THOMASVILLE BANCSHARES INC, 10KSB40, 1997-03-31

THOMASVILLE BANCSHARES INC
10KSB40, 1997-03-31
NATIONAL COMMERCIAL BANKS

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<PAGE> 1

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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

FORM 10-KSB

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

Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the Fiscal Year Ended December 31, 1996

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

Commission File Number 33-36512

THOMASVILLE BANCSHARES, INC.

A Georgia Corporation
(IRS Employer Identification No.58-2175800)
301 North Broad Street
Thomasville, Georgia 31792
(912) 226-3300

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

Securities Registered Pursuant to Section 12(b)
of the Securities Exchange Act of 1934:

None
-----------------------------------------------

Securities Registered Pursuant to Section 12(g)
of the Securities Exchange Act of 1934:

None
-----------------------------------------------

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----

Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and will not be contained, to the best of
Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]

Revenue for the fiscal year ended December 31, 1996: $2,793,373

The aggregate market value of the Common Stock of the Registrant held by
nonaffiliates of the Registrant (474,521 shares) on March 15, 1997, was
$4,621,835. As of such date, no organized trading market existed for the
Common Stock of the Registrant. The aggregate market value was computed by
reference to the book value of the Common Stock of the Registrant as of
December 31, 1996. For the purposes of this response, directors, officers and
holders of 5% or more of the Registrant's Common Stock are considered the
affiliates of the Registrant at that date.

The number of shares outstanding of the Registrant's Common Stock, as of March
15, 1997: 600,000 shares of $1.00 par value Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
None.

Transitional Small Business Disclosure Format (check one)
Yes No X
----- -----

<PAGE> 2

PART I

ITEM 1. DESCRIPTION OF BUSINESS

GENERAL

Thomasville Bancshares, Inc. (the "Company") was incorporated under
the laws of the State of Georgia on March 30, 1995 and owns 100% of the
outstanding capital stock of Thomasville National Bank (the "Bank"). The
Company was incorporated as a mechanism to enhance the Bank's ability to serve
its future customers' requirements for financial services. The holding company
structure provides flexibility for expansion of the Company's banking business
through acquisition of other financial institutions and provision of additional
banking-related services which the traditional commercial bank may not provide
under present laws. For example, banking regulations require that the Bank
maintain a minimum ratio of capital to assets. In the event that the Bank's
growth is such that this minimum ratio is not maintained, the Company may
borrow funds, subject to the capital adequacy guidelines of the Federal Reserve
Board, and contribute them to the capital of the Bank and otherwise raise
capital in a manner which is unavailable to the Bank under existing banking
regulations.

The Bank commenced operations on October 2, 1995 in a temporary
facility located at 108 Washington Street in Thomasville, Georgia. On January
6, 1997, the Bank moved into its permanent facility located at 301 North Broad
Street. The permanent facility, the construction of which was recently
completed, contains approximately 8,500 square feet of finished space and an
additional 2,000 square feet of unfinished space which may be built out in the
future should the Bank require additional space for expansion. The building
contains a lobby, vault, eight offices, four teller stations, three drive-in
windows, a boardroom conference facility, a loan operations area, and an area
for the Bank's bookkeeping operations.

The Bank is a full service commercial bank, without trust powers. The
Bank offers a full range of interest bearing and non-interest bearing accounts,
including commercial and retail checking accounts, money market accounts,
individual retirement and Keogh accounts, regular interest bearing statement
savings accounts, certificates of deposit, commercial loans, real estate loans,
home equity loans and consumer/installment loans. In addition, the Bank
provides such consumer services as U.S. Savings Bonds, travelers checks,
cashiers checks, safe deposit boxes, bank by mail services, direct deposit and
automatic teller services.

MARKET AREA AND COMPETITION

The market area of the Bank in Thomasville, Thomas County, Georgia has
been experiencing steady growth in both jobs and banking deposits in recent
years. Thomasville is the county seat of Thomas County, and contains one-half
of the county's population. Thomasville is a regional and commercial medical
center for Southwest Georgia. Thomas County maintains a steady industrial and
agricultural base, which has been expanding in recent years. The largest
employers in the county include the John D. Archbold Memorial Hospital,
Sunnyland Food (a food processing company) and Warners (foundation garments).
Agricultural activities in the county are supported by the second largest fresh
vegetable market in Georgia and a daily cash market for hogs, cattle and
poultry.

The population of Thomasville is 18,765 and Thomas County has 40,199
residents. The city is growing at a rate of 1.5% while the county is growing
at a rate of .8%. The median household income in Thomas County in 1992 was
$22,405 and the unemployment rate was 4.4% as of November, 1994. Real estate
values in the Bank's market area have appreciated over the last five years.

Competition among financial institutions in the Bank's primary service
area is intense. There are six commercial banks with a total of nine branches
in Thomasville and five additional branches in smaller communities in Thomas
County. In addition, there is one savings and loan association in Thomasville.
The
<PAGE> 3

two largest banks are affiliated with major bank holding companies. There are
also five credit unions headquartered in Thomas County.

Financial institutions primarily compete with one another for
deposits. In turn, a bank's deposit base directly affects such bank's loan
activities and general growth. Primary methods of competition include interest
rates on deposits and loans, service charges on deposit accounts and the
designing of unique financial services products. The Bank is competing with
financial institutions which have much greater financial resources than the
Bank, and which may be able to offer more and unique services and possibly
better terms to their customers. However, the management of the Bank believes
that the Bank will be able to attract sufficient deposits to enable the Bank to
compete effectively with other area financial institutions.

The Bank competes with existing area financial institutions other than
commercial banks and savings and loan associations, including insurance
companies, consumer finance companies, brokerage houses, credit unions and
other business entities which have recently been invading the traditional
banking markets. Due to the growth of the Thomasville area, it is anticipated
that additional competition will continue from new entrants to the market.

DEPOSITS

The Bank offers a full range of interest bearing and non-interest
bearing accounts, including commercial and retail checking accounts, money
market accounts, individual retirement and Keogh accounts, regular interest
bearing statement savings accounts and certificates of deposit with fixed and
variable rates and a range of maturity date options. The sources of deposits
are residents, businesses and employees of businesses within the Bank's market
area, obtained through the personal solicitation of the Bank's officers and
directors, direct mail solicitation and advertisements published in the local
media. The Bank pays competitive interest rates on time and savings deposits
up to the maximum permitted by law or regulation. In addition, the Bank has
implemented a service charge fee schedule competitive with other financial
institutions in the Bank's market area, covering such matters as maintenance
fees on checking accounts, per item processing fees on checking accounts,
returned check charges and the like.

DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY; INTEREST RATES
AND INTEREST DIFFERENTIAL

The following is a presentation of the average consolidated balance
sheet of the Company for the years ended December 31, 1996 and 1995. This
presentation includes all major categories of interest earning assets and
interest bearing liabilities:

AVERAGE CONSOLIDATED ASSETS

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
Cash and due from banks . . . . . . . . . . . . . $ 1,318,633 $ 1,501,240
----------------- -----------------

Funds with Escrow Agent . . . . . . . . . . . . . -- 2,560,000

Taxable securities . . . . . . . . . . . . . . . . 2,627,339 2,048,652

Federal funds sold . . . . . . . . . . . . . . . . 4,064,993 5,488,492

Net loans . . . . . . . . . . . . . . . . . . . . 23,506,716 7,299,544
----------------- -----------------

Total earning assets . . . . . . . . . . . . $ 30,199,048 $ 17,396,688

Other assets . . . . . . . . . . . . . . . . . . . 1,724,470 941,750
----------------- -----------------

Total assets . . . . . . . . . . . . . . . . $ 33,242,181 $ 19,839,678
================= =================
</TABLE>

-2-
<PAGE> 4

AVERAGE CONSOLIDATED LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
Non-interest bearing deposits . . . . . . . . . . $ 5,569,694 $ 3,063,680

NOW and money market deposits . . . . . . . . . . 9,387,399 5,890,740

Savings deposits . . . . . . . . . . . . . . . . . 524,144 216,272

Time deposits . . . . . . . . . . . . . . . . . . 11,873,927 2,016,832

Other borrowings . . . . . . . . . . . . . . . . . -- 229,144

Other liabilities . . . . . . . . . . . . . . . . 152,969 2,596,890
----------------- -----------------

Total liabilities . . . . . . . . . . . . . . $ 27,508,133 $ 14,013,558

Stockholders' equity . . . . . . . . . . . . . . . 5,734,048 5,826,120
----------------- -----------------

Total liabilities and
stockholders' equity . . . . . . . . . . . . . $ 33,242,181 $ 19,839,678
================= ================
</TABLE>

The following is a presentation of an analysis of the net interest
earnings of the Company for the periods indicated with respect to each major
category of interest earning asset and each major category of interest bearing
liability:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
--------------------------------------------
AVERAGE INTEREST AVERAGE
ASSETS AMOUNT EARNED YIELD
------ ------------- ---------- -----------
<S> <C> <C> <C>
Taxable securities . . . . . . . . . . . . . $ 2,627,339 $ 153,611 5.85
------------- ---------- ----
Federal funds sold . . . . . . . . . . . . . 4,064,993 212,203 5.22
------------- ---------- ----
Net loans . . . . . . . . . . . . . . . . . 23,506,716(1) 2,234,844(2) 9.51
------------- ---------- ----

Total earning assets . . . . . . . . $ 30,199,048 $2,600,658 8.61%
============= ========== ====
</TABLE>

<TABLE>
<CAPTION>
AVERAGE INTEREST AVERAGE
LIABILITIES AMOUNT EXPENSE COST
----------- ------------- ----------- -----------
<S> <C> <C> <C>
NOW and money market deposits . . . . . . . $ 9,387,399 $ 316,501 3.37%

Savings deposits . . . . . . . . . . . . . . 524,144 18,326 3.50

Time deposits . . . . . . . . . . . . . . . 11,873,927 682,218 5.75
------------- ----------- ----

Total interest bearing liabilities . . $ 21,785,470 $ 1,017,045 4.67
============= =========== ====

Net yield on earning assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.24%
====
</TABLE>
- --------------------

(1) During 1996, all loans were accruing interest.
(2) Interest earned on net loans includes $102,230 in loan fees and
loan service fees.

-3-
<PAGE> 5

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
------------------------------------------
AVERAGE INTEREST AVERAGE
ASSETS AMOUNT EARNED YIELD
------ ----------- ---------- ---------
<S> <C> <C> <C>
Funds with escrow agent . . . . . . . . . . $ 2,560,000 $ 58,685 5.50%

Taxable securities . . . . . . . . . . . . . 2,048,652 26,011 5.08

Federal funds sold . . . . . . . . . . . . . 5,488,492 77,891 5.67

Net loans . . . . . . . . . . . . . . . . . 7,299,544(1) 189,604(2) 10.39
----------- ---------- -----

Total earning assets . . . . . . . . $17,396,688 $ 352,191 7.56%
=========== ========== =====
</TABLE>

<TABLE>
<CAPTION>
AVERAGE INTEREST AVERAGE
LIABILITIES AMOUNT EXPENSE COST
----------- ----------- ---------- ----------
<S> <C> <C> <C>
NOW and money market deposits . . . . . . . $ 5,890,740 $ 40,864 2.77%

Savings deposits . . . . . . . . . . . . . . 216,272 1,811 3.35

Time deposits . . . . . . . . . . . . . . . 2,016,832 28,407 5.63

Other borrowings . . . . . . . . . . . . . . 229,144 5,299 9.25
----------- ---------- ----

Total interest bearing liabilities . . $ 8,352,988 $ 76,381 3.66
=========== ========== ====

Net yield on earning assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.34%
====
</TABLE>
- --------------------

(1) During 1995, all loans were accruing interest.
(2) Interest earned on net loans includes $21,011 in loan fees and
loan service fees.

-4-
<PAGE> 6

RATE/VOLUME ANALYSIS OF NET INTEREST INCOME

The effect on interest income, interest expense and net interest
income in the periods indicated, of changes in average balance and rate from
the corresponding prior period is shown below. The effect of a change in
average balance has been determined by applying the average rate in the earlier
period to the change in average balance in the later period, as compared with
the earlier period. Changes resulting from average balance/rate variances are
included in changes resulting from rate. The balance of the change in interest
income or expense and net interest income has been attributed to a change in
average rate. Because the Company was not in existence as of December 31,
1994, a comparison of the 1995 results to 1994 has not been included.

<TABLE>
<CAPTION>
Year Ended December 31, 1996
compared with
Year Ended December 31, 1995
------------------------------------
Increase (decrease) due to:

Volume Rate Total
------ ---- -----
<S> <C> <C> <C>
Interest earned on:

Funds with escrow agent . . . . . . $ (58,685) $ -- $ (58,685)

Taxable securities . . . . . . . . 83,041 44,559 127,600
Federal funds sold . . . . . . . . 143,641 (9,329) 134,312

Net loans . . . . . . . . . . . . . 2,126,353 (81,113) 2,045,240
---------------- -------------- ------------
Total interest income . . . . . . . . 2,294,350 (45,883) 2,248,467
---------------- -------------- ------------

Interest paid on:
NOW deposits and money market . . 201,945 73,692 275,637

Savings deposits . . . . . . . . . 16,012 503 16,515
Time deposits . . . . . . . . . . . 650,972 2,839 653,811

Other borrowings . . . . . . . . . (5,299) -- (5,299)
Other liabilities . . . . . . . . . -- -- --
---------------- -------------- ------------

Total interest expense . . . . . . . 863,630 77,034 940,664
---------------- -------------- ------------

Change in net
interest income . . . . . . . . . . $ 1,430,720 $ (122,917) $ 1,307,803
================ ============== ============
</TABLE>

DEPOSITS

-5-
<PAGE> 7

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

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------

AVERAGE AVERAGE AVERAGE AVERAGE
DEPOSIT CATEGORY AMOUNT RATE PAID AMOUNT RATE PAID
- ---------------- ------ --------- ------ ---------
<S> <C> <C> <C> <C>
Non-interest bearing
demand deposits . . . . . . . . . . . . . . $ 5,569,694 Not applicable $3,063,680 Not Applicable
NOW and money
market deposits . . . . . . . . . . . . . . $ 9,387,399 3.37% $5,890,740 2.77%

Savings deposits . . . . . . . . . . . . . . $ 524,144 3.50% $ 216,272 3.35%

Time deposits . . . . . . . . . . . . . . . . $11,873,927 5.75% $2,016,832 5.63%
</TABLE>

The following table indicates amounts outstanding of time certificates
of deposit of $100,000 or more and respective maturities for the year ended
December 31, 1996:

<TABLE>
<CAPTION>
TIME
CERTIFICATES
OF DEPOSIT
------------
<S> <C>
3 months or less . . . . $ 3,542,320
3-6 months . . . . . . . 3,046,288
6-12 months . . . . . . . 1,328,779
over 12 months . . . . . 1,564,343
------------

Total . . . . . . . . . $ 9,481,730
============
</TABLE>

LOAN PORTFOLIO

The Bank engages in a full complement of lending activities, including
commercial/industrial, consumer and real estate loans. As of December 31,
1996, the Bank had a legal lending limit for unsecured loans of up to $810,416
to any one person. See "Supervision and Regulation."

While risk of loss in the Bank's loan portfolio is primarily tied to
the credit quality of the various borrowers, risk of loss may also increase due
to factors beyond the Bank's control, such as local, regional and/or national
economic downturns. General conditions in the real estate market may also
impact the relative risk in the Bank's real estate portfolio. Of the Bank's
target areas of lending activities, commercial loans are generally considered
to have greater risk than real estate loans or consumer installment loans.

Management of the Bank intends to originate loans and to participate
with other banks with respect to loans which exceed the Bank's lending limits.
Management of the Bank does not believe that loan participations necessarily
pose any greater risk of loss than loans which the Bank originates.

-6-
<PAGE> 8

The following is a description of each of the major categories of
loans in the Bank's loan portfolio:

Commercial, Financial and Agricultural Loans

Commercial lending is directed principally towards businesses whose
demands for funds fall within the Bank's legal lending limits and which are
potential deposit customers of the Bank. This category of loans includes loans
made to individual, partnership or corporate borrowers, and obtained for a
variety of business purposes. Particular emphasis is placed on loans to small
and medium-sized businesses. The primary repayment risk for commercial loans
is the failure of the business due to economic or financial factors. Although
the Bank typically looks to a commercial borrower's cash flow as the principal
source of repayment for such loans, many commercial loans are secured by
inventory, equipment, accounts receivable, and other assets.

Consumer Loans

The Bank's consumer loans consist primarily of installment loans to
individuals for personal, family and household purposes, including automobile
loans to individuals and pre-approved lines of credit. This category of loans
also includes lines of credit and term loans secured by second mortgages on the
residences of borrowers for a variety of purposes including home improvements,
education and other personal expenditures. In evaluating these loans the Bank
reviews the borrower's level and stability of income and past credit history
and the impact of these factors on the ability of the borrower to repay the
loan in a timely manner. In addition, the Bank maintains a proper margin
between the loan amount and collateral value.

Real Estate Loans

The Bank's real estate loans consist of residential first and second
mortgage loans, residential construction loans and commercial real estate loans
to a limited degree. These loans are made consistent with the Bank's appraisal
policy and real estate lending policy which detail maximum loan-to-value ratios
and maturities. These loan-to-value ratios are sufficient to compensate for
fluctuations in the real estate market to minimize the risk of loss to the
Bank.

The following table presents various categories of loans contained in
the Bank's loan portfolio for the periods indicated and the total amount of all
loans for such periods:

AS OF AS OF
TYPE OF LOAN DECEMBER 31, 1996 DECEMBER 31, 1995
------------ ----------------- -----------------
<S> <C> <C>
Commercial, Financial and Agricultural . . . . . . . . $16,484,185 $ 7,654,556

Real Estate - Construction . . . . . . . . . . . . . . 1,134,858 346,705

Real Estate - Mortgage . . . . . . . . . . . . . . . . 11,748,699 1,713,616

Installment and Other Loans
to Individuals . . . . . . . . . . . . . . . . . $ 4,171,502 $ 1,227,660
----------- ------------

Subtotal . . . . . . . . . . . . . . . . . . . $33,539,244 $ 10,942,537

Less: Allowance for
possible loan losses . . . . . . . . . (447,626) (110,000)
----------- ------------

Total (net of allowances) . . . . . . $33,091,618 $ 10,832,537
=========== ============
</TABLE>

The following is a presentation of an analysis of maturities of loans
as of December 31, 1996:

-7-
<PAGE> 9

<TABLE>
<CAPTION>
DUE IN 1 DUE AFTER 1 TO DUE AFTER
TYPE OF LOAN YEAR OR LESS 5 YEARS 5 YEARS TOTAL
------------ ------------ ------------ ---------- ---------

(In thousands)
<S> <C> <C> <C> <C>
Commercial, Financial and Agricultural . . . $ 9,534 $ 6,690 $ 260 $ 16,484

Real Estate - Construction . . . . . . . . . 580 555 -- 1,135
-------- -------- -------- --------

Total . . . . . . . . . . . . . . . . $ 10,114 $ 7,245 $ 260 $ 17,619
======== ======== ======== ========
</TABLE>

For the above loans, the following is a presentation of an analysis
of sensitivities to changes in interest rates as of December 31, 1996:

<TABLE>
<CAPTION>
DUE IN 1 DUE AFTER 1 TO DUE AFTER
INTEREST CATEGORY YEAR OR LESS 5 YEARS 5 YEARS TOTAL
----------------- ------------ ------------ ---------- ---------

(In thousands)
<S> <C> <C> <C> <C>
Predetermined interest rate . . . . . . . . $ 6,271 $ 4,609 $ -- $ 10,880

Floating interest rate . . . . . . . . . . . 3,843 2,636 260 6,739
-------- -------- ---------- --------

Total . . . . . . . . . . . . . . . . $ 10,114 $ 7,245 $ 260 $ 17,619
======== ======== ========== ========
</TABLE>

As of December 31, 1996 and 1995 all loans were accruing interest, no
accruing loans were contractually past due 90 days or more as to principal and
interest payments and no loans were defined as "troubled debt restructurings."

As of December 31, 1996, except for one loan in the amount of $35,115
which was classified as special mention, there were no loans not disclosed
above that are classified for regulatory purposes as doubtful, substandard or
special mention which (i) represent or result from trends or uncertainties
which management reasonably expects will materially impact future operating
results, liquidity, or capital resources, or (ii) represent material credits
about which management is aware of any information which causes management to
have serious doubts as to the ability of such borrowers to comply with the loan
repayment terms. There are no loans not disclosed above where known
information about possible credit problems of borrowers causes management to
have serious doubts as to the ability of such borrowers to comply with the
present loan repayment terms.

Accrual of interest is discontinued on a loan when management of the
Bank determines upon consideration of economic and business factors affecting
collection efforts that collection of interest is doubtful. During 1996 all
loans had accrued interest.

SUMMARY OF LOAN LOSS EXPERIENCE

An analysis of the Bank's loss experience is furnished in the
following table for the periods indicated, as well as a breakdown of the
allowance for possible loan losses:

-8-
<PAGE> 10

ANALYSIS OF THE ALLOWANCE FOR POSSIBLE LOAN LOSSES

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
Balance at beginning of period . . . . . . . . . . $ 110,000 $ 0
--------

Charge-offs:
Installments and other loans to individuals . (8,374) 0

Recoveries . . . . . . . . . . . . . . . . . . . . 0 0
---------- --------

Net charge-offs . . . . . . . . . . . . . . . . . (8,374) 0
---------- --------

Additions charged to operations . . . . . . . . . 346,000 110,000
---------- --------

Balance at end of period . . . . . . . . . . . . . $ 447,626 $110,000
========== ========

Ratio of net charge-offs during the period to
average loans outstanding during the period . .04% --
========== ========
</TABLE>

At December 31, 1996 the allowance was allocated as follows:

<TABLE>
<CAPTION>
PERCENT OF LOANS
IN EACH CATEGORY
AMOUNT TO TOTAL LOANS
---------- ------------------
<S> <C> <C>
Commercial, Financial and Agricultural . . . . . . $ 246,200 49.1%
Real Estate - Construction . . . . . . . . . . . . 22,400 3.4
Real Estate - Mortgage . . . . . . . . . . . . . . 125,300 35.0
Installment and Other Loans to Individuals . . . . 49,200 12.5
Lease financing . . . . . . . . . . . . . . . . . -- --
Unallocated . . . . . . . . . . . . . . . . . . . 4,526 --
---------- -----

Total . . . . . . . . . . . . . . . . . . $ 447,626 100.0%
========== =====
</TABLE>

At December 31, 1995 the allowance was allocated as follows:

<TABLE>
<CAPTION>
PERCENT OF LOANS
IN EACH CATEGORY
AMOUNT TO TOTAL LOANS
---------- ------------------
<S> <C> <C>
Commercial, Financial and Agricultural . . . . . . $ 77,000 70.0%
Real Estate - Construction . . . . . . . . . . . . 4,200 3.2
Real Estate - Mortgage . . . . . . . . . . . . . . 12,900 15.6
Installment and Other Loans to Individuals . . . . 10,500 11.2
Unallocated . . . . . . . . . . . . . . . . . . . 5,400 --
---------- -----

Total . . . . . . . . . . . . . . . . . . $ 110,000 100.0%
========== =====
</TABLE>

-9-
<PAGE> 11

LOAN LOSS RESERVE

In considering the adequacy of the Company's allowance for possible
loan losses, management has focused on the fact that as of December 31, 1996,
49.1% of outstanding loans are in the category of commercial loans, which
includes commercial real estate loans and agricultural loans. Commercial loans
are generally considered by management as having greater risk than other
categories of loans in the Company's loan portfolio. However, 89% of these
commercial loans at December 31, 1996 were made on a secured basis. Management
believes that the secured condition of the preponderant portion of its
commercial loan portfolio greatly reduces any risk of loss inherently present
in commercial loans.

The Company's consumer loan portfolio is also well secured. At
December 31, 1996 the majority of the Company's consumer loans were secured by
collateral primarily consisting of automobiles, boats and other personal
property. Management believes that these loans involve less risk than
commercial loans.

Real estate mortgage loans constituted 35.0% of outstanding loans at
December 31, 1996. All loans in this category represent residential real
estate mortgages where the amount of the original loan generally does not
exceed 80% of the appraised value of the collateral. These loans are
considered by management to be well secured with a low risk of loss.

A review of the loan portfolio by an independent firm is conducted
annually. The purpose of this review is to assess the risk in the loan
portfolio and to determine the adequacy of the allowance for loan losses. The
review includes analyses of historical performance, the level of non-conforming
and rated loans, loan volume and activity, review of loan files and
consideration of economic conditions and other pertinent information. Upon
completion, the report is approved by the Board and management of the Bank. In
addition to the above review, the Bank's primary regulator, the Comptroller of
the Currency, also conducts an annual examination of the loan portfolio. Upon
completion, the Comptroller of the Currency presents its report of findings to
the Board and management of the Bank. Information provided from the above two
independent sources, together with information provided by the management of
the Bank and other information known to members of the Board, are utilized by
the Board to monitor, on a quarterly basis, the loan portfolio. Specifically,
the Board attempts to identify risks inherent in the loan portfolio (e.g.,
problem loans, potential problem loans and loans to be charged off), assess the
overall quality and collectibility of the loan portfolio, and determine amounts
of the allowance for loan losses and the provision for loan losses to be
reported based on the results of their review.

INVESTMENTS

As of December 31, 1996, investment securities comprised
approximately 6.1% of the Bank's assets and net loans comprised approximately
75.6% of the Bank's assets. The Bank invests primarily in direct obligations
of the United States, obligations guaranteed as to principal and interest by
the United States, obligations of agencies of the United States and
certificates of deposit issued by commercial banks. In addition, the Bank
enters into Federal Funds transactions with its principal correspondent banks,
and acts as a net seller of such funds. The sale of Federal Funds amounts to a
short-term loan from the Bank to another bank.

-10-
<PAGE> 12

The following table presents, for the period indicated, the book
value of the Bank's investments. All securities held at December 31, 1996 and
1995 were categorized as available-for-sale.

<TABLE>
<CAPTION>
INVESTMENT CATEGORY DECEMBER 31,
------------------- -------------------------

AVAILABLE-FOR-SALE: 1996 1995
------------------ ---- ----
<S> <C> <C>
Obligations of U.S. Treasury
and other U.S. Agencies . . . . . . . . . . . $ 2,487,000 $ 2,510,406

Federal Reserve Bank Stock . . . . . . . . . . 165,000 144,000
------------ -----------

Total . . . . . . . . . . . . . . . . . . $ 2,652,000 $ 2,654,406
============ ===========
</TABLE>

The following table indicates for the year ended December 31, 1996 the
amount of investments due in (i) one year or less, (ii) one to five years,
(iii) five to ten years, and (iv) over ten years:

<TABLE>
<CAPTION>
INVESTMENT CATEGORY
-------------------
WEIGHTED
AVERAGE
AMOUNT YIELD(1)
------ --------
AVAILABLE-FOR-SALE:
------------------
<S> <C> <C>
Obligations of U.S. Treasury
and other U.S. Agencies:
0 - 1 year . . . . . . . . . . . . $
700,875 5.62%
Over 1 through 5 years . . . . . .
1,786,125 5.58
Federal Reserve Bank Stock,
no maturity . . . . . . . . . . . 165,000 6.0
------------- ----

Total . . . . . . . . . . . . $ 2,652,000 5.61%
============= ====
</TABLE>

____________________

(1) The Company has not invested in any tax exempt obligations.

RETURN ON EQUITY AND ASSETS

Returns on average consolidated assets and average consolidated
equity for the periods indicated are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
------------
1996 1995
---- ----
<S> <C> <C>
Return on Average Assets . . . . . . . . . . . . .73% (1.82)%
Return on Average Equity . . . . . . . . . . . . 4.2% (6.2)%
Average Equity to Average Assets Ratio . . . . . 17.2% 29.4 %
Dividend Payout Ratio . . . . . . . . . . . . . . -- --
</TABLE>

-11-
<PAGE> 13

ASSET/LIABILITY MANAGEMENT

It is the objective of the Bank to manage assets and liabilities to
provide a satisfactory, consistent level of profitability within the framework
of established cash, loan, investment, borrowing and capital policies. Certain
of the officers of the Bank are responsible for monitoring policies and
procedures that are designed to ensure acceptable composition of the
asset/liability mix, stability and leverage of all sources of funds while
adhering to prudent banking practices. It is the overall philosophy of
management to support asset growth primarily through growth of core deposits,
which include deposits of all categories made by individuals, partnerships and
corporations. Management of the Bank seeks to invest the largest portion of
the Bank's assets in commercial, consumer and real estate loans.

The Bank's asset/liability mix is monitored on a daily basis with a
monthly report reflecting interest- sensitive assets and interest-sensitive
liabilities being prepared and presented to the Bank's Board of Directors. The
objective of this policy is to control interest-sensitive assets and
liabilities so as to minimize the impact of substantial movements in interest
rates on the Bank's earnings.

CORRESPONDENT BANKING

Correspondent banking involves the providing of services by one bank
to another bank which cannot provide that service for itself from an economic
or practical standpoint. The Bank is required to purchase correspondent
services offered by larger banks, including check collections, purchase of
Federal Funds, security safekeeping, investment services, coin and currency
supplies, overline and liquidity loan participations and sales of loans to or
participations with correspondent banks. Such correspondent arrangements are
governed, in part, by the provisions of 12 C.F.R. 32.107 and O.C.C. Banking
Circular 181 (Rev.) (August 2, 1984).

The Bank sells loan participations to correspondent banks with respect
to loans which exceed the Bank's lending limit. As compensation for services
provided by a correspondent, the Bank may maintain certain balances with such
correspondents in non-interest bearing accounts. At December 31, 1996 the Bank
had outstanding participations totaling $2,098,118.

DATA PROCESSING

The Bank has entered into a data processing servicing agreement with
First National Bank of Grady County. This servicing agreement provides for the
Bank to receive a full range of data processing services, including an
automated general ledger, deposit accounting, commercial, real estate and
installment lending data processing, payroll, central information file and ATM
processing and investment portfolio accounting.

FACILITIES

Until January 6, 1997, the Bank operated out of a temporary facility
located at 108 Washington Street in Thomasville, Georgia. On January 6, 1997,
the Bank moved to its recently constructed permanent facility located at 301
North Broad Street. The building contains approximately 8,500 square feet of
finished space which was constructed at a cost of approximately $1,050,000.
The building also contains an additional 2,000 square feet of unfinished space
which may be built out in the future should the Bank require additional space
for expansion. The building contains a lobby, a vault, eight offices, four
teller stations, three drive-in windows, a boardroom conference facility, a
loan operations area, and an area for the Bank's bookkeeping operations.

EMPLOYEES

The Bank presently employs two persons on a part-time basis and 17
persons on a full-time basis, including four officers. The Bank will hire
additional persons as needed, including additional tellers and financial
service representatives.

-12-
<PAGE> 14

MONETARY POLICIES

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

SUPERVISION AND REGULATION

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

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

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

A bank holding company is generally prohibited from acquiring control
of any company which is not a bank and from engaging in any business other than
the business of banking or managing and controlling banks. However, there are
certain activities which have been identified by the Federal Reserve Board to
be so closely related to banking as to be a proper incident thereto and thus
permissible for bank holding companies, including the following activities:
acting as investment or financial advisor to subsidiaries and certain outside
companies; leasing personal and real property or acting as a broker with
respect thereto; providing management consulting advice to nonaffiliated banks
and nonbank depository institutions; operating collection agencies and credit
bureaus; acting as a futures commission merchant; providing data processing and
data transmission

-13-
<PAGE> 15

services; acting as an insurance agent or underwriter with respect to limited
types of insurance; performing real estate appraisals; arranging commercial
real estate equity financing; providing securities brokerage services; and
underwriting and dealing in obligations of the United States, the states and
their political subdivisions. In determining whether an activity is so closely
related to banking as to be permissible for bank holding companies, the Federal
Reserve Board is required to consider whether the performance of such
activities by a bank holding company or its subsidiaries can reasonably be
expected to produce such benefits to the public as greater convenience,
increased competition and gains in efficiency that outweigh such possible
adverse effects as undue concentration of resources, decreased or unfair
competition, conflicts of interest and unsound banking practices. Generally,
bank holding companies are required to obtain prior approval of the Federal
Reserve Board to engage in any new activity not previously approved by the
Federal Reserve Board.

The Company is also regulated by the Georgia Banking Department under
the Georgia Bank Holding Company Act, which requires every Georgia bank holding
company to obtain the prior approval of the Georgia Commissioner of Banking
before acquiring more than 5% of the voting shares of any bank or all or
substantially all of the assets of a bank, or before merging or consolidating
with any other bank holding company. A Georgia bank holding company is
generally prohibited from acquiring ownership or control of 5% or more of the
voting shares of any bank unless the bank being acquired is either a bank for
purposes of the federal Bank Holding Company Act of 1956, or a federal or state
savings and loan association or a savings bank or federal savings bank whose
deposits are insured by the federal deposit insurance program and such bank has
been in existence and continuously operating as a bank for a period of five
years or more prior to the date of acquisition.

As a national bank, the Bank is subject to the supervision of the
Comptroller and, to a limited extent, the FDIC and the Federal Reserve Board.
With respect to expansion, national banks situated in the State of Georgia are
generally prohibited from establishing branch offices or facilities outside of
the county in which such main office is located, except (i) in adjacent
counties in certain situations, or (ii) by means of a merger, consolidation or
sale of assets. The Georgia Legislature has recently adopted legislation which
reduces the limitations imposed on banks situated in the State of Georgia to
establish branch offices. The new law permits a Georgia bank to establish
three new or additional branch banks, de novo, in any county within the State
of Georgia beginning on July 1, 1996, in addition to establishing branch
offices or facilities in adjacent counties and by merger or consolidation.
Moreover, beginning on July 1, 1998, a bank located in the State of Georgia
will be permitted to establish new or additional branch banks anywhere in the
state by relocation of the parent bank or another branch bank, or by merger,
consolidation, or purchase of assets and assumption of liabilities involving
another parent bank or branch bank.

The Bank is also subject to the Georgia banking and usury laws
restricting the amount of interest which it may charge in making loans or other
extensions of credit. In addition, the Bank, as a subsidiary of the Company,
is subject to restrictions under federal law in dealing with the Company and
other affiliates, if any. These restrictions apply to extensions of credit to
an affiliate, investments in the securities of an affiliate and the purchase of
assets from an affiliate.

Loans and extensions of credit by national banks are subject to legal
lending limitations. Under federal law, a national bank may grant unsecured
loans and extensions of credit in an amount up to 15% of its unimpaired capital
and surplus to any person if the loans and extensions of credit are not fully
secured by collateral having a market value at least equal to their face
amount. In addition, a national bank may grant loans and extensions of credit
to a single person up to 10% of its unimpaired capital and surplus, provided
that the transactions are fully secured by readily marketable collateral having
a market value determined by reliable and continuously available price
quotations, at least equal to the amount of funds outstanding. This 10%
limitation is separate from, and in addition to, the 15% limitation for
unsecured loans. Loans and extensions of credit may exceed the general lending
limit if they qualify under one of several exceptions. Such exceptions include
certain loans or extensions of credit arising from the discount of commercial
or business paper, the

-14-
<PAGE> 16

purchase of bankers' acceptances, loans secured by documents of title, loans
secured by U.S. obligations and loans to or guaranteed by the federal
government.

Both the Company and the Bank are subject to regulatory capital
requirements imposed by the Federal Reserve Board and the Comptroller. In
1989, both the Federal Reserve Board and the Comptroller issued new risk-based
capital guidelines for bank holding companies and banks which make regulatory
capital requirements more sensitive to differences in risk profiles of various
banking organizations. The capital adequacy guidelines issued by the Federal
Reserve Board are applied to bank holding companies on a consolidated basis
with the banks owned by the holding company. The Comptroller's risk capital
guidelines apply directly to national banks regardless of whether they are a
subsidiary of a bank holding company. Both agencies' requirements (which are
substantially similar), provide that banking organizations must have capital
equivalent to 8% of weighted risk assets. The risk weights assigned to assets
are based primarily on credit risks. Depending upon the riskiness of a
particular asset, it is assigned to a risk category. For example, securities
with an unconditional guarantee by the United States government are assigned to
the lowest risk category. A risk weight of 50% is assigned to loans secured by
owner-occupied one to four family residential mortgages, provided that certain
conditions are met. The aggregate amount of assets assigned to each risk
category is multiplied by the risk weight assigned to that category to
determine the weighted values, which are added together to determine total
risk-weighted assets. Both the Federal Reserve Board and the Comptroller have
also implemented new minimum capital leverage ratios to be used in tandem with
the risk-based guidelines in assessing the overall capital adequacy of banks
and bank holding companies. Under these rules, banking institutions are
required to maintain a ratio of 3% "Tier 1" capital to total assets (net of
goodwill). Tier 1 capital includes common shareholders equity, noncumulative
perpetual preferred stock and minority interests in the equity accounts of
consolidated subsidiaries.

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

The Comptroller has amended the risk-based capital guidelines
applicable to national banks in an effort to clarify certain questions of
interpretation and implementation, specifically with regard to treatment of
originated and purchased mortgage servicing rights and other intangible assets.
The Comptroller's guidelines provide that intangible assets are generally
deducted from Tier 1 capital in calculating a bank's risk-based capital ratio.
However, certain intangible assets which meet specified criteria ("qualifying
intangibles") such as mortgage servicing rights are retained as a part of Tier
1 capital. The Comptroller currently maintains that only mortgage servicing
rights and purchased credit card relationships meet the criteria to be
considered qualifying intangibles. The Comptroller's guidelines formerly
provided that the amount of such qualifying intangibles that may be included in
Tier 1 capital was strictly limited to a maximum of 25% of total Tier 1
capital. The Comptroller has amended its guidelines to increase the limitation
on such qualifying intangibles from 25% to 50% of Tier 1 capital and further to
permit the inclusion of purchased credit card relationships as a qualifying
intangible asset.

In addition, the Comptroller has adopted rules which clarify treatment
of asset sales with recourse not reported on a bank's balance sheet. Among
assets affected are mortgages sold with recourse under Fannie Mae, Freddie Mac
and Farmer Mac programs. The rules clarify that even though those transactions
are treated as asset sales for bank Call Report purposes, those assets will
still be subject to a capital charge under the risk-based capital guidelines.

The Comptroller, the Federal Reserve Board and the FDIC recently
adopted final regulations revising their risk- based capital guidelines to
further ensure that the guidelines take adequate account of interest rate risk.

-15-
<PAGE> 17

Interest rate risk is the adverse effect that changes in market interest rates
may have on a bank's financial condition and is inherent to the business of
banking. Under the new regulations, when evaluating a bank's capital adequacy,
the agency's capital standards now explicitly include a bank's exposure to
declines in the economic value of its capital due to changes in interest rates.
The exposure of a bank's economic value generally represents the change in the
present value of its assets, less the change in the value of its liabilities,
plus the change in the value of its interest rate off-balance sheet contracts.
Concurrently, the agencies issued a joint policy statement to bankers,
effective June 26, 1996, to provide guidance on sound practices for managing
interest rate risk. In the policy statement, the agencies emphasize the
necessity of adequate oversight by a bank's Board of Directors and senior
management and of a comprehensive risk management process. The policy
statement also describes the critical factors affecting the agencies'
evaluations of a bank's interest rate risk when making a determination of
capital adequacy. The agencies' risk assessment approach used to evaluate a
bank's capital adequacy for interest rate risk relies on a combination of
quantitative and qualitative factors. Banks that are found to have high levels
of exposure and/or weak management practices will be directed by the agencies
to take corrective action.

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

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

The Act also provides that banks have to meet new safety and soundness
standards. In order to comply with the Act, the Federal Reserve Board, the
Comptroller and the FDIC have adopted regulations defining operational and
managerial standards relating to internal controls, loan documentation, credit
underwriting, interest rate exposure, asset growth, and compensation, fees and
benefits.

Both the capital standards and the safety and soundness standards
which the Act seeks to implement are designed to bolster and protect the
deposit insurance fund.

-16-
<PAGE> 18

In response to the directive issued under the Act, the regulators have
established regulations which, among other things, prescribe the capital
thresholds for each of the five capital categories established by the Act. The
following table reflects the capital thresholds:

<TABLE>
<CAPTION>
Total Risk - Tier 1 Risk - Tier 1
Based Capital Based Capital Leverage
Ratio Ratio Ratio
--------------- --------------- ---------
<S> <C> <C> <C>
Well capitalized(1) 10% 6% 5%
Adequately Capitalized(1) 8% 4% 4%(2)

Undercapitalized(4) < 8% < 4% < 4%(3)

Significantly Undercapitalized(4) < 6% < 3% < 3%
Critically Undercapitalized - - < 2%(5)
-
</TABLE>

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

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

As a national bank, the Bank is subject to examination and review by
the Comptroller. This examination is typically completed on-site at least
annually and is subject to off-site review at call. The Comptroller, at will,
can access quarterly reports of condition, as well as such additional reports
as may be required by the national banking laws.

On July 1, 1995, the State of Georgia enacted an interstate banking
statute which authorizes bank holding companies located throughout the United
States to acquire banks and bank holding companies located in Georgia under
certain conditions. Such legislation has had the effect of increasing
competition among financial institutions in the Bank's market area and in the
State of Georgia generally.

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

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

ITEM 2. DESCRIPTION OF PROPERTY

On February 3, 1994, the Company entered into a contract with a party
unaffiliated with any officer or director of the Company to acquire a 1.1 acre
tract of land located at 301 North Broad Street for a total purchase price of
$425,000. The Company recently completed construction of its headquarters
building on this property and moved its operations to the facility on January
6, 1997. The building contains approximately 8,500 square feet of finished
space at a cost of approximately $650,000. The building also contains an

-17-
<PAGE> 19

additional 2,000 square feet of unfinished space which may be built out in the
future should the Bank require additional space for expansion. The building
contains a lobby, a vault, eight offices, four teller stations, three drive-in
windows, a boardroom conference facility, a loan operations area, and an area
for the Bank's bookkeeping operations.

Prior to the completion of construction of the Company's permanent
facility, the Company operated out of offices in a modular bank facility
located at 301 North Broad Street, Thomasville, Georgia. The Company leased
the approximately 2,000 square feet facility pursuant to a month-to-month lease
at a monthly rental of $2,500 after spending approximately $15,000 for site
preparation and $7,500 as an initial payment for the facility.

ITEM 3. LEGAL PROCEEDINGS

There are no material pending legal proceedings to which the Company
or the Bank is a party or of which any of their properties are subject; nor are
there material proceedings known to the Company to be contemplated by any
governmental authority; nor are there material proceedings known to the
Company, pending or contemplated, in which any director, officer or affiliate
or any principal security holder of the Company, or any associate of any of the
foregoing is a party or has an interest adverse to the Company or the Bank.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted during the fourth quarter ended December 31,
1996 to a vote of security holders of the Company.

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

A. MARKET INFORMATION

During the period covered by this report and to date, there has been
no established public trading market for the Company's Common Stock.

B. HOLDERS OF COMMON STOCK

As of March 15, 1997, the number of holders of record of the
Company's Common Stock was 487.

C. DIVIDENDS

To date, the Company has not paid any dividends on its Common Stock.
As the Company and the Bank are both start-up operations, it is the policy of
the Board of Directors of the Company to reinvest earnings for such period of
time as is necessary to ensure the success of the operations of the Company and
of the Bank. There are no current plans to initiate payment of cash dividends,
and future dividend policy will depend on the Bank's earnings, capital
requirements, financial condition and other factors considered relevant by the
Board of Directors of the Company.

The Bank is restricted in its ability to pay dividends under the
national banking laws and by regulations of the Comptroller. Pursuant to 12
U.S.C. Section 56, a national bank may not pay dividends from its capital.
All dividends must be paid out of undivided profits, subject to other
applicable provisions of law. Payments of dividends out of undivided profits
is further limited by 12 U.S.C. Section 60(a), which prohibits a bank

-18-
<PAGE> 20

from declaring a dividend on its shares of common stock until its surplus
equals its stated capital, unless there has been transferred to surplus not
less than 1/10 of the Bank's net income of the preceding two consecutive
half-year periods (in the case of an annual dividend). Pursuant to 12 U.S.C.
Section 60(b), the approval of the Comptroller is required if the total of all
dividends declared by the Bank in any calendar year exceeds the total of its
net income for that year combined with its retained net income for the
preceding two years, less any required transfers to surplus.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following discussion of the Company's financial condition and
results of operations should be read in conjunction with the Company's
Consolidated Financial Statements, related notes and statistical information
included elsewhere herein.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

The Company was organized on January 15, 1995 to serve as a holding
company for a proposed national bank. For approximately the first six months,
the main activities centered in seeking, interviewing and selecting a cohesive
group of organizers/directors; applying for a national bank charter; applying
to become a bank holding company; and filing a Registration Statement with the
Securities and Exchange Commission. Once the Registration Statement became
effective, the organizers/directors focused their efforts on stock sale. By
mid-August 1995, 600,000 shares of common stock were sold for $5,972,407, net
of selling expenses. From mid-August to the end of September 1995, management
engaged in activities resulting in the opening of the Bank. During the
development stage, from January 15, 1995 ("Inception") to October 2, 1995 (the
"Bank Opening"), net loss amounted to $119,200. Net loss from the Bank Opening
to December 31, 1995 amounted to $241,993. Losses from Inception to December
31, 1995 amounted to $361,193, or $.60 per share. During 1996, total assets of
the Company grew from $21.1 million to $43.8 million. For the year ended
December 31, 1996, net income amounted to $241,198, or $.40 per share.

NET INTEREST INCOME

The Company's results of operations are determined by its ability to
manage effectively interest income and expense, to minimize loan and investment
losses, to generate non-interest income and to control non-interest expense.
Since interest rates are determined by market forces and economic conditions
beyond the control of the Company, the ability to generate net interest income
is dependent upon the Company's ability to maintain an adequate spread between
the rate earned on earning assets and the rate paid on interest-bearing
liabilities, such as deposits and borrowings. Thus, net interest income is the
key performance measure of income.

Presented below are various components of assets and liabilities,
interest income and expense as well as their yield/cost for the period
indicated.

<TABLE>
<CAPTION>
YEAR ENDED FROM JANUARY 15, 1995
DECEMBER 31, 1996 TO DECEMBER 31, 1995
----------------- --------------------
AVERAGE INTEREST YIELD/ AVERAGE INTEREST YIELD/
BALANCE INCOME/EXPENSE COST BALANCE INCOME/EXPENSE COST
------- -------------- ---- --------- -------------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Funds with Escrow Agent $ -- $ -- --% $ 2,560 $ 59 5.50%
Federal funds sold 4,065 212 5.22 5,488 78 5.67
Securities 2,627 154 5.85 2,049 26 5.08
Loans, net 23,507 2,235 9.51 7,300 190 10.39
------- -------- ---- ------- ----- -----
</TABLE>

-19-
<PAGE> 21

<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Total earning assets $ 30,199 $ 2,601 8.61% $17,397 $ 352 7.56%
======== ======== ==== ======= ====== ====

Interest bearing deposits $ 21,785 $ 1,017 4.67% $ 8,124 $ 71 3.50%
Other borrowings -- -- -- 229 5 9.25
-------- -------- ---- ------- ------ ----
Total interest-bearing liabilities
$ 21,785 $ 1,017 4.67% $ 8,353 $ 76 3.66%
======== ======== ==== ======= ====== ====

Net yield on earning assets 5.24% 6.34%
==== ====
</TABLE>

Net yield on earning assets for the years ended December 31, 1996 and
1995 were 5.24% and 6.34%, respectively. The decline in the net yield during
1996 is primarily attributed to a higher cost of funds. The cost of funds was
increased in order to obtain monies needed to fund the strong loan demand.
However, despite a lower net yield on earning assets, net interest income has
increased from $275,810 (1995) to $1,583,613 (1996). This increase is
attributed to the significant increase in earning assets during 1996 and to the
fact that the Company engaged in banking for only three months during 1995 and
for the full year during 1996.

NON-INTEREST INCOME

Non-interest income for the years ended December 31, 1996 and 1995
amounted to $192,715 and $3,815, respectively. As a percentage of average
assets, non-interest income increased from .08% in 1995 to .58% in 1996. The
increase in non-interest income during 1996 is attributed to the increase in
the number of deposit accounts, as well as transactional volume, and to a
higher fee structure.

The following table summarizes the major components of non-interest
income for the year ended December 31, 1996 and for the period from October 2,
1995 (Bank Opening) to December 31, 1995.

1996 1995
---- ----
<S> <C> <C>
Service fees on deposit accounts $148,977 $ 2,005
Miscellaneous, other 43,738 1,810
-------- -------
Total non-interest income $192,715 $ 3,815
======== =======
</TABLE>

NON-INTEREST EXPENSE

Non-interest expense increased from $530,818 during 1995 to
$1,719,129 in 1996. As a percent of total average assets, non-interest
expenses increased from 2.68% to 3.55%. The primary reason for the increase in
non-interest expense is due to the fact that during 1995 the Company was fully
operational for only three months, while during 1996 it was operational for the
entire year. Below are the components of non-interest expense for the years
1996 and 1995.

<TABLE>
<CAPTION>
NON-INTEREST EXPENSE
--------------------

DECEMBER 31, FROM JANUARY 15, 1995
1996 TO DECEMBER 31, 1995
-------------- --------------------
<S> <C> <C>
Salaries and benefits $ 581,101 $ 191,947
Supplies and printing 56,089 83,471
Advertising and public relations 80,652 33,737
Legal and professional 56,844 23,656
Other operating expenses 404,443 198,007
-------------- ---------
Total non-interest expense $ 1,179,129 $ 530,818
============== =========
</TABLE>

During 1996, the allowance for loan loses grew from $110,000 to
$447,626. During 1996, the allowance for loan losses as a percent of gross
loans increased from 1.01% to 1.33%. Net charge-offs during

-20-
<PAGE> 22

1996 amounted to $8,374, or .02% of loans. There were no charge-offs during
1995. As of December 31, 1996, management considers the allowance for loan
losses to be adequate to absorb possible future losses. However, there can be
no assurance that charge-offs in future periods will not exceed the allowance
for loan losses or that additional provisions to the allowance will not be
required.

LIQUIDITY AND INTEREST RATE SENSITIVITY

Net interest income, the Company's primary source of earnings,
fluctuates with significant interest rate movements. To lessen the impact of
these margin swings, the balance sheet should be structured so that repricing
opportunities exist for both assets and liabilities in roughly equivalent
amounts at approximately the same time intervals. Imbalances in these
repricing opportunities at any point in time constitute interest rate
sensitivity.

Interest rate sensitivity refers to the responsiveness of interest
bearing assets and liabilities to changes in market interest rates. The rate
sensitive position, or gap, is the difference in the volume of rate sensitive
assets and liabilities, at a given time interval. The general objective of gap
management is to manage actively rate sensitive assets and liabilities so as to
reduce the impact of interest rate fluctuations on the net interest margin.
Management generally attempts to maintain a balance between rate sensitive
assets and liabilities as the exposure period is lengthened to minimize the
Company's overall interest rate risks.

The asset mix of the balance sheet is continually evaluated in terms
of several variables: yield, credit quality, appropriate funding sources and
liquidity. To effectively manage the liability mix of the balance sheet, there
should be a focus on expanding the various funding sources. The interest rate
sensitivity position at year-end 1996 is presented in the following table. The
difference between rate sensitive assets and rate sensitive liabilities, or the
interest rate sensitivity gap, is shown at the bottom of the table. Since all
interest rates and yields do not adjust at the same velocity, the gap is only a
general indicator of rate sensitivity.

<TABLE>
<CAPTION>
After After
three six After
Within months months one year After
three but within but within but within five
months six months one year five years years Total
---------- ---------- ---------- ------------ --------- -----------
(In Thousands)
EARNING ASSETS
<S> <C> <C> <C> <C> <C> <C>
Loans $ 16,036 $ 1,280 $ 2,104 $ 13,606 $ 513 $ 33,539

US Government and agency securities -- -- 701 1,786 165 2,652

Federal funds sold 3,827 -- -- -- -- 3,827
-------- -------- ------- -------- ------ --------

Total earning assets $ 19,863 $ 1,280 $ 2,805 $ 15,392 $ 678 $ 40,018
======== ======== ======= ======== ====== ========

SUPPORTING SOURCES OF FUNDS

Interest bearing demand
deposits and savings $ 12,908 $ -- $ -- $ -- $ $ 12,908

Certificates, less than $100M 1,935 1,847 2,307 2,290 114 8,493

Certificates, $100M and over 3,542 3,046 1,329 1,565 -- 9,482
-------- -------- ------- -------- ------- --------

Total interest bearing liabilities $ 18,385 $ 4,893 $ 3,636 $ 3,855 $ 114 $ 30,883
======== ======== ======= ======== ======= ========

Interest rate sensitivity gap $ 1,478 $ (3,613) $ (831) $ 11,537 $ 564 $ 9,135

Cumulative gap $ 1,478 $ (2,135) $(2,966) $ 8,571 $ 9,135 $ 9,135

Interest rate sensitivity gap ratio 1.08 .27 .77 3.99 5.95 1.30

Cumulative interest rate
sensitivity gap ratio 1.08 .91 .89 1.28 1.30 1.30
</TABLE>

-21-
<PAGE> 23

As evidenced by the table above, the Company is cumulatively asset
sensitive. In a declining interest rate environment, a liability sensitive
position (a gap ratio of less than 1.0) is generally more advantageous since
liabilities are repriced sooner than assets. Conversely, in a rising interest
rate environment, an asset sensitive position (a gap ratio over 1.0) is
generally more advantageous as earning assets are repriced sooner than the
liabilities. With respect to the Company, an increase in interest rate would
result in higher earnings while a decline in interest rates will reduce income.
This, however, assumes that all other factors affecting income remain constant.

As the Company continues to grow, management will continuously
structure its rate sensitivity position to best hedge against rapidly rising or
falling interest rates. The Bank's Asset/Liability Committee meets on a
quarterly basis and develops management's strategy for the upcoming period.
Such strategy includes anticipations of future interest rate movements.

Liquidity represents the ability to provide steady sources of funds
for loan commitments and investment activities, as well as to maintain
sufficient funds to cover deposit withdrawals and payment of debt and operating
obligations. These funds can be obtained by converting assets to cash or by
attracting new deposits. The Company's primary source of liquidity comes from
its ability to maintain and increase deposits through the Bank. Deposits grew
by $22.3 million during 1996 and by $15.4 million in 1995. Below are the
pertinent liquidity balances and ratios for the year ended December 31, 1996
and from the period from inception to December 31, 1995.

<TABLE>
<CAPTION>
DECEMBER 31, FROM JANUARY 15, 1995
1996 TO DECEMBER 31, 1995
---------------- --------------------
<S> <C> <C>
Cash and cash equivalents . . . . . . . . . . . $ 5,628,235 $6,768,244
Securities . . . . . . . . . . . . . . . . . . 2,652,000 2,654,406
CDS, over $100,000 to total deposits ratio . . 25.2% 9.3%
Loan to deposit ratio . . . . . . . . . . . . . 87.8% 71.0%
Brokered deposits . . . . . . . . . . . . . . . -- --
</TABLE>

At December 31, 1996, large denomination certificates accounted for
25.2% of total deposits. Large denomination CDS are generally more volatile
than other deposits. As a result, management continually monitors the
competitiveness of the rates it pays on its large denomination CDS and
periodically adjusts its rates in accordance with market demands. Significant
withdrawals of large denomination CDS may have a material adverse effect on the
Bank's liquidity. Management believes that since a majority of the above
certificates were obtained from Bank customers residing in Thomas County,
Georgia, the volatility of such deposits is lower than if such deposits were
obtained from depositors residing outside of Thomas County, as outside
depositors are more likely to be interest rate sensitive.

Cash and cash equivalents are the primary source of liquidity. At
December 31, 1996, cash and cash equivalents amounted to $5.6 million,
representing 12.9% of total assets. Securities available for sale provide a
secondary source of liquidity. Approximately $700,000 of the $2.6 million in
the Bank's securities portfolio is scheduled to mature in 1997.

Brokered deposits are deposit instruments, such as certificates of
deposit, deposit notes, bank investment contracts and certain municipal
investment contracts that are issued through brokers and dealers who then offer
and/or sell these deposit instruments to one or more investors. As of December
31, 1996, the Company had no brokered deposits in its portfolio.

Management knows of no trends, demands, commitments, events or
uncertainties that should result in or are reasonably likely to result in the
Company's liquidity increasing or decreasing in any material way in the
foreseeable future.

-22-
<PAGE> 24

CAPITAL ADEQUACY

There are now two primary measures of capital adequacy for banks and
bank holding companies: (i) risk-based capital guidelines and (ii) the
leverage ratio.

The risk-based capital guidelines measure the amount of a bank's
required capital in relation to the degree of risk perceived in its assets and
its off-balance sheet items. Note that under the risk-based capital
guidelines, capital is divided into two "tiers." Tier 1 capital consists of
common shareholders' equity, non-cumulative and cumulative (bank holding
companies only) perpetual preferred stock and minority interest. Goodwill is
subtracted from the total. Tier 2 capital consists of the allowance for loan
losses, hybrid capital instruments, term subordinated debt and intermediate
term preferred stock. Banks are required to maintain a minimum risk-based
capital ratio of 8.0%, with at least 4.0% consisting of Tier 1 capital.

The second measure of capital adequacy relates to the leverage
ratio. The OCC has established a 3.0% minimum leverage ratio requirement.
Note that the leverage ratio is computed by dividing Tier 1 capital into total
assets. For banks that are not rated CAMEL 1 by their primary regulator,
(which includes the subsidiary Bank), the minimum leverage ratio should be 3.0%
plus an additional cushion of at least 1 to 2 percent, depending upon risk
profiles and other factors.

A new rule was recently adopted by the Federal Reserve Board, the
OCC and the FDIC that adds a measure of interest rate risk to the determination
of supervisory capital adequacy. In connection with this new rule, the
agencies issued a joint policy statement of bankers, effective June 26, 1996,
to provide guidance on sound practices for managing interest rate risk. In the
policy statement, the agencies emphasize the necessity of adequate oversight by
a bank's Board of Directors and senior management and of a comprehensive risk
management process. The policy statement also describes the critical factors
affecting the agencies' evaluations of a bank's interest rate risk when making
a determination of capital adequacy. The agencies' risk assessment approach
used to evaluate a bank's capital adequacy for interest rate risk relies on a
combination of quantitative and qualitative factors. Banks that are found to
have high levels of exposure and/or weak management practices will be directed
by the agencies to take corrective action.

The table below illustrates the Bank's and Company's regulatory
capital ratios at December 31, 1996:

<TABLE>
<CAPTION>
MINIMUM
DECEMBER 31, REGULATORY
BANK 1996 REQUIREMENT
---- ---------------- -----------
<S> <C> <C>
Tier 1 Capital 15.7% 4.0%
Tier 2 Capital 1.2% --
---- ---

Total risk-based capital ratio 16.9% 8.0%
==== ===

Leverage ratio 12.4% 3.0%
---- ===

COMPANY - CONSOLIDATED
----------------------

Tier 1 Capital 16.9% 4.0%
Tier 2 Capital 1.2% --
---- ---

Total risk-based capital ratio 18.1% 8.0%
==== ===

Leverage ratio 13.4% 3.0%
---- ===
</TABLE>

The above ratios indicate that the capital positions of the Company
and the Bank are sound and that the Company is well positioned for future
growth.

-23-
<PAGE> 25

ACCOUNTING MATTERS

Statement of Financial Accounting Standard No. 107, "Disclosures
about Fair Value of Financial Instruments" ("SFAS 107"), requires the
disclosure on financial instruments of estimated fair values for those assets
and liabilities capable of being so estimated. Fair value estimates are made
at a specific point in time and are based on relevant market information which
is continuously changing. For entities with less than $150 million in assets,
SFAS 107 shall be effective for fiscal years ending after December 15, 1995.
The Company has adopted SFAS 107. The adoption of SFAS 107 did not have a
significant impact on the Company's financial condition or results of
operations for the year ended December 31, 1995.

Statement of Financial Accounting Standard No. 119, "Disclosure about
Derivative Financial Instruments and Fair Value of Financial Instruments"
("SFAS 119"), requires issuers and holders of derivative financial instruments
to disclose new information about these instruments. Derivatives are financial
instruments that derive their value from changes in a benchmark based on stock
prices, interest rates, commodity prices or some other agreed upon base.
Option contracts and forward contracts are two basic forms of derivatives. For
entities with less than $150 million in assets, SFAS 119 shall be effective for
fiscal years ending after December 15, 1995. The Company has adopted SFAS 119.
The adoption of SFAS 119 did not have a significant impact on the Company's
financial condition or results of operations for the year ended December 31,
1995.

Statement of Financial Accounting Standard No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of" ("SFAS 121"), establishes accounting standards for the impairment of
long-lived assets and certain identifiable intangibles, and goodwill related to
those assets. SFAS 121 requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. In performing the review for recoverability, the entity should
estimate the future cash flows expected to result from the use of the asset and
its eventual disposition. SFAS 121 requires the above assets and intangibles
to be reported at the lower of (i) carrying amount or (ii) fair value less
selling costs. SFAS 121 is effective for fiscal years beginning after
December 15, 1995. As of December 31, 1995, the Company had not adopted SFAS
121.

Statement of Financial Accounting Standard No. 122, "Accounting for
Mortgage Servicing Rights" ("SFAS 122"), requires a mortgage banking enterprise
to recognize rights to service mortgage loans for others as a separate asset.
A mortgage banking enterprise that acquires mortgage servicing rights through
either the purchase or origination of mortgage loans and sells or securities
those loans with servicing rights retained should allocate the total cost of
the mortgage loans to (i) the mortgage servicing rights and (ii) the loans
(without the mortgage servicing rights). The above allocation should be based
on the relative fair values of (i) and (ii) above, if it is practicable to
estimate those fair values. In the event one may not estimate the above fair
values, the entire cost of purchasing or originating the loans should be
allocated to the loans and no cost should be allocated to the mortgage
servicing rights. The provisions of SFAS 122 shall be applied prospectively in
fiscal years beginning after December 15, 1995. As of December 31, 1995, the
Company had not adopted SFAS 122.

-24-
<PAGE> 26

ITEM 7. FINANCIAL STATEMENTS

The following financial statements are filed with this report:

Independent Auditors' Report

Consolidated Balance Sheet - December 31, 1996 and 1995

Consolidated Statement of Income - Year ended December 31, 1996 and
Period from January 15, 1995 through December 31, 1995

Consolidated Statement of Changes in Shareholders' Equity - Year
ended December 31, 1996 and Period from January 15, 1995 through
December 31, 1995

Consolidated Statement of Cash Flows - Year ended December 31, 1996
and Period from January 15, 1995 through December 31, 1995

Notes to Consolidated Financial Statements

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

There has been no occurrence requiring a response to this Item.

-25-
<PAGE> 27

[FRANCIS & CO., CPAS LETTERHEAD]

REPORT OF INDEPENDENT ACCOUNTANTS

Board of Directors
Thomasville Bancshares, Inc.
Thomasville, Georgia

We have audited the accompanying consolidated balance sheets of
Thomasville Bancshares, Inc. (the "Company") and its subsidiary, Thomasville
National Bank (the "Bank') as of December 31, 1996 and 1995, and the related
consolidated statements of income, changes in shareholders' equity and cash
flows for the years then ended. 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 audits
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of the Company at December 31, 1996 and 1995, and the consolidated
results of its operations and cash flows for the years then ended in conformity
with generally accepted accounting principles.

/s/ Francis & Co., CPAs

Atlanta, Georgia
February 26, 1997

<PAGE> 28

THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------
1996 1995
----------- ----------
<S> <C> <C>
ASSETS
------
Cash and due from banks $ 1,801,255 $ 1,243,244
Federal funds sold (Note 3) 3,826,980 5,525,000
------------ -------------
Total cash and cash equivalents $ 5,628,235 $ 6,768,244
Securities, (Notes 2 & 4)
available-for-sale, at market value 2,652,000 2,654,406
Loans, net, including loans of $2,177,384
(1996) and $635,770 (1995) to Directors
(Notes 2, 5 & 6 & 13) $ 33,091,618 $ 10,832,537
Property and equipment, net (Notes 2 & 7) 1,913,536 643,727
Other assets 466,776 189,914
------------ -------------
Total Assets $ 43,752,165 $ 21,088,828
============ =============

LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Liabilities:
- ------------
Deposits
Non-interest bearing deposits $ 6,815,217 $ 4,379,633
Interest bearing deposits 30,882,302 11,028,833
------------ -------------
Total deposits (Note 9) $ 37,697,519 $ 15,408,466
Other liabilities 208,389 58,522
------------ -------------
Total Liabilities $ 37,905,908 $ 15,466,988
------------ -------------

Commitments and Contingencies
(Note 8)

Shareholders' Equity:
- ---------------------
Common stock, par value $1; 10,000,000
shares authorized; 600,000 shares
issued and outstanding $ 600,000 $ 600,000
Paid-in-capital 5,372,407 5,372,407
Retained deficit (119,995) (361,193)
Unrealized (loss) on securities available-for-sale (6,155) 10,626
------------- -------------
Total Shareholders' Equity $ 5,846,257 $ 5,621,840
------------- -------------
Total Liabilities and Shareholders' Equity $ 43,752,165 $ 21,088,828
============ =============
</TABLE>

Refer to notes to the consolidated financial statements.

27
<PAGE> 29

THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FROM JANUARY 15
YEAR ENDED THROUGH
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
Interest income:
- ----------------
Interest and fees on loans $ 2,234,844 $ 189,604
Interest on investment securities 153,611 26,011
Interest on federal funds sold 212,203 77,891
Interest from Escrow Agent - - 58,685
------------ ----------
Total interest income $ 2,600,658 $ 352,191

Interest expense:
- -----------------
Interest on deposits and borrowings (Note 10) 1,017,045 76,381
------------ ----------
Net interest income $ 1,583,613 $ 275,810
Provision for possible loan losses (Note 6) 346,000 110,000
------------ ----------
Net interest income after
provision for possible loan losses $ 1,237,613 $ 165,810
------------ ----------

Other income:
- -------------
Service fees on deposit accounts $ 148,977 $ 2,005
Miscellaneous, other 43,738 1,810
------------ ----------
Total other income $ 192,715 $ 3,815
------------ ----------

Other expense:
- --------------
Salaries $ 451,919 $ 145,771
Employee benefits 129,182 46,176

Supplies and printing 56,089 83,471

Advertising & public relations 80,652 33,737
Legal & professional 56,844 23,656

Depreciation and amortization 88,035 22,577
Other operating expenses (Note 11) 316,408 175,430
------------ ----------
Total other expense $ 1,179,129 $ 530,818
------------ ----------

Income/(Loss) before income taxes $ 251,199 $ (361,193)
Income taxes (Notes 2 & 12) 10,001 - -
------------ ----------

Net Income/(Loss) $ 241,198 $ (361,193)
============ ==========

Net Income/(Loss) per share (Note 2) $ .40 $ (.60)
============ ==========
</TABLE>

Refer to notes to the consolidated financial statements.

28
<PAGE> 30

THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FROM INCEPTION, JANUARY 15, 1995 TO DECEMBER 31, 1996

COMMON STOCK UNREALIZED
------------------- PAID-IN- RETAINED SECURITIES
SHARES PAR VALUE CAPITAL EARNINGS LOSSES TOTAL
------- --------- ----------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 15, 1995 - - $ - - $ - - $ - - $ - - $ - -

Sale of Stock 600,000 600,000 5,372,407 - - - - 5,972,407

Net income (loss) from
inception, January 15, 1995 to - - - - - - (361,193) - - (361,193)
December 31, 1995

Net unrealized gains securities - - - 10,626 10,626
------- ---------- --------- ----------- ------------ -----------

Balance December 31, 1995 600,000 $ 600,000 $5,372,407 $ (361,193) $ 10,626 $ 5,621,840
------- ---------- ---------- ----------- ------------ -----------

Net income, 1996 - - - - - - 241,198 - - 241,198

Net unrealized losses--securities - - - (16,781) (16,781)
------- -------- ---------- ----------- ------------ -----------

Balance, December 31, 1996 600,000 $ 600,000 $5,372,407 $ (119,995) $ (6,155) $ 5,846,257
======= ======== ========== =========== ============ ===========
</TABLE>

Refer to notes to the consolidated financial statements.

29
<PAGE> 31

THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
From January 15
Year ended through
December 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
- -------------------------------------
Net Income/(Loss) $ 241,198 $ (361,193)
Adjustments to reconcile net income to
net cash provided by operating activities:
Provisions for loan losses 346,000 110,000
Depreciation and amortization 88,035 22,577
Net accretion on securities 5,804 1,658
(Increase) in receivables and other assets (288,086) (192,720)
Increase in payables and other liabilities 149,867 58,522
------------ ------------
Net cash used by operating activities $ 542,818 $ (361,156)
------------ ------------

Cash flows from investing activities:
- -------------------------------------
Securities available-for-sale:
Purchase of securities $ (1,020,179) $ (2,645,438)
Maturity of securities 1,000,000 - -
(Increase) in loans, net (22,605,081) (10,942,537)
Purchase of premises and equipment (1,346,620) (663,498)
------------ ------------
Net cash used by investing activities $(23,971,880) $(14,251,473)
------------ ------------

Cash flows from financing activities:
- -------------------------------------
Sale of stock, net $ - - $ 5,972,407
Increase in deposits 22,289,053 15,408,466
------------ ------------
Net cash provided by financing activities $ 22,289,053 $ 21,380,873
------------ ------------

Net (decrease) in cash and cash equivalents $ (1,140,009) $ 6,768,244
Cash and cash equivalents,
beginning of period 6,768,244 - -
------------ ------------
Cash and cash equivalents, end of period $ 5,628,235 $ 6,768,244
============ ============

SUPPLEMENTAL INFORMATION:

Income taxes paid $ 10,001 $ - -
============ ============

Interest paid $ 920,719 $ 46,951
============ ============
</TABLE>

Refer to notes to the consolidated financial statements.

30
<PAGE> 32

THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996 AND 1995

NOTE 1 - ORGANIZATION OF THE BUSINESS

Thomasville Bancshares, Inc., Thomasville, Georgia (the "Company") was
organized in January, 1995 to serve as a holding company for a proposed de novo
bank, Thomasville National Bank, Thomasville, Georgia (the "Bank"). In a
public offering conducted during 1995, the Company sold and issued 600,000
shares of its own $1.00 par value common stock. Proceeds from such sale
amounted to $5,972,407, net of selling expenses. The Company obtained a
national bank charter from the Office of the Comptroller of the Currency (the
"OCC"), the Bank's primary regulator. The Company purchased 100 percent of the
Bank's shares by injecting $4.8 million into the Bank's capital accounts
immediately prior to commencement of banking operations on October 2, 1995.
Subsequently, the Company injected an additional $700,000 into the Bank's
capital accounts in 1996. The Bank's deposits are each insured up to $100,000
by the Federal Deposit Insurance Corporation.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Reclassification. The consolidated
financial statements include the accounts of the Company and the Bank. All
significant intercompany accounts and transactions have been eliminated in
consolidation. Certain prior year amounts have been reclassified to conform
to the current year presentation.

Basis of Accounting. The accounting and reporting policies of the
Company conform to generally accepted accounting principles and to general
practices in the banking industry. The Company uses the accrual basis of
accounting by recognizing revenues when earned and expenses when incurred,
without regarding the time of receipt or payment of cash.

Organizational Costs. In accordance with the Financial Accounting
Standards Board ("FASB") Statement No. 7, the Company and the Bank capitalized
all direct organizational costs that were incurred in the expectation that they
would generate future revenues or otherwise be of benefit after the Bank opened
for business. These capitalized costs are amortized over a sixty-month period
using the straight line method. As of December 31, 1996 and 1995, total
organizational costs, net of accumulated amortization, amounted to $42,090 and
$53,315, respectively.

Investment Securities. The Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investment in Debt and
Equity Securities" ("SFAS 115") on January 15, 1995. SFAS 115 requires
investments in equity and debt securities to be classified into three
categories:

31
<PAGE> 33

THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996 AND 1995

1. Held-to-maturity securities: These are securities which the
Company has the ability and intent to hold until maturity.
These securities are stated at cost, adjusted for amortization
of premiums and the accretion of discounts.

2. Trading securities: These are securities which are bought and
held principally for the purpose of selling in the near
future. Trading securities are reported at fair market value,
and related unrealized gains and losses are recognized in the
income statement.

3. Available-for-sale securities: These are securities which are
not classified as either held-to-maturity or as trading
securities. These securities are reported at fair market
value. Unrealized gains and losses are reported, net of tax,
as separate components of shareholders' equity. Unrealized
gains and losses are excluded from the income statement.

Loans, Interest and Fee Income on Loans. Loans are stated at the
principal balance outstanding. Unearned discount, unamortized loan fees and
the allowance for possible loan losses are deducted from total loans in the
statement of condition. Interest income is recognized over the term of the
loan based on the principal amount outstanding. Points on real estate loans
are taken into income to the extent they represent the direct cost of
initiating a loan. The amount in excess of direct costs is deferred and
amortized over the expected life of the loan.

Loans are generally placed on non-accrual status when principal or
interest becomes ninety days past due, or when payment in full is not
anticipated. When a loan is placed on non-accrual status, interest accrued but
not received is generally reversed against interest income. If collectibility
is in doubt, cash receipts on non-accrual loans are not recorded as interest
income, but are used to reduce principal.

Allowance for Possible Loan Losses. The provisions for loan losses
charged to operating expense reflect the amount deemed appropriate by
management to establish an adequate reserve to meet the present and foreseeable
risk characteristics of the current loan portfolio. Management's judgment is
based on periodic and regular evaluation of individual loans, the overall risk
characteristics of the various portfolio segments, past experience with losses
and prevailing and anticipated economic conditions. Loans which are determined
to be uncollectible are charged against the allowance. Provisions for loan
losses and recoveries on loans previously charged-off are added to the
allowance.

32
<PAGE> 34

THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996 AND 1995

The Company adopted Statement of Financial Accounting Standards No.
114, "Accounting by Creditors for Impairment of a Loan," ("SFAS 114") on
January 15, 1995. Under the new standard, a loan is considered impaired, based
on current information and events, if it is probable that the Company will be
unable to collect the scheduled payments of principal or interest when due
according to the contractual terms of the loan agreement. The measurement of
impaired loans is generally based on the present value of expected future cash
flows discounted at the historical effective interest rate, except that all
collateral-dependent loans are measured for impairment based on the fair value
of the collateral.

In October, 1994, FASB issued Statement of Financial Accounting
Standards No. 118, "Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosure" ("SFAS 118"). SFAS 118 amends SFAS 114 to allow a
creditor to use existing methods for recognizing interest income on an impaired
loan.

Property and Equipment. Building, furniture and equipment are stated
at cost, net of accumulated depreciation. Depreciation is computed using the
straight line method over the estimated useful lives of the related assets.
Maintenance and repairs are charged to operations, while major improvements are
capitalized. Upon retirement, sale or other disposition of property and
equipment, the cost and accumulated depreciation are eliminated from the
accounts, and gain or loss is included in income from operations.

Income Taxes. The consolidated financial statements have been
prepared on the accrual basis. When income and expenses are recognized in
different periods for financial reporting purposes and for purposes of
computing income taxes currently payable, deferred taxes are provided on such
temporary differences.

Effective January 15, 1995, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109").
Under SFAS 109, deferred tax assets and liabilities are recognized for the
expected future tax consequences of events that have been recognized in the
financial statements or tax return. Deferred tax assets and liabilities are
measured using the enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be realized or
settled.

Statement of Cash Flows. For purposes of reporting cash flows, cash
and cash equivalents include cash on hand, amounts due from banks and federal
funds sold. Generally, federal funds are purchased or sold for one day periods.

33
<PAGE> 35

THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996 AND 1995

Net Income/(Loss) Per Share. Net income/(loss) per share was
calculated using 600,000 as the average number of shares outstanding during
1996 and 1995.

NOTE 3 - FEDERAL FUNDS SOLD

The Bank is required to maintain legal cash reserves computed by
applying prescribed percentages to its various types of deposits. When the
Bank's cash reserves are in excess of the required amount, the Bank may lend
the excess to other banks on a daily basis. As of December 31, 1996 and 1995,
federal funds sold amounted to $3,826,980 and $5,525,000 respectively. The
funds were sold to seven and eleven banks at December 31, 1996 and 1995,
respectively.

NOTE 4 - SECURITIES AVAILABLE-FOR-SALE

The amortized costs and estimated market values of securities
available-for-sale as of December 31, 1996 follow:

<TABLE>
<CAPTION>
GROSS UNREALIZED ESTIMATED
AMORTIZED --------------------- MARKET
DESCRIPTION COSTS GAINS LOSSES VALUES
- ----------- ----- ----- ------ ------
<S> <C> <C> <C> <C>
U.S. Treasury
securities $ 2,496,325 $ 852 $(10,177) $ 2,487,000
FRB stock 165,000 - - - - 165,000
----------- ----- -------- -----------
Total securities $ 2,661,325 $ 852 $(10,177) $ 2,652,000
=========== ===== ======== ===========
</TABLE>

The amortized costs and estimated market values of securities
available-for-sale as of December 31, 1995 follow:

<TABLE>
<CAPTION>
GROSS UNREALIZED ESTIMATED
AMORTIZED --------------------- MARKET
DESCRIPTION COSTS GAINS LOSSES VALUES
- ----------- ----- ----- ------ ------
<S> <C> <C> <C> <C>
U.S. Treasury
securities $ 2,499,780 $ 10,626 $ - - $ 2,510,406
FRB stock 144,000 - - - - 144,000
----------- -------- -------- -----------
Total securities $ 2,643,780 $ 10,626 $ - - $ 2,654,406
=========== ======== ======== ===========

</TABLE>

34
<PAGE> 36

THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996 AND 1995

The amortized costs and estimated market values of securities
available-for-sale at December 31, 1996, by contractual maturity, are shown in
the following chart. 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.

<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED MARKET
DESCRIPTION COSTS VALUES
- ----------- ----- ------
<S> <C> <C>
Due in one year or less $ 700,934 $ 700,875
Due after one
through five years 1,795,391 1,786,125
FRB stock (no maturity) 165,000 165,000
------------ -----------
Total investment securities $ 2,661,325 $ 2,652,000
============ ===========
</TABLE>

There were no sales of securities during 1996 and 1995. As of
December 31, 1996, there were $903,000 in U.S. Treasury securities pledged as
collateral for public funds. At December 31, 1995, none of the securities was
pledged.

NOTE 5 - LOANS

The composition of net loans by major loan category, as of December
31, 1996 and 1995, is presented below:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
DESCRIPTION 1996 1995
- ----------- ------------ ------------
<S> <C> <C>
Commercial, financial, agricultural $ 16,484,185 $ 7,654,556
Real estate - construction 1,134,858 346,705
Real estate - mortgage 11,748,699 1,713,616
Installment 4,171,502 1,227,660
------------ ------------
Loans, gross $ 33,539,244 $ 10,942,537
Deduct:
Allowance for loan losses (447,626) (110,000)
------------ ------------
Loans, net $ 33,091,618 $ 10,832,537
============ ============
</TABLE>

As of December 31, 1996 and 1995, all loans were accruing interest.

35
<PAGE> 37

THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996 AND 1995

NOTE 6 - ALLOWANCE FOR POSSIBLE LOAN LOSSES

The allowance for possible loan losses is a valuation reserve
available to absorb future loan charge-offs. The allowance is increased by
provisions charged to operating expenses and by recoveries of loans which were
previously written-off. The allowance is decreased by the aggregate loan
balances, if any, which were deemed uncollectible during the year.

Activity within the allowance for loan losses account for the period
indicated below follows:

<TABLE>
<CAPTION>
FROM JANUARY 15
YEAR ENDED THROUGH
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
Balance, beginning of year $ 110,000 $ - -
Add: Provision for loan losses 346,000 110,000
Add: Recoveries of previously
charged off amounts - - - -
--------- ---------
Total $ 456,000 $ 110,000

Deduct: Amount charged-off (8,374) - -
--------- ---------
Balance, end of year $ 447,626 $ 110,000
========= =========
</TABLE>

NOTE 7 - PROPERTY AND EQUIPMENT

Furniture, equipment, and leasehold improvements are stated at cost
less accumulated depreciation. Components of property and equipment included
in the consolidated balance sheet at December 31, 1996 and 1995 were as
follows:

1996 1995
---- ----
<S> <C> <C>
Land $ 582,983 $ 444,026
Building 85,988 - -
Leasehold improvements - - 39,134
Furniture and equipment 224,317 180,338
---------- ---------
Subtotal $ 893,288 $ 663,498

Deduct: Accumulated depreciation (57,447) (19,771)
---------- ---------
Total fixed assets $ 835,841 $ 643,727
Add: Construction in progress 1,077,695 - -
---------- ---------
Total property and equipment $1,913,536 $ 643,727
========== =========
</TABLE>

36
<PAGE> 38

THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996 AND 1995

Depreciation expense for the years ended December 31, 1996 and 1995
amounted to $76,811 and 19,771, respectively. Depreciation is charged to
operations over the estimated useful lives of the assets. The estimated useful
lives and methods of depreciation for the principal items follow:

<TABLE>
<CAPTION>
TYPE OF ASSET LIFE IN YEARS DEPRECIATION METHOD
------------- ------------- -------------------
<S> <C> <C>
Furniture and equipment 5 to 7 Straight-line
Building 39 Straight-line
</TABLE>

Construction in progress relates to costs incurred during 1996 which
were associated with the Company's future headquarters. Construction was
completed during the first quarter of 1997.

NOTE 8 - COMMITMENTS AND CONTINGENCIES

Please refer to Note 13 concerning contracts the Company executed with
the Bank's president and executive vice president.

Please refer to Note 14 concerning financial instruments with
off-balance sheet risk.

NOTE 9 - DEPOSITS

The following is a detail of the deposit accounts at December 31, 1996
and 1995:

<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
Non-interest bearing deposits $ 6,815,217 $ 4,379,633
Interest bearing deposits:
NOW accounts 4,372,728 2,481,851
Money market accounts 7,841,663 4,800,159
Savings 693,560 313,585
Time, less than $100,000 8,492,621 2,007,499
Time, $100,000 and over 9,481,730 1,425,739
------------ ------------
Total deposits $ 37,697,519 $ 15,408,466
============ ============
</TABLE>

37
<PAGE> 39

THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996 AND 1995

NOTE 10 - INTEREST ON DEPOSITS AND BORROWINGS

A summary of interest expense for the year ended December 31, 1996 and
for the period from January 15, 1995 to December 31, 1995 follows:
<TABLE>
<CAPTION>
FROM JANUARY 15
YEAR ENDED THROUGH
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
Interest on NOW and Super NOW accounts $ 103,902 $ 9,443
Interest on money market accounts 212,599 31,421
Interest on savings accounts 18,326 1,811
Interest on CDs under $100,000 314,958 19,751
Interest on CDs $100,000 and over 367,260 8,656
Interest, other borrowings - - 5,299
------------ ---------
Total interest on deposits and borrowings $ 1,017,045 $ 76,381
============ =========
</TABLE>

NOTE 11 - OTHER OPERATING EXPENSES

A summary of other operating expenses for the year ended December 31,
1996 and for the period from January 15, 1995 to December 31, 1995 follows:

<TABLE>
<CAPTION>
FROM JANUARY 15
YEAR ENDED THROUGH
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
Postage and delivery $ 25,087 $ 2,039
Data processing 24,749 10,198
Rent expense 27,690 16,761
Travel and entertainment 20,168 14,351
Utilities and telephone 19,100 13,668
ATM fees 21,153 11,067
Repairs, maint. & service contracts 24,935 8,357
All other operating expenses 153,526 98,989
--------- ---------
Total other operating expenses $ 316,408 $ 175,430
========= =========
</TABLE>

NOTE 12 - INCOME TAXES

For the period from inception, January 15, 1995 to December 31, 1995,
net (loss) for tax purposes amounted to $(289,645). The net operating loss
carry forward ("NOL") of $289,645 can be utilized to reduce future tax
liability. For the year ended December 31, 1996, the entire NOL was utilized
to reduce the tax liability by $97,895.

38
<PAGE> 40

THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996 AND 1995

The provision for income taxes for the years ended December 31, 1996
and 1995 consists of the following:

<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Income tax:
Currently payable $ 107,896 $ - -
Deferred (97,895) - -
---------- ----------
Income tax expense $ 10,001 $ - -
========== ==========
</TABLE>

The components of the deferred income tax provision for December 31,
1996 and 1995 follow:

1996 1995
---------- ----------
<S> <C> <C>
Net operating loss carry forward $ (97,895) $ 97,895
Valuation reserve - - (97,895)
---------- ----------
Total $ (97,895) $ - -
========== ==========
</TABLE>

A reconciliation of federal statutory income taxes to the Company's
actual income tax provision follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
<S> <C>
Income taxes at statutory rate (34%) $ 100,864
Net operating loss carry forward (97,895)
Other 7,032
---------

Total $ 10,001
=========
</TABLE>

Included under other assets at December 31, 1996 is a net deferred tax
asset in the amount of $3,170. The tax effects of the temporary differences
that comprise the net deferred tax asset follow:
<TABLE>

<S> <C>
Deferred tax assets:
Unrealized loss, securities $ 3,170
Provision for loan losses 32,389
Depreciation 2,591
Contributions 2,861
Valuation allowance (37,841)
---------
Net deferred tax asset $ 3,170
=========
</TABLE>

39
<PAGE> 41

THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996 AND 1995

NOTE 13 - RELATED PARTY TRANSACTIONS

Stock Options. The Employment Agreements with the Bank's president
and executive vice president provide for the grant of stock options for each to
acquire 15,000 shares of the Company's common stock upon the Bank's
commencement of business at a purchase price equal to $10.00 per share. Such
options will become exercisable at the rate of 3,000 shares per year and shall
remain exercisable for ten years after the date of initial grant, so long as
each remains employed by the Bank.

Employment Agreements. On March 7, 1995, the Company entered into
employment agreements with two of its directors who serve as the president and
executive vice president of the Bank. Both agreements are for a three year
terms. The agreements provide for health and disability insurance, other
customary benefits and, as discussed above, the granting of stock options.

The agreement with the president provides for an annual base salary of
$75,000 increasing to $85,000 per year when the Bank becomes profitable on a
cumulative basis. The employment agreement provides that during its term, the
president will be entitled to an annual bonus of 5% of the Bank's pretax
profits based on a formula determined by the Bank's Board of Directors;
provided however that the bonus may not exceed 30% of his annual salary. The
agreement with the executive vice president provides for an annual base salary
of $65,000 increasing to $75,000 per year when the Bank becomes profitable on a
cumulative basis. The employment agreement provides that during its term, the
executive vice president will be entitled to an annual bonus of 5% of the
Bank's pretax profits based on a formula determined by the Bank's Board of
Directors; provided however that the bonus shall not exceed 30% of his annual
salary. For the year ended December 31, 1996, the Company incurred expenses
for salary and benefits as follows: (i) for the president: $93,051; and (ii)
for the executive vice president: $81,627.

Compensation of Directors. In March 1996, the Board of Directors of
the Company approved a deferred compensation plan (the "Plan") for the Company's
and Bank's directors which grants to each member restricted shares of the
Company's common stock as follows: (a) five shares for each Bank or Company
committee meeting attended and (b) ten shares for each Bank or Company Board of
Directors meeting attended. Shares of restricted stock granted pursuant to the
Plan shall not vest until the earlier to occur of (a) the retirement of the
director from the Company's Board of Directors, or (b) a change in control of
the Company. As of December 31, 1996, the Company granted 1,460 such restricted
stocks to members of the Bank's or Company's Board of Directors.

40
<PAGE> 42

THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996 AND 1995

Borrowings and Deposits by Directors and Executive Officers. Certain
directors, executive officers and companies with which they are affiliated, are
customers of and have banking transactions with the Bank in the ordinary course
of business. As of December 31, 1996, loans outstanding to directors, their
related interests and executive officers aggregated $2,177,384. These loans
were made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable arms-length
transactions.

A summary of loan transactions with directors, including their
affiliates, and executive officers during 1996 and 1995 follows:
<TABLE>
<CAPTION>
FROM JANUARY 15
YEAR ENDED THROUGH
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
Balance, beginning of year $ 635,770 $ - -
New loans 1,654,140 718,568
Less: loan payments (112,526) (82,798)
------------ -----------
Balance, end of year $ 2,177,384 $ 635,770
============ ===========
</TABLE>

Deposits by directors and their related interests, at December 31,
1996 and 1995, approximated $4,205,433 and $761,003, respectively.

NOTE 14 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

In the ordinary course of business, and to meet the financing needs of
its customers, the Company is a party to various financial instruments with
off-balance sheet risk. These financial instruments, which include commitments
to extend credit and standby letters of credit, involve, to varying degrees,
elements of credit and interest rate risk in excess of the amounts recognized
in the balance sheets. The contract amount of those instruments reflects the
extent of involvement the Company has in particular classes of financial
instruments.

The Company's exposure to credit loss in the event of nonperformance
by the other party to the financial instrument for commitments to extend credit
and standby letters of credit is represented by the contractual amounts of
those instruments. The Company uses the same credit policies in making
commitments and conditional obligations as it does for on-balance sheet
instruments.

Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any material condition established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require the payment of a fee.

41
<PAGE> 43

THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996 AND 1995

At December 31, 1996 and 1995, unfunded commitments to extend credit were
$5,430,822 and $1,316,500, respectively. The Company evaluates each customer's
credit worthiness on a case-by-case basis. The amount of collateral obtained,
if deemed necessary by the Company upon extension of credit, is based on
management's credit evaluation of the borrower. Collateral varies but may
include accounts receivable, inventory, property, plant and equipment, farm
products, livestock and income producing commercial properties.

At December 31, 1996 and 1995, there were $143,500 and zero
commitments under letters of credit, respectively. The credit risk involved in
issuing letters of credit is essentially the same as that involved in extending
loan facilities to customers. Collateral varies but may include accounts
receivable, inventory, equipment, marketable securities and property. Since
most of the letters of credit are expected to expire without being drawn upon,
they do not necessarily represent future cash requirements.

The Company makes commercial, agricultural, real estate and consumer
loans to individuals and businesses located in and around Thomas County,
Georgia. The Company does not have a significant concentration of credit risk
with any individual borrower. However, a substantial portion of the Company's
loan portfolio is collateralized by real estate and chattel mortgages located
in and around Thomas County, Georgia.

NOTE 15 - FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107, "Disclosures
About Fair Value of Financial Instruments" ("SFAS 107"), requires the
disclosure of estimated fair values for all financial instruments, both
on-and-off balance sheet assets and liabilities, whose values may be
practically estimated, along with pertinent information on those financial
instruments whose values may not be so estimated.

Fair value estimates are made at a specific point in time and are
based on relevant market information which is continuously changing. Because
no quoted market prices exist for a significant portion of the Company's
financial instruments, fair values for such instruments are based on
management's assumptions with respect to future economic conditions, estimated
discount rates, estimates of the amount and timing of future cash flows,
expected loss experience and other factors. These estimates are subjective in
nature involving uncertainties and matters of significant judgment. Therefore,
they cannot be determined with precision. Note that changes in the assumption
could significantly affect the estimates. The following disclosures should not
be considered a substitute for the liquidation value of the Company and its
subsidiary, but rather a good-faith estimate of the increase or decrease in

42
<PAGE> 44

THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996 AND 1995

value of financial instruments held by the Company since purchase, origination
or issuance. The Company has not undertaken any steps to value any assets or
liabilities that are not considered financial instruments. For example,
premises, equipment, core deposits, intangibles and goodwill are not considered
financial instruments.

The following methods and assumptions were used by the Company in
estimating the fair value of its financial instruments.

1. Cash and due from banks and interest bearing deposits with other
banks: Fair value equals the carrying value of such assets.

2. Investment securities and investment securities
available-for-sale: Fair values for investment securities are based on quoted
market prices.

3. Federal funds sold and securities purchased under agreements to
resell: Due to the short term nature of these assets, the carrying values of
these assets approximate their fair value.

4. Loans: For variable rate loans, (those repricing within six months
or less) fair values are based on carrying values. Fixed rate commercial
loans, other installment loans and certain real estate mortgage loans were
valued using discounted cash flows. The discount rate used to determine the
present value of these loans was based on interest rates currently being
charged by the Company on comparable loans as to credit risk and term.

5. Off-balance sheet instruments: The Company's loan commitments are
negotiated at current market rates and are relatively short-term in nature and,
as a matter of policy, the Company generally makes commitments for fixed rate
loans for relatively short periods of time. Therefore, the estimated value of
the Company's loan commitment approximates carrying amount.

6. Deposit liabilities: The fair values of demand deposits are, as
required by SFAS 107, equal to the carrying value of such deposits. Demand
deposits include non-interest bearing deposits, savings accounts, NOW accounts
and money market demand accounts.

Discounted cash flows have been used to value fixed rate term deposits
and variable rate term deposits having reached an interest rate floor. The
discount rate used is based on interest rates currently being offered by the
Company on comparable deposits as to amount and term.

43
<PAGE> 45

THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996 AND 1995

<TABLE>
<CAPTION>
DECEMBER 31, 1996
CARRYING ESTIMATED
AMOUNT FAIR VALUE
------------- ---------------
<S> <C> <C> <C>
ASSETS:
Cash and due from banks $ 1,801,255 $ 1,801,255
Investment securities
available-for-sale 2,652,000 2,652,000
Federal funds sold 3,826,980 3,826,980
Loans 33,091,618 33,026,114
LIABILITIES:
Non-interest bearing deposits $ 6,815,217 $ 6,815,217
Interest bearing deposits 30,882,302 30,893,700
</TABLE>

NOTE 16 - DIVIDENDS

There are no current plans to initiate payment of cash dividends and
future dividend policy will depend on the Bank's and Company's earnings,
capital requirements, financial condition and other factors considered relevant
by the Company's board of directors. In addition, the Bank and the Company are
restricted by their primary regulators in their ability to pay cash dividends.

NOTE 17 - PARENT COMPANY FINANCIAL INFORMATION

This information should be read in conjunction with the other notes to
the consolidated financial statements.

44
<PAGE> 46

THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996 AND 1995

PARENT COMPANY BALANCE SHEETS
-----------------------------

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1995
---- ----
ASSETS
------
<S> <C> <C>
Cash $ 269,568 $ 1,144,747
Investment in the Bank 5,405,942 4,469,541
Property and Equipment 183,838 - -
Other assets 10,125 17,825
----------- -----------
Total Assets $ 5,869,473 $ 5,632,113
=========== ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Accounts payable $ 23,216 $ 10,273
----------- -----------
Total Liabilities $ 23,216 $ 10,273
----------- -----------

Common stock $ 600,000 $ 600,000
Paid-in-capital 5,372,407 5,372,407
Retained earnings (119,995) (361,193)
Unrealized gain on securities (6,155) 10,626
----------- -----------
Total Shareholders' Equity $ 5,846,257 $ 5,621,840
----------- ----------
Total Liabilities
and Shareholders' Equity $ 5,869,473 $ 5,632,113
=========== ===========
</TABLE>

45
<PAGE> 47

THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996 AND 1995

PARENT COMPANY STATEMENTS OF OPERATIONS
---------------------------------------

<TABLE>
<CAPTION>
FROM JANUARY 15
YEAR ENDED THROUGH
DECEMBER 31, 1996 DECEMBER 31,1995
----------------- ----------------
<S> <C> <C>
Revenues:
- ---------
Interest income $ 11,896 $ 70,858
Rental Income 18,281 - -
--------- ----------
Total revenues $ 30,177 $ 70,858
--------- ----------

Expenses:
- ---------
Management fees $ - - $ 55,000
Interest expense - - 5,299
Depreciation and Amortization 4,850 675
Other expenses 37,310 29,992
--------- ----------
Total expenses $ 42,160 $ 90,966
--------- ----------

(Loss) before earnings/equity in
undistributed losses of Bank $ (11,983) $ (20,108)
Equity in undistributed earnings/
(losses) of Bank 253,181 (341,085)
--------- ----------
Net Income/(Loss) $ 241,198 $ (361,193)
========= ==========
</TABLE>

46
<PAGE> 48

THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996 AND 1995

PARENT COMPANY STATEMENTS OF CASH FLOWS
---------------------------------------

<TABLE>
<CAPTION>
FROM JANUARY 15
YEAR ENDED THROUGH
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
- -------------------------------------
Net Income/(Loss) $ 241,198 $ (361,193)
Adjustments to reconcile net income to
net cash provided by operating activities
Equity in undistributed Income/
(losses) of the Bank (253,181) 341,085
Amortization of organization costs 4,850 675
(Decrease) in other assets 4,999 (18,500)
Increase in payables 12,943 10,273
------------- ------------
Net cash used by operating activities $ 10,809 $ (27,660)
------------- ------------

Cash flows from investing activities:
- -------------------------------------
Purchase of Building (185,988) - -
Purchase of Bank stock $ (700,000) $ (4,800,000)
------------- ------------
Net cash used by investing activities $ (885,988) $ (4,800,000)
------------- ------------

Cash flows from financing activities:
- -------------------------------------
Proceeds from sale of stock, net $ - - $ 5,972,407
------------- ------------
Net cash provided from financing activities $ - - $ 5,972,407
------------- ------------

Net (decrease) in cash
and cash equivalents $ (875,179) $ 1,144,747
Cash and cash equivalents,
beginning of year 1,144,747 - -
------------- ------------

Cash and cash equivalents, end of year $ 269,568 $ 1,144,747
============= ============
</TABLE>

47
<PAGE> 49

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

The directors and executive officers of the Company are as follows:

<TABLE>
<CAPTION>
Position with
Name Company
-------------------------------------- -------------------------------------------
<S> <C>
Charles A. Balfour Class I Director

Clifford S. Campbell, Jr. Class I Director

Stephen H. Cheney President, Chief Executive Officer and
Class I Director

Charles E. Hancock, M.D. Class II Director

Charles H. Hodges, III Executive Vice President and Class II
Director

Harold L. Jackson Class II Director

Charles W. McKinnon, Jr. Class III Director

Cochran A. Scott, Jr. Class III Director

Richard L. Singletary, Jr. Class III Director
</TABLE>

Each of the above persons has been a director of the Company since
March 31, 1995. The Company has a classified Board of Directors whereby
one-third of the members will be elected each year at the Company's Annual
Meeting of Shareholders. Upon such election, each director of the Company will
serve for a term of three years. The Company's officers are appointed by the
Board of Directors and hold office at the will of the Board.

CHARLES A. BALFOUR, age 33, served as Vice President of Balfour
Pulpwood Company, Inc., a family-owned business, from 1989 to 1994 and since
1994, has served as President. From 1992 to January 1995, he served on the
Advisory Board of Directors of Trust Company Bank of South Georgia, N.A. He is
presently a member of the Balfour Foundation, which supports a wide array of
community and charitable organizations.

CLIFFORD S. CAMPBELL, JR., age 68, has been retired since 1989. From
1969 to 1989, he was the Chairman, President and Chief Executive Officer of C&S
Bank of Thomas County and subsequently C&S National Bank - Thomasville. For
fifteen years prior to 1969, Mr. Campbell held numerous positions with both
Trust Company Bank of Georgia in Atlanta and the C&S Bank of Albany. Mr.
Campbell remains active in numerous civic affairs. He is currently a member of
the Board of Directors and past Chairman of Archbold Medical Center. He also
serves on the Boards of Thomasville Rotary Club, Thomas County Historical
Society and the Thomasville/Thomas County Chamber of Commerce, each of which he
is past President. Mr. Campbell also served as a member of the Thomasville
City Board of Education.

STEPHEN H. CHENEY, age 38, has served as President of the Company
since its inception in March 1995. Mr. Cheney joined Trust Company Bank of
South Georgia, N.A. in February 1985, and from 1987 to January 1995, served as
President of the Thomasville Division. From 1981 to 1985, Mr. Cheney spent two
years with an accounting firm and two years in private business. In addition
to his profession, Mr. Cheney is presently a member of the Thomasville Payroll
Development Authority, the Industrial Development Committee

-48-
<PAGE> 50

and Thomasville Team 2000. He is also immediate past Chairman of the
Thomasville/Thomas County Chamber of Commerce and former Vice Chairman of the
Thomasville Housing Authority.

CHARLES E. HANCOCK, M.D., age 37, is a Board Certified Orthopedic
Surgeon in private practice in Thomasville, Georgia at the Thomasville
Orthopedic Center where he has practiced since 1991 and he is currently a
managing partner. He is a member of The American Academy of Orthopedic
Surgeons. Dr. Hancock is also affiliated with the Archbold Medical Center and
the Medical Association of Georgia. He currently serves on the Board of the
Thomasville Rotary Club and the Thomasville Y.M.C.A.

CHARLES H. HODGES, III, age 31, has served as Executive Vice
President of the Company since its inception in January 1995. Mr. Hodges
joined C&S National Bank (now NationsBank) in Atlanta, Georgia in March 1986,
and was promoted to Credit Manager in the Factoring Division where he served
until July 1987. From July 1987 to January 1995, he served as Vice President
of the Thomasville Division of Trust Company Bank of South Georgia, N.A. In
addition, Mr. Hodges serves as treasurer and board member of several key
organizations, including United Way, Downtown Development Authority,
Thomasville Ducks Unlimited, Thomasville Mainstreet, and Thomasville Music and
Drama Troupe.

HAROLD L. JACKSON, age 48, is the President and General Manager of
Petroleum Products, Inc., a distributor of fuel and oil products to retail,
industrial and agricultural customers throughout South Georgia. From 1992 to
January 1995, Mr. Jackson served as a member of the Advisory Board of Directors
of Trust Company Bank of South Georgia, N.A. He is also a member and past
President of the Thomasville Shriners Club and is a member of the Masonic
Lodge.

CHARLES W. MCKINNON, JR., age 62, is the Owner/Broker of First
Thomasville Realty, Ltd., one of the largest real estate companies in Southwest
Georgia. He has been actively involved in selling and developing shopping
centers, food stores, office buildings and warehouses. His civic and
professional leadership roles, past and present, include City Commissioner,
director of NationsBank, director of Industrial Development for City of
Thomasville, director of Thomasville/Thomas County Chamber of Commerce, member
of Georgia Development Council, lifetime membership in Thomasville Area Board's
Million Dollar Club, Real Estate Leaders of America, International Council of
Shopping Centers, National Association of Realtors, and Farm and Land
Institute.

COCHRAN A. SCOTT, JR., age 40, has served as President of Scott
Hotels, Inc. since 1996 and from 1987 to 1995 was the President of C.A. Scott
Construction Co., a commercial contracting firm specializing in roofing
systems. Mr. Scott served on the Advisory Board of Directors of Trust Company
Bank of South Georgia, N.A. for six years until resigning in January 1995. He
is presently a member of the Board of Directors of the Thomasville/Thomas
County Chamber of Commerce and City of Thomasville Contractor Board.

RICHARD L. SINGLETARY, JR., age 37, joined First National Bank of
Atlanta in 1982 where he advanced to Commercial Loan Officer before leaving to
work for Sing Oil Company in 1985. After Sing Oil Company was sold to Amoco
Oil Company in 1990, he began developing residential and multi-family real
estate in Tallahassee, Florida. Today, he is the President of four development
companies. Mr. Singletary is also a member of the Thomasville City Council,
The Brookwood School Board of Directors, and is a former member of the Advisory
Board of Directors of Trust Company Bank of South Georgia, N.A.

There are no family relationships between any director or executive
officer and any other director or executive officer of the Company.

The Company is not subject to the requirement of Section 16 of the
Securities Exchange Act of 1934, as amended.

ITEM 10. EXECUTIVE COMPENSATION

The following table provides certain summary information for the
fiscal years ended December 31, 1996 and 1995 concerning compensation paid or
accrued by the Company to or on behalf of the Company's Chief Executive
Officer. None of the other executive officers of the Company had total annual
salary and bonus which exceeded $100,000 during the last fiscal year.

-49-
<PAGE> 51

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
Long Term Compensation

Name and Annual Compensation Restricted Number of All other
Principal -------------------------- Stock Options Compen-
Position Year Salary Bonus Awards ($) Awarded sation(1)
-------- ---- ------ ----- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Stephen H. Cheney 1996 $75,000 $15,000 $1,864(2)(3) -- $1,250
President and Chief
Executive Officer 1995 65,500 -- $ 450(2) 15,000 $ --

</TABLE>
- --------------------------
(1) Represents matching contributions under the Company's 401(k) plan.
(2) Represents earned but unissued shares of restricted stock granted at
various times during fiscal 1996 and 1995 pursuant to the directors'
deferred compensation plan. Because there is no organized trading
market for the Company's Common Stock, the dollar value of the
restricted stock awarded in 1996 was computed by reference to the
average book value of the Company's Common Stock during fiscal 1996
and the dollar value of the restricted stock awarded in 1995 was
computed by reference to the offering price per share of Common Stock
of the Company in a public offering of Common Stock completed in
1995. See "--Compensation of Directors."
(3) During fiscal 1996, Mr. Cheney earned an aggregate of 195 shares of
restricted Common Stock pursuant to the directors' deferred
compensation plan, the fair market value of which was $1,899 as of
December 31, 1996. Because there is no organized trading market for
the Company's Common Stock, fair market value was calculated by
reference to the book value of the Company's Common Stock as of
December 31, 1996. See "--Compensation of Directors."

EMPLOYMENT AGREEMENT

On March 7, 1995, the organizers of the Company entered into a
three-year Employment Agreement with Stephen H. Cheney, pursuant to which Mr.
Cheney will be paid an annual salary of $75,000, which will be increased to
$85,000 per year by the Bank's Board of Directors if the Bank becomes
profitable on a cumulative basis. The Employment Agreement provides that
during its term, Mr. Cheney will be entitled to an annual bonus of 5% of the
Bank's pretax profits based on a formula determined by the Bank's Board of
Directors, such bonus not to exceed 30% of his annual salary. The Employment
Agreement provides for the grant of stock options to acquire 15,000 shares of
the Company's Common Stock upon the Bank's commencement of business at a
purchase price equal to $10.00 per share. Such options will become exercisable
at the rate of 3,000 shares per year so long as Mr. Cheney remains employed by
the Bank and shall remain exercisable for ten years after the date of initial
grant.

The Employment Agreement also provides that Mr. Cheney shall receive
the use of an automobile and such other benefits as the Company generally makes
available to its senior executives.

Mr. Cheney has agreed to a non-compete and non-solicitation
provision, pursuant to which he agrees that through the actual date of
termination of the Employment Agreement and for a period of five years
thereafter, he shall not, without the prior written consent of the Company,
within Thomas County, Georgia, be employed in the banking business in any
capacity. Mr. Cheney has also agreed that during such period, he will not,
without the prior written consent of the Bank, employ or attempt to employ any
employees of the Bank or cause an employee of the Bank to work elsewhere.

The Employment Agreement provides that the Company may terminate Mr.
Cheney for any reason upon majority vote of the Board of Directors of the
Company and the Bank.

-50-
<PAGE> 52

On March 7, 1995, the organizers of the Company entered into a
three-year Employment Agreement with Charles H. Hodges, III, containing
identical provisions to the Employment Agreement entered into with Mr. Cheney,
except that Mr. Hodges' annual salary is $65,000 per year, which will be
increased to $75,000 if the Bank becomes profitable on a cumulative basis. All
the other provisions of Mr. Hodges' Employment Agreement are identical to Mr.
Cheney's.

No other officers or directors of the Company have received any cash
compensation for services to the Company.

COMPENSATION OF DIRECTORS

In March 1996 the Board of Directors of the Company approved a
deferred compensation plan (the "Directors' Plan") for the Company's directors
calling for the issuance of restricted stock grants to directors to compensate
each director for each Board meeting and Committee meeting attended. The
Directors' Plan provides that each director is deemed to have earned shares of
restricted stock in the amount of five shares of the Company's Common Stock for
each Bank and each Company Committee meeting attended and ten shares for each
Bank and each Company Board of Directors meeting attended. The shares of
restricted stock earned pursuant to the terms of the Directors' Plan do not
vest and will not be granted until the earlier to occur of either the
retirement of the director from the Company's Board of Directors or a change in
control of the Company. One of the Company's directors has elected not to
participate in the Directors' Plan and has elected to receive in lieu of
restricted stock $100 for each Bank and Company Board of Directors meeting
attended and $50 for each Bank and Company Committee meeting attended. During
fiscal 1996, an aggregate of 1,215 shares of restricted stock were earned under
the Directors' Plan.

STOCK OPTIONS

No stock options were granted to the Chief Executive Officer during
the fiscal year ended December 31, 1996. The following table presents
information regarding the value of unexercised options held at December 31,
1996 by Stephen H. Cheney. No stock options were exercised and there were no
SARs outstanding during fiscal 1996.
<TABLE>
<CAPTION>
NUMBER OF
UNEXERCISED OPTIONS VALUE OF UNEXERCISED
AT FY-END IN-THE-MONEY OPTIONS
(#) AT FY-END
------------------- --------------------
EXERCISABLE/ EXERCISABLE (1)/
NAME UNEXERCISABLE UNEXERCISABLE
---- ------------- -------------
<S> <C> <C>
Stephen H. Cheney 3,000/12,000 $0/$0
</TABLE>

____________________

(1) Dollar values calculated by determining the difference between the
estimated fair market value of the Company's Common Stock at December 31,
1996 ($9.74) and the exercise price of such options. Because no organized
trading market exists for the Common Stock of the Company, the fair market
value was computed by reference to the book value of the Common Stock as of
December 31, 1996.

-51-
<PAGE> 53

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information as of March 15,
1997 with respect to ownership of the outstanding Common Stock of the Company
by (i) all persons known by the Company to beneficially own more than 5% of the
outstanding shares of Common Stock of the Company, (ii) each director of the
Company, and (iii) all executive officers and directors of the Company as a
group.

<TABLE>
<CAPTION>
Name of Number of Percent of
Beneficial Owner Shares(1) Total
---------------- --------- ----------
<S> <C> <C>
Charles A. Balfour 10,000 (2) 1.7%

Clifford S. Campbell, Jr. 1,150 (3) *

Stephen H. Cheney 26,013 (4) 4.3%

Charles E. Hancock, M.D. 10,000 1.7%

Charles H. Hodges, III 15,861(5) 2.6%

Harold L. Jackson 10,000 1.7%

Charles W. McKinnon, Jr. 10,000 (6) 1.7%

Cochran A. Scott, Jr. 14,000 (7) 2.3%

Richard L. Singletary, Jr. 40,455 (8) 6.7%
------- ----

All Directors and Officers as a
Total (9 persons) 137,479 22.5%
</TABLE>

* Less than 1% of shares outstanding.

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

(1) Except as otherwise indicated, each person named in this table
possesses sole voting and investment power with respect to the shares
beneficially owned by such person. "Beneficial Ownership" includes
shares for which an individual, directly or indirectly, has or shares
voting or investment power or both and also includes options which are
exercisable within sixty days of the date hereof. Beneficial
ownership as reported in the above table has been determined in
accordance with Rule 13d-3 of the Securities Exchange Act of 1934.
The percentages are based upon 600,000 shares outstanding, except for
certain parties who hold presently exercisable options to purchase
shares. The percentages for those parties who hold presently
exercisable options are based upon the sum of 600,000 shares plus the
number of shares subject to presently exercisable options held by
them, as indicated in the following notes.
(2) Includes 2,000 shares held by Mr. Balfour as custodian for his
children.
(3) Represents shares held in Mr. Campbell's individual retirement
account.
(4) Includes 6,000 shares subject to presently exercisable stock options,
2,952 shares held in Mr. Cheney's individual retirement account, 361
shares held in Mr. Cheney's wife's individual retirement account and
15,000 shares held in Mr. Cheney's father's individual retirement
account for the benefit of Mr. Cheney.
(5) Includes 6,000 shares subject to presently exercisable stock options,
5,044 shares held in Mr. Hodges' individual retirement account, 827
shares held by Mr. Hodges as custodian for his children and 2,900
shares owned jointly with his wife.
(6) Includes 6,100 shares held in Mr. McKinnon's individual retirement
account.
(7) Includes 9,000 shares owned by Mr. Scott's wife and 5,000 shares held
in Mr. Scott's individual retirement account.
(8) Includes 2,623 shares held in Mr. Singletary's individual retirement
account, 3,900 shares held as custodian for his children, 5,000 shares
owned by Mr. Singletary's wife and 4,743 shares held in Mr.
Singletary's wife's individual retirement account. Mr. Singletary's
address is 102 Chukkars Drive, Thomasville, Georgia 31792.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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

-52-
<PAGE> 54

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits. The following exhibits are filed with or incorporated
by reference into this report. The exhibits which are denominated by an
asterisk (*) were previously filed as a part of, and are hereby incorporated by
reference from a Registration Statement on Form SB-2 under the Securities Act
of 1933 for the Company, Registration Number 33-91536 (referred to as "SB-2").
The exhibit numbers correspond to the exhibit numbers in the referenced
document.

<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- ------------------------------------------------------------------------------------------
<S> <C> <C>
*3.1 - Articles of Incorporation of the Company (SB-2)

*3.2 - Bylaws of the Company (SB-2)

*10.1 - Employment Agreement dated March 7, 1995 between the Company and Stephen H. Cheney (SB-2)

*10.2 - Employment Agreement dated March 7, 1995 between the Company and Charles H. Hodges, III
(SB-2)

*10.3 - Purchase Agreement dated February 3, 1995 between Carlos G. Gay, on the one hand, and
Stephen H. Cheney and Charles H. Hodges, III, on the other, for the property located 301
North Broad Street, Thomasville, Georgia (SB-2)

*10.4 - Amendment, dated May 11, 1995, to Purchase Agreement dated February 3, 1995 between
Carlos G. Gay, on the one hand, and Stephen H. Cheney and Charles H. Hodges, III, on the
other, for the property located at 301 North Broad Street, Thomasville, Georgia (SB-2)

21.1 - Subsidiaries of the Registrant

27.1 - Financial Data Schedule (for SEC use only)
</TABLE>

(b) Reports on Form 8-K. No reports on Form 8-K were required to be
filed for the fourth quarter of 1996.

-53-
<PAGE> 55

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

<TABLE>
<S> <C>
THOMASVILLE BANCSHARES, INC.

Dated: March 25, 1997 By: /s/ Stephen H. Cheney
--------------------------------------------
Stephen H. Cheney
President and Chief Executive Officer
(Principal Executive and Accounting Officer)
</TABLE>

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Stephen H. Cheney President and Chief Executive Officer March 25, 1997
-------------------------------------------- (Principal Executive and Accounting
Stephen H. Cheney Officer) and Director

/s/ Charles H. Hodges, III Executive Vice President and Director March 26, 1997
--------------------------------------------
Charles H. Hodges, III

/s/ Charles A. Balfour Director March 25, 1997
--------------------------------------------
Charles A. Balfour

/s/ Clifford S. Campbell, Jr. Director March 25, 1997
--------------------------------------------
Clifford S. Campbell, Jr.

/s/ Charles E. Hancock, M.D. Director March 26, 1997
--------------------------------------------
Charles E. Hancock, M.D.

/s/ Harold L. Jackson Director March 26, 1997
--------------------------------------------
Harold L. Jackson

/s/ Charles W. McKinnon, Jr. Director March 25, 1997
--------------------------------------------
Charles W. McKinnon, Jr.

/s/ Cochran A. Scott, Jr. Director March 26, 1997
--------------------------------------------
Cochran A. Scott, Jr.

/s/ Richard L. Singletary, Jr. Director March 26, 1997
--------------------------------------------
Richard L. Singletary, Jr.
</TABLE>

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT
TO SECTION 12 OF THE ACT.

No annual report or proxy material has been sent to security holders as
of the date of filing this report. An annual report and proxy materials will
be furnished to security holders subsequent to the filing of this Annual Report
on Form 10-KSB, and the Registrant will furnish copies of such material to the
Commission when they are sent to security holders.
<PAGE> 56

EXHIBIT INDEX

Exhibit
No Description Page
------- -------------------------- ----
<S> <C> <C>
21.1 Subsidiaries of Registrant
27.1 Financial Data Schedule (for SEC use only)
</TABLE>

<PAGE> 1

EXHIBIT 21.1

<PAGE> 2

SUBSIDIARIES OF THE REGISTRANT

Thomasville National Bank, a national bank organized under the laws of
the United States.

<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
FINANCIAL STATEMENTS OF THOMASVILLE BANCSHARES, INC. FOR THE YEAR ENDED DECEMBER
31, 1996 AND THE PERIOD FROM JANUARY 15, 1995 TO DECEMBER 31, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,801,255
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 3,826,980
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2,652,000
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 33,539,244
<ALLOWANCE> 447,626
<TOTAL-ASSETS> 43,752,165
<DEPOSITS> 37,697,519
<SHORT-TERM> 0
<LIABILITIES-OTHER> 208,389
<LONG-TERM> 0
0
0
<COMMON> 600,000
<OTHER-SE> 5,246,257
<TOTAL-LIABILITIES-AND-EQUITY> 43,752,165
<INTEREST-LOAN> 2,234,844
<INTEREST-INVEST> 153,611
<INTEREST-OTHER> 212,203
<INTEREST-TOTAL> 2,600,658
<INTEREST-DEPOSIT> 1,017,045
<INTEREST-EXPENSE> 1,017,045
<INTEREST-INCOME-NET> 1,583,613
<LOAN-LOSSES> 346,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,179,129
<INCOME-PRETAX> 251,199
<INCOME-PRE-EXTRAORDINARY> 251,199
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 241,198
<EPS-PRIMARY> .40
<EPS-DILUTED> .40
<YIELD-ACTUAL> 5.24
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 110,000
<CHARGE-OFFS> 8,374
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 447,626
<ALLOWANCE-DOMESTIC> 443,100
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 4,526

</TABLE>