within       Within       Within       After
                                        Three Months   One Year    Five Years   Five Years     Total
                                        ------------   --------    ----------  -----------     -------
<S>                                       <C>          <C>           <C>          <C>          <C>
Earning assets:
  Interest-bearing deposits
    in banks                              $     31     $    100      $   --       $   --       $    131
  Federal funds sold                        27,485         --            --           --         27,485
  Securities                                   823        3,155         8,444        8,790       21,212
  Loans                                     70,875       10,040        22,708        3,106      106,729
                                          --------     --------      --------     --------     --------
    Total rate sensitive assets           $ 99,214     $ 13,295      $ 31,152     $ 11,896     $155,557
                                          --------     --------      --------     --------     --------


Interest-bearing liabilities:
  Interest-bearing demand
    deposits                              $ 49,227     $   --        $   --       $   --       $ 49,227
  Savings accounts                           7,320         --            --           --          7,320
Time deposits                               28,980       36,977         7,790         --         73,747
  Other interest bearing
    liabilities                                354         --            --           --            354
                                          --------     --------      --------     --------     --------
    Total Rate sensitive
      liabilities                         $ 85,881     $ 36,977      $  7,790     $   --       $130,648
                                          --------     --------      --------     --------     --------
   Interest rate sensitivity
    GAP                                   $ 13,333     $(23,682)     $ 23,362     $ 11,896
                                          --------     --------      --------     --------
                                          --------     --------      --------     --------
  Cumulative interest rate
    sensitivity GAP                       $ 13,333     $(10,349)     $ 13,013     $ 24,909
                                          --------     --------      --------     --------
                                          --------     --------      --------     --------

  GAP as % of assets                         7.89%      (14.01%)       13.82%        7.04%
  Cumulative GAP as a % of assets            7.89%       (6.12%)        7.70%       14.74%
  Interest Rate Sensitivity
    GAP ratio                              115.52%        35.95%      399.90%        --
  Cumulative interest rate
    sensitivity GAP ratio                  115.52%        91.58%      109.96%       119.07%

</TABLE>


                    RETURN ON ASSETS AND SHAREHOLDERS' EQUITY

         The following rate of return  information for the periods  indicated is
presented below:
<TABLE>
<CAPTION>

                                       Year Ended December 31,
                                           1997        1996

<S>                                       <C>         <C>
Return on assets (1)                       1.30%       1.20%
Return on equity (2)                      14.47%      10.79%
Dividend payout ratio (3)                 20.48%      22.81%
Equity to assets ratio (4)                 9.01%      11.14%
</TABLE>

(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
    (basic).
(4) Average equity divided by average total assets.

                                        21

<PAGE>


ITEM 7.           FINANCIAL STATEMENTS

         The following  consolidated financial statements of the Company and its
subsidiary  are  included  on page 1 through  32 of this  Annual  Report on Form
10-KSB.

         Consolidated Balance Sheets--December 31, 1997 and 1996

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

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

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

         Notes to Consolidated Financial Statements


ITEM 8.           CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                  ACCOUNTING AND FINANCIAL DISCLOSURE

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


                                    PART III

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

         The following table sets forth the respective names, ages and positions
with the Company and the Bank, other directorships and principal  occupations of
the members of the Board of Directors and the executive  officers of the Company
and the Banks.
<TABLE>
<CAPTION>

                                  Position(s)
                                  with the Com-      Principal Occupation
Name                    Age       pany and Bank      During the Past Five Years
----                    ---       -------------      -------------------------------------------
<S>                     <C>       <C>                <C>

Barbara J. Bond         49        Executive V.P.     Ms. Bond serves as Executive Vice
                                  Westside Bank      President and Senior Operations Officer
                                  Secretary of       of Westside Bank and has served in such
                                  Company and        capacities since the organization of
                                  Westside Bank      Westside. Ms. Bond has served as
                                                     Secretary of the Bank and the Company
                                                     since September 1991 and March 1994,
                                                     respectively.


</TABLE>


                                       22

<PAGE>

<TABLE>
<S>                      <C>      <C>               <C>
Harry L. Hudson, Jr.     54       Director of        Mr. Hudson is currently serving as
                                  Company and        Chairman of the Board of Directors of
                                  Chairman of        Eastside Bank, an office he has held
                                  Eastside Bank      since February 1993.  Mr. Hudson has
                                                     been employed by State Farm Insurance
                                                     since January 1, 1970.  He has served
                                                     as Agent, Agency Manager, and Agency
                                                     Field Executive.

The Honorable             54      Director of       Judge Hines has served as chairman of
P. Harris Hines                   Company and       the Board of Directors of Westside Bank
                                  Chairman of       since April 1992. From January 1, 1983
                                  Westside Bank     until July 26, 1995, Judge Hines served
                                                    as a Judge of the Superior Court of Cobb
                                                    County. Since July 26, 1995, Judge Hines
                                                    has served as a Justice of the Supreme
                                                    Court of the State of Georgia. Judge
                                                    Hines is a Trustee of the Kennesaw State
                                                    College Foundation and is a past member
                                                    of the Judicial Council of Georgia.

Edward C. Milligan        53      Chairman,          Mr. Milligan has served as President and
                                  President and      Chief Executive Officer of Westside
                                  CEO of Company;    since its organization. Mr. Milligan has
                                  President, CEO     served as President and CEO of the
                                  and Director of    Company since its organization in March
                                  Westside Bank;     1994. Mr. Milligan has served as a
                                  Director of        Director of Eastside Bank since August
                                  Eastside Bank      1996.

John S. Thibadeau, Jr.     50     Director of        Since 1973, Mr. Thibadeau has been
                                  Company and        president of Deauton Corporation, a real
                                  Eastside Bank      estate Construction and development
                                                     firm. As a licensed real estate broker,
                                                     Mr. Thibadeau is an officer and
                                                     principal in Thibadeau Burton Realty and
                                                     serves as Vice President of University
                                                     Inn Operating Co., a hotel motel
                                                     management firm.

Benjamin Wofford, M.D.     59     Director of        Dr. Wofford served as Chairman of the
                                  Company and        Board of Directors of Westside Bank from
                                  Westside Bank      its organization until April, 1991.
                                                     From 1970 until his retirement in 1977
                                                     Dr. Wofford was a physician specializing
                                                     in plastic and cosmetic surgery in
                                                     Marietta, Georgia. Dr. Wofford is a
                                                     member of the Medical Association of
                                                     Georgia, Georgia Society of Plastic
                                                     Surgeons, Southeastern Society of
                                                     Plastic & Reconstructive Surgeons, and
                                                     American Society of Plastic and
                                                     Reconstructive Surgeons.

</TABLE>


                                       23

<PAGE>


         No director of the Company or the Bank is related to any other director
or executive officer. No director of the Company or the Bank is an active
director or executive officer of another bank, savings and loan association,
credit union or bank or savings and loan holding company.

ITEM 10.          EXECUTIVE COMPENSATION

         In August 1995, the Company and Westside Bank jointly entered into an
employment agreement with Edward C. Milligan. The term of the Agreement is a
continuing term of two years which is automatically extended each day for an
additional day so that the remaining term shall continue to be two years. In the
event Mr. Milligan's employment is involuntarily terminated prior to a "Change
in Control," Mr. Milligan shall be paid a lump sum equal to one (1) times the
annual base salary paid to him over the previous twelve month period, plus a
lump sum amount equal to one (1) times the annual incentive cash bonus paid to
him over the previous twelve (12) month period. In the event Mr. Milligan is
terminated without cause after a Change in Control or voluntarily terminates his
employment for good reason, he shall be paid the following amounts: a lump sum
equal to two (2) times the annual base salary and the annual incentive cash
bonus paid to him over the previous twelve (12) month period. In addition, Mr.
Milligan shall be entitled to participate for the shorter of a period of twelve
(12) months or twenty-four (24) months respectively, from the date of such
termination or until such time as the officer is employed by another employer in
all welfare benefit plans practices, policies and programs at least as favorable
as the most favorable of such plan, practices, policies and programs in effect
at any time during the ninety (90) day period preceding his termination.

         During 1997, the Directors received $182,400 for their service as
Directors of the Company and the banks.

         The following information is furnished with respect to the Chief
Executive Officer and each executive officer of the Company and the Banks who
had cash and cash equivalent forms of remuneration from the Bank which exceeded
$100,000 for the year ended December 31, 1997, and all executive officers of the
Company and the Banks as a group.

<TABLE>
<CAPTION>
                                                                          Long-Term
                                                                       Compensation
                                                                       ------------
                                                                         Securities
                                                                         Underlying
                                                Deferred       Other      Options/
Position            Year   Salary    Bonus   Compensation   Compensation    SAR(#)
----------------------------------------------------------------------------------

<S>                 <C>   <C>       <C>       <C>           <C>               <C>
Edward C. Milligan  1997  $131,672  $46,200   $48,383       $19,325           34,000
President & CEO     1996   122,136   42,000       --          7,882              --
Westside Bank       1995   117,425   34,800       --          5,348           14,760

Barbara J. Bond     1997    77,750   18,565     9,893         4,281              --
Executive V P       1996    73,583   17,390       --          2,637              --
Westside Bank       1995    70,750   14,300       --          2,423           11,070

Michael Henderson   1997    88,095   20,093     9,180         9,808              --
Executive V P       1996    81,500   19,270       --          8,445              --
Westside Bank       1995    78,333   15,800       --          8,150           11,070

</TABLE>


                                       24

<PAGE>

<TABLE>
<CAPTION>

                                                                           Long-Term
                                                                        Compensation
                                                                        ------------
                                                                          Securities
                                                                          Underlying
                                                 Deferred       Other       Options/
Position            Year   Salary     Bonus    Compensation   Compensation    SAR(#)
--------            ----------------------------------------------------------------
<S>                 <C>   <C>       <C>          <C>         <C>              <C>

All Executive       1997  $361,781  $ 94,498     $67,456     (1)$33,414       34,000
 Officers as        1996   338,424    86,660         --      (2) 18,963           --
 a Group            1995   325,358    65,900         --      (3) 15,921       36,900

</TABLE>

(1)  Includes Bank's contribution to the 401(k) Plan, directors fees ($12,200)
     paid to Mr. Milligan, and an auto allowance ($6,000) paid to Mr. Henderson.

(2)  Includes Bank's contribution to the 401(k) Plan, directors fees ($5,500)
     paid to Mr. Milligan, and an auto allowance ($6,000) paid to Mr. Henderson.

(3)  Includes Bank's contribution to the 401(k) Plan and directors fees ($3,000)
     paid to Mr. Milligan, an auto allowance ($6,000) paid to Mr. Henderson.

Stock Option Plan

         In September 1997 by unanimous written consent of the Board of
Directors of First Sterling Banks, Inc. the 1997 First Sterling Banks, Inc.
Incentive Stock Option Plan was adopted, subject to approval of the Company's
shareholders at the 1998 Annual Shareholders Meeting. Under the plan 200,000
shares of Common Stock may be granted by the Company to key employees of the
Company or a subsidiary.

     The following table reflects options currently outstanding under the
above described plan:

<TABLE>
<CAPTION>
                         Price Per
     Date       Granted   Share      Exercised    Terminated   *Outstanding
     ----       -------   -----      ---------    ----------   ------------
<S>             <C>       <C>            <C>           <C>     <C>
09-24-1997      44,900    $    9.25      --            --      44,900
01-04-1998      22,200        12.50      --            --      22,200

</TABLE>

 * Unless otherwise noted all outstanding shares are immediately exercisable.

 (1)     10,800 shares exercisable immediately
         16,250 shares exercisable 1st anniversary of 09-24-1997
         16,250 shares exercisable 2nd anniversary of 09-24-1997
         1,600 shares exercisable 3rd anniversary of 09-24-1997

 (2)     4,440 shares exercisable per year for five years beginning
         on January 5, 1999

         In September 1996 by unanimous written consent of the Board of
Directors of First Sterling Banks, Inc. in accordance with the Company's 1994
Substitute Incentive Stock Option Plan (the "1994 Plan") and the 1995 Directors
Stock Option Plan , as a result of the merger agreement and a stock dividend to
shareholders of record immediately prior to the merger, the number of shares
under option and the exercise price were adjusted so that there would be no
change in the aggregate purchase price payable upon the exercise of any such
options. In addition, the plans were amended to change the name to "First
Sterling Banks, Inc. 1994 Incentive Stock Option Plan" and "First Sterling
Banks, Inc. 1995 Directors Stock Option Plan".

                                       25

<PAGE>

         Under the 1994 Incentive Stock Option Plan 123,000 shares of Common
Stock may be granted by the Company to key employees of the Company and its
subsidiary, The Westside Bank & Trust Company.

         Under the 1995 Directors Stock Option Plan 147,600 shares of Common
Stock may be granted by the Company to all directors who are not employees of
the Company or Westside Bank; and any Emeritus Director who was a voting member
of the Board of Directors within the 12 months preceding the date of any grant
of options to such Emeritus Director.

         The following table reflects options currently outstanding under the
above described plans:

<TABLE>
<CAPTION>

                           Price Per
     Date          Granted   Share     Exercised Terminated    *Outstanding
---------------    ------    ------    ------    ----------    ------------
<S>                <C>       <C>        <C>           <C>      <C>

02-20-1991         61,500    $    4.065  --            --      61,500
04-19-1995         86,830         4.56  1,500          --      85,330
08-16-1995         51,660         5.285  --            --      51,660
09-20-1995         54,120         6.20   --            --      54,120
11-15-1995          4,920         6.91                 --       4,920

</TABLE>

 * Unless otherwise noted all outstanding shares are immediately exercisable.

         During 1996 the Company adopted the 1996 Substitute Incentive Stock
Option Plan replacing the former plan as amended February 17, 1993. Under the
plan 100,000 shares of Common Stock may be granted by the Company to key
employees of the Company and its subsidiary, The Eastside Bank & Trust Company.

         In 1997 the Company adopted the 1997 Directors Stock Option Plan. Under
the plan 90,000 shares of Common Stock may be granted by the Company to voting
members of the Board of Directors of either the Eastside Bank & Trust Company or
First Sterling Banks, Inc.

         The following table reflects options currently outstanding under the
above described plans:

<TABLE>
<CAPTION>
                              Price Per
     Date             Granted   Share       Exercised    Terminated  *Outstanding
------------------    ------    ------      ---------    ----------  ------------
<S>                   <C>       <C>         <C>          <C>         <C>
02-15-1993            10,000    $    4.09    10,000        --          --
02-17-1993            35,000         3.95    20,000        --        15,000
01-19-1994             4,000         4.20     4,000        --          --
12-14-1994            17,000         4.515   12,000        --         5,000
02-21-1996            34,000         6.50     7,668      11,666      16,666(1)
03-27-1997            90,000         9.00      --          --        90,000

</TABLE>

  Unless otherwise noted all outstanding shares are immediately exercisable.

  (1) 10,334 shares exercisable; remaining 6,332 shares exercisable 02-21-99

         The price at which a stock option is exercisable cannot be less than
the fair market value of the Common Stock on the date of the grant as determined
by the Board of Directors.


                                       26

<PAGE>


Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values

<TABLE>
<CAPTION>

                                                  Number of
                                                  Securities      Value of
                                                  Underlying      Unexercised
                                                  Unexercised     In-the-Money
                                                  Options/SARs    Options/SAR
                                                  at FY-End(#)    at FY-End(S)
                        Shares
                      Acquired on    Value         Exercisable/    Exercisable/
Name                  Exercise #    Realized($)   Unexercisable    Unexercisable
-----------------------------------------------------------------------------------
<S>                       <C>             <C>     <C>              <C>
Edward C. Milligan       -0-             -0-      50,160/23,200    $324,014/$63,800
</TABLE>


Retirement Plan

         The Banks participate in a 401(k) Retirement Plan ("Retirement Plan")
which is a defined contribution plan designed to meet the requirements of
Section 401(k) of the Internal Revenue Code of 1986, as amended ("Code") and the
Employee Retirement Income Security Act of 1974, as amended. All employees of
the Banks who have attained the age of 21 years and have completed one year of
service are eligible to participate in the Retirement Plan. Pursuant to the
Retirement Plan, the Bank may, in its discretion, contribute for each Plan Year
an amount equal to a matching percentage, as determined annually by the Board of
Directors of the Bank, of the employee's contributions for the Plan Year, up to
the maximum limit established by the Code. The matching contributions are
subject to limits established by the Code and a vesting schedule which provides
that matching contributions become 20% vested after more than 2 years and less
than 3 years of service, and vested in increments of 20% for each year of
service thereafter, becoming 100% vested after 6 years of service. The matching
contributions also become 100% vested upon death or disability. Each participant
under the Retirement Plan is always vested 100% in his or her 401(k)
contributions.  The trustee of the Retirement  Plan is Regions Bank of
Gainesville, Georgia. Westside Bank contributed a total of $36,287.83 during the
1997 fiscal year pursuant to the Retirement Plan, including the following
amounts to the accounts of persons named: Edward C. Milligan-- $7,125.00;
Michael J. Henderson--$3,808.13; Barbara J. Bond--$4,281.30; and all executive
officers as a group--$15,214.43. Eastside Bank contributed a total of $10,756
during the 1997 fiscal year.

         In December 1997 the directors of Westside Bank unanimously approved a
Deferred Compensation Plan for the benefit of key executives of the bank who
could be added to the Plan from time to time. Initial participants in the plan
are: Edward C. Milligan, Barbara J. Bond and Michael J. Henderson. The Plan
shall adopt certain retirement goals for each participant, which goals shall be
adjusted from time to time and the Bank shall make regular annual contributions
to the Plan in amounts needed to reach the retirement goal for each executive,
but any such contributions shall be at the discretion of the Board of Directors.
The following contributions totaling $ 67,456, were made for 1997; Edward C.
Milligan--$48,383; Barbara J. Bond--$ 9,893.00 and Michael J. Henderson--$
9,180.00.


                                       27

<PAGE>


ITEM 11.  Security Ownership of Certain Beneficial Owners and Management

         The following table sets forth certain information, as of March 1,
1998, with respect to: (i) each person who is known by the Company to own
beneficially more than 5% of the outstanding shares of the Company's common
stock; (ii) the beneficial ownership of Common Stock by each of the directors
and executive officer; and (iii) the beneficial ownership by all directors and
executive officers as a group. Except as noted below, all shares are owned
directly, and the owner has sole voting and investment power with respect to
such shares:

<TABLE>
<CAPTION>

Name                           Number of Shares%       # of Class (l)
---------------------------    -----------------       --------------
<S>                            <C>                      <C>
Barbara J. Bond                 34,520    (2)                 1.30%
P. Harris Hines                 17,896    (3)                  .68
Harry L. Hudson, Jr             42,300    (4)                 1.60
Edward C. Milligan             111,320    (5)                 4.12
John S. Thibadeau, Jr           20,000    (6)                  .76
Benjamin H. Wofford, Jr         66,058    (7)                 2.50
SouthTrust of Georgia, Inc.    128,794                        4.90
                               -------
                               443,888    (8)
                               -------
                               -------
</TABLE>

(1)      Based on total outstanding shares of 2,625,830 if no options are held
         by the named owner, or based on a pro forma calculation of the total
         outstanding shares including shares issued upon exercise of options
         held by the named owner or by member of the named group.

(2)      Includes 29,520 shares of Common Stock obtainable upon the exercise of
         options.

(3)      Includes 12,300 shares of Common Stock obtainable upon the exercise of
         options

(4)      Includes 10,000 shares of Common Stock obtainable upon the exercise of
         options and 20,000 shares held as joint tenant with spouse.

(5)      Includes 73,360 shares of Common Stock obtainable upon the exercise of
         options and 1,230 shares held by Mr. Milligan's minor children.


(6)      Includes 10,000 shares of Common Stock obtainable upon the exercise of
         options.

(7)      Includes 12,300 shares of Common Stock obtainable upon the exercise of
         options and 12,300 shares held as joint tenant with spouse.

(8)      Includes 147,480 shares of Common Stock obtainable upon the exercise of
         options.


ITEM 12.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The Company and the Bank have had and expect to have banking
transactions in the ordinary course of business with organizers, directors and
officers of the Company and Bank and their affiliates, including members of
their families or corporations, partnerships or other organizations in which
such officers or directors have a controlling interest, on substantially the
same terms (including price, or interest rates and collateral) as those
prevailing at the time for comparable transactions with unrelated parties. Such
banking transactions are not expected to involve more that the normal risk of
collectibility nor present other unfavorable features to the Company and the
Bank.


                                       28

<PAGE>


ITEM 13.          EXHIBITS AND REPORTS ON FORM 8-K

  Item 13(a) 1., 2. and 3. and Item 13(b).

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

                  1.  Financial statements:

                      (a) First Sterling Banks, Inc. and subsidiaries:

                              (i)  Consolidated Balance Sheets--December 31,
                                   1997 and 1996

                             (ii)   Consolidated Statements of Income--Years
                                    ended December 31, 1997 and 1996

                            (iii)   Consolidated Statements of Stockholders'
                                    Equity Years ended December 31, 1997 and
                                    1996

                             (iv)   Consolidated Statements of Cash Flows--
                                    Years ended December 31, 1997 and 1996

                              (v)  Notes to Consolidated Financial Statements

                  (b) First Sterling Banks, Inc. (Parent Company Only):

                  Parent Company only financial information has been included in
                  Note 15 of Notes to Consolidated financial statements.

                  2. Financial statement schedules:

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

                  3. Exhibits required by Item 601 of Regulation S-K:

        Number           Description
        ------           -----------

    Exhibit 3.1      Articles of Incorporation of First Sterling Banks, Inc.
                     (incorporated by reference to Exhibit 3.1 to Registration
                     Statement No. 33-78046 on Form S-4) as amended by
                     Certificate of Merger and Name Change (incorporated by
                     reference to Exhibit 3.1 of the December 31, 1996, 10K-SB)

    Exhibit 3.2      Bylaws of First Sterling Banks, Inc. (incorporated by
                     reference to Exhibit 3.2 to Registration Statement No.33-
                     78046 on Form S-4)

    Exhibit 4.1      The rights of security holders are defined in the
                     articles of Incorporation and Bylaws of First Sterling
                     Banks, Inc., provided in Exhibits 3.1 and 3.2
                     respectively.


                                       29

<PAGE>


    Exhibit 10.1       First Sterling Banks, Inc. 1994 Substitute Incentive
                       Stock Option Plan for The Westside Bank & Trust
                       Company's Incentive Stock Option Plan filed as
                       Exhibit 4.4 to Form S-8 (File No. 33-97300)

    Exhibit 10.2       Form of First Sterling Banks, Inc. 1994 Incentive Stock
                       Option Agreement filed as Exhibit 4.5 to Form S-8 (File
                       No. 33-97300)

    Exhibit 10.3       First Sterling Banks, Inc. 1995 Director Stock Option
                       Plan filed as Exhibit 4.4 to Form S-8 (File No. 33-
                       81053)

    Exhibit 10.4       Form of First Sterling Banks, Inc. 1995 Directors Stock
                       Option Agreement filed as Exhibit 4.5 to Form S-8(File
                       No. 33-81053)

    Exhibit 10.5       First Sterling Banks, Inc. 1996 Substitute Incentive
                       Stock Option Plan filed as Exhibit 4.1 to Form S-8 (File
                       No. 333-15069)

    Exhibit 10.6       Form of First Sterling Banks, Inc. 1996 Substitute
                       Incentive Stock Option Plan Incentive Stock Option
                       Agreement for options granted by Eastside Holding
                       Corporation prior to February 21, 1996 filed as
                       Exhibit 4.2 to Form S-8 (File No.333-15069)

    Exhibit 10.7       Form of First Sterling Banks, Inc. 1996 Substitute
                       Incentive Stock Option Plan Incentive Stock Option
                       Agreement for options granted by Eastside Holding
                       Corporation on February 21, 1996 filed as Exhibit 4.3 to
                       Form S-8 (File No. 333-15069)

    Exhibit 10.8       Employment Agreement dated August 16, 1995, between
                       Westside Financial Corporation, The Westside Bank & Trust
                       Company and Edward C. Milligan filed as Exhibit 10.5 to
                       Form S-4 (File No. 333-3116)

    Exhibit 10.9       First Sterling Banks, Inc. 1997 Directors Stock Option
                       Plan, attached as Exhibit 10.9

    Exhibit 10.10      Form of First Sterling Banks, Inc. 1997 Directors Stock
                       Option Plan, Stock Option Agreement, attached as
                       Exhibit 10.10

    Exhibit 10.11      First Sterling Banks, Inc. 1997 Incentive Stock Option
                       Plan, attached as Exhibit 10.11

    Exhibit 10.12      Form of First Sterling Banks, Inc. 1997 Incentive Stock
                       Option Plan, Incentive Stock Option Agreement, attached
                       as Exhibit 10.12


                                       30

<PAGE>


    Exhibit 22.1       Subsidiaries of First Sterling Banks, Inc., include: The
                       Westside Bank & Trust Company, Kennesaw, Georgia, and The
                       Eastside Bank & Trust Company, Snellville, Georgia

        (b)           Reports on Form 8-K

                      No reports on Form 8-K were filed during the last quarter
                      of the period covered by this report.


                                       31
<PAGE>



                       FIRST STERLING BANKS, INC.
                            AND SUBSIDIARIES

                     CONSOLIDATED FINANCIAL REPORT

                           DECEMBER 31, 1997

<PAGE>



                           FIRST STERLING BANKS, INC.
                                AND SUBSIDIARIES

                          CONSOLIDATED FINANCIAL REPORT
                                DECEMBER 31, 1997
---------------------------------------------------------------------------


                                TABLE OF CONTENTS
                                -----------------

<TABLE>
<CAPTION>

                                                                       Page
                                                                       ----
<S>                                                                 <C>
INDEPENDENT AUDITOR'S REPORT.......................................        1

FINANCIAL STATEMENTS

     Consolidated balance sheets...................................        2
     Consolidated statements of income.............................        3
     Consolidated statements of stockholders' equity...............        4
     Consolidated statements of cash flows.........................  5 and 6
     Notes to consolidated financial statements....................     7-32

</TABLE>



<PAGE>

                                  [letterhead]
                          INDEPENDENT AUDITOR'S REPORT

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

To the Board of Directors
First Sterling Banks, Inc. and Subsidiaries
Kennesaw, Georgia


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

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

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


                                            /S/MAULDIN & JENKINS, LLC
                                            ---------------------------------



Atlanta, Georgia
February 6, 1998, except for Note 16 as to
    which the date is February 25, 1998



<PAGE>

                           FIRST STERLING BANKS, INC.
                                AND SUBSIDIARIES
         TO PRINT: CLICK ON ACTIONS IN THE TOP MENU BAR. MAKE SELECTION.
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1997 AND 1996

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

<TABLE>
<CAPTION>

                                     Assets                                                1997                    1996
                                                                                 ---------------------   ---------------------
<S>                                                                             <C>                     <C>
Cash and due from banks                                                          $          7,651,995    $          5,574,568
Interest-bearing deposits in banks                                                            130,815                 113,277
Federal funds sold and securities purchased
    under resell agreements                                                                27,485,000              18,780,000
Securities available-for-sale                                                              18,963,075              19,140,719
Securities held-to-maturity, fair value
    of $2,238,285 and $3,461,476                                                            2,248,974               3,498,339

Loans                                                                                     106,729,770              83,725,739
Less allowance for loan losses                                                              1,379,678               1,094,621
                                                                                 ---------------------   ---------------------
          Loans, net                                                                      105,350,092              82,631,118
                                                                                 ---------------------   ---------------------

Premises and equipment                                                                      5,106,983               5,335,670
Other assets                                                                                2,104,301               1,632,385
                                                                                 ---------------------   ---------------------
          Total assets                                                           $        169,041,235    $        136,706,076
                                                                                 ---------------------   ---------------------
                                                                                 ---------------------   ---------------------

                      Liabilities and Stockholders' Equity

Deposits
    Noninterest-bearing demand                                                   $         21,028,926    $         18,707,503
    Interest-bearing demand                                                                49,227,141              40,005,223
    Savings                                                                                 7,320,138               3,795,476
    Time, $100,000 and over                                                                21,521,500              14,979,962
    Other time                                                                             52,224,917              43,052,253
                                                                                 ---------------------   ---------------------
          Total deposits                                                                  151,322,622             120,540,417
Securities sold under repurchase agreements                                                   354,061                 605,895
Other liabilities                                                                           1,244,142                 817,395
                                                                                 ---------------------   ---------------------
          Total liabilities                                                               152,920,825             121,963,707
                                                                                 ---------------------   ---------------------

Commitments and contingent liabilities

Stockholders' equity
    Common stock, no par value; 10,000,000 shares
        authorized; 2,757,330 and 2,710,662 issued
        at amount paid in, respectively                                                    12,350,404              12,142,205
    Retained earnings                                                                       4,696,598               2,977,853
    Unrealized gain on securities available-for-sale, net of tax                              107,283                  37,311
    Treasury stock, 131,500 and 61,500 shares, respectively                                (1,033,875)               (415,000)
                                                                                 ---------------------   ---------------------
          Total stockholders' equity                                                       16,120,410              14,742,369
                                                                                 ---------------------   ---------------------

          Total liabilities and stockholders' equity                             $        169,041,235    $        136,706,076
                                                                                 ---------------------   ---------------------
                                                                                 ---------------------   ---------------------
See Notes to Consolidated Financial Statements.

</TABLE>

                                      2

<PAGE>


                           FIRST STERLING BANKS, INC.
                                AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1997 AND 1996

-------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                                         1997                      1996
                                                                                 ---------------------   ---------------------
<S>                                                                             <C>                     <C>
Interest income
    Loans                                                                        $         10,026,825    $          8,439,303
    Taxable securities                                                                      1,234,173               1,228,815
    Nontaxable securities                                                                     184,001                 107,780
    Deposits in banks                                                                           5,900                   2,893
    Federal funds sold and securities purchased
        under resell agreements                                                             1,855,646                 653,536
                                                                                 ---------------------   ---------------------
          Total interest income                                                            13,306,545              10,432,327
                                                                                 ---------------------   ---------------------
Interest expense
    Deposits                                                                                5,543,230               4,382,921
    Federal funds purchased and securities sold
        under repurchase agreements                                                            18,332                  10,023
                                                                                 ---------------------   ---------------------
          Total interest expense                                                            5,561,562               4,392,944
                                                                                 ---------------------   ---------------------
          Net interest income                                                               7,744,983               6,039,383
Provision for loan losses                                                                     444,342                 137,500
                                                                                 ---------------------   ---------------------
          Net interest income after provision for loan losses                               7,300,641               5,901,883
                                                                                 ---------------------   ---------------------
Other income
    Service charges on deposit accounts                                                       389,948                 371,211
    Net realized losses on sales of securities available-for-sale                                (600)                 (4,157)
    Gains on sale of loans                                                                    279,002                 237,247
    Other operating income                                                                    371,157                 155,353
                                                                                 ---------------------   ---------------------
          Total other income                                                                1,039,507                 759,654
                                                                                 ---------------------   ---------------------
Other expense
    Salaries and employee benefits                                                          2,993,762               2,250,272
    Equipment expenses                                                                        316,728                 258,614
    Occupancy expenses                                                                        311,795                 267,283
    Other operating expenses                                                                1,431,002               1,504,305
                                                                                 ---------------------   ---------------------
          Total other expenses                                                              5,053,287               4,280,474
                                                                                 ---------------------   ---------------------

          Income before income taxes                                                        3,286,861               2,381,063

Income tax expense                                                                          1,120,194                 872,085
                                                                                 ---------------------   ---------------------
          Net income                                                             $          2,166,667    $          1,508,978
                                                                                 ---------------------   ---------------------
                                                                                 ---------------------   ---------------------
Basic earnings per common share                                                  $              0.83     $               0.57
                                                                                 ---------------------   ---------------------
                                                                                 ---------------------   ---------------------
Diluted earnings per common share                                                $              0.78     $               0.55
                                                                                 ---------------------   ---------------------
                                                                                 ---------------------   ---------------------
</TABLE>

See Notes to Consolidated Financial Statements.

                                      3


<PAGE>

                           FIRST STERLING BANKS, INC.
                                AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                     YEARS ENDED DECEMBER 31, 1997 AND 1996

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

<TABLE>
<CAPTION>

                                                                                 Unrealized
                                                                                   Gains

                                                                                    on
                                                       Common Stock              Securities
                                           -----------------------------------   Available-      Treasury Stock         Total
                                                         Amount       Retained   for-Sale,     ------------------    Stockholders'
                                            Shares       Paid In      Earnings   Net of Tax    Shares        Cost      Equity
                                            ------       -------      --------   ----------    ------        ----    -------------

<S>                                       <C>          <C>           <C>           <C>         <C>        <C>         <C>
Balance, December 31, 1995   ............   1,211,300  $12,113,610   $ 1,809,659   $  83,022     25,000   $  (415,000)  $13,591,291
    Net income ..........................       --                     1,508,978       --         --            --        1,508,978
    Cash dividends declared,
        $.13 per share ..................       --                      (340,784)      --                                  (340,784)
    Stock dividend.......................     140,531        --             --         --         5,750         --             --
    Exercise of stock options ...........       3,500       28,595          --         --          --           --           28,595
    Net change in unrealized gains on
        securities available-for-sale,
        net of tax ......................                    --             --       (45,711)      --           --          (45,711)
                                            ---------  -----------   -----------   ----------  ---------  -----------   -----------
Balance, December 31, 1996  .............   1,355,331   12,142,205     2,977,853      37,311     30,750      (415,000)   14,742,369
    Net income ..........................       --           --        2,166,667         --          --          --       2,166,667
    Cash dividends declared,
        $.17 per share ..................       --                      (447,922)        --          --          --        (447,922)
    Exercise of stock options ...........      23,334      208,199         --            --          --          --         208,199
    Purchase of treasury stock ..........       --           --            --                    35,000      (618,875)     (618,875)
    Net change in unrealized gains on
        securities available-for-sale,
        net of tax ......................       --           --           --          69,972       --           --           69,972
                                            ---------  -----------   -----------   ----------  ---------  -----------   -----------
Balance, December 31, 1997 .............. $ 1,378,665  $12,350,404    $4,696,598   $ 107,283     65,750   $(1,033,875)  $16,120,410
                                          -----------  -----------    ----------   ---------   --------   -----------   -----------
                                          -----------  -----------    ----------   ---------   --------   -----------   -----------

</TABLE>

See Notes to Consolidated Financial Statements.


                                       4
<PAGE>

                           FIRST STERLING BANKS, INC.
                                AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 1997 AND 1996

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

<TABLE>
<CAPTION>

                                                                          1997             1996
                                                                      -----------      -----------
<S>                                                                   <C>              <C>
OPERATING ACTIVITIES

    Net income    ...............................................    $  2,166,667     $  1,508,978
    Adjustments to reconcile net income to net cash
        provided by operating activities:
        Depreciation ............................................         352,364          290,983
        Provision for loan losses ...............................         444,342          137,500
        Deferred income taxes ...................................         (67,390)         (25,393)
        Net realized losses on sales of securities
            available-for-sale ..................................             600            4,157
        Gains on sale of loans ..................................        (279,002)        (237,247)
        Proceeds from sale of loans .............................       2,655,972        3,078,914
        Loans originated for sale ...............................      (4,070,000)      (4,035,245)
        Increase in interest receivable .........................         (73,628)          (4,029)
        Increase in interest payable ............................         220,843            1,896
        Other operating activities ..............................         136,866         (208,135)
                                                                      -----------      -----------
              Net cash provided by operating activities .........       1,487,634          512,379
                                                                      -----------      -----------

INVESTING ACTIVITIES

    Purchases of securities available-for-sale ..................     (10,050,881)      (5,529,234)
    Proceeds from sales of securities available-for-sale ........         119,400        1,270,143
    Proceeds from maturities of securities available-for-sale ...      10,212,584        4,591,337
    Proceeds from maturities of securities held-to-maturity .....       1,249,365          502,839
    Net increase in Federal funds sold and securities
        purchased under resell agreements .......................      (8,705,000)      (5,280,000)
    Net increase in interest-bearing deposits in banks ..........         (17,538)        (113,277)
    Net increase in loans .......................................     (21,797,756)      (9,442,466)
    Purchase of premises and equipment ..........................         (92,154)        (971,680)
                                                                      -----------      -----------
              Net cash used in investing activities .............     (29,081,980)     (14,972,338)
                                                                      -----------      -----------

FINANCING ACTIVITIES

    Net increase in deposits ....................................      30,782,205       14,074,918
    Net increase (decrease) in securities sold under
        repurchase agreements ...................................        (251,834)         605,895
    Dividends paid ..............................................        (447,922)        (390,784)
    Proceeds from exercise of stock options .....................         208,199           28,595
    Purchase of treasury stock ..................................        (618,875)            --
                                                                      -----------      -----------
              Net cash provided by financing activities .........      29,671,773       14,318,624
                                                                      -----------      -----------

</TABLE>


                                       5
<PAGE>

                           FIRST STERLING BANKS, INC.
                                AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 1997 AND 1996

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

<TABLE>
<CAPTION>

                                                                          1997             1996
                                                                      -----------      -----------
<S>                                                                  <C>              <C>
Net increase (decrease) in cash and due from banks   ............    $  2,077,427     $   (141,335)

Cash and due from banks at beginning of year ....................       5,574,568        5,715,903
                                                                      -----------      -----------
Cash and due from banks at end of year  .........................    $  7,651,995     $  5,574,568
                                                                      -----------      -----------
                                                                      -----------      -----------
SUPPLEMENTAL DISCLOSURES
  Cash paid for:

        Interest ................................................    $  5,340,719     $  4,391,048

        Income taxes ............................................    $  1,257,059     $  1,275,906

NONCASH TRANSACTION
    Unrealized (gains) losses on securities available-for-sale       $   (104,059)    $     73,187

</TABLE>

See Notes to Consolidated Financial Statements.


                                       6



<PAGE>


                           FIRST STERLING BANKS, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

                  Nature of Business

                     First Sterling Banks, Inc. (the Company) is a multi-bank
                     holding company whose business is conducted by its
                     wholly-owned subsidiaries, The Westside Bank & Trust
                     Company and The Eastside Bank & Trust Company, (the Banks).
                     The Banks are commercial banks located in Cobb and Gwinnett
                     Counties, Georgia. The Banks provide a full range of
                     banking services in their primary market areas of Cobb,
                     Gwinnett and surrounding counties. The Eastside Bank &
                     Trust Company has a wholly-owned subsidiary, Eastside
                     Financial Services, Inc., which originates, sells and
                     services loans made under the Small Business Administration
                     (SBA) Program.

                  Basis of Presentation

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

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

                  Cash and Due From Banks

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

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


                                       7

<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

                  Securities Purchased Under Resell Agreements

                     Securities purchased under resell agreements are recorded
                     at the amounts at which the securities are acquired plus
                     accrued interest. The Company enters into purchases of U.
                     S. Government and agency securities under resell agreements
                     to resell substantially identical securities.

                     The amounts advanced under resell agreements represent
                     short-term loans and are combined with Federal funds sold
                     in the balance sheet. The securities underlying the resell
                     agreements are delivered by appropriate entry into a
                     third-party custodian's account designated by the Company
                     under a written custodial agreement that explicitly
                     recognizes the Company's interest in the securities.
                     Securities purchased under resell agreements averaged
                     approximately $21,759,000 and $2,334,000 during 1997 and
                     1996, respectively, and the maximum amounts outstanding at
                     any month-end during 1997 and 1996 was $232,000,000 and
                     $25,000,000, respectively.

                  Securities

                     Securities are classified based on management's intention
                     on the date of purchase. Securities which management has
                     the intent and ability to hold to maturity are classified
                     as held-to-maturity and reported at amortized cost. All
                     other debt securities are classified as available-for-sale
                     and carried at fair value with net unrealized gains and
                     losses included in stockholders' equity, net of tax. Equity
                     securities without a readily determinable fair value are
                     carried at cost.

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

                  Loans

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

                     Nonrefundable loan fees and certain direct loan origination
                     costs are deferred with the net amount recognized into
                     income over the life of the loans as a yield adjustment.


                                       8

<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

                  Loans (Continued)

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

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

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

                  Sale of Loans

                     The Company originates and sells participations in certain
                     loans. Gains are recognized at the time the sale is
                     consummated. The amount of gain recognized on the sale of a
                     specific loan is equal to the percentage resulting from
                     determining the fair value of the portion sold as compared
                     to the fair value of the entire loan. Any gain that is
                     materially in excess of or less than the net premium
                     received is deferred and amortized into income over the
                     term of the loan. Losses are recognized at the time the
                     loan is identified as held for sale and the loan's carrying
                     value exceeds its fair value.


                                       9


<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

                  Premises and Equipment

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

                  Other Real Estate Owned

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

                  Income Taxes

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

                     Recognition of deferred tax balance sheet amounts is based
                     on management's belief that it is more likely than not that
                     the tax benefit associated with certain temporary
                     differences, tax operating loss carryforwards and tax
                     credits will be realized. A valuation allowance would be
                     recorded for those deferred tax items for which it is more
                     likely than not that realization would not occur.

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

                  Earnings Per Common Share

                     Basic earnings per common share are computed by dividing
                     net income by the weighted-average number of shares of
                     common stock outstanding. Diluted earnings per share are
                     computed by dividing net income by the sum of the
                     weighted-average number of shares of common stock
                     outstanding and potential common shares. Potential common
                     shares consist of stock options.


                                       10

<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

                  Recent Accounting Pronouncements

                     The Financial Accounting Standards Board (FASB) has issued,
                     and the Company has adopted, Statement of Financial
                     Accounting Standards (SFAS) No. 125, "Accounting for
                     Transfers and Servicing of Financial Assets and
                     Extinguishments of Liabilities". SFAS No. 125 was amended
                     by SFAS No. 127, which defers the effective date of certain
                     provisions of SFAS No. 125 until January 1, 1998. This
                     statement provides accounting and reporting standards for
                     transfers and servicing of financial assets and
                     extinguishments of liabilities based on consistent
                     application of a financial-components approach that focuses
                     on control. It distinguishes transfers of financial assets
                     that are sales from transfers that are secured borrowings.
                     The adoption of this statement did not have a material
                     effect on the Company's financial statements.

                     The FASB has issued, and the Company has adopted, SFAS No.
                     128, "Earnings Per Share". SFAS No. 128 supersedes
                     Accounting Principles Board Opinion No. 15 "Earnings Per
                     Share" and specifies the computation, presentation, and
                     disclosure requirements for earnings per share (EPS) for
                     entities with publicly held common stock or potential
                     issuable common stock. SFAS No. 128 replaces the
                     presentation of primary EPS with a presentation of basic
                     EPS and fully diluted EPS with diluted EPS. It also
                     requires dual presentation of basic and diluted EPS on the
                     face of the income statement for all entities with complex
                     capital structures and requires a reconciliation of the
                     numerator and denominator for the basic EPS computation to
                     the numerator and denominator of the diluted EPS
                     computation. SFAS No. 128 is effective for financial
                     statements for both interim and annual periods ending after
                     December 15, 1997. The adoption of this statement did not
                     have a material effect on the Company's financial
                     statements.

                     The FASB has issued SFAS No. 130, "Reporting Comprehensive
                     Income". This statement establishes standards for reporting
                     and display of comprehensive income and its components in
                     the financial statements. SFAS No. 130 requires all items
                     that are required to be recognized under accounting
                     standards as components of comprehensive income to be
                     reported in a financial statement that is displayed in
                     equal prominence with the other financial statements. The
                     term "comprehensive income" is used in the SFAS to describe
                     the total of all components of comprehensive income
                     including net income. "Other comprehensive income" refers
                     to revenues, expenses, gains and losses that are included
                     in comprehensive income but excluded from earnings under
                     current accounting standards. Currently, "other
                     comprehensive income" for the Company consists of items
                     previously recorded directly in equity under SFAS No. 115,
                     "Accounting for Certain Investments in Debt and Equity
                     Securities". SFAS No. 130 is effective for periods
                     beginning after December 15, 1997.


                                       11

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 2.  SECURITIES

                  The amortized cost and fair value of securities are summarized
as follows:
<TABLE>
<CAPTION>

                                                                       Gross           Gross
                                                    Amortized       Unrealized       Unrealized          Fair
                                                      Cost             Gains           Losses           Value
                                                ----------------  --------------  ---------------  ---------------
<S>                                             <C>               <C>             <C>              <C>
          Securities Available-for-Sale
              December 31, 1997:
                U. S. Government and agency
                  securities                    $     6,230,971   $      23,622   $      (3,050)   $    6,251,543
                State and municipal securities        4,765,041         128,926          (1,101)        4,892,866
                Mortgage-backed securities            7,491,706          27,781         (13,821)        7,505,666
                Equity securities                       313,000               -                -          313,000
                                                ----------------  --------------  ---------------  ---------------
                                                $    18,800,718   $     180,329   $     (17,972)   $   18,963,075
                                                ----------------  --------------  ---------------  ---------------
                                                ----------------  --------------  ---------------  ---------------

             December 31, 1996:
                U. S. Government and agency
                  securities                    $     9,646,750   $      29,120   $     (39,290)   $    9,636,580
                State and municipal securities        3,959,320          77,659          (4,323)        4,032,656
                Mortgage-backed securities            5,207,151          25,611         (30,479)        5,202,283
                Equity securities                       269,200               -                -          269,200
                                                ----------------  --------------  ---------------  ---------------
                                                $    19,082,421   $     132,390   $     (74,092)   $   19,140,719
                                                ----------------  --------------  ---------------  ---------------
                                                ----------------  --------------  ---------------  ---------------
</TABLE>

<TABLE>
<CAPTION>

                                                                                 Gross            Gross
                                                              Amortized        Unrealized      Unrealized          Fair
                                                                Cost             Gains           Losses           Value
                                                          ----------------  ---------------  --------------  ---------------
<S>                                                       <C>               <C>              <C>             <C>
                    Securities Held-to-Maturity
                       December 31, 1997:
                          U. S. Government and agency
                            securities                    $     2,248,974   $            -   $    (10,689)   $    2,238,285
                                                          ----------------  ---------------  --------------  ---------------
                                                          ----------------  ---------------  --------------  ---------------

                       December 31, 1996:
                          U. S.  Government and agency
                            securities                    $     3,498,339   $          599   $    (37,462)   $    3,461,476
                                                          ----------------  ---------------  --------------  ---------------
                                                          ----------------  ---------------  --------------  ---------------

</TABLE>

                                       12

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 2.  SECURITIES (Continued)

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

                                                         Securities Available-for-Sale        Securities Held-to-Maturity
                                                       ----------------------------------   ---------------------------------
                                                          Amortized            Fair             Amortized           Fair
                                                            Cost               Value              Cost             Value
                                                       ---------------   ----------------   ----------------  ---------------

<S>                                                    <C>               <C>                <C>               <C>
                     Due in one year or less           $    2,572,246    $     2,575,821    $     2,248,974   $    2,238,285
                     Due from one year to five years        5,657,809          5,704,242                  -                -
                     Due from five to ten years             2,143,324          2,209,861                  -                -
                     Due after ten years                      622,633            654,485                  -                -
                     Mortgage-backed securities             7,491,706          7,505,666                  -                -
                     Equity securities                        313,000            313,000                  -                -
                                                       ---------------   ----------------   ----------------  ---------------
                                                       $   18,800,718    $    18,963,075    $     2,248,974   $    2,238,285
                                                       ----------------- -----------------  ----------------  ---------------
                                                       ----------------- -----------------  ----------------  ---------------
 </TABLE>

                  Securities with a carrying value of $15,437,000 and
                  $12,027,000 at December 31, 1997 and 1996, respectively, were
                  pledged to secure public deposits and for other purposes.

                  Gains and losses on sales of securities available-for-sale
consist of the following:
<TABLE>
<CAPTION>

                                             December 31,
                                 --------------------------------------
                                        1997                 1996
                                 -----------------    -----------------

<S>                              <C>                  <C>
       Gross gains               $              -     $              -
       Gross losses                         (600)              (4,157)
                                 -----------------    -----------------
       Net realized losses       $          (600)     $        (4,157)
                                 -----------------    -----------------
                                 -----------------    -----------------

</TABLE>

                                       13

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 3.  LOANS AND ALLOWANCE FOR LOAN LOSSES

                  The composition of loans is summarized as follows:
<TABLE>
<CAPTION>

                                                                     December 31,
                                                         -------------------------------------
                                                                1997                1996
                                                         -----------------    ----------------

<S>                                                      <C>                  <C>
            Commercial, financial, and agricultural      $     24,768,799     $    19,853,352
            Real estate - construction                         35,840,760          21,791,259
            Real estate - mortgage                             39,560,475          34,224,333
            Consumer instalment and other                       6,946,810           8,223,197
                                                         -----------------    ----------------
                                                              107,116,844          84,092,141
            Deferred loan fees and costs                        (387,074)           (366,402)
            Allowance for loan losses                         (1,379,678)         (1,094,621)
                                                         -----------------    ----------------
            Loans, net                                   $    105,350,092     $    82,631,118
                                                         -----------------    ----------------
                                                         -----------------    ----------------

</TABLE>

                  Changes in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>

                                                                      December 31,
                                                          -------------------------------------
                                                                 1997                1996
                                                          -----------------    ----------------

<S>                                                       <C>                  <C>
            Balance, beginning of year                    $      1,094,621     $     1,015,059
               Provision for loan losses                           444,342             137,500
               Loans charged off                                 (188,120)            (80,298)
               Recoveries of loans previously charged off           28,835              22,360
                                                          -----------------    ----------------
            Balance, end of year                          $      1,379,678     $     1,094,621
                                                          -----------------    ----------------
                                                          -----------------    ----------------

</TABLE>


                                       14

<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

                  The total recorded investment in impaired loans was $41,501
                  and $322,992 at December 31, 1997 and 1996, respectively.
                  There were no impaired loans that had related allowances for
                  loan losses determined in accordance with Statement of
                  Financial Accounting Standard No. 114 ("Accounting by
                  Creditors for Impairment of a Loan") at December 31, 1997 and
                  1996. The average recorded investment in impaired loans for
                  1997 and 1996 was $191,133 and $177,432, respectively.
                  Interest income recognized on impaired loans for cash payments
                  received was not material for the years ended December 31,
                  1997 and 1996.

                  The Company has granted loans to certain directors, executive
                  officers, and their related entities. The interest rates on
                  these loans were substantially the same as rates prevailing at
                  the time of the transaction and repayment terms are customary
                  for the type of loan involved. Changes in related party loans
                  for the year ended December 31, 1997 are as follows:
<TABLE>

<S>                                           <C>
            Balance, beginning of year        $      3,816,082
               Advances                              5,075,666
               Repayments                          (3,222,024)
                                              -----------------
            Balance, end of year              $      5,669,724
                                              -----------------
                                              -----------------

</TABLE>


                                       15

<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 4.  PREMISES AND EQUIPMENT

                  Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>

                                                   December 31,
                                      --------------------------------------
                                             1997                 1996
                                      -----------------    -----------------

<S>                                   <C>                  <C>
     Land                             $      1,470,790     $      1,470,790
     Buildings                               3,887,711            3,906,025
     Equipment                               1,354,770            1,281,582
                                      -----------------    -----------------
                                             6,713,271            6,658,397
     Accumulated depreciation              (1,606,288)          (1,322,727)
                                      -----------------    -----------------
                                      $      5,106,983     $      5,335,670
                                      -----------------    -----------------
                                      -----------------    -----------------

</TABLE>

NOTE 5.  EMPLOYEE BENEFIT PLANS

                  The Company has a 401(k) retirement plan covering
                  substantially all employees. Contributions to the plan charged
                  to expense during 1997 and 1996 amounted to $47,044 and
                  $19,685, respectively.

                  The Company implemented deferred compensation agreements in
                  1997 for certain of its key officers. Amounts accrued under
                  these agreements totaled $67,456 at December 31, 1997.

NOTE 6.  STOCK OPTIONS

                  The Company has two incentive stock option plans with 423,000
                  shares of common stock reserved for options to key employees.
                  At December 31, 1997, 153,806 common stock options were
                  available to grant under these plans.

                  The Company also reserved 237,370 shares of common stock for
                  options to directors. At December 31, 1997, there were no
                  options available to grant under this plan.


                                       16

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------

NOTE 6.  STOCK OPTIONS (Continued)

                  Option prices under these plans are equal to the fair value of
                  the Company's common stock on the date of the grant. The
                  options expire in ten years from date of grant. Other
                  pertinent information related to the options is as follows:

<TABLE>
<CAPTION>

                                                                December 31,
                                         ----------------------------------------------------------
                                                    1997                           1996
                                         ----------------------------   ---------------------------
                                                         Weighted-                     Weighted-
                                                          Average                       Average
                                                         Exercise                       Exercise
                                           Number          Price          Number         Price
                                         -----------   --------------   -----------   -------------
<S>                                         <C>         <C>                <C>         <C>
     Under option, beginning of year        347,530     $       4.96       325,530     $      5.04
        Granted                             157,900             9.11        34,000            6.50
        Exercised                          (46,668)             4.46       (7,000)            4.09
        Terminated                          (6,666)             6.50       (5,000)            6.50
                                         -----------                    -----------
     Under option, end of year              452,096             6.44       347,530            4.96
                                         -----------                    -----------
                                         -----------                    -----------

     Exercisable, end of year               371,530             5.92       318,530            4.82
                                         -----------                    -----------
                                         -----------                    -----------

     Weighted-average fair value of
       options granted during the year         2.51                           1.21
                                         -----------                    -----------
                                         -----------                    -----------
</TABLE>

<TABLE>
<CAPTION>

                                     Under Option, End of Year
                                     -------------------------
                                                                                 Weighted-
                                                           Weighted-              Average
                                                            Average              Remaining
                                 Range of                  Exercise             Contractual
         Number                   Prices                     Price             Life in Years
      -------------        ----------------------        --------------       ----------------
<S>                         <C>                           <C>                         <C>
           218,490          $        3.95 - 5.29          $       4.55                7
           233,606                   6.20 - 9.25                  8.20                9
      -------------
      -------------
           452,096
      -------------
      -------------

</TABLE>

                                 Options Exercisable, End of Year
<TABLE>

<S>                         <C>                           <C>                         <C>
           218,490          $        3.95 - 5.29          $       4.55                7
           153,040                   6.20 - 9.00                  7.88                9
      -------------
           371,530
      -------------

</TABLE>

                                       17

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 6.  STOCK OPTIONS (Continued)

                  As permitted by SFAS No. 123 ("Accounting for Stock-Based
                  Compensation"), the Company recognizes compensation cost for
                  stock-based employee compensation awards in accordance with
                  APB Opinion No. 25, ("Accounting for Stock Issued to
                  Employees"). The Company recognized no compensation cost for
                  stock-based employee compensation awards for the years ended
                  December 31, 1997 and 1996. If the Company had recognized
                  compensation cost in accordance with SFAS No. 123, net income
                  and earnings per share would have been reduced as follows:
<TABLE>
<CAPTION>

                                                         December 31, 1997
                                        -----------------------------------------------------
                                                                Basic             Diluted
                                                               Earnings          Earnings
                                          Net Income          Per Share         Per Share
                                        ---------------    ---------------   ----------------
<S>                                     <C>                <C>               <C>
     As reported                        $    2,166,667     $         0.83    $          0.78
     Stock-based compensation,
        net of related tax effect            (162,391)             (0.06)             (0.06)
                                        ---------------    ---------------   ----------------
     As adjusted                        $    2,004,276     $         0.77    $          0.72
                                        ---------------    ---------------   ----------------
                                        ---------------    ---------------   ----------------

</TABLE>

<TABLE>
<CAPTION>

                                                         December 31, 1996
                                        -----------------------------------------------------
                                                                Basic             Diluted
                                                               Earnings          Earnings
                                          Net Income          Per Share         Per Share
                                        ---------------    ---------------   ----------------
<S>                                     <C>                <C>               <C>
     As reported                        $    1,508,978     $         0.57    $          0.55
     Stock-based compensation,
        net of related tax effect                    -                  -                  -
                                        ---------------    ---------------   ----------------
     As adjusted                        $    1,508,978     $         0.57    $          0.55
                                        ---------------    ---------------   ----------------
                                        ---------------    ---------------   ----------------
</TABLE>

                  The fair value of the options granted during the year was
                  based upon the discounted value of future cash flows of the
                  options using the following weighted-average assumptions:
<TABLE>
<CAPTION>

                                                                                      December 31,
                                                                             -------------------------
                                                                                1997          1996
                                                                             -----------   -----------
<S>                                                                               <C>           <C>

      Risk-free interest rate                                                     5.97%         6.13%
      Expected life of the options                                              7 years       7 years
      Expected dividends (as a percent of the fair value of the stock)            1.98%         2.51%
      Volatility                                                                  18.5%           N/A

</TABLE>

                                       18

<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 7.  INCOME TAXES

                  The components of income tax expense are as follows:
<TABLE>
<CAPTION>

                                                      December 31,
                                          -------------------------------------
                                                 1997                1996
                                          -----------------   -----------------

<S>                                       <C>                 <C>
       Current                            $      1,187,584    $        897,478
       Deferred                                   (67,390)            (25,393)
                                          -----------------   -----------------
                     Income tax expense   $      1,120,194    $        872,085
                                          -----------------   -----------------
                                          -----------------   -----------------

</TABLE>

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

                                                            December 31,
                                     -----------------------------------------------------------
                                                 1997                           1996
                                     ----------------------------   ----------------------------
                                         Amount        Percent          Amount         Percent
                                     ---------------  -----------   ---------------   ----------

<S>                                  <C>             <C>          <C>                <C>
   Income taxes at statutory rate    $    1,117,531       34 %      $      809,595        34 %
      Tax-exempt interest                  (61,943)      (2)              (36,612)       (2)
      State income taxes                     52,663        1                34,680         1
      Merger expenses                             -        -                44,755         2
      Other items, net                       11,943        -                19,667         -
                                     ---------------  -----------   ---------------   ----------
   Income tax expense                $    1,120,194       33 %      $      872,085        35 %
                                     ---------------  -----------   ---------------   ----------
                                     ---------------  -----------   ---------------   ----------

</TABLE>


                                       19

<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 7.  INCOME TAXES (Continued)

                  The components of deferred income taxes are as follows:
<TABLE>
<CAPTION>

                                                       December 31,
                                           -------------------------------------
                                                  1997                1996
                                           -----------------   -----------------
<S>                                        <C>                 <C>
      Deferred tax assets:
         Loan loss reserves                $        359,239    $        277,871
         Deferred loan fees and costs               127,776             137,605
                                           -----------------   -----------------
                                                    487,015             415,476
                                           -----------------   -----------------
      Deferred tax liabilities:
         Depreciation                                78,260              74,685
         Securities available-for-sale               58,828              20,988
         Other                                       55,074              58,255
                                           -----------------   -----------------
                                                    192,162             153,928
                                           -----------------   -----------------

      Net deferred tax assets              $        294,853    $        261,548
                                           -----------------   -----------------
                                           -----------------   -----------------

</TABLE>


NOTE 8.  EARNINGS PER COMMON SHARE

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

<TABLE>
<CAPTION>

                                               Year Ended December 31, 1997
                                   ---------------------------------------------
                                       Net          Weighted-Average
                                      Income        Shares            Per share
                                   (Numerator)      (Denominator)      Amount
                                   -----------------    ---------    -----------


<S>                                <C>               <C>          <C>
Basic EPS                          $    2,166,667    2,608,212    $     0.83
                                                                  ----------
                                                                  ----------

Effect of Dilutive Securities
   Stock options                               --      165,234
                                   --------------    --------
Diluted EPS                        $    2,166,667    2,773,446    $     0.78
                                   --------------    ---------    ----------
                                   --------------    ---------    ----------

</TABLE>


                                       20


<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 8.  EARNINGS PER COMMON SHARE (Continued)

<TABLE>
<CAPTION>

                                                     Year Ended December 31, 1996
                                       ---------------------------------------------------------
                                             Net           Weighted-Average
                                           Income               Shares             Per share
                                         (Numerator)         (Denominator)          Amount
                                       ----------------   --------------------  ----------------
<S>                                    <C>                          <C>         <C>
   Basic EPS                           $     1,508,978              2,643,036   $          0.57
                                                                                ---------------
                                                                                ---------------
   Effect of Dilutive Securities
      Stock options                                  -                126,110
                                       ----------------   -------------------
    Diluted EPS                        $     1,508,978              2,769,146   $          0.55
                                       ----------------   --------------------  ---------------
                                       ----------------   --------------------  ---------------

</TABLE>


NOTE 9.  COMMITMENTS AND CONTINGENT LIABILITIES

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

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

                                                December 31,
                                    --------------------------------------
                                           1997                 1996
                                    -----------------    -----------------

     Commitments to extend credit   $     35,017,000     $     24,219,000
     Standby letters of credit               384,000              298,000
                                    -----------------    -----------------
                                    $     35,401,000     $     24,517,000
                                    -----------------    -----------------
                                    -----------------    -----------------


                                       21

<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 9.  COMMITMENTS AND CONTINGENT LIABILITIES (Continued)

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

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

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

NOTE 10.          CONCENTRATIONS OF CREDIT

                  The Company originates primarily commercial, residential, and
                  consumer loans to customers in Cobb and Gwinnett Counties and
                  surrounding counties. The ability of the majority of the
                  Company's customers to honor their contractual loan
                  obligations is dependent on the economy in these areas.

                  Seventy-one percent of the Company's loan portfolio is
                  concentrated in loans secured by real estate, of which a
                  substantial portion is secured by real estate in the Company's
                  primary market areas. Accordingly, the ultimate collectibility
                  of the loan portfolio is susceptible to changes in market
                  conditions in the Company's primary market areas. The other
                  significant concentrations of credit by type of loan are set
                  forth in Note 3.

                  The Banks, as a matter of policy, do not generally extend
                  credit to any single borrower or group of related borrowers in
                  excess of 25% of the Banks' statutory capital, which amounted
                  to $1,527,000 for The Westside Bank & Trust Company and
                  $1,500,000 for The Eastside Bank & Trust Company.


                                       22

<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 11. REGULATORY MATTERS

                  The Banks are subject to certain restrictions on the amount of
                  dividends that may be declared without prior regulatory
                  approval. At December 31, 1997, approximately $1,150,000 of
                  retained earnings were available for dividend declaration
                  without regulatory approval.

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

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

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

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


                                       23

<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 11. REGULATORY MATTERS (Continued)

<TABLE>
<CAPTION>

                                                                                                            To Be Well
                                                                                  For Capital           Capitalized Under
                                                                                    Adequacy            Prompt Corrective
                                                          Actual                    Purposes            Action Provisions
                                                 -------------------------  ------------------------- -----------------------
                                                   Amount        Ratio        Amount        Ratio       Amount       Ratio
                                                 ------------  -----------  ------------  ----------- ------------  ---------
                                                                           (Dollars in Thousands)
                                                 ----------------------------------------------------------------------------
                  <S>                            <C>               <C>      <C>                <C>    <C>             <C>
                  As of December 31, 1997:
                  Total Capital
                     (to Risk Weighted Assets):
                     Consolidated                $    17,393       13.90%   $    10,009        8.00%  $    12,511     10.00%
                     Westside                    $     9,501       13.92%   $     5,460        8.00%  $     6,825     10.00%
                     Eastside                    $     7,596       13.37%   $     4,546        8.00%  $     5,683     10.00%
                  Tier I Capital
                     (to Risk Weighted Assets):
                     Consolidated                $    16,013       12.80%   $     5,005        4.00%  $     7,507      6.00%
                     Westside                    $     8,684       12.73%   $     2,730        4.00%  $     4,095      6.00%
                     Eastside                    $     7,033       12.38%   $     2,273        4.00%  $     3,410      6.00%
                  Tier I Capital
                     (to Average Assets):
                     Consolidated                $    16,013        6.52%   $     9,824        4.00%  $    12,280      5.00%
                     Westside                    $     8,684        5.03%   $     6,903        4.00%  $     8,629      5.00%
                     Eastside                    $     7,033        9.63%   $     2,921        4.00%  $     3,651      5.00%

</TABLE>


                                       24


<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 11. REGULATORY MATTERS (Continued)

<TABLE>
<CAPTION>

                                                                                                            To Be Well
                                                                                  For Capital           Capitalized Under
                                                                                    Adequacy            Prompt Corrective
                                                          Actual                    Purposes            Action Provisions
                                                 -------------------------  ------------------------- -----------------------
                                                   Amount        Ratio        Amount        Ratio       Amount       Ratio
                                                 ------------  -----------  ------------  ----------- ------------  ---------
                                                                           (Dollars in Thousands)
                                                 ----------------------------------------------------------------------------
                  <S>                            <C>               <C>      <C>                <C>    <C>             <C>
                  As of December 31, 1996:
                  Total Capital
                     (to Risk Weighted Assets):
                     Consolidated                $    15,800       15.50%   $     8,155        8.00%  $    10,194     10.00%
                     Westside                    $     8,527       15.37%   $     4,438        8.00%  $     5,548     10.00%
                     Eastside                    $     7,075       15.22%   $     3,719        8.00%  $     4,648     10.00%
                  Tier I Capital
                     (to Risk Weighted Assets):
                     Consolidated                $    14,705       14.42%   $     4,079        4.00%  $     6,119      6.00%
                     Westside                    $     7,879       14.20%   $     2,219        4.00%  $     3,329      6.00%
                     Eastside                    $     6,628       14.26%   $     1,859        4.00%  $     2,789      6.00%
                  Tier I Capital
                     (to Average Assets):
                     Consolidated                $    14,705       10.03%   $     5,864        4.00%  $     7,331      5.00%
                     Westside                    $     7,879        8.77%   $     3,594        4.00%  $     4,492      5.00%
                     Eastside                    $     6,628       11.68%   $     2,270        4.00%  $     2,837      5.00%

</TABLE>


                                       25

<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 12. FAIR VALUE OF FINANCIAL INSTRUMENTS

                  The following methods and assumptions were used by the Company
                  in estimating its fair value disclosures for financial
                  instruments. In cases where quoted market prices are not
                  available, fair values are based on estimates using discounted
                  cash flow methods. Those methods are significantly affected by
                  the assumptions used, including the discount rates and
                  estimates of future cash flows. In that regard, the derived
                  fair value estimates cannot be substantiated by comparison to
                  independent markets and, in many cases, could not be realized
                  in immediate settlement of the instrument. The use of
                  different methodologies may have a material effect on the
                  estimated fair value amounts. Also, the fair value estimates
                  presented herein are based on pertinent information available
                  to management as of December 31, 1997 and 1996. Such amounts
                  have not been revalued for purposes of these financial
                  statements since those dates and, therefore, current estimates
                  of fair value may differ significantly from the amounts
                  presented herein.

                  Cash, Due From Banks, Interest-Bearing Deposits in Banks,
                  Federal Funds Sold, and Securities Purchased Under Resell
                  Agreements:

                     The carrying amounts of cash, due from banks,
                     interest-bearing deposits in banks, Federal funds sold, and
                     securities purchased under resell agreements approximate
                     their fair value.

                  Securities:

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

                  Loans:

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


                                       26

<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 12. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

                  Deposits:

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

                  Securities Sold Under Repurchase Agreements:

                     The carrying amount of securities sold under repurchase
                     agreements approximates their fair value.

                  Accrued Interest:

                     The carrying amounts of accrued interest approximate their
fair values.

                  Off-Balance Sheet Instruments:

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


                                       27

<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 12. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

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

<TABLE>
<CAPTION>
                                             December 31, 1997              December 31, 1996
                                    ------------------------------------------------------------
                                       Carrying        Fair          Carrying          Fair
                                        Amount         Value           Amount          Value
                                    ------------    ------------    ------------    ------------
<S>                               <C>             <C>             <C>             <C>
Financial assets:
   Cash and due from banks,
      interest-bearing deposits in
      banks , Federal funds sold
      and securities purchased
      under resell agreements       $ 35,267,810    $ 35,267,810    $ 24,467,845    $ 24,467,845
    Securities available-for-sale     18,963,075      18,963,075      19,140,719      19,140,719
    Securities held-to-maturity        2,248,974       2,238,285       3,498,339       3,461,476
    Loans                            105,350,092     106,584,761      82,631,118      82,343,000
    Accrued interest receivable          927,091         927,091         853,463         853,463

Financial liabilities:
   Deposits                          151,322,622     151,548,714     120,540,417     121,117,670
   Securities sold under
      repurchase agreements              354,061         354,061         605,895         605,895
    Accrued interest payable             602,097         602,097         381,254         381,254

</TABLE>


                                       28

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 13. BUSINESS COMBINATION AND NAME CHANGE

                  On July 31, 1996, the Company effected a business combination
                  and merger with Eastside Holding Corporation by exchanging
                  600,000 shares of its common stock for all of the common stock
                  of Eastside Holding Corporation. The combination was accounted
                  for as a pooling of interests and, accordingly, all prior
                  financial statements have been restated to include Eastside
                  Holding Corporation. In conjunction with the combination. the
                  Company changed its name from Westside Financial Corporation
                  to First Sterling Banks, Inc. The results of operations of the
                  separate companies for periods prior to the combination are
                  summarized as follows:

<TABLE>
<CAPTION>

                                                                         Net Income
                                                                      ----------------
<S>                                                                  <C>
    For the period from January 1, 1996 through July 31, 1996:
       First Sterling Banks, Inc.                                     $       529,049
       Eastside Holding Corporation                                           377,752
                                                                      ----------------
                                                                      $       906,801
                                                                      ----------------
                                                                      ----------------

</TABLE>

NOTE 14. SUPPLEMENTAL FINANCIAL DATA

                  Components of other operating income and expenses in excess of
                  1% of total revenue are as follows:

<TABLE>
<CAPTION>

                                                December 31,
                                    -------------------------------------
                                           1997                1996
                                    -----------------   -----------------

<S>                                 <C>                 <C>
    SBA commission income           $        171,465    $        152,861
    Data processing                          212,179             197,125
    Directors fees                           182,400             140,225
    Merger expenses                                -             131,632

</TABLE>


                                       29

<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 15. PARENT COMPANY FINANCIAL INFORMATION

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

                                                   CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                     1997                 1996
                                                              -----------------    -----------------
<S>                                                           <C>                  <C>
            Assets
               Cash                                           $        274,125     $         79,675
               Investment in subsidiaries                           15,824,662           14,625,083
               Other assets                                             46,623               37,611
                                                              -----------------    -----------------

                          Total assets                        $     16,145,410     $     14,742,369
                                                              -----------------    -----------------
                                                              -----------------    -----------------

            Liabilities                                       $         25,000     $              --

            Stockholders' equity                                    16,120,410           14,742,369
                                                              -----------------    -----------------
            Total liabilities and stockholders' equity        $     16,145,410     $     14,742,369
                                                              -----------------    -----------------
                                                              -----------------    -----------------

</TABLE>


                                       30

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 15. PARENT COMPANY FINANCIAL INFORMATION (Continued)

                         CONDENSED STATEMENTS OF INCOME

<TABLE>
<CAPTION>

                                                                           1997                 1996
                                                                    -----------------    -----------------

<S>                                                                 <C>                  <C>
   Income, dividends from subsidiaries                              $      1,171,695     $        486,132
                                                                    -----------------    -----------------

   Expenses
      Merger expenses                                                              -              131,632
      Legal and professional                                                  24,338               40,581
      Other expense                                                          180,663               86,310
                                                                    -----------------    -----------------
                 Total expenses                                              205,001              258,523
                                                                    -----------------    -----------------

                 Income before income tax benefits and
                  equity in undistributed income of subsidiaries             966,694              227,609

   Income tax benefits                                                      (70,366)             (48,589)
                                                                    -----------------    -----------------

                 Income before equity in undistributed income
                  of subsidiaries                                          1,037,060              276,198

   Equity in undistributed income of subsidiaries                          1,129,607            1,232,780
                                                                    -----------------    -----------------

                 Net income                                         $      2,166,667     $      1,508,978
                                                                    -----------------    -----------------
                                                                    -----------------    -----------------

</TABLE>


                                       31

<PAGE>


                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 15. PARENT COMPANY FINANCIAL INFORMATION (Continued)

                       CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                           1997                1996
                                                                    -----------------   -----------------

<S>                                                                 <C>                 <C>
 OPERATING ACTIVITIES
    Net income                                                      $      2,166,667    $      1,508,978
    Adjustments to reconcile net income to net
       cash provided by operating activities:
       Undistributed income of subsidiaries                              (1,129,607)         (1,232,780)
       Other operating activities                                             15,988              75,924
                                                                    -----------------   -----------------

               Net cash provided by operating activities                   1,053,048             352,122
                                                                    -----------------   -----------------

 FINANCING ACTIVITIES
    Dividends paid                                                         (447,922)           (340,784)
    Proceeds from exercise of stock options                                  208,199              28,595
    Purchase of treasury stock                                             (618,875)                   -
                                                                    -----------------   -----------------

               Net cash used in financing activities                       (858,598)           (312,189)
                                                                    -----------------   -----------------

 Net increase in cash                                                        194,450              39,933

 Cash at beginning of year                                                    79,675              39,742
                                                                    -----------------   -----------------

 Cash at end of year                                                $        274,125    $         79,675
                                                                    -----------------   -----------------
                                                                    -----------------   -----------------

</TABLE>


NOTE 16. COMMON STOCK SPLIT

                  On February 25, 1998, the Company declared a two-for-one
                  common stock split payable on March 30, 1998 to stockholders
                  of record on March 16, 1998. The number of shares issued after
                  the split is 2,757,330, which is reflected in the number of
                  issued shares of common stock on the balance sheet. The basic
                  and diluted earnings per common share for the years ended
                  December 31, 1997 and 1996 have been retroactively adjusted
                  for the increased number of shares of common stock after
                  giving effect to the stock split.


                                       32


<PAGE>


SIGNATURES

        In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                  FIRST STERLING BANKS, INC.
-------------------------------------------------------------------------------
                                         (Registrant)



By: /s/ Edward C. Milligan                             Date:   March 30, 1998
   ---------------------------------                         ----------------
    Edward C. Milligan, President
    Chief Executive Officer and Chairman



        In  accordance  with the Exchange Act, this report has been signed below
by the following  persons on behalf of the  registrant and in the capacities and
on the dates indicated:


   /s/ Barbara J. Bond                             Date:   March 30, 1998
------------------------------------                    ----------------
Barbara J. Bond, Secretary/Treasurer,
Principal Financial and Accounting Officer


   /s/ P. Harris Hines                             Date:   March 30, 1998
------------------------------------                     ----------------
P. Harris Hines, Director


   /s/ Harry L. Hudson, Jr.                        Date:   March 30, 1998
------------------------------------                     ----------------
Harry L. Hudson, Jr., Director


   /s/ John S. Thibadeau, Jr.                      Date:   March 30, 1998
------------------------------------                    -----------------
John S. Thibadeau, Jr., Director


   /S/ Benjamin H. Wofford                         Date:   March 30, 1998
-----------------------------------                      ----------------
Benjamin H. Wofford, Director




        SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(d) OF THE EXCHANGE ACT BY NON-REPORTING ISSUERS.

        The registrant  will furnish proxy material to security  holders
subsequent to the filing of this Form 10-KSB and will submit four copies of such
materials to the Securities and Exchange Commission when they are provided to
the security holders.


                                       32