<PAGE>   1
                                   FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C 20549


[X]      QUARTERLY REPORT UNDER SECTION 13 AND 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934 
         For the quarterly period ended September 30, 1996

[ ]      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT 1934
         For the transition period from         to         
                                         -------    -------

                       Commission File Number:   0-23890
                                                 -------        

                            FIRST STATE CORPORATION
                            -----------------------
             (Exact name of registrant as specified in its charter)

              Georgia                                     58-1439347
              -------                                     ----------
  (State or other jurisdiction of           (I.R.S Employer Identification No.)
  incorporation or organization)

                  333 W. Broad Avenue,   Albany, Georgia  31703
                  ---------------------------------------------
                    (Address of principal executive offices)

                                 (912) 432-8000
                                 ----- --------
              (Registrant's telephone number, including area code)

                                 Not Applicable
                                 --- ----------
  (Former name, former address and former fiscal year, if changed since last
                                    report)

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

                     APPLICABLE-ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of September 30, 1996.  
        4,549,588 SHARES
<PAGE>   2

                         PART I - FINANCIAL INFORMATION



ITEM 1.  Financial Statements

The following financial statements are provided for First State Corporation and
subsidiaries:

     A.  Consolidated Balance Sheets as of  September 30, 1996 and December 31,
         1995.

     B.  Consolidated Statements of Income for the three months and nine months
         ended September 30, 1996 and 1995.

     C.  Consolidated Statements of Cash Flows for the nine months ended
         September 30, 1996 and 1995.



The consolidated statements furnished have not been examined by independent
certified public accountants, but, in the opinion of management, reflect all
adjustments (consisting only of normal recurring accruals) necessary for a fair
presentation of the results of operations. Results of operations for the nine
months are not necessarily indicative of the results of operations for the
entire year.


ITEM 2.

         Management's Discussion and Analysis of Financial Condition and
         Results of Operation.





                    
<PAGE>   3
                  FIRST STATE CORPORATION AND SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS
                  September 30, 1996 and  December 31, 1995
                           (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
                                              September 30,     December 31,
ASSETS                                            1996              1995
<S>                                            <C>               <C>
Cash and due from banks                        $ 25,105          $ 26,130
Interest-bearing deposits in banks               10,695            12,912
Investment securities - held to maturity         37,658            42,388
Investment securities - available for sale       80,860            29,171
Federal funds sold                                3,200            10,558
Loans                                           332,571           299,161

Less allowance for loan losses                    5,178             5,037
                                               --------          --------
          Loans, net                            327,393           294,124
                                               --------          --------

Premises and equipment, net                      10,737            10,905
Other assets                                     19,795            10,671
                                               --------          --------
                                               $515,443          $436,859
                                               ========          ========
LIABILITIES & STOCKHOLDERS' EQUITY

Deposits
     Noninterest-bearing demand                $ 84,638          $ 85,362
     Interest-bearing demand                    108,363           101,615
     Savings                                     32,539            24,850
     Time, $100,000 and over                     51,547            37,696
     Other time                                 175,525           134,803
                                               --------          --------
          Total deposits                        452,612           384,326

Federal funds purchased and securities
   sold under repurchase agreements               6,397             3,474
Debenture bonds and notes payable                 4,823               885
Other liabilities                                 5,226             5,026
                                               --------          --------
     Total liabilities                          469,058           393,711

Stockholders' Equity
7% cumulative nonvoting preferred
   stock, par value $50; 100,000 shares
   author: no shares issued  
Common stock, par value $1; 20,000,000
   shares authorized: 4,549,588 shares
   issued                                         4,550             6,853
Additional paid-in capital                        2,348            13,989
Retained earnings                                39,563            35,513
Net unrealized gains on available
   for sale securities (net of taxes)               (76)              171
                                               --------          --------
                                                 46,385            56,526

Less cost of common treasury stock
   0, and 2,281,284 shares                            0            13,378
                                               --------          --------
         Total stockholders' equity              46,385            43,148
                                               --------          --------
                                               $515,443          $436,859
                                               ========          ========
</TABLE>
<PAGE>   4




                   FIRST STATE CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF INCOME
              FOR THE PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
              (DOLLARS IN THOUSANDS, EXCEPT EARNINGS PER SHARE)

<TABLE>
<CAPTION>
                                                Three Months Ended     Nine Months Ended
                                                  September 30,          September 30,
                                                   1996       1995        1996        1995
<S>                                               <C>        <C>        <C>         <C>
INTEREST INCOME                                   
     Interest and fees on loans                   $7,861     $7,417     $22,545     $21,192
     Interest on investment securities
          Taxable                                  1,301      1,005       3,033       3,314
          Nontaxable                                 314        273         961         867
     Interest on federal funds sold                   23          9         197          45
     Interest on deposits in banks                    17         26         215         102
                                                  ------     ------     -------     -------
                                                   9,516      8,730      26,951      25,520
                                                  ------     ------     -------     -------

INTEREST EXPENSE
     Interest on deposits                          3,687      3,176      10,190       8,731
     Interest on federal funds purchased
        and securities sold under repurchase
        agreements                                   158         51         244         202
     Interest on other borrowings                     52          4          61          28
                                                  ------     ------     -------     -------
                                                   3,897      3,231      10,495       8,961
                                                  ------     ------     -------     -------

          Net interest income                      5,619      5,499      16,456      16,559
     Provision for loan losses                        82        188         350         565
          Net interest income after               ------     ------     -------     -------
            provision for loan losses              5,537      5,311      16,106      15,994
                                                  ------     ------     -------     -------
                                                                                           
                                                                                           
OTHER INCOME
     Service charges on deposit accounts             787        669       2,203       1,997
     Other loan income                               465        796       1,677       1,989
     Trust department income                         301        315         901         896
     Other                                            49        130         277         789
                                                  ------     ------     -------     -------
                                                   1,602      1,910       5,058       5,671
                                                  ------     ------     -------     -------

OTHER EXPENSE
     Salaries and employee benefits                2,392      2,495       7,191       7,174
     Equipment and occupancy, net                    811        931       2,304       2,442
     Data processing expense                         177        169         595         488
     FDIC Insurance                                  14        (16)         29         381
     Stationery and supplies                         129        113         336         337
     Amortization of intangible assets               142         58         259         175
     Legal fees                                       26         56         146         188
     Telephone and telegraph                          68         88         252         270
     Trust Investment Losses                           0        187           0         762
     Other operating expenses                        546        668       2,106       1,829
                                                  ------     ------     -------     -------
                                                   4,305      4,749      13,218      14,046
                                                  ------     ------     -------     -------
         Income before taxes                       2,834      2,472       7,946       7,619
     APPLICABLE INCOME TAXES                         835        820       2,463       2,347
                                                  ------     ------     -------     -------

NET INCOME                                        $1,999     $1,652      $5,483     $ 5,272
                                                  ======     ======      ======     =======
     Per share of common stock
          Net Income                              $ 0.44     $ 0.36      $ 1.21     $  1.16
</TABLE>

<PAGE>   5



                                                  
                   FIRST STATE CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENT OF CASh FLOWS
                   PERIOD ENDED SEPTEMBER 30, 1996 AND 1995
                            (DOLLARS IN THOUSANDS)
                                                  
                                                  
<TABLE>
<CAPTION>
                                                                 1996            1995
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                           <C>              <C>
Net Income                                                    $   5,483        $  5,272
Adjustments to reconcile net income to
       net cash provided by operating activities:
Depreciation and amortization                                     1,301           1,282
Provision for loan losses                                           350             565
Provision for deferred taxes  (benefits)                            (13)           (159)
Increase(Decrease)  in taxes payable                                233             (15)
 (Decrease) in interest payable                                      54             411
 (Increase) decrease in interest receivable                      (1,171)         (1,385)
Other prepaids, deferrals and accruals, net                         (58)          1,251
                                                              ---------        --------
                     Total adjustments                              696           1,950
                                                              ---------        --------
                    Net cash provided by operating activities     6,179           7,222
                                                              ---------        --------


CASH FLOWS FROM INVESTING ACTIVITIES

Change in interest bearing deposits
    with banks                                                    2,217             202
Proceeds from maturities of securities held to maturity           8,881          15,997
Proceeds from maturities of securities held for sale             53,149           5,831
Purchase of securities held to maturity                          (4,209)         (5,712)
Purchase of securities held for sale                           (104,780)         (1,358)
Decrease in federal funds sold                                    7,358           3,401
Decrease(Increase) in loans                                     (33,458)        (32,587)
Purchase of premises and equipment                                 (874)         (1,338)
Net cash received from acquisition of deposits                   73,447
                                                              ---------        --------
Net cash provided by (used in) investing activities               1,731         (15,564)
                                                              ---------        --------

CASH FLOWS FROM FINANCING ACTIVITIES

Increase (decrease) in deposits                                 (13,870)          2,473
(Decrease) in federal funds purchased and
  securities sold under repurchase agreements                     2,923            (684)
Principal payments on debt                                         (912)         (1,360)
Long term debt (Proceeds)                                         4,850
Purchase of fractional shares                                        (1)
Proceeds from stock options exercised                                 2
Treasury stock transactions, net                                   (569)
Dividends paid                                                   (1,358)           (975)
                                                              ---------        --------
    Net cash provided by (used in) financing activities          (8,935)           (546)
                                                              ---------        --------

Net increase (decrease) in cash and due from banks               (1,025)         (8,888)
Cash and due from banks at beginning of period                   26,130          29,081
                                                              ---------        --------
Cash and due from banks at end of period                      $  25,105        $ 20,193
                                                              =========        ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
  Cash paid during the period for:
       Interest on deposits and other borrowings              $  10,441        $  8,550
</TABLE>

<PAGE>   6


                    FIRST STATE CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         BASIS OF FINANCIAL STATEMENT PRESENTATION

          First State Corporation is a multi-bank holding company whose
          business is presently conducted by its wholly-owned subsidiaries,
          First State Bank and Trust Company of Albany, Georgia and subsidiary
          and First State Bank and Trust Company of Cordele, Georgia.  The
          Company provides a full range of banking services to individual and
          corporate customers in its primary market area of southwest Georgia.
          The Company and its subsidiaries are subject to the regulations of
          certain Federal and state agencies and are periodically examined by
          certain regulatory authorities.

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

          The consolidated financial statements include the accounts of the
          Company and its subsidiaries. Significant intercompany transactions
          and accounts are eliminated in consolidation.  Assets held by the
          Banks in a fiduciary or agency capacity are not assets of the Banks   
          and are not included in the financial statements.

          The principles which significantly affect the determination of
          financial position, results of operations and cash flows are  
          summarized below.
<PAGE>   7

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1.          SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)

                 CASH AND CASH EQUIVALENTS

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

                  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.

                 INVESTMENTS IN SECURITIES

                  The Company's investments in securities are classified and
                  accounted for as follows:

                  SECURITIES AVAILABLE FOR SALE

                   Securities classified as available for sale are those debt
                   securities that the Company intends to hold for an
                   indefinite period of time, but not necessarily to maturity. 
                   Any decision to sell a security classified as available for
                   sale would be based on various factors, including
                   significant movements in interest rates, changes in the
                   maturity mix of the Company's assets and liabilities,
                   liquidity needs, regulatory capital considerations and other
                   similar factors.  Securities available for sale are carried
                   at fair value.  Unrealized gains or losses are reported as
                   increases or decreases in stockholders' equity, net of the
                   related deferred tax effect. Realized gains or losses,
                   determined on the basis of the cost  of specific securities
                   sold, are included in earnings.
<PAGE>   8


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1.          SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)

                   SECURITIES HELD TO MATURITY

                      Securities classified as held to maturity are those debt
                      securities the Company has both the intent and ability to
                      hold to maturity regardless of changes in market
                      conditions, liquidity needs or changes in general
                      economic conditions.  These securities are carried at
                      cost adjusted for amortization of premium and accretion
                      of discount, computed by the interest method over their
                      contractual lives.  The sale of a security within three
                      months of its maturity date or after collection of at
                      least 85 percent of the principal outstanding at the time
                      the security was acquired is considered a maturity for
                      purposes of classification and disclosure.

                   A decline in the fair value below cost of any available for
                   sale or held to maturity security that is deemed other than
                   temporary is charged to earnings resulting in the
                   establishment of a new cost basis for the security.
<PAGE>   9



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




NOTE 1.          SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)

                 LOANS AND INTEREST INCOME

                   Loans are stated at principal amounts outstanding less
                   unearned income and the allowance for loan losses. Interest
                   income on loans is credited to income based on the principal
                   amount outstanding at the respective rate of interest except
                   for add on interest on certain installment loans for which
                   interest is recognized on the sum-of-the-months method.

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

                   Fees on loans and costs incurred in origination of loans are
                   recognized at the time the loan is placed on the books.
                   Because loan fees are not significant and the majority of
                   loans have maturities of one year or less, the results on
                   operations are not materially different than the results
                   which would be obtained by accounting for loan fees and
                   costs in accordance with generally accepted accounting
                   principles.

                   The allowance for loan losses is established through a
                   provision for loan losses charged to expense.  Loans are
                   charged against the allowance for loan losses when
                   management believes that collectibility of the principal is
                   unlikely.  The allowance is an amount that management
                   believes will be adequate to absorb estimated losses on
                   existing loans that may become uncollectible, based on
                   evaluation of the collectibility of loans and prior loss
                   experience.  This evaluation also takes into consideration
                   such
<PAGE>   10

                   factors as changes in the nature and volume of the loan
                   portfolio, overall portfolio quality, review of specific
                   problem loans and current economic conditions that may
                   affect the borrower's ability to pay.  Certain estimates are
                   susceptible to change in the near term.  Such estimates
                   include the creditworthiness of significant borrowers and
                   the collateral value of delinquent loans.  While management
                   uses the best information available to make its evaluation,
                   future adjustments to the allowance may be necessary if
                   there are significant changes in economic conditions.  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.
<PAGE>   11

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1.          SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)

                 LOANS AND INTEREST INCOME (CONTINUED)

                   Impaired loans are measured based on the present value of
                   expected future cash flows discounted at the loan's
                   effective interest rate or, as a practical expedient, at the
                   loan's observable market price or the fair value of the
                   collateral if the loan is collateral dependent.  A loan is
                   impaired when it is probable the creditor will be unable to
                   collect all contractual principal and interest payments due
                   in accordance with the terms of the loan agreement.  Accrual
                   of interest on an impaired loan is discontinued when
                   management believes, after considering collection efforts
                   and other factors, that the borrower's financial condition
                   is such that collection of interest is doubtful.  Cash
                   collections on impaired loans are credited to the loans
                   receivable balance, and no interest income is recognized on
                   those loans until the principal balance has been collected.

                 PREMISES AND EQUIPMENT

                   Premises and equipment are stated at cost less accumulated
                   depreciation, computed principally on the straight-line
                   method over the following estimated useful lives:

                                                           YEARS
                                                           -----

                          Buildings                        10-40
                          Equipment                         5-20
                          Leasehold improvements            7-15

<PAGE>   12



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 1.          SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)

                 OTHER REAL ESTATE OWNED

                   Other real estate owned (OREO) represents properties
                   acquired through foreclosure or other proceedings.  OREO is
                   held for sale and is recorded at the lower of the recorded
                   amount of the loan or fair value of the properties less
                   estimated costs of disposal.  Any write-down to fair value
                   at the time of transfer to OREO is charged to the allowance
                   for loan losses.  Property is evaluated regularly to ensure
                   the recorded amount is supported by its current fair value,
                   and valuation allowances to reduce the carrying amount to
                   fair value less estimated costs to dispose are recorded as
                   necessary.  Subsequent decreases in fair value and increases
                   in fair value, up to the value established at foreclosure,
                   are recognized as charges or credits to noninterest expense.
                   OREO is reported net of allowance for losses in the
                   Company's financial statements.

                 INTANGIBLE ASSETS

                    Intangible assets, arising from excess of purchase price
                    over net assets acquired of purchased banks, are being
                    amortized on the straight-line method over various periods
                    not exceeding 25 years.

                 INCOME TAXES

                   The Company and its subsidiaries file a consolidated income
                   tax return.  Each subsidiary provides for income taxes
                   based on its contribution to income taxes (benefits) of the
                   consolidated group.
<PAGE>   13

                   Provisions for income taxes are based on amounts reported in
                   the consolidated statements of income after exclusion of
                   nontaxable income such as interest on state and municipal
                   securities and include deferred taxes on temporary
                   differences in the recognition of income and expense for tax
                   and financial statement purposes.

                   Deferred taxes are provided on a liability method whereby
                   deferred tax assets are recognized for deductible temporary
                   differences, and operating loss and tax credit carryforwards
                   and deferred tax liabilities are recognized for taxable
                   temporary differences.  Temporary differences are the
                   differences between the reported amounts of assets and
                   liabilities and their tax bases.  Deferred tax assets are
                   reduced by a valuation allowance when, in the opinion of
                   management, it is more likely than not that some portion or
                   all of the deferred tax assets will not be realized.
                   Deferred tax assets and liabilities are adjusted for the
                   effect of changes in tax laws on the date of enactment.





                 
<PAGE>   14



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 1.          SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)

                 PROFIT-SHARING PLAN

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

                 PENSION PLAN

                    The Company has a defined benefit pension plan covering
                    substantially all employees.  The Company's policy is to
                    fund accrued pension costs.

                 EARNINGS PER SHARE

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

                 TRUST DEPARTMENT

                    Trust income is included in the accompanying consolidated
                    financial statements on the cash basis in accordance with
                    established industry practices.  Reporting of such fees on
                    the accrual basis would have no material effect on reported
                    income.  Assets of the Trust Department are not included in
                    these financial statements because they are not assets of
                    the Company.


                           
<PAGE>   15

                 STATEMENT OF CASH FLOWS

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

                 RECENTLY ISSUED ACCOUNTING STANDARDS

                 In May 1993, the Financial Accounting Standards Board issued
                 SFAS No. 114, "Accounting by Creditors for Impairment of a
                 Loan," effective for fiscal years beginning after December 15,
                 1994.  The adoption of this statement is not expected to have
                 a material effect on the Company's consolidated statements.
<PAGE>   16

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




NOTE 2.          CAPITAL REQUIREMENTS


                   The minimum capital requirements to be "well capitalized" and
                   the actual capital ratios for the Company at September 30,   
                   1996, and December 31, 1995, are as follows:




<TABLE>
<CAPTION>
                                              --Actual Ratio--


                                            September     December       Regulatory
                                            30, 1996      31, 1995       Minimum
<S>                                          <C>           <C>             <C>
Tier-1 Leverage Ratio                         7.68%         9.70%           5.00%
                                                                    
                                                                    
Tier-1 Risk Based Capital Ratio              12.52%        14.38%           6.00%
                                                                    
                                                                    
Total Risk Based Capital Ratio               13.81%        15.63%          10.00%
</TABLE>                                                            
<PAGE>   17

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Three months ended September 30, 1996 compared to the three months ended 
                              September 30, 1995
                                     and
Nine months ended September 30, 1996 compared to the nine months ended 
                              September 30, 1995

RESULTS OF OPERATIONS

INTEREST INCOME

Interest income for the quarter ended September 30, 1996 was $9,516,000, as
compared to $8,730,000 in the same period of 1995.  This is an increase of
$786,000, or 9.00%.  The increase can be attributed to growth in earning assets
to $464,984,000 at 9/30/96 from $394,190,000 at year-end 1995, an increase of
17.96%.  The increase in earning assets was the result of a 11.17% increase in
loan balances and a 39.34% increase in investments since December 31, 1995.
The increase in investments was primarily due to the August 9, 1996 acquisition
of approximately $82 million in Dougherty County deposits of First Union
National Bank of Georgia, NA.

For the nine months ended September 30, 1996, total interest income increased
$1,431,000, or 5.61%, from the nine months ended September 30, 1995.  This is
the result of increased interest and fees on loans of $1,353,000, coupled with
an increase in investment income of $78,000.  The increase in interest and fee
income on loans was due to the net effect of 11.17% increase in loan balances
since December 31, 1995 and slight decrease in average loan yields.  The
increase in investment income was due to a combination of an increase in
investment balances of $37,384,000 since 12/31/95 (most occurring in the First
Union acquisition in August 1996), offset by reduced yields in the investment
market.  Average investment yield for the corporation dropped from 6.49% for
the nine months ended September 30, 1995, to 5.93% for the nine months ended
September 30, 1996, consistent with current market yields for the period.

INTEREST EXPENSE

Interest expense for the three months ended September 30, 1996 was $3,897,000,
as compared to $3,231,000 for the third quarter 1995.  This is an increase of
20.61%. The increase is due to a 17.77% increase in deposits since December 31,
1995, which can be attributed to the net effect of (1) the $82 million First
Union acquisition in August 1996;  offset by (2) a decrease in other deposits
of $14 million.  An analysis of deposits also shows a 6.02% shift in deposits
to savings and time deposits (with higher interest rates) during 1996.
Interest on borrowings during the third quarter of 1996 was $52,000, up from
the third quarter of 1995, when interest on borrowings totaled $4,000. The
Corporation's debt was related to the matching of a large variable-rate
commercial loan with a variable-rate borrowing, and to the use of operating
lines of credit to supplement liquidity while pursuing  a graduated investment
strategy for funds acquired in the First Union purchase.

For the nine months ended September 30, 1996, interest expense increased by
$1,534,000 from the first nine months of 1995, a rise of 17.12%.  The increase
is explained by the increased deposits, higher interest rates, and a shift to
savings and time deposits.  Interest on borrowings increased to $61,000 in the
first three quarters of 1996 from $28,000 in the first nine months of 1995, a
117.86% increase, although insignificant to overall earnings.  The
Corporation's debt was related to the matching of a large commercial loan with
a variable rate borrowing, and to the use of operating lines of credit to
supplement liquidity while pursuing  a graduated investment strategy for funds
acquired in the First Union purchase.

PROVISION FOR LOAN LOSSES
<PAGE>   18

The provision for loan losses for the three months ended September 30, 1996 was
$82,000 as compared to $188,000 for the three months ended September 30, 1995.
The performance of the loan portfolio allows the decreased provision, while
maintaining the allowance for loan losses at levels deemed acceptable by
management and the regulators of the affiliated institutions.  The provision
for loan losses for the nine months ended September 30, 1996 was $350,000, down
$215,000 from the same period in the prior year.

OTHER INCOME

Noninterest income for the quarter ended September 30, 1996 was $1,602,000,
versus $1,910,000 for the third quarter of 1995.  The net decrease of $308,000
in other income is the result of three factors:  a decrease in volume of loan
sales in the secondary market caused other loan income to decline by $331,000;
other income declined by $81,000; and, offsetting these effects, service
charges on deposit accounts increased by $118,000 over the third quarter of
1995.  The decrease in other income for the quarter can be primarily explained
by a drop in customer check income of $42,000 and year-to-date net losses on
disposals of fixed assets of $21,000.

Noninterest income through the third quarter of 1996 was down $613,000 from the
same period of 1995.  $405,000 of the difference can be attributed to a
nonrecurring gain on a branch sale that occurred in the second quarter of 1995.
The remaining decrease of $208,000 in other income is the result of three
factors:  a decrease in other loan income totaling $312,000, primarily
attributable to a decrease in sales of loans in the secondary market;  a
decrease in other income of $107,000; and, offsetting these effects,
increased service charges on deposit accounts ($206,000 increase at 9/30/96).
Other declines can be explained by a drop in customer check income of $24,000
and a decline in miscellaneous income of $83,000.  The decline in
miscellaneous income was due to life insurance income in 1995 of $86,000,
recognized upon the death of a board member of the First State Bank and Trust
Company in Albany subsidiary.

OTHER EXPENSES

Other noninterest expenses were $4,305,000 in the third quarter of 1996, a
9.35% decrease from the $4,749,000 in these expenses in the same period of
1995.  The $444,000 decrease is due to a number of factors.  First, salaries
and benefits expense declined $103,000 from that of the third quarter of 1995.
Second, occupancy and equipment expenses declined $120,000 from the third
quarter of 1995. Third, consultant fees decreased by approximately $60,000 from
the third quarter of 1995.  The fees were for a continuing project to update
Trust Division policies and procedures that began in 1995 and was completed
before the third quarter of 1996.  Finally, the decline in noninterest expenses
can be explained by nonrecurring charges to earnings of $187,000 in the third
quarter of 1995 pertaining to a contingency reserve for certain bond
investments of the Trust Division of the First State Bank and Trust Company
subsidiary.

For the nine months ended September 30, 1996, other noninterest expense shows
an $828,000, or 5.89%, decline from that for the nine months ended September
30, 1995.  The decrease is due to the net effect of several fluctuations:  (1)
a decrease in FDIC Insurance Expense of $352,000, or 92.39%, due to a roll back
of insurance premiums payable to the regulatory agency; (2), the one-time
funding in 1995 of a $575,000 contingency reserve for certain bond investments
of the Trust Division; (3), a $138,000 decrease in equipment and occupancy
expense;  and offset by (4), increases in data processing expenses, which rose
$107,000 from the levels of the prior year due to upgrades of
technology-related products and services, and (5), a $69,000 increase in
consultant fees for the Trust Division project discussed above.

NET INCOME

Net income for the third quarter of 1996 was $1,999,000, as compared to
$1,652,000 during the third quarter of 1995.  This represents an increase of
21.00%.  Earnings per share for the quarter were $.44 per share, up 22.22% from
the third quarter 1995 figure of $.36 per share.  The increased earnings result
from a combination of higher net interest income for the quarter and reduced
noninterest expenses.
<PAGE>   19

Net income for the nine months ended September 30, 1996 was $5,483,000,
compared to $5,272,000 for the same period of 1995, an increase of 4.00%.  Net
income per share of common stock increased to $1.21 for the nine months ended
September 30, 1996, from $1.16 for the nine months ended September 30, 1995.
These figures have been adjusted for the July 1, 1996 stock split.  The
$211,000 increase in net income was primarily due to a combination of lower
noninterest expenses (down $828,000) and reduced provisions for loan loss (down
$215,000), offset by reduced noninterest income (down $613,000) and net
interest income (down $103,000).

BALANCE SHEET COMMENTS

Total assets at September 30, 1996 were $515,443,000, as compared to
$436,859,000 at year-end 1995, an increase of 17.99%.  The expansion can be
attributed to the First Union acquisition ($82,000,000 in deposits acquired
leading to cash invested) and to loan growth of $33,410,000 since the beginning
of the year.  The growth in loans constitutes an 11.17% rate of growth on an
annual basis.  The $9,124,000 increase in other assets includes a $7,416,000
core deposit intangible and $1,450,000 in real estate and fixed assets related
to the First Union acquisition.  Since September 30, 1996, $825,000 of the real
estate has been sold for book value.

Deposits at September 30, 1996 were $452,612,000, having increased 17.77% since
December 31, 1995.  The trend of deposits shifting into higher-yielding time
deposits has continued.  The total of savings, time deposits over $100,000 and
other time deposits has increased as a percentage of overall deposits since
year-end 1995, from  51.3% of the deposit base at 12/31/95, to 57.4% at
September 30, 1996.  This is primarily due to the deposit mix of the acquired
First Union deposits.

Debenture bonds and notes payable, and federal funds purchased and securities
sold under repurchase agreements increased by $6,861,000 to $11,220,000 at
September 30, 1996.  Securities sold under repurchase agreements accounted for
most of the increase, as the First State Bank & Trust Company in Albany
subsidiary entered into repurchase agreements with two major customers in 1996,
adding over $5,300,000 to this category.  Debenture bonds payable under an
operating line of credit increased by $765,000 to meet temporary demands for
liquidity.  $3,200,000 was borrowed under a note payable to the Federal Home
Loan Bank of Atlanta to match and fund a variable-rate commercial loan in the
current year.  Federal funds purchased declined by $2,450,000 in 1996.

CAPITAL RESOURCES

Stockholders' equity at September 30, 1996 totaled $46,385,000, as compared to
$43,148,000 at year-end 1995.  This is an increase of 7.50%.  At September 30,
1996, total capital was 9.00% of total assets.


LIQUIDITY

Management of the Company's liquidity position involves the understanding and
matching of customers' cash flow needs.  This includes the depositors' desire
to withdraw funds from the Company, as well as the borrowers' assurance of the
ability to fund their credit needs.  The Company meets these needs primarily
through the management of its short term investments.  Another source of
liquidity is the repayment of installment and single payment loans.  Should the
need arise, the Company maintains relationships with several correspondent
banks who can provide funds on short notice.

Liquidity is monitored on a regular basis by management, and by state and
federal regulatory authorities.  Regulatory guidelines establish liquidity
ratios that must be maintained.  The current liquidity levels are considered
satisfactory.
<PAGE>   20

                          PART II - OTHER INFORMATION

ITEM 1.  Legal Proceedings

         There are no material pending proceedings to which the Company is a
party or to which any of its properties are subject; nor are there material
proceedings known to the Company to be contemplated by any governmental
authority; nor are there material proceedings known to the Company, pending or
contemplated, in which any associate of the foregoing, is a party or has an
interest adverse to the Company.

         First State Bank & Trust Company, Albany, Georgia ("FSB Albany") is
involved in an appeal of litigation filed by shareholder and former trust
beneficiary, Frederick D. Ledbetter, in which Mr. Ledbetter alleges that FSB
Albany breached its fiduciary duties to him in connection with a revocable
trust that he established with FSB Albany.  After the United States District
Court for the Middle District of Georgia granted summary judgement in favor of
FSB Albany on all counts and dismissed Mr. Ledbetter's complaint, Mr. Ledbetter
filed a notice of appeal to the United States Court of Appeals for the Eleventh
Circuit.  On June 25, 1996, the Court of Appeals reversed the District Court's
ruling and remanded the case for trial.  The appellate Court subsequently
denied the bank's filing a motion for rehearing.  Accordingly, the case is
being remanded to the trial court and the case is expected to go to trial
during the first quarter of 1997.

         Reference is made to the Company's Form 10-K for the year ended
December 31, 1994 for additional information concerning this litigation.

ITEM 2.  Changes in Securities.

         None

ITEM 3.  Defaults Upon Senior Securities.

         None

ITEM 4.  Submission of Matters to a Vote of Security Holders.

         None

ITEM 5.  Other Information.

         None

ITEM 6.    Exhibits and reports on Form 8-K

A.   Exhibits - 27 Financial Data Schedule (for SEC use only)
B.   There were no reports filed on Form 8-K for the quarter ended September 
     30, 1996.
<PAGE>   21

                                   SIGNATURE



Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                            FIRST STATE CORPORATION

      11-8-96                                   /s/ Douglas E. Wren
---------------------                           ----------------------------
        Date                                    Douglas E. Wren,
                                                President & Chief Operating
                                                Officer
                                            
                                            
                                            
      11-8-96                                   /s/ Robert E. Lee               
----------------------                          ---------------------------
        Date                                    Robert E. Lee,
                                                Senior Vice President and
                                                Chief Financial Officer