<PAGE>
                                   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 March 31, 1997 

/ / 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
 incorporation or organization)                    Identification No.)

                   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 March 31, 1997. 

    4,549,918 shares

                                     

<PAGE>

                         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 March 31, 1997 and December 31, 1996.
 
    B. Consolidated Statements of Income for the three months ended March 31,
       1997 and 1996.
 
    C. Consolidated Statements of Cash Flows for the three months ended March
       31, 1997 and 1996.
 
    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 three 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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        Not applicable.

                                     2
<PAGE>

                   FIRST STATE CORPORATION AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                     March 31, 1997 and December 31, 1996
                          (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                                                           MARCH 31,   DECEMBER 31,
ASSETS                                                                                       1997          1996
----------------------------------------------------------------------------------------  -----------  ------------
<S>                                                                                       <C>          <C>
Cash and due from banks                                                                       25,638        30,151
Interest-bearing deposits in banks                                                             1,464         6,298
Investment securities--held to maturity                                                       32,916        34,813
Investment securities--available for sale                                                     87,235        87,026
Federal funds sold                                                                                 0           875
Loans                                                                                        343,989       334,332
Less allowance for loan losses                                                                 5,175         5,062
                                                                                             -------       -------
      Loans, net                                                                             338,814       329,270
                                                                                             -------       -------
Premises and equipment, net                                                                   10,465        10,358
Other assets                                                                                  17,448        17,708
                                                                                             -------       -------
                                                                                             513,980       516,499
                                                                                             -------       -------
                                                                                             -------       -------

Liabilities & Stockholders' Equity

Deposits 
  Noninterest bearing demand                                                                  85,883        90,636
  Interest-bearing demand                                                                    110,693       111,837
  Savings                                                                                     29,935        28,380
  Time, $100,000 and over                                                                     57,187        50,347
  Other time                                                                                 169,889       171,251
                                                                                             -------       -------
    Total deposits                                                                           453,587       452,451
                                                                                             -------       -------

Federal funds purchased and securities sold under repurchase agreements                        3,900         7,771
Debenture bonds and notes payable                                                              3,116         3,395
Other liabilities                                                                              4,329         4,752
                                                                                             -------       -------
  Total liabilities                                                                          464,932       468,369

Stockholders' Equity 
7% cumulative nonvoting preferred stock, par value $50; 100,000
  shares authorized; no shares issued
Common stock, par value $1; 20,000,000 shares authorized: 4,549,918 shares 
  and 4,549,588 shares issued                                                                  4,550         4,550
Additional paid-in capital                                                                     2,351         2,348
Retained earnings                                                                             42,438        41,142
Net unrealized gains (losses) on available for sale securities (net of taxes)                   (291)           90
                                                                                             -------       -------
  Total stockholders' equity                                                                  49,048        48,130
                                                                                             -------       -------
                                                                                             513,980       516,499
                                                                                             -------       -------
                                                                                             -------       -------
</TABLE>
                                   3


<PAGE>

                   FIRST STATE CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF INCOME
                 For the periods ended March 31, 1997 and 1996
               (Dollars in Thousands, except earnings per share)

<TABLE>
<CAPTION>
                                                                      THREE MONTHS ENDED
                                                                          MARCH 31,
                                                                     --------------------
<S>                                                                  <C>        <C>
                                                                       1997       1996
                                                                     ---------  ---------
Interest Income 
  Interest and fees on loans                                         $   8,059  $   7,285
  Interest on investment securities
    Taxable                                                              1,582        847
    Nontaxable                                                             272        324
  Interest on federal funds sold                                             6        144
  Interest on deposits in banks                                             68        142
                                                                     ---------  ---------
                                                                     $   9,987  $   8,742
                                                                     ---------  ---------
Interest Expense
  Interest on deposits                                               $   3,946  $   3,325
  Interest on federal funds purchased and          
   securities sold under repurchase agreements                              49         48
  Interest on other borrowings                                              60          6
                                                                     $   4,055  $   3,379
                                                                     ---------  ---------
    Net interest income                                                  5,932      5,363
  Provision for loan losses                                                180        144
  Net interest income after 
   provision for loan losses                                         $   5,752  $   5,219

Other Income 
  Service charges on deposit accounts                                      824        705
  Other loan income                                                        387        675
  Trust department income                                                  301        300
  Other                                                                    145        111
                                                                     ---------  ---------
                                                                     $   1,657    $ 1,791
Other Expense 
  Salaries and employee benefits                                     $   2,441    $ 2,454
  Equipment and occupancy, net                                             873        750
  Data processing expense                                                  194        177
  Stationery and supplies                                                  113        106
  Advertising and marketing                                                204        120
  Amortization of intangible assets                                        183         59
  Other operating expenses                                                 750        820
                                                                 --------------  ------------
                                                                     $   4,758    $ 4,486
                                                                 --------------  ------------
    Income before taxes                                                  2,651      2,524
  Applicable income taxes                                                  854        763
                                                                  -------------- ------------
Net Income                                                           $   1,797  $   1,761
                                                                   -------------  -----------
                                                                   -------------  -----------
  Per share of common stock, fully diluted                      
    Net Income                                                       $    0.38  $    0.37
                                                                   -------------  -----------
</TABLE>
 
                                      4

<PAGE>
                        FIRST STATE CORPORATION AND SUBSIDIARIES 
                          CONSOLIDATED STATEMENT OF CASH FLOWS 
                      For the periods ended March 31, 1997 and 1996 
                                 (Dollars in Thousands)
 
<TABLE>
<CAPTION>

                                                            1997       1996
                                                         ---------  ---------
<S>                                                          <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES  
 
Net Income                                                  1,797      1,761
Adjustments to reconcile net income to net cash 
  provided by operating activities:
Depreciation and amortization                                 585        382
Provision for loan losses                                     180        144
Provision for deferred tax benefits                           (51)        (9)
Increase in taxes payable                                     534        809
Decrease in interest payable                                  (72)        (5)
Decrease in interest receivable                               248        245
Other prepaids, deferrals and accruals, net                  (809)        75
                                                        -----------  -------------
    Total adjustments                                         615      1,641
                                                        -----------  -------------
    Net cash provided by operating activities               2,412      3,402
                                                        -----------  -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in interest bearing deposits with banks            4,834      4,776
Proceeds from maturities of securities held to 
  maturity                                                  1,897      3,008
Proceeds from maturities of securities held for sale        8,035        989
Purchase of securities held to maturity                         0     (4,411)
Purchase of securities held for sale                       (8,821)   (11,287)
Decrease in federal funds sold                                875      6,469
Increase in loans                                          (9,724)    (4,269)
Purchase of premises and equipment                           (509)      (403)
                                                         ---------- ------------
    Net cash used in investing activities                  (3,413)    (5,128)
                                                         ---------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from exercise of stock options                         2          0
Increase (decrease) in deposits                             1,136     (2,412)
Increase (decrease) in federal funds purchased 
  and securities sold under repurchase 
  agreements                                               (3,871)       538
Principal payments on debt                                   (279)      (885)
Dividends paid                                               (500)      (427)
                                                         ---------- ------------

    Net cash used in financing activities                  (3,512)    (3,186)
                                                         ---------- ------------
Net decrease in cash and due from banks                    (4,513)    (4,912)
Cash and due from banks at beginning of period             30,151     26,130
                                                         ---------- ------------
Cash and due from banks at end of period                   25,638     21,218
                                                         ---------- ------------
                                                         ---------- ------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION 
  Cash paid during the period for:
   Interest on deposits and other borrowings                4,126      3,383
</TABLE>
 
                                       5

<PAGE>

PER SHARE INFORMATION
 
    A 3-for-2 stock split had been declared effective May 20, 1997 to
shareholders of record May 10, 1997, at the time of this filing. Had the
financial statements been restated for this split, the following information
would have changed:
 
<TABLE>
<CAPTION>
                                               QUARTER ENDED      QUARTER ENDED
                                              MARCH 31, 1997     MARCH 31, 1996
                                            -----------------  -----------------
<S>                                         <C>                <C>
Net income per share, fully diluted........  $     .25          $     .25
                                             AT                 AT
                                             MARCH 31, 1997     MARCH 31, 1996
                                            --------------      --------------
Common shares outstanding..................  6,824,877          6,824,382
</TABLE>

                                        6

<PAGE>

                      FIRST STATE CORPORATION AND SUBSIDIARIES
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
         NATURE OF BUSINESS
 
           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.
 
         BASIS OF FINANCIAL STATEMENT PRESENTATION
 
           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.
 
        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.


 
                                   7

<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

          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. Marketable equity securities are carried at fair value with 
            net unrealized gains and losses included in stockholders' equity. 
            Other 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 HELD FOR SALE
 
            Loans held for sale include mortgage and other loans and are 
            carried at the lower of aggregate cost or fair value.
 
         LOANS
 
            Loans are carried at their 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.
 
            Loan origination fees and certain direct costs of most loans are 
            recognized at the time the loan is recorded. Because net 
            origination loan fees and costs are not material, the results of 
            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 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 to 
            record additions to the allowance based on their judgment about 
            information available to them at the time of their examinations.

                                        8

<PAGE>

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         LOANS (CONTINUED)

            The accrual of interest on impaired loans is discontinued when, in
            management's opinion, the borrower may be unable to meet payments
            as they become due. When accrual of interest is discontinued, all 
            unpaid accrued interest is reversed. 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 the
            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.
 
         PREMISES AND EQUIPMENT
 
            Premises and equipment are stated at cost less accumulated 
            depreciation. Depreciation is computed principally on the 
            straight-line method over the estimated useful lives of the assets.
 
                                      9

<PAGE>

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


         OTHER REAL ESTATE OWNED
 
            Other real estate owned represents properties acquired through 
            foreclosure and acquisition. 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 sales and any subsequent adjustment
            to the value are recorded as other expenses.
 
         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.
            Premiums paid for deposits are being amortized on the straight-line
            basis over 15 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.
 
            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 on 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 is recorded for those deferred tax items for
            which it is more likely than not that realization will not occur.

                                         10

<PAGE>

              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 common share are computed by dividing net income by 
            the weighted average number of shares of common stock and common 
            stock equivalents outstanding. All per share amounts for prior 
            periods have been adjusted to reflect the 3-for-2 stock split 
            effected in the form of a 50% stock dividend effective July 1, 
            1996.
 

                                        11

<PAGE>
                         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 March 31, 1997, and 
            December 31, 1996, are as follows:
 
<TABLE>
<CAPTION>
                                                        ACTUAL RATIO
                                                  ------------------------
<S>                                               <C>          <C>           <C>
                                                  MARCH        DECEMBER      REGULATORY
                                                  31, 1997     31, 1996      MINIMUM
                                                -----------   -----------  -----------
Tier-1 Leverage Ratio......................        8.42%        7.99%          5.00%

Tier-1 Risk Based Capital Ratio............       13.00%       12.98%          6.00%

Total Risk Based Capital Ratio.............       14.26%       14.24%         10.00%

</TABLE>
 
                                       12

<PAGE>
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
           Three months ended March 31, 1997 compared to the three 
                          months ended March 31, 1996
 
RESULTS OF OPERATIONS
 
INTEREST INCOME
 
    Interest income for the quarter ended March 31, 1997 was $9,987,000, as 
compared to $8,742,000 in the same period of 1996. This is an increase of 
$1,245,000, or 14.24%. The increase can be attributed to growth in quarterly 
average earning assets to $462,640,000 at 3/31/97 from $393,277,000 at 
3/31/96, an increase of 17.64%. The effect of the increase in earning assets 
was partially offset by the effect of a drop in average loan and investment 
yields. Average loan yield declined from 9.76% for the quarter ended March 
31, 1996, to 9.72% for the quarter ended March 31, 1997, a decrease of 0.04%. 
Average yields on investments, federal funds sold, and interest-bearing 
deposits as a group declined slightly from 6.29% for the quarter ended March 
31, 1996, to 6.19% for the quarter ended March 31, 1997, a decrease of 0.10%.
 
    The increase in average earning assets was the result of a 12.06% 
increase in average loan balances and a 35.62% increase in average balances 
of investments (including federal funds sold and interest-bearing deposits) 
as compared to the quarter ended March 31, 1996. The increase in investments 
was primarily due to funds acquired in the August 9, 1996 acquisition of 
approximately $82 million in Dougherty County deposits of First Union 
National Bank of Georgia, NA.
 
INTEREST EXPENSE
 
    Interest expense for the three months ended March 31, 1997 was 
$4,055,000, as compared to $3,379,000 for the first quarter of 1996. This is 
an increase of $676,000, or 20.01%. The increase is due to an increase in 
average deposit balances of $69.5 million, or 18.40%, since March 31, 1996. 
Deposit expense averaged 3.58% of deposit balances for the first quarter of 
1997, up slightly from the 3.54% figure for the first quarter of 1996. An 
analysis of average deposit balances also shows a 3.90% shift in deposit 
composition to savings and time deposits (with higher interest rates) since 
the first quarter of 1996.
 
    Interest on borrowings during the first quarter of 1997 was $60,000, up 
from the first quarter of 1996, when interest on borrowings totaled $6,000. 
The Corporation's debt is related to the matching of one large variable-rate 
commercial loan with a variable-rate borrowing of the same maturity.
 
PROVISION FOR LOAN LOSSES
 
    The provision for loan losses for the three months ended March 31, 1997 
was $180,000 as compared to $144,000 for the three months ended March 31, 
1996. The current provision maintains the allowance for loan losses at levels 
deemed acceptable by management and the regulators of the affiliated 
institutions. In anticipation of loan growth in 1997, management increased 
the loan loss provision to maintain a proportionate level of reserves.
 
                                    13

<PAGE>


OTHER INCOME
 
    Noninterest income for the quarter ended March 31, 1997 was $1,657,000, 
versus $1,791,000 for the first quarter of 1996. The net decrease of $134,000 
in other income is the result of two factors: a decrease in volume of loan 
sales in the secondary market caused other loan income to decline by $288,000 
and, offsetting these effects, service charges on deposit accounts increased 
by $119,000 over the first quarter of 1996. Service charges were higher due 
to the increased number of accounts due to the First Union deposit 
acquisition.
 
OTHER EXPENSES
 
    Other noninterest expenses were $4,758,000 in the first quarter of 1997, 
a 6.06% increase from the $4,486,000 reported in the same period of 1996. The 
$272,000 increase is due to a number of factors. First, amortization of 
intangibles attributable to the First Union deposit acquisition resulted in 
an increase in intangible expense of $124,000. Secondly, the Company 
experienced increased equipment expenses and depreciation charges related to 
upgrades to the Corporation's data processing systems, which resulted in 
$128,000 of additional expense. Finally, the Company's other operating 
expenses rose by $42,000. The increase was due to (a) an $84,000 increase in 
advertising and marketing; (b) a $24,000 increase in operational losses 
(chiefly due to two robberies in the first quarter of 1997); (c) a $20,000 
increase in training expense; (d) a $19,000 increase in postage expense; 
offset by (e) a decline in other real estate expenses of $61,000 and (f) a 
decline in consulting fees of $48,000.
 
NET INCOME
 
    Net income for the first quarter of 1997 was $1,797,000, as compared to 
$1,761,000 during the first quarter of 1996. This represents an increase of 
2.04%. Fully-diluted earnings per share for the quarter was $.38 per share, 
up $.01 from the split-adjusted first quarter 1996 figure of $.37 per share.
 
    The increase in earnings for the first quarter of 1997 was the result of 
an increase in net interest income (up $569,000 or 10.61%, from the first 
quarter of 1996), primarily due to the net increase in assets resulting from 
the third quarter 1996 acquisition of First Union deposits in Dougherty 
County, GA. This increase was offset by (a) a decrease in noninterest income 
(down $134,000 or 7.48% from the first quarter of 1996), due to decreased 
activity in the First State Mortgage lending division, (b) an increase in 
noninterest expenses (up $272,000, or 6.06% from the first quarter of 1996), 
due to increased amortization of intangibles attributable to the First Union 
deposit acquisition and due to increased depreciation charges related to 
upgrades to the Corporation's data processing systems, and (c) an increase in 
the Corporation's provision for income taxes (up $91,000, or 11.93% from the 
first quarter of 1996).
 
    The Corporation's net income for the first quarter of 1997 was on target 
with management's expectations for the quarter.
 
BALANCE SHEET COMMENTS
 
    Total assets at March 31, 1997 were $513,980,000, as compared to 
$516,499,000 at year-end 1996, a decrease of 0.49%. The small change is the 
result of several factors: (a) cash and interest bearing deposits, declined 
by $9,347,000; (b) investments held-to-maturity declined by 

                                      14

<PAGE>

$1,897,000 due to maturities of municipal bonds; and, (c), other assets 
declined by $260,000 primarily due to a reduction in intangible assets 
through amortization; these decreases were partially offset by (d) net loan 
growth of $9,544,000, or 2.90%, since year-end 1996 and (e) premises and 
equipment balance growth of $107,000 due to the purchase of computer 
equipment.
 
    Deposits at March 31, 1997 were $453,587,000, having increased 
$1,136,000, or 0.25%, since December 31, 1996. The composition of the 
Company's deposits continues to trend toward higher-yielding time deposits. 
The total of savings deposits, time deposits over $100,000 and other time 
deposits has increased as a percentage of overall deposits since year-end 
1996, from 55.25% of the deposit base at December 31, 1996, to 56.66% at 
March 31, 1997.
 
    Debenture bonds and notes payable, and federal funds purchased and 
securities sold under repurchase agreements decreased by $4,150,000 to 
$7,016,000 at March 31, 1997. Securities sold under repurchase agreements 
accounted for most of the decrease. The $3,116,000 in debentures and notes 
payable consists entirely of funds borrowed under a note payable to the 
Federal Home Loan Bank of Atlanta to match and fund a variable-rate 
commercial loan. Federal funds purchased declined by $1,000,000 in the first 
quarter of 1997.
 
CAPITAL RESOURCES
 
    Stockholders' equity at March 31, 1997 totaled $49,048,000, as compared 
to $48,130,000 at year-end 1996. This is an increase of 1.91%. At March 31, 
1997, total capital was 9.54% of total assets. Due to changes in market 
conditions, the FAS 115 allowance for unrealized gains (losses) on securities 
changed by $381,000 during the quarter, resulting in a reduction of capital 
of $291,000 at quarter-end.
 
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 the Company's 
Asset Liability Management Committee, and by state and federal regulatory 
authorities. Regulatory guidelines and management policies of the Company 
establish liquidity ratios that must be maintained. The current liquidity 
levels are considered satisfactory.
 
OUTLOOK FOR THE REMAINDER OF 1997 AND FORWARD LOOKING STATEMENT
 
    The remainder of 1997 brings with it new opportunities for growth in our 
existing markets, as well as opportunities to expand into new market areas 
through profitable bank acquisitions and branch purchases. Our philosophy 
remains to provide the services, products, and customer service that our 
customers have come to expect, while further enhancing stockholder value.

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<PAGE>

 
    In order for the Company to sustain the track record of growth established
over the past several years, both internal and external growth must occur. While
we strive for core internal growth of the Company, factors outside our control
could affect future growth opportunitites.
 
                                     16


<PAGE>
                           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 director, officer or affiliate or any principal 
security holder of the company, or any associate of the foregoing, is a party 
or has an interest adverse to the Company.
 
    On December 31, 1993, Frederick D. Ledbetter filed suit against FSB 
Albany in the U. S. District Court, Albany Division. The suit alleged certain 
fiduciary violations with respect to a revocable management trust established 
by Mr. Ledbetter at FSB Albany. The suit was based on dissatisfaction with a 
number of actions taken by the Board of Directors of the Company, including 
authorization of the stock offering which commenced December 2, 1993 (Count 
One), the failure of the Board of Directors to take affirmative action to 
sell the Company to a third party (Count Two) and the compensation of senior 
management of the Company (Count Three). The suit was later amended to add a 
fourth claim that the Bank improperly resigned as trustee of plaintiff's 
trust (Count Four). On March 15, 1995, the district court granted to FSB 
Albany summary judgment and complete dismissal of all claims. Mr. Ledbetter 
appealed the district court's judgment to the United States Court of Appeals 
for the Eleventh Circuit. On June 25, 1996, the Eleventh Circuit reversed the 
trial court's grant of summary judgment and remanded the case for trial 
before a jury. The suit was tried before a jury starting Tuesday, February 
25, 1997 in U. S. District Court in Albany, Georgia. At the conclusion of the 
trial, the Court decided in favor of the plaintiff as a matter of law as to 
Count One, but left to the jury whether any damages should be awarded to 
plaintiff under Count One. On March 6, 1997, the jury returned its verdict in 
which it found the defendant not liable on Counts Two and Three of the suit 
and liable on Count Four of the suit. The jury awarded no compensatory 
damages under the two counts in which the jury and the Court found for 
plaintiff, and awarded $100 in nominal damages and $42,000 in attorneys' 
fees. The parties agreed not to appeal the verdict and judgment, and on April 
23, 1997, FSB Albany paid $42,100 plus interest and costs, in satisfaction of 
the judgment.
 
    In a matter related to the Ledbetter litigation discussed above, the 
Board of Directors of FSB Albany and First State received a derivative demand 
letter dated October 4, 1996, from Sarah Haley Hixon, a shareholder from 
Greenville, South Carolina. Ms. Hixon, through her attorneys, demanded that 
an action be filed against the Directors of FSB Albany to indemnify FSB 
Albany for any liabilities which might arise from the Ledbetter litigation. 
In accordance with Georgia law, FSB Albany's Board 

                                      17

<PAGE>

established an independent committee to determine whether the demand was in 
the best interests of FSB Albany and its shareholders. First State 
Corporation's Board has also established an independent committee to 
determine whether the demand was in the best interests of First State 
Corporation and its shareholders. Neither Committee has made any 
recommendations to either Board as of this date, nor has any litigation been 
filed in connection with Ms. Hixon's demand.
 

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 March 31,
     1997.
 

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<PAGE>
                                   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


May 9, 1997                                     signed
------------------------                      --------------------------
 Date                                          Douglas E. Wren,
                                               President & Chief Operating
                                                Officer


May 9, 1997                                     signed
-------------------------                      ----------------------------
 Date                                           Robert E. Lee,
                                                Senior Vice President and
                                                Chief Financial Officer
 

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