EAGLE BANCSHARES INC, 424B1, 1996-02-13

EAGLE BANCSHARES INC
424B1, 1996-02-13
SAVINGS INSTITUTION, FEDERALLY CHARTERED

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<PAGE> 1

Sec File No. 333-00081
Rule 424(b)(1)

1,300,000 SHARES

EAGLE BANCSHARES, INC.
COMMON STOCK

All of the 1,300,000 shares of Common Stock offered hereby are being sold
by Eagle Bancshares, Inc. (the "Company"). The Company's Common Stock is listed
for trading on the Nasdaq National Market under the symbol "EBSI." On February
12, 1996, the last sale price of the Common Stock as reported on the Nasdaq
National Market was $16.00 per share. On that date, the closing bid and ask
prices for the Common Stock were $16.00 and $17.25, respectively.

SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.

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

THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS OR DEPOSIT ACCOUNTS OR OTHER
OBLIGATIONS OF A BANK AND ARE NOT INSURED BY THE SAVINGS ASSOCIATION
INSURANCE FUND OR THE BANK INSURANCE FUND OF THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(1)(2)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share......................... $16.00 $.85 $15.15
- -------------------------------------------------------------------------------------------------
Total(3).......................... $20,800,000 $1,071,344 $19,728,656
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>

(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. The Company has directed the sale of 67,312 shares (the "Directed
Shares") of Common Stock without the payment of a selling concession of $.50
per share which results in additional proceeds to the Company of $33,656
that are included in the total Proceeds to Company. The Tucker Federal
Savings & Loan Association 401(k) Savings and Employee Stock Ownership Plan
will purchase 62,500 of the Directed Shares. See "Management -- Stock
Ownership of Directors and Executive Officers" and "Underwriting."

(2) Before deducting expenses payable by the Company estimated at $245,000.

(3) The Company has granted the Underwriters a 30-day option to purchase up to
195,000 additional shares of Common Stock at the Price to Public solely to
cover over-allotments, if any. If the option is exercised in full, the total
Price to Public, Underwriting Discount and Proceeds to Company would be
$23,920,000, $1,237,094 and $22,682,906, respectively. See "Underwriting."

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

The shares of Common Stock are offered by the Underwriters, subject to
prior sale, receipt and acceptance by them and subject to the right of the
Underwriters to reject any order in whole or in part and certain other
conditions. It is expected that certificates for such shares will be available
for delivery on or about February 15, 1996.

INTERSTATE/JOHNSON LANE MORGAN KEEGAN & COMPANY, INC.

CORPORATION

THE DATE OF THIS PROSPECTUS IS FEBRUARY 12, 1996

<PAGE> 2

[A MAP OF METROPOLITAN ATLANTA SHOWING THE COMPANIES' 10 BRANCH OFFICE
LOCATIONS AND A MAP OF THE SOUTHEASTERN U.S. SHOWING THE COMPANIES' 14 LOAN
PRODUCTION OFFICES.]

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

2
<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements and related notes appearing elsewhere or
incorporated by reference in this Prospectus. Unless indicated otherwise, the
information in this Prospectus gives effect to a two-for-one split of the Common
Stock effected in the form of a stock dividend paid on December 21, 1995 and
assumes that the Underwriters' over-allotment option is not exercised.

THE COMPANY

Eagle Bancshares, Inc. (the "Company") is a metropolitan Atlanta, Georgia
based savings and loan holding company, primarily engaged through its
subsidiaries in retail and mortgage banking with 24 locations in the Southeast.
The Company's principal subsidiary is Tucker Federal Savings and Loan
Association (the "Bank"). Based on total assets at September 30, 1995, the Bank
is the largest thrift institution headquartered in metropolitan Atlanta and
operates ten full service branch offices located in Cherokee, DeKalb, Fulton and
Gwinnett counties, Georgia. Through its subsidiary Prime Eagle Mortgage
Corporation ("PrimeEagle"), the Company operates 14 loan production offices
located in Georgia, Florida, North Carolina, South Carolina and Tennessee. The
Company also engages in real estate brokerage and development in metropolitan
Atlanta.

As a result of the recent acquisitions of banks and thrifts in Atlanta by
large out-of-state bank holding companies, the Company is now the second largest
independent financial institution headquartered in the metropolitan Atlanta area
based on total assets at September 30, 1995. Because the Company is
headquartered in its primary market area, the Company believes it is able to
provide personalized service and local decision making that is typically not
available from financial institutions headquartered out-of-state. As a result,
the Company believes it is well positioned to serve the banking needs of small
businesses and individuals that consider personalized service and local decision
making to be important aspects of a banking relationship.

The Company's near-term strategy is to continue to capitalize on certain
opportunities which have been presented by recent consolidations. First, staff
reductions and branch closings at other institutions have enabled the Company to
hire experienced banking executives. Second, the Company has acquired a multi-
office mortgage banking company, acquired additional retail deposits and
attracted new customers. Third, the Company is now in a position to acquire
smaller financial institutions in the metropolitan Atlanta area, which will
enable the Company to further expand its franchise. Fourth, operating under a
federal thrift charter, the Bank can open or acquire new branches throughout the
State of Georgia and across state lines, including markets in which the Company
currently operates loan production offices. The Company's long-term strategy is
to increase stockholder value by building franchise value, creating competitive
advantages in targeted business niches, developing additional long-term,
customer driven relationships, and compensating employees based upon bottom line
performance.

Since the current management team assumed the leadership of the Bank in
October 1990, total assets of the Company have increased from $287.5 million at
September 30, 1990, to $528.2 million at September 30, 1995. Permanent single
family mortgage loans originated and sold increased from $56.5 million for the
twelve months ended September 30, 1990, to $346.6 million for the twelve months
ended September 30, 1995. During the same period, earnings improved from a loss
of $229,000 to net income of $4.4 million. At December 31, 1995, officers and
directors of the Company and the Bank's 401(k) Savings and Employee Stock
Ownership Plan (the "ESOP") owned 24.6% of the outstanding shares of the
Company's Common Stock.

THE OFFERING

Common Stock offered by the
Company.................. 1,300,000 shares

Common Stock outstanding
after the offering......... 4,412,200 shares(1)

Use of Proceeds............ To provide additional capital to the Bank to fund
loan and deposit growth, to finance possible future
acquisitions and for working capital.

Nasdaq National Market
Symbol................... EBSI
- ---------------

(1) Excludes 66,616 shares of Common Stock issuable upon exercise of outstanding
employee and director stock options and 301,800 shares of treasury stock.

3
<PAGE> 4

SUMMARY FINANCIAL AND OTHER INFORMATION

<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEARS ENDED MARCH 31, SEPTEMBER 30,
---------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1994 1995
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE, RATIO AND OTHER DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net interest income................ $ 5,819 $ 7,793 $ 12,200 $ 14,997 $ 16,711 $ 8,110 $ 8,894
Provision for loan losses.......... 446 398 630 1,000 643 371 54
Non-interest income, excluding
gains (losses) on asset sales.... 1,298 1,817 4,681 8,103 5,442 2,996 3,656
Gains on sale of assets............ 616 49 1,113 1,147 905 620 426
Non-interest expense............... 6,214 6,833 11,026 14,740 16,035 8,000 9,364
Income before income taxes,
accounting change and
extraordinary item............... 1,073 2,428 6,338 8,507 6,380 3,355 3,558
Net income(1)...................... 778 1,638 4,069 5,211 4,101 2,078 2,327
SHARE DATA:
Net income per share(1)(2)......... $ .25 $ .54 $ 1.38 $ 1.70 1.34 $ .67 .75
Book value per share(1)............ 6.94 7.56 8.76 10.20 10.90 10.48 11.47
Dividends per share................ -- .05 .20 .31 .47 .23 .25
Average shares outstanding(2)...... 3,112 3,058 2,948 3,063 3,059 3,044 3,100
BALANCE SHEET DATA:
Total assets....................... $279,860 $302,173 $321,597 $320,385 $457,317 $377,786 $528,193
Loans(3)........................... 152,438 158,741 190,115 219,726 303,906 263,475 335,348
Non-performing assets.............. 5,087 4,834 4,194 1,458 1,218 1,222 1,234
Loans and securities available for
sale(4).......................... 5,306 13,708 37,646 44,524 62,159 36,868 85,339
Investment securities held to
maturity......................... 89,537 106,718 73,759 34,683 57,599 54,126 56,022
Deposits........................... 206,132 219,825 228,633 244,297 286,315 265,228 327,660
Stockholders' equity............... 21,604 22,376 25,823 30,832 33,636 32,113 35,697
PERFORMANCE RATIOS:
Return on average assets........... .27% .57% 1.32% 1.62% 1.08% 1.19% .96%
Return on average equity........... 3.68 7.46 16.68 18.76 12.71 13.52 13.35
Interest rate spread(5)............ 1.73 2.40 3.74 4.43 4.46 4.53 3.68
Net interest margin(6)............. 2.12 2.80 4.12 4.80 4.79 4.89 3.92
Efficiency(7)...................... 86.16 70.45 62.42 63.22 72.14 71.94 69.87
</TABLE>

4
<PAGE> 5

<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEARS ENDED MARCH 31, SEPTEMBER 30,
---------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1994 1995
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE, RATIO AND OTHER DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSET QUALITY RATIOS:
Allowance for loan losses to net
loans plus reserves(3)........... .48% .51% 1.13% 1.36% .96% 1.24% 1.02%
Allowance for loan losses to period
end non-performing loans......... 15.00 18.45 57.70 229.70 276.03 271.11 279.98
Non-performing assets to period end
loans and foreclosed
properties(3).................... 3.26 2.98 2.18 .66 .40 .46 .37
Non-performing assets to period end
total assets..................... 1.82 1.60 1.30 .46 .27 .32 .23
Net charge-offs (recoveries) to
average loans.................... .29 .16 .33 .03 .23 .16 (.01)
CAPITAL AND LIQUIDITY:
Tangible capital to adjusted total
assets........................... 7.74% 7.37% 7.95% 9.30% 6.56% 8.02% 6.08%
Core capital to adjusted total
assets........................... 7.74 7.37 7.95 9.30 6.56 8.02 6.08
Core capital to risk-weighted
assets........................... 15.41 13.44 13.13 11.65 9.44 10.66 8.25
Risk-based capital to risk-weighted
assets........................... 15.95 13.98 14.37 12.74 10.51 11.76 9.14
Loans to deposits(3)............... 73.95 72.21 83.15 89.94 106.14 99.34 102.35
OTHER DATA:
Bank branches...................... 9 9 9 9 9 9 10
Loan production offices............ 1 1 4 8 12 11 14
-------- -------- -------- -------- -------- -------- --------
Total locations........... 10 10 13 17 21 20 24
========= ========= ========= ========= ========= ========= =========
</TABLE>

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

(1) Includes the effect of a third quarter extraordinary loss of $427,000, net
of income tax benefit of $261,000, relating to the early extinguishment of
certain Federal Home Loan Bank ("FHLB") advances ($.14 per share) and the
first quarter cumulative income effect of the change in accounting for
income taxes of $320,000 ($.11 per share) during the fiscal year ended
March 31, 1994.
(2) Fully diluted.
(3) Excludes loans held for sale.
(4) Includes loans, investment and mortgage-backed securities held or available
for sale.
(5) Yield on interest earning assets minus cost of interest-bearing liabilities.
(6) Net interest income divided by average earning assets.
(7) Computed by dividing non-interest expense minus provision for real estate
losses by the sum of net interest income and non-interest income, net of
gains and losses on sales of assets.

5
<PAGE> 6

RECENT CAPSULE FINANCIAL DATA

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------- -----------------------
1994 1995 1994 1995
------ ------ -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AND RATIO DATA)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net interest income........................... $4,306 $4,677 $ 12,416 $ 13,571
Provision for loan losses..................... 176 309 547 363
Net-interest income after provision for loan
losses...................................... 4,130 4,368 11,869 13,208
Non-interest income........................... 1,329 2,981 4,945 7,063
Non-interest expense.......................... 3,870 5,322 11,870 14,686
Income before tax............................. 1,589 2,027 4,944 5,585
Income tax expense............................ 585 594 1,862 1,825
Net income.................................... 1,004 1,433 3,082 3,760
SHARE DATA:
Net income per share(1)....................... $ .33 $ .44 $ 1.00 $ 1.18
Book value per share.......................... 10.58 11.91 10.58 11.91
Dividends per share........................... .12 .13 .35 .38
BALANCE SHEET DATA:
Total assets.................................. $421,247 $558,315
Loans, net.................................... 312,602 380,558
Deposits...................................... 274,473 332,288
Stockholders' equity.......................... 32,417 37,131
PERFORMANCE RATIOS:
Return on average assets...................... 1.03% 1.11% 1.13% 1.01%
Return on average equity...................... 12.94 15.77 13.33 14.18
Interest rate spread.......................... 4.34 3.67 4.46 3.68
Net interest margin........................... 4.64 3.96 4.80 3.98
</TABLE>

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

(1) Fully diluted.
RECENT DEVELOPMENTS

Capsule Third Quarter Results

For the quarter ended December 31, 1995, the Company's net income was $1.4
million or $.44 per share as compared to $1.0 million or $.33 per share for the
third quarter of fiscal 1994. The provision for loan losses for the quarter was
$309,000 as compared to $176,000 for the corresponding quarter of fiscal 1994.
Non-performing assets increased to $2.7 million from $972,000 at December 31,
1994. Potential problem loans were $2.1 million at December 31, 1995, an
increase of $1.4 million from $697,000 at December 31, 1994. The increase in
potential problem loans results primarily from the classification of six
equipment leases to one borrower aggregating $1.9 million as substandard due to
nonpayment of rent in December 1995 and January and February 1996. In January
1996, a group of this borrower's creditors, including the Bank, filed an
Involuntary Petition for Bankruptcy against the borrower. At December 31, 1995,
the reserve for loan losses of $3.8 million as a percentage of loans outstanding
was 1.0%. The ratio of the reserve for loan losses to total problem assets was
77.1% at December 31, 1995. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Summary of Recent Capsule
Financial Information."

One Time Deposit Insurance Assessment

As part of the Budget Reconciliation Act of 1995, Congress has proposed a
one-time assessment on the deposits of institutions which are insured by the
Savings Association Insurance Fund ("SAIF"). It is anticipated that the Bank's
one-time assessment will be between approximately $1.4 million and $1.5 million
net of tax and will be levied during the quarter ending March 31, 1996. However,
it is estimated that thereafter the level of ongoing premiums paid to the SAIF
will be reduced from the Company's current rate of premiums. Assuming the
Company is subject to the premiums at the rate of $.04 per $100 of deposits
subsequent to the one-time assessment, the annualized premium reduction would be
$386,000 net of tax based upon September 30, 1995 deposits. See "Risk
Factors -- Legislation and Regulation" and "Supervision and Regulation -- Recent
Legislation."

6
<PAGE> 7

THE COMPANY

The Company is a unitary savings and loan holding company that owns and
operates the Bank, Eagle Real Estate Advisors, Inc. ("EREA") and the
subsidiaries of the Bank, Eagle Service Corp. ("Eagle Service") and PrimeEagle.
The Company is based in metropolitan Atlanta with 24 locations in the Southeast.
The Company's principal subsidiary, the Bank, is involved in two core
businesses: retail banking and loan production, which includes construction and
permanent mortgage lending. Based on total assets at September 30, 1995, the
Bank is the largest thrift institution headquartered in metropolitan Atlanta
with ten full service branch offices, located in Cherokee, DeKalb, Fulton and
Gwinnett counties, Georgia. Through PrimeEagle, the Company operates 14 loan
production offices located in Georgia, Florida, North Carolina, South Carolina
and Tennessee. The Company and EREA also engage in real estate brokerage and
development in metropolitan Atlanta.

In November 1992, the Bank acquired Prime Lending, the loan production
operations of Southern Federal Savings & Loan Association, which substantially
increased the Company's asset generating capabilities and diversified its loan
production throughout the State of Georgia. The Company has benefited from the
takeovers of several Georgia based banks and thrifts by large out-of-state bank
holding companies. In February 1993, the Company hired an experienced team of
construction lenders who successfully brought to the Company relationships with
established homebuilders. In April 1994, the Company acquired $22 million of
deposits from the Resolution Trust Corporation (the "RTC"), which the Company
services from an existing branch facility. In September 1994, the Company hired
an experienced small business banker and achieved Certified Lender status with
the Small Business Administration (the "SBA"). In fiscal 1995, the Company
acquired mortgage banking offices in Jacksonville and St. Augustine, Florida,
and Columbia and Aiken, South Carolina. During the current fiscal year, the
Company acquired a loan production office in Charlotte, North Carolina, and
opened two loan production offices in the southern portion of metropolitan
Atlanta in Peachtree City and Stockbridge, Georgia.

Since the current management team assumed the leadership of the Bank in
October 1990, total assets of the Company have increased from $287.5 million at
September 30, 1990, to $528.2 million at September 30, 1995. Permanent single
family mortgage loans originated and sold increased from $56.5 million for the
twelve months ended September 30, 1990, to $346.6 million for the twelve months
ended September 30, 1995. During the same period, earnings improved from a loss
of $229,000 to net income of $4.4 million. At December 31, 1995, officers and
directors of the Company and the ESOP beneficially owned 24.6% of the
outstanding shares of the Company's Common Stock.

The Company's executive offices are located at 4305 Lynburn Drive, Tucker,
Georgia 30084-4441, and its telephone number at this address is (770) 908-6690.

7
<PAGE> 8

RISK FACTORS

Prospective investors should consider carefully the following risk factors,
as well as the other information contained in the Prospectus, before purchasing
the Common Stock.

CREDIT RISK AND LOAN CONCENTRATION

Over the past several years, the Company has experienced significant growth
in its permanent single family residential mortgage loan, construction loan and
leasing portfolios. The Company's portfolio of permanent single family
residential mortgage loans was $218.9 million at September 30, 1995,
constituting 41.4% of total assets and 53.8% of the Company's loan portfolio.
Construction loans comprise the second largest component of the Company's loan
portfolio. At September 30, 1995, construction loans constituted 27.4% of the
Company's loan portfolio and totaled $110.8 million. At September 30, 1995, the
Company's investment in the purchase of equipment leases was $38.0 million which
represented 11.3% of the Company's loan portfolio.

Construction loans frequently involve greater risk than residential
mortgage loans principally due to (i) the creditworthiness of construction
borrowers in general, (ii) the potential risks associated with securing
permanent financing, and (iii) general market conditions in the housing
industry. The Company's investment in equipment leases involves risk because of
(i) the decline in value of the leased equipment and the geographic location of
the equipment, (ii) the Company's reliance on third party lessors for servicing
the leases, and (iii) the location of lessees outside the Company's geographic
market.

Management believes that the Bank's credit review and loan monitoring
processes are adequate to evaluate and monitor these risks and that the Bank's
allowance for possible loan losses is adequate in relation to the composition of
its loan portfolio. Further, although the Company's non-performing loans as a
percentage of total loans was .17% at September 30, 1995, there is a risk that
the quality of the Company's loan portfolio could decline, particularly as a
result of the rapid growth in loans, as a result of the concentration of
construction loans and as a result of risk inherent in commercial equipment
leases. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Summary of Recent Capsule Financial Information,"
"-- Provision for Loan Losses and Risk Elements," "Business -- Lending
Activities -- Residential Construction Loans," "Business -- Lending
Activities -- Credit Risk Management" and "Business -- Lending
Activities -- Allowance for Loan Losses."

RELIANCE ON RESIDENTIAL MORTGAGE ORIGINATIONS

The market for residential mortgages is highly volatile and an increase in
interest rates could have a material adverse effect on both non-interest income
and interest income and in the growth of the Company's residential mortgage
portfolio. In addition, a substantial portion of the Company's non-interest
income has been derived from gains on the sale of mortgage loans and mortgage
production fees consisting of proceeds from the sale of mortgage servicing
rights, loan origination fees and discount points. Due to the cyclical nature of
residential mortgage originations, there can be no assurance that the Company
will be able to sustain recent levels of gains on the sale of mortgage loans and
mortgage production fees.

INTEREST RATE SENSITIVITY

The profitability of the Company depends to a large extent upon its net
interest income, which is the difference between interest income and interest
expense. The net interest income of the Company could be adversely affected if,
for example, changes in market interest rates resulted in the cost of
interest-bearing liabilities increasing faster than the increase in the yield on
the interest-earning assets of the Company. Additionally, increasing interest
rates could have an adverse impact on house sales which could negatively impact
construction lending and permanent mortgage originations. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Interest Rate Sensitivity."

8
<PAGE> 9

REAL ESTATE DEVELOPMENT ACTIVITIES

Approximately $8.4 million or 1.6% of the Company's total assets as of
September 30, 1995, was invested in three real estate development projects in
metropolitan Atlanta. Additionally, in December 1995, the Company invested
$600,000 in a fourth real estate development project in metropolitan Atlanta.
Two of these projects are currently under development. Although the Company
intends to acquire and develop real estate on a limited basis, the Company is
subject to the associated risks related to delays in construction and
development, lot absorption, occupancy, financing availability, and failure of
properties to perform as expected. See "Business -- Real Estate Development
Activity."

DEPENDENCE ON PRIMARY GEOGRAPHIC MARKET

The financial condition of the Company is primarily dependent on economic
conditions in the Atlanta metropolitan area. Of the 24 locations where the
Company operates, 13 are located in the Atlanta metropolitan area, and the
majority of deposits gathered originate from Atlanta-based offices. In addition,
$145.3 million or approximately 41.2% of loan originations for the six months
ended September 30, 1995, came from this area. While management believes that
the economy in metropolitan Atlanta is generally healthy and has experienced
above average growth, adverse changes in economic conditions in such area could
adversely impact the Company's growth and financial performance. See
"Business -- Growth in the Metropolitan Atlanta, Georgia Market."

LEGISLATION AND REGULATION

There is currently proposed as part of the Budget Reconciliation Act of
1995 a one-time assessment on the deposits of institutions which are insured by
the SAIF in order to recapitalize SAIF during the first quarter of calendar
1996. It is anticipated that such assessment will be in the amount of from $.80
to $.90 per $100 of SAIF insured deposits at March 31, 1995. If the assessment
were levied at $.85 per $100 in SAIF insured deposits, the Bank's earnings would
decrease approximately $1.5 million net of tax. Thereafter it is estimated that
the level of ongoing premiums paid to the SAIF would be reduced from the
Company's current rate of $.23 per $100 of SAIF insured deposits to between $0
and $.04 per $100 of SAIF insured deposits, thereby reducing in future periods
the premium payments currently paid by the Bank. Assuming the Company is subject
to premiums at the rate of $.04 per $100 of deposits subsequent to the one-time
assessment, the annualized premium reduction would be $386,000 net of tax based
upon September 30, 1995 deposits.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the Common Stock offered
hereby are estimated to be approximately $19,483,656 ($22,437,906 if the
Underwriters' over-allotment option is exercised in full), after deduction of
the offering expenses payable by the Company. The Company currently intends to
contribute substantially all of the net proceeds to the Bank to increase the
Bank's capital ratios for the purpose of supporting loan and deposit growth, to
finance possible future acquisitions and for working capital. The additional
Bank capital will be leveraged with deposits and advances from the FHLB to
support growth in its loan portfolio.

Pending the use of proceeds as noted above, the net proceeds will be
invested by the Bank in a variety of short and long-term interest-bearing assets
such as obligations of the United States government, including U.S. government
agency obligations, mortgage-backed securities, investment grade corporate debt
securities and other permitted investments.

9
<PAGE> 10

CAPITALIZATION

The following table sets forth the consolidated capitalization of the
Company as of September 30, 1995, and as adjusted at that date to give effect to
the sale by the Company of the 1,300,000 shares of Common Stock offered hereby
and the application of the estimated net proceeds therefrom as described in "Use
of Proceeds."

<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1995
----------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Debt:
Advances from the Federal Home Loan Bank of Atlanta................... $137,014 $ 137,014
Stockholders' Equity:
Common stock, $1.00 par value; 10,000,000 shares authorized, 3,414,000
shares issued; 4,714,000 shares issued, as adjusted................ 3,414 4,714
Additional paid-in capital............................................ 8,216 26,400
ESOP debt............................................................. -- (1,000)
Retained earnings (substantially restricted).......................... 25,000 25,000
Treasury stock at cost (301,800 shares)............................ (1,076) (1,076)
Unamortized restricted stock....................................... (214) (214)
Net unrealized gain on investment securities available for sale.... 357 357
-------- -----------
Total stockholders' equity.................................... 35,697 54,181
-------- -----------
Total capitalization.......................................... $172,711 $ 191,195
======== =========
</TABLE>

The following table sets forth certain regulatory capital ratios required
to be maintained by the Company, certain of the Company's capital ratios as of
September 30, 1995, and such capital ratios as adjusted at that date to give
effect to the sale by the Company of the 1,300,000 shares of Common Stock
offered hereby, and the application of the estimated net proceeds therefrom as
described in "Use of Proceeds."

<TABLE>
<CAPTION>
CURRENT SEPTEMBER 30, 1995
REGULATORY -----------------------
MINIMUM ACTUAL AS ADJUSTED(1)
---------- ------ --------------
<S> <C> <C> <C>
Tangible capital to adjusted total assets...................... 1.50% 6.08% 9.29%
Core capital to adjusted total assets.......................... 3.00 6.08 9.29
Risk-based capital to risk-weighted assets..................... 8.00 9.14 13.32
</TABLE>

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

(1) Assumes that the net proceeds of this offering were invested in the Bank's
capital and that such amounts were invested in assets that have a
risk-weight equal to the average risk-weight of the Bank's assets at
September 30, 1995.

10
<PAGE> 11

PRICE RANGE OF COMMON STOCK AND DIVIDEND HISTORY

The Company's Common Stock is traded on the Nasdaq National Market under
the symbol "EBSI." The following table sets forth for the periods indicated the
high and low last sale prices of the Common Stock as reported on the Nasdaq
National Market and dividends paid per share, which data reflects the
two-for-one split of the Common Stock effected in the form of a stock dividend
paid on December 21, 1995.

<TABLE>
<CAPTION>
FISCAL YEARS ENDED MARCH 31, HIGH LOW DIVIDENDS PAID
- -------------------------------------------------------- ------- ------- --------------
<S> <C> <C> <C>
1994
First Quarter........................................... $ 9.250 $ 7.875 $ .055
Second Quarter.......................................... 10.250 8.000 .070
Third Quarter........................................... 10.875 9.750 .085
Fourth Quarter.......................................... 12.375 10.500 .100
1995
First Quarter........................................... 12.000 11.125 .110
Second Quarter.......................................... 13.250 11.500 .115
Third Quarter........................................... 12.750 9.750 .120
Fourth Quarter.......................................... 12.000 10.125 .125
1996
First Quarter........................................... 14.375 11.875 .125
Second Quarter.......................................... 17.000 14.000 .125
Third Quarter........................................... 19.000 16.625 .130
Fourth Quarter (through February 12, 1996).............. 19.000 16.000 --
</TABLE>

On February 12, 1996, the last sale price of the Common Stock, as reported
on the Nasdaq National Market, was $16.00. On January 3, 1996, there were
3,117,200 shares of Common Stock outstanding and approximately 619 record
holders of the Common Stock.

The Company began the payment of cash dividends on its Common Stock during
fiscal 1992 and paid $.05 per share for the fourth quarter of that year. During
fiscal 1993, the Company paid four quarterly dividends totaling $.20 per share.
During fiscal 1994, the Company paid four quarterly dividends totaling $.31 per
share. During fiscal 1995, the Company paid four quarterly dividends totaling
$.47 per share. The current indicated dividend rate, on an annualized basis, is
$.52 per share.

The ability of the Company to pay cash dividends to its stockholders is
directly dependent upon the Bank's ability to pay cash dividends to the Company.
The Bank is subject to certain restrictions on the amount of dividends it is
permitted to pay. See "Supervision and Regulation -- Capital Distributions." The
amount of cash dividends, if any, paid on Common Stock will be determined by the
Company's Board of Directors in light of conditions existing from time to time,
including the Company's growth prospects, profitability, financial condition,
investment opportunities, liquidity requirements, results of operations,
regulatory restrictions and other factors deemed relevant by the Board of
Directors.

11
<PAGE> 12

SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth selected consolidated financial data
concerning the Company and is qualified in its entirety by the detailed
information and consolidated financial statements, including notes thereto,
included elsewhere or incorporated by reference herein. The selected data
presented below for and as of the end of each of the years in the five year
period ended March 31, 1995, are derived from the consolidated financial
statements of the Company. The consolidated financial statements as of and for
the year ended March 31, 1995 have been audited by Arthur Andersen LLP,
independent public accountants. The consolidated financial statements as of and
for each of the years in the four-year period ended March 31, 1994 have been
audited by KPMG Peat Marwick LLP, independent public accountants. The financial
statements as of March 31, 1994 and March 31, 1995, and for each of the three
years in the period ended March 31, 1995, are included elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEARS ENDED MARCH 31, SEPTEMBER 30,
---------------------------------------------------- -------------------
1991 1992 1993 1994 1995 1994 1995
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE, RATIO AND OTHER DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net interest income................ $ 5,819 $ 7,793 $ 12,200 $ 14,997 $ 16,711 $ 8,110 $ 8,894
Provision for loan losses.......... 446 398 630 1,000 643 371 54
Non-interest income, excluding
gains (losses) on asset sales.... 1,298 1,817 4,681 8,103 5,442 2,996 3,656
Gains on sale of assets............ 616 49 1,113 1,147 905 620 426
Non-interest expense............... 6,214 6,833 11,026 14,740 16,035 8,000 9,364
Income before income taxes,
accounting change and
extraordinary item............... 1,073 2,428 6,338 8,507 6,380 3,355 3,558
Net income(1)...................... 778 1,638 4,069 5,211 4,101 2,078 2,327
SHARE DATA:
Net income per share(1)(2)......... $ .25 $ .54 $ 1.38 $ 1.70 $ 1.34 $ .67 $ .75
Book value per share(1)............ 6.94 7.56 8.76 10.20 10.90 10.48 11.47
Dividends per share................ -- .05 .20 .31 .47 .23 .25
Average shares outstanding(2)...... 3,112 3,058 2,948 3,063 3,059 3,044 3,100
BALANCE SHEET DATA:
Total assets....................... $279,860 $302,173 $321,597 $320,385 $457,317 $377,786 $528,193
Loans(3)........................... 152,438 158,741 190,115 219,726 303,906 263,475 335,348
Non-performing assets.............. 5,087 4,834 4,194 1,458 1,218 1,222 1,234
Loans and securities available for
sale(4).......................... 5,306 13,708 37,646 44,524 62,159 36,868 85,339
Investment securities held to
maturity......................... 89,537 106,718 73,759 34,683 57,599 54,126 56,022
Deposits........................... 206,132 219,825 228,633 244,297 286,315 265,228 327,660
Stockholders' equity............... 21,604 22,376 25,823 30,832 33,636 32,113 35,697
PERFORMANCE RATIOS:
Return on average assets........... .27% .57% 1.32% 1.62% 1.08% 1.19% .96%
Return on average equity........... 3.68 7.46 16.68 18.76 12.71 13.52 13.35
Interest rate spread(5)............ 1.73 2.40 3.74 4.43 4.46 4.53 3.68
Net interest margin(6)............. 2.12 2.80 4.12 4.80 4.79 4.89 3.92
Efficiency(7)...................... 86.16 70.45 62.42 63.22 72.14 71.94 69.87
</TABLE>

12
<PAGE> 13

<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEARS ENDED MARCH 31, SEPTEMBER 30,
---------------------------------------------------- -------------------
1991 1992 1993 1994 1995 1994 1995
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE, RATIO AND OTHER DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSET QUALITY RATIOS:
Allowance for loan losses to net
loans plus reserves(3)........... .48% .51% 1.13% 1.36% .96% 1.24% 1.02%
Allowance for loan losses to period
end non-performing loans......... 15.00 18.45 57.70 229.70 276.03 271.11 279.98
Non-performing assets to period end
loans and foreclosed
properties(3).................... 3.26 2.98 2.18 .66 .40 .46 .37
Non-performing assets to period end
total assets..................... 1.82 1.60 1.30 .46 .27 .32 .23
Net charge-offs (recoveries) to
average loans.................... .29 .16 .33 .03 .23 .16 (.01)
CAPITAL AND LIQUIDITY:
Tangible capital to adjusted total
assets........................... 7.74% 7.37% 7.95% 9.30% 6.56% 8.02% 6.08%
Core capital to adjusted total
assets........................... 7.74 7.37 7.95 9.30 6.56 8.02 6.08
Core capital to risk-weighted
assets........................... 15.41 13.44 13.13 11.65 9.44 10.66 8.25
Risk-based capital to risk-weighted
assets........................... 15.95 13.98 14.37 12.74 10.51 11.76 9.14
Loans to deposits(3)............... 73.95 72.21 83.15 89.94 106.14 99.34 102.35
OTHER DATA:
Bank branches...................... 9 9 9 9 9 9 10
Loan production offices............ 1 1 4 8 12 11 14
-------- -------- -------- -------- -------- -------- --------
Total locations........... 10 10 13 17 21 20 24
========= ========= ========= ========= ========= ========= =========
</TABLE>

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

(1) Includes the effect of a third quarter extraordinary loss of $427,000, net
of income tax benefit of $261,000, relating to the early extinguishment of
certain FHLB advances ($.14 per share) and the first quarter cumulative
income effect of the change in accounting for income taxes of $320,000 ($.11
per share) during the fiscal year ended March 31, 1994.
(2) Fully diluted.
(3) Excludes loans held for sale.
(4) Includes loans, investment and mortgage-backed securities held or available
for sale.
(5) Yield on interest earning assets minus cost of interest-bearing liabilities.
(6) Net interest income divided by average earning assets.
(7) Computed by dividing non-interest expense minus provision for real estate
losses by the sum of net interest income and non-interest income, net of
gains and losses on sales of assets.

13
<PAGE> 14

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

OVERVIEW

The Company's financial condition and the results of operations from fiscal
1991 through 1995, and for the six month period ended September 30, 1995,
reflect the Company's growth and expansion. During that period, total assets
increased by $248.3 million or 88.7% to $528.2 million at September 30, 1995,
from $279.9 million at March 31, 1991, representing a compound annual growth
rate of 15.1%. Net income increased by $3.3 million or 424.2% to $4.1 million
for the fiscal year ended March 31, 1995, from $778,000 for the fiscal year
ended March 31, 1991. The Company accomplished this growth by increasing its
loan portfolio by $243.2 million to $400.9 million at September 30, 1995, from
$157.7 million at March 31, 1991, and decreasing non-performing assets by $3.9
million to $1.2 million at September 30, 1995 from $5.1 million at March 31,
1991.

The Company currently operates through ten full service branch locations
providing quality banking and financial services in the northeast sector of the
metropolitan Atlanta area. Since 1991, the Company has substantially increased
its loan production operations and now has 14 loan production offices in
Georgia, Florida, North Carolina, South Carolina and Tennessee. In addition to
permanent mortgages, the Company also provides construction financing in each of
its markets and has obtained significant benefits by offering permanent mortgage
financing to its construction lending customers.

SUMMARY OF RECENT CAPSULE FINANCIAL INFORMATION

For the quarter ended December 31, 1995, the Company's net income increased
$.4 million or 42.7% to $1.4 million from $1.0 million for the same quarter
ended December 31, 1994. The increase is attributable to growth in net interest
income as well as non-interest income. Net income per share increased to $.44
for the quarter ended December 31, 1995 compared to $.33 for the quarter ended
December 31, 1994.

Net interest income increased 8.6% to $4.7 million for the three months
ended December 31, 1995, from $4.3 million for the three months ended December
31, 1994, primarily due to the growth in the Company's loan portfolio. The
Company increased its provision for loan losses to $309,000 for the quarter
ended December 31, 1995, compared to $176,000 for the same quarter last year, a
75.6% increase. This increase is attributable to increased non-performing and
potential problem loans. Non-performing assets rose to $2.7 million at December
31, 1995, compared to $972,000 at December 31, 1994. This increase is primarily
attributable to a $1.0 million increase in non-performing permanent single
family mortgage loans and a $500,000 increase in non-performing construction
loans. Potential problem loans increased to $2.1 million at December 31, 1995,
compared to $697,000 at December 31, 1994. This increase is primarily
attributable to a recent default in six equipment leases to a single borrower
totaling $1.9 million. Such leases have been classified as substandard as a
result of nonpayment of rent in December 1995 and January and February 1996.
Although management is diligently pursuing its remedies with respect to such
leases so as to avoid losses, management believes that if the defaults are not
cured the entire $1.9 million may be classified as a non-performing loan by
March 31, 1996. Additionally, in January 1996 a group of the borrower's
creditors, including the Company, filed an Involuntary Petition for Bankruptcy
against the borrower. See "Risk Factors -- Credit Risk and Loan Concentration."

Non-interest income for the quarter ended December 31, 1995, increased
124.3% to $3.0 million from $1.3 million for the quarter ended December 31,
1994. This increase is primarily attributable to income generated from mortgage
production fees which rose due to higher loan origination volume. Non-interest
expenses for the quarter ended December 31, 1995, increased 37.5% to $5.3
million from $3.9 million for the quarter ended December 31, 1994. This increase
is attributable to higher mortgage loan originations and the growth in the
Company's loans and deposits.

Total assets increased 32.5% to $558.3 million at December 31, 1995, from
$421.2 million at December 31, 1994, primarily due to growth in the Company's
loan portfolio.

14
<PAGE> 15

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1994 AND SEPTEMBER
30, 1995

Net income for the six months ended September 30, 1995 increased by
$249,000 or 12.0% to $2.3 million from $2.1 for the same period ended September
30, 1994. Total interest income increased by $5.9 million or 40.3% to $20.6
million for the six months ended September 30, 1995, from $14.7 million for the
six months ended September 30, 1994. This increase was primarily attributable to
a $5.8 million increase in interest income on loans as a result of a 44.0%
increase in the Company's loan portfolio. Total interest expense increased $5.1
million or 77.9% to $11.7 million for the six months ended September 30, 1995,
from $6.6 million for the six months ended September 30, 1994. This increase is
primarily attributable to a 23.5% increase in deposits to $327.7 million at
September 30, 1995, from $265.2 million at September 30, 1994. Additionally, the
Company's borrowings from the FHLB increased 121.0% to $137.0 million at
September 30, 1995, from $62.1 million at September 30, 1994. Net interest
income for the six months ended September 30, 1995, was $8.9 million as compared
to $8.1 million for the six months ended September 30, 1994. As a result, the
Company's net interest spread decreased 85 basis points to 3.68% for the six
months ended September 30, 1995 from 4.53% for the six months ended September
30, 1994.

The Company's provision for loan losses was $54,000 during the six months
ended September 30, 1995, versus $371,000 for the six months ended September 30,
1994. The lower provision was a result of low delinquencies and management's
analysis of the various risks associated with its loan portfolio compared to its
existing loan loss reserves. Asset quality at September 30, 1995, continued to
improve, with non-performing assets to total assets at .23% compared to .27% at
March 31, 1995. Loan loss reserves totaled $3.5 million at September 30, 1995,
and $3.4 million at March 31, 1995. The Company believes that at September 30,
1995 the reserves for losses on loans are adequate based upon the Company's
continuing evaluation of the various risks associated with the Company's loan
portfolio.

Other income for the six months ended September 30, 1995, was $4.1 million
or 12.9% higher than other income for the six months ended September 30, 1994,
of $3.6 million. The increase was primarily attributable to higher mortgage
production fees for the six months ended September 30, 1995. For the six months
ended September 30, 1995, PrimeEagle mortgage increased its permanent mortgage
loan originations 29.1% to $212.0 million compared to $163.4 million for the six
months ended September 30, 1994. Additionally, the ratio of mortgage production
fees to loans sold in the secondary market increased to 137 basis points for the
six months ended September 30, 1995 versus 111 basis points for the six months
ended September 30, 1994. For the six months ended September 30, 1995, the
Company recorded gains on sale of assets of $426,000 as compared to gains on
sale of assets of $620,000 for the six months ended September 30, 1994. Other
expenses increased $1.4 million to $9.4 million for the six months ended
September 30, 1995, from $8.0 million for the six months ended September 30,
1994. This increase is principally attributable to increases in salaries,
employee benefits and net occupancy expenses. These additional expenses were
incurred in connection with opening additional branch banking and loan
production offices and a higher volume of lending activity.

RESULTS OF OPERATIONS FOR THE FISCAL YEARS ENDED MARCH 31, 1994 AND MARCH 31,
1995

Net Income

The Company's net income decreased by $1.1 million or 21.3% to $4.1 million
in the fiscal year ended March 31, 1995 from $5.2 million in the fiscal year
ended March 31, 1994. Management consciously increased asset size and grew the
loan portfolio during fiscal 1995 to increase net interest income in order to
compensate for the decline in loan production revenues. Loan production revenues
decreased in fiscal 1995 as a result of the rise in interest rates and reduction
in mortgage refinancing activities.

Net Interest Income

Net interest income increased by $1.7 million or 11.4% to $16.7 million in
fiscal 1995 from $15.0 million in fiscal 1994. The general upward trend in
market interest rates during those periods contributed to the increase in the
yield on interest earning assets in fiscal 1995 from fiscal 1994 and the
increase in the cost of interest bearing liabilities. The increase in interest
received on loans was primarily attributable to the Company's ability to expand
its loan portfolio through originations of residential construction loans,
short-term leases and adjustable rate permanent mortgage loans and consumer
loans. As a result, the Company improved

15
<PAGE> 16

its spread while limiting exposure to rising interest rates due to the variable
rates and short-term commitments these loans represent. Interest on
mortgage-backed securities decreased as a result of the trend of prepayment of
higher coupon securities and the Company's sale of selected mortgage-backed
securities during fiscal 1994 and 1995. The Company's decision to sell
mortgage-backed securities in fiscal 1994 was based primarily on the trend of
rapid prepayments as a result of record mortgage refinancings.

Interest expense increased by $3.1 million or 24.7% to $15.6 million in
fiscal 1995 from $12.5 million in fiscal 1994. This was primarily the result of
an increase in deposits and FHLB advances. During fiscal 1994, the Company
repaid $7.5 million of 8.45% FHLB advances. This transaction is reflected in the
financial statements as an extraordinary item. The prepayment penalty, net of
state and federal income taxes, was $427,000.

Provision for Loan Losses

The Company decreased its provision for loan losses by $357,000 or 35.7% to
$643,000 in fiscal 1995 from $1.0 million in fiscal 1994. The decrease in the
provision was a result of management's continuing evaluation of the inherent
risks in the Company's existing loan portfolio and the level of existing
reserves. Since the Company's historical charge-offs have been low, the
allocation of reserves to specific loan categories is based upon management's
analysis of the current inherent risk of each loan category, not historical
patterns.

Non-Interest Income

Non-interest income decreased by $2.9 million or 31.4% to $6.3 million in
fiscal 1995 from $9.2 million in fiscal 1994. The largest component of
non-interest income is generated by loan production activities and mortgage
production fees. Mortgage production fees represented 51.0% of total
non-interest income in fiscal 1995 compared to 65.9% in fiscal 1994. These fees
are directly related to the volume of loans originated and sold. Loans sold in
the secondary market decreased by $222.7 million or 44.2% to $281.4 million in
fiscal 1995 from $504.1 million during fiscal 1994. The reduced rate of loans
originated and sold results from rising interest rates which caused a decrease
in mortgage refinancing during fiscal 1995 and, therefore, lower permanent
mortgage originations.

Gain on sale of loans increased by $703,000 or 373.9% to $891,000 in fiscal
1995 from $188,000 in fiscal 1994. This was primarily attributable to the sale
of the guaranteed portions of SBA loans and the sale of multi-family loans
acquired from the RTC. Service charges increased by $137,000 or 29.8% to
$597,000 in fiscal 1995 from $460,000 in fiscal 1994. This was primarily the
result of the increase in the number of checking accounts and the fees generated
by the Company's retail banking group. In fiscal 1995, the Company recognized
$14,000 of gains on the sale of mortgage-backed securities, compared to $959,000
in fiscal 1994. The Company does not rely on gains of the sale of
mortgage-backed securities as a continuing source of income.

The following table sets forth, for the periods indicated, the principal
components of non-interest income:

<TABLE>
<CAPTION>
FISCAL YEARS
ENDED MARCH 31,
-----------------
1994 1995
------ ------
(IN THOUSANDS)
<S> <C> <C>
Mortgage production fees........................................... $6,100 $3,236
Service charges.................................................... 460 597
Gain on sale of loans.............................................. 188 891
Gain on sale of mortgage-backed securities......................... 959 14
Miscellaneous...................................................... 1,543 1,609
------ ------
Total non-interest income................................ $9,250 $6,347
====== ======
</TABLE>

Non-Interest Expenses

In fiscal 1995, approximately 60.0% of the Company's non-interest expenses
consisted of salaries and employee benefits compared to 60.8% in fiscal 1994. In
fiscal 1995, salaries and employee benefits increased

16
<PAGE> 17

7.4% to $9.6 million from $9.0 million in fiscal 1994. This increase was
primarily due to the additional processing personnel required to service the
growth in loans and customers.

In fiscal 1995, the Company added loan production offices in Columbia and
Sumter, South Carolina and purchased property for additional branch sites and
began construction of another metropolitan Atlanta branch located in Cherokee
County, Georgia. The Company's net occupancy expense increased by $395,000 or
26.4% to $1.9 million in fiscal 1995 from $1.5 million in fiscal 1994, as a
result of rent escalation and increased property taxes. The Company's data
processing expense increased as a result of the growth in the number of checking
accounts and the loan servicing portfolio. Increased deposits caused Federal
Deposit Insurance Corporation ("FDIC") insurance premiums to increase to
$607,000 in fiscal 1995 from $532,000 in fiscal 1994. Proposed legislation would
substantially reduce these premiums after a significant one-time assessment to
restore the SAIF fund. See "Risk Factors -- Legislation and Regulation."

Income Tax Expense

The effective income tax rate for fiscal 1995 was 35.7% compared to 37.5%
for fiscal 1994. The major factor contributing to this decrease was the tax
benefit received from certain investment securities.

RESULTS OF OPERATIONS FOR THE FISCAL YEARS ENDED MARCH 31, 1993 AND MARCH 31,
1994

Net Income

The Company's net income before extraordinary item and cumulative effect of
change in accounting principle increased by $1.2 million or 30.7% to $5.3
million in the fiscal year ended March 31, 1994 from $4.1 million in the fiscal
year ended March 31, 1993. Record net income in fiscal 1994 can be attributed to
a 22.9% increase in net interest income and a 59.6% increase in other income.
The increase in net interest income was a result of an improved net interest
margin. The increase in other income was primarily attributable to an 80.7%
increase in mortgage production fees generated by record origination volume at
the Company's mortgage banking segment. Other expenses increased 33.7% during
fiscal 1994 and the provision for loan losses increased 58.7% over fiscal 1993.

The Company adopted the provision of Statement of Financial Accounting
Standard No. 109, "Accounting for Income Taxes," and has reported the cumulative
effect of that change in method of accounting for income taxes of $320,000 in
the consolidated statements of income for fiscal 1994. During the third quarter
of fiscal 1994, the Bank repaid $7.5 million of 8.45% Federal Home Loan Bank
advances. This transaction is reflected in the fiscal 1994 financial statements
as an extraordinary item. The prepayment penalty, net of state and federal
income taxes, was $427,000. Net income (after extraordinary item and cumulative
effect of the change in accounting principle) increased by $1.1 million or 28.1%
to $5.2 million in fiscal 1994 from $4.1 million in fiscal 1993.

Net Interest Income

Net interest income increased by $2.8 million or 22.9% to $15.0 million in
fiscal 1994 from $12.2 million in fiscal 1993. The general decline in market
interest rates during those periods contributed to the decrease in the yield on
interest earning assets in fiscal 1994 from fiscal 1993 and the decrease in the
cost of interest bearing liabilities. The increase in interest received on loans
was primarily attributable to the Company's ability to expand its loan portfolio
through originations of residential construction, short-term leases and, to a
lesser extent, adjustable rate permanent mortgage loans. As a result, the
Company improved its spread while reducing its exposure to rising interest rates
due to the short-term rate commitments these loans represent. Interest on
mortgage-backed securities decreased as a result of the sale of selected
mortgage-backed securities in fiscal 1994. The Company's decision to sell
mortgage-backed securities was based primarily on the trend of rapid prepayments
as a result of record mortgage refinancings.

Interest expense decreased by $2.7 million or 17.8% to $12.5 million in
fiscal 1994 from $15.2 million in fiscal 1993. This decrease was primarily
attributable to a trend of declining interest rates and the repricing of the
Bank's deposits at lower rates and the repayment of other borrowings at higher
rates.

17
<PAGE> 18

Provision for Loan Losses

The Company increased its provision for loan losses by $370,000 or 58.7% to
$1.0 million in fiscal 1994 from $630,000 in fiscal 1993. The increase in the
provision was a result of management's continuing evaluation of the change in
the Company's loan mix. Charge-offs decreased to $104,000 in fiscal 1994 from
$635,000 in fiscal 1993. As a result of the increase in the provision and
decrease in charge-offs, the reserve for loan losses increased $929,000 from
$2.42 million at March 31, 1993, to $3.35 million at March 31, 1994.

Non-Interest Income

Non-interest income increased by $3.5 million or 59.6% to $9.3 million in
fiscal 1994 from $5.8 million in fiscal 1993. Mortgage production fees
represented 65.9% of total non-interest income in fiscal 1994 compared to 58.2%
in fiscal 1993. Loans sold in the secondary market increased by $227.0 million
or 81.9% to $504.1 million in fiscal 1994 from $277.0 million in fiscal 1993.
The increased rate of loans originated resulted from record mortgage
refinancings.

The following table sets forth, for the periods indicated, the principal
components of non-interest income:

<TABLE>
<CAPTION>
FISCAL YEARS
ENDED MARCH 31,
-----------------
1993 1994
------ ------
(IN THOUSANDS)
<S> <C> <C>
Mortgage production fees........................................... $3,375 $6,100
Service charges.................................................... 349 460
Gain on sale of loans.............................................. 221 188
Gain on sale of mortgage-backed securities......................... 892 959
Miscellaneous...................................................... 957 1,543
------ ------
Total non-interest income................................ $5,794 $9,250
====== ======
</TABLE>

Gain on sale of loans decreased by $33,000 or 14.9% to $188,000 in fiscal
1994 from $221,000 in fiscal 1993. Service charges increased by $111,000 or
31.8% to $460,000 in fiscal 1994 from $349,000 in fiscal 1993.

In fiscal 1994, the Company recognized $959,000 of gains on the sale of
mortgage-backed securities, compared to $892,000 in fiscal 1993.

Non-Interest Expenses

In fiscal 1994, approximately 60.8% of the Company's non-interest expenses
consisted of salaries and employee benefits compared to 57.0% in fiscal 1993. In
fiscal 1994, salaries and employee benefits increased 42.6% to $9.0 million from
$6.3 million in fiscal 1993. This increase was primarily due to the additional
processing personnel required to service the growth in loans and customers.

The Company's net occupancy expense increased by $458,000 or 44.2% to $1.5
million in fiscal 1994 from $1.0 million in fiscal 1993, as a result of
increased loan production offices and personnel. The Company's data processing
expense increased as a result of the growth in the number of checking accounts
and the loan servicing portfolio. Increased deposits caused FDIC insurance
premiums to increase to $532,000 in fiscal 1994 from $479,000 in fiscal 1993.

Income Tax Expense

The effective income tax rate for fiscal 1994 was 37.5% compared to 35.8%
for fiscal 1993. The major factor contributing to this increase was the payment
of state income taxes during the year at a rate of 6%, since all state net
operating loss carry forwards were fully-utilized in fiscal 1993.

18
<PAGE> 19

INTEREST RATE SENSITIVITY

The following table reflects the average balances, the actual interest
income or expense and the average yield and cost of funds of the Company's
interest earning assets and interest bearing liabilities during the fiscal years
ended March 31, 1993, 1994 and 1995:

SUMMARY OF AVERAGE ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
FISCAL YEARS ENDED MARCH 31,
------------------------------------------------------------------------------------------
1993 1994 1995
---------------------------- ---------------------------- ----------------------------
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST BALANCE INTEREST COST
-------- -------- ------ -------- -------- ------ -------- -------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Loans(1)...................... $191,178 $ 19,371 10.13% $233,976 $ 21,906 9.36% $279,367 $ 26,330 9.42%
Mortgage-backed securities.... 70,486 5,673 8.05 41,891 3,135 7.48 26,454 1,939 7.33
FHLB stock.................... 3,060 183 5.98 3,277 174 5.31 4,040 272 6.73
Taxable investments........... 24,954 1,906 7.64 29,524 2,204 7.47 34,002 2,663 7.83
Tax-exempt investment
securities.................. -- -- -- -- -- -- 15,958 1,650 10.34
Interest earning deposits and
Federal funds............... 6,730 308 4.58 3,838 110 2.87 1,645 74 4.50
-------- -------- ------ -------- -------- ------ -------- -------- ------
Total interest
earning assets..... 296,408 27,441 9.26 312,506 27,529 8.81 361,466 32,928 9.11
-------- -------- ------ -------- -------- ------ -------- -------- ------
Non-interest earning assets... 12,165 15,637 18,886
-------- -------- --------
Total assets......... $308,573 $328,143 $380,352
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Passbook accounts............. $ 47,660 1,707 3.58 $ 53,784 1,435 2.67 $ 52,850 1,425 2.70
NOW........................... 18,058 455 2.52 22,123 383 1.73 28,346 484 1.71
Money Market.................. 13,500 416 3.08 12,729 311 2.44 20,993 300 1.43
Certificates of Deposit....... 144,707 8,830 6.10 149,569 7,877 5.27 165,708 9,416 5.68
-------- -------- ------ -------- -------- ------ -------- -------- ------
Total Deposits.............. 223,925 11,408 5.09 238,205 10,006 4.20 267,897 11,625 4.34
Advances...................... 49,872 3,215 6.45 48,265 2,526 5.23 68,272 4,006 5.87
CMO........................... 2,392 618 25.84 -- -- -- -- -- --
-------- -------- ------ -------- -------- ------ -------- -------- ------
Total interest bearing
liabilities............... 276,189 15,241 5.52 286,470 12,532 4.38 336,169 15,631 4.65
-------- -------- ------ -------- -------- ------ -------- -------- ------
Non-interest bearing
liabilities................. 7,988 13,328 11,915
Stockholders' equity.......... 24,396 28,345 32,268
-------- -------- --------
Total liabilities and
stockholders'
equity............. $308,573 $328,143 $380,352
========= ========= =========
Net interest income........... $ 12,200 $ 14,997 $ 17,297
======== ======== ========
Net interest rate spread...... 3.74% 4.43% 4.46%
===== ===== =====
Taxable-equivalent
adjustment.................. -- -- (586)
======== ======== ========
Net interest income, actual... $ 12,200 $ 14,997 $ 16,711
Net interest earning assets... $ 20,219 $ 26,036 $ 25,297
========= ========= =========
Net interest margin........... 4.12% 4.80% 4.79%
===== ===== =====
Interest earning assets as a
percentage of interest
bearing liabilities......... 107.32% 109.09% 107.52%
========= ========= =========
</TABLE>

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

(1) Non-performing loans are included in average balances and income on such
loans, if recognized, is recorded on a cash basis.

The net interest margin remained stable during fiscal 1995 at 4.79%
compared to 4.80% for fiscal 1994. The net interest spread also remained
constant at 4.46% during fiscal 1995 compared to 4.43% during fiscal

19
<PAGE> 20

1994. The stability was the result of the 30 basis point increase in interest
earned on interest earning assets from 8.81% during fiscal 1994 to 9.11% during
fiscal 1995. For the same period, the cost of interest bearing liabilities
increased by 27 basis points from 4.38% during fiscal 1994 to 4.65% during
fiscal 1995.

The overall yield increased primarily as a result of the significant
investment in construction loans tied to the prime rate of interest. The prime
rate increased six times through the fiscal year ended March 31, 1995. In
addition, during fiscal 1995 the Company invested in securities which on a tax
equivalent basis yielded approximately 10.34%.

A significant portion of the asset growth during fiscal 1995 was funded
through advances from the FHLB. The cost of advances increased to 5.87% during
fiscal 1995 from 5.23% during fiscal 1994. The cost of deposits increased 14
basis points to 4.34% during fiscal 1995 from 4.20% during fiscal 1994. During
the fourth quarter of fiscal 1995, the Company began to experience pressure on
its net interest margin as the cost of interest bearing liabilities increased.
During the first two quarters of fiscal 1996, the Company has experienced
pressure on borrowing rates and net interest margin as a result of the
continuing decrease in the percentage of deposits and advances represented by
lower cost passbook and NOW accounts, an increase in the percentage of
certificates of deposits and advances from the FHLB, and higher borrowing costs
from the FHLB. The Company is increasing the size of its loan portfolio for the
purpose of increasing net interest income and mitigating the effect of the
decline in net interest margin.

The rate volume analysis below reflects the components of net interest
income for the periods indicated. For each category of interest earning assets
and interest bearing liabilities, information is provided on changes attributed
to (i) changes in rate (changes in rate multiplied by prior period volume), (ii)
changes in volume (changes in volume multiplied by prior period rate), and (iii)
changes in rate/volume (changes in rate multiplied by changes in volume). The
net change attributable to both volume and rate, which cannot be segregated, has
been allocated proportionately to change due to volume and change due to rate.

RATE/VOLUME ANALYSIS

<TABLE>
<CAPTION>
FISCAL YEARS ENDED MARCH 31,
--------------------------------------------------------
1994 COMPARED TO 1993 1995 COMPARED TO 1994
--------------------------- --------------------------
RATE VOLUME TOTAL RATE VOLUME TOTAL
------- ------- ------- ------ ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Changes due to:
Interest income on interest earning
assets:
Loans(1)............................. $(1,556) $ 4,091 $ 2,535 $ 141 $ 4,283 $ 4,424
Mortgage-backed securities........... (371) (2,167) (2,538) (66) (1,130) (1,196)
Taxable investment securities........ (43) 341 298 110 349 459
Tax-exempt investment
securities(2)...................... -- -- -- 1,649 -- 1,649
Interest earnings deposits and
federal funds...................... (91) (106) (197) 46 (81) (35)
FHLB stock........................... (22) 12 (10) 54 44 98
------- ------- ------- ------ ------- -------
Total interest income........... (2,083) 2,171 88 1,934 3,465 5,399
------- ------- ------- ------ ------- -------
Interest expense on interest bearing
liabilities:
Deposits............................. (2,087) 685 (1,402) 342 1,277 1,619
FHLB advances........................ (592) (97) (689) 338 1,142 1,480
Collateralized mortgage
obligations........................ -- (618) (618) -- -- --
------- ------- ------- ------ ------- -------
Total interest expense.......... (2,679) (30) (2,709) 680 2,419 3,099
------- ------- ------- ------ ------- -------
Net change in net interest
income........................ $ 596 $ 2,101 $ 2,797 $1,254 $ 1,046 $ 2,300
======= ======= ======= ====== ======= =======
</TABLE>

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

(1) Non-performing loans are included.
(2) Reflects taxable-equivalent adjustments using the statutory federal and
state income tax rate of 39% in adjusting interest on tax-exempt investment
securities to a taxable-equivalent basis.

20
<PAGE> 21

The Company manages the inherently different maturity and re-pricing
characteristics of its loans and deposits to achieve a desired interest rate
sensitivity position and to limit the Company's exposure to interest rate risk.
The Bank's Asset and Liability Committee ("ALCO") has primary responsibility for
managing the Company's exposure to interest rate risk. The ALCO is comprised of
three directors, two officers of the Bank and the manager of the Bank's
secondary marketing department. The ALCO meets two times a week to establish
interest rates on loans and deposits and review interest rate sensitivity and
liquidity positions. Funding positions are kept within predetermined limits
designed to ensure that the interest rate risk of the Company is properly
managed. The Company utilizes a simulation model to measure interest rate risk
and manage its exposure to interest rate risk. Mortgage-backed securities and
permanent real estate loans are evaluated based upon estimated prepayment timing
for these categories, rather than contractual maturity.

Interest rate sensitivity is a measure of exposure to changes in net
interest income due to changes in market interest rates. The excess of interest
earning assets over interest bearing liabilities repricing or maturing in a
given period of time is commonly referred to as "Gap." A positive Gap indicates
an excess of interest rate sensitive assets over interest rate sensitive
liabilities; a negative Gap indicates an excess of interest rate sensitive
liabilities over interest rate sensitive assets. The ALCO has continued to shift
the Company's Gap throughout fiscal 1995. The Company's Gap position is
evaluated continuously and reviewed by the ALCO in bi-weekly meetings. The
Company has a negative one year Gap of 23.59% as of March 31, 1995. Part of the
ALCO strategy for reducing interest rate risk revolves around increasing the
percentage of shorter term floating rate loans in the Company's portfolio. This
has been accomplished by originating residential construction and adjustable
rate permanent loans. The Company continues to originate consumer loans, second
mortgage loans and equipment lease financing loans. In general, these loans have
short maturities and floating interest rates.

The following table reflects the Company's interest rate sensitivity Gap
between interest earning assets and interest bearing liabilities at March 31,
1995 for the periods indicated. Assets and liabilities having no stated schedule
of repayments and no stated maturity are reported as due in less than three
months, except equity securities which are reported due after five years.

INTEREST RATE SENSITIVITY

<TABLE>
<CAPTION>
AT MARCH 31, 1995
----------------------------------------------------------------
AFTER AFTER AFTER
3 MONTHS 1 YEAR 3 YEARS
WITHIN WITHIN WITHIN WITHIN AFTER
3 MONTHS 1 YEAR 3 YEARS 5 YEARS 5 YEARS TOTAL
-------- --------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets re-pricing:
Loans receivable, net plus loan loss reserves.......... $103,573 $ 54,495 $ 37,766 $ 42,549 $ 68,885 $307,268
Investment securities held to maturity................. 7,609 2,400 13,932 16,458 17,200 57,599
Securities available for sale.......................... -- -- 345 155 20,439 20,939
Loans receivable held for sale(1)...................... 41,220 -- -- -- -- 41,220
FHLB stock............................................. -- -- -- -- 5,984 5,984
Interest bearing deposit............................... 144 -- -- -- -- 144
-------- --------- -------- -------- -------- --------
Total interest-earning assets.................... 152,546 56,895 52,043 59,162 112,508 433,154
-------- --------- -------- -------- -------- --------
Interest bearing liabilities re-pricing:
Deposits(2)............................................ 110,071 97,459 41,109 37,359 317 286,315
Borrowings............................................. 109,507 295 1,832 8,146 173 119,953
-------- --------- -------- -------- -------- --------
Total interest-bearing liabilities............... 219,578 97,754 42,941 45,505 490 406,268
-------- --------- -------- -------- -------- --------
Interest rate sensitivity Gap............................ $(67,032) $ (40,859) $ 9,102 $ 13,657 $112,018 $ 26,886
========= ========= ======== ======== ======== ========
Cumulative interest rate sensitivity Gap................. $(67,032) $(107,891) $(98,789) $(85,132) $ 26,886
========= ========= ======== ======== ========
Cumulative interest rate sensitivity Gap as a percentage
of total assets........................................ (14.66)% (23.59)% (21.60)% (18.62)% 5.88%
</TABLE>

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

(1) Represents loans committed to sell in less than three months.
(2) Savings and NOW account balances are reported due within three months.

21
<PAGE> 22

The following table reflects at March 31, 1995, information regarding the
dollar amount of loans maturing in the Company's net loan portfolio based on
their contractual terms to maturity. Demand loans having no stated schedule of
repayment and no stated maturity, and overdrafts are reported as due in one
year. The information was compiled based upon contractual terms to maturity. The
actual maturities may differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or prepayment
penalties:

MATURITIES AND SENSITIVITIES OF LOANS TO CHANGES IN INTEREST RATES

<TABLE>
<CAPTION>
AT MARCH 31, 1995
----------------------------------------------
ONE AFTER ONE AFTER
YEAR YEAR TO FIVE FIVE
OR LESS YEARS YEARS TOTAL
------- ------------ ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Real estate mortgage loans:
Fixed rates................................. $ 1,003 $ 7,713 $ 43,359 $ 52,075
Adjustable rates............................ 2,138 5,697 116,976 124,811
Real estate construction, net:
Adjustable rates............................ 84,913 12,819 -- 97,732
Investment in commercial leases:
Fixed rates................................. 1,783 30,224 575 32,582
Consumer -- fixed rates....................... 207 403 391 1,001
Loans on savings -- fixed rates............... 1,320 -- -- 1,320
------- ------------ ---------- --------
Total............................... $91,364 $ 56,856 $ 161,301 $309,521
======= ========= ======== ========
Less: Unearned income......................... 593
Deferred loan origination fees.......... 1,547
Reserve for loan losses................. 3,362
Unearned discount on loans purchased.... 113
--------
Total............................... $303,906
========
</TABLE>

The following table reflects the dollar amount of all loans due after one
year from March 31, 1995, which have predetermined or fixed interest rates and
have floating or adjustable rates:

<TABLE>
<CAPTION>
PREDETERMINED FLOATING OR
RATES ADJUSTABLE RATES
------------- ----------------
(IN THOUSANDS)
<S> <C> <C>
Real estate-mortgage.............................................. $51,072 $122,673
Real estate-construction, net..................................... -- 12,819
Commercial leases................................................. 30,799 --
Consumer.......................................................... 794 --
Loans on savings.................................................. -- --
------------- ----------------
Total................................................... $82,665 $135,492
========== ============
</TABLE>

22
<PAGE> 23

PROVISION FOR LOAN LOSSES AND RISK ELEMENTS

The Bank has an Asset Classification Committee (the "ACC"), comprised of
representatives of management, which undertakes an ongoing asset classification
program to serve as an early warning system in identifying and determining the
magnitude of potential problem assets. The ACC reports at least quarterly to the
Board of Directors. Management and the ACC consider numerous factors in
identifying potential problem loans including, among other factors, the
estimated value of the underlying collateral, loan concentrations, specific loan
problems, economic conditions that may affect the borrower's ability to repay,
past payment experience, general market conditions and such other factors as
management or the ACC believes should be considered under existing
circumstances. In addition, various regulatory agencies, as an integral part of
the examination process, periodically review the reserve for loan losses. Such
agencies require the Bank to recognize additions to the reserve based on
judgments with regard to information available to them at the time of the
examination. Management is not aware of any loans classified for regulatory
purposes as loss, doubtful or substandard that (i) have not been disclosed and
(ii) either (a) represent or result from trends or uncertainties, which
management reasonably expects will materially impact future operating results,
liquidity, or capital resources, or (b) represent material credits with respect
to which management is aware of any information which causes management to have
serious doubts as to the ability of such borrower to comply with the loan
repayment terms.

Construction loans represent a larger percentage of the Bank's loan
portfolio than many of its peer group. However, the Company believes that its
strict underwriting criteria, construction monitoring process, and knowledge of
local market conditions tend to reduce the risk of delinquencies and problem
loans. Despite higher credit risks, construction loans offer the Company a short
term variable interest rate asset which assists in the ALCO's goals of
decreasing the impact of rising interest rates on net income and equity.
Construction loans can also be an effective tool to help secure permanent
mortgage financing from home purchases. The Company has developed a construction
inspection and appraisal network that closely monitors construction progress and
loan disbursements throughout the process. At March 31, 1995, the Company had
only three construction loans with a combined disbursed balance of $131,000 that
were more than 60 days delinquent. Management and the ACC, along with
regulators, closely monitor total exposure to each market area and price range
in determining the appropriate concentrations of construction loans. The Office
of Thrift Supervision (the "OTS") also monitors and comments on the adequacy of
the Bank's provision for loan losses in conducting its examinations of the Bank.
Additionally, the broadening of the Company's lending area has reduced its
dependence on the economic prospects of the Atlanta metropolitan area.

At March 31, 1995, the reserve for loan losses as a percentage of average
loans outstanding was 1.2%. Charge-offs in fiscal 1995 were $684,000 versus
$104,000 in fiscal 1994 and $635,000 in 1993. The reserve for loan losses
remained virtually unchanged from $3.35 million at March 31, 1994, to $3.36
million at March 31, 1995. In fiscal 1995, charge-offs represented .23% of
average loans receivable versus .03% for fiscal 1994 and .33% in 1993.

Total problem assets, which include non-accrual loans, loans classified as
problem assets by the ACC and real estate acquired through the settlement of
loans, increased by $714,000 or 49.0% to $2.2 million at March 31, 1995, from
$1.5 million at March 31, 1994. At March 31, 1995, the Company had non-accrual
loans of $603,000 down from $787,000 at March 31, 1994. Interest income not
recognized on these loans amounted to $40,000 during 1995, and $26,000 during
1994. Approximately 75% of all non-accrual loans were first mortgage loans on
single family residential real estate. In addition, at March 31, 1995, the ACC
identified $954,000 of loans as potential problem loans. At March 31, 1994, the
Company had no loans classified as potential problems. Real estate owned
decreased by $56,000 or 8.3% to $615,000 at March 31, 1995, from $671,000 at
March 31, 1994. Total problem assets as a percent of total assets have remained
stable at .47% at March 31, 1995, when compared to .46% at March 31, 1994. The
five-year trend of total problem assets to total assets exhibits the progress
the Company has made in reducing problem assets. This decrease has been

23
<PAGE> 24

accomplished in a time of significant asset growth. The following table sets
forth an analysis of the Company's provision for loan losses for the periods
indicated.

<TABLE>
<CAPTION>
FISCAL YEARS ENDED MARCH 31,
--------------------------------------------------------
1991 1992 1993 1994 1995
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Reserve for loan losses, beginning of
year.................................. $ 757 $ 763 $ 892 $ 2,420 $ 3,349
Charge-offs:
Real estate-construction.............. 414 -- 184 -- 149
Real estate-mortgage.................. 12 305 432 101 521
Consumer and other.................... 15 2 19 3 14
Commercial leases..................... -- -- -- --
-------- -------- -------- -------- --------
Total charge-offs............. 441 307 635 104 684
Recoveries.............................. 1 38 5 33 54
-------- -------- -------- -------- --------
Net charge-offs......................... 440 269 630 71 630
Reserve on purchased loans.............. -- -- 1,528 -- --
Provision for loan losses............... 446 398 630 1,000 643
-------- -------- -------- -------- --------
Reserve for loan losses, end of year.... $ 763 $ 892 $ 2,420 $ 3,349 $ 3,362
======== ======== ======== ======== ========
Average loans outstanding for the
period................................ $150,377 $163,136 $191,178 $233,976 $279,367
Reserve for loan losses to period end
loans................................. .46% .48% .97% 1.11% .83%
Ratio of net charge-offs to average
loans .29% .16% .33% .03% .23%
</TABLE>

The allocation of the provision for loan losses for the year indicated is
as follows:

<TABLE>
<CAPTION>
FISCAL YEARS ENDED MARCH 31,
-------------------------------------------------------------------------------------------------
1991 1992 1993 1994 1995
----------------- ----------------- ----------------- ----------------- -----------------
% % % % %
DOLLAR OF TOTAL DOLLAR OF TOTAL DOLLAR OF TOTAL DOLLAR OF TOTAL DOLLAR OF TOTAL
AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS
------ -------- ------ -------- ------ -------- ------ -------- ------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real Estate:
First mortgage loans........ $266 85% $255 77% $ 345 55% $ 507 43% $ 639 51%
Second mortgage loans....... 77 8 120 7 129 5 350 4 148 2
Construction................ 54 6 109 15 460 31 934 42 1,008 38
Commercial leases............. -- -- -- -- 188 8 308 10 296 8
Consumer and other............ 21 1 19 1 10 1 10 1 10 1
Unallocated................... 345 -- 389 -- 1,288 -- 1,240 -- 1,261 --
------ --- ------ --- ------ --- ------ --- ------ ---
Total................ $763 100% $892 100% $2,420 100% $3,349 100% $3,362 100%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>

NON-PERFORMING ASSETS

Non-performing assets are composed of non-accrual loans and real estate
acquired in the settlement of loans ("REO"). Loans that are 90 days past due are
classified as non-accrual. An allowance is provided for all loans past due more
than 90 days and such loans are classified as non-accrual if the financial
condition of the borrower raises significant concern with regard to the ability
of the borrower to service debt in accordance with current loan terms. The trend
relating to non-accrual loans and REO is that problem assets have remained less
than 3% of total assets for the previous five years. In addition, total problem
assets as a percent of total assets have been less than 1% for fiscal 1994 and
1995. The ratio of the reserve for loan losses to problem assets exceeded 150%
at March 31, 1995 and 1994. At March 31, 1995, the Company had REO of $615,000
versus REO of $671,000 at March 31, 1994. The Company had non-accrual loans of
$603,000 at March 31, 1995, versus $787,000 at March 31, 1994. These loans are
composed primarily of first mortgage loans on single family residences.

The following table reflects non-performing loans, potential problem loans
and restructured loans as of the dates indicated. Non-performing loans consist
of non-accrual loans and foreclosed properties, as well as

24
<PAGE> 25

loans past due 90 days or more as to interest or principal and still accruing.
Potential problem loans are those with respect to which management has doubts
regarding the ability of the borrower to comply with current loan repayment
terms and have been classified as such by the ACC, regardless of payment status.

<TABLE>
<CAPTION>
AT MARCH 31,
------------------------------------------------
1991 1992 1993 1994 1995
------- ------- ------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Non-accrual loans
Residential real estate........................ $ 377 $ 1,051 $2,057 $ 780 $ 603
Commercial real estate......................... 1,224 -- -- -- --
Installment.................................... -- 87 -- 7 --
------- ------- ------ ------ ------
Total non-accrual...................... 1,601 1,138 2,057 787 603
Potential problem loans.......................... 2,063 -- 2,165 -- 954
Loans contractually delinquent 90 days which
still accrue interest.......................... -- -- -- -- --
Troubled debt restructurings..................... -- -- -- -- --
------- ------- ------ ------ ------
Total non-accrual and problem loans.............. 3,664 1,138 4,222 787 1,557
Real estate owned, net........................... 3,486 3,696 2,137 671 615
------- ------- ------ ------ ------
Total problem assets................... $ 7,150 $ 4,834 $6,359 $1,458 $2,172
====== ====== ====== ====== ======
Total problem assets/total assets................ 2.55% 1.60% 1.98% .46% .47%
Total problem assets/net loans plus reserves..... 4.51% 2.79% 3.30% .65% .71%
Reserve for loan losses/problem assets........... 10.67% 18.45% 38.06% 229.70% 154.79%
</TABLE>

LOAN PORTFOLIO AND CONCENTRATIONS

Since 1991, the Company's loan portfolio has grown 119%. During fiscal
1995, the Company increased residential mortgage loans 69%. This was
accomplished primarily by electing to retain adjustable rate mortgages for the
portfolio. The Company's primary lending activity is conducted through the loan
production operation and includes the origination of construction loans and
conventional, Federal Housing Administration ("FHA") and Veterans Administration
("VA") permanent loans secured by first mortgages on residential properties,
principally one to four family owner occupied residences. The Bank's residential
loan originations are conducted through PrimeEagle. Substantially all permanent
loans originated by PrimeEagle are underwritten in accordance with standards and
requirements acceptable to Federal National Mortgage Association ("FNMA"),
Federal Home Loan Mortgage Corporation ("FHLMC"), FHA and VA. Substantially all
fixed rate loans are sold to third party investors while adjustable rate
mortgages are retained in the Bank's portfolio. In addition, the loan production
segment originates construction loans on residential real estate in an attempt
to capture the permanent mortgage when the builder sells the house. This
provides an advantage to the loan production segment and reduces dependence on
refinances.

In fiscal 1993, the Company began an equipment leasing operation designed
primarily to provide financing for investment grade (Baa/BBB or better) and
other companies with unrated debt that meet the Bank's underwriting criteria.
The residual value of the equipment is not considered as part of the Company's
return. The Company looks to rental payments to provide its return. Each lease
is approved by the Bank's Loan Committee based upon the credit quality of the
lessee. Collateral value of equipment is not considered a material portion of
the credit analysis of the lease; rather the lessee's cash flow and ability to
make rental payments is most important. At March 31, 1995, the average duration
of these leases was 24 months and lease financing loans represented 8.0% of the
total loan portfolio.

25
<PAGE> 26

The following table reflects the composition of the Bank's loan portfolio
at the indicated dates:

<TABLE>
<CAPTION>
AT MARCH 31,
-----------------------------------------------------------------------------------------------------
1991 1992 1993 1994 1995
----------------- ----------------- ----------------- ----------------- -----------------
AMOUNT % AMOUNT % AMOUNT % AMOUNT % AMOUNT %
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real
Estate -- construction
loans
Construction............ $ 9,003 5.40% $ 23,156 12.36% $ 65,870 26.26% $102,983 34.18% $123,995 30.43%
Acquisition &
Development........... 545 0.33 4,500 2.40 13,059 5.20 23,771 7.89 30,517 7.49
Real Estate -- mortgage
loans
Non-residential......... 9,107 5.46 11,429 6.10 24,355 9.71 19,578 6.50 15,852 3.89
Residential............. 126,547 75.90 118,617 63.30 90,349 36.02 88,941 29.52 150,784 37.00
Home equity and second
mortgages............. 13,940 8.36 13,435 7.17 12,899 5.14 10,701 3.55 10,250 2.52
Loans held for sale..... 5,306 3.18 13,708 7.32 23,462 9.35 23,641 7.85 41,220 10.11
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Total real estate
loans........... 164,448 98.63 184,845 98.65 229,994 91.68 269,615 89.49 372,618 91.44
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Other loans:
Leases.................. -- -- -- -- 18,808 7.50 29,364 9.75 32,582 8.00
Consumer and other...... 2,287 1.37 2,539 1.35 2,054 0.82 2,305 0.76 2,321 0.56
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Total other
loans........... 2,287 1.37 2,539 1.35 20,862 8.32 31,669 10.51 34,903 8.56
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Total gross loans
receivable...... 166,735 100.00% 187,384 100.00% 250,856 100.00% 301,284 100.00% 407,521 100.00%
-------- ====== -------- ====== -------- ====== -------- ====== -------- ======
Less:
Undisbursed portion of
loans in process...... (3,749) (9,870) (31,460) (52,054) (56,780)
Deferred loan
origination fees...... (1,112) (1,221) (1,037) (1,176) (1,547)
Unearned income......... (3,266) (2,572) (1,782) (1,190) (593)
Reserve for loan
losses................ (763) (892) (2,420) (3,349) (3,362)
Unearned discount on
loans purchased....... (101) (380) (580) (148) (113)
-------- -------- -------- -------- --------
Loans receivable,
net(1).................. $157,744 $172,449 $213,577 $243,367 $345,126
======== ======== ======== ======== ========
</TABLE>

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

(1) Includes loans receivable held for sale.

At March 31, 1995, approximately 77.5% of the Company's loans receivable
are first mortgage loans secured by residential real estate consisting of one to
four family homes. One to four family home mortgages are generally believed to
be a conservative investment. The Company's high concentration of residential
first mortgages tends to reduce its level of delinquencies and problem loans.

The acquisition of the Prime Lending division during fiscal 1993 broadened
the Company's mortgage lending area from metropolitan Atlanta to emerging cities
in the Southeastern United States. Although Prime Lending's markets have not
grown as rapidly as metropolitan Atlanta, they have experienced over time more
consistent growth. Many of Prime Lending's markets are impacted by military
bases and their resulting housing requirements. During fiscal 1993, 1994 and
1995, the base populations in these markets increased. Total exposure to each
market area is monitored monthly. The factors considered in evaluating loan
concentrations and in approving loans include, among other things, housing
inventory, economic prospects of major employers, likelihood of job growth or
contraction and general economic conditions. The broadening of the Company's
lending area reduces its concentration of metropolitan Atlanta loans and
dependence on the economic prospects of Atlanta.

In accordance with the Company's business plan, the volume of construction
lending increased in each of the previous three years. The Company understands
the risks inherent in interim construction financing and has designed an
efficient organization to properly mitigate those risks through strict
underwriting and closely monitoring the process. The Company's underwriting
criteria consider, among other things, the equity investment of the borrower,
the track record and financial condition of the builder, the demand for the type
of house to be constructed including a marketing survey of inventory levels by
price range and location, the feasibility of house plans and costs, growth
prospects for the economy and the impact of changes in interest

26
<PAGE> 27

rates. The Company has a multistate construction inspection and appraisal
network. Its staff closely monitors construction progress and draws throughout
the process. Approximately 30.0% of the Company's construction loan portfolio is
comprised of loans on pre-sold single family residences. In addition, no single
customer accounted for more than 2.0% of the Company's loans in fiscal 1995,
1994 or 1993.

INVESTMENT SECURITIES

Federally chartered thrift institutions have the authority to invest in
various types of liquid assets. These assets include United States Treasury and
Federal Agency obligations, certain certificates of deposit, bankers'
acceptances, and Federal Funds. Subject to various restrictions, investments may
also be made in mortgage-backed securities, commercial paper and corporate debt
and equity securities. During 1995, investment securities increased 41.3% over
the prior year. At March 31, 1995, the Company had total investments in
securities of $78.5 million versus $55.6 million at March 31, 1994. At March 31,
1994, the Company adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities". Under SFAS No. 115, the Company classifies its securities in one of
three categories: trading, available for sale, or held to maturity. With the
adoption of SFAS No. 115, the Company has reported the effect of the change in
the method of accounting for investments in debt securities as a separate
component of equity, net of income taxes.

The investment securities portfolio at March 31, 1995, was comprised of
$57.6 million of investment securities held to maturity at amortized cost. The
Company has the ability and it is management's intent to hold these securities
to maturity for investment purposes. In addition, the Company had an estimated
market value of $20.9 million of investment securities available for sale at
March 31, 1995. Investment securities available for sale had a net unrealized
gain as shown in the Company's stockholders' equity section of $46,000 at March
31, 1995, versus $387,000 at March 31, 1994. Investment securities available for
sale are primarily comprised of mortgage-backed securities and investments in
equity securities, principally preferred stock. See Note 2 to the Consolidated
Financial Statements for further information on investment securities.

During 1995, the Company's weighted average yield (calculated on a taxable
equivalent basis) for the aggregate investment portfolio was 8.0% versus 7.2%
for 1994. The increase in yield is primarily due to the purchase of
approximately $15.0 million of investments comprised primarily of preferred
stock for which the Company has a tax exclusion for dividends received.

Included in other securities at March 31, 1995 and 1994, are $5.0 million
and $5.7 million, respectively, of investment grade residential mortgage pass
through certificates issued by the RTC. These securities are rated Aa2 by
Moody's and AA by Standard & Poor's. The Company holds no investment securities
by any single issuer, other than mortgage-backed securities issued by an agency
of the United States government, which equalled or exceeded 10% of stockholders'
equity at March 31, 1993, 1994 or 1995.

27
<PAGE> 28

The following table reflects securities held in the Bank's securities
portfolio for the periods indicated:

<TABLE>
<CAPTION>
AT MARCH 31,
---------------------------
1993 1994 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Investment Securities Held to Maturity:
US Treasury and US Government Agencies.................. $22,794 $17,860 $24,799
Mortgage-backed securities.............................. 35,085 11,388 10,009
Corporate bonds......................................... 7,742 2,463 10,376
Other debt securities................................... 7,174 2,972 12,415
Equity securities....................................... 964 -- --
------- ------- -------
Total........................................... 73,759 34,683 57,599
------- ------- -------
Securities Available for Sale:
Mortgage-backed securities.............................. 14,184 17,911 14,093
Equity securities-preferred stock....................... -- 2,972 6,846
------- ------- -------
Total........................................... 14,184 20,883 20,939
------- ------- -------
Total Investment Securities:
US Treasury and US Government agencies.................. 22,794 17,860 24,799
Mortgage-backed securities.............................. 49,269 29,299 24,102
Corporate bonds......................................... 7,742 2,463 10,376
Other debt securities................................... 7,174 2,972 12,415
Equity securities....................................... 964 2,972 6,846
------- ------- -------
Total........................................... $87,943 $55,566 $78,538
======= ======= =======
</TABLE>

28
<PAGE> 29

The following table reflects the stated contractual maturities, amortized
cost or estimated value and weighted average yield of securities held in the
Bank's portfolio, for the periods indicated:

<TABLE>
<CAPTION>
AT MARCH 31, 1995
---------------------------------------------------------------
INVESTMENT SECURITIES HELD
TO MATURITY SECURITIES AVAILABLE FOR SALE
----------------------------- -------------------------------
AMORTIZED WEIGHTED ESTIMATED WEIGHTED
COST AVERAGE YIELD(1) FAIR VALUE AVERAGE YIELD(1)
--------- ----------------- ----------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
US Treasury and US Government Agencies:
Within 1 year........................... -- -- -- --
1-5 years............................... $24,799 7.03% -- --
5-10 years.............................. -- -- -- --
More than 10 years...................... -- -- -- --
--------- ---------------- ----------- ----------------
Total............................ 24,799 7.03 -- --
--------- ---------------- ----------- ----------------
Mortgage-backed securities:
Government National Mortgage Association
Within 1 year........................... -- -- -- --
1 to 5 years............................ -- -- -- --
5 to 10 years........................... -- -- -- --
More than 10 years...................... 4,168 5.61 $ 296 8.00%
--------- ---------------- ----------- ----------------
Total............................ 4,168 5.61 296 8.00
--------- ---------------- ----------- ----------------
Federal National Mortgage Association
Within 1 year........................... -- -- -- --
1 to 5 years............................ -- -- 155 8.25
5 to 10 years........................... -- -- -- --
More than 10 years...................... 881 5.73 8,878 8.60
--------- ---------------- ----------- ----------------
Total............................ 881 5.73 9,033 8.59
--------- ---------------- ----------- ----------------
Federal Home Loan Mortgage Corporation
Within 1 year........................... -- -- -- --
1 to 5 years............................ -- -- 345 7.03
5 to 10 years........................... -- -- 526 8.50
More than 10 years...................... -- -- 3,893 8.50
--------- ---------------- ----------- ----------------
Total............................ -- -- 4,764 8.39
--------- ---------------- ----------- ----------------
Other:
Within 1 year........................... -- -- -- --
1 to 5 years............................ -- -- -- --
5 to 10 years........................... -- -- -- --
More than 10 years...................... 17,375 7.42 -- --
--------- ---------------- ----------- ----------------
Total............................ 17,375 7.42 -- --
--------- ---------------- ----------- ----------------
Corporate Debt:
Within 1 year........................... -- -- -- --
1 to 5 years............................ 5,591 7.64 -- --
5 to 10 years........................... 2,861 8.40 -- --
More than 10 years...................... 1,924 7.69 -- --
--------- ---------------- ----------- ----------------
Total............................ 10,376 7.86 -- --
--------- ---------------- ----------- ----------------
Preferred Stock:
Within 1 year........................... -- -- -- --
1 to 5 years............................ -- -- -- --
5 to 10 years........................... -- -- -- --
More than 10 years...................... -- 6,846 8.05
--------- ---------------- ----------- ----------------
Total............................ -- -- 6,846 8.05
--------- ---------------- ----------- ----------------
Total Securities:
Within 1 year........................... -- -- -- --
1 to 5 years............................ 30,390 7.14 500 7.41
5 to 10 years........................... 2,861 8.40 526 8.50
More than 10 years...................... 24,348 7.07 19,913 8.38
--------- ---------------- ----------- ----------------
Total............................ $57,599 7.17% $20,939 8.36%
========= ================ ========== ================
</TABLE>

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

(1) The weighted average yield has been calculated based on the amortized cost
of the respective securities.

29
<PAGE> 30

DEPOSITS

Deposits are the Company's primary funding source. Total deposits grew by
$42.0 million or 17.2% to $286.3 million at March 31, 1995, from $244.3 million
at March 31, 1994. During the twelve months ended September 30, 1995, deposits
grew by $62.5 million or 23.7% to $327.7 million at September 30, 1995, from
$265.2 million at September 30, 1994. The Bank uses traditional marketing
methods to attract new customers. Its deposit network is serviced from its ten
branches. During the fiscal year ending March 31, 1995, the number of savings
accounts grew 18.0% to 40,698 accounts at March 31, 1995, from 34,492 at March
31, 1994. Management believes that the majority of those additional accounts are
a result of the continued trend in consolidation of financial institutions in
the metropolitan Atlanta market and the desire of customers to deal with an
independent, local financial institution. In addition, in April 1994, the Bank
purchased insured deposits of approximately $22.1 million of a branch of
Southern Federal Savings Association of Georgia from the Resolution Trust
Corporation.

The growth in deposits was primarily in certificates of deposit with
maturities one year or less which grew 53.6% to $124.7 million at March 31,
1995, from $81.2 million at March 31, 1994. Certificates of deposit $100,000 and
greater were 8.6% of total deposits at March 31, 1994, and 9.7% at March 31,
1995. In addition, at March 31, 1995, 36.5% of certificates of deposit with
balances $100,000 and more have maturities of over 12 months. The Bank does not
actively solicit deposits outside of its local market area. At the same time,
the weighted average interest rate on deposits at March 31, 1995 increased 81
basis points to 4.87% from 4.06%. Demand deposits including NOW accounts,
passbook accounts and money market accounts were 29.0% of the Company's deposits
at March 31, 1995.

The following table sets forth information on the maturity distribution of
certificates of deposit of $100,000 or more.

<TABLE>
<CAPTION>
AT MARCH 31,
1995
---------------
(IN THOUSANDS)
<S> <C>
Certificates of Deposit:
3 months or less............................................................. $ 2,810
Over 3 months through 6 months............................................... 4,425
Over 6 months through 12 months.............................................. 10,403
Over 12 months............................................................... 10,156
---------------
Total outstanding.................................................... $27,794
===========
</TABLE>

The following table reflects the composition of deposits by type of account
and interest rate category for the years indicated:

<TABLE>
<CAPTION>
AT MARCH 31,
-----------------------------------------------
1994 1995
--------------------- ---------------------
AMOUNT % OF TOTAL AMOUNT % OF TOTAL
-------- ---------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
2.25% NOW accounts.......................... $ 24,609 10.1% $ 28,244 9.9%
2.50% Passbook accounts..................... 52,655 21.6 43,761 15.3
2.50% Money Markets......................... 12,487 5.1 10,836 3.8
Certificate accounts less than $100,000:
2.75% to 5.99%............................ 99,644 40.8 87,352 30.5
6.00% to 7.99%............................ 17,378 7.1 74,873 26.2
8.00% to 9.99%............................ 15,997 6.5 13,318 4.6
10.00% to 12.00%.......................... 559 0.2 137 0.0
Certificate accounts $100,000 and greater
ranging between 3.7% to 9.5%.............. 20,968 8.6 27,794 9.7
-------- ---------- -------- ----------
Total............................. $244,297 100.0% $286,315 100.0%
======== ======== ======== ========
</TABLE>

30
<PAGE> 31

The following table reflects the amount of deposits and weighted average
rate by the categories and for the periods indicated:

<TABLE>
<CAPTION>
FISCAL YEARS ENDED MARCH 31,
------------------------------------------------------------------
1993 1994 1995
-------------------- -------------------- --------------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
RATE AMOUNT RATE AMOUNT RATE AMOUNT
------- -------- ------- -------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Demand deposits:
Passbook accounts.......... 3.58% $ 47,660 2.67% $ 53,784 2.70% $ 52,850
NOW checking accounts...... 2.52 18,058 1.73 22,123 1.71 28,346
Money market accounts...... 3.08 13,500 2.44 12,729 1.43 20,993
Certificates of deposit.... 6.10 144,707 5.27 149,569 5.68 165,708
------- -------- ------- -------- ------- --------
Total.............. 5.09% $223,925 4.20% $238,205 4.34% $267,897
====== ======== ====== ======== ====== ========
</TABLE>

BORROWINGS

The FHLB system functions as a reserve credit facility for thrift
institutions and certain other member home financing institutions. The Bank
utilizes advances from the FHLB to fund a portion of its assets. At March 31,
1995, advances were $117.1 million up from $30.8 million at March 31, 1994. The
weighted average interest rate on these borrowings was 6.77% and 5.76% at March
31, 1995 and 1994, respectively. Increased borrowings during fiscal 1995 were
used primarily to fund the origination and retention of adjustable rate
mortgages for the portfolio. During the third quarter of fiscal 1994, the
Company recorded an extraordinary charge of $427,000 (net of income tax benefit
of $261,000) due to the early extinguishment of $7.5 million of certain FHLB
advances. This enabled the Company to reduce its cost of funds.

The following table reflects the amount outstanding, maximum month end and
average balances of short-term borrowings outstanding as well as the weighted
average rate at the end of the year:

<TABLE>
<CAPTION>
AT MARCH 31, MAXIMUM AVERAGE
------------ -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
1995:
Balances outstanding.............................. $108,643 $111,170 $49,355
Weighted average rate............................. 6.78% 6.54% 5.79%
1994:
Balances outstanding.............................. $ 3,750 $ 14,284 $ 7,435
Weighted average rate............................. 4.00% 4.00% 3.35%
1993:
Balances outstanding.............................. $ 500 $ 19,500 $ 7,913
Weighted average rate............................. 3.65% 3.60% 3.63%
</TABLE>

During fiscal 1995, the Company borrowed approximately $250.3 million from
the FHLB and repaid approximately $161.1 million of FHLB advances. At March 31,
1995, the Company had approximately $109.1 million of other borrowings due
within one year. For further information on the Company's borrowings, see Note 7
to Notes to Consolidated Financial Statements included elsewhere herein.

LIQUIDITY AND CAPITAL RESOURCES

The ALCO manages the Company's liquidity needs to ensure there is
sufficient cash flow to satisfy demand for credit, deposit withdrawals and other
Company needs. Traditional sources of funds include deposits, FHLB advances,
loan sales and payments on loans. The Company's assets were $528.2 million at
September 30, 1995, as compared to $377.8 million at September 30, 1994,
representing a 39.8% increase. At March 31, 1995, total assets were $457.3
million, a 42.7% increase from $320.4 million at March 31, 1994. The majority of
the increase in assets was in loans receivable, investment securities and real
estate held for development and sale. Substantially all of this growth was
funded with growth in deposits and FHLB

31
<PAGE> 32

advances. Under current regulations, the Bank is required to maintain liquid
assets at 5% or more of its net withdrawal deposits for short term borrowings.
For the month of September, 1995, the Bank maintained an average liquidity level
of 5.1% versus 5.3% for the month of March 1995 versus 8.5% for the month of
March 1994. At March 31, 1995, the Company had commitments to originate fixed
rate mortgage loans of approximately $3.3 million and commitments to originate
variable rate mortgage loans of approximately $2.4 million with terms of up to
thirty years and interest rates ranging from 6.5% to 11.0%. The Company had
commitments to sell mortgage loans of approximately $41.2 million at March 31,
1995. In addition, the Company is committed to loan funds on unused variable
rate lines of credit approximately $7.1 million at March 31, 1995. The Company's
funding sources for these commitments include deposits and FHLB advances.

Beginning April 1, 1995, the Bank formed an operating subsidiary,
PrimeEagle, and consolidated all real estate lending activities into this
business unit. This business unit generates revenues by originating construction
loans, permanent mortgage loans and SBA loans. Substantially all fixed rate
permanent mortgage and SBA loans are sold to investors. Permanent mortgage loan
originations increased 29.1% to $211.0 million for the six months ended
September 30, 1995, compared to $163.4 million for the six month period ended
September 30, 1995. The Company manages the funding requirements of these loans
primarily with short term advances from the FHLB. In addition, outstanding
commitments to originate loans, exclusive of the undisbursed portion of loans in
process, increased to approximately $22.3 million at September 30, 1995, from
$5.7 million at March 31, 1995.

The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") established five capital categories for financial institutions. The
OTS places each federally chartered thrift institution into one of five
categories: well capitalized, adequately capitalized, under capitalized,
significantly under capitalized, and critically under capitalized. These
classifications are based on the Bank's level of risk based capital, leverage
ratios and its supervisory ratings. FDICIA defines "well capitalized" banks as
entities having a total risk based capital ratio of 10% or higher, a tier one
risk based capital ratio of 6% or higher and a leveraged ratio of 5% or higher.
At March 31, 1995, the Bank was classified as "well capitalized" under the OTS
regulations that implement the FDICIA provisions described above.

The following table reflects the Bank's minimum regulatory capital
requirements, actual capital and the level of excess capital by category. The
Bank has historically maintained capital substantially in excess of the minimum
requirement. However, as can be seen from the chart, the Bank utilized excess
capital through asset growth and also paid $3.3 million of dividends to the
Company over the course of the year. A major portion of those dividends were
invested in real estate held for development and sale. Additionally, $1.4
million of these funds were paid to the Company's stockholders in the form of
cash dividend payments.

<TABLE>
<CAPTION>
AT MARCH 31, 1995
---------------------------------------------------------------------
OTS REQUIREMENT THE BANK'S CAPITAL EXCESS CAPITAL
--------------------- --------------------- ---------------------
DOLLARS % OF ASSETS DOLLARS % OF ASSETS DOLLARS % OF ASSETS
------- ----------- ------- ----------- ------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Tangible capital.................... $ 6,768 1.50% $29,616 6.56% $22,848 5.06%
Core capital........................ 13,600 3.00 29,616 6.56 16,016 3.56
Risk-based capital.................. 25,093 8.00 32,977 10.51 7,884 2.51
</TABLE>

32
<PAGE> 33

BUSINESS

OVERVIEW

The Company is a unitary savings and loan holding company headquartered in
Tucker, Georgia which owns and operates the Bank, EREA and the Bank's
wholly-owned subsidiaries, PrimeEagle and Eagle Service. At September 30, 1995,
the Company had total assets of approximately $528 million, total deposits of
approximately $328 million and stockholders' equity of approximately $36
million. The Bank is a federally chartered stock savings and loan association
organized in 1956 and based in Tucker, Georgia. The Bank serves the northeast
metropolitan Atlanta area through its home office and ten full service branch
offices in Cherokee, DeKalb, Fulton and Gwinnett Counties, Georgia. The Bank's
deposits are federally insured by the SAIF of the FDIC. Based on total assets at
September 30, 1995, the Bank is the third largest financial institution
headquartered in the metropolitan Atlanta area.

Prior to 1989, the Bank was engaged primarily in the traditional business
associated with thrift institutions, including the taking of deposits from the
general public and making loans secured by first mortgage liens on residential
and other real estate. Beginning in 1989, the Bank expanded the focus of its
operations beyond the traditional business of thrift institutions to include the
development of a loan production business. In connection with the expansion of
its operations, in 1989 the Bank organized Atlanta Mortgage Services as a
division of Eagle Service for the purpose of originating and selling
single-family first mortgage loans in the north metropolitan Atlanta area. In
November 1992, the Bank acquired the loan production operations of Prime
Lending.

The Bank is primarily engaged in the business of attracting deposits from
the general public, and, with these and other funds, making construction and
permanent first mortgage loans on residential and commercial real estate, making
various types of consumer and other loans, and investing in mortgage-backed
securities and money market securities. In addition to deposits, sources of
funds for the Bank's loans and other investments include origination and other
fees charged on certain types of loans, amortization and prepayment of loans,
sales of loans or participations in loans, and in sales of investment
securities. The principal sources of income for the Bank are interest and fees
collected on loans and, to a lesser extent, interest and dividends collected on
other investments and service charges on deposit accounts. The principal
expenses of the Bank are interest paid on deposits, employee compensation,
office expenses and other overhead expenses.

Effective April 1, 1995, the Bank consolidated its real estate lending
activities into its operating subsidiary, PrimeEagle. PrimeEagle generates
revenues by originating construction loans, permanent mortgage loans and SBA
loans and selling substantially all of the fixed rate permanent mortgage and SBA
loans to investors. PrimeEagle originates single family mortgage loans from its
loan production offices in Atlanta, Augusta, Hinesville, Peachtree City,
Savannah, Stockbridge and Warner Robins, Georgia; Akin, Columbia and Sumter,
South Carolina; Chattanooga, Tennessee; Jacksonville and St. Augustine, Florida;
and Charlotte, North Carolina. The Company intends to focus the geographic
expansion of its loan production business on emerging markets in the Southeast
and in which it is able to locate experienced managers and highly trained staff
who are capable of providing local market knowledge and superior customer
service.

PrimeEagle also generates revenues through fees for various services
including loan application and origination as well as through the gain or loss
on the sale of loans to third parties and from the sale of mortgage servicing
rights. Proceeds from sales of mortgage servicing rights are the largest
component of mortgage production fees. Fluctuations in the value of servicing
rights and management's analysis of the timing of mortgage prepayments impact
the Company's decision to retain or sell servicing. During fiscal 1995, the
Company sold substantially all of its permanent loans on a servicing released
basis.

The Company provides construction financing in each of its markets and
obtains significant benefits by coordinating the efforts of its construction
lending and permanent lending operations. The Company's permanent mortgage
products are primarily used for purchasing and refinancing single family homes
and producing fee income. Non-interest revenues are also earned as a result of
the Company's construction lending activities.

33
<PAGE> 34

The Bank competes for deposits with many financial institutions that are
larger and have greater financial resources. In order to remain competitive, the
Bank attempts to identify the specific needs of its target markets and to design
financial products and services to fill those needs. Currently, the Bank offers
a wide variety of insured savings programs and noninsured investment products.
Additionally, many new customers of the Bank express a desire to bank with a
local financial institution. The Bank believes that it provides a level of
personal service to each customer that may not be available from larger national
financial institutions. The Bank also believes the service it provides to its
customers can provide a platform for the sale of a variety of services.

BUSINESS AND OPERATING STRATEGY

The Company's strategic focus is based on four basic principles:

- Build long-term shareholder value

- Create competitive advantages in targeted business niches

- Develop long-term, customer driven relationships

- Create an entrepreneurial company where managers have an ownership
interest and operate like owners

In keeping with these principles, the Company's top priority is to increase
shareholder value by improving operating profitability, developing new sources
of income, prudently investing in the future and attracting highly qualified
employees.

Enhance Operating Profitability. The Company will continue its efforts to
increase the level of higher yielding assets in its loan portfolio. It intends
to expand its portfolio of non-conforming credit mortgages and increase its
level of consumer lending. The Company intends to continue its efforts to
improve operating efficiencies in its loan production operations by increasing
permanent originations in its targeted emerging Southeastern cities.

Develop New Sources of Income. The Company believes there is an
opportunity to develop a strong small business banking niche in its market
areas. Currently, the Bank is an active SBA lender in the metropolitan Atlanta
market. The Company believes that the financial services required by small
businesses are not adequately provided by the large banks operating in the
Atlanta area that are headquartered outside the State of Georgia. The real
estate activities of EREA also provide contributions to the Company's income.
The Company also intends to expand its consumer sales finance department.

Invest in the Future. Over the last 24 months the Company has invested
over $1.2 million in technology and plans to invest another $800,000 during the
next six months to improve efficiencies and enhance customer service. The
Company has opened seven loan production offices over the last 24 months.
Additionally, the Company opened a new branch banking facility in the Fall of
1995 and will open an additional branch in the Spring of 1996. These investments
are intended to enhance the Company's infrastructure and delivery system to
support future growth of the Company.

Recruit Experienced Banking Professionals. The consolidation of bank and
thrift institutions in the Atlanta marketplace has created opportunities for the
Company to recruit banking professionals who bring experience and customer
relationships. The Company believes that its entrepreneurial focus enhances the
attractiveness of a position with the Bank or the Company by allowing employees
to directly share in earnings and equity ownership. All employees are eligible
to receive bonus compensation based on net income and are afforded the
opportunity to participate in the equity ownership of the Company, thereby
enhancing the Company's ability to recruit and retain employees at all levels of
the organization.

GROWTH IN THE METROPOLITAN ATLANTA, GEORGIA MARKET

The Company is based in the metropolitan Atlanta, Georgia area and derives
a significant portion of its loans and deposits in that area. In recent years,
the metropolitan Atlanta area has enjoyed strong economic growth, including
growth in employment and population. The Company has benefitted from this growth
in the

34
<PAGE> 35

past and expects that its continued growth and profitability will depend in part
on the continued growth and the economic conditions in the Atlanta area. The
following tables indicates the historical and projected economic growth in
Atlanta:

<TABLE>
<CAPTION>
HISTORICAL
HISTORICAL HISTORICAL HOUSEHOLD
EMPLOYMENT POPULATION FORMATION
GROWTH GROWTH GROWTH
MARKETS (1990-1994) (1990-1994) (1990-1994)
- ------------------------------------------------------------ ----------- ----------- -----------
<S> <C> <C> <C>
Atlanta..................................................... 13.3% 12.6% 14.4%
Southeastern United States.................................. 7.2% 6.1% 5.9%
United States............................................... 4.0% 4.3% 4.4%
</TABLE>

<TABLE>
<CAPTION>
PROJECTED
PROJECTED PROJECTED HOUSEHOLD
EMPLOYMENT POPULATION FORMATION
GROWTH GROWTH GROWTH
MARKETS (1995-1999) (1995-1999) (1995-1999)
- ------------------------------------------------------------ ----------- ----------- -----------
<S> <C> <C> <C>
Atlanta..................................................... 18.2% 14.2% 14.4%
Southeastern United States.................................. 13.3% 7.2% 8.2%
United States............................................... 9.7% 5.0% 6.8%
</TABLE>

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

Source: For the historical data -- the U.S. Census Bureau and the U.S. Bureau of
Labor Statistics. For the forecasted data -- Robert L. Siegel &
Associates, Inc. and Dr. Donald Ratajczak, Director of Economic
Forecasting Center, Georgia State University. Southeastern United States
includes Alabama, Florida, Georgia, Maryland, North Carolina, South
Carolina, Tennessee and Virginia.

In addition, metropolitan Atlanta was ranked number one in DRI/McGraw
Hill's list of the top job-generating metropolitan areas for the period 1990 to
1995 and DRI/McGraw Hill projects that metropolitan Atlanta will retain its
first place status among the top metropolitan areas for job creation during the
period from 1995 to 2000. No assurances can be given that the metropolitan
Atlanta area will continue to have a strong economy or that, if the economy
continues to be strong, the Company will benefit from that economy.

LENDING ACTIVITIES

General

The Bank offers permanent mortgage, construction and SBA loans through 14
PrimeEagle offices located in Atlanta, Stockbridge, Peachtree City, Augusta,
Hinesville, Savannah, and Warner Robins, Georgia; Aiken, Columbia, and Sumter,
South Carolina; Chattanooga, Tennessee; Jacksonville and St. Augustine, Florida;
and Charlotte, North Carolina. The Company's goal is to continue geographic
expansion of its mortgage lending operations by focusing on the emerging markets
of the Southeast and to become the leading mortgage loan originator in the
markets it serves. The Bank also generally makes construction loans in each of
the markets where it operates mortgage origination offices in order to take
advantage of the cross selling opportunities between construction lending and
mortgage loan originations. In each market, the Bank follows the same stringent
underwriting and construction monitoring procedures.

In addition, the Bank's ten retail banking branches originate mortgage
loans and offer a range of consumer loans and equity lines of credit. The Bank
also has an equipment leasing operation which provides lease financing for
investment grade and middle market credits. The Company's goal is to increase
its line of products to attract the small business customer. The Company
believes that this market is currently underserved in the Atlanta metropolitan
area.

The acquisition of the Prime Lending operations in November 1992 broadened
the Company's mortgage lending area outside of the metropolitan Atlanta market.
The Company's has experienced consistent growth in loan originations in these
markets. Additionally, the Company generally faces less direct competition for
loans in these markets as compared to the metropolitan Atlanta area. Further,
many of the markets outside the metropolitan Atlanta area, including Augusta,
Savannah and Warner Robins, Georgia, are impacted by military bases and their
resulting housing requirements. During fiscal 1993, 1994 and 1995, the overall
base populations of the Company's markets increased. However, military base
closures in these markets could adversely effect the Company's business in these
markets.

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Federal laws and regulations prescribe the types and amounts of loans which
may be made by federal thrifts and generally permit such institutions to make
residential real estate loans, commercial real estate loans, business loans,
agricultural loans and consumer loans.

Permanent Residential Real Estate Loans

The Bank's principal lending operation traditionally has been the
origination of permanent single family residential mortgage loans, and these
loans continue to represent a significant part of the Bank's lending activities.
At September 30, 1995, permanent single family residential mortgage loans were
$218.9 million, constituting approximately 53.8% of the loan portfolio. Both
fixed rate and adjustable rate permanent loans on residential properties
currently are originated either for sale in the secondary market or for
retention in the Bank's loan portfolio. Generally, the Bank retains the
adjustable rate mortgage loans that it originates and sells the fixed rate loans
that it originates. See "-- Lending Activities -- Loan Sales and Purchases."

In the case of owner-occupied single family residences, the Bank may make
permanent residential mortgage loans for up to 95% of the appraised value of the
property. Loans on non-owner occupied real estate of not more than four family
units, generally are made for up to 75% of the appraised value. All conventional
loans with loan-to-value ratios in excess of 80% generally have private mortgage
insurance covering that portion of the loan in excess of 75% of the appraised
value. The borrower pays the cost of this insurance either through a single
premium paid at the time of loan origination or through a monthly payment during
the term of the loan. The borrower also generally makes monthly payments into an
escrow account equal to 1/12 of the annual hazard insurance premiums and
property taxes on the property which secures the loan. Interest rates and loan
fees charged on loans originated are competitive with other financial
institutions in the Bank's market areas.

The Bank has offered, in addition to fixed rate residential loans, a
variety of loans on which the interest rate, payment, loan balance or term to
maturity may be adjusted, provided that the adjustments are tied to specified
indices. These adjustable rate mortgage loans ("ARMs") permit greater
flexibility in adjusting loan yields to changes in the cost of funds. ARMs
generally have loan terms up to 30 years with rate adjustments ranging from one
to ten years during the term of the loan. Most ARMs have one of several
different caps on the maximum amount of change in the interest rate at any
adjustment period and over the life of the loan.

Residential Construction Loans

The Bank provides interim construction financing for single-family
residences and makes land acquisition and development loans on properties
intended for residential use. The Bank's general policy is to grant single
family construction loans and land acquisition and development loans up to 80%
of the lower of cost or appraised value of the property. Residential
construction loans are made for periods of one year or less, and land
acquisition and development loans are made for periods of up to five years.
These periods may be extended subject to negotiation and, typically, the payment
of an extension fee. Interest rates on construction and acquisition and
development loans are indexed to the Bank's base rate and are adjustable daily
during the term of the loan.

In accordance with the Company's business plan, the volume of construction
lending has increased in each of the previous three fiscal years. The Company
does not expect its percentage of construction loans to total loans to increase
significantly above the September 30, 1995 level of $110.8 million or 27.4% of
total loans. The Company recognizes the risks inherent in construction financing
and has designed an organization and system of controls to properly mitigate
those risks through strict underwriting and close monitoring of the lending and
construction process. Underwriting criteria include, among other things, the
track record and financial condition of the builder, applicable loan to
appraised value ratios, the demand for the type of house to be constructed,
including a marketing survey of inventory levels by price range and location,
the feasibility of house plans and costs and growth prospects for the economy.
The Company has a statewide construction inspection and appraisal network. The
Company's staff closely monitors construction progress and loan draws throughout
the process. Approximately 50% of the Company's construction loan portfolio is
secured by houses that are pre-sold. In addition, no single customer accounts
for more than 2% of the Bank's loans.

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Consumer Loans

Federal thrifts are authorized to make both secured and unsecured consumer
loans for personal or household purposes in amounts up to 30% of their total
assets. In addition, federal thrifts have lending authority above the 30% limit
for certain consumer loans, such as home equity loans (loans secured by the
equity in the borrower's residence but not necessarily used for the purpose of
home improvement), property improvement loans, mobile home loans, deposit
account secured loans, education loans and indirect automobile loans. At
September 30, 1995, total consumer loans constituted $4.5 million or 1.1% of the
Company's total loan portfolio. The Company intends to continue prudent
expansion of its consumer lending activities, subject to market conditions, as
part of its plan to become a full service financial institution providing a wide
range of personal financial services.

Commercial Leases/Business Loans

The Company is authorized by federal law to make secured and unsecured
loans for business or agricultural purposes in amounts aggregating up to 10% of
its total assets. Pursuant to this authority, the Company makes various types of
commercial loans and leases to creditworthy borrowers for the purposes of
financing equipment, capital projects and other legitimate business needs. The
Company also purchases lease payment streams from approved third party lessors.
In approving lessors, the Company evaluates their financial strength,
reputation, credit worthiness and documentation capabilities.

The Company evaluates creditworthiness of commercial and business loans
primarily on the basis of the borrowers' financial strength including analysis
of cash flow and balance sheet trends. In some instances, liquidation value or
lessor recourse is considered as a secondary method of payment. The Company
assigns a credit rating to each borrower based, among other things, on the
borrowers' historical cash flow, financial strength, paying habits, business
prospects, debt structure and capitalization, and reputation and character of
its principals.

These loans normally carry interest rates indexed to the Company's base
rate, nationally quoted prime rate and U.S. Government Treasury securities.
Commercial/business loans as of September 30, 1995 constituted approximately
$38.0 million or 11.3% of the total loan portfolio and 7.2% of total assets.

Commercial Real Estate Loans

Interim construction and permanent commercial real estate loans typically
are secured by apartment projects, office buildings, business properties,
shopping centers, nursing homes and motels located in the Company's primary
lending areas. Construction and permanent commercial real estate loans are made
generally to 75% of the appraised value of the property, with the loan amount
being determined through an evaluation of the net operating income and cash
flows of each project. Interest rates are generally determined by market
conditions. Commercial construction loans generally are made for periods of 12
to 24 months on an interest only basis at interest rates indexed to the prime
rate. Permanent commercial real estate loans are typically made with up to 25
year amortization and up to a 10 year maturity. Interest rates on permanent
loans are generally tied to the Bank's base rate or other interest rate indexes.
As of September 30, 1995, the Company had outstanding $16.1 million in loans
secured by commercial real estate. This constituted 4.0% of the Bank's loan
portfolio.

Loan Origination and Processing

PrimeEagle actively solicits mortgage loan applications from existing
customers, local real estate agents, builders, real estate developers and others
for sale in the secondary market. The Company has received delegated
underwriting from each of its primary investors in loan pools. A majority of
these loans are underwritten to meet FNMA and FHLMC standards. The Company's
loans are approved by qualified underwriters in the markets they serve. These
underwriters ensure that the loans are closed in accordance with the guidelines
set forth by FNMA and FHLMC and in the Company's lending policy and with
investors. Substantially all of the permanent mortgage loans originated by
PrimeEagle are sold to private investors on a servicing released basis.

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In addition, the Company has a structured loan approval process in which
lending authority for various types and amounts of loans is delegated by the
Board of Directors to loan officers on a basis commensurate with seniority and
lending experience. The Bank has a Loan Committee that approves loan requests
made by loan officers and must approve loans in amounts above $20,000.
Additionally, the Bank's Board of Directors must approve loans of $1 million or
more.

Loan Sales and Purchases

Permanent first mortgage loans on residential real estate are originated
for sale in the secondary market by PrimeEagle through its 14 offices in the
Southeast. These loans are pooled and sold through an assignment of trade to
private investors. Fluctuations in the value of servicing rights and
management's analysis of loan prepayments impact the Company's decision to
retain or sell servicing. Because of the high cost to service loans as compared
to the service release premiums paid by investors, the Company sells
substantially all of its permanent loans on a servicing released basis.

Credit Risk Management and Allowance for Loan Losses

The Bank has a multi-faceted program designed to control and monitor the
credit risks inherent in its loan portfolio. The Bank utilizes an asset
classification system which is consistent with the "Interagency Policy Statement
on the Allowance for Loan and Lease Losses" issued by the OTS to develop common
guidance on allowances. The statement asserts that an institution must maintain
an allowance for loan and lease losses ("ALLL") at an adequate level to absorb
estimated credit losses associated with its loan and lease portfolio. Also, the
ALLL should be sufficient to absorb estimated credit losses associated with
off-balance sheet credit instruments, to the extent they are not provided for in
a separate liability account.

The basic objectives of the Bank's ALLL policy are: (i) to provide
essential information regarding the overall quality of the Bank's assets; (ii)
to provide for early identification of potential problem assets so as to
minimize losses to the Bank; (iii) to project relevant trends that affect the
collectibility of the Bank's loan and lease portfolio and to isolate potential
problem areas; (iv) to provide adequate valuation allowances in accordance with
generally accepted accounting principles and OTS policies; (v) to provide
accurate and timely information relating to credit quality that can be used for
financial and regulatory reporting purposes; (vi) to assess the adequacy of
internal controls and adherence to internal credit policies and loan
administration procedures; (vii) to monitor compliance with relevant laws and
regulations through a loan review system; and (viii) to evaluate the activities
of lending personnel through a loan review system.

The Bank utilizes its Asset Classification Committee (the "ACC") to provide
a quarterly evaluation of the Bank's assets, to establish the adequacy of the
valuation allowances and to evaluate the loan review system. The ACC is
responsible for developing and implementing effective credit approval and loan
review systems and controls, including a credit grading system, that identifies,
monitors and addresses asset quality problems in an accurate and timely manner.

After a loan has been made, responsibility is placed with loan officers to
analyze continuously the loan portfolio and to identify promptly and report
problem loans. Loans are also reviewed by the loan committee, the ACC and,
periodically and on a spot-check basis, by an outside accounting firm that
conducts an independent credit review function for the Bank. The loan officer
responsible for a loan submits the loan to the loan committee for approval in
accordance with the guidelines of the Bank's lending authority. Each commercial
real estate, construction, and lease loan is given a rating which the loan
committee has the ability to approve or disapprove.

In addition, the frequency of ongoing review is determined by the loan
officer and approved by the Loan Committee. The ACC may determine that a loan or
borrower's credit grading or review frequency should be changed in accordance
with the framework provided by the Bank's grading system.

The Bank also periodically performs an analysis of the various components
of its portfolio, including all significant credits on an individual basis. In
order to analyze the adequacy of the ALLL, the Bank will segment the loan and
lease portfolios into components which have similar characteristics.
Characteristics that

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are considered include, but are not limited to, geographical location, risk
classification, past due status, type of loan, loan grade, and industry or
collateral. Estimates of credit losses reflect consideration of all significant
factors that affect the collectibility of the portfolio as of the evaluation
date.

The ACC considers historical losses or recent trends, changes in national
and local economic and business conditions and developments, the level and
structure of interest rates, job growth, consumer confidence and expected
movement in market value of collateral. The ACC considers (i) the affect of
external factors, such as competition and legal and regulatory requirements on
the level of estimated losses in the Bank's current portfolio; (ii) changes in
the duration, type and level of assets; (iii) the existence and affect of any
concentration of assets and changes in the level of such concentrations; (iv)
changes in the experience, ability and depth of the lending management and loan
administration staff of the Bank; (v) changes in lending policies and
procedures, including underwriting standards and collection, charge-off and
recovery practices; (vi) changes in the trend of the volume and severity of past
due and classified loans; (vii) trends in the volume of nonaccrual loans,
troubled debt restructurings and other loan modifications; and (viii) changes in
the quality of the Bank's loan review system and the degree of oversight by the
Bank's Board of Directors.

In addition, ratio analysis is used as a supplemental tool for evaluating
loans, portfolio concentration and the overall reasonableness of the ALLL.
Ratios are used to compare the Bank to its peer group and its historical
practices in identifying divergent trends in the relationship of classified and
nonclassified assets, past due and nonaccrual loans and leases, total loans and
binding commitments and historical gross and net charge-offs.

Based upon the amount and type of classifications, the ACC establishes the
appropriate and requisite general and specific valuation allowances and makes
any necessary adjustments to the allowances. The methodology for determining the
amount of general valuation allowances will take the amount of assets classified
substandard, doubtful, loss and special mention into consideration. Certain
percentages derived to properly reflect the risk associated with the Bank's loan
mix will be applied to the balance of all loans including those classified
substandard, doubtful, loss and special mention. These percentage range from .1%
to 100% and are derived primarily through industry standards and the Bank's
historical data. These percentages are reviewed as conditions require. The Bank
has a conservative philosophy and automatically considers any loan that is
delinquent 90 days or more and real estate acquired in the settlement of loans
as substandard.

The Bank will combine its estimates of the reserves needed for each
component of the portfolio. The ALLL will be divided into two distinct portions:
(i) an amount for specific allocations on significant individual credits and
(ii) a general reserve amount. Within the general reserve section, the loan
portfolio will be broken into as many segments as practical for the purpose of
making allocation to the ALLL.

See "Management's Discussion and Analysis of Results of Operations and
Financial Condition -- Provision for Loan Losses and Risk Elements."

ASSET LIABILITY MANAGEMENT

Interest Rate Risk

The Bank operates under an interest rate risk policy through the ALCO. The
policy outlines limits on interest rate risk in terms of changes in net interest
income and changes in the net market values of assets and liabilities over
certain changes in interest rate environments. These measurements are made
through a simulation model which projects the impact of changes in interest
rates on the Bank's assets and liabilities. Additionally, the committee may set
additional interest rate risk objectives. The policy also outlines
responsibility for monitoring interest rate risk, and the process for the
approval, implementation and monitoring of interest rate risk strategies to
achieve the Bank's interest rate risk objectives.

The Company's ALCO is comprised of senior management of the Bank. The ALCO
makes all tactical and strategic decisions with respect to the sources and uses
of funds that may affect net interest income, including net interest spread and
net interest margin. The ALCO's decisions are based upon policies established by
the Bank's Board of Directors which are designed to meet three goals -- improve
interest rate spread, maintain adequate liquidity and manage interest rate risk.

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The ALCO has developed a program of action which includes, among other
things, the following: (i) selling substantially all conforming, long-term,
fixed rate mortgage originations; (ii) originating and retaining for the
portfolio, shorter term, higher yielding loan products which meet the Company's
underwriting criteria; (iii) repaying high cost funding sources, where possible,
and (iv) actively managing the Company's Gap and interest rate risk exposure.
During fiscal 1995, the Company also introduced strategies to increase core
earnings which included increasing assets by retaining permanent adjustable rate
mortgages and maintaining steady construction and lease originations. The
Company's ability to expand its loan portfolio through originations or
residential construction, short term leases and adjustable rate permanent
mortgage loans has contributed to the Company's ability to improve its spread
while limiting exposure to rising interest rates due to the variable rates and
short term commitments these loans represent.

The excess of interest earning assets versus interest bearing liabilities
repricing or maturing in a given period of time is commonly referred to as
"Gap". The Bank's ALCO has continued to shift the Bank's Gap throughout the
year. The Bank's Gap position is evaluated continuously and discussed by the
ALCO in bi-weekly meetings. A positive Gap indicates an excess of rate sensitive
assets over rate sensitive liabilities, while a negative Gap indicates an excess
of rate sensitive liabilities over rate sensitive assets. The Bank had a
negative one year Gap of 23.59% as of March 31, 1995. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Interest Rate Sensitivity." Part of the ALCO strategy for reducing
interest rate risk revolves around increasing the percentage of shorter term
floating rate loans in the Company's portfolio. This has been accomplished by
originating residential construction and adjustable rate permanent loans. The
Bank continues to originate consumer loans, second mortgage loans and equipment
lease financing loans. In general, these loans have short maturities and
floating interest rates.

The Bank also operates under a secondary marketing policy. The secondary
marketing policy applies to the use of forward commitments ("coverage") by
PrimeEagle to hedge market exposure in the pipeline of loans originated for
sale. The ALCO is responsible for the implementation of the policy. The policy
outlines acceptable hedging instruments, sets limits on the maximum exposure to
risk and outlines authority and responsibility for the implementation of the
policy. Pursuant to the policy, PrimeEagle holds coverage equal to at least 100%
of estimated interest rate risk exposure.

INVESTMENT ACTIVITIES

Income from investments in securities provides the Bank's second largest
source of interest income after interest on loans. Federally chartered thrift
institutions are required to maintain a minimum amount of liquid assets that may
be invested in specified short-term securities. These assets include, among
others, United States Treasury and Federal Agency obligations, certain
certificates of deposit, bankers' acceptances and Federal Funds. Subject to
various restrictions, investments may also be made in mortgage-backed
securities, commercial paper and corporate debt and equity securities.

Investment decisions are made by authorized officers under the supervision
of the Bank's Board of Directors pursuant to the Bank's investment policy.
Brokers approved by the Board of Directors are used to effect securities
transactions. The Company holds no investment securities issued by a single
issuer, other than mortgage-backed securities issued by an agency of the United
States government, which equaled or exceeded 10% of stockholders' equity at
September 30, 1995.

Under the investment policy, the ALCO, with the approval of the Board of
Directors of the Bank, designates all investments at the time of purchase as
either trading assets, assets available for sale or assets held to maturity. At
September 30, 1995, fixed rate mortgage-backed securities have been classified
as assets available for sale based on management's determination that such
assets may be liquidated prior to maturity. PrimeEagle classifies all permanent
fixed rate loans originated as assets held for sale unless originated pursuant
to a portfolio commitment to the Bank. All other loans, investments and
mortgage-backed securities are considered assets held to maturity unless
specifically classified otherwise. As of September 30, 1995, $85.3 million or
16.2%, of the Company's assets were classified as held for sale.

At September 30, 1995, the Bank's investment portfolio, consisted of United
States Agency obligations, investment grade corporate debt securities, equity
securities and FHLB stock. Additionally, the Bank holds

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investments in mortgage-backed securities. At September 30, 1995, the Bank did
not own any repurchase agreements as investments.

REAL ESTATE DEVELOPMENT ACTIVITY

EREA was formed in October 1991 as a wholly-owned real estate services
subsidiary of the Company to perform third party real estate brokerage and
development activities, assist the Bank in identifying and acquiring branch
sites and assist in disposing of real estate acquired through foreclosure. In
connection with its development activities, the Company and EREA select only
local projects that management believes are well located and where zoning,
utility and economic risks can be minimized before the Company commits to engage
in development activities.

At September 30, 1995, the Company had invested in three real estate
development projects totaling $8.4 million and representing 1.6% of total
assets. In December 1995, the Company invested $600,000 in a fourth real estate
development project. Set forth below is information regarding each of the
projects.

- Union Hill LLC. In October 1994, the Company and two unaffiliated third
parties formed a limited liability corporation, Union Hill LLC, which purchased
149.7 acres of land located in Forsyth County, Georgia for the purpose of
developing a 323-lot single family residential community named Chadbourne. The
Company's investment in land and development costs at September 30, 1995, was
$4.1 million. Through December 31, 1995, Union Hill LLC had contracted to sell
217 lots at an average sales price of $30,878 per lot to one of Atlanta's
largest single family homebuilders with a specific takedown schedule. The
average development cost per lot is $22,599. The Company benefits from the
project by receiving a preferred return on its investment and 50% of any
remaining profits.

- Hampton Oaks L.P. In order to meet its goal of providing affordable
housing, the Company has invested $3.2 million in a limited partnership, Hampton
Oaks, L.P., that was organized to construct and lease a 50 unit affordable
housing cooperative in Fulton County, Georgia. The general partner of Hampton
Oaks, L.P. is a not-for-profit corporation. The Company owns a 99% limited
partnership interest. The property is supported by 50 Section 8 housing permits
and $2.6 million of Low Income Housing Tax Credits. As of December 31, 1995, the
units are 100% occupied and the Company, as a result of its equity investment,
will recognize Investment Tax Credits of $260,000 per year over the next 10
years.

- Cobb Woodlawn Development LLC. In January 1995, the Company formed a
wholly-owned limited liability corporation subsidiary, Cobb Woodlawn Development
LLC, for the purpose of purchasing 15.8 acres of land and developing a 48-lot
single-family residential community in Cobb County, Georgia named Woodlawn Park.
The Company's net investment as of September 30, 1995 was $1.1 million. At
December 30, 1995, Cobb Woodlawn Development LLC had contracted to sell all 48
lots at an average sales price per lot of $61,250. The average development cost
per lot is $47,950. Development is complete and the sales contract requires all
lot sales to be completed by August 1996.

- BN Development Company LLC. In December 1995, the Company and an
unaffiliated third party formed BN Development Company LLC for the purpose of
acquiring a commercial lot near Cumberland Mall in Cobb County, Georgia and
developing and leasing a 30,000 square foot Barnes & Noble, Inc. superstore. The
Company's total investment at December 31, 1995 was $600,000. BN Development
Company LLC's obligation is to provide a pad ready site for further development
and construction of the superstore by Barnes & Noble, Inc. Upon completion of
construction of the superstore, BN Development Company LLC will purchase the
facility and lease it to Barnes & Noble, Inc. under a 20 year triple net lease.
The Company benefits from the project by receiving a preferred return on its
investment and 50% of any remaining profits.

SOURCES OF FUNDS

General

Deposits are the Bank's largest source of funds for lending and other
investment purposes. In addition to deposits, the Bank obtains funds from
repurchase agreements, loan principal repayments, proceeds from sales of loans
and loan participations and advances from the FHLB. Loan repayments are a
relatively stable source

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of funds while deposit inflows and outflows and sales of loans and investment
securities are significantly influenced by prevailing interest rates and
economic conditions. Borrowings may be used to compensate for reductions in
normal sources of funds or to support expanded lending activities.

Deposits

The Bank offers a variety of savings and other deposit programs and related
services. Deposits are obtained primarily from the communities in which its
banking offices are located. The Bank uses traditional marketing methods to
attract new customers. The Bank does not advertise for deposits outside of its
local market area. For further details as to the composition of the Bank's
savings portfolio, see Note 6 of Notes to Consolidated Financial Statements. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Deposits."

Borrowings

Savings deposits are the primary source of funds for the Bank's lending and
investment activities and for its general business purposes. However, the Bank
periodically obtains additional funds by borrowing from the FHLB and through
repurchase agreements entered into with various brokerage organizations whose
credit worthiness has been approved by the Bank's Board of Directors. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition -- Borrowings" and Note 7 of Notes to Consolidated Financial
Statements.

COMPETITION

The Bank faces strong competition in attracting deposits and making loans
throughout its market areas. The most significant factors in competing for
deposits are interest rates, the quality and range of financial services
offered, convenience of office locations and office hours. The Bank competes
directly for deposits with commercial banks, money market funds and retail
securities brokerage houses with offices in the Bank's market areas. The Bank
also faces competition for deposits from (i) more distant depository
institutions that advertise locally or through national media, (ii) short-term
money funds, (iii) corporate and government borrowers (including, among others,
insurance companies) and (iv) credit unions.

The Bank competes for deposits principally by attempting to identify the
specific needs of its target market and by offering a high level of customer
service. Analysis of product needs is generated through dialogue with customers
and staff. The Bank offers a wide variety of savings programs including
passbooks, NOW checking accounts, certificates of deposit ranging from three
months to five years in maturity, tax deferred retirement programs, tax deferred
certificates of deposit and small savers plans.

Employee commitment to service is another important factor in attracting
deposits. The goal of the Bank is to render superior personal service through
convenient branch and main office locations and hours of operation. All of the
Bank's branches are open on Saturdays for customer convenience. The Bank does
not rely on any individual, group or entity for a material portion of its
deposits.

The Bank's competition for loans comes from mortgage companies, other
thrift institutions and commercial banks, credit unions, consumer finance
companies, insurance companies and investment banking firms. The primary factors
in competing for loans are interest rates, discount points, loan fees and the
quality and range of lending services offered. Competition for origination of
mortgage loans comes primarily from other thrift institutions and loan
production firms, commercial banks and insurance companies. The Bank competes
for loan originations through the quality of services it provides borrowers,
real estate brokers and builders, as well as the interest rate and terms of its
loans. The competition for loans varies from time to time depending on the
general availability of lendable funds and credit, general and local economic
conditions, interest rate levels, conditions in the local real estate market and
other factors that are not readily predictable. The Bank attempts to charge
interest rates and loan fees commensurate with the level of risk it accepts. The
Bank believes that providing superior service can allow improved loan pricing.
The expansion of PrimeEagle's mortgage origination offices has been targeted
toward markets with solid growth prospects which are under

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served by PrimeEagle's competitors. No market is entered, however, without an
experienced manager and highly trained staff.

Various states in the Southeastern region, including Georgia, have enacted
regional interstate banking laws which permit financial institutions and, in
some states such as Georgia, thrift institutions, to acquire financial
institutions in other states within the region. As a result of such laws there
have been major interstate acquisitions involving Georgia financial institutions
which have offices in the Bank's service area but are headquartered in other
Southeastern states. The effect of such acquisitions (and of the possible
increase in the size of the financial institutions in the Bank's market area)
may be to further increase the competition faced by the Bank.

Competition may be further increased as a result of the enactment of the
Riegle-Neal Interstate Banking and Branch Efficiency Act of 1994 (the
"Interstate Banking Act") on September 29, 1994. Beginning in September 1995,
bank holding companies, upon meeting certain criteria, were authorized to
acquire existing banks on a nationwide basis without regard to state statutes to
the contrary. Effective June 1, 1997, the Interstate Banking Act will permit
mergers of banks on an interstate basis, unless states in which such banks are
located pass legislation specifically prohibiting out-of-state banks from
operating interstate branches within their boundaries. In addition, the
Interstate Banking Act provides for de novo interstate branching where states
enact legislation specifically authorizing interstate branching within the host
state. See "Supervision and Regulation -- Recent Legislation."

EMPLOYEES

At December 28, 1995, the Company had 338 full-time employees and 52
part-time employees. All officers and other personnel serving the Company are
employed and compensated by the Bank. No employees are covered by a collective
bargaining agreement. Management considers its relations with its employees to
be good.

PROPERTIES

The principal executive offices of the Company are located at 4305 Lynburn
Drive, Tucker, Georgia and are located in a 4,320 square foot building owned by
the Bank. The main office of the Bank is located at 2355 Main Street, Tucker,
Georgia. The Company's ten branch offices are located in the Doraville,
Dunwoody, Lilburn, Norcross, Northlake, Roswell, Stone Mountain, Towne Lake,
Tucker and Wesley Chapel areas of metropolitan Atlanta, Georgia. Two of the
Bank's ten branch locations are leased under operating leases and the remaining
branch properties, including the main office are owned by the Bank. The Roswell,
Georgia branch office is leased on a month-to-month basis. The lease on the
Bank's Northlake office expires in 2002.

PrimeEagle operates 14 loan production offices located in Aiken, Columbia
and Sumter, South Carolina; Jacksonville and St. Augustine, Florida; Atlanta,
Augusta, Hinesville, Peachtree City, Savannah, Stockbridge and Warner Robins,
Georgia; Chattanooga, Tennessee; and Charlotte, North Carolina. Each of these
offices is leased pursuant to an operating lease. The Augusta office is leased
on a month-to-month basis. The Savannah office has a three-year lease that
expires in 1997. The Hinesville office has a five-year lease that expires in
1998. The Warner Robins office lease expires in 1999. The Chattanooga office
lease expires in 1996. The Jacksonville, Florida and Columbia, South Carolina
leases expire in 2000. The PrimeEagle office in Atlanta is leased pursuant to an
operating lease that expires in 1998 and includes an option to renew for a
three-year term. The Aiken and Sumter, South Carolina and the Stockbridge and
Peachtree City, Georgia leases expire in 1996. Management believes that it will
be able to renew such leases on satisfactory terms.

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<PAGE> 44

MANAGEMENT

Set forth below is information regarding the directors and key employees of
the Company and the Bank, including their principal occupations (which have
continued for at least the past five years, unless otherwise noted) as of
December 19, 1995:

DIRECTORS

Walter C. Alford, 46, has been an attorney practicing in Tucker, Georgia
since 1974, and has served as General Counsel to the Bank since 1995. Mr. Alford
has been a director of the Company and the Bank since 1995.

Richard J. Burrell, 67, retired in 1994 after 40 years of service with
Household International, Inc., a financial services company. During his
employment with Household International, Mr. Burrell served as Governmental
Relations Director from 1962 until 1994. He previously has served as President
of the Alabama and Florida Financial Services Associates and Georgia Equity
Lenders Association. He is a director of the Consumer Credit Counseling Service
of Atlanta. Mr. Burrell has been a director of the Company and the Bank since
1994.

Richard B. Inman, Jr., 44, has served as President and Chief Executive
Officer of the Bank since October 1990. He has also been Treasurer of the
Company since May 1993 and Secretary of the Company since July 1995. From 1982
until 1985, Mr. Inman served as President of Holly Ridge Foods. From 1985 until
October 1990, he was President of Inman Cream Company. Prior to 1982, Mr. Inman
worked as an investment banker. He has been a director of the Company since 1992
and a director of the Bank since 1988.

Weldon A. Nash, Jr., 49, has served as President and Chief Executive
Officer of Weldon, Inc., a company based in Stone Mountain, Georgia, which
designs, builds and develops residential and commercial properties, since 1975.
Mr. Nash has been a director of the Company since 1991 and a director of the
Bank since 1991.

Conrad J. (Jere) Sechler, Jr., 49, has served as President of Eagle
Service, a wholly-owned subsidiary of the Bank, since 1991, and served as
Executive Vice President of Eagle Service from 1989 to 1991. He has been a
director of the Company since April 1995 and a director of the Bank since 1985.
Prior to joining the Bank, Mr. Sechler was a self-employed real estate broker,
specializing in commercial real estate activities in and around metropolitan
Atlanta. He is the son of Conrad J. Sechler, Sr., the Chairman of the Board and
President of the Company.

Conrad J. Sechler, Sr., 82, was an organizer of the Bank and has served as
Chairman of the Board of the Bank since its organization in 1956, and has served
as Chairman of the Board and President of the Company since its incorporation in
September 1985. Mr. Sechler was the Managing Officer of the Bank from January
through September 1990. He also served as President and Chief Operating Officer
of Eagle Service from 1971 to 1991. He has been a director of the Company since
1985 and a director of the Bank since 1956. He is the father of Conrad J. (Jere)
Sechler, Jr.

George G. Thompson, 49, was the Superintendent of Gwinnett County Public
Schools from 1990 until December 1994. Prior to that time, he was the
Administrative Assistant to the Superintendent of the Gwinnett County Public
Schools from 1982 until 1989. Mr. Thompson is currently employed by The Center
for Leadership in School Reform as a Senior Associate. He has been a director of
the Company since 1993 and a director of the Bank since 1993.

KEY EMPLOYEES

LuAnn Durden, 36, has been Senior Vice President and Chief Financial
Officer of the Bank since 1994. Since joining the Bank in 1987, Ms. Durden has
served as Internal Auditor and Vice President of Finance. Prior to joining the
Bank, Ms. Durden was a Senior Auditor with Peat Marwick Mitchell & Co. She is a
Certified Public Accountant.

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<PAGE> 45

Glenn A. Farley, Sr., 42, is a Senior Vice President of the Bank and has
served as Chief Lending Officer since 1993. Prior to joining the Bank, Mr.
Farley was Vice President of Construction Lending at Decatur Federal Savings and
Loan Association from 1987 through 1993.

Zelma B. Martin, 48, has been a Senior Vice President since 1987. She
joined the Bank in 1967.

Betty Petrides, 42, has been Executive Vice President of the Bank since
1988. She has been Secretary of the Bank since 1989. Prior to joining the Bank,
Ms. Petrides was a consultant in governmental affairs with special emphasis on
banking and state and local issues. She has been a director of the Bank since
April 1995.

STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of December 22, 1995, by each
director of the Company, each executive officer of the Company and all directors
and executive officers of the Company as a group.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING(1) AFTER OFFERING(1)
-------------------------- --------------------------
NUMBER PERCENT NUMBER PERCENT
NAME AND POSITION WITH COMPANY OF SHARES OF CLASS OF SHARES OF CLASS
- ----------------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Walter C. Alford................................................. 26,036 (2) (10) 26,036 (2) (10)
Director
Richard J. Burrell............................................... 26,500 (3) (10) 26,500 (3) (10)
Director
Richard B. Inman, Jr............................................. 124,600 (4) 3.97% 124,600 (4) 2.81%
Director, Treasurer and Secretary of the Company; President and
Chief Executive Officer of the Bank
Weldon A. Nash, Jr............................................... 24,624 (5) (10) 24,624 (5) (10)
Director
Conrad J. (Jere) Sechler, Jr..................................... 72,699 (6) 2.32 72,699 (6) 1.64
Director; President of Eagle Service
Conrad J. Sechler, Sr............................................ 141,720 (7) 4.54 141,720 (7) 3.21
Chairman of the Board and President
George G. Thompson............................................... 3,600 (8) (10) 3,600 (8) (10)
Director
Betty Petrides................................................... 84,406 (9) 2.65 84,406 (9) 1.88
----------- -----------
Executive Vice President and Secretary of Bank
All directors and executive officers as a group (8 persons)...... 504,185 15.64% 504,185 11.17%
======= ====== ======= ======
</TABLE>

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

(1) The stock ownership information shown above has been furnished to the
Company by the named persons or obtained from information filed with the
Commission. Beneficial ownership as reported in this table has been
determined in accordance with regulations of the Commission and includes
shares of Common Stock which may be acquired within 60 days. Except as
otherwise indicated, the named persons have sole voting and investment
power with regard to the shares shown as owned by them.
(2) With regard to Mr. Alford, the shares shown include 1,704 shares which are
held of record by the spouse of Mr. Alford and as to which he disclaims
beneficial ownership.
(3) With regard to Mr. Burrell, the shares shown include 2,500 shares which he
may acquire upon the exercise of stock options.
(4) With regard to Mr. Inman, the shares shown include (i) 23,000 shares which
he may acquire upon the exercise of stock options, (ii) 30,000 shares of
restricted stock with respect to which Mr. Inman has voting power; however,
in accordance with the vesting provisions of the award, 7,500 of such
shares are subject to forfeiture; (iii) a total of 3,950 shares held for
the account of Mr. Inman and as a participant in the ESOP; and (iv) 2,000
shares which are held of record by the spouse of Mr. Inman and as to which
he disclaims beneficial ownership.

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<PAGE> 46

(5) With regard to Mr. Nash, the shares shown include (i) 13,332 shares which
are held of record as joint tenants by his spouse and mother-in-law and as
to which he disclaims beneficial ownership and (ii) 3,000 shares which he
may acquire upon the exercise of stock options.
(6) With regard to Mr. Sechler, Jr., the shares shown include (i) 9,666 shares
which he may acquire upon exercise of stock options; (ii) 15,000 shares of
restricted stock with respect to which he has voting power; however, in
accordance with the vesting provisions of the award, 7,500 of such shares
are subject to forfeiture; and (iii) 6,076 shares held for his account as a
participant in the ESOP.
(7) With regard to Mr. Sechler, Sr., the shares shown include (i) 3,000 shares
which he may acquire upon the exercise of stock options; (ii) 1,220 shares
held for his account as a participant in the ESOP; and (iii) 117,500 shares
owned by corporations which he votes as majority owner of such
corporations.
(8) With regard to Mr. Thompson, the shares shown include 3,000 shares which he
may acquire upon the exercise of stock options.
(9) With regard to Mrs. Petrides, the shares shown include (i) 62,166 shares
which she may acquire upon exercise of stock options; (ii) 15,000 shares of
restricted stock for which she has voting power; however, in accordance
with the vesting provisions of the award, 7,500 of such shares are subject
to forfeiture; and (iii) 7,240 shares held for her account as a participant
in the ESOP.
(10) Less than 1%.

Additionally, as of December 31, 1995, (i) LuAnn Durden, Senior Vice
President and Chief Financial Officer of the Bank, beneficially owned 8,420
shares of Common Stock, including 4,000 shares issuable upon exercise of
outstanding stock options and 4,420 shares allocated to her account in the ESOP,
(ii) Glenn A. Farley, Sr., Senior Vice President of the Bank, beneficially owned
5,065 shares of Common Stock, including 3,000 shares issuable upon exercise of
outstanding stock options and 565 shares allocated to his account in the ESOP,
and (iii) Zelma B. Martin, Senior Vice President of the Bank, beneficially owned
6,659 shares of Common Stock, including 2,800 shares issuable upon exercise of
outstanding options and 3,859 shares allocated to her account in the ESOP.

46
<PAGE> 47

SUPERVISION AND REGULATION

GENERAL

The Company is a savings and loan holding company and, as such, is subject
to regulation, examination, supervision and reporting requirements of the OTS
and the Georgia Department of Banking and Finance ("DBF"). The Bank is a
federally chartered savings institution and is a member of the FHLB system,
subject to examination and supervision by the OTS and the FDIC, and subject to
regulations of the Federal Reserve Board governing reserve requirements. To the
extent that the following information describes statutory and regulatory
provisions, it is qualified in its entirety by reference to particular statutory
and regulatory provisions. Any change in applicable laws or regulations may have
a material effect on the business and prospects of the Company.

FEDERAL SAVINGS AND LOAN HOLDING COMPANY REGULATIONS

As the owner of all of the stock of the Bank, the Company is a savings and
loan holding company subject to regulation by the OTS under the Home Owners'
Loan Act (the "HOLA"). As a unitary savings and loan holding company owning only
one savings institution, the Company generally is allowed to engage and invest
in a broad range of business activities not permitted to commercial bank holding
companies or multiple savings and loans holding companies, provided that the
Bank continues to qualify as a "qualified thrift lender." See "-- Regulation of
the Bank -- Qualified Thrift Lender Test" herein. In the event of any
acquisition by the Company of another savings association subsidiary, except for
a supervisory acquisition, the Company would become a multiple savings and loan
holding company and would be subject to limitations on the types of business
activities in which it could engage.

The Company is prohibited from directly or indirectly acquiring control of
any savings institution or savings and loan holding company without prior
approval from the OTS or from acquiring more than 5% of the voting stock of any
savings institution or savings and loan holding company which is not a
subsidiary. Control of a savings institution or a savings and loan holding
company is conclusively presumed to exist if, among other things, a person or
group of persons acting in concert, directly or indirectly, acquires more than
25% of any class of voting stock of the institution or holding company or
controls in any manner the election of a majority of the directors of the
insured institution or the holding company. Control is rebuttably presumed to
exist if, among other things, a person acquires 10% or more of any class of
voting stock (or 25% of any class of stock) and is subject to any of certain
specified "control factors."

RECENT LEGISLATION

The Budget Reconciliation Act of 1995 which is currently before Congress
contains a provision which seeks to recapitalize the SAIF by means of a one-time
assessment on the deposits of all depository institutions insured by the SAIF.
See "-- Regulation of the Bank -- Insurance of Accounts." As proposed, the
legislation establishes an assessment of from $.80 to $.90 per $100 of SAIF
insured deposits, with such assessment to be paid to the FDIC during the first
quarter of 1996 or such other date as may be prescribed by the FDIC during the
first quarter. As a SAIF insured institution, the Bank would be subject to the
one-time assessment should the proposed legislation be enacted. See "Risk
Factors -- Legislation and Regulation."

On November 17, 1995, legislation was introduced in the Senate which
provides for the elimination of all federal savings association charters by
January 1, 1998. By that date, a federally chartered thrift would be required to
(i) convert to a national bank charter, (ii) convert to a state depository
institution charter, or (iii) surrender its charter and liquidate. Any federal
savings association which has not taken one of the above actions by January 1,
1998 would become a national bank by operation of law as of January 1, 1998. The
proposed Act also amends the Bank Holding Company Act of 1956 to provide that
upon becoming a bank holding company, a former unitary thrift holding company
which was a unitary thrift holding company on September 15, 1995 could maintain
or enter into any nonbanking affiliation which the holding company was
authorized to maintain or enter into as of September 22, 1995. The holding
company also would be permitted to engage, directly or through affiliates, in
any activity in which such company or any affiliate was authorized

47
<PAGE> 48

to engage as of September 22, 1995, provided that the insured institution
controlled by the holding company continued to comply with limitations or
restrictions on the type or amounts of loans or investments of the institution
so as to continue to meet the "qualified thrift lender test." See "-- Regulation
of the Bank -- Qualified Thrift Lender Test." The grandfathered activities and
affiliations would cease to the extent that the former thrift holding company or
any subsidiary of the company acquired more than five percent (5%) of the shares
or assets of any bank or any savings association after September 13, 1995, or,
if after September 13, 1995 control of the former thrift holding company or its
subsidiaries should change. In addition, federally chartered savings
institutions that convert to banks and that engage in activities which are not
permitted under a bank charter must cease such activities two years following
the conversion, subject to two one-year extensions.

The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
(the "Interstate Banking Act") allows bank holding companies to acquire existing
banks across state lines, regardless of state statutes. Further, under the
Interstate Banking Act, effective June 1, 1997, a bank holding company may
consolidate interstate bank subsidiaries into branches and a bank may merge with
an unaffiliated bank across state lines to the extent that the applicable states
have not "opted out" of interstate branching prior to such effective date.
States may elect to permit interstate mergers prior to June 1, 1997. The
Interstate Banking Act also permits de novo branching to the extent that a
particular state "opts into" the de novo branching provisions. The Interstate
Banking Act generally prohibits an interstate acquisition (other than an initial
entry into a state by a bank holding company), which would result in either the
control of more than (i) 10% of the total amount of insured deposits in the
United States, or (ii) 30% of the total insured deposits in the home state of
the target bank, unless such 30% limitation is waived by the home state on a
basis which does not discriminate against out-of-state institutions.

The Riegle Community Development and Regulatory Improvement Act of 1994
provides for the creation of a community development financial institution's
fund to promote economic revitalization in community development. Banks and
thrift institutions are allowed to participate in such community development
banks. Said Act also contains (i) provisions designed to enhance small business
capital formation and to enhance disclosure with regard to high cost mortgages
for the protection of consumers, and (ii) more than 50 regulatory relief
provisions that apply to banks and thrift institutions, including the
coordination of examinations by various federal agencies, coordination of
frequency and types of reports financial institutions are required to file and
reduction of examinations for well capitalized institutions.

REGULATION OF THE BANK

Federal Home Loan Bank System

General. The Bank is a member of the FHLB, which consists of 12 regional
FHLBs subject to supervision and regulation by the Federal Housing Finance Board
("FHFB"). The FHLBs maintain central credit facilities primarily for member
institutions.

The Bank, as a member of the FHLB of Atlanta, is required to acquire and
hold shares of capital stock in the FHLB of Atlanta in an amount at least equal
to 1% of the greater of: (i) the aggregate outstanding principal amount of its
unpaid residential mortgage loans, home purchase contracts and similar
obligations as of the beginning of each year, (ii) 5% of its advances
(borrowings) from the FHLB of Atlanta, or (iii) $500. The Bank is in compliance
with this requirement with an investment in stock of the FHLB of Atlanta at
September 30, 1995 of $6.8 million.

Advances from Federal Home Loan Bank. Each FHLB serves as a reserve or
central bank for its member institutions within its assigned regions. It is
funded primarily from proceeds derived from the sale of obligations of the FHLB
System. A FHLB makes advances (i.e., loans) to members in accordance with
policies and procedures established by its Board of Directors. The Bank is
authorized to borrow funds from the FHLB of Atlanta to meet demands for
withdrawals of savings deposits, to meet seasonal requirements and for the
expansion of its loan portfolio. Advances may be made on a secured or unsecured
basis depending upon a number of factors, including the purpose for which the
funds are being borrowed and existing advances.

48
<PAGE> 49

Interest rates charged for advances vary depending upon maturity, the cost of
funds to the regional FHLB and the purpose of the borrowing.

Liquidity Requirements. Federal regulations require a member savings
institution to maintain an average daily balance of liquid assets (which
includes cash, certain time deposits, certain bankers' acceptances, certain
corporate debt securities and highly-rated commercial paper, securities of
certain mutual funds, balances maintained in a Federal Reserve Bank and
specified United States Government, state or federal agency obligations) equal
to a monthly average of not less than a specified percentage, currently 5%, of
its net withdrawable savings deposits plus short-term borrowings. These
regulations also require each member institution to maintain an average daily
balance of short-term liquid assets at a specified minimum percentage, currently
1%, of the total of its net withdrawable accounts and borrowings payable in one
year or less. The Bank complied with its requirements at September 30, 1995.

Insurance of Accounts

General. Deposits at the Bank are insured to a maximum of $100,000 for
each insured depositor by the FDIC through the SAIF. As an insurer, the FDIC
issues regulations, conducts examinations and generally supervises the
operations of its insured institutions (institutions insured by the FDIC
hereinafter are referred to as "insured institutions"). Any insured institution
which does not operate in accordance with or conform to FDIC regulations,
policies and directives may be sanctioned for non-compliance. The FDIC has the
authority to suspend or terminate insurance of deposits upon the finding that
the institution has engaged in unsafe or unsound practices, is operating in an
unsafe or unsound condition, or has violated any applicable law, regulation,
rule, order or condition imposed by the FDIC. The FDIC requires an annual audit
by independent accountants and also periodically makes its own examinations of
insured institutions.

Insured institutions are members of either the SAIF or the Bank Insurance
Fund. Pursuant to the Financial Institutions Reform, Recovery and Enforcement
Act of 1989 ("FIRREA"), an insured institution may not convert from one
insurance fund to the other without the advance approval of the FDIC; provided,
however, that conversions are not permitted until the date on which the SAIF
first meets or exceeds the designated reserve ratio (reserves to estimated SAIF
insured deposits) for such fund, subject to certain exceptions. To date, the
SAIF has not met the designated reserve ratio for the fund. FIRREA also
provides, generally, that the moratorium on insurance fund conversions shall not
be construed to prohibit a SAIF member from converting to a bank charter during
the moratorium, as long as the resulting bank remains a SAIF member during that
period. When a conversion is permitted, each insured institution participating
in the conversion must pay an "exit fee" to the insurance fund it is leaving and
an "entrance fee" to the insurance fund it is entering.

Insurance Premiums and Regulatory Assessments. As an insurer, the FDIC
issues regulations, conducts examinations and generally supervises the
operations of its insured members. FDICIA directed the FDIC to establish a
risk-based premium system under which each premium assessed against the Bank
would generally depend upon the amount of the Bank's deposits and the risk that
it poses to the SAIF. The FDIC was further directed to set semiannual
assessments for insured depository institutions to maintain the reserve ratio of
the SAIF at 1.25% of estimated insured deposits. The FDIC may designate a higher
reserve ratio if it determines there is a significant risk of substantial future
loss to the particular fund. Under the FDIC's risk-related insurance
regulations, an institution is classified according to capital and supervisory
factors. Institutions are assigned to one of three capital groups: "well
capitalized," "adequately capitalized" or "undercapitalized." Within each
capital group, institutions are assigned to one of three supervisory subgroups.
There are nine combinations of groups and subgroups (or assessment risk
classifications) to which varying assessment rates are applicable. These rates
range from $.23 per $100 of domestic deposits to $.31 per $100 of domestic
deposits. See "-- Recent Legislation."

In addition to deposit insurance premiums, savings institutions also must
bear a portion of the administrative costs of the OTS through an assessment
based on the level of total assets of each insured institution and which
differentiates between troubled and nontroubled savings institutions. During
fiscal 1995,

49
<PAGE> 50

the Bank paid $84,000 to the OTS for such assessments. Additionally, the OTS
assesses fees for the processing of various applications.

Qualified Thrift Lender Test

Historically, the amount of advances which may be obtained by a member
institution from the FHLB has been subject to the institution's compliance with
a qualified thrift lender ("QTL") test. In order to comply with the QTL test,
the Bank must maintain 65% of its total "Portfolio Assets" in "Qualified Thrift
Investments." This level must be maintained on a monthly average basis in nine
out of every twelve months. A savings institution that does not meet the
Qualified Thrift Lender test must either convert to a bank charter or comply
with the restrictions imposed for noncompliance. For purposes of the QTL test,
"Portfolio Assets" equal total assets minus (i) goodwill and other intangible
assets, (ii) the value of property used by an institution in the conduct of its
business and (iii) assets of the type used to meet liquidity requirements in an
amount not exceeding 20% of the savings institution's total assets. "Qualified
Thrift Investments" generally include (i) loans made to purchase, refinance,
construct, improve or repair domestic residential or manufactured housing, (ii)
home equity loans, (iii) securities backed by or representing an interest in
mortgages on domestic residential or manufactured housing, (iv) obligations
issued by the federal deposit insurance agencies and (v) shares of FHLB stock
owned by the savings institution. Qualified Thrift Investments also include
certain other specified investments, subject to a percentage of Portfolio Assets
limitation. The Bank's Qualified Thrift Investments as of September 30, 1995
were $376.7 million, or 79.5% of its Portfolio Assets at that date. The Bank
expects to remain in compliance with the QTL test.

Capital Requirements

General. Effective December 7, 1989, OTS capital regulations established
capital standards applicable to all savings institutions, including a core
capital requirement, a tangible capital requirement and a risk-based capital
requirement. The OTS also has established pursuant to FDICIA five
classifications for institutions based upon the capital requirements: well
capitalized, adequately capitalized, under capitalized, significantly under
capitalized and critically under capitalized. At March 31, 1995, the Bank was
"well capitalized." Failure to maintain that status could result in greater
regulatory oversight or restrictions on the Bank's activities.

Core Capital and Tangible Capital. The OTS requires a savings institution
to maintain "core capital" in an amount not less than 3% of the savings
institution's total assets. "Core capital" includes, generally, common
stockholders' equity, noncumulative perpetual preferred stock and related
surplus, nonwithdrawable accounts and pledged deposits of mutual savings
associations, and minority interests in fully-consolidated subsidiaries, less
(i) investments in certain "non-includable" subsidiaries (as determined by
regulation) and (ii) certain intangible assets (except for purchased mortgage
servicing rights and purchased credit card relationships).

The "tangible capital" requirement requires a savings institution to
maintain tangible capital in an amount not less than 1.5% of its adjusted total
assets. "Tangible capital" means core capital less any intangible assets (except
for purchased mortgage servicing rights included in core capital).

Most national banks will be required to maintain a level of core capital of
at least 100 to 200 basis points above the 3% minimum level. Because OTS capital
standards for savings institutions may not be less stringent than capital
standards established for national banks, savings institutions will be required
to maintain core capital levels at least as high as national banks. At September
30, 1995, the Bank's core capital and tangible capital were both $31.7 million
or 6.1% of adjusted total assets.

Risk-Based Capital. The OTS capital regulations require savings
institutions to maintain a ratio of total capital to total risk-weighted assets
of 8.0%. Total capital, for purposes of the risk-based capital requirement,
equals the sum of core capital plus supplementary capital, which includes
cumulative preferred stock, mandatory convertible securities, subordinated debt,
and allowance for loan and lease losses of up to 1.25% of total risk-weighted
assets. In determining total risk-weighted assets for purposes of the risk-based
capital requirements, (i) each off-balance sheet item must be converted to an
on-balance sheet credit equivalent amount by multiplying the face amount of each
such item by a credit conversion factor ranging from 0% to 100% (depending upon
the nature of the item); (ii) the credit equivalent amount of each off-balance
sheet

50
<PAGE> 51

item and each on-balance sheet asset must be multiplied by a risk factor ranging
from 0% to 100% (again depending on the nature of the item); and (iii) the
resulting amounts are added together and constitute total risk-weighted assets.
As of September 30, 1995, the Bank's ratio of total capital to total
risk-weighted assets was 9.1%.

In addition, the OTS requires institutions with an "above-normal" degree of
interest rate risk to maintain an additional amount of capital. The test of
"above-normal" is determined by postulating a 200 basis point shift (increase or
decrease) in interest rates and determining the effect on the market value of an
institution's portfolio equity. If the decline is less than 2%, no addition to
risk-based capital is required (i.e., an institution has only a normal degree of
interest rate risk). If the decline is greater than 2%, the institution must add
additional capital equal to one-half the difference between its measured
interest rate risk and 2% multiplied by the market value of its assets.
Management believes that the Bank's interest rate risk is within the normal
range.

Capital Distributions

"Capital distributions" by OTS-regulated savings institutions also are
regulated by the OTS. Capital distributions are defined to include, in part,
dividends, stock repurchases and cash-out mergers. An association is categorized
as either a "Tier 1," "Tier 2," or "Tier 3" association. A Tier 1 association is
defined as an association that has, on a pro forma basis after the proposed
distribution, capital equal to or greater than the OTS fully phased-in capital
requirements. A Tier 2 association is an association that has, on a pro forma
basis after the proposed distribution, capital equal to or in excess of its
minimum capital requirement but does not meet the fully phased-in capital
requirement. A Tier 3 association is defined as an association that has current
capital less than its minimum capital requirement.

The Bank currently is in compliance with the regulatory capital
requirements and therefore is a Tier 1 association. A "Tier 1" association is
permitted to make capital distributions during a calendar year up to the higher
of (i) 100% of its net income to date plus the amount that would reduce by
one-half its surplus capital ratio at the beginning of the calendar year, or
(ii) 75% of its net income over the most recent four-quarter period. Any
distributions in excess of that amount require prior OTS notice, with the
opportunity for the OTS to object to the distribution. In addition, a savings
association must provide the OTS with a 30-day advance written notice of all
proposed capital distributions, whether or not advance approval is required by
OTS regulations. Currently, the Bank periodically notifies the OTS of the gross
amount of dividends it intends to pay to the Company as the sole stockholder of
the Bank. On February 3, 1995, the OTS approved the payment by the Bank of $5
million in dividends of which the Bank had paid $800,000 through December 31,
1995. The Bank's ability to pay dividends to the Company is subject to the
financial performance of the Bank which is dependent upon, among other things,
the local economy, the success of the Bank's lending activities, compliance by
the Bank with applicable regulations, investment performance and the ability to
generate fee income.

Federal Reserve System Requirements

The Federal Reserve requires depository institutions to maintain
noninterest-bearing reserves against their deposit transaction accounts,
non-personal time deposits (transferrable or held by a person other than a
natural person) with an original maturity of less than one and one-half years
and certain money market deposit accounts. Federal Reserve regulations currently
require financial institutions to maintain average daily reserves equal to 3% on
the first $51.9 million of net transaction account, plus 10% on the remainder.
The balances maintained to meet the reserve requirements imposed by the Federal
Reserve may be used to satisfy liquidity requirements imposed by the OTS.
Members of the FHLB System also are authorized to borrow from the Federal
Reserve "discount window" subject to restrictions imposed by Federal Reserve
regulations. However, Federal Reserve policy generally requires that a savings
institution exhaust its FHLB resources before borrowing from the Federal
Reserve.

51
<PAGE> 52

Consumer Protection and Other Laws and Regulations

The Bank and PrimeEagle also are subject to various laws and regulations
dealing generally with consumer protection matters including without limitation,
the Equal Credit Opportunity Act and Regulation B, the Electronic Funds Transfer
Act and Regulation E, the Truth in Lending Act and Regulation Z, the Truth in
Savings Act and Regulation DD, the Expedited Funds Availability Act and
Regulation CC, the Bank Secrecy Act and fair housing laws. The Bank and
PrimeEagle may be subject to potential liability under these laws and
regulations for material violations.

State Regulation

As a federally chartered savings institution, the Bank generally is not
subject to those provisions of Georgia law governing state chartered financial
institutions or to the jurisdiction of the DBF. However, the DBF interprets the
Georgia Bank Holding Company Act to require the prior approval of the DBF for
any acquisition of control of any savings institution (whether chartered by
state or federal authority) located in Georgia.

The DBF also interprets the Georgia Bank Holding Company Act to include
savings and loan holding companies as "bank holding companies," thus giving the
DBF the authority to make examinations of the Company and any subsidiaries and
to require periodic and other reports. Existing DBF regulations do not restrict
the business activities or investments of the Company or the Bank.

State usury laws are applicable to federally insured institutions with
regard to loans made within Georgia. Generally speaking, Georgia law does not
establish ceilings on interest rates although certain specialized types of
lending in which the Bank engages, such as making loans of $3,000 or less, are
subject to interest rate limitations.

DESCRIPTION OF CAPITAL STOCK

GENERAL

Set forth below is a description of the material terms and provisions of
the equity securities of the Company. The following description does not purport
to be complete and is subject to and qualified in its entirety by reference to
the Restated Articles of Incorporation of the Company, as amended (the "Articles
of Incorporation"), the Bylaws of the Company, as amended (the "Bylaws"), and
the Shareholder Rights Plan of the Company dated as of January 26, 1993 (the
"Shareholder Rights Plan"). The Articles of Incorporation, the Bylaws and the
Shareholder Rights Plan are filed or incorporated by reference as exhibits to
the Registration Statement of which this Prospectus forms a part.

The Company is authorized to issue (i) 10,000,000 shares of Common Stock,
par value $1.00 per share, and (ii) 5,000,000 shares of serial preferred stock,
par value $1.00 per share, which may be issued in one or more series with such
voting powers, designations, preferences, rights, qualifications, limitations
and restrictions as shall be specified by the Board of Directors. On January 3,
1996, the Company had outstanding 3,117,200 shares of Common Stock held by
approximately 619 stockholders of record. As of the date of this Prospectus, the
Company does not have any series of preferred stock outstanding. See
"Capitalization."

COMMON STOCK

Dividends

Subject to the rights of the holders of any preferred stock then
outstanding, the holders of the Common Stock are entitled to dividends from
funds legally available therefor when and if the Board of Directors declares
such dividends payable. For a description of certain regulatory provisions that
affect the payment of cash dividends, see "Supervision and
Regulation -- Regulation of the Bank -- Capital Distributions."

52
<PAGE> 53

Voting Rights

Holders of the Common Stock are entitled to one vote per share on all
matters requiring stockholder action. The Company's stockholders are not
permitted to cumulate votes for the election of directors. Accordingly, holders
of more than 50% of the shares voting in the election of directors can elect
100% of the directors if they choose to do so, and in such event, the holders of
the remaining shares voting are not able to elect any directors.

Other Rights

No holder of Common Stock has any redemption or sinking fund privileges,
any preemptive or other rights to subscribe for any other shares or securities,
or any conversion rights. In the event of liquidation, the holders of Common
Stock are entitled to receive pro rata any assets distributable to stockholders
with regard to shares held by them, subject to the rights of any holders of
preferred stock.

Classified Board of Directors

The Articles of Incorporation provide for the division of the Company's
Board of Directors into three classes of directors, with one class being elected
each year by the stockholders and the members of each class serving three year
terms. Such a classified Board of Directors discourages and makes more difficult
a change in control of the Company or the removal of incumbent management, even
if favorable to the stockholders, since two successive annual meetings of the
stockholders generally would be required to elect a majority of the Board of
Directors. Additionally, the Articles of Incorporation provide that a director
may be removed with or without cause, but only upon the affirmative vote of the
holders of at least 80% of the outstanding shares of capital stock of the
Company entitled to vote for the election of directors.

Provisions Relating to Business Combinations

Certain of the provisions of the Company's Articles of Incorporation and
Bylaws summarized in the succeeding paragraphs may be deemed to have an
anti-takeover effect and may delay a tender offer or takeover attempt which a
stockholder might consider to be in such stockholder's best interest, including
attempts which might result in the payment to stockholders of a premium over the
market price for the Company's shares.

Article XIII of the Articles of Incorporation requires the approval of the
holders of not less than 75% of the Corporation's Voting Stock in order to
approve or authorize any Business Combination with a Principal Stockholder. The
purpose of this provision is to encourage potential acquirors to engage in arm's
length negotiations with the Company before attempting a takeover, in order to
provide protection for the Company and its stockholders. A Business Combination
includes (i) any merger, reorganization or consolidation of the Company or any
of its affiliates with or into any Principal Stockholder, (ii) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of all, or more than
25% of the fair market value, of the assets of the Company or any of its
affiliates to any Principal Stockholder, (iii) any sale, lease, exchange or
other transfer by any Principal Stockholder to the Company or any of the
Company's affiliates of any assets, cash or securities in exchange for shares of
Voting Stock (or for shares of stock of any of the Company's affiliates entitled
to vote in the election of directors of such affiliates or securities
convertible into or exchangeable for shares of Voting Stock or such stock of an
affiliate, or options, warrants or rights to purchase shares of Voting Stock or
such stock of an affiliate), (iv) the adoption, at any time when there exists
any Principal Stockholder, of any plan or proposal for the liquidation or
dissolution of the Company, and (v) any reclassification of securities
(including any reverse stock split), recapitalization or other transaction at
any time when there exists a Principal Stockholder, if the result would be a
decrease in the number of holders of the outstanding shares of Voting Stock. The
term "Principal Stockholder" is defined as any individual or entity which,
together with affiliates and associates, beneficially owns 10% or more of the
outstanding shares of Voting Stock. Such term also includes any affiliate or
associate of any such individual or entity. The term "Voting Stock" means the
stock of the company entitled to vote in the election of Directors.

Article XIV of the Articles of Incorporation provides that no Business
Combination shall take place unless certain price criteria and procedural
requirements are met. Generally, a Principal Stockholder must pay

53
<PAGE> 54

at least the same price per share to acquire more stock in the Company as the
highest price per share he ever paid to acquire ownership of any of the
Company's stock. The Principal Stockholder must also offer the same form and
kind of consideration to acquire more stock that he previously offered in order
to acquire a majority of the Company's stock which he acquired.

The provisions of Articles XIII and XIV, described above, will not apply to
a Business Combination if it is approved by two-thirds of those members of the
Board of Directors who were directors prior to the time any Principal
Stockholder became a Principal Stockholder. Articles XIII and XIV also will not
apply to a Business Combination which (a) does not change any stockholders'
percentage ownership in the shares of stock entitled to vote in the election of
directors of any successor of the Company from the percentage of shares of
Voting Stock owned by the stockholder, (b) provides for the provisions of
Article XIII or XIV without any amendment, change, alteration or deletion, to
apply to any successor to the Company; and (c) does not transfer all, or more
than 25% of the fair market value of, the Company's assets, other than to a
wholly-owned subsidiary of the Company. Nothing contained in Article XIV permits
the Company to issue any shares of Voting Stock or to transfer any of its assets
to a wholly-owned subsidiary of the Company, if the issuance of shares of Voting
Stock or transfer of assets is part of a plan to transfer such shares of Voting
Stock or assets to a Principal Stockholder.

Article XVI of the Articles of Incorporation specifically provides that the
Board of Directors may amend the Bylaws, but that the stockholders may not amend
the Bylaws except by the vote of holders of not less than 75% of the outstanding
shares of capital stock of the Company entitled to vote generally in the
election of directors, cast at a meeting of stockholders called for that
purpose. Article XVII of the Articles of Incorporation also requires the same
75% vote of stockholders to change certain provisions of the Articles of
Incorporation, including Articles XIII and XIV described above.

As noted above, the Company's preferred stock may be issued from time to
time in one or more series without stockholder approval. Thus, the Board of
Directors, without stockholder approval, could authorize the issuance of
preferred stock with conversion and other rights that could make it difficult
for another company to effect certain business combinations with the Company or
that could otherwise adversely affect the rights of the holders of Common Stock.

Shareholder Rights Plan

On January 26, 1993, the Board of Directors of the Company declared a
dividend, payable February 9, 1993, of one right (a "Right") for each
outstanding share of Common Stock of the Company held of record at the close of
business on February 9, 1993 (the "Record Time"), or issued thereafter and prior
to the Separation Time (as hereinafter defined). The Rights were issued pursuant
to a Shareholder Protection Rights Agreement. Each Right entitles its registered
holder to purchase from the Company, after the Separation Time, one share of
Common Stock for $17.50 (the "Exercise Price"), subject to adjustment.

The Rights are evidenced by the Common Stock certificates until the
Separation Time. The "Separation Time" is the close of business on the earlier
of either (i) the tenth day (or such later date as the Board of Directors of the
Company may from time to time fix by resolution adopted prior to the Separation
Time that otherwise would have occurred) after the date on which any person or
entity commences a tender or exchange offer, which, if consummated, would result
in such person or entity becoming the beneficial owner of 15% or more of the
outstanding shares of Common Stock (any person or entity having such beneficial
ownership being referred to as an "Acquiring Person") and (ii) the Flip-in Date;
provided that if a tender or exchange offer is cancelled, terminated, or
otherwise withdrawn prior to the Separation Time, such offer shall be deemed
never to have been made. The Flip-in Date is the tenth business day after the
first date of public announcement by the Company or an Acquiring Person that an
Acquiring Person has become such (the "Stock Acquisition Date"), other than as a
result of a Flip-over Event (as defined below).

Until the Separation Time, the Rights will be transferred only with the
Common Stock. Promptly following the Separation Time, separate certificates
evidencing the Rights ("Rights Certificates") will be mailed to holders of
record of Common Stock at the Separation Time. The Rights will not be
exercisable until the business day following the Separation Time.

54
<PAGE> 55

If a Flip-in Date occurs, the Company shall take action to ensure that each
Right (other than Rights beneficially owned by the Acquiring Person or any of
its affiliates) constitutes the right to purchase from the Company that number
of shares of Common Stock of the Company having an aggregate "Market Price" (as
defined in the Rights Agreement), on the Stock Acquisition Date that gave rise
to the Flip-in Date, equal to twice the Exercise Price, for an amount in cash
equal to the then current Exercise Price.

In addition, the Board of Directors of the Company may, at its option, at
any time after a Flip-in Date and prior to the time that an Acquiring Person
becomes the beneficial owner of more than 50% of the outstanding shares of
Common Stock, elect to exchange all (but not less than all) of the then
outstanding Rights (other than Rights beneficially owned by the Acquiring Person
or any of its affiliates thereof, which Rights become void) for shares of Common
Stock at an exchange ratio of one share of Common Stock per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date of the Separation Time (the "Exchange Ratio").
Immediately upon such action by the Board of Directors (the "Exchange Time"),
the right to exercise the Rights will terminate and each Right will thereafter
represent only the right to receive a number of shares of Common Stock equal to
the Exchange Ratio.

If the Company enters into a transaction, or series of transactions, on or
after the Stock Acquisition Date, in which directly or indirectly, (A) the
Company shall consolidate or merge with any other person or entity, or (B) the
Company shall sell or otherwise transfer (or one or more of its subsidiaries
shall sell or otherwise transfer) assets (i) aggregating more than 50% of the
assets (measured by either book value or fair market value), or (ii) generating
more than 50% of the consolidated operating income or cash flow of the Company,
to any other person or entity (other than the Company or one or more of its
wholly owned subsidiaries) or to two or more such persons or entities which are
affiliated or otherwise acting in concert (a "Flip-over Event"), the Company
shall not permit to occur such Flip-over Event until it shall have entered into
a supplemental agreement with the person or entity engaging in such Flip-over
Event (the "Flip-over Entity").

This supplemental agreement shall be for the benefit of the holders of the
Rights, and shall provide that, upon consummation or occurrence of the Flip-over
Event (i) each Right shall thereafter constitute the right to purchase from the
Flip-over Entity, upon exercise thereof in accordance with the terms of the
Rights Agreement, that number of shares of common stock of the Flip-over Entity
having an aggregate Market Price on the date of consummation or occurrence of
such Flip-over Event equal to twice the Exercise Price for an amount in cash
equal to the then current Exercise Price, and (ii) the Flip-over Entity shall
thereafter be liable for, and shall assume, by virtue of such Flip-over Event
and such supplemental agreement, all the obligations and duties of the Company
pursuant to the Rights Agreement.

The Rights will expire on the earliest of (i) the Exchange Time, (ii) the
close of business on January 26, 2003, and (iii) the date on which the Rights
are redeemed as described below (in any such case, the "Expiration Time").

The Board of Directors of the Company may, at its option, at any time prior
to the Flip-in Date, redeem all (but not less than all) of the then outstanding
Rights, at $.01 per Right (the "Redemption Price"). Immediately upon the action
of the Board of Directors electing to redeem the Rights, without any further
action and without any notice, the right to exercise the Rights will terminate
and each Right will thereafter represent only the right to receive the
Redemption Price in cash for each Right so held.

The Rights will not prevent a takeover of the Company. The Rights, however,
may have certain anti-takeover effects. The Rights may cause substantial
dilution to a person or group that acquires 15% or more of the Common Stock,
unless the Rights are first redeemed by the Board of Directors. Nevertheless,
the Rights should not interfere with a transaction that is in the best interests
of the Company and its stockholders on or prior to the Flip-in Date, because the
Rights can be redeemed before the consummation of such transaction.

Other Aspects

The transfer agent and registrar for the Common Stock is SunTrust Bank,
Atlanta, Georgia.

55
<PAGE> 56

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement by and
among the Company and the Underwriters named below, the Underwriters, through
their representatives Interstate/Johnson Lane Corporation and Morgan Keegan &
Co., have severally agreed to purchase from the Company, and the Company has
agreed to sell to the Underwriters, the respective number of shares of Common
Stock set forth opposite each Underwriter's name below:

<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
---------------------------------------------------------- ---------
<S> <C>
Interstate/Johnson Lane Corporation....................... 405,000
Morgan Keegan & Company, Inc. ............................ 405,000
Robert W. Baird & Co. Inc. ............................... 70,000
J.C. Bradford & Co. ...................................... 70,000
Equitable Securities Corporation.......................... 70,000
Allen C. Ewing & Co. ..................................... 70,000
Friedman, Billings, Ramsey & Co., Inc. ................... 70,000
Raymond James & Associates, Inc. ......................... 70,000
Sterne, Agee & Leach, Inc. ............................... 70,000
---------
Total........................................... 1,300,000
========
</TABLE>

The Underwriting Agreement provides that the obligations of the
Underwriters thereunder are subject to the approval of certain legal matters by
counsel and to various other conditions customary in a firm commitment
underwritten public offering, including the absence of any material change in
the Company's business and the receipt of certain certificates, opinions and
letters from the Company and its counsel and independent public accountants. The
nature of the Underwriters' obligation is such that they are committed to
purchase and pay for all shares of Common Stock offered hereby if any are
purchased.

The Underwriters propose to offer the shares of Common Stock being
purchased by them directly to the public at the public offering price set forth
on the cover page of this Prospectus and to certain securities dealers at such
price less a concession not in excess of $.50 per share of Common Stock. The
Underwriters may allow, and such selected dealers may reallow, a concession not
in excess of $.10 per share to certain other brokers and dealers. After the
initial offering to the public, the offering price and other selling terms may
be changed by the representatives.

Pursuant to the Underwriting Agreement, the Underwriters have agreed to
solicit offers to purchase an aggregate of 67,312 shares (the "Directed Shares")
of Common Stock from certain purchasers specified by the Company, including the
ESOP, Company directors and officers and persons associated with them. The ESOP
will purchase 62,500 of the Directed Shares. No selling concession will be paid
by the Company with respect to the Directed Shares.

The Company has granted a 30-day option to the Underwriters to purchase up
to a maximum of 195,000 additional shares of Common Stock to cover
over-allotments, if any, at the public offering price set forth on the cover
page of this Prospectus. To the extent that the Underwriters exercise the
option, the Underwriters have agreed, subject to certain conditions, to purchase
such additional shares in approximately the same proportion as set forth in the
above table. The Underwriters may purchase such shares only to cover over-
allotments made in connection with this offering.

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

The Company and certain of its affiliates have agreed that they will not
sell, contract to sell or otherwise dispose of any shares of Common Stock or any
securities convertible into or exchangeable for any shares of Common Stock for a
period of 90 days after the date of the commencement of the offering without the
prior written consent of the Underwriters. The Underwriters may from time to
time be customers of, engage in transactions with and perform services for the
Company or its subsidiaries in the ordinary course of business.

56
<PAGE> 57

The Company has agreed to indemnify the Underwriters against, and to
contribute to certain losses arising out of, certain liabilities, including
liabilities under the Securities Act of 1933, as amended.

In general, the rules of the Commission prohibit the Underwriters from
making a market in the Common Stock during the "cooling-off" period immediately
preceding the commencement of sales in this offering. The Commission has,
however, adopted exemptions from these rules that permit passive market making
under certain conditions. These rules permit an Underwriter to continue to make
a market subject to the conditions, among others, that its bid not exceed the
highest bid by a market maker not connected with this offering and that its net
purchases on any one trading day not exceed prescribed limits. Pursuant to these
exemptions, certain Underwriters, selling group members (if any) or their
respective affiliates intend to engage in passive market making in the Common
Stock during the "cooling-off" period.

AVAILABLE INFORMATION

The Company has filed with the Securities and Exchange Commission,
Washington, D.C. (the "Commission"), a Registration Statement on Form S-2 under
the Securities Act of 1933, as amended (the "Securities Act"), relating to the
Common Stock offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which have
been omitted pursuant to the rules of the Commission. Statements contained in
this Prospectus as to the contents of any contract or other document are not
necessarily complete, and in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to or incorporated by
reference in the Registration Statement, each statement being qualified in all
respects by such reference. Such information is available for inspection without
charge at, and copies can be obtained at prescribed rates from, the public
reference facilities and regional offices of the Commission referred to below.

The Company is subject to the informational 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
Commission. Such reports, proxy statements and other information may be
inspected and copied at the public reference facilities of the Commission at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the Commission's
regional offices at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60621-2511, and World Trade Center, 13th Floor, New York, New
York 10048; 1401 Brickell Avenue, Suite 200, Miami, Florida 33131; 1801
California Street, Suite 4800, Denver, Colorado 80202-2648; and 5670 Wilshire
Boulevard, 11th Floor, Los Angeles, California 90036-3648. Copies of such
material can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.

INCORPORATION OF DOCUMENTS BY REFERENCE

THIS PROSPECTUS INCORPORATES BY REFERENCE CERTAIN DOCUMENTS THAT ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS ARE AVAILABLE WITHOUT
CHARGE UPON REQUEST FROM: EAGLE BANCSHARES, INC., 4305 LYNBURN DRIVE, TUCKER,
GEORGIA 30084-4441, ATTENTION: INVESTOR RELATIONS; (770) 908-6690.

The following documents filed by the Company with the Securities and
Exchange Commission (the "Commission") (Commission File No. 0-14379) under
Section 13(a) or 15(d) of the Exchange Act are hereby incorporated by reference
in this Prospectus: (i) the Company's Annual Report on Form 10-K for the year
ended March 31, 1995; (ii) the Company's Quarterly Report on Form 10-Q for the
three months ended June 30, 1995; and (iii) the Company's Quarterly Report on
Form 10-Q for the six months ended September 30, 1995. Any financial and per
share data and any other statement contained in any such document shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that the financial and per share data and any other statement contained
herein modifies or supersedes such data or statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.

57
<PAGE> 58

LEGAL MATTERS

Certain legal matters will be passed upon for the Company by Long, Aldridge
& Norman, Atlanta, Georgia, and for the Underwriters by Holland & Knight,
Atlanta, Georgia.

EXPERTS

The consolidated financial statements of the Company as of March 31, 1995,
and for the year then ended, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are included or incorporated herein and in the Registration
Statement upon the authority of said firm as experts in accounting and auditing
in giving said report.

The consolidated financial statements of the Company as of March 31, 1994,
and for each of the years in the two-year period ended March 31, 1994, have been
included herein and in the Registration Statement in reliance upon the report of
KPMG Peat Marwick LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing. The report of KPMG Peat Marwick LLP covering the fiscal year 1994
and 1993 consolidated financial statements refers to changes in the method of
accounting for income taxes and investments.

58
<PAGE> 59

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AUDITED FINANCIAL STATEMENTS
Report of Independent Public Accountants (Arthur Andersen LLP)........................ F-2
Independent Auditors' Report (KPMG Peat Marwick LLP).................................. F-3
Consolidated Statements of Financial Condition as of March 31, 1994 and 1995.......... F-4
Consolidated Statements of Income for the years ended March 31, 1993, 1994, and
1995................................................................................ F-5
Consolidated Statements of Stockholders' Equity for the years ended March 31, 1993,
1994, and 1995...................................................................... F-6
Consolidated Statements of Cash Flows for the years ended March 31, 1993, 1994, and
1995................................................................................ F-7
Notes to Consolidated Financial Statements............................................ F-9
UNAUDITED INTERIM FINANCIAL STATEMENTS
Consolidated Statements of Financial Condition as of March 31, 1995 and September 30,
1995................................................................................ F-28
Consolidated Statements of Income for the three and six month periods ended September
30, 1994 and 1995................................................................... F-29
Consolidated Statements of Cash Flows for the six months ended September 30, 1994 and
1995................................................................................ F-30
Notes to Interim Consolidated Financial Statements.................................... F-31
</TABLE>

F-1
<PAGE> 60

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of
Eagle Bancshares, Inc.:

We have audited the accompanying consolidated statements of financial
condition of EAGLE BANCSHARES, INC. (A GEORGIA CORPORATION) AND SUBSIDIARIES as
of March 31, 1995 and the related consolidated statements of income,
stockholders' equity, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The consolidated financial statements of Eagle Bancshares, Inc. and
subsidiaries as of March 31, 1994 and for each of the two years ended March 31,
1994 were audited by other auditors whose report dated April 29, 1994 expressed
an unqualified opinion on those statements.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Eagle
Bancshares, Inc. and subsidiaries as of March 31, 1995 and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.

As discussed in Note 1, effective April 1, 1993, the Company changed its
method of accounting for income taxes and effective March 31, 1994, the Company
changed its method of accounting for investment securities.

Arthur Andersen LLP

Atlanta, Georgia
May 12, 1995
(except with respect to the
matters discussed in Note 16, as to
which the date is December 21, 1995)

F-2
<PAGE> 61

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Eagle Bancshares, Inc.:

We have audited the accompanying consolidated statement of financial
condition of Eagle Bancshares, Inc. and subsidiaries as of March 31, 1994 and
the related consolidated statements of income, stockholders' equity, and cash
flows for each of the years in the two-year period ended March 31, 1994. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 financial position of Eagle
Bancshares, Inc. and subsidiaries as of March 31, 1994 and the results of their
operations and their cash flows for each of the years in the two-year period
ended March 31, 1994, in conformity with generally accepted accounting
principles.

As discussed in notes 1 and 8 to the consolidated financial statements, the
Company changed its method of accounting for income taxes to adopt the
provisions of Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes" on April 1, 1993. As discussed in notes 1 and 2 to
the consolidated financial statements, the Company changed its method of
accounting for investments to adopt the provisions of SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities" at March 31, 1994.

KPMG PEAT MARWICK LLP

Atlanta, Georgia
April 29, 1994, except with respect
to the matter discussed in the
first paragraph of Note 16, as to
which the date is December 21, 1995

F-3
<PAGE> 62

EAGLE BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
MARCH 31, 1994 AND 1995
(IN THOUSANDS)

<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
ASSETS
Cash and amounts due from banks.......................................... $ 6,194 $ 6,214
Interest-bearing deposits................................................ 1,664 144
Securities available for sale (Note 2)................................... 20,883 20,939
Investment securities held to maturity, approximate market value of
$35,561 and $56,701 in 1994 and 1995, respectively (Notes 2 and 7)..... 34,683 57,599
Loans receivable held for sale, approximate market value of $23,946 and
$41,526 in 1994 and 1995, respectively (Note 3)........................ 23,641 41,220
Loans receivable, net (Notes 3 and 7).................................... 219,726 303,906
Stock in Federal Home Loan Bank, at cost (Note 7)........................ 3,341 5,984
Premises and equipment, net (Note 4)..................................... 6,417 8,299
Real estate held for development and sale................................ 0 6,620
Real estate acquired in settlement of loans, net......................... 671 615
Accrued interest receivable.............................................. 1,721 2,996
Other assets............................................................. 1,444 2,781
-------- --------
Total assets................................................... $320,385 $457,317
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits (Note 6)...................................................... $244,297 $286,315
Advance payments by borrowers for property taxes and insurance......... 954 2,187
Federal Home Loan Bank advances and other borrowings (Note 7).......... 30,750 119,953
Deferred income taxes (Note 8)......................................... 420 441
Drafts outstanding..................................................... 9,158 10,778
Accrued expenses and other liabilities................................. 3,974 4,007
-------- --------
Total liabilities.............................................. 289,553 423,681
-------- --------
Commitments (Note 3)
Stockholders' equity (Notes 9, 10, and 13):
Common stock, $1 par value; 10,000,000 shares authorized, 3,324,000 and
3,389,000 shares issued in 1994 and 1995, respectively.............. 3,324 3,389
Additional paid-in capital............................................. 7,726 8,131
Retained earnings...................................................... 20,795 23,450
Net unrealized gain on securities available for sale................... 387 46
Employee Stock Ownership Plan debt (Note 9)............................ (141) (11)
Unamortized restricted stock........................................... (183) (293)
Treasury stock, at cost; 301,800 shares in 1994 and 1995............... (1,076) (1,076)
-------- --------
Total stockholders' equity..................................... 30,832 33,636
-------- --------
Total liabilities and stockholders' equity..................... $320,385 $457,317
======== ========
</TABLE>

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

F-4
<PAGE> 63

EAGLE BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED MARCH 31, 1993, 1994, AND 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Interest income:
Interest on loans............................................... $19,371 $21,906 $26,330
Interest on mortgage-backed securities.......................... 5,673 3,135 1,939
Interest on securities and other interest-earning assets........ 2,397 2,488 4,073
------- ------- -------
Total interest income................................... 27,441 27,529 32,342
------- ------- -------
Interest expense:
Interest on deposits (Note 6)................................... 11,408 10,006 11,625
Interest on FHLB advances and other borrowings.................. 3,833 2,526 4,006
------- ------- -------
Total interest expense.................................. 15,241 12,532 15,631
------- ------- -------
Net interest income..................................... 12,200 14,997 16,711
Provision for loan losses (Note 3)................................ 630 1,000 643
------- ------- -------
Net interest income after provision for loan losses..... 11,570 13,997 16,068
------- ------- -------
Other income:
Mortgage production fees........................................ 3,375 6,100 3,236
Gain on sale of loans........................................... 221 188 891
Service charges................................................. 349 460 597
Gain on sale of mortgage-backed securities (Note 2)............. 892 959 14
Miscellaneous................................................... 957 1,543 1,609
------- ------- -------
Total other income...................................... 5,794 9,250 6,347
------- ------- -------
Other expenses:
Salaries and employee benefits (Note 9)......................... 6,287 8,966 9,629
Net occupancy expense........................................... 1,036 1,494 1,889
Data processing expense......................................... 484 673 817
Federal insurance premiums...................................... 479 532 607
Marketing expense............................................... 272 283 387
Provision for losses on real estate acquired in settlement of
loans........................................................ 489 136 10
Miscellaneous................................................... 1,979 2,656 2,696
------- ------- -------
Total other expenses.................................... 11,026 14,740 16,035
------- ------- -------
Income before income taxes, extraordinary item, and
cumulative effect of change in accounting principle... 6,338 8,507 6,380
Income tax expense (Note 8)....................................... 2,269 3,189 2,279
------- ------- -------
Income before extraordinary item and cumulative effect
of change in accounting principle..................... 4,069 5,318 4,101
Extraordinary item -- loss related to early extinguishment of
debt, net of income tax benefit of $261 (Note 7)................ 0 (427) 0
Cumulative effect of change in accounting for income taxes (Note
8).............................................................. 0 320 0
------- ------- -------
Net income.............................................. $ 4,069 $ 5,211 $ 4,101
======= ======= =======
Primary earnings per share of common stock (Note 14):
Income before extraordinary item and cumulative effect of change
in accounting principle...................................... $ 1.38 $ 1.74 $ 1.34
Extraordinary item, net......................................... (0.14)
Cumulative effect of change in accounting principle............. 0.11
------- ------- -------
Net income.............................................. $ 1.38 $ 1.71 $ 1.34
======= ======= =======
Fully diluted earnings per share of common stock (Note 14):
Income before extraordinary item and cumulative effect of change
in accounting principle...................................... $ 1.38 $ 1.73 $ 1.34
Extraordinary item, net......................................... (0.14)
Cumulative effect of change in accounting principle............. 0.11
------- ------- -------
Net income.............................................. $ 1.38 $ 1.70 $ 1.34
======= ======= =======
</TABLE>

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

F-5
<PAGE> 64

EAGLE BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 1993, 1994, AND 1995
(IN THOUSANDS)

<TABLE>
<CAPTION>
NET
UNREALIZED
GAIN IN
COMMON STOCK ADDITIONAL SECURITIES UNAMORTIZED TOTAL
--------------- PAID-IN RETAINED AVAILABLE RESTRICTED ESOP TREASURY STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS FOR SALE STOCK DEBT STOCK EQUITY
------ ------ ---------- -------- ---------- ----------- ----- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT MARCH 31, 1992, as
previously reported......... 1,625 $1,625 $7,367 $ 14,655 $ 0 $ 0 $(252) $ (1,019) $22,376
Effect of two-for-one split
(Note 16)................... 1,625 1,625 -- (1,625) 0 0 0 0 0
------ ------ ---------- -------- ---------- ----------- ----- -------- -------------
BALANCE AT MARCH 31, 1992, as
adjusted...................... 3,250 3,250 7,367 13,030 0 0 (252) (1,019) 22,376
Purchase of treasury stock
(13,800 shares)............. (57) (57)
Cash dividends declared ($.20
per share).................. (590) (590)
Principal reduction of ESOP
debt........................ 25 25
Net income.................... 4,069 4,069
------ ------ ---------- -------- ---------- ----------- ----- -------- -------------
BALANCE AT MARCH 31, 1993....... 3,250 3,250 7,367 16,509 0 0 (227) (1,076) 25,823
Cash dividends declared ($.31
per share).................. (925) (925)
Principal reduction of ESOP
debt........................ 86 86
Issuance of restricted stock
(30,000 shares) (Note 9).... 30 30 263 (293) 0
Amortization of restricted
stock (Note 9).............. 110 110
Stock options exercised
(44,000 shares)............. 44 44 96 140
Net unrealized gain on
securities available for
sale........................ 387 387
Net income.................... 5,211 5,211
------ ------ ---------- -------- ---------- ----------- ----- -------- -------------
BALANCE AT MARCH 31, 1994....... 3,324 3,324 7,726 20,795 387 (183) (141) (1,076) 30,832
Cash dividends declared ($.47
per share).................. (1,446) (1,446)
Principal reduction of ESOP
debt........................ 130 130
Issuance of restricted stock
(30,000 shares) (Note 9).... 30 30 308 (338) 0
Amortization of restricted
stock (Note 9).............. 228 228
Stock options exercised
(35,000 shares)............. 35 35 97 132
Change in net unrealized gain
on securities available for
sale, net of taxes.......... (341) (341)
Net income.................... 4,101 4,101
------ ------ ---------- -------- ---------- ----------- ----- -------- -------------
BALANCE AT MARCH 31, 1995....... 3,389 $3,389 $8,131 $ 23,450 $ 46 $(293) $ (11) $ (1,076) $33,636
===== ====== ======== ======= ======== ========== ====== ======= ==========
</TABLE>

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

F-6
<PAGE> 65

EAGLE BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1993, 1994, AND 1995
(IN THOUSANDS)

<TABLE>
<CAPTION>
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................... $ 4,069 $ 5,211 $ 4,101
-------- -------- --------
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation, amortization, and accretion................. 588 505 825
Provision for loan losses................................. 630 1,000 643
Provision for losses on real estate acquired in settlement
of loans................................................ 489 136 10
Cumulative effect of change in accounting principle....... 0 (320) 0
Amortization of restricted stock award.................... 0 110 228
Loss on sale of real estate acquired in settlement of
loans................................................... 57 67 5
Gain on sale of mortgage-backed securities................ (892) (959) (14)
Gain on sale of loans..................................... (221) (188) (891)
Deferred income tax (benefit) expense..................... 49 (18) 241
FHLB stock dividends...................................... (273) (179) 0
Amortization of deferred loan fees........................ (1,164) (2,325) (1,883)
Proceeds from sale of loans receivable held for sale...... 277,048 504,079 281,421
Origination of loans held for sale........................ (286,802) (504,070) (299,000)
Changes in assets and liabilities:
(Increase) decrease in accrued interest receivable...... 149 334 (1,275)
(Increase) decrease in other assets..................... 37 (669) (1,739)
Increase (decrease) in drafts outstanding............... 14,087 (4,929) 1,620
(Decrease) increase in accrued expenses and other
liabilities.......................................... 1,580 (94) (187)
-------- -------- --------
Total adjustments.................................... 5,362 (7,520) (19,996)
-------- -------- --------
Net cash (used in) provided by operating
activities......................................... 9,431 (2,309) (15,895)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of securities available for sale................... 0 0 (9,112)
Proceeds from sale of securities available for sale.......... 14,926 14,554 5,123
Purchases of investment securities held to maturity.......... (12,489) (2,009) (30,146)
Principal payments received on securities available for
sale...................................................... 16,306 7,379 3,396
Principal payments received on investment securities held to
maturity.................................................. 0 6,745 1,369
Proceeds from maturities of investment securities held to
maturity.................................................. 1,000 7,324 6,000
Loan originations, net of repayments......................... (6,012) (30,140) (94,650)
Purchases of loans receivable................................ (28,684) (749) (2,268)
Proceeds from sale of loans receivable held for sale......... 4,810 1,878 14,988
Purchases of FHLB stock...................................... 0 0 (3,244)
Redemption of FHLB stock..................................... 0 0 601
Proceeds from sale of real estate acquired in settlement of
loans..................................................... 280 1,988 130
Purchases of premises and equipment, net..................... (1,664) (2,315) (2,526)
Additions to real estate held for development and sale....... 0 0 (6,620)
-------- -------- --------
Net cash (used in) provided by investing
activities......................................... (11,527) 4,655 (116,959)
-------- -------- --------
</TABLE>

F-7
<PAGE> 66

EAGLE BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)

<TABLE>
<CAPTION>
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in time deposits..................... $ (3,449) $ 11,386 $ 48,928
Net (decrease) increase in demand deposits................... 12,257 4,278 (6,910)
Increase (decrease) in advance payments from borrowers for
property taxes and insurance.............................. (55) 96 1,233
Proceeds from FHLB advances and other borrowings............. 55,600 118,627 250,325
Repayment of FHLB advances and other borrowings.............. (64,423) (135,638) (161,122)
Principal reduction of ESOP debt............................. 25 86 130
Stock options exercised...................................... 0 140 132
Purchase of treasury stock................................... (57) 0 0
Cash dividends paid.......................................... (590) (771) (1,362)
-------- -------- --------
Net cash provided by (used in) financing
activities......................................... (692) (1,796) 131,354
-------- -------- --------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS........... (2,788) 550 (1,500)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR................. 10,096 7,308 7,858
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR....................... $ 7,308 $ 7,858 $ 6,358
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH PAID DURING YEAR FOR:
Interest..................................................... $ 15,594 $ 12,628 $ 15,155
======== ======== ========
Income taxes................................................. $ 2,172 $ 2,975 $ 2,763
======== ======== ========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Acquisition of real estate in settlement of loans............ $ 3,261 $ 4,117 $ 486
======== ======== ========
Loans made to finance sale of real estate.................... $ 2,415 $ 3,392 $ 575
======== ======== ========
</TABLE>

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

F-8
<PAGE> 67

EAGLE BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1993, 1994, AND 1995

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Eagle Bancshares, Inc. (the "Company") is a unitary savings and loan
holding company and owns 100% of Tucker Federal Savings and Loan Association's
(the "Association") common stock.

The Association provides a full range of banking services to individual and
corporate customers through its subsidiaries and branches located in DeKalb,
Fulton, and Gwinnett Counties of metropolitan Atlanta, Georgia. Additionally,
through its Prime Lending Division (now known as Prime Eagle Mortgage
Corporation), the Association originates construction loans and residential
mortgages in the Augusta and Savannah, Georgia, and Jacksonville, Florida
metropolitan areas. The Association is subject to competition from other
financial institutions in the markets in which it operates. The Association is
federally regulated by the Office of Thrift Supervision ("OTS") and certain
other federal agencies. Through Union Hill, LLC, Cobb Woodlawn, LLC, and Hampton
Oaks, LP, the Company is also engaged in real estate development activities in
the Atlanta metropolitan area.

The accounting and reporting policies of the Company conform to generally
accepted accounting principles and to general practice within the savings and
loan industry. The following is a description of the more significant policies
which the Company follows in preparing and presenting its consolidated financial
statements.

PRINCIPLES OF CONSOLIDATION

The financial statements include the accounts of Eagle Bancshares, Inc. and
its wholly owned subsidiaries -- Tucker Federal Savings and Loan Association,
Eagle Real Estate Advisors, Inc., Union Hill, LLC, Cobb Woodlawn, LLC, and the
Association's wholly owned subsidiaries, Eagle Service Corporation and Eagle
Asset Recovery Management Services, Inc. All significant intercompany accounts
and transactions have been eliminated.

SECURITIES

The Company adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," at March 31, 1994. Under SFAS No. 115, the Company
classifies its securities in one of three categories: trading, available for
sale, or held to maturity. Trading securities are bought and held principally
for the purpose of selling them in the near term; the Company has no investment
securities applicable to this classification at March 31, 1994 or 1995.
Held-to-maturity securities are those securities for which the Company has the
ability and intent to hold the security until maturity. All other securities not
included in trading or held to maturity are classified as available for sale.

With the adoption of SFAS No. 115, the Company has reported the effect of
the change in the method of accounting for investments in debt and equity
securities as a separate component of equity, net of income taxes. The
unrealized holding gains on securities available for sale, net of income taxes,
amounted to $387,000 and $46,000 at March 31, 1994 and 1995, respectively.

Trading and available-for-sale securities are recorded at fair value.
Held-to-maturity securities are recorded at amortized cost, adjusted for the
amortization or accretion of premiums or discounts. Unrealized holding gains and
losses on trading securities and transfers into trading securities are included
in earnings. Realized gains and losses for securities classified as available
for sale and held to maturity are included in earnings and are derived using the
specific identification method for determining the cost of securities sold.
Unrealized holding gains and losses, net of the related tax effect, on
securities available for sale are excluded from earnings and are reported as a
separate component of stockholders' equity until realized. Transfers of
securities between categories are recorded at fair value at the date of
transfer.

F-9
<PAGE> 68

EAGLE BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A decline in the market value of any available-for-sale or held-to-maturity
security below cost that is deemed other than temporary results in a charge to
earnings, resulting in the establishment of a new cost basis for the security.

Premiums and discounts are amortized or accreted over the life of the
related security as an adjustment to the yield using the effective interest
method and prepayment assumptions. Dividend and interest income is recognized
when earned.

Gains and losses on sales of investment securities are recognized on the
settlement date, based on the adjusted cost of the specific security. The
financial statement impact of settlement date accounting versus trade date
accounting was immaterial.

LOANS RECEIVABLE

Loans receivable held for investment are stated at their unpaid principal
balances less undisbursed portion of loans in process, unearned interest,
unamortized discounts and premiums, deferred loan fees, and the reserve for loan
losses. Loans held for sale are carried at the lower of cost or estimated market
value, as determined by outstanding commitments from investors or current
investor yield requirements calculated on an aggregate basis.

RESERVE FOR LOAN LOSSES

A provision for loan losses is charged to operations based on management's
evaluation of the potential losses in its portfolio. This evaluation considers
the estimated value of the underlying collateral, the nature and volume of the
portfolio, loan concentrations, specific problem loans, and economic conditions
that may affect the borrower's ability to repay and such other factors as, in
management's judgment, deserve recognition under existing economic conditions.
Loans are charged off to the allowance when, in the opinion of management, such
loans are deemed to be uncollectible. Subsequent recoveries are added to the
allowance.

Management believes that the reserve for loan losses is adequate and real
estate valuations are appropriate. While management uses available information
to recognize losses on loans and real estate owned, future additions to the
reserve may be necessary based on changes in economic conditions, particularly
in the Company's primary market areas. In addition, various regulatory agencies,
as an integral part of their examination processes, periodically review the
Company's reserve for loan losses and real estate valuations. Such agencies may
require the Company to recognize additions to the reserve or write down real
estate based on their judgments about information available to them at the time
of their examination.

LOAN ORIGINATION FEES

Loan origination fees, net of certain direct origination costs, are
deferred and amortized to income over the contractual life of the loan using a
level-yield method, adjusted for loan curtailment payments.

MORTGAGE PRODUCTION FEES

The Association and Eagle Service Corporation, the Association's wholly
owned subsidiary, originate conventional and FHA/VA loans, the majority of which
are presold to investors with servicing released. Fees received relating to the
origination and sale of these loans are included in mortgage production fees in
the statements of income when the loans are sold and consist of loan servicing
release premiums of approximately $1,800,000, $3,200,000, and $2,300,000 and
loan origination and discount points, net of commissions, of approximately
$1,575,000, $2,900,000, and $936,000 for the years ended March 31, 1993, 1994,
and 1995, respectively.

F-10
<PAGE> 69

EAGLE BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

STOCK IN FEDERAL HOME LOAN BANK ("FHLB") AND OTHER

Investment in stock of a FHLB is required of institutions utilizing their
services. The investment is carried at cost, since no ready market exists for
the stock and it has no quoted market value.

Eligible savings accounts are insured up to $100,000 by the Savings
Association Insurance Fund of the Federal Deposit Insurance Corporation.

REAL ESTATE ACQUIRED IN SETTLEMENT OF LOANS

Real estate acquired in settlement of loans is considered held for sale and
is carried at fair value adjusted for estimated costs to sell. Such
determination is made on an individual asset basis. Any excess of the loan
balance at the time of foreclosure over the fair value of the real estate held
as collateral is treated as a loan charge-off. A provision for estimated losses
on real estate is charged to earnings when a subsequent decline in value occurs.
The Association has recorded an allowance for estimated losses on real estate
acquired in settlement of loans of approximately $119,000 and $49,000 at March
31, 1994 and 1995, respectively. Costs relating to holding properties are
charged to operations.

REAL ESTATE HELD FOR DEVELOPMENT AND SALE

Real estate held for development and sale is carried at the lower of cost
or net realizable value. Certain carrying charges, including interest, related
to properties under development are capitalized as development costs during the
construction period.

PREMISES AND EQUIPMENT

Premises and equipment are carried at cost less accumulated depreciation.
Depreciation is provided on a straight-line basis over the estimated useful
lives of the related assets. Estimated lives are 15 to 40 years for buildings
and improvements and 3 to 10 years for furniture, fixtures, and equipment.

INCOME TAXES

Effective April 1, 1993, the Company adopted the provisions of SFAS No.
109, "Accounting for Income Taxes," and has reported the cumulative effect of
that change in the method of accounting for income taxes in the statement of
income for the year ended March 31, 1994. Under the asset and liability method
of SFAS No. 109, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards. Deferred
tax assets and liabilities are measured using tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Under SFAS No. 109, the effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.

In prior years, in accordance with the deferred method of Accounting
Principles Board Opinion No. 11, deferred income taxes resulted from the
recognition of certain income and expense items in different periods for
financial statement and tax reporting purposes using the tax rate applicable for
the year of calculation. Under the deferred method, deferred taxes were not
adjusted for subsequent changes in the tax rates.

The Company files consolidated income tax returns.

RECENT ACCOUNTING PRONOUNCEMENTS

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," will be required to be adopted by the Company during its
fiscal year beginning April 1, 1995. SFAS Nos. 114 and 118 require

F-11
<PAGE> 70

EAGLE BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

impaired loans to be measured based on the present value of expected future cash
flows, discounted at the loan's effective interest rate, or at the loan's
observable market price or the fair value of the collateral if the loan is
collateral-dependent. The Company has not yet determined the actual impact of
SFAS Nos. 114 and 118 on its financial statements. However, based on the
Company's current accounting policies related to providing for losses on problem
loans, the Company's management does not believe that the impact of SFAS Nos.
114 and 118 will be significant to the financial statements.

In May 1995, the Financial Accounting Standards Board issued SFAS No. 122,
"Accounting for Mortgage Servicing Rights." SFAS No. 122 addresses the
accounting for purchased and originated mortgage serving rights and is effective
for fiscal years beginning after December 15, 1995. The Company's management is
currently evaluating the impact SFAS No. 122 will have on its financial
statements.

CASH EQUIVALENTS

Cash equivalents include amounts due from banks and interest-bearing
deposits with maturities of three months or less.

RECLASSIFICATIONS

Certain reclassifications have been made to prior year balances in order to
conform with current year financial statement presentations.

2. SECURITIES

Securities available for sale at March 31, 1994 and 1995 are summarized as
follows (in thousands):

<TABLE>
<CAPTION>
1994
-----------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST LOSSES GAINS VALUE
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Mortgage-backed securities..................... $17,287 $ 0 $624 $17,911
Equity securities -- preferred stock........... 2,972 0 0 2,972
--------- ---------- ---------- ---------
$20,259 $ 0 $624 $20,883
======= ======== ======== =======
</TABLE>

<TABLE>
<CAPTION>
1995
-----------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST LOSSES GAINS VALUE
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Mortgage-backed securities..................... $13,890 $ 0 $203 $14,093
Equity securities -- preferred stock........... 6,975 (226) 97 6,846
--------- ---------- ---------- ---------
$20,865 $ (226) $300 $20,939
======= ======== ======== =======
</TABLE>

The Company sold mortgage-backed securities with a carrying value of
approximately $13,595,000 and $5,109,000 during the years ended March 31, 1994
and 1995, respectively, resulting in gross realized gains of approximately
$959,000 and $14,000, respectively.

F-12
<PAGE> 71

EAGLE BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Investment securities held to maturity at March 31, 1994 and 1995 are
summarized as follows (in thousands):

<TABLE>
<CAPTION>
1994
-----------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST LOSSES GAINS VALUE
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Mortgage-backed securities..................... $11,388 $ (128) $ 471 $11,731
U.S. government and agency obligations......... 17,860 (116) 352 18,096
Corporate bonds................................ 2,463 0 301 2,764
Other debt securities.......................... 2,972 (2) 0 2,970
--------- ---------- ---------- ---------
Total................................ $34,683 $ (246) $1,124 $35,561
======= ======== ======== =======
</TABLE>

<TABLE>
<CAPTION>
1995
-----------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST LOSSES GAINS VALUE
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Mortgage-backed securities..................... $10,009 $ (157) $ 39 $ 9,891
U.S. government and agency obligations......... 24,799 (539) 76 24,336
Corporate bonds................................ 10,376 (211) 209 10,374
Other debt securities.......................... 12,415 (315) 0 12,100
--------- ---------- ---------- ---------
Total................................ $57,599 $ (1,222) $324 $56,701
======= ======== ======== =======
</TABLE>

The amortized cost and estimated market value of securities other than
equities at March 31, 1995, by contractual maturity, are as follows (in
thousands):

<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED MARKET
COST VALUE
--------- ---------
<S> <C> <C>
Due in one year or less........................................... $ 0 $ 0
Due one to five years............................................. 30,889 30,393
Due five to ten years............................................. 3,384 3,481
Due after ten years............................................... 37,216 36,920
--------- ---------
$71,489 $70,794
======= =======
</TABLE>

Expected maturities may differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties.

F-13
<PAGE> 72

EAGLE BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. LOANS RECEIVABLE

At March 31, 1994 and 1995, loans receivable are summarized as follows (in
thousands):

<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Real estate mortgage loans:
Fixed rates.................................................... $ 43,100 $ 46,983
Adjustable rates............................................... 65,419 119,653
Real estate construction loans................................... 126,754 154,512
Home equity and second mortgage loans............................ 10,701 10,250
-------- --------
Total real estate loans................................ 245,974 331,398
-------- --------
Investment in commercial leases.................................. 29,364 32,582
Consumer loans................................................... 729 1,001
Loans secured by savings......................................... 1,576 1,320
-------- --------
Total loans............................................ 277,643 366,301
Less:
Undisbursed portion of loans in process........................ 52,054 56,780
Unearned income................................................ 1,190 593
Deferred loan origination fees................................. 1,176 1,547
Reserve for loan losses........................................ 3,349 3,362
Net discount on loans purchased................................ 148 113
-------- --------
Loans receivable, net............................................ $219,726 $303,906
======== ========
</TABLE>

At March 31, 1993, 1994, and 1995, an analysis of the reserve for loan
losses is as follows (in thousands):

<TABLE>
<CAPTION>
1993 1994 1995
------ ------ ------
<S> <C> <C> <C>
Reserve for loan losses, beginning of year................... $ 892 $2,420 $3,349
Charge-offs.................................................. (635) (104) (684)
Recoveries................................................... 5 33 54
Provision for loan losses.................................... 630 1,000 643
Reserve on purchased loans................................... 1,528 0 0
------ ------ ------
Reserve for loan losses, end of year......................... $2,420 $3,349 $3,362
====== ====== ======
</TABLE>

Substantially all of the Company's loans held for investment are secured by
real estate in Georgia, primarily in the metropolitan Atlanta, Augusta, and
Savannah areas and Jacksonville, Florida. A substantial portion of the real
estate owned also consists of single-family residential properties and land
located in those same markets. Additionally, no single customer accounted for
more than 2% of the Company's loans in 1994 or 1995.

At March 31, 1993, 1994, and 1995, the Company had nonaccrual loans
aggregating approximately $2,057,000, $787,000, and $603,000, respectively. The
interest income not recognized on these loans amounted to $11,000, $26,000, and
$40,000 for the years ended March 31, 1993, 1994, and 1995, respectively.

The Company was servicing loans for others with aggregate principal
balances of approximately $11,863,000, $15,654,000, and $13,271,000 at March 31,
1993, 1994, and 1995, respectively.

At March 31, 1994 and 1995, the Company had sold approximately $73,734,000
and $40,419,000, respectively, of loans with recourse. The recourse period is
three to six months on a substantial majority of these loans. Investors can
exercise their recourse option in the event the borrower defaults on the loan
during that recourse period. In 1993, 1994, and 1995 the Company has incurred
nominal losses from the repurchase of recourse loans.

F-14
<PAGE> 73

EAGLE BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

At March 31, 1995, the Company had commitments to originate fixed rate
mortgage loans of approximately $3,330,000 and commitments to originate variable
rate mortgage loans of approximately $2,394,000, with terms up to 30 years and
interest rates ranging from 6.5% to 11%. The Company had commitments to sell
mortgage loans of approximately $41,220,000 at March 31, 1995. In addition, the
Company is committed to loan funds on unused variable rate lines of credit of
approximately $7,093,000 at March 31, 1995. These off-balance sheet commitments
represent the unused portion of home equity lines of credit. The Company's
policy is to offer these lines where collateral requirements are residential
real estate with aggregate loan-to-value ratios of 80% or less.

4. PREMISES AND EQUIPMENT

At March 31, 1994 and 1995, premises and equipment are summarized as
follows (in thousands):

<TABLE>
<CAPTION>
1994 1995
------ ------
<S> <C> <C>
Land................................................................. $1,274 $2,389
Office buildings and improvements.................................... 4,318 5,004
Furniture, fixtures, and equipment................................... 3,362 4,065
------ ------
8,954 11,458
Less accumulated depreciation........................................ 2,537 3,159
------ ------
$6,417 $8,299
====== ======
</TABLE>

5. FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS No. 107, "Disclosures About Fair Value of Financial Instruments," and
SFAS No. 119, "Disclosure About Derivative Financial Instruments and Fair Value
of Financial Instruments," require that the Company disclose estimated fair
values for its financial instruments. Fair value estimates, methods, and
assumptions are set forth below for the Company's financial instruments.

CASH AND AMOUNTS DUE FROM BANKS AND INTEREST-BEARING DEPOSITS

The carrying amount approximates fair value because of the short maturity
of these instruments.

SECURITIES

The fair value of investment and mortgage-backed securities available for
sale and held to maturity is estimated based on bid quotations received from
securities dealers. As noted in Note 2 to these financial statements, the fair
value of securities available for sale and held to maturity is approximately
$20,939,000 and $56,701,000, respectively.

LOANS RECEIVABLE

Fair values are estimated for portfolios of loans with similar financial
characteristics. Loans are segregated by type. The fair value of performing
loans is calculated by discounting scheduled cash flows through the estimated
maturity using estimated market discount rates that reflect the credit and
interest rate risk inherent in the loan. The estimate of maturity is based on
the Association's historical experience with repayments for each loan
classification, modified, as required, by an estimate of the effect of the
current economic and lending conditions.

Fair value for significant nonperforming loans is based on recent external
appraisals. If appraisals are not available, estimated cash flows are discounted
using a rate commensurate with the risk associated with the

F-15
<PAGE> 74

EAGLE BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

estimated cash flows. Assumptions regarding credit risk, cash flows, and
discount rates are judgmentally determined using available market information
and specific borrower information.

The following table presents information for loans as of March 31, 1994 and
1995 (in thousands):

<TABLE>
<CAPTION>
1994 1995
------------------- -------------------
ESTIMATED ESTIMATED
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Real estate mortgage loans:
Fixed rates................................. $ 43,100 $ 44,099 $ 46,983 $ 47,159
Adjustable rates............................ 65,419 69,923 119,653 122,734
Real estate construction loans................ 126,754 126,754 154,512 154,512
Home equity and second mortgage loans......... 10,701 9,685 10,250 9,744
Investment in commercial leases............... 29,364 29,413 32,582 32,517
Other loans................................... 2,305 2,326 2,321 2,305
-------- -------- -------- --------
Total loans......................... 277,643 282,200 366,301 368,971
Less:
Undisbursed portion of loans in process..... 52,054 52,054 56,780 56,780
Unearned income............................. 1,190 797 593 410
Deferred loan origination fees.............. 1,176 1,029 1,547 1,385
Reserve for loan losses..................... 3,349 3,349 3,362 3,362
Net discount on loans purchased............. 148 122 113 72
-------- -------- -------- --------
Loans receivable, net......................... $219,726 $224,849 $303,906 $306,962
======== ======== ======== ========
</TABLE>

LOANS HELD FOR SALE

Loans held for sale are carried at the lower of cost or estimated market
value, as determined by outstanding commitments from investors or current
investor yield requirements calculated on an aggregate basis as of March 31,
1994 and 1995 (in thousands):

<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Carrying amount.................................................... $23,641 $41,220
======= =======
Estimated fair value............................................... $23,946 $41,526
======= =======
</TABLE>

DEPOSITS

Under SFAS Nos. 107 and 119, the fair value of deposits with no stated
maturity, such as Negotiable Order of Withdrawal ("NOW") accounts, money market
accounts, and passbook accounts, is equal to the amount payable on demand as of
March 31, 1994 and 1995. The fair value of certificates of deposit is based on

F-16
<PAGE> 75

EAGLE BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the discounted value of contractual cash flows. The discount rate is estimated
using the rates currently offered for deposits of similar remaining maturities
as of March 31, 1994 and 1995 (in thousands):

<TABLE>
<CAPTION>
1994 1995
--------------------- ---------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
NOW accounts.................................. $ 24,609 $ 24,609 $ 28,244 $ 28,244
Money market accounts......................... 12,487 12,487 10,836 10,836
Passbook accounts............................. 52,655 52,655 43,761 43,761
Time deposits:
Maturity one year or less................... 81,222 81,900 124,689 127,210
Maturity greater than one year through two
years.................................... 23,325 23,707 23,830 24,642
Maturity greater than two years through
three years.............................. 15,147 15,472 17,279 17,718
Maturity greater than three years........... 34,852 34,777 37,676 38,278
-------- ---------- -------- ----------
$244,297 $ 245,607 $286,315 $ 290,689
======== ======== ======== ========
</TABLE>

FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS

The fair value of the Association's advances from the FHLB and other
borrowings is estimated based on the quoted market prices for the same or
similar issues or on the current rates for advances and borrowings of the same
remaining maturities as of March 31, 1994 and 1995 (in thousands):

<TABLE>
<CAPTION>
1994 1995
------- --------
<S> <C> <C>
Carrying amount................................................... $30,750 $119,953
======= ========
Estimated fair value.............................................. $30,899 $119,958
======= ========
</TABLE>

COMMITMENTS

The fair value of commitments to extend credit to fund real estate
construction and real estate mortgage loans is immaterial at March 31, 1994 and
1995 because their underlying interest rates approximate market.

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 Association's entire holdings of a particular
financial instrument. Because no market exists for a portion of the
Association's financial instruments, fair value estimates are based on judgments
regarding future expected loss experience, current economic conditions, risk
characteristics of various financial instruments, and other factors. These
estimates are subjective in nature, 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. Other significant assets and liabilities that are not
considered financial assets or liabilities include deferred tax liabilities and
premises and equipment. 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 many of the estimates.

F-17
<PAGE> 76

EAGLE BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. DEPOSITS

At March 31, 1994 and 1995, deposits are summarized by type and remaining
term as follows (dollars in thousands):

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
INTEREST
RATE
-----------
1994 1995 1994 1995
-------- -------- ---- ----
<S> <C> <C> <C> <C>
Demand deposits:
NOW accounts....................................... $ 24,609 $ 28,244 1.82% 1.82%
Money market accounts.............................. 12,487 10,836 2.50 2.50
Passbook accounts.................................. 52,655 43,761 2.53 2.53
-------- --------
89,751 82,841 2.33 2.28
-------- --------
Time deposits:
Maturity one year or less.......................... 81,222 124,689
Maturity greater than one year through two years... 23,325 23,830
Maturity greater than two years through three
years........................................... 15,147 17,279
Maturity greater than three years.................. 34,852 37,676
-------- --------
154,546 203,474 5.06 5.93
-------- --------
Total deposits............................. $244,297 $286,315 4.06 4.87
======== ========
</TABLE>

Interest expense on deposits is summarized as follows (in thousands):

<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
NOW accounts.............................................. $ 455 $ 383 $ 484
Money market accounts..................................... 416 311 300
Passbook accounts......................................... 1,707 1,435 1,425
Time deposits............................................. 8,830 7,877 9,416
------- ------- -------
$11,408 $10,006 $11,625
======= ======= =======
</TABLE>

7. FHLB ADVANCES AND OTHER BORROWINGS

FHLB advances and other borrowings at March 31, 1994 and 1995 are
summarized as follows (in thousands):

<TABLE>
<CAPTION>
1994 1995
------- --------
<S> <C> <C>
FHLB advances..................................................... $30,750 $117,143
Other borrowings.................................................. 0 2,810
------- --------
$30,750 $119,953
======= ========
</TABLE>

FHLB advances are collateralized by unencumbered mortgage loans of at least
150% of outstanding advances, approximately $28,902,000 of investment securities
and by stock in the FHLB at March 31, 1995. The advances mature at various dates
through July 20, 1999. The weighted average interest rate on FHLB advances was
5.76% and 6.77% at March 31, 1994 and 1995, respectively. Maximum short-term
borrowings during fiscal years 1995 were $111,170,000.

F-18
<PAGE> 77

EAGLE BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

As of March 31, 1995, repayments of FHLB advances and other borrowings for
subsequent fiscal years are estimated to be as follows (in thousands):

<TABLE>
<S> <C>
1996...................................................................... $109,088
1997...................................................................... 2,165
1998...................................................................... 381
1999...................................................................... 381
2000...................................................................... 7,765
Thereafter................................................................ 173
--------
$119,953
========
</TABLE>

The Company recorded an extraordinary loss of $427,000, net of income tax
benefit of $261,000, relating to the early extinguishment of certain FHLB
advances during the year ended March 31, 1994.

8. INCOME TAXES

As discussed in Note 1, the Company adopted SFAS No. 109 as of April 1,
1993. The cumulative effect of the change in accounting for income taxes was
$320,000 as of April 1, 1993 and was reported separately in the statement of
income for the year ended March 31, 1994. Prior years' financial statements have
not been restated to apply the provisions of SFAS No. 109.

Income tax expense is allocated as follows (in thousands):

<TABLE>
<CAPTION>
1993 1994 1995
------ ------ ------
<S> <C> <C> <C>
Income tax expense from continuing operations:
Current expense:
Federal............................................. $2,167 $2,824 $1,843
State............................................... 53 345 195
------ ------ ------
2,220 3,169 2,038
------ ------ ------
Deferred expense:
Federal............................................. 45 17 205
State............................................... 4 3 36
------ ------ ------
49 20 241
------ ------ ------
2,269 3,189 2,279
Extraordinary item -- income tax benefit relating to
early extinguishment of debt........................... 0 (261) 0
------ ------ ------
$2,269 $2,928 $2,279
====== ====== ======
</TABLE>

The following is a summary of the differences between the income tax
expense as shown in the accompanying financial statements and the income tax
expense which would result from applying the federal

F-19
<PAGE> 78

EAGLE BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

statutory tax rate of 34% for fiscal years 1993, 1994, and 1995 to income before
income taxes, extraordinary item, and cumulative effect of change in accounting
principle (in thousands):

<TABLE>
<CAPTION>
1993 1994 1995
------ ------ ------
<S> <C> <C> <C>
Expected income tax expense.............................. $2,155 $2,892 $2,169
Increase (decrease) in income taxes resulting from:
State income taxes, net of federal income tax
benefit............................................. 38 230 152
Statutory bad debt deduction........................... (381) 0 0
Provision for loan losses.............................. 377 0 0
Other, net............................................. 80 67 (42)
------ ------ ------
Actual income tax expense................................ $2,269 $3,189 $2,279
====== ====== ======
</TABLE>

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at March 31,
1994 and 1995 are as follows (in thousands):

<TABLE>
<CAPTION>
1994 1995
------ ------
<S> <C> <C>
Deferred tax assets:
Loans receivable, due to reserve for loan losses................... $ 710 $1,023
Other.............................................................. 0 64
------ ------
Total gross deferred tax assets............................ 710 1,087
------ ------
Deferred tax liabilities:
FHLB stock, due to dividends not recognized for tax purposes....... 480 400
Loans receivable, due to differences in deferred loan fees and
costs recognition for tax purposes.............................. 250 922
Premises and equipment, due to differences in depreciation methods
for tax purposes................................................ 120 178
Net unrealized gain on securities available for sale, not
recognized for tax purposes..................................... 237 28
Other.............................................................. 43 0
------ ------
Total gross deferred tax liabilities....................... 1,130 1,528
------ ------
Net deferred tax liability........................................... $ 420 $ 441
====== ======
</TABLE>

No valuation allowances for deferred tax assets have been recorded as of
March 31, 1994 and 1995, based on management's assessment that it is more likely
than not that these assets will be realized. This assessment is based primarily
on the level of historical taxable income and projections for future taxable
income over the periods in which the deferred tax assets are deductible.

Retained earnings at March 31, 1995 include approximately $3,900,000 for
which no provision for federal income tax has been made. This amount represents
allocations of income to bad debt reserves for tax computation purposes and is
subject to federal income tax in future years if used for purposes other than to
absorb bad debt losses.

9. EMPLOYEE BENEFIT PLANS

Effective April 1, 1989, the board instituted an employee stock ownership
plan ("ESOP"). During the year ended March 31, 1992, the Company's ESOP borrowed
approximately $269,000 from Eagle Bancshares, Inc. to acquire common stock of
the Company on the open market. The note will be repaid principally from the
Association's contributions to the ESOP and, accordingly, the note is reflected
in the equity section as a reduction from equity. The Association's contribution
expense in fiscal years 1993, 1994, and 1995 was approximately $310,000,
$584,000, and $569,000, respectively.

F-20
<PAGE> 79

EAGLE BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In connection with the Association's conversion to a federally chartered
stock association, the board of directors adopted the Eagle Bancshares, Inc.
Stock Option and Incentive Plan ("Option Plan"), pursuant to which options to
purchase 10% of the shares of the Company's common stock issued in the
conversion can be granted to officers and other full-time employees. The Option
Plan also provides for the granting of nonincentive stock options and stock
appreciation rights. Information relating to these stock options for the years
ended March 31, 1993, 1994, and 1995 is as follows:

<TABLE>
<CAPTION>
1993 1994 1995
-------------- --------------- ----------------
<S> <C> <C> <C>
Options outstanding at beginning of
year................................. 152,000 152,000 156,000
Options granted........................ 0 48,000 156,500
Options exercised...................... 0 (44,000) (33,000)
-------------- --------------- ----------------
Options outstanding at end of year..... 152,000 156,000 279,500
============ ============= ==============
Options exercisable at end of year..... 108,000 114,666 100,998
Option prices per share:
Options granted during year............ $0.00 $9.75 to $12.13 $11.25 to $12.13
Options exercised during the year...... $0.00 $3.19 $3.19
Options outstanding at end of year..... $3.19 to $4.88 $3.19 to $12.13 $3.38 to $12.13
============ ============= ==============
</TABLE>

During the year ended March 31, 1994, the Company awarded 30,000
nontransferable restricted shares of the Company's common stock to an officer of
the Association. During the year ended March 31, 1995, the Company awarded two
officers of the Association 15,000 each, nontransferable restricted shares of
the Company's common stock. The market value of the shares at the date of award
of $293,000 and $338,000 for the year ended March 31, 1994 and 1995,
respectively, is being amortized by charges to compensation expense over the
three-year vesting period. Compensation expense related to these awards for the
year ended March 31, 1994 and 1995 was $110,000 and $228,000, respectively. The
unamortized balance of the awards are included as a deduction from stockholders'
equity in the statements of financial condition. Additionally, certain officers
of the Company are employed under various employment agreements, expiring over
the next three years.

Also, eligible employees participate in a 401(k) defined contribution plan.
The Association's contribution is determined annually by the board of directors
and is allocated to participants in the proportion of their compensation to
total compensation of participants. The Association's 401(k) contributions in
fiscal years 1993, 1994, and 1995 were approximately $30,000, $62,000, and
$154,000, respectively.

10. STOCKHOLDERS' EQUITY

At the time of conversion to a federally chartered stock association, the
Association was required by the Federal Savings and Loan Insurance Corporation
to establish a liquidation account in an amount equal to its retained earnings
determined at December 31, 1985. The purpose of the account is to grant a
limited priority claim on the assets of the Association to qualifying depositors
("Eligible Account Holders") as of April 19, 1985. In the event of a future
complete liquidation of the Association, each Eligible Account Holder would
receive from the liquidation account a liquidation distribution based on his/her
share of the then remaining qualifying deposits. This account is reduced
annually in proportion to the reduction of eligible savings account balances
measured on March 31 of each year.

The source of funds for payment of dividends by the Company will be
dividends paid to the Company by the Association. Without the approval of the
OTS, repurchases of capital stock may not be made, nor may cash dividends on
capital stock be declared or paid, if the effect thereof would be to cause the
Association's net worth to be reduced below (a) the amount required for the
liquidation account or (b) the regulatory capital requirements of the OTS. This
restriction amounted to approximately $22,500,000 of the Association's

F-21
<PAGE> 80

EAGLE BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

net worth as of March 31, 1995. The Association paid dividends to the Company of
approximately $901,000, $1,050,000, and $3,300,000 during the years ended March
31, 1993, 1994, and 1995, respectively.

11. INDUSTRY SEGMENTS

The Company operates principally in the thrift industry through its wholly
owned subsidiary, Tucker Federal Savings and Loan Association. The Company also
operates in the mortgage banking industry through the Association's wholly owned
subsidiary, Eagle Service Corporation, and its Prime Lending Division, which
originates and sells residential mortgages and construction loans. All
significant intersegment accounts and transactions are eliminated in
consolidation.

Industry segment information for the years ended March 31, 1993, 1994, and
1995 are presented below (in thousands):

<TABLE>
<CAPTION>
RETAIL MORTGAGE
BANKING BANKING ELIMINATIONS CONSOLIDATED
-------- -------- ------------ ------------
<S> <C> <C> <C> <C>
1993:
Revenues $ 27,031 $ 8,353 $ (2,149) $ 33,235
Net income 2,303 1,937 (171) 4,069
Identifiable assets 287,947 71,474 (37,824) 321,597
Capital expenditures, net 1,626 38 0 1,664
Depreciation on premises and equipment 303 31 0 334
1994:
Revenues $ 26,962 $ 14,465 $ (4,648) $ 36,779
Net income 2,726 2,889 (404) 5,211
Identifiable assets 287,242 99,188 (66,045) 320,385
Capital expenditures, net 2,252 63 0 2,315
Depreciation on premises and equipment 498 98 0 596
1995:
Revenues $ 29,488 $ 15,514 $ (6,313) $ 38,689
Net income 4,667 2,149 (2,715) 4,101
Identifiable assets 450,159 117,602 (110,444) 457,317
Capital expenditures, net 2,291 235 0 2,526
Depreciation on premises and equipment 536 108 0 644
</TABLE>

The Company includes construction lending activity and the origination and
sale of first mortgage loans in the mortgage banking segment.

F-22
<PAGE> 81

EAGLE BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

12. FINANCIAL INFORMATION OF EAGLE SERVICE CORPORATION

The following condensed statements of financial condition as of March 31,
1994 and 1995 and the related condensed statements of income for the years ended
March 31, 1993, 1994, and 1995 summarize the financial position and operating
results of the Association's wholly owned subsidiary, Eagle Service Corporation:

CONDENSED STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
1994 1995
------ ------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash..................................................................... $ 77 $ 43
Loans held for sale...................................................... 7,543 3,512
Other assets............................................................. 646 902
------ ------
Total assets................................................... $8,266 $4,457
====== ======
LIABILITIES AND STOCKHOLDER'S EQUITY
Notes payable to parent.................................................. $4,502 $1,017
Drafts outstanding....................................................... 1,962 1,677
Accrued expenses and other liabilities................................... 480 434
------ ------
Total liabilities.............................................. 6,944 3,128
------ ------
Stockholder's equity:
Common stock........................................................... 500 500
Retained earnings...................................................... 822 829
------ ------
Total stockholder's equity..................................... 1,322 1,329
------ ------
Total liabilities and stockholder's equity..................... $8,266 $4,457
====== ======
</TABLE>

CONDENSED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
1993 1994 1995
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Mortgage production fees......................................... $1,474 $1,969 $1,003
Appraisal and other fees......................................... 196 326 190
Interest income.................................................. 551 651 329
Interest on note payable to parent............................... (394) (392) (145)
Other............................................................ (12) (16) 316
------ ------ ------
Operating income....................................... 1,815 2,538 1,693
General and administrative expenses.............................. 1,422 1,726 1,682
------ ------ ------
Income before income tax expense....................... 393 812 11
Federal income tax expense....................................... 148 308 4
------ ------ ------
Net income....................................................... $ 245 $ 504 $ 7
====== ====== ======
</TABLE>

13. REGULATORY CAPITAL

The Financial Institutions Reform, Recovery, and Enforcement Act of 1989
requires institutions to maintain a minimum regulatory tangible capital equal to
1.5% of total assets, a minimum 3% core capital ratio, and an 8% risk-based
capital ratio. At March 31, 1995, the Company and the Association met all
minimum regulatory capital requirements.

F-23
<PAGE> 82

EAGLE BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") established five capital categories for financial institutions. The
thrift regulators adopted regulations defining these five capital categories
effective December 1992. Under the new regulations, each thrift will be
classified into one of the five categories (well-capitalized, adequately
capitalized, undercapitalized, significantly undercapitalized, and critically
undercapitalized) based on its level of risk-based capital as measured by Tier 1
capital, total risk-based capital, Tier 1 leverage ratios, and its supervisory
ratings. FDICIA defines well-capitalized banks as entities having a total
risk-based capital ratio of 10% or higher, a Tier 1 risk-based capital ratio of
6% or higher, and a leverage ratio of 5% or higher. At March 31, 1995, the
Association is classified as a well-capitalized institution under the FDICIA
regulations.

14. EARNINGS PER SHARE

Weighted average common and common equivalent shares for the years ended
March 31, 1993, 1994, and 1995 are computed as follows :

<TABLE>
<CAPTION>
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Primary:
Weighted average shares outstanding................. 2,948,000 2,968,824 3,059,324
Common shares assumed outstanding to reflect
dilutive effect of common stock options.......... 0 91,706 41,336
--------- --------- ---------
Weighted average shares and common equivalent shares
outstanding......................................... 2,948,000 3,060,530 3,100,660
======== ======== ========
Fully diluted:
Weighted average shares outstanding................. 2,948,000 2,968,824 3,059,324
Common shares assumed outstanding to reflect
dilutive effect of common stock options.......... 0 94,368 45,468
--------- --------- ---------
Weighted average shares outstanding................... 2,948,000 3,063,192 3,104,792
======== ======== ========
</TABLE>

The dilutive effect of common stock equivalents on earnings per share is
less than 3% for the year ending March 31, 1995; therefore, simple weighted
average shares outstanding are used in computing earnings per share.

See Note 16 where a two-for-one stock split effected as a stock dividend
paid on December 21, 1995 is discussed.

15. FINANCIAL INFORMATION OF EAGLE BANCSHARES, INC. (PARENT ONLY)

Eagle Bancshares, Inc.'s condensed statements of financial condition as of
March 31, 1994 and 1995 and related condensed statements of income and cash
flows for the years ended March 31, 1993, 1994, and 1995 are as follows:

CONDENSED STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash............................................................... $ 1,042 $ 591
Investment in subsidiaries......................................... 30,247 31,508
Other assets....................................................... 39 2,161
------- -------
Total assets............................................. $31,328 $34,260
======= =======
</TABLE>

F-24
<PAGE> 83

EAGLE BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Due to subsidiaries................................................ $ 133 $ 182
Other liabilities.................................................. 363 442
------- -------
496 624
------- -------
Stockholders' equity:
Common stock..................................................... 3,324 3,389
Additional paid-in capital....................................... 7,726 8,131
Retained earnings................................................ 20,795 23,450
Net unrealized gain on securities available for sale............. 387 46
ESOP debt........................................................ (141) (11)
Unamortized restricted stock..................................... (183) (293)
Treasury stock................................................... (1,076) (1,076)
------- -------
Total stockholders' equity............................... 30,832 33,636
------- -------
Total liabilities and stockholders' equity............... $31,328 $34,260
======= =======
</TABLE>

CONDENSED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
1993 1994 1995
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest and other income.................................... $ 83 $ 31 $ 2
Management fee income........................................ 100 100 100
Equity in undistributed earnings of subsidiaries............. 3,132 4,327 869
Dividends from subsidiaries.................................. 901 1,050 3,300
------ ------ ------
Total income....................................... 4,216 5,508 4,271
General and administrative expenses.......................... 147 190 170
------ ------ ------
Income before extraordinary item and cumulative
effect of change in accounting principle......... 4,069 5,318 4,101
Extraordinary item........................................... 0 (427) 0
Cumulative effect of change in accounting for income taxes... 0 320 0
------ ------ ------
Net income................................................... $4,069 $5,211 $4,101
====== ====== ======
</TABLE>

F-25
<PAGE> 84

EAGLE BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income...................................................... $ 4,069 $ 5,211 $ 4,101
Adjustments to reconcile net income to net cash provided by
operating activities:
Equity in undistributed earnings of subsidiaries............. (3,132) (4,327) (869)
Cumulative effect of change in accounting principle.......... 0 (320) 0
Amortization of restricted stock award....................... 0 110 228
(Increase) decrease in other assets.......................... 35 (3) (122)
Increase in due to subsidiaries.............................. 62 88 49
Increase (decrease) in other liabilities..................... (45) 2 79
------- ------- -------
Total adjustments....................................... (3,080) (4,450) (635)
------- ------- -------
Net cash provided by operating activities............... 989 761 3,466
------- ------- -------
Cash flows from investing activities:
Loan to Cobb Woodlawn LLC....................................... 0 0 (2,000)
Capital contribution to Union Hill LLC.......................... 0 0 (817)
------- ------- -------
Net cash used in investing activities................... 0 0 (2,817)
------- ------- -------
Cash flows from financing activities:
Early extinguishment of debt penalties, net..................... 0 427 0
Purchase of treasury stock...................................... (57) 0 0
Cash dividends paid............................................. (590) (771) (1,362)
Stock options exercised......................................... 0 140 132
Principal reduction of ESOP debt................................ 25 86 130
------- ------- -------
Net cash used in financing activities................... (622) (118) (1,100)
------- ------- -------
Net (decrease) increase in cash................................... 367 643 (451)
Cash at beginning of year......................................... 32 399 1,042
------- ------- -------
Cash at end of year............................................... $ 399 $ 1,042 $ 591
======= ======= =======
Supplemental disclosure of noncash financing activities:
Dividends declared, not paid.................................... $ 148 $ 302 $ 386
======= ======= =======
Restricted stock award.......................................... $ 0 $ 293 $ 338
======= ======= =======
Net (decrease) increase in unrealized gain on securities
available for sale, net of taxes............................. $ 0 $ 387 $ (341)
======= ======= =======
</TABLE>

F-26
<PAGE> 85

EAGLE BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

16. SUBSEQUENT EVENTS

All share and per share data have been adjusted to reflect the effect of a
two-for-one split of the Common Stock effected in the form of a stock dividend
paid on December 21, 1995.

F-27
<PAGE> 86

EAGLE BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
MARCH 31, 1995 AND SEPTEMBER 30, 1995
(IN THOUSANDS)

<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1995 1995
--------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and amounts due from banks....................................... $ 6,214 $ 9,586
Interest-bearing deposits............................................. 144 7,225
Loans receivable held for sale........................................ 41,220 65,572
Investment securities available for sale.............................. 20,939 19,767
Investment securities held to maturity................................ 57,599 56,022
Loans receivable, net................................................. 303,906 335,348
Stock in Federal Home Loan Bank, at cost.............................. 5,984 6,753
Premises and equipment................................................ 8,299 9,861
Real estate acquired in settlement of loans, net...................... 615 541
Real estate held for development and sale............................. 6,620 8,419
Accrued interest receivable........................................... 2,996 3,350
Other assets.......................................................... 2,781 5,749
--------- -------------
Total assets................................................ $ 457,317 $ 528,193
--------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits............................................................ $ 286,315 $ 327,660
Advance payments by borrowers for property taxes and insurance...... 2,187 1,786
Federal Home Loan Bank advances..................................... 119,953 137,014
Deferred income taxes............................................... 441 610
Drafts outstanding.................................................. 10,778 20,845
Accrued expenses and other liabilities.............................. 4,007 4,581
--------- -------------
Total liabilities........................................... 423,681 492,496
--------- -------------
Stockholders' Equity (Note D):
Common stock, $1.00 par value, 10,000,000 shares authorized, 3,389,000
and 3,414,000 issued in March and September, respectively........... 3,389 3,414
Additional paid-in capital............................................ 8,131 8,216
Retained earnings, substantially restricted........................... 23,450 25,000
Net unrealized gain on investment securities.......................... 46 357
Employee Stock Ownership Plan (ESOP) debt............................. (11) --
Unamortized restricted stock.......................................... (293) (214)
Treasury stock, 301,800 shares at cost................................ (1,076) (1,076)
--------- -------------
Total stockholders' equity.................................. 33,636 35,697
--------- -------------
Total liabilities and stockholders' equity.................. $ 457,317 $ 528,193
======== ==========
</TABLE>

F-28
<PAGE> 87

EAGLE BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTH PERIODS ENDED SEPTEMBER 30, 1994 AND 1995
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS
ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------- -----------------
1994 1995 1994 1995
------- ------ ------- -------
<S> <C> <C> <C> <C>
Interest income:
Interest on loans........................................ $ 6,085 $9,090 $11,693 $17,466
Interest on mortgage-backed securities................... 483 419 994 858
Interest on investment securities and other interest
earning assets........................................ 1,105 1,129 2,020 2,306
------- ------ ------- -------
Total interest income............................ 7,673 10,638 14,707 20,630
------- ------ ------- -------
Interest expense:
Interest on deposits..................................... 2,776 4,171 5,430 7,953
Interest on borrowings................................... 720 1,916 1,167 3,783
------- ------ ------- -------
Total interest expense........................... 3,496 6,087 6,597 11,736
------- ------ ------- -------
Net interest income...................................... 4,177 4,551 8,110 8,894
Provision for loan losses.................................. 189 54 371 54
------- ------ ------- -------
Net interest income after provision for loan
losses......................................... 3,988 4,497 7,739 8,840
------- ------ ------- -------
Other income:
Mortgage production fees................................. 851 1,486 1,920 2,551
Service charges.......................................... 153 195 292 352
Gain on sale of real estate held for development and
sale.................................................. -- 345 -- 345
Gain on sale of loans.................................... 535 81 606 81
Gain on sale of mortgage-backed securities............... -- -- 14 --
Miscellaneous............................................ 401 332 784 753
------- ------ ------- -------
Total other income............................... 1,940 2,439 3,616 4,082
------- ------ ------- -------
Other expenses:
Salaries and employee benefits........................... 2,403 3,047 4,909 5,751
Net occupancy expense.................................... 441 533 896 1,032
Marketing expense........................................ 89 127 175 229
Federal insurance premium................................ 152 169 296 329
Data processing.......................................... 202 339 392 605
Miscellaneous............................................ 735 820 1,332 1,418
------- ------ ------- -------
Total other expenses............................. 4,022 5,035 8,000 9,364
------- ------ ------- -------
Income before income taxes................................. 1,906 1,901 3,355 3,558
Income tax expense......................................... 727 641 1,277 1,231
------- ------ ------- -------
Net income....................................... $ 1,179 $1,260 $ 2,078 $ 2,327
======= ====== ======= =======
Net income per share............................. $ 0.38 $ 0.41 $ 0.67 $ 0.75
======= ====== ======= =======
</TABLE>

F-29
<PAGE> 88

EAGLE BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIODS ENDED SEPTEMBER 30, 1994 AND 1995
(UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30,
---------------------
1994 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................................................. $ 2,078 $ 2,327
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation, amortization and accretion................................................... 416 599
Provision for loan losses.................................................................. 371 54
Provision for losses on real estate owned.................................................. 10 --
Loss (gain) on sale of real estate held for development and sale........................... -- (345)
Loss (gain) on sale of real estate acquired in settlement of loans......................... (7) (39)
Gain on sale of loans...................................................................... (606) (81)
Gain on sale of mortgage-backed securities................................................. (14) --
Amortization of restricted stock award..................................................... 149 79
Amortization of deferred loan fees......................................................... (917) (814)
Proceeds from sale of loans receivable held for sale....................................... 172,473 186,729
Originations of loans held for sale........................................................ (163,389) (211,000)
Changes in assets and liabilities:
(Increase) decrease in accrued interest receivable....................................... (679) (354)
Decrease (increase) in other assets...................................................... (3,517) (3,173)
Increase (decrease) in drafts outstanding................................................ 3,807 10,067
Increase (decrease) in accrued expense and other liabilities............................. (603) 743
--------- ---------
Net cash provided by (used in) operating activities.................................. $ 9,572 $ (15,208)
--------- ---------
Cash flows from investing activities:
Purchase of investment securities available for sale....................................... (9,112) --
Proceeds from sale of investment securities available for sale............................. 5,123 --
Purchases of investment securities held to maturity........................................ (22,192) --
Principle payments received on investments available for sale.............................. 2,594 1,183
Principle payments received on investments held to maturity................................ 812 1,659
Proceeds from maturities of investment securities held to maturity......................... 2,000 --
Proceeds from maturities of investment securities available for sale....................... -- 464
Loan originations, net of repayments....................................................... (43,386) (30,907)
Purchases of loans receivable.............................................................. (2,268) --
Proceeds from sale of loans receivable..................................................... 2,804 --
Proceeds from sale of real estate acquired in settlement of loans.......................... 516 173
Purchases of FHLB stock.................................................................... -- (1,048)
Redemption of FHLB stock................................................................... -- 279
Purchase of premises and equipment......................................................... (1,037) (2,039)
Additions to real estate held for development and sale..................................... -- (1,454)
--------- ---------
Net cash (used in) provided by investing activities.................................. $ (64,146) $ (31,690)
--------- ---------
Cash flows from financing activities:
Net change in time deposits................................................................ $ 15,999 $ 44,095
Net change in demand deposit accounts...................................................... 4,932 (2,750)
Repayment of FHLB advances and other borrowings............................................ (65,471) (136,545)
Proceeds from FHLB advances and other borrowings........................................... 96,835 153,606
Dividends paid............................................................................. (639) (775)
Principal reduction of ESOP debt........................................................... 79 11
Proceeds from exercise of stock options.................................................... 37 110
Increase (decrease) in advance payments from borrowers for property taxes and insurance.... 226 (401)
--------- ---------
Net cash (used in) provided by financing activities.................................. 51,998 57,351
--------- ---------
Net (decrease) increase in cash and cash equivalents................................. (2,576) 10,453
Cash and cash equivalents at beginning of year............................................... 7,858 6,358
--------- ---------
Cash and cash equivalents at end of period................................................... $ 5,282 $ 16,811
========= =========
Supplemental disclosure of cash paid during period for:
Interest................................................................................... $ 6,686 $ 11,763
========= =========
Income taxes............................................................................... $ 1,490 $ 932
========= =========
Supplemental schedule of noncash investing and financing activities:
Acquisition of real estate in settlement on loans.......................................... $ 203 $ 280
========= =========
Loans made to finance real estate.......................................................... $ 575 $ 340
========= =========
</TABLE>

See accompanying notes to consolidated financial statements

F-30
<PAGE> 89

EAGLE BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(UNAUDITED)

A. BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions for preparation of the Securities
and Exchange Commission Form 10-Q. Accordingly, they do not include all of the
information and disclosures required for fair presentation in accordance with
generally accepted accounting principles. These financial statements should
therefore be read in conjunction with management's discussion and analysis of
results of operations and financial condition included in this report and the
complete annual report for the year ended March 31, 1995, which has been filed
with the Company's most recent Form 10-K. In the opinion of management, all
eliminations and normal recurring adjustments considered necessary for fair
presentation have been included. Operating results for the three and six month
periods ended September 30, 1995, are not necessarily indicative of the results
that may be expected during the fiscal year ending March 31, 1996.

B. RECLASSIFICATION OF PRIOR PERIOD AMOUNTS

Certain reclassifications have been made in the Company's financial statements
for the prior fiscal period to conform to the classifications used in the
financial statements for the current fiscal period.

C. RECENT ACCOUNTING PRONOUNCEMENTS

In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for
Impairment of a Loan". For fiscal years beginning after December 15, 1994, SFAS
No. 114 requires impaired loans to be measured based on the present value of
expected cash flows discounted at the loan's effective interest rate, or at the
loan's observable market price or at the fair value of the collateral if the
loan is collateral dependent. A valuation allowance equivalent to the amount of
the impairment is required for all loans determined to be impaired. In October
1994, the Financial Accounting Standards Board issued Statement of Accounting
Standards No. 118, "Accounting by Creditors for Impairment of a Loan-Income
Recognition and Disclosures," which amends certain requirements of SFAS No. 114
regarding interest income recognition on impaired loans and clarifies related
disclosure requirements. SFAS No. 118 is to be implemented concurrently with
SFAS No. 114. The Company adopted SFAS No. 114 and SFAS No. 118 on April 1,
1995, and there was no impact to the consolidated financial statements. For
further information see the Impaired Loan Schedule in Management's Discussion
and Analysis of Financial Condition and Results of Operation.

The company adopted SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" ("SFAS No. 115") as of March 1994. In conjunction
with the adoption of SFAS No. 115, the Company classified all investments in
equity securities and certain mortgage-backed securities as available for sale.
Pursuant to SFAS No. 115, the Company has presented such investments and
mortgage-backed securities at estimated fair value with the unrealized gain or
(losses) on such securities, net of income taxes, disclosed as a separate
component of shareholders equity. In October 1995, the Financial Accounting
Standards Board ("FASB") voted to allow reclassification of any portion of an
enterprises' held-to-maturity debt security portfolio without "tainting".
Without this FASB action, "tainting" could cause all held-to-maturity securities
to be reclassified as available-for-sale. The decision was made during the
FASB's process of issuing the FASB Special Reports, A Guide to Implementation of
Statement 115. The Guide clarifies certain aspects of Statement 115, and as a
result, the FASB deemed the one-time window as necessary. The reclassification
"window" opens concurrent with implementation of the Guide, but no later than
December 31, 1995, regardless of an enterprises year end. The Company's
management is currently evaluating the impact a one-time reclassification
associated with SFAS No. 115 will have on its financial statements.

F-31
<PAGE> 90

EAGLE BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

In May 1995, the Financial Accounting Standards Board issued SFAS No. 122,
"Accounting for Mortgage Servicing Rights," as an amendment to SFAS No. 65,
"Accounting for Certain Mortgage Banking Activities". SFAS No. 122 addresses the
accounting for purchased and originated mortgage servicing rights and is
effective for fiscal years beginning after December 15, 1995. SFAS No. 122
requires that a mortgage banking enterprise recognize as a separate asset rights
to service mortgage loans for others regardless of whether their servicing
rights are acquired through either the purchase or origination of mortgage
loans. The statement also requires that the mortgage banking enterprise assess
its capitalized mortgage servicing rights for impairment based upon the fair
value of those rights purchased before adoption of SFAS No. 122. Impairment
should be recognized through a valuation allowance. The Company's mortgage
banking segment, PrimeEagle Mortgage generates revenues through fees for various
services including application and origination as well as through the gain or
loss on sale of loans to third parties and from the sale of mortgage servicing
rights. Service release premiums are the largest component of mortgage
production fees. Fluctuations in the value of servicing rights impact
management's decision to retain or sell servicing. SFAS No. 122 does not have an
effect on the Company's financial statements as substantially all of its
permanent loans are sold on a servicing released basis.

D. SUBSEQUENT EVENTS

All share and per share data have been adjusted to reflect the effect of a
two-for-one split of the Common Stock effected in the form of a stock dividend
paid on December 21, 1995.

F-32
<PAGE> 91

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

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

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
The Company........................... 7
Risk Factors.......................... 8
Use of Proceeds....................... 9
Capitalization........................ 10
Price Range of Common Stock and
Dividend History.................... 11
Selected Consolidated Financial
Data................................ 12
Management's Discussion and Analysis
of Results of Operations and
Financial Condition................. 14
Business.............................. 33
Management............................ 44
Supervision and Regulation............ 47
Description of Capital Stock.......... 52
Underwriting.......................... 56
Available Information................. 57
Incorporation of Documents by
Reference........................... 57
Legal Matters......................... 58
Experts............................... 58
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>

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

- ------------------------------------------------------
- ------------------------------------------------------
1,300,000 SHARES

EAGLE BANCSHARES, INC.

COMMON STOCK
------------------

PROSPECTUS

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

INTERSTATE/JOHNSON LANE

CORPORATION

MORGAN KEEGAN &
COMPANY, INC.

FEBRUARY 12, 1996

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