GEORGIA CAROLINA BANCSHARES INC, SB-2/A, 1998-10-02

GEORGIA CAROLINA BANCSHARES INC
SB-2/A, 1998-10-02

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 2, 1998

REGISTRATION NO. 333-62493

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1

FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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GEORGIA-CAROLINA BANCSHARES, INC.
(FORMERLY PINNACLE BANCSHARES, INC.)
(Name of small business issuer in its charter)
------------------------------

<TABLE>
<S> <C> <C>
GEORGIA 6022 58-2326075
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>

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110 EAST HILL STREET
THOMSON, GEORGIA 30824
(706) 595-1600
(Address and telephone number of principal executive offices)
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PATRICK G. BLANCHARD
PRESIDENT AND CHIEF EXECUTIVE OFFICER
110 EAST HILL STREET
THOMSON, GEORGIA 30824
(706) 595-1600
(Name, address and telephone number of agent for service)
------------------------------
COPIES TO:

<TABLE>
<S> <C>
ROBERT C. SCHWARTZ, ESQ. BARNEY STEWART, III, ESQ.
SMITH, GAMBRELL & RUSSELL, LLP MOORE & VAN ALLEN, PLLC
PROMENADE II, SUITE 3100 NATIONSBANK CORPORATE CENTER
1230 PEACHTREE STREET, N.E. 100 NORTH TRYON STREET, FLOOR 47
ATLANTA, GEORGIA 30309 CHARLOTTE, NORTH CAROLINA 28202-4003
(404) 815-3758 (704) 331-1000
</TABLE>

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APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after this Registration Statement becomes effective. If this Form is filed to
register additional securities for an offering pursuant to Rule 462(b) under the
Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.

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<PAGE> 2

Pursuant to Rule 429 of the Securities Act, the Prospectus included in this
Registration Statement relates to the Registrant's Registration Statement on
Form SB-2 (File No. 333-41547). On February 19, 1998, the Registrant's
Registration Statement (File No. 333-41547), registering 740,741 shares of the
Registrant's Common Stock was declared effective by the Commission. That
Registration Statement related to a "best efforts" offering of 518,519 to
740,741 shares of Common Stock undertaken by certain directors and officers of
the Registrant (the "Best Efforts Offering"). Although, by its terms, the Best
Efforts Offering could be extended without modification through February 14,
1999, the Registrant has elected to restructure the plan of distribution prior
to that date.

The Best Efforts Offering commenced on February 19, 1998 and, as of August
18, 1998, had resulted in the receipt of subscriptions for 310,000 shares of
Common Stock from approximately 265 subscribers (the "Initial Subscribers"). The
Registrant has elected to engage Interstate/Johnson Lane Corporation ("IJL") to
(i) underwrite, on a firm commitment basis, 430,000 of the shares offered hereby
and (ii) to underwrite, on a standby firm commitment basis, any of the 310,000
shares of Common Stock withdrawn by the Initial Subscribers after receipt by
them of the Prospectus included in this Registration Statement. See
"Underwriting."

The Prospectus included in this Registration Statement provides updated
financial information consistent with the requirements of Item 310 of Regulation
S-B and discloses the underwriting arrangements with IJL on a firm commitment
and standby basis for 740,000 shares of Common Stock at the same price per share
($13.50) as offered in the Best Efforts Offering.
<PAGE> 3

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

PROSPECTUS

SUBJECT TO COMPLETION, DATED OCTOBER 2, 1998

740,000 SHARES

(GEORGIA CAROLINA BANCSHARES, INC. LOGO)

COMMON STOCK

Georgia-Carolina Bancshares, Inc. (the "Company"), a Georgia corporation
and holding company for First Bank of Georgia (the "Bank"), hereby offers for
sale 740,000 shares of the Company's common stock, $.001 par value per share
(the "Common Stock"), at an offering price of $13.50 per share. See
"Underwriting" for the factors considered in determining the public offering
price. Prior to this offering (this "Offering"), there has been no established
public market for the Common Stock. The Company intends to apply for listing of
the Common Stock on The Nasdaq SmallCap Market (the "SmallCap Market") under the
symbol "GCBI."

SEE "RISK FACTORS" COMMENCING ON PAGE 5 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE COMMON STOCK.
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR SAVINGS DEPOSITS AND
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
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PRICE UNDERWRITING
TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1)(2) THE COMPANY(3)
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<S> <C> <C> <C>
Per Share................................ $13.50 $1.0125 $12.4875
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Total(2)(4).............................. $9,990,000 $749,250 $9,240,750
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</TABLE>

(1) The Company has agreed to indemnify Interstate/Johnson Lane Corporation
("IJL") and the several underwriters named herein (the "Underwriters")
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended (the "Securities Act"). See "Underwriting."

(2) Of the 740,000 shares offered hereby, the Underwriters are underwriting
310,000 shares (the "Standby Shares") on a standby firm commitment basis.
The Underwriting Discounts and Commissions assume that all of the Standby
Shares will be purchased by the Underwriters pursuant to this commitment.
See "Underwriting."

(3) Before deducting expenses estimated at $300,000, all of which are payable by
the Company.

(4) The Company has granted to the Underwriters a 30-day option to purchase up
to 111,000 additional shares of Common Stock solely to cover
over-allotments, if any. If such option is exercised in full, the total
Price to Public, Underwriting Discounts and Commissions and Proceeds to the
Company will be $11,488,500, $861,638 and $10,626,862, respectively.

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

The shares of Common Stock are offered by the Underwriters, subject to
prior sale, receipt and acceptance by them and subject to the right of the
Underwriters to reject any order in whole or in part and certain other
conditions. It is expected that certificates for such shares will be available
for delivery on or about , 1998.

INTERSTATE/JOHNSON LANE
C O R P O R A T I O N

The date of this Prospectus is , 1998.
<PAGE> 4

GEORGIA-CAROLINA BANCSHARES, INC.
AUGUSTA MARKET

(MAP DEPICTING THE STATES OF GEORGIA AND SOUTH CAROLINA WITH AUGUSTA MARKET
HIGHLIGHTED)
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(1) The Company operates two offices in Thomson, Georgia.
(2) The Company expects the new branch office in Augusta, Georgia to open in the
fourth quarter of 1998 and the new branch office in Martinez, Georgia to
open in early 1999.
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CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH
SECURITIES, AND THE IMPOSITION OF A PENALTY BID, DURING AND AFTER THIS OFFERING.
IN ADDITION, IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS ALSO MAY ENGAGE
IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE SMALLCAP MARKET
IN ACCORDANCE WITH RULE 103 OF REGULATION M UNDER THE SECURITIES EXCHANGE ACT OF
1934 (THE "EXCHANGE ACT"). FOR A DESCRIPTION, SEE "UNDERWRITING."

i
<PAGE> 5

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements and notes thereto included in
this Prospectus. Except as otherwise specified, all information in this
Prospectus assumes no exercise of the Underwriter's over-allotment option.
Unless the context otherwise requires, the term the "Company" refers to
Georgia-Carolina Bancshares, Inc. and its wholly-owned subsidiary, First Bank of
Georgia.

THE COMPANY

Georgia-Carolina Bancshares, Inc. is a bank holding company that owns First
Bank of Georgia, a state-chartered commercial bank that operates two offices in
Thomson, Georgia under the name "McDuffie Bank & Trust." The Company has
immediate plans to expand its presence in the Augusta, Georgia Metropolitan
Statistical Area (the "Augusta Market"). Construction has begun on the Company's
new branch office in Augusta which is expected to open in the fourth quarter of
1998. In early 1999, the Company expects to open another branch office in
Martinez, a rapidly growing community adjacent to Augusta. Future business plans
include further expansion in the Augusta Market by opening additional branch
offices and through the acquisition of other banks or branches. As of June 30,
1998, the Company had total assets of $44.0 million, deposits of $36.2 million
and shareholders' equity of $7.3 million.

The Augusta Market consists of the City of Augusta in Richmond County, the
adjacent Georgia counties of McDuffie and Columbia located west and northwest of
Augusta, and the adjacent South Carolina counties of Aiken and Edgefield located
east and northeast of Augusta just across the Savannah River. Columbia County is
one of the fastest growing counties in Georgia, in terms of both population and
commercial growth. The economy of the Augusta Market is diverse and consists of
established and new residential neighborhoods, commercial and retail businesses,
large corporate headquarters, light and heavy manufacturing, a growing service
sector, a university-supported health care community and significant sports and
recreation enterprises. Augusta is the second largest city in Georgia with a
population of approximately 193,000. Augusta was recently listed in the Top 10
List of the Best Southern Cities for Business by Entrepreneur Magazine and as
the best place outside of Atlanta to live in Georgia by MacMillan's Places Rated
Almanac. As of June 30, 1997, the latest period for which government reports are
available, there were 14 depository institutions (including the Bank)
represented in the Augusta Market with aggregate deposits of approximately $3.6
billion.

The Augusta Market has been significantly affected by consolidation in the
banking industry in recent years, and particularly by the acquisition of Bankers
First Corporation by SouthTrust Corporation in 1996 and by the acquisition of
Allied Bankshares, Inc. by Regions Financial Corporation in 1997. Consolidation
often results in the dissolution of local boards of directors and the
dislocation of management and customer service personnel with extensive banking
experience and strong ties to the local community. Accordingly, management
believes that many customer relationships in the Augusta Market have been
disrupted as the bigger financial institutions have increasingly focused their
attention on larger corporate customers, standardized loan and deposit products
and other services. Generally, these products and services are offered by less
personalized delivery systems, creating a demand for the delivery of higher
quality, personalized banking services to individuals and small to medium-sized
businesses. As a result of these factors, management believes that the Company
has a unique opportunity to attract and retain experienced and talented
management personnel and to become the primary provider of community banking
services in the Augusta Market.

1
<PAGE> 6

The Company's management team includes individuals who have significant
experience in the banking industry. Patrick G. Blanchard, President and Chief
Executive Officer of the Company, has organized two state banks and has held
numerous senior banking positions over his 32-year banking career. Prior to
joining the Company in October 1997, Mr. Blanchard served as the President of
Georgia Bank and Trust Company of Augusta for 10 years which, as of June 30,
1998, had approximately $234 million in total deposits. Heyward Horton, Jr.,
President and Chief Executive Officer of the Bank, has held various senior
banking positions since beginning his banking career in 1966, including
President and Chief Executive Officer of First Gwinnett Bank in Norcross,
Georgia from 1987 to 1995, and President and Chief Executive Officer of Citizens
Bank of Ashburn in Ashburn, Georgia from 1983 to 1985.

The Company's business strategy is to become the community bank of choice
in the Augusta Market. The principal elements of this strategy are to:

- Expand the Company's presence in the Augusta Market by opening a branch
office in Augusta in the fourth quarter of 1998 and in Martinez in early
1999;

- Staff branch offices with local and responsive management teams
emphasizing a high level of personalized customer service;

- Leverage the extensive business relationships and diverse backgrounds of
its Board of Directors and its branch office advisory boards to assist
the Company in attracting customers;

- Establish local identities by using the names "First Bank of Augusta" for
the Augusta branch office and "First Bank of Columbia County" for the
Martinez branch office;

- Target individuals, professionals and small to medium-sized business
customers that require the attention and service which a
community-oriented bank is well suited to provide;

- Provide a broad array of traditional banking products and services while
utilizing technology and strategic outsourcing to compete effectively
with other financial institutions; and

- Pursue further expansion opportunities in the Augusta Market by opening
additional branch offices and through the possible acquisition of other
banks or branches.

The Company's executive offices are located at 110 East Hill Street,
Thomson, Georgia, and its telephone number is (706) 595-1600.

2
<PAGE> 7

THE OFFERING

Common Stock offered by the Company............. 740,000 shares

Common Stock to be outstanding after this
Offering........................................ 1,375,380 shares(1)

Use of Proceeds................................. To support internal growth
related to expanding the
Company's presence in the
Augusta Market, to finance
possible future acquisitions
and for other general
corporate purposes. See "Use
of Proceeds."

Proposed SmallCap Market symbol................. "GCBI"

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(1) Excludes 24,500 shares issuable upon the exercise of outstanding stock
options, 15,750 shares issuable upon the exercise of a stock option to be
granted upon the completion of this Offering and up to 111,000 shares
issuable upon the exercise of the Underwriters' over-allotment option.

RISK FACTORS

Prior to making an investment decision, prospective investors should
consider all of the information set forth in this Prospectus and should evaluate
the statements set forth under the heading "Risk Factors" beginning on page 5.

3
<PAGE> 8

SUMMARY CONSOLIDATED FINANCIAL DATA

The following table sets forth summary consolidated financial data
concerning the Company and is qualified in its entirety by the detailed
information and consolidated financial statements, including notes thereto,
included elsewhere in this Prospectus. The summary data presented below for and
as of the end of each of the years in the three-year period ended December 31,
1997 are derived from the consolidated financial statements of the Company, all
of which have been audited by Cherry, Bekaert & Holland, L.L.P., independent
auditors. The financial statements as of and for the years ended December 31,
1997 and 1996 are included elsewhere in this Prospectus. The summary data
presented below for the six months ended June 30, 1998 and 1997 are derived from
the unaudited financial statements of the Company.

<TABLE>
<CAPTION>
AT JUNE 30, AT DECEMBER 31,
------------------ ---------------------------
1998 1997 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Assets......................................... $43,989 $37,691 $40,571 $38,026 $42,450
Loans(2)....................................... 21,456 19,759 19,732 21,008 21,105
Allowance for loan losses...................... 824 881 752 889 1,155
Deposits....................................... 36,217 30,269 32,937 30,655 35,320
Shareholders' equity........................... 7,346 7,161 7,278 7,132 6,937
</TABLE>

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4
<PAGE> 9

RISK FACTORS

Certain statements contained in this Prospectus, such as statements
relating to financial results, plans for future business development activities,
capital spending or financing sources, capital structure and the effects of
regulation and competition are prospective in nature. Such statements are
subject to risks, uncertainties and other factors which could cause actual
results to differ materially from future results expressed or implied by such
forward looking statements. Potential risks and uncertainties include those
discussed below, as well as risks and uncertainties discussed elsewhere in this
Prospectus and described from time to time in the Company's filings with the
Securities and Exchange Commission (the "SEC").

EXPANSION AND MANAGEMENT OF GROWTH

The Company intends to pursue an aggressive growth strategy in the Augusta
Market, and future results of operations will be affected by its ability to,
among other things, identify suitable sites for branch offices, build a customer
base, attract qualified bank staff, negotiate leases and other agreements with
acceptable terms in connection with the opening of additional branch offices and
maintain adequate working capital. Failure to manage growth effectively or to
attract and retain qualified personnel could have a material adverse effect on
the Company's business, future prospects, financial condition or results of
operations, and could adversely affect the Company's ability to implement its
business strategy successfully. There can be no assurance that the Company will
be able to expand its market presence in the Augusta Market or that any such
expansion will not adversely affect the Company.

The process of opening new branch offices may divert management time and
resources. There can be no assurance that the Company will not incur disruption
and unexpected expenses in integrating newly established branch offices. The
Company's ability to manage growth as it pursues its expansion strategy will
also be dependent upon, among other factors, its ability to (i) maintain
appropriate policies, procedures and systems to ensure that the Company's loan
portfolio maintains an acceptable level of credit risk and loss and (ii) manage
the costs associated with expanding its infrastructure, including systems,
personnel and facilities. The Company's inability to manage growth as it pursues
its expansion strategy could have a material adverse effect on the Company's
business, future prospects, financial condition or results of operations. See
"Business -- Business Strategy."

NO OPERATING HISTORY FOR OFFICES IN AUGUSTA AND MARTINEZ, GEORGIA

The Company has immediate plans to expand its presence in the Augusta
Market by opening a branch office in Augusta and in Martinez, Georgia, a
community adjacent to Augusta. The Company's profitability will, in large part,
depend upon the successful operations of these new offices. The operations of
these new offices will be subject to the risks inherent in the establishment of
a new business and, specifically, of a new bank. The likelihood of the success
of each of the offices must be considered in light of the expenses,
complications, and delays frequently encountered in connection with the
development of a new bank and the competitive environment in which each office
will operate.

Typically, new offices incur substantial initial expenses and often are not
profitable on an annual basis until several years after commencing business.
There can be no assurance that any of the offices will ever operate profitably
or that the impact of one or more of their respective operations will not have a
material adverse impact on the results of operations and financial condition of
the Company.

DEPENDENCE ON LOCAL ECONOMIC CONDITIONS

Management anticipates that a majority of the Company's customers will be
located and doing business in and around the Augusta Market. Any factors
adversely affecting the economy of this area could, in turn, adversely affect
the performance of the Company due to the impact unfavorable economic conditions
could have on the ability of borrowers to repay their loans. Further, commercial
banks and other financial institutions are affected by economic and political
conditions, both domestic and international, and by governmental monetary
policies. Conditions such as inflation, recession, unemployment, high interest
rates, short money

5
<PAGE> 10

supply, scarce natural resources, international disorders and other factors
beyond the control of the Company may adversely affect its profitability.

COMPOSITION OF LOAN PORTFOLIO

As of June 30, 1998, real estate loans comprised approximately 70% of the
Company's total loan portfolio, which includes residential mortgages and
construction and commercial loans secured by real estate. Because the Company
generates a substantial portion of its real estate loans in Thomson and in
suburban Atlanta, real estate market conditions in these areas could strongly
influence the level of the Company's non-performing loans and the results of
operations and financial condition of the Company. Real estate values and the
demand for mortgages and construction loans are affected by, among other things,
changes in general or local economic conditions, changes in governmental rules
or policies, the availability of loans to potential purchasers and natural
disasters. Although the Company's underwriting standards are intended to protect
the Company against adverse general and local real estate trends, declines in
real estate markets could adversely impact the demand for new real estate loans,
the value of the collateral securing the Company's loans and the business,
results of operations and financial condition of the Company.

The Company first began making real estate loans in suburban Atlanta in
June 1997. These loans are generated by a third party loan broker and consist
primarily of construction loans to builders of new homes and, to a lesser
degree, commercial office buildings. As of June 30, 1998, the Company's real
estate loans outstanding in suburban Atlanta totaled $4.1 million and comprised
approximately 27% of the Company's total loan portfolio. These loans typically
have a six month maturity, subject to possible renewal. To date, the Company has
not experienced any defaults on these loans and management does not believe that
these loans entail any greater risk than real estate loans made in the Augusta
Market. However, because the Company has only recently begun making these loans
and has not had a long enough history with the borrowers to evaluate the
potential for loss, there can be no assurance that these loans, and any future
real estate loans the Company makes in and around Atlanta, will not experience
defaults that could adversely affect the Company's results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Lending Activities."

CREDIT RISK; ADEQUACY OF ALLOWANCE FOR LOAN LOSSES

There are certain risks inherent in making all loans, including risks with
respect to the period of time over which loans may be repaid, risks resulting
from changes in economic and industry conditions, risks inherent in dealing with
individual borrowers, and, in the case of a collateralized loan, risks resulting
from uncertainties about the future value of the collateral. The Company will
maintain an allowance for loan losses based on, among other things, historical
experience, an evaluation of economic conditions, and regular reviews of
delinquencies and loan portfolio quality. Management's judgment as to the
adequacy of the allowance for loan losses is based upon a number of assumptions
about future events which it believes to be reasonable but which may or may not
be valid. Thus, there can be no assurance that charge-offs in future periods
will not exceed the allowance for loan losses or that additional increases in
the allowance for loan losses will not be required. Additions to the allowance
for loan losses would result in a decrease of the Company's net income.

INTEREST RATE SENSITIVITY

The results of operations of the Company are materially affected by the
monetary and fiscal policies of the federal government and the regulatory
policies of governmental authorities. The Company's profitability is dependent
to a large extent on its net interest income, which is the difference between
the Company's income on interest-earning assets, such as loans, and the
Company's expense on interest-bearing liabilities, such as deposits.
Consequently, the Company, like most bank holding companies, is particularly
sensitive to interest rate fluctuations and, accordingly, a change in market
interest rates could adversely affect the Company's earnings.

6
<PAGE> 11

NO ESTABLISHED MARKET FOR THE COMMON STOCK

Presently, there is no established public market for the Common Stock.
Management anticipates that the Common Stock will be quoted on the SmallCap
Market, an electronic securities market operated by a subsidiary of the National
Association of Securities Dealers, Inc. (the "NASD"). The trading markets for
securities quoted on the SmallCap Market typically lack the depth, liquidity and
orderliness necessary to maintain an active market in the trading of such
securities. Initial listing on the SmallCap Market requires a minimum of three
market makers and continued listing requires a minimum of two market makers. IJL
has advised the Company that it intends to act as a market maker for the Common
Stock subsequent to this Offering, but is not contractually obligated to do so.
The Company will seek to encourage other broker-dealers to make a market in the
Common Stock upon completion of this Offering, but there can be no assurance
that it will be successful in doing so. The development of a public trading
market depends upon the existence of willing buyers and sellers, the presence of
which is not within the control of the Company nor assured by listing the Common
Stock on the SmallCap Market. Accordingly, investors should consider the
potential illiquid and long-term nature of an investment in the Common Stock.
There can be no assurance that an active and liquid trading market for the
Common Stock will develop, or once developed, will continue, nor any assurance
that purchasers of the Common Stock will be able to sell their shares at or
above the public offering price. The absence of a liquid and active trading
market, or the discontinuance thereof, may have an adverse effect on both the
price and the liquidity of the Common Stock.

POTENTIAL FLUCTUATION IN QUARTERLY RESULTS AND VOLATILITY OF STOCK PRICE

Subsequent to this Offering, prices for the Common Stock will be determined
by the market for the Common Stock and may be influenced by a number of factors,
including depth and liquidity of the market, investor perceptions of the
Company, changes in conditions or trends in the banking industry or in the
industries of the Company's significant customers, publicly traded comparable
companies and general economic, political and other conditions. In addition, the
trading price of the Common Stock could be subject to significant fluctuations
in response to quarterly variations in the Company's actual or anticipated
operating results, changes in general market conditions and other factors. In
particular, the Company's quarterly revenues are difficult to forecast and the
Company's expense levels are based in part on its expansion plans in
anticipation of loan growth and corresponding revenues generated from new branch
offices. If revenue levels are below expectations, the Company may be unable or
unwilling to reduce expenses proportionately and operating results would likely
be adversely affected. As a result, prior to the full implementation of the
Company's business strategy, the Company believes that period to period
comparisons of its results may not necessarily be meaningful and should not be
relied upon as indications of future performance. Due to all of the foregoing
factors, it is possible that in future quarters the Company's operating results
will be below the expectations of public market analysts and investors. In such
event, the market price of the Common Stock would likely be materially adversely
affected. In recent years, significant price and volume fluctuations have
occurred in the stock prices of companies that often have been unrelated or
disproportionate to their operating performance. There can be no assurance that
the market price of the Common Stock will not decline below the public offering
price.

COMPETITION

Competition among financial institutions in the Augusta Market is intense.
The Company competes with other state and national banks, savings and loan
associations, consumer financial companies, credit unions, money market mutual
funds and other financial institutions which have far greater financial
resources than those available to the Company. The Company's relatively small
size may adversely impact its ability to compete effectively with larger
institutions. If the Company is unable to compete for deposits effectively in
its primary service areas, such inability would likely have an adverse effect on
the Company's potential for growth and profitability.

7
<PAGE> 12

DEPENDENCE ON KEY PERSONNEL

The Company relies on a number of key executives, including Patrick G.
Blanchard, its President and Chief Executive Officer, and Heyward Horton, Jr.,
the Bank's President and Chief Executive Officer. Messrs. Blanchard and Horton
each have employment agreements with the Company. The Company maintains key man
life insurance on Mr. Blanchard in the amount of $500,000, although it has no
such policy with respect to Mr. Horton. The loss of the services of any key
executive could have a material adverse effect on the Company. No assurance can
be given that replacements for any of these officers could be hired and retained
if these officers' services were no longer available. See "Management."

YEAR 2000

A critical issue affecting companies that rely extensively on electronic
data processing systems, such as the Company, is the Year 2000 issue. The Year
2000 issue has arisen due to the widespread use of computer programs that rely
on two-digit date codes to perform computations or decision-making functions.
Many of these programs may fail as a result of their inability to interpret
properly date codes beginning January 1, 2000. For example, such programs may
misinterpret "00" as the year 1900 rather than 2000. In addition, equipment
controlled by microprocessor chips may not deal appropriately with the year
"00." The Bank primarily uses a third-party vendor for processing its primary
banking applications. During 1997, the Company formed an internal task force to
address the Year 2000 issue, conduct a comprehensive review of the Company's
systems and ensure that the Company takes any necessary remedial measures. The
Company believes that its systems and those of the Bank and its data processing
service provider are currently Year 2000 compliant and does not believe that
material expenditures will be necessary to implement any further modifications.
As of June 30, 1998, the Company had spent approximately $15,000 to upgrade its
software and hardware systems to help ensure that its systems would be Year 2000
compliant. Further, the Company has issued a certification request to its data
processing service provider seeking assurance that its systems will be Year 2000
compliant. The service provider has responded that it believes that its systems
are Year 2000 compliant. However, there can be no assurance that unforeseen
difficulties or costs will not arise. In addition, there can be no assurance
that the systems of other companies on which the Company's systems rely, such as
the Bank's data processing vendor, will be modified on a timely basis, or that
the failure by another company to modify properly its systems will not
negatively impact the Company's systems or operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -- Year
2000."

GOVERNMENT REGULATION AND LEGISLATION

The Company operates in a highly regulated environment and is subject to
supervision by several governmental regulatory agencies, including the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board"), the
Federal Deposit Insurance Corporation (the "FDIC") and the Georgia Department of
Banking and Finance (the "Georgia Banking Department"). These regulations are
generally intended to provide protections for depositors and borrowers rather
than for the benefit of shareholders. The Company is subject to future
legislation and government policy, including bank deregulation and interstate
expansion, which could adversely affect the banking industry as a whole,
including the operations of the Company. Moreover, the establishment of branch
offices and the acquisition of other financial institutions are subject to the
prior receipt of certain regulatory approvals. Failure to obtain regulatory
approvals for branch sites could impair the Company's long-term plans for
expansion and have a material adverse effect on the Company's business, future
prospects, financial condition or results of operation. See "Supervision and
Regulation."

LIMITATIONS ON DIVIDENDS

Georgia law restricts the Company's payment of dividends if, after such
payment, the Company would be unable to meet its obligations as they mature or
the Company's liabilities would exceed its assets. The Company's ability to pay
dividends is dependent upon the Bank's ability to provide funds to the Company
through the payment of dividends. Pursuant to the Financial Institutions Code of
Georgia (the "Georgia Code"), the Bank may pay dividends only when and if the
Bank is not insolvent or when the payment of such

8
<PAGE> 13

dividends would not render the Bank insolvent or when the declaration or payment
would not be contrary to any restrictions contained in the Bank's Articles of
Incorporation. In addition, dividends may not be declared or paid by the Bank at
any time when it does not have paid-in capital and appropriated retained
earnings which, in combination, equal at least 20% of the Bank's capital stock.
Moreover, dividends may not be paid by the Bank without the prior approval of
the Georgia Banking Department, if the dividends are in excess of specified
amounts. Therefore, future dividend policy will depend on the Bank's earnings,
capital requirements, financial condition and other factors considered relevant
by the Board of Directors of the Company. See "Dividend Policy."

ANTI-TAKEOVER PROVISIONS

The Company's Articles of Incorporation (the "Articles") contain provisions
requiring supermajority shareholder approval to effect certain extraordinary
corporate transactions which are not approved by the Company's Board of
Directors. These provisions make it more difficult to effect a merger, sale of
control or other similar transaction involving the Company even though a
majority of the Company's shareholders may vote in favor of such a transaction.
In addition, the Articles authorize the issuance of up to 1,000,000 shares of
preferred stock, the relative rights and preferences of which may be designated
by the Company's Board of Directors without shareholder approval. These
provisions make it more difficult to effect a change in control of the Company
through the acquisition of a large block of the Common Stock or otherwise. See
"Description of Capital Stock."

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this Offering, 1,375,380 shares of Common Stock will be
outstanding (excluding options to purchase 40,250 shares of Common Stock and up
to 111,000 shares issuable upon the exercise of the Underwriters' overallotment
option). All of these shares will be freely tradable without restriction under
the Securities Act, except for any such shares which may be acquired by an
"affiliate" of the Company as that term is defined in Rule 144 under the
Securities Act (an "Affiliate").

The Company, its directors and executive officers, who, upon completion of
this Offering, will beneficially own in the aggregate 298,082 shares of Common
Stock, have each agreed not to offer, sell or contract to sell, or otherwise
dispose of, directly or indirectly, or announce an offering of, any shares of
Common Stock or any securities convertible into, or exchangeable for, shares of
Common Stock for a period of 180 days from the date of this Prospectus, without
the prior written consent of IJL, except under limited circumstances. See
"Underwriting."

Promptly after completion of this Offering, the Company intends to file a
Registration Statement on Form S-8 with the SEC to register 100,000 shares of
Common Stock reserved for issuance or sale under the Company's 1997 Stock Option
Plan.

No prediction can be made as to the effect, if any, that future sales of
shares, or the availability of shares for future sale, will have on the market
price of the Common Stock prevailing from time to time. Sales of substantial
amounts of Common Stock (including shares issued upon the exercise of
outstanding stock options), or the perception that such sales could occur, could
adversely affect the prevailing market prices of the Common Stock. See "Shares
Eligible for Future Sale."

9
<PAGE> 14

USE OF PROCEEDS

The net proceeds to be received by the Company from this Offering will be
approximately $9.2 million ($10.6 million if the Underwriters' over-allotment
option is exercised in full), before the deduction of offering expenses payable
by the Company estimated at $300,000.

Approximately $7.0 million of the net proceeds of this Offering will be
contributed to the capital of the Bank and used to support internal growth
related to expanding the Company's presence in the Augusta Market. The Company
currently has no specific plan for the remaining estimated net proceeds. The
Company is raising such monies for general corporate purposes, including working
capital and possible acquisitions. The Company does not presently have any
agreements, arrangements or understandings regarding any material acquisition.

Pending such uses, the Company expects that the net proceeds of this
Offering will be invested by the Company in a variety of short and
intermediate-term interest-bearing assets, such as obligations of the United
States government and its agencies, and other permitted investments.

DIVIDEND POLICY

Prior to being reorganized into a holding company structure in 1997, the
Bank paid a cash dividend of $.10 per share on its common stock in April 1996,
January 1997 and April 1997. Subsequent to the Bank's reorganization into a
holding company structure, the Company paid a cash dividend of $.10 per share in
April 1998.

Future dividends will be determined by the Board of Directors of the
Company in light of circumstances existing from time to time, including the
Company's growth, financial condition and results of operations, the continued
existence of the restrictions described below on the Bank's ability to pay
dividends and other factors that the Board of Directors of the Company considers
relevant. In addition, the Board of Directors of the Company may determine, from
time to time, that it is prudent to pay special nonrecurring cash dividends in
addition to or in lieu of regular cash dividends. Such special dividends will
depend upon the financial performance of the Company and will take into account
its capital position. No special dividend is presently contemplated.

Because the Company's principal operations are conducted through the Bank,
the Company generates cash to pay dividends primarily through dividends paid to
it by the Bank. Accordingly, any dividends paid by the Company will depend on
the Bank's earnings, capital requirements, financial condition and other factors
considered relevant by the Company's Board of Directors. Pursuant to the Georgia
Code, the Bank may pay dividends only when and if the Bank is not insolvent. In
addition, dividends may not be declared or paid at any time when the Bank does
not have combined paid-in capital and appropriated retained earnings equal to at
least 20% of the Bank's capital stock. Moreover, dividends may not be paid by
the Bank without the prior approval of the Georgia Banking Department, if the
dividends are in excess of specified amounts fixed by the Georgia Banking
Department.

10
<PAGE> 15

SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth selected consolidated financial data
concerning the Company and is qualified in its entirety by the detailed
information and consolidated financial statements, including notes thereto,
included elsewhere in this Prospectus. The selected data presented below for and
as of the end of each of the years in the three-year period ended December 31,
1997, are derived from the consolidated financial statements of the Company, all
of which have been audited by Cherry, Bekaert & Holland, L.L.P., independent
auditors. The financial statements as of and for the years ended December 31,
1997 and 1996 are included elsewhere in this Prospectus. The selected financial
data presented below for the six months ended June 30, 1998 and 1997 are derived
from the unaudited financial statements of the Company. In the opinion of
management, such unaudited financial statements have been prepared on the same
basis as the audited financial statements referred to above and include all
adjustments, consisting of normal recurring accruals, necessary for a fair
presentation of the financial position of the Company and results of operations
for the indicated periods.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
----------------- ---------------------------
1998 1997 1997 1996 1995
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AND RATIO DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income............................................. $ 1,639 $ 1,452 $ 2,963 $ 3,053 $ 3,194
Interest expense............................................ 679 590 1,213 1,385 1,411
Net interest income......................................... 960 862 1,750 1,668 1,783
Provision for loan losses................................... -- 12 16 56 240
Net interest income after provision......................... 960 850 1,734 1,612 1,543
Noninterest income.......................................... 128 131 257 292 261
Noninterest expense......................................... 962 730 1,619 1,447 1,577
Income before income taxes.................................. 126 251 372 457 227
Income tax expense.......................................... 28 80 138 132 73
Net income.................................................. 98 171 234 325 154
PER COMMON SHARE DATA:
Net income, basic........................................... $ 0.15 $ 0.27 $ 0.37 $ 0.51 $ 0.24
Net income, diluted(1)...................................... 0.15 0.26 0.35 0.50 0.24
Cash dividends.............................................. 0.10 0.20 0.20 0.10 0.10
Book value (at period end).................................. 11.56 11.27 11.45 11.22 10.92
Tangible book value (at period end)......................... 11.56 11.27 11.45 11.22 10.92
BALANCE SHEET DATA (AT PERIOD END):
Assets...................................................... $43,989 $37,691 $40,571 $38,026 $42,450
Loans(2).................................................... 21,456 19,759 19,732 21,008 21,105
Allowance for loan losses................................... 824 881 752 889 1,155
Deposits.................................................... 36,217 30,269 32,937 30,655 35,320
Shareholders' equity........................................ 7,346 7,161 7,278 7,132 6,937
PERFORMANCE RATIOS:
Return on average assets(3)................................. 0.46% 0.91% 0.58% 0.83% 0.37%
Return on average equity(3)................................. 2.67 4.78 3.22 4.68 2.24
Net interest margin (taxable equivalent).................... 4.94 4.94 5.02 4.65 4.80
Dividend payout............................................. 65.31 74.27 54.27 19.69 40.91
Efficiency(4)............................................... 88.42 73.52 80.67 73.82 77.15
ASSET QUALITY RATIOS:
Allowance for loan losses to period end loans............... 3.84% 4.46% 3.81% 4.23% 5.47%
Net charge-offs to average loans............................ (0.35) 0.10 0.75 1.52 2.06
Non-performing assets to period end loans and foreclosed
property(5)............................................... 0.13 0.11 0.22 0.71 1.07
CAPITAL AND LIQUIDITY RATIOS (AT PERIOD END):
Average equity to average assets............................ 17.29% 18.88% 18.54% 17.87% 17.22%
Leverage.................................................... 16.70 17.20 18.90 17.10 17.10
Tier 1 risk-based........................................... 27.50 30.60 30.00 30.80 28.20
Total risk-based............................................ 28.80 31.40 31.30 32.10 29.50
Average loans to average deposits........................... 59.56 66.92 65.40 68.80 70.84
Average loans to average deposits and borrowings............ 59.56 66.92 65.33 68.78 70.84
</TABLE>

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

(1) Assumes the exercise of outstanding options to acquire Common Stock. See
Note 8 to the Company's consolidated financial statements.
(2) Loans exclusive of unearned income, before allowance for losses.
(3) Annualized for six month periods.
(4) Computed by dividing noninterest expense by the sum of taxable equivalent
net interest income and noninterest income.
(5) Non-performing loans and non-performing assets include loans past due 90
days or more that are still accruing interest.

11
<PAGE> 16

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

The following discussion provides information about the major components of
the results of operations and financial condition, liquidity and capital
resources of the Company and should be read in conjunction with the Company's
consolidated financial statements and notes thereto.

SUMMARY

The Company was incorporated under the laws of the State of Georgia in
January 1997 for the purpose of acquiring and holding all of the Bank's
outstanding capital stock. The Company's principal business activities have been
conducted solely through the Bank since June 1997, when the Bank became a
subsidiary of the Company. The Company's principal business has historically
consisted of attracting deposits from the general public and making consumer and
commercial loans secured by various types of collateral. The primary goals of
management are to increase the Company's profitability, monitor its capital
position, and enhance its banking franchise. The Company's results of operations
are dependent upon net interest income, which is the difference between income
earned on interest-earning assets, such as loans and investments, and the cost
of its interest-bearing liabilities consisting primarily of deposits. Operations
are affected to a much lesser degree by the Company's noninterest income, such
as transaction and other service fee income, and other sources of income. Net
income also is affected by, among other things, the Company's provision for loan
losses and operating expenses. The Company's principal operating expenses, aside
from interest expense, consist of compensation and employee benefits, office
occupancy costs, data processing expenses, and federal deposit insurance
premiums. The Company's results of operations also are significantly affected by
general economic and competitive conditions, particularly changes in market
interest rates, government legislation, policies concerning monetary and fiscal
affairs and the attendant actions of regulatory authorities.

The Company currently operates two branch offices in Thomson, Georgia under
the name "McDuffie Bank & Trust." The Company has immediate plans to expand its
presence in the Augusta Market by opening branch offices in Augusta and in
Martinez, Georgia, a community adjacent to Augusta. Construction has begun on
the Augusta office, which is expected to open during the fourth quarter of 1998.
The Company expects to open its Martinez office in early 1999. The Company
expects to incur substantial start-up expenses in connection with opening branch
offices, including costs for construction, personnel, furnishings, equipment and
advertising. Management anticipates that each branch office is likely to incur
operating losses during its first year of operations, and possibly for a longer
period. As a result of the recent consolidation in the banking industry in the
Augusta Market and the opportunities that management believes this consolidation
offers the Company, management believes the investment in new branch offices
should, over time, result in profitable contributions by these offices to the
Company's consolidated results of operations. See "Use of Proceeds."

RESULTS OF OPERATIONS

Comparison of Six Months Ended June 30, 1998 and 1997. Net interest income
increased to $960,000 for the six months ended June 30, 1998 from $862,000 for
the six months ended June 30, 1997, an increase of $98,000, or 11.4%. This
increase in net interest income is attributed to the growth in average earning
assets and an increase in the average yield on earning assets. "See -- Net
Interest Income."

Noninterest income for the six months ended June 30, 1998 was $128,000, a
decrease of $3,000, or 2.3%, from $131,000 for the six months ended June 30,
1997. Deposit service charges and other income remained relatively constant from
the 1997 period to 1998 as a result of a consistent deposit base.

Noninterest expense was $962,000 for the six months ended June 30, 1998, an
increase of $232,000, or 31.8%, from $730,000 for the six months ended June 30,
1997. Personnel costs were $514,000 for the six months ended June 30, 1998, an
increase of $125,000, or 32.1%, from $389,000 for the six months ended June 30,
1997. Of the increase in personnel costs, $45,000 resulted from the addition of
a senior lending officer during 1997 and $70,000 resulted from the addition of
an executive officer in October 1997 to support the Company's planned expansion
in the Augusta Market. Occupancy expenses were $94,000 for the six months ended
June 30, 1998, an increase of $15,000, or 18.9%, from $79,000 for the six months
ended June 30, 1997.

12
<PAGE> 17

The increase resulted from equipment costs associated with Year 2000 compliance
and the Company's planned expansion in the Augusta Market. Other noninterest
expenses were $354,000 for the six months ended June 30, 1998, an increase of
$92,000, or 35.2%, from $262,000 for the six months ended June 30, 1997. This
increase included an increase in data processing costs of approximately $12,000
related to the implementation of an image processing system, an increase in
directors' fees of approximately $11,000 related to the expansion of the Board
of Directors, an increase of approximately $6,000 for costs of maintaining other
real estate owned and approximately $40,000 related to the Company's planned
expansion in the Augusta Market. In addition, the Company provided for a
non-recurring $18,000 valuation adjustment of other real estate owned during the
six months ended June 30, 1998.

The provision for income taxes for the six months ended June 30, 1998 was
$28,000 compared to $80,000 for the six months ended June 30, 1997. The decrease
resulted from a decrease in income before income taxes and deferred tax benefits
arising from the Company's improved loan loss experience.

The Company's net income for the six months ended June 30, 1997 was
$98,000, a decline of $73,000, or 42.7%, from net income of $171,000 for the six
months ended June 30, 1997. Basic earnings per share was $.15 for the six months
ended June 30, 1998 and $.27 for the six months ended June 30, 1997. The
decrease in net income is attributed to an increase in noninterest expense that
was partially offset by an increase in net interest income.

Comparison of Years Ended December 31, 1997 and 1996. Net interest income
increased to $1.8 million for the year ended December 31, 1997 from $1.7 million
for the year ended December 31, 1996, an increase of 4.9%. This increase in net
interest income resulted primarily from a stable yield on earning assets from
1996 to 1997 and a decrease in the average cost of interest-bearing funds during
this period. See "-- Net Interest Income."

Noninterest income for the year ended December 31, 1997 was $257,000, a
decline of $35,000, or 11.9%, from the balance of $292,000 for the year ended
December 31, 1996. The decrease is primarily attributed to a decline of $28,000
in deposit non-sufficient-funds service charges arising from the introduction of
an overdraft protection loan product by the Company. This decrease in fees was
partially offset by an increase in interest income as a result of activating the
overdraft lines of credit.

Noninterest expense was $1.6 million for the year ended December 31, 1997,
an increase of $172,000, or 11.8%, from $1.4 million for the year ended December
31, 1996. Personnel costs for the year ended December 31, 1997 were $831,000, an
increase of $117,000, or 16.5%, from $714,000 for the year ended December 31,
1996. Approximately $73,000 of this personnel cost increase resulted from the
addition of a new senior lending officer in April of 1997 and approximately
$35,000 resulted from the addition of an executive officer in October 1997 to
support the Company's planned expansion in the Augusta Market. Also contributing
to the personnel expense increase were salary increases for existing staff and
increased costs associated with benefits programs. Occupancy expenses for the
year ended December 31, 1997 were $167,000, representing a decline of $64,000
from $231,000 for the year ended December 31, 1996. The decline resulted
primarily from decreased depreciation estimates and maintenance costs. Other
noninterest expenses increased $119,000, or 23.7%, from $502,000 for the year
ended December 31, 1996 to $621,000 for the year ended December 31, 1997. This
included an increase in legal costs of approximately $39,000 related to a
special shareholders' meeting and the drafting and negotiation of various
agreements in connection with the Company's planned expansion in the Augusta
Market. Also included was an increase in advertising costs of approximately
$11,000, an increase in professional fees of approximately $12,000 primarily
related to the preparation of public company reporting documents and
approximately $50,000 of legal and professional fees associated with the
Company's formation. The Company has elected to fully expense the $50,000 of
legal and professional fees in the year incurred.

The provision for income taxes for the year ended December 31, 1997 was
$138,000 compared to $132,000 for the year ended December 31, 1996. While income
before income tax declined from $457,000 for the year ended December 31, 1996 to
$372,000 for the year ended December 31, 1997, the income tax provision
increased due to deferred tax expenses related to the utilization of net
operating loss carryforwards

13
<PAGE> 18

during 1997. At December 31, 1997, the Company did not have any further net
operating loss carryforwards available to offset future taxable income.

Net income for the year ended December 31, 1997 was $234,000, a decline of
$91,000, or 28.0%, from net income of $325,000 for the year ended December 31,
1996. Basic earnings per share was $.37 for the year ended December 31, 1997
compared to $.51 for the year ended December 31, 1996. The decrease in net
income is primarily attributed to an increase in noninterest expense that was
partially offset by an increase in net interest income.

NET INTEREST INCOME

The following table sets forth, for the periods indicated, certain
information related to the Company's average balance sheet, its yield on average
earning assets and its average rates on interest-bearing liabilities. Such
yields and rates are derived by dividing income or expense by the average
balance of the corresponding assets or liabilities.

AVERAGE BALANCE SHEET AND NET INTEREST INCOME ANALYSIS
FULLY TAXABLE EQUIVALENT BASIS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,(1)
-----------------------------------------------------------
1998 1997
---------------------------- ----------------------------
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
------- -------- ------- ------- -------- -------
(IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Loans, net.................. $20,590 $1,113 10.81% $20,382 $1,019 10.00%
Taxable investment
securities................. 13,766 403 5.86 11,570 343 5.93
Tax-exempt investment
securities................. 1,012 31 6.13 1,282 46 7.28
Federal funds sold.......... 3,380 88 5.21 1,400 39 5.57
Interest-bearing deposits in
bank....................... 150 4 5.33 220 5 4.55
------- ------ ------- ------
Total earning
assets.............. 38,898 1,639 8.43 34,854 1,452 8.33
NON-EARNING ASSETS:
Cash and due from banks..... 1,320 1,212
Premises and equipment...... 1,742 1,449
Other assets................ 1,108 1,229
Less: Allowance for loan
losses..................... (788) (885)
------- -------
Total assets......... $42,280 $37,859
======= =======
INTEREST BEARING
LIABILITIES:
Savings and time deposits... $30,518 $ 679 4.45% $27,081 $ 588 4.34%
Federal funds purchased..... -- -- -- -- 2 --
------- ------ ------- ------
Total interest
bearing
liabilities......... 30,518 679 4.45 27,081 590 4.34
OTHER LIABILITIES AND
SHAREHOLDERS' EQUITY:
Demand deposits............. 4,059 3,381
Other liabilities........... 391 250
Shareholders' equity........ 7,312 7,147
------- -------
Total liabilities and
shareholders'
equity.............. $42,280 $37,859
======= =======
Net interest income and net
yield on earning assets.... $ 960 4.94% $ 862 4.94%
====== ===== ====== =====
Interest rate spread........ 3.98% 3.99%
===== =====

<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1997 1996
---------------------------- ----------------------------
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
------- -------- ------- ------- -------- -------
(IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Loans, net.................. $19,729 $2,034 10.31% $21,841 $2,178 9.97%
Taxable investment
securities................. 10,900 670 6.15 10,845 677 6.24
Tax-exempt investment
securities................. 1,147 88 7.67 1,243 95 7.64
Federal funds sold.......... 2,824 160 5.67 1,611 87 5.40
Interest-bearing deposits in
bank....................... 243 11 4.53 363 16 4.41
------- ------ ------- ------
Total earning
assets.............. 34,843 2,963 8.50 35,903 3,053 8.50
NON-EARNING ASSETS:
Cash and due from banks..... 984 1,696
Premises and equipment...... 1,459 1,501
Other assets................ 1,207 1,023
Less: Allowance for loan
losses..................... (907) (1,165)
------- -------
Total assets......... $37,586 $38,958
======= =======
INTEREST BEARING
LIABILITIES:
Savings and time deposits... $26,806 $1,211 4.51% $28,905 $1,384 4.79%
Federal funds purchased..... 32 2 -- 9 1 --
------- ------ ------- ------
Total interest
bearing
liabilities......... 26,838 1,213 4.51 28,914 1,385 4.79
OTHER LIABILITIES AND
SHAREHOLDERS' EQUITY:
Demand deposits............. 3,361 2,840
Other liabilities........... 420 243
Shareholders' equity........ 6,967 6,961
------- -------
Total liabilities and
shareholders'
equity.............. $37,586 $38,958
======= =======
Net interest income and net
yield on earning assets.... $1,750 5.02% $1,668 4.65%
====== ===== ====== ====
Interest rate spread........ 3.99% 3.71%
===== ====
</TABLE>

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

(1) Average yields for six month periods have been annualized.

The net yield on earning assets remained constant at 4.94% on average
earning assets of $38.9 million for the six months ended June 30, 1998 compared
to average earning assets of $34.9 million for the six months ended June 30,
1997. The Company has maintained a stable interest rate spread and an increase
in the average

14
<PAGE> 19

yield on earning assets to offset increases in the cost of funds. The average
yield on earning assets increased 10 basis points to 8.43% from 8.33% primarily
due to an increase in the yield on loans. The increase in the cost of
interest-bearing liabilities is attributable to an increase in rates on time
deposits and savings accounts. The interest rate spread decreased one basis
point to 3.98% for the six months ended June 30, 1998 from 3.99% for the six
months ended June 30, 1997.

The net yield on earning assets increased 37 basis points to 5.02% on
average earning assets of $34.8 million for the year ended December 31, 1997
from 4.65% on average earning assets of $35.9 million for the year ended
December 31, 1996. The average yield on earning assets was 8.50% for the years
ended December 31, 1997 and 1996. The average yield on the loan portfolio
increased 34 basis points to 10.31% for the year ended December 31, 1997 from
9.97% for the year ended December 31, 1996. During 1997 the loan portfolio
composition included $2.2 million more in real estate loans over 1996, including
construction loans, which generally provide a greater yield than most other
types of loans, contributing to the increased average yield on loans. The
decrease in the cost of interest-bearing liabilities resulted from changes in
rates and volumes of the liability accounts. The interest rate spread for the
year ended December 31, 1997 was 3.99%, an increase of 28 basis points from
3.71% for the year ended December 31, 1996. This increase resulted from a
combination of the stable yield on earning assets and the declining volume and
rate of interest-bearing liabilities.

Apart from the changes in the average yields on loans for the six month and
annual periods, changes in the average yields on the other earning assets had a
minimal impact on interest income. The prime rate remained constant at 8.25%
throughout 1996. In 1997, the rate increased 25 basis points to 8.50% in March
and remained at that level throughout 1997, and through June 30, 1998.
Approximately 21.4% of the Company's loan portfolio floats with variable rate
indices such as the prime rate. When interest rates rise, interest income on
this segment of the portfolio increases. Conversely, interest income from this
segment of the portfolio declines if interest rates fall and these loans reprice
at lower rates.

The table below presents the increase (decrease) in interest income and
interest expense attributable to volume and rate changes between the years ended
December 31, 1997 and 1996, and for the years ended December 31, 1996 and 1995.
In addition, the table presents changes for the six month periods ended June 30,
1998 and 1997, and June 30, 1997 and 1996.

VOLUME AND RATE VARIANCE ANALYSIS

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
---------------------------------------------------------------
1998 1997
------------------------------ ------------------------------
VOLUME RATE TOTAL VOLUME RATE TOTAL
VARIANCE VARIANCE VARIANCE VARIANCE VARIANCE VARIANCE
-------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME:
Loans, net........................ $(5) $ 99 $ 94 $(116) $ 59 $ (57)
Taxable investment securities..... 79 (19) 60 30 (9) 21
Tax-exempt investment
securities....................... (6) (9) (15) 4 (5) (1)
Other earning assets.............. -- (1) (1) -- (3) (3)
Federal funds sold and securities
purchased under agreement to
resell........................... 6 43 49 (24) 6 (18)
--- ----- ----- ----- ---- -----
Total interest income............ 74 113 187 (106) 48 (58)
--- ----- ----- ----- ---- -----
INTEREST EXPENSE:
Savings and time deposits......... 81 10 91 (45) (63) (108)
Federal funds purchased, borrowed
funds and securities sold under
agreements to repurchase......... (2) -- (2) 2 -- 2
--- ----- ----- ----- ---- -----
Total interest expense........... 79 10 89 (43) (63) (106)
--- ----- ----- ----- ---- -----
Increase (decrease) in net
interest income.................. $(5) $ 103 $ 98 $ (63) $111 $ 48
=== ===== ===== ===== ==== =====

<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
1997 1996
------------------------------ ------------------------------
VOLUME RATE TOTAL VOLUME RATE TOTAL
VARIANCE VARIANCE VARIANCE VARIANCE VARIANCE VARIANCE
-------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME:
Loans, net........................ $(195) $ 51 $(144) $(143) $ (30) $(173)
Taxable investment securities..... 7 (14) (7) (7) 54 47
Tax-exempt investment
securities....................... 8 (15) (7) 57 (4) 53
Other earning assets.............. (1) (4) (5) (1) (9) (10)
Federal funds sold and securities
purchased under agreement to
resell........................... (18) 91 73 (40) (18) (58)
----- ----- ----- ----- ----- -----
Total interest income............ (199) 109 (90) (134) (7) (141)
----- ----- ----- ----- ----- -----
INTEREST EXPENSE:
Savings and time deposits......... (130) (43) (173) (19) (5) (24)
Federal funds purchased, borrowed
funds and securities sold under
agreements to repurchase......... 3 (2) 1 (3) (1) (4)
----- ----- ----- ----- ----- -----
Total interest expense........... (127) (45) (172) (22) (6) (28)
----- ----- ----- ----- ----- -----
Increase (decrease) in net
interest income.................. $ (72) $ 154 $ 82 $(112) $ (1) $(113)
===== ===== ===== ===== ===== =====
</TABLE>

15
<PAGE> 20

FINANCIAL CONDITION

General. At June 30, 1998, the Company's consolidated assets were $43.9
million, an increase of $6.2 million, or 16.4%, from $37.7 million at June 30,
1997. Management believes the asset increase was directly related to new
customers gained from a competing local community bank that was acquired by a
regional bank holding company in 1997. For the six months ended June 30, 1998,
loans represented 52.9%, investment securities comprised 37.9%, Federal funds
sold comprised 8.2% and interest-bearing deposits in banks comprised 1.0% of
average earning assets. The Company's total loans outstanding were $21.5 million
at June 30, 1998, an increase of $1.8 million, or 9.1%, from the June 30, 1997
balance of $19.7 million.

At December 31, 1997, the Company's consolidated assets were $40.6 million,
an increase of $2.6 million, or 6.8%, from $38.0 million at December 31, 1996.
The additional funds were invested by the Company in investment securities and
Federal funds. For the year ended December 31, 1997, loans represented 56.6%,
investment securities comprised 34.6%, Federal funds sold comprised 8.0% and
interest-bearing deposits in banks comprised 1.0% of average earning assets.

The table below provides an analysis of the loan portfolio by major type as
of June 30, 1998 and 1997 and December 31, 1997 and 1996.

LOAN PORTFOLIO COMPOSITION

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
--------------------------------- ---------------------------------
1998 1997 1997 1996
--------------- --------------- --------------- ---------------
(IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REAL ESTATE:
Commercial.................. $ 4,596 21.4% $ 4,166 21.2% $ 4,549 23.1% $ 3,974 18.9%
Residential................. 5,152 24.0 5,723 29.0 4,588 23.3 6,943 33.0
Construction and
development............... 5,346 24.9 2,838 14.3 4,893 24.8 2,547 12.1
------- ----- ------- ----- ------- ----- ------- -----
Total real estate...... 15,094 70.3 12,727 64.5 14,030 71.2 13,464 64.0
------- ----- ------- ----- ------- ----- ------- -----
COMMERCIAL, FINANCIAL AND
AGRICULTURAL.............. 3,600 16.8 4,274 21.4 3,059 15.5 4,794 22.8
------- ----- ------- ----- ------- ----- ------- -----
CONSUMER:
Direct...................... 2,617 12.2 2,614 13.3 2,495 12.6 2,585 12.3
Revolving................... 145 0.7 144 0.8 148 0.7 165 0.9
------- ----- ------- ----- ------- ----- ------- -----
Total consumer......... 2,762 12.9 2,758 14.1 2,643 13.3 2,750 13.2
------- ----- ------- ----- ------- ----- ------- -----
Total............. $21,456 100.0% $19,759 100.0% $19,732 100.0% $21,008 100.0%
======= ===== ======= ===== ======= ===== ======= =====
</TABLE>

For additional information regarding the composition of the loan portfolio
and descriptions of loan types, see "Business -- Lending Activities."

Real estate loans include loans secured by real estate for a variety of
purposes including commercial properties, income producing properties,
owner-occupied residential and construction and development. Loans secured by
real estate equaled $15.1 million, or 70.3%, of the loan portfolio at June 30,
1998 compared to $12.7 million, or 64.5%, of the portfolio at June 30, 1997. At
December 31, 1997, loans secured by real estate were $14.0 million, or 71.2%, of
the portfolio compared to $13.5 million, or 64.0%, at December 31, 1996. The
Company has experienced significant loan growth in the area of construction and
development lending. This growth has, in part, resulted from the Company's
lending activities in the suburban Atlanta, Georgia area. See
"Business -- Lending Activities."

Commercial, financial and agricultural loans include loans to individual,
partnership or corporate borrowers which are obtained for a variety of business
purposes. Commercial, financial and agricultural loans equaled $3.6 million, or
16.8%, of the portfolio at June 30, 1998 compared to $4.3 million, or 21.4%, of
the portfolio at June 30, 1997. At December 31, 1997, these loans were $3.1
million, or 15.5%, of the portfolio compared to $4.8 million, or 22.8%, of the
portfolio at December 31, 1996.

16
<PAGE> 21

Consumer loans consist primarily of residential first and second mortgage
loans, home equity loans, installment loans, including automobile loans and
pre-approved lines of credit. At June 30, 1998 and June 30, 1997, consumer loans
were $2.8 million representing 12.9% and 14.1% of the portfolio, respectively.
At December 31, 1997, consumer loans were $2.6 million, or 13.3%, of the
portfolio compared to $2.8 million, or 13.2%, at December 31, 1996.

The repayment of loans in the portfolio as they mature is a source of
liquidity for the Company. The following table sets forth the maturity of the
Company's portfolio within specific intervals as of June 30, 1998:

<TABLE>
<CAPTION>
JUNE 30, 1998
------------------------------------------------------------------------------
RATE STRUCTURE FOR LOANS
MATURITY MATURING OVER ONE YEAR
------------------------------------------- --------------------------------
OVER
ONE ONE FLOATING
YEAR YEAR TO OVER PREDETERMINED OR
OR FIVE FIVE INTEREST ADJUSTABLE
LESS YEARS YEARS TOTAL RATE RATE
-------- ---------- --------- ------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial and
agricultural............ $ 2,345 $1,255 $-- $ 3,600 $1,256 $ --
Real
estate -- construction... 3,826 1,510 10 5,346 1,520 --
Real estate -- mortgage... 4,810 4,925 13 9,748 4,938 --
Consumer.................. 1,623 1,139 -- 2,762 1,139 --
------- ------ --- ------- ------ -------
$12,604 $8,829 $23 $21,456 $8,853 $ --
======= ====== === ======= ====== =======
</TABLE>

Asset Quality. Management considers the Company's asset quality to be of
primary importance. The allowance for loan losses, which is utilized to absorb
actual charge-offs in the loan portfolio, is maintained at a level sufficient to
provide for estimated potential charge-offs of non-collectible loans. The loan
portfolio is analyzed periodically in an effort to identify potential problems
before they actually occur. The Company's allowance for loan losses is also
analyzed monthly by management. This analysis includes a methodology that
segments the loan portfolio by selected loan types and considers the current
status of the portfolio, historical charge-off experience, current levels of
delinquent, impaired and non-performing loans, as well as economic and inherent
risk factors. In addition, the Company engages a third party consultant to
review its loan portfolio semi-annually. The provision for loan losses
represents a charge against income in an amount necessary to maintain the
allowance at an appropriate level. The monthly provision for loan losses may
fluctuate based on the results of this analysis. The following table sets forth
the allowance for loan losses at June 30, 1998 and 1997 and December 31, 1997
and 1996. The allocation is based on management's grading of the loan portfolio
with the remaining portion allocated to the general category, although the
entire allowance is available to be used for charge-offs in any loan category.

ALLOCATION OF ALLOWANCE FOR LOAN LOSSES

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
--------------------------------- ---------------------------------
1998 1997 1997 1996
--------------- --------------- --------------- ---------------
% OF % OF % OF % OF
LOANS IN LOANS IN LOANS IN LOANS IN
$ CATEGORY $ CATEGORY $ CATEGORY $ CATEGORY
---- -------- ---- -------- ---- -------- ---- --------
(IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at end of period applicable
to:
Commercial......................... $ 80 38.2% $ 80 42.6% $ 6 38.6% $ 66 41.7%
Real estate -- construction........ -- 24.9 -- 14.3 -- 24.8 66 12.1
Real estate -- mortgage............ 265 24.0 334 29.0 323 23.3 365 33.0
Consumer........................... 36 12.9 55 14.1 105 13.3 57 13.2
General............................ 443 -- 412 -- 318 -- 325 --
---- ----- ---- ----- ---- ----- ---- -----
Total allocation......... $824 100.0% $881 100.0% $752 100.0% $889 100.0%
==== ===== ==== ===== ==== ===== ==== =====
</TABLE>

17
<PAGE> 22

The Company did not provide a provision for loan losses for the six months
ended June 30, 1998. For the six months ended June 30, 1997, the Company
provided a loss provision of $12,000. For the year ended December 31, 1997, the
Company provided a provision of $16,000, representing a 71.4% decrease from the
provision of $56,000 for the year ended December 31, 1996. The Company is
continuing to decrease the amount of the provision in recognition of
improvements made in the Company's level of non-performing assets and loan
charge-offs. The Company experienced a net recovery of $72,000 for the six
months ended June 30, 1998, compared with a net charge-off of $20,000 for the
six months ended June 30, 1997. Net charge-offs were $153,000 for the year ended
December 31, 1997, or 0.8%, of average loans outstanding, compared with
$322,000, or 1.5%, of average loans outstanding, for the year ended December 31,
1996. The following table contains an analysis of the allowance for loan losses
including the amount of charge-offs and recoveries by loan type, for the six
months ended June 30, 1998 and 1997 and for the years ended December 31, 1997
and 1996.

SUMMARY OF ALLOWANCES

<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ -------------
1998 1997 1997 1996
---- ---- ---- ------
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C>
Balance, beginning of period................................ $752 $889 $889 $1,155
CHARGE-OFFS:
Commercial, financial and agricultural (primarily single
payment).................................................. -- 22 91 143
Consumer (primarily installment)............................ 18 35 141 381
Credit cards................................................ -- 1 10 29
---- ---- ---- ------
18 58 242 553
RECOVERIES:
Commercial.................................................. 14 4 8 11
Consumer (primarily installment)............................ 75 33 80 212
Credit cards................................................ 1 1 1 8
---- ---- ---- ------
90 38 89 231
Net charge-offs (recovery).................................. (72) 20 153 322
---- ---- ---- ------
Provision charged to operations............................. -- 12 16 56
---- ---- ---- ------
Balance, end of period...................................... $824 $881 $752 $ 889
==== ==== ==== ======
Ratio of net charge-offs to average loans................... (0.3)% 0.1% 0.8% 1.5%
==== ==== ==== ======
Ratio of allowance to period-end loans...................... 3.8% 4.5% 3.8% 4.2%
==== ==== ==== ======
</TABLE>

Non-performing assets include non-accrual loans, accruing loans
contractually past due 90 days or more, restructured loans, other real estate,
and other real estate under contract for sale. Loans are placed on non-accrual
when management has concerns relating to the ability to collect the loan
principal and interest, and when such loans are 90 days or more past due.
Although non-performing assets represent potential losses to the Company,
management does not anticipate any aggregate material losses since most loans
are believed to be adequately secured. Management believes the allowance for
loan losses is sufficient to absorb known risks in the portfolio. No assurance
can be given that economic conditions will not adversely affect borrowers and
result in increased losses.

18
<PAGE> 23

The following table summarizes non-performing assets by type at June 30,
1998 and 1997 and December 1977 and 1996. Other than the amounts listed, there
were no other loans that (i) represent or result from trends or uncertainties
which management reasonably expects will materially impact future operating
results, liquidity or capital resources or (ii) represent material credits about
which management has information that causes them to have serious doubts as to
the ability of such borrowers to comply with the loan repayment terms.

SCHEDULE OF NON-PERFORMING ASSETS

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
----------- -------------
1998 1997 1997 1996
---- ---- ----- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Non-accrual................................................. $ 28 $ 22 $ 43 $143
Past due 90 days or more and still accruing interest........ -- -- -- 7
Other real estate........................................... 253 451 306 516
</TABLE>

Investment Portfolio. Total investment securities were $15.8 million at
June 30, 1998, an increase of $3.9 million, or 32.8%, from $11.9 million at June
30, 1997. At December 31, 1997, total investment securities were $13.8 million,
an increase of $1.2 million, or 9.3%, from $12.6 million at December 31, 1996.
As a percentage of total assets, investment securities were 35.9% and 31.5% at
June 30, 1998 and 1997, respectively, and were 34.0% and 33.1% at December 31,
1997 and 1996, respectively.

The Company invests primarily in direct obligations of the United States,
obligations guaranteed as to principal and interest by the United States and
obligations of agencies of the United States. In addition, the Company enters
into Federal funds transactions with principal correspondent banks.

The Company's entire securities portfolio has been categorized as
Available-For-Sale. While the Company has no plans to liquidate a significant
amount of any securities, the Company's securities may be used for liquidity
purposes when management deems it to be in the best interests of the Company.
Due to declines in interest rates, and in order to maintain liquidity, the
majority of the securities purchased has been relatively short-term in maturity.
United States government agency securities continue to represent a majority of
the portfolio.

19
<PAGE> 24

The following tables present the amortized cost, market value and weighted
average yield for investment securities at June 30, 1998 and 1997, and December
31, 1997 and 1996, and presents the scheduled maturities and yields of the
securities at June 30, 1998.

INVESTMENT SECURITIES
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
--------------------------------------------------------------- ------------------------------------------
1998 1997 1997 1996
------------------------------ ------------------------------ ------------------------------ ---------
WEIGHTED WEIGHTED WEIGHTED
AMORTIZED MARKET AVERAGE AMORTIZED MARKET AVERAGE AMORTIZED MARKET AVERAGE AMORTIZED
COST VALUE YIELD COST VALUE YIELD COST VALUE YIELD COST
--------- ------- -------- --------- ------- -------- --------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury........ $ 248 $ 250 6.6% $ 245 $ 247 6.7% $ 247 $ 249 6.7% $ 244
U.S. government
agency............. 14,257 14,308 6.4 9,651 9,573 6.6 11,724 11,705 6.5 10,260
State and municipal
obligations(1)..... 1,200 1,220 7.2 2,033 2,049 7.3 1,784 1,824 7.4 2,137
------- ------- ------- ------- ------- ------- -------
Total investment
securities(1)...... $15,705 $15,778 $11,929 $11,869 $13,755 $13,778 $12,641
======= ======= ======= ======= ======= ======= =======

<CAPTION>
DECEMBER 31,
------------------
1996
------------------
WEIGHTED
MARKET AVERAGE
VALUE YIELD
------- --------
<S> <C> <C>
U.S. Treasury........ $ 253 6.8%
U.S. government
agency............. 10,204 6.5
State and municipal
obligations(1)..... 2,146 6.9
-------
Total investment
securities(1)...... $12,603
=======
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1998
---------------------------------------------------------------------------------------
AFTER ONE AFTER FIVE
WITHIN YEAR TO YEARS TO AFTER
ONE YEAR FIVE YEARS TEN YEARS TEN YEARS WEIGHTED
-------------- -------------- -------------- --------------- AVERAGE
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD TOTAL YIELD
------ ----- ------ ----- ------ ----- ------- ----- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury........................... $250 6.6% $ -- --% $ -- --% $ -- --% $ 250 6.6%
U.S. government agency.................. -- -- 4,933 6.2 9,360 6.4 15 10.0 14,308 6.4
State and municipal obligations(1)...... 395 6.9 218 7.1 607 7.5 -- -- 1,220 7.2
---- ------ ------ ------- -------
Total investment
securities(1)................. $645 $5,151 $9,967 $ 15 $15,778
==== ====== ====== ======= =======
</TABLE>

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

(1) Yields stated on a tax equivalent basis.

Deposits. The Company's deposits were $36.2 million at June 30, 1998, an
increase of $5.9 million, or 19.5%, from the June 30, 1997 balance of $30.3
million. The Company's deposits were $32.9 million at December 31, 1997, an
increase of $2.2 million, or 7.2%, from $30.7 million at December 31, 1996.

Average interest-bearing liabilities were $30.5 million for the six months
ended June 30, 1998 compared to $27.1 million for the six months ended June 30,
1997. Average noninterest-bearing deposits were $4.1 million and $3.4 million
for the six months ended June 30, 1998 and 1997, respectively. Average interest
bearing liabilities were $26.8 million for the year ended December 31, 1997
compared to $28.9 million for the year ended December 31, 1996. Average
noninterest-bearing deposits were $3.4 million and $2.8 million for the years
ended December 31, 1997 and 1996, respectively.

As interest rates declined over the past several years, the Company's
customers shortened the terms of their deposits allowing the depositors to react
more quickly to rising interest rates. The marketplace for deposits is extremely
competitive from both traditional financial institutions, such as banks, as well
as other more non-traditional and less regulated financial intermediaries such
as brokerage houses and mutual funds. The Company seeks to attract and retain
retail customers through competitive products and quality service. In the
commercial area, management is focused on building long-lasting relationships
that will foster deposit growth. In addition, the Company offers a broad range
of products to attract and maintain customers.

The Company's growth in retail deposits has been primarily through
increases in certificate of deposit accounts. At June 30, 1998, certificates of
deposit totaled $19.3 million, an increase of $1.1 million, or 6.0%, from the
June 30, 1997 balance of $18.2 million. At June 30, 1998, certificates with
maturities of one year or less were $16.4 million representing an increase of
$3.5 million, or 27.5%, from June 30, 1997. Certificates with maturities of one
year or more were $2.7 million representing a decrease of $2.6 million, or
49.5%, from June 30, 1997. At December 31, 1997, certificates of deposit totaled
$17.6 million, a decrease of $753,000, or 4.1%, from the December 31, 1996
balance of $18.4 million. Certificates with maturities of one year or less were
$13.0 million, representing a decrease of 7.6% from December 31, 1996.
Certificates with maturities of one year or more were $4.6 million, representing
an increase of 15.0% from December 31, 1996.

20
<PAGE> 25

The Company may at times purchase Federal funds as an additional short-term
funding source. In addition, the Company has available lines of credit with
various correspondence institutions. See "Business -- Correspondent Banking."

The following table presents, for the periods indicated, the average amount
of and average rate paid on each of the following deposit categories:

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31,
------------------------------------- -------------------------------------
1998 1997 1997 1996
----------------- ----------------- ----------------- -----------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE RATE BALANCE RATE BALANCE RATE BALANCE RATE
------- ------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Noninterest-bearing...................... $ 4,059 --% $ 3,381 --% $ 3,361 --% $ 2,840 --%
NOW...................................... 6,934 2.1 3,767 2.3 4,464 2.3 4,146 2.5
Money Market............................. 2,894 3.5 2,577 3.0 2,649 3.2 2,270 2.6
Savings.................................. 1,886 2.4 1,918 2.5 1,814 2.5 1,920 2.5
Time Deposits............................ 18,804 5.7 18,819 5.4 17,879 5.6 20,569 5.7
------- --- ------- --- ------- --- ------- ---
$34,577 4.5 $30,462 4.5 $30,167 4.5 $31,745 4.8
======= ======= ======= =======
</TABLE>

The maturities of certificates of deposit accounts of $100,000 or more as
of June 30, 1998 were as follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Three months or less........................................ $1,471
Three to six months......................................... 600
Six to twelve months........................................ 2,424
Over twelve months.......................................... 251
------
$4,746
======
</TABLE>

CAPITAL RESOURCES

Shareholders' equity was $7.3 million at June 30, 1998, an increase of
$100,000, or 1.4%, from $7.2 million at June 30, 1997. At December 31, 1997,
shareholders' equity was $7.3 million, an increase of $200,000, or 2.8%, from
$7.1 million at December 31, 1996. The increase in both periods resulted from
retained net income and changes in the unrealized gain or loss on securities
available-for-sale. Assuming this Offering had been completed on June 30, 1998
and resulted in net proceeds of $8.9 million, the Company's pro forma
shareholders' equity would have been approximately $16.5 million, pro forma book
value per share would have been $11.92, pro forma leverage capital ratio would
have been 31.8%, tier 1 risk based capital ratio would have been 47.0% and total
risk based capital ratio would have been 48.2%

Banks and bank holding companies, as regulated institutions, must meet
required levels of capital. The FDIC and the Federal Reserve Board, the primary
federal regulators for the Bank and the Company, respectively, have adopted
minimum capital regulations or guidelines that categorize components and the
level of risk associated with various types of assets. Financial institutions
are expected to maintain a level of capital commensurate with the risk profile
assigned to its assets in accordance with the guidelines. As shown in the
following table, at June 30, 1998 and 1997, and at December 31, 1997 and 1996,
the Company maintained capital levels exceeding the minimum levels required for
"well capitalized" bank holding companies. See "Supervision and Regulation."

REGULATORY CAPITAL

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
----------------------------------- -----------------------------------
1998 1997 1997 1996
---------------- ---------------- ---------------- ----------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ ------- ------ ------- ------ -------
(IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Tier 1 risk based:
Actual............................... $7,248 27.5% $7,124 30.6% $7,099 30.0% $6,870 30.8%
Minimum required..................... 981 4.0 967 4.0 945 4.0 891 4.0
Total risk based:
Actual............................... 7,521 28.8 7,498 31.4 7,400 31.3 7,156 32.1
Minimum required..................... 1,973 8.0 1,945 8.0 1,890 8.0 1,783 8.0
Leverage:
Actual............................... 7,248 16.7 7,124 17.2 7,099 18.9 6,870 17.6
Minimum required..................... 1,543 4.0 1,525 4.0 1,503 4.0 1,557 4.0
</TABLE>

21
<PAGE> 26

INTEREST RATE SENSITIVITY AND LIQUIDITY MANAGEMENT

A primary objective of interest rate sensitivity management is to ensure
the stability and quality of the Company's primary earning component, net
interest income. This process involves monitoring the Company's balance sheet in
order to determine the potential impact that changes in the interest rate
environment would have on net interest income. Rate sensitive assets and
liabilities have interest rates which are subject to change within a specific
time period, due to either maturity or contractual agreements which allow the
instruments to reprice prior to maturity. Interest rate sensitivity management
seeks to ensure that both assets and liabilities react to changes in interest
rates within a similar time period, thereby minimizing the risk to net interest
income.

INTEREST SENSITIVITY ANALYSIS

<TABLE>
<CAPTION>
JUNE 30, 1998
------------------------------------------------------------------------
TOTAL TOTAL OVER
1-90 DAYS 91-180 DAYS 181-365 DAYS ONE YEAR ONE YEAR TOTAL
--------- ----------- ------------ -------- ---------- -------
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNINGS ASSETS:
Loans, net of non-accruals.... $6,376 $1,780 $ 4,448 $12,604 $ 8,852 $21,456
Taxable investment
securities.................. 1,818 1,531 2,305 5,654 8,904 14,558
Tax exempt investment
securities.................. 395 -- -- 395 825 1,220
Federal funds sold............ 3,010 -- -- 3,010 -- 3,010
------ ------ ------- ------- ------- -------
Total interest
earning assets.... 11,599 3,311 6,753 21,663 18,581 40,244
------ ------ ------- ------- ------- -------
INTEREST BEARING LIABILITIES:
Savings/NOW/MMA............... 3,097 -- -- 3,097 9,293 12,390
Other time deposits........... 3,559 3,159 9,704 16,422 2,941 19,363
------ ------ ------- ------- ------- -------
Total interest
bearing
liabilities....... 6,656 3,159 9,704 19,519 12,234 31,753
------ ------ ------- ------- ------- -------
Interest sensitivity gap...... $4,943 $ 152 $(2,951) $ 2,144
====== ====== ======= =======
Ratio of interest sensitive
assets to interest sensitive
liabilities................. 174% 105% 69% 111%
</TABLE>

The measurement of the Company's interest rate sensitivity, or "gap," is a
technique traditionally used in asset/liability management. The interest
sensitivity gap is the difference between repricing assets and repricing
liabilities for a particular time period. The preceding table indicates a ratio
of rate sensitive assets to rate sensitive liabilities within one year at June
30, 1998 of 111%. This ratio indicates that net interest income would increase
in a rising interest rate environment and decrease in a falling interest rate
environment. Included in rate sensitive liabilities are certain deposit accounts
(such as savings, NOW and MMA accounts), that are subject to immediate
withdrawal and repricing, and have no stated maturity. These balances are
presented in the category that management believes best identifies their actual
repricing patterns.

In addition to the traditional gap analysis, the Company also utilizes a
computer based interest rate risk simulation model. This comprehensive model
includes rate sensitivity gap analysis, rate shock net interest margin analysis,
and asset/liability term and rate analysis. The Company uses this model to
monitor interest rate risk on a monthly basis and to detect trends that may
affect the overall net interest income for the Company. This simulation
incorporates the dynamics of balance sheet and interest rate changes and
reflects the related effect on net interest income. As a result, this analysis
more accurately projects the risk to net interest income over the upcoming
twelve month period.

Liquidity management refers to the ability to meet day-to-day cash flow
requirements based primarily on activity in loan and deposit accounts of the
Company's customers. Deposit withdrawals, loan funding, and general corporate
activity create a need for liquidity for the Company. Liquidity is derived from
sources such as deposit growth, maturity/calls/sales of investment securities,
principal and interest payments on loans, access to borrowed funds or lines of
credit, and profits.

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<PAGE> 27

The Company purchases Federal funds as an additional short-term funding
sources. In addition, the Company has available lines of credit with various
correspondent institutions. See "Business -- Correspondent Banking."

Interest rate risk management and liquidity management are both a part of
the Company's overall asset/ liability management process. The primary oversight
of asset/liability management rests with the Bank's Asset and Liability
Committee, which is comprised of senior management and a member of the Board of
Directors. The committee meets on a regular basis to review the asset liability
management activities of the Company and monitor compliance with established
policies. A member of the Board of Directors chairs the committee and reports on
its activities to the full Board of Directors.

YEAR 2000

A critical issue affecting companies that rely extensively on electronic
data processing systems, such as the Company, is the Year 2000 issue. This issue
deals with the Company's ability to process year-date data accurately beyond the
year 1999. The Year 2000 issue has been a well-publicized, but nevertheless
continually evolving issue. The Company is dependent upon electronic data
processing for nearly all of its major activities. During 1997, the Company
formed an internal task force, chaired by the Executive Vice President, to
address the Year 2000 issue, conduct a comprehensive review of the Company's
systems and ensure that the Company takes any necessary measures. The Company
believes that its systems, those of the Bank and its data processing service
provider are currently Year 2000 compliant and does not believe that material
expenditures will be necessary to implement any further modifications. As of
June 30, 1998, the Company had spent approximately $15,000 to upgrade its
software and hardware systems to help ensure that its systems would be Year 2000
compliant. The Company has issued a certification request to its data processing
service provider seeking assurance that its systems will be Year 2000 compliant.
The service provider has responded that its systems are Year 2000 compliant now.
See "Risk Factors -- Year 2000."

NEW ACCOUNTING PRONOUNCEMENTS

In February 1997, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings
Per Share," which establishes standards for computing and presenting earnings
per share. This new accounting standard applied to entities with publicly held
common stock or potential common stock, such as the Company. SFAS No. 128
simplifies the standards for computing earnings per share previously found in
other accounting standards, requires dual presentation of basic and diluted
earnings per share on the face of the income statement for entities with complex
capital structures such as the Company, and requires a reconciliation of the
numerator and denominator of the basic earnings per share computation to the
numerator and denominator of the diluted earnings per share computation. The
Company adopted this new accounting standard at December 31, 1997 and restated
all prior period earnings per share data presented.

In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which establishes standards for reporting and display of comprehensive
income and its components in a full set of general purpose financial statements.
The comprehensive income and related cumulative equity impact of comprehensive
income items will be required to be disclosed prominently as part of the notes
to the financial statements. Only the impact of unrealized gains or losses on
securities available-for-sale is expected to be disclosed as an additional
component of the Company's income under the requirements of SFAS No. 130. This
statement is effective for fiscal years beginning after December 15, 1997.

In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information," which changes the way public companies
report information about segments of their business on their annual financial
statements and requires them to report selected segment information in their
quarterly reports issued to shareholders. It also requires entity wide
disclosures about the products and services an entity provides, the foreign
countries in which it holds assets and reports revenues, and its major
customers. This statement is effective for fiscal years beginning after December
15, 1997.

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<PAGE> 28

In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits," which revises employers'
disclosures about pension and other post-retirement benefit plans. The statement
does not change the measurement or recognition of those plans, but requires
additional information on changes in benefits obligations and fair values of
plan assets, and eliminates certain disclosures previously required by SFAS Nos.
87, 88 and 106. This statement is effective for fiscal years beginning after
December 15, 1997.

EFFECTS OF INFLATION

Inflation affects financial institutions in ways that are different from
most commercial and industrial companies, which have significant investments in
fixed assets and inventories. The effect of inflation on interest rates can
materially impact bank operations, which rely on net interest margins as a major
source of earnings. Noninterest expenses, such as salaries and wages, occupancy
and equipment cost are also negatively impacted by inflation.

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<PAGE> 29

BUSINESS

BACKGROUND

The Company was formed as a Georgia corporation in January 1997 at the
direction of the Board of Directors of the Bank based on its belief that a
reorganization of the Bank (the "Reorganization") into a holding company
structure would provide a platform to strengthen the Bank's competitive
position. On April 28, 1997, the shareholders of the Bank approved the
Reorganization and, after receipt of final regulatory approvals, the
Reorganization was consummated on June 6, 1997.

The Bank, which is the only subsidiary of the Company, was chartered under
the laws of Georgia in 1988 as a locally-owned, full-service commercial bank
with deposits insured by the FDIC. Due to unsuccessful operating strategies
employed by the former management of the Bank, the Board of Directors of the
Bank began addressing certain asset quality problems which had developed during
1994. As a result of these asset quality problems, the Bank recorded a loss of
$508,000 in 1994 and entered into a Memorandum of Understanding with the Georgia
Banking Department and the FDIC in March 1995 (the "MOU"). Pursuant to the MOU,
the Bank agreed to improve its condition and operating performance and to
address certain specifically identified deficiencies. In 1995, a new management
team, led by President and Chief Executive Officer Heyward Horton, Jr., made
significant progress in addressing the performance issues identified in the MOU.
The Bank returned to profitability by earning $154,000 in that year and, in
November 1996, the MOU was rescinded.

In February 1997, the Bank was contacted by several Augusta businessmen who
offered to assist the Company in financing the expansion of the Company's
banking operations in the Augusta Market. This group of Augusta businessmen
included Ray Brown, Arthur J. Gay, Jr., J. Randal Hall, George H. Inman, John W.
Lee, A. Montague Miller and Julian W. Osbon (collectively, the "Augusta Group").
Discussions with the Augusta Group continued until October 1997, when an
agreement was entered into with the Augusta Group (the "Agreement"), pursuant to
which the Company agreed (i) to register shares of the Common Stock for sale in
a public offering and to use the net proceeds to expand the Company's banking
operations in the Augusta Market, (ii) to elect Patrick G. Blanchard President
and Chief Executive Officer of the Company and (iii) to elect certain members or
representatives of the Augusta Group to the Board of Directors of the Company.
See "Management."

The Company is currently constructing a branch office in Augusta's Daniel
Village, which is expected to open during the fourth quarter of 1998. In early
1999, the Company is planning to open a branch office in Martinez, Georgia, a
growing community adjacent to Augusta. Future business plans include further
expansion in the Augusta Market by opening additional branch offices and through
the possible acquisition of other banks or branches.

AUGUSTA MARKET

The Augusta Market consists of the City of Augusta in Richmond County, the
adjacent Georgia counties of McDuffie and Columbia located west and northwest of
Augusta, and the adjacent South Carolina counties of Aiken and Edgefield,
located east and northeast of Augusta just across the Savannah River. Columbia
County is one of the fastest growing counties in Georgia in terms of both
population and commercial growth. The economy of the Augusta Market is diverse,
and consists of established and new residential neighborhoods, commercial and
retail businesses, large corporate headquarters, light and heavy manufacturing,
a growing service sector, a university-supported health care community and
significant sports and recreation enterprises. As of June 30, 1997, the latest
period for which government reports are available, there were 14 depository
institutions (including the Bank) represented in the Augusta Market with
aggregate deposits of approximately $3.6 billion.

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<PAGE> 30

results in the dissolution of local boards of directors and the dislocation of
management and customer service personnel with extensive banking experience and
strong ties to the local community. Accordingly, management believes that many
customer relationships in the Augusta Market have been disrupted as the larger
regional financial institutions have increasingly focused on larger corporate
customers, standardized loan and deposit products and other services. Generally,
these products and services are offered by less personalized delivery systems,
creating a demand for the delivery of higher quality, personalized banking
services to individuals and small to medium-sized businesses. As a result of
these factors, management believes that the Company has a unique opportunity to
attract and retain experienced and talented management personnel and to become
the primary provider of community banking services in the Augusta Market.

The following is a summary description of each of the communities the
Company currently serves or will serve after its initial expansion in the
Augusta Market.

Augusta. As a result of the consolidation of the City of Augusta and
Richmond County in 1996, Augusta became the second largest city in Georgia with
an estimated population of 193,000. Metropolitan Augusta is ranked 35th out of
310 metropolitan areas in the nation in terms of population. Metropolitan
Augusta is also ranked number one among Georgia's municipalities as a growth
market. Further, Augusta was recently listed in the Top 10 List of the Best
Southern Cities for Business by Entrepreneur Magazine and as the best place
outside of Atlanta to live in Georgia by MacMillan's Places Rated Almanac.

Augusta is the nucleus of what is known as the Central Savannah River Area
("CSRA"), which is comprised of the surrounding Georgia counties of Columbia,
McDuffie, Burke, Jefferson, Lincoln and Wilkes and the South Carolina counties
of Aiken, Edgefield, McCormick and Barnwell. Augusta is also home to a large
medical community, with the Medical College of Georgia being one of the area's
largest employers. Augusta's Fort Gordon, where the United States Army Signal
Corps operates one of the largest communication facilities in the world, further
contributes to the strong economic base of Augusta by employing over 4,500
civilians.

The Company's new Augusta office, which is presently under construction at
2805 Wrightsboro Road, is located in the Daniel Village, an area which
management believes to be one of Augusta's strongest commercial and residential
markets. As of June 30, 1997, deposit reports indicate total deposits for
Augusta to be $2.1 billion, with the Daniel Village area accounting for
approximately $240 million, or 11.5%, of Augusta's total deposits.

To assist in the long-term growth, development and marketing of the Bank's
new Augusta office, the Bank has established an Augusta Advisory Board of
Directors. Members of the Augusta Advisory Board of Directors presently include:
Karen Foushee, M.D., a member of a local pediatric physicians practice group;
Don Grantham, President of Forest Sales Corporation; Michael B. Hagler, a local
attorney; Frank Lawrence, President of Bobby Jones Ford, Inc.; Will McKnight,
President of McKnight Construction Company; Edwin S. Presnell, City Director of
KMC Telecom, Inc.; Cary H. Rivers, a retired executive of Club Car, Inc.; and
Stephen H. Steinberg, a local attorney.

Martinez. Adjacent to Augusta, Martinez is located in Columbia County, one
of Georgia's fastest growing counties. With an estimated population of over
90,000, Columbia County's population is estimated to increase to over 102,000 in
the next five years. As of June 30, 1997, deposit reports indicate total
deposits for Columbia County to be $462 million, with the Martinez community
accounting for $252 million, or 54.5% of Columbia County's total deposits.
Although there are no banks headquartered in Columbia County, six southeastern
regional banks and one community bank operate offices in the county.

The major employers in Columbia County include: Greenfield Industries,
Inc.; World Color Press; Howard Lumber Company; Club Car, Inc.; Fairway Ford of
Augusta, Inc.; and the Columbia County Government Complex in nearby Evans,
Georgia.

The Company has established an Advisory Board of Directors for its new
Martinez office. Members of the Advisory Board presently include: former U.S.
Representative Doug Barnard, Jr.; Douglas Duncan, President and Chief Executive
Officer of Golf Augusta Pro Shops, Inc., a franchisor of retail golf merchandise
stores; Jake Ivey, President of J.W. Ivey & Associates, a residential
construction firm; T.R. Reddy, an

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<PAGE> 31

engineer and developer; Carl E. Sanders, Jr., a real estate developer; and Jimmy
Whitehead, owner of a local retail tire business and Chairman of the Columbia
County Board of Commissioners.

Thomson. The county seat of McDuffie County, Thomson is located
approximately 30 miles west of Augusta at the hub formed by the intersection of
Interstate Highway 20 and U.S. Highway 78. McDuffie County's excellent highway
system has served to make Thomson a retail shopping center for the surrounding
counties. Major employers in McDuffie County include: Shaw Industries, Inc.,
Temple-Inland Forest Products Corporation, Badcock Furniture Company's
distribution center, McDuffie County Hospital and Advance Auto Parts'
distribution center.

In addition to the Bank's two offices, McDuffie County is served by two
southeastern regional banks and a branch of a community bank headquartered in an
adjacent county.

BUSINESS STRATEGY

The Company's business strategy is to become the community bank of choice
in the Augusta Market. The principal elements of this strategy are to:

- Expand the Company's presence in the Augusta Market by opening a branch
office in Augusta in the fourth quarter of 1998 and in Martinez in early
1999;

- Staff branch offices with local and responsive management teams
emphasizing a high level of personalized customer service;

- Leverage the extensive business relationships and diverse backgrounds of
its Board of Directors and its branch office advisory boards to assist
the Company in attracting customers;

- Establish local indentities by using the names "First Bank of Augusta"
for the Augusta branch office and "First Bank of Columbia County" for the
Martinez branch office;

- Target individuals, professionals and small to medium-sized business
customers that require the attention and service which a
community-oriented bank is well suited to provide;

- Provide a broad array of traditional banking products and services while
utilizing technology and strategic outsourcing to compete effectively
with other financial institutions; and

- Pursue further expansion opportunities in the Augusta Market by opening
additional branch offices and through the possible acquisition of other
banks or branches.

LENDING ACTIVITIES

General. The Company engages in a full complement of lending activities,
including real estate, commercial and consumer loans to individuals and small to
medium-sized businesses and other organizations that are generally located in,
or conduct a substantial portion of their business in, the Company's primary
market area. The Company concentrates its lending efforts in the areas of real
estate and consumer loans. As of June 30, 1998, the Company's loan portfolio
consisted of 70.3% real estate loans (24.9% construction, 24.0% mortgage and
21.4% commercial), 16.8% commercial, financial and agricultural loans and 12.9%
consumer loans. As of June 30, 1998, the Company had no large loan
concentrations (exceeding 10% of its portfolio) in any particular industry. For
more information on the Company's loan composition, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

Real Estate Loans. Loans secured by real estate for a variety of purposes
constituted $15.1 million, or 70.3%, of the Company's total loans as of June 30,
1998. The Company held, as of June 30, 1998, real estate loans of various sizes
ranging up to $1.5 million, secured by office buildings, retail establishments,
warehouses, motels, restaurants and other types of property. Loan terms are
typically limited to five years, although the installment payments may be
structured generally on a 15-year amortization basis. Interest rates may be
fixed or adjustable, based on market conditions. Management has attempted to
reduce credit risk in the real estate portfolio by emphasizing loans on owner
occupied office and retail buildings where the loan to value ratio, established
by independent appraisals, does not exceed 80% and net project cash flow
available for debt service

27
<PAGE> 32

equals 120% of the debt service requirement. The Company also requires personal
guarantees of the principal owners of the property and obtains personal
financial statements of the principal owners in such cases.

As of June 30, 1998, approximately 27% of the Company's total loan
portfolio consisted of real estate mortgage loans in suburban Atlanta. These
loans were generated by a third party loan broker pursuant to a brokerage
agreement with the Company and consist primarily of construction loans to
builders of new homes and, to a lesser degree, commercial office buildings. The
Company does not consider the loans generated by this broker to have any greater
amount of risk than those generated in its primary market area of Thomson.

The Company originates residential loans on single and multi-family
properties, both owner occupied and non-owner occupied, and, as of June 30,
1998, it held $5.8 million of such loans. Loan terms are typically limited to
five years, with payments through the date of maturity generally based on a
15-year amortization schedule. Rates may be fixed or variable, and the Company
typically charges an origination fee. The Company attempts to minimize credit
risk by requiring a loan to value ratio of 80% or less.

Currently, the Company limits its portfolio of construction and development
loans on commercial and residential projects to $7.5 million. However, as the
Company's capital increases, this limit may be raised. As of June 30, 1998 and
1997, the Company held $5.3 million and $2.8 million, respectively, of such
loans. To reduce credit risk associated with such loans, the Company limits its
lending to projects involving small commercial centers that are substantially
pre-leased. The leases on commercial projects must generally result in a loan to
capitalized lease value of no greater value than 80% and a net cash flow to debt
service ratio of at least 120%. The Company requires a personal guarantee from
the developer or builder. Loan terms are typically six to 12 months on a
commercial project and six months on a residential project, although the Company
occasionally will make a "mini-permanent" loan for purposes of construction and
development up to a five to 15-year term. Rates are typically variable, and the
Company typically charges an origination fee. During 1997 and 1996, the Company
experienced no net loan losses on these types of loans.

Commercial Loans. Commercial lending is directed principally towards
businesses whose demands for funds fall within the Company's legal lending
limits and which are potential deposit customers of the Company. This category
of loans includes loans made to individual, partnership or corporate borrowers
which are obtained for a variety of business purposes. Such loans include
short-term lines of credit, short to medium-term plant and equipment loans,
short to medium-term land acquisition and development loans, construction loans
and letters of credit. Commercial loans are generally secured by real estate,
equipment and other business assets. Commercial loans to corporate borrowers
generally require the guarantee of the owners.

Consumer Loans. The Company's consumer loans consist primarily of
residential first and second mortgage loans, home equity loans, installment
loans to individuals for personal, family or household purposes, including
automobile loans to individuals and pre-approved lines of credit. The Company's
consumer loan portfolio comprised 12.9% of the Company's total loan portfolio as
of June 30, 1998. As of June 30, 1998, the majority of the Company's consumer
loans were secured by collateral primarily consisting of automobiles, and other
personal property. Management believes that these loans involve less risk than
other categories of loans.

Loan Approval and Review. The Company's loan approval policies provide for
various levels of officer lending authority. When the aggregate outstanding
loans to a single borrower exceed the Senior Lending Officer's lending
authority, the loan request must be considered and approved by the Chief
Executive Officer. The Senior Lending Officer has a lending limit up to
$100,000; loans in excess of that limit must be approved by the Chief Executive
Officer. If the lending request exceeds the Chief Executive Officer's lending
limit, which is $100,000, the loan must be submitted to and approved by the
Bank's Loan Committee.

While risk of loss in the Company's loan portfolio is primarily tied to the
credit quality of the various borrowers, risk of loss may also increase due to
factors beyond the Company's control, such as local, regional and/or national
economic downturns. General conditions in the real estate market may also impact
the relative risk in the Company's real estate portfolio. Although the Company
has a diversified loan portfolio, the

28
<PAGE> 33

ability of borrowers to repay their loans is largely dependent upon economic
conditions in the Augusta Market and the Atlanta metropolitan area, where many
of the Company's construction loans are originated.

The Company has a continuous loan review procedure involving the Chief
Executive and Senior Lending Officers which is designed to promote early
identification of credit quality problems. The Bank's Chief Executive and Senior
Lending Officers are charged with the responsibility of reviewing, no less than
annually, all credit relationships in excess of $100,000 in their respective
portfolios. The Chief Executive Officer and Senior Lending Officer also review
all criticized and classified assets in the Company's portfolio quarterly with
the Loan Committee of the Bank. The Chief Executive Officer and the Senior
Lending Officer are responsible for implementing, where appropriate, approved
action plans with respect to such criticized and classified assets designed to
improve the Company's credit position for an early resolution of the problem
loan. As part of its overall strategy to improve policies and procedures, the
Company also engages a third party consultant to review its loan portfolio on a
semi-annual basis.

For more information on the Company's allowance for loan and lease losses,
see "Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Unless the Board of Directors of the Bank approves otherwise, loans past
due 90 days or more, or those involved in bankruptcy proceedings, are placed in
non-accrual status. For a loan to be an exception to this policy, it must be
well secured by readily marketable collateral with sufficient liquidation value
to protect the Company from loss and the loan must be in the process of
collection. There were no loans restructured for 1997 or 1996. The Board of
Directors of the Bank monitors the loan portfolio quarterly to enable it to
evaluate the adequacy of the allowance for loan losses. The loans are rated and
the reserve established based on the assigned rating. The provision for loan
losses charged to operating expenses is based on this established reserve.
Factors considered by the Bank's Loan Committee in rating the loans include
delinquent loans, underlying collateral value, payment history and local and
general economic conditions affecting collectibility.

DEPOSITS

The Company offers a wide range of commercial and consumer interest bearing
and noninterest bearing deposit accounts, including checking accounts, money
market accounts, negotiable order of withdrawal ("NOW") accounts, individual
retirement accounts, certificates of deposit and regular savings accounts. The
sources of deposits are residents, businesses and employees of businesses within
the Company's market area, obtained through the personal solicitation of the
Company's officers and directors, direct mail solicitation and advertisements
published in the local media. See "-- Marketing." The Company pays competitive
interest rates on time and savings deposits. In addition, the Company has
implemented a service charge fee schedule competitive with other financial
institutions in the Company's market area, such as maintenance fees on checking
accounts, per item processing fees on checking accounts and returned check
charges.

For more information on the Company's various types of deposits accounts,
see "Management's Discussion and Analysis of Financial Condition and Results of
Operations."

MARKETING

The Company currently markets its services through advertising campaigns
and in printed material, such as newspapers, magazines and direct mailings, as
well as through promotional items, such as caps, pens, pencils and shirts. The
Company's officers are also heavily involved in local civic affairs and
philanthropic organizations in order to focus customers on products and services
on a personal level. The Company sponsors community events and holds grand
opening ceremonies for its new branches to which local dignitaries are invited
to speak and to participate in the festivities. Since the Company does not have
a fully-staffed marketing department, the Company's marketing, advertising and
public relations campaigns focus on the following two components:

- Value. Among other things, the Company offers attractive rates for its
financial products, including its certificates of deposit and checking
accounts. This pricing structure has been successful in attracting

29
<PAGE> 34

depositors who are motivated by the Company's rates, as well as by the
variety of individualized services the Company promotes and offers.

- Convenience and Service. All personnel of the Company are encouraged to
focus on serving the individual needs of the Company's customers. For
example, senior personnel are accessible to customers on very short
notice, even after normal banking hours.

Management intends to continue to market the Company's services through a
combination of advertising campaigns, public relations activities and local
affiliations. In Augusta and Martinez, the Company has established advisory
boards, comprised of local community leaders, to assist the branch offices in
attracting customers. While the key messages of value, convenience, service and
reliability will continue to play a major role in the Company's marketing and
public relations efforts, management may also focus on targeted groups, such as
professionals, in addition to small to medium-sized local businesses.

A vital part of the Company's marketing plan is the execution of a public
relations strategy. Many traditional public relations methods will be used in
promoting Company services. Management intends to pursue media coverage,
including general press, industry periodicals and other media covering banking
and finance, consumer issues and special interests. Press releases, media alerts
and presentations will announce new banking services as they are added.

CORRESPONDENT BANKING

Correspondent banking involves the provision of services by one bank to
another bank which cannot provide that service for itself from an economic or
practical standpoint. The Company is required to purchase correspondent services
offered by larger banks, including check collections, purchase of federal funds,
security safekeeping, investment services, coin and currency supplies, over line
and liquidity loan participations and sales of loans to or participations with
correspondent banks.

The Company participates in loans with correspondent banks. Management of
the Company has established correspondent relationships with The Bankers Bank,
Atlanta, Georgia and SunTrust Bank, Atlanta, Georgia. As compensation for
services provided by a correspondent, the Bank maintains certain balances with
the correspondent in noninterest bearing accounts.

COMPETITION

Competition among financial institutions in the Augusta Market is intense.
The Company competes primarily with other bank holding companies, state and
national commercial banks and savings and loan associations. Most of these
competitors offer a full range of banking services and vigorously compete for
all types of services, especially deposits. In addition, in certain aspects of
its banking business, the Company also competes with credit unions, small loan
companies, consumer finance companies, brokerage houses, insurance companies,
money market funds, and other financial institutions which have recently begun
offering some traditional banking services. The competition between these types
of financial institutions and commercial banks has increased significantly
within the past few years as a result of federal and state legislation which
has, in several respects, deregulated financial institutions. The full impact of
this legislation and subsequent laws that will continue to deregulate the
financial services industry even further cannot be fully assessed or predicted.
Many of the Company's competitors have substantially greater resources and
lending limits, larger branch office networks and are able to offer a broader
range of products and services than the Company.

EMPLOYEES

The Company currently employs 24 persons on a full-time or part-time basis,
including six officers. The Company anticipates that approximately 11 additional
persons will be required on a full-time basis, including additional tellers and
customer service representatives, to staff the Company's two proposed office
locations.

PROPERTIES

The Company's main office is located at 110 East Hill Street in Thomson.
The property consists of a two-story building with approximately 6,000 square
feet of usable space on the first floor and approximately 2,800

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<PAGE> 35

square feet of unfinished space on the second floor designated for future
expansion. The building is constructed on 3.4 acres of land owned by the Bank.
In addition, the Company has a branch office, which is located at 1043
Washington Road, in Thomson. The branch office is approximately two miles north
of the main office, is approximately 2,600 square feet in size and is located on
1.25 acres of land.

The Company has purchased a site located adjacent to the Daniel Village
Shopping Center at 2805 Wrightsboro Road for its new Augusta branch office.
Construction has begun and the Company expects this office to be open during the
fourth quarter of 1998. The Company expects to purchase property in Martinez, a
community adjacent to Augusta, in the near future. The Augusta and Martinez
offices will be relatively similar to the Company's current branch office
located on Washington Road.

MONETARY POLICIES

The results of operations of the Company are affected by credit policies of
monetary authorities, particularly the Federal Reserve Board. The instruments of
monetary policy employed by the Federal Reserve Board include open market
operations in U.S. Government securities, changes in the discount rate on member
bank borrowings, changes in reserve requirements against member bank deposits
and limitations on interest rates which member banks may pay on time and savings
deposits. In view of changing conditions in the national economy and in the
money markets, as well as the effect of action by monetary and fiscal
authorities, including the Federal Reserve Board, no prediction can be made as
to possible future changes in interest rates, deposit levels, loan demand or the
business and earnings of the Company.

LEGAL PROCEEDINGS

From time to time, the Company may be involved in litigation relating to
claims arising out of operations in the normal course of business. As of the
date of this Prospectus, the Company is not engaged in any legal proceedings
that are expected, individually or in the aggregate, to have a material effect
on the Company.

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SUPERVISION AND REGULATION

GENERAL

The Company and the Bank operate in a highly regulated environment, and
their business activities are governed by statute, regulation and administrative
policies. The business activities of the Company and the Bank are closely
supervised by a number of federal regulatory agencies, including the Federal
Reserve Board, the Georgia Banking Department and the FDIC.

The Company is regulated by the Federal Reserve Board under the Bank
Holding Company Act of 1956, as amended (the "BHC Act"), which requires every
bank holding company to obtain the prior approval of the Federal Reserve Board
before acquiring more than 5% of the voting shares of any bank or all or
substantially all of the assets of a bank, and before merging or consolidating
with another bank holding company. The Federal Reserve Board (pursuant to
regulation and published policy statements) has maintained that a bank holding
company must serve as a source of financial strength to its subsidiary banks. In
adhering to the Federal Reserve Board policy, the Company may be required to
provide financial support to a subsidiary bank at a time when, absent such
Federal Reserve Board policy, the Company may not deem it advisable to provide
such assistance.

Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994, (the "Riegle-Neal Act") the restrictions on interstate acquisitions of
banks by bank holding companies were repealed on September 29, 1995, such that
the Company and any other bank holding company located in Georgia is able to
acquire a bank located in any other state, and a bank holding company located
outside Georgia can acquire any Georgia-based bank, in either case, subject to
certain deposit percentage and other restrictions. The legislation also provides
that, unless an individual state elects beforehand either (i) to accelerate the
effective date or (ii) to prohibit out-of-state banks from operating interstate
branches within its territory, on or after June 1, 1997, adequately capitalized
and managed bank holding companies will be able to consolidate their multistate
bank operations into a single bank subsidiary and to branch interstate through
acquisitions. De novo branching by an out-of-state bank would be permitted only
if it is expressly permitted by the laws of the host state. The authority of a
bank to establish and operate branches within a state will continue to be
subject to applicable state branching laws. Pursuant to the Riegle-Neal Act,
Georgia has adopted an interstate banking statute that removed restrictions on
the ability of banks to branch interstate through mergers, consolidations and
acquisitions.

A bank holding company is generally prohibited from acquiring control of
any company which is not a bank and from engaging in any business other than the
business of banking or managing and controlling banks. However, there are
certain activities which have been identified by the Federal Reserve Board to be
so closely related to banking as to be a proper incident thereto and thus
permissible for bank holding companies, including the following activities:
acting as investment or financial advisor to subsidiaries and certain outside
companies; leasing personal and real property or acting as a broker with respect
thereto; providing management consulting advice to nonaffiliated banks and
nonbank depository institutions; operating collection agencies and credit
bureaus; acting as a futures commission merchant; providing data processing and
data transmission services; acting as an insurance agent or underwriter with
respect to limited types of insurance; performing real estate appraisals;
arranging commercial real estate equity financing; providing securities
brokerage services; and underwriting and dealing in obligations of the United
States, the states and their political subdivisions. In determining whether an
activity is so closely related to banking as to be permissible for bank holding
companies, the Federal Reserve Board is required to consider whether the
performance of such activities by a bank holding company or its subsidiaries can
reasonably be expected to produce such benefits to the public as greater
convenience, increased competition or gains in efficiency that outweigh such
possible adverse effects as undue concentration of resources, decreased or
unfair competition, conflicts of interest or unsound banking practices.
Generally, bank holding companies are required to obtain prior approval of the
Federal Reserve Board to engage in any new activity not previously approved.

The Company is also regulated by the Georgia Banking Department under the
Georgia Bank Holding Company Act, which requires every Georgia bank holding
company to obtain the prior approval of the

32
<PAGE> 37

Commissioner of Banking before acquiring more than 5% of the voting shares of
any bank or all or substantially all of the assets of a bank, and before merging
or consolidating with any other bank holding company. A Georgia bank holding
company is generally prohibited from acquiring ownership or control of 5% or
more of the voting shares of any bank unless the bank being acquired is either a
bank for purposes of the BHC Act, or a federal or state savings and loan
association or a federal savings bank whose deposits are insured by the Savings
Association Insurance Fund, and such bank has been in existence and continuously
operating as a bank for a period of five years or more prior to the date of
application to the Commissioner of Banking for approval of such acquisition.

As a state bank, the Bank is subject to the supervision of the Georgia
Banking Department and the FDIC. In addition, the Bank, as a subsidiary of the
Company, will be subject to restrictions under federal law in dealing with the
Company and other affiliates, if any. These restrictions apply to extensions of
credit to an affiliate, investments in the securities of an affiliate and the
purchase of assets from an affiliate.

Georgia recently adopted legislation which reduces the restrictions on a
bank's ability to establish branch offices. Under the new legislation, a bank
located in the state is permitted to establish new or additional branch offices
anywhere in the state (i) upon approval of the Georgia Banking Department, (ii)
by relocation of the parent bank or another branch office, or (iii) by merger,
consolidation, or the purchase of assets and the assumption of liabilities
involving another parent bank or branch bank.

Georgia has also enacted an interstate banking statute which authorizes
bank holding companies located throughout the United States to acquire banks and
bank holding companies located in Georgia under certain conditions. Such
legislation has had the effect of increasing competition among financial
institutions in the Augusta Market and in Georgia generally.

CAPITAL ADEQUACY REQUIREMENTS

Both the Company and the Bank are subject to regulatory capital
requirements imposed by the Federal Reserve Board and the FDIC which vary based
on differences in risk profiles. The capital adequacy guidelines issued by the
Federal Reserve Board are applied to bank holding companies on a consolidated
basis with the banks owned by the holding company. The FDIC's risk-based capital
guidelines apply directly to state-chartered banks which are not members of the
Federal Reserve Board System and whose deposits are insured by the FDIC
regardless of whether they are a subsidiary of a bank holding company. Both
agencies' requirements (which are substantially similar) provide that banking
organizations must have capital (as defined in the rules) equivalent to 8% of
risk-weighted assets. The risk weights assigned to assets are based primarily on
credit risks. Depending upon the riskiness of a particular asset, it is assigned
to a risk category. For example, securities with an unconditional guarantee by
the United States government are assigned to the lowest risk category. A risk
weight of 50% is assigned to loans secured by owner-occupied one to four family
residential mortgages. The aggregate amount of assets assigned to each risk
category is multiplied by the risk weight assigned to that category to determine
the weighted values, which are added together to determine total risk-weighted
assets. As of June 30, 1998, the Bank's risk-based capital ratio was 28.8% and
its leverage ratio was 16.7%. These ratios are well above the minimum standards.

Both the Federal Reserve Board and the FDIC have also adopted minimum
capital leverage ratios to be used in tandem with the risk-based guidelines in
assessing the overall capital adequacy of banks and bank holding companies.
Under the Federal Reserve Board's rule, banking institutions are required to
maintain a ratio of 3% "Tier 1" capital to total assets (net of goodwill). Tier
1 capital includes common shareholders' equity, noncumulative perpetual
preferred stock and minority interests in the equity accounts of consolidated
subsidiaries.

Both the risk-based capital guidelines and the leverage ratio are minimum
requirements, applicable only to top-rated banking institutions. Institutions
operating at or near these levels are expected to have well-diversified risk,
excellent asset quality, high liquidity, good earnings and in general, have to
be considered strong banking organizations rated composite 1 under the CAMEL
rating systems for banks. Institutions with lower ratings and institutions with
high levels of risk or experiencing or anticipating significant growth would be
expected to maintain ratios 100 to 200 basis points above the stated minimums.

33
<PAGE> 38

The Federal Reserve Board and the FDIC have adopted regulations revising
their risk-based capital guidelines to further ensure that the guidelines take
adequate account of interest rate risk. Interest rate risk is the adverse effect
that changes in market interest rates may have on a bank's financial condition
and is inherent to the business of banking. Under the regulations, when
evaluating a bank's capital adequacy, the agencies' capital standards now
explicitly include a bank's exposure to declines in the economic value of its
capital due to changes in interest rates. The exposure of a bank's economic
value generally represents the change in the present value of its assets, less
the change in the value of its liabilities, plus the change in the value of its
interest rate off-balance sheet contracts. The agencies have also issued a joint
policy statement which provides guidance on sound practices for managing
interest rate risk. In the policy statement, the agencies emphasize the
necessity of adequate oversight by a bank's Board of Directors and senior
management and of a comprehensive risk management process The policy statement
also describes the critical factors affecting the agencies' evaluations of a
bank's interest rate risk when making a determination of capital adequacy. The
agencies' risk assessment approach used to evaluate a bank's capital adequacy
for interest rate risk relies on a combination of quantitative and qualitative
factors. Banks that are found to have high levels of exposure and/or weak
management practices will be directed by the agencies to take corrective action.

PROMPT CORRECTIVE ACTION

The Federal Deposit Insurance Corporation Improvement Act of 1991 (the
"FDICIA"), enacted on December 19, 1991, provides for a number of reforms
relating to the safety and soundness of the deposit insurance system,
supervision of domestic and foreign depository institutions and improvement of
accounting standards. One aspect of the FDICIA involves the development of a
regulatory monitoring system requiring prompt action on the part of banking
regulators with regard to certain classes of undercapitalized institutions.
While the FDICIA does not change any of the minimum capital requirements, it
directs each of the federal banking agencies to issue regulations putting the
monitoring plan into effect. The FDICIA creates five "capital categories" ("well
capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized" and "critically undercapitalized") which are defined in the
FDICIA and which will be used to determine the severity of corrective action the
appropriate regulator may take in the event an institution reaches a given level
of undercapitalization. For example, an institution which becomes
"undercapitalized" must submit a capital restoration plan to the appropriate
regulator outlining the steps it will take to become adequately capitalized.
Upon approving the plan, the regulator will monitor the institution's
compliance. Before a capital restoration plan will be approved, any entity
controlling a bank (i.e., holding companies) must guarantee compliance with the
plan until the institution has been adequately capitalized for four consecutive
calendar quarters. The liability of the holding company is limited to the lesser
of 5% of the institution's total assets or the amount which is necessary to
bring the institution into compliance with all capital standards. In addition,
"undercapitalized" institutions will be restricted from paying management fees,
dividends and other capital distributions. Further, these institutions will be
subject to certain asset growth restrictions and will be required to obtain
prior approval from the appropriate regulator to open new branches or expand
into new lines of business.

As an institution drops to lower capital levels, the extent of action to be
taken by the appropriate regulator increases, restricting the types of
transactions in which the institution may engage and ultimately providing for
the appointment of a receiver for certain institutions deemed to be critically
undercapitalized.

In order to comply with the FDICIA, the Federal Reserve Board and the FDIC
have adopted regulations defining operational and managerial standards relating
to internal controls, loan documentation, credit underwriting criteria, interest
rate exposure, asset growth, and compensation, fees and benefits.

34
<PAGE> 39

In response to the directive issued under the FDICIA, the Federal Reserve
Board and the FDIC have adopted regulations which, among other things, prescribe
the capital thresholds for each of the five capital categories established by
the FDICIA. The following table reflects the capital thresholds:

<TABLE>
<CAPTION>
TOTAL RISK - TIER 1 RISK - TIER 1
BASED CAPITAL BASED CAPITAL LEVERAGE
RATIO RATIO RATIO
------------- ------------- --------
<S> <C> <C> <C>
Well Capitalized(1)................................. >10% >6% >5%
- - -
Adequately Capitalized(1)........................... > 8% >4% >4%(2)
- - -
Undercapitalized(3)................................. <8% <4% 4%(4)

Significantly Undercapitalized(3)................... <6% <3% <3%

Critically Undercapitalized......................... -- -- <2%(5)
-
</TABLE>

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

(1) An institution must meet all three minimums.
(2) 3% for composite 1-rated institutions, subject to appropriate federal
banking agency guidelines.
(3) An institution falls into this category if it is below the specified capital
level for any of the three capital measures.
(4) 3% for composite 1-rated institutions, subject to appropriate federal
banking agency guidelines.
(5) Ratio of tangible equity to total assets.

REPORTING REQUIREMENTS

As a state-chartered bank, most of the Bank's operations are regulated and
examined by the Georgia Banking Department and the FDIC, including reserves for
loan losses and other contingencies, loans, investments, borrowings, deposits,
mergers, issuances of securities, payments of dividends, interest rates payable
on deposits, interest rates or fees chargeable on loans, establishment of
branches, consolidation or corporate reorganization, and maintenance of books
and records. The Bank is required by the Georgia Banking Department to prepare
reports on its financial condition and to conduct an annual external audit of
its financial affairs, in compliance with minimum standards and procedures
prescribed by the Georgia Banking Department. Reports of the Bank's auditors
must be filed with the Georgia Banking Department within 15 days after the
Bank's receipt of any such report. The Bank is also subject to the Georgia
banking and usury laws restricting the amount of interest which it may charge in
making loans or other extensions of credit.

As a bank holding company, the Company is required to file with the Federal
Reserve Board an annual report of its operations at the end of each fiscal year
and such additional information as the Federal Reserve Board may require
pursuant to the BHC Act. The Federal Reserve Board may also make examinations of
the Company and each of its subsidiaries.

The scope of regulation and permissible activities of the Company and the
Bank is subject to change by future federal and state legislation. In addition,
regulators may require higher capital levels on a case-by-case basis based on
such factors as the risk characteristics or management of a particular
institution. The Company and the Bank are not aware of any attributes of their
operating plan that would cause regulators to impose higher requirements.

35
<PAGE> 40

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY AND THE BANK

The Company's directors and executive officers, as well as the Bank's
directors and executive officers, are named below:

<TABLE>
<CAPTION>
NAME POSITION WITH COMPANY POSITION WITH BANK
- ------------------------------ ---------------------------- ----------------------------
<S> <C> <C>
Patrick G. Blanchard.......... President, Chief Executive Vice Chairman
Officer and Class III
Director
Larry DeMeyers................ None Director
Phillip G. Farr............... Class I Director Director
Samuel A. Fowler, Jr. ........ Class I Director Vice Chairman
Arthur J. Gay, Jr. ........... Class I Director Director
Joseph E. Gore................ Executive Vice President and Executive Vice President and
Senior Credit Officer Senior Lending Officer
Joseph D. Greene.............. Class I Director Director
J. Randal Hall................ Class II Director Director
Hugh L. Hamilton, Jr.......... Class I Director Director
William G. Hatcher............ Class I Director Director
Heyward Horton, Jr............ Class II Director President, Chief Executive
Officer and Director
George O. Hughes.............. Class II Director Director
George H. Inman............... Class II Director Director
David W. Joesbury, Sr......... Chairman, Class III Director Director
John W. Lee................... Class III Director Chairman
James L. Lemley, M.D.......... Class II Director Director
Julian W. Osbon............... Class II Director Director
J. Harold Ward, Jr............ Senior Vice President and Senior Vice President and
Chief Financial Officer Chief Financial Officer
Robert N. Wilson, Jr.......... Class III Director Director
Bennye M. Young............... None Director
</TABLE>

The Board of Directors of the Company (the "Company Board") consists of 16
directors. Each member of the Company Board has served as a director since
February 1997, except (i) Messrs. Gay, Hall, Hamilton, Hatcher, Inman, Lee and
Osbon, who were appointed to the Company Board pursuant to the Agreement and
(ii) Mr. Blanchard who, pursuant to the Agreement, was named President, Chief
Executive Officer and a Class III Director. See "Business -- Background." The
terms of the members of the Company Board are staggered such that one-third of
the members are elected each year at the Company's annual meeting of
shareholders. Upon such election, each director of the Company serves for a term
of three years. The Company's officers are appointed by the Company Board and
hold office at the discretion of the Company Board.

The Board of Directors of the Bank (the "Bank Board") presently consists of
18 directors. The Bank's Articles of Incorporation and Bylaws provide for a
single class of directors, ranging in number from five to 25 members, the
precise number to be determined from time to time by resolution of the
shareholders at any annual or special meeting of the shareholders. Each member
of the Bank Board has served as a director since the Bank was organized in April
1988, except (i) Mr. Horton, who has served as a director since joining the Bank
as President and Chief Executive Officer in 1995, (ii) Dr. Lemley, who was
elected to the Bank Board by shareholders at the Bank's 1997 annual meeting of
shareholders and (iii) Messrs. Blanchard, DeMeyers, Gay, Hall, Hamilton,
Hatcher, Inman, Lee and Osbon, each of whom was elected, pursuant to the
Agreement, to the Bank Board. Each Bank director serves for a term of one year
and is elected at the Bank's

36
<PAGE> 41

annual meeting of shareholders. The Bank's officers are appointed by the Bank
Board and hold office at the pleasure of the Bank Board.

PATRICK G. BLANCHARD, age 55, was elected President and Chief Executive
Officer of the Company on October 8, 1997. Prior to accepting this position, Mr.
Blanchard had served as President of Georgia Bank & Trust Company of Augusta
since 1988. Mr. Blanchard began his banking career in 1966 and, since that time,
has organized two state banks. Mr. Blanchard has also been employed in a number
of senior banking positions including President of the Columbia County Division
of Georgia Railroad Bank & Trust Company until its acquisition by First Union
Corporation in 1988, and President of Georgia State Bank, Martinez, Georgia for
11 years until its merger with Georgia Railroad Bank & Trust Company in 1985.
Mr. Blanchard is Past President of the Columbia County Chamber of Commerce and
Past Chairman of the Board of the Metro Augusta Chamber of Commerce. He
presently serves as Chairman of the Georgia Southern University Foundation and
as President of Historic Augusta, Inc. He was named "1994 CEO of the Year" by
The Augusta Business Journal and was named "1995 Sponsor of the Year" by the
Credit Professionals International of Georgia. He was recently recognized by the
International Fraternity of Delta Sigma Pi as one of its most outstanding
alumnus on a national level.

LARRY DEMEYERS, age 52, has served as President, Chief Operating Officer
and as a director of Bankers First Corporation and its successor, SouthTrust
Bank, prior to his resignation from these positions in November 1997. Mr.
DeMeyers had been associated with Bankers First Corporation in various positions
for over twenty years. Mr. DeMeyers is Past President and a member of the
Augusta Kiwanis Club. He currently serves as Treasurer of the St. Joseph
Hospital Foundation and as Secretary and a member of the Board of Governors of
the Augusta Country Club. He is also an active member of Reid Memorial
Presbyterian Church.

PHILLIP G. FARR, age 49, founded a local certified public accounting firm
in 1975 in Thomson and has been the managing principal since that time. Prior to
1975, Mr. Farr worked in public accounting for both a regional and a national
firm. Mr. Farr served as Chairman of the Bank Board from 1991 to 1995.

SAMUEL A. FOWLER, JR., age 51, is currently a partner in the Thomson law
firm of Fowler & Wills. Mr. Fowler has practiced law in McDuffie and Wilkes
Counties since 1977. Fowler & Wills serves as the Bank's legal counsel.

ARTHUR J. GAY, JR., age 51, is President and Chief Executive Officer of T
and T Associates, Inc., a land development and consulting firm that he founded
in 1996. From 1970-1996, Mr. Gay was employed as Corporate Vice President of
Bankers First Corporation and Executive Vice President of Bankers First Savings
Bank, FSB in Augusta. Mr. Gay is a past Chairman and a past member of the
Columbia County Planning and Zoning Commission, and a past Chairman of the Board
of the Golden Harvest Food Bank. He is also a past board member of the Augusta
State University Alumni Association and has been active with the United Way, the
Georgia Heart Association and the Church of Christ of Augusta.

JOSEPH E. GORE, age 50, joined the Bank in April of 1997 as Executive Vice
President and Senior Lending Officer. Mr. Gore also serves as Executive Vice
President and Senior Credit Officer of the Company, a position he has held since
joining the Bank. Prior to his employment with the Bank, from April 1996 to
April 1997, Mr. Gore served as President and Chief Executive Officer of The Bank
of Spalding County, Griffin, Georgia. From March 1994 to April 1996, he served
as President and Chief Executive Officer of Pineland State Bank, Metter,
Georgia. From September 1987 to March 1994, he served as Executive Vice
President of The Bank of Spalding County, Griffin, Georgia. Mr. Gore has also
served as a Senior Lending Officer of banks in Houston and Coweta Counties and
as an officer of two regional bank affiliates. Mr. Gore holds a Bachelor of
Science in Industrial Management from the Georgia Institute of Technology in
Atlanta and is a graduate of the School of Banking of the South at Louisiana
State University and from the National Graduate Compliance School at The
University of Oklahoma.

JOSEPH D. GREENE, age 57, was employed from 1959 until 1991 with Pilgrim
Health and Life Insurance Company where he most recently held the positions of
Executive Vice President and Director. In 1991, Mr. Greene accepted a position
as Professor of Business Administration at Augusta State University. He also
previously served as a member and Chairman of the Board of Regents of the
University System of Georgia.

37
<PAGE> 42

J. RANDAL HALL, age 39, is an attorney at law with the Augusta law firm of
Hall & Mullins, P.C., which he founded in 1996. From 1985 to 1996, Mr. Hall
served as Corporate Vice President and Legal Counsel of Bankers First
Corporation in Augusta, Georgia. Mr. Hall is past President of the Augusta Lions
Club, past Chairman of the Board of the Augusta Southern Nationals, Inc., serves
as counsel for the Augusta-Richmond County Community Partnership for Children &
Families, Inc. and is a member of the Augusta-Richmond County Planning
Commission.

HUGH L. HAMILTON, JR., age 43, has served as General and Operations Manager
of Intertape Polymer Group, an Evans, Georgia manufacturing firm, since 1996.
Mr. Hamilton previously served as President of Augusta Bag Co. Mr. Hamilton is
an active member of the Rotary Club of Augusta. He serves on the Board of
Directors of the Boys and Girls Club, the Episcopal Day School and the
Tuttle-Newton Home. He is a past board member of the Georgia-Carolina Council of
the Boys Scouts of America.

WILLIAM G. HATCHER, age 72, is Chief Executive Officer and principal
shareholder of MAU, Inc. ("MAU"), an Augusta personnel services company he
founded in 1973. In 1998, MAU won the 1998 Kennesaw State University
"Medium-Sized Family Business of the Year Award" for being an outstanding family
business with a superior performance record in the human resource and staffing
field. Mr. Hatcher is a member of the Augusta Kiwanis Club and serves as a
Trustee of Historic Augusta, Inc. He has also served on the Board of Directors
for the Boys Club for 30 years and is a member of the Augusta Country Club.

HEYWARD HORTON, JR., age 51, was elected President and Chief Executive
Officer of the Bank on February 15, 1995. Previously, Mr. Horton was President
and Chief Executive Officer of First Gwinnett Bank in Norcross, Georgia from
1987 to 1995. Since beginning his banking career in 1966 with Citizens &
Southern National Bank in Savannah, Georgia, Mr. Horton has been employed in a
number of senior banking positions including President and Chief Executive
Officer of Citizens Bank of Ashburn, Ashburn, Georgia, as well as Senior Vice
President and Senior Lending Officer at two other commercial banks.

GEORGE O. HUGHES, age 74, is Chairman of the Board of George O. Hughes
Furniture Co., Inc., a retail furniture and appliance business in Thomson that
he founded in 1947.

GEORGE H. INMAN, age 65, retired in May 1997 as Chairman of Club Car, Inc.,
a manufacturer of golf cars and utility vehicles in Augusta, Georgia. Mr. Inman
had been employed by Club Car, Inc. since 1978. Mr. Inman is a graduate of the
Georgia Institute of Technology. For a number of years he served on the Board of
Directors of Junior Achievement of Augusta and the Board of Directors of the
Chamber of Commerce. Mr. Inman also served on the Board of Directors of Bankers
First Savings Bank in Augusta for approximately nine years.

DAVID W. JOESBURY, SR., age 48, is President of Joesbury Insurance Agency,
Inc. and, since 1971, has served in various capacities with that company. Mr.
Joesbury currently serves as Chairman of the Company Board.

JOHN W. LEE, age 59, retired in 1995 as a consultant to GIW Industries,
Inc., a manufacturing firm located in Grovetown, Georgia. From 1986 to 1993, Mr.
Lee served as President and Chief Operating Officer of GIW Industries, Inc. Mr.
Lee currently serves as Chairman of the Bank Board. Mr. Lee previously served on
the Boards of Directors of the Bank of Thomson and Allied Bankshares, Inc. Mr.
Lee is a member of the Boards of Directors of University Hospital and the CSRA
Community Foundation.

JAMES L. LEMLEY, M.D., age 38, has practiced family medicine in Thomson,
Georgia since 1988. Dr. Lemley is on the active medical staff at McDuffie County
Hospital, serves on the courtesy staff at University Hospital in Augusta and is
an affiliate faculty member of the Medical College of Georgia's Schools of
Nursing, Medicine and Allied Health.

JULIAN W. OSBON, age 57, is President and Chief Executive Officer of
Charter Management d/b/a Osbon & Associates, an Augusta consulting and
management firm he founded in 1997. Prior to 1997, Mr. Osbon was President and
Chief Executive Officer of Osbon Medical Systems. Mr. Osbon is Chairman of the
Board of Directors of the CSRA Community Foundation and First Vice President of
Historic Augusta, Inc. He also serves as Vice President of Augusta Tomorrow,
Inc. and on the Board of Directors of the Metro Augusta

38
<PAGE> 43

Chamber of Commerce, Main Street Augusta, the Augusta State University
Foundation, and the East Georgia Easter Seals. In 1997, he received the Spirit
of Georgia Award presented by the State of Georgia. He also was named
Philanthropist of the Year in Augusta in 1996.

J. HAROLD WARD, JR., age 55, joined the Bank in April of 1995 as Senior
Vice President and Chief Financial Officer. Mr. Ward also serves as Senior Vice
President and Chief Financial Officer of the Company, a position he has held
since the commencement of operations in February 1997. Prior to his employment
with the Bank, from September 1992 to April 1995, Mr. Ward served as Senior Vice
President and Chief Financial Officer of DeKalb State Bank, Tucker, Georgia and
from March 1987 to September 1992, he served as Senior Vice President of First
Gwinnett Bank, Norcross, Georgia. Mr. Ward has also served as Vice President and
Senior Operations Officer of banks in Walton County and Tift County, as well as
Assistant Operations Officer of First National Bank of Atlanta. Mr. Ward holds a
BBA in Management from Georgia State University in Atlanta and has completed the
Bank Administration Institute School of Banking at the University of Wisconsin.

ROBERT N. WILSON, JR., age 46, has served as the manager of Wilson Finance
Corp. d/b/a The Wilson Co. since 1982. In addition, Mr. Wilson currently owns
Wilson Ventures, Inc. ("Wilson Ventures"), which engages in real estate
speculation and manages residential rental properties as well as Wilson
Ventures' real estate and insurance businesses. Mr. Wilson served as Chairman of
the Bank Board from 1988 until 1991.

BENNYE M. YOUNG, age 54, taught school in DeKalb, Richmond and McDuffie
Counties from 1966 until 1980. Since that time, she has been a homemaker.

COMPENSATION OF DIRECTORS

During fiscal 1997, directors of the Bank received director's fees of $200
per regular board meeting attended and $25 per committee meeting attended.
Directors of the Company currently do not receive any compensation for services
provided to the Company.

EXECUTIVE COMPENSATION

The following table sets forth information regarding all cash and noncash
compensation paid to the Chief Executive Officer of the Company and the Bank
during each of the last three fiscal years (the "Named Executive Officers"). No
other executive officer of the Company or the Bank received annual salary and
bonus in excess of $100,000 during the last three fiscal years.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL ------------
COMPENSATION SECURITIES
------------ UNDERLYING OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) OPTIONS COMPENSATION($)(1)
--------------------------- ---- ------------ ------------ ------------------
<S> <C> <C> <C> <C>
Patrick G. Blanchard(2) 1997 29,000(3) -- --
President and Chief Executive
Officer of the Company
Heyward Horton, Jr.(4) 1997 115,000 5,000 3,450
President and Chief Executive 1996 115,000 -- 1,760
Officer of the Bank 1995 98,487 -- 863
Luther P. Powell, Jr. 1995 48,917 -- --
Interim Chief Executive
Officer of the Bank(5)
</TABLE>

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

(1) Consists of matching contributions to the Bank's 401(k) Plan implemented
April 1, 1994.
(2) Mr. Blanchard was elected President and Chief Executive Officer of the
Company on October 8, 1997.
(3) Only covers the period from October 8, 1997 through December 31, 1997.
(4) Mr. Horton was elected President and Chief Executive Officer of the Bank on
February 15, 1995 and continues to serve in that capacity. He served as
President and Chief Executive Officer of the Company

39
<PAGE> 44

from the commencement of operations in February 1997 until October 8, 1997.
See "Management -- Directors and Executive Officers of the Company and the
Bank."
(5) Mr. Powell served as Interim Chief Executive Officer of the Bank from
November 23, 1994 until February 15, 1995.

EMPLOYMENT AGREEMENTS

Agreement with Patrick G. Blanchard. The Company has entered into an
employment agreement with Patrick G. Blanchard pursuant to which he serves as
President and Chief Executive Officer of the Company and Vice Chairman of the
Bank. The current term of the agreement expires on December 31, 2001, but on
February 28, 1999 and the last day of February of each year thereafter, the
expiration date will automatically be extended by one additional year unless the
agreement is terminated pursuant to its terms. The agreement provides for an
annual salary of $120,000, an annual incentive bonus of $12,000, subject to the
satisfaction of certain performance criteria, and certain incidental benefits
commensurate with his position. The agreement also provides that Mr. Blanchard
will be granted an option to purchase a number of shares of Common Stock equal
to 2.5% of the number of shares of Common Stock sold in this Offering up to a
maximum of 15,750 shares of Common Stock at an exercise price of $13.50 per
share upon the completion of this Offering. The option will vest with respect to
one-fourth of the underlying shares on the grant date. The balance of the option
will vest in three equal installments on December 31 of the years in which the
Company's average assets exceed $100 million, $150 million and $200 million,
respectively. The option will expire 10 years from the date of grant. Under the
agreement, in the event Mr. Blanchard's employment is terminated within three
years after any "change of control" (as defined in the agreement) by (i) the
Company, other than for "cause" (as defined in the agreement), or (ii) Mr.
Blanchard as a result of certain reasons set forth in the agreement, then Mr.
Blanchard will be entitled to receive cash in an amount equal to two times his
current base salary, plus an amount equal to the "in-the-money" portion of any
unexercised stock options held by him, whether or not then exercisable (the
"Additional Severance Payment"). In the event Mr. Blanchard terminates his
employment for any reason other than those set forth in the agreement during the
three-year period following a change of control, he will be entitled to a cash
payment equal to his current base salary plus the Additional Severance Payment.
The agreement further provides that upon termination of Mr. Blanchard's
employment without cause, he will receive 12 months' salary at the prevailing
level and a continuation of all insurance benefits until the earlier of (i) 12
months or (ii) employment in another full-time position. The agreement also
provides that for 12 months following Mr. Blanchard's termination he shall not
(i) serve as an executive officer of any financial institution in McDuffie,
Richmond, and Columbia Counties, Georgia and Aiken County, South Carolina or
(ii) solicit business from any of the Company's customers.

Agreement with Heyward Horton, Jr. The Company has also entered into an
employment agreement with Heyward Horton, Jr. pursuant to which he serves as
President and Chief Executive Officer of the Bank. The agreement expires on
December 31, 2001, but on February 28, 1999 and the last day of February of each
year thereafter, the expiration date will automatically be extended by one
additional year unless the agreement is terminated pursuant to its terms. The
agreement provides for an annual salary of $120,000, annual incentive bonuses
equal to 20% of his base salary, subject to the satisfaction of certain
performance criteria, and certain incidental benefits commensurate with his
position. The agreement also contains a covenant of the Company to grant Mr.
Horton an option to purchase an unspecified number of shares of Common Stock.
Pursuant to this covenant, on June 11, 1997, Mr. Horton was granted an option to
purchase 5,000 shares of Common Stock at an exercise price of $12.10 per share.
The option became exercisable with respect to 40% of the underlying shares in
February 1998 and will vest at a rate of 20% per annum in each of the three
succeeding years. Provisions in the agreement regarding a change in control of
the Company, termination, non-competition and non-solicitation are substantially
similar to those in Mr. Blanchard's agreement, except that Mr. Horton's
non-competition covenant applies only to McDuffie County, Georgia.

SEVERANCE AGREEMENTS

J. Harold Ward, Jr., Senior Vice President and Chief Financial Officer of
the Company as well as Joseph E. Gore, Executive Vice President and Senior
Credit Officer of the Company, have entered into severance

40
<PAGE> 45

agreements with the Company on terms substantially similar to the change of
control provisions contained in Messrs. Blanchard's and Horton's employment
agreements except that Messrs. Ward and Gore will not be entitled to any
Additional Severance Payment as severance pay. Messrs. Ward and Gore, however,
do not have employment agreements with the Company.

STOCK OPTION PLAN

In connection with the Reorganization, the Company adopted the McDuffie
Bank & Trust 1997 Stock Option Plan (the "Stock Plan") which became effective on
February 12, 1997. The purpose of the Stock Plan is to encourage and enable
participating directors, officers, key employees and certain consultants or
advisors of the Company to remain in the employ of, and to give a greater effort
on behalf of, the Company through the ownership of Common Stock. The maximum
number of shares of Common Stock reserved under the Stock Plan is 100,000. The
Stock Plan is administered by either the Company Board or a committee comprised
of no fewer than two "Non-Employee Directors" (as defined under Rule 16b-3 of
the Exchange Act) (such committee or the Company Board itself, the "Committee").
Subject to the provisions of the Stock Plan, the Committee has the authority to
determine the individuals to whom options shall be granted and to determine
exercise prices, vesting requirements, and other terms and conditions of each
option. The Stock Plan provides for the grant of "incentive stock options"
intended to qualify under Section 422 of the Internal Revenue Code of 1986, as
amended, and "nonqualified stock options." Options granted under the Stock Plan
must be exercised within the period fixed by the Committee, which may not exceed
10 years from the date of the option grant, or in the case of incentive stock
options granted to any 10% stockholder, five years from the date of the option
grant. The exercise price for incentive stock options is the fair market value
(the "FMV") of the Common Stock on the date of grant (or in the case of
incentive stock options granted to any 10% shareholder, 110% of FMV of the
Common Stock on the date of grant) and for nonqualified stock options is no less
than 75% of FMV of the Common Stock on the date of grant. The FMV of Common
Stock with respect to which incentive stock options are exercisable by an
optionee for the first time cannot exceed $100,000 in any calendar year.

There are currently options outstanding under the Stock Plan to purchase
24,500 shares of Common Stock. These options vest in installments over a period
of four years beginning three years from the date of grant and the exercise
prices range from $10.00 to $12.10 per share. Pursuant to the terms of his
employment agreement with the Company, Patrick G. Blanchard will be granted an
option under the Stock Plan to purchase 15,750 shares of Common Stock at an
exercise price of $13.50 per share upon the completion of this Offering. See
"Management -- Employment Agreements."

The following table presents information regarding grants of options to
purchase shares of the Common Stock to the Named Executive Officers during the
year ended December 31, 1997:

OPTIONS GRANTED IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------- POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
OPTIONS ANNUAL RATES OF
NUMBER OF GRANTED STOCK PRICE
SECURITIES TO APPRECIATION FOR
UNDERLYING EMPLOYEES OPTION TERM(1)
OPTION AS OF EXERCISE EXPIRATION --------------------
NAME GRANTED 12/31/97 PRICE DATE 5% 10%
- ---- ---------- ---------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Heyward Horton, Jr............ 5,000(2) 59% $12.10 06/11/07 $38,047 $96,421
</TABLE>

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

(1) The dollar amounts under these columns represent the potential realizable
value of the option assuming that the market price of the Common Stock
appreciates in value from the date of grant for the full 10 year term at the
5% and 10% annualized rates prescribed by regulation. Accordingly, these
rates are not intended to forecast possible future appreciation, if any, of
the price of the Common Stock.
(2) The option expires 10 years from date of grant and becomes exercisable as to
40% after three years of employment with the Bank (February 1998) and at the
rate of 20% per annum thereafter.

41
<PAGE> 46

The following table provides certain information concerning the exercise of
stock options during the year ended December 31, 1997, and the value of
unexercised stock options held at December 31, 1997 by the Named Executive
Officers:

AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTION OPTIONS
AS OF 12/31/97 AS OF 12/31/97
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE
- ---- ------------------ --------------------
<S> <C> <C>
Heyward Horton, Jr................................. 0/5,000 $0/$0
</TABLE>

CERTAIN TRANSACTIONS

The Company extends loans from time to time to certain of its directors,
executive officers, their associates and members of the immediate families of
such directors and executive officers. These loans are made in the ordinary
course of business, are made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with persons not affiliated with the Company and do not involve
more than the normal risks of collectibility or present other unfavorable
features.

42
<PAGE> 47

SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS

The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of August 17, 1998, and as adjusted to reflect
the completion of this Offering, by: (i) each person known by the Company to
beneficially own 5% or more of the outstanding Common Stock; (ii) each of the
Company's directors and executive officers; and (iii) all directors and
executive officers of the Company as a group. The shares listed under "Minimum
Number of Shares to be Purchased" represent the shares of Common Stock that each
of the named persons subscribed to purchase in the best efforts offering
conducted by the Company from February 19, 1998 through August 18, 1998. Each of
these persons will have an opportunity to withdraw their subscription prior to
the completion of this Offering. As of the date of this Prospectus, the Company
does not expect that any of these subscriptions will be withdrawn. See
"Underwriting." Except as otherwise noted below, each of the holders listed
below has sole voting and investment power with respect to the shares shown as
beneficially owned by them.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO MINIMUM OWNED AFTER THIS
THIS OFFERING(1) NUMBER OF OFFERING(1)
------------------- SHARES TO BE -------------------
NAME NUMBER PERCENT PURCHASED NUMBER PERCENT
---- -------- -------- ------------ -------- --------
<S> <C> <C> <C> <C> <C>
Patrick G. Blanchard............................ -- * 3,704 3,704 *
Larry DeMeyers+................................. -- * 3,704 3,704 *
Phillip G. Farr(2).............................. 11,750 1.8% -- 11,750 *
Samuel A. Fowler, Jr.(3)........................ 10,600 1.7 -- 10,600 *
Arthur J. Gay, Jr............................... -- * 3,704 3,704 *
Joseph E. Gore.................................. -- * 296 296 *
Joseph D. Greene................................ 13,000 2.0 -- 13,000 *
J. Randal Hall.................................. -- * 4,000 4,000 *
Hugh L. Hamilton, Jr............................ -- * 18,518 18,518 1.3%
William G. Hatcher.............................. -- * 26,000 26,000 1.9
Heyward Horton, Jr.(4).......................... 5,400 * 100 5,500 *
George O. Hughes(5)............................. 39,724 6.3 -- 39,724 2.9
George H. Inman(6).............................. 10,212 1.6 4,150 14,362 1.0
David W. Joesbury, Sr.(7)....................... 11,650 1.8 450 12,100 *
John W. Lee(8).................................. 10,211 1.6 18,515 28,726 2.1
James L. Lemley, M.D.(9)........................ 33,800 5.3 -- 33,800 2.5
Julian W. Osbon(10)............................. 10,211 1.6 26,668 36,879 2.7
J. Harold Ward, Jr.(11)......................... 3,080 * 115 3,195 *
Robert N. Wilson, Jr.(12)....................... 13,220 2.1 100 13,320 1.0
Bennye M. Young+(13)............................ 14,400 2.3 800 15,200 1.1
The Augusta Group(14)........................... 51,058 8.0 57,037 108,095 7.9
The Prime Group, Inc.(15)....................... 59,058 9.1 -- 59,058 4.2
All directors and executive officers
as a group (20 persons)....................... 187,258 29.3 110,824 298,082 21.6
</TABLE>

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

* Represents less than 1%.
+ Bank Director only.
(1) Beneficial ownership as reported in the above table has been determined in
accordance with Rule 13d-3 of the Exchange Act.
(2) Includes 200 shares owned by Mr. Farr's wife, with whom Mr. Farr shares
voting and investment power.
(3) Includes 100 shares owned by Mr. Fowler's wife, with whom Mr. Fowler shares
voting and investment power. Also includes 500 shares held by a
professional corporation established and managed by Mr. Fowler.
(4) Includes 3,000 shares subject to presently exercisable stock options.

43
<PAGE> 48

(5) Includes 4,914 shares owned by Mr. Hughes' wife, with whom Mr. Hughes
shares voting and investment power. Also includes 5,946 shares held by a
corporation controlled by Mr. Hughes. Mr. Hughes' address is 626 Beechwood
Drive, Thomson, Georgia 30824.
(6) Does not include 40,846 shares (6.4% of the currently outstanding shares of
the Common Stock) presently owned by certain members of the Augusta Group,
as to which Mr. Inman disclaims beneficial ownership.
(7) Includes 2,100 shares owned by Mr. Joesbury's wife, with whom Mr. Joesbury
shares voting and investment power. Also includes 100 shares held by Mr.
Joesbury as custodian for his children.
(8) Does not include 40,847 shares (6.4% of the currently outstanding shares of
the Common Stock) presently owned by certain members of the Augusta Group,
as to which Mr. Lee disclaims beneficial ownership.
(9) Includes 33,500 shares held by a trust for which Dr. Lemley serves as
co-trustee. Dr. Lemley shares voting and investment power with respect to
shares held by this trust. James L. Lemley's brother, Robert K. Lemley,
M.D., serves as the other co-trustee of the trust. Accordingly, Robert K.
Lemley may also be deemed to beneficially own the 33,500 shares held by the
trust. James L. Lemley's address is P.O. Box 1898, Thomson, Georgia 30824.
(10) Does not include 40,847 shares (6.4% of the currently outstanding shares of
the Common Stock) presently owned by certain members of the Augusta Group,
as to which Mr. Osbon disclaims beneficial ownership.
(11) Includes 1,000 shares subject to presently exercisable stock options.
(12) Includes 1,220 shares held by Mr. Wilson as custodian for his children.
(13) Includes 1,700 shares held by Ms. Young as custodian for her children.
(14) Includes 10,212 shares beneficially owned by George H. Inman; 10,211 shares
beneficially owned by John W. Lee; 10,212 shares beneficially owned by A.
Montague Miller; 10,211 shares beneficially owned by Julian W. Osbon; and
10,212 shares beneficially owned by RDB Family Limited Partnership. Each of
the foregoing individuals and entities disclaims beneficial ownership of
the shares owned by any other member of the Augusta Group as such
individuals do not have or share voting and/or investment power with
respect to such shares. The business address of the Augusta Group is P.O.
Box 1463, Augusta, Georgia 30903.

(15) Includes 16,000 shares subject to presently exercisable options. Share
ownership is based on a Schedule 13G dated February 10, 1998 filed by the
Prime Group, Inc. The business address of the Prime Group, Inc. is 736
Jones Creek, Evans, Georgia 30809. The Company makes no representation as
to the accuracy or completeness of the information reported.

DESCRIPTION OF CAPITAL STOCK

The Company is currently authorized to issue 9,000,000 shares of Common
Stock, of which 635,380 shares are issued and outstanding and 1,000,000 shares
of preferred stock, $.001 par value (the "Preferred Stock"), of which no shares
are presently issued and outstanding. As of August 17, 1998, the 635,380 shares
of Common Stock currently issued and outstanding were held of record by 520
persons.

COMMON STOCK

The holders of Common Stock are entitled to elect the members of the
Company Board and such holders are entitled to vote as a class on all matters
required or permitted to be submitted to the shareholders of the Company. No
holder of any class of stock of the Company has preemptive rights with respect
to the issuance of shares of that or any other class of stock and the Common
Stock is not entitled to cumulative voting rights with respect to the election
of directors.

The holders of Common Stock are entitled to receive ratably such dividends
and other distributions if, as, and when declared by the Company Board out of
assets legally available therefor, subject to the preferential dividend or
distribution rights of any outstanding shares of Preferred Stock. Upon the
liquidation, dissolution or winding up of the Company, the holders of Common
Stock will be entitled to share ratably in the distribution of the Company's net
assets, subject to the prior rights of any outstanding shares of Preferred

44
<PAGE> 49

Stock. The holders of Common Stock are not entitled to the benefit of any
sinking fund provision. The shares of Common Stock are not subject to any
redemption provisions, nor are they convertible into any other security or
property of the Company. All outstanding shares of Common Stock are, and the
shares to be outstanding upon completion of this Offering will be, fully paid
and nonassessable.

PREFERRED STOCK

The Company Board is authorized, without further action by the
shareholders, to divide any and all shares of Preferred Stock into one or more
series and to fix and determine the relative rights and preferences of the
Preferred Stock, such as the designation of the series and the number of shares
constituting such series, dividend rights, redemption and sinking fund
provisions, liquidating and dissolution preferences, conversion or exchange
rights and voting rights, if any. The issuance of Preferred Stock by the Company
Board may result in such shares having senior dividend and/or liquidation
preferences to the holders of shares of Common Stock and may dilute the voting
rights of such holders. The issuance of Preferred Stock, while providing
desirable flexibility in connection with possible acquisitions and other
corporate purposes, could, among other things, adversely affect the voting
rights of holders of Common Stock and could make it more difficult for a third
party to acquire, or discourage a third party from acquiring, a majority of the
outstanding voting stock of the Company. No shares of Preferred Stock have been
issued or authorized for issuance, and the Company has no present plans to issue
any shares of Preferred Stock.

CERTAIN PROVISIONS OF THE ARTICLES AND BYLAWS

Classified Board of Directors. The Company Board presently consists of 16
directors. The directors are divided into three classes, designated Class I,
Class II and Class III. Each class consists, as nearly as may be possible, of
one-third of the total number of directors constituting the entire Company
Board. The term of the Company's Class I directors expires at the Company's
annual meeting of shareholders in 2001; the term of the Company's initial Class
II directors expires at the Company's annual meeting of shareholders in 1999;
and the term of the Company's initial Class III directors expires at the
Company's annual meeting of shareholders in 2000. At each annual meeting of
shareholders, successors to the class of directors whose term expires at that
meeting will be elected for a three-year term. If the number of directors is
changed, an increase or decrease will be apportioned among the classes so as to
maintain the number of directors in each class as nearly equal as possible, and
any additional director of any class elected to fill a vacancy resulting from an
increase in such class will hold office until the next annual meeting of
shareholders, but in no event will a decrease in the number of directors shorten
the term of any incumbent director. Except in the case of removal from office,
any vacancy on the Company Board will be filled by a majority vote of the
remaining directors then in office.

Because the Company has a classified Board of Directors, as many as two
consecutive annual meetings of shareholders may be required to replace a
majority of the directors on the Company Board and thus gain control of the
Company. As a consequence, the classified Board of Directors makes it more
difficult for a person, entity or group to effect a change in control of the
Company through a proxy contest or the acquisition of a large block of the
Company's voting stock.

Requirement for Supermajority Approval of Transactions. The Articles
contain provisions requiring supermajority approval to effect certain
extraordinary corporate transactions which are not approved by the Company
Board. The Articles require the affirmative vote of the holders of at least
two-thirds (66 2/3%) of the shares of each class of stock of the Company
entitled to vote in elections of directors to approve any merger, consolidation,
disposition of all or a substantial part of the assets of the Company or a
subsidiary of the Company, if any person who together with his affiliates and
associates owns beneficially 5% or more of any voting stock of the Company
("Interested Person") is a party to the transaction; provided that such approval
is not required if three-fourths ( 3/4) of the entire Company Board approve the
transaction. In addition, the Articles require the separate approval by the
holders of at least a majority of the shares of each class of stock of the
Company entitled to vote in elections of directors which are not beneficially
owned by an Interested Person, of any merger, consolidation, disposition of all
or a substantial part of the assets of the Company or a subsidiary of the
Company, or exchange of securities requiring shareholder approval ("Business
Combination"), if an Interested Person is a party to such transaction; provided,
that such approval is not required if

45
<PAGE> 50

(a) the consideration to be received by the holders of the capital stock of the
Company meets certain minimum levels determined by a formula contained in the
Articles (generally the highest price paid by the Interested Person for any
shares which he has acquired), (b) there has been no reduction in the average
dividend rate from that which prevailed prior to the time the Interested Person
became such, and (c) the consideration to be received by shareholders who are
not Interested Persons is paid in cash or the same consideration that the
Interested Person previously paid for shares of such class of stock. These
provisions of the Articles may be amended, altered or repealed only by the
affirmative vote of the holders of not less than eighty percent (80%) of the
shares of each class of stock of the Company entitled to vote in elections of
directors.

Constituency Considerations. The Articles provide for the right of the
Company Board to consider the interests of various constituencies, including
employees, customers, suppliers and creditors of the Company as well as the
communities in which the Company is located, in addition to the interests of the
Company and its shareholders, in discharging its duties in determining what is
in the Company's best interests.

These provisions may make it more difficult for a person, entity or group
to effect a change in control of the Company that is not approved in advance by
the Company Board.

Limitation of Directors' Liability. The Articles eliminate, subject to
certain exceptions, the personal liability of directors to the Company or its
shareholders for monetary damages for breaches of such directors' duty of care
or other duties as a director. The Articles do not provide for the elimination
of or any limitation on the personal liability of a director for (i) any
appropriation, in violation of the director's duties, of any business
opportunity of the Company, (ii) acts or omissions that involve intentional
misconduct or a knowing violation of law, (iii) unlawful corporate distributions
or (iv) any transaction from which the director received an improper benefit.
The effect of these provisions, among others, is to eliminate the rights of the
Company and its shareholders (through shareholder derivative suits on behalf of
the Company), to recover monetary damages against a director for a breach of his
fiduciary duty of care except in the situations described in clauses (i) through
(iv) above. This provision does not limit or eliminate the rights of the Company
or any shareholder to seek nonmonetary relief (such as an injunction or a
rescission) in the event of a breach of a director's duty of care.

Indemnification. The Company's Bylaws also provide broad indemnification
rights to directors and officers so long as the director or officer acted in a
manner believed in good faith to be in, or not opposed to, the best interests of
the Company, and with respect to criminal proceedings, if the director had no
reasonable cause to believe his or her conduct was unlawful.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is the Bank.

46
<PAGE> 51

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, 1,375,380 shares of Common Stock will be
outstanding, and all of such shares will be freely tradeable without restriction
or further registration under the Securities Act, except for any shares
purchased in this Offering by an "affiliate" (as defined in the Securities Act)
of the Company, which will be subject to the resale limitations of Rule 144
("Rule 144") under the Securities Act.

The Company, its directors and executive officers, who, upon completion of
this Offering, will beneficially own an aggregate of 298,082 shares of Common
Stock, have each agreed not to offer, sell or contract to sell, or otherwise
dispose of, directly or indirectly, or announce an offering of, any shares of
Common Stock or any securities convertible into, or exchangeable for, shares of
Common Stock for a period of 180 days from the date of this Prospectus, without
the prior written consent of IJL, except under limited circumstances. See
"Underwriting."

Promptly upon completion of the Offering, the Company intends to file a
Registration Statement on Form S-8 with the SEC to register 100,000 shares of
Common Stock reserved for issuance or sale under the Stock Plan. As of August
17, 1998, there were outstanding options under the Stock Plan to purchase a
total of 8,500 shares of Common Stock, 3,000 of which were vested. Upon
completion of this Offering, an option to purchase 15,750 shares of Common Stock
will be granted under the Stock Plan. Following such registration, all shares of
Common Stock issuable upon the exercise of options granted under the Stock Plan
will be freely tradable without restriction under the Securities Act, unless
such shares are held by an affiliate of the Company. Upon completion of this
Offering, there will also be outstanding a presently exercisable option to
purchase 16,000 shares of Common Stock. The sale these shares by the Company
upon the exercise of this option will not be registered under the Securities Act
and such shares will be "restricted securities" as that term is defined in Rule
144.

Prior to the Offering, there has been no established market for the Common
Stock, and no predictions can be made about the effect, if any, that market
sales of shares of Common Stock or the availability of such shares for sale will
have on the market price prevailing from time to time. Nevertheless, the actual
sale of, or the perceived potential for the sale of, Common Stock in the public
market may have an adverse effect on the market price for the Common Stock.

47
<PAGE> 52

UNDERWRITING

Subject to the terms and conditions of the underwriting agreement among the
Company and the Underwriters named below (the "Underwriting Agreement"), the
Underwriters for whom IJL is acting as representative (the "Representative"),
have (i) severally agreed to purchase from the Company, and the Company has
agreed to sell to the Underwriters, the respective number of firm shares of
Common Stock (the "Firm Shares") set forth opposite each Underwriter's name
below, and (ii) severally agreed to purchase from the Company on a standby
basis, and the Company has agreed to sell to the Underwriters on a standby
basis, the number of Standby Shares set forth opposite each Underwriter's name
below:

<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
UNDERWRITER FIRM SHARES STANDBY SHARES
----------- ----------- --------------
<S> <C> <C>
Interstate/Johnson Lane Corporation.........................
............................................................
............................................................
............................................................
-------- --------
Total............................................. 430,000
======== ========
</TABLE>

The Underwriting Agreement provides that the obligations of the
Underwriters are subject to approval of certain legal matters by counsel and to
various other conditions customary in a firm commitment underwritten public
offering. The Underwriters' are obligated to purchase and pay for all the Firm
Shares offered hereby (other than those covered by the over-allotment option
described below) if any such shares are purchased. The Underwriters are
obligated to purchase and pay for only the number of Standby Shares that become
available for distribution by the Underwriters as a result of withdrawals of
subscriptions to purchase shares of Common Stock from the best efforts offering
conducted by the Company from February 19, 1998 through August 18, 1998 (the
"Best Efforts Offering"), and then only if any of the Firm Shares are purchased.
The Best Efforts Offering resulted in receipt of subscriptions for 310,000
shares of Common Stock. Prior to 1998, the persons who subscribed to purchase
these shares will have an opportunity to withdraw their subscriptions from the
Best Efforts Offering. Any shares subject to subscriptions that are withdrawn
from the Best Efforts Offering will become available for distribution by the
Underwriters in this Offering. The Underwriting Discounts and Commissions (the
"Underwriting Discounts") with respect to the Firm Shares equal 7.5% of the
Price to Public on the cover page of this Prospectus (the "Public Offering
Price"), or $1.0125 per share. The Underwriting Discounts with respect to any
Standby Shares that become available for distribution by the Underwriters equal
6% of the Public Offering Price. In addition, the Representative will receive a
fee of $62,775 for its commitment to purchase the Standby Shares.

The Underwriters propose to offer the shares of Common Stock being
purchased directly to the public at the Public Offering Price and to certain
securities dealers at such price less a concession not in excess of
$ per share of Common Stock. The Underwriters may allow, and such
selected dealers may reallow, a concession not in excess of $ per share
to certain other brokers and dealers. After the initial public offering, the
Public Offering Price and other selling terms may be changed.

The Company has granted the Underwriters an option, exercisable within 30
days of the date of this Prospectus, to purchase up to 111,000 additional shares
of Common Stock to cover over-allotments, if any, at the Public Offering Price
less the Underwriting Discounts of 7.5%. To the extent that the Underwriters
exercise this option, in whole or in part, each Underwriter has agreed, subject
to certain conditions, to purchase a number of option shares approximately
proportionate to such Underwriter's commitment to purchase the Firm Shares as
set forth in the above table. The Underwriters may purchase such shares only to
cover over-allotments made in connection with this Offering.

The Underwriters do not intend to sell shares of Common Stock to any
account over which they exercise discretionary authority.

The Company, its executive officers and directors have each agreed with the
Underwriters that they will not sell, contract to sell, or otherwise dispose of
any shares of Common Stock or any securities convertible into or exchangeable
for any shares of Common Stock for a period of 180 days from the date of this
Prospectus

48
<PAGE> 53

without the prior written consent of the Representative, except (a) in the case
of the Company, (i) grants of options and issuances of Common Stock pursuant to
the Stock Plan and (ii) issuances of Common Stock or securities convertible into
Common Stock in connection with acquisitions, provided that the recipients of
such securities agree in writing with the Representative to be bound by the
unexpired term of such agreement not to sell; and (b) in the case of directors
and executive officers, shares of Common Stock disposed of as bona fide gifts or
pledges where the recipients of such gifts or pledges, as the case may be, agree
in writing with the Representative to be bound by the terms of such agreement.
The Underwriters may from time to time be a customer of, engage in transactions
with, and perform services for the Company or the Bank in the ordinary course of
business.

Prior to this Offering, there has been no public market for the Common
Stock. Accordingly, the Public Offering Price has been determined by negotiation
between the Company and the Representative. Among the factors considered in
addition to prevailing market conditions, were the Company's historical
performance, estimates of the business potential and earnings prospects of the
Company, an assessment of the Company's management and the consideration of the
above factors in relation to the market valuation of other community banks and
community bank holding companies in the Southeast. There can be no assurance
that the price at which shares of the Common Stock will sell in the public
market after this Offering will not be lower than the Public Offering Price.

The Company has agreed to indemnify the Underwriters against, and to
contribute to certain losses arising out of, certain liabilities, including
liabilities under the Securities Act or contribute to payments that the
Underwriters may be required to make in respect thereof.

In connection with this Offering, the Underwriters may purchase and sell
Common Stock in the open market in accordance with Regulation M under the
Exchange Act. These transactions may include over-allotment and stabilizing
transactions and purchases to cover syndicate short positions created in
connection with this Offering. Stabilizing transactions consist of certain bids
or purchases for the purpose of preventing or retarding a decline in the market
price of the Common Stock; and syndicate short positions involve the sale by the
Underwriters of a greater number of shares of Common Stock than they are
required to purchase from the Company in the Offering. The Underwriters also may
impose a penalty bid, whereby selling concessions allowed to syndicate members
or other broker-dealers in respect of the Common Stock sold in this Offering for
their account may be reclaimed by the syndicate if such securities are
repurchased by the syndicate in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
Common Stock which may be higher than the price that might otherwise prevail in
the open market. These activities, if commenced, may be effected on the SmallCap
Market or otherwise, and may be discontinued at any time.

LEGAL MATTERS

Certain legal matters in connection with this Offering are being passed
upon for the Company by Smith, Gambrell & Russell, LLP, Atlanta, Georgia,
counsel to the Company. Certain legal matters to related to this Offering are
being passed upon for the Underwriters by Moore & Van Allen, PLLC, Charlotte,
North Carolina.

EXPERTS

The financial statements included in this Prospectus have been audited by
Cherry, Bekaert & Holland, L.L.P., independent auditors, as stated in their
report appearing herein; and are included in reliance upon the report of said
firm given upon their authority as experts in accounting and auditing.

49
<PAGE> 54

AVAILABLE INFORMATION

The Company has filed a Registration Statement on Form SB-2 (together with
all amendments and exhibits filed or to be filed in connection therewith, the
"Registration Statement") under the Securities Act with respect to the Common
Stock offered hereby. This Prospectus does not contain all the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the SEC. Statements contained
herein concerning the provisions of documents are necessarily summaries of such
documents, and each statement is qualified in its entirety by reference to the
copy of the applicable document filed with the SEC.

The Company is subject to certain informational requirements of the
Exchange Act and, in accordance therewith, files reports and other information
with the SEC. Such reports and other information can be inspected and copied at
the public reference facilities maintained by the SEC at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the SEC's regional offices located
at Seven World Trade Center, 13th Floor, New York, New York 10048 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material can also be obtained at prescribed rates by writing to the
Securities and Exchange Commission, Public Reference Section, 450 Fifth Street,
N.W., Washington, D.C. 20549. The SEC also maintains a World Wide Web site,
containing such reports, proxy and information statements and other information
regarding the Company, at http://www.sec.gov.

50
<PAGE> 55

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
NO.
----
<S> <C>
GEORGIA-CAROLINA BANCSHARES, INC.
Condensed Consolidated Balance Sheets as of June 30, 1998
and 1997.................................................. F-2
Condensed Consolidated Statements of Income and
Comprehensive Income for the Six Months Ended June 30,
1998 and 1997............................................. F-3
Condensed Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1998 and 1997....................... F-4
Notes to Condensed Consolidated Financial Statements........ F-5

GEORGIA-CAROLINA BANCSHARES, INC.
Report of Cherry, Bekaert & Holland, L.L.P., Independent
Certified Public Accountants.............................. F-6
Consolidated Statements of Financial Condition as of
December 31, 1997 and 1996................................ F-7
Consolidated Statements of Income for the Years Ended
December 31, 1997 and 1996................................ F-8
Consolidated Statements of Shareholders' Equity for the
Years Ended December 31, 1997 and 1996.................... F-9
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997 and 1996................................ F-10
Notes to Consolidated Financial Statements.................. F-11
</TABLE>

F-1
<PAGE> 56

GEORGIA-CAROLINA BANCSHARES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
JUNE 30,
-----------------
1998 1997
------- -------
<S> <C> <C>
ASSETS
Cash and due from banks..................................... $ 1,092 $ 1,239
Federal funds sold.......................................... 3,010 2,850
Interest-bearing deposits in banks.......................... 199 199
Securities available-for-sale............................... 15,778 11,869
Loans, net of allowance for loan losses of $824 (1998), $881
(1997).................................................... 20,632 18,878
Bank premises and fixed assets.............................. 2,038 1,458
Accrued interest receivable................................. 483 389
Foreclosed real estate, net of allowance.................... 253 452
Deferred tax benefit........................................ 176 243
Other assets................................................ 328 114
------- -------
TOTAL ASSETS...................................... $43,989 $37,691
======= =======

LIABILITIES AND SHAREHOLDERS' EQUITY
DEPOSITS:
Non-interest bearing...................................... $ 4,464 $ 3,666
Interest-bearing:
NOW accounts........................................... 7,265 3,792
Savings................................................ 2,100 1,891
Money market accounts.................................. 3,025 2,730
Time deposits of $100,000, and over.................... 4,141 5,385
Other time deposits.................................... 15,222 12,805
------- -------
TOTAL DEPOSITS.................................... 36,217 30,269
Accrued expenses and other liabilities...................... 426 261
------- -------
TOTAL LIABILITIES................................. 36,643 30,530
------- -------
SHAREHOLDERS' EQUITY:
Common stock, par value $.001; 9,000,000 shares
authorized; 635,380 shares issued and outstanding...... 1 1
Preferred stock, par value $.001; 1,000,000 shares
authorized; none issued................................ -- --
Additional paid-in capital................................ 6,354 6,354
Retained earnings......................................... 943 845
Unrealized gain (loss) on securities available-for-sale,
net of tax............................................. 48 (39)
------- -------
TOTAL SHAREHOLDERS' EQUITY........................ 7,346 7,161
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........ $43,989 $37,691
======= =======
</TABLE>

See notes to condensed consolidated financial statements.

F-2
<PAGE> 57

GEORGIA-CAROLINA BANCSHARES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------
1998 1997
---------- ----------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans................................ $1,113 $1,019
Interest on taxable securities............................ 403 343
Interest on nontaxable securities......................... 31 46
Interest on Federal funds sold............................ 88 39
Interest on deposits in other banks....................... 4 5
------ ------
TOTAL INTEREST INCOME............................. 1,639 1,452
------ ------
INTEREST EXPENSE
Interest on time deposits of $100,000 or more............. 128 133
Interest on other deposits................................ 551 455
Interest on Federal funds purchased....................... -- 2
------ ------
TOTAL INTEREST EXPENSE............................ 679 590
------ ------
NET INTEREST INCOME............................... 960 862
PROVISION FOR LOAN LOSSES................................... -- 12
------ ------
NET INTEREST INCOME AFTER PROVISION FOR LOAN
LOSSES.......................................... 960 850
------ ------
NONINTEREST INCOME
Service charges on deposits............................... 114 111
Other income.............................................. 18 23
Net realized gain (loss), sales of available-for-sale
securities............................................. (4) (3)
------ ------
128 131
------ ------
NONINTEREST EXPENSE
Salaries and employee benefits............................ 514 389
Occupancy expenses........................................ 94 79
Other expenses............................................ 354 262
------ ------
962 730
------ ------
INCOME BEFORE INCOME TAXES.................................. 126 251
INCOME TAX EXPENSE.......................................... 28 80
------ ------
NET INCOME........................................ $ 98 $ 171
====== ======
OTHER COMPREHENSIVE INCOME, NET OF TAX
Unrealized gain (loss) on securities arising during
current period, net of reclassification adjustment for
gains included in net income........................... 35 (14)
------ ------
COMPREHENSIVE INCOME........................................ $ 133 $ 157
====== ======
NET INCOME PER SHARE OF COMMON STOCK
Basic..................................................... $ .15 $ .27
====== ======
Diluted................................................... $ .15 $ .26
====== ======
DIVIDENDS PER SHARE OF COMMON STOCK......................... $ .10 $ .20
====== ======
</TABLE>

See notes to condensed consolidated financial statements.

F-3
<PAGE> 58

GEORGIA-CAROLINA BANCSHARES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------
1998 1997
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................ $ 98 $ 171
Adjustments to reconcile net income to net cash provided
by (used in) operating activities......................
Depreciation and amortization........................ 53 39
Provision for loan loss.............................. -- 12
Deferred income tax.................................. 7 49
Adjustment to foreclosed real estate................. -- 5
Net (increase) decrease in accrued interest
receivable.......................................... (102) 20
Net increase in other assets......................... (218) (66)
Net increase in other liabilities.................... 71 22
------- -------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES....................................... (91) 252
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in federal funds sold............. 740 (1,430)
Net increase in interest-bearing deposits with banks...... (99) (99)
Net (increase) decrease in loans, net..................... (1,660) 1,097
Net purchase and proceeds, available-for-sale
securities............................................. (1,967) 713
Net purchases of premises and equipment................... (645) (57)
Proceeds from sale of foreclosed real estate.............. 53 188
------- -------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES....................................... (3,578) 412
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits....................... 3,279 (386)
Dividends paid............................................ (64) (127)
------- -------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES....................................... 3,215 (513)
------- -------
NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKS.......... (454) 151
CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD.............. 1,546 1,088
------- -------
CASH AND DUE FROM BANKS AT END OF PERIOD.................... $ 1,092 $ 1,239
======= =======
</TABLE>

See notes to condensed consolidated financial statements.

F-4
<PAGE> 59

GEORGIA-CAROLINA BANCSHARES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
(UNAUDITED)

NOTE 1 -- BASIS OF PRESENTATION

The accompanying financial statements include the accounts of
Georgia-Carolina Bancshares, Inc. (the "Company") and its wholly-owned
subsidiary, First Bank of Georgia (the "Bank"). Significant intercompany
transactions and accounts are eliminated in consolidation.

The financial statements as of and for the six months ended June 30, 1998
and 1997 are unaudited and have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. These condensed consolidated
financial statements should be read in conjunction with the Company's audited
consolidated financial statements and notes thereto for the year ended December
31, 1997.

The financial information included herein reflects all adjustments
(consisting of normal recurring adjustments) which are, in the opinion of
management, necessary to a fair presentation of the financial position and
results for interim periods.

The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities and income and expense amounts. Actual results could differ from
those estimates.

NOTE 2 -- EARNINGS PER SHARE

Earnings per share are calculated on the basis of the weighted average
number of shares outstanding. During 1997 the Company adopted SFAS No. 128,
"Earnings Per Share." This Statement establishes standards for computing and
presenting basic and diluted earnings per share. As the Company has granted
stock options to certain officers of the Company, diluted earnings per share has
been presented in the Statements of Income and Comprehensive Income. See the
Company's audited consolidated financial statements and notes thereto for the
year ended December 31, 1997, for information on the outstanding stock options.

NOTE 3 -- COMPREHENSIVE INCOME

During the first quarter of 1998 the Company adopted SFAS No. 130,
"Reporting Comprehensive Income." This Statement establishes standards for
reporting and display of comprehensive income in a set of financial statements.
Matters of comprehensive income have been presented in the accompanying
condensed consolidated statements of income and comprehensive income for 1998
and 1997.

F-5
<PAGE> 60

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors
GEORGIA-CAROLINA BANCSHARES, INC.
Thomson, Georgia

We have audited the accompanying consolidated statements of financial
condition of GEORGIA-CAROLINA BANCSHARES, INC. as of December 31, 1997 and 1996,
and the related consolidated statements of income, changes in shareholders'
equity, and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

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

Cherry, Bekaert & Holland, L.L.P.

Augusta, Georgia
February 6, 1998, except for Note 15 as
to which the date is August 27, 1998

F-6
<PAGE> 61

GEORGIA-CAROLINA BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1997 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
ASSETS
Cash and due from banks..................................... $ 1,546 $ 1,088
Federal funds sold.......................................... 3,750 1,420
Interest-bearing deposits in banks.......................... 100 100
Securities available-for-sale............................... 13,778 12,603
Loans, net of allowance for loan losses..................... 18,972 20,116
Bank premises and fixed assets.............................. 1,446 1,440
Accrued interest receivable................................. 381 409
Foreclosed real estate, net of allowance.................... 306 516
Deferred tax benefit........................................ 182 286
Other assets................................................ 110 48
------- -------
TOTAL ASSETS...................................... $40,571 $38,026
======= =======

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing...................................... $ 3,654 $ 3,096
Interest-bearing:
NOW accounts........................................... 7,187 4,959
Savings................................................ 1,602 2,007
Money market accounts.................................. 2,832 2,178
Time deposits of $100,000, and over.................... 4,700 4,746
Other time deposits.................................... 12,962 13,669
------- -------
Total deposits.................................... 32,937 30,655
Accrued expenses and other liabilities...................... 356 239
------- -------
Total liabilities................................. 33,293 30,894
------- -------
Commitments and contingent liabilities
Shareholders' equity:
Preferred stock, par value $.001; 1,000,000 shares
authorized; none issued................................ -- --
Common stock, par value $.001; 9,000,000 shares
authorized; 635,380 shares issued and outstanding...... 1 1
Additional paid-in capital................................ 6,354 6,354
Retained earnings......................................... 908 801
Unrealized gain (loss) on securities available-for-sale,
net of tax............................................. 15 (24)
------- -------
Total shareholders' equity........................ 7,278 7,132
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........ $40,571 $38,026
======= =======
</TABLE>

See notes to consolidated financial statements.

F-7
<PAGE> 62

GEORGIA-CAROLINA BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1997 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans................................ $2,034 $2,178
Interest on taxable securities............................ 670 677
Interest on nontaxable securities......................... 88 95
Interest on Federal funds sold............................ 160 87
Interest on deposits in other banks....................... 11 16
------ ------
TOTAL INTEREST INCOME............................. 2,963 3,053
------ ------
INTEREST EXPENSE
Interest on time deposits of $100,000, or more............ 273 310
Interest on other deposits................................ 938 1,074
Interest on federal funds purchased....................... 2 1
------ ------
TOTAL INTEREST EXPENSE............................ 1,213 1,385
------ ------
NET INTEREST INCOME............................... 1,750 1,668
PROVISION FOR LOAN LOSSES................................... 16 56
------ ------
NET INTEREST INCOME AFTER PROVISION FOR LOAN
LOSSES........................................... 1,734 1,612
------ ------
NONINTEREST INCOME
Service charges on deposits............................... 210 239
Other income.............................................. 45 52
Net realized gain, sales of available-for-sale
securities............................................. 2 1
------ ------
257 292
------ ------
NONINTEREST EXPENSE
Salaries and employee benefits............................ 831 714
Occupancy expenses........................................ 167 231
Other expenses............................................ 621 502
------ ------
1,619 1,447
INCOME BEFORE INCOME TAXES.................................. 372 457
INCOME TAX EXPENSE.......................................... 138 132
------ ------
NET INCOME........................................ $ 234 $ 325
====== ======
EARNINGS PER SHARE
Net income, basic......................................... $ 0.37 $ 0.51
====== ======
Net income, diluted....................................... $ 0.35 $ 0.50
====== ======
</TABLE>

See notes to consolidated financial statements.

F-8
<PAGE> 63

GEORGIA-CAROLINA BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS)
ON
SECURITIES
COMMON STOCK ADDITIONAL AVAILABLE-FOR- TOTAL
------------------- PAID-IN RETAINED SALE, NET OF SHAREHOLDERS'
SHARES PAR VALUE CAPITAL EARNINGS DEFERRED TAXES EQUITY
------- --------- ---------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995....... 635,380 $1 $6,354 $ 540 $ 42 $ 6,937
Net income....................... -- -- -- 325 -- 325
Change in unrealized gain (loss)
on securities
available-for-sale, net of
deferred taxes................. -- -- -- -- (66) (66)
Cash dividend of $.10 per
share.......................... -- -- -- (64) -- (64)
------- -- ------ ----- ---- -------
BALANCE, DECEMBER 31, 1996....... 635,380 1 6,354 801 (24) 7,132
Net income....................... -- -- -- 234 -- 234
Change in unrealized gain (loss)
on securities
available-for-sale, net of
deferred taxes................. -- -- -- -- 39 39
Cash dividend of $.20 per
share.......................... -- -- -- (127) -- (127)
------- -- ------ ----- ---- -------
BALANCE, DECEMBER 31, 1997....... 635,380 $1 $6,354 $ 908 $ 15 $ 7,278
======= == ====== ===== ==== =======
</TABLE>

See notes to consolidated financial statements.

F-9
<PAGE> 64

GEORGIA-CAROLINA BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................ $ 234 $ 325
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 86 151
Provision for loan losses.............................. 16 56
Net realized loss on available-for-sale securities..... -- --
Deferred income tax.................................... 83 60
Adjustment to foreclosed real estate................... -- 48
Other gains and losses, net............................ (4) 2
Net decrease (increase) in accrued interest
receivable............................................ 28 (16)
Net decrease (increase) in other assets................ (62) 26
Net increase in other liabilities...................... 115 46
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES............ 496 698
------- -------

CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease in interest-bearing deposits with banks...... -- 98
Net (increase) decrease in Federal funds sold............. (2,330) 4,530
Net (increase) decrease in loans, net..................... 1,058 (446)
Purchases of available-for-sale securities................ (6,166) (5,360)
Proceeds from sales of available-for-sale securities...... 2,096 248
Proceeds from maturities of available-for-sale
securities............................................. 2,957 3,382
Proceeds from sale of foreclosed real estate.............. 284 67
Net purchases of premises and equipment................... (92) (40)
------- -------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES....................................... (2,193) 2,479
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits....................... 2,282 (4,665)
Dividends paid............................................ (127) (64)
------- -------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES....................................... 2,155 (4,729)
------- -------
NET INCREASE (DECREASE) IN CASH AND DUE FROM
BANKS............................................ 458 (1,552)
CASH AND DUE FROM BANKS AT BEGINNING OF YEAR................ 1,088 2,640
------- -------
CASH AND DUE FROM BANKS AT END OF YEAR...................... $ 1,546 $ 1,088
======= =======
</TABLE>

See notes to consolidated financial statements.

F-10
<PAGE> 65

GEORGIA-CAROLINA BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996

NOTE 1 -- NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS

Georgia-Carolina Bancshares, Inc. (the "Company") is a one-bank holding
company. Substantially all of its business is conducted by its wholly-owned
subsidiary, First Bank of Georgia (the "Bank"), Thomson, Georgia. Most of the
Bank's loans and loan commitments have been granted to customers in the Thomson,
Georgia and McDuffie County area. Many of the Bank's loan customers are also
depositors of the Bank.

The Company and Bank are subject to the regulations of Federal and state
banking agencies and is periodically examined by them.

During 1997, the Board of Directors of the Bank formed a holding company to
acquire 100% of the outstanding shares of the Bank's stock. The transaction has
been accounted for in a manner substantially similar to a pooling of interests.
Accordingly, all periods presented in the consolidated financial statements have
been restated to give effect to the transaction as if it occurred at the
beginning of the earliest period presented.

SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION -- The consolidated financial statements include the
accounts of the Company and the Bank. Significant intercompany transactions and
accounts are eliminated in consolidation. The accounting and reporting policies
of the Bank conform to generally accepted accounting principles and general
practices within the banking industry.

ESTIMATES -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

CASH AND DUE FROM BANKS -- 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). The Bank maintains due from accounts with banks
primarily located in Georgia. Balances generally exceed insured amounts.

INVESTMENT SECURITIES -- The Bank's investments in securities are
classified and accounted for as follows:

Securities available-for-sale -- Securities classified as
available-for-sale are identified when acquired as being available-for-sale
to meet liquidity needs or other purposes. They are carried at fair value
with unrealized gains and losses, net of taxes, reported at a net amount as
a separate component of shareholders' equity.

Securities to be held-to-maturity -- Securities classified as
held-to-maturity are those debt securities the Bank has both the intent and
ability to hold to maturity regardless of changes in market conditions,
liquidity needs or changes in general economic conditions. These securities
are carried at cost adjusted for amortization of premium and accretion of
discount, computed by the interest method over their contractual lives.

The Bank has not classified any securities as trading.

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

LOANS AND RESERVE FOR LOAN LOSSES -- Loans are stated at principal amounts
outstanding less unearned income and the allowance for loan losses. Interest
income on loans is credited to income based on the principal amount outstanding
at the respective rate of interest, except for unearned interest on discounted
loans which is recognized as income over the term of the loan using a method
that approximates a level yield.

F-11
<PAGE> 66
GEORGIA-CAROLINA BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Accrual of interest income is discontinued when a loan becomes 90 days past
due as to principal and interest or when, in management's judgment, the interest
will not be collectible in the normal course of business. Accrual of interest on
such loans is resumed when, in management's judgment, the collection of interest
and principal becomes probable. When a loan is placed on nonaccrual status, all
interest previously accrued but not collected is reversed against current
interest income. Interest income is subsequently recognized only to the extent
cash payments are received.

Effective January 1, 1995, the Bank prospectively adopted Statement of
Financial Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for
the Impairment of a Loan," and SFAS No. 118, "Accounting by Creditors for
Impairment of a Loan -- Income Recognition and Disclosures; An Amendment to SFAS
No. 114." These Statements apply to all loans of the Bank that are identified
for evaluation except for smaller-balance homogenous residential mortgage and
consumer installment loans that are collectively evaluated by management for
impairment. A loan is impaired when, based on current information and events, it
is probable that the Bank will be unable to collect all amounts due according to
the contractual terms of the loan agreement. Management of the Bank evaluates
the borrower's ability to pay, the value of any collateral, and other factors in
determining when a loan is impaired. Management does not consider a loan to be
impaired during a period of delay in payment if it is expected that the Bank
will collect all amounts due including interest accrued at the contractual
interest rate for the period of the delay.

Interest payments on impaired loans are applied to the remaining principal
balance until the balance is fully recovered. Once principal is recovered, cash
payments received are recorded as recoveries to the extent of any principal
previously charged-off, and then as interest income.

The allowance for loan losses is established through a provision for loan
losses charged to expense. Loans, including impaired loans, are charged against
the allowance for loan losses when management believes that collectibility of
the principal is unlikely. The allowance is an amount that management believes
will be adequate to absorb estimated losses on existing loans that may become
uncollectible, based on evaluation of the collectibility of certain specific
loans and prior loss experience. This evaluation also takes into consideration
such factors as changes in the nature and volume of the loan portfolio, overall
portfolio quality, review of specific problem loans and current economic
conditions that may affect the borrower's ability to pay. While management uses
the best information available to make its evaluation, future adjustments to the
allowance may be necessary if there are significant changes in economic
conditions.

FORECLOSED REAL ESTATE -- Foreclosed real estate represents properties
acquired through foreclosure or other proceedings. The property is held for sale
and is recorded at the lower of the recorded amount of the loan or fair value of
the properties less estimated costs of disposal. Any write-down to fair value at
the time of foreclosure is charged to the allowance for loan losses. Property is
evaluated regularly to ensure the carrying amount is supported by its current
fair value. Foreclosed real estate is reported net of allowance for losses in
the Bank's financial statements.

BANK PREMISES AND EQUIPMENT -- Premises and equipment are stated at cost
less accumulated depreciation, computed by straight-line and declining balance
methods over the estimated useful lives of the assets.

INCOME TAXES -- Provisions for income taxes are based on amounts reported
in the statements of income after exclusion of nontaxable income, such as
interest on state and municipal securities, and include deferred taxes on
temporary difference in the recognition of income and expense for tax and
financial statement purposes. Deferred taxes are computed on the liability
method. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized.

EARNINGS PER SHARE -- Earnings per share are calculated on the basis of the
weighted average number of shares outstanding. During the year, the Company
adopted SFAS No. 128, "Earnings per Share." This

F-12
<PAGE> 67
GEORGIA-CAROLINA BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Statement establishes standards for computing and presenting earnings per share
("EPS") and applies to entities with publicly held common stock or potential
common stock.

FAIR VALUE OF FINANCIAL INSTRUMENTS -- The financial statements include
disclosure of fair value information about the Bank's financial instruments,
whether or not recognized in the balance sheet, for which it is practicable to
estimate that value. In cases where quoted market prices are not available, fair
values are based on estimates using present value or other valuation techniques.
Those techniques are significantly affected by the assumptions used, including
the discount rate and estimates of future cash flows. In that regard, the
derived fair value estimates cannot be substantiated by comparison to
independent markets and, in many cases, could not be realized in immediate
settlement of the instrument. Accordingly, the aggregate fair value amounts
presented are not intended to and do not represent the underlying value of the
Bank.

The following methods and assumptions are used by the Bank in estimating
fair values of financial instruments:

Cash and due from banks, Federal funds sold and interest-bearing
deposits in banks -- Due to the short-term nature of these instruments,
their estimated fair values approximates their carrying amounts.

Available-for-sale and held-to-maturity securities -- Estimated fair
values are based on quoted market prices when available. Where quoted
market prices are not available, quoted market prices of comparable
instruments or discounted cash flow methods are used to estimate fair
value.

Loans -- Fair values for loans are estimated by discounted cash flows
using interest rates currently being offered by the Bank for loans with
similar terms and similar credit quality.

Deposit liabilities -- Due to the short-term nature of demand and
savings accounts, the estimated fair value of these instruments
approximates their carrying amounts. Fair values for certificates of
deposit are estimated by discounted cash flows using interest rates
currently being offered by the Bank on certificates.

Commitments to extend credit and standby letters of credit are not recorded
until such commitments are funded. The value of these commitments are the fees
charged to enter into such agreements. These commitments do not represent a
significant value to the Bank until such commitments are funded. The Bank has
determined that such instruments do not have a distinguishable fair value and no
fair value has been assigned to these instruments.

NET ACCOUNTING PRONOUNCEMENTS -- The Financial Accounting Standards Board
("FASB") has issued SFAS No. 130, "Reporting Comprehensive Income," and SFAS No.
131, "Disclosures About Segments of an Enterprise and Related Information." Both
Statements will be effective for the Company beginning in 1998. SFAS No. 130
establishes standards for reporting and display of comprehensive income to be
reported in a set of financial statements with the same prominence as other
financial statements. SFAS No. 131 establishes standards for the way that public
businesses report information about operating segments, products and services,
geographic areas and major customers in a set of financial statements. Each of
these Statements is a matter of reporting and display and does not effect
revenue or expense measurement. Management of the Company does not expect the
adoption of these Statements to materially effect the Company's financial
statements.

F-13
<PAGE> 68
GEORGIA-CAROLINA BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 2 -- INVESTMENT SECURITIES

The amortized cost and fair values of securities owned as of December 31,
are shown below:

<TABLE>
<CAPTION>
1997
---------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
--------- ---------- ---------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Available-for-sale securities:
U.S. Government and agency securities........ $10,713 $40 $(27) $10,726
State, county and municipal securities....... 1,784 41 -- 1,825
Mortgage-backed securities................... 1,258 2 (33) 1,227
------- --- ---- -------
$13,755 $83 $(60) $13,778
======= === ==== =======
</TABLE>

<TABLE>
<CAPTION>
1996
---------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
--------- ---------- ---------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Available-for-sale securities:
U.S. Government and agency securities........ $ 7,840 $33 $ (51) $ 7,822
State, county and municipal securities....... 2,133 16 (4) 2,145
Mortgage-backed securities................... 2,668 22 (54) 2,636
------- --- ----- -------
$12,641 $71 $(109) $12,603
======= === ===== =======
</TABLE>

The amortized cost and fair value of securities as of December 31, 1997, by
contractual maturity are as follows. Actual maturities may differ from
contractual maturities in mortgage-backed securities because the mortgages
underlying the securities may be called or prepaid without penalty, therefore
these securities are not included in the maturity categories in the following
maturity summary.

<TABLE>
<CAPTION>
SECURITIES
AVAILABLE-FOR-SALE
--------------------
AMORTIZED FAIR
COST VALUE
--------- -------
(IN THOUSANDS)
<S> <C> <C>
One year or less............................................ $ 641 $ 645
After one year through five years........................... 3,924 3,921
After five years through ten years.......................... 7,832 7,880
After ten years............................................. 100 105
Montage-backed securities................................... 1,258 1,227
------- -------
$13,755 $13,778
======= =======
</TABLE>

Securities with a carrying amount of approximately $3.4 million and $6.5
million at December 31, 1997 and 1996, respectively, were pledged to secure
public deposits and for other purposes.

Net realized gains (losses) on sales of securities available-for-sale were:

F-14
<PAGE> 69
GEORGIA-CAROLINA BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 3 -- LOANS

The composition of loans is summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Commercial and industrial................................... $ 3,026 $ 3,865
Real estate -- construction................................. 4,893 2,547
Real estate -- mortgage..................................... 9,137 10,917
Consumer.................................................... 2,676 2,807
Federal funds sold, term.................................... -- 872
------- -------
19,732 21,008
Unearned income............................................. (8) (3)
------- -------
19,724 21,005
Allowance for loan losses................................... (752) (889)
------- -------
Loans, net........................................ $18,972 $20,116
======= =======
</TABLE>

Changes in the allowance for loan losses were as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1997 1996
---- ------
(IN THOUSANDS)
<S> <C> <C>
Balance, beginning of year.................................. $889 $1,155
Provision charged to operations............................. 16 56
Recoveries.................................................. 89 231
Loans charged off........................................... (242) (553)
---- ------
Balance, end of year.............................. $752 $ 889
==== ======
</TABLE>

Loans for which the accrual of interest had been discontinued or reduced
amounted to approximately $40,000 and $140,000 at December 31, 1997 and 1996,
respectively. There was no significant reduction in interest income associated
with nonaccrual and renegotiated loans. There were no loans identified as
impaired under SFAS No. 114 at December 31, 1997 or 1996.

At December 31, 1997, executive officers and directors, and companies in
which they have a beneficial ownership, were indebted to the Bank in the
aggregate amount of $563,000. The interest rates on these loans were
substantially the same as rates prevailing at the time of the transactions, and
repayment terms are customary for the type of loan involved. Following is a
summary of transactions for 1997 and 1996:

<TABLE>
<CAPTION>
1997 1996
----- -----
(IN THOUSANDS)
<S> <C> <C>
Balance, beginning of year.................................. $408 $573
Advances.................................................... 225 108
Repayments.................................................. 70 273
---- ----
Balance, end of year.............................. $563 $408
==== ====
</TABLE>

F-15
<PAGE> 70
GEORGIA-CAROLINA BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 4 -- FORECLOSED REAL ESTATE

A summary of foreclosed real estate is as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1997 1996
------ ------
(IN THOUSANDS)
<S> <C> <C>
Carrying amount of property................................. $336 $613
Less, valuation allowance................................... 30 97
---- ----
$306 $516
==== ====
</TABLE>

NOTE 5 -- BANK PREMISES AND EQUIPMENT

Bank premises and equipment consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Land........................................................ $ 475 $ 475
Building and improvements................................... 1,248 1,248
Equipment, furniture & fixtures............................. 825 750
------- -------
Total cost........................................ 2,548 2,473
Less accumulated depreciation............................... (1,102) (1,033)
------- -------
Premises and equipment, net....................... $ 1,446 $ 1,440
======= =======
</TABLE>

NOTE 6 -- DEPOSITS

At December 31, 1997, the scheduled maturities of time-deposit liabilities
were as follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1998...................................................... $ 13,008
1999...................................................... 3,344
2000...................................................... 1,128
2001...................................................... 60
2002 and thereafter....................................... 122
--------------
$ 17,662
==============
</TABLE>

NOTE 7 -- EMPLOYEE BENEFIT PLAN

The Bank has a 401(k) salary-deferred plan covering substantially all
employees. At the discretion of the Bank's Board of Directors, the Bank may
match a percentage of the annual amounts deferred by employees. Matching amounts
are funded by the Bank as accrued. Total deferred and matching amounts are
limited to amounts that can be deducted for Federal income tax purposes. The
Bank's matching contribution for the three years ended December 31, 1997, was
approximately $12,000 per year.

NOTE 8 -- SHAREHOLDERS' EQUITY AND REGULATORY MATTERS

The primary source of funds available to the Company is the payment of
dividends by the subsidiary Bank. Banking regulations limit the amount of
dividends that may be paid by the Bank without prior approval of regulatory
agencies. Approximately $115,000 is available to be paid as dividends at
December 31, 1997, without prior regulatory approval.

F-16
<PAGE> 71
GEORGIA-CAROLINA BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In 1995, regulatory agencies required the Bank to enter into a Memorandum
of Understanding with the agencies requiring the Bank to comply with and
implement certain operating procedures. In 1996, the regulatory agencies
released the Bank from the Memorandum of Understanding.

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

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

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

The Bank's actual capital amounts and ratios are also presented in the
table.

<TABLE>
<CAPTION>
REQUIRED
TO BE WELL-
CAPITALIZED
UNDER
REQUIRED PROMPT
FOR CAPITAL CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS
-------------- ------------------ ------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- -------- ------- -------- -------
(IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1997:
Total capital
(To Risk Weighted Assets)................. $7,400 31.3% $1,890 8.0% $2,363 10.0%
Tier I capital
(To Risk Weighted Assets)................. 7,099 30.0 945 4.0 1,418 6.0
Tier I capital
(To Average Assets)....................... 7,099 18.9 1,503 4.0 1,879 5.0
</TABLE>

As of December 31, 1996, the Bank's actual regulatory capital ratios were
as follows:

<TABLE>
<S> <C>
Total capital (to Risk Weighted Assets)..................... 32.1%
Tier I capital (to Risk Weighted Assets).................... 30.8
Tier I capital (to Average Assets).......................... 17.6
</TABLE>

During 1997 the Company adopted the 1997 Stock Option Plan (the "Plan") for
eligible directors, officers and key employees of the Company and subsidiary
bank. Options are granted to purchase common shares at prices not less than the
fair market value of the stock at the date of grant as established by the Board
of Directors. The maximum number of shares which may be reserved and made
available-for-sale under the Plan is 100,000 shares.

F-17
<PAGE> 72
GEORGIA-CAROLINA BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Plan provides for the grant of both incentive and nonqualified stock
options on the Company's common stock. The Board of Directors of the Company
establishes to whom options shall be granted and determines exercise prices,
vesting requirements and the number of shares covered by each option.

As permitted by SFAS No. 123, "Accounting for Stock Based Compensation,"
the Company has elected to account for the Plan in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees."

Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, and has been determined as if the Company had
accounted for the Plan under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant using an option
pricing model which included the following assumptions:

<TABLE>
<S> <C>
Dividend yield.............................................. 1.0%
Volatility.................................................. 10.0
Risk-free rate.............................................. 7.5
</TABLE>

In addition, the model assumed that each option was exercised during the
first year of vesting.

For purposes of pro forma disclosures, the estimated fair value of options
is amortized to expense over the option's vesting period. The Company's pro
forma information follows (in thousands except for earnings per share
information):

<TABLE>
<S> <C>
Pro forma net income........................................ $231
Pro forma earnings per share................................ .36
</TABLE>

Option valuation models require the input of highly subjective assumptions
including the expected stock price volatility. Changes in the subjective input
assumptions can materially affect the fair value estimate. value estimate. In
management's opinion, the model does not necessarily provide a reliable single
measure of the fair value of options.

During 1997, all options granted have ten year terms to expiration and vest
and become exercisable based on the following schedule of years of continued
employment:

<TABLE>
<CAPTION>
YEARS OF CONTINUED
EMPLOYMENT VESTING
------------------ -------
<S> <C>
3.................................................... 40%
4.................................................... 60
5.................................................... 80
6.................................................... 100
</TABLE>

A summary of the Company's stock option activity, and related formation,
for the year ended December 31, 1997 follows:

<TABLE>
<CAPTION>
EXERCISE
PRICE
OPTIONS PER SHARE
------- ---------
<S> <C> <C>
Outstanding -- beginning of year............................ -- $ --
Granted..................................................... 8,500 12.10
-----
Outstanding -- end of year.................................. 8,500
=====
</TABLE>

None of the options were exercisable at year end. The estimated fair value
per option of the options granted during the year is $0.92.

At December 31, 1997, options to purchase 16,000 shares of the Company's
common stock were outstanding from a plan originated prior to the Stock Plan.
The options are nontransferrable and have exercise
F-18
<PAGE> 73
GEORGIA-CAROLINA BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

prices between ten and twelve dollars per share and expire during the years 2000
to 2003. No options were exercised during the years ended December 31, 1997 and
1996. No additional shares are available to be granted under this plan. None of
the options outstanding under this plan are owned by employees or directors of
the Company.

During the current year the Company adopted SFAS No. 129, "Disclosure of
Information about Capital Structure." This Statement establishes standards for
disclosing information about the Company's capital structure. The adoption of
this Statement did not have a material effect on the Company's financial
statements.

NOTE 9 -- INCOME TAXES

The total income taxes in the statements of income for the years end
December 31, are as follows:

<TABLE>
<CAPTION>
1997 1996
------ ------
(IN THOUSANDS)
<S> <C> <C>
Current tax................................................. $ 58 $ 72
Deferred tax................................................ 80 60
---- ----
$138 $132
==== ====
</TABLE>

The Bank's provision for income taxes differs from the amounts computed by
applying the Federal and state income tax statutory rates to income before
income taxes. A reconciliation of the differences is as follows:

<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Statutory rates............................................. 38.0% 38.0%
Tax exempt income......................................... (8.0) (8.0)
Nondeductible interest.................................... 1.0 1.0
Other, including effect of graduated rate brackets........ 5.0 (2.0)
---- ----
36.0% 29.0%
==== ====
</TABLE>

The primary components of deferred income taxes at December 31, are as
follows:

<TABLE>
<CAPTION>
1997 1996
------ ------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets
Allowance for loan losses................................. $171 $253
Foreclosed real estate allowance.......................... 9 18
Unrealized loss on securities available-for-sale.......... -- 15
Other..................................................... 10 --
---- ----
Deferred income tax assets........................ 190 286
---- ----
Deferred tax liabilities
Unrealized gain on securities available-for-sale.......... 8 --
---- ----
Net deferred income tax asset..................... $182 $286
==== ====
</TABLE>

Realization of deferred tax assets is dependent upon sufficient future
taxable income during the period that deductible temporary differences are
expected to be available to reduce taxable income.

F-19
<PAGE> 74
GEORGIA-CAROLINA BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 10 -- COMMITMENTS AND CONTINGENCIES

In the ordinary course of business, the Bank may enter into
off-balance-sheet financial instruments which are not reflected in the financial
statements. These instruments include commitments to extend credit and standby
letters of credit. Such financial instruments are recorded in the financial
statements when funds are disbursed or the instruments become payable. The Bank
uses the same credit policies for these off-balance-sheet financial instruments
as it does for other instruments that are recorded in the financial statements.

Following is an analysis of significant off-balance-sheet financial
instruments:

<TABLE>
<CAPTION>
1997 1996
------ ------
(IN THOUSANDS)
<S> <C> <C>
Commitments to extend credit................................ $5,407 $1,981
Standby letters of credit................................... 31 50
------ ------
$5,438 $2,031
====== ======
</TABLE>

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

The nature of the business of the Bank is such that it ordinarily results
in a certain amount of litigation. In the opinion of management, there are no
present matters in which the outcome will have a material adverse effect on the
financial statements.

NOTE 11 -- SUPPLEMENTAL CONSOLIDATED CASH FLOW INFORMATION

<TABLE>
<CAPTION>
1997 1996
------ ------
(IN THOUSANDS)
<S> <C> <C>
Income taxes paid........................................... $ 68 $ 29
Interest paid............................................... 1,131 1,369
</TABLE>

NOTE 12 -- FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair values of the Bank's financial instruments, for those
instruments for which the Bank's management believes estimated fair value does
not by nature approximate the instruments' carrying amount, are as follows at
December 31, 1997 and 1996 (in millions):

<TABLE>
<CAPTION>
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Loans.................................................. $19.0 $18.9 $21.0 $20.9
===== ===== ===== =====
Certificates of deposit................................ $17.7 $17.8 $18.4 $18.4
===== ===== ===== =====
</TABLE>

Estimated fair value information of investment securities is presented in
Note 2 of the financial statements.

F-20
<PAGE> 75
GEORGIA-CAROLINA BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 13 -- OTHER EXPENSES

Other noninterest expenses are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1997 1996
----- -----
(IN THOUSANDS)
<S> <C> <C>
Data processing............................................. $ 97 $104
FDIC assessment............................................. 9 10
Legal and accounting........................................ 157 57
Printing and supplies....................................... 31 37
Other....................................................... 327 294
---- ----
$621 $502
==== ====
</TABLE>

NOTE 14 -- CONDENSED FINANCIAL INFORMATION ON GEORGIA-CAROLINA
BANCSHARES, INC. (PARENT COMPANY ONLY)

CONDENSED BALANCE SHEET
DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)

<TABLE>
<S> <C>
ASSETS
Cash...................................................... $ 1
Investment in subsidiary.................................. 7,286
Deferred tax benefit...................................... 10
------
TOTAL ASSETS........................................... $7,297
======
LIABILITIES
Accrued expenses and other liabilities.................... $ 19
SHAREHOLDERS' EQUITY........................................ 7,278
------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............. $7,297
======
</TABLE>

CONDENSED STATEMENT OF INCOME
DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)

<TABLE>
<S> <C>
INCOME, DIVIDENDS FROM SUBSIDIARY........................... $ 35
EXPENSES
Accounting and legal...................................... 48
Other..................................................... 4
----
(Loss) before income tax benefits and equity in
undistributed earnings of subsidiary.................. (17)
INCOME TAX BENEFITS......................................... 10
----
(Loss) before equity in undistributed earnings of
subsidiary............................................ (7)
Equity in undistributed earnings of subsidiary......... 241
----
NET INCOME............................................. $234
====
</TABLE>

F-21
<PAGE> 76
GEORGIA-CAROLINA BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED STATEMENT OF CASH FLOWS
DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)

<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................ $ 234
Adjustments to reconcile net income to net cash used in
operating activities
Equity in undistributed earnings of subsidiary......... (241)
Deferred income tax.................................... (10)
------
Total adjustments................................. (251)
------
Net cash used in operating activities............. (17)
------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in notes payable............................. 18
------
Net cash provided by financing activities......... 18
------
Net increase in cash........................................ 1
Cash at beginning of year................................... --
------
Cash at end of year......................................... $ 1
======
NONCASH INVESTING AND FINANCING ACTIVITIES
Equity of subsidiary at formation of holding company...... $6,990
======
</TABLE>

NOTE 15 -- ISSUANCE OF COMMON STOCK

The Company is in the process of filing with the Securities and Exchange
Commission (the "SEC") for the registration and sale of up to 740,000 shares of
the Company's common stock. The Company is awaiting issuance of an order by the
SEC declaring the registration statement effective.

F-22
<PAGE> 77

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

NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY UNDERWRITER. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE
REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF,
ANY PERSON IN ANY CIRCUMSTANCES IN WHICH SUCH AN OFFER OR SOLICITATION IS
UNLAWFUL.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 5
Use of Proceeds....................... 10
Dividend Policy....................... 10
Selected Consolidated Financial
Data................................ 11
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 12
Business.............................. 25
Supervision and Regulation............ 32
Management............................ 36
Certain Transactions.................. 42
Security Ownership of Management and
Certain Beneficial Owners........... 43
Description of Capital Stock.......... 44
Shares Eligible for Future Sale....... 47
Underwriting.......................... 48
Legal Matters......................... 49
Experts............................... 49
Available Information................. 50
Index to Financial Statements......... F-1
</TABLE>

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

Until , 1998 (40 days after the date of this Prospectus), all
dealers effecting transactions in the Common Stock offered hereby, whether or
not participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.

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

740,000 SHARES

(GEORGIA CAROLINA BANCSHARES, INC. LOGO)
COMMON STOCK
------------------
PROSPECTUS
------------------

INTERSTATE/JOHNSON LANE
C O R P O R A T I O N
, 1998
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 78
[Form of Notice of Conditional Withdrawal Right]
[Letterhead of Georgia-Carolina Bancshares, Inc.]

VIA CERTIFIED MAIL
RETURN RECEIPT REQUESTED

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

Re: Subscription for _____ Shares of Common Stock of
Georgia-Carolina Bancshares, Inc.

Dear __________:

We are pleased to inform you of a positive development related to the
Company's pending offering of common stock. Interstate/Johnson Lane Corporation
("IJL"), an investment banking firm with extensive experience raising equity for
community banks and their holding companies, has indicated an interest in
underwriting, on a firm commitment basis, up to 740,000 shares of the Company's
common stock (the "IJL Offering"). These shares would be sold by IJL to the
public at the same price per share ($13.50) as your subscription. We believe the
involvement of IJL will achieve a broader distribution of the Company's common
stock and increase the liquidity of the market for the common stock after the
offering. Enclosed is a copy of our preliminary prospectus, dated October 2,
1998, that reflects the potential change in our plan of distribution and updated
financial information regarding the Company.

Because of the possible change in our plan of distribution, we will be
extending to you, subject to the successful completion of the IJL Offering, the
right to withdraw your previous subscription. If you would like to withdraw your
subscription, you must complete the enclosed Notice of Withdrawal and return it
to us in the enclosed, self-addressed, postage paid envelope by OCTOBER 15,
1998. If the IJL Offering is successfully completed and your Notice of
Withdrawal is received by October 15, 1998, the Escrow Agent will return your
subscription funds promptly following completion of the IJL Offering. If you
wish to continue your participation in the offering, you do not need to return
the Notice of Withdrawal. In that event, your subscription funds will remain on
deposit with the Escrow Agent. If the IJL Offering is not successfully
completed, the Company expects to continue its best efforts offering and your
subscription funds, regardless of whether or not you now choose to withdraw your
subscription, will remain on deposit with the Escrow Agent.

<PAGE> 79

Due to the possible change in the plan of distribution, the Escrow
Agreement between the Company and the Escrow Agent may require modification. If
you would like to review the modification, please call us at (706) 595-1600 to
receive a copy.

We sincerely appreciate the confidence you have shown in our Company.
Should you have any questions regarding this positive development, please do not
hesitate to contact us.

Yours very truly,

Patrick G. Blanchard

<PAGE> 80

NOTICE OF WITHDRAWAL

Instructions: If the IJL firm commitment underwriting (the "IJL Offering") is
successfully completed and you do NOT wish to continue your subscription to
purchase shares of Common Stock in the Company, please sign your name in the
space below and return this page to us by October 15, 1998.

Unless we receive this page from you by OCTOBER 15, 1998, you will be
deemed to have decided to continue your subscription to purchase shares of
Common Stock in the Company. In that event, your subscription funds will
remain on deposit with the Escrow Agent until such time as they are paid to the
Company. If the IJL Offering is not successfully completed, the Company
expects to continue its best efforts offering, and your subscription funds,
regardless of whether or not you now choose to withdraw your subscription, will
remain on deposit with the Escrow Agent.

For your convenience, you may mail this page to us in the enclosed,
self-addressed, postage paid envelope.

The undersigned has received and read the Company's Preliminary
Prospectus, dated October 2, 1998. If the IJL Offering underwriting is
successfully completed, the undersigned has decided not to continue his
investment in the Company.

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

(Signature)

Print Name:
-------------------------
Date:
-------------------------------

<PAGE> 81

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

As provided under Georgia law, the Company's Articles of Incorporation
provide that a director shall not be personally liable to the Company or its
shareholders for monetary damages, for breach of duty of care or any other
fiduciary duty owed to the Company as a director, except that such provisions
shall not eliminate or limit the liability of a director (a) for any
appropriation, in violation of his or her duties, of any business opportunity of
the Company; (b) for acts or omissions which involve intentional misconduct or
knowing violation of law; (c) for unlawful corporate distributions; or (d) for
any transaction from which the director received an improper personal benefit.
If applicable law is amended to authorize corporate action further eliminating
or limiting the liability of directors, the liability of each director of the
Company shall be eliminated or limited to the fullest extent permitted by
applicable law. These provisions apply to claims against officers, employees,
and agents of the Company as well.

Article VI of the Company's Bylaws provides that the Company shall
indemnify a director who has been successful in the defense of any proceeding to
which he was a party or in defense of any claim, issue or matter therein because
he was a director of the Company, against reasonable expenses incurred by him in
connection with such defense.

The Company's Bylaws also provide that the Company may indemnify any
director, officer, employee or agent made a party to a proceeding because he is
or was a director, officer, employee or agent against liability incurred in the
proceeding if he acted in a manner he believed in good faith to be in or not
opposed to the best interests of the Company and, in the case of any criminal
proceeding, he had no reasonable cause to believe his conduct was unlawful.
Determination concerning whether or not the applicable standard of conduct has
been met can be made by (a) a disinterested majority of the Board of Directors;
(b) a majority of a committee of disinterested Directors; (c) independent legal
counsel; or (d) an affirmative vote of a majority of shares held by
disinterested directors. No indemnification may be made to or on behalf of a
director, officer, employee or agent (1) in connection with a proceeding by or
in the right of the Company in which such person was adjudged liable to the
Company, or (2) in connection with any other proceeding in which such person was
adjudged liable on the basis that personal benefit was improperly received by
him.

The Company may, if authorized by its shareholders by a majority of votes
which would be entitled to be cast in a vote to amend the Company's Articles of
Incorporation, indemnify or obligate itself to indemnify a director, officer,
employee or agent made a party to a proceeding, including a proceeding brought
by or in the right of the Company.

II-1
<PAGE> 82

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth all expenses expected to be incurred in
connection with the issuance and distribution of the securities being
registered. All of the amounts shown are estimated except for the registration
fees of the Securities and Exchange Commission.

<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 3,390
NASD Filing Fee............................................. 1,650
Nasdaq SmallCap Listing Fee................................. 10,500
Blue Sky Fees and Expenses.................................. 15,000
Printing and Engraving Expenses............................. 65,000
Legal Fees and Expenses..................................... 75,000
Financial Advisor Fees...................................... 70,000
Accounting Fees and Expenses................................ 25,000
Miscellaneous............................................... 34,460
--------
Total............................................. $300,000
========
</TABLE>

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.

Not applicable.

ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

The following exhibits are filed as part of this Registration Statement:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <C> <S>
1.1 -- Form of Underwriting Agreement.
3.1 -- Amended and Restated Articles of Incorporation of the
Company.(2)(Incorporated by reference to the exhibit of the
same number in the Company's Registration Statement on Form
SB-2 (File No. 333-41547), previously filed with the
Commission)
3.2 -- Amended and Restated By-Laws of the Company.(2)
(Incorporated by reference to the exhibit of the same number
in the Company's Registration Statement on Form SB-2 (File
No. 333-41547), previously filed with the Commission)
4.1 -- Specimen Common Stock Certificate. (Incorporated by
reference to the exhibit of the same number in the Company's
Registration Statement on Form 8-A, previously filed with
the Commission)
4.2 -- Escrow Agreement dated January 22, 1998 between the Company
and The Bankers Bank, Atlanta, Georgia.(Incorporated by
reference to the exhibit of the same number in the Company's
Registration Statement on Form SB-2 (File No. 333-41547),
previously filed with the Commission)
4.2.1 -- Amendment No. 1 to Escrow Agreement dated January 22, 1998
between the Company and The Bankers Bank, Atlanta, Georgia,
dated September 30, 1998.
5.1 -- Opinion of Smith, Gambrell & Russell, LLP.
10.1 -- Employment Agreement dated October 6, 1997 between McDuffie
Bank & Trust, the Company and Patrick G. Blanchard.
(Incorporated by reference to the exhibit of the same number
in the Company's Quarterly Report on Form 10-QSB for the
quarter ended September 30, 1997, previously filed with the
Commission)
10.1.1 -- Amendment No. 1 to Employment Agreement dated October 6,
1997 between First Bank of Georgia, the Company and Patrick
G. Blanchard, dated September 30, 1998.
</TABLE>

II-2
<PAGE> 83

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <C> <S>
10.2 -- Agreement dated October 6, 1997 among Ray Brown, RDB Limited
Partnership, Arthur J. Gay, Jr., J. Randal Hall, George H.
Inman, John W. Lee, A. Montague Miller and Julian W. Osbon
as the Augusta Group and Pinnacle Bancshares, Inc.
(Incorporated by reference to the exhibit of the same number
in the Company's Quarterly Report on Form 10-QSB for the
quarter ended September 30, 1997, previously filed with the
Commission)
10.2.1 -- Amendment No. 1 to Agreement dated October 6, 1997 among Ray
Brown, RDB Limited Partnership, Arthur J. Gay, Jr., J.
Randal Hall, George H. Inman, John W. Lee, A. Montague
Miller and Julian W. Osbon as the Augusta Group and the
Company, dated January 22, 1998.(Incorporated by reference
to the exhibit of the same number in the Company's
Registration Statement on Form SB-2 (File No. 333-41547),
previously filed with the Commission)
10.2.2 -- Amended and Restated Agreement among Ray Brown, RDB Limited
Partnership, Arthur J. Gay, Jr., J. Randal Hall, George H.
Inman, John W. Lee, A. Montague Miller and Julian W. Osbon
as the Augusta Group and the Company, dated September 30,
1998.
10.3 -- Employment Agreement dated July 17, 1996, between McDuffie
Bank & Trust and Heyward Horton, Jr. (Incorporated by
reference to Exhibit 10.1 in McDuffie Bank & Trust's Annual
Report on Form 10-KSB for the year ended December 31, 1996,
previously filed with the Commission).
10.3.1 -- Amendment No. 1 to Employment Agreement dated July 17, 1997
between McDuffie Bank & Trust and Heyward Horton, Jr., dated
March 26, 1997. (Incorporated by reference to Exhibit 10.1.1
in McDuffie Bank & Trust's Annual Report on Form 10-KSB for
the year ended December 31, 1996, previously filed in the
Commission)
10.3.2 -- Amendment No. 2 to Employment Agreement dated July 17, 1997
between McDuffie Bank & Trust and Heyward Horton, Jr., dated
May 13, 1998.
10.4 -- Severance Agreement dated March 27, 1997 between the
Company, McDuffie Bank & Trust and J. Harold Ward, Jr.
(Incorporated by reference to Exhibit 10.2 in McDuffie Bank
& Trust's Annual Report on Form 10-KSB for the year ended
December 31, 1996, previously filed with the Commission)
10.5 -- Severance Agreement dated July 7, 1997 between the Company,
McDuffie Bank & Trust and Joseph E. Gore.(Incorporated by
reference to the exhibit of the same number in the Company's
Registration Statement on Form SB-2 (File No. 333-41547),
previously filed with the Commission)
23.1 -- Consent of Smith, Gambrell & Russell, LLP (contained in
their opinion at Exhibit 5.1).
23.2 -- Consent of Cherry, Bekaert & Holland, L.L.P.
24 -- Power of Attorney (included in the original signature page
to this Registration Statement) (1)
99 -- Form of Notification of Withdrawal Right to Initial
Subscribers
</TABLE>

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

(1) Previously filed.

(2) Restated pursuant to Rule 102(c) of Regulation S-T and Item 601(b)(3) of
Regulation S-B.

II-3
<PAGE> 84

ITEM 28. UNDERTAKINGS.

(e) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

(f) (1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant under Rule 424(b)(1), or (4) or 497(h) under
the Securities Act as part of this Registration Statement as of the time the
Commission declared it effective.

(2) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
Registration Statement for the securities offered in the Registration Statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.

II-4
<PAGE> 85

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements of filing on Form SB-2 and has authorized this Amendment No. 1
to the Registration Statement to be signed on its behalf by the undersigned, in
the City of Thomson, State of Georgia on the 30th day of September, 1998.

GEORGIA-CAROLINA BANCSHARES, INC.

By: /s/ PATRICK G. BLANCHARD
------------------------------------
Patrick G. Blanchard
President and Chief Executive
Officer

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ DAVID W. JOESBURY, SR.* Chairman of the Board September 30, 1998
- -----------------------------------------------------
David W. Joesbury, Sr.

/s/ PATRICK G. BLANCHARD Director, President and September 30, 1998
- ----------------------------------------------------- Chief Executive Officer
Patrick G. Blanchard

/s/ HEYWARD HORTON, JR. Director September 30, 1998
- -----------------------------------------------------
Heyward Horton, Jr.

/s/ PHILLIP G. FARR* Director September 30, 1998
- -----------------------------------------------------
Phillip G. Farr

/s/ SAMUEL A. FOWLER, JR.* Director September 30, 1998
- -----------------------------------------------------
Samuel A. Fowler, Jr.

Director
- -----------------------------------------------------
Arthur J. Gay, Jr.

/s/ JOSEPH D. GREENE* Director September 30, 1998
- -----------------------------------------------------
Joseph D. Greene

/s/ J. RANDAL HALL* Director September 30, 1998
- -----------------------------------------------------
J. Randal Hall

/s/ HUGH L. HAMILTON, JR.* Director September 30, 1998
- -----------------------------------------------------
Hugh L. Hamilton, Jr.

/s/ WILLIAM G. HATCHER* Director September 30, 1998
- -----------------------------------------------------
William G. Hatcher

/s/ GEORGE O. HUGHES* Director September 30, 1998
- -----------------------------------------------------
George O. Hughes
</TABLE>

II-5
<PAGE> 86

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ GEORGE H. INMAN* Director September 30, 1998
- -----------------------------------------------------
George H. Inman

/s/ JOHN W. LEE* Director September 30, 1998
- -----------------------------------------------------
John W. Lee

/s/ JAMES L. LEMLEY, M.D.* Director September 30, 1998
- -----------------------------------------------------
James L. Lemley, M.D.

Director
- -----------------------------------------------------
Julian W. Osbon

/s/ J. HAROLD WARD, JR. Principal Accounting Officer September 30, 1998
- -----------------------------------------------------
J. Harold Ward, Jr.

/s/ ROBERT N. WILSON, JR.* Director September 30, 1998
- -----------------------------------------------------
Robert N. Wilson, Jr.

*By: /s/ HEYWARD HORTON, JR.
-----------------------------------------------
Heyward Horton, Jr.
Attorney-in-Fact
</TABLE>

II-6
<PAGE> 87

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <C> <S> <C>
1.1 -- Form of Underwriting Agreement.
4.2.1 -- Form of Amendment No. 1 to Escrow Agreement dated January
22, 1998 between the Company and The Bankers Bank, Atlanta,
Georgia, dated .
5.1 -- Opinion of Smith, Gambrell & Russell, LLP.
10.1.1 -- Amendment No. 1 to Employment Agreement dated October 6,
1997 between First Bank of Georgia, the Company and Patrick
G. Blanchard, dated September 30, 1998.
10.2.2 -- Amended and Restated Agreement among Ray Brown, RDB Limited
Partnership, Arthur J. Gay, Jr., J. Randal Hall, George H.
Inman, John W. Lee, A. Montague Miller and Julian W. Osbon
as the Augusta Group and the Company, dated September 30,
1998.
10.3.2 -- Amendment No. 2 to Employment Agreement dated July 17, 1997
between McDuffie Bank & Trust and Heyward Horton, Jr., dated
May 13, 1998.
23.2 -- Consent of Cherry, Bekaert & Holland, L.L.P.
</TABLE>

<PAGE> 1
EXHIBIT 1.1

GEORGIA-CAROLINA BANCSHARES, INC.

COMMON STOCK

UNDERWRITING AGREEMENT

______________, 1998

INTERSTATE/JOHNSON LANE CORPORATION
As the Representative of the several
Underwriters named in Schedule I hereto,
c/o Interstate/Johnson Lane Corporation
IJL Financial Center
201 North Tryon Street
Charlotte, North Carolina 28202

Dear Sirs:

Georgia-Carolina Bancshares, Inc., a Georgia corporation (the
"Company") proposes, subject to the terms and conditions stated herein, to issue
and sell to the underwriters named in Schedule I hereto (the "Underwriters") (i)
an aggregate of 430,000 shares of common stock, $.001 par value (the "Common
Stock"), of the Company (the "Firm Shares"), (ii) up to 310,000 shares of Common
Stock only to the extent of the number of such shares that are withdrawn by
persons who subscribed to the best efforts offering conducted by the Company
(the "Best Efforts Offering") from February 19, 1998 through August 18, 1998
(the "Standby Shares"), and (iii) at the election of the Underwriters, up to
111,000 additional shares of Common Stock (the "Optional Shares") solely to
cover overallotments, if any; provided, however, that the total number of
Optional Shares shall not exceed an amount equal to 15% of the total number of
Firm Shares and Standby Shares purchased by the Underwriters (the Firm Shares,
the Standby Shares and the Optional Shares that the Underwriters elect to
purchase pursuant to Section 2 hereof are collectively referred to as the
"Shares").

1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with each of the Underwriters that:

(a) A registration statement on Form SB-2 (File No. 333-62493)
(the "Registration Statement") with respect to the Shares has been
filed by the Company with the U.S. Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933, as amended (the
"Act"); the Registration Statement and any post-effective amendment
thereto, each in the form heretofore delivered to you, and, excluding
exhibits

<PAGE> 2
thereto but including all documents incorporated by reference in the
prospectus contained therein, delivered to you for each of the
Underwriters, have been declared effective by the Commission in such
form; other than a registration statement increasing the size of the
offering, filed pursuant to Rule 462(b) under the Act which became
effective upon filing (the "Rule 462(b) Registration Statement"); no
other document with respect to the Registration Statement, any
post-effective amendment thereto or the Rule 462(b) Registration
Statement has heretofore been filed with the Commission; and no stop
order suspending the effectiveness of the Registration Statement has
been issued and no proceeding for that purpose has been instituted or
threatened by the Commission (any preliminary prospectus included in
the Registration Statement or filed with the Commission pursuant to
Rule 424 of the Rules and Regulations of the Commission under the Act,
being hereinafter called a "Preliminary Prospectus," the various parts
of such Registration Statement and the Rule 462(b) Registration
Statement, including all exhibits thereto and the information contained
in the form of final prospectus filed with the Commission pursuant to
Rule 424(b) under the Act in accordance with Section 5(a) of this
Agreement and deemed by virtue of Rule 430(A) under the Act to be part
of the Registration Statement at the time it was declared effective,
each as amended at the time such part became effective, being herein
called collectively the "Registration Statement," and the final
prospectus, in the form first filed pursuant to Rule 424(b), being
hereinafter called the "Prospectus."

(b) No order preventing or suspending the use of any
Prospectus has been issued and no proceeding for that purpose has been
instituted or threatened by the Commission or the securities authority
of any state or other jurisdiction. No stop order suspending the
effectiveness of the Registration Statement or any part thereof has
been issued and no proceeding for that purpose has been instituted or
threatened or, to the best knowledge of the Company, contemplated by
the Commission or the securities authority of any state or other
jurisdiction.

(c) Each Prospectus filed as part of the Registration
Statement as originally filed or as part of any amendment thereto
complied when so filed in all material respects with the requirements
applicable to it under the Act and the rules and regulations
promulgated thereunder and none of such documents contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; and any further documents so filed and
incorporated by reference in the Prospectus or any further amendment or
supplement thereto, when such documents become effective or are filed
with the Commission, as the case may be, will conform in all material
respects to the requirements of the Act or the Securities Exchange Act
of 1934, as applicable, and the rules and regulations of the Commission
thereunder and will not contain an untrue statement of material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter
through the Representative expressly for use therein. When the
Registration Statement or any

-2-
<PAGE> 3

amendment thereto was declared effective, and at each Time of Delivery
(as hereinafter defined), it (i) contained all statements required to
be stated therein in accordance with, and complied or will comply in
all material respects with the requirements of the Act and the rules
and regulations of the Commission thereunder and (ii) did not include
any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein not misleading. When the
Prospectus or any amendment or supplement thereto is filed with the
Commission pursuant to Rule 424(b) (or, if the Prospectus or such
amendment or supplement is not required to be so filed, when the
Registration Statement or the amendment thereto containing such
amendment or supplement to the Prospectus was or is declared effective)
and at each Time of Delivery, the Prospectus, as amended or
supplemented at any such time (i) contained or will contain all
statements required to be stated therein in accordance with, and
complied or will comply in all material respects with the requirements
of, the Act and the rules and regulations of the Commission thereunder
and (ii) did not or will not include any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading. The foregoing provisions of this paragraph (c) do
not apply to statements or omissions made in any Preliminary
Prospectus, the Registration Statement or any amendment thereto or the
Prospectus or any amendment or supplement thereto in reliance upon and
in conformity with written information furnished to the Company by any
Underwriter.

(d) The descriptions in the Registration Statement and the
Prospectus of statutes, legal and governmental proceedings or contracts
and other documents that are required to be so described are accurate
in all material respects and fairly present the information required to
be shown; and there are no statutes or legal or governmental
proceedings required to be described in the Registration Statement or
the Prospectus that are not described as required and no contracts or
documents of a character that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to
the Registration Statement that are not described and filed as
required.

(e) Each of the Company and its subsidiary has been duly
incorporated, is validly existing as a corporation under the laws of
its jurisdiction of incorporation and has full power and authority to
own or lease its properties and conduct its business as described in
the Prospectus. The Company has full power and authority to enter into
this Agreement and to perform its obligations hereunder. Each of the
Company and its subsidiary is duly qualified to transact business as a
foreign corporation and is in good standing under the laws of each
other jurisdiction in which it owns or leases properties, or conducts
any business, so as to require such qualification, except where the
failure to so qualify would not have a material adverse effect on the
financial position, results of operations or business of the Company
and its subsidiary.

(f) The Company's authorized, issued and outstanding capital
stock is as disclosed in the Prospectus. All of the issued shares of
capital stock of the Company have been duly authorized and validly
issued, are fully paid and nonassessable and

-3-
<PAGE> 4

conform to the description of the Common Stock contained in the
Prospectus. None of the issued shares of capital stock of the Company
or its subsidiary has been issued or is owned or held in violation of
any preemptive rights of shareholders, and no person or entity
(including any holder of outstanding shares of capital stock of the
Company or its subsidiary) has any preemptive or other rights to
subscribe for any of the Shares.

(g) All of the issued shares of capital stock of the Company's
subsidiary have been duly authorized and validly issued, are fully
paid, and nonassessable and are owned beneficially by the Company free
and clear of all liens, security interests, pledges, charges,
encumbrances, defects, shareholders' agreements, voting trusts,
equities or claims of any nature whatsoever. Other than First Bank of
Georgia, the Company does not own, directly or indirectly, any capital
stock or other equity securities of any other corporation or any
ownership interest in any partnership, joint venture or other
association.

(h) Except as disclosed in the Prospectus, there are no
outstanding (i) securities or obligations of the Company or its
subsidiary convertible into or exchangeable for any capital stock of
the Company or its subsidiary, (ii) warrants, rights or options to
subscribe for or purchase from the Company or its subsidiary any such
capital stock or any such convertible or exchangeable securities or
obligations, or (iii) obligations of the Company or its subsidiary to
issue any shares of capital stock, any such convertible or exchangeable
securities or obligations, or any such warrants, rights or options.

(i) Since the date of the most recent financial statements
included in the Prospectus, neither the Company nor its subsidiary has
sustained any material loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as disclosed in or contemplated by the
Prospectus.

(j) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, (i) neither the
Company nor its subsidiary has incurred any liabilities or obligations,
direct or contingent, or entered into any transactions, not in the
ordinary course of business, that are material to the Company and its
subsidiary, (ii) the Company has not purchased any of its outstanding
capital stock or declared, paid or otherwise made any dividend or
distribution of any kind on its capital stock, (iii) there has not been
any change in the capital stock, long-term debt or short-term debt of
the Company or its subsidiary, and (iv) there has not been any material
adverse change, or any development involving a prospective material
adverse change, in or affecting the financial position, results of
operations or business of the Company and its subsidiary, in each case
other than as disclosed in or contemplated by the Prospectus.

(k) The Shares have been duly authorized and, when issued and
delivered against payment therefor as provided therein, will be validly
issued and fully paid and nonassessable and will conform to the
description of the Common Stock contained in the

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<PAGE> 5

Prospectus; and the certificates evidencing the Shares will comply with
all applicable requirements of Georgia law.

(l) There are no contracts, agreements or understandings
between the Company and any person granting such person the right to
require the Company to file a registration statement under the Act with
respect to any securities of the Company owned or to be owned by such
person or to require the Company to include such securities in the
securities registered pursuant to the Registration Statement (or any
such right has been effectively waived) or any securities being
registered pursuant to any other registration statement filed by the
Company under the Act.

(m) Neither the Company nor its subsidiary is, or (with or
without the giving of notice or passage of time or both), would be in
violation of its Articles of Incorporation or Bylaws or in default
under any indenture, mortgage, deed of trust, loan agreement, lease or
other agreement or instrument to which the Company or its subsidiary is
a party or to which any of their respective properties or assets are
subject that is material to the Company and its subsidiary, when taken
as a whole.

(n) The issue and sale of the Shares and the performance of
this Agreement and the consummation of the transactions herein
contemplated will not conflict with, or (with or without the giving of
notice or the passage of time or both) result in a breach or violation
of any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement, lease or other
material agreement or instrument to which the Company or its subsidiary
is a party or to which any of their respective properties or assets is
subject, nor will such action conflict with or violate any provision of
the Articles of Incorporation or Bylaws of the Company or its
subsidiary or any statute, rule or regulation or any order, judgment or
decree of any court or governmental agency or body having jurisdiction
over the Company or its subsidiary or any of their respective
properties or assets.

(o) The Company and its subsidiary have good and marketable
title in fee simple to all real property, if any, and good title to all
personal property owned by them, in each case free and clear of all
liens, security interests, pledges, charges, encumbrances, mortgages
and defects, except such as are disclosed in the Prospectus or such as
do not materially and adversely interfere with the operations of the
Company and its subsidiary; and any real property and buildings held
under lease by the Company or its subsidiary are held under valid,
subsisting and enforceable leases, with such exceptions as are
disclosed in the Prospectus or are not material and do not interfere
with the operations of the Company or its subsidiary.

(p) No consent, approval, authorization, order or declaration
of or from, or registration, qualification or filing with, any court,
governmental agency or body or self-regulatory organization is required
for the issue and sale of the Shares or the consummation of the
transactions contemplated by this Agreement, except the registration of
the Shares under the Act and such as may be required under state
securities

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<PAGE> 6

or blue sky laws in connection with the offer, sale and distribution of
the Shares by the Underwriters.

(q) Other than as disclosed in the Prospectus, there is no
litigation, arbitration, claim, proceeding (formal or informal) or
investigation pending or threatened (or any basis therefor) in which
the Company or its subsidiary is a party or of which any of their
respective properties or assets are the subject which, if determined
adversely to the Company or its subsidiary, would individually or in
the aggregate have a material adverse effect on the financial position,
results of operations or business of the Company and its subsidiary.

(r) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes the valid and binding
agreement of the Company enforceable against the Company in accordance
with its terms subject, as to enforcement, to applicable bankruptcy,
insolvency, reorganization and moratorium laws and other laws relating
to or affecting the enforcement of creditors' rights generally and to
general equitable principles, and except as the enforceability of
rights to indemnity and contribution under this Agreement may be
limited under applicable securities laws or the public policy
underlying such laws.

(s) Neither the Company nor any of its officers, directors or
affiliates has (i) taken, directly or indirectly, any action designed
to cause or result in, or that has constituted or might reasonably be
expected to constitute, the stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of the
Shares or (ii) since the filing of the Registration Statement (A) sold,
bid for, purchased or paid anyone any compensation for soliciting
purchases of, the Shares or (B) paid or agreed to pay to any person any
compensation for soliciting another to purchase any other securities of
the Company.

(t) The Company has obtained for the benefit of the Company
and the Underwriters from each of its directors and officers a written
agreement that for a period of 180 days from the date of the Prospectus
such director or officer will not, without your prior written consent,
offer, pledge, sell, contract to sell, grant any option for the sale
of, or otherwise dispose of (or announce any offer, pledge, sale, grant
of an option to purchase or other disposition), directly or indirectly,
any shares of Common Stock or securities convertible into, or
exercisable or exchangeable for, shares of Common Stock.

(u) The Company's subsidiary is not currently prohibited,
directly or indirectly, from paying any dividends to the Company, from
making any other distributions on its subsidiary's capital stock, from
repaying to the Company any loans or advances to its subsidiary or from
transferring its subsidiary's property or assets to the Company, except
as disclosed in the Prospectus.

(v) The Company and its subsidiary have filed all material
foreign, federal, state and local tax returns that are required to be
filed by them and have paid all taxes

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<PAGE> 7

shown as due on such returns as well as all other taxes, assessments
and governmental charges that are due and payable; and no deficiency
with respect to any such return has been assessed or proposed in any
material respects.

(w) The Company is not, nor will it become as a result of
transactions contemplated hereby, and does not intend to conduct its
business in a manner that would cause it to become, an "investment
company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.

(x) The Company has complied in all material respects with its
obligations under the Escrow Agreement, dated January 22, 1998 and
amended as of the date hereof (the "Escrow Agreement"), by and between
the Company and The Bankers Bank (the "Escrow Agent") and is not aware
of any failure by the Escrow Agent to comply in all material respects
with its obligations under the Escrow Agreement.

2. PURCHASE AND SALE OF SHARES. Subject to the terms and conditions
herein set forth: (a) the Company agrees to issue and sell to each of the
Underwriters, and each of the Underwriters agree, severally and not jointly, to
purchase from the Company, at a purchase price of $12.4875 per share, the number
of Firm Shares set opposite the name of such Underwriter in Schedule I hereto;
(b) the Company agrees to issue and sell to each of the Underwriters, and each
of the Underwriters agree, severally and not jointly, to purchase from the
Company, at a purchase price of $12.69 per share, the number of Standby Shares
set opposite the name of such Underwriter in Schedule I hereto; and (c) in the
event and to the extent that the Underwriters shall exercise the election to
purchase Optional Shares as provided below, the Company agrees to issue and to
sell to each of the Underwriters, and each of the Underwriters agree, severally
and not jointly, to purchase from the Company, at the purchase price per share
set forth in clause (a) of this Section 2, that portion of the number of
Optional Shares as to which such election shall have been exercised (to be
adjusted by you so as to eliminate fractional shares) determined by multiplying
such number of Optional Shares by a fraction, the numerator of which is the
maximum number of Optional Shares that such Underwriter is entitled to purchase
as set forth opposite the name of such Underwriter in Schedule I hereto and the
denominator of which is the maximum number of the Optional Shares that all of
the Underwriters are entitled to purchase hereunder. In addition, the Company
shall pay the Representative a standby underwriting fee in the amount of
Sixty-Two Thousand Seven Hundred Seventy-Five Dollars ($62,775).

The Company hereby grants to the Underwriters the right to purchase at
its election in whole or in part from time to time up to 111,000 Optional
Shares, at the purchase price per share set forth in clause (a) in the paragraph
above for the sole purpose of covering over-allotments in the sale of Firm
Shares and the Standby Shares. Any such election to purchase Optional Shares may
be exercised by written notice from you to the Company, given from time to time
within a period of 30 calendar days after the date of this Agreement and setting
forth the aggregate number of Optional Shares to be purchased and the date on
which such Optional Shares are to be delivered, as determined by you but in no
event earlier than the First Time of Delivery (as hereinafter defined) or,
unless you and the Company otherwise agree in writing, earlier than two or later
than ten business days after the date of such notice. In the event you elect to
purchase all or a portion of the Optional Shares, the Company agrees to furnish
or cause to be furnished to you the certificates, letters and opinions, and to
satisfy all conditions set forth in Section 7 hereof at each Subsequent Time of
Delivery (as hereinafter defined).

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<PAGE> 8

3. OFFERING BY THE UNDERWRITERS. Upon the authorization by you of the
release of the Shares, the several Underwriters propose to offer the Shares for
sale upon the terms and conditions disclosed in the Prospectus.

4. DELIVERY OF SHARES; CLOSING. Certificates in definitive form for the
Shares to be purchased by each Underwriter hereunder, and in such denominations
and registered in such names as the Representative may request upon at least 48
hours prior notice to the Company shall be delivered by or on behalf of the
Company to you for your account against payment by you of the purchase price
therefor by official bank check or checks (payable in same day funds) drawn on a
Charlotte, North Carolina bank, payable to the order of the Company. The closing
of the sale and purchase of the Shares shall be held at the offices of Moore &
Van Allen, PLLC, Charlotte, North Carolina. The time and date of such delivery
and payment shall be, with respect to the Firm Shares and the Standby Shares, at
10:00 a.m., Charlotte time, on the fourth full business day after the execution
of this Agreement or at such other time and date as you and the Company may
agree upon in writing, and, with respect to the Optional Shares, at 10:00 a.m.,
Charlotte time, on the date specified by you in the written notice given by you
of the Underwriters' election to purchase all or part of such Optional Shares,
or at such other time and date as you and the Company may agree upon in writing.
Such time and date for delivery of the Firm Shares is herein called the "First
Time of Delivery," such time and date for delivery of the Optional Shares, if
not the First Time of Delivery, is herein called a "Subsequent Time of
Delivery," and each such time and date for delivery is herein called a "Time of
Delivery." The Company will make such certificates available for checking and
packaging at least 24 hours prior to each Time of Delivery at your office at the
address set forth above or such other location designated by you to the Company.

5. COVENANTS OF THE COMPANY. The Company covenants and agrees with the
Underwriter:

(a) The Company will file the Prospectus with the Commission
pursuant to and in accordance with subparagraph (1) (or, if applicable
and if consented to by you, subparagraph (4)) of Rule 424(b) not later
than the earlier of (i) the second business day following the execution
and delivery of this Agreement or (ii) the 15th business day after the
date on which the Registration Statement is declared effective. The
Company will advise you promptly of any such filing pursuant to Rule
424(b).

(b) The Company will not file with the Commission the
Prospectus or the amendment referred to in the second sentence of
Section l(a) hereof, any amendment or supplement to the Prospectus or
any amendment to the Registration Statement unless you have received a
reasonable period of time to review any such proposed amendment or
supplement and consented to the filing thereof and will use its best
efforts to cause any such amendment to the Registration Statement to be
declared effective as promptly as possible. Upon the request of the
Representative or counsel for the Representative, the Company will
promptly prepare and file with the Commission, in accordance with the
rules and regulations of the Commission, any amendments to the
Registration Statement or amendments or supplements to the Prospectus
that may be necessary or advisable in

-8-
<PAGE> 9

connection with the distribution of the Shares by the Underwriters and
will use its best efforts to cause any such amendment to the
Registration Statement to be declared effective as promptly as
possible. If required, the Company will file any amendment or
supplement to the Prospectus with the Commission in the manner and
within the time period required by Rule 424(b) under the Act. The
Company will advise the Representative, promptly after receiving notice
thereof, of the time when the Registration Statement or any amendment
thereto has been filed or declared effective or the Prospectus or any
amendment or supplement thereto has been filed and will provide
evidence to the Representative of each such filing or effectiveness.

(c) The Company will advise you promptly after receiving
notice or obtaining knowledge of (i) the issuance by the Commission of
any stop order suspending the effectiveness of the Registration
Statement or any part thereof or any order preventing or suspending the
use of any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto, (ii) the suspension of the qualification of the
Shares for offer or sale in any jurisdiction or of the initiation or
threatening of any proceeding for any such purpose, or (iii) any
request made by the Commission or any securities authority of any other
jurisdiction for amending the Registration Statement, for amending or
supplementing the Prospectus or for additional information. The Company
will use its best efforts to prevent the issuance of any such stop
order and, if any such stop order is issued, to obtain the withdrawal
thereof as promptly as possible.

(d) If the delivery of a Prospectus relating to the Shares is
required under the Act at any time prior to the expiration of nine
months after the date of the Prospectus, and if at such time any events
have occurred as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading, or if for any reason it is necessary during such
same period to amend or supplement the Prospectus to comply with the
Act or the rules and regulations thereunder, the Company will promptly
notify you and upon your request (but at the Company's expense) prepare
and file with the Commission an amendment or supplement to the
Prospectus that corrects such statement or omission or effects such
compliance and will furnish without charge to each Underwriter and to
any dealer in securities, as many copies of such amended or
supplemented Prospectus as you may from time to time reasonably
request. If the delivery of a Prospectus relating to the Shares is
required under the Act at any time nine months or more after the date
of the Prospectus, upon your request but at the expense of such
Underwriter, the Company will prepare and deliver to such Underwriter
as many copies as you may request of an amended or supplemented
Prospectus complying with Section 10(a)(3) of the Act. Neither your
consent to nor the Underwriter's delivery of, any such amendment or
supplement shall constitute a waiver of any of the conditions set forth
in Section 7.

(e) The Company promptly from time to time will take such
action as you may reasonably request to qualify the Shares for offering
and sale under the securities or

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<PAGE> 10

blue sky laws of such jurisdictions as you may request and will
continue such qualifications in effect for as long as may be necessary
to complete the distribution of the Shares, provided that in connection
therewith the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction.

(f) The Company will promptly provide you, without charge, (i)
one manually executed copy of the Registration Statement as originally
filed with the Commission and of each amendment thereto, (ii) for each
other Underwriter a conformed copy of the Registration Statement as
originally filed and of each amendment thereto, without Exhibits, and
(iii) so long as a prospectus relating to the Shares is required to be
delivered under the Act, as many copies of each Preliminary Prospectus
or the Prospectus or any amendment or supplement thereto as you may
reasonably request.

(g) As soon as practicable, but in any event not later than
the last day of the thirteenth month after the effective date of the
Registration Statement, the Company will make generally available to
its security holders an earnings statement of the Company and its
subsidiary, if any, covering a period of at least 12 months beginning
after the effective date of the Registration Statement (which need not
be audited) complying with Section 11(a) of the Act and the rules and
regulations thereunder.

(h) During the period beginning from the date hereof and
continuing to and including the date 180 days after the date of the
Prospectus, the Company will not, without your prior written consent,
offer, pledge, issue, sell, contract to sell, grant any option for the
sale of, or otherwise dispose of (or announce any offer, pledge, sale,
grant of an option to purchase or other disposition), directly or
indirectly, any shares of Common Stock or securities convertible into,
exercisable or exchangeable for, shares of Common Stock, except for (i)
the Optional Shares, (ii) the issuance of Common Stock upon the
exercise of stock options outstanding on the date of this Agreement and
(iii) the issuance of an option to purchase 15,750 shares of Common
Stock to Patrick G. Blanchard at the First Time of Delivery.

(i) Neither the Company nor any of its officers, directors or
affiliates will, prior to the closing of the purchase and sale of the
Shares, (i) take, directly or indirectly, any action designed to cause
or to result in, or that might reasonably be expected to constitute,
the stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of any of the Shares, (ii)
sell, bid for, purchase or pay anyone any compensation for soliciting
purchases of, the Shares or (iii) pay or agree to pay to any person any
compensation for soliciting another to purchase any other securities of
the Company.

(j) The Company will apply the net proceeds from the offering
in the manner set forth under "Use of Proceeds" in the Prospectus.

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<PAGE> 11

(k) The Company will cause the Shares to be listed on the
Nasdaq SmallCap Market of The Nasdaq Stock Market, Inc. (the "SmallCap
Market") at each Time of Delivery and for at least one year from the
date hereof.

(l) The Company will comply in all material respects with its
obligations under the Escrow Agreement and will take such action as
may be necessary to enable the Escrow Agent to satisfy its
obligations under the Escrow Agreement.

6. EXPENSES. The Company will pay all costs and expenses incident to
the performance of its obligations under this Agreement, whether or not the
transactions contemplated hereby are consummated or this Agreement is terminated
pursuant to Section 10 hereof, including without limitation all costs and
expenses incident to (i) the fees, disbursements and expenses of the Company's
counsel and accountants in connection with the registration of the Shares under
the Act and all other expenses in connection with the preparation, printing and
filing of the Registration Statement (including all amendments thereto), any
Preliminary Prospectus, the Prospectus and any amendments and supplements
thereto, this Agreement and any blue sky memoranda; (ii) the delivery of copies
of the foregoing documents to the Underwriters; (iii) the filing fees of the
Commission and the National Association of Securities Dealers, Inc. relating to
the Shares; (iv) the preparation, issuance and delivery to the Underwriters of
any certificates evidencing the Shares, including transfer agent's and
registrar's fees; (v) the qualification of the Shares for offering and sale
under state securities and blue sky laws, including filing fees and fees and
disbursements of counsel for the Underwriters relating thereto; (vi) any fees or
expenses associated with the listing of the Shares on the SmallCap Market; and
(vii) any expenses for travel, lodging and meals incurred by the Company and any
of its officers, directors and employees in connection with any meetings with
prospective investors in the Shares. It is understood, however, that, except as
provided in this Section, Section 8 and Section 10 hereof, the Underwriters will
pay all of their own costs and expenses, including the fees of their counsel,
stock transfer taxes on resale of any of the Shares by them, and any advertising
expenses relating to the offer and sale of the Shares.

7. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations of the
Underwriters hereunder to purchase and pay for the Shares to be delivered at
each Time of Delivery shall be subject, in their discretion, to the accuracy of
the representations and warranties of the Company contained herein as of the
date hereof and as of such Time of Delivery, to the accuracy of the statements
of Company officers made pursuant to the provisions hereof, to the performance
by the Company of its covenants and agreements hereunder, and to the following
additional conditions precedent:

(a) If the Registration Statement as amended to date has not
become effective prior to the execution of this Agreement, such
registration statement shall have been declared effective not later
than 11:00 a.m., Charlotte time, on the date of this Agreement or such
later date and/or time as shall have been consented to by you in
writing. The Prospectus and any amendment or supplement thereto shall
have been filed with the Commission pursuant to Rule 424(b) within the
applicable time period prescribed for such filing and in accordance
with Section 5(a) of this Agreement; no stop order

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<PAGE> 12

suspending the effectiveness of the Registration Statement or in part
thereof shall have been issued and no proceedings for that purpose
shall have been instituted, threatened or, to the knowledge of the
Company and the Representative, contemplated by the Commission; and all
requests for additional information on the part of the Commission shall
have been complied with to your reasonable satisfaction.

(b) Moore & Van Allen, PLLC, counsel for the Underwriters,
shall have furnished to you such opinion or opinions, dated such Time
of Delivery, with respect to the incorporation of the Company, the
validity of the Shares being delivered at such Time of Delivery, the
Registration Statement, the Prospectus, and other related matters as
you may reasonably request and which are customary, and the Company
shall have furnished to such counsel such documents as they request for
the purpose of enabling them to pass upon such matters.

(c) You shall have received an opinion, dated such Time of
Delivery, of Smith, Gambrell & Russell, LLP, counsel for the Company in
form and substance satisfactory to you and your counsel, to the effect
that:

(i) The Company has been duly incorporated and is
validly existing as a corporation under the laws of Georgia
and has the corporate power and authority to own or lease its
properties and conduct its business as described in the
Registration Statement and the Prospectus and to enter into
this Agreement and perform its obligations hereunder.

(ii) The subsidiary of the Company has been duly
incorporated, is validly existing as a bank under the laws of
Georgia and has the corporate power and authority to own or
lease its properties and conduct its business as described in
the Registration Statement and the Prospectus. The subsidiary
is duly qualified to transact business as a foreign
corporation and is in good standing under the laws of each
other jurisdiction in which it owns or leases property, or
conducts any business, so as to require such qualification,
except where the failure to so qualify would not have a
material adverse effect on the financial position, results of
operations or business of the Company and its subsidiary.

(iii) The Company's authorized, issued and
outstanding capital stock is as disclosed in the Prospectus.
All of the issued shares of capital stock of the Company have
been duly authorized and validly issued, are fully paid and
nonassessable and conform to the description of the Common
Stock contained in the Prospectus.

(iv) All of the issued shares of capital stock of the
Company's subsidiary has been duly authorized and validly
issued, are fully paid and nonassessable, and are owned
beneficially by the Company.

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<PAGE> 13

(v) The Shares have been duly authorized and, when
issued and delivered against payment therefor as provided
herein, will be validly issued and fully paid and
nonassessable and will conform to the description of the
Common Stock contained in the Prospectus.

(vi) The issue and sale of the Shares being issued at
such Time of Delivery and the performance of this Agreement
and the consummation of the transactions herein contemplated
do not conflict with, or result in a breach or violation of
any of the terms or provisions of, or constitute a default
under any of the following which is filed as an exhibit to the
Registration Statement: any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument
to which the Company or its subsidiary is a party or to which
any of their respective properties or assets is subject, nor
will such action conflict with or violate any provision of the
Articles of Incorporation or Bylaws of the Company or its
subsidiary or any statute, rule or regulation which in such
counsel's experience is normally applicable to transactions of
the type contemplated by this Agreement or to the best of
counsel's knowledge any order, judgment or decree of any court
or governmental agency or body having jurisdiction over the
Company or its subsidiary.

(vii) No consent, approval, authorization or order
from, or registration, qualification or filing with, any
governmental agency or body or self-regulatory organization is
required for the issue and sale of the Shares or the
consummation of the transactions contemplated by this
Agreement, except the registration of the Shares under the Act
and such as may be required under state securities or blue sky
laws in connection with the offer, sale and distribution of
the Shares by the Underwriters.

(viii) This Agreement has been duly authorized,
executed and delivered by the Company.

(ix) The Registration Statement and the Prospectus
and each amendment or supplement thereto (other than the
financial statements and schedules and other financial
information included therein, as to which such counsel need
express no opinion), as of their respective effective or issue
dates, complied as to form in all material respects with the
requirements of the Act and the rules and regulations
thereunder. The descriptions in the Registration Statement and
the Prospectus of statutes are accurate in all material
respects and fairly present the information required to be
shown; and such counsel does not know of any statutes or legal
or governmental proceedings required to be described in the
Registration Statement or Prospectus that are not described as
required or of any contracts or documents of a character
required to be described in the Registration Statement or
Prospectus or to be filed as exhibits to the Registration
Statement which are not described and filed as required.

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<PAGE> 14

(x) The Registration Statement is effective under the
Act; any required filing of the Prospectus pursuant to Rule
424(b) has been (or will be) made in the manner and within the
time period required by Rule 424(b); and to such counsel's
knowledge no stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued
and, to such counsel's knowledge, no proceedings for that
purpose have been instituted or threatened or are contemplated
by the Commission.

(xi) The Company is not, and will not be as a result
of the consummation of the transactions contemplated by this
Agreement, an "investment company," or a company "controlled"
by an "investment company", within the meaning of the
Investment Company Act of 1940.

Such counsel shall also state that no facts have come to their
attention which lead them to believe that as of its effective date, the
Registration Statement or any further amendment thereto made by the
Company prior to the date hereof (other than the financial statements
and related schedules therein or other financial data derived from
accounting records, as to which they need express no opinion) contained
an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading or that, as of its date, the Prospectus or any
further amendment or supplement thereto made by the Company prior to
the date hereof (other than the financial statements and related
schedules therein or other financial data derived from accounting
records, as to which they need express no opinion) contained an untrue
statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading or that, as of
the date hereof, either the Registration Statement or the Prospectus or
any further amendment or supplement thereto made by the Company prior
to the date hereof (other than the financial statements and related
schedules therein or other financial data derived from accounting
records, as to which they need express no opinion) contains an untrue
statement of a material fact or omits to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.

In rendering any such opinion, such counsel may rely, as to
matters of fact, to the extent such counsel deem proper, on
certificates of responsible officers of the Company and public
officials.

(d) You shall have received from Cherry, Bekaert & Holland,
L.L.P. letters dated, respectively, the date of this Agreement and the
effective date of the most recently filed post-effective amendment to
the Registration Statement and also at each Time of Delivery, in form
and substance satisfactory to you, containing statements and
information of the type ordinarily included in accountants' "comfort
letters" to underwriters with respect to the financial statements and
certain financial information contained in or incorporated by reference
in the Registration Statement and the Prospectus.

-14-
<PAGE> 15

(e) Since the date of the latest audited financial statements
included in the Prospectus, neither the Company nor its subsidiary
shall have sustained (i) any material loss or interference with their
respective businesses from fire, explosion, flood, hurricane or other
calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as disclosed in or contemplated by the Prospectus, or (ii) any
material change, or any material development involving a prospective
change (including without limitation a change in management or control
of the Company), in or affecting the position (financial or otherwise),
results of operations, net worth or business prospects of the Company
and its subsidiary, otherwise than as disclosed in or contemplated by
the Prospectus (including any amendment), the effect of which, in
either such case, is in your judgment so material and adverse as to
make it impracticable or inadvisable to proceed with the purchase, sale
and delivery of the Shares being delivered at such Delivery as
contemplated by the Registration Statement, as amended as of the date
hereof.

(f) Subsequent to the date hereof there shall not have
occurred any of the following: (i) any suspension or limitation in
trading in securities generally on the New York Stock Exchange (other
than normal market breaks or cooling periods), or any setting of
minimum prices for trading on such exchange, or in the Common Stock by
the Commission or The Nasdaq Stock Market, Inc.; (ii) a moratorium on
commercial banking activities in New York declared by either federal or
state authorities; (iii) any major outbreak or major escalation of
hostilities involving the United States, declaration by the United
States of a national emergency (other than with respect to natural
disasters) or war or any other national or international calamity or
emergency if the effect of any such event specified in this clause
(iii) in your judgment makes it impracticable or inadvisable to proceed
with the purchase, sale and delivery of the Shares being delivered at
such Time of Delivery as contemplated by the Registration Statement, as
amended as of the date hereof.

(g) The Company shall have furnished to you at such Time of
Delivery certificates of officers of the Company, satisfactory to you
as to the accuracy of the representations and warranties of the Company
herein at and as of such Time of Delivery, as to the performance by the
Company of all of its obligations hereunder to be performed at or prior
to such Time of Delivery, and as to such other matters as you may
reasonably request, and the Company shall have furnished or caused to
be furnished certificates as to the matters set forth in subsections
(a) and (e) of this Section 7, and as to such other matters as you may
reasonably request.

(h) The Shares shall be included for listing on the SmallCap
Market.

8. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to
indemnify and hold harmless each Underwriter against any losses, claims, damages
or liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based

-15-
<PAGE> 16

upon: (i) any untrue statement or alleged untrue statement made by the Company
in Section 1 of this Agreement; (ii) any untrue statement or alleged untrue
statement of any material fact contained in (A) the Registration Statement or
any amendment thereto, any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto, or (B) any application or other document, or
any amendment or supplement thereto, executed by the Company or based upon
written information furnished by or on behalf of the Company filed in any
jurisdiction in order to qualify the Shares under the securities or blue sky
laws thereof or filed with the Commission or any securities association or
securities exchange (each an "Application"); or (iii) the omission or alleged
omission to state in the Registration Statement or any amendment thereto, any
Preliminary Prospectus, the Prospectus or any amendment or supplement thereto,
or any Application, material fact required to be stated therein or necessary to
make the statements therein not misleading, and will reimburse each Underwriter
for any legal or other expenses reasonably incurred by such Underwriter in
connection with investigating, defending against or appearing as a third-party
witness in connection with any such loss, claim, damage, liability or action;
provided, however, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage, liability or action arises out of or
is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement or any amendment thereto,
any Preliminary Prospectus, the Prospectus or any amendment or supplement
thereto or any Application in reliance upon and in conformity with written
information furnished to the Company by any Underwriter. The Company will not,
without the prior written consent of each Underwriter, settle or compromise or
consent to the entry of any judgment in any pending or threatened claim, action,
suit or proceeding (or related cause of action or portion thereof) in respect of
which indemnification may be sought hereunder (whether or not such Underwriter
is a party to such claim, action, suit or proceeding), unless: such settlement,
compromise or consent includes an unconditional release of such Underwriter from
all liability arising out of such claim, action, suit or proceeding or related
cause of action or portion thereof.

(b) Each Underwriter agrees to indemnify and hold harmless the Company
and its officers, directors, agents, representatives and affiliates against any
losses, claims, damages or liabilities to which the Company or its officers,
directors, agents, representatives and affiliates may become subject under the
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the Registration
Statement or any amendment thereto, any Preliminary Prospectus, the Prospectus
or any amendment or supplement thereto or any Application or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company by the Underwriter through you expressly for use therein; and will
reimburse the Company for any legal or other expenses reasonably incurred by
such Company in connection with investigating or defending any such loss, claim,
damage, liability or action.

-16-
<PAGE> 17

(c) Promptly after receipt by an indemnified party under subsection (a)
and (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party); provided, however, that if the defendants in any such action included
the indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be one or more legal defenses available
to it or other indemnified parties which are different from or additional to
those available to the indemnifying party, the indemnifying party shall not have
the right to assume the defense of such action on behalf of such indemnified
party and such indemnified party shall have the right to select separate counsel
to defend such action on behalf of such indemnified party. After such notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof and approval by such indemnified party of counsel
appointed to defend such action, the indemnifying party will not be liable to
such indemnified party under this Section 8 for any legal or other expenses,
other than reasonable costs of investigation, subsequently incurred by such
indemnified party in connection with the defense thereof, unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the next preceding sentence (it being understood, however, that in
connection with such action the indemnifying party shall not be liable for the
expenses of more than one separate counsel (in addition to local counsel) in any
one action or separate but substantially similar actions in the same
jurisdiction arising out of the same general allegations or circumstances, which
separate counsel shall be designated by the Representative in the case of
indemnity arising under paragraph (a) of this Section 8) or (ii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party. Nothing in this Section 8(c)
shall preclude an indemnified party from participating at its own expense in the
defense of any such action so assumed by the indemnifying party.

(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriter on
the other from the offering of the Shares. If, however, the allocation provided
by the immediately preceding sentence is not permitted by applicable law or if
the indemnified party failed to give the notice required under subsection (c)
above, then each indemnifying party shall contribute to such amount paid or
payable by such indemnified party in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of the
Company on the one hand and the Underwriter on the other in connection with the

-17-
<PAGE> 18

statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Underwriter on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting discounts, and
commissions received by the Underwriters. The relative fault shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand or
the Underwriters on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this subsection (d) were determined by
pro rata allocation (even if the Underwriters were treated as one for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this subsection (d). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to above in this
subsection (d) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this subsection (d),
the Underwriter shall not be required to contribute any amount in excess of the
amount by which the total price at which the Shares underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.

(e) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company and to each person, if
any, who controls the Company within the meaning of the Act.

9. DEFAULT OF UNDERWRITERS. (a) If any Underwriter defaults in its
obligation to purchase Shares at a Time of Delivery, you may in your discretion
arrange for you or another party, or other parties to purchase such shares on
the terms contained herein. If within 36 hours after such default by any
Underwriter you do not arrange for the purchase of such Shares, the Company
shall be entitled to a further period of 36 hours within which to procure
another party or other parties satisfactory to you to purchase such Shares on
such terms. In the event that, within the respective prescribed periods, you
notify the Company that you have so arranged for the purchase of such Shares, or
the Company notifies you that it has so arranged for the purchase of such
Shares, you or the Company shall have the right to postpone a Time of Delivery
for a period of not more than 7 days in order to effect whatever change is made
thereby be made necessary in the Registration Statement or the Prospectus, or in
any other documents or

-18-
<PAGE> 19

arrangements, and the Company agrees to file promptly any amendments to the
Registration Statement or the Prospectus that in your opinion may thereby be
made necessary. The cost of preparing, printing and filing any such amendments
shall be paid for by the Underwriters. The term "Underwriter" as used in this
Agreement shall include any person substituted under this Section with effect as
if such person had originally been a party to this Agreement with respect to
such Shares.

(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased does not exceed one-eleventh of the aggregate number of
Shares to be purchased at such Time of Delivery, then the Company shall have the
right to require each non-defaulting Underwriter to purchase the number of
Shares which such Underwriter agreed to purchase hereunder at such Time of
Delivery and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Shares which such
Underwriter agreed to purchase hereunder) of the Shares of such defaulting
Underwriter or Underwriters for which such arrangements have not been made, but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.

10. TERMINATION. (a) This Agreement may be terminated with respect to
the Shares in the sole discretion of the Representative by notice to the Company
given prior to the First Time of Delivery or any Subsequent Time of Delivery,
respectively, in the event that (i) any condition to the obligations of the
Underwriters set forth in Section 7 hereof has not been satisfied, or (ii) the
Company shall have failed, refused or been unable to deliver the Shares or to
perform all obligations and satisfy all conditions on its part to be performed
or satisfied hereunder at or prior to such Time of Delivery, in either case
other than by reason of a default by any of the Underwriters. If this Agreement
is terminated pursuant to this Section 10(a), the Company will reimburse the
Underwriters upon demand for all out-of-pocket expenses (including counsel fees
and disbursements) that shall have been incurred by it in connection with the
proposed purchase and sale of the Shares. The Company shall not in any event be
liable to any of the Underwriters for the loss of anticipated profits from the
transactions covered by this Agreement.

(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in Section 9(a), the aggregate number of such Shares which remain
unpurchased exceeds one-eleventh of the aggregate number of Shares to be
purchased at such Time of Delivery, or if the Company shall not exercise the
right described in Section 9(b) to require non-defaulting Underwriters to
purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement
(or, with respect to a Subsequent Time of Delivery, the obligations of the
Underwriters to purchase and of the Company to sell the Optional Shares)
thereupon will terminate, without liability on the part of any nonfaulting
Underwriter or the Company, except for the expenses to be borne by the Company
and the Underwriters as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.

-19-
<PAGE> 20

11. SURVIVAL. The respective indemnities, agreements, representations,
warranties and other statements of the Company, its officers and the
Underwriter, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of the Underwriter or any controlling person referred to in
Section 8(e) or the Company, or any officer or director or controlling person of
the Company referred to in Section 8(e), and shall survive delivery of and
payment for the Shares. The respective agreements, covenants, indemnities and
other statements set forth in Sections 6 and 8 hereof shall remain in full force
and effect, regardless of any termination or cancellation of this Agreement.

12. NOTICES. All communications hereunder shall be in writing and, if
sent to the Underwriter, shall be mailed, delivered or telegraphed and confirmed
in writing to the Representative, 201 North Tryon Street, Charlotte, North
Carolina 28202, Attention: Corporate Finance Department (with a copy to Moore &
Van Allen, PLLC, 100 North Tryon Street, Floor 47, Charlotte, North Carolina
28202-4003, Attention: Barney Stewart III, Esq., and if sent to the Company,
shall be mailed, delivered or telegraphed and confirmed in writing to the
Company at 110 East Hill Street, Thomson, Georgia 30824, Attention: President
and Chief Executive Officer (with a copy to Smith, Gambrell & Russell, LLP,
Promenade II, Suite 3100, 1230 Peachtree Street, N.E., Atlanta, Georgia 30309,
Attention: Robert C. Schwartz).

13. REPRESENTATIVE. You will act for the several Underwriters in
connection with the transactions contemplated by this Agreement, and any action
under this Agreement taken by you will be binding upon all the Underwriters.

14. BINDING EFFECT. This Agreement shall be binding upon, and inure
solely to the benefit of, each Underwriter and the Company and to the extent
provided in Sections 8 and 10 hereof, the officers and directors and controlling
persons referred to therein and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. No purchaser of any of the
Shares from the Underwriters shall be deemed a successor or assign by reason
merely of such purchase.

15. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina without giving effect to
any provisions regarding conflicts of laws.

16. COUNTERPARTS. This Agreement may be executed by any one or more of
the parties hereto in any number of counterparts, each of which shall be deemed
to be an original, but all such counterparts shall together constitute one and
the same instrument.

-20-
<PAGE> 21

If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us one of the counterparts hereof, and upon
the acceptance hereof by the Representative, this letter will constitute a
binding agreement among the Underwriters and the Company.

Very truly yours,

GEORGIA-CAROLINA BANCSHARES, INC.

By: _______________________________
Name: Patrick G. Blanchard
Title: President and Chief Executive Officer

-21-
<PAGE> 22

The foregoing Agreement is hereby
confirmed and accepted as of the
date first written above
at Charlotte, North Carolina.

INTERSTATE/JOHNSON LANE CORPORATION

By: ___________________________
James H. Glen, Jr.
Managing Director

-22-
<PAGE> 23

SCHEDULE I

GEORGIA-CAROLINA BANCSHARES, INC.

740,000 SHARES
COMMON STOCK

<TABLE>
<CAPTION>
NUMBER OF
OPTIONAL SHARES
TO BE PURCHASED
IF THE MAXIMUM
NUMBER OF
TOTAL MAXIMUM STANDBY SHARES
NUMBER OF NUMBER OF ARE PURCHASED
FIRM SHARES STANDBY AND THE
TO BE SHARES TO BE MAXIMUM OPTION
UNDERWRITER PURCHASED PURCHASED IS EXERCISED
- ----------- ----------- ------------ ---------------
<S> <C> <C> <C>

Interstate/Johnson Lane Corporation

Total

</TABLE>

-23-

<PAGE> 1
EXHIBIT 4.2.1

Georgia-Carolina Bancshares, Inc.
P.O. Box 1560
Thomson, Georgia 30326

October __, 1998

The Bankers Bank
2410 Paces Ferry Road
600 Paces Summit
Atlanta, Georgia 30339-4098
Attention: William R. Burkett

Gentlemen:

(1) This letter will serve as an amendment to that certain letter
agreement (the "Escrow Agreement"), dated January 22, 1998, by and between
Georgia-Carolina Bancshares, Inc., a Georgia corporation (the "Company") and
you, whereby the Company appointed you as Escrow Agent in connection with a
"best efforts" offering of a minimum of 518,519 shares and a maximum of 740,741
shares of the Company's $.001 par value per share Common Stock. Capitalized
terms used herein and not otherwise defined shall have the meanings given
therefor in the Escrow Agreement.

(2) The Company and Interstate/Johnson Lane Corporation ("IJL")
contemplate entering into an agreement (the "Underwriting Agreement") whereby
IJL will underwrite, on both a firm commitment and standby firm commitment
basis, an aggregate of 740,000 shares of the Common Stock. In order to conform
the terms of the Escrow Agreement to the terms of the Underwriting Agreement,
the parties hereto agree that the Escrow Agreement is amended as follows:

A. Paragraph 3 shall be deleted in its entirety and the
following substituted in lieu thereof:

"(3) On February 19, 1998, the Company's
Registration Statement on Form SB-2 (File No. 333-41547), registering the
740,741 shares of Common Stock in connection with the best efforts offering
undertaken by certain directors and officers of the Company (the "Best Efforts
Offering") was declared effective by the Securities and Exchange Commission.
The Best Efforts Offering commenced on February 19, 1998 and, as of August 18,
1998, had resulted in the receipt of subscription funds ("Subscription Funds")
for 310,000 shares of Common Stock from approximately 265 subscribers (the
"Initial Subscribers"). As of August 18, 1998, all Subscription Funds had been
deposited by you into an escrow account (the "Escrow Account").

(4) Although, by its terms, the Best Efforts
Offering could be extended without modification through February 14, 1999, the
Company has elected, prior to that date, to restructure the plan of distribution
of the Best Efforts Offering and to engage Interstate/Johnson Lane Corporation
("IJL") to (i) underwrite, on a firm commitment basis, 430,000 of the shares
registered under the Company's Registration Statement (File No. 333-41547) and
(ii) underwrite, on a standby firm commitment basis, any of the 310,000 shares
which are withdrawn by the Initial Subscribers as contemplated by Paragraph 5
below (the "IJL Offering").

<PAGE> 2

The Bankers Bank
October __, 1998
Page 2

(5) Because of the possible change in the
Company's plan of distribution, the Company will be, subject to the successful
completion of the IJL Offering, extending to each Initial Subscriber the right
to withdraw his subscription and have his Subscription Funds returned without
interest or net profits earned thereon. In order to effect a withdrawal of his
Subscription Funds, each Initial Subscriber must complete a Withdrawal Notice
and return it to the Company by October 15, 1998. In the event the IJL Offering
is successfully completed, the Company shall promptly provide you with written
notice of such completion and a copy of each Withdrawal Notice received by the
Company. Upon receipt of the Company's written notice and the Withdrawal
Notice(s), you shall return the Initial Subscriber's Subscription Funds,
without interest or net profits earned thereon, to the Initial Subscriber. A
copy of the Withdrawal Notice is attached hereto as Exhibit A.

(6) If a Withdrawal Notice is not received by
the Company by October 15, 1998, the Initial Subscriber's Subscription Funds
will remain on deposit with you until the closing of the IJL Offering with IJL.
At that time, all Subscription Funds held by you, including any interest earned
thereon, will be disbursed by you to the Company.

B. Paragraphs 5 through 8 shall be deleted in their entirety.

C. Paragraph 4 shall be renumbered as Paragraph 8.

D. Paragraph 9 shall be amended such that all references to
"Paragraph 8" contained therein (regarding return of Subscription Funds) shall
mean Paragraphs 5 or 7, as applicable.

E. Paragraph 10 shall be deleted in its entirety and the
following substituted in lieu thereof:

"(10) Your obligations as Escrow Agent hereunder shall
terminate upon your transferring all funds you hold hereunder pursuant to the
terms of Paragraphs 5, 6 or 7 herein, as applicable."

F. Paragraph 11 shall be deleted in its entirety.

G. Paragraphs 12 through 26 shall be renumbered as Paragraphs
10 through 24, respectively.

H. Paragraph 15 (formerly Paragraph 16) shall be further
amended such that all references to "Paragraphs 15 and 17" contained therein
(regarding reimbursement of expenses, indemnity and fees) shall mean Paragraphs
14 and 16, respectively.

(3) In addition, the parties hereto agree that the Fee Schedule
attached to the Escrow Agreement is amended as follows:

A. The first sentence shall be amended such that the
reference to Paragraph 17 of the Escrow Agreement contained therein shall mean
Paragraph 16 of the Escrow Agreement, as amended.

B. The last sentence shall be amended such that the reference
to Section 7 of the Escrow Agreement contained therein shall mean Paragraph 6
of the Escrow Agreement, as amended.

<PAGE> 3

The Bankers Bank
October __, 1998
Page 3

Please indicate your acceptance of these amendments to the Escrow
Agreement and Fee Schedule by executing a copy of this letter and returning it
to the undersigned.

Very truly yours,

GEORGIA-CAROLINA BANCSHARES, INC.

By:
-------------------------------------------------
J. Harold Ward, Jr.
Senior Vice President and Chief Financial Officer

Attest:

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

(CORPORATE SEAL)

ACCEPTED AND AGREED:

THE BANKERS BANK

By:
-------------------------------------------------
William R. Burkett
Senior Vice President

<PAGE> 4
EXHIBIT A

NOTICE OF WITHDRAWAL

For your convenience, you may mail this page to us in the enclosed,
self-addressed, postage paid envelope.

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

(Signature)

Print Name:
-------------------------
Date:
-------------------------------

<PAGE> 1
EXHIBIT 5.1

[SMITH, GAMBRELL & RUSSELL, LLP LETTERHEAD]

October 1, 1998

Board of Directors
Georgia-Carolina Bancshares, Inc.
110 East Hill Street
Thomson, Georgia 30824

Re: Georgia-Carolina Bancshares, Inc.
Registration Statement on Form SB-2
851,000 Shares of Common Stock
Registration No. 333-62493

Gentlemen:

We have acted as counsel for Georgia-Carolina Bancshares, Inc. (the
"Company"), in connection with the proposed public offering of the shares of
its $.001 par value Common Stock covered by the above-described Registration
Statement.

In connection therewith, we have examined the following:

(1) The Articles of Incorporation of the Company, as amended,
certified by the Secretary of State of the State of Georgia;

(2) The Bylaws of the Company, as amended, certified as complete
and correct by the Secretary of the Company;

(3) The minute book of the Company, certified as correct and
complete by the Secretary of the Company;

(4) Certificate of Good Standing with respect to the Company,
issued by the Secretary of State of the State of Georgia; and

(5) The Registration Statement, including all exhibits thereto.

<PAGE> 2

Board of Directors
Georgia-Carolina Bancshares, Inc.
October 1, 1998
Page 2

Based upon such examination and upon examination of such other
instruments and records as we have deemed necessary, we are of the opinion
that:

(A) The Company has been duly incorporated under the laws of the
State of Georgia and is validly existing and in good standing
under the laws of that State.

(B) The 851,000 shares of Common Stock covered by the
Registration Statement have been legally authorized and, when
issued in accordance with the terms described in said
Registration Statement, will be validly issued, fully paid
and nonassessable.

We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the Prospectus. In giving this consent, we do not thereby
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, or the rules and regulations of
the Securities and Exchange Commission thereunder.

Sincerely,

SMITH, GAMBRELL & RUSSELL, LLP

/s/ Robert C. Schwartz

Robert C. Schwartz

<PAGE> 1
EXHIBIT 10.1.1

AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT

This Agreement (the "Agreement"), dated as of the 30th day of
September, 1998, is made and entered into by and among First Bank of Georgia,
Thomson, Georgia, a bank chartered under the laws of the State of Georgia (the
"Bank"), Georgia-Carolina Bancshares, Inc., a corporation chartered under the
laws of the State of Georgia (the "Company") and Patrick G. Blanchard, an
individual residing in Richmond County, Georgia (the "Executive").

W I T N E S S E T H :

WHEREAS, the Bank, the Company and the Executive entered into an
Employment Agreement dated October 6, 1997 (the "Employment Agreement"); and

WHEREAS, the Bank, the Company and the Executive desire to amend the
Employment Agreement;

NOW, THEREFORE, for and in consideration of the mutual premises and
covenants herein contained, the parties hereto agree as follows:

1. Section 3.2(B)(5) of the Employment Agreement shall be deleted
in its entirety.

2. Sections 4 through 12 of the Employment Agreement shall be
renumbered as Sections 5 through 13, respectively.

3. Between Section 3.3 and Section 5 (formerly Section 4 of the
Employment Agreement) the following shall be added:

"4. STOCK OPTIONS. Upon the closing of the Company's
registered public offering of 740,000 shares of common stock,
$.001 par value per share (the "Common Stock"), pursuant to
that certain Registration Statement on Form SB-2 (File No.
333- 62493), the Executive shall be granted an option (the
"Option") to purchase a number of shares of Common Stock equal
to 2.5% of the number of shares of Common Stock sold in such
offering up to a maximum of 15,750 shares of Common Stock at
an exercise price of $13.50 per share. The Option shall become
exercisable in one-fourth (1/4) increments as follows:

(A) Upon the date of grant;

(B) At the end of the calendar year when the
Bank's average assets exceed $100 million;

<PAGE> 2

(D) At the end of the calendar year when the
Bank's average assets exceed $200 million.

The Option shall expire on the tenth anniversary of the
date of grant; provided, however, that in the event of the
termination of employment of the Executive, the Executive
shall have ninety (90) days to exercise all of the then
presently exercisable options. On the ninety-first day after
the termination of employment of the Executive, all
unexercised options shall terminate."

4. Section 5 (formerly Section 4 of the Employment Agreement)
shall be amended such that all references to "Section 4" contained therein shall
mean Section 5.

5. Section 5(D) (formerly Section 4(D) of the Employment
Agreement) shall be deleted in its entirety and the following substituted in
lieu thereof:

"(D) Notwithstanding anything to the contrary set forth
in this Section 5, a "change in control" shall not include any
sale of Common Stock by the Company in connection with the
registered public offering of 740,000 shares of Common Stock
pursuant to that certain Registration Statement on Form SB-2
(File No. 333-62493)."

6. Section 6 (formerly Section 5 of the Employment Agreement)
shall be amended such that the reference to Paragraph 5(ii) contained therein
shall mean Section 5.

7. Section 2.1(D) of the Employment Agreement shall be amended
such that all references to "Paragraph 6" contained therein shall mean Section
6.

8. Except as otherwise specifically set forth herein, all of the
other terms and conditions of the Employment Agreement shall remain in full
force and effect as originally written without amendment or modification.

<PAGE> 3

IN WITNESS WHEREOF, the Bank, the Company and the Executive have
executed and delivered this Agreement as of the date first above written.

"Bank"

FIRST BANK OF GEORGIA

By: /s/ John W. Lee
--------------------------
Title: Chairman

"Company"

GEORGIA-CAROLINA BANCSHARES, INC.

By: /s/ David W. Joesbury, Sr.
--------------------------
Title: Chairman

"Executive"

/s/ Patrick G. Blanchard
-----------------------------------
Patrick G. Blanchard

<PAGE> 1

EXHIBIT 10.2.2

AMENDED AND RESTATED
AGREEMENT

AMONG

RAY BROWN
RDB FAMILY LIMITED PARTNERSHIP
ARTHUR J. GAY, JR.
J. RANDAL HALL
GEORGE H. INMAN
JOHN W. LEE
A. MONTAGUE MILLER
AND
JULIAN W. OSBON
AS THE AUGUSTA GROUP

AND

GEORGIA-CAROLINA BANCSHARES, INC.

DATED AS OF SEPTEMBER 30, 1998

<PAGE> 2

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page

<S> <C> <C>
ARTICLE I OFFER FOR SALE OF COMMON STOCK
1.1 Structure of Offering...................................................2
1.2 Regulatory Approval and Proposed Purchase of Common Stock by
Augusta Group......................................................2

ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY

2.1 Due Incorporation and Qualification.....................................2
2.2 Outstanding Capital Stock...............................................3
2.3 Options or Other Rights.................................................3
2.4 Title to Common Stock...................................................3
2.5 Authority of the Company................................................3

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE AUGUSTA
GROUP...................................................................3

ARTICLE IV CONTINUED APPOINTMENT OF DIRECTORS AND OFFICERS
4.1 Continued Appointment of David W. Joesbury, Sr. as Chairman
of the Company's Board of Directors.....................................4
4.2 Continued Appointment of John W. Lee as Chairman of the Bank's
Board of Directors......................................................4
4.3 Continued Appointment of Patrick G. Blanchard as President and CEO
of the Company..........................................................4
4.4 Continued Appointment of Heyward Horton, Jr. as President and CEO
of the Bank.............................................................4

ARTICLE V CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES
5.1 Compliance with Securities Laws.........................................4
5.2 Regulatory Approvals and Filings........................................5

ARTICLE VI MISCELLANEOUS
6.1 Survival of Representations and Warranties..............................5
6.2 Publicity...............................................................5
6.3 Knowledge...............................................................5
6.4 Standard for Representations and Warranties.............................5
6.5 Gender..................................................................5
6.6 Expenses................................................................6
6.7 Entire Agreement........................................................6
</TABLE>

(i)

<PAGE> 3

<TABLE>
<S> <C> <C>
6.8 Waivers and Consents....................................................6
6.9 Notices.................................................................6
6.10 Rights of Third Parties.................................................8
6.11 Headings................................................................8
6.12 Governing Law...........................................................8
6.13 Parties in Interest.....................................................8
6.14 Counterparts............................................................8
6.15 Severability............................................................8
</TABLE>

Exhibit A - Amendment No. 1 to that certain Employment Agreement between the
Bank, the Company and Patrick G. Blanchard

(ii)

<PAGE> 4

AMENDED AND RESTATED
AGREEMENT

THIS AMENDED AND RESTATED AGREEMENT (the "Agreement"), dated as of the
30th day of September, 1998, is made and entered into by and among RAY BROWN,
RDB FAMILY LIMITED PARTNERSHIP, ARTHUR J. GAY, JR., J. RANDAL HALL, GEORGE H.
INMAN, JOHN W. LEE, A. MONTAGUE MILLER, and JULIAN W. OSBON (collectively, the
"Augusta Group"), and GEORGIA-CAROLINA BANCSHARES, INC. ("the Company"). Unless
expressly stated otherwise herein, this Agreement shall be deemed to supersede
all prior warranties, representations, covenants and agreements between the
parties hereto.

W I T N E S S E T H :

WHEREAS, the Company is a bank holding company owning one hundred
percent (100%) of the issued and outstanding common stock of First Bank of
Georgia, a Georgia state bank (the "Bank");

WHEREAS, the Company proposes, subject to the terms and conditions
stated in an underwriting agreement (the "Underwriting Agreement"), to issue and
to sell to the underwriters named in Schedule I to the Underwriting Agreement
(the "Underwriters") (i) an aggregate of 430,000 shares of common stock, par
value $.001 per share (the "Common Stock"), of the Company on a firm commitment
basis (the "Firm Shares"), (ii) up to 310,000 shares of the Common Stock that
were subscribed for and subsequently withdrawn by participants in a best efforts
offering conducted by the Company on a standby firm commitment basis (the
"Standby Shares"), and (iii) at the election of the Underwriters, up to 111,000
additional shares of the Common Stock (the "Optional Shares") solely to cover
overallotments, if any (the Firm Shares, the Standby Shares and the Optional
Shares that the Underwriters elect to purchase are collectively referred to as
the "Shares");

WHEREAS, certain members of the Augusta Group desire to purchase the
Common Stock, subject to the review of a prospectus and certain other conditions
as set forth in this Agreement, having an aggregate value greater than or equal
to $560,000; and

WHEREAS, the Augusta Group desires to have certain persons represent
its interests on the Boards of Directors of the Company and the Bank;

NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements contained in this Agreement and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto covenant and agree as follows:

<PAGE> 5

ARTICLE I

OFFER FOR SALE OF COMMON STOCK

1.1 Structure of Offering. (a) On February 19, 1998, the Company's
Registration Statement on Form SB-2 (File No. 333-41547), registering 740,741
shares of the Common Stock in connection with a best efforts offering undertaken
by certain directors and officers of the Company (the "Best Efforts Offering")
was declared effective by the Securities and Exchange Commission (the
"Commission"). The Best Efforts Offering commenced on February 19, 1998 and, as
of August 18, 1998, had resulted in the receipt of subscription funds
("Subscription Funds") for 310,000 shares of the Common Stock from approximately
265 subscribers (the "Initial Subscribers"). As of August 18, 1998, all
Subscription Funds had been deposited into an escrow account.

(b) Although, by its terms, the Best Efforts Offering
could be extended without modification through February 14, 1999, the Company
has elected, prior to that date, to restructure the plan of distribution of the
Best Efforts Offering and to issue and to sell to the Underwriters the Shares.

1.2 Regulatory Approval and Proposed Purchase of Common Stock by
Augusta Group. The Augusta Group shall file all necessary applications and make
such other filings with the appropriate state and federal bank regulatory
agencies as are necessary to approve the purchase of the Common Stock by the
Augusta Group and each of the members thereof, and shall present proof of such
regulatory approval(s) to the Company. Upon the Company's satisfaction that all
necessary regulatory approval(s) have been obtained, and subject to the review
of a prospectus, Arthur J. Gay, Jr., J. Randal Hall, John W. Lee and Julian W.
Osbon shall purchase Common Stock having an aggregate value greater than or
equal to $560,000, each of the aforementioned individuals agreeing to separately
purchase Common Stock having a value of not less than $50,000.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

As an inducement to the Augusta Group to enter into this Agreement and
to consummate the transactions contemplated hereby, and with the knowledge that
the Augusta Group shall rely thereon, the Company, represents and warrants to
the Augusta Group the following as of the date of this Agreement:

2.1 Due Incorporation and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Georgia, and has the corporate power and lawful authority to own
and operate its properties and assets, to carry on its business

<PAGE> 6

as now being conducted, and to execute and deliver this Agreement and to perform
the terms hereof. The Company has taken all corporate action necessary to
authorize the execution and delivery of this Agreement.

2.2 Outstanding Capital Stock. The Company's authorized, issued
and outstanding capital stock is as disclosed in the Company's Registration
Statement on Form SB-2 (File No. 333-62493) (the "Registration Statement") filed
with the Commission on August 28, 1998. All of the issued and outstanding shares
of the capital stock of the Company are duly authorized and are validly issued,
fully paid and non-assessable from all taxes, liens and charges with respect to
the issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).

2.3 Options or Other Rights. Except as disclosed in the
Registration Statement, there are no outstanding rights, subscriptions,
warrants, conversion rights, calls, unsatisfied preemptive rights, commitments,
options or other agreements or rights of any kind pursuant to which any person
or entity has the right or option to purchase or otherwise to receive from the
Company any shares of the Common Stock or any other security of the Company and
there is no outstanding security of any kind convertible into or redeemable or
exchangeable for any shares of the Common Stock of the Company.

2.4 Title to Common Stock. The Company has full power and
authority to convey free and clear of all liens, encumbrances, equities,
restrictions, claims and obligations of every kind, all of the shares of the
Common Stock contemplated to be issued pursuant to the Registration Statement
and, upon delivery of and payment for such Common Stock as herein provided, all
subscribers therefor will acquire good and marketable title thereto, free and
clear of all liens, encumbrances, equities, restrictions, claims and obligations
of every kind.

2.5 Authority of the Company. The Company has full power and legal
capacity to execute and deliver this Agreement and the other agreements required
to be executed and delivered by the Company hereunder and, subject to the
receipt of approvals, if any, required under applicable banking regulation, to
carry out the transactions contemplated hereby.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE AUGUSTA GROUP

As an inducement to the Company to enter into this Agreement and to
consummate the transactions contemplated hereby, and with the knowledge that the
Company shall rely thereon, the members of the Augusta Group, jointly and
severally, represent and warrant to the Company that this Agreement when
executed and delivered by the Augusta Group will constitute a valid and legally
binding obligation of the Augusta Group and each of them, enforceable in
accordance with its terms, subject to (i) laws of general application relating
to bankruptcy, insolvency, and relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief, and other equitable remedies.

<PAGE> 7

ARTICLE IV

CONTINUED APPOINTMENT OF DIRECTORS AND OFFICERS

4.1 Continued Appointment of David W. Joesbury, Sr. as Chairman of
the Company's Board of Directors. Following the execution of this Agreement by
the parties hereto, David W. Joesbury, Sr. shall continue to serve as the
Chairman of the Company's Board of Directors until the Company's next annual
meeting of shareholders and until his successor is elected and qualified by the
Company's Board of Directors.

4.2 Continued Appointment of John W. Lee as Chairman of the Bank's
Board of Directors. Following the execution of this Agreement by the parties
hereto, John W. Lee shall continue to serve as the Chairman of the Bank's Board
of Directors until the Bank's next annual meeting of the sole shareholder and
until his successor is elected and qualified by the Bank's Board of Directors.

4.3 Continued Appointment of Patrick G. Blanchard as President and
CEO of the Company. Following the execution of this Agreement by the parties
hereto, Patrick G. Blanchard shall continue to serve as the President and Chief
Executive Officer of the Company, which position shall continue to report to,
and be under the direct supervision of, the Executive Committee of the Bank, and
to enter into that certain Amendment No. 1 to that certain employment agreement
with the Bank and Company dated October 6, 1997, in substantially the form and
upon the terms as set forth in Exhibit A hereto.

4.4 Continued Appointment of Heyward Horton, Jr. as President and
CEO of the Bank. Following the execution of this Agreement by the parties
hereto, Heyward Horton, Jr. shall continue to serve as the President and Chief
Executive Officer of the Bank, which position shall continue to report to, and
be under the direct supervision of, the Executive Committee of the Bank.

ARTICLE V

CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES

5.1 Compliance with Securities Laws. The Company shall not be
under any obligation to complete the transactions contemplated under this
Agreement unless and until the Company shall have satisfied all requirements
under any federal or state securities laws necessary for the offer and sale of
the Shares.

<PAGE> 8

5.2 Regulatory Approvals and Filings. The Company shall not be
under any obligation to complete the transactions contemplated under this
Agreement unless and until the Company or the Augusta Group, as the case may be,
shall have made all filings and registrations with and obtained all approvals
from all federal and state bank regulatory agencies respecting the transactions
contemplated herein which approvals shall be in full force and effect and all
waiting periods required by law shall have expired. In addition, if the Company
or the Augusta Group shall have received notification from any state or federal
bank regulatory agency which in the reasonable judgment of the Company is
materially adverse to the transactions contemplated herein and which requires
the Company to undertake to make any filing or to take other measures which are
unduly onerous to the Company, the Company shall not be under any obligation to
complete that transaction contemplated by this Agreement.

ARTICLE VI

MISCELLANEOUS

6.1 Survival of Representations and Warranties. All of the
representations and warranties of the Company and the Augusta Group contained in
this Agreement shall survive the termination of this Agreement.

6.2 Publicity. Except as otherwise required by law or applicable
stock exchange rules, none of the parties hereto shall issue any press release
or make any other public statement, in each case relating to or in connection
with or arising out of this Agreement or the matters contained herein, without
obtaining the prior written approval of all parties hereto as to the contents
and manner of presentation and publication thereof.

6.3 Knowledge. Where any representation or warranty contained in
this Agreement is expressly qualified by reference to the knowledge, information
or belief of the party or parties making such representation or warranty, each
of the representing or warranting parties confirms that he has made due and
diligent inquiry as to the matters that are the subject of such representations
and warranties.

6.4 Standard for Representations and Warranties. No representation
or warranty of the Company or the Augusta Group contained in this Agreement
shall be deemed untrue or incorrect, and no party hereto shall be deemed to have
breached a representation or warranty as a consequence of the existence of any
fact, circumstance or event, individually or taken together with all other
facts, circumstances or events inconsistent with any representation or warranty
made in Article II by the Company or Article III by the Augusta Group of this
Agreement, unless such inconsistent fact, circumstance, or event has had or is
expected to have a material adverse effect on the other party.

6.5 Gender. All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the identity of the person
or persons may require.

<PAGE> 9

6.6 Expenses. The Augusta Group and the Company shall pay their
own respective expenses, including the fees and disbursements of their
respective counsel in connection with the negotiation, preparation and execution
of this Agreement and the consummation of the trans actions contemplated hereby;
provided, however, that if the transactions contemplated by this Agreement are
not completed as a consequence of the withdrawal of either party to this
Agreement otherwise than as expressly provided for herein or due to any other
intentional act in material contravention of this Agreement by either of the
parties hereto, such withdrawing or intentionally acting party (the "Breaching
Party") shall reimburse the other party (the "Nonbreaching Party") for all
expenses incurred by the Nonbreaching Party with respect to the transactions
contemplated by this Agreement, including the preparation of this Agreement and
all ancillary documents thereto and the enforcement of this provision.

6.7 Entire Agreement. This Agreement, including all schedules and
exhibits hereto, constitutes the entire agreement of the parties with respect to
the subject matter hereof, supersedes all prior agreements, negotiations or
letters of intent, and may not be modified, amended or terminated except by a
written instrument specifically referring to this Agreement signed by each of
the parties hereto.

6.8 Waivers and Consents. All waivers and consents given hereunder
shall be in writing. No waiver by any party hereto of any breach or anticipated
breach of any provision hereof by any other party shall be deemed a waiver of
any other contemporaneous, preceding or succeeding breach or anticipated breach,
whether or not similar, on the part of the same or any other party.

6.9 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been given only if and when (i)
personally delivered or (ii) three (3) business days after mailing, postage
prepaid, by certified mail or (iii) when delivered (as evidenced by a receipt)
by a nationally recognized overnight delivery service, addressed in each case as
follows:

(a) If to the Company to:

First Bank of Georgia
110 East Hill Street
Thomson, Georgia 30824
Telecopy Number: 706-595-2074
Attention: Heyward Horton, Jr.

<PAGE> 10

copy to counsel:

Smith, Gambrell & Russell, LLP
1230 Peachtree Street, NE
Suite 3100, Promenade II
Atlanta, Georgia 30309-3592
Telecopy Number: 404-685-7058
Attention: Robert C. Schwartz

(b) If to the Augusta Group to:

Ray Brown
RDB Family Limited Partnership
410 Carolina Springs Road
North Augusta, South Carolina 29841
Arthur J. Gay, Jr.
3643 Pebble Beach Drive
Augusta, Georgia 30907

J. Randal Hall
1202 First Union Bank Building
699 Broad Street
Augusta, Georgia 30901

George H. Inman
P.O. Box 204658
Augusta, Georgia 30917

John W. Lee
807 Carriage Court
Augusta, Georgia 30909

A. Montague Miller
4384 Deer Run
Evans, Georgia 30809

Julian W. Osbon
P.O. Box 1447
Augusta, Georgia 30903

Each party may change its address for the giving of notices and communications
to it, and/or copies thereof, by written notice to the other parties in
conformity with the foregoing.

<PAGE> 11

6.10 Rights of Third Parties. All conditions of the obligations of
the parties hereto, and all undertakings herein, are solely and exclusively for
the benefit of the parties hereto and their respective successors,
representatives and permitted assigns, and no other person or entity shall have
standing to require satisfaction of such conditions or to enforce such
undertakings in accordance with their terms, or be entitled to assume that any
party hereto will refuse to consummate the purchase and sale contemplated hereby
in the absence of strict compliance with any or all thereof, and no other person
or entity shall, under any circumstances, be deemed a beneficiary of such
conditions or undertakings, any or all of which may be freely waived in whole or
in part, by mutual consent of the parties hereto at any time, if in their sole
discretion they deem it desirable to do so.

6.11 Headings. The Table of Contents and Article and Section
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.

6.12 Governing Law. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the laws of the
State of Georgia.

6.13 Parties in Interest. This Agreement may not be transferred,
assigned, pledged or hypothecated by the Augusta Group or any one of them, other
than by operation of law or with the consent of the Company. This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective heirs, executors, administrators, successors and permitted
assigns.

6.14 Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.

6.15 Severability. In case any provision in this Agreement shall be
held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.

[THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK]

<PAGE> 12

IN WITNESS WHEREOF, the parties have executed this agreement under seal
as of the date first above written.

GEORGIA-CAROLINA BANCSHARES, INC.

By: /s/ David W. Joesbury, Sr.
-----------------------------------------
Name: David W. Joesbury, Sr.
Title: Chairman of the Board

Attest: /s/ Patrick G. Blanchard
----------------------------------------
Title: President and Chief Executive Officer

[CORPORATE SEAL]

AUGUSTA GROUP MEMBERS:

/s/ Ray Brown
--------------------------------------------
Ray Brown

RDB Family Limited Partnership

By: /s/ Ray Brown
--------------------------------------------
General Partner

/s/ Arthur J. Gay, Jr.
--------------------------------------------
Arthur J. Gay, Jr.

/s/ J. Randal Hall
--------------------------------------------
J. Randal Hall

/s/ George H. Inman
--------------------------------------------
George H. Inman

/s/ John W. Lee
--------------------------------------------
John W. Lee

/s/ A. Montague Miller
--------------------------------------------
A. Montague Miller

/s/ Julian W. Osbon
--------------------------------------------
Julian W. Osbon

<PAGE> 13
EXHIBIT A

AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT

W I T N E S S E T H :

WHEREAS, the Bank, the Company and the Executive entered into an
Employment Agreement dated October 6, 1997 (the "Employment Agreement"); and

WHEREAS, the Bank, the Company and the Executive desire to amend the
Employment Agreement;

NOW, THEREFORE, for and in consideration of the mutual premises and
covenants herein contained, the parties hereto agree as follows:

1. Section 3.2(B)(5) of the Employment Agreement shall be deleted
in its entirety.

2. Sections 4 through 12 of the Employment Agreement shall be
renumbered as Sections 5 through 13, respectively.

3. Between Section 3.3 and Section 5 (formerly Section 4 of the
Employment Agreement) the following shall be added:

(A) Upon the date of grant;

(B) At the end of the calendar year when the
Bank's average assets exceed $100 million;

<PAGE> 14

(D) At the end of the calendar year when the
Bank's average assets exceed $200 million.

4. Section 5 (formerly Section 4 of the Employment Agreement)
shall be amended such that all references to "Section 4" contained therein shall
mean Section 5.

5. Section 5(D) (formerly Section 4(D) of the Employment
Agreement) shall be deleted in its entirety and the following substituted in
lieu thereof:

6. Section 6 (formerly Section 5 of the Employment Agreement)
shall be amended such that the reference to Paragraph 5(ii) contained therein
shall mean Section 5.

7. Section 2.1(D) of the Employment Agreement shall be amended
such that all references to "Paragraph 6" contained therein shall mean Section
6.

<PAGE> 15

IN WITNESS WHEREOF, the Bank, the Company and the Executive have
executed and delivered this Agreement as of the date first above written.

"Bank"

FIRST BANK OF GEORGIA

By:
--------------------------
Title: Chairman

"Company"

GEORGIA-CAROLINA BANCSHARES, INC.

By:
--------------------------
Title: Chairman

"Executive"

-----------------------------------
Patrick G. Blanchard

<PAGE> 1
EXHIBIT 10.3.2

AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT

This Agreement is made and entered into on the 13th day of May, 1998 by
and among the First Bank of East Georgia, Thomson, Georgia, a bank chartered
under the laws of the State of Georgia (the "Bank"), Georgia-Carolina
Bancshares, Inc., a corporation chartered under the laws of the State of Georgia
(the "Company") and Heyward Horton, Jr., an individual residing in Thomson,
McDuffie County, Georgia (the "Executive");

W I T N E S S E T H:

WHEREAS, the Bank and the Executive entered into an Employment
Agreement dated as of July 17, 1996, which was amended by Amendment No. 1 dated
as of July 17, 1997 (collectively, the "Employment Agreement"); and

WHEREAS, the Bank and the Executive desire to amend the Employment
Agreement;

NOW, THEREFORE, for and in consideration of the mutual premises and
covenants herein contained, the parties hereto agree as follows:

1. All references to defined terms as set forth in the Employment
Agreement will have the same meaning herein as in the Employment Agreement.

2. Section 2.1(D)(ii) of the Employment Agreement is hereby amended by
deleting Section 2.1(D)(ii) in its entirety and replacing the same with the
following:

"(ii) "Without Cause:" The Bank, subject to the approval of a
majority vote of the Board of Directors of the Bank, may, upon
thirty (30) days written notice to the Executive, terminate
this Agreement without cause at any time during the term of
this Agreement, upon the condition that Executive shall be
entitled, as liquidated damages in lieu of all claims, to not
less than twelve (12) months salary at the then prevailing
Base Salary level, with all insurance benefits as identified
in Paragraph 3.3 of this Agreement to be maintained for a
period of twelve (12) months, or until Executive is employed
in a full-time position, whichever first occurs. The
termination of Executive "without cause" shall entitle the
Bank to enforcement of the Post Termination Covenants
contained in Paragraph 6 hereof."

3. Section 3.3(G) of the Employment Agreement is hereby amended by
deleting Section 3.3(G) in its entirety and replacing the same with the
following:

"(G) Vacation - The Executive shall be entitled to four (4) weeks
paid vacation or such period as may be provided by the Board
or the Bank's Personnel Policy and he shall also be entitled
to vacation days on all official holidays observed by the
Bank."

4. Except as otherwise specifically set forth herein, all the other
terms and conditions of the Employment Agreement shall remain in full force and
effect as originally written without amendment or modification.

<PAGE> 2

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.

"Bank"

FIRST BANK OF EAST GEORGIA

By: /s/ John W. Lee
------------------------------
Title: Chairman

"Company"

GEORGIA-CAROLINA BANCSHARES, INC.

By: /s/ David W. Joesbury, Sr.
-------------------------------
Title: Chairman

"Executive"

/s/ Heyward Horton, Jr.
----------------------------------
Heyward Horton, Jr.

<PAGE> 1
EXHIBIT 23.2

[CHERRY, BEKAERT & HOLLAND, L.L.P. LETTERHEAD]

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors
Georgia-Carolina Bancshares, Inc.

We consent to the use in this Registration Statement on Form SB-2 of our
report dual dated February 6, 1998 and August 24, 1998, relating to the
statements of financial condition of Georgia-Carolina Bancshares, Inc. as of
December 31, 1997 and December 31, 1996, and the related statements of income,
shareholders' equity, and cash flows for the years then ended, and to the
reference to our firm under the caption "Experts" in the Prospectus, which is
part of this Registration Statement.

/s/ Cherry, Bekaert & Holland, L.L.P.

Augusta, Georgia
October 1, 1998