<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 June 30, 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 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 June 30, 1997.  

    6,853,808 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 June 30, 1997 and December 31,
           1996.
 
        B.  Consolidated Statements of Income for the three months ended 
            June 30, 1997 and 1996 and for the six months ended June 30, 1997 
            and 1996.
 
        C.  Consolidated Statements of Cash Flows for the six months ended 
            June 30, 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 six
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.   

<PAGE>
                    FIRST STATE CORPORATION AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
 
                      JUNE 30, 1997 AND DECEMBER 31, 1996
 
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                            JUNE 30,    DECEMBER 31,
Assets                                                                                        1997          1996
                                                                                           -----------  -------------
<S>                                                                                        <C>          <C>
Cash and due from banks..................................................................      23,193        30,151
Interest-bearing deposits in banks.......................................................      17,516         6,298
Investment securities--held to maturity..................................................      32,514        34,813
Investment securities--available for sale................................................      86,657        87,026
Federal funds sold.......................................................................           0           875
Loans....................................................................................     365,861       334,332

Less allowance for loan losses...........................................................       5,212         5,062
                                                                                           -----------  -------------
      Loans, net.........................................................................     360,649       329,270

Premises and equipment, net..............................................................      10,006        10,358
Other assets.............................................................................      17,470        17,708
                                                                                           -----------  -------------
Total Assets.............................................................................     548,005       516,499
                                                                                           -----------  -------------
                                                                                           -----------  -------------
Liabilities & Stockholders' Equity
Deposits
  Noninterest-bearing demand.............................................................      98,619        90,636
  Interest-bearing demand................................................................     108,465       111,837
  Savings................................................................................      29,389        28,380
  Time, $100,000 and over................................................................      77,984        50,347
  Other time.............................................................................     165,544       171,251
                                                                                           -----------  -------------
      Total deposits.....................................................................     480,001       452,451
Federal funds purchased and securities sold under repurchase agreements..................       9,227         7,771
Debenture bonds and notes payable........................................................       3,087         3,395
Other liabilities........................................................................       5,059         4,752
                                                                                           -----------  -------------
      Total Liabilities..................................................................     497,374       468,369
Stockholders' Equity
7% cumulative nonvoting preferred stock, par value $50; 100,000 shares authorized; 0
  shares issued..........................................................................
Common stock, par value $1; 20,000,000 shares authorized: 6,853,808 shares and 6,828,537
  shares issued..........................................................................       6,854         6,829
Additional paid-in capital...............................................................         232            69
Retained earnings........................................................................      43,519        41,142
Net unrealized gains on available for sale securities (net of taxes).....................          26            90
                                                                                           -----------  -------------
      Total Stockholders' Equity.........................................................      50,631        48,130
                                                                                           -----------  -------------
Total Liabilities and Stockholders'
Equity...................................................................................     548,005       516,499
                                                                                           -----------  -------------
</TABLE>
 
<PAGE>
                    FIRST STATE CORPORATION AND SUBSIDIARIES
 
                       CONSOLIDATED STATEMENTS OF INCOME
 
                  FOR THE PERIODS ENDED JUNE 30, 1997 AND 1996
 
               (DOLLARS IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
 
<TABLE>
<CAPTION>
                                                                                THREE MONTHS ENDED     SIX MONTHS ENDED
                                                                                     JUNE 30,              JUNE 30,
                                                                               --------------------  --------------------
<S>                                                                            <C>        <C>        <C>        <C>
                                                                                 1997       1996       1997       1996
                                                                               ---------  ---------  ---------  ---------
Interest Income
  Interest and fees on loans.................................................  $   8,519  $   7,399  $  16,578  $  14,684
  Interest on investment securities
    Taxable..................................................................      1,583        885      3,165      1,732
    Nontaxable...............................................................        264        323        536        647
  Interest on federal funds sold.............................................         13         30         19        174
  Interest on deposits in banks..............................................         44         56        112        198
                                                                               ---------  ---------  ---------  ---------
                                                                               $  10,423  $   8,693  $  20,410  $  17,435
                                                                               ---------  ---------  ---------  ---------
Interest Expense
  Interest on deposits.......................................................  $   4,175  $   3,178  $   8,121  $   6,503
  Interest on federal funds purchased and securities sold under repurchase
    agreements...............................................................         63         38        112         86
Interest on other borrowings.................................................         59          3        119          9
                                                                               ---------  ---------  ---------  ---------
                                                                               $   4,297  $   3,219  $   8,352  $   6,598
                                                                               ---------  ---------  ---------  ---------
    Net interest income......................................................      6,126      5,474     12,058     10,837
  Provision for loan losses..................................................        315        124        495        268
                                                                               ---------  ---------  ---------  ---------
    Net interest income after provision for loan losses......................  $   5,811  $   5,350  $  11,563  $  10,569
                                                                               ---------  ---------  ---------  ---------
Other Income
  Service charges on deposit accounts........................................        876        711      1,700      1,416
  Other loan income..........................................................        395        537        782      1,212
  Trust department income....................................................        301        300        602        600
  Other......................................................................        119        117        264        228
                                                                               ---------  ---------  ---------  ---------
                                                                               $   1,691  $   1,665  $   3,348  $   3,456
                                                                               ---------  ---------  ---------  ---------
Other Expense
  Salaries and employee benefits.............................................      2,440      2,345  $   4,881  $   4,799
  Equipment and occupancy, net...............................................        906        743      1,779      1,493
  Data processing expense....................................................        247        241        476        418
  Stationery and supplies....................................................        104        101        217        207
  Amortization of intangible assets..........................................        182         58        365        117
  Legal fees.................................................................        401         57        468        120
  Advertising and marketing..................................................        142        110        346        230
  Other operating expenses...................................................        590        772      1,238      1,529
                                                                               ---------  ---------  ---------  ---------
                                                                                   5,012      4,427  $   9,770  $   8,913
                                                                               ---------  ---------  ---------  ---------
    Income before taxes......................................................      2,490      2,588      5,141      5,112
  Applicable income taxes....................................................        793        865      1,647      1,628
                                                                               ---------  ---------  ---------  ---------
Net Income...................................................................  $   1,697  $   1,723  $   3,494  $   3,484
                                                                               ---------  ---------  ---------  ---------
                                                                               ---------  ---------  ---------  ---------
  Per share of common stock
    Net Income per share, fully-diluted......................................       0.24       0.24       0.49       0.50
</TABLE>
 
<PAGE>
                    FIRST STATE CORPORATION AND SUBSIDIARIES
 
                      CONSOLIDATED STATEMENT OF CASH FLOWS
 
                      PERIOD ENDED JUNE 30, 1997 AND 1996
 
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                                    1997       1996
                                                                                                  ---------  ---------
<S>                                                                                               <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income......................................................................................      3,494      3,484
Adjustments to reconcile net income to net cash provided by operating activities:
  Depreciation and amortization.................................................................      1,186        790
  Net loss (gain) on sale of other real estate and fixed assets.................................         10         (5)
  Provision for loan losses.....................................................................        495        268
  Provision for deferred tax benefits...........................................................        (83)       (52)
Increase in taxes payable.......................................................................          9        818
Increase (decrease) in interest payable.........................................................        290       (149)
Increase in interest receivable.................................................................       (186)      (150)
Other prepaids, deferrals and accruals, net.....................................................        183        729
                                                                                                  ---------  ---------
      Total adjustments.........................................................................      1,904      2,249
                                                                                                  ---------  ---------
  Net cash provided by operating activities.....................................................      5,398      5,733
CASH FLOWS FROM INVESTING ACTIVITIES
Change in interest bearing deposits in banks....................................................    (11,218)    12,695
Proceeds from maturities of securities held to maturity.........................................      2,299      5,932
Proceeds from maturities of securities held for sale............................................      9,846      3,996
Purchase of securities held to maturity.........................................................          0     (4,411)
Purchase of securities held for sale............................................................     (9,574)   (15,047)
Decrease in federal funds sold..................................................................        875      8,558
Increase in loans...............................................................................    (31,874)   (16,473)
Sales of premises and equipment.................................................................        517        330
Purchases of premises and equipment.............................................................       (996)    (1,061)
                                                                                                  ---------  ---------
  Net cash used in investing activities.........................................................    (40,125)    (5,481)
                                                                                                  ---------  ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in deposits.................................................................     27,550    (12,805)
Increase in federal funds purchased and securities sold under repurchase agreements.............      1,456      8,027
Principal payments on debt......................................................................       (308)      (885)
Proceeds from long-term debt....................................................................          0      3,200
Purchase of fractional shares...................................................................         (1)         0
Proceeds from exercise of stock options.........................................................        189          0
Dividends paid..................................................................................     (1,117)      (930)
                                                                                                  ---------  ---------
  Net cash provided by (used in) financing activities...........................................     27,769     (3,393)
                                                                                                  ---------  ---------
Net decrease in cash and due from banks.........................................................     (6,958)    (3,141)
Cash and due from banks at beginning of period..................................................     30,151     26,130
                                                                                                  ---------  ---------
Cash and due from banks at end of period........................................................     23,193     22,989
                                                                                                  ---------  ---------
                                                                                                  ---------  ---------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
  Cash paid during the period for:
    Interest on deposits and other borrowings...................................................      8,062      6,747
    Federal income taxes paid...................................................................      1,717        809
</TABLE>


<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.

<PAGE>
                    FIRST STATE CORPORATION AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
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.

<PAGE>
                    FIRST STATE CORPORATION AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
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.

<PAGE>
                    FIRST STATE CORPORATION AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
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.

<PAGE>
                    FIRST STATE CORPORATION AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
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 and the 3-for-2 stock split effected in the form of a 50%
stock dividend effective May 20, 1997.
<PAGE>
                    FIRST STATE CORPORATION AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 2. CAPITAL REQUIREMENTS
 
    The minimum capital requirements to be "well capitalized" and the actual
capital ratios for the Company at June 30,1997, and December 31, 1996, are as
follows:
 
                                --Actual Ratio--

                                       JUNE 30,     DECEMBER 31,    REGULATORY
                                         1997           1996          MINIMUM
                                      -----------  ---------------  -----------

Tier-1 Leverage Ratio..................  8.46%          7.99%          5.00%
Tier-1 Risk Based Capital Ratio........ 12.14%         12.98%          6.00%
Total Risk Based Capital Ratio......... 13.39%         14.24%         10.00%

 

<PAGE>

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Three months ended June 30, 1997 compared to the three months ended 
                                June 30, 1996
                                      and
 Six months ended June 30, 1997 compared to the six months ended June 30, 1996
 
RESULTS OF OPERATIONS
 
INTEREST INCOME
 
    Interest income for the quarter ended June 30, 1997 was $10,423,000, as
compared to $8,693,000 in the same period of 1996. This is an increase of
$1,730,000, or 19.90%. The increase can be attributed to growth in quarterly
average earning assets to $477,966,000 at 6/30/97 from $391,884,000 at 6/30/96,
an increase of 21.97%. The effect of the increase in earning assets was
partially offset by the effect of a drop in average loan yields. Average loan
yield declined from 9.73% for the quarter ended June 30, 1996, to 9.67% for the
quarter ended June 30, 1997, a decrease of 0.06%. Average yields on investments,
federal funds sold, and interest-bearing deposits as a group grew slightly from
6.05% for the quarter ended June 30, 1996, to 6.13% for the quarter ended June
30, 1997, an increase of 0.08%.
 
    The increase in average earning assets was the result of a 15.57% increase
in average loan balances and a 44.70% increase in average balances of
investments (including federal funds sold and interest-bearing deposits) as
compared to the quarter ended June 30, 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 income for the six months ended June 30, 1997 was $20,410,000, as
compared to $17,435,000 in the same period of 1996. This is an increase of
$2,975,000, or 17.06%. The increase can be primarily attributed to growth in
year-to-date average earning assets to $470,323,000 at 6/30/97 from $392,638,000
at 6/30/96, an increase of 19.79%. The effect of the increase in earning assets
was slightly offset by the effect of a drop in average loan and investment
yields. Average loan yield declined slightly from 9.75% for the six months ended
June 30, 1996, to 9.69% for the six months ended June 30, 1997, a decrease of
0.06%. Average yields on investments, federal funds sold, and interest-bearing
deposits as a group declined slightly from 6.17% for the six months ended June
30, 1996, to 6.16% for the quarter ended June 30, 1997, a decrease of 0.01%.
 
    The increase in average earning assets was the result of a 13.84% increase
in six-month average loan balances and a 39.89% increase in six-month average
balances of investments (including federal funds sold and interest-bearing
deposits) as compared to the six month average balances at June 30, 1996. As
stated above, the increase in investments was primarily due to funds 


<PAGE>

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 June 30, 1997 was $4,297,000, as
compared to $3,219,000 for the second quarter of 1996. This is an increase of
$1,078,000, or 33.49%. The increase is due to an increase in average deposit
balances of $85.6 million, or 22.92%, since June 30, 1996. Deposit expense
averaged 3.65% of deposit balances for the second quarter of 1997, up from the
3.42% figure for the second quarter of 1996. An analysis of average deposit
balances also shows a 4.84% shift in deposit composition to savings and time
deposits (with higher interest rates) since the second quarter of 1996.
 
    Interest on federal funds purchased and securities sold under repurchase
agreements amounted to $63,000 as compared to $38,000 for the second quarter of
1996. This was primarily due to an increase in the average balance of securities
sold under repurchase agreements. Interest on other borrowings during the second
quarter of 1997 was $59,000, up from the second quarter of 1996, when interest
on borrowings totaled $3,000. The Corporation has long-term debt related to the
matching of one large variable-rate commercial loan with a variable-rate
borrowing of the same maturity and thus incurs this expense item.
 
    Interest expense for the six months ended June 30, 1997 was $8,352,000, as
compared to $6,598,000 for the second quarter of 1996. This is an increase of
$1,754,000, or 26.58%. The increase is due to an increase in six-month average
deposit balances of $78.0 million, or 20.77%, as compared to the six-month
average at June 30, 1996. Deposit expense has increased as a percent of deposit
liabilities since 1996. Deposit expense averaged 3.61% of deposit balances for
the six month period ended June 30, 1997, up from the 3.48% figure for the same
period in 1996. Again, an analysis of average deposit balances also shows a
shift in deposit composition to savings and time deposits (with higher interest
rates) since June 30, 1996.
 
    Interest on federal funds purchased and securities sold under repurchase 
agreements amounted to $112,000 as compared to $86,000 for the six months 
ended June 30, 1996, due to increased balances of repurchase agreements. 
Interest on other borrowings during the first six months of 1997 was 
$119,000, up from the second quarter of 1996, when interest on borrowings 
totaled $9,000. Again, this expense is attributable to the Corporation's 
long-term debt.
 
PROVISION FOR LOAN LOSSES
 
    The provision for loan losses for the three months ended June 30, 1997 was
$315,000 as compared to $124,000 for the three months ended June 30, 1996, an
increase of $191,000 or 154.03%. Given the large amount of loan growth in 1997
($31.5 million, or 9.43% since year-end 1996), management increased the loan
loss provision to maintain a proportionate level of reserves. The current
provision maintains the allowance for loan losses at levels deemed acceptable by
management and the regulators of the affiliated institutions.
 
    For the six month period ended June 30, 1997, the loan loss provision was
$495,000 as compared to $268,000 for the six months ended June 30, 1996. This
represents an 84.7% increase. Again the provision was increased to allow for
increased growth in the loan portfolio.

<PAGE>

OTHER (NONINTEREST) INCOME
 
    Noninterest income for the quarter ended June 30, 1997 was $1,691,000,
versus $1,665,000 for the quarter ended June 30, 1996. The net increase of
$26,000 in other income is the result of two factors: service charges on deposit
accounts increased by $165,000 over the second quarter of 1996, and a decrease
in volume of loan sales in the secondary market caused other loan income to
decline by $142,000. Service charges were higher due to the increased number of
accounts due to the First Union deposit acquisition and other deposit growth.
 
    Noninterest income for the six month period ended June 30, 1997 was
$3,348,000, versus $3,456,000 for the six month period ended June 30, 1996. The
net decrease of $108,000, or 3.13%, in noninterest income year-to-date is the
result of three factors: (a) a decrease in volume of loan sales in the secondary
market caused other loan income to decline by $430,000; (b) service charges on
deposit accounts increased by $284,000 over the first six months of 1996; and,
(c), other noninterest income increased by $36,000 over the first six months of
1996. Service charges were higher due to the increased number of accounts due to
the First Union deposit acquisition and other deposit growth. Other noninterest
income grew because of several offsetting factors: increases in customer check
income, gains on sale of other real estate, and other fee income totaling
$108,000 (versus the prior June 30, 1996 figure) were offset by losses on the
sale of fixed assets and decreased gains on sale of investments that had an
aggregate effect of $81,000 on earnings.
 
OTHER (NONINTEREST) EXPENSES
 
    Other noninterest expenses were $5,012,000 in the second quarter of 1997, a
13.21% increase from the $4,427,000 reported in the same period of 1996. The
$585,000 increase is due to a number of factors. First, legal fees rose
$344,000, or 603.5%, over the second quarter figure for 1996, due to
nonrecurring fees arising from a lawsuit adjudicated in the second quarter of
1997. Secondly, the Company experienced increased equipment maintenance and
depreciation charges related primarily to upgrades to the Corporation's data
processing systems, which resulted in $133,000 of additional expense. In
addition, amortization of intangibles attributable to the First Union deposit
acquisition of 1996 resulted in an increase in intangible expenses of $124,000.
Salary and benefit expenses for the second quarter exceeded the second quarter
of 1996 amount by $95,000, a 4.05% increase. Finally, offsetting these
increases, the Company's other operating expenses decreased by $182,000. The
decrease was primarily due to (a) a $76,000 decrease in operational losses; 
(b) a $53,000 decrease in other real estate expense; (c) a $38,000 decrease 
in postage expense due to a first quarter overaccrual; (d) a $32,000 decrease 
in consultant fees; offset by (e) an increase in state sales tax expense of 
$45,000 and (f) an increase in personnel training costs of $27,000.
 
    For the six month period ended June 30, 1997, other noninterest expenses
were $9,770,000, a 9.62% increase from the $8,913,000 reported in the same
period of 1996. The $857,000 increase is due to a number of factors. First,
legal fees rose $348,000, or 290.0%, over the June 30, 1996 figure due to the
nonrecurring fees arising from the lawsuit noted above. Secondly, the Company
experienced increased equipment maintenance and depreciation charges principally
related to upgrades to the Corporation's data processing systems, which resulted
in $262,000 of additional expense for the six month period. In addition,
amortization of intangibles attributable to the First Union deposit acquisition
of 1996 resulted in an increase in intangible expenses of $248,000 on a
year-to-date basis. Advertising and marketing expenses rose $116,000 from the

<PAGE>

prior June 30, 1996 figure of $230,000, a result of increased charitable
contributions and the retention of a Nashville-based advertising agency since
the third quarter of 1996. Salary and benefit expenses for the period ended June
30, 1997 exceeded the amount for the period ended June 30, 1996 by $82,000, a
1.71% increase.

    Finally, offsetting these increases for the six month period, the 
Company's other operating expenses decreased by $291,000. The decrease was 
primarily due to (a) a $114,000 decline in other real estate expense; (b) a 
$79,000 decrease in consulting fee expense; and (c) a $52,000 decrease in 
other operational losses offset by (d) an increase in training expenses of 
$47,000. An accounting reclassification of certain modem and computer 
network-related telephone expenses to the data processing expense line item 
also served to decrease other operating expense by $74,000 compared to the 
figure for June 30, 1996.
 
NET INCOME
 
    Net income for the second quarter of 1997 was $1,697,000, as compared to
$1,723,000 during the second quarter of 1996. This represents an decrease of
1.51%. Fully-diluted earnings per share for the quarter were $.24 per share,
equal to the split-adjusted second quarter 1996 figure.
 
    The decrease in earnings for the second quarter of 1997 was the result of an
increase in noninterest expenses. Legal fees increased $344,000 over the second
quarter of 1996 due to nonrecurring legal expenses related to a lawsuit that was
adjudicated in the second quarter. Management also allocated more funds to loan
loss reserves in its member banks, First State Bank & Trust Company, Albany, and
First State Bank & Trust in Cordele, to maintain these reserves in step with
recent increases in loan growth. As a result, loan loss provision expense rose
$191,000 from the second quarter of 1996 to the second quarter of 1997, an
increase of 154.0%. Increases in equipment and occupancy expenses of $163,000
arose principally from increases in depreciation charges related to upgraded
computer equipment and to reduced rental income from tenants, a result of the
sale of the Oglethorpe Real Estate Holding Company assets in 1996. Amortization
of intangibles increased $124,000, or 213.8%, as the Corporation amortized
additional monthly premium amounts related to its third quarter 1996 purchase of
First Union deposits in Dougherty County, Georgia.
 
    The above cost increases were offset by (a) an increase in net interest
income of $652,000 over the same quarter in 1996 (an 11.9% increase); (b)
decreases in operational losses of $76,000 (a 64.0% decrease); and (c) by
decreases in other real estate expenses of $53,000. (or 95.4%).
 
    For the six month period ended June 30, 1997, net income is up $10,000 from
the prior June 30 figure, or 0.29%. Due to the dilutive effect of stock options
issued and outstanding, the fully-diluted net income per share declined from
$.50 per share at June 30, 1996 to $.49 per share at June 30, 1997.
 
    The net change in income for the six month period occurred as the result 
of increased net interest income and increased noninterest expenses. Net 
interest income increased (up $1,221,000 or 11.27%, over the six months ended 
June 30, 1996), primarily due to the net increase in assets resulting from 
the 1996 acquisition of First Union deposits in Dougherty County, GA. This 
increase was primarily offset by (a) an increase in noninterest expenses (up 
$857,000, or 9.62% from the first six months of 1996), due to nonrecurring 
legal fees (accounting for $348,000 of the increase), increased amortization 
of intangibles attributable to the First Union deposit acquisition ($248,000 
of the increase) and due to increased depreciation charges related to 
upgrades to the 

<PAGE>

Corporation's data processing systems; (b) an increase in the Corporation's 
provision for loan losses (up $227,000, or 84.70% from the six months of 
1996); and (c) a decrease in noninterest income (down $108,000 or 3.13% from 
the period ended June 30, 1996), due to decreased activity in the First State 
Mortgage lending division.

BALANCE SHEET COMMENTS
 
    Total assets at June 30, 1997 were $548,005,000, as compared to $516,499,000
at year-end 1996, an increase of $31,506,000 or 6.10%. The growth is the result
of several factors: (a) a growth in loans of $31,529,000, or 9.43%, due to
commercial, commercial real estate, agricultural real estate, and consumer real
estate loan growth; (b) increases in cash and interest bearing deposits in banks
of $4,260,000; offset by (c) a decline in investments held-to-maturity of
$2,299,000 due to maturities of municipal bonds; (d) declines in investments
held for sale and federal funds sold of $1,244,000 due to demands on liquidity
and net amortization of premiums; and, (e) a decline in premises and equipment
of $352,000, resulting from normal depreciation of existing assets.
 
    Deposits at June 30, 1997 were $480,001,000, having increased $27,550,000,
or 6.09%, since December 31, 1996. The overall composition of the Company's
deposits continues to trend toward higher-yielding time deposits. Growth in 1997
has been dominated by the acquisition of public fund certificates of deposit and
maintenance of the remainder of the deposit portfolio. 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 56.86% at June 30, 1997.
 
    Debenture bonds and notes payable, and federal funds purchased and
securities sold under repurchase agreements increased by $1,148,000 to
$12,314,000 at June 30, 1997. Securities sold under repurchase agreements
accounted for most of the increase. The $3,087,000 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 six months of 1997.
 
CAPITAL RESOURCES
 
    Stockholders' equity at June 30, 1997 totaled $50,631,000, as compared to
$48,130,000 at year-end 1996. This is an increase of 5.20%. At June 30, 1997,
total capital was 9.24% of total assets. Due to changes in market conditions,
the FAS 115 allowance for unrealized gains (losses) on securities declined by
$64,000 (net of tax effect) during the year-to-date, resulting in an net effect
on capital of $26,000 (net of tax effect) at June 30, 1997.
 
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.

<PAGE>

    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.
 
    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 opportunities.

<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 

<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. The Committee of independent directors 
recommended, and the boards of the Company and FSB Albany accepted the 
recommendation, that the corporations take no action to seek indemnification 
from their directors. The Committee recommended that the Company deposit the 
sum of $50.00 into the accounts of each trust that held the Company stock 
among its trust assets. No litigation has been filed at this time.

ITEM 2. CHANGES IN SECURITIES.
 
    None

ITEM 3. Defaults Upon Senior Securities.

    None
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 
    The Annual Meeting of Shareholders was held on April 28, 1997, and the
Stockholders voted on the following matters: (i) the election of five nominees
to serve as directors of the Company for a term of three years until 2000; (ii)
to approve the First State Corporation 1997 Stock Incentive Plan. Represented at
the annual meeting were 3,690,101 shares of common stock, $1.00 par value, or
81.11% of the issued and outstanding shares of the company.
 
    PROPOSAL ONE:  Pursuant to the Company's Articles of Incorporation, its
Board of Directors is divided into three classes. The Board of Directors
proposed that the four directors whose terms expired in 1997 be reelected
directors of the Company to serve additional three-year terms. The five
directors were reelected by the following vote:
 
                                SHARES VOTED
                                     FOR        AUTHORITY
DIRECTOR                         REELECTION      WITHHELD
------------------------------  ------------   ----------

Temp S. Davis, III............     3,120,529      569,572
G. William Hughey, III........     3,120,529      569,572
A. Collins Knight, III........     3,120,529      569,572
Earle P. Spurlock.............     3,120,529      569,572
Vernon H. Warren..............     3,120,529      569,572

<PAGE>

    PROPOSAL TWO:  To approve the First State Corporation 1997 Stock Incentive
Plan, the full text of which is set forth in Appendix A of the 1997 Proxy
Statement.
 
           SHARES VOTED       SHARES VOTED            SHARES ABSTAINING
           FOR PROPOSAL TWO   AGAINST PROPOSAL TWO    FROM THE VOTE
           ----------------   --------------------    -----------------

              2,913,966            591,217                 16,897

 
    In addition, there were 167,220 shares not voted by brokers on Proposal Two.
 
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 June 30,
       1997.

<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

 August 11, 1997                     /s/ DOUGLAS E. WREN
 ---------------------------------   -------------------------------------------
                    Date             Douglas E. Wren,
                                     President & Chief Operating
                                     Officer

 August 11, 1997                     /s/ ROBERT E. LEE
 ---------------------------------   -------------------------------------------
                    Date             Robert E. Lee,
                                     Senior Vice President and
                                     Chief Financial Officer