FIRST BANKING CO OF SOUTHEAST GEORGIA, S-4/A, 1996-07-05

FIRST BANKING CO OF SOUTHEAST GEORGIA
S-4/A, 1996-07-05
STATE COMMERCIAL BANKS

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<PAGE> 1

As Filed With the Securities And Exchange Commission on July 5, 1996;

Registration No. 333-3679

================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

------------------------------------
PRE-EFFECIVE AMENDMENT NO. 1

TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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

FIRST BANKING COMPANY OF SOUTHEAST GEORGIA
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

Georgia 6025 58-1458268
- --------------- -------------------- ------------
(State of other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classi- Identification No.)
incorporation) fication Code No.)

40 North Main Street
Statesboro, Georgia 30458
(912) 764-6611
-------------------------------------------------------------
(Address, including ZIP Code, and telephone number, including
area code, of registrant's principal executive offices)

Walter G. Moeling, IV, Esq.
Powell, Goldstein, Frazer & Murphy
Sixteenth Floor, 191 Peachtree Street, N.E.
Atlanta, Georgia 30303
(404) 572-6600
--------------------------------------------------
(Name, address, including ZIP Code, and telephone
number, including area code, of agent for service)

Approximate date of commencement of the proposed sale of the securities to the
public: As soon as practicable after this Registration Statement becomes
effective.

If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G check the following box. ___

[Cover Page Continued]
<PAGE> 2

- ------------------------------------------------------------------------------------------------------------
CALCULATION OF REGISTRATION FEE
============================================================================================================
Proposed Proposed
Title of each class maximum maximum Amount of
of securities Amount to be offering aggregate Registration
to be registered registered price per unit offering price Fee
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, 340,420 shares $10.97(1) $3,734,408(1) $ 1,288(1)(2)
$1.00 par value
===========================================================================================================
</TABLE>

(1) In accordance with Rule 457(f)(2), the registration fee has been calculated
based on the book value per share of the FNB Bancshares, Inc. common stock to
be surrendered in the merger as of March 31, 1996 ($10.97).

(2) Previously paid.

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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE> 3

FIRST BANKING COMPANY OF SOUTHEAST GEORGIA
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K

<TABLE>
<CAPTION>
ITEM
NUMBER CAPTION IN FORM S-4 CAPTION IN PROSPECTUS
------ ------------------- ---------------------
<S> <C> <C>
1 Forepart of Registration Statement and Facing Page of Registration Statement; Proxy
Outside Front Cover Page of Prospectus Statement/Prospectus Cover Page

2 Inside Front and Outside Back Cover Proxy Statement/Prospectus Cover Page;
Pages of Prospectus . . . . . . . . . Available Information

3 Risk Factors, Ratio of Earnings to Summary
Fixed Charges and Other Information .

4 Terms of the Transaction . . . . . . Summary; Description of the Transaction;
Effect of the Merger on the Rights of
Shareholders; Appendices A through C

5 Pro Forma Financial Information . . . Summary; Pro Forma Combined Financial Data

6 Material Contracts with the Company Summary; Description of the Transaction
Being Acquired . . . . . . . . . . .

7 Additional Information Required for Not Applicable
Reoffering by Persons and Parties
Deemed to be Underwriters . . . . . .

8 Interests of Named Experts and Counsel
Not Applicable

9 Disclosure of Commission Position on Part II of Registration Statement--
Indemnification for Securities Act Undertakings
Liabilities . . . . . . . . . . . . .

10 Information with Respect to S-3 Not Applicable
Registrants . . . . . . . . . . . . .

11 Incorporation of Certain Information Not Applicable
by Reference . . . . . . . . . . . .

</TABLE>
<PAGE> 4

<TABLE>
<CAPTION>
ITEM
NUMBER CAPTION IN FORM S-4 CAPTION IN PROSPECTUS
------ ------------------- ---------------------
<S> <C> <C>
12 Information with Respect to S-2 or S-3 Available Information; Documents
Registrants . . . . . . . . . . . . . Incorporated by Reference; Summary; First
Banking Selected Historical Financial Data;
Comparative Market Prices and Dividends;
Business of First Banking; Certain
Regulatory Considerations; Description of
First Banking Capital Stock

13 Incorporation of Certain Information Documents Incorporated by Reference
by Reference . . . . . . . . . . . .

14 Information with Respect to Not Applicable
Registrants Other Than S-2 or S-3
Registrants . . . . . . . . . . . . .

15 Information with Respect to S-3 Not Applicable
Companies . . . . . . . . . . . . . .

16 Information with Respect to S-2 or S-3 Not Applicable
Companies . . . . . . . . . . . . . .

17 Information with Respect to Companies Summary; FNB Financial Statements; FNB
Other Than S-2 or S-3 Companies . . . Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business of FNB; Comparative
Market Prices and Dividends; FNB Selected
Historical Financial Data

18 Information if Proxies, Consents or Summary; The Special Meeting; The Merger;
Authorizations Are to be Solicited . Certain Relationships and Related
Transactions; Management of First Banking;
Management of FNB; Voting Securities and
Principal Shareholders of FNB

19 Information if Proxies, Consents or Not Applicable
Authorizations Are Not to be Solicited
in an Exchange Offer

</TABLE>
<PAGE> 5

Dear FNB Bancshares, Inc. Shareholder:

You are cordially invited to attend the Special Meeting of Shareholders
of FNB Bancshares, Inc. ("FNB") to be held at FNB's main office, 501 South
Laurel Street, Springfield, Georgia on ____________, 1996, at ______________,
local time, notice of which is enclosed.

At the Special Meeting, you will be asked to consider and vote on a
proposal to approve an Agreement and Plan of Merger (the "Agreement") entered
into with First Banking Company of Southeast Georgia ("First Banking") pursuant
to which FNB will merge (the "Merger") with and into First Banking, and First
National Bank of Effingham (the "Bank"), a wholly owned subsidiary of FNB, will
become a wholly owned subsidiary of First Banking. Upon consummation of the
Merger, each share of FNB common stock issued and outstanding (except for
certain shares held by FNB or First Banking) will be converted into 0.892 of a
share of First Banking common stock and each outstanding option or warrant to
purchase FNB common stock will be converted into the right to receive 0.466 of
a share of First Banking common stock for each share underlying the option or
warrant.

The accompanying Proxy Statement/Prospectus includes a description of
the proposed Merger and provides other specific information concerning the
Special Meeting. Please read these materials carefully and consider
thoughtfully the information set forth in them.

The Merger has been approved unanimously by your Board of Directors and
is recommended by the Board to you for approval. Consummation of the Merger is
subject to certain conditions, including approval of the Agreement by FNB
shareholders and approval of the Merger by various regulatory agencies.

It is important to understand that approval of the Agreement requires
the affirmative vote of the holders of a majority of the common stock of FNB
entitled to vote at the Special Meeting, not just a majority of the votes cast.
Consequently, a failure to vote will have the same effect as a vote against the
Agreement.

Accordingly, whether or not you plan to attend the Special Meeting,
please complete, sign, and return promptly the enclosed proxy card. If you
attend the Special Meeting, you may vote in person if you wish, even if you
previously have returned your proxy card. The proposed Merger with First
Banking is a significant step for FNB, and your vote on this matter is of great
importance. ON BEHALF OF THE BOARD OF DIRECTORS, I URGE YOU TO VOTE FOR
APPROVAL OF THE MERGER BY MARKING THE ENCLOSED PROXY CARD "FOR" ITEM ONE.
You should not forward any of your stock certificates at this time.

Sincerely,

----------------------------------
Larry D. Weddle
Chairman of the Board

<PAGE> 6

FNB BANCSHARES, INC.
501 SOUTH LAUREL STREET
SPRINGFIELD, GEORGIA 31329
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD __________________, 1996

Notice is hereby given that a Special Meeting of Shareholders (the
"Special Meeting") of FNB Bancshares, Inc. ("FNB"), a bank holding company,
will be held at FNB's main office, 501 South Laurel Street, Springfield,
Georgia 31329 on _________________, 1996, at ___________, local time, for the
following purposes:

1. Merger. To consider and vote on the Agreement and Plan of Merger,
dated as of March 13, 1996 (the "Agreement"), by and between FNB and First
Banking Company of Southeast Georgia ("First Banking") pursuant to which (i)
First Banking will acquire all of the issued and outstanding common stock of
FNB through the merger of FNB with and into First Banking (the "Merger"), (ii)
each share of FNB common stock (except for certain shares held by FNB or First
Banking) will be converted into 0.892 of a share of First Banking common stock,
(iii) each option or warrant to purchase FNB common stock will be converted
into the right to receive 0.466 of a share of First Banking common stock for
each share underlying the option or warrant, and (iv) each FNB shareholder will
receive cash in lieu of any remaining fractional share interest, all as
described more fully in the accompanying Proxy Statement/Prospectus; and

2. Other Business. To transact such other business as may properly come
before the Special Meeting, including adjourning the Special Meeting to permit,
if necessary, further solicitation of proxies.

Only shareholders of record at the close of business on _____________,
1996, are entitled to receive notice of and to vote at the Special Meeting or
any adjournment or postponement thereof.

THE BOARD OF DIRECTORS OF FNB UNANIMOUSLY RECOMMENDS THAT HOLDERS OF FNB
COMMON STOCK VOTE TO APPROVE THE PROPOSALS LISTED ABOVE.

FNB shareholders have the right to dissent from approval of the
Agreement and obtain payment for the fair value of their shares of FNB common
stock by following the procedures described in Title 14, Chapter 2, Article 13
of the Georgia Business Corporation Code. See Appendix C and "Description of
the Transaction -- Dissenters' Rights."

We urge you to sign and return the enclosed proxy as promptly as
possible, whether or not you plan to attend the Special Meeting in person. The
proxy may be revoked by the person executing the proxy by filing with the
Secretary of FNB an instrument of revocation or a duly executed proxy bearing a
later date or by electing to vote in person at the Special Meeting.

By Order of the Board of Directors

-----------------------
Carolyn B. Williamson
Secretary

Springfield, Georgia
_____________, 1996
<PAGE> 7

FNB BANCSHARES, INC. FIRST BANKING COMPANY OF
PROXY STATEMENT SOUTHEAST GEORGIA
FOR SPECIAL MEETING PROSPECTUS
OF SHAREHOLDERS COMMON STOCK
TO BE HELD __________, 1996 (PAR VALUE $1.00)

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

This Prospectus of First Banking Company of Southeast Georgia, a bank
holding company organized and existing under the laws of the state of Georgia
("First Banking"), relates to the shares of its common stock, par value $1.00
per share ("First Banking Common Stock"), which are issuable to the
shareholders of FNB Bancshares, Inc. ("FNB") upon consummation of the proposed
merger (the "Merger") described herein, by which FNB will merge with and into
First Banking pursuant to the terms of an Agreement and Plan of Merger, dated
as of March 13, 1996, by and between First Banking and FNB (the "Agreement").

On the effective date of the Merger (the "Effective Date"), except as
otherwise described herein, (i) FNB will merge with and into First Banking,
(ii) each outstanding share of the $.01 par value common stock of FNB ("FNB
Common Stock") will be converted into 0.892 of a share of First Banking Common
Stock, (iii) each outstanding option or warrant to purchase FNB Common Stock
will be converted into the right to receive 0.466 of a share of First Banking
Common Stock for each share underlying the option or warrant, and (iv) each FNB
shareholder will receive cash in lieu of any remaining fractional share
interest. A copy of the Agreement is attached to this Proxy
Statement/Prospectus as Appendix A.

As a result of the Merger, the separate existence of FNB will cease, and
First National Bank of Effingham, a wholly owned subsidiary of FNB (the
"Bank"), will become a wholly owned subsidiary of First Banking. For a further
description of the terms of the Merger, see "Description of the Transaction."

This Prospectus also constitutes a Proxy Statement of FNB and is being
furnished to the shareholders of FNB in connection with the solicitation of
proxies by the Board of Directors of FNB for use at its special meeting of
shareholders, including any adjournment or postponement thereof (the "Special
Meeting"), to be held on __________________, 1996, to consider and vote on the
proposed Merger and related matters. This Proxy Statement/Prospectus and the
accompanying proxy card are first being mailed to shareholders of FNB on or
about ___________________, 1996.

THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS, SAVINGS ACCOUNTS OR OTHER
OBLIGATIONS OF A DEPOSITORY INSTITUTION AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.

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 PROXY STATEMENT/PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

The date of this Proxy Statement/Prospectus is _____________, 1996.
<PAGE> 8

AVAILABLE INFORMATION

First Banking is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance
therewith, files reports, proxy statements, and other information with the
Securities and Exchange Commission (the "SEC"). Copies of such reports, proxy
statements, and other information can be obtained, at prescribed rates, from
the SEC by addressing written requests for such copies to the Public Reference
Section at the SEC at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549. In addition, such reports, proxy statements, and other information can
be inspected at the public reference facilities referred to above and at the
regional offices of the SEC at 7 World Trade Center, 13th Floor, New York, New
York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661.

This Proxy Statement/Prospectus constitutes part of the Registration
Statement on Form S-4 of First Banking (including any exhibits and amendments
thereto, the "Registration Statement") filed with the SEC under the Securities
Act of 1933, as amended (the "Securities Act"), relating to the securities
offered hereby. This Proxy Statement/Prospectus does not include all of the
information in the Registration Statement, certain portions of which have been
omitted pursuant to the rules and regulations of the SEC. For further
information about First Banking and the securities offered hereby, reference is
made to the Registration Statement. The Registration Statement may be inspected
and copied, at prescribed rates, at the SEC's public reference facilities at
the addresses set forth above. First Banking Common Stock is traded on the
Nasdaq Stock Market, Inc.'s National Market System ("Nasdaq"). Reports, proxy
statements, and other information concerning First Banking may be inspected at
the offices of the National Association of Securities Dealers, Inc. (the
"NASD"), 1735 K Street, N.W., Washington, D.C. 20006.

NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE INCLUDED IN THIS PROXY STATEMENT/PROSPECTUS,
AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY FIRST BANKING OR FNB. THIS PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO BUY, THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO OR FROM
ANY PERSON TO OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY
DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE
AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF FIRST BANKING OR
FNB SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.

All information included or incorporated by reference in this Proxy
Statement/Prospectus with respect to First Banking was supplied by First
Banking, and all information included or incorporated by reference herein with
respect to FNB was supplied by FNB.

DOCUMENTS INCORPORATED BY REFERENCE

THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THOSE DOCUMENTS ARE
AVAILABLE UPON REQUEST, WITHOUT CHARGE, FROM FIRST BANKING COMPANY OF SOUTHEAST
GEORGIA, 40 NORTH MAIN STREET, STATESBORO, GEORGIA 30458. IN ORDER TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY
___________________, 1996.

i
<PAGE> 9

The following document previously filed with the SEC by First Banking
pursuant to the Exchange Act is hereby incorporated by reference herein:

1. First Banking's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1995.

2. First Banking's Quarterly Report on Form 10-QSB for the
quarter ended March 31, 1996.

First Banking's Annual Report on Form 10-KSB for the year ended December
31, 1995 incorporates by reference specific portions of First Banking's Annual
Report to Shareholders for that year (the "First Banking Annual Report to
Shareholders"), and, accordingly, the portions of the First Banking Annual
Report to Shareholders entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Selected Financial Data,"
as well as the Consolidated Financial Statements, the notes thereto and the
Independent Auditors' Report thereon, are incorporated herein by reference.
Copies of the First Banking Annual Report to Shareholders and the First Banking
Quarterly Report to Shareholders for the quarter ended March 31, 1996 are
enclosed with this Proxy Statement/Prospectus.

Any statement contained herein or in a document incorporated by
reference herein shall be deemed to be modified or superseded for purposes
hereof to the extent that a statement contained herein modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed to constitute a part hereof, except as so modified or superseded.

ii
<PAGE> 10

TABLE OF CONTENTS

<TABLE>
<S> <C>
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Special Meeting of FNB Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Record Date; Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
The Merger; Exchange Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Reasons for the Merger; Recommendation of FNB's Board of Directors . . . . . . . . . . . . . . . . . . . . . 3
Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Exchange of Stock Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Regulatory Approvals and Other Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Waiver, Amendment, and Termination of the Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Interests of Certain Persons in the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Certain Federal Income Tax Consequences of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Certain Differences in Shareholders' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Comparative Market Prices of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Comparative Per Share Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Selected Pro Forma Condensed Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

THE SPECIAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Record Date; Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

DESCRIPTION OF THE TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Treatment of FNB Options and Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Background of and Reasons for the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Opinion of FNB's Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Effective Date of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Distribution of First Banking Stock Certificates and Payment for Fractional Shares . . . . . . . . . . . . . 17
Conditions to Consummation of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Waiver, Amendment, and Termination of the Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Conduct of Business Pending the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Management Following the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Interests of Certain Persons in the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Certain Federal Income Tax Consequences of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Expenses and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Resales of First Banking Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Liquidity and Marketability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
</TABLE>

iii
<PAGE> 11

<TABLE>
<S> <C>
Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Removal of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Vote Required for Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Special Meeting of Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Shareholder Nominations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Interested Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

COMPARATIVE MARKET PRICES AND DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

BUSINESS OF FNB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Loan Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Credit Underwriting and Monitoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

FNB MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . 34
Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Liquidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Liquidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

VOTING SECURITIES HELD BY MANAGEMENT AND PRINCIPAL SHAREHOLDERS OF FNB . . . . . . . . . . . . . . . . . . . . . . . 39

BUSINESS OF FIRST BANKING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Loan Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Credit Underwriting and Monitoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

MANAGEMENT OF FIRST BANKING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Compensation of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Indebtedness of Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Stock Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

PRO FORMA FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

CERTAIN REGULATORY CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Bank Holding Company Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Bank Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Capital Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
FDIC Insurance Assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Payment of Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Support of Subsidiary Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Safety and Soundness Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Depositor Preference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
CRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Fair Lending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Future Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Monetary Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
</TABLE>

iv
<PAGE> 12

<TABLE>
<S> <C>
DESCRIPTION OF FIRST BANKING COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

SHAREHOLDER PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

OPINIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

FINANCIAL STATEMENTS OF FNB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1

APPENDIX A: AGREEMENT AND PLAN OF MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1

APPENDIX B: OPINION OF STEVENS & COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1

APPENDIX C: ARTICLE 13 OF THE GEORGIA BUSINESS CORPORATION CODE . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1
</TABLE>

v
<PAGE> 13

SUMMARY

The following is a summary of certain information relating to the
Special Meeting, the proposed Merger, and the offering of shares of First
Banking Common Stock to be issued upon consummation thereof. This summary does
not purport to be complete and is qualified in its entirety by the more
detailed information appearing elsewhere or incorporated by reference in this
Proxy Statement/Prospectus. Shareholders are urged to read carefully the entire
Proxy Statement/Prospectus, including the Appendices. As used in this Proxy
Statement/Prospectus, the terms "First Banking" and "FNB" refer to those
entities, respectively, and, where the context requires, to those entities and
their respective subsidiaries. On February 28, 1995, the Bank completed a
holding company reorganization and became a wholly-owned subsidiary of FNB.
References to FNB as of dates prior to February 28, 1995 shall refer to the
Bank.

THE PARTIES

FNB. FNB is a bank holding company organized and existing under the laws
of the state of Georgia, with its principal executive offices located in
Springfield, Georgia. FNB operates principally through the Bank, which is a
wholly owned national bank subsidiary of FNB and which provides a range of
retail banking services through two offices in Springfield and Rincon, Georgia.
At March 31, 1996, FNB had total consolidated assets of approximately $52
million, total consolidated deposits of approximately $48 million, and total
consolidated shareholders' equity of approximately $3 million. FNB's principal
executive office is located at 501 South Laurel Street, Springfield, Georgia
31329, and its telephone number at such address is (912) 754-6111.

First Banking. First Banking is a bank holding company organized and
existing under the laws of the state of Georgia and headquartered in
Statesboro, Georgia. All of First Banking's business is presently conducted by
its wholly-owned subsidiaries, First Bulloch Bank & Trust Company ("Bulloch
Bank") and Metter Banking Company ("Metter Bank"), which provide a range of
retail banking services through six offices in Statesboro and Metter, Georgia.
At March 31, 1996, First Banking had total consolidated assets of
approximately $318 million, total consolidated deposits of approximately $274
million, and total consolidated shareholders' equity of approximately $31
million.

First Banking commenced operations in 1981 as a registered bank holding
company under the Bank Holding Company Act of 1956, as amended (the "BHC Act").
First Banking's principal executive offices are located at 40 North Main
Street, Statesboro, Georgia 30458, and its telephone number at such address is
(912) 764-6611.

Additional information with respect to First Banking and its
subsidiaries is included in documents incorporated by reference in this Proxy
Statement/Prospectus. See "Available Information," "Documents Incorporated by
Reference," and "Business of First Banking."

SPECIAL MEETING OF FNB SHAREHOLDERS

The Special Meeting will be held at _________, local time, on
___________, 1996, at FNB's main office, 501 South Laurel Street, Springfield,
Georgia 31329, for the purpose of considering and voting on approval of the
Agreement. See "The Special Meeting."

1
<PAGE> 14

RECORD DATE; VOTE REQUIRED

Only holders of record of FNB Common Stock at the close of business on
_______________, 1996 (the "Record Date"), will be entitled to vote at the
Special Meeting. The affirmative vote of the holders of a majority of the FNB
Common Stock entitled to vote at the Special Meeting will be required to
approve the Agreement. As of the Record Date, there were 310,114 shares of FNB
Common Stock outstanding and entitled to be voted.

The directors and executive officers of FNB and their affiliates
beneficially owned, as of the Record Date, 214,765 shares (or approximately
54.9% of the outstanding shares) of FNB Common Stock. Of the indicated shares,
80,782 represent shares subject to exercisable options and warrants that, to
management's knowledge, will not be exercised prior to the Record Date. If
such shares were excluded from the totals listed above, the number and
percentage of shares beneficially owned by FNB's directors and executive
officers would decrease to 133,983 and 43.2% respectively. The directors and
executive officers of First Banking and their affiliates beneficially owned, as
of the Record Date, no shares of FNB Common Stock. As of that date, neither FNB
nor First Banking held any shares of FNB Common Stock in a fiduciary capacity
for others. See "The Special Meeting--Record Date; Vote Required."

THE MERGER; EXCHANGE RATIO

The Agreement provides for the acquisition of FNB by First Banking
pursuant to the Merger of FNB with and into First Banking. On the Effective
Date, each share of FNB Common Stock then issued and outstanding (excluding any
shares held by FNB, First Banking, or their respective subsidiaries, other than
shares held in a fiduciary capacity or in satisfaction of debts previously
contracted) will be converted into 0.892 of a share of First Banking Common
Stock and each option or warrant to purchase FNB Common Stock then outstanding
will be cancelled and exchanged for the right to receive 0.466 of a share of
First Banking Common Stock for each share subject to the option or warrant,
subject in each case to possible adjustment in the event of any stock dividend,
stock split, or similar stock reclassification (the "Exchange Ratio"). The
Exchange Ratio for the options and warrants was calculated after deducting the
$10.00 per share exercise price of the options and warrants, all of which are
currently exercisable, from the value assigned by First Banking during the
negotiation of the Merger to the shares of FNB Common Stock to be exchanged in
the Merger. No fractional shares of First Banking Common Stock will be issued.
Rather, cash will be paid in lieu of any fractional share interest to which any
FNB shareholder would be entitled upon consummation of the Merger, based on the
closing price of First Banking Common Stock on Nasdaq (as reported by The Wall
Street Journal, or, if not reported thereby, by another authoritative source
selected by First Banking) on the last full trading day immediately preceding
the Effective Date on which there is a trade. See "Description of the
Transaction--General."

DISSENTERS' RIGHTS

In accordance with the Georgia Business Corporation Code (the "Georgia
Act"), holders of FNB Common Stock will be entitled to dissenters' rights in
connection with the Merger. HOLDERS OF SHARES OF FNB COMMON STOCK WHO WISH TO
EXERCISE THEIR DISSENTERS' RIGHTS MUST SEND WRITTEN NOTICE OF THEIR INTENT TO
DEMAND PAYMENT FOR THEIR SHARES BEFORE THE SHAREHOLDERS OF THE COMPANY VOTE ON
THE MERGER PROPOSAL AT THE SPECIAL MEETING ON _________________, 1996. Such
written notice should be sent to FNB Bancshares, Inc., 501 South Laurel Street,
Springfield, Georgia 31329, Attention: President. See "Description of the
Transaction -- Dissenters' Rights" and the text of Article 13 of the Georgia
Act attached as Appendix C to this Proxy Statement.

2
<PAGE> 15

REASONS FOR THE MERGER; RECOMMENDATION OF FNB'S BOARD OF DIRECTORS

FNB's Board of Directors has unanimously approved the Merger and the
Agreement and has determined that the Merger is fair to, and in the best
interests of, FNB and its shareholders. ACCORDINGLY, FNB'S BOARD UNANIMOUSLY
RECOMMENDS THAT FNB'S SHAREHOLDERS VOTE FOR APPROVAL OF THE AGREEMENT. In
approving the Merger, FNB's directors considered First Banking's financial
condition, the financial terms and the income tax consequences of the Merger,
the likelihood of the Merger being approved by regulatory authorities without
undue conditions or delay, the alternatives to the Merger, the report and
opinion of FNB's financial advisor regarding the fairness of the Merger to
FNB's shareholders, the increased liquidity of the First Banking Common Stock,
the competitive and regulatory environment, and the management philosophy of
First Banking.

FAIRNESS OPINION

FNB retained Stevens & Company ("Stevens") to act as FNB's financial
advisor in connection with the Merger. As part of this engagement, Stevens
agreed to render to the FNB Board an opinion with respect to the fairness to
the shareholders of the consideration to be received in the Merger from a
financial point of view. On March 11, 1996, Stevens delivered to the FNB Board
its oral opinion that, as of such date, the consideration to be received was
fair to the FNB shareholders from a financial point of view. Stevens
subsequently confirmed such opinion in writing as of ___________, 1996, based
on the final Agreement. The full text of Stevens' final written opinion to the
FNB Board is included as Appendix B to this Proxy Statement/Prospectus and
should be read carefully and in its entirety. Stevens' opinion to the FNB Board
does not constitute a recommendation to any shareholder as to how such
shareholder should vote at the Special Meeting. The fairness opinion was based
upon information available to Stevens as of the date the opinion was rendered.
See "Description of the Transaction -- Opinion of FNB's Financial Advisor."

EFFECTIVE DATE

Subject to the conditions to the obligations of the parties to effect
the Merger, the Effective Date will occur on the date and at the time specified
in Articles or a Certificate of Merger filed by First Banking with the Georgia
Secretary of State, or, if no date and time are specified, on the date and at
the time of filing. The parties expect that all conditions to consummation of
the Merger will be satisfied so that the Merger can be consummated during the
third quarter of 1996, although there can be no assurance as to whether or when
the Merger will occur. See "Description of the Transaction--Effective Date of
the Merger, --Conditions to Consummation of the Merger, and --Waiver,
Amendment, and Termination of the Agreement."

EXCHANGE OF STOCK CERTIFICATES

Promptly after the Effective Date, First Banking will cause SunTrust
Bank, Atlanta, Georgia, acting in its capacity as exchange agent for First
Banking (the "Exchange Agent"), to mail to the former shareholders of FNB a
form letter of transmittal, together with instructions for the exchange of such
shareholders' certificates representing shares of FNB Common Stock for
certificates representing shares of First Banking Common Stock.

On February 28, 1995, the Bank completed a holding company
reorganization and became a wholly-owned subsidiary of FNB. As a result of
this reorganization, shareholders of the Bank became shareholders of FNB and
should have exchanged their certificates representing Bank Common Stock for
certificates representing FNB Common Stock. After the Effective Date, FNB
shareholders who have not yet

3
<PAGE> 16

exchanged their Bank Common Stock certificates for FNB Common Stock
certificates should submit their Bank Common Stock certificates to the Exchange
Agent for First Banking Common Stock certificates.

FNB SHAREHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES UNTIL THEY
RECEIVE THE FORM LETTER OF TRANSMITTAL AND INSTRUCTIONS. See "Description of
the Transaction--Distribution of First Banking Stock Certificates and Payment
for Fractional Shares."

REGULATORY APPROVALS AND OTHER CONDITIONS

The Merger is subject to approval by the Board of Governors of the
Federal Reserve System (the "Federal Reserve"), the Office of the Comptroller
of the Currency (the "OCC"), and the Department of Banking and Finance of the
State of Georgia (the "Georgia Department"). Applications for the requisite
approvals have been filed with these agencies. There can be no assurance,
however, that approval will be given or as to the timing or conditions of such
approval.

Consummation of the Merger is subject to various other conditions,
including receipt of the required approval of FNB shareholders, receipt of an
opinion of counsel or a ruling from the Internal Revenue Service as to the
tax-free nature of certain aspects of the Merger, and certain other customary
conditions. See "Description of the Transaction--Conditions to Consummation of
the Merger."

WAIVER, AMENDMENT, AND TERMINATION OF THE AGREEMENT

The Agreement may be terminated, and the Merger abandoned, at any time
prior to the Effective Date by mutual action of the Boards of Directors of both
FNB and First Banking, or by action of the Board of Directors of either company
under certain circumstances, including if the Merger is not consummated by
September 30, 1996, unless the failure to consummate by such time is due to a
breach of the Agreement by the party seeking to terminate. If for any reason
the Merger is not consummated, FNB will continue to operate as a bank holding
company under its present management. See "Description of the
Transaction--Waiver, Amendment, and Termination of the Agreement."

INTERESTS OF CERTAIN PERSONS IN THE MERGER

Certain members of FNB's management and Board of Directors have
interests in the Merger in addition to their interests as shareholders of FNB
generally. Those interests relate to, among other things, provisions in the
Agreement regarding indemnification and eligibility for certain First Banking
employee benefits, and treatment of outstanding options and warrants to acquire
FNB Common Stock. See "Description of the Transaction-- Interests of Certain
Persons in the Merger."

CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

First Banking and FNB have received an opinion of Powell, Goldstein,
Frazer & Murphy, counsel to First Banking, to the effect that, among other
things, the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
the exchange in the Merger of FNB Common Stock for First Banking Common Stock
will not give rise to gain or loss to FNB shareholders, except to the extent of
any cash received in lieu of fractional share interests or any cash paid to
those shareholders who perfect their statutory dissenters' rights, and neither
First Banking nor FNB will recognize income, gain or loss as a result of the
Merger except for income and deferred gain recognized pursuant to Treasury
regulations issued under Section 1502 of the Code. Gain recognition, if any,
will not be in excess of the amount of cash received. Subject to the provisions
and limitations of Section 302(a) of the Code, gain or loss will be

4
<PAGE> 17

recognized upon the receipt of cash in lieu of fractional share interests. See
"Description of the Transaction--Certain Federal Income Tax Consequences of the
Merger."

DUE TO THE INDIVIDUAL NATURE OF THE TAX CONSEQUENCES OF THE MERGER, FNB
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE
SPECIFIC EFFECT OF THE MERGER ON THEM UNDER FEDERAL, STATE, LOCAL, AND FOREIGN
TAX LAWS.

ACCOUNTING TREATMENT

It is anticipated that the Merger will be accounted for as a pooling of
interests. Under the pooling-of-interests method of accounting, the recorded
amounts of the assets and liabilities of FNB will be carried forward and
recorded on the financial statements of First Banking at their previously
recorded amounts.

In order for the Merger to qualify for pooling-of-interests accounting
treatment, substantially all (90% or more) of the outstanding shares of FNB
Common Stock must be exchanged for First Banking Common Stock with
substantially similar terms. There are certain other criteria that must be
satisfied in order for the Merger to qualify as a pooling of interests, some of
which criteria cannot be satisfied until after the Effective Date. See
"Description of the Transaction -- Resales of First Banking Common Stock."

CERTAIN DIFFERENCES IN SHAREHOLDERS' RIGHTS

On the Effective Date, FNB shareholders, whose rights are governed by
the Georgia Act and by FNB's Articles of Incorporation and Bylaws, will
automatically become First Banking shareholders, and their rights as First
Banking shareholders will be determined by the Georgia Act and by First
Banking's Articles of Incorporation and Bylaws.

The rights of First Banking shareholders differ from the rights of FNB
shareholders in certain important respects, some of which constitute additional
antitakeover provisions provided for in First Banking's governing documents.
See "Effect of the Merger on Rights of Shareholders."

COMPARATIVE MARKET PRICES OF COMMON STOCK

The First Banking Common Stock is traded on the Nasdaq Stock Market,
Inc.'s National Market System ("Nasdaq"). The FNB Common Stock is not traded
in any established market. The following table sets forth the last sale price
of the First Banking Common Stock on October 13, 1995, the date of the last
sale reported by Nasdaq prior to October 17, 1995 (the date of public
announcement of the proposed Merger), the equivalent per share price of FNB
Common Stock as if the Merger had been consummated on that date, and the sale
price of the FNB Common Stock on August 7, 1995, the date of the last reported
sale of FNB Common Stock prior to October 17, 1995. It also provides the last
sale price of First Banking Common Stock on _____________, 1996, the date of
the last sale reported by Nasdaq prior to the mailing of this Proxy
Statement/Prospectus, the equivalent per share price of FNB Common Stock as if
the Merger had been consummated on that date, and the sale price of FNB Common
Stock on __________, 1996, the date of the most recent reported sale of FNB
Common Stock.

First Banking Common Stock FNB Common Stock
$19.25 at October 13, 1995 $15.00 at August 7, 1995;
equivalent per share: $17.17
$____ at ____________, 1996 $_____ at ____________, 1996;
equivalent per share: $____

Shareholders are advised to obtain current market quotations for the
First Banking Common Stock. No assurance can be given as to the market price
of First Banking Common Stock at or after the Effective Date.

COMPARATIVE PER SHARE DATA

The following table sets forth certain per share data of First Banking
and combined per share data on an unaudited pro forma basis after giving effect
to the Merger contemplated herein on a pooling-of-interests basis of
accounting, assuming that 0.892 of a share of First Banking Common Stock is
issued and exchanged for each share of FNB Common Stock and 0.466 of a share of
First Banking Common Stock is issued and exchanged for each share subject to an
option or warrant to purchase shares of FNB Common Stock in the Merger. This
data should be read in conjunction with the unaudited pro forma condensed
financial statements and the separate historical financial statements of First
Banking and FNB and notes thereto incorporated by reference or included
elsewhere in this Proxy Statement/Prospectus. The pro forma combined financial
data is not necessarily indicative of the operating results that would have
been achieved had the Merger been

5
<PAGE> 18

consummated as of the beginning of the periods indicated, nor is such data
necessarily indicative of future financial condition or results of operations.

<TABLE>
<CAPTION>
Three Months
Ended
March 31, 1996 1995 1994 1993
-------------- ---- ---- ----
<S> <C> <C> <C> <C>
FIRST BANKING:

Net income per share $ .44 $ 1.70 $ 1.30 $ 1.22
Dividends per share .15 0.48 0.38 0.30
Book value per share(1) 11.75 11.58 9.86 9.44

FNB:

Net income per share before
cumulative effect of change
in accounting principle $ .37 $ 0.55 $ 1.23 $ 0.41
Dividends per share 0.00 0.00 0.00 0.00
Book value per share(1) 10.97 10.65 9.67 9.01

PRO FORMA COMBINED:

Pro forma combined income per share
before cumulative effect
of change in accounting principle $ .43 $ 1.57 $ 1.28 $ 1.12
Equivalent per FNB share(3) .38 1.40 1.14 1.00
Pro forma combined dividends per share .15 .48 .38 .30
Equivalent per FNB share(3) .43 .34 .27
Pro forma combined book value per share(2) 11.30
Equivalent per FNB share(3) 10.08
</TABLE>

______________________________

(1) The historical book value per share is computed by dividing shareholders'
equity by the number of shares of Common Stock outstanding at the end of each
period.

(2) First Banking and FNB anticipate that they will incur combined direct
transaction costs estimated to be $290,000 associated with the Merger, which
will be charged to operations upon consummation of the Merger. The pro forma
combined book value per share data gives effect to such estimated costs
resulting in a $203,000 charge, net of tax, as if such costs had been incurred
as of March 31, 1996. These costs are not included in the pro forma income
before cumulative effect of change in accounting principles per share data.
See "Pro Forma Financial Information."

(3) Calculated by multiplying the First Banking combined pro forma per share
amounts by the Exchange Ratio of 0.892.

6
<PAGE> 19

SELECTED FINANCIAL DATA

The following tables present certain selected historical financial
information for First Banking and FNB. The data should be read in conjunction
with the historical financial statements, related notes, and other financial
information concerning First Banking and FNB incorporated by reference or
included herein. See "Documents Incorporated by Reference."

Selected Historical Financial Data of First Banking

Three Months Three Months Year Ended December 31,
Ended Ended -------------------------------------------------------------
March 31, 1996 March 31, 1995 1995 1994 1993 1992 1991
-------------- -------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL STATEMENT OF
INCOME DATA

Interest Income $ 6,444,341 $ 5,561,975 $ 23,866,982 $ 18,912,947 $ 17,437,563 $ 18,921,928 $ 21,307,828
Interest Expense 3,047,986 2,291,760 10,653,053 7,342,462 6,815,796 8,624,088 11,736,340
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net Interest Income 3,396,355 3,270,215 13,213,929 11,570,485 10,621,767 10,297,840 9,571,488
Provision for
Loan Losses 189,546 153,000 560,000 534,573 586,768 820,030 1,113,850
Other Income 498,032 457,148 1,898,300 2,022,524 2,027,061 1,917,430 1,835,023
Other Expense 2,038,655 1,997,828 8,146,976 8,136,244 7,530,160 7,229,921 6,817,091
Provision for
Income Taxes 496,908 485,005 1,868,560 1,472,918 1,284,543 1,163,155 931,034
------------ ------------ ------------ ------------ ------------ ------------ ------------

Net Income $ 1,169,278 $ 1,091,530 $ 4,536,693 $ 3,449,274 $ 3,247,357 $ 3,002,164 $ 2,544,536
============ ============= ============ ============ ============ ============ ============

Net Income per Share $ 0.44 $ 0.41 $ 1.70 $ 1.30 $ 1.22 $ 1.13 $ 0.96
============ ============ ============ ============ ============ ============ ============

Weighted Average Shares
Outstanding 2,661,711 2,661,939 2,661,795 2,661,939 2,661,939 2,661,939 2,661,939

HISTORICAL CASH
DIVIDEND DATA

Cash Dividends Declared $ 399,256 $ 316,105 $ 1,274,321 $ 998,227 $ 798,582 $ 565,661 $ 499,114
Cash Dividends Per Share $ 0.15 $ 0.12 $ 0.48 $ 0.375 $ 0.30 $ 0.21 $ 0.19

HISTORICAL BALANCE
SHEET DATA

Total Assets $317,515,894 $270,950,150 $300,200,521 $262,152,174 $238,199,804 $232,382,976 $230,909,536
Other Borrowed Money $ 8,616,847 $ 5,505,936 $ 7,234,447 $ 4,629,876 $819,323 $ 485,000 $ 300,000
</TABLE>

The book value per share, cash dividends, and average shares outstanding have
been restated to reflect the 2-for-1 stock split effected in the form of a 100
percent stock dividend effective May 7, 1992 and to reflect the 8-for-5 stock
split effected in the form of a 60% stock dividend effective May 15, 1995.

7
<PAGE> 20

Selected Historical Financial Data of FNB

Three Months Three Months Year Ended December 31,
Ended Ended ------------------------------------------------
March 31, 1996 March 31, 1995 1995 1994 1993
-------------- -------------- ---- ---- ----
<S> <C> <C> <C> <C> <C>
HISTORICAL STATEMENT OF INCOME DATA

Interest Income $ 1,050,831 $ 728,132 $ 3,580,821 $ 2,406,899 $ 1,755,421
Interest Expense 571,428 304,272 1,764,991 928,902 741,588
------------- ------------ ------------- ------------- -------------
Net Interest Income 479,403 423,860 1,815,830 1,477,997 1,013,833
Provision for Loan Losses 39,000 15,000 299,300 97,500 140,000
Other Income 102,100 84,734 431,614 308,433 238,666
Other Expense 376,558 361,631 1,694,729 1,120,081 929,305
50,000 45,000 84,140 186,000 56,322
------------- ------------ ------------- ------------- -------------
Net Income Before
Cumulative Effect of Change
in Accounting Principle $ 115,945 $ 86,963 $ 169,275 $ 382,849 $ 126,872
============= ============ ============= ============= =============

Net Income $ 115,945 $ 86,963 $ 169,275 $ 382,849 $ 345,264
============= ============ ============= ============= =============

Net Income Per Share Before
Cumulative Effect of Change
in Accounting Principle .37 .28 .55 1.23 0.41

Net Income Per Share .37 .28 .55 1.23 1.11

Weighted Average Shares Outstanding 310,114 310,114 310,114 310,114 310,114

HISTORICAL CASH DIVIDEND DATA

Cash Dividends Declared $ 0 $ 0 0 0 0
Cash Dividends Per Share 0.00 0.00 0.00 0.00 0.00

HISTORICAL BALANCE SHEET DATA

Total Assets $ 51,786,441 $ 35,991,185 $ 50,165,516 $ 34,358,368 $ 26,300,003
Other Borrowed Money 0 0 0 0 0
</TABLE>

8
<PAGE> 21

SELECTED PRO FORMA CONDENSED FINANCIAL DATA

The selected pro forma condensed financial data set forth below is
derived from the unaudited pro forma condensed financial statements, which give
effect to the Merger contemplated herein as a pooling of interests and should
be read in conjunction with, and are qualified by reference to, such pro forma
statements and the notes thereto included elsewhere in the Proxy
Statement/Prospectus. See "Pro Forma Financial Information." For purposes of
the pro forma condensed balance sheet data, First Banking's consolidated
balance sheet at March 31, 1996 has been combined with FNB's balance sheet
at that date and has been adjusted to reflect $203,000 (net of tax) of
estimated costs of the transaction. For purposes of the pro forma condensed
statement of income data, First Banking's consolidated results of operations
for each of the fiscal years ended December 31, 1995, 1994 and 1993 and for the
three-month period ended March 31, 1996 have been combined with FNB's results
of operations for each of those periods, respectively.

The pro forma data is presented for illustrative purposes only and is
not necessarily indicative of the operating results or financial position that
would have been achieved if the Merger had been consummated at the beginning of
the periods indicated nor is it necessarily indicative of future financial
position or results of operations.

<TABLE>
<CAPTION>
Three Months Year Ended December 31,
Ended ----------------------------------------------
March 31, 1996 1995 1994 1993
-------------- ---- ---- ----
<S> <C> <C> <C> <C>
PRO FORMA CONDENSED STATEMENT OF
INCOME DATA:

Interest Income $ 7,495,172 $ 27,447,803 $ 21,319,846 $ 19,192,984
Interest Expense 3,619,414 12,418,044 8,271,364 7,557,384
Net Interest Income 3,875,758 15,029,759 13,048,482 11,635,600
Provision for Loan Losses 228,546 859,300 632,073 726,768
Net income before cumulative effect
of accounting change 1,285,223 4,705,958 3,832,123 3,374,229

Net income per share before
cumulative effect of accounting
change .43 1.57 1.28 1.12

PRO FORMA CONDENSED DIVIDEND DATA:

Cash dividends paid $ 399,000 $ 1,274,321 $ 998,227 $ 798,582
Dividends per share .15 0.48 0.38 0.30

PRO FORMA CONDENSED BALANCE SHEET DATA:

Total assets $ 369,302,335 $ 350,366,037 $ 296,510,542 $ 264,499,807
Loans - net 211,609,168 212,115,817 185,837,509 169,025,064
Total deposits 321,635,063 304,482,566 259,513,764 233,098,652
Other borrowed money 8,616,847 7,234,447 4,629,876 819,323
Shareholders' equity 34,474,954 33,925,001 29,254,983 27,925,188
</TABLE>

9
<PAGE> 22

THE SPECIAL MEETING

GENERAL

This Proxy Statement/Prospectus is being furnished to the holders of FNB
Common Stock in connection with the solicitation by the FNB Board of Directors
of proxies for use at the Special Meeting, at which FNB shareholders will be
asked to vote upon a proposal to approve the Agreement. The Special Meeting
will be held at __________, local time, on _______________, 1996, at the main
offices of FNB, located at 501 South Laurel Street, Springfield, Georgia 31329.

FNB shareholders are requested promptly to sign, date, and return the
accompanying proxy card to FNB in the enclosed postage-paid, addressed
envelope. A shareholder's failure to return a properly executed proxy card or
to vote at the Special Meeting will have the same effect as a vote against the
Agremeement.

Any FNB shareholder who has delivered a proxy may revoke it at any time
before it is voted by giving notice of revocation in writing or submitting to
FNB a signed proxy card bearing a later date, provided that such notice or
proxy card is actually received by FNB before the vote of shareholders or in
open meeting prior to the taking of the shareholder vote at the Special
Meeting. Any notice of revocation should be sent to FNB Bancshares, Inc., 501
South Laurel Street, Springfield, Georgia 31329, Attention: Corporate
Secretary. A proxy will not be revoked by death or supervening incapacity of
the shareholder executing the proxy unless, before the vote, notice of such
death or incapacity is filed with the Secretary. The shares of FNB Common Stock
represented by properly executed proxies received at or prior to the Special
Meeting and not subsequently revoked will be voted as directed in such proxies.
IF INSTRUCTIONS ARE NOT GIVEN, SHARES REPRESENTED BY PROXIES RECEIVED WILL BE
VOTED FOR APPROVAL OF THE AGREEMENT AND IN THE DISCRETION OF THE PROXY HOLDER
AS TO ANY OTHER MATTERS THAT PROPERLY MAY COME BEFORE THE SPECIAL MEETING. IF
NECESSARY, AND UNLESS CONTRARY INSTRUCTIONS ARE GIVEN, THE PROXY HOLDER ALSO
MAY VOTE IN FAVOR OF A PROPOSAL TO ADJOURN THE SPECIAL MEETING TO PERMIT
FURTHER SOLICITATION OF PROXIES IN ORDER TO OBTAIN SUFFICIENT VOTES TO APPROVE
THE AGREEMENT. PROXIES VOTED AGAINST THE MERGER WILL NOT BE VOTED IN FAVOR OF
SUCH A PROPOSAL FOR ADJOURNMENT. As of the date of this Proxy
Statement/Prospectus, FNB is unaware of any other matter to be presented at the
Special Meeting.

Solicitation of proxies will be made by mail but also may be made by
telephone or telegram or in person by the directors, officers, and employees of
FNB, who will receive no additional compensation for such solicitation but may
be reimbursed for out-of-pocket expenses. Brokerage houses, nominees,
fiduciaries, and other custodians will be requested to forward solicitation
materials to beneficial owners and will be reimbursed for their reasonable
out-of-pocket expenses.

FNB shareholders should not forward any stock certificates with their
proxy cards.

RECORD DATE; VOTE REQUIRED

FNB's Board of Directors has established the close of business on
_________, 1996, as the Record Date for determining the FNB shareholders
entitled to notice of and to vote at the Special Meeting. Only FNB shareholders
of record as of the Record Date will be entitled to vote at the Special
Meeting. The affirmative vote of the holders of a majority of the FNB Common
Stock entitled to vote at the Special Meeting is required in order to approve
the Agreement. Therefore, an abstention or failure to return a properly
executed proxy card will have the same effect as a vote against the Agreement,
as will a broker's submitting a proxy card without exercising discretionary
voting authority with respect to the Agreement. As of the Record Date, there
were approximately ____ holders of 310,114 shares of FNB Common Stock
outstanding and entitled to vote at the Special Meeting, with each share
entitled to one vote. For information as to persons known by FNB

10
<PAGE> 23

to beneficially own more than five percent of the outstanding shares of FNB
Common Stock as of the Record Date, see "Voting Securities and Principal
Shareholders of FNB."

The presence, in person or by proxy, of a majority of the outstanding
shares of FNB Common Stock is necessary to constitute a quorum of the
shareholders in order to take action at the Special Meeting. For these
purposes, shares of FNB Common Stock that are present, or represented by proxy,
at the Special Meeting will be counted for quorum purposes regardless of
whether the holder of the shares or proxy fails to vote on the Agreement or
whether a broker with discretionary authority fails to exercise its
discretionary voting authority with respect to the Agreement. Once a quorum is
established, approval of the Agreement requires the affirmative vote of the
holders of a majority of the FNB Common Stock entitled to vote at the Special
Meeting.

11
<PAGE> 24

DESCRIPTION OF THE TRANSACTION

The following material describes certain aspects of the Merger. This
description does not purport to be complete and is qualified in its entirety by
reference to the Appendices hereto, including the Agreement, which is attached
as Appendix A to this Proxy Statement/Prospectus and incorporated herein by
reference. All shareholders are urged to read the Appendices in their entirety.

GENERAL

Upon consummation of the Merger, FNB will merge with and into First
Banking and the separate existence of FNB will cease. The Bank will become a
wholly owned subsidiary of First Banking.

At the Effective Date, each share of FNB Common Stock (excluding any
shares held by FNB, First Banking, or their respective subsidiaries, other than
shares held in a fiduciary capacity or in satisfaction of debts previously
contracted) issued and outstanding will be converted into 0.892 of a share of
First Banking Common Stock and each outstanding option or warrant to purchase
FNB Common Stock will be cancelled and exchanged for the right to receive 0.466
of a share of First Banking Common Stock for each share underlying the option
or warrant, subject in each case to possible adjustment in the event of a stock
dividend, stock split, or similar stock reclassification. Each share of First
Banking Common Stock outstanding immediately prior to the Effective Date will
remain outstanding and unchanged as a result of the Merger.

No fractional shares of First Banking Common Stock will be issued in
connection with the Merger. In lieu of issuing fractional shares, First Banking
will make a cash payment equal to the fractional interest which a FNB
shareholder would otherwise receive multiplied by the closing price of First
Banking Common Stock on Nasdaq (as reported by The Wall Street Journal, or, if
not reported thereby, by another authoritative source selected by First
Banking) on the last full trading day prior to the Effective Date on which
there is a trade.

TREATMENT OF FNB OPTIONS AND WARRANTS

The Agreement provides that each option or warrant to purchase FNB Common
Stock which is outstanding at the Effective Date, whether or not then
exercisable, will be cancelled and exchanged for the right to receive 0.466 of a
share of First Banking Common Stock in the Merger for each share subject to the
option or warrant. The Exchange Ratio for the options and warrants was
calculated after deducting the $10.00 per share exercise price of the options
and warrants, all of which are currently exercisable, from the value assigned
by First Banking during the negotiation of the Merger to the shares of FNB
Common Stock to be exchanged in the Merger. The directors and executive
officers of FNB collectively hold exercisable options and warrants to purchase
80,782 shares of FNB Common Stock. See "-- Voting Securities and Principal
Shareholders of FNB."

BACKGROUND OF AND REASONS FOR THE MERGER

Background of the Merger. In September 1994, the President of FNB
contacted Charles Stevens of Stevens & Co., a financial consulting and
investment banking firm specializing in community bank transactions, to discuss
the Board's desire to expand FNB's operations through an acquisition of a
specific target bank. Mr. Stevens was authorized and directed to approach the
target on behalf of FNB. Through Mr. Stevens, the target informed FNB's Board
that it was not interested in pursuing further discussions with FNB. The Board
then directed Mr. Stevens to advise the Board of any banks in the Bank's market
area that might be interested in being acquired.

No further action was taken until February 28, 1995, when the Board
contacted Mr. Stevens regarding an expression of interest by an out of state
bank holding company in an expansion into Georgia. The meeting

12
<PAGE> 25

was attended by the President and two directors of FNB, Mr. Stevens,
representatives of the out of state holding company and counsel to FNB. The
holding company expressed an interest in acquiring FNB, but was concerned about
the relatively small size of the Bank.

Representatives of the out of state holding company visited the Bank
during May 1995. Following discussions with counsel, the holding company and
FNB's Board proposed a consolidation of several banks along the I-95 corridor
into a single holding company that would be acquired by the out of state
holding company. On May 12, 1995, Stevens & Co. was engaged to represent FNB
in this project.

Between May 12, 1995 and September 8, 1995, eight banks were contacted
on behalf of FNB, with several showing some interest in the plan. No candidate
would commit, however, without a more definite proposal from the out of state
holding company.

During this time frame, FNB was also approached by other banks
contemplating an expansion into Effingham County. Consequently, in September
1995, FNB's Board of Directors decided to consider proposals by other
candidates to acquire FNB. FNB had received proposals from First Banking and
two other banks. One of the other proposals was for cash from a Georgia-based
bank and the other was for stock from an Alabama-based bank holding company.

The Board's discussions ultimately focused on the cash offer from the
Georgia-based bank and First Banking's stock offer. Based on the factors
listed under "FNB's Reasons for the Merger" below, the Board authorized and
directed the President of FNB to execute a letter of intent with First Banking.
The letter of intent was signed on October 12, 1995.

Between October 12, 1995 and February 21, 1996, the parties conducted
various due diligence activities and negotiated the terms and conditions of the
definitive merger agreement. The Bank also underwent its annual examination by
the OCC in November 1995. On February 21, 1996, following the completion of
the due diligence and review of the OCC's Report of Examination, First Banking
and FNB executed a revised letter of intent setting forth a reduced exchange
ratio. On March 13, 1996, the parties executed the Agreement.

FNB's Reasons for the Merger. In approving the Merger, the directors of
FNB considered a number of factors. Without assigning any relative or specific
weights to the factors, the FNB Board of Directors considered the following
material factors:

(a) the information presented to the directors by the management of FNB
concerning the business, operations, earnings, asset quality, and financial
condition of First Banking, including compliance with regulatory capital
requirements on an historical and prospective basis;

(b) the financial terms of the Merger, including the relationship of the
merger price to the market value, tangible book value, and earnings per share
of FNB Common Stock, the partial protection against a decline in the market
value of First Banking Common Stock resulting from FNB's ability to terminate
the Merger in the event the closing price of the First Banking Common Stock
falls below $20 per share during the 20 trading days prior to the scheduled
Effective Date, and the participation in any appreciation in value of First
Banking Common Stock;

(c) the nonfinancial terms of the Merger, including the treatment of the
Merger as a tax-free exchange of FNB Common Stock for First Banking Common
Stock for federal and state income tax purposes;

(d) the likelihood that the Merger would be approved by applicable
regulatory authorities without undue conditions or delay;

13
<PAGE> 26

(e) the alternatives to the Merger, including remaining as an
independent bank holding company, in light of current economic conditions in
FNB's primary markets and the competition presented by larger financial
institutions operating in such markets;

(f) the report of FNB's financial advisor reviewing FNB's projected
earnings on a stand-alone basis over a five-year period and the anticipated
increases in liquidity, capital, return on equity and management depth that
would result from the Merger;

(g) the opinion rendered by FNB's financial advisor to the effect that
the consideration to be received in the Merger is fair, from a financial point
of view, to the shareholders of FNB;

(h) the anticipated synergies and operating efficiencies, increased
access to capital, increased utilization of capital for lending, increased
managerial resources and enhanced service capabilities that would result from
the Merger;

(i) the current lack of marketability of the FNB Common Stock,
contrasted with the ability of FNB's shareholders to exchange their FNB Common
Stock for First Banking Common Stock in connection with the Merger and
thereafter have the ability to trade such securities on Nasdaq;

(j) the competitive and regulatory environment for financial
institutions and commercial lending businesses generally; and

(k) the management philosophy of First Banking and its compatibility
with that of FNB.

The terms of the Merger were the result of arms-length negotiations
between representatives of FNB and representatives of First Banking. Based upon
the consideration of the foregoing factors, the Board of Directors of FNB
unanimously approved the Merger as being in the best interests of FNB and its
shareholders.

FNB'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT FNB SHAREHOLDERS
VOTE FOR APPROVAL OF THE AGREEMENT.

First Banking's Reasons for the Merger. The First Banking Board of
Directors has approved the Agreement and determined that the Merger is in the
best interests of First Banking and its shareholders. In approving the
Agreement, the First Banking Board considered a number of factors. Without
assigning any relative or specific weights to the factors, the First Banking
Board of Directors considered the following material factors:

(a) a review, based in part on a presentation by First Banking's
management, of (i) the business, operations, earnings, and financial condition,
including the capital levels and asset quality, of FNB on an historical,
prospective, and pro forma basis and in comparison to other financial
institutions in the area, (ii) the demographic, economic, and financial
characteristics of the markets in which FNB operates, including existing
competition, history of the market areas with respect to financial
institutions, and average demand for credit, on an historical and prospective
basis, and (iii) the results of First Banking's due diligence review of FNB;

(b) the opportunity to utilize a portion of First Banking's excess
capital in connection with the Merger; and

14
<PAGE> 27

(c) a variety of factors affecting and relating to the overall strategic
focus of First Banking, including First Banking's desire to expand into markets
in the general vicinity of its core markets.

OPINION OF FNB'S FINANCIAL ADVISOR

FNB retained Stevens to act as FNB's financial advisor in connection
with the Merger. As part of this engagement, Stevens agreed to render to the
FNB Board an opinion with respect to the fairness to the shareholders of the
consideration to be received in the Merger from a financial point of view. On
March 11, 1996, Stevens delivered to the FNB Board its oral opinion that, as
of such date, the consideration to be received was fair to the FNB shareholders
from a financial point of view. Stevens subsequently confirmed such opinion in
writing as of ___________, 1996, based on the final Agreement. The full text of
Stevens' final written opinion to the FNB Board is included as Appendix B to
this Proxy Statement/Prospectus and should be read carefully and in its
entirety. Stevens' opinion to the FNB Board does not constitute a
recommendation to any shareholder as to how such shareholder should vote at the
Special Meeting. The fairness opinion was based upon information available to
Stevens as of the date the opinion was rendered.

In rendering its opinion, Stevens has, among other things: (i) reviewed
certain publicly available financial and other data with respect to First
Banking, including financial statements for the past five years, FNB's audited
financial statements for the past five years, and certain other relevant
financial and operating data relating to FNB and First Banking made available
to Stevens from published sources and from the internal records of FNB and
First Banking; (ii) reviewed the Agreement; (iii) reviewed certain historical
market prices and trading volumes of First Banking Common Stock as reported by
Nasdaq and the historical and current market for the FNB Common Stock; (iv)
considered the financial terms, to the extent publicly available, of selected
recent acquisitions of financial institutions which Stevens deemed to be
comparable, in whole or in part, to the Merger; (v) reviewed and discussed with
representatives of the managements of FNB and First Banking certain information
of a business and financial nature regarding FNB and First Banking,
respectively, furnished to Stevens by FNB and First Banking, respectively; (vi)
analyzed the business prospects of FNB and First Banking and the economies of
their respective markets; (vii) reviewed the terms of other offers to acquire
FNB; (viii) inquired about and discussed the Agreement and other matters
related thereto with FNB's counsel; and (ix) performed such other analyses and
examinations as Stevens deemed appropriate.

In connection with its review, Stevens assumed and relied on the
accuracy and completeness of the financial and other information provided to it
by FNB and First Banking.

Stevens is a financial consulting and investment banking firm that
specializes in community bank transactions. Stevens also engages in the
valuation of businesses and their securities in connection with merger
transactions and other types of acquisitions, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted
securities, private placements, and valuations for corporate and other
purposes. FNB's Board of Directors selected Stevens to act as its financial
advisor in connection with the Merger on the basis of the firm's expertise in
mergers and acquisitions of community banks and its representation of both
purchasers and sellers in counties contiguous to Effingham and Bulloch
Counties.

This summary reflects the material analysis performed by Stevens but
does not purport to be a complete description of the analysis performed by
Stevens. The evaluation of the fairness, from a financial point of view, of
the consideration to be received in the Merger was to some extent a subjective
one based on the experience and judgment of Stevens and not merely the result
of mathematical analysis of financial data. The preparation of a fairness
opinion involves determination as to the most appropriate factors to be
considered as well as relevant methods of financial analysis and the
application of those factors and methods to the particular circumstances, and,
therefore, such an opinion is not readily susceptible to summary description.

15
<PAGE> 28

Stevens believes that its analysis must be considered as a whole and that
selecting only portions of the analysis and factors considered by Stevens could
create an incomplete view of the process underlying Stevens' opinion. In
addition, Stevens may have given various factors more or less weight than
others and may have deemed various assumptions more or less probable than other
assumptions. In its analysis, Stevens incorporated numerous assumptions with
respect to business, market, monetary and economic conditions, industry
performance and other matters, many of which are beyond FNB's and First
Banking's control. Any estimates contained in Stevens' analysis are not
necessarily indicative of future results or values, which may be significantly
more or less favorable than such estimates. Such estimates were prepared solely
as part of Stevens' analysis of the fairness to the FNB shareholders of the
consideration to be paid in the Merger.

The following is a brief summary of analyses performed by Stevens in
connection with its opinion delivered to the FNB Board of Directors on March
11, 1996:

SUMMARY OF PROPOSAL. Stevens reviewed the terms of the proposed
transaction as reflected in the Merger Agreement, including the terms of the
Exchange Ratio. Based on a closing price of $26.00 per share of First Banking
on March 10, 1996, the Exchange Ratio of 0.892 on the shares of FNB Common
Stock would have a value of $23.19, with the Exchange Ratio of the warrants and
options of 0.466 resulting in a value of $12.12. Stevens also noted that the
Board of Directors of FNB could terminate the transaction if the closing price
of a share of First Banking Common Stock falls below $20 per share on any
trading day during the 20 days prior to the scheduled Effective Date.

POSSIBLE VALUE OF FNB IN A SALE OF CONTROL. In determining the
potential value per share of FNB Common Stock if FNB were sold to an
alternative purchaser, Stevens reviewed the historical financial results of
FNB and examined FNB's internally prepared financial projections. Stevens
computed the value of FNB based on a multiple of 15 to 18 times FNB's
earnings for 1995 and a multiple of 2.0 to 2.5 times FNB's shareholders'
equity. Based on this analysis, Stevens calculated an expected value to FNB
shareholders in a sale of control transaction of between $18 and $20.25 per
share, and from $8.00 to $10.12 for the holders of the warrants and options.

INDICATED VALUE OF FNB AS AN INDEPENDENT COMPANY. Stevens also
undertook an analysis addressing the range of potential values which would be
implied if FNB were to remain an independent company. Stevens assumed FNB
shareholders would receive a terminal value of 18 times the fifth year
projected earnings stream, plus a limited dividend stream reflecting excess
cash generated during this five year period which FNB could pay to its
shareholders while maintaining adequate levels of capital. Discounting these
amounts at ranges of 10 to 15% to indicate net present value, Stevens concluded
that the per share values would be at ranges of $13.88 to $15.28 per share for
the FNB Common Stock and $5.80 to $7.12 for the warrants and options.

DILUTION ANALYSIS. Using an earnings estimate for FNB prepared by FNB
management and an earnings estimate for First Banking prepared by First
Banking, Stevens compared the earnings per share of FNB on a stand alone basis
to the pro forma earnings of First Banking which would be received in the
Merger. Stevens also recognized the potential after tax effect of a
consolidation and concluded that the Merger would result in an increase in
earnings per share during 1996 for former FNB shareholders in the combined
company.

DIVIDEND YIELD. Stevens' analysis also considered the benefits of a cash
dividend that would be afforded with a merger with First Banking. Given the
rapid growth of the Effingham market, Stevens concluded that there would be
limited FNB dividend income in the next five years should FNB remain
independent, as regulatory and growth issues could result in the requirement of
additional capital for FNB and therefore FNB would have a minimal amount of
excess cash after maintaining adequate capital levels with which to pay
dividends. Stevens noted that First Banking is currently paying a cash
dividend for $0.15 per share per quarter, which would be applicable to
shareholders of FNB post-merger.

ANALYSIS OF SELECTED OTHER BANK MERGERS INVOLVING SOUTHEASTERN COMMUNITY
BANKS. Stevens reviewed in excess of twenty mergers involving Georgia banks,
thrifts, or bank holding companies between 1993 and 1995. Stevens noted the
prices paid in these mergers as a multiple of earnings and book value. Stevens
also reviewed other data in connection with each of these mergers, including
the amount of total assets, return of equity, and return of assets of the
selling institutions. Stevens then compared this data to that of FNB and to the
value to be received by FNB shareholders in the merger.

This comparison yielded a range of transaction values as multiples of
latest twelve months earnings per share of a low 11.13 to a high of 22.40.
Price to book ranges were 1.41 to 3.03, with the average price to book at 2.10
times. Based on the Exchange Ratio and the closing price of First Banking
Common Stock of $26.00 on March 10, 1996, FNB's earnings per share multiple
would be 52.24 and its price to book ratio would be 2.68 if the Merger had been
consummated on such date.

The foregoing analysis was reviewed in detail with the directors of FNB
with respect to FNB's ability to support the growth patterns of Effingham
County, as well as its ability to perform in a manner satisfactory to the
regulatory agencies governing national banks.

Stevens also analyzed the value that First Banking would add in terms of
(i) liquidity, (ii) return on equity, (iii) capital infusion, and (iv)
management depth resulting from consolidation with a $300 million company. In
addition, Stevens discussed with the management of FNB and First Banking the
relative operating performance and future prospects of each organization,
primarily with respect to the current level of their earnings and future
expected operating results, giving weight to the future of the banking industry
and each organization's performance within the industry. With respect to
liquidity, First Banking Common Stock is traded on Nasdaq, with three primary
market makers. With a capital asset ratio of 10.3% and return on equity
exceeding 15%, First Banking provides the strength necessary to grow the Bank.
Stevens concluded that management and regulatory positions at First Banking
further support this conclusion.

There was no one company or transaction used in the above analysis as a
comparison that is identical to FNB, First Banking, or the Merger.
Accordingly, an analysis of the results of the foregoing necessarily involves
complex considerations and judgments concerning differences in financial and
operating characteristics of the companies and other factors that could affect
the public trading of the companies to which they are being compared.
Mathematical analysis (such as determining an average or median) is not, in
itself, a meaningful method of using comparable company data. Analysis must
also be given to consolidation issues within the financial services industry,
as well as competitive issues involving de novo banks.

EFFECTIVE DATE OF THE MERGER

No assurance can be provided that the necessary shareholder and
regulatory approvals can be obtained or that other conditions precedent to the
Merger can or will be satisfied. First Banking and FNB anticipate that all
conditions to consummation of the Merger will be satisfied so that the Merger
can be consummated during the third quarter of 1996. However, delays in the
consummation of the Merger could occur.

The Board of Directors of either First Banking or FNB generally may
terminate the Agreement if the Merger is not consummated by September 30, 1996,
unless the failure to consummate by that date is the result

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<PAGE> 29

of a breach of the Agreement by the party seeking termination. See
"--Conditions to Consummation of the Merger" and "--Waiver, Amendment, and
Termination of the Agreement."

DISTRIBUTION OF FIRST BANKING STOCK CERTIFICATES AND PAYMENT FOR FRACTIONAL
SHARES

Promptly after the Effective Date, First Banking will cause SunTrust
Bank, Atlanta, Georgia, acting in the capacity of Exchange Agent, to mail to
the former shareholders of FNB a form letter of transmittal, together with
instructions for the exchange of such shareholders' certificates representing
shares of FNB Common Stock for certificates representing shares of First
Banking Common Stock. FNB shareholders who have not exchanged their Bank
Common Stock certificates for FNB Common Stock certificates will be permitted
to submit their Bank Common Stock certificates to the Exchange Agent for First
Banking Common Stock certificates.

FNB SHAREHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY
RECEIVE THE FORM LETTER OF TRANSMITTAL AND INSTRUCTIONS. Upon surrender to the
Exchange Agent of certificates for FNB Common Stock, together with a properly
completed letter of transmittal, there will be issued and mailed to each holder
of FNB Common Stock surrendering such items a certificate or certificates
representing the number of shares of First Banking Common Stock to which such
holder is entitled, if any, and a check for the amount to be paid in lieu of
any fractional share interest, without interest. After the Effective Date, to
the extent permitted by law, FNB shareholders of record as of the Effective
Date will be entitled to vote at any meeting of holders of First Banking Common
Stock the number of whole shares of First Banking Common Stock into which their
FNB Common Stock has been converted, regardless of whether such shareholders
have surrendered their FNB Common Stock certificates. No dividend or other
distribution payable after the Effective Date with respect to First Banking
Common Stock, however, will be paid to the holder of any unsurrendered FNB
certificate until the holder duly surrenders such certificate. Upon such
surrender, all undelivered dividends and other distributions and, if
applicable, a check for the amount to be paid in lieu of any fractional share
interest will be delivered to such shareholder, in each case without interest.

After the Effective Date, there will be no transfers of shares of FNB
Common Stock on FNB's stock transfer books. If certificates representing
shares of FNB Common Stock are presented for transfer after the Effective Date,
they will be canceled and exchanged for the shares of First Banking Common
Stock and a check for the amount due in lieu of fractional shares, if any,
deliverable in respect thereof.

CONDITIONS TO CONSUMMATION OF THE MERGER

Consummation of the Merger is subject to a number of conditions,
including, but not limited to:

(a) approval from the Federal Reserve, the OCC and the Georgia
Department without any conditions or restrictions that would, in the reasonable
judgment of either First Banking's or FNB's Board of Directors, so materially
adversely impact the economic or business benefits of the transactions
contemplated by the Agreement as to render inadvisable the consummation of the
Merger, and the expiration of applicable waiting periods under the BHC Act;

(b) the approval by the holders of a majority of the FNB Common Stock
issued and outstanding;

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<PAGE> 30

(d) the receipt of a satisfactory opinion of counsel that the Merger
qualifies for federal income tax treatment as a reorganization under Section
368(a) of the Code, that the exchange of FNB Common Stock for First Banking
Common Stock will not give rise to recognition of gain or loss to FNB
shareholders, except to the extent of any cash received, and that neither First
Banking nor FNB will recognize gain or loss as a consequence of the Merger
except for income and deferred gain recognized pursuant to Treasury Regulations
issued under Section 1502 of the Code;

(e) notification for listing on the Nasdaq National Market of the shares
of First Banking Common Stock to be issued in the Merger;

(f) a maximum of 15,506 shares of FNB Common Stock perfecting statutory
rights to dissent to the Merger; and

(g) the receipt of all consents required for the consummation of the
Merger or for the prevention of any default under any contract or permit that
is reasonably likely to have a material adverse effect on the party seeking the
consent.

Consummation of the Merger also is subject to the satisfaction or waiver
of various other conditions specified in the Agreement, including, among
others: (i) the delivery by First Banking and FNB of opinions of their
respective counsel and certificates executed by their respective Chief
Executive Officers and Chief Financial Officers as to compliance with the
Agreement; and (ii) as of the Effective Date, the accuracy of certain
representations and warranties and the compliance in all material respects with
the agreements and covenants of each party.

REGULATORY APPROVALS

The Merger may not proceed in the absence of receipt of the requisite
regulatory approvals. There can be no assurance that such regulatory approvals
will be obtained or as to the timing of such approvals. There also can be no
assurance that such approvals will not be accompanied by a conditional
requirement which causes such approvals to fail to satisfy the conditions set
forth in the Agreement. Applications for the approvals described below have
been submitted to the appropriate regulatory agencies.

First Banking and FNB are not aware of any material governmental
approvals or actions that are required for consummation of the Merger, except
as described below. Should any other approval or action be required, it
presently is contemplated that such approval or action would be sought.

The Merger requires the prior approval of the Federal Reserve, pursuant
to Section 3 of the BHC Act. In granting its approval under Section 3 of the
BHC Act, the Federal Reserve must take into consideration, among other factors,
the financial and managerial resources and future prospects of the institutions
and the convenience and needs of the communities to be served. The relevant
statutes prohibit the Federal Reserve from approving the Merger (i) if it would
result in a monopoly or be in furtherance of any combination or conspiracy to
monopolize or attempt to monopolize the business of banking in any part of the
United States or (ii) if its effect in any section of the country may be to
substantially lessen competition or to tend to create a monopoly, or if it
would be a restraint of trade in any other manner, unless the Federal Reserve
finds that any anticompetitive effects are outweighed clearly by the public
interest and the probable effect of the transaction in meeting the convenience
and needs of the communities to be served. Under the BHC Act, the Merger may
not be consummated until either the 15th day or the 30th day following the date
of Federal Reserve approval, during which time the United States Department of
Justice may challenge the transaction

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<PAGE> 31

on antitrust grounds. The commencement of any antitrust action would stay the
effectiveness of the Federal Reserve's approval, unless a court specifically
orders otherwise.

Once the Federal Reserve receives the application for the Merger, it
must give notice to both the OCC and the Georgia Department. The purpose of
the notice is to give these regulatory agencies an opportunity to submit views
and recommendations on the proposed Merger. The views and recommendations of
the OCC and the Georgia Department must be submitted within 30 days of the date
on which the Federal Reserve's notice is given. Both the OCC and the Georgia
Department take into account considerations similar to those applied by the
Federal Reserve.

Although there can be no assurance of obtaining the necessary regulatory
approvals for consummation of the Merger, neither First Banking nor FNB is
aware of any condition or circumstance which would cause the Federal Reserve,
the OCC or the Georgia Department to disapprove First Banking's application for
approval of the Merger.

WAIVER, AMENDMENT, AND TERMINATION OF THE AGREEMENT

Prior to the Effective Date, and to the extent permitted by law, any
provision of the Agreement generally may be (i) waived by the party benefitted
by the provision or (ii) amended by a written agreement between First Banking
and FNB approved by their respective Boards of Directors; provided, however,
that after approval by the FNB shareholders, no amendment decreasing the
consideration to be received by FNB shareholders may be made without the
further approval of such shareholders.

The Agreement may be terminated, and the Merger abandoned, at any time
prior to the Effective Date, either before or after approval by FNB
shareholders, under certain circumstances, including:

(a) by the Board of Directors of either party, provided that the
terminating party is not then in material breach of the Agreement, upon final
nonappealable denial of any required regulatory approval, or in the event that
any of the conditions precedent to the obligations of such party to consummate
the Merger cannot be satisfied or fulfilled by September 30, 1996;

(b) by the Board of Directors of either party, provided that the
terminating party is not then in material breach of the Agreement, if the
holders of a majority of shares of FNB Common Stock issued and outstanding
shall not have approved the Agreement;

(d) by the Board of Directors of either party, provided that the
terminating party is not then in material breach of the Agreement, in the event
of a breach of any provision of the Agreement which meets certain standards
specified in the Agreement;

(e) by the Board of Directors of either party if the Merger shall not
have been consummated by September 30, 1996, but only if the failure to
consummate the Merger by such date has not been caused by the terminating
party's breach of the Agreement;

(f) by the Board of Directors of either party in the event actions have
been taken to preclude accounting for the Merger as a pooling of interests; or

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<PAGE> 32

(g) by the Board of Directors of FNB if the closing price of a share of
First Banking Common Stock falls below $20 per share on any trading day during
the 20 trading days prior to the scheduled Effective Date.

If the Agreement is terminated, the parties will have no further
obligations, except with respect to certain provisions, including those
providing for payment of expenses and restricting disclosure of confidential
information. Further, termination will not relieve the parties from the
consequences of any uncured willful breach of the Agreement giving rise to such
termination.

CONDUCT OF BUSINESS PENDING THE MERGER

Each of FNB and First Banking generally has agreed, unless the prior
consent of the other party is obtained, and except as otherwise contemplated by
the Agreement, to operate its business only in the ordinary course, preserve
intact its business organizations and assets, maintain its rights and
franchises, and take no action that would affect, adversely and materially, the
ability of either party to perform its covenants and agreements under the
Agreement or to obtain any consent or approval required for the consummation of
the transactions contemplated by the Agreement. The Agreement also requires
FNB to permit a representative of First Banking (currently designated as James
Eli Hodges, the President of First Banking) to attend and participate (but only
to the extent of expressing his opinion on any matter before the Board or the
Loan Committee and not otherwise to influence the decision of the Board or the
Loan Committee and not to vote) (i) in all meetings of the Board of Directors
of FNB and the Bank and (ii) in all meetings of the Loan Committee of the Bank,
with such representative to be excused during deliberations relating to the
Merger. In addition, the Agreement contains certain other restrictions
applicable to the conduct of the business of either FNB or First Banking prior
to consummation of the Merger, as described below.

FNB. FNB has agreed not to take certain actions relating to the
operation of its business pending consummation of the Merger without the prior
approval of First Banking. Those actions generally include, without limitation:
(i) amending its Articles of Incorporation or Bylaws; (ii) becoming responsible
for any obligation for borrowed money in excess of an aggregate of $10,000
(except in the ordinary course of business consistent with past practices);
(iii) acquiring or exchanging any shares of its capital stock or paying any
dividend or other distribution in respect of its capital stock; (iv) issuing or
selling any additional shares of any FNB capital stock, any rights to acquire
any such stock, or any security convertible into such stock (except as set
forth in the Agreement or pursuant to the exercise of outstanding stock options
or warrants); (v) adjusting or reclassifying any of its capital stock,
disposing of or encumbering any shares of capital stock of any subsidiary
(excluding inter-company transfers) or disposing of or encumbering any asset
with a book value of $10,000 or more other than in the ordinary course of
business; (vi) acquiring control over any other entity; (vii) granting any
increase in compensation or benefits to employees or officers (except in
accordance with past practice previously disclosed to First Banking or as
required by law), paying any bonus (except in accordance with past practice
previously disclosed to First Banking or in accordance with any existing
program or plan), entering into or amending any severance agreements with
officers, or granting any increase in compensation or other benefits to
directors; (viii) entering into or amending any employment contract that it
does not have the unconditional right to terminate (except as previously
disclosed to First Banking and except for any amendment required by law); (ix)
adopting any new employee benefit plan or program, or materially changing any
existing plan or program (except for any change required by law or advisable to
maintain the tax qualified status of any such plan); (x) making any significant
change in any tax or accounting methods or systems of internal accounting
controls (except in conformity to changes in regulatory accounting requirements
or generally accepted accounting principles ("GAAP")); (xi) commencing any
litigation (except in accordance with past practices), settling any litigation
involving liability of FNB or the Bank for damages in excess of $10,000 or
material restrictions upon FNB's operations; (xii) modifying or terminating any

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<PAGE> 33

material contract; or (xiii) taking any action that would preclude the Merger
from being accounted for as a pooling of interests.

In addition, FNB has agreed not to solicit, directly or indirectly, any
acquisition proposal from any other person or entity. FNB also has agreed not
to negotiate with respect to any such proposal, provide nonpublic information
to any party making such a proposal, or enter into any agreement with respect
to any such proposal, except in compliance with the fiduciary obligations of
its Board of Directors. In addition, FNB has agreed to use reasonable efforts
to cause its advisors and other representatives not to engage in any of the
foregoing activities.

First Banking. The Agreement prohibits First Banking, prior to the
earlier of the Effective Date or the termination of the Agreement, from
declaring, setting aside or paying any extraordinary cash dividend on the First
Banking Common Stock, other than normal and customary quarterly cash dividends
in accordance with current dividend policy and any increases consistent with
past practices. First Banking is also required to continue to conduct its
business in a manner designed to enhance the long-term value of the First
Banking Common Stock and First Banking's business prospects.

MANAGEMENT FOLLOWING THE MERGER

The directors of First Banking in office immediately prior to the
Effective Date, together with Larry D. Weddle, a director of FNB, and such
other additional persons as may thereafter be elected, will serve as the
directors of First Banking from and after the Effective Date in accordance with
First Banking's Bylaws. The officers of First Banking in office immediately
prior to the Effective Date, together with such additional persons as may
thereafter be elected, will serve as the officers of First Banking from and
after the Effective Date in accordance with First Banking's Bylaws. The
directors of the Bank immediately prior to the Effective Date, together with
James Eli Hodges, will serve as the initial directors of the Bank from and
after the Effective Date in accordance with the Bank's Bylaws.

INTERESTS OF CERTAIN PERSONS IN THE MERGER

The Agreement provides that First Banking will, and will cause FNB to,
maintain all rights of indemnification existing in favor of each person
entitled to indemnification from FNB or any of its subsidiaries on terms no
less favorable than the rights provided in the Articles of Incorporation or
Bylaws of FNB or its subsidiaries, as the case may be, or the rights otherwise
in effect on the date of the Agreement, and that such rights will continue in
full force and effect for six years from the Effective Date with respect to
matters occurring at or prior to the Effective Date.

The Agreement also provides that, after the Effective Date, First
Banking will provide generally to officers and employees of FNB and its
subsidiaries who become officers or employees of First Banking or its
subsidiaries employee benefits under employee benefit plans (other than stock
option or other plans involving the potential issuance of First Banking Common
Stock) on terms and conditions that, taken as a whole, are substantially
similar to those currently provided by First Banking and its subsidiaries to
their similarly situated officers and employees. For a period of 12 months
after the Effective Date, First Banking will provide generally to officers and
employees of FNB and the Bank severance benefits in accordance with the
policies of either FNB or First Banking, whichever will provide the greater
benefit to the officer or employee. For purposes of participation and vesting
(but not benefit accrual) under such employee benefit plans, service with FNB
or its subsidiaries prior to the Effective Date will be treated as service with
First Banking or its

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<PAGE> 34

subsidiaries. The Agreement further provides that First Banking will cause FNB
to honor all employment, severance, consulting, and other compensation
contracts previously disclosed to First Banking between FNB or its subsidiaries
and any current or former director, officer, or employee, and all provisions
for vested amounts earned or accrued through the Effective Date under FNB's
benefit plans.

As described above under "--Treatment of FNB Options and Warrants," the
Agreement also provides that all rights with respect to FNB Common Stock
pursuant to warrants issued to organizers of FNB or stock options granted by
FNB under any stock option and other stock-based compensation plans which are
outstanding at the Effective Date, whether or not then exercisable, will be
cancelled and exchanged for 0.466 of a share of First Banking Common Stock in
the Merger.

As of the Record Date, directors and executive officers of FNB
beneficially owned no shares of First Banking Common Stock.

DISSENTERS' RIGHTS

In accordance with the applicable provisions of the Georgia Act, the
holders of shares of FNB Common Stock are entitled to dissent from the Merger
and to receive an appraised value of such shares in cash. Subject to the
resale restrictions applicable to executive officers, directors and 10%
shareholders described under "-- Resales of First Banking Common Stock,"
holders of FNB Common Stock may also sell the shares of First Banking Common
Stock they receive in the Merger on Nasdaq. The holders of FNB Common Stock
should note that appraised value is determined without regard to the Merger.

Pursuant to the provisions of Article 13 of the Georgia Act, if the
Merger is consummated, any shareholder who (i) gives to FNB, prior to the vote
at the meeting with respect to the approval of the Agreement, written notice of
such holder's intent to demand payment for such holder's shares and (ii) does
not vote in favor thereof, shall be entitled to receive, upon compliance with
the statutory requirements summarized below, the fair value of such holder's
shares as of the Effective Date. The Agreement requires, as a condition to
consummation of the Merger, that the holders of no more than 15,506 shares of
FNB Common Stock may assert dissenters' rights with respect to approval of the
Agreement. The parties to the Agreement agreed to this condition in order to
be able to account for the Merger as a pooling-of-interests, to avoid the
administrative difficulties inherent in dealing with substantial numbers of
dissenters' claims, and as a means of enabling the Merger to be abandoned if a
substantial number of shareholders were to dissent from the Merger.

A record shareholder may assert dissenters' rights as to fewer than all
of the shares registered in such holder's name only if such holder dissents
with respect to all shares beneficially owned by any one beneficial shareholder
and such holder notifies FNB in writing of the name and address of each person
on whose behalf such holder asserts dissenters' rights. The rights of such a
partial dissenter are determined as if the shares as to which such holder
dissents and such holder's other shares were registered in the names of
different shareholders.

The written objection requirement referred to above will not be
satisfied under the Georgia Act by merely voting against approval of the
Agreement by proxy or in person at the Special Meeting. Any shareholder who
returns a signed proxy but fails to provide instructions as to the manner in
which such shares are to be voted will be deemed to have voted in favor of the
Merger and will not be entitled to assert dissenters' rights. In addition to
not voting in favor of the Agreement, a shareholder wishing to preserve the
right to dissent and seek appraisal must give a separate written notice of such
holder's intent to demand payment for such holder's shares if the Merger is
effected, as hereinabove provided.

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<PAGE> 35

Any written objection to the Agreement satisfying the requirements
discussed above should be addressed to FNB Bancshares, Inc., 501 South Laurel
Street, Springfield, Georgia 31329, Attention: President.

If the Merger is authorized at the Special Meeting, FNB must deliver a
written dissenters' notice (the "Dissenters' Notice") to all of its
shareholders who satisfied the foregoing requirements. The Dissenters' Notice
must be sent within 10 days after the Effective Date and must (i) state where
the demand for payment must be sent and where and when certificates for the
shares must be deposited, (ii) inform holders of uncertificated shares to what
extent transfer of these shares will be restricted after the demand for payment
is received, (iii) set a date by which FNB must receive the demand for payment
(which date may not be fewer than 30 nor more than 60 days after the
Dissenters' Notice is delivered), and (iv) be accompanied by a copy of Article
13 of the Georgia Act.

A record shareholder who receives the Dissenters' Notice must demand
payment and deposit such holder's certificates in accordance with the
Dissenters' Notice. Such shareholder will retain all other rights of a
shareholder until those rights are canceled or modified by the consummation of
the Merger. A record shareholder who does not demand payment or deposit such
holder's share certificates where required, each by the date set in the
Dissenters' Notice, is not entitled to payment for such holder's shares under
Article 13 of the Georgia Act.

Except as described below, the Surviving Corporation must, within 10
days of the later of the Effective Date or receipt of a payment demand, offer
to pay to each dissenting shareholder who complied with the payment demand and
deposit requirements described above the amount the Surviving Corporation
estimates to be the fair value of such holder's shares, plus accrued interest
from the Effective Date. Such offer of payment must be accompanied by (i)
certain recent financial statements of FNB, (ii) the Surviving Corporation's
estimate of the fair value of the shares, (iii) an explanation of how the
interest was calculated, (iv) a statement of the dissenter's right to demand
payment under Section 14-2-1327 of the Georgia Act, and (v) a copy of Article
13 of the Georgia Act. If the shareholder accepts the Surviving Corporation's
offer by written notice to the Surviving Corporation within 30 days after the
Surviving Corporation's offer, payment must be made within 60 days after the
later of the making of the offer or the Effective Date.

If the Merger is not effected within 60 days after the date set forth
demanding payment and depositing share certificates, FNB must return the
deposited certificates and release the transfer restrictions imposed on
uncertificated shares. If, after such return and release, the Merger is
effected, the Surviving Corporation must send a new Dissenters' Notice and
repeat the payment demand procedure described above.

Section 14-2-1327 of the Georgia Act provides that a dissenting
shareholder may notify the Surviving Corporation in writing of such holder's
own estimate of the fair value of such holder's shares and the interest due,
and may demand payment of such holder's estimate, if (i) such holder believes
that the amount offered by the Surviving Corporation is less than the fair
value of such holder's shares or that the interest due has been calculated
incorrectly, or (ii) FNB, having failed to effect the Merger, does not return
the deposited certificates or release the transfer restrictions imposed on
uncertificated shares within 60 days after the date set for demanding payment.
A dissenting shareholder waives such holder's right to demand payment under
Section 14-2-1327 unless such holder notifies the Surviving Corporation of such
holder's demand in writing within 30 days after the Surviving Corporation makes
or offers payment for such holder's shares. If the Surviving Corporation does
not offer payment within 10 days of the later of the Effective Date or receipt
of a payment demand, then (i) the shareholder may demand the financial
statements and other information required to accompany the Surviving
Corporation's payment offer, and the Surviving Corporation must provide such
information within 10 days after receipt of the written demand, and (ii) the
shareholder may

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<PAGE> 36

notify the Surviving Corporation of such holder's own estimate of the fair
value of such holder's shares and the amount of interest due, and may demand
payment of that estimate.

If a demand for payment under Section 14-2-1327 remains unsettled, the
Surviving Corporation must commence a nonjury equity valuation proceeding in
the Superior Court of Bulloch County, Georgia, within 60 days after receiving
the payment demand and must petition the court to determine the fair value of
the shares and accrued interest. If the Surviving Corporation does not
commence the proceeding within those 60 days, it is required to pay each
dissenting shareholder whose demand remains unsettled the amount demanded. The
Surviving Corporation is required to make all dissenting shareholders whose
demands remain unsettled parties to the proceeding and to serve a copy of the
petition upon each dissenting shareholder. The court may appoint appraisers to
receive evidence and to recommend a decision on fair value. Each dissenting
shareholder made a party to the proceeding is entitled to judgment for the fair
value of such holder's shares plus interest to the date of judgment.

The court in an appraisal proceeding commenced under the foregoing
provision must determine the costs of the proceeding, excluding fees and
expenses of attorneys and experts for the respective parties, and must assess
those costs against the Surviving Corporation, except that the court may assess
the costs against all or some of the dissenting shareholders to the extent the
court finds they acted arbitrarily, vexatiously, or not in good faith in
demanding payment under Section 14-2-1327. The court also may assess the fees
and expenses of attorneys and experts for the respective parties against the
Surviving Corporation if the court finds the Surviving Corporation did not
substantially comply with the requirements of specified provisions of Article
13 of the Georgia Act, or against either the Surviving Corporation or a
dissenting shareholder if the court finds that such party acted arbitrarily,
vexatiously, or not in good faith with respect to the rights provided by
Article 13 of the Georgia Act.

If the court finds that the services of attorneys for any dissenting
shareholder were of substantial benefit to other dissenting shareholders
similarly situated, and that the fees for those services should be not assessed
against the Surviving Corporation, the court may award those attorneys
reasonable fees out of the amounts awarded the dissenting shareholders who were
benefited. No action by any dissenting shareholder to enforce dissenters'
rights may be brought more than three years after the Effective Date,
regardless of whether notice of the Merger and of the right to dissent was
given by FNB or the Surviving Corporation in compliance with the Dissenters'
Notice and payment offer requirements.

The foregoing is a summary of the material rights of a dissenting
shareholder, but is qualified in its entirety by reference to Article 13 of the
Georgia Act, included as Appendix C to this Proxy Statement/Prospectus. Any
shareholder who intends to dissent from approval of the Agreement should
carefully review the text of such provisions and should also consult with such
holder's attorney. No further notice of the events giving rise to dissenters'
rights or any steps associated therewith will be furnished to shareholders,
except as indicated above or otherwise required by law.

Any dissenting shareholder who perfects such holder's right to be paid
the value of such holder's shares will recognize taxable gain or loss upon
receipt of cash for such shares for federal income tax purposes. See "Certain
Federal Income Tax Consequences of the Merger."

CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

THE FOLLOWING IS A SUMMARY OF CERTAIN ANTICIPATED FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER. THIS SUMMARY IS BASED ON THE FEDERAL INCOME TAX
LAWS NOW IN EFFECT AND AS CURRENTLY INTERPRETED; IT DOES NOT TAKE INTO ACCOUNT
POSSIBLE CHANGES IN SUCH LAWS OR INTERPRETATIONS, INCLUDING AMENDMENTS TO

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<PAGE> 37

APPLICABLE STATUTES OR REGULATIONS OR CHANGES IN JUDICIAL OR ADMINISTRATIVE
RULINGS, SOME OF WHICH MAY HAVE RETROACTIVE EFFECT. THIS SUMMARY DOES NOT
PURPORT TO ADDRESS ALL ASPECTS OF THE POSSIBLE FEDERAL INCOME TAX CONSEQUENCES
OF THE MERGER AND IS NOT INTENDED AS TAX ADVICE TO ANY PERSON. IN PARTICULAR,
AND WITHOUT LIMITING THE FOREGOING, THIS SUMMARY DOES NOT ADDRESS THE FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER TO SHAREHOLDERS IN LIGHT OF THEIR
PARTICULAR CIRCUMSTANCES OR STATUS (FOR EXAMPLE, AS FOREIGN PERSONS, TAX-EXEMPT
ENTITIES, DEALERS IN SECURITIES, INSURANCE COMPANIES, OR CORPORATIONS, AMONG
OTHERS). NOR DOES THIS SUMMARY ADDRESS ANY CONSEQUENCES OF THE MERGER UNDER ANY
STATE, LOCAL, ESTATE, OR FOREIGN TAX LAWS. SHAREHOLDERS, THEREFORE, ARE URGED
TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM
OF THE MERGER, INCLUDING TAX RETURN REPORTING REQUIREMENTS, THE APPLICATION AND
EFFECT OF FEDERAL, FOREIGN, STATE, LOCAL, AND OTHER TAX LAWS, AND THE
IMPLICATIONS OF ANY PROPOSED CHANGES IN THE TAX LAWS.

A federal income tax ruling with respect to this transaction was not
requested from the Internal Revenue Service. Instead, Powell, Goldstein,
Frazer & Murphy, counsel to First Banking, has rendered an opinion to First
Banking and FNB concerning certain federal income tax consequences of the
proposed Merger under federal income tax law. It is such firm's opinion that:

(a) The Merger qualifies as a statutory merger under the Georgia Act.
Consequently, the Merger will be a reorganization within the meaning of section
368(a) of the Code.

(b) The shareholders of FNB will recognize no gain or loss upon the
exchange of their FNB Common Stock solely for shares of First Banking Common
Stock.

(c) The payment of cash in lieu of fractional share interests of First
Banking Common Stock will be treated as if the fractional shares were issued
as part of the exchange and then redeemed by First Banking. Whether these cash
payments will be treated as having

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<PAGE> 38

been received as distributions in full payment in exchange for the
fractional shares of FNB Common Stock redeemed or a dividend generally is
determined under Section 302 of the Code. Generally, any gain or loss
recognized will be capital gain or loss, provided the fractional share
constitutes a capital asset in the hands of the exchanging shareholder and the
requirements of Section 302(b)(1) are met. FNB shareholders receiving cash in
lieu of fractional shares should consult their own tax advisors as to the tax
treatment in their particular circumstances.

(d) FNB shareholders who dissent from the Merger will be treated as having
received such payment as a distribution in redemption of their shares of stock.
Generally, any gain or loss recognized will be capital gain or loss, provided
the FNB Common Stock constitutes a capital asset in the hands of the exchanging
shareholder and the requirements Section 302(b)(1),(2) or (3) are met. FNB
shareholders electing to exercise dissenters' rights should consult their own
tax advisors as to the tax treatment in their particular circumstances.

(e) No income, gain or loss will be recognized for federal income tax
purposes by First Banking or FNB as a consequence of the Merger, except for
deferred gain or loss recognized pursuant to Treasury Regulations issued under
Section 1502 of the code.

THE TAX OPINION DOES NOT ADDRESS ANY STATE, LOCAL, OR OTHER TAX
CONSEQUENCES OF THE MERGER. FNB SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES OF THE PROPOSED TRANSACTION TO
THEM INDIVIDUALLY, INCLUDING TAX CONSEQUENCES UNDER STATE OR LOCAL LAW.

ACCOUNTING TREATMENT

For additional information concerning certain conditions to be imposed
on the exchange of FNB Common Stock for First Banking Common Stock in the
Merger by affiliates of FNB and certain restrictions to be imposed on the
transferability of the First Banking Common Stock received by those affiliates
in the Merger in order, among other things, to ensure the availability of
pooling-of-interests accounting treatment, see "--Resales of First Banking
Common Stock."

EXPENSES AND FEES

The Agreement provides, in general, that each of the parties will bear
and pay its own expenses in connection with the transactions contemplated by
the Agreement, including fees and expenses of its own financial or other
consultants, investment bankers, accountants, and counsel, except that each of
the parties will pay one-half of the filing fees payable and the printing costs
incurred in connection with the preparation and filing of this Proxy
Statement/Prospectus and the related Registration Statement. In addition, to
the extent First Banking terminates the agreement for any reason other than a
breach by FNB of a term of the Agreement or any event having a material adverse
effect on FNB, First Banking is required to reimburse FNB for all of its costs
and expenses incurred in connection with the Merger and paid to third parties.

RESALES OF FIRST BANKING COMMON STOCK

The issuance of First Banking Common Stock to FNB shareholders in the
Merger has been registered under the Securities Act. The shares of First
Banking Common Stock issued pursuant to the Merger will be freely transferable
under the Securities Act except for shares issued to any person who may be
deemed to be an "affiliate" of FNB for purposes of Rule 145 under the
Securities Act as of the date of the Special Meeting. In general, affiliates
of FNB include persons who control, are controlled by, or are under common
control with, FNB. Generally, executive officers, directors, and 10%
shareholders are presumed to be affiliates. Affiliates may not sell shares of
First Banking Common Stock acquired in connection with the Merger except
pursuant to an effective registration statement under the Securities Act or in
compliance with SEC Rule 145 or another applicable exemption from the
Securities Act registration requirements.

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<PAGE> 39

Prior to the Effective Date, each person who FNB reasonably believes to
be an affiliate of FNB will deliver to First Banking a written agreement
providing that such person generally will not sell, pledge, transfer, or
otherwise dispose of any First Banking Common Stock to be received by such
person upon consummation of the Merger, except in compliance with the
Securities Act and the rules and regulations of the SEC promulgated thereunder.

27
<PAGE> 40

EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS

On the Effective Date, FNB shareholders will become shareholders of
First Banking, and their rights as shareholders will be determined by First
Banking's Articles of Incorporation and Bylaws. The following is a summary of
the material differences in the rights of shareholders of First Banking and
FNB. Both First Banking and FNB are Georgia corporations governed by the
Georgia Act. Accordingly, there are no material differences between the rights
of a First Banking shareholder and the rights of an FNB shareholder solely
under the Georgia Act. The following discussion is necessarily general; it is
not intended to be a complete statement of all differences affecting the rights
of shareholders of their respective entities, and it is qualified in its
entirety by reference to the Georgia Act, First Banking's Articles of
Incorporation and Bylaws, and FNB's Articles of Incorporation and Bylaws.

LIQUIDITY AND MARKETABILITY

First Banking. All of the 2,661,711 outstanding shares of First Banking
Common Stock are freely tradeable except for approximately 530,032 shares held
by "affiliates" of First Banking, as such term is defined in the Securities
Act, which shares may only be sold pursuant to an effective registration
statement under the Securities Act or in compliance with Rule 144 or another
applicable exemption from the registration requirements of the Securities Act.

FNB. The FNB Common Stock is not registered with the Securities and
Exchange Commission or listed on any national securities exchange or quoted on
any interdealer quotation system. There is no established market for the FNB
Common Stock, and none is expected to develop.

REPORTING REQUIREMENTS

First Banking. First Banking is a reporting company under the Exchange
Act and files annual and quarterly financial reports with the Securities and
Exchange Commission.

FNB. FNB does not file reports with the Securities and Exchange
Commission.

BOARD OF DIRECTORS

First Banking. First Banking's Board of Directors is divided into three
classes. Each class is to consist, as nearly as possible, of one-third of the
total number of directors. At each annual meeting of shareholders, successors
to the class of directors whose term expired as of the annual meeting are
elected for a three-year term. The affirmative vote of the holders of at least
80% of the shares of First Banking Common Stock entitled to vote in an election
of directors is required to amend or rescind the provision of the Articles of
Incorporation establishing a classified Board.

The effect of having a classified Board is that only approximately
one-third of the directors are selected each year. Consequently, two annual
meetings are effectively required for shareholders to change a majority of the
members of the Board. This provision, coupled with the 80% vote required to
amend or rescind it, renders it more difficult to gain control of First Banking
and may have the effect of discouraging such attempts.

FNB. FNB's Board of Directors is also divided into three classes, with
each class consisting, as nearly as possible, of one-third of the total number
of directors. At each annual meeting of shareholders, successors to the class
of directors whose term expired as of the annual meeting are elected for a
three-year term. No

28
<PAGE> 41

specific requirements apply to the amendment or rescission of the provision of
FNB's Bylaws establishing a classified Board.

REMOVAL OF DIRECTORS

First Banking. First Banking's Bylaws provide that any director may be
removed at a meeting with respect to which notice of such purpose is given:
(i) without cause, only upon the affirmative vote of the holders of at least
80% of the issued and outstanding shares of First Banking Common Stock; and
(ii) for cause only upon the affirmative vote of the holders of a majority of
the issued and outstanding shares of First Banking Common Stock.

FNB. Under FNB's Bylaws and the Georgia Act, a director may be removed
with or without cause at a meeting of shareholders with respect to which notice
of the purpose to remove one or more directors has been given, upon the
affirmative vote of the holders of a majority of the issued and outstanding
shares of FNB Common Stock.

VOTE REQUIRED FOR SHAREHOLDER APPROVAL

First Banking. The Georgia Act requires that unless a greater vote is
required elsewhere under the Act or under the corporation's Articles of
Incorporation or Bylaws, more votes must be cast in favor of a proposal than
against it in order to approve a proposal. However, the Georgia Act requires
the vote of a majority of the votes entitled to be cast in order to approve
certain mergers or dispositions of assets and amendments to the Articles of
Incorporation.

First Banking's Bylaws state that the affirmative vote of a majority of
the shares of First Banking Common Stock represented at the meeting and
entitled to vote on the subject matter will represent the act of the
shareholders, except as otherwise provided by law or First Banking's Articles
of Incorporation or Bylaws.

Under First Banking's Articles of Incorporation, unless 80% of the
directors then in office have approved the following matters, action on these
matters requires the affirmative vote of the holders of at least 80% of the
issued and outstanding shares of First Banking Common Stock entitled to vote in
an election of directors:

(i) amendment of the provision of the Articles of Incorporation
establishing a classified Board;

(ii) a change in the number of directors;

(iii) amendment of the provision of the Bylaws prescribing the vote
required to amend the Bylaws;

(iv) amendment of the provision of the Articles of Incorporation
setting forth the grounds and vote required for removal of directors;

(v) a merger or consolidation of First Banking with or into any
other corporation or the sale, lease, exchange or other disposition of all or
substantially all of its assets if the other party to the transaction is the
beneficial owner of 5% or more of the outstanding First Banking Common Stock;

(vi) amendment of the provision of the Articles of Incorporation
prescribing the vote required for the transactions described in clause (v)
above; or

29
<PAGE> 42

(vii) amendment of the provision of the Articles of Incorporation
listing the factors permitted to be considered by the Board in evaluating a
potential change of control of the corporation.

FNB. FNB's Bylaws state that a matter will be approved by the
shareholders if the votes cast in favor of the action exceed the votes cast
against the action, except as otherwise required by statute, FNB's Articles of
Incorporation or a provision of FNB's Bylaws adopted by the shareholders.
FNB's Articles of Incorporation and Bylaws contain no contrary provisions.

SPECIAL MEETING OF SHAREHOLDERS

First Banking. First Banking's Bylaws state that special meetings of
the shareholders may be called at any time by the President of First Banking or
upon the request of any one or more shareholders owning an aggregate of not
less than 25% of the outstanding capital stock. Notice must be given in
writing not less than 10 or more than 50 days before the date of the meeting
and must state the purpose for which the meeting is called.

FNB. FNB's Bylaws state that special meetings of shareholders may be
called at any time by the Chairman of the Board, the President, or the Board of
Directors, or upon the written request of the holders of shares of FNB Common
Stock representing at least a majority of the votes entitled to be cast on each
issue proposed to be considered at the meeting. Written notice of the meeting
must be given not less than 10 or more than 60 days before the date of the
meeting and must state the purpose for which the meeting is called.

SHAREHOLDER NOMINATIONS

First Banking. First Banking's Articles of Incorporation and Bylaws do
not specify any mechanism for nominating directors for election or for
presenting any matter for consideration at a shareholders' meeting.

FNB. FNB's Bylaws provide that any nomination by shareholders or
individuals for election to the Board of Directors must be made by delivering
written notice of such nomination (the "Nomination Notice") to the Secretary of
FNB at FNB's principal executive offices not less than the later of 14 days
before any meeting of the shareholders called for the election of directors or
5 days after notice of such meeting is given. The Nomination Notice must set
forth certain background information about the person(s) to be nominated and an
affidavit regarding the nominee's consent to serve on the Board. The chairman
of the shareholders' meeting at which directors are to be elected may waive the
foregoing requirements for good cause.

INTERESTED DIRECTORS AND OFFICERS

First Banking. First Banking's Bylaws define an "interested" director
or officer as one who is a party to a contract or transaction with First
Banking or who is an officer or director of, or has a financial interest in,
another entity that is a party to a contract or transaction with First Banking.
Contracts and transactions between First Banking and one or more interested
directors or officers are not void or voidable solely because of the vote or
involvement of an interested person so long as: (i) the contract or
transaction is approved in good faith by the Board of Directors or appropriate
committee by the affirmative vote of a majority of disinterested directors
(even if this constitutes less than a quorum), at a meeting of the Board or
committee at which the material facts of the interest are disclosed or known to
the Board or committee prior to the vote; (ii) the contract or transaction is
approved in good faith by the shareholders after the material facts of the
interest have been disclosed to them; or (iii) the contract or transaction is
fair to First Banking as of the time it is authorized by the Board, committee
or shareholders. Interested directors may be counted in determining the
presence of a quorum at a meeting of the Board or committee authorizing the
contract or transaction.

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<PAGE> 43

FNB. FNB's Articles of Incorporation and Bylaws do not contain any
specific provisions governing transactions involving interested directors or
officers. The Georgia Act, however, contains provisions similar to those set
forth in First Banking's Bylaws.

COMPARATIVE MARKET PRICES AND DIVIDENDS

The First Banking Common Stock is traded on Nasdaq under the symbol
FBCG. At March 31, 1996, First Banking had 840 shareholders of record. The
following table sets forth on a per share basis the high and low sale prices of
the Company's common stock and the cash dividends paid by the Company on a
quarterly basis since December 1, 1994, adjusted for the 60% stock dividend
paid in May 1995.

<TABLE>
<CAPTION>
1994 HIGH LOW DIVIDEND
- ---- ---- --- --------
<S> <C> <C> <C>
First Quarter $ 11.25 $ 10.00 $ 0.09
Second Quarter 11.88 10.31 0.09
Third Quarter 12.50 10.94 0.09
Fourth Quarter 12.81 11.25 0.09

1995
- ----
First Quarter $ 13.13 $ 11.56 $ 0.12
Second Quarter 18.50 13.13 0.12
Third Quarter 19.50 16.50 0.12
Fourth Quarter 20.75 18.00 0.12

1996
- ----
First Quarter $ 27.00 $ 20.00 $ 0.15
Second Quarter 27.50 26.00 0.15
</TABLE>

There is no established market for the FNB Common Stock. Based on
actual transactions of which FNB management is aware, sales of FNB Common Stock
since January 1, 1994 have occurred in a price range of $12 to $22 per share.
However, over such period there has been only a very limited number of
transactions and all such transactions have involved limited numbers of shares
of FNB Common Stock. No assurance can be given that the stated price range
represents the actual market value of the FNB Common Stock. At March 31, 1996,
FNB had 293 shareholders of record.

The following table sets forth the last sale price of the First Banking
Common Stock on October 13, 1995, the date of the last sale reported by Nasdaq
prior to October 17, 1995 (the date of public announcement of the proposed
Merger), the equivalent per share price of the FNB Common Stock as if the
Merger had been consummated on that date, and the sale price of the FNB Common
Stock on August 7, 1995, the date of the last recorded sale of FNB Common Stock
prior to October 17, 1995. It also provides the last sale price of First
Banking Common Stock on _____________, 1996, the date of the last sale reported
by Nasdaq prior to the mailing of this Proxy Statement/Prospectus, the
equivalent per share price of the FNB Common Stock as if the Merger had been
consummated on that date, and the sale price of FNB Common Stock on
___________, 1996, the date of the most recent reported sale of FNB Common
Stock.

<TABLE>
<CAPTION>
First Banking Common Stock FNB Common Stock
- -------------------------- ----------------
<S> <C>
$19.25 at October 13, 1995 $15.00 at August 7, 1995; equivalent per share: $17.17
$____ at ____________, 1996 $_____ at _________, 1996; equivalent per share: $____

</TABLE>

31
<PAGE> 44

The holders of First Banking Common Stock are entitled to receive
dividends when and if declared by the Board of Directors out of funds legally
available therefor. First Banking has paid regular cash dividends since its
inception in 1981. Although First Banking currently intends to continue to pay
quarterly cash dividends on the First Banking Common Stock, there can be no
assurance that First Banking's dividend policy will remain unchanged after
completion of the Merger. The declaration and payment of dividends thereafter
will depend upon business conditions, operating results, capital and reserve
requirements, and the Board of Directors' consideration of other relevant
factors.

FNB has never declared or paid any cash dividends on the FNB Common
Stock and does not anticipate paying any dividends in the foreseeable future.

First Banking and FNB are legal entities separate and distinct from
their respective subsidiaries and their revenues depend in significant part on
the payment of dividends from their respective subsidiary financial
institutions. These subsidiary depository institutions are subject to certain
legal restrictions on the amount of dividends they are permitted to pay. See
"Certain Regulatory Considerations--Payment of Dividends."

32
<PAGE> 45

BUSINESS OF FNB

GENERAL

FNB is a bank holding company organized under the laws of the state of
Georgia, with its principal executive office located in Springfield, Georgia.
FNB operates principally through the Bank, which is a national bank, chartered
and opened for business on December 7, 1989, providing a range of retail
banking services through two offices in Springfield and Rincon, Georgia. At
March 31, 1996, FNB had total consolidated assets of approximately $52
million, total consolidated deposits of approximately $48 million, and total
consolidated shareholders' equity of approximately $3 million. FNB's and the
Bank's principal executive office is located at 501 South Laurel Street,
Springfield, Georgia 31329, and its telephone number at such address is (912)
754-6111.

The Bank offers a full range of banking services principally to
individuals and to small and medium-sized businesses in Effingham County. It
offers typical checking and time deposit accounts, makes personal as well as
commercial loans, and also offers safe deposit services.

As of March 31, 1996, the Bank had a main office, two ATM
installations, and one branch office.

COMPETITION

The Bank's primary market area consists of Effingham County, Georgia,
which is included in the Savannah-Chatham County Metropolitan Statistical Area.
The county has experienced tremendous growth in recent years as a result of
population movement from Savannah-Chatham County and of the establishment of a
large paper mill operation in the county. The county has been recognized as
one of the "bedroom communities" of Savannah and had an estimated population at
December 31, 1995 of approximately 32,000.

The Bank competes for all types of loans, deposits and other financial
services with one community bank and two branches of a regional bank. As of
March 31, 1996, the Bank was the largest of the two community banks in its
market area, based upon total deposits and total assets. To a lesser extent
the Bank also competes with other financial institutions in Effingham County as
well as in neighboring Screven and Chatham counties. The Bank also competes
for loans with credit unions and small loan companies.

EMPLOYEES

As of March 31, 1996, the Bank had 24 full-time and 3 part-time
employees. The Bank is not a party to any collective bargaining agreement and
considers employee relations to be good.

In February 1996, following the Board's identification of certain
management issues relating to the positioning of the Bank as a potential
acquisition candidate and the administration of the Bank, David M. Atkins
resigned as President and as a director of the Bank and an interim president,
Carolyn Williamson, was appointed. In view of Mr. Atkins' years of experience
and prior service to the Bank, the Bank has retained Mr. Atkins' services as a
consultant until October 21, 1996 in exchange for payment of his base salary of
$6,538 per month and continued payment of his health insurance premiums until
that date. In addition, FNB paid Mr. Atkins $600 per month in director fees
for the months of January and February 1996 and allowed him the continued use
of a company car through March 22, 1996.

LOAN PORTFOLIO

FNB's loan portfolio consists of the following categories of loans:

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<PAGE> 46

includes accounts receivable, inventory, equipment, furniture and fixtures, and
certificates of deposit. Commercial, financial and agricultural loans
represented approximately 63% of FNB's net charge-offs for 1995. Risks
associated with these loans include fraud, bankruptcy, economic downturn,
deteriorating or non-existent collateral and changes in interest rates.
Agricultural loans, which comprise only a nominal portion of the overall loan
portfolio, also carry risks associated with fluctuating commodity prices and
inclement weather. Management seeks to reduce the risks associated with
commercial, financial and agricultural loans by reviewing the borrower's
management, financial strength and cash flow position and, to a lesser extent,
the value of the collateral before extending the loan.

Real Estate - Construction. Loans classified as construction loans are
typically made short-term to finance the construction of residential (1-4)
family dwellings and will be fully repaid upon completion of construction.
Such loans require site inspections and evaluations prior to the payment of any
draws. Risks associated with such loans generally include cost overruns,
interest rate movements, and the ability of the builder to sell the individual
residences. The Bank avoids these risk by obtaining a takeout commitment
letter for each loan to be extended. No construction loans were charged off
during 1995.

Installment Loans to Individuals. Installment loans to individuals
consists of consumer loans made for personal, household and family purposes,
such as home improvement and mobile home and automobile purchases. Installment
loans represented approximately 37% of net charge-offs in 1995. Types of
collateral included automobiles, mobile homes, savings accounts and stock.
Risks associated with such loans include deteriorating collateral, general
economic downturn, and bankruptcy of the borrower. Management seeks to reduce
these risks by investigating thoroughly the borrower's creditworthiness and
verifying the existence and value of the collateral.

Real Estate - Mortgage. Real estate mortgage loans include all loans
secured by real estate which were made for commercial, financial or
agricultural purposes and which are not construction loans. The primary
collateral in such loans is first lien mortgages but also includes
second-mortgage positions. Risks associated with this type of loan include
title defects, fraud, bankruptcy, deteriorating or non-existing collateral and
changes in interest rates. Management seeks to reduce the risk associated with
real estate mortgage loans by limiting such loans to constitute only a nominal
portion of the Bank's portfolio, by investigating thoroughly the Borrower's
creditworthiness and by obtaining an independent appraisal of the real estate.
No real estate mortgage loans were charged off during 1995.

CREDIT UNDERWRITING AND MONITORING

The Bank seeks to be the predominant lender in serving the credit needs
of qualified borrowers within its market area at a reasonable price. The
extent and amount of collateral required is based on factors such as the
character of the borrower, the borrower's financial condition, ability to
service the debt, credit history and the loan purpose. Because each loan is
evaluated on its own merit, there are no predetermined or minimal loan-to-value
ratios, except as provided by bank regulators in the case of real estate loans.
OCC regulations specify the acceptable loan-to-value ratios in a range from 65%
in the case of loans secured by "raw land" up to 90% in the case of loans
secured by 1-4 family residential properties.

During 1996 the Bank adopted and implemented a comprehensive loan policy
which individually addresses the various types and purposes of loans the Bank
can make and defines acceptable collateral. The lending policy emphasizes the
financial strength and cash flow position of the borrower and considers
collateral as the last resort source of repayment. Included as part of the
newly-adopted loan policy is a formal loan classification and grading system.
All loans are assigned a grade and are subject to review based on the perceived
risk of loss to the Bank. Such review includes verification of all necessary
documentation, as well as financial statement analysis and compliance with
regulations and bank policy. Prior to the adoption of this loan policy, the
Bank retained a qualified outside party to perform an annual review of the loan
portfolio through an evaluation of individual loans as well as of internal
policies and procedures.

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

The following narrative presents management's discussion and analysis of
FNB's financial condition and results of operations as of and for the
three-month periods ended March 31, 1996 and 1995 and for the years ended
December 31, 1995 and 1994. The historical financial

34
<PAGE> 47

statements of FNB are set forth elsewhere herein. This discussion should be
read in conjunction with those financial statements and the other financial
information included in this Proxy Statement/Prospectus. As FNB has no
subsidiaries other than the Bank and no activities other than those of the
Bank, the following discussion refers to the operations of the Bank.

THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO
THREE MONTHS ENDED MARCH 31, 1995

FINANCIAL CONDITION

FNB functions as the sole owner of a commercial bank, and its financial
condition should be examined in terms of trends in sources and uses of funds.
FNB's primary use of funds comes from loan demand. Since December 31, 1995,
loans outstanding have increased $1,958,000, or 5.4%. Investment securities
have increased $198,000 (4.2%) while federal funds sold decreased $170,000
(2.7)% from year-end.

Total assets have increased $1,621,000 (3.2%) since year-end, while total
deposits have increased $1,602,000 (3.5%). Demand deposits increased $419,000
(9.1%) and savings deposits (including NOW accounts and liquid money market
accounts) have increased $21,000 (0.1%). Time deposits over $100,000 have
increased approximately $778,000 (9.5%), while other time deposits have
increased approximately $384,000 (1.7%). The Bank does not accept brokered
deposits.

The increases in loans and deposits since December 31, 1995 are primarily
attributable to continued economic growth in the market area served by the
Bank. Management believes that although continued growth at this rate could
strain the Bank's capital base, the Merger will provide any necessary
additional long-term capital. Continued loan growth, together with other
factors such as increases in classified and past due loans and increased
portfolio diversification, could require an increase in the provision for loan
losses in the future. See "--Results of Operations -- Provision for Loan
Losses."

CAPITAL RESOURCES

FNB's ratio of shareholders' equity to total assets was 6.6% at March 31, 1996
and December 31, 1995. The Bank is also required to maintain minimum amounts
of capital to total "risk-weighted" assets, as defined by banking regulators.
At March 31, 1996, the Bank was required to have minimum Tier 1 and Total
Capital ratios of 4% and 8%, respectively, and a leverage ratio of at least
3%. At that date the Bank had a Tier 1 Capital ratio of 8.1%, a Total Capital
ratio of 9.4% and a leverage ratio of 6.6%. These ratios qualify the Bank for
the "adequately capitalized" classification as defined by banking regulators.

LIQUIDITY

The percentage of net loans to total deposits was 75.5% at March 31, 1996 and
73.8% at December 31, 1995. At March 31, 1996, the Bank had $8,797,000 in Cash
and Due from Banks and Federal Funds Sold as compared with $9,304,000 at
December 31, 1995, representing a 5.4% decrease. The Bank has established with
its correspondent banks back-up lines of credit to purchase federal funds on a
short-term basis when needed.

The decrease in cash and cash equivalents at March 31, 1996 and 1995 is the
result of loan and investment growth exceeding deposit growth during the first
quarter of each respective year. Cash inflows from operations totaled $72,902
and $85,233 at March 31, 1996 and 1995, while cash outflows from investing
activities totaled $2,012,578 and $1,983,368, respectively. Loan growth
accounted for $1,957,732 (97.3%) of the total outflow for the first quarter of
1996 and accounted for $2,006,224 (101.2%) of the total outflow, funded in part
by a decrease in federal funds sold of $490,000, for the first quarter of 1995.
Cash inflows, all of which is from increases in deposits, totaled $1,602,374
and $1,470,439 at March 31, 1996 and 1995, respectively. FNB has not paid any
dividends to its shareholders since its organization.

RESULTS OF OPERATIONS

Interest Income. Total interest income increased $323,000 (44.3%) in the first
three months of 1996 as compared to the first three months of 1995. Interest
on loans increased $231,000 (34.4%) in the first three months of 1996 as
compared to the first three months of 1995 as a result of higher interest rates
on loans outstanding as well as an increase in the average loan portfolio of
$7,676,000. Interest on investments increased $16,000 (32.4%) as a result of
an increase of $1,352,000 in the average carrying amount of investments as well
as higher yields within the portfolio from 6.07% to 6.23%.

Interest on federal funds sold increased by $72,000 from $7,685 for the first
three months of 1995 to $79,569 for the first three months of 1996. This
increase resulted from an increase in the average amount carried in federal
funds sold of $5,662,000 from the first quarter of 1995 to the first quarter of
1996.

Interest Expense. During the first three months of 1996, total interest
expense increased $276,000 (87.8%) from the first three months of 1995. This
interest expense is comprised only of interest expense on deposit accounts and
is attributable to higher interest rates paid on deposits outstanding in 1996
as compared to 1995 as well as an increase in the average amount of interest
bearing deposits of $13,582,000.

Provision for Loan Losses. The provision for loan losses for the first three
months of 1996 increased by $24,000 from $15,000 for the first three months of
1995 to $39,000 for the first three months of 1996. Changes in the amount of
the provision for loan losses are the result of judgments made by management
after considering changes in the creditworthiness and size of the loan
portfolio. The increase in the provision for loan losses during the first
three months of 1996 was based primarily on the growth in loans outstanding
during 1995. At March 31, 1996 the allowance for loan losses was 1.54% of
outstanding loans less unearned interest.

Management seeks to maintain the allowance for loan losses at a level which
will be adequate under current economic conditions. However, management's
judgment is based upon a number of assumptions about future events, which are
believed to be reasonable, but which may or may not prove valid. Thus, there
can be no assurance that charge-offs in future periods will not exceed the
allowance for possible loan losses, that additional increases in the allowance
will not be required, or that any particular level of allowance for possible
loan losses will be maintained.

Nonperforming loans were $404,000 at March 31, 1996 and $338,000 at December
31, 1995. These loans included those on a nonaccrual status of $131,000 and
$148,000, respectively, and accruing loans contractually past due at least 90
days of $273,000 and $192,000, respectively, at March 31, 1996 and December 31,
1995. There were no restructured loans at March 31, 1996 or December 31, 1995.
Net loans recovered totaled $6,000 during the first quarter of 1996 as compared
to $2,000 during the first quarter of 1995.

Other Income and Expense. Other income increased $17,000 (20.5%) in the first
three months of 1996 from the first three months of 1995, primarily as a result
of an increase in income from service charges on deposit accounts. This
increase in income is attributable to the increase in volume of accounts in the
Bank. Other expense increased $15,000 (4.1%) in the first three months of 1996
compared to the first three months of 1995, primarily as a result of an
increase in salaries and personnel expense of $18,000, an increase in occupancy
and equipment expense of $9,000, and a decrease in other expense of $12,000,
reflecting a $12,000 decrease in FDIC premiums.

Year Ended December 31, 1995 Compared to the Year Ended December 31, 1994

CAPITAL RESOURCES

FNB's ratio of shareholders' equity to total assets was 6.6% at December 31,
1995 and 8.7% at December 31, 1994. The Bank is also required to maintain
minimum amounts of capital to total "risk weighted" assets, as defined by the
banking regulators. The table below presents the Bank's regulatory capital
position at December 31, 1995.

<TABLE>
<S> <C>
Risk-Based Capital Ratios
-------------------------

Tier 1 Capital 8.5%
Regulatory minimum Tier 1 capital requirement 4.0%
----

Excess 4.5%
----

Total Capital 9.7%
Regulatory minimum Total Capital requirement 8.0%
----

Excess 1.7%
----

Leverage Ratio
--------------

Tier 1 Capital to Total Assets 6.6%
Regulatory minimum leverage requirement 3.0%
----

Excess 3.6%
----
</TABLE>

These ratios qualify the Bank for the "adequately capitalized" classification
as defined by the banking regulators. Capital needs are continually evaluated
by management, especially in light of the rapid growth experienced by the Bank.

LIQUIDITY

The percentage of net loans to deposits was 72.7% at December 31, 1995 and
83.9% at December 31, 1994. At December 31, 1995 the Bank held $9,304,380 in
cash and cash equivalents as compared to $2,871,369 at December 31, 1994.
Management considers the Bank's liquidity to be adequate to repay deposits and
other obligations and to meet expected loan demands. The Bank has established
with its correspondent banks back-up lines of credit to purchase federal funds
on a short-term basis when needed.

The increase in cash and cash equivalents in 1995 from 1994 is a result of
deposit growth exceeding loan and investment growth. Cash inflows from
operations totaled $771,331 and $648,158 in 1995 and 1994, respectively. Cash
outflows from investing activities totaled $9,428,287 and $6,726,587 in 1995
and 1994, with loan growth accounting for $7,697,882 (81.6%) and $6,128,280
(91.1%) of the total outflow, respectively. Cash inflows, all of which is from
increases in deposits, totaled $15,089,967 and $7,731,101 in 1995 and 1994,
respectively. FNB has not paid any dividends to its shareholders since its
organization.

35
<PAGE> 48

FINANCIAL CONDITION

Total assets increased by $15,807,148 (46.0%) at December 31, 1995 from
December 31, 1994 and increased $8,058,365 (30.6%) at December 31, 1994 from
December 31, 1993. The 1995 growth was reflected primarily in the increase in
federal funds sold, investment securities and loans and resulted from an
increase in total deposits of $15,089,967, in other liabilities of $413,051 and
from net income of $169,275. The 1994 increase was reflected primarily in the
increase in cash and due from banks, federal funds sold and loans and resulted
from an increase in total deposits of $7,736,497 at December 31, 1994 from
December 31, 1993 and from net income of $382,849 offset by the unrealized loss
on investment securities classified available for sale.

Investment Securities. The Bank has classified its entire investment portfolio
as available for sale . A net unrealized loss of $43,905 at December 31, 1995
and of $178,760 at December 31, 1994 was included in shareholders' equity
related to available for sale securities. Such losses are not expected to have
an adverse impact on future operations of the Bank. There were no realized
losses from the sale or call of investment securities in 1995 and 1994.

Loans. Loans are the largest category of earning assets and typically provide
higher yield than all other assets. Associated with the higher yields are the
inherent credit and liquidity risks which management attempts to control and
counterbalance. Loans increased $7,735,640 or 29.3% in 1995 as compared to
1994 and increased $6,109,296 or 30.1% in 1994 as compared to 1993. The 1995
increase was primarily attributable to additional loan volume resulting from
the opening of the Bank's new branch office in Rincon, a high growth market, in
1995, while the 1994 increase was primarily attributable to general economic
growth in the market area served by the Bank. Although continued growth at
this rate could strain the Bank's capital base, management believes the Merger
will provide any necessary additional capital. Continued loan growth, together
with other factors such as increases in classified and past due loans and
increased portfolio diversification, could require an increase in the provision
for loan losses in the future. See "--Results of Operations -- Provision for
Loan Losses."

Deposits. Deposits increased $15,089,967 (48.5%) in 1995 and $7,736,497
(33.1%) in 1994. These increases are attributable to general market growth,
the opening of a new branch office in Rincon in 1995, which is in a high growth
area of the market, and commercial growth occurring in the market area served
by the Bank.

Interest Rate Sensitivity. The objective of interest-sensitivity management is
to minimize the effect of interest rate changes on net interest margin.
Maintaining a balanced interest rate sensitivity position by adjusting the
asset and liability mix so that roughly equal volumes of assets and liabilities
reprice each period is one way of achieving this objective. Profits, however,
are not always maximized by this balance and the Bank may selectively mismatch
asset and liability repricing to take advantage of short-term interest rate
movements. The principal monitoring technique employed by the Bank is the
measurement of the Banks's interest sensitivity "gap", which is the positive or
negative dollar difference between assets and liabilities that are subject to
interest rate repricing within a given period of time.

The Bank evaluates interest sensitivity risk and then develops guidelines
regarding asset generation and repricing, funding sources and pricing, and
off-balance sheet commitments in order to decrease interest sensitivity risk.
The Bank uses computer simulations prepared by a third party to measure the net
income effect of various interest rate scenarios. The modeling reflects
interest rate changes and the related impact on net income over specified
periods of time.

The Bank generally would benefit from increasing market rates of interest when
it has an asset-sensitive gap and generally would benefit from decreasing
market rates of interest when it is liability sensitive. However, the Bank's
gap analysis is not a precise indicator of its interest sensitivity position.
The analysis presents only a static view of the timing of maturities and
repricing opportunities, without taking into consideration that changes in
interest rates do not affect all assets and liabilities equally. For example,
rates paid on a substantial portion of core deposits may change contractually
within a relatively short time frame, but those rates are viewed by management
as significantly less interest-sensitive than market-based rates such as those
paid on non-core deposits. Accordingly, management believes a
liability-sensitive gap position is not as indicative of the Bank's true
interest sensitivity as it would be for an organization which depends to a
greater extent on purchased funds to support earning assets. Other significant
factors may impact net interest income in a given

36
<PAGE> 49

interest rate environment, including changes in the volume and mix of earning
assets and interest-bearing liabilities. At December 31, 1995, the Bank's
cumulative interest rate sensitivity gap ratio was 117% at one year, indicating
that its interest-earning assets will reprice during this period at a rate
slightly faster than the Bank's interest-bearing liabilities. For purposes of
this analysis, the Bank treats savings deposits and NOW checking accounts as
rate sensitive.

RESULTS OF OPERATIONS

Interest Income. Total interest income increased $1,173,922 (48.8%) in 1995
from 1994 and increased $651,478 (37.1%) in 1994 from 1993. Interest on loans
increased $1,016,401 in 1995 from 1994 and increased $660,400 in 1994 from
1993. The increase in 1995 is the result of an increase in yield from 9.43% in
1994 to 10.58% in 1995 as well as an increase in the total loan portfolio. The
increase in 1994 is the result of an increase in yield from 9.34% in 1993 to
9.43% in 1994 as well as an increase in the total loan portfolio.

Interest on investments decreased $10,880 (5.0%) in 1995 from 1994 and
increased $33,934 (18.6%) in 1994 from 1993. The decrease in 1995 is the
primarily result of a decrease in yield from 6.09% to 5.58% offset by a slight
increase in the average balance of investment securities. The increase in 1994
is primarily the result of an increase in the average amount of investment
securities offset by a slight decrease in the yield on the portfolio from 6.15%
to 6.09%.

During 1995 interest on federal funds sold increased $168,401 (1,467.2%) from
1994 and decreased $42,856 (78.9%) in 1994 from 1993. The increase in 1995 was
the result of an increase in total funds available for short-term investment as
well as an increase in yield on such investments from 5.44% in 1994 to 5.74% in
1995. The decrease in 1994 was the result of a decrease in the average amount
invested in federal funds sold offset by a steady increase in interest rates
during 1994.

Interest Expense. During 1995 interest paid on deposits increased $840,127
(90.9%) from 1994 and in 1994 increased $182,476 (24.6%) from 1993. The
increases in such interest in 1995 and 1994 is the result of an overall
increase in interest rates paid on deposits of 1.3% in 1995 along with an
increase in average interest bearing deposits. The increase in 1994 is
attributable solely to an increase in interest bearing deposits. The overall
cost of funds for 1994 did not change from that of 1993.

Provision for Loan Losses. Provision for loan losses increased $201,800 in
1995 from 1994 and decreased $42,500 in 1994 from 1993. Changes in the amount
of the provision for loan losses are the result of judgments made by management
after considering changes in the creditworthiness and size of the loan
portfolio. At December 31, 1995 and 1994 the allowance for possible loan
losses was 1.5% and 1.0%, respectively, of outstanding loans.

Management seeks to maintain the allowance for loan losses at a level which
will be adequate under current economic conditions. However, management's
judgment is based uon a number of assumptions about future events, which are
believed to be reasonable, but which may or may not prove valid. Thus, there
can be no assurance that chare-offs in future periods will not exceed the
allowance for possible loan losses, that additional increases in the allowance
will not be required, or that any particular level of allowance for possible
loan losses will be maintined. Total nonperforming loans were $323,000 at
December 31, 1995 and $576,000 at December 31, 1994. The allowance for loan
losses was 151% of total nonperforming loans at December 31, 1995 and 50% of
total nonperforming loans at December 31, 1994. The amount of the allowance
for loan losses is determined by management after considering, among other
things, factors such as classified and past due loans as well as loan
growth and portfolio diversification.

Nonaccrual, Past Due and Restructured Loans

<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------
($ in thousands) 1995 1994 1993 1992 1991
- ---------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Nonaccrual Loans $ 131 $ 292 $ 211 $ 193 $ 117
Accruing Loans Past Due
at least 90 days 192 284 113 280 0
Restructured Loans 0 0 0 0 0
----- ----- ------ ------ ------
Total Nonperforming Loans 323 576 324 473 117
----- ----- ------ ------ ------
Other Real Estate 0 186 93 0 0
----- ----- ------ ------ ------
Total Nonperforming Assets $ 323 $ 762 $ 417 $ 473 $ 117
===== ===== ====== ====== ======
</TABLE>

37
<PAGE> 50

Interest income that would have been recognized on these nonperforming loans in
accordance with their original terms amounted to $16,741, $24,100, $15,600,
$11,800, and $1,760 in 1995, 1994, 1993, 1992, and 1991, respectively. Actual
cash received amounted to $563 in 1995. Actual cash received in the other four
prior years is not readily determinable without undue burden and is deemed to
be a nominal amount in each year.

Loans are placed on nonaccrual status when management does not consider the
collection of interest to be reasonably assured. In accordance with current
industry practice, loans greater than 90 days past due are placed on
non-accrual status unless such loans are well collateralized and in the process
of collection. At December 31, 1995, the Bank had no significant loans
designated by management as potential problem loans which have not been
disclosed above as non-accrual or past due loans.

There are not deemed to be any loan concentrations as of December 31, 1995.

Summary of Loan Loss Experience. The following table summarizes average loan
balances, changes in the allowance for loan losses arising from loans charged
off and recoveries on loans previously charged off, by loan category, and
additions to the allowance which have been charged to expense. The Bank was
not required to charge off any real estate construction or mortgage loans
during the periods presented.

<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------
($ in thousands) 1995 1994 1993 1992 1991
- ---------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Average Amount of Loans $ 30,289 $ 23,107 $ 16,271 $ 11,104 $ 6,070
Allowance for Loan Losses at
beginning of period 269 191 183 109 50
Loans Charged Off:
Commercial, Financial and
Agricultural 39 7 125 5 83
Installment Loans to
Individuals 29 22 14 7 2
--------- -------- -------- --------- ---------
Total Loans Charged Off 68 29 139 12 85
--------- -------- -------- --------- ---------
Recoveries on Loans Previously
Charged Off:
Commercial, Financial and
Agricultural 4 2 5 2 7
Installment Loans to
Individuals 8 8 2 2 7
--------- -------- -------- --------- ---------
Total Recoveries 12 10 7 4 14
--------- -------- -------- --------- ---------
Net Loans Charged Off 56 19 132 8 78
Additions to Allowance
Charged to Expense 299 97 140 82 137
--------- -------- -------- --------- ---------
Balance at End of Period $ 512 $ 269 $ 191 $ 183 $ 109
========= ======== ======== ========= =========

Ratio of Net Charge Offs during
the period to Average Loans
Outstanding 0.18% 0.08% 0.81% 0.07% 1.29%
========= ======== ======== ========= =========
</TABLE>

The Bank's provision for loan losses is based upon management's continuing
review and evaluation of the portfolio and is intended to create an allowance
adequate to absorb losses on loans outstanding as of the end of each reporting
period. For individually significant amounts, management's review consists of
evaluations of the financial strength of the borrowers and the related
collateral. Such evaluation is made by classifying loans based on values for
financial strength. The totals by loan classification, along with related
historical loss ratios, are used to determine the allowance required to provide
for potential losses. The review of groups of loans which are individually
insignificant is based upon delinquency status of the group, lending policies

38
<PAGE> 51

and previous collection experience by each category. Also the effects of
current economic conditions on specific industries or classes of borrowers are
considered in determining allowance for loan loss requirements.

The approximate anticipated amount of charge offs by category, in thousands of
dollars, during 1996 is:

<TABLE>
<S> <C>
Commercial, Financial and Agricultural $50
Installment Loans to Individuals 25
---
Total $75
</TABLE>

Non-interest Income and Expense. Non-interest income increased $123,181 in
1995 from 1994 and increased $69,767 in 1994 from 1993. Non-interest expense
increased $574,648 in 1995 from 1994 and increased $190,776 in 1994 from 1993.
The increase in non-interest income in 1995 and 1994 is primarily the result of
an increase of $86,152 and $59,226, respectively, in service charges on deposit
accounts and of $37,279 and $12,340, respectively, in credit insurance
commissions. The increases in these components of non-interest income is a
direct result of the growth in the volume of deposit and loan accounts. The
increases in non-interest expense resulted primarily from an increase in total
salary and personnel expense of $256,965 in 1995 and $89,328 in 1994, an
increase in total occupancy and equipment expense of $113,363 in 1995 and
$14,576 in 1994 and an increase in Other Expense of $204,320 in 1995 and
$86,872 in 1994. The increases in non-interest expense and in the overall
volume of accounts previously discussed are primarily attributable to the
opening and staffing of the branch facility in 1995 and the resulting growth in
loan and deposit account volume.

Income Taxes. The decrease in the provision for income taxes of $101,860 in
1995 and the increase of $129,678 in 1994 resulted from changes in taxable
income. The effective tax rate for 1995, 1994 and 1993 was 33%, 33% and 31%,
respectively.

VOTING SECURITIES HELD BY MANAGEMENT AND PRINCIPAL SHAREHOLDERS OF FNB

The following table sets forth certain information concerning shares of
FNB Common Stock held by FNB's directors, its Chief Executive Officer, the
beneficial owners of more than five percent of FNB Common Stock and all
directors and executive officers of FNB as a group, as of the Record Date.
Unless otherwise indicated, the person listed is the record owner of and has
sole voting and investment powers over his or her shares.

<TABLE>
<CAPTION> Pro Forma
Name of Number Percent of
Beneficial of Percent of Class After
Owner Shares Class(1) the Merger(2)
- ----- ------ -------- -------------
<S> <C> <C> <C>
David M. Atkins 22,418(3) 6.9 *
Allen Hollis 15,000(4) 4.8 *
W. Darrel Hutcheson 12,400(5) 3.9 *
Roger C. Macomber 30,951(6) 9.5 *
Neil W. Ratchford 10,400(7) 3.3 *
Ted O. Romine 41,748(8) 13.1 1.1
Raymon M. Starling 10,000(9) 3.2 *
Thomas D. Stewart, Jr. 44,132(10) 13.6 1.1
Wilhelmina A. Webb 7,040(11) 2.2 *
Larry D. Weddle 19,176(12) 6.1 *
</TABLE>

39
<PAGE> 52

<TABLE>
<S> <C> <C> <C>
Carolyn B. Williamson 1,500(13) * *
All directors and
executive officers
as a group 214,765(14) 54.9 5.3
- ----------------------
</TABLE>

* Represents less than one percent of the outstanding shares.

(1) Calculated giving effect to the exercise of the listed person's
exercisable options or warrants.

(2) Calculated giving effect to the Merger, including the conversion of all
options and warrants to purchase FNB Common Stock into shares of First
Banking Common Stock.

(3) Includes 7,500 shares subject to options and 7,182 shares subject to
warrants that are exercisable as of the Record Date and 6,182 shares
held in an IRA. The indicated person's address is P.O. Drawer 1046,
Springfield, Georgia 31329.

(4) The indicated person's address is 319 Randolph Drive, Vidalia, Georgia
30474.

(5) Includes 6,200 shares subject to warrants that are exercisable as of
the Record Date and 5,000 shares held in an IRA. The indicated person's
address is P.O. Box 7023, Garden City, Georgia 31418.

(6) Includes 15,200 shares subject to warrants that are exercisable as of
the Record Date. The indicated person's address is 1071 Oliver Highway,
Newington, Georgia 30446.

(7) Includes 5,200 shares subject to warrants that are exercisable as of
the Record Date. The indicated person's address is P.O. Box 146,
Guyton, Georgia 31312.

(8) Includes 9,550 shares subject to warrants that are exercisable as of
the Record Date. The indicated person's address is P.O. Box 7035,
Garden City, Georgia 31418.

(9) Includes 5,000 shares subject to warrants that are exercisable as of
the Record Date. The indicated person's address is 265 Magnolia Place,
Guyton, Georgia 31312.

(10) Includes 15,500 shares subject to warrants that are exercisable as of
the Record Date, 1,623 shares held in an IRA and 2,100 shares held in
the TDS Construction Profit Sharing Trust. The indicated person's
address is P.O. Box 763, Baxely, Georgia 31513.

(11) Includes 3,000 shares subject to warrants that are exercisable as of
the Record Date. The indicated person's address is 111 Lake Drive,
Springfield, Georgia 31329.

(12) Includes 5,200 shares subject to warrants that are exercisable as of
the Record Date. The indicated person's address is P.O. Box 247,
Springfield, Georgia 31329.

(13) Includes 1,250 shares subject to options that are exercisable as of
the Record Date. The indicated person's address is 204 Hawk Hammock,
Springfield, Georgia 31329.

(14) Includes 80,782 shares subject to options and warrants that are
exercisable as of the Record Date.

40
<PAGE> 53

BUSINESS OF FIRST BANKING

GENERAL

First Banking is a bank holding company organized on October 27, 1981.
All of First Banking's business is presently conducted by its wholly-owned
subsidiaries, First Bulloch Bank & Trust Company ("Bulloch Bank") and Metter
Banking Company ("Metter Bank") (collectively, the "Banks"), which are engaged
in bank and bank-related activities. First Banking does not engage in any
non-bank activities. Bulloch Bank was organized under the laws of the State of
Georgia in 1934 as a state banking corporation. On December 31, 1985, Metter
Financial Services, Inc. ("Metter Financial") combined with First Banking and
Metter Financial's subsidiary, Metter Bank, became a wholly-owned subsidiary of
First Banking.

As of March 31, 1996, First Banking had consolidated assets of
approximately $318 million, consolidated deposits of approximately $274 million
and consolidated shareholders' equity of approximately $31 million.

The Banks accept customary types of demand and time deposits, make
installment and commercial loans and offer safe deposit services and individual
retirement accounts to their customers. Bulloch Bank also performs corporate,
pension and personal trust services as well as other financial services for its
customers and for those of Metter Bank.

As of March 31, 1996, Bulloch Bank had a headquarters building, three
branches and five ATM installations, and Metter Bank had a headquarters
building, a drive-in facility, one ATM installation and a supermarket branch
office.

COMPETITION

The banking business is highly competitive. The Banks emphasize the
quality of services they provide. The prices of the Banks' financial products
relative to those of other financial institutions is another important variable
influencing customer choice. Bulloch Bank's primary market area consists of
Bulloch County, Georgia, which has a population of approximately 46,278.
Bulloch Bank competes for all types of loans, deposits, and other financial
services with four other commercial banks in Bulloch County. As of March
31, 1996, Bulloch Bank was the largest of the five commercial banks located in
Bulloch County, based upon total deposits and total assets.

Metter Bank's primary market area consists of Candler County, Georgia,
which is adjacent to Bulloch County. Candler County has a population of
approximately 8,200. Metter Bank competes for all types of loans, deposits and
other financial services with one other commercial bank and a local thrift in
the county, as well as other providers of financial services in adjacent
counties. Metter Bank is the largest of the two commercial banks and a local
thrift in its primary service area, based upon total deposits and total assets.

First Banking also competes with other financial institutions that are
located in Bulloch and Candler counties as well as with commercial banks,
savings and loan associations, other financial institutions and brokerage
houses located in Evans, Bryan, Effingham, Screven and Jenkins Counties. To a
lesser extent, First Banking competes for loans with insurance companies,
regulated small loan companies, credit unions and certain governmental
agencies. Recent legislation, together with other regulatory changes by the
primary regulators of the various financial institutions and competition from
unregulated entities, has resulted in the elimination of many traditional
distinctions between commercial banks, thrift institutions and other providers

41
<PAGE> 54

of financial services. Consequently, competition among financial institutions
of all types is virtually unlimited with respect to legal ability and authority
to provide most financial services.

EMPLOYEES

Except for the six officers of First Banking, who are also officers of
the Banks, First Banking does not have any employees. As of March 31, 1996,
Bulloch Bank had 88 full-time employees and nine part-time employees, and
Metter Bank had 39 full-time employees and five part-time employees. Management
considers employee relations to be generally good. Neither First Banking nor
the Banks have collective bargaining agreements with any employees.

LOAN PORTFOLIO

First Banking's loan portfolio consists of the following categories of
loans:

Commercial, Financial and Agricultural. Commercial, Financial and
Agricultural loans consist of all business and agricultural loans not secured
by real estate. The borrowers in this category are small to medium sized
businesses located in First Banking's market area. Most loans in this category
are collateralized. Types of collateral include accounts receivable,
inventory, equipment, furniture and fixtures, and certificates of deposit.
Risks associated with these types of loans include bankruptcy, economic
downturn, deteriorating collateral, and, in the case of agricultural loans,
crop failure as a result of extreme or poor weather, and changes in market
prices for underlying crops. Management seeks to reduce the risks associated
with these loans by reviewing the borrower's management, financial strength,
and cash flow position and, to a lesser extent, the value of the collateral
before extending the loan. Commercial, financial and agricultural loans
represented approximately 19% of new charge-offs for 1995.

Real Estate - Construction. Loans classified as construction loans are
typically made short-term to finance the construction of residential (1-4
family) dwellings, have permanent take-out mortgages approved and will be fully
repaid upon completion of construction. Builder financing is generally
discouraged. Such loans require site inspections and evaluations prior to the
payment of any draws. Risk associated with these loans include the ability of
the builder to sell the individual residences, a buyer's ability to obtain
permanent financing, cost overruns, interest rate movements, and the nature of
changeing economic conditions. First Banking avoids these risks by obtaining a
takeout commitment letter for each loan to be extended. No construction loans
were charged off in 1995.

Real Estate - Mortgage. Loans classified as mortgage real estate
include all loans secured by real estate which were made for commercial,
financial or agricultural purposes and which are not construction loans. The
primary collateral on such loans is first lien mortgages, but also includes
second-mortgage positions. Risks associated with this type of loan include
title defects, fraud, bankruptcy, deteriorating or non-existing collateral, and
changes in interest rates. Management seeks to reduce the risks associated
with real estate mortgage loans by investigating thoroughly the borrower's
creditworthiness, obtaining an independent appraisal of the collateral and
obtaining appropriate insurance coverage. No real estate mortgage loans were
charged off in 1995.

Installment Loans to Individuals. Installment loans to individuals
consists of consumer loans made for personal, household and family purposes,
such as home improvement and automobile purchases. Types of collateral include
automobiles, mobile homes, savings accounts and stock. Risks associated with
such loans include deteriorating collateral, general economic downturn, changes
in interest rates, and bankruptcy. Management seeks to reduce these risks by
investigating thoroughly the borrower's creditworthiness and verifying the
existence and value of the collateral. Installment loans represented
approximately 81% of new charge-offs in 1995.

Agriculturally Related. Agriculturally related loans are defined
as those loans secured by farmland as well as those originated to finance
agricultural production. Risks associated with such loans are typically those
identified above in "Commercial, Financial and Agricultural," as well as those
associated with declining commodity prices and inclement weather. First
Banking limits such loans to operators who exhibit strong financial ability and
proven performance and can offer the collateral deemed necessary for their
individual lines of credit. Farm visits and inspections are also performed
periodically to assess the collateral and the overall soundness of the
operation. No agriculturally related loans were charged off in 1995.

42
<PAGE> 55

CREDIT UNDERWRITING AND MONITORING

It is First Banking's practice to meet the credit needs of qualified
borrowers within its market area at a reasonable price. The extent and amount
of collateral required is based on factors such as the character of the
borrower, his financial condition, his ability to service the debt according to
a predetermined repayment plan, his credit history, and the loan purpose.
Because each loan is evaluated on its own merit, there are no predetermined or
minimal loan-to-value ratios or lien positions, except as provided by bank
regulators in the case of real estate loans. State banking regulations require
that, in the absence of other acceptable collateral, a real estate loan be less
than or equal to 90% and 75% of the appraised value of the real estate taken as
security in the case of an amortizing loan and of a nonamortizing loan,
respectively.

Agriculturally related loans made for real estate or for equipment
follow the general guidelines discussed above. Crop production and livestock
operation loans typically require liens on the livestock or the current year
crop production. Farm visits and inspections are also performed periodically to
assess the collateral and the overall soundness of the operation. A customized
repayment plan is developed for each operator based upon his projected cash
flow from crop production or livestock sales.

In 1992, First Banking adopted and implemented a comprehensive loan
policy which individually addresses the various types and purposes of loans the
Banks can make and defines acceptable collateral. The lending policy
emphasizes the financial strength and cash flow position of the borrower and
considers collateral as the last resort source of repayment. First Banking
also established in 1992 a formal loan classification and grading system,
performed as a separate and independent function within the company. All loans
are assigned a grade and are subject to review based on the perceived risk of
loss to First Banking. Such review includes verification of all necessary
documentation as well as financial statement analysis and compliance with
regulations and bank policy.

MANAGEMENT OF FIRST BANKING

DIRECTORS

First Banking's Board of Directors is divided into three classes: Class
I, Class II and Class III. The current terms of the Class I directors expire
in 1998; those of the Class II directors expire in 1999; and those of the Class
III directors expire in 1997.

The table set forth below shows for each director (a) his current class
and term of office, (b) his name, (c) his age at March 31, 1996, (d) the
year he was first elected as a director of First Banking, (e) any positions
held by him with First Banking or its subsidiary banks, other than as a
director, and (f) his business experience for the past five years. See the
section entitled "Management of First Banking -- Compensation of Directors" for
a discussion of the directorships of the Bulloch Bank and the Metter Bank held
by each of the persons listed below.

43
<PAGE> 56

<TABLE>
<CAPTION>
CLASS I
Current Term Expires in 1998
----------------------------

Year
First Positions with Company
Name Age Elected and Business Experience
- ---- --- ------- -----------------------
<S> <C> <C> <C>
E. Raybon Anderson(1) 57 1981 Chairman of the Board, Bulloch
Fertilizer Co., Inc.

A. M. Braswell, Jr.(2) 76 1981 Chairman of the Board, A.M.
Braswell, Jr. Food Company, Inc. (Manufacturer
of Preserves and Other Condiments)

W. A. Crider, Jr.(1) 56 1986 President, Crider's Poultry, Inc.
(Wholesale Poultry Processor)

Dan J. Parrish, Jr.(1)(2) 60 1986 Owner, Candler Computers (Computer Consulting);
Vice President of the Metter Bank and Senior
Vice President of First Banking until April
1993
</TABLE>

<TABLE>
<CAPTION>
CLASS II
Current Term Expires in 1999
----------------------------

Year
First Positions with Company
Name Age Elected and Business Experience
- ---- --- ------- -----------------------
<S> <C> <C> <C>
James Eli Hodges 54 1981 President of First Banking and the Bulloch Bank

C. Arthur Howard(1) 54 1984 President, Claude Howard Lumber Company, Inc.

Lanier A. Hunnicutt(2) 69 1986 Retired Farmer

Joe P. Johnston(2) 61 1981 Realtor

Harry S. Mathews 44 1996 Private investor since April 1994; President,
Statesboro Telephone Company until April 1994
</TABLE>

44
<PAGE> 57

<TABLE>
<CAPTION>
CLASS III
Current Term Expires in 1997
----------------------------

Year
First Positions with Company
Name Age Elected and Business Experience
- ---- --- ------- -----------------------
<S> <C> <C> <C>
Julian C. Lane, Jr. 47 1988 Vice President of First Banking and President
of the Metter Bank

Charles M. Robbins, Jr.(2) 75 1981 Retired Chairman of the Board, Robbins Packing
Company (Meat Packing & Distribution)

J. E. Smith(1) 82 1981 Retired Partner, Smith-Tillman Mortuary

Alvin Williams(2) 69 1986 Retired Executive Vice President of the Metter
Bank

John M. Wilson, Jr. 62 1985 Vice President of First Banking and Executive
Vice President of the Bulloch Bank
</TABLE>

Footnotes

(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.

Larry D. Weddle, who is currently a director of FNB, will serve as a
director of First Banking after the Merger. Mr. Weddle has been employed by
Purina Mills, Inc. since 1967, holding a number of positions in buying,
marketing and district management. He does not beneficially own any shares of
First Banking Common Stock.

COMPENSATION OF DIRECTORS

During 1995, the following directors also served as directors of the
Bulloch Bank: Messrs. Anderson, Braswell, Hodges, Howard, Johnston, Mathews,
Parrish, Robbins, Smith and Wilson. Also during 1995, the following directors
served as directors of the Metter Bank: Messrs. Hodges, Hunnicutt, Lane,
Parrish and Williams. During 1995, Mr. Crider served only as a director of
First Banking, for which he was paid an aggregate amount of $2,000. Each
director of First Banking who was also a director of the Bulloch Bank during
1995 was paid an aggregate amount of $6,800 for his service as a director of
the Bulloch Bank, and each director of First Banking who was also a director of
the Metter Bank during 1995 was paid an aggregate amount of $6,800 for his
service as a director of the Metter Bank. Directors of First Banking who also
serve as directors of the Bulloch and/or Metter Banks are not separately
compensated for their service as directors of First Banking or for their
service as members of committees. In addition to his directors' fees, Mr.
Parrish received $2,500 per month and the cost of his medical insurance
premiums as payment for consulting services rendered to First Banking.

45
<PAGE> 58

EXECUTIVE OFFICERS

The following table sets forth for each executive officer of First
Banking (a) the person's name, (b) his age at March 31, 1996, (c) the year
he was first elected as an executive officer of First Banking, and (d) his
position with First Banking and its subsidiary banks. Unless otherwise
indicated, each executive officer has been employed by the Bulloch or Metter
Bank for more than five years.

<TABLE>
<CAPTION>
Year Positions with First Banking
First and the Bulloch or Metter
Name Age Elected Banks; Business Experience
- ---- --- ------- ----------------------------------
<S> <C> <C> <C>
James Eli Hodges 54 1981 President of First Banking and the Bulloch Bank

Julian C. Lane, Jr. 47 1985 Vice President of First Banking and President
of the Metter Bank

John M. Wilson, Jr. 62 1985 Vice President of First Banking and Executive
Vice President of the Bulloch Bank

Dwayne E. Rocker 31 1992 Secretary and Treasurer of First Banking since
October 1992; Vice President and Secretary of
the Bulloch Bank since February 1996; Assistant
Vice President and Secretary of the Bulloch
Bank from August 1992 to February 1996; Banking
Officer of the Bulloch Bank from February 1992
to August 1992; Internal Auditor and loan
review officer of the Metter Bank from 1988 to
July 1992.
</TABLE>

EXECUTIVE COMPENSATION

The following table provides certain summary information concerning
compensation earned by First Banking's Chief Executive Officer and its only
other executive officer who earned over $100,000 in salary and bonus in 1995.
First Banking has not granted any stock options, stock appreciation rights or
other long-term stock or stock-based incentives.

46
<PAGE> 59

<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE

Long-Term Compensation
--------------------------------------
Annual Compensation Awards Payouts
-----------------------------------------------------------------------------------

Securities
Name and Other Restricted Underlying All
Principal Annual Stock Options/ LTIP Other
Position Year Salary Bonus Compensation (1) Award(s) SARs Payouts Compensation
-------- ---- ------ ----- ------------ ------- ------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James Eli Hodges 1995 $166,860 $75,087 -- $ 0 0 $ 0 $ 25,785(2)
Chief Executive 1994 $162,000 $58,363 -- $ 0 0 $ 0 $ 15,676(3)
Officer; President 1993 $150,000 $ 700 -- $ 0 0 $ 0 $ 26,632(4)
of First Banking
and the Bulloch Bank

Julian C. Lane, Jr. 1995 $ 94,554 $24,820 -- $ 0 0 $ 0 $ 22,888(5)
Vice President of 1994 $ 91,800 $22,617 -- $ 0 0 $ 0 $ 10,270(6)
the Company and 1993 $ 85,000 $ 0 -- $ 0 0 $ 0 $ 15,950(7)
President of the
Metter Bank
====================================================================================================================================
</TABLE>

(1) This column would include the value of certain personal benefits only
where the value of such benefits is greater than the lower of $50,000
or 10% of the executive's salary and bonus for the year. Such
threshold was not exceeded in any of the years reported.
(2) Includes $16,650 in company contributions to Mr. Hodges' account under
First Banking's 401(k) Plan and $9,135 in company contributions to his
account under the Target Benefit Plan.
(3) Includes $8,475 in company contributions to Mr. Hodges' account under
First Banking's 401(k) Plan and $7,201 in company contributions to his
account under the Target Benefit Plan.
(4) Includes $15,507 in company contributions to Mr. Hodges' account under
First Banking's 401(k) Plan and $11,125 in company contributions to his
account under the Target Benefit Plan.
(5) Includes $18,162 in company contributions to Mr. Lane's account under
First Banking's 401(k) Plan and $4,726 in company contributions to his
account under the Target Benefit Plan.
(6) Includes $6,885 in company contributions to Mr. Lane's account under
First Banking's 401(k) Plan and $3,385 in company contributions to his
account under the Target Benefit Plan.
(7) Includes $11,883 in company contributions to Mr. Lane's account under
First Banking's 401(k) Plan and $4,067 in company contributions to his
account under the Target Benefit Plan.

On February 20, 1996, Mr. Hodges entered into an employment agreement
with First Banking and the Bulloch Bank. The agreement provides for an annual
base salary of $174,000, which may be increased annually in such amounts as may
be determined by the Board of Directors. Mr. Hodges is also entitled to
participate in such option, bonus and other executive compensation programs and
to receive such other employee benefits as are made available to members of
senior management from time to time. During the term of his employment and, in
the event of termination under clauses (i), (iv), (v) or (vi) below, for a
period of six months thereafter, Mr. Hodges may not engage in the commercial
banking business or solicit clients, prospective customers or employees within
Bulloch County and Candler County, Georgia.

The initial term of the agreement expires on February 20, 1999. At the
end of the first twelve months, however, and at the end of each successive
twelve-month period thereafter, the agreement will automatically be extended
for a successive twelve-month period following the then two-year remaining term
unless either party gives written notice of its intent not to extend the term
at least 90 days prior to the end of such twelve month period. If

47
<PAGE> 60

such notice is properly given, the agreement will terminate at the end of the
remaining term then in effect. The agreement terminates automatically upon Mr.
Hodges' death or permanent disability and may be terminated: (i) by First
Banking or the Bulloch Bank for just cause (as defined in the agreement) upon
written notice to Mr. Hodges; (ii) by First Banking or the Bulloch Bank without
cause upon 30 days' prior written notice to Mr. Hodges; (iii) by Mr. Hodges for
cause without prior written notice except as required in connection with notice
of a material breach of the terms of the agreement; (iv) by Mr. Hodges without
cause upon 60 days' prior written notice; (v) by Mr. Hodges upon written notice
within six months following a change in control (as defined in the agreement)
of First Banking or the Bulloch Bank; or (vi) at any time upon mutual written
agreement of the parties. In the event of termination under the circumstances
described in clauses (ii), (iii) or (v) above, Mr. Hodges will continue to
receive his base salary for a period of 24 months following his termination.

On April 9, 1996, Mr. Lane entered into an employment agreement with
First Banking and the Metter Bank. The agreement is identical to Mr. Hodges'
employment agreement, except that Mr. Lane's annual base salary is $100,000 and
the initial term of the agreement expires on April 9, 1999.

INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS

First Banking's directors and executive officers and certain business
organizations and individuals associated with them have been customers of and
have had banking transactions with First Banking's subsidiary banks and are
expected to continue such relationships in the future. Pursuant to such
transactions, First Banking's directors and executive officers from time to
time have borrowed funds from First Banking's subsidiary banks for various
business and personal reasons. The extensions of credit made by First
Banking's subsidiary banks to its directors and executive officers (a) were
made in the ordinary course of business, (b) were made on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons and (c) did not involve
more than a normal risk of collectibility or present other unfavorable
features. As of December 31, 1995, First Banking's directors and executive
officers were indebted to First Banking in an aggregate amount of $7,967,986.

STOCK OWNERSHIP

On the Record Date, First Banking had _____ shareholders of record.
The following table sets forth the number and percentage of outstanding shares
of First Banking Common Stock beneficially owned as of the Record Date by (i)
each person who beneficially owned 5% or more of the outstanding shares of
First Banking Common Stock to the best information and knowledge of First
Banking, (ii) each director (including the Chief Executive Officer of First
Banking), (iii) each executive officer named in the Summary Compensation Table,
and (iv) all directors and executive officers of First Banking, as a group.
Unless otherwise indicated, each person has sole voting and investment powers
over the indicated shares. An asterisk (*) represents beneficial ownership of
less than one percent of the outstanding shares of First Banking Common Stock.

<TABLE>
<CAPTION>
Name of Number of Shares Percent
Director Beneficially Owned Of Class
------------------ ------------------ --------
<S> <C> <C>
E. Raybon Anderson 12,160 (1) *
A. M. Braswell, Jr. 8,256 (2) *
W. A. Crider, Jr. 135,042 (3) 5.07%
James Eli Hodges 9,970 (4) *
C. Arthur Howard 33,932 (5) 1.27%
Lanier A. Hunnicutt 24,584 (6) *
Joe P. Johnston 9,516 (7) *
</TABLE>

48
<PAGE> 61

<TABLE>
<S> <C> <C>
Julian C. Lane, Jr. 5,157 (8) *
Harry S. Mathews 14,982 (9) *
Dan J. Parrish, Jr. 184,489 (10) 6.93%
Charles M. Robbins, Jr. 8,036 (11) *
J. E. Smith 18,457 (12) *
Alvin Williams 56,884 (13) 2.14%
John M. Wilson, Jr. 4,739 (14) *
All Directors and Executive
Officers as a Group
(15 persons) 530,032 (15) 19.91%
</TABLE>

Footnotes

(1) Consists of 10,490 shares owned by Mr. Anderson and 1,670 shares owned
by Mr. Anderson's wife, as to which Mr. Anderson disclaims beneficial
ownership. Mr. Anderson's address is 1156 Jones Mill Road, Statesboro,
Georgia 30458.

(2) Consists of 6,816 shares owned by Mr. Braswell and 1,440 shares owned
jointly by Mr. and Mrs. Braswell, as to which voting and investment
powers are shared. Mr. Braswell's address is P.O. Box 485, Statesboro,
Georgia 30459.

(3) Consists of 33,068 shares owned by Mr. Crider and 101,974 shares owned
by the Crider Family Trust. Mr. Crider's address is P. O. Box 398,
Stillmore, Georgia 30464.

(4) Consists of (a) 4,937 shares owned by Mr. Hodges, (b) 76 shares owned
by Mr. Hodges' wife, as to which Mr. Hodges disclaims beneficial
ownership, (c) 19 shares owned by Mr. Hodges as custodian for his
child, and (d) 4,938 shares held for Mr. Hodges's benefit and owned by
the 401(k) Plan, as to which Mr. Hodges disclaims beneficial ownership.
Mr. Hodges' address is 40 North Main Street, Statesboro, Georgia 30458.

(5) Consists of (a) 14,544 shares owned by Mr. Howard, (b) 2,953 shares
owned by Mr. Howard's wife, as to which Mr. Howard disclaims
beneficial ownership and (c) 16,435 shares owned by the Claude Howard
Lumber Company, Inc., of which Mr. Howard is President. Mr. Howard's
address is 316 Wendwood Drive, Statesboro, Georgia 30458.

(6) Consists of 21,312 shares owned by Mr. Hunnicutt and 3,272 shares owned
by Mr. Hunnicutt's wife, as to which Mr. Hunnicutt disclaims
beneficial ownership. Mr. Hunnicutt's address is Route 2, Box 49,
Metter, Georgia 30439.

(7) Consists of 9,476 shares owned by Mr. Johnston and 40 shares owned by
Mr. Johnston's wife, as to which Mr. Johnston disclaims beneficial
ownership. Mr. Johnston's address is Route 3, Box 160, Statesboro,
Georgia 30458.

(8) Consists of 4,368 shares owned jointly by Mr. and Mrs. Lane, as to
which voting and investment powers are shared, and 789 shares held for
Mr. Lane's benefit and owned by the 401(k) Plan, as to which Mr. Lane
disclaims beneficial ownership. Mr. Lane's address is 347 South
College Street, Metter, Georgia 30439.

49
<PAGE> 62

(9) Consists of (a) 7,907 shares owned by Mr. Mathews, (b) 1,760 shares
owned by Mr. Mathews' wife, as to which Mr. Mathews disclaims
beneficial ownership, and (c) 5,315 shares owned by Mr. Mathews as
custodian for his children. Mr. Mathews' address is P. O. Box 1338,
Statesboro, Georgia 30459.

(10) Consists of (a) 7,104 shares owned jointly with Mr. Parrish's wife, as
to which voting and investment powers are shared, (b) 1,776 shares
owned by his wife, as to which Mr. Parrish disclaims beneficial
ownership, (c) 134,676 shares owned by Parrish Properties, an affiliate
of Mr. Parrish, (d) 40,537 shares owned by Mr. Parrish, and (e) 396
shares held for Mr. Parrish's benefit and owned by the 401(k) Plan, as
to which Mr. Parrish disclaims beneficial ownership. Mr. Parrish's
address is P.O. Box 564, Metter, Georgia 30439.

(11) Consists of 2,820 shares owned jointly by Mr. and Mrs. Robbins, as to
which voting and investment powers are shared, and 5,216 shares owned
by Mr. Robbins' wife, as to which Mr. Robbins disclaims beneficial
ownership. Mr. Robbins' address is 812 Highway 80 West, Statesboro,
Georgia 30458.

(12) Consists of 16,000 shares owned by Mr.Smith and 2,457 shares owned by
Mr. Smith's wife, as to which Mr. Smith disclaims beneficial ownership.
Mr. Smith's address is 338 Savannah Avenue, Statesboro, Georgia 30458.

(13) Consists of (a) 4,446 shares owned by Mr. Williams, (b) 49,718 shares
owned jointly by Mr. and Mrs. Williams, as to which voting and
investment powers are shared, and (c) 2,720 shares owned by Mr.
Williams' wife, as to which Mr. Williams disclaims beneficial
ownership. Mr. Williams' address is P.O. Box 75, Pulaski, Georgia
30451.

(14) Consists of (a) 2,320 shares owned by Mr. Wilson, (b) 96 shares owned
by Mr. Wilson's wife, as to which Mr. Wilson disclaims beneficial
ownership, and (c) 2,323 shares held for Mr. Wilson's benefit and owned
by the 401(k) Plan, as to which Mr. Wilson disclaims beneficial
ownership. Mr. Wilson's address is 599 Williams Road, Statesboro,
Georgia 30458.

(15) Includes shares as to which the persons in the group disclaim
beneficial ownership as indicated above.

50
<PAGE> 63

PRO FORMA FINANCIAL INFORMATION

On March 20, 1996, First Banking announced it had entered into a
definitive agreement to acquire all of the outstanding common stock of FNB in
the Merger as contemplated herein. The Merger is expected to close before
September 30, 1996 and is expected to be accounted for under the "pooling
of interests" method of accounting. Under the terms of the Merger, each share
of FNB Common Stock is expected to be exchanged for 0.892 shares of
First Banking Common Stock and each option or warrant to purchase shares of FNB
Common Stock will be converted into the right to receive 0.466 shares of First
Banking Common Stock for each share underlying the option or warrant.

The following unaudited pro forma condensed financial statements give
effect to the Merger as contemplated herein. The transaction is under the
"pooling of interests" method of accounting. These pro forma financial
statements are presented for illustrative purposes only and, therefore, are not
necessarily indicative of the operating results and financial position that
might have been achieved had the Merger occurred as of an earlier date, nor are
they necessarily indicative of the operating results and financial position
which may occur in the future.

The pro forma condensed balance sheets as of March 31, 1996 and
December 31, 1995 give effect to the Merger as though the transaction had been
consummated on that date. Pro forma condensed income statements for the three
month period ended March 31, 1996 and for the fiscal years ended December 31,
1995, 1994 and 1993 give effect to the Merger as though the transaction had
occurred at the beginning of the earliest period presented. Certain pro forma
adjustments to the pro forma condensed balance sheets have been made to give
effect to transaction costs at March 31, 1996 and December 31, 1995. No pro
forma adjustments were necessary for any of the pro forma income statements
presented; however, integration costs related to the proposed merger will be
recorded in the historical statements of income as incurred.

The pro forma condensed financial statements are derived from the
historical consolidated financial statements of First Banking and FNB as of
March 31, 1996 and December 31, 1995 and for the three month period ended March
31, 1996 and for the fiscal years ended December 31, 1995, 1994 and 1993 and
should be read in conjunction with First Banking's and FNB's historical
financial statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" incorporated by reference or contained
elsewhere in this Prospectus/Proxy Statement.

51
<PAGE> 64

UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
AS OF MARCH 31, 1996

<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
First Banking FNB Adjustments Combined
------------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
ASSETS
Cash and Due from Banks $ 10,310,074 $ 2,497,078 $ 12,807,152
Interest Bearing Deposits in Other Banks 21,674,930 21,674,930
Federal Funds Sold 100,000 6,300,000 6,400,000
Investment Securities:
Available for Sale 67,108,394 4,848,982 71,957,376
Held to Maturity 31,835,758 36,080,711 31,835,758

Loans 179,593,710 36,080,711 215,674,421
Allowance for Loan Losses (3,508,259) (556,994) (4,065,253)
------------ ----------- ------------- ------------
Loans-Net 176,085,451 35,523,717 211,609,168
------------ ----------- ------------- ------------
Other Assets 10,401,287 2,616,664 13,017,951
------------ ----------- ------------- ------------

TOTAL ASSETS: $317,515,894 $51,786,441 $369,302,335
============ =========== ============= ============

LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
Deposits:
Demand $ 32,681,718 $ 4,997,740 $ 37,679,458
Interest Bearing 241,145,169 42,810,436 283,955,605
------------ ----------- ------------- ------------
Total Deposits 273,826,887 47,808,176 321,635,063

Other Borrowed Money 8,616,847 8,616,847
Other Liabilities 3,797,072 575,394 $ 203,000 4,575,466
------------ ----------- ------------- ------------
Total Liabilities 286,240,806 48,383,570 203,000 334,827,376

Shareholder's Equity:
Common Stock 2,661,711 3,101 337,319 3,002,131
Additional Paid-in-Capital 5,264,824 3,098,039 (337,319) 8,025,544
Retained Earnings 23,368,967 360,877 (203,000) 23,526,844
Net Unrealized Gain
(Loss) on Investment
Securities Available for Sale (20,414) (59,146) (79,560)
------------ ----------- ------------- ------------
Total Shareholders' Equity 31,275,088 3,402,871 (203,000) 34,474,959
------------ ----------- ------------- ------------

TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $317,515,894 $51,786,441 $ $369,302,335
============ =========== ============= ============
</TABLE>

See accompanying notes to pro forma condensed financial statements.

52
<PAGE> 65

UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
AS OF DECEMBER 31, 1995

<TABLE>
<CAPTION>
Historical Historical Pro Forma
First Banking FNB Adjustments Combined
------------- --- ----------- --------
<S> <C> <C> <C> <C>
ASSETS
Cash and Due from Banks $ 12,171,152 $ 2,834,380 $ 15,005,532
Interest Bearing Deposits in Other Banks 12,291,546 12,291,546
Federal Funds Sold 1,700,000 6,470,000 8,170,000
Investment Securities:
Available for Sale 49,363,889 4,651,301 54,015,190
Held to Maturity 35,778,105 35,778,105
Loans 181,855,406 34,116,732 215,972,138
Allowance for Loan Losses (3,344,574) (511,747) (3,856,321)
--------------- ------------ ------------- -------------
Loans - Net 178,510,832 33,604,985 0 212,115,817
--------------- ------------ ------------- --------------
Other Assets 10,384,997 2,604,850 12,989,847
--------------- ------------ ------------- -------------

TOTAL ASSETS: $ 300,200,521 $ 50,165,516 0 $ 350,366,037
=============== ============ ============= =============

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Demand $ 33,817,337 $ 4,579,080 $ 38,396,417
Interest Bearing 224,459,427 41,626,722 266,086,149
--------------- ------------ ------------- -------------
Total Deposits 258,276,764 46,205,802 0 304,482,566

Other Borrowed Money 7,234,447 7,234,447
Other Liabilities 3,863,476 657,547 $ 203,000 4,724,023
--------------- ------------ ------------- -------------
Total Liabilities 269,374,687 46,863,349 203,000 316,441,036

Shareholders' Equity:
Common Stock 2,661,711 3,101 337,319 3,002,131
Additional Paid-in-Capital 5,264,825 3,098,039 (337,319) 8,025,545
Retained Earnings 22,598,946 244,932 (203,000) 22,640,878
Net Unrealized Gain
(Loss) on Investment
Securities Available for Sale 300,352 (43,905) 256,447
--------------- ------------ ------------- -------------
Total Shareholders' Equity 30,825,834 3,302,167 (203,000) 33,925,001
--------------- ------------ ------------- -------------

TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 300,200,521 $ 50,165,516 $ 0 $ 350,366,037
=============== ============ ============= =============
</TABLE>

See accompanying notes to pro forma condensed financial statements.

53
<PAGE> 66

UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME
FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 1996

Historical Historical Pro Forma
First Banking FNB Combined
------------- ---------- ----------
<S> <C> <C> <C>
Interest Income
Loans (Including Fees) $4,828,177 $ 903,802 $5,731,979
Interest Bearing Deposits 166,395 166,395
Investment Securities 1,428,733 67,460 1,496,193
Federal Funds Sold 21,036 79,569 100,605
---------- ---------- ----------
Total Interest Income 6,444,341 1,050,831 7,495,172
Interest Expense
Deposits 2,926,115 571,428 3,497,543
Other 121,871 121,871
---------- ---------- ----------
Total Interest Expense 3,047,986 571,428 3,619,414
---------- ---------- ----------
Net Interest Income 3,396,355 479,403 3,875,758
Provision for Loan Losses 189,546 39,000 228,546
---------- ---------- ----------
Net Interest Income after Provision for
Loan Losses 3,206,809 440,403 3,647,212
---------- ---------- ----------
Non-interest Income
Service Charges on Deposit Accounts 356,592 88,310 444,902
Fees for Trust Services 37,764 37,764
Other 103,676 13,790 117,466
---------- ---------- ----------
Total Non-interest Income 498,032 102,100 600,182
---------- ---------- ----------
Non-interest Expense
Salaries and Other Personnel Expense 1,081,914 193,757 1,275,671
Occupancy Expense and Equipment Expense, Net 360,112 56,571 416,683
Other 596,629 126,230 722,859
---------- ---------- ----------
Total Non-interest Expense 2,038,655 376,558 2,415,213
---------- ---------- ----------
Income Before Income Taxes 1,666,186 165,945 1,832,131
Provision for Income Taxes 496,908 50,000 546,908
---------- ---------- ----------
Net Income $1,169,278 $ 115,945 $1,285,223
========== ========== ==========
Earnings Per Share $ 0.44 $ 0.37 $ 0.43
========== ========== ==========
Weighted Average Number of Shares Outstanding $2,661,711 310,114 3,002,131
========== ========== ==========

</TABLE>

See accompanying notes to pro forma condensed financial statements.

<PAGE> 67

UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995

Historical Historical
First Banking FNB Combined
------------- ------------- --------------
<S> <C> <C> <C>
Interest Income
Loans (Including Fees) $ 18,530,655 $ 3,195,797 $ 21,726,452
Interest Bearing Deposits 755,892 755,892
Investment Securities 4,491,983 205,145 4,697,128
Federal Funds Sold 88,452 179,879 268,331
------------- -------------- --------------
Total Interest Income 23,866,982 3,580,821 27,447,803
------------- -------------- --------------
Interest Expense
Deposits 10,253,463 1,764,191 12,017,654
Other 399,590 800 400,390
-------------- --------------
Total Interest Expense 10,653,053 1,764,991 12,418,044
------------- -------------- -------------
Net Interest Income 13,213,929 1,815,830 15,029,759
Provision for Loan Losses 560,000 299,300 859,300
------------- -------------- --------------
Net Interest Income after Provision for Loan Losses 12,653,929 1,516,530 14,170,459
------------- -------------- -------------
Non-interest Income
Service Charges on Deposit Accounts 1,408,407 343,008 1,751,415
Fees for Trust Services 200,236 200,236
Other 289,657 88,606 378,263
-------------- --------------
Total Non-interest Income 1,898,300 431,614 2,329,914
------------- -------------- --------------
Non-interest Expense
Salaries and Other Personnel Expense 4,341,431 791,565 5,132,996
Occupancy Expense and Equipment Expense, Net 1,379,243 231,302 1,610,545
Other 2,426,302 671,862 3,098,164
------------- -------------- --------------
Total Non-interest Expense 8,146,976 1,694,729 9,841,705
------------- -------------- --------------
Income Before Income Taxes 6,405,253 253,415 6,658,668
Provision for Income Taxes 1,868,560 84,140 1,952,700
------------- -------------- --------------
Net Income $ 4,536,693 $ 169,275 $ 4,705,968
============= ============== ==============
Earnings Per Share $ 1.70 $ 0.55 $ 1.57
============= ============== ==============
Weighted Average Number of Shares Outstanding 2,661,795 310,114 3,002,215
============= ============== ==============
</TABLE>

See accompanying notes to pro forma condensed financial statements.

55
<PAGE> 68

UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994

Historical Historical
First Banking FNB Combined
------------- -------------- --------------
<S> <C> <C> <C>
Interest Income
Loans (Including Fees) $ 14,990,146 $ 2,179,396 $ 17,169,542
Interest Bearing Deposits 138,028 138,028
Investment Securities 3,520,132 216,025 3,736,157
Federal Funds Sold 264,641 11,478 276,119
------------- -------------- --------------
Total Interest Income 18,912,947 2,406,899 21,319,846
------------- -------------- --------------
Interest Expense
Deposits 7,177,048 924,064 8,101,112
Other 165,414 4,838 170,252
-------------- --------------
Total Interest Expense 7,342,462 928,902 8,271,364
------------- -------------- --------------
Net Interest Income 11,570,485 1,477,997 13,048,482
Provision for Loan Losses 534,573 97,500 632,073
------------- -------------- --------------
Net Interest Income after Provision for Loan Losses 11,035,912 1,380,497 12,416,409
------------- -------------- --------------
Non-interest Income
Service Charges on Deposit Accounts 1,374,638 256,856 1,631,494
Fees for Trust Savings 216,375 216,375
Other 431,511 51,577 483,088
-------------- --------------
Total Non-interest Income 2,022,524 308,433 2,330,957
------------- -------------- --------------
Non-interest Expense
Salaries and Other Personnel Expense 4,185,955 534,600 4,720,555
Occupancy Expense and Equipment Expense, Net 1,308,903 117,939 1,426,842
Other 2,641,386 467,542 3,108,928
-------------- --------------
Total Non-interest Expense 8,136,244 1,120,081 9,256,325
------------- -------------- --------------
Income Before Income Taxes 4,922,192 568,849 5,491,041
Provision for Income Taxes 1,472,918 186,000 1,658,918
------------- -------------- --------------
Net Income $ 3,449,274 $ 382,849 $ 3,832,123
============= ============== ==============
Earnings Per Share $ 1.30 $ 1.23 $ 1.28
============= ============== ==============
Weighted Average Number of Shares Outstanding 2,661,939 310,114 3,002,359
============= ============== ==============
</TABLE>

See accompanying notes to pro forma condensed financial statements.

56
<PAGE> 69

UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993

Historical Historical
First Banking FNB Combined
------------- -------------- --------------
<S> <C> <C> <C>
Interest Income
Loans (Including Fees) $ 13,786,435 $ 1,518,996 $ 15,305,431
Interest Bearing Deposits 99,669 99,669
Investment Securities 3,398,940 182,091 3,581,031
Federal Funds Sold 152,519 54,334 206,853
------------- -------------- --------------
Total Interest Income 17,437,563 1,755,421 19,192,984
------------- -------------- --------------
Interest Expense
Deposits 6,771,793 741,588 7,513,381
Other 44,003 0 44,003
Total Interest Expense 6,815,796 741,588 7,557,384
------------- -------------- --------------
Net Interest Income 10,621,767 1,013,833 11,635,600
Provision for Loan Losses 586,768 140,000 726,768
------------- -------------- --------------
Net Interest Income after Provision for Loan Losses 10,034,999 873,833 10,908,832
------------- -------------- --------------
Non-interest Income
Service Charges on Deposit Accounts 1,375,611 197,630 1,573,241
Fees for Trust Savings 170,404 - 170,404
Other 481,046 41,036 522,082
------------- -------------- --------------
Total Non-interest Income 2,027,061 238,666 2,265,727
------------- -------------- --------------
Non-interest Expense
Salaries and Other Personnel Expense 3,930,784 445,272 4,376,056
Occupancy Expense and Equipment Expense, Net 1,128,469 103,363 1,231,832
Other 2,470,907 380,670 2,851,577
------------- -------------- --------------
Total Non-interest Expense 7,530,160 929,305 8,459,465
------------- -------------- --------------
Income Before Income Taxes 4,531,900 183,194 4,715,094
Provision for Income Taxes 1,284,543 56,322 1,340,865
------------- -------------- --------------
Income before cumulative effect of change in
accounting principle $ 3,247,357 $ 126,872 $ 3,374,229
============= ============== ==============
Earnings Per Share Before Cumulative Effect
of Change in Accounting Principle $ 1.22 $ 0.41 $ 1.12
============= ============== ==============
Weighted Average Number of Shares Outstanding 2,661,939 310,114 3,002,359
============= ============== ==============
</TABLE>

See accompanying notes to pro forma condensed financial statements.

57
<PAGE> 70

NOTES TO UNAUDITED PRO FORMA CONDENSED

FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The unaudited pro forma combined financial statements are presented for
illustrative purposes only and give effect to the Merger of First Banking
Company of Southeast Georgia ("First Banking") and FNB Bancshares, Inc. ("FNB")
as contemplated herein, with the transaction accounted for as a "pooling of
interests." In accordance with Commission reporting rules, the pro forma
condensed statements of income, and the historical statements from which they
are derived, present only income from continuing operations before
extraordinary items and the cumulative effect of accounting changes.

Because the transaction has not been completed and transition plans are
currently being developed, transaction costs expected to be incurred can only
be estimated at this time. With respect to the merger of First Banking and
FNB, the pro forma condensed statement of income for the three month period
ended March 31, 1996 for the fiscal year ended December 31, 1995 excludes: (i)
the positive effects of potential cost savings which may be achieved upon
combining the resources of the companies, and (ii) merger and non-recurring
costs to integrate the companies, currently estimated to be approximately
$290,000, including investment broker, legal, and miscellaneous transactions
costs of the Merger, and other nonrecurring costs and expenses expected to be
incurred subsequent to the Merger.

The pro forma condensed balance sheet as of March 31, 1996 includes,
in accordance with Commission reporting rules, the impact of all transactions,
whether of a recurring or nonrecurring nature, that can be reasonably estimated
and should be reflected as of that date. Therefore, current liabilities and
stockholders' equity reflect a pro forma adjustment of $203,000, net of tax,
determined based on the $290,000 of amounts for transaction, costs related to
the Merger of First Banking and FNB as contemplated herein.

2. OTHER PRO FORMA ADJUSTMENTS

Intercompany Transactions. There were no intercompany transactions which
required elimination from the pro forma combined operating results or balance
sheet.

Common Stockholders' Equity. Pro forma common stockholders' equity as of
March 31, 1996 has been adjusted to reflect the following:

- Common stock accounts are adjusted for the assumed issuance of
approximately 340,420 shares of First Banking Common Stock in exchange
for approximately 310,114 shares of FNB Common Stock issued and
outstanding as of March 31, 1996 as well as 136,907 FNB options to
purchase FNB Common Stock outstanding as of March 31, 1996 utilizing
the Exchange Ratio.

- Paid-in capital is adjusted for the effects of the aforementioned
issuance of shares of First Banking Common Stock having a par value of
$1.00 per share in exchange for FNB Common Stock having a par value of
$.01 per share.

Income per Common Share. Pro forma weighted average common shares
outstanding for the three years ended December 31, 1995 and for the three month
period ended March 31, 1996 are based upon First Banking's historical weighted
average share as of the end of the respective period plus the additional
340,240 aforementioned shares that will be issued in conjunction with the
Merger contemplated herein.

58
<PAGE> 71

CERTAIN REGULATORY CONSIDERATIONS

The following discussion sets forth certain of the material elements of
the regulatory framework applicable to banks and bank holding companies and
provides certain specific information related to First Banking and FNB.
Additional information is available in First Banking's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1995. See "Documents
Incorporated by Reference."

GENERAL

Bank holding companies and banks are extensively regulated under both
federal and state law. The following is a brief summary of certain statutes
and rules and regulations affecting First Banking, FNB and their respective
subsidiaries. This summary is qualified in its entirety by reference to the
particular statutes and regulatory provisions referred to below and is not
intended to be an exhaustive description of the statutes or regulations
applicable to the business of First Banking, FNB and their respective
subsidiaries. Supervision, regulation and examination of First Banking, FNB
and their respective subsidiaries by the bank regulatory agencies are intended
primarily for the protection of depositors rather than shareholders of First
Banking or FNB.

BANK HOLDING COMPANY REGULATION

First Banking and FNB are both registered holding companies under the
BHC Act and the Georgia Bank Holding Company Act (the "Georgia Bank Holding
Company Act") and are regulated under such acts by the Federal Reserve and by
the Georgia Department, respectively. In addition, the Bank is also registered
with the OCC and is subject to the regulation, supervision, examination and
reporting requirements of the OCC.

As bank holding companies, First Banking and FNB are required to file
annual reports with the Federal Reserve and the Georgia Department and such
additional information as the applicable regulator may require pursuant to the
BHC Act and the Georgia Bank Holding Company Act. The Federal Reserve and the
Georgia Department may also conduct examinations of First Banking and FNB to
determine whether they are in compliance with both the BHC Act and the Georgia
Bank Holding Company Act and the regulations promulgated thereunder.

The BHC Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before: (i) it may acquire direct or indirect
ownership or control of any voting shares of any bank if, after such
acquisition, the bank holding company will directly or indirectly own or
control more than 5.0% of the voting shares of the bank; (ii) it or any of its
subsidiaries, other than a bank, may acquire all or substantially all of the
assets of any bank; or (iii) it may merge or consolidate with any other bank
holding company. Similar federal statutes require savings and loan holding
companies and other companies to obtain the prior approval of the OTS before
acquiring direct or indirect ownership or control of a savings association.

The BHC Act further provides that the Federal Reserve may not approve
any transaction that would result in a monopoly or would be in furtherance of
any combination or conspiracy to monopolize or attempt to monopolize the
business of banking in any section of the United States, or the effect of which
may be substantially to lessen competition or to tend to create a monopoly in
any section of the country, or that in any other manner would be in restraint
of trade, unless the anticompetitive effects of the proposed transaction are
clearly outweighed by the public interest in meeting the convenience and needs
of the community to be served. The Federal Reserve is also required to
consider the financial and managerial resources and future prospects of the
bank holding companies and banks concerned and the convenience and needs of the
community to be served. Consideration of financial resources generally focuses
on capital adequacy, which is discussed below.

On September 29, 1994, the President of the United States signed the
"Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994" (the
"Interstate Branching Act"). The Interstate Branching Act amends federal law
to permit bank holding companies to acquire existing banks in any state
effective September 29, 1995, subject to certain deposit - percentage and aging
requirements and other restrictions. In addition, the Interstate Branching

59
<PAGE> 72

Act provides that any interstate bank holding company is permitted to merge its
various bank subsidiaries into a single bank with interstate branches effective
June 1, 1997. By adopting legislation prior to that date, a state has the
authority either to "opt in" and accelerate the date after which interstate
branching is permissible or to "opt out" and prohibit interstate branching
altogether.

In response to the Interstate Branching Act, the Georgia legislature
adopted the "Georgia Interstate Banking Act," effective July 1, 1995, which
provides that (1) interstate acquisitions by institutions located in Georgia
will be permitted in states which also allow national interstate acquisitions,
and (2) interstate acquisitions of institutions located in Georgia will be
permitted by institutions located in states which also allow national
interstate acquisitions; provided, however, that if the board of directors of a
Georgia bank or bank holding company adopts a resolution to except such bank or
bank holding company from being acquired pursuant to the provisions of the
Georgia Interstate Banking Act and properly files a certified copy of such
resolution with the Georgia Department, such bank or bank holding company may
not be acquired by an institution located outside of the State of Georgia.

Additionally, in February 1996, the Georgia legislature adopted the
"Georgia Interstate Branching Act," which when signed by the Governor, will
permit Georgia-based banks and bank holding companies owning or acquiring banks
outside of Georgia and all non-Georgia banks and bank holding companies owning
or acquiring banks in Georgia the right to merge any lawfully acquired bank
into an interstate branch network. The Georgia Interstate Branching Act also
allows banks to establish de novo branch banks on a limited basis beginning
July 1, 1996. Beginning July 1, 1998, the number of de novo bank branches
which may be established will no longer be limited.

In addition to having the right to acquire ownership or control of other
banks, bank holding companies are authorized to acquire ownership or control of
nonbanking companies, provided the activities of such companies are so closely
related to banking or managing or controlling banks that the Federal Reserve
considers such activities to be proper to the operation and control of banks.
Regulation Y, promulgated by the Federal Reserve, sets forth those activities
which are regarded as closely related to banking or managing or controlling
banks and, thus, are permissible activities for bank holding companies, subject
to approval by the Federal Reserve in individual cases.

First Banking is also subject to various federal securities laws,
including the Securities Act and the Exchange Act. The Securities Act
regulates the distribution or public offering of securities, while the Exchange
Act regulates trading in securities that are already issued and outstanding.
Both Acts provide civil and criminal penalties for misrepresentations and
omissions in connection with the sale of securities, and the Exchange Act also
prohibits market manipulation and insider trading. Pursuant to the Exchange
Act, First Banking files annual, quarterly and current reports with the
Securities and Exchange Commission. In addition, First Banking and its
respective directors, executive officers and 5% shareholders are subject to
certain additional reporting requirements, including requirements governing the
submission of proxy statements and reports of beneficial ownership of the bank
holding company.

BANK REGULATION

Each of the subsidiary depository institutions of First Banking and FNB
is a member of the Federal Deposit Insurance Corporation (the "FDIC"), and as
such, its deposits are insured by the FDIC to the maximum extent provided by
law. Each such subsidiary is also subject to numerous state and federal
statutes and regulations that affect its business, activities, and operations,
and each is supervised and examined by one or more state or federal bank
regulatory agencies.

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

60
<PAGE> 73

The regulatory agencies having supervisory jurisdiction over the
respective subsidiary institutions of First Banking and FNB (the FDIC and the
Georgia Department in the case of Bulloch Bank and Metter Bank, and the FDIC
and the OCC in the case of the Bank) regularly examine the operations of such
institutions and have authority to approve or disapprove mergers,
consolidations, the establishment of branches, and similar corporate actions.
Such regulatory agencies also have the power to prevent the continuance or
development of unsafe or unsound banking practices or other violations of law.

CAPITAL REQUIREMENTS

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

At December 31, 1995, Bulloch Bank and Metter Bank had Tier 1 leverage
ratios of 10.3% and 9.4%, respectively, Tier 1 risk-based ratios of 17.9% and
15.1%, respectively, and Total risk-based ratios of 19.7% and 17.1%,
respectively, and FNB had a Tier 1 leverage ratio of 6.6%, a Tier 1
risk-based ratio of 8.5% and a Total risk-based ratio of 9.7%.

Prompt Corrective Action. The Federal Deposit Insurance Corporation
Improvement Act of 1991 (the "FDIC Act") imposes a regulatory matrix which
requires the federal banking agencies to take prompt corrective action to deal
with depository institutions that fail to meet their minimum capital
requirements or are otherwise in a troubled condition. The prompt corrective
action provisions require undercapitalized institutions to become subject to an
increasingly stringent array of restrictions, requirements and prohibitions, as
their capital levels deteriorate and supervisory problems mount. Should these
corrective measures prove unsuccessful in recapitalizing the institution and
correcting its problems, the FDIC Act mandates that the institution be placed
in receivership.

Pursuant to regulations promulgated under the FDIC Act, the corrective
actions that the banking agencies either must or may take are tied primarily to
an institution's capital levels. In accordance with the framework adopted by
the FDIC Act, the banking agencies have developed a classification system,
pursuant to which all banks and thrifts will be placed into one of five
categories: well-capitalized institutions, adequately capitalized institutions,
undercapitalized institutions, significantly undercapitalized institutions and
critically undercapitalized institutions. The capital thresholds established
for each of the categories are as follows:

61
<PAGE> 74

<TABLE>
<CAPTION>
=================================================================================================================
RISK-BASED TIER 1 RISK-BASED
CAPITAL CATEGORY TIER 1 CAPITAL CAPITAL CAPITAL OTHER
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Well-Capitalized 5% or more 10% or more 6% or more Not subject to a
capital directive
- -----------------------------------------------------------------------------------------------------------------
Adequately Capitalized 4% or more 8% or more 4% or more ---
- -----------------------------------------------------------------------------------------------------------------
Undercapitalized less than 4% less than 8% less than 4% ---
- -----------------------------------------------------------------------------------------------------------------
Significantly less than 3% less than 6% less than 3% ---
Undercapitalized
- -----------------------------------------------------------------------------------------------------------------
Critically 2% or less --- --- ---
Undercapitalized tangible equity
=================================================================================================================
</TABLE>

The undercapitalized, significantly undercapitalized and critically
undercapitalized categories overlap; therefore, a critically undercapitalized
institution would also be an undercapitalized institution and a significantly
undercapitalized institution. This overlap ensures that the remedies and
restrictions prescribed for undercapitalized institutions will also apply to
institutions in the lowest two categories.

The down-grading of an institution's category is automatic in two
situations: (1) whenever an otherwise well-capitalized institution is subject
to any written capital order or directive, and (2) where an undercapitalized
institution fails to submit or implement a capital restoration plan or has its
plan disapproved. The federal banking agencies may treat institutions in the
well-capitalized, adequately capitalized and undercapitalized categories as if
they were in the next lower capital level based on safety and soundness
considerations relating to factors other than capital levels.

All insured institutions regardless of their level of capitalization are
prohibited by the FDIC Act from paying any dividend or making any other kind of
capital distribution or paying any management fee to any controlling person if
following the payment or distribution the institution would be
undercapitalized. While the prompt corrective action provisions of the FDIC
Act contain no requirements or restrictions aimed specifically at adequately
capitalized institutions, other provisions of the FDIC Act and the agencies'
regulations relating to deposit insurance assessments, brokered deposits and
interbank liabilities treat adequately capitalized institutions less favorably
than those that are well-capitalized.

At December 31, 1995, FNB and the Bank had the requisite capital levels
to qualify as adequately capitalized.

The FDIC has adopted or currently proposes to adopt other rules pursuant
to the FDIC Act that include: (1) real estate lending standards for banks,
which would provide guidelines concerning loan-to-value ratios for various
types of real estate loans; (2) revision to the risk-based capital rules to
account for interest rate risk, concentration of credit risk and the risks
proposed by "non-traditional activities"; (3) rules requiring depository
institutions to develop and implement internal procedures to evaluate and
control credit and settlement exposure to their correspondent banks; (4) a rule
restricting the ability of depository institutions that are not well
capitalized from accepting brokered deposits; (5) rules addressing various
"safety and soundness" issues, including operations and managerial standards
for asset quality, earnings and stock valuations, and compensation standards
for the officers, directors, employees and principal shareholders of the
depository institutions; (6) rules mandating enhanced financial reporting and
audit requirements; and (7) rules restricting the ability of a state bank, or a
subsidiary thereof, to engage as principal in activities not permissible for a
national bank or make any investment not permissible for a national bank.

<PAGE> 75

FDIC INSURANCE ASSESSMENTS

Pursuant to FDICIA, the FDIC adopted a new risk-based assessment system
for insured depository institutions that takes into account the risks
attributable to different categories and concentrations of assets and
liabilities. The new system, which went into effect on January 1, 1994, and
replaced a transitional system that the FDIC had used for the 1993 calendar
year, assigns an institution to one of three capital categories: (1)
well-capitalized; (2) adequately capitalized; and (3) undercapitalized. These
three categories are substantially similar to the prompt corrective action
categories described above, with the undercapitalized category including
institutions that are undercapitalized, significantly undercapitalized, and
critically undercapitalized for prompt corrective action purposes. An
institution is also assigned by the FDIC to one of three supervisory subgroups
within each capital group. The supervisory subgroup to which an institution is
assigned is based on a supervisory evaluation provided to the FDIC by the
institution's primary federal regulator and information which the FDIC
determines to be relevant to the institution's financial condition and the risk
posed to the deposit insurance funds (which may include, if applicable,
information provided by the institution's state supervisor). An institution's
insurance assessment rate is then determined based on the capital category and
supervisory category to which it is assigned. Under the final risk-based
assessment system, as well as the prior transitional system, there are nine
assessment risk classifications (i.e., combinations of capital groups and
supervisory subgroups) to which different assessment rates are applied.
Assessment rates for members of both the Bank Insurance Fund ("BIF") and the
Savings Association Insurance Fund ("SAIF") for the first half of 1995, as they
had during 1994, ranged from 23 basis points (0.23% of deposits) for an
institution in the highest category (i.e., "well-capitalized" and "healthy") to
31 basis points (0.31% of deposits) for an institution in the lowest category
(i.e., "undercapitalized" and "substantial supervisory concern"). These rates
were established for both funds to achieve a designated ratio of reserves to
insured deposits (i.e., 1.25%) within a specified period of time.

Once the designated ratio for the BIF was reached in May 1995,
the FDIC was authorized to reduce the minimum assessment rate below the 23 basis
points and to set future assessment rates at such levels that would maintain
the fund's reserve ratio at the designated level. In August 1995, the FDIC
adopted final regulations reducing the assessment rates for BIF-member banks.
Under the revised schedule, BIF-member banks, starting with the second half of
1995, will now pay assessments ranging from 4 basis points to 31 basis points,
with an average assessment rate of 4.5 basis points. Refunds, with interest,
were paid for assessments for the month(s) after the month in which the
designated reserve ratio for the BIF was reached. Subsequently, on November
14, 1995, the FDIC announced that, beginning in 1996, it would further reduce
the deposit insurance premiums for 92% of all BIF members that are in the
highest capital and supervisory categories to $2,000 per year, regardless of
deposit size. At the same time, the FDIC elected to retain the existing
assessment rate range of 23 to 31 basis points for SAIF members for the
foreseeable future given the undercapitalized nature of that insurance fund.

Recognizing that the disparity between the SAIF and BIF premium rates
had adverse consequences for SAIF-insured institutions and other banks with
SAIF assessed deposits, including reduced earnings and an impaired ability to
raise funds in capital markets and to attract deposits, on July 28, 1995, the
FDIC, the Treasury Department, and the OTS released statements outlining a
proposed plan (the "Proposed Plan") to recapitalize the SAIF, certain features
of which were subsequently approved by the Banking Committees of the House of
Representatives and the Senate of the United States in bills that provided for
different resolutions of the BIF-SAIF disparity. Under the Proposed Plan, as
approved by members of the Banking Committees of the House and Senate, all
SAIF-insured institutions were to pay a special assessment to recapitalize the
SAIF, and the assessment base for the payments on the FICO bonds would have
been expanded to include the deposits of both BIF and SAIF-insured
institutions. As a result of the SAIF becoming fully capitalized, it was
anticipated that insurance premium rates for SAIF members shortly thereafter
would have been reduced to the same levels as those currently paid by BIF
members.

The amount of the special assessment required to recapitalize the SAIF
was estimated to be approximately 78 to 85 basis points. Under the latest
version of the Proposed Plan, banks that had acquired SAIF-insured deposits
would have paid a special assessment of approximately 64 basis points -- 20%
less than SAIF-member institutions. The special assessment would have been
payable sometime in 1996 based on deposits held on March 31, 1995.

Congress adopted the Proposed Plan as part of a budget bill. However,
in December 1995, the President vetoed the balanced budget legislation passed
by Congress which included the proposed provisions of the Proposed Plan. With
no prospect of a budget agreement between the Administration and Congress, as
well as significant oppositon to the Proposed Plan now coming from many
BIF-insured banks, the fate of the SAIF special assessment provisions of the
legislation is uncertain, and it now appears possible that a significant
disparity between SAIF and BIF insurance premium rates could continue to exist
for some time.

In view of the legislative uncertainty that currently exists, it cannot
predicted whether the Proposed Plan or any other legislative proposal will be
enacted as decribed above or, if enacted, the amount of any special SAIF
assessment, whether ongoing SAIF premiums will be reduced to a level equal to
that of BIF premiums, or whether such legislation, if enacted, may contain
other provisions, such as requiring all federally-chartered thrifts to convert
to bank charters. A significant increase in SAIF insurance premiums, either
absolutely or relative to BIF premiums, a significant one-time fee to
recapitalize the SAIF, or a significant tax liability associated with the
recapture of the bad debt reserve could have a potentially adverse effect on
the operating expenses and results of operations of the Surviving Corporation.

63
<PAGE> 76

PAYMENT OF DIVIDENDS

First Banking and FNB are legal entities separate and distinct from
their banking, thrift, and other subsidiaries. The principal sources of cash
flow of both First Banking and FNB, including cash flow to pay dividends to
their respective shareholders, are dividends from their subsidiary depository
institutions. There are statutory and regulatory limitations on the payment of
dividends by these subsidiary depository institutions to First Banking and FNB,
as well as by First Banking and FNB to their shareholders.

Both of First Banking's banking subsidiaries are subject to the laws and
regulations of the State of Georgia as to the payment of dividends. FNB's bank
subsidiary is subject to OCC regulations regarding the payment of dividends.
If, in the opinion of the federal banking regulator, a depository institution
under its jurisdiction is engaged in or is about to engage in an unsafe or
unsound practice (which, depending on the financial condition of the depository
institution, could include the payment of dividends), such authority may
require, after notice and hearing, that such institution cease and desist from
such practice. The federal banking agencies have indicated that paying
dividends that deplete a depository institution's capital base to an inadequate
level would be an unsafe and unsound banking practice. Under the Federal
Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), a depository
institution may not pay any dividend if payment would cause it to become
undercapitalized or if it already is undercapitalized. See "--Prompt Corrective
Action." Moreover, the federal agencies have issued policy statements that
provide that bank holding companies and insured banks should generally only pay
dividends out of current operating earnings.

At December 31, 1995, under dividend restrictions imposed under federal
and state laws, the subsidiary depository institutions of First Banking and
FNB, without obtaining governmental approvals, could declare aggregate
dividends to First Banking and FNB of approximately $2,337,396 and $897,388,
respectively.

The payment of dividends by First Banking and FNB and their subsidiary
depository institutions may also be affected or limited by other factors, such
as the requirement to maintain adequate capital above regulatory guidelines.

SUPPORT OF SUBSIDIARY INSTITUTIONS

Under Federal Reserve policy, First Banking and FNB are expected to act
as sources of financial strength for, and to commit resources to support, each
of their respective banking subsidiaries. This support may be required at times
when, absent such Federal Reserve policy, First Banking or FNB may not be
inclined to provide it. In addition, any capital loans by a bank holding
company to any of its banking subsidiaries are subordinate in right of payment
to deposits and to certain other indebtedness of such banks. In the event of a
bank holding company's bankruptcy, any commitment by the bank holding company
to a federal bank regulatory agency to maintain the capital of a banking
subsidiary will be assumed by the bankruptcy trustee and entitled to a priority
of payment.

Under the Federal Deposit Insurance Act ("FDIA"), a depository
institution insured by the FDIC can be held liable for any loss incurred by, or
reasonably expected to be incurred by, the FDIC after August 9, 1989, in
connection with (i) the default of a commonly controlled FDIC-insured
depository institution or (ii) any assistance provided by the FDIC to any
commonly controlled FDIC-insured depository institution "in danger of default."
"Default" is defined generally as the appointment of a conservator or receiver,
and "in danger of default" is defined generally as the existence of certain
conditions indicating that a default is likely to occur in the absence of
regulatory

64
<PAGE> 77

assistance. The FDIC's claim for damages is superior to claims of shareholders
of the insured depository institution or its holding company, but is
subordinate to claims of depositors, secured creditors, and holders of
subordinated debt (other than affiliates) of the commonly controlled insured
depository institution. The subsidiary depository institutions of First Banking
and FNB are subject to these cross-guarantee provisions. As a result, any loss
suffered by the FDIC in respect of any of these subsidiaries would likely
result in assertion of the cross-guarantee provisions, the assessment of such
estimated losses against the depository institution's banking or thrift
affiliates, and a potential loss of First Banking's or FNB's respective
investments in such other subsidiary depository institutions.

SAFETY AND SOUNDNESS STANDARDS

The FDIA, as amended by FDICIA and the Riegle Community Development and
Regulatory Improvement Act of 1994, requires the federal bank regulatory
agencies to prescribe standards, by regulations or guidelines, relating to
internal controls, information systems and internal audit systems, loan
documentation, credit underwriting, interest rate risk exposure, asset growth,
asset quality, earnings, stock valuation and compensation, fees and benefits,
and such other operational and managerial standards as the agencies deem
appropriate. The federal bank regulatory agencies have adopted, effective
August 9, 1995, a set of guidelines prescribing safety and soundness standards
pursuant to FDICIA, as amended. The guidelines establish general standards
relating to internal controls and information systems, internal audit systems,
loan documentation, credit underwriting, interest rate exposure, asset growth
and compensation, fees, and benefits. In general, the guidelines require, among
other things, appropriate systems and practices to identify and manage the
risks and exposures specified in the guidelines. The guidelines prohibit
excessive compensation as an unsafe and unsound practice and describe
compensation as excessive when the amounts paid are unreasonable or
disproportionate to the services performed by an executive officer, employee,
director, or principal shareholders. The federal banking agencies determined
that stock valuation standards were not appropriate. In addition, the agencies
adopted regulations that authorize, but do not require, an agency to order an
institution that has been given notice by an agency that it is not satisfying
any of such safety and soundness standards to submit a compliance plan. If,
after being so notified, an institution fails to submit an acceptable
compliance plan or fails in any material respect to implement an accepted
compliance plan or fails in any material respect to implement an accepted
compliance plan, the agency must issue an order directing action to correct the
deficiency and may issue an order directing other actions of the types to which
an undercapitalized association is subject under the "prompt corrective action"
provisions of FDICIA. See "--Prompt Corrective Action." If an institution fails
to comply with such an order, the agency may seek to enforce such order in
judicial proceedings and to impose civil money penalties. The federal bank
regulatory agencies also proposed guidelines for asset quality and earnings
standards.

DEPOSITOR PREFERENCE

The Omnibus Budget Reconciliation Act of 1993 provides that deposits and
certain claims for administrative expenses and employee compensation against an
insured depository institution would be afforded a priority over other general
unsecured claims against such an institution in the "liquidation or other
resolution" of such an institution by any receiver.

CRA

On April 19, 1995, the federal bank regulatory agencies adopted
revisions to the regulations promulgated pursuant to the Community Reinvestment
Act (the "CRA"), which are intended to set distinct assessment standards for
financial institutions. The revised regulation contains three evaluation
tests: (1) a lending test which will compare the institutions's market share
of loans in low-and moderate-income areas to its market share of loans in its
entire service area and the percentage of a bank's outstanding loans to low-
and moderate-income areas or individuals, (2) a services test which will
evaluate the provision of services that promote the availability of credit to
low-and moderate-income areas, and (3) an investment test, which will evaluate
an institution's record of investments in organizations designed to foster
community development, small-and minority-owned businesses and affordable
housing lending, including state and local government housing or revenue bonds.
The regulation is

65
<PAGE> 78

designed to reduce the paperwork requirements of the current regulations and
provide regulators, institutions and community groups with a more objective and
predictable manner with which to evaluate the CRA performance of financial
institutions. The rule became effective on January 1, 1996, at which time
evaluation under streamlined procedures began for institutions with assets of
less than $250 million that are owned by a holding company with total assets of
less than $1 billion.

FAIR LENDING

Congress and various federal agencies (including, in addition to the
bank regulatory agencies, the Department of Housing and Urban Development, the
Federal Trade Commission and the Department of Justice) (collectively the
"Federal Agencies") responsible for implementing the nation's fair lending laws
have been increasingly concerned that prospective home buyers and other
borrowers are experiencing discrimination in their efforts to obtain loans. In
recent years, the Department of Justice has filed suit against financial
institutions which it determined had discriminated, seeking fines and
restitution for borrowers who allegedly suffered from discriminatory practices.
Most, if not all, of these suits have been settled (some for substantial sums)
without a full adjudication on the merits.

On March 8, 1994, the Federal Agencies, in an effort to clarify what
constitutes lending discrimination and to specify the factors the agencies will
consider in determining if lending discrimination exits, announced a joint
policy statement detailing specific discriminatory practices prohibited under
the Equal Credit Opportunity Act and the Fair Housing Act. In the policy
statement, three methods of proving lending discrimination were identified:
(1) overt evidence of discrimination, when a lender blatantly discriminates on
a prohibited basis, (2) evidence of disparate treatment, when a lender treats
applicants differently based on a prohibited factor even where there is no
showing that the treatment was motivated by prejudice or a conscious intention
to discriminate against a person, and (3) evidence of disparate impact, when a
lender applies a practice uniformly to all applicants, but the practice has a
discriminatory effect, even where such practices are neutral on their face and
are applied equally, unless the practice can be justified on the basis of
business necessity.

FUTURE REQUIREMENTS

Statutes and regulations are regularly introduced which contain
wide-ranging proposals for altering the structures, regulations and competitive
relationships of the nation's financial institutions. It cannot be predicted
whether or what form any proposed statute or regulation will be adopted or the
extent to which the business of First Banking, FNB and their respective
subsidiaries may be affected by such statute or regulation.

MONETARY POLICY

The earnings of First Banking and FNB are affected by domestic and
foreign economic conditions, particularly by the monetary and fiscal policies
of the United States government and its agencies.

The Federal Reserve has had, and will continue to have, an important
impact on the operating results of commercial banks through its power to
implement national monetary policy in order, among other things, to mitigate
recessionary and inflationary pressures by regulating the national money
supply. The techniques used by the Federal Reserve include setting the reserve
requirements of member banks and establishing the discount rate on member bank
borrowings. The Federal Reserve also conducts open market transactions in
United States government securities.

<PAGE> 79

DESCRIPTION OF FIRST BANKING COMMON STOCK

First Banking is authorized to issue 10,000,000 shares of First Banking
Common Stock, of which 2,661,711 shares were issued and outstanding at March
31, 1996. No other class of stock is authorized.

Holders of First Banking Common Stock are entitled to receive such
dividends as may be declared by the Board of Directors out of funds legally
available therefor. The ability of First Banking to pay dividends is affected
by the ability of its subsidiary institutions to pay dividends, which is
limited by applicable regulatory requirements and capital guidelines. At
December 31, 1995, under such requirements and guidelines, First Banking's
subsidiary institutions had $2,337,396 of undivided profits legally available
for the payment of dividends. See "Certain Regulatory Considerations--Payment
of Dividends."

For a further description of First Banking Common Stock, see "Effect of
the Merger on Rights of Shareholders."

SHAREHOLDER PROPOSALS

First Banking expects to hold its next annual meeting of shareholders
after the Merger during April 1997. Proposals with respect to First Banking's
1997 annual meeting of shareholders may be submitted until the date specified
in First Banking's 1996 annual meeting proxy statement.

EXPERTS

The consolidated financial statements of First Banking, incorporated in
this Proxy Statement/Prospectus by reference from First Banking's Annual Report
on Form 10-KSB and Annual Report to Shareholders for the year ended December
31, 1995, have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report, which is incorporated herein by reference, and have
been so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.

The consolidated financial statements of FNB as of December 31, 1995,
and for each of the years in the three-year period ended December 31, 1995, have
been included herein in reliance upon the report of McNair, McLemore,
Middlebrooks & Co., independent public accountants, included herein, and upon
the authority of such firm as experts in accounting and auditing.

OPINIONS

The legality of the shares of First Banking Common Stock to be issued in
the Merger and certain tax consequences of the transaction will be passed upon
by Powell, Goldstein, Frazer & Murphy, Atlanta, Georgia.

67
<PAGE> 80

68
<PAGE> 81

FINANCIAL STATEMENTS OF FNB

F-1
<PAGE> 82

FNB BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)

<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
Cash and Due From Banks $ 2,497,078 $ 2,834,380
Federal Funds Sold 6,300,000 6,470,000
Investment Securities Available for
Sale (Cost of $4,938,597 in 1996 and
$4,717,824 in 1995) 4,848,982 4,651,301
Loans 36,118,635 34,116,732
Less: Unearned Interest (37,924)
Allowance for Loan Losses (556,994) (511,747)
----------- -----------
Loans, Net 35,523,717 33,604,985
----------- -----------
Interest Receivable 501,770 490,174
Premises and Equipment, Net 1,834,256 1,856,192
Other Assets 280,638 258,484
----------- -----------
TOTAL ASSETS $51,786,441 $50,165,516
=========== ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Demand $ 4,997,740 $ 4,579,080
Interest Bearing:
NOW Accounts 6,189,928 6,221,481
Money Market Deposit Accounts 3,746,191 3,844,743
Savings 1,477,685 1,326,371
Time ($100,000 and above) 8,933,886 8,155,512
Other Time 22,462,746 22,078,615
----------- -----------
Total Deposits 47,808,176 46,205,802
----------- -----------
Interest Payable 400,501 359,133
Other Liabilities 174,893 298,414
----------- -----------
Total Liabilities 48,383,570 46,863,349
----------- -----------

Shareholders' Equity (Note 3):
Common Stock, 340,114 Shares Issued
and Outstanding $ 3,101 $ 3,101
Additional Paid-in Capital 3,098,039 3,098,039
Retained Earnings 360,877 244,932
Net Unrealized Loss on Investment
Securities Available for Sale (59,146) (43,905)
----------- -----------
Shareholders' Equity 3,402,871 3,302,167
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $51,786,441 $50,165,516
=========== ===========
</TABLE>

See notes to consolidated financial statements.

F-2
<PAGE> 83

FNB BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

<TABLE>
<CAPTION>
For the Three Months Ended March 31,
-----------------------------------
1996 1995
---------- --------
<S> <C> <C>
INTEREST INCOME
Loans (including fees) $ 903,802 $672,575
Investments:
U.S. Government Agencies 63,398 47,872
Dividend Income 4,062
Federal Funds Sold 79,569 7,685
---------- --------
Total Interest Income 1,050,831 728,132
---------- --------

INTEREST EXPENSE
NOW Accounts 33,623 22,013
Money Market Deposit Accounts 32,193 27,789
Savings 8,542 6,531
Time Deposits ($100,000 and above) 141,387 81,640
Other Time Deposits 355,683 165,703
Other 596
---------- --------
Total Interest Expense 571,428 304,272
---------- --------
NET INTEREST INCOME 479,403 423,860
Provision for Loan Losses 39,000 15,000
---------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 440,403 408,860
---------- --------
NON-INTEREST INCOME
Service Charges on Deposits 88,310 72,888
Other 13,790 11,846
---------- --------
Total Non-interest Income 102,100 84,734
---------- --------
NON-INTEREST EXPENSE
Salaries 169,269 153,850
Other Personnel Expense 24,488 21,829
Occupancy Expense, Net 25,177 17,374
Equipment Expense 28,994 27,935
Other 128,630 140,643
---------- --------
Total Non-interest Expense 376,558 361,631
---------- --------
INCOME BEFORE INCOME TAXES 165,945 131,963
Provision for Income Taxes 50,000 45,000
---------- --------
NET INCOME $ 115,945 $ 86,963
========== ========
EARNINGS PER COMMON SHARE
(Note 3) $ .37 $ .28
========== ========
DIVIDENDS PER COMMON SHARE
(Note 3) $ .00 $ .00
========== ========

AVERAGE NUMBER OF SHARES
OUTSTANDING (Note 3) 310,114 310,114
========== ========
</TABLE>

See notes to consolidated financial statements.

F-2
<PAGE> 84

FNB BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995

<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
1996 1995
----------------------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 115,945 $ 86,963
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Provision for Depreciation 30,492 28,248
Provision for Loan Losses 39,000 15,000
Amortization of Organizational Costs 6,458 2,153
Gain on Call of Securities (991)
Net Amortization (Accretion) of Premiums
and Discounts on Securities (3,493) (1,353)
Changes in Assets and Liabilities:
Increase in Interest Receivable (11,595) (28,469)
Increase in Other Assets (20,761) (37,321)
Increase in Interest Payable 41,371 21,268
Decrease in Other Liabilities (123,524) (1,256)
----------- -----------
Net Cash Provided by Operating Activities 72,902 85,233
----------- -----------

Cash Flows from Investing Activities:
Net Decrease in Federal Funds Sold 170,000 490,000
Available-for-Sale Securities:
Proceeds from Call and Maturity 1,120,129 114,352
Purchases (1,336,419) (124,729)
Net Increase in Loans (1,957,732) (2,006,224)
Purchases of Premises and Equipment (8,556) (456,767)
----------- -----------
Net Cash Used in Investing Activities (2,012,578) (1,983,368)
----------- -----------

Cash Flows from Financing Activities
Net Increase in Deposits 1,602,374 1,470,439
----------- -----------
Net Cash Provided by Financing Activities 1,602,374 1,470,439
----------- -----------

Increase (Decrease) in Cash and Due from Banks (337,302) (427,696)
Cash and Due from Banks at Beginning of Year 2,834,380 2,331,369
----------- -----------
Cash and Due from Banks at End of Period $ 2,497,078 $ 1,903,673
=========== ===========

Supplemental Disclosure of Cash Flow Information:
Cash paid (received) during the year for:
Interest $ 530,057 $ 283,004
Income Taxes 56,981 26,912
Supplemental Disclosure of Non-Cash Investing Activities:
Change in Net Unrealized Gain (Loss) on
Investment Securities Available for Sale (15,241) 53,251

</TABLE>

See notes to consolidated financial statements.

F-4

<PAGE> 85

FNB BANCSHARES, INC. AND SUBSIDIARY
SPRINGFIELD, GEORGIA

CONSOLIDATED FINANCIAL STATEMENTS AS OF
DECEMBER 31, 1995 AND 1994 AND FOR THE YEARS
ENDED DECEMBER 31, 1995, 1994 AND 1993 AND
REPORT OF INDEPENDENT ACCOUNTANTS

F-5
<PAGE> 86

FNB BANCSHARES, INC. AND SUBSIDIARY

CONTENTS

<TABLE>
<S> <C>
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4

Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5

Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7

Consolidated Statements of Changes in Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-8

Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-9

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-10
</TABLE>

F-6
<PAGE> 87

MCNAIR, MCLEMORE, MIDDLEBROOKS & CO.
CERTIFIED PUBLIC ACCOUNTANTS
A PARTNERSHIP INCLUDING A PROFESSIONAL CORPORATION

<TABLE>
<S> <C>
RALPH S. McLEMORE, SR., C.P.A. (1963-1977) 389 MULBERRY STREET
SIDNEY B. McNAIR, C.P.A. (1954-1992) POST OFFICE BOX ONE
- -------------------------------------------- MACON, GEORGIA 31202
SIDNEY E. MIDDLEBROOKS, C.P.A., P.C. (912) 746-6277
RAY C. PEARSON, C.P.A. FAX (912) 741-8353
J. RANDOLPH NICHOLS, C.P.A.
WILLIAM H. EPPS, JR., C.P.A. 1117 MORNINGSIDE DRIVE
RAYMOND A. PIPPIN, JR., C.P.A. POST OFFICE BOX 1287
JERRY A. WOLFE, C.P.A. PERRY, GA 31069
W. E. BARFIELD, JR., C.P.A. (912) 987-0947
HOWARD S. HOLLEMAN, C.P.A. FAX (912) 987-0526
F. GAY McMICHAEL, C.P.A.
KENNETH R. NEIL, C.P.A. POST OFFICE BOX 668
RICHARD A. WHITTEN, JR., C.P.A. WALTERBORO, SC 29488
ELIZABETH WARE HARDIN, C.P.A. (803) 549-9518
CAROLINE E. GRIFFIN, C.P.A.
RONNIE K. GILBERT, C.P.A.
</TABLE>

February 2, 1996

REPORT OF INDEPENDENT ACCOUNTANTS

The Board of Directors and Stockholders
FNB Bancshares, Inc.

We have audited the accompanying consolidated balance sheets of FNB BANCSHARES,
INC. AND SUBSIDIARY as of December 31, 1995 and 1994 and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of FNB
BANCSHARES, INC. AND SUBSIDIARY as of December 31, 1995 and 1994, and the
consolidated results of income and cash flows for each of the years in the
three-year period ended December 31, 1995 in conformity with generally accepted
accounting principles.

As discussed in Notes 2 and 7 to the consolidated financial statements, FNB
BANCSHARES, INC. AND SUBSIDIARY changed its method of accounting for investment
securities in 1994 and income taxes in 1993.

McNAIR, McLEMORE, MIDDLEBROOKS & CO.

Macon, Georgia

F-7

<PAGE> 88

FNB BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31

ASSETS

<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
CASH AND DUE FROM BANKS $ 2,834,380 $ 2,331,369
----------- -----------

FEDERAL FUNDS SOLD 6,470,000 540,000
----------- -----------

INVESTMENT SECURITIES AVAILABLE FOR SALE (COST OF
$4,717,824 IN 1995 AND $3,447,753 IN 1994) (NOTE 2) 4,651,301 3,176,904
----------- -----------

LOANS (NOTE 3) 34,116,732 26,381,092
Allowance for Loan Losses (Note 4) (511,747) (269,290)
----------- -----------

33,604,985 26,111,802
----------- -----------

BANK PREMISES AND EQUIPMENT (NOTE 5) 1,856,192 1,394,784
----------- -----------

OTHER REAL ESTATE - 186,192
----------- -----------

OTHER ASSETS 748,658 617,317
----------- -----------

TOTAL ASSETS $50,165,516 $34,358,368
=========== ===========
</TABLE>

The accompanying notes are an integral part of these consolidated balance
sheets.

F-8
<PAGE> 89

FNB BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31

LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
DEPOSITS
Demand $ 4,579,080 $ 3,896,153
Interest-Bearing Demand 10,066,224 7,193,586
Savings 1,326,371 1,055,953
Time, $100,000 and Over 8,155,512 5,781,900
Other Time 22,078,615 13,188,243
----------- -----------

46,205,802 31,115,835
----------- -----------

OTHER LIABILITIES 657,547 244,496
----------- -----------

COMMITMENTS AND CONTINGENCIES (NOTE 11)

STOCKHOLDERS' EQUITY

Common Stock, Par Value $.01 a Share; 2,000,000 Shares
Authorized, 310,114 Shares Issued and Outstanding 3,101 3,101
Paid-In Capital 3,098,039 3,098,039
Retained Earnings 244,932 75,657
Net Unrealized Loss on Securities Available for Sale, Net
of Tax Benefit of $22,618 in 1995 and $92,089 in 1994 (43,905) (178,760)
----------- -----------

3,302,167 2,998,037
----------- -----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $50,165,516 $34,358,368
=========== ===========
</TABLE>

The accompanying notes are an integral part of these consolidated balance
sheets.

F-9
<PAGE> 90

FNB BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31

<TABLE>
<CAPTION>
1995 1994 1993
----------- ---------- ----------
<S> <C> <C> <C>
INTEREST INCOME
Loans and Loan Fees $3,195,797 $2,179,396 $1,518,996
Federal Funds Sold 179,879 11,478 54,334
Investment Securities
U.S. Government Agencies 194,950 210,442 176,508
Other 10,195 5,583 5,583
---------- ---------- ----------

3,580,821 2,406,899 1,755,421
---------- ---------- ----------
INTEREST EXPENSE
Interest on Deposits 1,764,191 924,064 741,588
Other 800 4,838 -
---------- ---------- ----------

1,764,991 928,902 741,588
---------- ---------- ----------

NET INTEREST INCOME 1,815,830 1,477,997 1,013,833

Provision for Loan Losses (Note 4) (299,300) (97,500) (140,000)
---------- ---------- ----------

NET INCOME AFTER PROVISION FOR LOAN LOSSES 1,516,530 1,380,497 873,833
---------- ---------- ----------
NONINTEREST INCOME
Service Charges on Deposits 343,008 256,856 197,630
Securities Gains - 250 2,049
Other 88,606 51,327 38,987
---------- ---------- ----------

431,614 308,433 238,666
---------- ---------- ----------
NONINTEREST EXPENSES
Salaries and Employee Benefits 791,565 534,600 445,272
Occupancy and Equipment 231,302 117,939 103,363
Other (Note 8) 671,862 467,542 380,670
---------- ---------- ----------

1,694,729 1,120,081 929,305
---------- ---------- ----------
INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT
OF ACCOUNTING CHANGE 253,415 568,849 183,194

INCOME TAXES (NOTE 7) 84,140 186,000 56,322
---------- ---------- ----------
INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 169,275 382,849 126,872

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE FOR INCOME TAXES (NOTE 7) - - 218,392
---------- ---------- ----------

NET INCOME $ 169,275 $ 382,849 $ 345,264
========== ========== ==========
NET INCOME PER COMMON SHARE $ .55 $ 1.23 $ 1.11
========== ========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING 310,114 310,114 310,114
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.

F-10
<PAGE> 91

FNB BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

<TABLE>
<CAPTION>
Net
Unrealized
Gain (Loss)
on Securities
Common Paid-In Retained Available
Stock Capital Earnings for Sale Total
----------- ----------- ------------ -------------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1992 $3,101 $3,098,039 $(652,456) $2,448,684

Net Income - - 345,264 345,264
------ ---------- --------- --------- ----------
BALANCE, DECEMBER 31, 1993 3,101 3,098,039 (307,192) 2,793,948

Cumulative Effect of
Accounting Change for
Investment Securities
on Years Prior to 1994
(Note 2) $ 32,101 32,101

Net Income 382,849 382,849
Unrealized Loss on
Securities Available
for Sale, Net of
Tax Benefit $(210,861) (210,861)
------ ---------- --------- --------- ----------
BALANCE, DECEMBER 31, 1994 3,101 3,098,039 75,657 (178,760) 2,998,037

Net Income 169,275 169,275
Unrealized Gain on
Securities Available
for Sale, Net of
Tax 134,855 134,855
------ ---------- --------- --------- ----------
BALANCE, DECEMBER 31, 1995 $3,101 $3,098,039 $ 244,932 $ (43,905) $3,302,167
====== ========== ========= ========= ==========
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-11
<PAGE> 92

FNB BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31

<TABLE>
<CAPTION>
1995 1994 1993
------------ ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 169,275 $ 382,849 $ 345,264
Adjustments to Reconcile Net Income to Net Cash
Flows from Operating Activities
Provision for Loan Losses 299,300 97,500 140,000
Depreciation 117,758 57,018 48,404
Amortization 26,928 31,932 28,136
Deferred Taxes (61,281) 133,482 (162,070)
Securities Gain - (250) (2,049)
Gain on Sale of Other Real Estate (30,493) - -
CHANGE IN
Interest Receivable (137,252) (108,773) (59,766)
Prepaid Expenses (7,979) 1,377 (6,541)
Interest Payable 218,215 39,759 32,617
Other 176,860 13,264 (28,288)
------------ ----------- -----------
771,331 648,158 335,707
------------ ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Sales of Securities - 202,313
Proceeds from Sales of Securities Available for Sale - 350,250 -
Purchases of Securities - - (2,254,567)
Proceeds from Maturities of Securities Available for Sale 320,556 152,881 -
Purchases of Securities Available for Sale (1,596,029) (266,250) -
Increase in Loans, Net (7,697,882) (6,128,280) (6,393,100)
Purchase of Premises and Equipment (579,166) (835,188) (31,960)
Proceeds from Sales of Other Real Estate 124,234 - -
------------ ----------- -----------

(9,428,287) (6,726,587) (8,477,314)
------------ ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net Increase in Demand, Interest-Bearing Demand
and Savings Accounts 3,825,983 3,949,317 2,088,021
Increase in Time Deposits 11,263,984 3,781,784 5,936,007
------------ ----------- -----------

15,089,967 7,731,101 8,024,028
------------ ----------- -----------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 6,433,011 1,652,672 (117,579)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 2,871,369 1,218,697 1,336,276
------------ ----------- -----------

CASH AND CASH EQUIVALENTS, END OF YEAR $ 9,304,380 $ 2,871,369 $ 1,218,697
============ =========== ===========
NONCASH INVESTING TRANSACTIONS
Other Real Estate Acquired through Loan Foreclosure $ - $ - $ 92,651
============ =========== ===========
Loan Acquired through Sale of Other Real Estate $ 115,905 $ - $ -
============ =========== ===========
Deferred Gain on Sale of Other Real Estate $ 21,304 $ - $ -
============ =========== ===========
Unrealized Gain (Loss) on Securities Available for Sale $ 204,326 $ (270,849) $ -
============ =========== ===========
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-12
<PAGE> 93

FNB BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements include the accounts of FNB Bancshares,
Inc. and its wholly-owned subsidiary, First National Bank of Effingham (the
Bank) located in Springfield, Georgia. All significant intercompany accounts
have been eliminated. The accounting and reporting policies of FNB Bancshares,
Inc. conform to generally accepted accounting principles and practices utilized
in the commercial banking industry.

BASIS OF PRESENTATION

In preparing the financial statements, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities as
of the balance sheet date and revenues and expenses for the period. Actual
results could differ significantly from those estimates.

Material estimates that are particularly susceptible to significant change in
the near-term relate to the determination of the allowance for loan losses and
the valuation of real estate acquired in connection with foreclosures or in
satisfaction of loans. Other estimates subject to change are the valuation of
deferred tax assets.

INVESTMENT SECURITIES

Investment securities are recorded under the provisions of Statement of
Financial Accounting Standards (SFAS) No. 115, Accounting for Certain
Investments in Debt and Equity Securities, whereby the Bank must classify its
securities as trading, available for sale or held to maturity. Trading
securities are purchased and held for sale in the near term. Securities held
to maturity are those which the Bank has the ability and intent to hold until
maturity. All other securities not classified as trading or held to maturity
are considered available for sale. As of December 31, 1995 and 1994, all
investment securities held by the Bank are classified as available for sale.

Securities available for sale are measured at fair value with unrealized gains
and losses reported net of deferred taxes as a separate component of
stockholders' equity until realization. Realized and unrealized gains and
losses are determined using the specific identification method. Fair values
are subject to significant change in the near term based, primarily, on
increases or decreases in interest rates.

LOANS

Loans consist of commercial, financial and agricultural loans, real estate
mortgage loans and consumer loans primarily to individuals and entities located
throughout southeastern Georgia. Accordingly, the ultimate collectibility of
the loans is largely dependent upon economic conditions in the southeastern
Georgia area.

F-13
<PAGE> 94

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

LOANS (CONTINUED)

Loans are reported at principal amount less unearned interest and fees. On
January 1, 1995, the Bank adopted Statement of Financial Accounting Standards
(SFAS) No. 114, Accounting by Creditors for Impairment of a Loan and SFAS No.
118, Accounting by Creditors for Impairment of a Loan-Income Recognition and
Disclosures. The cumulative effect of adopting SFAS No. 114 and 118 was
immaterial. Impaired loans are loans for which principal and interest are
unlikely to be collected in accordance with the original loan terms and,
generally, represent loans delinquent in excess of 120 days which have been
placed on nonaccrual status and for which collateral values are less than
outstanding principal and interest. Small balance, homogeneous loans are
excluded from impaired loans.

Generally, interest payments received on impaired loans are applied to
principal. Upon receipt of all loan principal, additional interest payments
are recognized as interest income on the cash basis.

Other nonaccrual loans are loans for which payments of principal and interest
are considered doubtful of collection but collateral values equal or exceed
outstanding principal and interest.

ALLOWANCE FOR LOAN LOSSES

The allowance method is used in providing for losses on loans. Accordingly,
all loan losses are charged to the allowance and all recoveries are credited to
it. The provision for loan losses is based on factors which, in management's
judgment, deserve current recognition in estimating possible loan losses. Such
factors considered by management include growth and composition of the loan
portfolio, economic conditions and the relationship of the allowance for loan
losses to outstanding loans.

An allowance for loan losses is maintained for impaired loans. Provisions are
made for impaired loans upon changes in expected future cash flows or estimated
net realizable value of collateral. When determination is made that impaired
loans are wholly or partially uncollectible, the uncollectible portion is
charged off.

Management believes the allowance for possible loan losses is adequate. While
management uses available information to recognize losses on loans, future
additions to the allowance may be necessary based on changes in economic
conditions. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the Bank's allowance for loan
losses. Such agencies may require the Bank to recognize additions to the
allowance based on their judgment about information available to them at the
time of their examination.

PREMISES AND EQUIPMENT

Premises and equipment are recorded at acquisition cost net of accumulated
depreciation.

Depreciation is charged to operations over the estimated useful lives of the
assets. The estimated useful lives and methods of depreciation are as follows:

DESCRIPTION LIFE IN YEARS METHOD
<S> <C> <C>
Banking Premises 15-31.5 Straight-Line

Furniture and Equipment 5-20 Straight-Line
</TABLE>

F-14
<PAGE> 95

(1) Summary of Significant Accounting Policies (Continued)

PREMISES AND EQUIPMENT (CONTINUED)

Expenditures for major renewals and betterments are capitalized. Maintenance
and repairs are charged to operations as incurred. When property and equipment
are retired or sold, the cost and accumulated depreciation are removed from the
respective accounts and any gain or loss is reflected in other income or
expense.

CASH FLOWS

For reporting cash flows, cash and cash equivalents include cash on hand,
noninterest-bearing amounts due from banks and federal funds sold. Cash flows
from demand deposits, NOW accounts, savings accounts, certificates of deposit
and loans are reported net.

Cash payments for interest on deposits totaled $1,545,976, $884,305 and
$708,956 for the years ended December 31, 1995, 1994 and 1993, respectively.
Cash payments for income taxes were $108,208 in 1995. Due to net operating
loss carryforwards, no cash payments for income taxes were made in 1994 and
1993.

Cash dividends payable to stockholders are limited by various bank regulatory
agencies. Standard limitations may be exceeded by specific approval of
regulatory authorities.

INCOME TAXES

Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes.
Deferred taxes are recognized for differences between the basis of assets and
liabilities for financial statement and income tax purposes. The differences
relate primarily to depreciable assets (use of different depreciation methods
for financial statement and income tax purposes) and allowance for loan losses
(use of the allowance method for financial statement purposes and the direct
write-off method for tax purposes). The deferred tax assets and liabilities
represent the future tax return consequences of those differences, which will
either be taxable or deductible when the assets and liabilities are recovered
or settled.

Tax-free income totaling $15,000 originated from loans to political
subdivisions of the state of Georgia.

OTHER REAL ESTATE

Other real estate owned includes property acquired through foreclosure. These
properties are carried at the lower of cost or fair value minus costs to
dispose. Losses from the acquisition of property in full or partial
satisfaction of debt are recorded as loan losses. Subsequent declines in
value, routine holding costs and gains or losses upon disposition are included
in other expense.

AMOUNTS PER SHARE

Per share amounts are computed based on the weighted average number of common
shares outstanding during the period.

F-15
<PAGE> 96

(2) INVESTMENT SECURITIES AVAILABLE FOR SALE

The Bank adopted Statement of Financial Accounting Standards (SFAS) No. 115,
Accounting for Certain Investments in Debt and Equity Securities, as of January
1, 1994. The cumulative effect of the accounting change on years prior to 1994
was an increase in stockholders' equity of $32,101. The change in accounting
had no effect on net income of current or prior years.

Amortized cost and approximate fair value of investment securities as of
December 31, 1995 are as follows:

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE
U.S. Government Agencies $3,569,200 $ 8,341 $ (76,242) $3,501,299
U.S. Government Agencies-
Mortgaged-Backed 832,774 9,799 (8,421) 834,152
Restricted Stock
Federal Reserve Bank of Atlanta 93,050 93,050
Federal Home Loan Bank of Atlanta 108,000 108,000
Community Financial Services, Inc. 114,800 114,800
---------- ------- --------- ----------
$4,717,824 $18,140 $ (84,663) $4,651,301
========== ======= ========= ==========
</TABLE>

Amortized cost and approximate fair value of investment securities as of
December 31, 1994 are as follows:

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE
U.S. Government Agencies $2,558,951 $ 158 $(217,366) $2,341,743
U.S. Government Agencies-
Mortgaged-Backed 795,752 3,232 (56,873) 742,111
Restricted Stock
Federal Reserve Bank of Atlanta 93,050 93,050
---------- ------- --------- ----------
$3,447,753 $ 3,390 $(274,239) $3,176,904
========== ======= ========= ==========
</TABLE>

The amortized cost and fair value of investment securities as of December 31,
1995 by contractual maturity are shown below. Expected maturities will differ
from contractual maturities because issuers have the right to call or prepay
obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
------------- -----------
<S> <C> <C>
Due Within One Year $ 901,570 $ 902,762
Due After One Year but Within Five Years 3,346,035 3,268,477
Due After Five Years but Within Ten Years 470,219 480,062
---------- ----------
$4,717,824 $4,651,301
========== ==========
</TABLE>

F-16
<PAGE> 97

(2) INVESTMENT SECURITIES AVAILABLE FOR SALE(Continued)

Gross realized gains on sales of investment securities for the years ended
December 31 were as follows:

<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
U.S. Treasury $ - $ - $ 2,049

U.S. Government Agencies - 250 -
-------- ------- -------
$ - $ 250 $ 2,049
======== ======= =======
</TABLE>

Investment securities having a carrying value of $2,617,762 and $1,069,765 were
pledged to secure public and trust deposits and for other purposes required or
permitted by law for the years ended December 31, 1995 and 1994, respectively.

(3) LOANS

The composition of loans as of December 31 is:

<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Commercial, Financial and Agricultural $13,319,883 $ 9,903,634
Real Estate-Construction 7,271,108 5,018,182
Real Estate-Mortgage 6,383,235 5,196,010
Installment 7,142,506 6,263,266
----------- -----------

$34,116,732 $26,381,092
=========== ===========
</TABLE>

On January 1, 1995, the Bank adopted the provisions of SFAS Nos. 114 and 118
related to impaired loans. The total recorded investment in impaired loans as
of December 31, 1995 is $146,004 for which an allowance for impaired loan
losses of $65,685 has been established. Total nonaccrual loans as of December
31, 1995 are:

<TABLE>
<S> <C>
Impaired Loans $146,004
Other Nonaccrual Loans -
--------
$146,004
========
</TABLE>

The average balance of impaired loans outstanding during 1995 approximated
$176,500 for which interest income recognized on the cash basis totaled $583.
No income was recognized utilizing any other method. Interest foregone during
1995 totaled $16,741.

Nonaccrual loans as of December 31, 1994 and 1993 were $292,473 and $210,618,
respectively. Interest foregone during 1994 and 1993 approximated $24,100 and
$15,600, respectively.

F-17
<PAGE> 98

(3) LOANS (CONTINUED)

Loans include a note for $116,000 issued to a purchaser of other real estate
owned by the Bank. An inadequate initial investment by the purchaser resulted
in the deferral of gain totaling $21,304. The deferred gain is carried as a
reduction of installment loans and will be amortized to future income using the
installment method. The balance of unamortized gain may be recorded as income
at such time that cumulative principal payments are equivalent to 20 percent of
the sales price.

(4) ALLOWANCE FOR LOAN LOSSES

Transactions in the allowance for loan losses related to impaired loans and all
other loans for the year ended December 31, 1995 are summarized as follows:

<TABLE>
<CAPTION>
Unimpaired Impaired Total
---------- ----------- ----------
<S> <C> <C> <C>
BALANCE, JANUARY 1 $269,290 $269,290
-------- ------- --------

Transfer of Allowance (65,685) $65,685 -
-------- ------- --------

Provision Charged to Operations 299,300 299,300
-------- ------- --------

Loan Losses (69,318) (69,318)
Recoveries 12,475 12,475
-------- ------- --------

(56,843) (56,843)
-------- ------- --------

BALANCE, DECEMBER 31 $446,062 $65,685 $511,747
======== ======= ========
</TABLE>

Transactions in the allowance for loan losses prior to adoption of SFAS 114 and
118 as of December 31 are:

<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
BALANCE, JANUARY 1 $ 190,774 $ 183,342

Provision Charged to Operations 97,500 140,000
Loan Losses (29,177) (139,623)
Recoveries 10,193 7,055
--------- ---------

BALANCE, DECEMBER 31 $ 269,290 $ 190,774
========= =========
</TABLE>

F-18

<PAGE> 99

(5) BANK PREMISES AND EQUIPMENT

Bank premises and equipment as of December 31 consist of:

<TABLE>
<CAPTION>
1995 1994
------------ -------------
<S> <C> <C>
Land $ 277,425 $ 277,425
Building 1,159,848 495,006
Furniture, Fixtures and Equipment 755,335 323,358
Construction Work-in-Progress - 517,218
---------- ----------

2,192,608 1,613,007
Accumulated Depreciation (336,416) (218,223)
---------- ----------

$1,856,192 $1,394,784
========== ==========
</TABLE>

Depreciation charged to operations for financial reporting totaled $117,758 in
1995, $57,018 in 1994 and $48,404 in 1993.

(6) ORGANIZATION COSTS

Organization costs totaling $129,156 incurred in connection with formation of
the parent company are being amortized to operations over a period of 60
months. The unamortized balance of $107,630 is included in other assets as of
December 31, 1995. Related amortization expense included in the 1995 statement
of operations totaled $21,526. Amortization of bank organization costs fully
amortized during 1994 resulted in amortization expense of $27,756 and $30,279
for the years ended December 31, 1994 and 1993, respectively.

(7) INCOME TAXES

Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes, which requires an
asset and liability approach to financial accounting and reporting for income
taxes. Deferred income tax assets and liabilities are computed annually for
differences between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized. Income tax expense is the tax payable or refundable for the
period plus or minus the change during the period in deferred tax assets and
liabilities.

The adoption of Statement 109 had the effect of increasing 1993 net income by
$162,070. The cumulative effect of the accounting change on years prior to
1993 of $218,392 is included in 1993 net income.

F-19
<PAGE> 100

(7) INCOME TAXES (CONTINUED)

The components of income tax expense for the years ended December 31 are:

<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Current $145,421 $ 52,518 $ -
Deferred (61,281) 133,482 56,322
-------- -------- --------

$ 84,140 $186,000 $ 56,322
======== ======== ========
</TABLE>

Income tax expense amounted to $84,140 in 1995, $186,000 in 1994 and $56,322 in
1993 which is less than the tax expense computed by applying the federal
statutory tax rate of 34 percent to income before income taxes. The reasons
for the differences are as follows:

<TABLE>
<CAPTION>
1995 1994 1993
--------- ---------- ----------
<S> <C> <C> <C>
FEDERAL STATUTORY TAXES $ 86,161 $193,408 $ 62,285

Increase (Reductions) Resulting from
Tax Free Interest on Loans (5,100) - -
Disallowed Interest Expense 521 - -
Contributions - - 1,044

Dividends Received Deduction (2,427) (2,657) -
Meals and Entertainment 2,534 786 258
Officers' Life Insurance 442 409 98
Other 2,009 (5,946) (7,363)
-------- -------- --------

ACTUAL FEDERAL TAXES $ 84,140 $186,000 $ 56,322
======== ======== ========
</TABLE>

The components of the net deferred tax assets included in other assets on the
accompanying consolidated balance sheets as of December 31 are as follows:

<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Deferred Tax Assets
Net Unrealized Loss on Securities Available for Sale $ 22,618 $ 92,089
Allowance for Loan Losses 138,496 64,685
-------- --------

161,114 156,774
-------- --------

Deferred Tax Liability
Depreciation and Disposal of Premises and Equipment (35,466) (28,138)
Discount Accretion on Investment Securities (13,162) (7,959)
-------- --------

(48,628) (36,097)
-------- --------

NET DEFERRED TAX ASSETS $112,486 $120,677
======== ========
</TABLE>

F-20
<PAGE> 101

(8) OTHER EXPENSES

Other expenses included in noninterest expenses consist of:

<TABLE>
<CAPTION>
1995 1994 1993
-------- --------- ---------
<S> <C> <C> <C>
Supplies $ 91,538 $ 49,650 $ 38,150
Advertising 32,966 25,593 20,739
Promotional Expense 27,739 27,433 23,173
Professional Fees 129,002 36,547 33,361
Directors' and SEC Fees 40,500 26,000 17,850
Bank Membership Dues 10,446 9,789 7,173
Insurance 14,152 16,786 11,167
Data Processing 92,490 71,227 70,211
Postage and Courier 46,113 33,693 27,662
Organization Cost Amortization 21,526 27,756 30,279
Telephone 27,653 13,168 9,975
Travel and Entertainment 10,597 7,862 9,076
Donations 7,169 6,767 3,072
Taxes 10,800 15,250 7,720
Examination Fees 54,806 71,026 53,408
Analysis Charges 20,337 - -
Miscellaneous 34,028 28,995 17,654
-------- -------- --------

$671,862 $467,542 $380,670
======== ======== ========
</TABLE>

(9) RELATED PARTY TRANSACTIONS

The Bank has direct and indirect loans outstanding to certain officers,
directors and related interests of $1,808,460 and $1,675,770 as of December 31,
1995 and 1994, respectively. All related party loans were made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons and
involve no more than the normal risk of collectibility. A summary of activity
of related party loans for 1995 is shown below:

<TABLE>
<S> <C>
BEGINNING BALANCE $ 1,675,770

New Loans 1,592,393
Repayments (1,459,703)
-----------
ENDING BALANCE $ 1,808,460
===========
</TABLE>

F-21
<PAGE> 102

(10) NONCOMPENSATORY STOCK OPTION PLAN

In connection with the initial stock offering, the Bank issued warrants to
purchase common stock to its organizers, interim directors and executive
officers. Each option entitles the owner to purchase one share of stock at the
exercise price of $10 per share until the warrant expires. All warrants issued
expire 10 years from the date of issuance of the Bank's charter. A summary of
option transactions follows:

<TABLE>
<CAPTION>
NONQUALIFIED SHARES
UNDER OPTION
----------------------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
OUTSTANDING, BEGINNING OF YEAR 136,907 136,907 136,907

Granted - - -
Canceled - - -
Exercised - - -
-------- -------- --------

OUTSTANDING, ENDING 136,907 136,907 136,907
======== ======== ========

ELIGIBLE TO BE EXERCISED, DECEMBER 31 136,907 136,907 136,907
======== ======== ========
</TABLE>

(11) COMMITMENTS AND CONTINGENCIES

The Bank is contingently liable with respect to various loan commitments and
other contingent liabilities in the normal course of business. Maximum
exposure to credit risk for loan commitments (unfunded loans and unused lines
of credit) and standby letters of credit as of December 31 is as follows:

1995 1994
----------- ------------
<S> <C> <C>
Commitments to Extend Credit $5,058,000 $3,627,000

Standby Letters of Credit $ 285,000 $ 35,000
</TABLE>

Fixed rate commitments to extend credit included above total $526,000 and
$1,172,000 as of December 31, 1995 and 1994, respectively. The credit risk
associated with loan commitments and standby letters of credit is essentially
the same as that involved in extending loans to customers and is subject to the
Bank's credit policies. Collateral is obtained based on management's
assessment of the customer.

On October 16, 1995, First National Bank of Effingham agreed in principle that
all of its outstanding common stock and common stock options would be exchanged
for common shares of First Banking Company of Southeast Georgia in a merger
contemplated as a pooling of interests. Consummation of the merger is
dependent upon regulatory approvals, satisfactory completion of all due
diligence investigations and various other conditions as set forth in the
nonbinding letter of intent.

F-22
<PAGE> 103

(12) FINANCIAL INFORMATION OF FNB BANCSHARES, INC. (PARENT ONLY)

FNB Bancshares, Inc. (the parent company) was formed in 1995 as a one-bank
holding company from First National Bank of Effingham. The parent company's
balance sheet as of December 31, 1995 and the related statements of income and
retained earnings and cash flows for the year then ended are presented
hereafter:

FNB BANCSHARES, INC. (PARENT ONLY)
BALANCE SHEET
DECEMBER 31, 1995

ASSETS

<TABLE>
<S> <C>
Investment in Subsidiary, at Equity $3,186,198
Organization Costs 107,630
Income Tax Benefit 8,339
----------

TOTAL ASSETS $3,302,167
==========
</TABLE>

STOCKHOLDERS' EQUITY

<TABLE>
<S> <C>
Common Stock, Par Value $.01; 5,000,000 Shares
Authorized; 310,114 Shares Issued and Outstanding $ 3,101
Paid-In Capital 3,098,039
Retained Earnings 244,932
Net Unrealized Loss on Investment Securities, Net of Tax Benefit (43,905)
----------

TOTAL STOCKHOLDERS' EQUITY $3,302,167
==========
</TABLE>

F-23
<PAGE> 104

(12) FINANCIAL INFORMATION OF FNB BANCSHARES, INC. (PARENT ONLY)

FNB BANCSHARES, INC. (PARENT ONLY)
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1995

<TABLE>
<S> <C>
INCOME
Dividends from Subsidiary $132,156
--------

EXPENSE
Amortization of Organization Costs 21,526
Other 3,000
--------

24,526
--------

INCOME BEFORE TAXES AND EQUITY IN UNDISTRIBUTED
EARNINGS OF SUBSIDIARY 107,630

Income Tax Benefit 8,339
--------

INCOME BEFORE EQUITY IN UNDISTRIBUTED EARNINGS
OF SUBSIDIARY 115,969

Equity in Undistributed Earnings of Subsidiary 53,306
--------

NET INCOME 169,275

RETAINED EARNINGS, BEGINNING OF YEAR 75,657
--------

RETAINED EARNINGS, END OF YEAR $244,932
========
</TABLE>

F-24

<PAGE> 105

(12) FINANCIAL INFORMATION OF FNB BANCSHARES, INC. (PARENT ONLY)

FNB BANCSHARES, INC. (PARENT ONLY)
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995

<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 169,275

Adjustments to Reconcile Net Income to Net Cash
Provided from Operating Activities

Amortization 21,526

Equity in Undistributed Earnings of Subsidiary (53,306)
Income Tax Benefit (8,339)
----------

129,156
----------

CASH FLOWS FROM FINANCING ACTIVITIES

Payment for Organization Costs (129,156)
----------

INCREASE IN CASH AND CASH EQUIVALENTS $ -
==========

NONCASH INVESTING TRANSACTIONS

Capital Infusion in Subsidiary $3,162,635
==========

Unrealized Loss on Investment Securities of Subsidiary $ 43,905
==========
</TABLE>

F-25
<PAGE> 106

(13) FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS No. 107, Disclosures about Fair Value of Financial Instruments requires
disclosure of fair value information about financial instruments, whether or
not recognized on the face of the balance sheet, for which it is practicable to
estimate that value. The assumptions used in the estimation of the fair value
of the Bank's financial instruments are detailed below. Where quoted prices
are not available, fair values are based on estimates using discounted cash
flows and other valuation techniques. The use of discounted cash flows can be
significantly affected by the assumptions used, including the discount rate and
estimates of future cash flows. The following disclosures should not be
considered a surrogate of the liquidation value of the Bank, but rather a
good-faith estimate of the increase or decrease in value of financial
instruments held by the Bank since purchase, origination or issuance.

CASH AND SHORT-TERM INVESTMENTS - For cash, due from banks and federal funds
sold, the carrying amount is a reasonable estimate of fair value.

INVESTMENT SECURITIES AVAILABLE FOR SALE - Fair values for investment
securities are based on quoted market prices.

LOANS - The fair value of fixed rate loans is estimated by discounting the
future cash flows using the current rates at which similar loans would be
made to borrowers with similar credit ratings. For variable rate loans, the
carrying amount is a reasonable estimate of fair value.

DEPOSIT LIABILITIES - The fair value of demand deposits, savings accounts
and certain money market deposits is the amount payable on demand at the
reporting date. The fair value of fixed maturity certificates of deposit is
estimated by discounting the future cash flows using the rates currently
offered for deposits of similar remaining maturities.

COMMITMENTS TO EXTEND CREDIT, STANDBY LETTERS OF CREDIT AND FINANCIAL
GUARANTEES WRITTEN - Because commitments to extend credit and standby
letters of credit are made using variable rates, the contract value is a
reasonable estimate of fair value.

LIMITATIONS - Fair value estimates are made at a specific point in time,
based on relevant market information and information about the financial
instrument. These estimates do not reflect any premium or discount that
could result from offering for sale at one time the Bank's entire holdings
of a particular financial instrument. Because no market exists for a
significant portion of the Bank's financial instruments, fair value
estimates are based on many judgments. These estimates are subjective in
nature and involve uncertainties and matters of significant judgment and
therefore cannot be determined with precision. Changes in assumptions could
significantly affect the estimates.

Fair value estimates are based on existing on and off-balance sheet
financial instruments without attempting to estimate the value of
anticipated future business and the value of assets and liabilities that are
not considered financial instruments. Significant assets and liabilities
that are not considered financial instruments include the mortgage banking
operation, brokerage network, deferred income taxes, premises and equipment
and goodwill. In addition, the tax ramifications related to the realization
of the unrealized gains and losses can have a significant effect on fair
value estimates and have not been considered in the estimates.

F-26
<PAGE> 107

(13) FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

The carrying amount and estimated fair values of the Bank's financial
instruments as of December 31, 1995 are as follows:

<TABLE>
<CAPTION>
CARRYING ESTIMATED
AMOUNT FAIR VALUE
---------- ------------
<S> <C> <C>
(IN THOUSANDS)

ASSETS
Cash and Short-Term Investments $ 9,304 $ 9,304
Investment Securities Available for Sale 4,651 4,651
Loans 34,116 33,938

LIABILITIES
Deposits 46,206 46,500

UNRECOGNIZED FINANCIAL INSTRUMENTS
Commitments to Extend Credit 5,058 5,058
Standby Letters of Credit 285 285
</TABLE>

(14) STOCKHOLDERS' EQUITY

The primary source of funds for payment of dividends by the Company to its
stockholders is dividends received from its banking subsidiary. The bank may
pay dividends to the Company in any year in an amount up to 50 percent of the
previous year's net income, or $92,731 in 1996 without the approval of the
Georgia Department of Banking and Finance.

The bank is also required to maintain minimum amounts of capital to total "risk
weighted" assets, as defined by the banking regulations. As of December 31,
1995, the bank was required to have minimum Tier 1 and Total Capital ratios of
4 percent and 8 percent, respectively, and a leverage ratio (Tier 1 Capital to
total assets) of at least 3 percent. The bank's actual ratios as of December
31, 1995 were as follows:

<TABLE>
<S> <C>
Tier 1 Capital Ratio 8.5%
Total Capital Ratio 9.7%
Leverage Ratio 6.6%
</TABLE>

F-27
<PAGE> 108

(15) RECLASSIFICATIONS

Certain reclassifications have been made in the 1994 and 1993 financial
statements to conform to the 1995 presentation.

F-28

<PAGE> 109

APPENDIX A

AGREEMENT AND PLAN OF MERGER

A-1
<PAGE> 110

AGREEMENT AND PLAN OF MERGER

BY AND BETWEEN

FIRST BANKING COMPANY OF SOUTHEAST GEORGIA

AND

FNB BANCSHARES, INC.

MARCH 13, 1996

A-2
<PAGE> 111

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
<S> <C>
Preamble . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

ARTICLE 1 TRANSACTIONS AND TERMS OF MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.1 Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.2 Time and Place of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.3 Effective Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

ARTICLE 2 TERMS OF MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.1 Articles of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.2 Bylaws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.3 Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

ARTICLE 3 MANNER OF CONVERTING SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.1 Conversion of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 Anti-Dilution Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.3 Shares Held by FNB or First Banking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.4 Fractional Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 Dissenting Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.6 Pooling of Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 FNB Effingham . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

ARTICLE 4 EXCHANGE OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.1 Exchange Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.2 Rights of Former FNB Shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF FNB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.1 Organization; Standing; Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.2 Authority; No Breach By Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.3 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.4 FNB Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.6 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.7 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.8 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.9 Allowance for Possible Loan Losses; Loan Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.10 Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.11 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.12 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.13 Labor Relations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.14 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.15 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.16 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>

A-3
<PAGE> 112

<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
5.17 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.18 Statements True and Correct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.19 Tax and Regulatory Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.20 Pooling of Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF FIRST BANKING . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.1 Organization; Standing; Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.2 Authority; No Breach By Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.3 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.4 First Banking Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.6 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.7 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.8 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.9 Allowance for Possible Loan Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.10 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.11 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.12 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.13 Labor Relations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.14 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.15 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.16 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.17 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.18 Statements True and Correct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.19 Tax and Regulatory Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.20 Pooling of Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

ARTICLE 7 CONDUCT OF BUSINESS PENDING CONSUMMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.1 Affirmative Covenants of FNB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.2 Negative Covenants of FNB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.3 Covenants of First Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.4 Adverse Changes in Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.5 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

ARTICLE 8 ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.1 Registration Statement; Proxy Statement; Shareholder Approval . . . . . . . . . . . . . . . . . . . . 34
8.2 Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.3 Applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.4 Filings with State Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.5 Agreement as to Efforts to Consummate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.6 Investigation and Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.7 Press Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.8 Certain Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.9 Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>

A-4
<PAGE> 113

<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
8.10 Agreement of Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.11 Employee Benefits and Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.12 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

ARTICLE 9 CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.1 Conditions to Obligations of Each Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.2 Conditions to Obligations of First Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.3 Conditions to Obligations of FNB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

ARTICLE 10 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.3 Non-Survival of Representations and Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

ARTICLE 11 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.3 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.5 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.6 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.7 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
11.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
11.9 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
11.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
11.11 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
11.12 Enforcement of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
11.13 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
</TABLE>

A-5
<PAGE> 114

LIST OF EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
<S> <C>
1. Form of agreement of affiliates of FNB. (Section 8.10).

2. Matters as to which Nelson, Mullins, Riley & Scarborough will opine. (Section 9.2(d)).

3. Form of Claims/Indemnification Letter (Section 9.2(g))

4. Matters as to which Powell, Goldstein, Frazer & Murphy will opine. (Section 9.3(d)).
</TABLE>

A-6
<PAGE> 115

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of March 13, 1996, by and between FNB BANCSHARES, INC. ("FNB"), a
corporation organized and existing under the laws of the State of Georgia, with
its principal office located in Springfield, Effingham County, Georgia and
FIRST BANKING COMPANY OF SOUTHEAST GEORGIA ("First Banking"), a corporation
organized and existing under the laws of the State of Georgia, with its
principal office located in Statesboro, Georgia.

PREAMBLE

Certain terms used in this Agreement are defined in Section 11.1 of this
Agreement.

The Boards of Directors of FNB and First Banking are of the opinion that
the transactions described herein are in the best interests of the parties and
their respective shareholders. This Agreement provides for the combination of
FNB with First Banking pursuant to the merger of FNB with and into First
Banking. At the effective time of such merger, the outstanding shares of the
capital stock of FNB shall be converted into the right to receive shares of the
common stock of First Banking (except as provided herein). As a result,
shareholders of FNB shall become shareholders of First Banking. The
transactions described in this Agreement are subject to the approvals of the
shareholders of FNB, the Board of Governors of the Federal Reserve System, and
the Georgia Department of Banking and Finance and the satisfaction of certain
other conditions described in this Agreement. It is the intention of the
parties to this Agreement that the Merger, for federal income tax purposes,
shall qualify as a "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code.

Following the Closing of the Merger, First National Bank of Effingham
("FNB Effingham"), a wholly-owned national bank subsidiary of FNB, will be
operated as a separate subsidiary of First Banking.

NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants and agreements set forth herein, the parties agree
as follows:

ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER

1.1 MERGER. Subject to the terms and conditions of this Agreement,
at the Effective Time, FNB shall be merged with and into First Banking in
accordance with the provisions of Section 14-2-1101 of the GBCC and with the
effect provided in Section 14-2-1106 of the GBCC (the "Merger"). First Banking
shall be the Surviving Corporation resulting from the Merger. The Merger shall
be consummated pursuant to the terms of this Agreement, which has been approved
and adopted by the respective Boards of Directors of FNB and First Banking.

A-7
<PAGE> 116

1.2 TIME AND PLACE OF CLOSING. The Closing will take place at 11:00
a.m. on the date that the Effective Time occurs, or at such other time as the
Parties, acting through their chief executive officers, may mutually agree.
The place of Closing shall be at the offices of Powell, Goldstein, Frazer &
Murphy, Atlanta, Georgia, or such other place as may be mutually agreed upon by
the Parties.

1.3 EFFECTIVE TIME. The Merger and other transactions contemplated
by this Agreement shall become effective on the date and at the time the
Articles of Merger reflecting the Merger shall become effective with the
Secretary of State of the State of Georgia (the "Effective Time"). Subject to
the terms and conditions hereof, unless otherwise mutually agreed upon in
writing by the chief executive officers of each Party, the Parties shall use
their reasonable efforts to cause the Effective Time to occur on the last
business day of the month in which occurs the last to occur of (a) the
effective date (including expiration of any applicable waiting period) of the
last required Consent of any Regulatory Authority having authority over and
approving or exempting the Merger, and (b) the date on which the shareholders
of FNB approve this Agreement to the extent such approval is required by
applicable Law; or such other date as may be mutually agreed upon in writing by
the chief executive officers of each Party.

ARTICLE 2
TERMS OF MERGER

2.1 ARTICLES OF INCORPORATION. The Articles of Incorporation of
First Banking in effect immediately prior to the Effective Time shall be the
Articles of Incorporation of the Surviving Corporation until otherwise amended
or repealed.

2.2 BYLAWS. The Bylaws of First Banking in effect immediately prior
to the Effective Time shall be the Bylaws of the Surviving Corporation until
otherwise amended or repealed.

2.3 DIRECTORS AND OFFICERS.

(a) The directors of First Banking in office immediately
prior to the Effective Time, together with Larry D. Weddle, a Director of FNB,
and such other additional persons as may thereafter be elected, shall serve as
the directors of the Surviving Corporation from and after the Effective Time in
accordance with the Bylaws of the Surviving Corporation.

(b) The officers of First Banking in office immediately prior
to the Effective Time, together with such additional persons as may thereafter
be elected, shall serve the officers of First Banking from and after the
Effective Time in accordance with the Bylaws of First Banking.

(c) The directors of FNB Effingham immediately prior to the
Effective Time, together with James Eli Hodges, shall serve as the initial
directors of FNB Effingham from and after the Effective Time in accordance with
the Bylaws of FNB Effingham.

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ARTICLE 3
MANNER OF CONVERTING SHARES

3.1 CONVERSION OF SHARES. Subject to the provisions of this Article
3, at the Effective Time, by virtue of the Merger and without any action on the
part of the holders thereof the shares of the constituent corporations shall be
converted as follows:

(a) Each share of First Banking Common Stock issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding from and after the Effective Time.

(b) Subject to the provisions of Subsection (c) hereof, each
share of FNB Common Stock (excluding shares held by FNB or any of its
Subsidiaries or by First Banking or any of its Subsidiaries, in each case other
than in a fiduciary capacity or as a result of debts previously contracted)
issued and outstanding at the Effective Time shall cease to be outstanding and
shall be converted into and exchanged for the right to receive .892 shares of
First Banking Common Stock.

(c) Each outstanding option or warrant to purchase shares of
FNB Common Stock will be converted into .466 shares of First Banking Common
Stock.

3.2 ANTI-DILUTION PROVISIONS. In the event FNB or First Banking
changes the number of shares of FNB Common Stock or First Banking Common Stock,
respectively, issued and outstanding prior to the Effective Time as a result of
a stock split, stock dividend or similar recapitalization with respect to such
stock and the record date therefor (in the case of a stock dividend) or the
effective date therefor (in the case of a stock split or similar
recapitalization) shall be prior to the Effective Time, the First Banking
Common Stock to be issued hereunder shall be proportionately adjusted.

3.3 SHARES HELD BY FNB OR FIRST BANKING. Each of the shares of FNB
Common Stock held by any FNB Company or by any First Banking Company, in each
case other than in a fiduciary capacity or as a result of debts previously
contracted, shall be canceled and retired at the Effective Time and no
consideration shall be issued in exchange therefor.

3.4 FRACTIONAL SHARES. Notwithstanding any other provision of this
Agreement, each holder of shares of FNB Common Stock exchanged pursuant to the
Merger who would otherwise have been entitled to receive a fraction of a share
of First Banking Common Stock (after taking into account all certificates
delivered by such holder) shall receive, in lieu thereof cash (without
interest) in an amount equal to such fractional part of a share of First
Banking Common Stock multiplied by the market value of one share of First
Banking Common Stock at the Effective Time, in the case of shares exchanged
pursuant to the Merger. The market value of one share of First Banking Common
Stock at the Effective Time shall be the last sale price of such common stock
on the NASDAQ/NMS (as reported by The Wall Street Journal or, if not reported
thereby, any other authoritative source) on the last business day preceding the
Effective Time on which there is a trade. No such holder will be entitled to
dividends, voting rights, or any other rights as a shareholder in respect of
any fractional shares.

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3.5 DISSENTING SHAREHOLDERS. Any holder of shares of FNB Effingham
Common Stock who perfects such holder's dissenters' rights of appraisal in
accordance with and as contemplated by Section 14-2-1106 of the GBCC shall be
entitled to receive the value of such shares in cash as determined pursuant to
such provision of Law; provided, that no such payment shall be made to any
dissenting shareholder unless and until such dissenting shareholder has
complied with the applicable provisions of the GBCC and surrendered to FNB
Effingham the certificate or certificates representing the shares for which
payment is being made. In the event that after the Effective Time a dissenting
shareholder of FNB Effingham fails to perfect, or effectively withdraws or
loses, such holder's right to appraisal and of payment for such holder's
shares, First Banking shall issue and deliver the consideration to which such
holder of shares of FNB Effingham Common Stock is entitled under this Article 3
(without interest) upon surrender by such holder of the certificate or
certificates representing shares of FNB Effingham Common Stock held by such
holder.

3.6 POOLING OF INTERESTS. The exchange of shares and conversion of
warrants and stock options shall be such that the Merger will qualify to be
accounted for as a pooling of interests.

3.7 FNB EFFINGHAM. After consummation of the Merger, FNB Effingham
shall be a separate subsidiary of First Banking.

ARTICLE 4
EXCHANGE OF SHARES

4.1 EXCHANGE PROCEDURES. Promptly after the Effective Time, First
Banking and FNB shall cause the exchange agent selected by First Banking (the
"Exchange Agent") to mail to the former shareholders of FNB appropriate
transmittal materials (which shall specify that delivery shall be effected, and
risk of loss and title to the certificates theretofore representing shares of
FNB Common Stock shall pass, only upon proper delivery of such certificates to
the Exchange Agent). After the Effective Time, each holder of shares of FNB
Common Stock (other than shares to be canceled pursuant to Section 3.3 of this
Agreement or as to which dissenters' rights have been perfected as provided in
Section 3.5 of this Agreement) issued and outstanding at the Effective Time
shall surrender the certificate or certificates representing such shares or
shares of FNB Effingham Common Stock or an affidavit or affirmation by such
holder of the loss, theft or destruction of such certificate or certificates in
such form as First Banking may reasonably require and, if First Banking
reasonably requires, a bond of indemnity in form and amount, and issued by such
sureties, as First Banking may reasonably require (the "Lost Certificate
Documents"), to the Exchange Agent and shall promptly upon surrender thereof
receive in exchange therefor the consideration provided in Section 3.1 of this
Agreement. To the extent required by Section 3.4 of this Agreement, each
holder of shares of FNB Common Stock issued and outstanding at the Effective
Time also shall receive, upon surrender of the certificate or certificates
representing such shares or shares of FNB Effingham Common Stock, or the Lost
Certificate Documents, cash in lieu of any fractional share of First Banking
Common Stock to which such holder may be otherwise entitled (without interest).
First Banking shall not be obligated to deliver the consideration to which any
former holder of FNB Common Stock is entitled as a result of the Merger until
such holder surrenders his or her certificate or certificates representing the
shares of FNB Common Stock or shares of FNB Effingham Common Stock, or the Lost
Certificate Documents, for exchange as provided in this Section 4.1. The

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certificate or certificates of FNB Common Stock so surrendered shall be duly
endorsed as the Exchange Agent may require. Any other provision of this
Agreement notwithstanding, neither First Banking nor the Exchange Agent shall
be liable to a holder of FNB Common Stock for any amounts paid or property
delivered in good faith to a public official pursuant to any applicable
abandoned property Law.

4.2 RIGHTS OF FORMER FNB SHAREHOLDERS. At the Effective Time, the
stock transfer books of FNB shall be closed as to holders of FNB Common Stock
immediately prior to the Effective Time and no transfer of FNB Common Stock by
any such holder shall thereafter be made or recognized. Until surrendered for
exchange in accordance with the provisions of Section 4.1 of this Agreement,
each certificate theretofore representing shares of FNB Common Stock (other
than shares to be canceled pursuant to Section 3.3 of this Agreement or as to
which dissenters' rights have been perfected as provided in Section 3.5 of this
Agreement) shall from and after the Effective Time represent for all purposes
only the right to receive the consideration provided in Sections 3.1 and 3.4 of
this Agreement in exchange therefor. To the extent permitted by Law, former
shareholders of record of FNB shall be entitled to vote after the Effective
Time at any meeting of First Banking shareholders the number of whole shares of
First Banking Common Stock into which their respective shares of FNB Common
Stock are converted, regardless of whether such holders have exchanged their
certificates representing FNB Common Stock or shares of FNB Effingham Common
Stock, or the Lost Certificate Documents, for certificates representing First
Banking Common Stock in accordance with the provisions of this Agreement.
Whenever a dividend or other distribution is declared by First Banking on the
First Banking Common Stock, the record date for which is at or after the
Effective Time, the declaration shall include dividends or other distributions
on all shares issuable pursuant to this Agreement, but no dividend or other
distribution payable to the holders of record of First Banking Common Stock as
of any time subsequent to the Effective Time shall be delivered to the holder
of any certificate representing shares of FNB Common Stock issued and
outstanding at the Effective Time until such holder surrenders such certificate
or a certificate for FNB Effingham Common Stock, or the Lost Certificate
Documents, for exchange as provided in Section 4.1 of this Agreement. However,
upon surrender of such FNB or FNB Effingham Common Stock certificate or the
Lost Certificate Documents, both the First Banking Common Stock certificate
(together with all such undelivered dividends or other distributions without
interest) and any undelivered cash payments to be paid for fractional share
interests (without interest) shall be delivered and paid with respect to each
share represented by such certificate.

ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF FNB

FNB hereby represents and warrants to First Banking as follows:

5.1 ORGANIZATION; STANDING; POWER. FNB is a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
Georgia, and is duly registered as a bank holding company under the BHC Act.
FNB has the corporate power and authority to carry on its business as now
conducted and to own, lease and operate its Assets. FNB is duly qualified or
licensed to transact business as a foreign corporation in good standing in the
States of the United States and foreign jurisdictions where the character of its
Assets or the nature or conduct of its

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business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on FNB.

5.2 AUTHORITY; NO BREACH BY AGREEMENT.

(a) FNB has the corporate power and authority necessary to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly
authorized by all necessary corporate action in respect thereof on the part of
FNB, subject to the approval of this Agreement by the holders of a majority of
the outstanding shares of FNB Common Stock. Subject to such requisite
shareholder approval, this Agreement represents a legal, valid, and binding
obligation of FNB, enforceable against FNB in accordance with its terms (except
in all cases as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or similar Laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceeding may be brought).

(b) Neither the execution and delivery of this Agreement by
FNB, nor the consummation by FNB of the transactions contemplated hereby, nor
compliance by FNB with any of the provisions hereof will (i) conflict with or
result in a breach of any provision of FNB's Articles of Incorporation or
Bylaws, or (ii) constitute or result in a Default under, or require any Consent
pursuant to, or result in the creation of any Lien on any Asset of any FNB
Company under, any Contract or Permit of any FNB Company, where such Default or
Lien, or any failure to obtain such Consent, is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on FNB, or, (iii)
subject to receipt of the requisite approvals referred to in Section 9.1(b) of
this Agreement, violate any Law or Order applicable to any FNB Company or any
of their respective Assets.

(c) Other than in connection or compliance with the
provisions of the Securities Laws, applicable state corporate and securities
Laws, and rules of the NASD, and other than Consents required from Regulatory
Authorities, and other than notices to or filings with the Internal Revenue
Service or the Pension Benefit Guaranty Corporation with respect to any
employee benefit plans, and other than Consents, filings or notifications
which, if not obtained or made, are not reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on FNB, no notice to, filing
with, or Consent of any public body or authority is necessary for the
consummation by FNB of the Merger and the other transactions contemplated in
this Agreement.

5.3 CAPITAL STOCK.

(a) The authorized capital stock of FNB consists of 5,000,000
shares of FNB Common Stock, of which 310,114 shares are issued and outstanding
as of the date of this Agreement. All of the issued and outstanding shares of
FNB Common Stock are duly and validly issued and outstanding and are fully paid
and nonassessable under the GBCC, except that certificates for FNB Common Stock
have not been distributed to the former shareholders of FNB Effingham

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Common Stock who became FNB shareholders pursuant to the Reorganization
Agreement dated December 9, 1993, between FNB and FNB Effingham. None of the
outstanding shares of FNB Common Stock has been issued in violation of any
preemptive rights of the current or past shareholders of FNB. FNB has reserved
136,907 shares of FNB Common Stock for issuance under the FNB Stock Plans and
organizer warrants, pursuant to which options or warrants to purchase not more
than 136,907 shares of FNB Common Stock are outstanding as of the date of this
Agreement or will be outstanding at the Effective Time.

(b) Except as set forth in Section 5.3(a) of this Agreement
or as Previously Disclosed, there are no shares of capital stock or other
equity securities of FNB outstanding and no outstanding options, warrants,
scrip, rights to subscribe to, calls, or commitments of any character
whatsoever relating to, or securities or rights convertible into or
exchangeable for, shares of the capital stock of FNB or contracts, commitments,
understandings, or arrangements by which FNB is or may be bound to issue
additional shares of its capital stock or options, warrants, or rights to
purchase or acquire any additional shares of its capital stock.

5.4 FNB SUBSIDIARIES. FNB has Previously Disclosed all of the FNB
Subsidiaries as of the date of this Agreement. FNB owns all of the issued and
outstanding shares of capital stock of each FNB Subsidiary. No equity
securities of any FNB Subsidiary are or may become required to be issued (other
than to a FNB Company) by reason of any options, warrants, scrip, rights to
subscribe to, calls, or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of the
capital stock of any such Subsidiary, and there are no Contracts by which any
FNB Subsidiary is bound to issue (other than to a FNB Company) additional
shares of its capital stock or options, warrants, or rights to purchase or
acquire any additional shares of its capital stock or by which any FNB Company
is or may be bound to transfer any shares of the capital stock of any FNB
Subsidiary (other than to a FNB Company). There are no Contracts relating to
the rights of any FNB Company to vote or to dispose of any shares of the
capital stock of any FNB Subsidiary. All of the shares of capital stock of
each FNB Subsidiary held by a FNB Company are fully paid and nonassessable
under the applicable corporation Law of the jurisdiction in which such
Subsidiary is incorporated or organized and are owned by the FNB Company free
and clear of any Lien. Each FNB Subsidiary is either a bank or a corporation,
and is duly organized, validly existing, and (as to corporations) in good
standing under the Laws of the jurisdiction in which it is incorporated or
organized, and has the corporate power and authority necessary for it to own,
lease and operate its Assets and to carry on its business as now conducted.
Each FNB Subsidiary is duly qualified or licensed to transact business as a
foreign corporation in good standing in the States of the United States and
foreign jurisdictions where the character of its Assets or the nature or
conduct of its business requires it to be so qualified or licensed, except for
such jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on FNB. Each FNB Subsidiary that is a depository institution is an
"insured institution" as defined in the Federal Deposit Insurance Act and
applicable regulations thereunder.

5.5 FINANCIAL STATEMENTS. FNB has Previously Disclosed, and
delivered to First Banking prior to the execution of this Agreement, copies of
all FNB Financial Statements for periods ended prior to the date hereof and
will deliver to First Banking copies of all FNB Financial Statements prepared
subsequent to the date hereof. The FNB Financial Statements (as of the dates
thereof and

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for the periods covered thereby) in all material respects (a) are or, if dated
after the date of this Agreement, will be in accordance with the books and
records of the FNB Companies, which are or will be, as the case may be,
complete and correct and which have been or will have been, as the case may be,
maintained in accordance with good business practices, and (b) present or will
present, as the case may be, fairly the consolidated financial position of the
FNB Companies as of the dates indicated and the consolidated results of
operations, changes in shareholders' equity, and cash flows of the FNB
Companies for the periods indicated, in accordance with GAAP (subject to any
exceptions as to consistency specified therein or as may be indicated in the
notes thereto or, in the case of interim financial statements, to normal
recurring year-end adjustments that are not material).

5.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as Previously
Disclosed, no FNB Company has any Liabilities that are reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on FNB,
except Liabilities which are accrued or reserved against in the consolidated
balance sheets of FNB as of December 31, 1995 included in the FNB Financial
Statements or reflected in the notes thereto. Except as Previously Disclosed,
no FNB Company has incurred or paid any Liability since December 31, 1995,
except for such Liabilities incurred or paid in the ordinary course of business
consistent with past business practice and which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on FNB.

5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1995,
except as Previously Disclosed, (a) there have been no events, changes or
occurrences which have had, or are reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on FNB, and (b) the FNB Companies
have not taken any action, or failed to take any action, prior to the date of
this Agreement, which action or failure, if taken after the date of this
Agreement, would represent or result in a material breach or violation of any
of the covenants and agreements of FNB provided in Article Seven of this
Agreement.

5.8 TAX MATTERS.

(a) All Tax returns required to be filed by or on behalf of
any of the FNB Companies have been timely filed or requests for extensions have
been timely filed and granted, and have not expired for periods ended on or
before December 31, 1995, and on or before the date of the most recent fiscal
year end immediately preceding the Effective Time, except to the extent that
all such failures to file, taken together, are not reasonably likely to have a
Material Adverse Effect on FNB, and all returns filed are complete and accurate
to the Knowledge of FNB. All Taxes shown on filed returns have been paid. As
of the date of this Agreement, there is no audit examination, deficiency, or
refund Litigation with respect to any Taxes that is reasonably likely to result
in a determination that would have, individually or in the aggregate, a
Material Adverse Effect on FNB, except as reserved against in the FNB Financial
Statements delivered prior to the date of this Agreement. All Taxes and other
Liabilities due with respect to completed and settled examinations or concluded
Litigation have been paid.

(b) None of the FNB Companies has executed an extension or
waiver of any statute of limitations on the assessment or collection of any Tax
due that is currently in effect, and no unpaid tax deficiency has been asserted
in writing against or with respect to any FNB Company,

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which deficiency is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on FNB.

(c) Adequate provision for any Taxes due or to become due for
any of the FNB Companies for the period or periods through and including the
date of the respective FNB Financial Statements has been made and is reflected
on such FNB Financial Statements.

(d) Deferred Taxes of the FNB Companies have been provided
for in accordance with GAAP.

(e) Each of the FNB Companies is in compliance with, and its
records contain all information and documents (including, without limitation,
properly completed IRS Forms W-9) necessary to comply with, all applicable
information reporting and Tax withholding requirements under federal, state and
local Tax Laws, and such records identify with specificity all accounts subject
to backup withholding under Section 3406 of the Internal Revenue Code, except
for such instances of noncompliance and such omissions as are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
FNB.

(f) Effective January 1, 1993, FNB Effingham adopted
Financial Accounting Standards Board Statement 109, "Accounting for Income
Taxes."]

5.9 ALLOWANCE FOR POSSIBLE LOAN LOSSES; LOAN PORTFOLIO.

(a) The allowance for possible loan or credit losses (the
"Allowance") shown on the consolidated balance sheets of FNB included in the
most recent FNB Financial Statements dated prior to the date of this Agreement
was, and the Allowance shown on the consolidated balance sheets of FNB included
in the FNB Financial Statements as of dates subsequent to the execution of this
Agreement will be equal to approximately 1.5% of the total outstanding loans of
FNB, and this amount was and will be, as of the dates thereof, adequate (within
the meaning of GAAP and applicable regulatory requirements or guidelines) to
provide for losses relating to or inherent in the loan and lease portfolios
(including accrued interest receivables) of the FNB Companies and other
extensions of credit (including letters of credit and commitments to make loans
or extend credit) by the FNB Companies as of the dates thereof except where the
failure of such Allowance to be so adequate is not reasonably likely to have a
Material Adverse Effect on FNB.

(b) All evidences of indebtedness in original principal
amount in excess of $10,000 reflected as assets in the consolidated balance
sheets of the FNB Companies included in the most recent FNB Financial
Statements dated prior to the date of this Agreement were, and such evidences
of indebtedness shown on the consolidated balance sheets of FNB included in the
FNB Financial Statements as of dates subsequent to the execution of this
Agreement will be, genuine, legal, valid and binding obligations of the
respective makers thereof and are not, and will not be, insofar as FNB is
aware, subject to any defense, offset or counterclaim. All such evidences of
indebtedness were, and will be, entered into by the FNB Company in the ordinary
course of its business and in compliance with all applicable laws and
regulations, except as to any noncompliance which has not had, and will not
have, a Material Adverse Effect on FNB.

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5.10 ASSETS. Except as Previously Disclosed or as disclosed or
reserved against in the FNB Financial Statements, the FNB Companies have good
and marketable title, free and clear of all Liens, to all of their respective
Assets. All material tangible properties used in the businesses of the FNB
Companies are in good condition, reasonable wear and tear excepted, and are
usable in the ordinary course of business consistent with FNB's past practices.
All Assets which are material to FNB's business on a consolidated basis, held
under leases or subleases by any of the FNB Companies, are held under valid
Contracts enforceable in accordance with their respective terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceedings may be brought), and each
such Contract is in full force and effect. The policies of fire, theft,
liability, and other insurance maintained with respect to the Assets or
businesses of the FNB Companies provide adequate coverage under current
industry practices against loss or Liability, and the fidelity and blanket
bonds in effect as to which any of the FNB Companies is a named insured are
reasonably sufficient. The Assets of the FNB Companies include all assets
required to operate the business of the FNB Companies as presently conducted.

5.11 ENVIRONMENTAL MATTERS.

(a) Each FNB Company, its Participation Facilities and its
Loan Properties are, and have been, in compliance with all Environmental Laws,
except for violations which are not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on FNB.

(b) There is no Litigation pending or threatened before any
court, governmental agency or authority or other forum in which any FNB Company
or any of its Participation Facilities has been or, with respect to threatened
Litigation, may be named as a defendant (i) for alleged noncompliance
(including by any predecessor) with any Environmental Law or (ii) relating to
the release into the environment of any Hazardous Material or oil, whether or
not occurring at, on, under or involving a site owned, leased or operated by
any FNB Company or any of its Participation Facilities, except for such
Litigation pending or threatened that is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on FNB.

(c) There is no Litigation pending or threatened before any
court, governmental agency or board or other forum in which any of its Loan
Properties (or any FNB Company in respect of such Loan Property) has been or,
with respect to threatened Litigation, may be named as a defendant or
potentially responsible party (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release into
the environment of any Hazardous Material or oil, whether or not occurring at,
on, under or involving a Loan Property, except for such Litigation pending or
threatened that is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on FNB.

(d) To the knowledge of FNB, there is no reasonable basis for
any Litigation of a type described in subsections (b) or (c), except such as is
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on FNB.

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(e) During the period of (i) any FNB Company's ownership or
operation of any of their respective current properties, (ii) any FNB Company's
participation in the management of any Participation Facility, or (iii) any FNB
Company's holding of a security interest in a Loan Property, there have been no
releases of Hazardous Material or oil in, on, under or affecting any such
property, Participation Facility, or Loan Property, except such as are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on FNB. Prior to the period of (i) any FNB Company's ownership or
operation of any of their respective current properties, (ii) any FNB Company's
participation in the management of any Participation Facility, or (iii) any FNB
Company's holding of a security interest in a Loan Property, there were no
releases of Hazardous Material or oil in, on, under or affecting any such
property, Participation Facility or Loan Property, except such as are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on FNB.

5.12 COMPLIANCE WITH LAWS. FNB is duly registered as a bank holding
company under the BHC Act. Each FNB Company has in effect all Permits
necessary for it to own, lease or operate its Assets and to carry on its
business as now conducted, except for those Permits the absence of which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on FNB, and there has occurred no Default under any such Permit,
other than Defaults which are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on FNB. No FNB Company:

(a) is in violation of any Laws, Orders or Permits applicable
to its business or employees conducting its business, except for violations
which are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on FNB; and

(b) except as Previously Disclosed, has received any
notification or communication from any agency or department of federal, state,
or local government or any Regulatory Authority or the staff thereof (i)
asserting that any FNB Company is not in compliance with any of the Laws or
Orders which such governmental authority or Regulatory Authority enforces,
where such noncompliance is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on FNB, (ii) threatening to revoke any
Permits, the revocation of which is reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on FNB, or (iii) requiring any FNB
Company to enter into or consent to the issuance of a cease and desist order,
formal agreement, directive, commitment or memorandum of understanding, or to
adopt any Board resolution or similar undertaking, which restricts materially
the conduct of its business, or in any manner relates to its capital adequacy,
its credit or reserve policies, its management, or the payment of dividends.

5.13 LABOR RELATIONS. No FNB Company is the subject of any
Litigation asserting that it or any other FNB Company has committed an unfair
labor practice (within the meaning of the National Labor Relations Act or
comparable state law) or seeking to compel it or any other FNB Company to
bargain with any labor organization as to wages or conditions of employment,
nor is there any strike or other labor dispute involving any FNB Company,
pending or threatened, or to its Knowledge, is there any activity involving any
FNB Company's employees seeking to certify a collective bargaining unit or
engaging in any other organization activity.

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5.14 EMPLOYEE BENEFIT PLANS.

(a) FNB has Previously Disclosed, and delivered or made
available to First Banking prior to the execution of this Agreement, copies of
all pension, retirement, profit-sharing, deferred compensation, stock option,
employee stock ownership, severance pay, vacation, bonus, or other incentive
plans all other written employee programs, arrangements, or agreements, all
medical, vision, dental, or other health plans, all life insurance plans, and
all other employee benefit plans or fringe benefit plans, including, without
limitation, "employee benefit plans" as that term is defined in Section 3(3) of
ERISA, currently adopted, maintained by, sponsored in whole or in part by, or
contributed to by any FNB Company or Affiliate thereof for the benefit of
employees, retirees, dependents, spouses, directors, independent contractors,
or other beneficiaries and under which employees, retirees, dependents,
spouses, directors, independent contractors, or other beneficiaries are
eligible to participate (collectively, the "FNB Benefit Plans"). Any of the
FNB Benefit Plans which is an "employee pension benefit plan," as that term is
defined in Section 3(2) of ERISA, is referred to herein as a "FNB ERISA Plan."
Each FNB ERISA Plan which is also a "defined benefit plan" (as defined in
Section 414(j) of the Internal Revenue Code) is referred to herein as a "FNB
Pension Plan." No FNB Pension Plan is or has been a multiemployer plan within
the meaning of Section 3(37) of ERISA.

(b) All FNB Benefit Plans are in substantial compliance with
the applicable terms of ERISA, the Internal Revenue Code, and any other
applicable Laws the breach or violation of which are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on FNB. Each FNB
ERISA Plan which is intended to be qualified under Section 401(a) of the
Internal Revenue Code has received a favorable determination letter from the
Internal Revenue Service, and FNB is not aware of any circumstances likely to
result in revocation of any such favorable determination letter. To the
Knowledge of FNB, no FNB Company has engaged in a transaction with respect to
any FNB Benefit Plan that, assuming the taxable period of such transaction
expired as of the date hereof would subject any FNB Company to a tax or penalty
imposed by either Section 4975 of the Internal Revenue Code or Section 502(i)
of ERISA in amounts which are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on FNB.

(c) No FNB ERISA Plan which is a defined benefit pension plan
has any "unfunded current liability," as that term is defined in Section
302(d)(8)(A) of ERISA, based on actuarial assumptions set forth for such plan's
most recent actuarial valuation. Since the date of the most recent actuarial
valuation, there has been (i) no material change in the financial position of
any FNB Pension Plan, (ii) no change in the actuarial assumptions with respect
to any FNB Pension Plan, and (iii) no increase in benefits under any FNB
Pension Plan as a result of plan amendments or changes in applicable Law which
is reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on FNB or materially adversely affect the funding status of any
such plan. Neither any FNB Pension Plan nor any "single-employer plan," within
the meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained
by any FNB Company, or the single-employer plan of any entity which is
considered one employer with FNB under Section 4001 of ERISA or Section 414 of
the Internal Revenue Code or Section 302 of ERISA (whether or not waived) (an
"ERISA Affiliate") has an "accumulated funding deficiency" within the meaning
of Section 412 of the Internal Revenue Code or Section 302 of ERISA, which is
reasonably likely to have a Material Adverse Effect on FNB. No FNB Company has
provided, or is required to provide,

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security to a FNB Pension Plan or to any single-employer plan of an ERISA
Affiliate pursuant to Section 401(a)(29) of the Code.

(d) Within the six-year period preceding the Effective Time,
no Liability under Subtitle C or D of Title IV or ERISA has been or is expected
to be incurred by any FNB Company with respect to any ongoing, frozen or
terminated single-employer plan or the single-employer plan of any ERISA
Affiliate, which Liability is reasonably likely to have a Material Adverse
Effect on FNB. Except as Previously Disclosed, no FNB Company has incurred any
withdrawal Liability with respect to a multiemployer plan under Subtitle B of
Title IV or ERISA (regardless of whether based on contributions of an ERISA
Affiliate), which Liability is reasonably likely to have a Material Adverse
Effect on FNB. No notice of a "reportable event," within the meaning of
Section 4043 of ERISA for which the 30-day reporting requirement has not been
waived, has been required to be filed for any FNB Pension Plan or by any ERISA
Affiliate within the 12-month period ending on the date hereof.

(e) No FNB Company has any obligations for retiree health and
life benefits under any of the FNB Benefit Plans and there are no restrictions
on the rights of such FNB Company to amend or terminate any such Plan without
incurring any Liability thereunder, which Liability is reasonably likely to
have a Material Adverse Effect on FNB.

(f) Except as Previously Disclosed, neither the execution and
delivery of this Agreement nor the consummation of the transactions
contemplated hereby will (i) result in any payment (including, without
limitation, severance, unemployment compensation, golden parachute or
otherwise) becoming due to any director or any employee of any FNB Company from
any FNB Company under any FNB Benefit Plan or otherwise, (ii) increase any
benefits otherwise payable under any FNB Benefit Plan, or (iii) result in any
acceleration of the time of payment or vesting of any such benefit.

(g) The actuarial present values of all accrued deferred
compensation entitlements (including, without limitation, entitlements under
any executive compensation, supplemental retirement, or employment agreement)
of employees and former employees of any FNB Company and their respective
beneficiaries, other than entitlements accrued pursuant to funded retirement
plans subject to the provisions of Section 412 of the Internal Revenue Code or
Section 302 of ERISA, have been fully reflected on the FNB Financial Statements
to the extent required by and in accordance with GAAP.

5.15 MATERIAL CONTRACTS. Except as Previously Disclosed or otherwise
reflected in the FNB Financial Statements, none of the FNB Companies, nor any
of their respective Assets, businesses or operations, is a party to, or is
bound or affected by, or receives benefits under, (a) any employment,
severance, termination, consulting or retirement Contract providing for
aggregate payments to any Person in any calendar year in excess of $10,000; (b)
any Contract relating to the borrowing of money by any FNB Company or the
guarantee by any FNB Company of any such obligation (other than Contracts
evidencing deposit liabilities, purchases of federal funds, fully-secured
repurchase agreements, or trade payables, and Contracts relating to borrowings
or guarantees made in the ordinary course of business); (c) any Contracts
between or among FNB Companies; and (d) any other Contract or amendment thereto
that would be required to be filed as an exhibit to a

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Form 10-K filed by FNB with the SEC as of the date of this Agreement (together
with all Contracts referred to in Sections 5.10 and 5.14(a) of this Agreement,
the "FNB Contracts"). None of the FNB Companies is in Default under any FNB
Contract, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on FNB. All of the
indebtedness of any FNB Company for money borrowed is prepayable at any time by
such FNB Company without penalty or premium.

5.16 LEGAL PROCEEDINGS. There is no Litigation instituted or
pending, or, to the Knowledge of FNB, threatened (or unasserted but considered
probable of assertion and which if asserted would have at least a reasonable
probability of an unfavorable outcome) against any FNB Company, or against any
Asset, interest, or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on FNB, nor are
there any Orders of any Regulatory Authorities, other governmental authorities,
or arbitrators outstanding against any FNB Company, that are reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on FNB.

5.17 REPORTS. Since January 1, 1991, each FNB Company has timely
filed all reports and statements, together with any amendments required to be
made with respect thereto, that it was required to file with (a) Regulatory
Authorities, and (b) any applicable state securities or banking authorities
(except, in the case of state securities authorities, failures to file which
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on FNB). As of their respective dates, each of such reports and
documents, including the financial statements, exhibits, and schedules thereto,
complied in all material respects with all applicable Laws. As of its
respective date, each such report and document did not, in all material
respects, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.

5.18 STATEMENTS TRUE AND CORRECT. No statement, certificate,
instrument or other writing furnished or to be furnished by any FNB Company or
any Affiliate thereof to First Banking pursuant to this Agreement or any other
document, agreement or instrument referred to herein contains or will contain
any untrue statement of material fact or will omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except that FNB makes no representation
or warranty with respect to any statement, certificate, instrument or other
writing that was superseded by a later statement, certificate, instrument or
other writing delivered to First Banking and its counsel described in Section
11.8 of this Agreement. None of the information supplied or to be supplied by
any FNB Company or any Affiliate thereof for inclusion in the Registration
Statement to be filed by First Banking with the SEC will, when the Registration
Statement becomes effective, be false or misleading with respect to any
material fact, or omit to state any material fact necessary to make the
statements therein not misleading. None of the information supplied or to be
supplied by any FNB Company or any Affiliate thereof for inclusion in the Proxy
Statement to be mailed to FNB's shareholders in connection with the
Shareholders' Meeting, and any other documents to be filed by any FNB Company
or any Affiliate thereof with the SEC or any other Regulatory Authority in
connection with the transactions contemplated hereby, will, at the respective
time such documents are filed, and with respect to the Proxy Statement, when
first mailed to the shareholders of FNB, be false or misleading with respect

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to any material fact, or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or, in the case of the Proxy Statement or any amendment thereof
or supplement thereto, at the time of the Shareholders' Meeting, be false or
misleading with respect to any material fact, or omit to state any material
fact necessary to correct any statement in any earlier communication with
respect to the solicitation of any proxy for the Shareholders' Meeting. All
documents that any FNB Company or any Affiliate thereof is responsible for
filing with any Regulatory Authority in connection with the transactions
contemplated hereby will comply as to form in all material respects with the
provisions of applicable Law.

5.19 TAX AND REGULATORY MATTERS. No FNB Company or any Affiliate
thereof has taken any action or has any knowledge of any fact or circumstance
that is reasonably likely to (a) prevent the transactions contemplated hereby,
including the Merger, from qualifying as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code, or (b) materially impede or delay
receipt of any Consents of Regulatory Authorities referred to in Section 9.1(b)
of this Agreement or result in the imposition of a condition or restriction of
the type referred to in the second sentence of such Section. To the knowledge
of FNB, there exists no fact, circumstance, or reason why the requisite
Consents referred to in Section 9.1(b) of this Agreement cannot be received in
a timely manner without the imposition of any condition or restriction of the
type described in the second sentence of such Section 9.1(b).

5.20 POOLING OF INTERESTS. No Affiliate of FNB shall take any
action, including disposing of shares of FNB Common Stock or of shares received
of First Banking Common Stock, that would preclude the Merger from being
accounted for as a pooling of interests.

ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF FIRST BANKING

First Banking hereby represents and warrants to FNB as follows:

6.1 ORGANIZATION; STANDING; POWER. First Banking is a corporation
duly organized validly existing, and in good standing under the Laws of the
State of Georgia, and is duly registered as a bank holding company under the
BHC Act. First Banking has the corporate power and authority to carry on its
business as now conducted and to own, lease and operate its Assets. First
Banking is duly qualified or licensed to transact business as a foreign
corporation in good standing in the States of the United States and foreign
jurisdictions where the character of its Assets or the nature or conduct of its
business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on First Banking.

6.2 AUTHORITY; NO BREACH BY AGREEMENT.

(a) First Banking has the corporate power and authority
necessary to execute, deliver and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated herein, including the Merger, have been duly and

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validly authorized by all necessary corporate action in respect thereof on the
part of First Banking. This Agreement represents a legal, valid, and binding
obligation of First Banking, enforceable against First Banking in accordance
with its terms (except in all cases as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or similar Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding
may be brought).

(b) Neither the execution and delivery of this Agreement by
First Banking, nor the consummation by First Banking of the transactions
contemplated hereby, nor compliance by First Banking with any of the provisions
hereof will (i) conflict with or result in a breach of any provision of First
Banking's Articles of Incorporation or Bylaws, or (ii) constitute or result in
a Default under, or require any Consent pursuant to, or result in the creation
of any Lien on any Asset of any First Banking Company under any Contract or
Permit of any First Banking Company, where such Default or Lien, or any failure
to obtain such Consent, is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on First Banking, or (iii) subject to
receipt of the requisite approvals referred to in Section 9.1(b) of this
Agreement, violate any Law or Order applicable to any First Banking Company or
any of their respective Assets.

(c) Other than in connection or compliance with the
provisions of the Securities Laws, applicable state corporate and securities
Laws, and rules of the NASD, and other than Consents required from Regulatory
Authorities, and other than notices to or filings with the Internal Revenue
Service or the Pension Benefit Guaranty Corporation with respect to any
employee benefit plans, and other than Consents, filings or notifications
which, if not obtained or made, are not reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on First Banking, no notice to,
filing with, or Consent of any public body or authority is necessary for the
consummation by First Banking of the Merger and the other transactions
contemplated in this Agreement.

6.3 CAPITAL STOCK.

(a) The authorized capital stock of First Banking consists of
5,000,000 shares of First Banking Common Stock of which 2,661,711 shares are
issued and outstanding as of the date of this Agreement. All of the issued and
outstanding shares of First Banking Common Stock are, and all of the shares of
First Banking Common Stock to be issued in exchange for shares of FNB Common
Stock upon consummation of the Merger, when issued in accordance with the terms
of this Agreement, will be, duly and validly issued and outstanding and fully
paid and nonassessable under the GBCC. None of the outstanding shares of First
Banking Common Stock has been, and none of the shares of First Banking Common
Stock to be issued in exchange for shares of FNB Common Stock upon consummation
of the Merger will be, issued in violation of any preemptive rights of the
current or past shareholders of First Banking.

(b) Except as set forth in Section 6.3(a) of this Agreement,
or as Previously Disclosed, there are no shares of capital stock or other
equity securities of First Banking outstanding and no outstanding options,
warrants, scrip, rights to subscribe to, calls, or commitments of any character
whatsoever relating to, or securities or rights convertible into or
exchangeable for, shares

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of the capital stock of First Banking or contracts, commitments,
understandings, or arrangements by which First Banking is or may be bound to
issue additional shares of its capital stock or options, warrants, or rights to
purchase or acquire any additional shares of its capital stock.

6.4 FIRST BANKING SUBSIDIARIES. First Banking has Previously
Disclosed all of the First Banking Subsidiaries as of the date of this
Agreement. First Banking owns all of the issued and outstanding shares of
capital stock of each First Banking Subsidiary. No equity securities of any
First Banking Subsidiary are or may become required to be issued (other than to
a First Banking Company) by reason of any options, warrants, scrip, rights to
subscribe to, calls, or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of the
capital stock of any such Subsidiary, and there are no Contracts by which any
First Banking Subsidiary is bound to issue (other than to a First Banking
Company) additional shares of its capital stock or options, warrants, or rights
to purchase or acquire any additional shares of its capital stock or by which
any First Banking Company is or may be bound to transfer any shares of the
capital stock of any First Banking Subsidiary (other than to a First Banking
Company). There are no Contracts relating to the rights of any First Banking
Company to vote or to dispose of any shares of the capital stock of any First
Banking Subsidiary. All of the shares of capital stock of each First Banking
Subsidiary held by a First Banking Company are fully paid and nonassessable
under the applicable corporation Law of the jurisdiction in which such
Subsidiary is incorporated or organized and are owned by the First Banking
Company free and clear of any Lien. Each First Banking Subsidiary is either a
bank or a corporation, and is duly organized, validly existing, and (as to
corporations) in good standing under the Laws of the jurisdiction in which it
is incorporated or organized, and has the corporate power and authority
necessary for it to own, lease and operate its Assets and to carry on its
business as now conducted. Each First Banking Subsidiary is duly qualified or
licensed to transact business as a foreign corporation in good standing in the
States of the United States and foreign jurisdictions where the character of
its Assets or the nature or conduct of its business requires it to be so
qualified or licensed, except for such jurisdictions in which the failure to be
so qualified or licensed is not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on First Banking. Each First Banking
Subsidiary that is a depository institution is an "insured institution" as
defined in the Federal Deposit Insurance Act and applicable regulations
thereunder.

6.5 FINANCIAL STATEMENTS. First Banking has Previously Disclosed
and delivered to FNB prior to the execution of this Agreement, copies of all
First Banking Financial Statements for periods ended prior to the date hereof
and will deliver to FNB copies of all First Banking Financial Statements
prepared subsequent to the date hereof. The First Banking Financial Statements
(as of the dates thereof and for the periods covered thereby) in all material
respects (a) are or, if dated after the date of this Agreement, will be in
accordance with the books and records of the First Banking Companies, which are
or will be, as the case may be, complete and correct and which have been or
will have been, as the case may be, maintained in accordance with good business
practices, and (b) present or will present, as the case may be, fairly the
consolidated financial position of the First Banking Companies as of the dates
indicated and the consolidated results of operations, changes in shareholders'
equity, and cash flows of the First Banking Companies for the periods
indicated, in accordance with GAAP (subject to exceptions as to consistency
specified therein or as may be indicated in the notes thereto or, in the case
of interim financial statements, to normal recurring year-end adjustments that
are not material).

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6.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as Previously
Disclosed, no First Banking Company has any Liabilities that are reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
First Banking, except Liabilities which are accrued or reserved against in the
consolidated balance sheets of First Banking as of December 31, 1995 included
in the First Banking Financial Statements or reflected in the notes thereto.
Except as Previously Disclosed, no First Banking Company has incurred or paid
any Liability since December 31, 1995, except for such Liabilities incurred or
paid in the ordinary course of business consistent with past business practice
and which are not reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on First Banking.

6.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1995,
except as previously disclosed in SEC Documents filed by First Banking prior to
the date of this Agreement, (a) there have been no events, changes or
occurrences which have had, or are reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on First Banking, and (b) the First
Banking Companies have not taken any action, or failed to take any action,
prior to the date of this Agreement, which action or failure, if taken after
the date of this Agreement, would represent or result in a material breach or
violation of any of the covenants and agreements of First Banking provided in
Article Seven of this Agreement.

6.8 TAX MATTERS.

(a) All Tax returns required to be filed by or on behalf of
any of the First Banking Companies have been timely filed or requests for
extensions have been timely filed and granted, and have not expired for periods
ended on or before December 31, 1994, and on or before the date of the most
recent fiscal year end immediately preceding the Effective Time, except to the
extent that all such failures to file, taken together, are not reasonably
likely to have a Material Adverse Effect on First Banking, and all returns
filed are complete and accurate to the Knowledge of First Banking. All Taxes
shown on filed returns have been paid. As of the date of this Agreement, there
is no audit examination, deficiency, or refund Litigation with respect to any
Taxes that is reasonably likely to result in a determination that would have,
individually or in the aggregate, a Material Adverse Effect on First Banking,
except as reserved against in the First Banking Financial Statements delivered
prior to the date of this Agreement. All Taxes and other Liabilities due with
respect to completed and settled examinations or concluded Litigation have been
paid.

(b) None of the First Banking Companies has executed an
extension or waiver of any statute of limitations on the assessment or
collection of any Tax due that is currently in effect, and no unpaid tax
deficiency has been asserted in writing against or with respect to any First
Banking Company, which deficiency is reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on First Banking.

(c) Adequate provision for any Taxes due or to become due for
any of the First Banking Companies for the period or periods through and
including the date of the respective First Banking Financial Statements has
been made and is reflected on such First Banking Financial Statements.

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(d) Deferred Taxes of the First Banking Companies have been
provided for in accordance with GAAP.

(e) Each of the First Banking Companies is in compliance
with, and its records contain all information and documents (including, without
limitation, properly completed IRS Forms W-9) necessary to comply with, all
applicable information reporting and Tax withholding requirements under
federal, state and local Tax Laws, and such records identify with specificity
all accounts subject to backup withholding under Section 3406 of the Internal
Revenue Code, except for such instances of noncompliance and such omissions as
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on First Banking.

(f) Effective January 1, 1993, First Banking adopted
Financial Accounting Standards Board Statement 109, "Accounting for Income
Taxes."

6.9 ALLOWANCE FOR POSSIBLE LOAN LOSSES.

(a) The allowance for possible loan or credit losses (the
"Allowance") shown on the consolidated balance sheets of First Banking included
in the most recent First Banking Financial Statements dated prior to the date
of this Agreement was, and the Allowance shown on the consolidated balance
sheets of First Banking included in the First Banking Financial Statements as
of dates subsequent to the execution of this Agreement will be, as of the dates
thereof, adequate (within the meaning of GAAP and applicable regulatory
requirements or guidelines) to provide for losses relating to or inherent in
the loan and lease portfolios (including accrued interest receivables) of the
First Banking Companies and other extensions of credit (including letters of
credit and commitments to make loans or extend credit) by the First Banking
Companies as of the dates thereof except where the failure of such Allowance to
be so adequate is not reasonably likely to have a Material Adverse Effect on
First Banking.

(b) All evidences of indebtedness in original principal
amount in excess of $10,000 reflected as assets in the consolidated balance
sheets of the First Banking Companies included in the most recent First Banking
Financial Statements dated prior to the date of this Agreement were, and such
evidences of indebtedness shown on the consolidated balance sheets of First
Banking included in the First Banking Financial Statements as of dates
subsequent to the execution of this Agreement will be, genuine, legal, valid
and binding obligations of the respective makers thereof and are not, and will
not be, insofar as First Banking is aware, subject to any defense, offset or
counterclaim. All such evidences of indebtedness were, and will be, entered
into by the First Banking Company in the ordinary course of its business and in
compliance with all applicable laws and regulations, except as to any
noncompliance which has not had, and will not have, a Material Adverse Effect
on First Banking.

6.10 ASSETS. Except as Previously Disclosed or as disclosed or
reserved against in the First Banking Financial Statements, the First Banking
Companies have good and marketable title, free and clear of all Liens, to all
of their respective Assets. All material tangible properties used in the
businesses of the First Banking Companies are in good condition, reasonable
wear and tear excepted, and are usable in the ordinary course of business
consistent with First Banking's past practices. All Assets which are material
to First Banking's business on a consolidated basis, held

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under leases or subleases by any of the First Banking Companies, are held under
valid Contracts enforceable in accordance with their respective terms (except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceedings may be brought), and each
such Contract is in full force and effect. The policies of fire, theft,
liability, and other insurance maintained with respect to the Assets or
businesses of the First Banking Companies provide adequate coverage under
current industry practices against loss or Liability, and the fidelity and
blanket bonds in effect as to which any of the First Banking Companies is a
named insured are reasonably sufficient. The Assets of the First Banking
Companies include all assets required to operate the business of the First
Banking Companies as presently conducted.

6.11 ENVIRONMENTAL MATTERS.

(a) Each First Banking Company, its Participation Facilities
and its Loan Properties are, and have been, in compliance with all
Environmental Laws, except for violations which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on First
Banking.

(b) There is no Litigation pending or threatened before any
court, governmental agency or authority or other forum in which any First
Banking Company or any of its Participation Facilities has been or, with
respect to threatened Litigation, may be named as a defendant (i) for alleged
noncompliance (including by any predecessor) with any Environmental Law or (ii)
relating to the release into the environment of any Hazardous Material or oil,
whether or not occurring at, on, under or involving a site owned, leased or
operated by any First Banking Company or any of its Participation Facilities,
except for such Litigation pending or threatened that is not reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on First
Banking.

(c) There is no Litigation pending or threatened before any
court, governmental agency or board or other forum in which any of its Loan
Properties (or any First Banking Company in respect of such Loan Property) has
been or, with respect to threatened Litigation, may be named as a defendant or
potentially responsible party (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release into
the environment of any Hazardous Material or oil, whether or not occurring at,
on, under or involving a Loan Property, except for such Litigation pending or
threatened that is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on First Banking.

(d) To the knowledge of First Banking, there is no reasonable
basis for any Litigation of a type described in subsections (b) or (c), except
such as is not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on First Banking.

(e) During the period of (i) any First Banking Company's
ownership or operation of any of their respective current properties, (ii) any
First Banking Company's participation in the management of any Participation
Facility, or (iii) any First Banking Company's holding of a security interest
in a Loan Property, there have been no releases of Hazardous Material or oil
in, on, under or affecting such property, Participation Facility or Loan
Property, except such as are not reasonably

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likely to have, individually or in the aggregate, a Material Adverse Effect on
First Banking. Prior to the period of (i) any First Banking Company's
ownership or operation of any of their respective current properties, (ii) any
First Banking Company's participation in the management of any Participation
Facility, or (iii) any First Banking Company's holding of a security interest
in a Loan Property, there were no releases of Hazardous Material or oil in, on,
under or affecting any such property, Participation Facility or Loan Property,
except such as are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on First Banking.

6.12 COMPLIANCE WITH LAWS. First Banking is duly registered as a
bank holding company under the BHC Act. Each First Banking Company has in
effect all Permits necessary for it to own, lease or operate its Assets and to
carry on its business as now conducted, except for those Permits the absence of
which are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on First Banking, and there has occurred no Default
under any such Permit, other than Defaults which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on First
Banking. No First Banking Company:

(b) has received any notification or communication from any
agency or department of federal, state, or local government or any Regulatory
Authority or the staff thereof (i) asserting that any First Banking Company is
not in compliance with any of the Laws or Orders which such governmental
authority or Regulatory Authority enforces, where such noncompliance is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on First Banking, (ii) threatening to revoke any Permits, the revocation
of which is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on First Banking, or (iii) requiring any First Banking
Company to enter into or consent to the issuance of a cease and desist order,
formal agreement, directive, commitment or memorandum of understanding, or to
adopt any Board resolution or similar undertaking, which restricts materially
the conduct of its business, or in any manner relates to its capital adequacy,
its credit or reserve policies, its management, or the payment of dividends.

6.13 LABOR RELATIONS. No First Banking Company is the subject of any
Litigation asserting that it or any other First Banking Company has committed
an unfair labor practice (within the meaning of the National Labor Relations
Act or comparable state law) or seeking to compel it or any other First Banking
Company to bargain with any labor organization as to wages or conditions of
employment, nor is there any strike or other labor dispute involving any First
Banking Company, pending or threatened, or to its Knowledge, is there any
activity involving any First Banking Company's employees seeking to certify a
collective bargaining unit or engaging in any other organization activity.

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6.14 EMPLOYEE BENEFIT PLANS.

(a) First Banking has Previously Disclosed and delivered or
made available to FNB prior to the execution of this Agreement, copies of all
pension, retirement, profit-sharing, deferred compensation, stock option,
employee stock ownership, severance pay, vacation, bonus, or other incentive
plans, all other written employee programs, arrangements, or agreements, all
medical, vision, dental, or other health plans, all life insurance plans, and
all other employee benefit plans or fringe benefit plans, including, without
limitation, "employee benefit plans" as that term is defined in Section 3(3) of
ERISA, currently adopted, maintained by, sponsored in whole or in part by, or
contributed to by any First Banking Company or Affiliate thereof for the
benefit of employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries and under which employees, retirees,
dependents, spouses, directors, independent contractors, or other
beneficiaries are eligible to participate (collectively, the "First Banking
Benefit Plans"). Any of the First Banking Benefit Plans which is an "employee
pension benefit plan," as that term is defined in Section 3(2) of ERISA, is
referred to herein as a "First Banking ERISA Plan." Each First Banking ERISA
Plan which is also a "defined benefit plan" (as defined in Section 414(j) of
the Internal Revenue Code) is referred to herein as a "First Banking Pension
Plan." No First Banking Pension Plan is or has been a multiemployer plan within
the meaning of Section 3(37) of ERISA.

(b) All First Banking Benefit Plans are in substantial
compliance with the applicable terms of ERISA, the Internal Revenue Code, and
any other applicable Laws the breach or violation of which are reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
First Banking. Each First Banking ERISA Plan which is intended to be qualified
under Section 401(a) of the Internal Revenue Code has received a favorable
determination letter from the Internal Revenue Service, and First Banking is
not aware of any circumstances likely to result in revocation of any such
favorable determination letter. To the Knowledge of First Banking, no First
Banking Company has engaged in a transaction with respect to any First Banking
Benefit Plan that, assuming the taxable period of such transaction expired as
of the date hereof would subject any First Banking Company to a tax or penalty
imposed by either Section 4975 of the Internal Revenue Code or Section 502(i)
of ERISA in amounts which are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on First Banking.

(c) No First Banking ERISA Plan which is a defined benefit
pension plan has any "unfunded current liability," as that term is defined in
Section 302(d)(8)(A) of ERISA, based on actuarial assumptions set forth for
such plan's most recent actuarial valuation. Since the date of the most recent
actuarial valuation, there has been (i) no material change in the financial
position of any First Banking Pension Plan, (ii) no change in the actuarial
assumptions with respect to any First Banking Pension Plan, and (iii) no
increase in benefits under any First Banking Pension Plan as a result of plan
amendments or changes in applicable Law which is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on First Banking or
materially adversely affect the funding status of any such plan. Neither any
First Banking Pension Plan nor any "single-employer plan," within the meaning
of Section 4001(a)(15) of ERISA, currently or formerly maintained by any First
Banking Company, or the single-employer plan of any ERISA Affiliate has an
"accumulated funding deficiency" within the meaning of Section 412 of the
Internal Revenue Code or Section 302 of ERISA, which is reasonably likely to
have a Material Adverse Effect on First Banking. No First Banking Company has
provided, or is required to provide, security to a First

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Banking Pension Plan or to any single-employer plan of an ERISA Affiliate
pursuant to Section 401(a)(29) of the Code.

(d) No Liability under Subtitle C or D of Title IV or ERISA
has been or is expected to be incurred by any First Banking Company with
respect to any ongoing, frozen or terminated single-employer plan or the
single-employer plan of any ERISA Affiliate, which Liability is reasonably
likely to have a Material Adverse Effect on First Banking. No First Banking
Company has incurred any withdrawal Liability with respect to a multiemployer
plan under Subtitle B of Title IV or ERISA (regardless of whether based on
contributions of an ERISA Affiliate), which Liability is reasonably likely to
have a Material Adverse Effect on First Banking. No notice of a "reportable
event," within the meaning of Section 4043 of ERISA for which the 30-day
reporting requirement has not been waived, has been required to be filed for
any First Banking Pension Plan or by any ERISA Affiliate within the 12-month
period ending on the date hereof

(e) (i) No First Banking Company has any obligations for
retiree health and life benefits under any of the First Banking Benefit Plans
and (ii) there are no restrictions on the rights of such First Banking Company
to amend or terminate any such Plan without incurring any Liability thereunder,
which Liability is reasonably likely to have a Material Adverse Effect on First
Banking.

(f) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i) result in any
payment (including, without limitation, severance, unemployment compensation,
golden parachute or otherwise) becoming due to any director or any employee of
any First Banking Company from any First Banking Company under any First
Banking Benefit Plan or otherwise, (ii) increase any benefits otherwise payable
under any First Banking Benefit Plan, or (iii) result in any acceleration of
the time of payment or vesting of any such benefit.

(g) The actuarial present values of all accrued deferred
compensation entitlements (including, without limitation, entitlements under
any executive compensation, supplemental retirement, or employment agreement)
of employees and former employees of any First Banking Company and their
respective beneficiaries, other than entitlements accrued pursuant to funded
retirement plans subject to the provisions of Section 412 of the Internal
Revenue Code or Section 302 of ERISA, have been fully reflected on the First
Banking Financial Statements to the extent required by and in accordance with
GAAP.

6.15 MATERIAL CONTRACTS. Except as Previously Disclosed or otherwise
reflected in the First Banking Financial Statements, none of the First Banking
Companies, nor any of their respective Assets, businesses or operations, is a
party to, or is bound or affected by, or receives benefits under, (a) any
employment, severance, termination, consulting or retirement Contract providing
for aggregate payments to any Person in any calendar year in excess of $10,000;
(b) any Contract relating to the borrowing of money by any First Banking
Company or the guarantee by any First Banking Company of any such obligation
(other than Contracts evidencing deposit liabilities, purchases of federal
funds, fully-secured repurchase agreements, or trade payables, and Contracts
relating to borrowings or guarantees made in the ordinary course of business);
(c) any Contracts between or among First Banking Companies; and (d) any other
Contract or amendment thereto that would be required to be filed as an exhibit
to a Form 10-K filed by First Banking with the SEC as

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of the date of this Agreement (together with all Contracts referred to in
Sections 5.10 and 5.14(a) of this Agreement, the "First Banking Contracts").
None of the First Banking Companies is in Default under any First Banking
Contract, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on First Banking.
All of the indebtedness of any First Banking Company for money borrowed is
prepayable at any time by such First Banking Company without penalty or
premium.

6.16 LEGAL PROCEEDINGS. There is no Litigation instituted or
pending, or, to the knowledge of First Banking, threatened (or unasserted but
considered probable of assertion and which if asserted would have at least a
reasonable probability of an unfavorable outcome) against any First Banking
Company, or against any Asset, interest, or right of any of them, that is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on First Banking, nor are there any Orders of any Regulatory
Authorities, other governmental authorities, or arbitrators outstanding against
any First Banking Company, that are reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on First Banking.

6.17 REPORTS. Since January 1, 1991, each First Banking Company has
timely filed all reports and statements, together with any amendments required
to be made with respect thereto, that it was required to file with the SEC,
including, but not limited to, Forms 10-K, Forms 10-Q, Forms 8-K, and proxy
statements, (b) other Regulatory Authorities, and (c) any applicable state
securities or banking authorities (except, in the case of state securities
authorities, failures to file which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on First Banking).
As of their respective dates, each of such reports and documents, including the
financial statements, exhibits, and schedules thereto, complied in all material
respects with all applicable Laws. As of its respective date, each such report
and document did not, in all material respects, contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading.

6.18 STATEMENTS TRUE AND CORRECT. No statement, certificate,
instrument or other writing furnished or to be furnished by First Banking
Company or any Affiliate thereof to FNB pursuant to this Agreement or any other
document, agreement or instrument referred to herein contains or will contain
any untrue statement of material fact or will omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except that First Banking Company makes
no representation or warranty with respect to any statement, certificate,
instrument or other writing that was superseded by a later statement,
certificate, instrument or other writing delivered to FNB Effingham and its
counsel described in Section 11.8 of this Agreement. None of the information
supplied or to be supplied by any First Banking Company or any Affiliate
thereof for inclusion in the Registration Statement to be filed by First
Banking with the SEC will, when the Registration Statement becomes effective,
be false or misleading with respect to any material fact, or omit to state any
material fact necessary to make the statements therein not misleading. None of
the information supplied or to be supplied by any First Banking Company or any
Affiliate thereof for inclusion in the Proxy Statement to be mailed to FNB's
shareholders in connection with the Shareholders' Meeting, and any other
documents to be filed by any First Banking Company or any Affiliate thereof
with the SEC or any other Regulatory

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Authority in connection with the transactions contemplated hereby, will, at the
respective time such documents are filed, and with respect to the Proxy
Statement, when first mailed to the shareholders of FNB, be false or misleading
with respect to any material fact, or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, or, in the case of the Proxy Statement or any
amendment thereof or supplement thereto, at the time of the Shareholders'
Meeting, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for the
Shareholders' Meeting. All documents that any First Banking Company or any
Affiliate thereof is responsible for filing with any Regulatory Authority in
connection with the transactions contemplated hereby will comply as to form in
all material respects with the provisions of applicable Law.

6.19 TAX AND REGULATORY MATTERS. No First Banking Company or any
Affiliate thereof has taken any action or has any knowledge of any fact or
circumstance that is reasonably likely to (a) prevent the transactions
contemplated hereby, including the Merger, from qualifying as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code, or (b)
materially impede or delay receipt of any Consents of Regulatory Authorities
referred to in Section 9.1(b) of this Agreement or result in the imposition of
a condition or restriction of the type referred to in the second sentence of
such Section. To the knowledge of First Banking, there exists no fact,
circumstance, or reason why the requisite Consents referred to in Section
9.1(b) of this Agreement cannot be received in a timely manner without the
imposition of any condition or restriction of the type described in the second
sentence of such Section 9.1(b).

6.20 POOLING OF INTERESTS. No Affiliate of First Banking has taken
or will take any action that would preclude the Merger from being accounted for
as a pooling of interests.

ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION

7.1 AFFIRMATIVE COVENANTS OF FNB. Unless the prior written consent
of First Banking shall have been obtained, and except as otherwise contemplated
herein, FNB shall, and shall cause each of its Subsidiaries: (a) to operate its
business in the usual, regular, and ordinary course; (b) to preserve intact its
business organization and Assets and maintain its rights and franchises; (c) to
use its reasonable efforts to cause its representations and warranties to be
correct at all times; (d) to take no action which would (i) adversely affect
the ability of any Party to obtain any Consents required for the transactions
contemplated hereby without imposition of a condition or restriction of the
type referred to in the second sentence of Section 9.1(b) of this Agreement or
(ii) adversely affect in any material respect the ability of either Party to
perform its covenants and agreements under this Agreement; and (e) to permit a
representative of First Banking (who is expected to be James Eli Hodges) to
attend and participate (but only to the extent of expressing his opinion on any
matter before the Board or the Committee and not otherwise to influence the
decision of the Board or the Committee and not to vote) (i) in all meetings of
the Board of Directors of FNB and Effingham Bank and (ii) in all meetings of
the Loan Committee of Effingham Bank with such representative to be excused
during deliberations relating to the transactions contemplated by this
Agreement (i) in all

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meetings of the Board of Directors of FNB and FNB Effingham and (ii) in all
meetings of the Loan Committee of FNB Effingham.

7.2 NEGATIVE COVENANTS OF FNB. From the date of this Agreement
until the earlier of the Effective Time or the termination of this Agreement,
FNB covenants and agrees that it will not do or agree or commit to do, or
permit any of its Subsidiaries to do or agree or commit to do, any of the
following without the prior written consent of the chief executive officer of
First Banking, which consent shall not be unreasonably withheld:

(a) amend the Articles of Incorporation, Bylaws or other
governing instruments of any FNB Company; or

(b) incur any additional debt obligation or other obligation
for borrowed money (other than indebtedness of a FNB Company to another
FNB Company) in excess of an aggregate of $10,000 (for the FNB Companies
on a consolidated basis) except in the ordinary course of the business
of FNB Companies consistent with past practices (which shall include,
for FNB Subsidiaries that are depository institutions, creation of
deposit liabilities, purchases of federal funds, and entry into
repurchase agreements fully secured by U.S. government or agency
securities), or impose, or suffer the imposition, on any share of stock
held by any FNB Company of any Lien or permit any such Lien to exist; or

(c) other than as Previously Disclosed, repurchase, redeem,
or otherwise acquire or exchange (other than exchanges in the ordinary
course under employee benefit plans), directly or indirectly, any
shares, or any securities convertible into any shares, of the capital
stock of any FNB Company; or

(d) declare or pay any dividend or make any other
distribution in respect of FNB's capital stock; or

(e) except for this Agreement, or pursuant to the exercise of
stock options outstanding as of the date hereof and pursuant to the
terms thereof in existence on the date hereto, or as Previously
Disclosed, issue, sell, pledge, encumber, authorize the issuance of, or
enter into any Contract to issue, sell, pledge, encumber, or authorize
the issuance of or otherwise permit to become outstanding, any
additional shares of FNB Common Stock or any other capital stock of any
FNB Company, or any stock appreciation rights, or any option, warrant,
conversion, or other right to acquire any such stock, or any security
convertible into any such stock; or

(f) adjust, split, combine or reclassify any capital stock of
any FNB Company or issue or authorize the issuance of any other
securities in respect of or in substitution for shares of FNB Common
Stock or sell, lease, mortgage or otherwise dispose of or otherwise
encumber (i) any shares of capital stock of any FNB Subsidiary (unless
any such shares of stock are sold or otherwise transferred to another
FNB Company) or (ii) any Asset having a book value in excess of $10,000
other than in the ordinary course of business for reasonable and
adequate consideration; or

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(g) acquire direct or indirect control over any Person, other
than in connection with (i) internal reorganizations or consolidations
involving existing Subsidiaries, (ii) foreclosures in the ordinary
course of business, or (iii) acquisitions of control by a depository
institution Subsidiary in its fiduciary capacity; or

(h) other than as Previously Disclosed, grant any increase in
compensation or benefits to the employees or officers of any FNB Company
(including such discretionary increases as may be contemplated by
existing employment agreements), except in accordance with past practice
Previously Disclosed or as required by Law; pay any bonus except in
accordance with past practice Previously Disclosed or the provisions of
any applicable program or plan adopted by its Board of Directors prior
to the date of this Agreement; enter into or amend any severance
agreements with officers of any FNB Company; grant any increase in fees
or other increases in compensation or other benefits to directors of any
FNB Company, provided, however, that beginning after the Effective Time,
FNB Effingham shall be entitled to pay its directors the same directors'
fees (and other benefits, if any) which are then paid by First Bulloch
Bank & Trust Company and Metter Banking Company to their directors,
respectively; or

(i) other than as Previously Disclosed, enter into or amend
any employment Contract between any FNB Company and any Person (unless
such amendment is required by Law) that the FNB Company does not have
the unconditional right to terminate without Liability (other than
Liability for services already rendered), at any time on or after the
Effective Time; or

(j) adopt any new employee benefit plan of any FNB Company or
make any material change in or to any existing employee benefit plans of
any FNB Company other than any such change that is required by Law or
that, in the opinion of counsel, is necessary or advisable to maintain
the tax qualified status of any such plan; or

(k) make any significant change in any accounting methods or
systems of internal accounting controls, except as may be appropriate to
conform to changes in regulatory accounting requirements or GAAP; or

(l) commence any Litigation other than in accordance with
past practice, settle any Litigation involving any Liability of any FNB
Company for money damages in excess of $10,000 or which involves
material restrictions upon the operations of any FNB Company; or

(m) except in the ordinary course of business, modify, amend
or terminate any material Contract or waive, release, compromise or
assign any material rights or claims; or

(n) take any action that would preclude the Merger from being
accounted for as a pooling of interests.

7.3 COVENANTS OF FIRST BANKING. From the date of this Agreement
until the earlier of the Effective Time or the termination of this Agreement,
First Banking covenants and agrees that

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(a) it shall continue to conduct its business and the business of its
Subsidiaries in a manner designed in its reasonable judgment, to enhance the
long-term value of the First Banking Common Stock and the business prospects of
the First Banking Companies and to the extent consistent therewith to use all
reasonable efforts to preserve intact the First Banking Companies' core
businesses and goodwill with their respective employees and the communities
they serve, and (b) without the prior written consent of FNB, which consent
will not be unreasonably withheld, it will not declare, set aside, or pay any
extraordinary cash dividend on its Common Stock other than normal and customary
quarterly cash dividends in accordance with its current dividend policy and any
increases consistent with past practices.

7.4 ADVERSE CHANGES IN CONDITION. Each Party agrees to give written
notice promptly to the other Party upon becoming aware of the occurrence or
impending occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (a) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (b) is reasonably likely to cause
or constitute a material breach of any of its representations, warranties, or
covenants contained herein, and to use its reasonable efforts to prevent or
promptly to remedy the same.

7.5 REPORTS. Each Party and its Subsidiaries shall file all reports
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other Party copies of
all such reports promptly after the same are filed. If financial statements
are contained in any such reports filed with the SEC, such financial statements
will fairly present the consolidated financial position of the entity filing
such statements as of the dates indicated and the consolidated results of
operations, changes in shareholders' equity, and cash flows for the periods
then ended in accordance with GAAP (subject in the case of interim financial
statements to normal recurring year-end adjustments that are not material). As
of their respective dates, such reports filed with the SEC will comply in all
material respects with the Securities Laws and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. Any financial
statements contained in any other reports to another Regulatory Authority shall
be prepared in accordance with Laws applicable to such reports.

ARTICLE 8
ADDITIONAL AGREEMENTS

8.1 REGISTRATION STATEMENT; PROXY STATEMENT; SHAREHOLDER APPROVAL.
As soon as practicable after execution of this Agreement, First Banking shall
file the Registration Statement with the SEC, and shall use its reasonable
efforts to cause the Registration Statement to become effective under the 1933
Act and take any action required to be taken under the applicable state Blue
Sky or securities Laws in connection with the issuance of the shares of First
Banking Common Stock upon consummation of the Merger. FNB shall furnish all
information concerning it and the holders of its capital stock as First Banking
may reasonably request in connection with such action. FNB shall call a
Shareholders' Meeting, to be held as soon as reasonably practicable after the
Registration Statement is declared effective by the SEC, for the purpose of
voting upon approval of this Agreement and such other related matters as it
deems appropriate. In connection with the Shareholders' Meeting, (a) First
Banking shall prepare on FNB's behalf a Proxy Statement (which shall be
included in the

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Registration Statement) and furnish same to the SEC and mail it to its
shareholders, (b) the Parties shall furnish to each other all information
concerning them that they may reasonably request in connection with such Proxy
Statement, (c) the Board of Directors of FNB shall recommend (subject to
compliance with their fiduciary duties as advised by counsel) to its
shareholders that they approve this Agreement, and (d) the Board of Directors
and officers of FNB shall use their reasonable efforts to obtain such
shareholders' approval (subject to compliance with their fiduciary duties as
advised by counsel).

8.2 LISTING. First Banking shall use its best efforts to list,
prior to the Effective Time, on the NASDAQ/NMS, the shares of First Banking
Common Stock to be issued to the holders of FNB Common Stock pursuant to the
Merger.

8.3 APPLICATIONS. First Banking shall promptly prepare and file,
and FNB shall cooperate in the preparation and, where appropriate, filing of,
applications with all Regulatory Authorities having jurisdiction over the
transactions contemplated by this Agreement seeking the requisite Consents
necessary to consummate the transactions contemplated by this Agreement.

8.4 FILINGS WITH STATE OFFICES. Upon the terms and subject to the
conditions of this Agreement, First Banking shall execute and file the Articles
of Merger with the Secretary of State of the State of Georgia in connection
with the Closing.

8.5 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the terms and
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws, as promptly as practicable so as to permit
consummation of the Merger at the earliest possible date and to otherwise
enable consummation of the transactions contemplated hereby and shall cooperate
fully with the other Party hereto to that end (it being understood that any
amendments to the Registration Statement filed by First Banking in connection
with the First Banking Common Stock to be issued in the Merger or a
resolicitation of proxies as a consequence of an acquisition agreement by First
Banking or any of its Subsidiaries shall not violate this covenant), including,
without limitation, using its reasonable efforts to lift or rescind any Order
adversely affecting its ability to consummate the transactions contemplated
herein and to cause to be satisfied the conditions referred to in Article Nine
of this Agreement. Each Party shall use, and shall cause each of its
Subsidiaries to use, its reasonable efforts to obtain all Consents necessary or
desirable for the consummation of the transactions contemplated by this
Agreement.

8.6 INVESTIGATION AND CONFIDENTIALITY.

(a) Prior to the Effective Time, each Party will keep the
other Party advised of all material developments relevant to its business and
to consummation of the Merger and shall permit the other Party to make or cause
to be made such investigation of the business and properties of it and its
Subsidiaries and of their respective financial and legal conditions as the
other Party reasonably requests, provided that such investigation shall be
reasonably related to the transactions contemplated hereby and shall not
interfere unnecessarily with normal operations. No investigation by a Party
shall affect the representations and warranties of the other Party.

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(b) In addition to the Parties' respective obligations under
the Confidentiality Agreement, each Party shall, and shall cause its advisers
and agents to, maintain the confidentiality of all confidential information
furnished to it by the other Party concerning its and its Subsidiaries'
businesses, operations, and financial positions and shall not use such
information for any purpose except in furtherance of the transactions
contemplated by this Agreement. If this Agreement is terminated prior to the
Effective Time, each Party shall promptly return all documents and copies
thereof and all work papers containing confidential information received from
the other Party, except one copy of certain materials that can be retained for
legal files in accordance with the provisions of the Confidentiality Agreement.

(c) Each Party agrees to give the other Party notice as soon
as practicable after any determination by it of any fact or occurrence relating
to the other Party which it has discovered through the course of its
investigation and which represents, or is reasonably likely to represent,
either a material breach of any representation, warranty, covenant or agreement
of the other Party or which has had or is reasonably likely to have a Material
Adverse Effect on the other Party.

8.7 PRESS RELEASES. Prior to the Effective Time, FNB and First
Banking shall consult with each other as to the form and substance of any press
release or other public disclosure materially related to this Agreement or any
other transaction contemplated hereby; provided, however, that nothing in this
Section 8.7 shall be deemed to prohibit any Party from making any disclosure
which its counsel deems necessary or advisable in order to satisfy such Party's
disclosure obligations imposed by Law.

8.8 CERTAIN ACTIONS. Except with respect to this Agreement and the
transactions contemplated hereby, no FNB Company nor any Affiliate thereof nor
any investment banker, attorney, accountant or other representative
(collectively, "Representatives") retained by any FNB Company shall directly or
indirectly solicit any Acquisition Proposal by any Person. Except to the extent
necessary to comply with the fiduciary duties of FNB's Board of Directors as
advised by counsel, no FNB Company or any Affiliate or Representative thereof
shall furnish any non-public information that it is not legally obligated to
furnish, negotiate with respect to, or enter into any Contract with respect to,
any Acquisition Proposal, but FNB may communicate information about such an
Acquisition Proposal to its stockholders if and to the extent that it is
required to do so in order to comply with its legal obligations as advised by
counsel. FNB shall promptly notify First Banking orally and in writing in the
event that it receives any inquiry or proposal relating to any such
transaction. Subject to such legal obligations, FNB shall (a) immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any Persons conducted heretofore with respect to any of the
foregoing, and (b) direct and use its reasonable efforts to cause all of its
Representatives not to engage in any of the foregoing.

8.9 TAX TREATMENT. Each of the Parties undertakes and agrees to use
its reasonable efforts to cause the Merger, and to take no action which would
cause the Merger not, to qualify for treatment as a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code for federal income tax
purposes.

8.10 AGREEMENT OF AFFILIATES. FNB has Previously Disclosed all
Persons whom it reasonably believes is an "affiliate" of FNB for purposes of
Rule 145 under the 1933 Act. FNB

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shall use its reasonable efforts to cause each such Person to deliver to First
Banking not later than 30 days after the date of this Agreement, a written
agreement, substantially in the form of Exhibit 1 hereto, providing that such
Person will not sell, pledge, transfer, or otherwise dispose of the shares of
FNB Common Stock held by such Person except as contemplated by such agreement
or by this Agreement and will not sell, pledge, transfer, or otherwise dispose
of the shares of First Banking Common Stock to be received by such Person upon
consummation of the Merger except in compliance with applicable provisions of
the 1933 Act and the rules and regulations thereunder (including in compliance
with Staff Accounting Bulletin No. 76 issued by the SEC). First Banking agrees
to publish, as soon as practicable after the Effective Date, financial results
covering at least 30 days of combined operations of First Banking and FNB
within the meaning of Section 201.01 of the SEC's Codification of Financial
Reporting Policies. First Banking shall not be required to maintain the
effectiveness of the Registration Statement under the 1933 Act for the purposes
of resale of First Banking Common Stock by such affiliates.

8.11 EMPLOYEE BENEFITS AND CONTRACTS. Following the Effective Time,
First Banking shall provide generally to officers and employees of the FNB
Companies employee benefits under employee benefit plans (other than stock
option or other plans involving the potential issuance of First Banking Common
Stock), on terms and conditions which when taken as a whole are substantially
similar to those currently provided by the First Banking Companies to their
similarly situated officers and employees provided, that, for a period of
twelve months after the Effective Time, First Banking shall provide generally
to officers and employees of FNB Companies severance benefits in accordance
with the policies of either (a) FNB as Previously Disclosed, or (b) First
Banking, whichever of (a) or (b) will provide the greater benefit to the
officer or employee. For purposes of participation and vesting under such
employee benefit plans, the service of the employees of the FNB Companies prior
to the Effective Time shall be treated as service with a First Banking Company
participating in such employee benefit plans. First Banking also shall honor
in accordance with their terms all employment, severance, consulting and other
compensation Contracts Previously Disclosed to First Banking between any FNB
Company and any current or former director, officer, or employee thereof and
all provisions for vested benefits or other vested amounts earned or accrued
through the Effective Time under the FNB Benefit Plans.

8.12 INDEMNIFICATION.

(a) For a period of six years after the Effective Time, First
Banking shall, and shall cause FNB to, indemnify, defend and hold harmless the
present and former directors, officers, employees, and agents of the FNB
Companies (each, an "Indemnified Party") against all Liabilities arising out of
actions or omissions occurring at or prior to the Effective Time (including the
transactions contemplated by this Agreement) to the full extent permitted under
Georgia Law and by FNB's Articles of Incorporation and Bylaws or any Contract
providing for indemnification as in effect on the date hereof, including
provisions relating to advances of expenses incurred in the defense of any
Litigation. Without limiting the foregoing, in any case in which approval by
FNB is required to effectuate any indemnification, First Banking shall cause
FNB to direct, at the election of the Indemnified Party, that the determination
of any such approval shall be made by independent counsel mutually agreed upon
between First Banking and the Indemnified Party.

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(b) Any Indemnified Party wishing to claim indemnification
under paragraph (a) of this Section 8.12, upon learning of any such Liability
or Litigation, shall promptly notify First Banking thereof. In the event of
any such Litigation (whether arising before or after the Effective Time), (i)
First Banking shall have the right to assume the defense thereof and First
Banking shall not be liable to such Indemnified Parties for any legal expenses
of other counsel or any other expenses subsequently incurred by such
Indemnified Parties in connection with the defense thereof, except that if
First Banking or FNB elects not to assume such defense or counsel for the
Indemnified Parties advises that there are substantive issues which raise
conflicts of interest between First Banking or FNB and the Indemnified Parties,
the Indemnified Parties may retain counsel satisfactory to them, and First
Banking or FNB shall pay all reasonable fees and expenses of such counsel for
the Indemnified Parties promptly as statements therefor are received; provided,
that First Banking shall be obligated pursuant to this paragraph (b) to pay for
only one firm of counsel for all Indemnified Parties in any jurisdiction, (ii)
the Indemnified Parties will cooperate in the defense of any such Litigation,
and (iii) First Banking shall not be liable for any settlement effected without
its prior written consent; and provided further that FNB shall not have any
obligation hereunder to any Indemnified Party when and if a court of competent
jurisdiction shall determine, and such determination shall have become final,
that the indemnification of such Indemnified Party in the manner contemplated
hereby is prohibited by applicable Law.

ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE

9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective
obligations of each Party to perform this Agreement and consummate the Merger
and the other transactions contemplated hereby are subject to the satisfaction
of the following conditions, unless waived by both Parties pursuant to Section
11.6 of this Agreement:

(a) SHAREHOLDER APPROVAL. The shareholders of FNB shall have
approved this Agreement, and the consummation of the transactions contemplated
hereby, including the Merger, as and to the extent required by Law or by the
provisions of any governing instruments.

(b) REGULATORY APPROVALS. All Consents of, filings and
registrations with, and notifications to, all Regulatory Authorities required
for consummation of the Merger shall have been obtained or made and shall be in
full force and effect, and all waiting periods required by Law shall have
expired. No Consent obtained from any Regulatory Authority which is necessary
to consummate the transactions contemplated hereby shall be conditioned or
restricted in a manner (including, without limitation, requirements relating to
the raising of additional capital or the disposition of Assets) which in the
reasonable judgment of the Board of Directors of either Party would so
materially adversely impact the economic or business benefits of the
transactions contemplated by this Agreement so as to render inadvisable the
consummation of the Merger.

(c) CONSENTS AND APPROVALS. Each Party shall have obtained
any and all Consents required for consummation of the Merger (other than those
referred to in Section 9.1(b) of this Agreement) or for the preventing of any
Default under any Contract or Permit of such Party

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which, if not obtained or made, is reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on such Party.

(d) LEGAL PROCEEDINGS. No court or governmental or
regulatory authority of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any Law or Order (whether temporary,
preliminary or permanent) or taken any other action which prohibits, materially
restricts or makes illegal consummation of the transactions contemplated by
this Agreement.

(e) REGISTRATION STATEMENT. The Registration Statement shall
be effective under the 1933 Act, no stop orders suspending the effectiveness of
the Registration Statement shall have been issued, no action, suit, proceeding
or investigation by the SEC to suspend the effectiveness thereof shall have
been initiated and be continuing, and all necessary approvals under state
securities Laws or the 1933 Act or 1934 Act relating to the issuance or trading
of the shares of First Banking Common Stock issuable pursuant to the Merger
shall have been received.

(f) NASD LISTING. The shares of First Banking Common Stock
issuable pursuant to the Merger shall have been approved for listing on the
NASDAQ/NMS.

(g) TAX MATTERS. FNB shall have received a written opinion
of counsel from Powell, Goldstein, Frazer & Murphy, in form reasonably
satisfactory to it (the "Tax Opinion"), to the effect that for federal income
tax purposes (a) the Merger will constitute a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code, (b) the exchange in the Merger
of FNB Common Stock for First Banking Common Stock will not give rise to gain
or loss to the shareholders of FNB with respect to such exchange (except to the
extent of any cash received), and (c) neither FNB nor First Banking will
recognize gain or loss as a consequence of the Merger except for income and
deferred gain recognized pursuant to Treasury regulations issued under Section
1502 of the Internal Revenue Code. In rendering such Tax Opinion, counsel for
shall be entitled to rely upon representations of officers of FNB and First
Banking reasonably satisfactory in form and substance to such counsel.

9.2 CONDITIONS TO OBLIGATIONS OF FIRST BANKING. The obligations of
First Banking to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by First Banking pursuant to Section
11.6(a) of this Agreement:

(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of FNB set forth or referred to in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and as of the
Effective Time with the same effect as though all such representations and
warranties had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date), except (i) as expressly contemplated by this
Agreement, or (ii) for representations and warranties (other than the
representations and warranties set forth in Section 5.3 of this Agreement,
which shall be true in all material respects) the inaccuracies of which relate
to matters that are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on FNB.

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(b) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of
the agreements and covenants of FNB to be performed and complied with pursuant
to this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with in all material
respects.

(c) CERTIFICATES. FNB shall have delivered to First Banking
(i) a certificate, dated as of the Effective Time and signed on its behalf by
its chief executive officer and its chief financial officer, to the effect
that, to their knowledge (except, with respect to the representations in
Section 5.11, their actual knowledge without inquiry), the conditions of its
obligations set forth in Section 9.2(a) and 9.2(b) of this Agreement have been
satisfied, and (ii) certified copies of resolutions duly adopted by FNB's Board
of Directors and shareholders evidencing the taking of all corporate action
necessary to authorize the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby, all in
such reasonable detail as First Banking and its counsel shall request.

(d) OPINION OF COUNSEL. FNB shall have delivered to First
Banking an opinion of Nelson, Mullins, Riley & Scarborough, counsel to FNB,
dated as of the Closing, in substantially the form of Exhibit 2 hereto.

(e) FAIRNESS OPINION. First Banking shall have received from
The Carson Medlin Company a letter dated no more than 5 business days prior to
the date of the Proxy Statement, to the effect that, in the opinion of such
firm, the Merger is fair, from a financial point of view, to the First Banking
shareholders.

(f) CLAIMS/INDEMNIFICATION LETTERS. Each of the directors
and officers of FNB shall have executed and delivered to First Banking letters
in substantially the form of Exhibit 3 hereto.

(h) DISSENTING SHARES. The aggregate number of shares of FNB
Common Stock dissenting to the Merger shall not exceed 15,506 shares.

9.3 CONDITIONS TO OBLIGATIONS OF FNB. The obligations of FNB to
perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following
conditions, unless waived by FNB pursuant to Section 11.6(b) of this Agreement:

(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of First Banking set forth or referred to in this Agreement shall be
true and correct in all material respects as of the date of this Agreement and
as of the Effective Time with the same effect as though all such
representations and warranties had been made on and as of the Effective Time
(provided that representations and warranties which are confined to a specified
date shall speak only as of such date), except (i) as expressly contemplated by
this Agreement, or (ii) for representations and warranties (other than the
representations and warranties set forth in Section 6.3 of this Agreement,
which shall be true in all material respects) the inaccuracies of which relate
to matters that are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on First Banking.

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(b) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of
the agreements and covenants of First Banking to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby prior
to the Effective Time shall have been duly performed and complied with in all
material respects.

(c) CERTIFICATES. First Banking shall have delivered to FNB
(i) a certificate, dated as of the Effective Time and signed on its behalf by
its chief executive officer and its chief financial officer, to the effect
that, to their knowledge (except, with respect to the representations in
Section 6.11, their actual knowledge without inquiry), the conditions of its
obligations set forth in Section 9.3(a) and 9.3(b) of this Agreement have been
satisfied, and (ii) certified copies of resolutions duly adopted by First
Banking's Board of Directors evidencing the taking of all corporate action
necessary to authorize the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby, all in
such reasonable detail as FNB and its counsel shall request.

(d) OPINION OF COUNSEL. First Banking shall have delivered
to FNB an opinion of Powell, Goldstein, Frazer & Murphy, counsel to First
Banking, dated as of the Closing in substantially the form of Exhibit 4 hereto.

(e) FAIRNESS OPINION. FNB shall have received from Stevens &
Company a letter, dated not more than 5 business days prior to the date of the
Proxy Statement, to the effect that, in the opinion of such firm, the
consideration to be received by FNB shareholders and option holders in
connection with the Merger is fair, from a financial point of view, to such
shareholders and option holders.

ARTICLE 10
TERMINATION

10.1 TERMINATION. Notwithstanding any other provision of this
Agreement, and notwithstanding the approval of this Agreement by the
shareholders of FNB, this Agreement may be terminated and the Merger abandoned
at any time prior to the Effective Time:

(a) By mutual consent of the Board of Directors of First
Banking and the Board of Directors of FNB; or

(b) By the Board of Directors of either Party (provided that
the terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the
event of a breach by the other Party of any representation or warranty
contained in this Agreement which cannot be or has not been cured within 30
days after the giving of written notice to the breaching Party of such breach
and which breach would provide the non-breaching party the ability to refuse to
consummate the Merger under the standard set forth in Section 9.2(a) of this
Agreement in the case of First Banking and Section 9.3(a) of this Agreement in
the case of FNB; or

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(c) By the Board of Directors of either Party (provided that
the terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the
event of a material breach by the other Party of any covenant or agreement
contained in this Agreement which cannot be or has not been cured within 30
days after the giving of written notice to the breaching Party of such breach;
or

(d) By the Board of Directors of either Party (provided that
the terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the
event (i) any Consent of any Regulatory Authority required for consummation of
the Merger and the other transactions contemplated hereby shall have been
denied by final nonappealable action of such authority or if any action taken
by such authority is not appealed within the time limit for appeal, or (ii) if
the shareholders of FNB fail to vote their approval of this Agreement and the
transactions contemplated hereby as required by the GBCC at the Shareholders'
Meeting where the transactions were presented to such shareholders for approval
and voted upon; or

(e) By the Board of Directors of either Party in the event
that the Merger shall not have been consummated by September 30, 1996, but only
if the failure to consummate the transactions contemplated hereby on or before
such date is not caused by any breach of this Agreement by the Party electing
to terminate pursuant to this Section 10.1(e); or

(f) By the Board of Directors of either Party (provided that
the terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the
event that any of the conditions precedent to the obligations of such Party to
consummate the Merger cannot be satisfied or fulfilled by the date specified in
Section 10.1(e) of this Agreement; or

(g) By the Board of Directors of either Party in the event
actions have been taken to preclude the accounting for the Merger as pooling of
interest; or

(h) By the Board of Directors of FNB if the closing price of
a share of common stock of First Banking falls below $20 per share (adjusted as
provided in Section 3.2 hereof) on any trading day during the 20 trading days
prior to the scheduled Effective Time (and First Banking agrees promptly to
notify FNB in such event), provided that FNB shall give First Banking written
notice of its election to terminate this Agreement not later than 5:00 p.m. on
the fourth trading day following the day on which the closing price falls below
$20 per share; or

(i) By the Board of Directors of either Party, at any time
prior to the fifth day after execution of this Agreement without any Liability
in the event that the review of the disclosures contained in the other Party's
Disclosure Memorandum causes its Board of Directors to determine, in its
reasonable good faith judgment, that a fact or circumstance exists or is likely
to exist or result which materially and adversely impacts the economic benefits
to it of the transaction contemplated by this Agreement so as to render
inadvisable the consummation of the Merger.

10.2 EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to Section 10.1 of this Agreement, this
Agreement shall become void and have

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no effect, except that (a) the provisions of this Section 10.2 and Article
Eleven and Section 8.6(b) of this Agreement shall survive any such termination
and abandonment, and (b) a termination pursuant to Sections 10.1(b), 10.1(c) or
10.1(f) of this Agreement shall not relieve the breaching Party from Liability
for an uncured willful breach of a representation, warranty, covenant, or
agreement giving rise to such termination.

10.3 NON-SURVIVAL OF REPRESENTATIONS AND COVENANTS. The respective
representations, warranties, obligations, covenants, and agreements of the
Parties shall not survive the Effective Time except for this Section 10.3 and
Articles Two, Three, Four and Eleven and Sections 8.10 and 8.12 of this
Agreement.

ARTICLE 11
MISCELLANEOUS

11.1 DEFINITIONS. Except as otherwise provided herein, the
capitalized terms set forth below (in their singular and plural forms as
applicable) shall have the following meanings:

"1933 ACT" shall mean the Securities Act of 1933, as amended.

"1934 ACT" shall mean the Securities Exchange Act of 1934, as
amended.

"ACQUISITION PROPOSAL" with respect to a Party shall mean any
tender offer or exchange offer or any proposal for a merger, acquisition
of all of the stock or Assets of, or other business combination
involving such Party or any of its Subsidiaries or the acquisition of a
substantial equity interest in, or a substantial portion of the Assets
of such Party or any of its Subsidiaries.

"AFFILIATE" of a Person shall mean: (a) any other Person
directly, or indirectly through one or more intermediaries, controlling,
controlled by or under common control with such Person or (b) any
officer, director, partner, employer, or direct or indirect beneficial
owner of any 10% or greater equity or voting interest of such Person.

"AGREEMENT" shall mean this Agreement and Plan of Merger and the
Exhibits delivered pursuant hereto and incorporated herein by reference.

"ALLOWANCE" shall have the meaning provided in Section 5.9 of
this Agreement.

"ASSETS" of a Person shall mean all of the assets, properties,
businesses and rights of such Person of every kind, nature, character
and description, whether real, personal or mixed, tangible or
intangible, accrued or contingent, or otherwise relating to or utilized
in such Person's business, directly or indirectly, in whole or in part,
whether or not carried on the books and records of such Person, and
whether or not owned in the name of such Person or any Affiliate of such
Person and wherever located.

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"BHC ACT" shall mean the federal Bank Holding Company Act of
1956, as amended.

"CLOSING" shall mean the closing of the transactions
contemplated hereby, as described in Section 1.2 of this Agreement.

"CONFIDENTIALITY AGREEMENT" shall mean that certain Letter of
Intent, dated February 21, 1995, between FNB and First Banking.

"CONSENT" shall mean any consent, approval, authorization,
clearance, exemption, waiver, or similar affirmation by any Person
pursuant to any Contract, Law, Order, or Permit.

"CONTRACT" shall mean any written or oral agreement,
arrangement, authorization, commitment, contract, indenture, instrument,
lease, obligation, plan, practice, restriction, understanding or
undertaking of any kind or character, or other document to which any
Person is a party or that is binding on any Person or its capital stock,
Assets or business.

"DEFAULT" shall mean (a) any breach or violation of or default
under any Contract, Order or Permit, (b) any occurrence of any event
that with the passage of time or the giving of notice or both would
constitute a breach or violation of or default under any Contract, Order
or Permit, or (c) any occurrence of any event that with or without the
passage of time or the giving of notice would give rise to a right to
terminate or revoke, change the current terms of, or renegotiate, or to
accelerate, increase, or impose any Liability under, any Contract, Order
or Permit.

"EFFECTIVE TIME" shall mean the date and time at which the
Merger becomes effective as defined in Section 1.3 of this Agreement.

"ENVIRONMENTAL LAWS" shall mean all Laws which are administered,
interpreted or enforced by the United States Environmental Protection
Agency and state and local agencies with primary jurisdiction over
pollution or protection of the environment.

"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.

"ERISA AFFILIATE" shall have the meaning provided in Section
5.14 of this Agreement.

"ERISA PLAN" shall have the meaning provided in Section 5.14 of
this Agreement.

"EXCHANGE AGENT" shall have the meaning provided in Section 4.1
of this Agreement.

"EXHIBITS" 1 through 3, inclusive, shall mean the Exhibits so
marked, copies of which are attached to this Agreement. Such Exhibits
are hereby incorporated by reference herein and made a part hereof and
may be referred to in this Agreement and any other related instrument or
document without being attached hereto.

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"FIRST BANKING BENEFIT PLANS" shall have the meaning set forth
in Section 6.14 of this Agreement.

"FIRST BANKING FINANCIAL STATEMENTS" shall mean (i) the
consolidated statements of condition (including related notes and
schedules, if any) of First Banking as of December 31, 1995 and 1994,
and the related statements of income, changes in shareholders' equity,
and cash flows (including related notes and schedules, if any) for each
of the three years ended December 31, 1995, 1994 and 1993, as filed by
First Banking in SEC Documents and (ii) the consolidated statements of
condition of First Banking (including related notes and schedules, if
any) and related statements of income, changes in shareholders' equity,
and cash flows (including related notes and schedules, if any) included
in SEC Documents filed with respect to periods ended subsequent to
December 31, 1995.

"FIRST BANKING COMPANIES" shall mean, collectively, First
Banking and all First Banking Subsidiaries.

"FIRST BANKING COMMON STOCK" shall mean the $1.00 par value
common stock of First Banking.

"FIRST BANKING STOCK PLANS" shall mean the existing stock option
and other stock-based compensation plans.

"FIRST BANKING SUBSIDIARIES" shall mean the Subsidiaries of
First Banking.

"FNB BENEFIT PLANS" shall have the meaning set forth in Section
5.14 of this Agreement.

"FNB COMPANIES" shall mean, collectively, FNB and all FNB
Subsidiaries.

"FNB COMMON STOCK" shall mean the $.01 par value common stock of
FNB.

"FNB EFFINGHAM" shall mean First National Bank of Effingham, a
national bank and a FNB Subsidiary.

"FNB FINANCIAL STATEMENTS" shall mean (a) the consolidated
balance sheets (including related notes and schedules, if any) of FNB or
FNB Effingham, as the case may be, as of December 31, 1995 and December
31, 1994, and the related statements of income, changes in shareholders'
equity, and cash flows (including related notes and schedules, if any)
for each of the three fiscal years ended December 31, 1995, 1994 and
1993, as audited by McNair, McLemore, Middlebrooks & Co., and (b) the
consolidated balance sheets of FNB (including related notes and
schedules, if any) and related statements of income, changes in
shareholders' equity, and cash flows (including related notes and
schedules, if any) included in FNB Effingham's Reports of Condition and
Income filed with respect to periods ended subsequent to December 31,
1995.

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"FNB STOCK PLANS" shall mean the existing stock option and other
stock-based compensation plans of FNB.

"FNB SUBSIDIARIES" shall mean the Subsidiaries of FNB, which
shall include the FNB Subsidiaries described in Section 5.4 of this
Agreement and any Person acquired as a Subsidiary of FNB in the future
and owned by FNB at the Effective Time.

"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.

"GBCC" shall mean the Georgia Business Corporation Code.

"GEORGIA ARTICLES OF MERGER" shall mean the Articles of Merger
to be executed by First Banking and filed with the Secretary of State of
the State of Georgia relating to the Merger as contemplated by Section
1.1 of this Agreement.

"HAZARDOUS MATERIAL" shall mean any pollutant, contaminant, or
hazardous substance within the meaning of the Comprehensive Environment
Response, Compensation, and Liability Act, 42 U.S.C. Section 9601 et
seq., or any similar federal, state or local Law.

"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of
1986, as amended, and the rules and regulations promulgated thereunder.

"IRS" shall mean the Internal Revenue Service.

"KNOWLEDGE" as used with respect to a Person shall mean the
knowledge after due inquiry of the Chairman, President, Chief Financial
Officer, Chief Accounting Officer, Chief Credit Officer, General
Counsel, any Assistant or Deputy General Counsel, or any Senior or
Executive Vice President of such Person or any subsidiary of such
Person.

"LAW" shall mean any code, law, ordinance, regulation, reporting
or licensing requirement, rule, or statute applicable to a Person or its
Assets, Liabilities or business, including, without limitation, those
promulgated, interpreted or enforced by any of the Regulatory
Authorities.

"LIABILITY" shall mean any direct or indirect, primary or
secondary, liability, indebtedness, obligation, penalty, cost or expense
(including, without limitation, costs of investigation, collection and
defense), claim, deficiency, guaranty or endorsement of or by any Person
(other than endorsements of notes, bills, checks, and drafts presented
for collection or deposit in the ordinary course of business) of any
type, whether accrued, absolute or contingent, liquidated or
unliquidated, matured or unmatured, or otherwise.

"LIEN" shall mean any conditional sale agreement, default of
title, easement, encroachment, encumbrance, hypothecation, infringement,
lien, mortgage, pledge, reservation, restriction, security interest,
title retention or other security arrangement, or any adverse right or
interest, charge, or claim of any nature whatsoever of, on, or with
respect

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to any property or property interest, other than (i) Liens for current
property Taxes not yet due and payable, (ii) for depository institution
Subsidiaries of a Party, pledges to secure deposits and other Liens
incurred in the ordinary course of the banking business, and (iii) Liens
which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on a Party.

"LITIGATION" shall mean any action, arbitration, cause of
action, claim, complaint, criminal prosecution, demand letter,
governmental or other examination or investigation, hearing, inquiry,
administrative or other proceeding, or notice (written or oral) by any
Person alleging potential Liability or requesting information relating
to or affecting a Party, its business, its Assets (including, without
limitation, Contracts related to it), or the transactions contemplated
by this Agreement, but shall not include regular, periodic examinations
of depository institutions and their Affiliates by Regulatory
Authorities.

"LOAN PROPERTY" shall mean any property owned by the Party in
question or by any of its Subsidiaries or in which such Party or
Subsidiary holds a security interest, and, where required by the
context, includes the owner or operator of such property, but only with
respect to such property.

"MATERIAL" for purposes of this Agreement shall be determined in
light of the facts and circumstances of the matter in question; provided
that any specific monetary amount stated in this Agreement shall
determine materiality in that instance.

"MATERIAL ADVERSE EFFECT" on a Party shall mean an event, change
or occurrence which has a material adverse impact on (a) the financial
position, business, or results of operations of such Party and its
Subsidiaries, taken as a whole, or (b) the ability of such Party to
perform its obligations under this Agreement or to consummate the Merger
or the other transactions contemplated by this Agreement, provided that
"material adverse impact" shall not be deemed to include the impact of
(x) changes in banking and similar Laws of general applicability or
interpretations thereof by courts or governmental authorities, (y)
changes in generally accepted accounting principles or regulatory
accounting principles generally applicable to banks and their holding
companies, and (z) the Merger and compliance with the provisions of this
Agreement on the operating performance of the Parties.

"MERGER" shall mean the merger of FNB with and into First
Banking referred to in Section 1.1 of this Agreement.

"NASD" shall mean the National Association of Securities
Dealers, Inc.

"NASDAQ/NMS" shall mean the National Market System of the
National Association of Securities Dealers Automated Quotations System.

"ORDER" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi- judicial decision or award, ruling,
or writ of any federal, state, local

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or foreign or other court, arbitrator, mediator, tribunal,
administrative agency or Regulatory Authority.

"PARTICIPATION FACILITY" shall mean any facility or property in
which the Party in question or any of its Subsidiaries participates in
the management (including any property or facility held in a joint
venture) and, where required by the context, the term means the owner or
operator of such facility or property, but only with respect to such
facility or property.

"PARTY" shall mean either FNB or First Banking, and "Parties"
shall mean both FNB and First Banking.

"PERMIT" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing,
franchise, license, notice, permit, or right to which any Person is a
party or that is or may be binding upon or inure to the benefit of any
Person or its capital stock, Assets, Liabilities, or business.

"PERSON" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability
company, trust, business association, group acting in concert, or any
person acting in a representative capacity.

"PREVIOUSLY DISCLOSED" shall mean information (a) delivered in
writing prior to the date of this Agreement in the manner and to the
Party and counsel described in Section 11.8 of this Agreement and
describing in reasonable detail the matters contained therein, provided
that in the case of Subsidiaries acquired after the date of this
Agreement, such information may be so delivered by the acquiring Party
to the other Party prior to the date of such acquisition, or (b)
disclosed prior to the date of this Agreement by one Party to the other
in an SEC Document delivered to such other Party and such counsel
described in Section 11.8 of this Agreement in which the specific
information has been identified by the Party making the disclosure, or
(c) in the case of information pertaining to FNB Effingham, matters
specifically disclosed to James Eli Hodges or Perry Smith prior to the
date hereof by any Effingham director, Larry D. Weddle, Carolyn
Williamson or David Atkins.

"PROXY STATEMENT" shall mean the proxy statement used by FNB to
solicit the approval of its shareholders of the transactions
contemplated by this Agreement and shall include the prospectus of First
Banking relating to shares of First Banking Common Stock to be issued to
the shareholders of FNB.

"REGISTRATION STATEMENT" shall mean the Registration Statement
on Form S-4, or other appropriate form, filed with the SEC by First
Banking under the 1933 Act in connection with the transactions
contemplated by this Agreement.

"REGULATORY AUTHORITIES" shall mean, collectively, the Federal
Trade Commission, the United States Department of Justice, the Board of
the Governors of the Federal Reserve System, the Office of the
Comptroller of the Currency, the Federal Deposit Insurance

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Corporation, all state regulatory agencies having jurisdiction over the
Parties and their respective Subsidiaries, the NASD, and the SEC.

"SEC DOCUMENTS" shall mean all reports and registration
statements filed, or required to be filed, by a Party or any of its
Subsidiaries with any Regulatory Authority pursuant to the Securities
Laws.

"SECURITIES LAWS" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act
of 1940, as amended, the Trust Indenture Act of 1939, as amended, and
the rules and regulations of any Regulatory Authority promulgated
thereunder.

"SHAREHOLDERS' MEETING" shall mean the meeting of the
shareholders of FNB to be held pursuant to Section 8.1 of this
Agreement, including any adjournment or adjournments thereof.

"SUBSIDIARIES" shall mean all those corporations, banks,
associations, or other entities of which the entity in question owns or
controls 5% or more of the outstanding equity securities either directly
or through an unbroken chain of entities as to each of which 5% or more
of the outstanding equity securities is owned directly or indirectly by
its parent; provided, however, there shall not be included any such
entity acquired through foreclosure or any such entity the equity
securities of which are owned or controlled in a fiduciary capacity.

"SURVIVING CORPORATION" shall mean First Banking as the
surviving corporation resulting from the Merger.

"TAXES" shall mean any federal, state, county, local, foreign
and other taxes, assessments, charges, fares, and impositions, including
interest and penalties thereon or with respect thereto.

11.2 EXPENSES. Except as otherwise provided in this Section 11.2,
each of the Parties shall bear and pay all direct costs and expenses incurred
by it or on its behalf in connection with the transactions contemplated
hereunder, including filing, registration and application fees, printing fees,
and fees and expenses of its own financial or other consultants, investment
bankers, accountants, and counsel, except (a) that each of the Parties shall
bear and pay one- half of the filing fees payable in connection with the
Registration Statement and the Proxy Statement and printing costs incurred in
connection with the printing of the Registration Statement and the Proxy
Statement and (b) that to the extent First Banking terminates this Agreement
for any reason other than (i) a breach by FNB of a representation, warranty,
term or condition of this Agreement or (ii) an event, change or occurrence
which has a Material Adverse Effect on FNB, then First Banking shall reimburse
FNB for all of its costs and expenses incurred in connection with the Merger
and paid to third parties.

11.3 BROKERS AND FINDERS. Except for Stevens & Company as to FNB
(whose fee will not exceed 1.5% of the total consideration paid pursuant to
this Agreement) and except for The Carson Medlin Company as to First Banking,
each of the Parties represents and warrants that neither

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it nor any of its officers, directors, employees, or Affiliates has employed
any broker or finder or incurred any Liability for any financial advisory fees,
investment bankers' fees, brokerage fees, commissions, or finders' fees in
connection with this Agreement or the transactions contemplated hereby. In the
event of a claim by any broker or finder based upon its representing or being
retained by or allegedly representing or being retained by FNB or First
Banking, each of FNB and First Banking, as the case may be, agrees to indemnify
and hold the other Party harmless of and from any Liability in respect of any
such claim.

11.4 ENTIRE AGREEMENT. Except as otherwise expressly provided
herein, this Agreement (including the documents and instruments referred to
herein) constitutes the entire agreement between the Parties with respect to
the transactions contemplated hereunder and supersedes all prior arrangements
or understandings with respect thereto, written or oral (except, as to Section
8.6(b) of this Agreement, with respect to the Confidentiality Agreement).
Nothing in this Agreement expressed or implied, is intended to confer upon any
Person, other than the Parties or their respective successors, any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
other than as provided in Section 8.12 of this Agreement.

11.5 AMENDMENTS. To the extent permitted by Law, this Agreement may
be amended by a subsequent writing signed by each of the Parties upon the
approval of the Boards of Directors of each of the Parties; provided, however,
that after any such approval by the holders of FNB Common Stock, there shall be
made no amendment decreasing the consideration to be received by FNB
shareholders without the further approval of such shareholders.

11.6 WAIVERS.

(a) Prior to or at the Effective Time, First Banking, acting
through its Board of Directors, chief executive officer or other authorized
officer, shall have the right to waive any Default in the performance of any
term of this Agreement by FNB, to waive or extend the time for the compliance
or fulfillment by FNB of any and all of its obligations under this Agreement,
and to waive any or all of the conditions precedent to the obligations of First
Banking under this Agreement, except any condition which, if not satisfied,
would result in the violation of any Law. No such waiver shall be effective
unless in writing signed by a duly authorized officer of First Banking.

(b) Prior to or at the Effective Time, FNB, acting through
its Board of Directors, chief executive officer or other authorized officer,
shall have the right to waive any Default in the performance of any term of
this Agreement by First Banking, to waive or extend the time for the compliance
or fulfillment by First Banking of any and all of its obligations under this
Agreement, and to waive any or all of the conditions precedent to the
obligations of FNB under this Agreement, except any condition which, if not
satisfied, would result in the violation of any Law. No such waiver shall be
effective unless in writing signed by a duly authorized officer of FNB.

(c) The failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
Party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained
in this Agreement in one or more instances shall be deemed to be or construed
as a further

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or continuing waiver of such condition or breach or a waiver of any other
condition or of the breach of any other term of this Agreement.

11.7 ASSIGNMENT. Except as expressly contemplated hereby, neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any Party hereto (whether by operation of Law or otherwise)
without the prior written consent of the other Party. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the Parties and their respective successors and assigns.

11.8 NOTICES. All notices or other communications which are required
or permitted hereunder shall be in writing and sufficient if delivered by hand,
by facsimile transmission, by registered or certified mail, postage pre- paid,
or by courier or overnight carrier, to the persons at the addresses set forth
below (or at such other address as may be provided hereunder), and shall be
deemed to have been delivered as of the date so delivered:

First Banking: First Banking Company of Southeast Georgia
40 North Main Street
P.O. Box 878
Statesboro, Georgia 30458
Telecopy Number: (912) 489-5241

Attention: James Eli Hodges
President

Copy to Counsel: Powell, Goldstein, Frazer & Murphy
Sixteenth Floor
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
Telecopy Number: (404) 572-5958

Attention: Walter G. Moeling, IV

FNB: FNB Bancshares, Inc.
501 S. Laurel Street
Springfield, Georgia 31329-1045
Telecopy Number: (912) 754-7509

Attention: Larry D. Weddle

Copy to Counsel: Nelson, Mullins, Riley & Scarborough
400 Colony Square, Suite 2200
1201 Peachtree Street
Atlanta, Georgia 30361
Telecopy Number: (404) 817-6151

Attention: Glenn W. Sturm and
Neil E. Grayson

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11.9 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the Laws of the State of Georgia, without regard
to any applicable conflicts of Laws, except to the extent that the federal laws
of the United States may apply to the Merger.

11.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.

11.11 CAPTIONS. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.

11.12 ENFORCEMENT OF AGREEMENT. The Parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the Parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.

11.13 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.

IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf and its corporate seal to be hereunto affixed and
attested by its officers as of the day and year first above written.

ATTEST: FIRST BANKING COMPANY OF SOUTHEAST
GEORGIA

/s/ Dwayne E. Rocker By: /s/ James Eli Hodges
- ----------------------------------- ------------------------------
Secretary James Eli Hodges
President

[CORPORATE SEAL]

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FNB BANCSHARES, INC.

By: /s/ Carolyn Williamson
-----------------------------
Carolyn Williamson
Secretary
[CORPORATE SEAL]

DIRECTORS:

- ------------------------------------ ----------------------------------
Allen Hollis Raymon M. Starling

- ------------------------------------ ----------------------------------
W. Darrel Hutcheson Thomas D. Stewart, Jr.

- ------------------------------------ ----------------------------------
Roger C. Macomber Wilhelmina A. Webb

- ------------------------------------ ----------------------------------
Neil W. Ratchford Larry D. Weddle

- ------------------------------------
Ted O. Romine

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EXHIBIT 1
AFFILIATE AGREEMENT

First Banking Company of Southeast Georgia
40 North Main Street
Statesboro, Georgia 30458

Attention: James E. Hodges
President and Chief Executive Officer

Ladies and Gentlemen:

The undersigned is a shareholder of FNB Bancshares, Inc. ("FNB"), a
corporation organized and existing under the laws of the State of Georgia and
located in Springfield, Georgia, and will become a shareholder of First Banking
Company of Southeast Georgia ("First Banking") pursuant to the transactions
described in the Agreement and Plan of Merger, dated as of March 13, 1995 (the
"Agreement"), by and between First Banking and FNB. Under the terms of the
Agreement, FNB will be merged into First Banking (the "Merger") and the shares
of the $.01 par value common stock of FNB ("FNB Common Stock") will be
converted into shares of the $1.00 par value common stock of First Banking
("First Banking Common Stock"). This Affiliate Agreement represents an
agreement between the undersigned and First Banking regarding certain rights
and obligations of the undersigned in connection with the shares of First
Banking to be received by the undersigned as a result of the Merger.

In consideration of the Merger and the mutual covenants contained
herein, the undersigned and First Banking hereby agree as follows:

(a) Affiliate Status. The undersigned understands and
agrees that as to FNB the undersigned is an "affiliate" under Rule 145(c) as
defined in Rule 405 of the Rules and Regulations of the Securities and Exchange
Commission ("SEC") under the Securities Act of 1933, as amended ("1933 Act"),
and the undersigned anticipates that the undersigned will be such an
"affiliate" at the time of the Merger.

(b) Initial Restriction on Disposition. The undersigned
agrees that the undersigned will not, except by operation of law, by will or
under the laws of descent and distribution, sell, transfer, or otherwise
dispose of the undersigned's interests in, or reduce the undersigned's risk
relative to, any of the shares of First Banking Common Stock into which the
undersigned's shares of FNB Common Stock are converted upon consummation of the
Merger until such time as First Banking notifies the undersigned that the
requirements of SEC Accounting Series Release Nos. 130 and 135 ("ASR 130 and
135") have been met. The undersigned understands that ASR 130 and 135 relate
to publication of financial results of post-Merger combined operations of First
Banking and FNB. First Banking agrees that it will publish such results within
45 days after the end of the first fiscal quarter of First Banking containing
the required period of post-Merger combined operations and that it will notify
the undersigned promptly following such publication.

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<PAGE> 163

During the 30 days immediately preceding the
effective time of the Merger, the undersigned will not, except by
operation of law, by will, or under the laws of descent and
distribution, sell, transfer, or otherwise dispose of the
undersigned's interests in, or reduce the undersigned's risk relative
to, any of the shares of FNB Common Stock beneficially owned by the
undersigned as of the date of the shareholders' meeting of FNB held to
approve the Merger.

The First Banking Common Stock received by the
undersigned as a result of the Merger will be taken for the
undersigned's own account and not for others, directly or indirectly,
in whole or in part.

First Banking has informed the undersigned that any
distribution by the undersigned of First Banking Common Stock has not
been registered under the 1933 Act and that shares of First Banking
Common Stock received pursuant to the Merger can only be sold by the
undersigned (1) following registration under the 1933 Act, or (2) in
conformity with the volume and other requirements of Rule 145(d)
promulgated by the SEC as the same now exist or may hereafter be
amended, or (3) to the extent some other exemption from registration
under the 1933 Act might be available. The undersigned understands
that First Banking is under no obligation to file a registration
statement with the SEC covering the disposition of the undersigned's
shares of First Banking Common Stock.

The undersigned is aware that First Banking intends
to treat the Merger as a tax-free reorganization under Section 368 of
the Internal Revenue Code ("Code") for federal income tax purposes.
The undersigned agrees to treat the transaction in the same manner as
First Banking for federal income tax purposes. The undersigned
acknowledges that Section 1.368-1(b) of the Income Tax Regulations
requires "continuity of interest" in order for the Merger to be
treated as tax-free under Section 368 of the Code. This requirement
is satisfied if, taking into account those FNB shareholders who
receive cash in exchange for their stock, who receive cash in lieu of
fractional shares, or who dissent from the Merger, there is no plan or
intention on the part of the FNB shareholders to sell or otherwise
dispose of the First Banking Common Stock to be received in the Merger
that will reduce such shareholders' ownership to a number of shares
having, in the aggregate, a value at the time of the Merger of less
than 50% of the total fair market value of the FNB Common Stock
outstanding immediately prior to the Merger. The undersigned has no
prearrangement, plan, or intention to sell or otherwise dispose of an
amount of the undersigned's First Banking Common Stock to be received
in the Merger which would cause the foregoing requirement not to be
satisfied.

(d) Restrictions on Transfer. The undersigned
understands and agrees that stop transfer instructions with respect to the
shares of First Banking Common Stock received by the undersigned pursuant to
the Merger will be given to First Banking's Transfer Agent and that there will
be placed on the certificates for such shares, or shares issued in substitution
thereof, a legend stating in substance:

"The shares represented by this certificate were issued pursuant to a
business combination which is accounted for as a "pooling of
interests" and may not be sold, nor may the owner thereof reduce his
risks relative thereto in any way, until such time as First Banking
Company of Southeast Georgia ("First Banking") has published the
financial results covering at least 30 days of combined operations
after the

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<PAGE> 164

effective date of the merger through which the business combination
was effected. In addition, the shares represented by this certificate
may not be sold, transferred, or otherwise disposed of except or
unless (1) covered by an effective registration statement under the
Securities Act of 1933, as amended, (2) in accordance with (i) Rule
145(d) (in the case of shares issued to an individual who is not an
affiliate of First Banking) or (ii) Rule 144 (in the case of shares
issued to an individual who is an affiliate of First Banking) of the
Rules and Regulations of such Act, or (3) in accordance with a legal
opinion satisfactory to counsel for First Banking that such sale or
transfer is otherwise exempt from the registration requirements of
such Act."

Such legend will also be placed on any certificate representing First Banking
securities issued subsequent to the original issuance of the First Banking
Common Stock pursuant to the Merger as a result of any stock dividend, stock
split, or other recapitalization as long as the First Banking Common Stock
issued to the undersigned pursuant to the Merger has not been transferred in
such manner to justify the removal of the legend therefrom. If the provisions
of Rules 144 and 145 are amended to eliminate restrictions applicable to the
First Banking Common Stock received by the undersigned pursuant to the Merger,
or at the expiration of the restrictive period set forth in Rule 145(d), First
Banking, upon the request of the undersigned, will cause the certificates
representing the shares of First Banking Common Stock issued to the undersigned
in connection with the Merger to be reissued free of any legend relating to the
restrictions set forth in Rules 144 and 145(d) upon receipt by First Banking of
an opinion of its counsel to the effect that such legend may be removed.

(e) Understanding of Restrictions on Dispositions. The
undersigned has carefully read the Agreement and this Affiliate Agreement and
discussed their requirements and impact upon his ability to sell, transfer, or
otherwise dispose of the shares of First Banking Common Stock received by the
undersigned, to the extent the undersigned believes necessary, with the
undersigned's counsel or counsel for FNB.

(f) Filing of Reports by First Banking. First Banking
agrees, for a period of three years after the effective date of the Merger, to
file on a timely basis all reports required to be filed by it pursuant to
Section 13 of the Securities Exchange Act of 1934, as amended, so that the
public information provisions of Rule 145(d) promulgated by the SEC as the same
are presently in effect will be available to the undersigned in the event the
undersigned desires to transfer any shares of First Banking Common Stock issued
to the undersigned pursuant to the Merger.

(g) Transfer Under Rule 145(d). If the undersigned
desires to sell or otherwise transfer the shares of First Banking Common Stock
received by the undersigned in connection with the Merger at any time during
the restrictive period set forth in Rule 145(d), the undersigned will provide
the necessary representation letter to the transfer agent for First Banking
Common Stock together with such additional information as the transfer agent
may reasonably request. If First Banking's counsel concludes that such
proposed sale or transfer complies with the requirements of Rule 145(d), First
Banking shall cause such counsel to provide such opinions as may be necessary
to First Banking's Transfer Agent so that the undersigned may complete the
proposed sale or transfer.

(h) Acknowledgments. The undersigned recognizes and
agrees that the foregoing provisions also apply to (i) the undersigned's
spouse, (ii) any relative of the undersigned or of the undersigned's spouse who
has the same home as the undersigned, (iii) any trust or estate in which the
undersigned, the undersigned's spouse, and any such relative collectively own
at least a 10%

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<PAGE> 165

beneficial interest or of which any of the foregoing serves as trustee,
executor, or in any similar capacity, and (iv) any corporation or other
organization in which the undersigned, the undersigned's spouse and any such
relative collectively own at least 10% of any class of equity securities or of
the equity interest. The undersigned further recognizes that, in the event
that the undersigned is a director or officer of First Banking or becomes a
director or officer of First Banking upon consummation of the Merger, among
other things, any sale of First Banking Common Stock by the undersigned within
a period of less than six months following the effective time of the Merger may
subject the undersigned to liability pursuant to Section 16(b) of the
Securities Exchange Act of 1934, as amended.

(i) Miscellaneous. This Affiliate Agreement is the
complete agreement between First Banking and the undersigned concerning the
subject matter hereof. Any notice required to be sent to any party hereunder
shall be sent by registered or certified mail, return receipt requested, using
the addresses set forth herein or such other address as shall be furnished in
writing by the parties. This Affiliate Agreement shall be governed by the laws
of the State of Delaware.

This Affiliate Agreement is executed as of the ____ day of_____________, 1995.

Very truly yours,

---------------------------
Signature

=--------------------------
Print Name

AGREED TO AND ACCEPTED as of
, 1995
- ----------------------------------

FIRST BANKING COMPANY OF SOUTHEAST GEORGIA

By:
---------------------------------------
James E. Hodges
President and Chief Executive Officer

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<PAGE> 166

EXHIBIT 2
MATTERS AS TO WHICH
NELSON, MULLINS, RILEY & SCARBOROUGH,
COUNSEL TO FNB, WILL OPINE*

1. FNB is a corporation duly organized, existing and in good
standing under the laws of the State of Georgia with corporate power and
authority to conduct its business as now conducted and to own and use its
Assets.

2. FNB's authorized capital stock consists of 5,000,000 shares of
FNB Common Stock, of which 310,114 shares were outstanding as of the date
hereof. The outstanding shares of FNB Common Stock are duly authorized and
validly issued and fully paid and nonassessable, except that certificates for
FNB Common Stock have not been distributed to former shareholders of FNB
Effingham Common Stock who became FNB shareholders pursuant to the
Reorganization Agreement, dated December 9, 1993, between FNB and FNB
Effingham. None of the outstanding shares of FNB Common Stock has been issued
in violation of any statutory preemptive rights. Except as Previously
Disclosed in FNB's Disclosure Memorandum delivered March ____, 1995, to our
knowledge, there are no options, subscriptions, warrants, calls, rights or
commitments obligating FNB to issue equity securities or acquire its equity
securities.

3. The execution and delivery by FNB of the Agreement do not, and
if FNB were now to perform its obligations under the Agreement such performance
would not, result in any violation of the Articles of Incorporation or Bylaws
of FNB, or, to our knowledge, result in any breach of, or default or
acceleration under, any material Contract or Order to which FNB is a party or
by which FNB is bound.

4. FNB has duly authorized the execution and delivery of the
Agreement and all performance by FNB thereunder and has duly executed and
delivered the Agreement.

5. The Agreement is enforceable against FNB.

_______________________
*Pursuant to the January 1, 1992 edition of the Interpretive Standards
Applicable to Legal Opinions to Third Parties in Corporate Transactions adopted
by the Legal Opinion Committee of the Corporate and Banking Law Section of the
State Bar of Georgia.

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<PAGE> 167

EXHIBIT 3

CLAIMS/INDEMNIFICATION LETTER

_______________________, 1996

First Banking Company of Southeast Georgia
40 North Main Street
P.O. Box 878
Statesboro, Georgia 30458

Ladies and Gentlemen:

This letter is delivered pursuant to Section 9.2(g) of the Agreement
and Plan of Merger (the "Agreement"), dated as of March 13, 1996, by and
between First Banking Company of Southeast Georgia ("First Banking") and FNB
Bancshares, Inc. ("FNB") which provides for the merger (the "Merger") of FNB
with and into First Banking.

Concerning claims which I may have against FNB or its wholly-owned
subsidiary, First National Bank of Effingham ("First National"), in my capacity
as an officer or director:

(a) First Banking shall assume all liability (to the
extent FNB was so liable) for claims for indemnification arising under
FNB's Articles of Incorporation or Bylaws or under any indemnification
contract disclosed to First Banking, as existing on __________, 1996,
and for claims for salaries, wages or other compensation, employee
benefits, reimbursement of expenses, or worker's compensation arising
out of employment through the effective time of the Merger;

(b) First National shall retain all liability (to the
extent it was so liable) for claims for indemnification arising under
its Charter or Bylaws as existing on __________, 1996, and for claims
for salaries, wages, or other compensation, employee benefits,
reimbursement of expenses, or worker's compensation arising out of
employment through the effective time of the Merger;

(c) In my capacity as an officer or a director, I am not
aware that I have any claims (other than those referred to in
paragraphs (a) or (b) above) against FNB or First National (other than
as a result of routine deposit, loan and other banking services
conducted in the ordinary course of business with FNB or First
National, as applicable); and

(d) I hereby release FNB and First National from any and
all claims which I am aware that I have against either of them in my
capacity as an officer or a director, other than those referred to in
paragraphs (a) or (b) above.

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<PAGE> 168

First Banking Company of Southeast Georgia
____________________, 1996
Page 2

By executing this letter on behalf of First Banking, you shall
acknowledge the assumption by First Banking of the liabilities described in
paragraphs (a) and (b) above, except to the extent set forth in Section 8.12 of
the Merger Agreement.

Sincerely,

-----------------------------------
Signature of Officer or Director

-----------------------------------
Printed Name of Officer or Director

On behalf of First Banking, I hereby acknowledge receipt of this
letter and affirm the assumption by First Banking of the liabilities described
in paragraph (a) and (b) above, as of this _____ day of _______________, 1996.

FIRST BANKING COMPANY OF
SOUTHEAST GEORGIA

By:
------------------------------
James Eli Hodges
President

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<PAGE> 169

EXHIBIT 4
MATTERS AS TO WHICH
POWELL, GOLDSTEIN, FRAZER & MURPHY,
COUNSEL TO FIRST BANKING, WILL OPINE*

1. First Banking is a corporation duly organized, existing and in
good standing under the laws of the State of Georgia with corporate power and
authority to conduct its business as now conducted and to own and use its
Assets.

2. First Banking's authorized capital stock consists of 5,000,000
shares of First Banking Common Stock, of which 2,661,711 shares were
outstanding as of the date hereof. The outstanding shares of First Banking
Common Stock are, and all of the shares of First Banking Common Stock to be
issued in exchange for shares of FNB Common Stock upon consummation of the
Merger, when issued in accordance with the terms of the Agreement, will be,
duly authorized and validly issued and fully paid and nonassessable. None of
the outstanding shares of First Banking Common Stock has been, and none of the
shares of First Banking Common Stock to be issued in exchange for shares of FNB
Common Stock upon consummation of the Merger will be, issued in violation of
any statutory preemptive rights.

3. The execution and delivery by First Banking of the Agreement
do not, and if First Banking were now to perform its obligations under the
Agreement such performance would not, result in any violation of the Articles
of Incorporation or Bylaws of First Banking, or, to our knowledge, result in
any breach of, or default or acceleration under, any material Contract or Order
to which First Banking is a party or by which First Banking is bound.

4. First Banking has duly authorized the execution and delivery
of the Agreement and all performance by First Banking thereunder and has duly
executed and delivered the Agreement.

5. The Agreement is enforceable against First Banking.

____________________________
*Pursuant to the January 1, 1992 edition of the Interpretive Standards
Applicable to Legal Opinions to Third Parties in Corporate Transactions adopted
by the Legal Opinion Committee of the Corporate and Banking Law Section of the
State Bar of Georgia.

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APPENDIX B

OPINION OF STEVENS & COMPANY

STEVENS
& COMPANY MERGER AND ACQUISITION SERVICES

[DATE]

Board of Directors
FNB Bancshares, Inc.
501 S. Laurel Street
Springfield, Georgia 31329

Ladies and Gentlemen:

You have requested our opinion as to the fairness, from a financial
point of view, to the holders of shares of common stock, $.01 par value per
share (the "common stock") of FNB Bancshares, Inc. ("FNB") of the consideration
to be received by such stockholders in the proposed merger (the "Proposed
Merger") of FNB with First Banking Company of Southeast Georgia ("First
Banking") pursuant to the Agreement and Plan of Reorganization, dated March 13,
1996 (the "Agreement").

The Proposed Agreement provides for a merger (the "Merger") of FNB and
First Banking pursuant to which each share of common stock of FNB will be
converted into the right to receive .892 shares of common stock of First
Banking, with each warrant and option holder of FNB receiving .466 shares of
First Banking. The Board of Directors of FNB can terminate the proposed merger
if the closing price of a share of common stock of First Banking falls below
$20 per share on any trading day during the 20 trading days prior to the
scheduled effective time, as defined in the agreement.

Stevens & Company is a financial consulting and investment banking
firm that specializes in community bank transactions. We have represented both
buyers and sellers including those in five counties that are contiguous to
Effingham and Bulloch Counties. Stevens & Company is not affiliated with FNB
or First Banking. Stevens & Company has been retained on a contingency fee
basis.

In connection with rendering our opinion, we have reviewed and
analyzed, among other things, the following: (i) the Agreement, (ii) certain
public information on First Banking, including their audited financial
statements for the previous five years, (iii) the audited financial statements
for FNB for the previous five years, (iv) other information made available to
us by direct interviews with senior management of First Banking regarding the
management philosophy of the company, the liquidity of their stock, and their
future acquisition plans. We have also met with directors and management of
FNB, as well as with Nelson Mullins Riley & Scarborough, legal counsel for FNB,
to discuss the foregoing as well as other matters we believe relevant to our
inquiry.

In our review and analysis and in arriving at our opinion, we have
assumed and relied upon the accuracy and completeness of all of the financial
and other information provided to us by both FNB and First Banking.

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Board of Directors
FNB Bancshares, Inc.
[Date]

In conducting our analysis and arriving at our opinion, we have
considered such financial and other factors as we deemed appropriate under the
circumstances, including the following: (i) the historical as well as current
financial conditions and results of operations of FNB and First Banking,
including interest income, interest expense, net-interest margins, interest
sensitivity, non-interest income, dividends, book value, return on assets,
return on equity, non- performing assets, and reserve for loan losses; (ii) the
business prospects for both firms; (iii) the economy in the markets served;
(iv) the historical and current market for the securities of both firms; (v)
the nature and terms of certain transactions of certain other acquisition that
we feel to be relevant; and (vi) an analysis of the other potential candidates
that might be interested in the banking markets served by FNB.

Based on the above, we are of the opinion that the exchange ratio to
be received by the holders of FNB common stock in the Proposed Merger is fair,
as of the date hereof, from a financial point of view, to such shareholders.

This opinion is being delivered to the Board of Directors of FNB, and
is not to be reproduced or delivered to any third party without the expressed
written consent of Stevens & Company, except as required by law. However, it
is understood that this opinion may be included in its entirety in any
communication by the FNB or its Board of Directors to the FNB shareholders.

Very truly yours,

STEVENS & COMPANY

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APPENDIX C

ARTICLE 13 OF THE GEORGIA
BUSINESS CORPORATION CODE

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PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES

Section 14-2-1301. DEFINITIONS.

As used in this article, the term:

a. "Beneficial shareholder" means the person who is a
beneficial owner of shares held in a voting trust or by a nominee as
the record shareholder.

b. "Corporate Action" means the transaction or other
action by the corporation that creates dissenters' rights under the
Code Section 14-2-1302.

c. "Corporation" means the issuer of shares held by a
dissenter before the corporate action, or the surviving or acquiring
corporation by merger or share exchange of that issuer.

d. "Dissenter" means a shareholder who is entitled to
dissent from corporate action under Code Section 14-2-1302 and who
exercises that right when and in the manner required by Code Sections
14-2-1320 through 14-2-1327.

e. "Fair value," with respect to a dissenter's shares,
means the value of the shares immediately before the effectuation of
the corporate action to which the dissenter objects, excluding any
appreciation or depreciation in anticipation of the corporate action.

f. "Interest" means interest from the effective date of
the corporate action until the date of payment, at a rate that is fair
and equitable under all the circumstances.

g. "Record shareholder" means the person in whose name
shares are registered in the records of a corporation or the
beneficial owner of shares to the extent of the rights granted by a
nominee certificate on file with a corporation.

h. "Shareholder" means the record shareholder or the
beneficial shareholder.

Section 14-2-1302. RIGHT TO DISSENT.

(a) A record shareholder of the corporation is entitled
to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:

(1) Consummation of a plan of merger to which the
corporation is a party:

(A) If approval of the shareholders of
the corporation is required for the merger by Code
Section 14-2-1103 or the articles of incorporation
and the shareholder is entitled to vote on the
merger; or

(B) If the corporation is a subsidiary
that is merged with its parent under Code Section
14-2-1104;

(2) Consummation of a plan of share exchange to
which the corporation is a party as the corporation whose
shares will be acquired, if the shareholder is entitled to
vote on the plan;

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(3) Consummation of a sale or exchange of all or
substantially all of the property of the corporation if a
shareholder vote is required on the sale or exchange pursuant
to Code Section 14-2-1202, but not including a sale pursuant
to court order or a sale for cash pursuant to a plan by which
all or substantially all of the net proceeds of the sale will
be distributed to the shareholders within one year after the
date of sale;

(4) An amendment of the articles of incorporation
that materially and adversely affects rights in respect of a
dissenter's shares because it:

(A) Alters or abolishes a preferential
right of the shares;

(B) Creates, alters, or abolishes a
right in respect of redemption, including a provision
respecting a sinking fund for the redemption or
repurchase, of the shares;

(D) Excludes or limits the right of the
shares to vote on any matter, or to cumulate votes,
other than a limitation by dilution through issuance
of shares or other securities with similar voting
rights;

(E) Reduces the number of shares owned
by the shareholder to a fraction of a share if the
fractional share so created is to be acquired for
cash under Code Section 14-2-604; or

(F) Cancels, redeems, or repurchases all
or part of the shares of the class; or

(5) Any corporate action taken pursuant to a
shareholder vote to the extent that Article 9 of this chapter,
the articles of incorporation, bylaws, or a resolution of the
board of directors provides that voting or nonvoting
shareholders are entitled to dissent and obtain payment for
their shares.

(b) A shareholder entitled to dissent and obtain payment
for his shares under this article may not challenge the corporate
action creating his entitlement unless the corporate action fails to
comply with procedural requirements of this chapter or the articles of
incorporation or bylaws of the corporation or the vote required to
obtain approval of the corporate action was obtained by fraudulent and
deceptive means, regardless of whether the shareholder has exercised
dissenter's rights.

(c) Notwithstanding any other provision of this article,
there shall be no right of dissent in favor of the holder of shares of
any class or series which, at the record date fixed to determine the
shareholders entitled to receive notice of and to vote at a meeting at
which a plan of merger or share exchange or a sale or exchange of
property or an amendment of the articles of incorporation is to be
acted on, were either listed on a national securities exchange or held
of record by more than 2,000 shareholders, unless:

(1) In the case of a plan of merger or share
exchange, the holders of shares of the class or series are
required under the plan of merger or share exchange to accept
for their shares anything except shares of the surviving
corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either
listed on

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a national securities exchange or held of record by more than
2,000 shareholders, except for scrip or cash payments in lieu
of fractional shares; or

(2) The articles of incorporation or a resolution
of the board of directors approving the transaction provides
otherwise.

Section 14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.

A record shareholder may assert dissenters' rights as to fewer
than all the shares registered in his name only if he dissents with
respect to all shares beneficially owned by any one beneficial
shareholder and notifies the corporation in writing of the name and
address of each person on whose behalf he asserts dissenters' rights.
The rights of a partial dissenter under this Code section are
determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.

PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS

Section 14-2-1320. NOTICE OF DISSENTERS' RIGHTS.

(a) If proposed corporate action creating dissenters'
rights under Code Section 14-2-1302 is submitted to a vote at a
shareholders' meeting, the meeting notice must state that shareholders
are or may be entitled to assert dissenters' rights under this article
and be accompanied by a copy of this article.

(b) If corporate action creating dissenters' rights under
Code Section 14-2-1302 is taken without a vote of shareholders, the
corporation shall notify in writing all shareholders entitled to
assert dissenters' rights that the action was taken and send them the
dissenters' notice described in Code Section 14-2-1322 no later than
ten days after the corporate action was taken.

Section 14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT.

(a) If proposed corporate action creating dissenters'
rights under Code Section 14-2-1302 is submitted to a vote at a
shareholders' meeting, a record shareholder who wishes to assert
dissenters' rights:

(1) must deliver to the corporation before the
vote is taken written notice of his intent to demand payment
for his shares if the proposed action is effectuated; and

(2) must not vote his shares in favor of the
proposed action.

(b) A record shareholder who does not satisfy the
requirements of subsection (a) of this Code section is not entitled to
payment for his shares under this article.

Section 14-2-1322. DISSENTERS' NOTICE.

(a) If proposed corporate action creating dissenters'
rights under Code Section 14-2-1302 is authorized at a shareholders'
meeting, the corporation shall deliver a written dissenters' notice to
all shareholders who satisfied the requirements of Code Section
14-2-1321.

(b) The dissenters' notice must be sent no later than ten
days after the corporate action was taken and must:

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(1) State where the payment demand must be sent
and where and when certificates for certificated shares must
be deposited;

(2) Inform holders of uncertificated shares to
what extent transfer of the shares will be restricted after
the payment demand is received;

(3) Set a date by which the corporation must
receive the payment demand, which date may not be fewer than
30 nor more than 60 days after the date the notice required in
subsection (a) of this Code section is delivered; and

(4) Be accompanied by a copy of this article.

Section 14-2-1323. DUTY TO DEMAND PAYMENT.

(a) A record shareholder sent a dissenters' notice
described in Code Section 14-2-1322 must demand payment and deposit
his certificates in accordance with the terms of the notice.

(b) A record shareholder who demands payment and deposits
his shares under subsection (a) of this Code section retains all other
rights of a shareholder until these rights are cancelled or modified
by the taking of the proposed corporate action.

(c) A record shareholder who does not demand payment or
deposit his share certificates where required, each by the date set in
the dissenters' notice, is not entitled to payment for his shares
under this article.

Section 14-2-1324. SHARE RESTRICTIONS.

(a) The corporation may restrict the transfer of
uncertificated shares from the date the demand for their payment is
received until the proposed corporate action is taken or the
restrictions released under Code Section 14-2-1326.

(b) The person for whom dissenters' rights are asserted
as to uncertificated shares retains all other rights of a shareholder
until these rights are cancelled or modified by the taking of the
proposed corporate action.

Section 14-2-1325. OFFER OF PAYMENT.

(a) Except as provided in Code Section 14-2-1327, within
ten days of the later of the date the proposed corporate action is
taken or receipt of a payment demand, the corporation shall by notice
to each dissenter who complied with Code Section 14-2-1323 offer to
pay to such dissenter the amount the corporation estimates to be the
fair value of his or her shares, plus accrued interest.

(b) The offer of payment must be accompanied by:

(1) The corporation's balance sheet as of the end
of a fiscal year ending not more than 16 months before the
date of payment, an income statement for that year, a
statement of changes in shareholders' equity for that year,
and the latest available interim financial statements, if any;

(2) A statement of the corporation's estimate of
the fair value of the shares;

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(3) An explanation of how the interest was
calculated;

(4) A statement of the dissenter's right to
demand payment under Code Section 14-2-1327; and

(5) A copy of this article.

(c) If the shareholder accepts the corporation's offer by
written notice to the corporation within 30 days after the
corporation's offer or is deemed to have accepted such offer by
failure to respond within said 30 days, payment for his or her shares
shall be made within 60 days after the making of the offer or the
taking of the proposed corporate action, whichever is later.

Section 14-2-1326. FAILURE TO TAKE ACTION.

(a) If the corporation does not take the proposed action
within 60 days after the date set for demanding payment and depositing
share certificates, the corporation shall return the deposited
certificates and release the transfer restrictions imposed on
uncertificated shares.

(b) If, after returning deposited certificates and
releasing transfer restrictions, the corporation takes the proposed
action, it must send a new dissenters' notice under Code Section
14-2-1322 and repeat the payment demand procedure.

Section 14-2-1327. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH
PAYMENT OR OFFER.

(a) A dissenter may notify the corporation in writing of
his own estimate of the fair value of his shares and amount of
interest due, and demand payment of his estimate of the fair value of
his shares and interest due, if:

(1) The dissenter believes that the amount
offered under Code Section 14-2-1325 is less than the fair
value of his shares or that the interest due is incorrectly
calculated; or

(2) The corporation, having failed to take the
proposed action, does not return the deposited certificates or
release the transfer restrictions imposed on uncertificated
shares within 60 days after the date set for demanding
payment.

(b) A dissenter waives his or her right to demand payment
under this Code section and is deemed to have accepted the
corporation's offer unless he or she notifies the corporation of his
or her demand in writing under subsection (a) of this Code section
within 30 days after the corporation offered payment for his or her
shares, as provided in Code Section 14-2-1325..

(1) The shareholder may demand the information
required under subsection (b) of Code Section 14-2-1325, and
the corporation shall provide the information to the
shareholder within ten days after receipt of a written demand
for the information; and

(2) The shareholder may at any time, subject to
the limitations period of Code Section 14- 2-1332, notify the
corporation of his own estimate of the fair value of his
shares and the amount of interest due and demand payment of
his estimate of the fair value of his shares and interest due.

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PART 3. JUDICIAL APPRAISAL OF SHARES

Section 14-2-1330. COURT ACTION.

(a) If a demand for payment under Code Section 14-2-1327
remains unsettled, the corporation shall commence a proceeding within
60 days after receiving the payment demand and petition the court to
determine the fair value of the shares and accrued interest. If the
corporation does not commence the proceeding within the 60 day period,
it shall pay each dissenter whose demand remains unsettled the amount
demanded.

(b) The corporation shall commence the proceeding, which
shall be a nonjury equitable valuation proceeding, in the superior
court of the county where a corporation's registered office is
located. If the surviving corporation is a foreign corporation
without a registered office in this state, it shall commence the
proceeding in the county in this state where the registered office of
the domestic corporation merged with or whose shares were acquired by
the foreign corporation was located.

(c) The corporation shall make all dissenters, whether or
not residents of this state, whose demands remain unsettled parties to
the proceeding, which shall have the effect of an action quasi in rem
against their shares. The corporation shall serve a copy of the
petition in the proceeding upon each dissenting shareholder who is a
resident of this state in the manner provided by law for the service
of a summons and complaint, and upon each nonresident dissenting
shareholder either by registered or certified mail or by publication,
or in any other manner permitted by law.

(d) The jurisdiction of the court in which the proceeding
is commenced under subsection (b) of this Code section is plenary and
exclusive. The court may appoint one or more persons as appraisers to
receive evidence and recommend decision on the question of fair value.
The appraisers have the powers described in the order appointing them
or in any amendment to it. Except as otherwise provided in this
chapter, Chapter 11 of Title 9, known as the "Georgia Civil Practice
Act," applies to any proceeding with respect to dissenters' rights
under this chapter.

(e) Each dissenter made a party to the proceeding is
entitled to judgment for the amount which the court finds to be the
fair value of his shares, plus interest to the date of judgment.

Section 14-2-1331. COURT COSTS AND COUNSEL FEES.

(a) The court in an appraisal proceeding commenced under
Code Section 14-2-1330 shall determine all costs of the proceeding,
including the reasonable compensation and expenses of appraisers
appointed by the court, but not including fees and expenses of
attorneys and experts for the respective parties. The court shall
assess the costs against the corporation, except that the court may
assess the costs against all or some of the dissenters, in amounts the
court finds equitable, to the extent the court finds the dissenters
acted arbitrarily, vexatiously, or not in good faith in demanding
payment under Code Section 14-2-1327.

(b) The court may also assess the fees and expenses of
attorneys and experts for the respective parties, in amounts the court
finds equitable:

(1) Against the corporation and in favor of any
or all dissenters if the court finds the corporation did not
substantially comply with the requirements of Code Sections
14-2-1320 through 14-2- 1327; or

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(2) Against either the corporation or a
dissenter, in favor of any other party, if the court finds
that the party against whom the fees and expenses are assessed
acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this article.

(c) If the court finds that the services of attorneys for
any dissenter were of substantial benefit to other dissenters
similarly situated, and that the fees for those services should not be
assessed against the corporation, the court may award to these
attorneys reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.

Section 14-2-1332. LIMITATION OF ACTIONS.

No action by any dissenter to enforce dissenters' rights shall
be brought more than three years after the corporate action was taken,
regardless of whether notice of the corporate action and of the right
to dissent was given by the corporation in compliance with the
provisions of Code Section 14-2-1320 and Code Section 14-2-1322.

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PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The provisions of the Georgia Business Corporation Code (the "Georgia
Act") and the Registrant's Bylaws set forth the extent to which the
Registrant's directors and officers may be indemnified against liabilities they
may incur while serving in such capacities. Under the Registrant's Bylaws, the
Registrant is required to indemnify its officers and directors against
reasonable expenses (including attorneys' fees) incurred by them in the defense
of any action, suit or proceeding to which they were made a party, or in
defense of any claim, issue or matter therein, by reason of the fact that they
are or were officers, directors, employees or agents of the Registrant, to the
extent that they have been successful, on the merits or otherwise, in such
defense. The Registrant's Bylaws also permit indemnification of its directors
and officers against any liability incurred in connection with any threatened,
pending or completed action, suit or proceeding by reason of the fact that they
are or were directors or officers of the Registrant or who, while directors or
officers of the Registrant, are or were serving at the Registrant's request as
directors, officers, partners, trustees, employees or agents of another entity,
if they acted in a manner they reasonably believed to be in, or not opposed to,
the best interests of the Registrant, or, with respect to any criminal
proceeding, had no reasonable cause to believe their conduct was unlawful, if a
determination has been made that they have met these standards of conduct.
Such indemnification in connection with a proceeding by or in the right of the
Registrant, however, is limited to reasonable expenses, including attorneys'
fees, incurred in connection with the proceeding. The Registrant must also
provide advancement of expenses incurred by any director or officer in
defending any such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such officer or director to repay such advances if it is
ultimately determined that he or she is not entitled to indemnification by the
Registrant.

The Registrant may not indemnify a director or officer in connection
with a proceeding by or in the right of the Registrant in which the director or
officer was adjudged liable to the Registrant, for appropriation of a business
opportunity, for payment of unlawful dividends, in connection with a proceeding
in which he or she was adjudged liable on the basis that he or she improperly
received a personal benefit or for intentional misconduct or a knowing
violation of law.

The indemnification provisions of the Georgia Act are essentially
identical to those set forth above, except that the Georgia Code permits, but
does not require, a corporation to advance expenses under the circumstances for
such payments described above.

The Registrant maintains an insurance policy insuring the Registrant and
its directors and officers against certain liabilities, including liabilities
under the Securities Act of 1933.

The Registrant's Articles of Incorporation provide that no director of
the Registrant shall be personally liable to the Registrant or its shareholders
for monetary damages for a breach of the duty of care or of any other duty as a
director, except in the case of: (i) wrongful appropriation of any business
opportunity of the Registrant; (ii) acts or omissions not in good faith or
involving intentional misconduct or a knowing violation or law; (iii) liability
for unlawful distributions; or (iv) any transaction from which the director
derived an improper personal benefit. The Georgia Act currently permits a
corporation to limit the liability of its directors to the foregoing extent.
If the Georgia Act is amended to permit additional limitations on liability in
the future, the liability of directors of the Registrant will be limited to the
fullest extent permitted under the Georgia Act.

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ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits (See exhibit index immediately preceding the exhibits for
the page number where each exhibit can be found)

EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------

1 -- Agreement and Plan of Merger dated March 13, 1996 between First
Banking and FNB (included as Appendix A to the Proxy
Statement/Prospectus contained herein).

3.1 -- Amended and Restated Articles of Incorporation of the
Registrant.(1)

3.1(a) -- Amendment to the Articles of Incorporation of the Registrant.*

3.2 -- Bylaws of the Registrant.(1)

5.1 -- Opinion of Powell, Goldstein, Frazer & Murphy, including consent

8.1 -- Opinion of Powell, Goldstein, Frazer & Murphy, including consent

10.1 -- Profit Sharing Plan, as restated December 29, 1994.(2)

10.2 -- Trust Agreement related to the Registrant's Profit Sharing Plan,
as amended and restated December 30, 1988, effective January 1,
1989.(1)

10.3 -- Target Benefit Retirement Plan, as restated December 29, 1994.(2)

10.4 -- Trust Agreement related to the Registrant's Target Benefit
Retirement Plan, as amended and restated December 30, 1988,
effective January 1, 1989.(1)

10.5 -- Employment Agreement dated as of February 20, 1996 among the
Registrant, Bulloch Bank & Trust Co. and James Eli Hodges.(3)

10.6 -- Employment Agreement dated as of April 9, 1996 among the
Registrant, Metter Banking Company and Julian C. Lane, Jr.(4)

23.1 -- Consent of Powell, Goldstein, Frazer & Murphy (included in
Exhibits 5.1 and 8.1)

23.2 -- Consent of Deloitte & Touche LLP

23.3 -- Consent of McNair, McLemore, Middlebrooks & Co.

23.4 -- Consent of Stevens & Company

24 -- Power of Attorney (see signature page to the Registration
Statement)*

99 -- Form of Proxy of FNB*

- --------------------
* Previously filed.

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(1) Incorporated by reference to the exhibit of the same number to the
Registrant's Annual Report on Form 10-K, for the year ended December
31, 1989.

(2) Incorporated by reference to the exhibit of the same number to the
Registrant's Annual Report on Form 10-KSB for the year ended December
31, 1994.

(3) Incorporated by reference to the exhibit of the same number to the
Registrant's Annual Report on Form 10-KSB for the year ended December
31, 1995.

(4) Incorporated by reference to the exhibit of the same number to the
Registrant's Quarterly Report on Form 10-QSB for the quarter ended
March 31, 1996.

(b) Financial Statement Schedules

Schedules are omitted because they are not required or are not
applicable, or the required information is shown in the financial statements or
notes thereto.

ITEM 22. UNDERTAKINGS.

(a) The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement;

(i) To include any Prospectus required by Section
10(a)(3) of the Securities Act of 1933;

(ii) To reflect in the Prospectus any facts or events
arising after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range may
be reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price represent no
more than a 20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective Registration
Statement;

(iii) To include any material information with respect
to the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration
Statement.

Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the Registration Statement is on Form S-3, Form S-8 or Form F-3, and
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement.

(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new Registration Statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.

(b) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of the Registrant's Annual Report pursuant to Section 13(a) or 15(d) of
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by

II-3
<PAGE> 183

reference in the Registration Statement shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions (see Item 20),
or otherwise, the Registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 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 of
whether such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.

(d) The undersigned Registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the Prospectus
pursuant to Item 4, 10(b), 11 or 13 of Form S-4, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the Registration Statement
through the date of responding to the request.

(e) The undersigned Registrant hereby undertakes to supply by
means of a post-effective amendment all information concerning a transaction,
and the company being acquired involved therein, that was not the subject of
and included in the Registration Statement when it became effective.

II-4
<PAGE> 184

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Amendment to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Statesboro, State of Georgia, on July 1, 1996.

FIRST BANKING COMPANY OF SOUTHEAST
GEORGIA

By: /s/ James Eli Hodges
----------------------------------
James Eli Hodges
President

Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ James Eli Hodges President and Director July 1, 1996
- ---------------------- (principal executive officer)
James Eli Hodges

/s/ Julian C. Lane, Jr. * Vice President and Director July 1, 1996
- -----------------------------
Julian C. Lane, Jr.

/s/ John M. Wilson, Jr. * Vice President and Director July 1, 1996
- -----------------------------
John M. Wilson, Jr.

/s/ Dwayne E. Rocker Secretary and Treasurer July 1, 1996
- ---------------------- (principal financial and
Dwayne E. Rocker accounting officer)

/s/ E. Raybon Anderson * Director July 1, 1996
- -----------------------------
E. Raybon Anderson
</TABLE>

II-5
<PAGE> 185

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ A. M. Braswell, Jr.* Director July 1, 1996
- -----------------------------
A. M. Braswell, Jr.

/s/ W. A. Crider, Jr.* Director July 1, 1996
- -----------------------------
W. A. Crider, Jr.

/s/ C. Arthur Howard* Director July 1, 1996
- ----------------------
C. Arthur Howard

/s/ Lanier A. Hunnicutt* Director July 1, 1996
- -----------------------------
Lanier A. Hunnicutt

/s/ Joe P. Johnston* Director July 1, 1996
- -----------------------------
Joe P. Johnston

/s/ Dan J. Parrish, Jr.* Director July 1, 1996
- -----------------------------
Dan J. Parrish, Jr.

/s/ Charles M. Robbins, Jr.* Director July 1, 1996
- -----------------------------
Charles M. Robbins, Jr.

/s/ J. E. Smith* Director July 1, 1996
- -----------------------------
J. E. Smith

/s/ Alvin Williams* Director July 1, 1996
- -----------------------------
Alvin Williams

/s/ Harry S. Mathews* Director July 1, 1996
- ----------------------
Harry S. Mathews

*By: /s/ James Eli Hodges
--------------------
James Eli Hodges
Attorney-in-Fact
</TABLE>

II-6
<PAGE> 186

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<S> <C> <C>
1 -- Agreement and Plan of Merger dated March 13, 1996 between First Banking and FNB
(included as Appendix A to the Proxy Statement/Prospectus contained herein).

3.1 -- Amended and Restated Articles of Incorporation of the Registrant.(1)

3.1(a) -- Amendment to the Articles of Incorporation of the Registrant.*

3.2 -- Bylaws of the Registrant.(1)

5.1 -- Opinion of Powell, Goldstein, Frazer & Murphy, including consent

8.1 -- Opinion of Powell, Goldstein, Frazer & Murphy, including consent

10.1 -- Profit Sharing Plan, as restated December 29, 1994.(2)

10.2 -- Trust Agreement related to the Registrant's Profit Sharing Plan, as amended and
restated December 30, 1988, effective January 1, 1989.(1)

10.3 -- Target Benefit Retirement Plan, as restated December 29, 1994.(2)

10.4 -- Trust Agreement related to the Registrant's Target Benefit Retirement Plan, as
amended and restated December 30, 1988, effective January 1, 1989.(1)

10.5 -- Employment Agreement dated as of February 20, 1996 among the Registrant, Bulloch
Bank & Trust Co. and James Eli Hodges.(3)

10.6 -- Employment Agreement dated as of April 9, 1996 among the Registrant, Metter
Banking Company and Julian C. Lane, Jr.(4)

23.1 -- Consent of Powell, Goldstein, Frazer & Murphy (included in Exhibits 5.1 and 8.1)

23.2 -- Consent of Deloitte & Touche LLP

23.3 -- Consent of McNair, McLemore, Middlebrooks & Co.

23.4 -- Consent of Stevens & Company

24 -- Power of Attorney (see signature page to the Registration Statement)*

99 -- Form of Proxy of FNB*
</TABLE>

___________________

* Previously filed.

(1) Incorporated by reference to the exhibit of the same number to the
Registrant's Annual Report on Form 10-K, for the year ended December
31, 1989.

II-7
<PAGE> 187

(2) Incorporated by reference to the exhibit of the same number to the
Registrant's Annual Report on Form 10-KSB for the year ended December
31, 1994.

(3) Incorporated by reference to the exhibit of the same number to the
Registrant's Annual Report on Form 10-KSB for the year ended December
31, 1995.

(4) Incorporated by reference to the exhibit of the same number to the
Registrant's Quarterly Report on Form 10-QSB for the quarter ended
March 31, 1996.

II-8

<PAGE> 1

EXHIBIT 5.1

OPINION OF POWELL, GOLDSTEIN, FRAZER & MURPHY

POWELL, GOLDSTEIN, FRAZER & MURPHY
191 PEACHTREE STREET, N.E.
ATLANTA, GEORGIA 3030
(404) 572-6600

July 3, 1996

First Banking Company of Southeast Georgia
40 North Main Street
Statesboro, Georgia 30458

Re: Registration Statement on Form S-4 (Regis. No. 333-3679)

Ladies and Gentlemen:

This opinion is given in connection with the filing by First Banking
Company of Southeast Georgia ("First Banking"), a corporation organized and
existing under the laws of the State of Georgia, with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, of a
Registration Statement on Form S-4 ("Registration Statement") with respect to
the shares of the $1.00 par value common stock of First Banking to be issued in
connection with the proposed merger of FNB Bancshares, Inc. ("FNB") with and
into First Banking (the "Merger").

The Merger is intended to be effected pursuant to an Agreement and Plan
of Merger dated as of March 13, 1996 (the "Agreement") between First Banking
and FNB, pursuant to which each outstanding share of FNB common stock (other
than shares held by FNB, First Banking or their subsidiaries or by
shareholders who perfect their dissenters' rights) will be converted into and
exchanged for the right to receive 0.892 shares of First Banking common stock
and each option or warrant to purchase FNB common stock will be converted into
and exchanged for the right to receive 0.466 shares of First Banking common
stock for each share of FNB common stock subject to the option or warrant.

In rendering this opinion, we have examined such corporate records and
documents, including the Agreement, as we have deemed relevant and necessary as
the basis for the opinion set forth herein.

Based upon the foregoing, it is our opinion that the shares of First
Banking common stock, when issued to the holders of FNB common stock in
accordance with the terms and upon the fulfillment of the conditions set forth
in the Agreement, such shares will be validly issued, fully paid and
non-assessable under the Georgia Business Corporation Code.

<PAGE> 2

First Banking Company of Southeast Georgia
July 3, 1996
Page 2

We hereby consent to the use of this opinion and to the reference made
to our Firm under the caption "Legal Matters" in the Proxy Statement/Prospectus
constituting part of the Registration Statement.

Very truly yours,

/S/ POWELL, GOLDSTEIN, FRAZER & MURPHY

<PAGE> 1

EXHIBIT 8.1

OPINION OF POWELL, GOLDSTEIN, FRAZER & MURPHY

POWELL, GOLDSTEIN, FRAZER & MURPHY
191 PEACHTREE STREET, N.E.
ATLANTA, GEORGIA 30303
(404) 572-6600

July 3, 1996

FNB Bancshares, Inc.
501 S. Laurel Street
Springfield, Georgia 31329-1045

First Banking Company of Southeast Georgia
40 North Main St.
P.O. Box 878
Statesboro, Georgia 30358

Ladies and Gentlemen:

You have requested our opinion with respect to certain federal income
tax consequences of the proposed merger of FNB Bancshares, Inc., a corporation
organized and existing under the laws of the State of Georgia ("FNB"), with and
into First Banking Company of Southeast Georgia, a corporation organized and
existing under the laws of the State of Georgia ("First Banking"). For
purposes of rendering this opinion, we have reviewed and relied on the
Agreement and Plan of Merger by and between FNB and First Banking, dated as of
March 13, 1996 (the "Merger Agreement"), the Form S-4 Registration Statement
filed with the Securities and Exchange Commission (the "S-4") relating to the
First Banking securities to be issued pursuant to the Merger Agreement, the
certificates attached hereto, and such other documents as we have considered
appropriate. Unless otherwise indicated, terms used in this opinion have the
same meaning as in the Merger Agreement.

For purposes of this opinion, we have assumed that the Merger will be
consummated at the Effective Time pursuant to the terms and conditions set
forth in the Merger Agreement. We have assumed that there is no plan or
intention on the part of the shareholders of FNB to sell, exchange or otherwise
dispose of a number of shares of First Banking Common Stock received in the
Merger that would reduce the FNB shareholders' ownership of First Banking
Common Stock to a number of shares having a value, determined as of the
Effective Time, of less than fifty percent (50%) of the value of all of the
formerly outstanding shares of FNB Common Stock as of the Effective Time.

In addition, we have assumed with your permission that the facts and
representations certified to us in writing by FNB and First Banking which are
set forth in the certificates attached hereto, will

<PAGE> 2

First Banking Company of Southeast Georgia
July 3, 1996
Page 2

apply as of the Effective Time. Copies of such certificates are attached
hereto and incorporated herein by reference. We have neither investigated nor
verified the accuracy of any of the facts which have been certified to us, upon
which this opinion is based.

This opinion is based also on the Internal Revenue Code, Treasury
regulations, Internal Revenue Service rulings, judicial decisions, and other
applicable authority, all as in effect on the date of this opinion. The legal
authorities on which this opinion is based may change at any time. Any such
change may be applied retroactively and could modify the opinions expressed
herein. This opinion does not address any tax considerations under foreign,
state, or local laws, or the tax considerations to certain FNB shareholders in
light of their particular circumstances, including persons who are not United
States persons, dealers in securities, tax-exempt entities, shareholders who do
not hold FNB Common Stock as "capital assets" within the meaning of Section
1221 of the Internal Revenue Code, and shareholders who acquired their shares
of FNB Common Stock pursuant to the exercise of FNB options or otherwise as
compensation. Also, this opinion does not address any tax considerations
associated with the receipt of First Banking Common Stock by holders of FNB
Common Stock options or warrants in exchange for such options or warrants.

Based upon and subject to the foregoing, we are of the opinion the
Merger will qualify as a statutory merger and will constitute a reorganization
within the meanining of Section 368(a)(1)(A) of the Internal Revenue Code, and
that the following are certain federal income tax consequences which will
result:

(a) No gain or loss will be recognized for federal income tax purposes
by FNB shareholders upon the exchange of their shares of FNB Common Stock
for shares of First Banking Common Stock. Each FNB shareholder's basis in
the First Banking Common Stock received in the exchange (including
fractional shares of First Banking Common Stock) will be equal to such
shareholder's basis in the FNB Common Stock surrendered in the Merger.
Each FNB shareholder's holding period of the First Banking Common Stock
(for purposes of determining whether gain or loss or a subsequent sale of
such stock is long-term or short-term gain or loss) will include the period
that such shareholder held his or her FNB Common Stock, provided that the
FNB Common Stock was a capital asset in the hands of such shareholder.

(b) The payment of cash in lieu of fractional shares of First Banking
Common Stock will be treated as if the fractional shares were issued as
part of the exchange and then redeemed by First Banking. These cash
payments will be treated as having been received as distributions in full
payment in exchange for the fractional shares of First Banking Common Stock
redeemed as provided in Section 302(a) of the Internal Revenue Code, and
gain or loss will be recognized in an amount equal to the difference between
the cash received and the basis allocated to the fractional shares.
Generally, any gain or loss recognized from such exchange will be capital
gain or loss, provided (i) the FNB Common Stock constitutes a capital asset
in the hands of such shareholder, and (ii) the requirements of Section
302(b)(1) of the Internal Revenue Code are met. Each affected FNB
shareholder should consult such shareholder's own tax advisor for the tax
effect of such redemption (i.e., exchange treatment or dividend).

(c) FNB shareholders who receive solely cash pursuant to their
statutory right to dissent will be treated as having received such payment
in redemption of their stock, as provided in Section 302(a) of the Internal
Revenue Code. Generally, any gain or loss recognized by any such FNB
shareholder will be capital gain or loss, provided (i) the FNB Common Stock
constitutes a capital asset in the hands of such shareholder, and (ii) the
requirements of 302(b)(1), (2) or (3) of the Internal Revenue Code are met.
Each affected

<PAGE> 3

First Banking Company of Southeast Georgia
July 3, 1996
Page 3

FNB shareholder should consult such shareholder's own tax advisor for
the tax effect of such redemption (i.e., exchange treatment or dividend).

(d) No income, gain or loss will be recognized for federal income tax
purposes by First Banking or FNB as a consequence of the Merger, except for
deferred gain or loss recognized pursuant to Treasury regulations issued
under Section 1502 of the Internal Revenue Code.

This opinion is being rendered solely to the parties to whom it is
addressed and may be relied upon by them and by the shareholders of FNB. This
opinion may not be relied upon by any other party without the express written
permission of our Firm. We hereby consent to the reference to our Firm in, and
to the filing of this opinion as an exhibit to, the S-4.

Very truly yours,

/s/ POWELL, GOLDSTEIN, FRAZER & MURPHY

<PAGE> 1

EXHIBIT 23.2

CONSENT OF DELOITTE & TOUCHE LLP

We consent to the incorporation by reference in Amendment No. 1 to Registration
Statement No. 333-3679 of First Banking Company of Southeast Georgia on Form
S-4 of our report dated January 19, 1996 (February 21, 1996 as to Note 15),
incorporated by reference in the Annual Report on Form 10-KSB of First Banking
Company of Southeast Georgia for the year ended December 31, 1995 and to the
reference to us under the heading "Experts" in the Proxy Statement/Prospectus,
which is part of this Registration Statement.

DELOITTE & TOUCHE LLP
Atlanta, Georgia

July 1, 1996

<PAGE> 1

EXHIBIT 23.3

CONSENT OF MCNAIR, MCLEMORE, MIDDLEBROOKS & CO.

We hereby consent to the use of our report dated February 2, 1996 relating to
the consolidated financial statements of FNB Bancshares, Inc. and Subsidiary as
of December 31, 1995 and 1994 and for each of the years in the three-year
period ended December 31, 1995 included in Amendment No. 1 to the Registration
Statement on Form S-4 and to the reference to our firm under the heading
"Experts" in the Prospectus.

McNAIR, MCLEMORE, MIDDLEBROOKS & CO.
Macon, Georgia

July 2, 1996

<PAGE> 1

EXHIBIT 23.4

CONSENT OF STEVENS & COMPANY

In connection with the proposed merger of FNB Bancshares, Inc.,
Springfield, Georgia and First Banking Company of Southeast Georgia,
Statesboro, Georgia, the undersigned, acting as an independent financial
analyst to the Board of Directors of FNB Bancshares, Inc. hereby consents to
the reference to our firm in the proxy statement/prospectus and to the
inclusion of our fairness opinion as an exhibit to the proxy
statement/prospectus.

July 1, 1996

STEVENS & COMPANY

By: /s/ Charles Stevens
-------------------------------------
Charles Stevens