SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549

                                ____________

                                  FORM 10-K

          /x/  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                       SECURITIES EXCHANGE ACT OF 1934

                 For the Fiscal Year Ended December 31, 1998

        / /  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                       SECURITIES EXCHANGE ACT OF 1934


         For the transition period from ___________ to _____________

                       Commission File Number 0-21656

                        United Community Banks, Inc.
                        ----------------------------
           (Exact name of registrant as specified in its charter)

               Georgia                               58-180-7304
            -------------------------------------------------------
            (State or other jurisdiction          (I.R.S. Employer
              of incorporation)                  Identification No.)

                        59 Highway 515, P.O. Box 398,
                  Blairsville, Georgia                30512
                 -------------------------------------------
                 (Address of principal            (Zip Code)
                   executive offices)

Registrant's telephone number, including area code:  (706) 745-2151

Securities registered pursuant to Section 12(b) of the Act:  None

Name of exchange on which registered:  None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.00 par value

     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 / /

     Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein 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-K or any amendment to this Form 10-K.  / /

     Aggregate market value of the voting stock held by non- affiliates
(which for purposes hereof are all holders other than executive officers and
directors) of the Registrant as of February 15, 1999: $215,896,365  based on
5,265,765 shares at $41.00 per share, the last sale price known to the
Registrant for the Common Stock, for which there is no established public
trading market. 

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     As of February 15, 1999, 7,686,609 shares of Common Stock were issued
and outstanding, par value $1.00 per share, including 140,000 shares deemed
outstanding pursuant to 2006 Debentures and presently exercisable options to
acquire 153,004 shares. 


                     DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Registrant's annual report to shareholders for the
fiscal year ended December 31, 1998, contained in Appendix A to the
Registrant's definitive Proxy Statement for the 1999 Annual Meeting of
Shareholders, to be filed with the Commission, are incorporated by reference
into Parts I and II.  Portions of the Registrant's definitive Proxy
Statement for the 1999 Annual Meeting of Shareholders, to be filed with the
Commission, are incorporated into Part III.






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                                   PART I


ITEM 1.   BUSINESS.

UNITED AND THE BANKS
- --------------------

     United Community Banks, Inc. ("United") was incorporated under the
laws of Georgia in 1987 and commenced operations in 1988 by acquiring 100%
of the outstanding shares of Union County Bank, now known as United
Community Bank ("UCB").  United is a bank holding company registered under
the Bank Holding Company Act of 1956.  All of United's activities are
currently conducted by its wholly-owned subsidiaries: UCB, which was
organized as a Georgia banking corporation in 1950;  Carolina Community
Bank, Murphy, North Carolina ("Carolina"), which United acquired in 1990;
Peoples Bank of Fannin County, Blue Ridge, Georgia ("Peoples"), which United
acquired in 1992;  Towns County Bank, Hiawassee, Georgia ("Towns"), which
United also acquired in 1992;  White County Bank, Cleveland, Georgia
("White"), which United acquired in 1995;  and First Clayton Bank and Trust
("First Clayton"), which United acquired in 1997.  UCB, Carolina, Peoples,
Towns, White and First Clayton are collectively referred to in this report
as the "Banks".   United also operates two consumer finance companies - 
United Family Finance Co., which operates two offices in Georgia, and United
Family Finance Co. of North Carolina, which operates two offices in North
Carolina.   In this report, both United Family Finance Co. and United Family
Finance Co. of North Carolina are collectively referred to as ("UFFC").

     The Banks are community-oriented, and offer a full range of retail and
corporate banking services, including checking, savings and time deposit
accounts, secured and unsecured loans, wire transfers, trust services and
rental of safe deposit boxes.   As of December 31, 1998, the Banks operated
a total of 27 locations.   In order to emphasize the commitment to community
banking, both UCB and Peoples operate branches under trade names that are
closely identified with the communities in which they are located.   UCB
operates two branches in Lumpkin County, Georgia, under the trade name
"United Community Bank of Lumpkin County" and two branches in Habersham
County, Georgia, under the trade name "First Bank of Habersham."    Peoples
operates one branch in Gilmer County, Georgia, under the trade name of
"United Community Bank of Gilmer County."   The operation of bank branches
under trade names is permissible under current state and federal banking
regulations and requires certain customer disclosures, which both UCB and
Peoples provide.  

     The Mortgage People Company ("MPC"), a division of UCB, is a full-
service retail mortgage lending operation approved as a seller/servicer for
Federal National Mortgage Association and Federal Home Mortgage Corporation. 
MPC was organized to provide fixed and adjustable-rate mortgages.   During
1998, MPC originated $145 million of residential mortgage loans for the
purchase of homes and to refinance existing mortgage debt, of which over 99%
were sold into the secondary market with no recourse to MPC.

FORWARD-LOOKING STATEMENTS
- --------------------------

     This Form 10-K, both in the Management's Discussion and Analysis
section and elsewhere, contains forward-looking statements under the Private
Securities Litigation Reform Act of 1995 that involve risks and
uncertainties.    Although United believes that the assumptions underlying
the forward-looking statements contained in the discussion are reasonable,
any of the assumptions could be inaccurate, and therefore, no assurance can
be made that any of the forward-looking statements included in this
discussion will be accurate.  Factors that could cause actual results to
differ from results discussed in forward-looking statements include, but are
not limited to:  economic conditions (both generally and in the markets
where United operates); competition from other providers of financial
<PAGE>
services offered by United; government regulation and legislation;  changes
in interest rates; material unforeseen changes in the financial stability
and liquidity of  United's credit customers; material unforeseen
complications related to the Year 2000 issues for United, its suppliers,
customers and governmental agencies; and other risks detailed in United's
filings with the Securities and Exchange Commission, all of which are
difficult to predict and which may be beyond the control of United. United
undertakes no obligation to revise forward-looking statements to reflect
events or changes after the date of this discussion or to reflect the
occurrence of unanticipated events.


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<PAGE>
YEAR 2000
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     A detailed discussion of United's state of readiness, budget and actual
costs, material risks and contingency plans related to the "Year 2000" issue
is contained in the MANAGEMENT'S DISCUSSION AND ANALYSIS section  (Part II,

I
tem 7) of this report.

RECENT DEVELOPMENTS
- -------------------

     On January 21, 1999, United entered into a definitive agreement to
acquire the stock of Adairsville Bancshares, Inc. ("Adairsville") in Bartow
County, Georgia.  This acquisition was closed on March 15, 1999 and was
accounted for as a purchase transaction.  As of December 31, 1998,
Adairsville had $37.1 million of total assets and $4.0 million of total
equity.   

     During 1998, three new branch offices of the Banks were opened.  UCB
opened an office in Clarkesville, Georgia, which operates under the trade
name First Bank of Habersham, and Carolina opened new offices in Cherokee
and Etowah, North Carolina.  Construction of a new branch office of UCB
located in Murrayville, Georgia, is scheduled for completion during the
third quarter of 1999 and will operate under the trade name of United
Community Bank of Hall County.  In February, 1999, Carolina purchased a
vacant banking facility in Brevard, North Carolina that is expected to be
open for business during the second quarter of 1999. 

     In July, 1998, a statutory business trust ("United Community Capital
Trust") was created by United which in July, 1998, issued guaranteed
preferred beneficial interests in United's junior subordinated deferrable
interest debentures ("Trust Preferred Securities") to institutional
investors in the amount of $21 million. This issuance represented the
guaranteed preferred beneficial interests in $21.7 million in junior
subordinated deferrable interest debentures ("Subordinated Debentures")
issued by United to United Community Capital Trust.  For regulatory
purposes, the Trust Preferred Securities will be treated as Tier I capital
of United.  The subordinated debentures are the sole assets of United
Community Capital Trust and bear an interest rate of 8.125% with a maturity
date of July 15, 2028, which may be shortened to a date not earlier than
July 15, 2018.  If the subordinated debentures are redeemed in part or in
whole prior to July 15, 2008, the redemption price of the Subordinated
Debentures and the Trust Preferred Securities will include a premium ranging
from 4.06% in 2008 to .41% in 2018.

     On January 30, 1998, Peoples acquired certain assets and deposit
liabilities of the Ellijay office of The Bank of North Georgia, which had
total loans of $3 million, and total deposits of $23 million.  This office
is operated under the trade name of United Community Bank of Gilmer County.

MONETARY POLICY AND ECONOMIC CONDITIONS
- ---------------------------------------

     The operating income and net income of the Banks depend to a
substantial extent on the difference between income the Banks receive from
their loans, investments and other earning assets, and the interest the
Banks pay on their deposits and other liabilities.  These rates are highly
sensitive to many factors that are beyond the control of the Banks,
including national and international economic conditions and the monetary
policies of various governmental and regulatory authorities.

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COMPETITION
- -----------

     The market for banking and bank-related services is highly competitive. 
The Banks actively compete in their respective market areas, which
collectively covers northeastern Georgia and western North Carolina, with
other providers of deposit and credit services.  These competitors include
other commercial banks, savings banks, savings and loan associations, credit
unions, mortgage companies and brokerage firms.  he following table displays
each of Banks and the respective percentage of total deposits in each county
where the Bank has operations.  The table also indicates the ranking by
deposit size in each of the local markets.  All information in the table was
obtained from the Federal Deposit Insurance Corporation ("FDIC") Summary of
Deposits as of June 30, 1998.







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         UNITED COMMUNITY BANKS, INC.
    SHARE OF LOCAL MARKET DEPOSITS (COUNTY)
        BANKS AND SAVINGS INSTITUTIONS


                   MARKET          RANK IN
                   SHARE           MARKET
UCB
   Habersham        13%               4
   Lumpkin          18%               3
   Union            85%               1


CAROLINA
   Cherokee         43%               1
   Clay             61%               1
   Graham           38%               2
   Haywood           7%               6
   Henderson        NM               NM
   Jackson           7%               5
   Macon             7%               6
   Swain            15%               3
   Transylvania      5%               5


PEOPLES
   Fannin           57%               1
   Gilmer           11%               4

WHITE
   White            47%               1


TOWNS
   Towns            35%               2


FIRST CLAYTON
   Rabun            26%               3


NM = Not Meaningful


LOANS

     The Banks make both secured and unsecured loans to individuals, firms
and corporations.  Secured loans include first and second real estate
mortgage loans.  The Banks also make direct installment loans to consumers
on both a secured and unsecured basis.  At December 31, 1998, consumer, real
estate construction, real estate mortgage and commercial loans represented
approximately 12.0%, 11.6%, 67.4% and 9.0% respectively, of United's total
loan portfolio.

Specific risk elements associated with each of the Banks' lending categories
include, but are not limited to:

Commercial                     Industry concentrations; inability to monitor 
                               the condition of collateral (inventory, accounts
                               receivable and vehicles); lack of borrower 
                               management expertise, increased competition;


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                               use of specialized or obsolete equipment as
                               collateral; insufficient cash flow from
                               operations to service debt payment.


Real estate - construction     Inadequate collateral and long-term financing
                               agreements

Real estate - mortgage         Changes in local economy affecting borrower's
                               employment; insufficient collateral value due
                               to decline in property value.

Consumer                       Loss of borrower's employment; changes in local
                               economy; the inability to monitor collateral
                               (vehicles, boats and mobile homes)

     Effective March 19, 1993, inter-agency guidelines adopted by federal
bank regulators mandated that financial institutions establish real estate
lending policies with maximum allowable real estate loan-to-value limits, 
subject to an allowable amount of non-conforming loans as a percentage of
capital.  The Banks adopted the federal guidelines as their maximum
allowable limits; however, policy exceptions are permitted for real estate
loan customers with strong financial credentials.


LENDING POLICY
- --------------

     The current lending policy of the Banks is to make loans primarily to
persons who reside, work or own property in their primary market areas. 
Unsecured loans are generally made only to persons who maintain depository
relationships with the Banks.  Secured loans are made to persons who are
well established and have net worth, collateral and cash flow to support the
loan.  Exceptions to the policy are permitted on a case-by-case basis and
require the approving officer to document in writing the reason for the
exception.  Policy exceptions made for borrowers whose total aggregate loans
exceed the approving officer's credit limit must be submitted to the Bank
Board of Directors for approval. 

     The Banks provide each lending officer with written guidelines for
lending activities.  Lending authority is delegated by the Boards of
Directors of the Banks to loan officers, each of whom is limited in the
amount of secured and unsecured loans which he or she can make to a single
borrower or related group of borrowers.  Loans in excess of individual
officer credit authority must either be approved by a senior officer with
sufficient approval authority, or be approved by the Bank Board of
Directors.

LOAN REVIEW AND NONPERFORMING ASSETS
- ------------------------------------

     The Loan Review Department of United reviews each of the Banks' loan
portfolios on an annual basis  to determine any weaknesses in the portfolio
and to assess the general quality of credit underwriting.  The results of
the reviews by the loan review officers are presented to the Presidents of
each of the Banks, the President and the Chief Credit Officer of United and
the Boards of Directors of each of the Banks.  If an individual loan or
credit relationship has a weakness identified during the review process the
risk rating of the loan, or all loans comprising a credit relationship, will
be downgraded to a classification that most closely matches the current risk
level.  The review process also provides for the upgrade of loans that show
improvement since the last review.  Since each loan in a credit relationship
may have a different credit structure, collateral and other secondary source
of repayment, different loans in a relationship can be assigned different
risk ratings.   United utilizes an eight-grade rating system in which grades
one through four are considered "pass", or acceptable, credit risk and
grades five through eight are "adversely classified" credits that require
management's attention.    Both the pass and adversely classified ratings,
and the entire eight-grade rating scale, provide for a higher numeric rating
for increased risk.  For example, a risk rating of one is the least risky of
all credits and would be typical of a loan that is 100% secured by a deposit
at one of the Banks.   Risk ratings of two, three and four in the pass
category each have incrementally more risk.  The four adversely classified
credit ratings and rating definitions are:


        Five (Watch)  -     Weaknesses exist that could cause
                            future impairment,  including the 


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                            deterioration of financial ratios, past-due
                            status and questionable management
                            capabilities.  Collateral values generally
                            afford adequate coverage, but may not be
                            immediately marketable.

        Six (Substandard) - Specific and well-defined weaknesses that may 
                            include poor liquidity and deterioration  of
                            financial ratios.  Loan may be past-due and
                            related deposit accounts experiencing overdrafts.
                            Immediate corrective action is necessary.

        Seven (Doubtful) -  Specific weaknesses characterized by
                            Substandard that are severe enough to make
                            collection in full unlikely.  No strong secondary
                            source of repayment.

        Eight  (Loss) -     Same characteristics as Doubtful; however,
                            probability of loss is certain.  Loans classified
                            as such are generally recommended for charge-off
                            at the next Bank Board of Directors meeting.

     In addition, the Loan Review Department conducts a quarterly analysis
to determine the adequacy of the Allowance for Loan Losses ("ALL") for each
of the Banks.  The aggregation of the ALL analyses for the Banks provides
the consolidated analysis for United.  The ALL analysis starts by taking
total loans and deducting loans secured by deposit accounts at the Banks,
which effectively have no risk of loss.  Next, all loans with an adversely
classified rating are deducted.  The remaining loan balance is then
multiplied by the average historical loss rate for the preceding five year
period (1994 through 1998), which provides required minimum ALL for Pass
credits (component "A").  The remaining total loans in each of the four
adversely classified rating categories are then multiplied by a projected
loss factor to determine the ALL allocation for adversely classified credits
(component "B").  The loss factors currently used are:  Watch (5%);
Substandard (15%); Doubtful (50%); and Loss (100%).  The sum of components A
and B comprises the total allocated ALL.  There is no current process
utilized to measure or adjust for differences between the loss factors for
adversely classified loans used in the ALL analysis and actual losses
charged to the ALL.

     The difference between the actual ALL (as presented in the consolidated
financial statements) and the allocated ALL represents the unallocated ALL.
The unallocated ALL provides for coverage of credit losses inherent in the
loan portfolio but not provided for in the ALL analysis.  United and the
Banks determine the level of unallocated ALL primarily by assessing the
ratio of ALL to total loans of peer bank holding companies and peer banks,
using the Federal Reserve Uniform Bank Performance Report and other bank
industry analytical publications.


ASSET/LIABILITY MANAGEMENT
- --------------------------

     Committees composed of officers of each of the Banks and the Chief
Financial Officer and Treasurer of United are charged with managing the
assets and liabilities of the Banks.  The committees attempt to manage asset
growth, liquidity and capital in order to maximize income and reduce
interest rate risk.  The committees direct each Bank's overall acquisition
and allocation of funds.  At monthly meetings, the committees review the
monthly asset and liability funds budget in relation to the actual flow of
funds and peer group comparisons; the ratio of the amount of rate sensitive
assets to the amount of rate sensitive liabilities; the ratio of allowance
for loan losses to outstanding and non-performing loans; and other
variables, such as expected loan demand, investment opportunities, core
<PAGE>
deposit growth within specified categories, regulatory changes, monetary
policy adjustments and the overall state of the economy.  A more
comprehensive discussion of United's Asset/Liability Management and interest
rate risk is contained in the Management's Discussion and Analysis (Part II,
Item 7) and QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 
(Part II, Item 7A) sections of this report.


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<PAGE>

INVESTMENT POLICY
- -----------------

     The Banks' investment portfolio policy is to maximize income consistent
with liquidity, asset quality and regulatory constraints.  The policy is
reviewed from time to time by the Banks' Boards of Directors.  Individual
transactions, portfolio composition and performance are reviewed and
approved monthly by the Boards of Directors or a committee thereof.  The
Chief Financial Officer of United and the President of each of the Banks
administer the policy and report information to the full Board of Directors
of each of the Banks on a quarterly basis concerning sales, purchases,
maturities and calls, resultant gains or losses, average maturity, federal
taxable equivalent yields and appreciation or depreciation by investment
categories. 

EMPLOYEES
- ---------

     As of December 31, 1998, United and its subsidiaries had an aggregate
of 638 full-time equivalent employees.  Neither United nor any of the
subsidiaries is a party to any collective bargaining agreement, and United
believes that employee relations are good.  None of  United's or the Banks'
executive officers is employed pursuant to an employment contract.

SUPERVISION AND REGULATION
- --------------------------

     GENERAL.  United is a registered bank holding company subject to
regulation by the Board of Governors of the Federal Reserve System (the
"Federal Reserve") under the Bank Holding Company Act of 1956, as amended
(the "Act").  United is required to file financial information with the
Federal Reserve periodically and is subject to periodic examination by the
Federal Reserve. 

     The Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before (i) it may acquire direct or indirect
ownership or control of more than 5% of the voting shares of any bank that
it does not already control; (ii) it or any of its subsidiaries, other than
a bank, may acquire all or substantially all of the assets of a bank; and
(iii) it may merge or consolidate with any other bank holding company.  In
addition, a bank holding company is generally prohibited from engaging in,
or acquiring, direct or indirect control of the voting shares of any company
engaged in non-banking activities.  This prohibition does not apply to
activities found by the Federal Reserve, by order or regulation, to be so
closely related to banking or managing or controlling banks as to be a
proper incident thereto.  Some of the activities that the Federal Reserve
has determined by regulation or order to be closely related to banking are:
making or servicing loans and certain types of leases; performing certain
data processing services; acting as fiduciary or investment or financial
advisor; providing discount brokerage services; underwriting bank eligible
securities; underwriting debt and equity securities on a limited basis
through separately capitalized subsidiaries; and making investments in
corporations or projects designed primarily to promote community welfare.

     United must also register with the Georgia Department of Banking and
Finance ("DBF") and file periodic information with the DBF.  As part of such
registration, the DBF requires information with respect to the financial
condition, operations, management and intercompany relationships of United
and the Banks and related matters.  The DBF may also require such other
information as is necessary to keep itself informed as to whether the
provisions of Georgia law and the regulations and orders issued thereunder
by the DBF have been complied with, and the DBF may examine United and each
of the Banks.   The North Carolina Banking Commission ("NCBC"), which has
the statutory authority to regulate non-banking affiliates of North Carolina
<PAGE>
banks, in 1992 began using this authority to examine and regulate the
activities of North Carolina-based holding companies owning North Carolina-
based banks.  Although the NCBC has not exercised its authority to date to
examine and regulate holding companies outside of North Carolina that own
North Carolina banks, it is likely the NCBC may do so in the future. 

     United is an "affiliate" of the Banks under the Federal Reserve Act,
which imposes certain restrictions on (i) loans by the Banks to United, (ii)
investments in the stock or securities of United by the Banks, (iii) the
Banks' taking the stock or securities of an "affiliate" as collateral for
loans by the Bank to a borrower, and (iv) the purchase of assets from United
by the Banks.  Further, a bank holding company and its subsidiaries are
prohibited from engaging in certain tie-in arrangements in connection with
any extension of credit, lease or sale of property or furnishing of
services.   Each of United's subsidiaries is regularly examined by the
Federal Deposit Insurance Corporation (the "FDIC").  UCB, Peoples, White,
Towns and First Clayton, as state banking associations organized under
Georgia law, are subject to the supervision of, and are regularly examined

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<PAGE>

by, the DBF.  Carolina is subject to the supervision of, and is regularly
examined by, the NCBC and the FDIC.  Both the FDIC and the DBF must grant
prior approval of any merger, consolidation or other corporation
reorganization involving UCB, Peoples, White, Towns or First Clayton, and
the FDIC and the NCBC must grant prior approval of any merger, consolidation
or other corporate reorganization of Carolina.  A bank can be held liable
for any loss incurred by, or reasonably expected to be incurred by, the FDIC
in connection with the default of a commonly-controlled institution. 

     PAYMENT OF DIVIDENDS.  United is a legal entity separate and distinct
from the Banks.  Most of the revenues of United result from dividends paid
to it by the Banks.  There are statutory and regulatory requirements
applicable to the payment of dividends by the Banks, as well as by United to
its shareholders. 

     UCB, Peoples, Towns, White and First Clayton are each state chartered
banks regulated by the DBF and the FDIC.  Under the regulations of the DBF,
dividends may not be declared out of the retained earnings of a state bank
without first obtaining the written permission of the DBF, unless such bank
meets all the following requirements: 


     (a)  total classified assets as of the most recent examination of the
          bank do not exceed 80% of equity capital (as defined by
          regulation); 

     (b)  the aggregate amount of dividends declared or anticipated to be
          declared in the calendar year does not exceed 50% of the net
          profits after taxes but before dividends for the previous calendar
          year; and

     (c)  the ratio of equity capital to adjusted assets is not less than
          6%.

     Under North Carolina law, the Board of Directors of Carolina may
declare a dividend for as much of the undivided profits of Carolina as it
deems appropriate, so long as Carolina's surplus is greater than 50% of its
capital. 

     The payment of dividends by United and the Banks may also be affected
or limited by other factors, such as the requirement to maintain adequate
capital above regulatory guidelines.  In addition, if, in the opinion of the
applicable regulatory authority, a bank under its jurisdiction is engaged in
or is about to engage in an unsafe or unsound practice (which, depending
upon the financial condition of the bank, could include the payment of
dividends), such authority may require, after notice and hearing, that such
bank cease and desist from such practice.  The FDIC has issued a policy
statement providing that insured banks should generally only pay dividends
out of current operating earnings.  In addition to the formal statutes and
regulations, regulatory authorities consider the adequacy of each of the
Bank's total capital in relation to its assets, deposits and other such
items.  Capital adequacy considerations could further limit the availability
of dividends to the Banks.  At December 31, 1998, net assets available from
the Banks to pay dividends without prior approval from regulatory
authorities totaled approximately $17.2 million.  For 1998, United's
declared cash dividend payout to stockholders was  9.1 % of net income.

     MONETARY POLICY.  The results of operations of the Banks are affected
by credit policies of monetary authorities, particularly the Federal
Reserve.  The instruments of monetary policy employed by the Federal Reserve
include open market operations in U.S. government securities, changes in the
discount rate on bank borrowings and changes in reserve requirements against
bank deposits.  In view of changing conditions in the national economy and
in the money markets, as well as the effect of actions by monetary and
<PAGE>
fiscal authorities, including the Federal Reserve, no prediction can be made
as to possible future changes in interest rates, deposit levels, loan demand
or the business and income of the Banks.

     CAPITAL ADEQUACY.  The Federal Reserve and the FDIC have implemented
substantially identical risk-based rules for assessing bank and bank holding
company capital adequacy.  These regulations establish minimum capital
standards in relation to assets and off-balance sheet exposures as adjusted
for credit risk.  Banks and bank holding companies are required to have (1)
a minimum level of total capital (as defined) to risk-weighted assets of
eight percent (8%); (2) a minimum  Tier One Capital (as defined) to risk-
weighted assets of four percent (4%); and (3) a minimum stockholders' equity
to risk-weighted assets of four percent (4%).  In addition, the Federal
Reserve and the FDIC have established a minimum three percent (3%) leverage
ratio of Tier One Capital to total assets for the most highly-rated banks
and bank holding companies.  "Tier One Capital" generally consists of common
equity not including unrecognized gains and losses on securities, minority
interests in equity accounts of consolidated subsidiaries and certain
perpetual preferred stock less certain intangibles.  The Federal Reserve and
the FDIC will require a bank holding company and a bank, respectively, to



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maintain a leverage ratio greater than three percent (3%) if either is
experiencing or anticipating significant growth or is operating with less
than well-diversified risks in the opinion of the Federal Reserve.  The
Federal Reserve and the FDIC use the leverage ratio in tandem with the risk-
based ratio to assess the capital adequacy of banks and bank holding
companies.  The FDIC, the Office of the Comptroller of the Currency (the
"OCC") and the Federal Reserve have amended, effective January 1, 1997, the
capital adequacy standards to provide for the consideration of interest rate
risk in the overall determination of a bank's capital ratio, requiring banks
with greater interest rate risk to maintain adequate capital for the risk. 
The revised standards have not had a significant effect on United's capital
requirements.

     In addition, effective December 19, 1992, a new Section 38 to the
Federal Deposit Insurance Act implemented the prompt corrective action
provisions that Congress enacted as a part of the Federal Deposit Insurance
Corporation Improvement Act of 1991 (the "1991 Act").  The "prompt
corrective action" provisions set forth five regulatory zones in which all
banks are placed largely based on their capital positions.  Regulators are
permitted to take increasingly harsh action as a bank's financial condition
declines.  Regulators are also empowered to place in receivership or require
the sale of a bank to another depository institution when a bank's capital
leverage ratio reaches 2%.  Better capitalized institutions are generally
subject to less onerous regulation and supervision than banks with lesser
amounts of capital.  The FDIC has adopted regulations implementing the
prompt corrective action provisions of the 1991 Act, which place financial
institutions in the following five categories based upon capitalization
ratios: (1) a "well capitalized" institution has a total risk-based capital
ratio of at least 10%, a Tier One risk-based ratio of at least 6% and a
leverage ratio of at least 5%; (2) an "adequately capitalized" institution
has a total risk- based capital ratio of at least 8%, a Tier One risk-based
ratio of at least 4% and a leverage ratio of at least 4%; (3) an
"undercapitalized" institution has a total risk-based capital ratio of under
8%, a Tier One risk-based ratio of under 4% or a leverage ratio of under 4%;
(4) a "significantly undercapitalized" institution has a total risk-based
capital ratio of under 6%, a Tier One risk-based ratio of under 3% or a
leverage ratio of under 3%; and (5) a "critically undercapitalized"
institution has a leverage ratio of 2% or less.  Institutions in any of the
three undercapitalized categories would be prohibited from declaring
dividends or making capital distributions.  The FDIC regulations also
establish procedures for "downgrading" an institution to a lower capital
category based on supervisory factors other than capital.  As of December
31, 1998 and 1997, the most recent notifications from the FDIC categorized
each of the Banks as "well capitalized" under current regulations.

     RECENT LEGISLATIVE AND REGULATORY ACTION.  On April 19, 1995, the four
federal bank regulatory agencies adopted revisions to the regulations
promulgated pursuant to the Community Reinvestment Act (the "CRA"), which
are intended to set distinct assessment standards for financial
institutions.  The revised regulation contains three evaluation tests:  (i)
a lending test, which will compare an institution's market share of loans in
low and moderate income areas to its market share of loans in its entire
service area and the percentage of a bank's outstanding loans to low and
moderate-income areas or individuals, (ii) a services test, which will
evaluate the provisions of services that promote the availability of credit
to low and moderate income areas, and (iii) an investment test, which will
evaluate an institution's record of investments in organizations designed to
foster community development, small and minority-owned businesses and
affordable housing lending, including state and local government housing or
revenue bonds.  The regulations are designed to reduce some paperwork
requirements of the current regulations and provide regulators, institutions
and community groups with a more objective and predictable manner with which
to evaluate the CRA performance of financial institutions. CRA became
effective on January 1, 1996 and has not had any appreciable impact upon
United and the Banks. 
<PAGE>
     Congress and various federal agencies (including, in addition to the
bank regulatory agencies, the Department of Housing and Urban Development,
the Federal Trade Commission and the Department of Justice) (collectively
the "Federal Agencies") responsible for implementing the nation's fair
lending laws have been increasingly concerned that prospective home buyers
and other borrowers are experiencing discrimination in their efforts to
obtain loans.  In recent years, the Department of Justice has filed suit
against financial institutions, which it determined had discriminated,
seeking fines and restitution for borrowers who allegedly suffered from
discriminatory practices.  Most, if not all, of these suits have been
settled (some for substantial sums) without a full adjudication on the
merits. 

     On March 8, 1994, the Federal Agencies, in an effort to clarify what
constitutes lending discrimination and specify the factors the agencies will
consider in determining if lending discrimination exists, announced a joint
policy statement detailing specific discriminatory practices prohibited
under the Equal Opportunity Act and the Fair Housing Act.  In the policy
statement, three methods of proving lending discrimination were identified: 
(1) overt evidence of discrimination, when a lender blatantly discriminates
on a prohibited basis, (2) evidence of disparate treatment, when a lender
treats applicants differently based on a prohibited factor even where there
is no showing that the treatment was motivated by prejudice or a conscious



                                     10
<PAGE>

<PAGE>
intention to discriminate against a person, and (3) evidence of disparate
impact, when a lender applies a practice uniformly to all applicants, but
the practice has a discriminatory effect, even where such practices are
neutral on their face and are applied equally, unless the practice can be
justified on the basis of business necessity. 

     On September 23, 1994, President Clinton signed the Reigle Community
Development and Regulatory Improvement Act of 1994 (the "Regulatory
Improvement Act").  The Regulatory Improvement Act contains funding for
community development projects through banks and community development
financial institutions and also numerous regulatory relief provisions
designed to eliminate certain duplicative regulations and paperwork
requirements. 

     On September 29, 1994, President Clinton signed the Reigle-Neal
Interstate Banking and Branching Efficiency Act of 1994 (the "Federal
Interstate Bill") which amends federal law to permit bank holding companies
to acquire existing banks in any state effective September 29, 1995. 
Further, any interstate bank holding company is permitted to merge its
various bank subsidiaries into a single bank with interstate branches after
May 31, 1997.  States have the authority to authorize interstate branching
before June 1, 1997, or, alternatively, to opt out of interstate branching
prior to that date.  The Georgia Financial Institutions Code was amended in
1994 to permit the acquisition of a Georgia bank or bank holding company by
out-of-state bank holding companies beginning July 1, 1995.  On September
29, 1995, the interstate banking provisions of the Georgia Financial
Institutions Code were superseded by the Federal Interstate Bill.

     On January 26, 1996, the Georgia legislature adopted a bill (the
"Georgia Intrastate Bill") to permit, effective July 1, 1996, any Georgia
bank or group of affiliated banks under one holding company to establish up
to an aggregate of three new or additional branch banks anywhere within the
State of Georgia, excluding any branches established by a bank in a county
in which it is already located.  After July 1, 1998, all restrictions on
state-wide branching were removed.  Before adoption of the Georgia
Intrastate Bill, Georgia only permitted branching via merger or
consolidation with an existing bank or in certain other limited
circumstances.

     FDIC INSURANCE AND FICO ASSESSMENTS FOR THE BANKS.  The Banks are
subject to FDIC deposit insurance assessments for the Bank Insurance Fund
(the "BIF") which provides deposit insurance coverage of up to $100,000 per
bank customer (as defined by the FDIC).  There have been no BIF deposit
insurance assessments for the highest-rated depository institutions   which
includes all of the Banks - since 1995 when the BIF reached the target
funding level mandated by Congress.  All depository institutions covered
by the BIF are, however, required to pay a special assessment to cover
interest on the FICO bonds that were issued to fund the Savings and Loan
industry bailout.  The Banks paid total FICO bond assessments of $115
thousand in 1998.  United expects to pay total FICO bond assessments of
approximately $140 thousand in 1999 and no BIF assessment due to the
continued strength of the banking industry.

EXECUTIVE OFFICERS OF UNITED
- ----------------------------

     Executive officers of United are elected by the Board of Directors
annually in January and hold office until the following January unless they
sooner resign or are removed from office by the Board of Directors. 

     The executive officers of United, and their ages, positions with United
and the Banks and terms of office as of December 31, 1998, are as follows:




<TABLE>
<CAPTION>
   Name (age)                      Position with United or Banks            Officer of United Since
   ---------                       -----------------------------            -----------------------

<S>                      <S>                                                         <C>
Jimmy C. Tallent         President, Chief Executive Officer and                      1988
                         Director of United; Chief Executive Officer of
                         UCB; Chairman of the Board of UCB, Towns and
                         White; Director of Carolina, Peoples, First
                         Clayton and UFFC.

Thomas C. Gilliland      President, Chief  Executive Officer and Vice                1992
(50)                     Chairman of the Board of Peoples; Executive
                         Vice President and Director of United; Chairman
                         of the Board of UFFC.


                                     11
<PAGE>

<PAGE>
   Name (age)                      Position with United or Banks            Officer of United Since
   ----------                      -----------------------------            -----------------------


Billy M. Decker          Senior Vice President, Director and Secretary of            1988
(55)                     United and UCB;  Director of Carolina.

Guy W. Freeman           President, Chief Executive Officer and Director             1995
(63)                     of Carolina; Senior Vice President of United.
                         Mr. Freeman served as President, Chief
                         Executive Officer and Chairman of the Board of
                         White prior to the merger with United.

Christopher J. Bledsoe   Senior Vice President and Chief Financial                   1993
(35)                     Officer of United and UCB; Director of UFFC.

Roger L. Bishop          Senior Vice President and Chief Operations and              1998
(49)                     Information Officer of United  since August, 1998; 
                         prior to joining United, he served as Senior Vice
                         President of Brintech, Inc. of New Smyrna Beach,
                         Florida, and was a Senior Consultant for Alex
                         Sheshunoff Management Services, Inc. of Austin, Texas.

L. Gene Sprayberry       Executive Vice President of UCB; Assistant                  1988
(53)                     Secretary of United.

Richard E. Martin, Jr.   President and Director of Towns; Vice President             1992
(50)                     of United.

Robert L. Cochran        Vice President and Treasurer of United and UCB;             1995
(34)                     prior to joining United, he was an Accounting 
                         Manager for PNC Bank in Cincinnati, Ohio.

Eugene B. White          President and Director of  White; Vice President of         1995
(54)                     United.  Prior to joining United in March, 1995, 
                         he served as Executive Vice President of First 
                         National Bank of Habersham in Cornelia, Georgia.
 
J. Mark Smith            President and Chief Executive Officer of First              1996
(47)                     Clayton; Vice President of United.  Mr. Smith 
                         served as President and Chief Executive Officer 
                         of First Clayton prior to the merger with United.

Patrick J. Rusnak        Vice President and Controller of United since               1998
(35)                     September 1998; prior to joining United, he was 
                         Senior Assistant Controller of Trans Financial,
                         Inc. in Bowling Green, Kentucky.

Andrew M. Williams III   President of UCB and Vice President of United since         1998
(45)                     November , 1998.  Prior to joining United, he served
                         as President and Chief Executive Officer of Eagle
                         Bancorp, Inc. in Statesboro, Georgia.


                                     12

<PAGE>

<PAGE>
     None of the above officers is related to another and there are no
arrangements or understandings between them and any other person pursuant to
which any of them was elected as an officer, other than arrangements or
understandings with directors or officers of United acting solely in their
capacities as such.



ITEM 2.   PROPERTIES.

     The executive offices of United are located at 65 Highway 515,
Blairsville, Georgia.  United owns this property.  The Banks conduct
business from facilities primarily owned by the respective banks, all of
which are in a good state of repair and appropriately designed for use as
banking facilities.  The Banks provide services or perform operational
functions at 30 locations, of which 25 locations are owned and 5 are leased.
UFFC conducts operations at four locations, all of which are leased.  Note
5 to United's Consolidated Financial Statements includes additional
information regarding amounts invested in premises and equipment.



ITEM 3.   LEGAL PROCEEDINGS.

     In the ordinary course of operations, United and the Banks are
defendants in various legal proceedings.  In the opinion of management,
there is no pending or threatened proceeding in which an adverse decision
could result in a material adverse change in the consolidated financial
condition or results of operations of United.



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

      No matters were submitted to a vote of the security holders of United
during the fourth quarter of the fiscal year covered by this report.



ITEM 5.   MARKET FOR UNITED'S COMMON EQUITY AND RELATED
          STOCKHOLDER MATTERS.

      STOCK.  There is no established public trading market for United's
Common Stock.  At December 31, 1998, there were 2,874 shareholders of
record.

     DIVIDENDS.  United declared cash dividends of $.15 per common share in
1998 and $.10 per common share in 1997.  Federal and state laws and
regulations impose restrictions on the ability of United and the Banks to
pay dividends.  Additional information regarding this item is included in
note 16 to the Consolidated Financial Statements and under the heading of
"Supervision and Regulation" in Part I of this report.

     RECENT SALES OF UNREGISTERED SECURITIES.  On December 31, 1996,
debentures due December 31, 2006, in the aggregate amount of $3,500,000 were
sold to 26 accredited investors in the States of Georgia and North Carolina
for cash in a transaction not involving a public offering within the meaning
of Section 4(2) of the Securities Act of 1933 and in compliance with
exemptions contained in Rule 506 of Regulation D promulgated thereunder. 
All of the purchasers were either existing shareholders, current officers or
directors of United.


                                     13
<PAGE>

<PAGE>

ITEM 6.   SELECTED FINANCIAL DATA.

     Selected financial data for each of the five years ended December 31,
1998 appears under the caption "Selected Financial Data" on page A-2 of
United's Annual Report to Shareholders which is included as the appendix to
the Proxy Statement used in connection with the solicitation of proxies for
United's Annual Meeting of Shareholders to be held on April 15, 1999, to be
filed with the SEC (the "Proxy Statement") and is incorporated herein by
reference.



                                   PART II


ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS.

     Management's discussion and analysis of financial condition and results
of operation appears under the caption "Management's Discussion and Analysis
of Financial Condition and Results of Operation" on pages A-1 through A-28
of United's Annual Report to Shareholders, which is included as the appendix
to the Proxy Statement, is incorporated herein by reference. 



ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
          RISK

     United's net interest income and the fair value of its financial
instruments (interest earning assets and interest bearing liabilities) are
influenced by changes in market interest rates.  United actively manages its
exposure to interest rate fluctuations through policies established by its
Asset/Liability Management Committee (the "ALCO").  The ALCO meets regularly
and is responsible for approving asset/liability management policies,
developing and implementing strategies to improve balance sheet positioning
and net interest income and assessing the interest rate sensitivity of the
Banks.

     United utilizes an interest rate simulation model to monitor and
evaluate the impact of changing interest rates on net interest income.  The
estimated impact on United's net interest income sensitivity over a one-year
time horizon as of December 31, 1998 and 1997 is indicated in the tables
below.  The tables assume an immediate and sustained parallel shift in
interest rates of 100 basis points and no change in the composition of
United's balance sheet.




                                     14

<PAGE>

<PAGE>
NET INTEREST INCOME SENSITIVITY
DECEMBER 31, 1998
(in thousands)

</TABLE>


<TABLE>
<CAPTION>
                                                                        Percentate Increase (Decrease) in
                                                                          Interest Income/Expense Given
                                           Principal/Notional            Immediate and Sustained Parallel
                                           Amounts of Earning                   Interest Rate Shifts
                                         Assets, Interest Bearing      ------------------------------------
                                          Liabilities and Caps at           Down 100              Up 100
                                            December 31, 1998             Basis Points         Basis Points
                                        ---------------------------     ----------------     ----------------
<S>                                        <C>                               <C>                   <C>
Assets repricing in:
  One year or less                         $    693,174
  Over one year                                 693,803
                                            -----------
    Total                                  $  1,386,977                       -4.87%                4.85%
                                            ===========

Liabilities repricing in:
  One year or less                         $    974,889
  Over one year                                 274,234
                                            -----------
    Total                                  $  1,249,123                       -7.14%                6.55%
                                            ===========

Derivative hedge instruments <F1>          $     20,000

Net interest income sensitivity                                               -2.71%                3.40%

<FN>
<F1> Does not include swap contracts that expired on January 2, 1999
</FN>

                                                                        Percentate Increase (Decrease) in
                                                                          Interest Income/Expense Given
                                           Principal/Notional            Immediate and Sustained Parallel
                                           Amounts of Earning                   Interest Rate Shifts
                                         Assets, Interest Bearing      ------------------------------------
                                          Liabilities and Caps at           Down 100              Up 100
                                            December 31, 1997             Basis Points         Basis Points
                                        ---------------------------     ----------------     ----------------

Assets repricing in:
  One year or less                         $    705,147
  Over one year                                 344,012
                                            -----------
    Total                                  $  1,049,159                       -4.79%                4.72%
                                            ===========

Liabilities repricing in:
  One year or less                         $    795,751
  Over one year                                 133,008
                                            -----------
    Total                                  $    928,759                       -7.36%                7.23%
                                            ===========

Derivative hedge instruments               $     35,000

Net interest income sensitivity                                               -1.51%                1.52%
</TABLE>


                                     15
<PAGE>

<PAGE>
     United's ALCO policy requires that a 100 basis point shift in interest
rates not result in a decrease of net interest income of  more than 5%.  
The information presented in the tables above is based on the same
assumptions set forth in United's ALCO policy.



ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     The Report of Independent Certified Public Accountants, the
consolidated financial statements and notes to the consolidated financial
statements appear on pages A-30 through A-55 of United's Annual Report to
Shareholders, which is included as the appendix to the Proxy Statement, is
incorporated herein by reference. 


ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
          ACCOUNTING AND FINANCIAL DISCLOSURE.

     During United's two most recent fiscal years, United did not change
accountants and had no disagreement with its accountants on any matters of
accounting principles or practices or financial statement disclosure.


                              PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF UNITED.

     The information contained under the heading "Information About Nominees
for Director" in the Proxy Statement is incorporated herein by reference. 
Pursuant to instruction 3 to paragraph (b) of Item 401 of Regulation S-K,
information relating to the executive officers of United is included in Item
1 of this Report.


ITEM 11.  EXECUTIVE COMPENSATION.

     The information contained under the heading "Executive Compensation" in
the Proxy Statement is incorporated herein by reference.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT.

     The information contained under the heading  "Security Holdings of
Certain Beneficial Owners and Management," in the Proxy Statement is
incorporated herein by reference.  For purposes of determining the aggregate
market value of United's voting stock held by nonaffiliates, shares held by
all directors and executive officers of United have been excluded.  The
exclusion of such shares is not intended to, and shall not, constitute a
determination as to which persons or entities may be "Affiliates" of United
as defined by the Commission.



ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The information contained under the heading "Compensation Committee
Interlocks and Insider Participation" in the Proxy Statement is incorporated
herein by reference.


ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
          FORM 8-K.

(a)  1.   Financial Statements.
          --------------------

     The following financial statements and notes thereto of United are
incorporated herein by reference:

                                     16
<PAGE>

<PAGE>

     Report of Independent Certified Public Accountants

     Consolidated Balance Sheets - December 31, 1998 and 1997

     Consolidated Statements of Income for the Years ended
     December 31, 1998, 1997 and 1996

     Consolidated Statements of Comprehensive Income for the Years
     ended December 31, 1998, 1997 and 1996.

     Consolidated Statements of Changes in Stockholders' Equity
     for the Years ended December 31, 1998, 1997 and 1996

     Consolidated Statements of Cash Flows for the Years ended
     December 31, 1998, 1997 and 1996


     Notes to Consolidated Financial Statements

     2.   Financial Statement Schedules.
          -----------------------------


     No financial statement schedules are required to be filed as part of
this Report on Form 10-K.

     3.   Exhibits.
          --------

     The following exhibits are required to be filed with this Report on
Form 10-K by Item 601 of Regulation S-K:

          EXHIBIT NO.   EXHIBIT
          -----------   -------

              2.1       Agreement and Plan of Reorganization between
                        Adairsville Bancshares, Inc. and United Community
                        Banks, Inc., dated as of January 21, 1999.

              3.1       Articles of Incorporation of United, as amended
                        (included as Exhibit 3.1 to United's Registration
                        Statement on Form S-4, File No. 33-93286, filed with
                        the Commission on July 24, 1997 (the "1997 S-4") and
                        incorporated herein by reference).

              3.2       Amended and Restated Bylaws of United, as amended
                        (included as Exhibit 3.1 to United's Annual Report on
                        Form 10-K, for the year ended December 31, 1997 (the
                        "1997 10-K") previously filed with the Commission and
                        incorporated herein by reference).

              4.1(a)    Junior Subordinated Indenture of United with The Chase
                        Manhattan Bank, as Trustee, relating to the Junior
                        Subordinated Debentures (included as Exhibit 4.1 to
                        United's Registration Statement on Form S-4, File No.
                        333-64911, filed with the Commission on September 30,
                        1998 (the "1998 S-4") and incorporated herein by
                        reference).

              4.1(b)    Form of Certificate of Junior Subordinated Debenture
                        (included as Exhibit 4.2 to the 1998 S-4 previously
                        filed with the Commission and incorporated herein by
                        reference).

<PAGE>
              4.1(c)    Certificate of Trust of United Community Capital Trust
                        (included as Exhibit 4.3 to the 1998 S-4 previously
                        filed with the Commission and incorporated herein by
                        reference).

              4.1(d)    Amended and Restated Trust Agreement for United
                        Community Capital Trust (included as Exhibit 4.4 to
                        the 1998 S-4 previously filed with the Commission and
                        incorporated herein by reference).

              4.1(e)    Form of New Capital Security Certificate for United
                        Community Capital Trust (included as Exhibit 4.5 to



                                     17
<PAGE>

<PAGE>
                        the 1998 S-4 previously filed with the Commission and
                        incorporated herein by reference).

              4.1(f)    Guarantee of United relating to the Capital Securities
                        (included as Exhibit 4.6 to the 1998 S-4 previously
                        filed with the Commission and incorporated herein by
                        reference).

              4.1(g)    Registration Rights Agreement (included as Exhibit 4.7
                        to the 1998 S-4 previously filed with the Commission
                        and incorporated herein by reference).

              4.1(h)    Form of Floating Rate Convertible Subordinated Payable
                        In Kind Debenture due December 31, 2006 (included as
                        Exhibit 4.2 to United's Registration Statement on Form
                        S-1, File No. 33-93278, filed with the Commission on
                        June 8, 1995,  and incorporated herein by reference).


              4.1(i)    Form of Subscription Agreement (included as Exhibit A
                        to United's Form S-1, File No. 333-20887, filed with
                        the Commission on January 31, 1997 and incorporated by
                        reference).

              4.2(a)    See Exhibits 3.1 and 3.2 for provisions of Articles of
                        Incorporation and By-Laws, as amended, which define
                        the rights of the Shareholders.

              10.1      United's Key Employee Stock Option Plan (included as
                        Exhibit 10.3 to United's Annual Report on Form 10-K
                        for the year ended December 31, 1994 (the "1994 10-
                        K"), previously filed with the Commission and
                        incorporated herein by reference).*

              10.2      Loan Agreement dated April 26, 1995 by and between The
                        Bankers Bank and United, together with the related
                        Promissory Note in the principal amount of $12,000,000
                        and Stock Pledge Agreement (included as Exhibit 10.17
                        to United's Registration Statement on Form S-1, File
                        No. 33-93278, filed with the Commission on June 8,
                        1995 and incorporated herein by reference).

              10.3      Split-Dollar Agreement between United and Jimmy C.
                        Tallent dated June 1, 1994 (included as Exhibit 10.11
                        to the 1994 10-K, previously filed with the Commission
                        and incorporated herein by reference).*

              10.4      Agreement and Plan of Reorganization by and among
                        White County Bancshares, Inc., White County Bank and
                        United, dated as of April 11, 1995 (included as
                        Exhibit 2.1 to the 1997 S-4, previously filed with the
                        Commission and incorporated herein by reference).

              10.5      Agreement and Plan of Merger by and between Registrant
                        and White County Bancshares, Inc., dated as of April
                        11, 1995 (included as Exhibit 2.2 to the 1997 S-4,
                        previously filed with the Commission and incorporated
                        herein by reference).

              10.6      Agreement and Plan of Merger by and between White
                        County Bank and White Interim Bank, dated as of June
                        12, 1995 (included as Exhibit 2.3 to the 1997 S-4,
                        previously filed with the Commission and incorporated
                        herein by reference).


<PAGE>
              10.7      Purchase and Assumption Agreement by and between
                        Carolina Bank and NationsBank, N.A. dated May 25, 1995
                        (included as Exhibit 10.16 to United's Registration
                        Statement on Form S-1, File No. 33-93278, filed with
                        the Commission on June 8, 1995 and incorporated herein
                        by reference).

              10.8      Broker Dealer Agreement between the Registrant and The
                        Carson Medlin Company dated January 28, 1997 (included
                        as Exhibit 10.10 to United's Registration Statement on
                        Form S-1, File No. 333-20887, previously filed with
                        the Commission on January 31, 1997, and incorporated
                        herein by reference)

              10.10     Amendment to Broker Dealer Agreement between the
                        Registrant and The Carson Medlin Company dated March
                        3, 1997 (included as Exhibit 10.11 to United's

                                     18

<PAGE>

<PAGE>
                        Registration Statement on Form S-1, File No. 333-
                        20887, filed with the Commission on January 31, 1997,
                        and incorporated herein by reference).

              10.11     Agreement and Plan of Merger, dated June 12, 1997, by
                        and between United and First Clayton Bancshares, Inc.
                        (included as Appendix A to United's Registration
                        Statement on Form S-4,  File No. 333-31997, filed with
                        the Commission on July 24, 1997, and incorporated
                        herein by reference).

              12.1      Computation of ratio of earnings to fixed charges
                        (included as Exhibit 12.1 to the 1998 S-4 previously
                        filed with the Commission and incorporated herein by
                        reference).

              21.1      Subsidiaries of United

              23.1      Consent of Porter Keadle Moore, LLP

              24.1      Power of Attorney of certain officers and directors of
                        United (included on Signature Page)

              27.1      Financial Data Schedule

              99.1      Notice of Annual Meeting and Proxy Statement of
                        United, including the Annual Report to Shareholders
                        attached as Appendix A.
________________________
*   Management contract or compensatory plan or arrangement required to be
filed as an Exhibit to this Annual Report on Form 10-K pursuant to Item
14(c) of Form 10-K.

(b)  United did not file any reports on Form 8-K during the fourth quarter
of 1998.



                                     19
<PAGE>

<PAGE>

 
                                SIGNATURES


     Pursuant to the requirements of the Securities Exchange Act of 1934,
United has duly caused this Report on Form 10-K to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Blairsville,
State of Georgia, on the 17th of March, 1999.


                         UNITED COMMUNITY BANKS, INC.
                                   (Registrant)



                         By:  /s/ Jimmy C. Tallent
                              Jimmy C. Tallent
                              Title:  President



                      POWER OF ATTORNEY AND SIGNATURES


     Know all men by these presents, that each person whose signature
appears below constitutes and appoints Jimmy C. Tallent and Robert L. Head,
or either of them, as attorney-in-fact, with each having the power of
substitution, for him in any and all capacities, to sign any amendments to
this Report on Form 10-K and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said attorneys-
in-fact, or his substitute or substitutes, may do or cause to be done by
virtue hereof.

     Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of
United in the capacities set forth and on the 17th of March, 1999.

          SIGNATURE                     TITLE
          ---------                     -----

/s/ Jimmy C. Tallent
Jimmy C. Tallent                   President and Director
                                   (PRINCIPAL EXECUTIVE OFFICER)

/s/ Robert L. Head, Jr.
Robert L. Head, Jr.                Chairman of the Board of Directors

/s/ Billy M. Decker
Billy M. Decker                    Director

/s/ Thomas C. Gilliland
Thomas C. Gilliland                Director

/s/ Charles Hill
Charles Hill                       Director




                                     20

<PAGE>

<PAGE>
/s/ Hoyt O. Holloway
Hoyt O. Holloway                   Director

/s/ P. Deral Horne
P. Deral Horne                     Director

____________________________
John R. Martin                     Director

/s/ Clarence William Mason, Sr.
Clarence William Mason, Sr.        Director

/s/ Zell B. Miller
Zell B. Miller                     Director

____________________________
W. C. Nelson, Jr.                  Director

/s/ Charles E. Parks
Charles E. Parks                   Director

/s/ Christopher J. Bledsoe
Christopher J. Bledsoe             Chief Financial Officer
                                   (PRINCIPAL FINANCIAL OFFICER)

/s/ Patrick J. Rusnak
Patrick J. Rusnak                  Controller
                                   (PRINCIPAL ACCOUNTING OFFICER)



                                     21
<PAGE>

<PAGE>

                                EXHIBIT INDEX


Exhibit No.         Description
- -----------         -----------

   2.1         Agreement and Plan of Reorganization between
               Adairsville Bancshares, Inc. and United Community
               Banks, Inc., dated as of January 21, 1999.

   21          Subsidiaries of United.

   23          Consent of Porter Keadle Moore, LLP.

   27          Financial Data Schedule (for SEC use only)

   99          Notice of Annual Meeting and Proxy Statement of United,
               including the Annual Report to Shareholders as Appendix A.





                                     22





                 AGREEMENT AND PLAN OF REORGANIZATION
                 ------------------------------------

          THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement")
is made and entered into as of this 21st day of January, 1999, by and
between ADAIRSVILLE BANCSHARES, INC., a Georgia business corporation
(hereinafter "Adairsville," and unless the context otherwise requires,
the term "Adairsville" shall include both Adairsville Bancshares, Inc.
and its subsidiary Bank of Adairsville ("Adairsville Bank")), and
UNITED COMMUNITY BANKS, INC., a Georgia business corporation
(hereinafter "United," and unless the context otherwise requires, the
term "United" shall include United Community Banks, Inc. and its
subsidiaries.

                           R E C I T A L S:
                           ----------------

          WHEREAS, the respective boards of directors of Adairsville
and United deem it advisable and in the best interests of each such
entity and their respective shareholders that Adairsville be acquired
by United and that such acquisition be accomplished by a merger of
Adairsville and Adairsville Interim Corporation, a Georgia business
corporation and a wholly-owned subsidiary of United ("Interim"),
pursuant to which Interim will merge with and into Adairsville with
each of the issued and outstanding shares of common stock, $4 par
value per share, of Adairsville
 ("Adairsville Stock") being converted
into the right to receive $18.50 in cash, all upon the terms and
conditions hereinafter set forth and as set forth in the Agreement and
Plan of Merger attached hereto as Exhibit A and incorporated herein by
reference (the "Merger Agreement");

          NOW, THEREFORE, for and in consideration of the premises and
the mutual covenants and agreements herein contained, and other good
and valuable consideration, the receipt and adequacy of which as
legally sufficient consideration are hereby acknowledged, the parties
hereto agree as follows:

                               ARTICLE I
                               ---------

                                CLOSING
                                -------

          The transactions contemplated herein shall be consummated
(the "Closing") at the offices of Adairsville Bank in Adairsville,
Georgia, or some other mutually agreeable location, on the first
business day following the later to occur of (i) the receipt of all
approvals from any governmental authorities having jurisdiction over
the transactions contemplated by this Agreement and the Merger
Agreement, and the expiration of any waiting or similar period
required by applicable law and (ii) the satisfaction of all other
conditions to consummation of the Merger (the "Closing Date"), or at
such other time and place as may be mutually satisfactory to the
parties hereto.

<PAGE>

<PAGE>
                              ARTICLE II
                              ----------

                                MERGER
                                ------
          Pursuant to the terms and conditions provided herein, on the
Closing Date Adairsville and Interim shall be merged in accordance
with and in the manner set forth in the Merger Agreement.  The
surviving corporation following the Merger will operate under the
Articles of Incorporation of Adairsville and will be a wholly-owned
subsidiary of United.  Upon the terms and conditions of this Agreement
and the Merger Agreement, United shall make available on or before the
Closing Date (as defined in the Merger Agreement) for delivery to the
holders of Adairsville Stock sufficient funds to provide for cash
payments of $18.50 per share (the "Purchase Price"); provided that if
the Closing Date is ninety days after the date hereof (the "Threshold
Date"), then the consideration per share payable shall be increased by
the amount of the net earnings per share of Adairsville between
January 1, 1999 and the Closing Date.  Net earnings for the purpose of
this Article shall be reduced by the amount of any non-operating
earnings and not reduced by any reserves or charges made pursuant to
Section 3.13 hereof.

                              ARTICLE III

                           OTHER AGREEMENTS

          3.1  Meeting of Shareholders of Adairsville.  Adairsville
               --------------------------------------
shall take all actions in accordance with the laws of Georgia and its
Articles of Incorporation and Bylaws to call a special meeting of its
shareholders (the "Special Meeting") to be held not more than sixty
(60) days from the date hereof for the purpose of submitting the
Merger Agreement to such shareholders for their approval.  In
connection with the Special Meeting, Adairsville shall prepare and
submit to its shareholders a notice of meeting and information
statement (the "Adairsville Information Materials").

          3.2  Absence of Brokers.  Except for $10,000 payable by
               ------------------
Adairsville to Dr. Bob Swasky, each party hereto represents and
warrants to the other that no broker, finder or other financial
consultant has acted on its behalf in connection with this Agreement
or the transactions contemplated hereby.  Each party agrees to
indemnify the other and hold and save it harmless from any claim or
demand for commissions or other compensation by any broker, finder,
financial consultant or similar agent claiming to have been employed
by or on behalf of such party.

          3.3  Access to Properties, Books, Etc.  Adairsville shall
               ---------------------------------
allow United and its authorized representatives reasonable access
during normal business hours from and after the date hereof and prior
to the Closing Date to all of the respective properties, books,
contracts, commitments and records of Adairsville and its subsidiaries
and shall furnish United and its authorized representatives such
information concerning its affairs and the affairs of its subsidiaries
as United may reasonably request provided that such request shall be
reasonably related to the transactions contemplated by this Agreement
and shall not interfere unreasonably with normal operations. 
Adairsville shall require its personnel to assist United in making any
such investigation and shall cause the counsel (subject to attorney-
client privilege), accountants, employees and other representatives of

                                  -2-
<PAGE>

<PAGE>

Adairsville to be available to United for such purposes.  Such
investigation will be conducted in a manner designed to be the least
disruptive of the affairs of Adairsville as possible.  During such
investigation, United and its authorized representatives shall have
the right, subject to the confidentiality provisions of this
Agreement, to make copies of such records, files, tax returns and
other materials as it may deem advisable and shall advise Adairsville
of those items of which copies are made.  No investigation made
heretofore or hereafter by either party and its authorized
representatives shall affect the representations and warranties of
either such party hereunder.

          3.4  Confidentiality.  The parties agree that the
               ---------------
Confidentiality Agreement between Adairsville and United dated
December 15, 1998 (the "Confidentiality Agreement") shall survive
termination, for any reason whatsoever, of this Agreement and remain
in full force and effect in accordance with its terms.

          3.5  Full Cooperation. The parties shall cooperate fully
               ----------------
with each other in connection with any acts or actions required to be
taken as part of their respective obligations under this Agreement.

          3.6  Expenses.  All of the expenses incurred by United in
               --------
connection with the authorization, preparation, execution and
performance of this Agreement and the Merger Agreement including,
without limitation, all fees and expenses of its agents,
representatives, counsel and accountants and the fees and expenses
related to filing of all regulatory applications with state and
federal authorities in connection with the transactions contemplated
hereby and thereby, shall be paid by United.  All expenses incurred by
Adairsville in connection with the authorization, preparation,
execution and performance of this Agreement and the Merger Agreement,
including, without limitation, all fees and expenses of its agents,
representatives, counsel and accountants for Adairsville and the cost
of reproducing and mailing the Adairsville Information Materials,
shall be paid by Adairsville.

          3.7  Preservation of Goodwill.  Adairsville shall use
               ------------------------
reasonable efforts to preserve its business organization and the
business organization of its subsidiaries consistent with past
practices, to keep available the services of its present employees and
of the present employees of its subsidiaries, and to preserve the
goodwill of customers and others having business relations with
Adairsville or its subsidiaries.

          3.8  Approvals and Consents.  Each party hereto represents
               ----------------------
and warrants to and covenants with the other that it will use its best
efforts, and will cause its officers, directors, employees and agents
and its subsidiaries and any subsidiary's officers, directors,
employees and agents to use their best efforts, to obtain as soon as
is reasonably practicable all approvals and consents of state and
federal departments or agencies required or deemed necessary for
consummation of the transactions contemplated by this Agreement and
the Merger Agreement.  In particular, within 30 days of the date of
this Agreement, United shall file all applications required to obtain
all consents and approvals of bank regulatory authorities for the

                                 -3-
<PAGE>

<PAGE>

transactions contemplated by this Agreement.  United shall provide
drafts of the public sections of applications to Adairsville prior to
filing the same, and shall promptly provide Adairsville with copies of
all correspondence to and from regulatory authorities with respect to
the transactions contemplated by this Agreement.

          3.9  Agreement by Certain Adairsville Shareholders.
               ---------------------------------------------
Contemporaneously with the execution of this Agreement, each of the
shareholders of Adairsville whose signatures are set forth on Exhibit
B will execute and deliver to United an agreement, the form of which
is attached hereto as Exhibit B, pursuant to which each of them agrees
to vote the Adairsville Stock owned or controlled by them in favor of
the Merger.

          3.10 Press Releases.  Prior to the Closing Date, Adairsville
               --------------
and United shall agree with each other as to the form and substance of
any press release or other public disclosure materially related to
this Agreement or any other transaction contemplated hereby; provided,
however, that nothing in this Section 3.10 shall be deemed to prohibit
any Party from making any disclosure which its counsel deems necessary
or advisable in order to satisfy such Party's disclosure obligations
imposed by law.

          3.11 Employees of Adairsville Bank.  For purposes of any
               ------------------------------
length of service requirements, waiting periods, vesting periods or
benefits based on length of service in any benefit plan of Adairsville
Bank for which an employee may be eligible after the Closing, United
shall ensure that service by such employee with Adairsville Bank shall
be deemed to have been service with United.

          3.12 "Run-off" Liability Insurance Coverage.  Adairsville
               --------------------------------------
shall acquire for the benefit of its officers and directors "run-off"
liability insurance coverage to survive the Closing Date, which
coverage shall be satisfactory to Adairsville.  Alternatively, United
shall obtain coverage for the officers and directors of Adairsville
under its officer and director liability policy satisfactory to
Adairsville.

          3.13 Letter re Accounting Issues.
               ---------------------------
          (a)  Within fifteen (15) days period prior to the Closing
Date, at the written request of United, Adairsville shall establish
and take such reserves and accruals as United shall request to conform
Adairsville's loan, accrual and reserve policies to United's policies,
shall establish and take such accruals, reserves and charges in order
to implement such policies and to recognize, for financial accounting
purposes, such expenses of the Merger and restructuring charges
related to or to be incurred in connection with the Merger, in each
case at such times as are mutually agreeable to United and
Adairsville; provided, however, that Adairsville shall not be required
to take any such action that is not consistent with GAAP.

          (b)  No accrual or other adjustment made by Adairsville
pursuant to the provisions of this Section 3.13 shall constitute an
acknowledgment by Adairsville or create any implication, for any
purpose, that such accrual or adjustment was necessary for any purpose
other than to comply with the provisions of this Section 3.13.

                                 -4-
<PAGE>

<PAGE>
          (c)  No accrual or other adjustment made by Adairsville
pursuant to the provisions of this Section 3.13 shall be considered in
determining the existence of, or comprise the basis for, a material
adverse change as contemplated by Section 10.1 of this Agreement.

          3.14 McCool Bonus.  Notwithstanding anything to the contrary
               ------------
contained herein, in the event that Jerrell McCool, the President of
Adairsville Bank, shall be in the employ of Adairsville Bank as of the
Closing Date, then Adairsville, or Adairsville Bank, shall be entitled
to pay to McCool, and shall pay to McCool, a bonus in the amount of
twenty thousand dollars ($20,000).  If Adairsville or Adairsville Bank
shall not have paid such bonus prior to the Closing Date, United shall
be responsible for the payment of such amount to McCool.

                              ARTICLE IV
                              ----------

             REPRESENTATIONS AND WARRANTIES OF ADAIRSVILLE
             ---------------------------------------------

          As an inducement to United to enter into this Agreement and
to consummate the transactions contemplated hereby, Adairsville repre-
sents, warrants, covenants and agrees as follows:

          4.1  Adairsville Disclosure Memorandum.  By February 11,
               ---------------------------------
1999, Adairsville will deliver to United a memorandum (the
"Adairsville Disclosure Memorandum") containing certain information
regarding Adairsville as indicated at various places in this
Agreement.  All information set forth in the Adairsville Disclosure
Memorandum or in documents incorporated by reference in the
Adairsville Disclosure Memorandum is true, correct and complete, does
not omit to state any fact necessary in order to make the statements
therein not misleading, and shall be deemed for all purposes of this
Agreement to constitute part of the representations and warranties of
Adairsville under this Article IV.  The information contained in the
Adairsville Disclosure Memorandum shall be deemed to be part of and
qualify all representations and warranties contained in this Article
IV and the covenants in Article V to the extent applicable.  All
information in each of the documents and other writings furnished to
United pursuant to this Agreement or the Adairsville Disclosure
Memorandum is or will be true, correct and complete and does not and
will not omit to state any material fact necessary in order to make
the statements therein not misleading.  Adairsville shall promptly
provide United with written notification of any event, occurrence or
other information necessary to maintain the Adairsville Disclosure
Memorandum and all other documents and writings furnished to United
pursuant to this Agreement as true, correct and complete in all
material respects at all times prior to and including the Closing. 
Adairsville agrees that upon receipt of the Adairsville Disclosure
Memorandum, United shall have until February 18, 1999 to review the
Adairsville Disclosure Memorandum and to terminate this Agreement if
for any reason in its sole discretion United believes that proceeding
with the Merger in light of the contents of such memorandum would be
detrimental to United.

          4.2  Corporate and Financial.
               -----------------------

               4.2.1     Authority.  Subject to the approval of
                         ---------
various state and federal regulators and Adairsville Shareholders, the
execution, delivery and performance of this Agreement and the other
                                 -5-
<PAGE>

<PAGE>

transactions contemplated or required in connection herewith will not,
with or without the giving of notice or the passage of time, or both,
(a) violate any provision of federal or state law applicable to
Adairsville, the violation of which could be reasonably expected to
have a material adverse effect on the business, operations,
properties, assets, financial condition or prospects of Adairsville;
(b) violate any provision of the articles of incorporation or bylaws
of Adairsville; (c) conflict with or result in a breach of any
provision of, or termination of, or constitute a default under any
instrument, license, agreement, or commitment to which Adairsville is
a party, which, singularly or in the aggregate, could reasonably be
expected to have a material adverse effect on the business,
operations, properties, assets, financial condition or prospects of
Adairsville; or (d) constitute a violation of any order, judgment or
decree to which Adairsville is a party, or by which Adairsville or any
of its assets or properties are bound.  Assuming this Agreement
constitutes the valid and binding obligation of United, this Agreement
constitutes the valid and binding obligation of Adairsville, and is
enforceable in accordance with its terms, except as limited by laws
affecting creditors' rights generally and by the discretion of courts
to compel specific performance.

               4.2.2     Corporate Status.  Adairsville is a business
                         ----------------
corporation duly organized, validly existing and in good standing
under the laws of the state of Georgia and has no direct or indirect
subsidiaries other than Adairsville Bank.  Adairsville Bank is a
banking corporation duly organized and validly existing under the laws
of the State of Georgia.  Adairsville and Adairsville Bank have all of
the requisite corporate power and authority and are entitled to own or
lease their respective properties and assets and to carry on their
respective businesses as and in the places where such properties or
assets are now owned, leased or operated and such businesses are now
conducted.

               4.2.3     Capital Structure.  (a)  Adairsville has an
                         -----------------
authorized capital stock consisting of 1,000,000 shares, $4 par value
of common stock, of which 381,116 shares of common stock are issued
and outstanding as of the date hereof.  Adairsville Bank has an
authorized capital stock consisting solely of 4,000 shares of common
stock, par value $100.00 ("Adairsville Bank Stock"), of which 4,000
shares are issued and outstanding as of the date hereof.  All of the
outstanding shares of Adairsville Stock and Adairsville Bank stock are
duly and validly issued, fully paid and non-assessable and were
offered, issued and sold in compliance with all applicable federal and
state securities laws.  No person has any right of rescission or claim
for damages under federal or state securities laws with respect to the
issuance of any shares of Adairsville Stock or Adairsville Bank Stock
previously issued.  None of the shares of Adairsville Stock or
Adairsville Bank Stock has been issued in violation of any preemptive
or other rights of its shareholders.  All of the issued and
outstanding shares of Adairsville Bank Stock are owned by Adairsville.

               (b)  Except as set forth in the Adairsville Disclosure
Memorandum, Adairsville does not have outstanding any securities which
are either by their terms or by contract convertible or exchangeable
into shares of Adairsville Stock, or any other securities or debt, of


                                  -6-
<PAGE>

<PAGE>

Adairsville, or any preemptive or similar rights to subscribe for or
to purchase, or any options or warrants or agreements or
understandings for the purchase or the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character
relating to, its capital stock or securities convertible into shares
of Adairsville Stock.  Adairsville is not subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or
retire, or to register, any shares of its capital stock.

               (c)  Except as set forth in the Disclosure Memorandum,
there is no agreement, arrangement or understanding to which
Adairsville is a party restricting or otherwise relating to the
transfer of any shares of capital stock of Adairsville.

               (d)  All shares of Adairsville Stock or other capital
stock, or any other securities or debt, of Adairsville, which have
been purchased or redeemed by Adairsville have been purchased or
redeemed in accordance with all applicable federal, state and local
laws, rules, and regulations, including, without limitation, all
federal and state securities laws and rules and regulations of any
securities exchange or system on which such stock, securities or debt
are, or at such time were, traded, and no such purchase or redemption
has resulted or will, with the giving of notice or lapse of time, or
both, result in a default or acceleration of the maturity of, or
otherwise modify, any agreement, note, mortgage, bond, security
agreement, loan agreement or other contract or commitment of
Adairsville.

          4.2.4     Corporate Records.  The stock records and minute
                    -----------------
books of Adairsville, whether heretofore or hereafter furnished or
made available to United by Adairsville, (a) fully and accurately
reflect all issuances, transfers and redemptions of the Common Stock,
(b) correctly show the record addresses and the number of shares of
such stock issued and outstanding on the date hereof held by the
shareholders of Adairsville, (c) correctly show all corporate action
taken by the directors and shareholders of Adairsville (including
actions taken by consent without a meeting) and (d) contain true and
correct copies or originals of the respective articles of incorpo-
ration and all amendments thereto, bylaws as amended and currently in
force, and the minutes of all meetings or consent actions of its
directors and shareholders.  No resolutions, regulations or bylaws
have been passed, enacted, consented to or adopted by such directors
or shareholders except those contained in the minute books.  All
corporate records have been maintained in accordance with all
applicable statutory requirements and are complete and accurate in all
material respects.

          4.2.5     Tax Returns; Taxes.  (a)  Adairsville has duly
                    ------------------
filed (i) all required federal and state tax returns and reports, and
(ii) all required returns and reports of other governmental units
having jurisdiction with respect to taxes imposed upon its income,
properties, revenues, franchises, operations or other assets or taxes
imposed which might create a material lien or encumbrance on any of
such assets or affect materially and adversely its business or
operations.  Such returns or reports are, and when filed will be,
true, complete and correct, and Adairsville has paid, to the extent
such taxes or other governmental charges have become due, all taxes
and other governmental charges set forth in such returns or reports. 
All federal, state and local taxes and other governmental charges paid
or payable by Adairsville have been paid, or have been accrued or

                                  -7-
<PAGE>

<PAGE>

reserved on its books in accordance with generally accepted accounting
principles ("GAAP") applied on a basis consistent with prior periods. 
Adequate reserves for the payment of taxes have been established on
the books of Adairsville for all periods through the date hereof,
whether or not due and payable and whether or not disputed.  Until the
Closing Date, Adairsville shall continue to provide adequate reserves
for the payment of expected tax liabilities in accordance with GAAP
applied on a basis consistent with prior periods.  Adairsville has not
received any notice of a tax deficiency or assessment of additional
taxes of any kind and, to the knowledge of the officers of Adairsville
(collectively, "Management"), there is no threatened claim against
Adairsville, or any basis for any such claim, for payment of any
additional federal, state, local or foreign taxes for any period prior
to the date of this Agreement in excess of the accruals or reserves
with respect to any such claim shown in the 1998 Adairsville Financial
Statements described in Section 4.2.6 below or disclosed in the notes
with respect thereto.  There are no waivers or agreements by
Adairsville for the extension of time for the assessment of any taxes. 
The federal income tax returns of Adairsville have not been examined
by the Internal Revenue Service for any period since January 1, 1994.

          (b)  Except as set forth in the Adairsville Disclosure
Memorandum, proper and accurate amounts have been withheld by
Adairsville from its employees for all periods in full and complete
compliance with the tax withholding provisions of applicable federal,
state and local tax laws, and proper and accurate federal, state and
local tax returns have been filed by Adairsville for all periods for
which returns were due with respect to withholding, social security
and unemployment taxes, and the amounts shown thereon to be due and
payable have been paid in full.

          4.2.6     Financial Statements.  Adairsville has delivered
                    --------------------
to United true, correct and complete copies of unaudited financial
statements of Adairsville for the 11 month period ended November 30,
1998, including a balance sheet and statement of income (the unaudited
financial statements for the 11 month period ended November 30, 1998
being referred to as the "1998 Adairsville Financial Statements"). 
The 1998 Adairsville Financial Statements have been prepared in
accordance with GAAP consistently applied and present fairly the
assets, liabilities and financial condition of Adairsville as of the
dates indicated therein and the results of its operations for the
period then ended except that such financial statements do not include
the footnote disclosure required by GAAP.

          4.2.7     Regulatory Reports.  Adairsville has made
                    ------------------
available to United for review and inspection the year-end Report of
Condition and Income as filed by Adairsville Bank with the Board of
Governors of the Federal System (the "Federal Reserve") for each of
the two years ended December 31, 1997 and 1996, together with all such
other reports filed for the same three-year period with the Department
of Banking and Finance of the State of Georgia (the "Department of
Banking"), and other applicable regulatory agencies and the Form F.R.
Y-6 filed by Adairsville with the Federal Reserve for each of the
years ended December 31, 1997 and 1996 (collectively, the "Adairsville
Reports").  All of the Adairsville Reports, as amended, have been
prepared in accordance with applicable rules and regulations applied
on a basis consistent with prior periods and contain in all material
respects all information required to be presented therein in
accordance with such rules and regulations.


<PAGE>
          4.2.8     Accounts.  The Adairsville Disclosure Memorandum
                    --------
contains a list of each and every bank and other institution in which
Adairsville maintains an account or safety deposit box, the account
numbers, and the names of all persons who are presently authorized to
draw thereon, have access thereto or give instructions regarding
distribution of funds or assets therein.


                                  -8-
<PAGE>

<PAGE>

          4.2.9     Notes and Obligations.  Except as set forth in the
                    ---------------------
Adairsville Disclosure Memorandum or as provided for in the loss
reserve, all notes receivable or other obligations owned by
Adairsville or due to it shown in the 1998 Adairsville Financial
Statements and any such notes receivable and obligations on the date
hereof and on the Closing Date are and will be genuine, legal, valid,
and to Adairsville's knowledge, collectible obligations of the
respective makers thereof and are not and will not be subject to any
offset or counterclaim.  All such notes and obligations are evidenced
by written agreements, true and correct copies of which will be made
available to United for examination prior to the Closing Date.  All
such notes and obligations were entered into by Adairsville in the
ordinary course of its business and, to Adairsville's knowledge, in
compliance with all applicable laws and regulations.

          4.2.10    Liabilities.  Adairsville has no debt, liability
                    -----------
or obligation of any kind required to be shown pursuant to GAAP on the
1998 Adairsville Financial Statements, whether accrued, absolute,
known or unknown, contingent or otherwise, including, but not limited
to (a) liability or obligation on account of any federal, state or
local taxes or penalty, interest or fines with respect to such taxes,
(b) liability arising from or by virtue of the distribution, delivery
or other transfer or disposition of goods, personal property or
services of any type, kind or variety, (c) unfunded liabilities with
respect to any pension, profit sharing or employee stock ownership
plan, whether operated by Adairsville or any other entity covering
employees of Adairsville, or (d) environmental liabilities, except (i)
those reflected in the 1998 Adairsville Financial Statements, and (ii)
as disclosed in the Adairsville Disclosure Memorandum.

          4.2.11    Absence of Changes.  Except as specifically
                    ------------------
provided for in this Agreement or specifically set forth in the
Adairsville Disclosure Memorandum, since November 30, 1998:

          (a)  there has been no change in the business, assets,
liabilities, results of operations or financial condition of
Adairsville, or in any of its relationships with customers, employees,
lessors or others, other than changes in the ordinary course of
business, none of which individually or in the aggregate has had, or
which the Adairsville Management believes may have, a material adverse
effect on such businesses or properties;

          (b)  there has been no material damage, destruction or loss
to the assets, properties or business of Adairsville, whether or not
covered by insurance, which has had, or which the Adairsville
Management believes may have, an adverse effect thereon;

          (c)  the business of Adairsville has been operated in the
ordinary course, and not otherwise;

          (d)  the properties and assets of Adairsville used in its
business have been maintained in good order, repair and condition,
ordinary wear and tear excepted;

          (e)  the books, accounts and records of Adairsville have
been maintained in the usual, regular and ordinary manner;


                                  -9-
<PAGE>

<PAGE>
          (f)  there has been no declaration, setting aside or payment
of any dividend or other distribution on or in respect of the capital
stock of Adairsville;

          (g)  there has been no increase in the compensation or in
the rate of compensation or commissions payable or to become payable
by Adairsville to any director or executive officer, or to any
employee earning $35,000 or more per annum, or any general increase in
the compensation or in the rate of compensation payable or to become
payable to employees of Adairsville earning less than $35,000 per
annum ("general increase" for the purpose hereof meaning any increase
generally applicable to a class or group of employees, but not
including increases granted to individual employees for merit, length
of service, change in position or responsibility or other reasons
applicable to specific employees and not generally to a class or group
thereof), or any director, officer, or employee hired at a salary in
excess of $35,000 per annum, or any increase in any payment of or
commitment to pay any bonus, profit sharing or other extraordinary
compensation to any employee;

          (h)  there has been no change in the articles of
incorporation or bylaws of Adairsville;

          (i)  there has been no labor dispute, unfair labor practice
charge or employment discrimination charge, nor, to the knowledge of
Adairsville, any organizational effort by any union, or institution or
threatened institution, of any effort, complaint or other proceeding
in connection therewith, involving Adairsville, or affecting its
operations;

          (j)  there has been no issuance, sale, repurchase,
acquisition, or redemption by Adairsville of any of its capital stock,
bonds, notes, debt or other securities, and there has been no
modification or amendment of the rights of the holders of any
outstanding capital stock, bonds, notes, debt or other securities
thereof;

          (k)  there has been no mortgage, lien or other encumbrance
or security interest (other than liens for current taxes not yet due
or purchase money security interests arising in the ordinary course of
business) created on or in (including without limitation, any deposit
for security consisting of) any asset or assets of Adairsville or
assumed by it with respect to any asset or assets;

          (l)  there has been no indebtedness or other liability or
obligation (whether absolute, accrued, contingent or otherwise)
incurred by Adairsville which would be required to be reflected on a
balance sheet of Adairsville prepared as of the date hereof in
accordance with GAAP applied on a consistent basis, except as incurred
in the ordinary course of business;

          (m)  no obligation or liability of Adairsville has been
discharged or satisfied, other than in the ordinary course of
business;

          (n)  there have been no sales, transfers or other
dispositions of any asset or assets of Adairsville, other than sales
in the ordinary course of business; and


                                 -10-
<PAGE>

<PAGE>
          (o)  there has been no amendment, termination or waiver of
any right of Adairsville under any contract or agreement or
governmental license, permit or permission which has had or may have
an adverse effect on its business or properties.

          4.2.12    Litigation and Proceedings.  Except as set forth
                    --------------------------
on the Adairsville Disclosure Memorandum, there are no actions,
decrees, suits, counterclaims, claims, proceedings or governmental
actions or investigations, pending or, to the knowledge of
Adairsville, threatened against, by or affecting Adairsville, or any
officer, director, employee or agent in such person's capacity as an
officer, director, employee or agent of Adairsville or relating to the
business or affairs of Adairsville, in any court or before any
arbitrator or governmental agency, and no judgment, award, order or
decree of any nature has been rendered against or with respect thereto
by any agency, arbitrator, court, commission or other authority, nor
does Adairsville have any unasserted contingent liabilities which
might have an adverse effect on its assets or on the operation of its
businesses or which might prevent or impede the consummation of the
transactions contemplated by this Agreement.

     4.3  Business Operations.
          -------------------

          4.3.1     Customers.  Adairsville has no knowledge of any
                    ---------
presently existing facts which could reasonably be expected to result
in the loss of any material borrower or depositor or in Adairsville's
inability to collect amounts due therefrom or to return funds
deposited thereby, except as set forth on the Adairsville Disclosure
Memorandum.

          4.3.2     Permits; Compliance with Law.  (a) Adairsville has
                    ----------------------------
all permits, licenses, approvals, authorizations and registrations
under all federal, state, local and foreign laws required for
Adairsville to carry on its business as presently conducted, and all
of such permits, licenses, approvals, authorizations and registrations
are in full force and effect, and no suspension or cancellation of any
of them is pending or, to the knowledge of Adairsville, threatened.

          (b)  Except as set forth in the Disclosure Memorandum,
Adairsville has complied with all laws, regulations, and orders
applicable to it or its business, except for any non-compliance which
would not have a material adverse effect on Adairsville.  The
Adairsville Disclosure Memorandum contains a list of any known
violations of such laws, regulations, ordinances or rules by any
present officer, director, or employee of Adairsville which occurred
since December 31, 1993, and which resulted in any order, proceeding,
judgment or decree which would be required to be disclosed pursuant to
Item 401(f) of Regulation S-K promulgated by the Securities and
Exchange Commission if Adairsville had been subject to the reporting
requirements under the 1933 Act or the Securities Exchange Act of
1934.  Except as set forth in the Disclosure Memorandum, no past
violation of any such law, regulation, ordinance or rule has occurred
which could impair the right or ability of Adairsville to conduct its
business.

          (c)  Except as set forth in the Adairsville Disclosure
Memorandum, no notice or warning from any governmental authority with
respect to any failure or alleged failure of Adairsville to comply in
any respect with any law, regulation or order has been received, nor

                                 -11-
<PAGE>

<PAGE>

is any such notice or warning proposed or, to the knowledge of
Adairsville, threatened.

          4.3.3     Environmental.  (a) Except as set forth in the
                    -------------
Adairsville Disclosure Memorandum, Adairsville 

               (i)  has not caused or permitted, and has no knowledge
          of, any claim regarding the environmental condition of any
          properties or facilities currently owned or leased by
          Adairsville or adjacent to any properties so owned or leased
          or the generation, manufacture, use, or handling or the
          release or presence of, any hazardous substances or
          hazardous wastes, including petroleum, on, in, under or from
          any properties or facilities currently owned or leased by
          Adairsville or adjacent to any properties so owned or
          leased; and

               (ii) has complied in all material respects with, and
          has kept all records and made all filings or reports
          required by, and is otherwise in compliance with all
          applicable federal, state and local laws, regulations,
          orders, permits and licenses relating to the generation,
          treatment, manufacture, use, handling, release or presence
          of any hazardous substances or hazardous wastes, including
          petroleum and asbestos, on, in, under or from any properties
          or facilities currently owned or leased by Adairsville.

          (b)  Except as set forth in the Adairsville Disclosure
Memorandum, neither Adairsville nor any of its officers, directors,
employees or agents, in the course of such individual's employment by
Adairsville, has given advice with respect to, or participated in any
respect in, the management or operation of any entity or concern whose
business relates in any way to the generation, storage, handling,
disposal, transfer, production, use or processing of hazardous
substances or hazardous wastes, including petroleum, nor to
Adairsville's knowledge has Adairsville foreclosed on any property on
which there is a threatened release of any hazardous substances or
hazardous wastes, including petroleum, or on which there has been such
a release and full remediation has not been completed, or any property
on which contained (non-released) hazardous substances or hazardous
wastes, including petroleum, are or were located.

          (c)  Except as set forth in the Adairsville Disclosure
Memorandum, neither Adairsville, nor any of its officers, directors,
employees, or agents, is aware of, has been told of, or has observed,
the presence of any hazardous substance or hazardous wastes, including
petroleum, on, in, under, or around property on which Adairsville
holds a legal or security interest, in violation of, or creating
liability under, federal, state, or local environmental statutes,
regulations, or ordinances.

          (d)  The term hazardous substances or hazardous waste does
not include those substances which are normally and reasonably used in
connection with the occupancy or operation of office buildings (such
as cleaning fluids, and supplies normally used in the day to day
operation of business offices).


                                 -12-
<PAGE>

<PAGE>
          4.3.4     Insurance.  The Adairsville Disclosure Memorandum
                    ---------
contains a complete list and description (including the expiration
date, premium amount and coverage thereunder) of all policies of
insurance and bonds presently maintained by, or providing coverage
for, Adairsville or any of its officers, directors and employees, all
of which are, and will be maintained through the Closing Date (or a
reasonable substitute obtained), in full force and effect, together
with a complete list of all pending claims under any of such policies
or bonds.  All terms, obligations and provisions of each of such
policies and bonds have been complied with, all premiums due thereon
have been paid, and no notice of cancellation with respect thereto has
been received.  Adairsville will not as of the Closing Date have any
liability for premiums or for retrospective premium adjustments for
any period prior to the Closing Date.  Adairsville has heretofore
made, or will hereafter make, available to United a true, correct and
complete copy of each insurance policy and bond in effect since
January 1, 1994 with respect to the business and affairs of
Adairsville.

     4.4  Properties and Assets.
          ---------------------

          4.4.1     Contracts and Commitments.  Other than loans,
                    -------------------------
mortgages and other security instruments or devices entered into
within the ordinary course of business, the Adairsville Disclosure
Memorandum contains a list identifying and briefly describing all
written contracts, purchase orders, agreements, security deeds,
guaranties or commitments to which Adairsville is a party or by which
it may be bound involving the payment or receipt, actual or con-
tingent, of more than $50,000 or having a term or requiring per-
formance over a period of more than one (1) year.  Each such contract,
agreement, guaranty and commitment of Adairsville is in full force and
effect and is valid and enforceable in accordance with its terms, and
constitutes a legal and binding obligation of the respective parties
thereto and is not the subject of any notice of default, termination,
partial termination or of any ongoing, pending, completed or
threatened investigation, inquiry or other proceeding or action that
may give rise to any notice of default, termination or partial
termination.  Adairsville has complied in all material respects with
the provisions of such contracts, agreements, guaranties and commit-
ments.  A true and complete copy of each such document has been or
will be made available to United for examination.

          4.4.2     Licenses; Intellectual Property.  Adairsville has
                    -------------------------------
no patents, trademarks, trade names, service marks, or copyrights. 
Except as described in the Adairsville Disclosure Memorandum,
Adairsville is not a party, either as licensor or licensee, to any
agreement for any patent, process, trademark, service mark, trade
name, copyright, trade secret or other confidential information and
there are no rights of third parties with respect to any trademark,
service mark, trade secrets, confidential information, trade name,
patent, patent application, copyright, invention, device or process
owned or used by Adairsville or presently expected to be used by it in
the future.  Adairsville has complied with all applicable laws
relating to the filing or registration of "fictitious names" or trade
names.

          4.4.3     Personal Property.  Adairsville has good and
                    -----------------
marketable title to all of its personalty, tangible and intangible,
reflected in the 1998 Adairsville Financial Statements (except as
since sold or otherwise disposed of by it in the ordinary course of
business), free and clear of all encumbrances, liens or charges of any
kind or character, except (i) those described in the Adairsville
Disclosure Memorandum and (ii) liens for taxes not due and payable.


                                 -13-
<PAGE>

<PAGE>

          4.4.4     Adairsville Leases.  (a)  All leases (the
                    ------------------
"Adairsville Leases") pursuant to which Adairsville is lessor or
lessee of any real or personal property (such property, the "Leased
Property") are valid and enforceable in accordance with their terms;
there is not under any of the Adairsville Leases any default or, to
the knowledge of Adairsville, any claimed default by Adairsville, or
event of default or event which with notice or lapse of time, or both,
would constitute a default by Adairsville and in respect of which
adequate steps have not been taken to prevent a default on its part
from occurring.

          (b)  The copies of the Adairsville Leases heretofore or
hereafter furnished or made available by Adairsville to United are
true, correct and complete, and the Adairsville Leases have not been
modified in any respect other than pursuant to amendments, copies of
which have been concurrently delivered or made available to United,
and are in full force and effect in accordance with their terms.

          (c)  Except as set forth in the Adairsville Disclosure
Memorandum, there are no contractual obligations, agreements in
principle or present plans for Adairsville to enter into new leases of
real property or to renew or amend existing Adairsville Leases prior
to the Closing Date.

          4.4.5     Real Property.  (a)  Adairsville does not own any
                    -------------
interest in any real property (other than as lessee) except as set
forth in the Adairsville Disclosure Memorandum (such properties being
referred to herein as "Adairsville Realty").  Except as disclosed in
the Adairsville Disclosure Memorandum, Adairsville has good title to
the Adairsville Realty and the titles to the Adairsville Realty are
covered by title insurance policies providing coverage in the amount
of the original purchase price, true, correct and complete copies of
which have been or will be furnished to United with the Adairsville
Disclosure Memorandum.  Adairsville has not encumbered the Adairsville
Realty since the effective dates of the respective title insurance
policies.

          (b)  Except as set forth in the Adairsville Disclosure
Memorandum, the interests of Adairsville in the Adairsville Realty and
in and under each of the Adairsville Leases are free and clear of any
and all liens and encumbrances and are subject to no present claim,
contest, dispute, action or, to the knowledge of Adairsville,
threatened action at law or in equity.

          (c)  The present and past use and operations of, and
improvements upon, the Adairsville Realty and all real properties
leased by Adairsville (the "Adairsville Leased Real Properties") are
in compliance in all material respects with all applicable building,
fire, zoning and other applicable laws, ordinances and regulations and
with all deed restrictions of record, no notice of any violation or
alleged violation thereof has been received, and to the knowledge of
Adairsville there are no proposed changes therein that would affect
the Adairsville Realty, the Adairsville Leased Real Properties or
their uses.

          (d)  Except as set forth in the Adairsville Disclosure
Memorandum, no rent has been paid in advance and no security deposit
has been paid by, nor is any brokerage commission payable by or to,
Adairsville with respect to any Lease pursuant to which it is lessor
or lessee.

                                  -14-
<PAGE>

<PAGE>

          (e)  Adairsville is not aware of any proposed or pending
change in the zoning of, or of any proposed or pending condemnation
proceeding with respect to, any of the Adairsville Realty or the
Adairsville Leased Real Properties which may adversely affect the
Adairsville Realty or the Adairsville Leased Real Properties or the
current or currently contemplated use thereof.

          (f)  The buildings and structures owned, leased or used by
Adairsville are, taken as a whole, in good operating order (except for
ordinary wear and tear), usable in the ordinary course of business,
and are sufficient and adequate to carry on the business and affairs
of Adairsville.

     4.5  Employees and Benefits.
          ----------------------

               4.5.1     Compensation Structure.  The Disclosure Memo-
                         ----------------------
randum contains a true and complete list of the names, titles,
responsibilities and compensation arrangements of each person whose
earned compensation (including without limitation all salary, wages,
bonuses and fringe benefits other than those fringe benefits made
available to all employees on a non-discriminatory basis), regardless
of whether actually payable in such year, from Adairsville for the
current fiscal year will equal or exceed $35,000.  Adairsville has
heretofore made available or shall make available to United copies of
all written agreements, correspondence (other than outstanding offers
of employment to prospective employees whose compensation levels will
not exceed $35,000 in cash), memoranda and other written materials
currently in effect which have been provided to such employees
relating to their compensation.

               4.5.2     Directors or Officers of Other Corporations. 
                         -------------------------------------------
Except as set forth in the Disclosure Memorandum, no director, offi-
cer, or employee of Adairsville serves, or in the past five years has
served, as a director or officer of any other corporation on behalf of
or as a designee of Adairsville or any of its subsidiaries.

               4.5.3     Employee Benefits.  (a) Except as set forth
                         -----------------
in the Disclosure Memorandum, Adairsville does not have or maintain a
pension plan, profit sharing plan, group insurance plan, employee
welfare benefit plan (as such term is defined in Section 3(1) of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA")), severance plan, bonus plan, stock option plan or deferred
compensation plan for any of its current or former employees.

               (b)  Each "employee benefit plan" as defined in Section
3(3) of ERISA, maintained by or on behalf of Adairsville (including
any plans which are "multi-employer plans" under Section 3(37)(A) of
ERISA ("Multi-employer Plans") and any defined benefit plan (as
defined in Section 3(35) of ERISA) terminated by Adairsville within
the five plan-years ending immediately before the Closing Date), which
covers or covered any employees of Adairsville, of any subsidiary or
of any predecessors ("Plan"), is listed in the Disclosure Memorandum,

                                 -15-
<PAGE>

<PAGE>

and copies of all the Plans and Plan trusts (if applicable), Summary
Plan Descriptions, Actuarial Reports and valuations (if any), and
Annual Reports (and attachments thereto) on Form 5500, 5500-C or 5500-
R, as the case may be (if required pursuant to ERISA) for the most
recent three years with respect to the Plans, Internal Revenue Service
determination letters and any other related documents requested by
United or its counsel have been, or prior to the Closing Date will be,
provided to United.

               (c)  Except as set forth in the Disclosure Memorandum,
with respect to each Plan:  no litigation or administrative or other
proceeding is pending or, to the knowledge of Sellers, threatened; the
Plan has been restated or amended so as to comply with all applicable
requirements of law, including all applicable requirements of ERISA,
the Internal Revenue Code of 1986, as amended (the "Code"), and the
regulations promulgated thereunder by the Internal Revenue Service and
United States Department of Labor, other than changes in such laws for
which amendments are not yet required; to the knowledge of Sellers,
neither the Plan nor any trustee, administrator or fiduciary thereof
has at any time been involved in any transaction relating to the Plan
which would constitute a breach of fiduciary duty under ERISA or a
"prohibited transaction" within the meaning of Section 406 of ERISA or
Section 4975 of the Code, unless such transaction is specifically
permitted under Sections 407 or 408 of ERISA, Section 4975 of the Code
or a class or administrative exemption issued by the Department of
Labor.

               (d)  Except as set forth in the Disclosure Memorandum,
each Plan has been administered in compliance in all material respects
with applicable law and the terms of the Plan.

               (e)  Except as disclosed in the Disclosure Memorandum
and except for obligations under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"), Adairsville has no
obligation to provide, or material liability for, health care, life
insurance or other benefits after termination of active employment. 
As of the Closing Date, Adairsville will have provided adequate
reserves, or insurance or qualified trust funds, for all claims
incurred through the Closing Date, including adequate reserves to
provide for any post-retirement health care, life insurance or other
benefits with respect to periods of employment prior to the Closing
Date, based on an actuarial valuation satisfactory to the actuaries of
Adairsville representing a projection of claims expected to be
incurred for such retirees during its period of coverage under such
Plan.

               (f)  Except as described in the Disclosure Memorandum,
to the knowledge of Management, no fact or circumstance exists which
could constitute grounds in the future for the Pension Benefit
Guaranty Corporation ("PBGC") (or any successor to the PBGC) to take
any action whatsoever under Section 4042 of ERISA in connection with
any plan which an Affiliate (as defined below) of Adairsville main-
tains within the meaning of Section 4062 or 4064 of ERISA, and, in
either case, the PBGC has not previously taken any such action which
has, or reasonably might, result in any liability of an Affiliate or
Adairsville to the PBGC, which would have a material adverse effect on
the business of Adairsville.  The term "Affiliate" for purposes of
this Section means any trade or business (whether incorporated or
unincorporated) which is a member of a group described in Sections
414(b) or 414(c) of the Code of which Adairsville is also a member.

                                 -16-
<PAGE>

<PAGE>
               (g)  Only current and former employees of Adairsville
participate in the Plans.

               4.5.4     Labor-Related Matters.  Except as described
                         ---------------------
in the Disclosure Memorandum, Adairsville is not, and has not been, a
party to any collective bargaining agreement or agreement of any kind
with any union or labor organization or to any agreement with any of
its employees which is not terminable at will or upon ninety (90) days
notice at the election of, and without cost or penalty to,
Adairsville.  Adairsville has not received at any time in the past
five (5) years, any demand for recognition from any union, and no
attempt has been made, or will have been made as of the Closing Date,
to organize any of its employees.  Adairsville has complied in all
material respects with all obligations under the National Labor
Relations Act, as amended, the Age Discrimination in Employment Act,
as amended, and all other federal, state and local labor laws and
regulations applicable to employees.  There are no unfair labor
practice charges pending or threatened against Adairsville, and there
are, and in the past three (3) years there have been, no charges,
complaints, claims or proceedings, no slowdowns or strikes pending or
threatened against, or involving, as the case may be, Adairsville with
respect to any alleged violation of any legal duty (including but not
limited to any wage and hour claims, employment discrimination claims
or claims arising out of any employment relationship) by Adairsville
as to any of its employees or as to any person seeking employment
therefrom, and no such violations exist.

               4.5.5     Related Party Transactions.  Except for (a)
                         --------------------------
loans and extensions of credit made on substantially the same terms,
including interest rates and collateral, as those prevailing at the
time for comparable transactions by Adairsville with other persons who
are not affiliated with Adairsville, and which do not involve more
than the normal risk of repayment or present other unfavorable
features, (b) deposits, all of which are on terms and conditions
identical to those made available to all customers of Adairsville at
the time such deposits were entered into, and (c) transactions
specifically described in the Disclosure Memorandum, there are no
contracts with or commitments to present or former 5% or greater
shareholders, directors, officers, or employees involving the
expenditure after November 30, 1998 of more than $60,000 as to any one
individual, including with respect to any business directly or
indirectly controlled by any such person, or $100,000 for all such
contracts or commitments in the aggregate for all such individuals
(other than contracts or commitments relating to services to be
performed by any officer, director or employee as a currently-employed
employee of Adairsville).

     4.6  Other Matters.
          -------------

          4.6.1     Regulatory Reports.  Adairsville will make
                    ------------------
available to United for review and inspection all applications,
reports or other documents filed by it for each of its past three full
fiscal years with any regulatory or governmental agencies.  All of
such applications, reports and other documents have been prepared in
accordance with applicable rules and regulations of the regulatory
agencies with which they were filed.


<PAGE>
          4.6.2     Approvals, Consents and Filings.  Except for the
                    -------------------------------
approval of the Federal Reserve and the Department of Banking, or as
set forth in the Adairsville Disclosure Memorandum, neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (a) require any consent,
approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, or (b) violate any
order, writ, injunction, decree, statute, rule or regulation
applicable to Adairsville, or any of Adairsville's assets.

                                 -17-
<PAGE>

<PAGE>
          4.6.3     Default.  (a)  Except for those consents described
                    -------
in or set forth pursuant to Section 4.6.2 above, neither the execution
of this Agreement nor consummation of the transactions contemplated
herein (i) constitutes a breach of or default under any contract or
commitment to which Adairsville is a party or by which Adairsville or
its properties or assets are bound, (ii) does or will result in the
creation or imposition of any security interest, lien, encumbrance,
charge, equity or restriction of any nature whatsoever in favor of any
third party upon any assets of Adairsville, or (iii) constitutes an
event permitting termination of any agreement or the acceleration of
any indebtedness of Adairsville.

          (b)  Adairsville is not in default under its articles of
incorporation or bylaws or under any term or provision of any security
deed, mortgage, indenture or security agreement or of any other
contract or instrument to which Adairsville is a party or by which it
or any of its property is bound.

          4.6.4     Representations and Warranties.  No representation
                    ------------------------------
or warranty contained in the Adairsville Disclosure Memorandum, this
Article IV or in any certificate delivered by or at the direction of
Adairsville pursuant hereto or in connection with the transactions
contemplated hereby contains or shall contain any untrue statement,
nor shall such representations and warranties taken as a whole omit
any statement necessary in order to make any statement not misleading. 
Copies of all documents that have been or will be furnished to United
in connection with this Agreement or pursuant hereto are or shall be
true, correct and complete.

                               ARTICLE V
                               ---------

          CONDUCT OF BUSINESS OF ADAIRSVILLE PENDING CLOSING
          --------------------------------------------------

          Except as expressly otherwise provided herein, Adairsville
covenants and agrees that, without the prior written consent of
United, between the date hereof and the Closing Date:

          5.1  Conduct of Business.  Adairsville will conduct its
               -------------------
business only in the ordinary course, without the creation of any
indebtedness for borrowed money (other than deposit and similar
accounts and customary credit arrangements between banks in the
ordinary course of business).

          5.2  Maintenance of Properties.  Adairsville will maintain
               -------------------------
its properties and assets in good operating condition, ordinary wear
and tear excepted.

                                 -18-
<PAGE>

<PAGE>
          5.3  Insurance.  Adairsville will maintain and keep in full
               ---------
force and effect all of the insurance referred to in Section 4.3.4
hereof or other insurance equivalent thereto in all material respects.

          5.4  Capital Structure.  No change will be made in the
               -----------------
authorized or issued capital stock or other securities of Adairsville,
and Adairsville will not issue or grant any right or option to
purchase or otherwise acquire any of the capital stock or other
securities of Adairsville or Adairsville Bank.

          5.5  Dividends.  No dividend, distribution or payment will
               ---------
be declared or made in respect to the Adairsville Stock and
Adairsville will not, directly or indirectly, redeem, purchase or
otherwise acquire any of its capital stock.

          5.6  Amendment of Articles; Corporate Existence. 
               ------------------------------------------
Adairsville will not amend its articles of incorporation or bylaws,
and Adairsville will maintain its corporate existence and powers.

          5.7  No Acquisitions.  Adairsville shall not acquire by
               ---------------
merging or consolidating with, or by purchasing a substantial portion
of the assets of, or by any other manner, any business or any
corporation, partnership, association or other entity or division
thereof or otherwise acquire or agree to acquire any assets which are
material, individually or in the aggregate, to it.

          5.8  No Dispositions.  Adairsville will not sell, mortgage,
               ---------------
lease, buy or otherwise acquire, transfer or dispose of any
Adairsville Realty or interest therein (except for sales in the
ordinary course of business) and Adairsville will not, except in the
ordinary course of business, sell or transfer, mortgage, pledge or
subject to any lien, charge or other encumbrance any other tangible or
intangible asset.

          5.9  Banking Arrangements.  No change will be made in the
               --------------------
banking and safe deposit arrangements referred to in Section 4.2.8
hereof.

          5.10 Contracts.  Except for renewals of existing contracts
               ---------
in effect as of the date hereof, or entering into a contract for the
purpose of substituting a vendor under any such existing contract,
Adairsville will not enter into any contract of the kind described in
Section 4.4.1 hereof.

          5.11 Books and Records.  The books and records of
               -----------------
Adairsville will be maintained in the usual, regular and ordinary
course.

          5.12 Advice of Changes.  Adairsville shall promptly advise
               -----------------
United orally and in writing of any change or event having, or which
the Adairsville Management believes could have, a material adverse
effect on the assets, liabilities, business, operations or financial
condition of Adairsville.

                                 -19-
<PAGE>

<PAGE>
                              ARTICLE VI
                              ----------

               REPRESENTATIONS AND WARRANTIES OF UNITED
               ----------------------------------------

          As an inducement to Adairsville to enter into this Agreement 
and to consummate the transactions contemplated hereby, United repre-
sents, warrants, covenants and agrees as follows:

     6.1  United Disclosure Memorandum.  United has heretofore
          ----------------------------
delivered to Adairsville a memorandum (the "United Disclosure
Memorandum") containing certain information regarding United as
indicated at various places in this Agreement.  All information set
forth in the United Disclosure Memorandum or in documents incorporated
by reference in the United Disclosure Memorandum is true, correct and
complete, does not omit to state any fact necessary in order to make
the statements therein not misleading, and shall be deemed for all
purposes of this Agreement to constitute part of the representations
and warranties of United under this Article VI.  The information
contained in the United Disclosure Memorandum shall be deemed to be
part of and qualify all representations and warranties contained in
this Article VI and the covenants in Article VII to the extent
applicable.  All information in each of the documents and other
writings furnished to Adairsville pursuant to this Agreement or the
United Disclosure Memorandum is or will be true, correct and complete
and does not and will not omit to state any fact necessary in order to
make the statements therein not misleading.  United shall promptly
provide Adairsville with written notification of any event, occurrence
or other information necessary to maintain the United Disclosure
Memorandum and all other documents and writings furnished to
Adairsville pursuant to this Agreement as true, correct and complete
in all material respects at all times prior to and including the
Closing.

     6.2  Authority.  Subject to the approval of various state and
          ---------
federal regulators, the execution, delivery and performance of this
Agreement and the other transactions contemplated or required in
connection herewith will not, with or without the giving of notice or
the passage of time, or both, (a) violate any provision of federal or
state law applicable to United or Interim, the violation of which
could be reasonably expected to have a material adverse effect on the
business, operations, properties, assets, financial condition or
prospects of United; (b) violate any provision of the articles of
incorporation or bylaws of United or Interim; (c) conflict with or
result in a breach of any provision of, or termination of, or
constitute a default under any instrument, license, agreement, or
commitment to which United is a party, which, singly or in the
aggregate, could reasonably be expected to have a material adverse
effect on the business, operations, properties, assets, financial
condition or prospects of United; or (d) constitute a violation of any
order, judgment or decree to which United is a party, or by which
United or any of its assets or properties are bound.  Assuming this
Agreement constitutes the valid and binding obligation of Adairsville,
this Agreement constitutes the valid and binding obligation of United,
and is enforceable in accordance with its terms, except as limited by
laws affecting creditors' rights generally and by the discretion of
courts to compel specific performance.

<PAGE>
     6.3  Corporate Status.  United and Interim are business
          ----------------
corporations duly organized, validly existing and in good standing
under the laws of the State of Georgia.

                                 -20-

<PAGE>

<PAGE>
     6.4  Litigation and Proceedings.  Except as set forth on the
          --------------------------
United Disclosure Memorandum, there are no actions, decrees, suits,
counterclaims, claims, proceedings or governmental actions or
investigations, pending or, to the knowledge of United, threatened
against, by or affecting United, or any officer, director, employee or
agent in such person's capacity as an officer, director, employee or
agent of United or relating to the business or affairs of United, in
any court or before any arbitrator or governmental agency, and no
judgment, award, order or decree of any nature has been rendered
against or with respect thereto by any agency, arbitrator, court,
commission or other authority, nor does United have any unasserted
contingent liabilities which might have an adverse effect on its
assets or on the operation of its businesses or which might prevent or
impede the consummation of the transactions contemplated by this
Agreement.

     6.5  Approvals, Consents and Filings.  Except for the approval of
          -------------------------------
the Federal Reserve and the Department of Banking, or as set forth in
the United Disclosure Memorandum, neither the execution and delivery
of this Agreement nor the consummation of the transactions
contemplated hereby will (a) require any consent, approval,
authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, or (b) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to United,
or any of United's assets.

     6.6  Default.  (a)  Except for those consents described in or set
          -------
forth pursuant to Section 6.5 above, neither the execution of this
Agreement nor consummation of the transactions contemplated herein (i)
constitutes a breach of or default under any contract or commitment to
which United is a party or by which United or its properties or assets
are bound, (ii) does or will result in the creation or imposition of
any security interest, lien, encumbrance, charge, equity or
restriction of any nature whatsoever in favor of any third party upon
any assets of United, or (iii) constitutes an event permitting
termination of any agreement or the acceleration of any indebtedness
of United.

          (b)  United is not in default under its articles of
incorporation or bylaws or under any term or provision of any security
deed, mortgage, indenture or security agreement or of any other
contract or instrument to which United is a party or by which it or
any of its property is bound.

     6.7  Regulatory Approval.  United is not aware of any reasonable
          -------------------
basis that would preclude it from obtaining regulatory approval for
the Merger.

     6.8  Representations and Warranties.  No representation or
          ------------------------------
warranty contained in the United Disclosure Memorandum, this Article
VI or in any certificate delivered by or at the direction of United
pursuant hereto or in connection with the transactions contemplated
hereby contains or shall contain any untrue statement, nor shall such
representations and warranties taken as a whole omit any statement
necessary in order to make any statement not misleading.  Copies of
all documents that have been or will be furnished to Adairsville in
connection with this Agreement or pursuant hereto are or shall be
true, correct and complete.

                                 -21-
<PAGE>

<PAGE>
                              ARTICLE VII
                              -----------

                  CONDITIONS TO OBLIGATIONS OF UNITED
                  -----------------------------------

          All of the obligations of United under this Agreement are
subject to the fulfillment prior to or at the Closing Date of each of
the following conditions, any one or more of which may be waived by
United:

          7.1  Veracity of Representations and Warranties.  The
               ------------------------------------------
representations and warranties of Adairsville contained herein, in the
Disclosure Memorandum or in any certificate delivered pursuant to the
provisions hereof, or in connection herewith, shall be true in all
material respects as of the date when made and shall be deemed to be
made again at and as of the Closing Date and shall be true in all
material respects at and as of such time, except as a result of
changes or events expressly permitted or contemplated herein.

          7.2  Performance of Agreements.  Adairsville shall have
               -------------------------
performed and complied with all agreements and conditions required by
this Agreement to be performed or complied with by it prior to or on
the Closing Date.

          7.3  Certificates, Resolutions, Opinion. Adairsville shall
               ----------------------------------
have delivered to United:

          (a)  a certificate executed by the Vice Chairman and
    Secretary of Adairsville, dated as of the Closing Date, and
    certifying in such detail as United may reasonably request to the
    fulfillment of the conditions specified in Sections 7.1 and 7.2
    hereof;

          (b)  duly adopted resolutions of the Board of Directors and
    shareholders of Adairsville certified by the Secretary thereof,
    dated the Closing Date, (i) authorizing and approving the
    execution of this Agreement (with respect to the directors of
    Adairsville) and the Merger Agreement (with respect to the
    directors and shareholders of Adairsville) and the consummation of
    the transactions contemplated herein and therein in accordance
    with their respective terms and (ii) authorizing all other
    necessary and proper corporate action to enable Adairsville to
    comply with the terms hereof and thereof;

          (c)  certificates of the valid existence of Adairsville and
    the Adairsville Bank under the laws of the State of Georgia,
    executed by the Secretary of State and the Department of Banking,
    respectively, and dated not more than five (5) business days prior
    to the Closing Date;

          (d)  certificates from the appropriate public officials of
    the State of Georgia, dated not more than five (5) business days
    prior to the Closing Date, certifying that Adairsville has filed
    all corporate tax returns required by the laws of such state and
    has paid all taxes shown thereon to be due; and

                                 -22-
<PAGE>

<PAGE>
          (e)  an opinion of Jenkens & Gilchrist, P.C., counsel for
    Adairsville, dated the Closing Date, in the form attached hereto
    as Exhibit C.

          7.4  Shareholder Approval. The Merger Agreement shall have
               --------------------
been approved by the vote of the holders of at least two-thirds of
Adairsville Stock.

          7.5  Regulatory Approvals.  United shall have received from
               --------------------
any and all governmental authorities, bodies or agencies having
jurisdiction over the transactions contemplated by this Agreement and
the Merger Agreement, including, but not limited to the Federal
Reserve and the Department of Banking, such consents, authorizations
and approvals as are necessary for the consummation thereof and all
applicable waiting or similar periods required by law shall have
expired.  Such consents, authorizations and approvals shall be without
conditions other than such conditions as are ordinarily imposed in
connection with transactions of the type contemplated hereby and which
do not, in the reasonable judgment of United, and in the exercise of
the fiduciary duties of the Board of Directors of United, make it
inadvisable to consummate the Merger.

          7.6  Certificate of Merger.  The Secretary of State of the
               ---------------------
State of Georgia shall have issued a certificate of merger with regard
to the Merger in accordance with the provisions of the Georgia
Business Corporation Code.

          7.7  Resignations of Directors.  United shall have received
               -------------------------
the resignations of all of the Directors of Adairsville and
Adairsville Bank effective as of the Closing Date.

          7.8  No Adverse Changes.  There shall have been no material
               ------------------
adverse change in the properties, business or financial condition of
Adairsville, in the aggregate, from that reflected in the 1998
Financial Statements of Adairsville included in the Adairsville
financial statements referred to in Section 4.2.6 of this Agreement,
and Adairsville shall not have suffered any substantial loss or damage
to its properties or assets whether or not insured that would affect
or impair its ability to conduct its business.  It is understood that
a material adverse change will not include a change with respect to,
or affect on, Adairsville resulting from a change in law, rule,
regulation or GAAP or from any other matter affecting federally-
insured depository institutions generally (including, without
limitation, their holding companies), including, without limitation,
changes in general economic conditions and changes in prevailing
interest or deposit rates; provided, any such changes do not impact
Adairsville more adversely than other similarly situated financial
institutions.

                             ARTICLE VIII
                             ------------

               CONDITIONS TO OBLIGATIONS OF ADAIRSVILLE
               ----------------------------------------

          All of the obligations of Adairsville under this Agreement
are subject to the fulfillment prior to or at the Closing Date of each
of the following conditions, any one or more of which may be waived by
it:
                                 -23-
<PAGE>

<PAGE>
          8.1  Veracity of Representations and Warranties.  The
               ------------------------------------------
representations and warranties of United contained herein or in any
certificate, schedule or other document delivered pursuant to the
provisions hereof, or in connection herewith, shall be true in all
material respects as of the date when made and shall be deemed to be
made again at and as of the Closing Date and shall be true in all
material respects at and as of such time, except as a result of
changes or events expressly permitted or contemplated herein.

          8.2  Performance of Agreements.  United shall have performed
               -------------------------
and complied with all agreements and conditions required by this
Agreement to be performed or complied with by it prior to or at the
Closing Date.

          8.3  Certificates, Resolutions, Opinion.  United shall have
               ----------------------------------
delivered to Adairsville:

          (a)  a certificate executed by the President and Secretary
    of United, dated the Closing Date, certifying in such detail as
    Adairsville may reasonably request to the fulfillment of the
    conditions specified in Sections 8.1 and 8.2 hereof; and

          (b)  duly adopted resolutions of the board of directors of
    United, certified by the Secretary thereof, dated the Closing
    Date, (i) authorizing and approving the execution and delivery of
    this Agreement and the Merger Agreement on behalf of United, and
    the consummation of the transactions contemplated herein and
    therein in accordance with their respective terms, and (ii)
    authorizing all other necessary and proper corporate actions to
    enable United to comply with the terms hereof and thereof;

          (c)  duly adopted resolutions of the Board of Directors and
    sole shareholder of Interim certified by the Secretary thereof,
    dated the Closing Date, (i) authorizing and approving the
    execution of the Merger Agreement and the consummation of the
    transactions contemplated therein in accordance with its terms and
    (ii) authorizing all other necessary and proper corporate action
    to enable Interim to comply with the terms thereof;

          (d)  an opinion of Kilpatrick Stockton LLP, counsel for
    United, dated the Closing Date, in the form attached hereto as
    Exhibit D.

          8.4  Shareholder Approval.  The Merger Agreement shall have
               --------------------
been approved by the vote of the holders of at least two-thirds of
Adairsville Stock.

          8.5  Regulatory Approvals.  Any and all governmental
               --------------------
authorities, bodies or agencies having jurisdiction over the
transactions contemplated by this Agreement and the Merger Agreement,
including, but not limited to the Federal Reserve and the Department
of Banking, shall have granted such consents, authorizations and
approvals as are necessary for the consummation hereof and thereof,
and all applicable waiting or similar periods required by law shall
have expired. Such consents, authorizations and approvals shall be

                                 -24-
<PAGE>

<PAGE>

without conditions other than such conditions as are ordinarily
imposed in connection with transactions of the type contemplated
hereby and which do not, in the reasonable judgment of Adairsville,
and in the exercise of the fiduciary duties of the Board of Directors
of Adairsville, make it inadvisable to consummate the Merger.

          8.6  Certificate of Merger.  The Secretary of State of the
               ---------------------
State of Georgia shall have issued a certificate of merger with regard
to the Merger in accordance with the provisions of the Georgia
Business Corporation Code.

          8.7  Receipt of Fairness Opinion.  Adairsville shall have
               ---------------------------
received an opinion of Dr. Bob Swasky (or another qualified person or
entity satisfactory to Adairsville and United), that the consideration
to be received by the shareholders of Adairsville pursuant to the
Merger is adequate.

          8.8  Third Party Escrow Account.  United shall have
               --------------------------
transferred by wire all of the funds required to be paid as
consideration to Adairsville stockholders pursuant to Article II of
this Agreement to an independent third party escrow agent, which may
be a law firm chosen by United, under an escrow agreement in form and
substance reasonably satisfactory to Adairsville which will provide
that the escrow agent shall distribute the funds to Adairsville
shareholders solely upon receipt of notification by either United or
Adairsville of the effectiveness of the merger and receipt of
certificates formerly representing shares of Adairsville Stock duly
endorsed for transfer.

                              ARTICLE IX
                              ----------

                       WARRANTIES, NOTICES, ETC.
                       -------------------------

          9.1  Warranties.  All statements contained in any
               ----------
certificate delivered by or on behalf of Adairsville or United
pursuant hereto or in connection with the transactions contemplated
hereby shall be deemed representations and warranties hereunder by
them.  Unless the context otherwise requires, the representations and
warranties required of Adairsville shall be required to be made, and
shall be considered made, on behalf of both Adairsville and its
subsidiary Adairsville Bank, and the representations and warranties
required of United, shall be required to be made, and shall be
considered made, on behalf of United and the United Subsidiaries.

          9.2  Survival of Representations.  All representations,
               ---------------------------
warranties, covenants, and agreements made by either party hereto in
or pursuant to this Agreement or in any exhibit or certificate
delivered pursuant hereto shall be deemed to have been material and to
have been relied upon by the party to which made, but, except as set
forth hereafter or specifically stated in this Agreement, such
representations, warranties, covenants, and agreements shall expire
and be of no further force and effect upon the consummation of the
Merger; provided, however, that the following shall survive
consummation of the Merger and the transactions contemplated hereby:


<PAGE>
          (a)  the opinions of counsel referred to in Sections 7.3(e)
    and 8.3(d) of this Agreement;

                                 -25-
<PAGE>

<PAGE>

          (b)  any fraudulent misrepresentation of any material fact
    made by either party hereto in or pursuant to this Agreement or in
    any instrument, document or certificate delivered pursuant hereto;
    and

          (c)  the covenant with respect to the confidentiality of
    certain information contained in Section 3.4 hereof.

          9.3  Notices.  All notices or other communications required
               -------
or permitted to be given or made hereunder shall be in writing and
delivered personally or sent by pre-paid, first class certified or
registered mail, return receipt requested, or by facsimile
transmission, to the intended recipient thereof at its address or
facsimile number set out below.  Any such notice or communication
shall be deemed to have been duly given immediately (if given or made
in person or by facsimile confirmed by mailing a copy thereof to the
recipient in accordance with this Paragraph 9.3 on the date of such
facsimile), or five days after mailing (if given or made by mail), and
in proving same it shall be sufficient to show that the envelope
containing the same was delivered to the delivery service and duly
addressed, or that receipt of a facsimile was confirmed by the
recipient as provided above.  Either party may change the address to
which notices or other communications to such party shall be delivered
or mailed by giving notice thereof to the other party hereto in the
manner provided herein.

          (a)  To Adairsville:     Adairsville Bancshares, Inc.
                                   7400 Hwy. 140
                                   P. O. Box 405
                                   Adairsville, Georgia  30103-0405
                                   Attention:  William B. Hurley
                                               CEO
                                   Facsimile:  (770) 773-9195

               With copies to:     Jenkens & Gilchrist, a Professional
                                    Corporation
                                   1445 Ross Avenue
                                   Suite 3200
                                   Dallas, Texas  75202-2799
                                   Attention:  Peter G. Weinstock

          (b)  To United:          United Community Banks, Inc.
                                   P.O. Box 398
                                   Blairsville, Georgia 30512
                                   Attention:     Jimmy Tallent
                                                  President
                                   Facsimile:  (706) 745-1335



                                 -26-

<PAGE>

<PAGE>

               With copies to:     Kilpatrick Stockton LLP
                                   Suite 2800
                                   1100 Peachtree Street
                                   Atlanta, Georgia  303039-4530
                                   Attention:  Richard R. Cheatham
                                   Facsimile:  (404) 815-6555

          9.4  Entire Agreement.  This Agreement, the Merger Agreement
               ----------------
and the Confidentiality Agreement supersede all prior discussions and
agreements between Adairsville and United with respect to the Merger
and the other matters contained herein and therein, and this
Agreement, the Merger Agreement and the Confidentiality Agreement
contain the sole and entire agreement between Adairsville and United
with respect to the transactions contemplated herein and therein.

          9.5  Waiver; Amendment.  Prior to or on the Closing Date,
               -----------------
United shall have the right to waive any default in the performance of
any term of this Agreement by Adairsville, to waive or extend the time
for the fulfillment by Adairsville of any or all of Adairsville'
obligations under this Agreement, and to waive any or all of the
conditions precedent to the obligations of United under this
Agreement, except any condition which, if not satisfied, would result
in the violation of any law or applicable governmental regulation. 
Prior to or on the Closing Date, Adairsville shall have the right to
waive any default in the performance of any term of this Agreement by
United, to waive or extend the time for the fulfillment by United of
any or all of United's obligations under this Agreement, and to waive
any or all of the conditions precedent to the obligations of
Adairsville under this  Agreement, except any condition which, if not
satisfied, would result in the violation of any law or applicable
governmental regulation.  This Agreement may be amended by a
subsequent writing signed by the parties hereto, provided, however,
that the provisions of Sections 7.5 and 8.5 requiring regulatory
approval shall not be amended by the parties hereto without regulatory
approval.

          9.6  Enforcement of Agreement.  The parties hereto agree
               ------------------------
that irreparable damage would occur in the event that any of the
provisions of this Agreement was not performed in accordance with its
specific terms or was otherwise breached.  It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the
terms and provisions hereof in any court of the United States or any
state having jurisdiction, this being in addition to any other remedy
to which they are entitled at law or in equity.

                               ARTICLE X
                               ---------

                              TERMINATION
                              -----------

          This Agreement may be terminated at any time prior to or on
the Closing Date upon written notice to the other party as follows,
and, upon any such termination of this Agreement, neither party hereto
shall have any liability to the other, except that the provisions of
Sections 3.4, 3.6 and 3.10 hereof shall survive the termination of
this Agreement for any reason.


                                 -27-
<PAGE>

<PAGE>
          10.1 Material Adverse Change.  By United, if, after the date
               -----------------------
hereof, a material adverse change in the financial condition or
business of Adairsville shall have occurred which change would
reasonably be expected to have a material adverse affect on the market
price of Adairsville Stock, or if Adairsville shall have suffered a
material loss or damage to any of its properties or assets, which
change, loss or damage materially affects or impairs its ability to
conduct its business.  It is understood that a material adverse change
will not include a change with respect to, or affect on, Adairsville
resulting from a change in law, rule, regulation or GAAP or from any
other matter affecting federally-insured depository institutions
generally (including, without limitation, their holding companies),
including, without limitation, changes in general economic conditions
and changes in prevailing interest or deposit rates; provided, any
such changes do not impact Adairsville more adversely than other
similarly situated financial institutions.

          10.2 Noncompliance.  (a) By United, if the terms, covenants
               -------------
or conditions of this Agreement to be complied with or performed by
Adairsville before the Closing shall not have been substantially
complied with or performed at or before the Closing Date and such
noncompliance or nonperformance shall not have been waived by United. 
(b) By Adairsville, if the terms, covenants or conditions of this
Agreement to be complied with or performed by United before the
Closing shall not have been substantially complied with or performed
at or before the Closing Date and such noncompliance or nonperformance
shall not have been waived by Adairsville.

          10.3 Failure to Disclose.  By United, if it learns of any
               -------------------
fact or condition not disclosed in this Agreement, the Adairsville
Disclosure Memorandum, or the 1998 Adairsville Financial Statements,
which was required to be disclosed by Adairsville pursuant to the
provisions of this Agreement at or prior to the date of execution
hereof with respect to the business, properties, assets or earnings of
Adairsville which materially and adversely affects such business,
properties, assets or earnings or the ownership, value or continuance
thereof.  It is understood that a material adverse change will not
include a change with respect to, or affect on, Adairsville resulting
from a change in law, rule, regulation or GAAP or from any other
matter affecting federally-insured depository institutions generally
(including, without limitation, their holding companies), including,
without limitation, changes in general economic conditions and changes
in prevailing interest or deposit rates; provided, any such changes do
not impact Adairsville more adversely than other similarly situated
financial institutions.

          10.4 Adverse Proceedings.  By either party, if any action,
               -------------------
suit or proceeding shall have been instituted or threatened against
either party to this Agreement to restrain or prohibit, or to obtain
substantial damages in respect of, this Agreement or the consummation
of the transactions contemplated herein, which, in the good faith
opinion of Adairsville or United makes consummation of the
transactions herein contemplated inadvisable.

          10.5 Termination Date.  This Agreement shall automatically
               ----------------
terminate, without the requirement of notice on behalf of either
party, if the Closing Date shall not have occurred on or before June 30,
1999.

                                 -28-
<PAGE>

<PAGE>
          10.6 Shareholders Vote.  By either party, if the Merger
               -----------------
Agreement is not approved by the vote of the holders of Adairsville
Stock as required by applicable law.

          10.7 Environmental Liability of Adairsville.  By United, if
               --------------------------------------
it learns of any potential material liability of Adairsville arising
from noncompliance with any federal, state or local environmental law
by Adairsville, or any potential material liability of Adairsville
arising from any environmental condition of the properties or assets
of Adairsville, including any properties or assets in which
Adairsville holds a security interest.

                              ARTICLE XI
                              ----------

                     COUNTERPARTS, HEADINGS, ETC.
                     ----------------------------

          This Agreement may be executed simultaneously in any number
of counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.  The headings
herein set out are for convenience of reference only and shall not be
deemed a part of this Agreement.  A pronoun in one gender includes and
applies to the other genders as well.













                                 -29-
<PAGE>

<PAGE>
                              ARTICLE XII
                              -----------

                            BINDING EFFECT
                            --------------

          This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and
assigns; provided, however, that this Agreement may not be assigned by
either party without the prior written consent of the other.

                             ARTICLE XIII
                             ------------

                             GOVERNING LAW
                             -------------

          The validity and effect of this Agreement and the Merger
Agreement and the rights and obligations of the parties hereto and
thereto shall be governed by and construed and enforced in accordance
with the laws of the State of Georgia.

          IN WITNESS WHEREOF, Adairsville and United have caused this
Agreement to be executed by their respective duly authorized corporate
officers and their respective corporate seals to be affixed hereto as
of the day and year first above written.

                                   ADAIRSVILLE BANCSHARES, INC.


(CORPORATE SEAL)                   By: /s/ Sue Hurley
                                        Sue Hurley
                                        Chairman
Attest:

/s/ E. Millard Acree, Jr.
E. Millard Acree, Jr.
Vice Chairman

                                   UNITED COMMUNITY BANKS, INC.


(CORPORATE SEAL)                   By: /s/ Jimmy Tallent
                                      Jimmy Tallent
                                      President
Attest:

/s/ Billy M. Decker
Billy M. Decker
Secretary

                                 -30-
<PAGE>

<PAGE>

                               EXHIBIT A

                     AGREEMENT AND PLAN OF MERGER


          THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made
and entered into as of this _____ day of January , 1999, by and
between ADAIRSVILLE INTERIM CORPORATION ("Interim"), and ADAIRSVILLE
BANCSHARES, INC. ("Adairsville"), both Georgia corporations (said
corporations are hereinafter collectively referred to as the
"Constituent Corporations").

                           R E C I T A L S:

          WHEREAS, the authorized capital stock of Adairsville
consists of 1,000,000 shares of Common Stock, $4 par value per share,
of which 381,116 shares are issued and ("Adairsville Stock"); and

          WHEREAS, the respective Boards of Directors of the
Constituent Corporations deem it advisable and in the best interests
of each such corporation and its shareholders that Interim merge with
Adairsville, with Adairsville being the surviving corporation; and

          WHEREAS, the respective Boards of Directors of the
Constituent Corporations, by resolutions duly adopted, have
unanimously approved and adopted this Agreement; and

          WHEREAS, the Board of Directors of Adairsville and Interim,
by resolutions duly adopted, have directed that this Agreement be
submitted to the shareholders of Adairsville and the sole shareholder
of Interim for their approval; and

          WHEREAS, United Community Banks, Inc. ("United"), the sole
shareholder of Interim, pursuant to the Agreement and Plan of
Reorganization of even date herewith between Adairsville and United
(the "Acquisition Agreement") has agreed to pay the shareholders of
Adairsville $18.50 per share in cash, according to the terms and
conditions contained herein, on or after the Closing Date (as defined
herein) of the merger provided for herein.

          NOW, THEREFORE, for and in consideration of the premises and
the mutual agreements herein contained, and other good and valuable
consideration, the receipt and adequacy of which as legally sufficient
consideration are hereby acknowledged, the parties hereto have agreed
and do hereby agree, as follows:

     1.   MERGER.
          ------

          Pursuant to and with the effects provided in the applicable
provisions of Article 11 of the Georgia Business Corporation Code, as
amended (Chapter 2 of Title 14 of the Official Code of Georgia),
Interim (hereinafter sometimes referred to as the "Merged
Corporation") shall be merged with and into Adairsville (the
"Merger").  Adairsville shall be the surviving corporation (the
"Surviving Corporation") and shall continue under the name
"Adairsville Bancshares, Inc.".  On the Closing Date (as defined

<PAGE>
herein) of the Merger, the individual existence of the Merged
Corporation shall cease and terminate.

     2.   ACTIONS TO BE TAKEN.
          -------------------

          The acts and things required to be done by the Georgia
Business Corporation Code in order to make this Agreement effective,
including the submission of this Agreement to the shareholders of the
Constituent Corporations and the filing of the Certificate of Merger
relating hereto in the manner provided in said Code, shall be attended
to and done by the proper officers of the Constituent Corporations
with the assistance of counsel as soon as practicable.

     3.   CLOSING DATE.
          ------------

          The Merger shall be effective upon the approval of this
Agreement by the shareholders of the Constituent Corporations and the
filing of the Certificate of Merger relating hereto in the manner
provided in the Georgia Business Corporation Code (the "Closing
Date").

     4.   ARTICLES OF INCORPORATION AND BYLAWS OF THE SURVIVING
          -----------------------------------------------------
CORPORATION.
- -----------

          (a)  The Articles of Incorporation of Adairsville, as
heretofore amended, shall on the Closing Date be the Articles of
Incorporation of the Surviving Corporation.

          (b)  Until altered, amended or repealed, as therein
provided, the Bylaws of Adairsville as in effect on the Closing Date
shall be the Bylaws of the Surviving Corporation.

     5.   DIRECTORS.
          ---------

          Upon the Merger contemplated herein becoming effective, the
directors of the Surviving Corporation shall be the individuals set
forth on Attachment 1 hereto.  Said persons shall hold office until
the next annual meeting of the shareholders of the Surviving
Corporation and until their successors are elected in accordance with
the By-Laws of the Surviving Corporation.  If on the Closing Date any
vacancy shall exist on the Board of Directors of the Surviving
Corporation, such vacancy shall be filled in the manner specified in
the By-Laws of the Surviving Corporation.

     6.   MANNER AND BASIS OF CONVERTING SHARES OF CAPITAL STOCK;
          -------------------------------------------------------
CAPITAL STRUCTURE OF THE SURVIVING CORPORATION.
- ----------------------------------------------

          The manner and basis of converting the shares of capital
stock of each of the Constituent Corporations into shares of the
Surviving Corporation or into cash or other property shall be as
follows:

          (a)  Upon the Closing Date each of the shares of Adairsville
Stock outstanding on the Closing Date shall be converted into $18.50
in cash (the "Purchase Price"); provided that if the Closing Date is

                                 -2-
<PAGE>

<PAGE>
ninety days after the date hereof (the "Threshold Date"), then the
consideration per share payable shall be increased by the amount of
the net earnings per share of Adairsville between January 1, 1999 and
the Closing Date.  Net earnings for the purpose of this Section 6(a)
shall be reduced by the amount of any non-operating earnings and not
reduced by any reserves or charges made pursuant to Section 3.13 of
the Acquisition Agreement.

          (b)  On or after the Closing Date, each holder as of the
Closing Date of any of the shares of Adairsville Stock, upon
presentation and surrender of the certificates representing such
shares to the transfer agent or agents designated by United, shall be
entitled to receive in exchange therefor a check in settlement for
cash payable for the Adairsville Stock.  Until such surrender, each
such outstanding certificate which prior to the Closing Date
represented Adairsville Stock shall be deemed for all corporate
purposes, except as set forth below, to evidence the right to receive
the cash into which the same shall have been converted.  Unless and
until any such certificate shall be so evidenced, the holder of such
certificate shall not have the right to receive any interest or any
cash into which the shares have been converted.

          (c)  Upon the Closing Date, the shares of Interim Stock
issued and outstanding immediately prior to the Closing Date shall be
converted into 381,116 shares, $4 par value per share, of Common Stock
of the Surviving Corporation.

     7.   TERMINATION OF SEPARATE EXISTENCE.
          ---------------------------------

          Upon the Closing Date, the separate existence of the Merged
Corporation shall cease and the Surviving Corporation shall possess
all of the rights, privileges, immunities, powers and franchises, as
well of a public nature as of a private nature, of each of the
Constituent Corporations; and all property, real, personal and mixed,
and all debts due on whatever account, and all other choses in action,
and all and every other interest of or belonging to or due to each of
the Constituent Corporations shall be taken and deemed to be
transferred to and vested in the Surviving Corporation without further
act or deed, and the title to any real estate or any interest therein,
vested in either of the Constituent Corporations shall not revert or
be in any way impaired by reason of the Merger.  The Surviving
Corporation shall thenceforth be responsible and liable for all the
liabilities, obligations and penalties of each of the Constituent
Corporations; and any claim existing or action or proceeding, civil or
criminal, pending by or against either of said Constituent
Corporations may be prosecuted as if the Merger had not taken place,
or the Surviving Corporation may be substituted in its place, and any
judgment rendered against either of the Constituent Corporations may
thenceforth be enforced against the Surviving Corporation; and neither
the rights of creditors nor any liens upon the property of either of
the Constituent Corporations shall be impaired by the Merger.

     8.   FURTHER ASSIGNMENTS.
          -------------------

          If at any time the Surviving Corporation shall consider or
be advised that any further assignments or assurances in law or any
other things are necessary or desirable to vest in said corporation,
according to the terms hereof, the title to any property or rights of
the Merged Corporation, the proper officers and directors of the
Merged Corporation shall and will execute and make all such proper

                                 -3-
<PAGE>

<PAGE>
assignments and assurances and do all things necessary and proper to
vest title in such property or rights in the Surviving Corporation,
and otherwise to carry out the purposes of this Agreement.

     9.   CONDITIONS PRECEDENT TO CONSUMMATION OF THE MERGER.
          --------------------------------------------------

          This Agreement is subject to, and consummation of the Merger
is conditioned upon, the fulfillment as of the Closing Date of each of
the following conditions:

          (a)  Approval of this Agreement by the affirmative vote of
the holders of two-thirds of the outstanding voting shares of
Adairsville Stock and the sole shareholder of Interim; and

          (b)  All the terms, covenants, agreements, obligations and
conditions of the Acquisition Agreement to be complied with, satisfied
and performed on or prior to the Closing Date (as defined therein),
shall have been complied with, satisfied and performed in all material
respects unless accomplishment of such covenants, agreements,
obligations and conditions has been waived by the party benefited
thereby.

     9.   TERMINATION.
          -----------

          This Agreement may be terminated and the Merger abandoned in
accordance with the terms of the Acquisition Agreement, at any time
before or after adoption of this Agreement by the directors of either
of the Constituent Corporations, notwithstanding favorable action on
the Merger by the shareholders of the Constituent Corporations, but
not later than the issuance of the certificate of merger by the
Secretary of State of Georgia with respect to the Merger in accordance
with the provisions of the Georgia Business Corporation Code.

     10.  COUNTERPARTS; TITLE; HEADINGS.
          -----------------------------

          This Agreement may be executed simultaneously in any number
of counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.  The title of this
Agreement and the headings herein set out are for the convenience of
reference only and shall not be deemed a part of this Agreement.

     11.  AMENDMENTS; ADDITIONAL AGREEMENTS.
          ---------------------------------

          At any time before or after approval and adoption by the
shareholders of Adairsville, this Agreement may be modified, amended
or supplemented by additional agreements, articles or certificates as
may be determined in the judgment of the respective Boards of
Directors of the Constituent Corporations to be necessary, desirable
or expedient to further the purposes of this Agreement, to clarify the
intention of the parties, to add to or modify the covenants, terms or
conditions contained herein or to effectuate or facilitate any
governmental approval of the Merger or this Agreement, or otherwise to
effectuate or facilitate the consummation of the transactions
contemplated hereby; provided, however, that no such modification,
amendment or supplement shall reduce to any extent the consideration
into which shares of Adairsville Stock shall be converted in the
Merger pursuant to Section 5 hereof.

                                 -4-
<PAGE>

<PAGE>
          IN WITNESS WHEREOF, the Constituent Corporations have each
caused this Agreement to be executed on their respective behalfs and
their respective corporate seals to be affixed hereto as of the day
and year first above written.

                                   ADAIRSVILLE INTERIM 
                                   CORPORATION

(CORPORATE SEAL)

                                   By:___________________________
ATTEST:                               Jimmy Tallent
                                      President

______________________________
Billy M. Decker
Secretary


                                   ADAIRSVILLE BANCSHARES, INC.

(CORPORATE SEAL)

                                   By:___________________________
                                        Sue Hurley
ATTEST:                                 Chairman

______________________________
E. Millard Acree, Jr.
Vice Chairman






                                  -5-

<PAGE>

<PAGE>
                             ATTACHMENT 1

                               Directors


Jimmy Tallent
Christopher J. Bledsoe








                                 -6-

<PAGE>

<PAGE>
                               EXHIBIT B


United Community Banks, Inc.
P.O. Box 398
Blairsville, Georgia 30512

Gentlemen:

          In connection with the proposed merger (the "Merger") of
Adairsville Interim Corporation ("Interim") with and into Adairsville
Bancshares, Inc. ("Adairsville"), pursuant to the Agreement and Plan
of Reorganization between United and Adairsville (the "Reorganization
Agreement") and the Agreement and Plan of Merger between Interim and
Adairsville, the undersigned hereby agrees to vote any and all shares
of the capital stock of Adairsville owned or controlled by her, him or
it in favor of the Merger.

                              Sincerely,

                              Estate of Ernest M. Acree, Sr.


                              By:___________________________
                                   Executor


                              ______________________________
                              Ernest M. Acree, Jr.


                              ______________________________
                              Thomas L. Manton


                              ______________________________
                              Franklin G. Fuller


                              ______________________________
                              Thomas Kinnamon



<PAGE>

<PAGE>
                              Summerville/Trion Bancshares, Inc.


                              By:___________________________
                              Name:
                              Title:


                              ______________________________
                              T. Fay Hurley


                              ______________________________
                              Sue Hurley


                              ______________________________
                              William B. Hurley




<PAGE>

<PAGE>
                               EXHIBIT C


     (1)  Adairsville was duly organized as a corporation, and is
existing and in good standing, under the laws of the State of Georgia.

     (2)  Adairsville has the corporate power to execute and deliver
the Agreement and Plan of Reorganization Agreement (the
"Reorganization Agreement") and the Agreement and Plan of Merger (the
"Merger Agreement"), to perform its obligations thereunder, to own and
use its Assets and to conduct its business.

     (3)  Adairsville has duly authorized the execution and delivery
of the Reorganization Agreement and the Merger Agreement and all
performance by Adairsville thereunder, and has duly executed and
delivered the Reorganization Agreement and the Merger Agreement.

     (4)  No consent, approval, authorization or other action filed
by, or filing with, any governmental authority of the United States or
the State of Georgia is required for Adairsville's execution and
delivery of the Reorganization Agreement and the Merger Agreement and
consummation of the Transaction, which consent, approval or
authorization has not been previously received.  

     (5)  The Reorganization Agreement and the Merger Agreement are
enforceable against Adairsville.

     (6)  The authorized capital stock of Adairsville consists of
1,000,000 shares of Common Stock, $4 par value per share, of which
381,116 shares are issued and outstanding.  All of the issued and
outstanding shares of capital stock of Adairsville has been duly
authorized and validly issued and are fully paid and non-assessable
and, to such counsel's knowledge, there are no outstanding options,
warrants, rights, calls, commitments, conversion rights, plans or
other agreements providing for the purchase or issuance of any
authorized but unissued shares of such capital stock.



<PAGE>

<PAGE>
                               EXHIBIT D


     (1)  United and Interim were duly organized as a corporations,
and are existing and in good standing, under the laws of the State of
Georgia.

     (2)  United has the corporate power to execute and deliver the
Agreement and Plan of Reorganization Agreement (the "Reorganization
Agreement") and Interim has the Corporate power and authority to
execute the Agreement and Plan of Merger (the "Merger Agreement"), and
each have the power to perform their respective obligations
thereunder, to own and use its Assets and to conduct its business.

     (3)  United has duly authorized the execution and delivery of the
Reorganization Agreement has duly authorized all performance by United
thereunder, and has duly executed and delivered the Reorganization
Agreement.

     (4)  Interim has duly authorized the execution and delivery of
the Merger Agreement and all performance by Interim thereunder, and
has duly executed and delivered the Merger Agreement.

     (5)  No consent, approval, authorization or other action filed
by, or filing with, any governmental authority of the United States or
the State of Georgia is required for United's execution and delivery
of the Reorganization Agreement and Interim's execution and delivery
of the Merger Agreement and consummation of the Transaction, which
consent, approval or authorization has not been previously received.

     (6)  The Reorganization Agreement and the Merger Agreement are
enforceable against United and Interim, respectively.





                            Exhibit 21


           Subsidiaries of United Community Banks, Inc.


               Subsidiary                  State of Organization
               ----------                  ---------------------
United Community Bank,                         Georgia
Blairsville, Georgia (d/b/a Union
County Bank in Union County,
Georgia; d/b/a First Bank of
Habersham in Habersham County,
Georgia; d/b/a United Community
Bank of Lumpkin County, Georgia)

Carolina Community Bank, Murphy,           North Carolina
 North Carolina

Peoples Bank of Fannin County,                 Georgia
Blue Ridge, Georgia (d/b/a Peoples
Bank and United Community Bank
of Gilmer County)

Towns County Bank, Hiawassee,                  Georgia
 Georgia

White County Bank, Cleveland,                  Georgia
 Georgia

First Clayton Bancshares, Inc.,                Georgia
 Clayton, Georgia

United Family Finance Co.                      Georgia

United Family Finance Co. of               North Carolina
North Carolina, Murphy,
 North Carolina






                              EXHIBIT 23

       CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



We have issued our report dated February 26, 1999, accompanying the
consolidated financial statements incorporated by reference in
the Annual Report of United Community Banks, Inc. on Form 10-K
for the year ended December 31, 1998.  We hereby consent to the
incorporation by reference of said report in the Registration
Statement of United Community Banks, Inc. on Form S-8 (File No.
33-80885, effective December 27, 1995).


                                        PORTER KEADLE MOORE, LLP


                                       /s/ Porter Keadle Moore, LLP




Atlanta, Georgia
March 22, 1999






<TABLE> <S> <C>

<ARTICLE> 9
<CIK> 0000857855
<NAME> UNITED COMMUNITY BANKS, INC.
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          DEC-31-1998
<PERIOD-START>                             JAN-01-1998
<PERIOD-END>                               DEC-31-1998
<CASH>                                          48,510
<INT-BEARING-DEPOSITS>                               0
<FED-FUNDS-SOLD>                                 7,190
<TRADING-ASSETS>                                     0
<INVESTMENTS-HELD-FOR-SALE>                    314,394
<INVESTMENTS-CARRYING>                          57,393
<INVESTMENTS-MARKET>                            59,106
<LOANS>                                        999,871
<ALLOWANCE>                                     11,929
<TOTAL-ASSETS>                               1,498,599
<DEPOSITS>                                   1,163,124
<SHORT-TERM>                                    26,520
<LIABILITIES-OTHER>                             19,574
<LONG-TERM>                                    202,631
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                         7,394
<OTHER-SE>                                      79,356
<TOTAL-LIABILITIES-AND-EQUITY>               1,498,599
<INTEREST-LOAN>                                 93,133
<INTEREST-INVEST>                               14,408
<INTEREST-OTHER>                                 1,518
<INTEREST-TOTAL>                               109,139
<INTEREST-DEPOSIT>                              50,174
<INTEREST-EXPENSE>                              56,640
<INTEREST-INCOME-NET>                           52,499
<LOAN-LOSSES>                                    2,372
<SECURITIES-GAINS>                                 800
<EXPENSE-OTHER>                                 41,098
<INCOME-PRETAX>                                 17,740
<INCOME-PRE-EXTRAORDINARY>                      17,740
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                    12,152
<EPS-PRIMARY>                                     1.64
<EPS-DILUTED>                                     1.62
<YIELD-ACTUAL>                                    4.58
<LOANS-NON>                                        518
<LOANS-PAST>                                       464
<LOANS-TROUBLED>                                 4,300
<LOANS-PROBLEM>                                      0
<ALLOWANCE-OPEN>                                10,352
<CHARGE-OFFS>                                    1,288
<RECOVERIES>                                       493
<ALLOWANCE-CLOSE>                               11,929
<ALLOWANCE-DOMESTIC>                                 0
<ALLOWANCE-FOREIGN>                                  0
<ALLOWANCE-UNALLOCATED>                         11,929
        

</TABLE>






                                 U N I T E D
                              _________________

                               COMMUNITY BANKS
                              _________________


                        NOTICE OF 1999 ANNUAL MEETING




                              _________________

                               PROXY STATEMENT
                              _________________






                         ANNUAL FINANCIAL STATEMENTS
                          AND REVIEW OF OPERATIONS



<PAGE>
                           TABLE OF CONTENTS


                                                                    PAGE
                                                                    ----

    NOTICE OF ANNUAL MEETING OF SHAREHOLDERS.......................    1

    PROXY STATEMENT................................................    2
        Security Holdings of Certain Beneficial Owners
          and Management...........................................    3
        Nomination and Election of Directors.......................    5
        Information About Nominees for Director....................    5
        Executive Compensation.....................................    7
        Section 16(a) Beneficial Ownership Reporting Compliance....    9
        Compensation Committee Interlocks and Insider 
          Participation............................................    9
        Joint Report on Executive Compensation.....................   10
        Shareholder Return Performance Graph.......................   12
        Meetings and Committees of the Board of Directors..........   13
        Information Concerning United's Accountants................   13
        Shareholder Proposals......................................   13
        Other Matters that May Come Before the Meeting.............   13

    APPENDIX:  ANNUAL REPORT TO SHAREHOLDERS............................
        General Description of the Business/Forward
          Looking Information......................................  A-1
        Selected Financial Data....................................  A-2
        Management's Discussion and Analysis of Financial
          Condition and Results of Operations......................  A-3
        Market and Dividend Data................................... A-29
        Report of Independent Certified Public Accountants......... A-30
        Consolidated Balance Sheets - December 31, 1998 and 1997... A-31
        Consolidated Statements of Income - For the Years

          Ended December 31, 1998, 1997 and 1996................... A-32
        Consolidated Statements of Comprehensive Income - For
          the Years Ended December 31, 1998, 1997 and 1996......... A-33
        Consolidated Statements of Changes in Stockholders'
          Equity - For the Years Ended December 31, 1998, 
          1997 and 1996............................................ A-34
        Consolidated Statements of Cash Flows - For the Years
          Ended December 31, 1998, 1997 and 1996A-35 Notes to
          Consolidated Financial Statements........................ A-36


<PAGE>


                                                        March 17, 1999

Dear Shareholder: 

   It is my pleasure to invite you to attend the 1999 Annual Meeting
of Shareholders of United Community Banks, Inc. which will be held
April 15, 1999 at The Brasstown Valley Resort, Trackrock Amphitheater,
Highway 515, Young Harris, Georgia at 2:30 p.m.  The accompanying
Notice of Annual Meeting of Shareholders and Proxy Statement describe
the items of business which will be discussed during the meeting.  A
report to shareholders, containing certain financial information, is
included as an appendix to the Proxy Statement.

   TO BE SURE THAT YOUR VOTE IS COUNTED, WE URGE YOU TO CAREFULLY
REVIEW THE PROXY STATEMENT AND VOTE YOUR CHOICES ON THE ENCLOSED PROXY
CARD AS SOON AS POSSIBLE.  If you wish to attend the meeting, any
ballot that you submit at the meeting will supersede your proxy.

   On behalf of the management, employees and directors of United
Community Banks, Inc., I want to thank you for your continued support.

                                   Sincerely, 

                                    /s/ Jimmy C. Tallent

                                   Jimmy C. Tallent, 
                                   President and Chief Executive Officer




<PAGE>
                     UNITED COMMUNITY BANKS, INC.
                            59 HIGHWAY 515
                             P.O. BOX 398
                      BLAIRSVILLE, GEORGIA  30512

          ___________________________________________________

               NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
          ___________________________________________________

                     TO BE HELD ON APRIL 15, 1999


   The annual meeting of shareholders of United Community Banks, Inc.
("United") will be held on April 15, 1999 at 2:30 p.m. at The
Brasstown Valley Resort, Trackrock Amphitheater, Highway 515, Young
Harris, Georgia, for the purposes of considering and voting upon:

     1.   The election of twelve directors to constitute the Board of
          Directors to serve until the next annual meeting and until
          their successors are elected and qualified; 

     2.   Such other matters as may properly come before the meeting
          or any adjournment thereof.

   Only shareholders of record at the close of business on March 1,
1999 will be entitled to notice of and to vote at the meeting or any
adjournment thereof.

   A Proxy Statement and a Proxy solicited by the Board of Directors
are enclosed herewith.  Please sign, date and return the Proxy
promptly in the enclosed business reply envelope.  If you attend the
meeting you may, if you wish, withdraw your Proxy and vote in person.

   Also enclosed as an appendix to the Proxy Statement is a report to
shareholders, including United's audited annual financial statements,
management's  discussion and analysis of financial condition and
results of operations, selected financial data, market and dividend
data and certain other matters. 

                              By Order of the Board of Directors,

                               /s/Jimmy C. Tallent

                              Jimmy C. Tallent,
                              President and Chief Executive Officer

March 17, 1999

   _______________________________________________________________
  |                                                               |
  |  PLEASE COMPLETE AND RETURN THE ENCLOSED PROXY PROMPTLY SO    |
  |  THAT YOUR VOTE MAY BE RECORDED AT THE MEETING IF YOU DO NOT  |
  |  ATTEND PERSONALLY.                                           |
  |_______________________________________________________________|



                                  -1-

<PAGE>
                     UNITED COMMUNITY BANKS, INC.

                            59 Highway 515
                             P.O. Box 398
                      Blairsville, Georgia  30512
                         _____________________

                            PROXY STATEMENT
                         _____________________

   This Proxy Statement is furnished in connection with the
solicitation of Proxies by the Board of Directors of United Community
Banks, Inc. ("United") for use at the Annual Meeting of Shareholders
of United to be held on April 15, 1999, and any adjournment thereof,
for the purposes set forth in the accompanying notice of the meeting. 
The expenses of this solicitation, including the cost of preparing and
mailing this Proxy Statement, will be paid by United.  Copies of
solicitation materials may be furnished to banks, brokerage houses and
other custodians, nominees and fiduciaries for forwarding to
beneficial owners of shares of United's common stock, and normal
handling charges may be paid for such forwarding services.  In
addition to solicitations by mail, directors and regular employees of
United may solicit Proxies in person or by telephone.  It is
anticipated that this Proxy Statement and the accompanying Proxy will
first be mailed to shareholders on approximately March 22, 1999.

   At the meeting, shareholders will elect twelve directors that will
serve a one-year term that will expire at the next annual meeting when
their successors are elected and qualified. 

   The record of shareholders entitled to vote at the Annual Meeting
was taken as of the close of business on March 1, 1999.  On that date,
United had outstanding and entitled to vote 7,393,605 shares of common
stock, par value $1.00 per share (the "Common Stock").

   Any Proxy given pursuant to this solicitation may be revoked by any
shareholder who attends the meeting and gives oral notice of his or
her election to vote in person, without compliance with any other
formalities.  In addition, any Proxy given pursuant to this
solicitation may be revoked before the meeting by delivering an
instrument revoking it or a duly executed Proxy bearing a later date
to the Secretary of United.  If the Proxy is properly completed and
returned by the shareholder and is not revoked, it will be voted at
the meeting in the manner specified thereon.  If the Proxy is returned
but no choice is specified thereon, it will be voted for all the
persons named below under the caption "Information About Nominees For
Director".

   The percentages outstanding of Common Stock are based on 7,686,609
shares of Common Stock, including 140,000 shares deemed outstanding
pursuant to United's prime plus 1/4% Convertible Subordinated Payable-
in-Kind Debentures due December  31, 2006 ("2006 Debentures") and
presently exercisable options to acquire 153,004 shares.

   UNITED WILL FURNISH WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON
FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE
"SEC") FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998, INCLUDING
FINANCIAL STATEMENTS AND SCHEDULES, TO ANY SHAREHOLDER OF RECORD OR
ANY BENEFICIAL OWNER OF ITS COMMON STOCK AS OF MARCH 1, 1999 WHO
REQUESTS A COPY OF SUCH REPORT.  ANY REQUEST FOR THE FORM 10-K SHOULD
BE IN WRITING AND ADDRESSED TO:

                              LOIS JONES
                            59 HIGHWAY 515
                             P.O. BOX 398
                      BLAIRSVILLE, GEORGIA  30512



                                  -2-
<PAGE>

     SECURITY HOLDINGS OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

   The following table sets forth as of February 15, 1999 beneficial
   ownership of United's Common Stock by, by each director or
   nominee, by each named executive officer and by all directors and
   officers as a group.  As of February 15, 1999, there were no
   "persons" (as that term is defined by the SEC) known by United to
   be the beneficial owner of more than 5% of United's Common Stock
   other than indicated in the table below.
  
                                          NUMBER OF SHARES
                                                OWNED           PERCENT OF
          DIRECTORS AND NOMINEES            BENEFICIALLY          CLASS
          ----------------------          ----------------     -----------

          Jimmy C. Tallent                    159,886 <F1>         2.1%

          Billy M. Decker                     141,287 <F2>         1.8%

          Thomas C. Gilliland                 177,581 <F3>         2.3%

          Robert L. Head, Jr.                 672,743 <F4>         8.8%

          Charles E. Hill                     170,563 <F5>         2.2%

          Hoyt O. Holloway                     48,085 <F6>          *

          P. Deral Horne                       30,000 <F7>          *

          John R. Martin                       51,529               *

          Clarence W. Mason, Sr.               47,340 <F8>          *

          Zell B. Miller                        1,000               *

          W.C. Nelson, Jr.                    686,728 <F9>         8.9%

          Charles E. Parks                    102,109 <F10)        1.3%


          NAMED EXECUTIVE OFFICERS
          ------------------------
          Christopher J. Bledsoe ..........    23,422 <F12>         *

          Guy W. Freeman ..................    34,918 <F11>         *


          ALL DIRECTORS AND EXECUTIVE
          OFFICERS AS A GROUP (22 PERSONS)  2,420,844 <F13>       31.5%




                                -3-

<PAGE>
          [FN]
          *     Less than one percent.
          <F1>  Includes 10,000 shares beneficially owned by Mr. Tallent
                pursuant to the 2006 Debentures and 28,250 shares
                beneficially owned by Mr. Tallent pursuant to currently-
                exercisable options.
          <F2>  Includes 10,000 shares beneficially owned by Mr. Decker
                pursuant to the 2006 Debentures and 10,900 shares
                beneficially owned by Mr. Decker pursuant to currently-
                exercisable options.  Does not include 9,613 shares
                owned by Mr. Decker's wife, for which he disclaims
                beneficial ownership.
          <F3>  Includes 6,270 shares beneficially owned by Mr.
                Gilliland as custodian for his children, 10,000 shares
                beneficially owned pursuant to the 2006 Debentures and
                16,950 shares beneficially owned pursuant to currently
                exercisable stock options.
          <F4>  Includes 96,555 shares beneficially owned by a trust
                over which Mr. Head has voting power and 10,000 shares
                owned pursuant to the 2006 Debentures.  Does not include
                16,965 shares owned by Mr. Head's wife, for which he
                disclaims beneficial ownership.
          <F5>  Includes 10,000 shares beneficially owned by Mr. Hill
                pursuant to the 2006 Debentures.  Does not include
                89,175 shares owned by Mr. Hill's wife, for which he
                disclaims beneficial ownership.
          <F6>  Includes 10,000 shares beneficially owned pursuant to
                the 2006 Debentures and 35,565 beneficially owned by
                Holloway Motors, Inc., a company 100% owned by Mr.
                Holloway.  Does not include 485 shares owned by Mr.
                Holloway's wife, for which he disclaims beneficial
                ownership.
          <F7>  Includes 10,000 shares beneficially owned by Mr. Horne 
                pursuant to the 2006 Debentures.
          <F8>  Includes 10,000 shares beneficially owned by Mr. Mason 
                pursuant to the 2006 Debentures.
          <F9>  Includes 11,250 shares beneficially owned by a trust
                over which Mr. Nelson has voting power and 10,000 shares
                owned pursuant to the 2006 Debentures; does not include
                12,035 shares owned by Mr. Nelson's wife, for which he
                disclaims beneficial ownership.
          <F10> Includes 10,000 shares beneficially owned by Mr. Parks 
                pursuant to the 2006 Debentures.
          <F11> Includes 6,000 shares beneficially owned by Mr. Freeman
                pursuant to the 2006 Debentures and 15,400 shares
                beneficially owned by Mr. Freeman pursuant to currently-
                exercisable options.
          <F12> Includes 6,000 shares beneficially owned by Mr. Bledsoe
                pursuant to the 2006 Debentures and 11,300 shares
                beneficially owned by Mr. Bledsoe pursuant to currently-
                exercisable options.
          <F13> Includes currently exerciseable options to acquire
                116,902 shares and 116,000 shares beneficially owned
                pursuant to the 2006 Debentures. 
          </FN>


                                  -4-

<PAGE>
                 NOMINATION AND ELECTION OF DIRECTORS
                             (Proposal 1)

   The Bylaws of United provide that the number of directors may range
from eight to fourteen directors.  The board of Directors of United
has set the number of directors at twelve.  The number of directors
may be increased or decreased from the foregoing from time to time by
the Board of Directors by amendment of the Bylaws, but no decrease
shall have the effect of shortening the term of an incumbent director. 
The terms of office for directors continue until the next annual
meeting and until their successors are elected and qualified.

   Each Proxy executed and returned by a shareholder will be voted as
specified thereon by the shareholder.  If no specification is made,
the Proxy will be voted for the election of the nominees named below
to constitute the entire Board of Directors.  In the event that any
nominee withdraws or for any reason is not able to serve as a
director, the Proxy will be voted for such other person as may be
designated by the Board of Directors as a substitute nominee, but in
no event will the Proxy be voted for more than twelve nominees. 
Management of United has no reason to believe that any nominee will
not serve if elected.  All of the nominees are currently directors of
United.

   Directors are elected by a plurality of the votes cast by the
holders of the shares entitled to vote in an election at a meeting at
which a quorum is present.  A quorum is present when the holders of a
majority of the shares outstanding on the record date are present at a
meeting in person or by proxy.  An abstention and a broker non-vote
would be included in determining whether a quorum is present at a
meeting, but would not have an effect on the outcome of a vote.


                INFORMATION ABOUT NOMINEES FOR DIRECTOR

   The following information as of December 31, 1998 has been
furnished by the respective nominees for director.  Except as
otherwise indicated, each nominee has been or was engaged in his
present or last principal employment, in the same or a similar
position, for more than five years.


<TABLE>
<CAPTION>
                                                 INFORMATION                         DIRECTOR OF
         NAME (AGE)                             ABOUT NOMINEE                        UNITED SINCE
         ----------                             -------------                        ------------
<S>                          <S>                                                         <C>
Jimmy C. Tallent..........   President and Chief Executive Officer of United             1987
   (46)

Billy M. Decker              Senior Vice President and Secretary of United               1988
   (55)

Thomas C. Gilliland.......   Executive Vice President of United and President            1992
   (50)                         of Peoples Bank of Fannin County

Robert L. Head, Jr........   Chairman of the Board of Directors of United;               1988
   (59)                         Owner of Head Construction Company, Head-
                                Westgate Corp.,  and Mountain Building
                                Supply in Blairsville, Georgia

Charles E. Hill              Director of United; Retired Director of                     1988
   (61)                         Pharmacy at Union General Hospital in
                                Blairsville, Georgia.

                                  -5-
<PAGE>
Hoyt O. Holloway..........   Director of United; owner of H&H Farms, a                   1993
   (58)                         poultry farm in Blue Ridge, Georgia.

P. Deral Horne............   Director of United; owner of Mountain and                   1992
   (71)                         Valley Properties, a land development and 
                                sales business in Murphy, North Carolina.

John R. Martin............   Director of United; Owner of John Martin                    1997
   (48)                         Construction and of several mini-warehouse
                                facilities in northeast Georgia and western
                                South Carolina;  registered pharmacist.

Clarence W. Mason, Sr. ...   Director of United; Owner of Mason Tractor, in              1992
   (61)                         Blue Ridge, Georgia.

Zell B. Miller............   Director of United; Governor of Georgia from                1999
   (67)                         1991 to 1998.

W. C. Nelson, Jr..........   Vice Chairman of the Board of United; Owner                 1988
   (55)                         of Nelson Tractor Company in Blairsville,
                                Georgia.

Charles E. Parks..........   Director of United; Former Owner of Parks                   1997
   (69)                         Lumber Co, Murrayville, Georgia.
</TABLE>


___________________________________________________________________________

   There are no family relationships between any director, executive
officer or nominee for director of United or any of its subsidiaries.
___________________________________________________________________________





                                  -6-
<PAGE>
                        EXECUTIVE COMPENSATION

   The table below sets forth the annual and other compensation paid
by United and its bank subsidiaries to the following persons who
served in the designated offices during 1998:  Jimmy C. Tallent,
President and Chief Executive Officer of United and UCB, Billy M.
Decker, Senior Vice President and Secretary of United, Guy Freeman,
President and Chief Executive Officer of Carolina and Senior Vice
President of United, Thomas C. Gilliland, President and Chief
Executive Officer of Peoples and Executive Vice President of United,
Christopher J. Bledsoe, Senior Vice President and Chief Financial
Officer of United and UCB (individually a "Named Executive Officer,
collectively, the "Named Executive Officers").


<TABLE>
<CAPTION>
                                                                                              Long-Term
                                                 Annual Compensation                         Compensation
                                      --------------------------------------------------   ----------------
                                                                                              Securities              All
        Name and Principal Offices                                                            Underlying             Other
             Held During 1998            Year     Salary       Bonus        Other               Options           Compensation
        --------------------------     -------  ----------  -----------  ------------        ------------      ------------------

<S>                                      <C>     <C>          <C>         <C>                   <C>                <C>
Jimmy C. Tallent....................     1998    $231,125     $100,000    $36,900 <F1>           8,750             $29,118 <F2>
   President and Chief Executive         1997    $215,000     $ 90,000    $32,875 <F1>           8,750             $27,058
   Officer of United and UCB             1996    $188,650     $ 65,000    $10,000 <F1>           8,750             $23,781

Thomas C. Gilliland.................     1998    $165,000     $ 45,000    $ 5,400 <F1>           5,250             $ 8,250 <F3>
   President and Chief Executive         1997    $157,500     $ 42,500    $ 5,400 <F1>           5,250             $13,388
   Officer of Peoples; Executive         1996    $142,188     $ 35,000    $ 6,400 <F1>           5,250             $12,086
   Vice President of United

Billy M. Decker.....................     1998    $121,450     $ 30,000    $18,600 <F1>           2,500             $14,817 <F3>
   Senior Vice President and             1997    $117,700     $ 30,000    $18,600 <F1>           3,500             $14,359
   Secretary of United                   1996    $107,500     $ 35,500    $10,000 <F1>           3,500             $13,115

Guy W. Freeman......................     1998    $158,550     $ 50,000    $ 7,300 <F1>           4,000             $19,343 <F3>
   President and Chief Executive         1997    $138,200     $ 40,000    $ 7,000 <F1>          10,000             $16,982
   Officer of Carolina; Senior Vice      1996    $117,500     $ 20,000    $ 3,850 <F1>           3,500             $14,335
   President of United

Christopher J. Bledsoe..............     1998    $116,250     $27,500         --                 3,500             $14,183 <F3>
   Senior Vice President and Chief       1997    $102,500     $25,000         --                 3,500             $12,505
   Financial Officer of United and UCB   1996    $ 91,500     $20,500         --                 3,500             $11,163
</TABLE>

__________________________________

   [FN]
   <F1>  Directors' fees for service on United's bank subsidiaries'
         boards of directors.  Other perquisites do not meet the
         Securities and Exchange Commission threshold for disclosure,
         is the lesser of $50,000 or 10% of the total salary and
         bonus for any named executive.
   <F2>  Represents a contribution by United of $28,197 on behalf of
         Mr. Tallent to United's Profit Sharing Plan and insurance
         premiums of $921 paid by UCB on behalf of Mr. Tallent on a
         life insurance policy.
   <F3>  Represents United's contribution on behalf of the named
         individual to United's Profit Sharing Plan.
   </FN>

   United has never granted restricted stock, stock appreciation
rights or similar awards to any of its present or past executive
officers, other than awards of stock options under the United
Community Banks Key Employee Stock Option Plan.

   Directors of United, other than a President or Vice President of a
bank subsidiary who serves on United's Board of Directors, received
$1,250 per board meeting attended during 1998.  Certain members of
United's Board of Directors also serve as members of one or more of
the Boards of Directors of United's bank subsidiaries, for which they
are compensated by the bank subsidiaries.


                                -7-

<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR

   The following table sets forth information concerning stock options
granted to the Named Executive Officers under the Plan during fiscal
year 1998 and the projected value of those options at assumed annual
rates of appreciation.


<TABLE>
<CAPTION>
______________________________________________________________________________________________________________
                                                                                |                             |
                                                                                |    Potential Realizable     |
                                                                                |           Value             |
                         Individual Grants                                      |   at Assumed Annual Rates   |
                                                                                |       of Stock Price        |
                                                                                |        Appreciation         |
                                                                                |         for Option          |
                                                                                |          Term <F2>          |
________________________________________________________________________________|_____________________________|
|                          |                |                    |              | |           |               |
|                          |   Number of    |                    |              | |           |               |
|                          |   Securities   |  Percent of Total  |              | |           |               |
|                          |   Underlying   |  Options Granted   |              | |           |               |
|                          |    Options     |  to Employees in   |  Expiration  | |           |               |
|       Name               |  Granted <F1>  |     Fiscal Year    |     Date     | |     5%    |     10%       |
|__________________________|________________|____________________|______________|_|___________|_______________|
|  <S>                     |     <C>        |        <C>         |    <C>       | |  <C>      |   <C>         |
|  Jimmy C. Tallent        |     8,750      |        16%         |    1/1/08    | |  $165,085 |   $418,357    |
|__________________________|________________|____________________|______________|_|___________|_______________|
|                          |                |                    |              | |           |               |
|  Thomas C. Gilliland     |     5,250      |         9%         |    1/1/08    | |  $ 99,051 |   $251,014    |
|__________________________|________________|____________________|______________|_|___________|_______________|
|                          |                |                    |              | |           |               |
|  Billy M. Decker         |     2,500      |         5%         |    1/1/08    | |  $ 47,167 |   $119,531    |
|__________________________|________________|____________________|______________|_|___________|_______________|
|                          |                |                    |              | |           |               |
|  Guy W. Freeman          |     4,000      |         7%         |    1/1/08    | |  $ 75,467 |   $191,249    |
|__________________________|________________|____________________|______________|_|___________|_______________|
|                          |                |                    |              | |           |               |
|  Christopher J. Bledsoe  |     3,500      |         6%         |    1/1/08    | |  $ 66,034 |   $167,343    |
|__________________________|________________|____________________|______________|_|___________|_______________|
</TABLE>

__________________________
[FN]
<F1>  20% of the options were vested at the date of grant and an
      additional 20% vest at each of the first four anniversaries of the
      date of grant.  Exercise price of the options is $30.00 per share,
      the fair market value on the date of grant of the options.
<F2>  "Potential Realizable Value" is disclosed in response to SEC
      regulations that require such disclosure for illustration only. 
      The values disclosed are not intended to be, and should not be
      interpreted as, representations or projections of the future value
      of United's Common Stock or of the stock price.  Amounts are
      calculated at  5% and 10% assumed appreciation of the value of the
      Common Stock (compounded annually over the option term) and are not
      intended to forecast actual expected future appreciation, if any,
      of the Common Stock.  The potential realizable value to the
      optionee is the difference between the exercise price and the
      appreciated stock price at the assumed annual rates of appreciation
      multiplied by the number of shares underlying the options.
</FN>


                                  -8-

<PAGE>
OPTION FISCAL YEAR-END VALUES

   Shown below is information with respect to unexercised options to
purchase the Common Stock granted under the Plan to the Named
Executive Officers and held by them at December 31, 1998.  No options
were exercised during 1998 by a Named Executive Officer.


<TABLE>
<CAPTION>
___________________________________________________________________________________________
|                                                                                          |
|                             Fiscal Year-End Option Values                                |
|__________________________________________________________________________________________|

____________________________________________________________________________________________
|                         |                                  |                             |
|                         |                                  |   Value of Unexercised in   |
|                         |   Number of Unexercised          |    the Money Options at     |
|                         |   Options at Fiscal Year End     |   Fiscal Year End ($)<F1>   |
|          Name           |   Exercisable/Unexercisable (#)  |  Exercisable/Unexercisable  |
|_________________________|__________________________________|_____________________________|
| <S>                     |         <C>                      |       <C>                   |
| Jimmy C. Tallent        |         23,000/15,750            |       $571,000/241,500      |
|_________________________|__________________________________|_____________________________|
|                         |                                  |                             |
| Thomas C. Gilliland     |          13,800/9,540            |       $342,600/144,900      |
|_________________________|__________________________________|_____________________________|
|                         |                                  |                             |
| Billy M. Decker         |           9,000/5,500            |       $226,400/88,600       |
|_________________________|__________________________________|_____________________________|
|                         |                                  |                             |
| Guy W. Freeman          |         11,900/10,600            |       $276,200/170,800      |
|_________________________|__________________________________|_____________________________|
|                         |                                  |                             |
| Christopher J. Bledsoe  |           9,200/6,300            |       $228,400/96,600       |
|_________________________|__________________________________|_____________________________|
</TABLE>


___________________
[FN]
<F1> Based on $40.00 per share, the last sale price known to United
     during 1998.  United's Common Stock is not publicly traded.
</FN>

        SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section 16(a) of the Securities and Exchange Act of 1934 (the
"Exchange Act") requires United's executive officers, directors and
persons who own more than ten percent (10%) of United's Common Stock
to file with the Securities and Exchange Commission ("SEC") reports of
ownership and changes in ownership.  Based solely on its review of
the forms filed with the SEC and representations of reporting persons,
United believes that everyone who was an executive officer, director
or greater than 10% beneficial owner at any time during 1998 complied
with all filing requirements applicable to them during 1998.


      COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     The Board of Directors of United reviewed the compensation of
Messrs. Tallent, Gilliland, Freeman, Decker and Bledsoe and of
United's other executive officers for the 1998 fiscal year.  Although
all members of the Board of Directors participated in deliberations
regarding the salaries of executive officers, none of such officers
participated in any decisions regarding his own compensation as an
executive officer.

     Mr. Robert L. Head, Jr., Chairman of the Board of Directors of
United, is the owner of a construction company that United and two of
its bank subsidiaries engaged during the course of the year to perform
various construction projects totaling approximately $2.0 million.

   The Banks have had, and expect to have in the future, banking
transactions in the ordinary course of business with directors and
officers of United and their associates, including corporations in
which such officers or directors are shareholders, directors and/or
officers, on the same terms (including interest rates and collateral)



                                  -9-
<PAGE>
as those prevailing at the time for comparable transactions with
unaffiliated third parties.  Such transactions have not involved more
than the normal risk of collectability or presented other unfavorable
features.

                JOINT REPORT ON EXECUTIVE COMPENSATION

GENERAL

   Under rules established by the SEC, United is required to provide
certain information with respect to compensation provided to United's
President and Chief Executive Officer and to United's other executive
officers.  The SEC regulations require a report setting forth a
description of United's executive compensation policy in general and
the considerations that led to the compensation decisions affecting
Messrs. Tallent, Gilliland, Decker, Freeman and  Bledsoe.  In
fulfillment of this requirement, the Board of Directors and
Compensation Committee has prepared the following report for inclusion
in this Proxy Statement.

   The fundamental policy of United's compensation program is to offer
competitive compensation and benefits for all employees, including the
President and Chief Executive Officer and the other officers of
United, in order to compete for and retain talented personnel who will
lead United in achieving levels of financial performance which enhance
shareholder value.  United's executive compensation package
historically has consisted of salary, annual incentive compensation,
matching profit sharing contributions and other customary fringe
benefits.  The grant of stock options under the Plan is also a part of
United's compensation package for certain executive officers,
including the Named Executive Officers.

SALARY

   All members of the Board of Directors of United participated in
deliberation regarding salaries of executive officers.  Although
subjective in nature, factors considered by the Board in setting the
salaries of executive officers (other than Mr. Tallent) were Mr.
Tallent's recommendations, compensation paid by comparable banks to
their executive officers (although such information was obtained
informally and United did not attempt to pay any certain percentage of
salary for comparable positions with other banks), each executive
officer's performance, contribution to United, tenure in his or her
position, and internal comparability considerations.  The Board of
Directors set the salary of Mr. Tallent based on Mr. Tallent's salary
during the preceding fiscal year, his tenure, the salaries of chief
executive officers of comparable banks (although such information was
obtained informally and United did not attempt to pay any certain
percentage of salary for a comparable position with other banks) and
the increase in earnings of United in recent years.  The Board did not
assign relative weights to the factors considered in setting salaries
of executive officers, including Mr. Tallent.

ANNUAL INCENTIVE COMPENSATION

   Annual incentive compensation for 1998, paid in the form of a cash
bonus during the fourth quarter of the fiscal year, was based on
annual financial results of United's bank subsidiaries, including
general targets with respect to net income and return on average
assets.  Cash bonuses were granted by the Board to Mr. Tallent, and
the Board set a range of bonuses (based on a percentage of salary) for
all employees other than Mr. Tallent, within which range Mr. Tallent
determined each officer's bonus, based on individual performance.

                                  -10-
<PAGE>
KEY EMPLOYEE STOCK OPTION PLAN

   Options to acquire 55,500 shares of Common Stock were awarded under
the Plan in fiscal 1998, including options to acquire 24,000 shares of
Common Stock awarded to the Named Executive Officers by the Compensation
Committee.

               UNITED COMMUNITY BANKS, INC. BOARD OF DIRECTORS

          Jimmy C. Tallent               P. Deral Horne
          Billy M. Decker                John R. Martin
          Thomas C. Gilliland            Clarence W. Mason, Sr.
          Robert L. Head, Jr.            Zell B. Miller
          Charles E. Hill                W. C. Nelson, Jr.
          Hoyt O. Holloway               Charles E. Parks


              COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

          Robert L. Head, Jr.            John R. Martin
          Charles E. Hill                Clarence W. Mason, Sr.
          Hoyt O. Holloway               Zell B. Miller
          P. Deral Horne                 W. C. Nelson, Jr.
          Charles E. Parks




                                  -11-
<PAGE>
                   SHAREHOLDER RETURN PERFORMANCE GRAPH

   Set forth below is a line graph comparing the yearly percentage
change in the cumulative total shareholder return on United's Common
Stock against the cumulative total return on The Nasdaq Stock Market
(U.S. Companies) Index and The Nasdaq Bank Stocks Index for the period
of five fiscal years commencing January 1, 1994 and ending on December
31, 1998.  This graph was prepared at United's request by Research
Data Group, San Francisco, California.  United's Common Stock is not
publicly traded; therefore, the total shareholder return is based on
stock trades known to United during the periods presented.


                     COMPARISON OF 5 YEAR CUMULATIVE
                               TOTAL RETURN*
                     AMONG UNITED COMMUNITY BANKS, INC.
                    THE NASDAQ STOCK MARKET (U.S.) INDEX
                          AND THE NASDAQ BANK INDEX


                   _______________________________________



                            GRAPHICS APPEARS HERE


                   _______________________________________


                 * $100 INVESTED ON 12/31/93 IN STOCK OR INDEX -
                   INCLUDING REINVESTMENT OF DIVIDENDS.
                   FISCAL YEAR ENDING DECEMBER 31.


<TABLE>
<CAPTION>
_____________________________________________________________________________________________
|                                  |  |                                                     |
|                                  |  |                        CUMULATIVE TOTAL RETURN      |
|__________________________________|__|_____________________________________________________|
|                                  |  |        |        |        |        |        |        |
|                                  |  |  12/93 |  12/94 |  12/95 |  12/96 |  12/97 |  12/98 |
|__________________________________|__|________|________|________|________|________|________|
| <S>                              |  |   <C>  |   <C>  |   <C>  |   <C>  |   <C>  |   <C>  |
| UNITED COMMUNITY BANKS, INC.     |  |   100  |   157  |   253  |   333  |   479  |   641  |
|__________________________________|__|________|________|________|________|________|________|
|                                  |  |        |        |        |        |        |        |
| NASDAQ STOCK MARKET (U.S.)       |  |   100  |    98  |   138  |   170  |   209  |   293  |
|__________________________________|__|________|________|________|________|________|________|
|                                  |  |        |        |        |        |        |        |
| NASDAQ BANK                      |  |   100  |   100  |   148  |   196  |   328  |   325  |
|__________________________________|__|________|________|________|________|________|________|
</TABLE>


                                    -12-

<PAGE>

          MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

    The United Board of Directors held four meetings during 1998. 
All of the directors attended at least seventy- five percent (75%) of
the meetings of the Board and meetings of the committees of the Board
on which they sat that were held during their tenure as directors.

   The Board of Directors does not have a standing audit or nominating
committee.  The compensation committee of the Board of Directors is
comprised of all members of the Board who are not employees of the
bank subsidiaries of United.  The compensation committee makes
compensation decisions for executive officers and key employees and
administers the Plan.


              INFORMATION CONCERNING UNITED'S ACCOUNTANTS

   Porter Keadle Moore, LLP ("Porter Keadle") was the principal
independent public accountant for United during the year ended
December 31, 1998.  Representatives of Porter Keadle are expected to
be present at the annual meeting and will have the opportunity to make
a statement if they desire to do so and to respond to appropriate
questions.  United anticipates that Porter Keadle will be United's
accountants for the current fiscal year. 


                         SHAREHOLDER PROPOSALS

   Proposals of shareholders intended to be presented at United's 2000
annual meeting must be received by December 12, 1999 and otherwise
must comply with United's bylaws  in order to be eligible for
inclusion in United's Proxy Statement and Proxy for that meeting.

            OTHER MATTERS THAT MAY COME BEFORE THE MEETING

   Management of United knows of no matters other than those stated
above that are to be brought before the meeting.  If any other matters
should be presented for consideration and voting, however, it is the
intention of the persons named as proxies in the enclosed Proxy to
vote in accordance with their judgment as to what is in the best
interest of United.


                                   By Order of the Board of Directors,

                                    /s/ Jimmy C. Tallent

                                   Jimmy C. Tallent
                                   President and Chief Executive Officer



                                  -13-
<PAGE>

                             COMMON STOCK
                    OF UNITED COMMUNITY BANKS, INC.

                THIS PROXY IS SOLICITED BY THE BOARD OF
        DIRECTORS FOR THE 1999 ANNUAL MEETING OF SHAREHOLDERS.


          This undersigned hereby appoints Jimmy C. Tallent or Robert
L. Head, Jr. the proxy of the undersigned to vote the Common Stock of
the undersigned at the Annual Meeting of Shareholders of UNITED
COMMUNITY BANKS, INC. to be held on April 15, 1999, and any
adjournment thereof.
     __
1.  |__|  FOR all nominees for director listed below (except as
indicated to the contrary):

JIMMY C. TALLENT; BILLY M. DECKER; THOMAS C. GILLILAND; ROBERT L.
HEAD, JR.; CHARLES E. HILL; HOYT O. HOLLOWAY; P. DERAL HORNE; JOHN R.
MARTIN; CLARENCE W. MASON, SR.; ZELL B. MILLER; W. C. NELSON, JR.;
CHARLES E. PARKS

(INSTRUCTION:  TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, WRITE THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW)

_________________________________________________________________________

     __
2.  |__|  WITHHOLD AUTHORITY to vote for all nominees listed above.

     In accordance with their best judgment with respect to any other
     matters that may properly come before the meeting.


THE BOARD OF DIRECTORS FAVORS A VOTE "FOR" THE ELECTION AS DIRECTORS
OF THE PERSONS NAMED IN THE PROXY AND UNLESS INSTRUCTIONS TO THE
CONTRARY ARE INDICATED IN THE SPACE PROVIDED, THIS PROXY WILL BE SO
VOTED.



                              ________________________________________
                              Please sign this Proxy exactly as name
                              appears on the Proxy.

                              Note:  When signing as an attorney,
                              trustee, administrator or guardian,
                              please give your title as such.  In the
                              case of joint tenants, each joint owner
                              must sign.

                              Date: __________________________________


<PAGE>
                  GENERAL DESCRIPTION OF THE BUSINESS

     United Community Banks, Inc. ("United") was incorporated under
the laws of Georgia in 1987 and commenced operations in 1988 by
acquiring 100% of the outstanding shares of Union County Bank, now
known as United Community Bank ("UCB").  United is a bank holding
company registered under the Bank Holding Company Act of 1956.  All of
United's activities are currently conducted by its wholly-owned
subsidiaries: UCB, which was organized as a Georgia banking
corporation in 1950; Carolina Community Bank, Murphy, North Carolina
("Carolina"), which United acquired in 1990; Peoples Bank of Fannin
County, Blue Ridge, Georgia ("Peoples"), which United acquired in
1992; Towns County Bank, Hiawassee, Georgia ("Towns"), which United
also acquired in 1992; White County Bank, Cleveland, Georgia
("White"), which United acquired in 1995; and First Clayton Bank and
Trust ("First Clayton"), which United acquired in 1997.  UCB,
Carolina, Peoples, Towns, White and First Clayton are collectively
referred to in this report as the "Banks".  United also operates two
consumer finance companies - United Family Finance Co., which operates
two offices in Georgia, and United Family Finance Co. of North
Carolina, which operates two offices in North Carolina.  In this
report, both United Family Finance Co. and United Family Finance Co.
of North Carolina are collectively referred to as ("Finance").

     The Banks are community-oriented, and offer a full range of
retail and corporate banking services, including checking, savings and
time deposit accounts, secured and unsecured loans, wire transfers,
trust services and rental of safe deposit boxes.  As of December 31,
1998, the Banks operated a total of 27 locations.   In order to
emphasize the commitment to community banking, both UCB and Peoples
operate branches under trade names that are closely identified with
the communities in which they are located.  UCB operates two branches
in Lumpkin County, Georgia, under the trade name "United Community
Bank of Lumpkin County" and two branches in Habersham County, Georgia,
under the trade name "First Bank of Habersham."  Peoples operates one
branch in Gilmer County, Georgia, under the trade name of "United
Community Bank of Gilmer County."  The operation of bank branches
under trade names is permissible under current state and federal
banking regulations and requires certain customer disclosures, which
both UCB and Peoples provide.  

     The Mortgage People Company ("MPC"), a division of UCB, is a
full-service retail mortgage lending operation approved as a
seller/servicer for Federal National Mortgage Association and Federal
Home Mortgage Corporation.  MPC was organized to provide fixed and
adjustable-rate mortgages.  During 1998, MPC originated $145 million
of residential mortgage loans for the purchase of homes and to
refinance existing mortgage debt, of which substantially all were
sold into the secondary market with no recourse to MPC.

     On January 21, 1999, United entered into a definitive agreement
to acquire the stock of Adairsville Bancshares, Inc. ("Adairsville")
in  Bartow County, Georgia.   This acquisition was closed on March 15,
1999 and was accounted for as a purchase transaction.   As of December
31, 1998, Adairsville had $37.1 million of total assets and $4.0
million of total equity.   

                    FORWARD LOOKING STATEMENTS

     The following Management's Discussion and Analysis contains
forward-looking statements under the Private Securities Litigation
Reform Act of 1995 that involve risks and uncertainties.    Although
United believes that the assumptions underlying the forward-looking
statements contained in the discussion are reasonable, any of the
assumptions could be inaccurate, and therefore, no assurance can be
made that any of the forward-looking statements included in this
<PAGE>
discussion will be accurate.   Factors that could cause actual results
to differ from results discussed in forward-looking statements
include, but are not limited to: economic conditions (both generally
and in the markets where United operates); competition from other
providers of financial services offered by United; government
regulation and legislation;  changes in interest rates; material
unforeseen changes in the financial stability and liquidity of
United's credit customers; material unforeseen complications related
to the Year 2000 issues for United, its suppliers, customers and
governmental agencies; and other risks detailed in United's filings
with the Securities and Exchange Commission, all of which are
difficult to predict and which may be beyond the control of United.
United undertakes no obligation to revise forward-looking statements
to reflect events or changes after the date of this discussion or to
reflect the occurrence of unanticipated events.



                                  A-1

<PAGE>

<PAGE>

<TABLE>
<CAPTION>
                                           SELECTED FINANCIAL DATA
                               (in thousands, except per share data and ratios)

                                                      1998          1997        1996        1995        1994
                                             ----------------------------------------------------------------
<S>                                          <C>               <C>           <C>          <C>        <C>
FOR THE YEAR
Net interest income                          $         52,499      43,232      33,815      25,015      20,067
Provision for loan losses                               2,372       2,634       1,597       1,116         998
Non-interest income                                     8,711       6,980       5,666       4,523       3,962
Non-interest expense                                   41,098      32,077      24,843      19,204      15,125
Income taxes                                            5,588       4,766       4,114       2,549       2,205
Net income                                   $         12,152      10,735       8,927       6,669       5,701

PER COMMON SHARE
Net income - basic                           $           1.64        1.47        1.29        1.03        0.91
Net income - diluted                                     1.62        1.46        1.26        1.01        0.89
Cash dividends declared                                  0.15        0.10        0.10        0.08        0.09
Book value                                   $          11.73       10.17        8.14        7.09        5.56

AT YEAR END
Loans                                        $        999,871     823,324     634,574     474,857     354,521
Earning assets                                      1,386,977   1,049,159     824,476     659,548     458,446
Assets                                              1,498,599   1,153,367     886,103     712,298     496,527
Deposits                                            1,163,124     977,079     773,300     637,832     427,998
Stockholders' equity                         $         86,750      75,113      57,675      49,207      34,871
Common shares outstanding                                           7,385       7,085       6,945       6,275

AVERAGE BALANCES
Loans                                        $        899,957     733,551     545,449     423,953     332,793
Earning assets                                      1,181,635     960,346     723,994     565,523     429,152
Assets                                              1,272,994   1,024,730     783,509     607,877     464,767
Deposits                                            1,077,605     894,200     695,391     538,518     408,645
Stockholders' equity                         $         80,180      66,333      53,472      42,110      32,463
Weighted average shares outstanding                     7,392       7,301       6,919       6,499       6,275

KEY PERFORMANCE RATIOS
Return on average assets                                0.95%       1.05%       1.14%       1.10%       1.23%
Return on average stockholders' equity                 15.16%      16.18%      16.69%      15.84%      17.56%
Net interest margin, taxable equivalent                 4.58%       4.64%       4.85%       4.64%       4.93%
Efficiency ratio                                       68.04%      64.84%      62.93%      65.01%      62.92%
Dividend payout ratio                                   9.13%       6.51%       7.58%       8.82%       9.89%
Average equity to average assets                        6.30%       6.47%       6.82%       6.93%       6.98%

</TABLE>




                                                          A-2

<PAGE>

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

General

     United is a bank holding company registered under the Bank
Holding Company Act of 1956 and was incorporated under the laws of the
state of Georgia in 1987.  All of United's activities are currently
conducted by its wholly-owned subsidiaries: UCB, which was organized
as a Georgia banking corporation in 1950; Carolina, which United
acquired in 1990; Peoples, which United acquired in 1992; Towns, which
United also acquired in 1992; White which United acquired in 1995; and
First Clayton, which United acquired in 1997.  Collectively, these
banking institutions are referred to in this report as the "Banks." 
In addition, United owns two consumer finance companies: United Family
Finance Co. and United Family Finance Co. of North Carolina
(collectively, "Finance").

     At December 31, 1998, United had total consolidated assets of
$1.50 billion, total loans of $996 million, total deposits of $1.16
billion and stockholders' equity of $86.8 million.  United's net
income for 1998 was $12.2 million, an increase of $1.4 million, or
13.2%, from 1997.  Diluted income per common share increased to $1.62
in 1998, from $1.46 in 1997.
 
     The following discussion is intended to provide insight into the
financial condition and results of operations of United and should be
read in conjunction with the consolidated financial statements and
accompanying notes.


Expansions since December 31, 1997

     On January 21, 1999, United entered into a definitive agreement
to acquire the stock of Adairsville Bancshares, Inc. ("Adairsville")
in Bartow County, Georgia.   This acquisition was closed on March 15,
1999 and was accounted for as a purchase transaction.   As of December 31,
1998, Adairsville had $37.1 million of total assets and $4.0 million
of total equity.  

     Effective January 30, 1998, Peoples assumed deposits totaling
$23.4 million and purchased certain assets totaling $3.7 million of a
branch bank located in Ellijay, Georgia.  This office is operated
under the trade name of United Community Bank of Gilmer County.

     Three de novo branch offices of the Banks were opened for
business during 1998.  Carolina opened offices in Etowah and Cherokee,
North Carolina, and UCB opened a branch in Clarkesville, Georgia,
which is operated under the trade name of First Bank of Habersham.

     Management intends to evaluate opportunities for de novo
expansion into new markets and in the current market area of the
Banks.  A new branch office of UCB located in Murrayville, Georgia, is
scheduled to open during the third quarter of 1999 and will be
operated under the trade name of United Community Bank of Hall County. 
Subsequent to December 31, 1998, Carolina acquired a bank facility in
Brevard, North Carolina, and filed for necessary regulatory approvals
to commence operation of a full-service branch office.  In addition,
Peoples has filed for regulatory approval to open a second branch in
Ellijay, Georgia.

Expansions prior to December 31, 1997

     Effective September 12, 1997, United completed the acquisition of
First Clayton Bank and Trust in Clayton, Georgia.  United issued
646,257 shares of its common stock and paid approximately $7,000 for
<PAGE>
fractional shares in connection with this acquisition.  The
acquisition was accounted for as a pooling of interests. 

     In addition to the purchase of First Clayton, United expanded its
market area during 1997 and 1996, primarily through de novo branching
and purchasing  of existing branch bank offices. Carolina created de
novo branch offices in the Western North Carolina cities of Brevard
during 1997 and Bryson City and Cashiers in 1996.

                                  A-3


<PAGE>

<PAGE>

     Effective July 1, 1996, the Georgia bank branching laws were
amended to permit subsidiary banks of Georgia bank holding companies
to branch in an aggregate of three additional locations prior to July
1, 1998, after which time statewide branching is permitted.  On July
1, 1996, UCB changed its name from Union County Bank to United
Community Bank and established a branch office in Dahlonega, Lumpkin
County, Georgia.  UCB simultaneously filed for a trade name permitting
it to conduct its operations in Union County, Georgia under the trade
name Union County Bank.  On September 28, 1996, UCB assumed deposits
of $23.7 million and purchased assets of $21.1 million in Cornelia,
Habersham County, Georgia, from a banking institution that sold its
operations in the county.  In Habersham County, UCB operates under the
trade name of First Bank of Habersham, and in Lumpkin County, UCB does
business as United Community Bank of Lumpkin County. 

Income Statement Review

     Net income was $12.2 million in 1998, an increase of 13.2% from
the $10.7 million earned in 1997.  Diluted income per common share was
$1.62 for 1998, compared with $1.46 reported for 1997, an increase of
11.0%.  Return on average assets and return on average equity for 1998
were 0.95% and 15.16%, respectively, compared with 1.05% and 16.18%,
respectively, for 1997.

     The following table summarizes the components of income and
expense and the changes in those components for the past three years.

<TABLE>
<CAPTION>
 Table 1 - Condensed Consolidated Statements of Income
 For the years ended December 31
 (In thousands)

                                                       Change                               Change
                                          1998         Amount         %         1997        Amount        %         1996
                                      -------------------------------------------------------------------------------------
 <S>                                  <C>              <C>          <C>        <C>          <C>         <C>        <C>
 Interest income                      $  109,139       19,359       21.6%      89,780       21,874      32.2%      67,906
 Interest expense                         56,640       10,092       21.7%      46,548       12,457      36.5%      34,091
                                      -----------------------                  -------------------                 ------
 Net interest income                      52,499        9,267       21.4%      43,232        9,417      27.8%      33,815
 Provision for loan losses                 2,372         (262)      -9.9%       2,634        1,037      64.9%       1,597
                                      -----------------------                  -------------------                 ------
 Net interest income after
    provision for loan losses             50,127        9,529       23.5%      40,598        8,380      26.0%      32,218
 Non-interest income                       8,711        1,731       24.8%       6,980        1,314      23.2%       5,666
 Non-interest expense                     41,098        9,021       28.1%      32,077        7,234      29.1%      24,843
                                      -----------------------                  -------------------                 ------
 Income before income taxes               17,740        2,239       14.4%      15,501        2,460      18.9%      13,041
 Income tax expense                        5,588          822       17.2%       4,766          652      15.8%       4,114
                                      -----------------------                  -------------------                 ------
 Net income                           $   12,152        1,417       13.2%      10,735        1,808      20.3%       8,927
                                      =======================                  ===================                 ======
</TABLE>


The individual components of income and expense are discussed in
further detail below.

Net Interest Income

     Net interest income (the difference between the interest earned
on assets and the interest paid on deposits and liabilities) is the
single largest component of United's operating income.  United
actively manages this income source to provide an optimal level of
income while balancing interest rate, credit and liquidity risks.  Net
interest income totaled $52.5 million in 1998, an increase of $9.3
million, or 21.4%, from the level recorded in 1997 and an increase of
$18.7 million from 1996.  On a fully tax-equivalent basis, net
interest income was $54.2 million in 1998, compared with $44.6 million
in 1997 and $35.1 million in 1996.

     Average interest earning assets increased $221.2 million, or
23.0%, over the 1997 amount.  This increase was primarily due to the
increased volume of loans.  Average loans outstanding for 1998 were
$905.3 million, compared with $737.9 million in 1997.  Average
interest bearing liabilities for 1998 increased $200.5 million, or
23.4%, over the 1997 average balance.  This increase was primarily due
to an increase in the level of average interest bearing deposits of
$151.1 million, or 18.9%, and an increase in borrowed funds of $49.4
million, or 86.4%.  The majority of new borrowings were fixed and
floating rate advances from the Federal Home Loan Bank (FHLB) that

                                  A-4
<PAGE>
were at a funding cost competitive with the Banks' current certificate
of deposit rates.  Additional information regarding the FHLB advances
is provided in note 7 of the consolidated financial statements.

     The banking industry uses two key ratios to measure relative
profitability of net interest income.  The net interest rate sprea
measures the difference between the average yield on earning assets
and the average rate paid on interest bearing liabilities.  The
interest rate spread eliminates the impact of non-interest bearing
deposits and gives a direct perspective on the effect of market
interest rate movements.  The net interest margin is defined as net
interest income as a percent of average total earning assets and takes
into account the positive impact of investing non-interest bearing
deposits.

     The net interest spread was 4.02% in 1998, 4.05% in 1997 and
4.33% in 1996, while the net interest margin (on a tax-equivalent
basis) was 4.58% in 1998, 4.64% in 1997 and 4.85% in 1996.  The
decrease in the margin and spread are primarily due to competitive
pressures on loan pricing, which produced a 12 basis point decline in
the average rate from 1997 to 1998.   The average cost of interest
bearing liabilities for 1998 was 5.36%, a decrease of 8 basis points
from 1997.  Core deposits, which include transaction accounts, savings
accounts and certificates of deposit less than $100 thousand,
represented approximately 82.5% of total deposits in 1998, a decrease
from 84.0% in 1997.

     The following table shows, for the past three years, the
relationship between interest income and expense and the average
balances of interest earning assets and interest bearing liabilities.


                                  A-5

<PAGE>
Table 2 - Average Consolidated Balance Sheets and Net Interest
For the Years Ended December 31
Fully tax-equivalent basis
(in thousands)

<TABLE>
<CAPTION>
                                                        1998                               1997                        1996
                                          -----------------------------      ---------------------------   ------------------------
                                          Average     Interest     Avg.      Average    Interest  Avg.    Average   Interest  Avg.
                                          Balance      <F1>        Rate      Balance     <F1>     Rate    Balance     <F1>    Rate
                                          -------     --------    ------     -------    -------- ------   -------   -------- ------
<S>                                      <C>            <C>        <C>     <C>          <C>      <C>      <C>        <C>     <C>
ASSETS:
Interest-earning assets:
  Loans, net of unearned income <F2>    $   905,268     93,202     10.30%     737,889   76,860    10.42%   551,043   58,227  10.57%
  Taxable investments                       184,305     11,283      6.12%     148,390    9,097     6.13%   115,480    6,735   5.83%
  Tax-exempt investments                     65,930      4,808      7.29%      44,326    3,514     7.93%    36,250    3,022   8.34%
  Federal funds sold
   and other interest income                 26,132      1,518      5.81%      29,741    1,642     5.52%    21,221    1,198   5.65%
                                        ----------------------               -----------------            -----------------
Total interest-earning assets /
 interest income                          1,181,635    110,811      9.38%     960,346   91,113     9.49%   723,994   69,182   9.56%
                                        ----------------------               -----------------            -----------------
Non-interest-earning assets:
  Allowance for loan losses                 (11,095)                           (9,304)                      (7,530)
  Cash and due from banks                    41,705                            28,542                       21,396
  Premises and equipment                     33,098                            23,194                       18,097
  Other assets                               27,651                            21,952                       27,552
                                        -----------                         ---------                      -------
Total assets                            $ 1,272,994                         1,024,730                      783,509
                                        ===========                         =========                      =======

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
  Interest-bearing deposits:
    Transaction accounts                $   235,362      9,353      3.97%     176,054    6,712     3.81%   169,811    5,445   3.21%
    Savings deposits                         52,585      1,478      2.81%      43,286    1,190     2.75%    41,834    1,147   2.74%
    Certificates of deposit                 661,894     39,343      5.94%     579,398   34,966     6.03%   410,656   25,569   6.23%
                                        ----------------------              ------------------            -----------------
    Total interest-bearing deposits         949,841     50,174      5.28%     798,738   42,868     5.37%   622,301   32,161   5.17%
                                        ----------------------              ------------------            -----------------
    Federal Home Loan Bank advances          83,627      4,615      5.52%      39,615    2,382     6.01%    17,237      981   5.69%
    Long-term debt and other
      borrowings <F3>                        22,922      1,851      8.08%      17,532    1,298     7.40%    12,238      949   7.75%
                                        ----------------------              ------------------            ----------------
      Total borrowed funds                  106,549      6,466      6.07%      57,147    3,680     6.44%    29,475    1,930   6.55%
                                        ----------------------              ------------------            ----------------
    Total interest-bearing liabilities/
     interest expense                     1,056,390     56,640      5.36%     855,885   46,548     5.44%   651,776   34,091   5.23%
    Non-interest-bearing liabilities:
     Non-interest-bearing deposits          127,764                            95,462                       73,090
     Other liabilities                        8,660                             7,050                        5,171
                                        -----------                         ---------                      -------
     Total liabilities                    1,192,814                           958,397                      730,037
                                        -----------                         ---------                      -------
    Stockholders' equity                     80,180                            66,333                       53,472
                                        -----------                         ---------                      -------
    Total liabilities
     and stockholders' equity           $ 1,272,994                         1,024,730                      783,509
                                        ===========                         =========                      =======
    Net interest-rate spread                                        4.02%                           4.05%                     4.33%
    Impact of non-interest bearing
      sources and other changes in
      balance sheet composition                                     0.56%                           0.59%                     0.52%
                                                                  -------                          ------                    ------
    Net interest income /
     margin on interest-earning assets <F4>             54,171      4.58%                44,565     4.64%            35,091   4.85%
                                                      ===================                ================            ==============
<FN>
<F1>  Interest income on tax-exempt securities and loans has been increased
      by 50% to reflect comparable interest on taxable securities.
<F2>  For computational purposes, includes non-accrual loans and mortgage
      loans held for sale.
<F3>  Includes Trust Preferred Securities.
<F4>  Tax equivalent net interest income as a percentage of average
      earning assets.
</FN>
</TABLE>

                                                             A-6

<PAGE>

     The following table shows the relative impact on net interest
income of changes in the average outstanding balances (volume) of
earning assets and interest bearing liabilities and the rates earned
and paid by United on such assets and liabilities.  Variances
resulting from a combination of changes in rate and volume are
allocated in proportion to the absolute dollar amounts of the change
in each category.


 Table 3 - Change in Interest Income and Expense on a Tax Equivalent Basis
 (in thousands)

<TABLE>
<CAPTION>
                                              1998 Compared to 1997                     1997 Compared to 1996
                                               Increase (decrease)                       Increase (decrease)
                                          in interest income and expense            in interest income and expense
                                                 due to changes in:                        due to changes in:
                                         Volume         Rate        Total          Volume         Rate          Total
                                         --------------------------------          ----------------------------------
     <S>                                 <C>          <C>          <C>             <C>         <C>           <C>
     INTEREST-EARNING ASSETS:
     Loans                               $  17,242      (900)      16,342          19,743      (1,110)       18,633
     Taxable investments                     2,199       (13)       2,186           1,919         443         2,362
     Tax-exempt investments                  1,595      (301)       1,294             673        (181)          492
     Federal funds sold
       and other interest income              (207)       83         (124)            481         (37)          444
                                         --------------------------------          ----------------------------------
    Total interest-earning assets           20,829    (1,131)      19,698          22,816        (885)       21,931


     INTEREST-BEARING LIABILITIES:
     Transaction accounts                    2,346       295        2,641             200       1,067         1,267
     Savings deposits                          261        27          288              40           3            43
     Certificates of deposit                 4,911      (534)       4,377          10,507      (1,110)        9,397
                                         --------------------------------          ----------------------------------
       Total interest-bearing deposits       7,518      (212)       7,306          10,747         (40)       10,707
     FHLB advances                           2,444      (211)       2,233           1,274         127         1,401
     Long-term debt and other borrowings       427       126          553             411         (62)          349
                                         --------------------------------          ----------------------------------
       Total borrowed funds                  2,871       (85)       2,786           1,685          65         1,750
                                         --------------------------------          ----------------------------------
     Total interest-bearing liabilities     10,389      (297)      10,092          12,432          25        12,457
                                         --------------------------------          ----------------------------------
     Increase (decrease)
      in net interest income             $  10,440      (834)       9,606          10,384        (910)        9,474
                                         ================================          ==================================
</TABLE>


Provision for Loan Losses

     The provision for loan losses in 1998 was $2.4 million, compared
with $2.6 million in 1997 and $1.6 million in 1996. As a percentage of
average outstanding loans, the provisions recorded for 1998, 1997 and
1996 were .26%, .36% and .29%, respectively.  Net loan charge-offs as
a percentage of average outstanding loans for 1998 were .09%, compared
with .06% for 1997 and .07% for 1996. 

     The provision for loan losses is based on management's evaluation
of inherent risks in the loan portfolio and the corresponding analysis
of the allowance for loan losses.  Additional discussion on loan
quality and the allowance for loan losses is included in the Asset
Quality section of this report.

                                  A-7
<PAGE>

<PAGE>

Non-interest Income

     Total non-interest income for 1998 was $8.7 million, compared
with $7.0 million in 1997 and $5.7 million in 1996.  The following
table presents the components of non-interest income for 1998, 1997
and 1996.


Table 4 - Non-interest Income
(in thousands)

<TABLE>
<CAPTION>
                                                                   Years Ended December 31,
                                               ----------------------------------------------------------
                                                   1998     % Change       1997       % Change       1996
                                                   ----     --------       ----       --------       ----
<S>                                            <C>             <C>        <C>         <C>           <C>
Service charges on deposit accounts            $  3,962         13%       3,505           17%       2,990
Mortgage loan and related fees                    1,822         57%       1,157          (26)%      1,566
ATM fees                                            312         37%         227           47%         154
Insurance commissions                               617        161%         236           22%         194
Trust and brokerage revenue                         378        105%         184          175%          67
Gains (losses) on securities sales, net             800          8%         742       (5,808)%        (13)
Safe deposit box rental                             162         17%         139           10%         126
Other                                               658        (17)%        790           36%         582
                                                -------                   -----                     -----
     Total                                     $  8,711          25%      6,980           23%       5,666
                                                =======                   =====                     =====
</TABLE>


     The primary source of non-interest income for United is service
charges and fees on deposit accounts held by the Banks.  Total deposit
service charges and fees for 1998 were $4.0 million, or 45% of total
non-interest income, compared with $3.5 million, or 50% of total non-
interest income in 1997.  The growth of deposit service charge and fee
revenue for 1998 and 1997 was primarily due to the increase in the
number of deposit accounts resulting from the opening of new branch
bank locations.

     Net gains on the sale of securities totaled $800 thousand for
1998, compared with $742 thousand for 1997.  The gains were primarily
the result of a general decline in interest rates coupled with
management's decision to shift a portion of the balance of the
securities portfolios of the Banks to higher yielding mortgage
securities.

     Mortgage loan and related fees for 1998 were $1.8 million, an
increase of 57% compared with 1997.  This increase was primarily due
to the low interest rate environment during 1998 that encouraged
individuals to refinance existing mortgage debt.  Substantially all of
the mortgage loan and related fees recorded during 1998 were received
as the result of originating approximately $145 million of residential
mortgages that were subsequently sold into the secondary market. 
These loans were all sold with the right to service the loans (the
servicing asset) released to the purchaser for a fee.  The increase in
mortgage loan and related fees for 1998 also includes the effect of
recognizing $243 thousand in additional amortization of mortgage
servicing rights in 1998 compared with 1997.  This additional
amortization was recognized in response to increased prepayment levels
within the serviced loan portfolio.

     Trust and brokerage revenue for 1998 was $378 thousand, an
increase of 105% compared with 1997.  This increase is primarily
attributed to management's continued focus on personal trust business
opportunities within the current customer base of the Banks.  Total
trust assets under management at December 31, 1998 were $63.2 million,
compared with $37.8 million at December 31, 1997.

     Insurance commissions increased 161% during 1998, to $617
thousand, compared with 1997.  This increase is primarily attributed
to loan growth at Finance of $2.7 million, or 101%, during 1998.

                                  A-8

<PAGE>

<PAGE>

Non-interest Expense

     Total non-interest expense for 1998 was $41.1 million, compared
with $32.1 million in 1997 and $24.8 million in 1996.  The following
table presents the components of non-interest expense for the years
ended December 31, 1998, 1997 and 1996.

Table 5 - Non-interest Expense
(in thousands)

<TABLE>
<CAPTION>
                                                                   Years Ended December 31,
                                               ----------------------------------------------------------
                                                   1998     % Change       1997       % Change       1996
                                                   ----     --------       ----       --------       ----
<S>                                            <C>             <C>        <C>         <C>           <C>
Salaries                                       $ 18,101         29%      14,052           32%      10,677
Employee benefits                                 4,786         31%       3,643           35%       2,696
Occupancy                                         2,547         33%       1,921           28%       1,502
Furniture and equipment                           2,975         41%       2,108           35%       1,562
Communications                                    1,154         66%         697           38%         506
Advertising and public relations                  2,006         (2)%      2,038           36%       1,498
Postage, printing and supplies                    2,183         32%       1,660           11%       1,492
Professional fees                                 1,384         29%       1,076           26%         852
Amortization of intangibles                         509         23%         414            0%         414
Other expense                                     5,453         22%       4,468           23%       3,644
                                                -------                  ------                    ------
     Total                                     $ 41,098         28%      32,077           29%      24,843
                                                =======                  ======                    ======
</TABLE>


     Total salaries and benefits for 1998 increased by 29% over the
1997 levels, primarily due to staff additions for new branch bank
offices, staffing increases at existing branches that experienced
growth and the addition of several senior management positions at the
holding company level.  United had 638 full-time equivalent employees
at December 31, 1998, compared with 569 at year-end 1997.

     Total occupancy expense and furniture and equipment expense for
1998 increased by 33% and 41%, respectively, compared with 1997. 
These increases are primarily attributed to the opening of new branch
bank offices located in the primary market areas of United.

     Postage, printing and supply expense for 1998 increased by 32%
compared with 1997.  This increase is a direct result of increases in
the number of deposit, loan and trust customers during the year.

     Advertising and public relations expense for 1998 decreased 2%
compared with 1997.   The primary reason for this decline was the
decrease in marketing expenditures related to opening of new bank
facilities in 1998 compared with 1997.

     Amortization of intangible assets in 1998 increased 23% compared
with 1997.  This increase is attributed to the amortization of the
core deposit intangible asset related to the January, 1998 acquisition
of $23.4 million of deposits from a bank located in Ellijay, Georgia. 
Information regarding United's accounting policy for goodwill and
deposit-based intangible assets is included in the notes to the
consolidated financial statements.

     The efficiency ratio measures a bank's total operating expenses
as a percentage of net interest income (before provision for loan
losses) and non-interest income, excluding net gains or losses on the
sale of securities.   United's efficiency ratio for 1998 was 68.04%,
<PAGE>
compared with 64.84% in 1997 and 62.93% in 1996. This increase was
primarily attributed to the new branch expansions during 1997 and 1998
that added immediate "fully loaded" operating expenses without
immediate offsetting revenue streams.  Management expects the
efficiency ratio trend to decline in 1999 and beyond as the revenue
for new locations grows and the pace of new facility construction
declines.


                                  A-9

<PAGE>

<PAGE>
     During the fourth quarter of 1998, management initiated a plan to
centralize many operational functions that were currently being
performed at individual bank offices, including wire transfers,
accounts payable and deposit operations.  Although no staff reductions
were incurred in conjunction with this project, management expects to
realize operational efficiency improvements in the future by limiting
the need to increase operational support staffing at the same rate as
overall growth of the Banks.  The centralization project is expected
to be substantially complete by the end of the first quarter of 1999.

Income Taxes

     United had income tax expense of $5.6 million in 1998, compared
with $4.8 million in 1997 and $4.1 million in 1996.  United's
effective tax rates (as a percentage of pre-tax net income) for 1998,
1997 and 1996 were 31.5%, 30.7% and 31.5%, respectively.  These
effective rates are lower than the statutory Federal tax rate
primarily because of interest income on certain investment securities
and loans that is exempt from income taxes.  Additional information
regarding United's income taxes can be found in note 11 to the
consolidated financial statements.

Balance Sheet Review

     Total assets at December 31, 1998 were $1.50 billion, an increase
of $345.2 million, or 29.9%, from December 31, 1997.  On an average
basis, total assets increased $248.3 million, or 24.2%, from 1997 to
1998.  Average interest earning assets for 1998 were $1.18 billion,
compared with $960.3 million for 1997, an increase of 23.0%.

Loans

     Total loans averaged $905.3 million in 1998, compared with $737.9
million in 1997, an increase of 22.7%.   At December 31, 1998, total
loans were $999.9 million, an increase of $176.5 million, or 21.4%,
from December 31, 1997.  Over the past five years, United has
experienced strong loan growth in all markets, with particular
strength in loans secured by real estate, both residential and non-
residential.  The following table presents a summary of the loan
portfolio by category over that period.

Table 6 - Loans Outstanding
(in thousands)

<TABLE>
<CAPTION>
                                                                               December 31,
                                                    ----------------------------------------------------------------
                                                          1998        1997          1996          1995         1994
                                                          ----        ----          ----          ----         ----
<S>                                                 <C>             <C>           <C>          <C>          <C>
Commercial                                          $    89,779     105,462       100,538        64,727       65,521
Real estate - construction                              116,481      78,699        51,425        30,065       20,274
Real estate - mortgage                                  673,631     523,629       380,681       294,724      203,270
Consumer                                                119,980     115,534       101,930        85,341       65,456
                                                    -----------     -------       -------       -------      -------
   Total loans                                      $   999,871     823,324       634,574       474,857      354,521
                                                    ===========     =======       =======       =======      =======
As a percentage of total loans:
   Commercial                                              9.0%       12.8%         15.8%         13.6%        18.5%
   Real estate - construction                             11.6%        9.6%          8.1%          6.3%         5.7%
   Real estate - mortgage                                 67.4%       63.6%         60.0%         62.1%        57.3%
   Consumer                                               12.0%       14.0%         16.1%         18.0%        18.5%
                                                         ------      ------        ------        ------       ------
       Total                                             100.0%      100.0%        100.0%        100.0%       100.0%
                                                         ======      ======        ======        ======       ======


                                                        A-10

<PAGE>

<PAGE>
     Substantially all of United's loans are to customers located in
Georgia and North Carolina, in the immediate market areas of the
Banks.   The following table indicates United's loans by specific
collateral type or loan purpose as of December 31, 1998:

Table 7 - Loans by Collateral Type or Purpose
(in thousands)

                                                                   Percent of
Secured by real estate:                                           Total Loans
                                                                  -----------
   Residential first liens                   $     360,326             36.0%
   Residential second liens                         17,346              1.7%
   Home equity lines of credit                      18,057              1.8%
   Construction and land development               116,481             11.7%
   Non-farm, non-residential                       263,794             26.4%
   Farmland                                          7,665              0.8%
   Multi-family residential                          6,443              0.6%
                                             -------------        ----------
     Total real estate                             790,112             79.0%
                                             -------------        ----------
Other loans:
  Commercial and industrial                         72,491              7.3%
  Agricultural production                           10,512              1.1%
  States and municpalities                           6,776              0.7%
  Consumer installment loans                       112,670             11.2%
  Credit cards and other revolving credit            7,310              0.7%
                                             -------------        ----------
     Total other loans                             209,759             21.0%
                                             -------------        ----------
     Total loans                             $     999,871            100.0%
                                             =============        ==========

     As of December 31, 1998, United's 20 largest credit relationships
consisted of loans and loan commitments ranging from $2.5 to $11.0
million, with an aggregate total credit exposure of $83 million.   All
of these credits have been underwritten in a prudent manner and
structured in order to minimize United's potential exposure to loss. 
The deterioration of the financial condition of one or more of these
borrowers or a significant decline in real estate values in United's
markets could, however, result in an increase in the provision for
loan losses and charge-offs.

     The following table sets forth the maturity distribution of real
estate construction and commercial loans, including the interest rate
sensitivity for loans maturing in greater than one year, as of December 31,
1998.  United's loan policy does not permit automatic roll-over of
matured loans.

     Table 8 - Loan Portfolio Maturity
     (in thousands)

</TABLE>


<TABLE>
<CAPTION>
                                                                                                      Rate Structure for Loans
                                                          Maturity                                     Maturing Over One Year
                                    -----------------------------------------------------------------------------------------
                                         One Year       One through      Over Five                     Fixed         Floating
                                          or Less        Five Years        Years          Total         Rate           Rate
     ------------------------------------------------------------------------------------------------------------------------
     <S>                            <C>                   <C>             <C>         <C>             <C>             <C>
     Commercial                     $     48,988          30,982          9,809         89,779        18,469          22,322
     Real estate - construction           97,080          19,401            -          116,481        14,005           5,396
                                     ---------------------------------------------------------------------------------------
          Total                     $    146,068          50,383          9,809        206,260        32,474          27,718
                                     =======================================================================================
</TABLE>

                                  A-11

<PAGE>

<PAGE>
Asset Quality and Risk Elements
     
     United manages asset quality and controls credit risk through
diversification of the loan portfolio and the application of policies
designed to foster sound underwriting and loan monitoring practices. 
United's loan administration function is charged with monitoring asset
quality, establishing credit policies and procedures, and enforcing
the consistent application of these policies and procedures at all of
the Banks.
     
     The provision for loan losses is the annual cost of providing an
adequate allowance for anticipated potential future losses on loans. 
The amount each year is dependent upon many factors including loan
growth, net charge-offs, changes in the composition of the loan
portfolio, delinquencies, management's assessment of loan portfolio
quality, the value of collateral, and economic factors and trends. 
The evaluation of these factors is performed by United's credit
administration department through an analysis of the adequacy of the
allowance for loan losses.
     
     Reviews of non-performing, past due loans and larger credits,
designed to identify potential charges to the allowance for loan
losses, as well as determine the adequacy of the allowance, are
conducted on a regular basis during the year.  These reviews are
performed by the responsible lending officers, as well as a separate
loan review department, and consider such factors as the financial
strength of borrowers, the value of the applicable collateral, past
loan loss experience, anticipated loan losses, growth in the loan
portfolio, prevailing and anticipated economic conditions and other
factors.

     United does not currently allocate the allowance for loan losses
to the various loan categories and there were no significant changes
is the estimation methods and assumptions used to determine the
adequacy of the allowance for loan losses during 1998.   Management
does not expect the level of net loan charge-offs for 1999 to be
significantly different from the amount recorded in 1998.



                                  A-12

<PAGE>
     The following table presents a summary of changes in the
allowance for loan losses for each of the past five years.


 Table 9 -  Summary of Loan Loss Experience
 (in thousands)

<TABLE>
<CAPTION>
                                                            Years Ended December 31,

                                                             1998        1997        1996        1995        1994
 ------------------------------------------------------------------------------------------------------------------
 <S>                                                   <C>               <C>
 Balance beginning of period                           $    10,352       8,125       6,884       4,231       3,465
 Provision for loan losses                                   2,372       2,634       1,597       1,116         998
 Allowance for loan losses acquired 
   from  subsidiary at acquisition date                        -           -           -         1,813         -
 Amounts charged-off:
   Commercial                                                  438          73         329         148          27
   Real estate - construction                                  -           -           -            24         -
   Real estate - residential mortgage                          175          99          13         337          49
   Consumer                                                    675         625         353         192         262
                                                       -----------------------------------------------------------
     Total loans charged-off                                 1,288         797         695         701         338
                                                       -----------------------------------------------------------
 Recoveries of charged-off loans:
   Commercial                                                  271          22         251         157           6
   Real estate - construction                                  -           -           -           -           - 
   Real estate - residential mortgage                           36         224          39         188           1
   Consumer                                                    186         144          49          80          99
                                                       -----------------------------------------------------------
     Total recoveries                                          493         390         339         425         106
                                                       -----------------------------------------------------------
   Net charge-offs                                             795         407         356         276         232
                                                       -----------------------------------------------------------
 Balance end of period                                 $    11,929      10,352       8,125       6,884       4,231
                                                       ===========================================================
 Total loans:
   At year-end                                         $   999,871     823,324     634,574     474,857     354,521
   Average                                             $   899,957     733,551     545,449     423,953     332,793
 As a percentage of average loans:
  Net charge-offs                                            0.09%       0.06%       0.07%       0.07%       0.07%
  Provision for loan losses                                  0.26%       0.36%       0.29%       0.26%       0.30%
 Allowance as a percentage of year-end loans                 1.19%       1.26%       1.28%       1.45%       1.19%
 Allowance as a percentage of non-performing loans           1215%        985%        552%        298%        631%
</TABLE>


     Management believes that the allowance for loan losses at
December 31, 1998 is sufficient to absorb losses inherent in the loan
portfolio as of that date based on the best information available,
including the credit risks related to the Year 2000 issue described in
detail later in this discussion.  This assessment involves uncertainty
and judgement; therefore, the adequacy of the allowance for loan
losses cannot be determined with precision and may be subject to
change in future periods.   In addition, bank regulatory authorities,
as part of their periodic examination of the Banks, may require
additional charges to the provision for loan losses in future periods
if the results of their review warrant. 



                                  A-13

<PAGE>

<PAGE>
Non-performing Assets

     Non-performing loans, which included non-accrual loans and
accruing loans past due over 90 days, totaled $982 thousand at year-
end 1998, compared with $1.05 million at December 31, 1997.  At
December 31, 1998, the ratio of non-performing loans to total loans
was .10%, compared with .13% at year-end 1997.  Non-performing assets,
which include non-performing loans and foreclosed real estate, totaled
$1.36 million at December 31, 1998, compared with $1.44 million at
year-end 1997.

     It is the general policy of the Banks to place loans on non-
accrual status when, in the opinion of management, the principal and
interest on a loan is not likely to be repaid in accordance with the
loan terms.   When a loan is placed on non-accrual status, interest
previously accrued but not collected is reversed against current
interest income.  Depending on management's evaluation of the borrower
and loan collateral, interest on a non-accrual loan may be recognized
on a cash basis as payments are received.  Loans made by the Banks to
facilitate the sale of other real estate are made on terms comparable
to loans of similar risk.

     There were no commitments to lend additional funds to loans on
non-accrual status at December 31, 1998.  The table below summarizes
United's non-performing assets for each of the last five years.

Table 10 - Non-Performing Assets
(in thousands)

<TABLE>
<CAPTION>
                                                     December 31, 
                                   -----------------------------------------------
                                      1998      1997      1996     1995       1994
                                      ----      ----      ----     ----       ----
<S>                               <C>        <C>       <C>       <C>        <C>
Non-accrual loans                 $    518        515      984     2,017        569
Loans past due 90 days or more
 and still accruing                    464        536      487       291        102
                                   -------    -------  -------   -------    -------
    Total non-performing loans         982      1,051    1,471     2,308        671
Other real estate owned                376        386      210        65          -
                                   -------    -------  -------   -------    -------
    Total non-performing assets   $  1,358      1,437    1,681     2,373        671
                                   =======    =======  =======   =======    =======
Total non-performing loans as a
 percentage of total loans           0.10%      0.13%    0.23%     0.49%      0.19%
Total non-performing assets as a
 percentage of total assets          0.09%      0.12%    0.19%     0.33%      0.14%
</TABLE>

     At December 31, 1998, United had $4.3 million of loans which were
not classified as non-performing but for which known information about
the borrowers' financial condition caused management to have concern
about the ability of the borrowers to comply with the repayment terms
of the loans.  These loans were identified through the loan review
process described in the Asset Quality and Risk Elements section of
this discussion above that provides for assignment of a risk rating
based on an eight-grade scale to all commercial and commercial real
estate loans.  Based on the evaluation of current market conditions,
loan collateral, other secondary sources of repayment and cash flow
generation, management does not anticipate any significant losses
related to these loans.  These loans are subject to continuing
management attention and are considered in the determination of the
allowance for loan losses.

                                  A-14
<PAGE>

<PAGE>
Investment Securities

     The composition of the securities portfolio reflects United's
investment strategy of maintaining an appropriate level of liquidity
while providing a relatively stable source of income.  The securities
portfolio also provides a balance to interest rate risk and credit
risk in other categories of the balance sheet while providing a
vehicle for the investment of available funds, furnishing liquidity,
and supplying securities to pledge as required collateral for certain
deposits.

     Total average securities increased 29.8% during 1998 and 27.0%
during 1997.   The following table shows the carrying value of
United's securities, by security type, as of December 31, 1998, 1997
and 1996.   

Table 11 - Carrying Value of Securities
(in thousands)

<TABLE>
<CAPTION>

                                                             December 31,
                                                      1998       1997       1996
- ---------------------------------------------------------------------------------
<S>                                              <C>           <C>       <C>
Securities held to maturity:
      U.S. Treasury                              $     -           500      2,368
      U.S. Government agencies                        1,885     22,361     34,804
      State and political subdivisions               53,386     42,330     33,036
      Mortgage-backed securities                      2,122      4,368      7,118
                                                 --------------------------------
           Total securites held to maturity          57,393     69,559     77,326
                                                 --------------------------------
Securities available for sale:
      U.S. Treasury                                  33,080     46,945     12,841
      U.S. Government agencies                       41,029     45,552     38,953
      State and political subdivisions               20,512     11,860      6,833
      Mortgage-backed securities                    209,216     33,347     18,635

      Other securities                               10,557      6,190      4,002
                                                 --------------------------------
           Total securities available for sale      314,394    143,894     81,264
                                                 --------------------------------
           Total securities                      $  371,787    213,453    158,590
                                                 ================================
</TABLE>


Carrying Value of Investments

     The December 31, 1998, market value of securities held to
maturity, as a percentage of amortized cost was 103%, up from 102% at
December 31, 1997.  The market value of the portfolio of securities
held to maturity will change as interest rates change and such
unrealized gains or losses will not flow through the financial
statements unless the related securities are called at prices
different from the carrying value at the time of call.  On January 1,
1999, United adopted Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities"
("SFAS No. 133").  As permitted by SFAS No. 133, United transferred
all securities classified as held to maturity at January 1, 1999 to
available for sale.  This transfer resulted in an increase in
stockholders' equity of $1.1 million, which represents the amount of
the unrealized gain on those securities, net of tax, as of January 1,
1999.
<PAGE>
     United's investment portfolio consists principally of U.S.
Government and agency securities, municipal securities, various equity
securities and U.S. Government sponsored agency mortgage-backed
securities.  A mortgage-backed security relies on the underlying
mortgage pools of loans to provide a cash flow of principal and
interest.  The actual maturities of these securities will differ from
the contractual maturities because the loans underlying the security
may prepay with or without prepayment penalties.  Decreases in
interest rates will generally cause an increase in prepayment levels. 

                                  A-15
<PAGE>

<PAGE>
In a declining interest rate environment, United may not be able to
reinvest the proceeds from these prepayments in assets that have
comparable yields.   However, because the majority of the mortgage-
backed securities have adjustable rates, the negative effects of
changes in interest rates on income and the carrying values of these
securities are somewhat mitigated. 

     During the fourth quarter of 1998, management initiated a
leverage program designed to make optimal utilization of United's
assets and capital.  This program provides for using borrowed funds
(principally FHLB advances) secured by mortgage loans and securities
of the Banks to purchase additional securities. The securities
purchased in conjunction with the leverage program are primarily
mortgage backed pass-through and other mortgage backed securities,
including collateralized mortgage obligations ("CMOs").  As of
December 31, 1998, the leverage program at United added $75 million in
total borrowings and earning assets.   Management expects the leverage
program to add additional earning assets and related borrowings of
between 10% and 15% of total consolidated assets by the end of 1999.

     At December 31, 1998, United had 35% of its total investment
portfolio in mortgage backed pass-through securities, all of which are
issued or backed by Federal agencies, compared with 18% at December
31, 1997.  United did not have securities of any issuer in excess of
10% of equity at year-end 1998 or 1997. Other mortgage-backed
securities, including CMOs, represented 19% of the total securities
portfolio at December 31, 1998, compared with 0% at year-end 1997. 
Approximately 87% of the other mortgage-backed securities portfolio
was collateralized by mortgage-backed securities issued or backed by
Federal agencies as of December 31, 1998.

Deposits

     Total average deposits for 1998 were $1.08 billion, an increase
of $183.4 million, or 20.5% from 1997.  Average non-interest bearing
demand deposit accounts increased $32.3 million, or 33.8%, and average
interest bearing transaction accounts increased $59.3 million, or
33.7%, from 1997.  Average time deposits for 1998 were $661.9, an
increase of 14.2% from 1997.  The lower rate of time deposit growth
experienced by the Banks during 1998 was primarily due to stricter
deposit pricing and an increased reliance on wholesale funding
sources, including advances from the FHLB, that were more cost-
effective.

     Time deposits of $100 thousand and greater totaled $208.1 million
at December 31, 1998, compared with $156.8 million at year-end 1997. 
Total interest paid on time deposits of $100 thousand and greater
during 1998 was $11.4 million.  The Banks did not hold any material
amount of brokered certificates of deposit of $100 thousand and
greater at December 31, 1998 or 1997.  The following table sets forth
the scheduled maturities of time deposits of $100 thousand and greater
at December 31, 1998.

Table 12 - Maturities of Time Deposits of $100 Thousand and Greater
(in thousands)

Three months or less                $       81,427
Over three through six months               60,638
Over six through twelve months              40,426
Over one year                               25,629
                                    --------------
     Total                          $      208,120
                                    ==============

                                  A-16
<PAGE>

<PAGE>
Short-term Borrowings

     At December 31, 1998, all of the Banks were shareholders in the
Federal Home Loan Bank of Atlanta.  Through this affiliation, secured
advances totaling $176.9 million were outstanding at rates competitive
with time deposits of like maturities.  United anticipates continued
utilization of this short and long term source of funds to minimize
interest rate risk and to provide funding for the leverage program
described above.  The FHLB advances outstanding at December 31, 1998
had both fixed and floating interest rates ranging from 4.29% to
7.81%.  Approximately 19% of the FHLB advances mature prior to
December 31, 1999.  Additional information regarding FHLB advances is
provided in note 7 to the consolidated financial statements. 

Interest Rate Sensitivity Management

     The absolute level and volatility of interest rates can have a
significant impact on United's profitability.  The objective of
interest rate risk management is to identify and manage the
sensitivity of net interest income to changing interest rates, in
order to achieve United's overall financial goals.  Based on economic
conditions, asset quality and various other considerations, management
establishes tolerance ranges for interest rate sensitivity and manages
within these ranges.

      United uses income simulation modeling as the primary tool in
measuring interest rate risk and managing interest rate sensitivity. 
Simulation modeling considers not only the impact of changing market
rates of interest on future net interest income, but also such other
potential causes of variability as earning asset volume, mix, yield
curve relationships, customer preferences and general market
conditions.

     Interest rate sensitivity is a function of the repricing
characteristics of United's portfolio of assets and liabilities. 
These repricing characteristics are the time frames within which the
interest bearing assets and liabilities are subject to change in
interest rates either at replacement, repricing or maturity during the
life of the instruments.  Interest rate sensitivity management focuses
on the maturity structure of assets and liabilities and their
repricing characteristics during periods of changes in market interest
rates.  Effective interest rate sensitivity management seeks to ensure
that both assets and liabilities respond to changes in interest rates
within an acceptable timeframe, thereby minimizing the impact of
interest rate changes on net interest income. Interest rate
sensitivity is measured as the difference between the volumes of
assets and liabilities in United's current portfolio that are subject
to repricing at various time horizons: immediate; one to three months;
four to twelve months; one to five years; over five years, and on a
cumulative basis.  The differences are known as interest sensitivity
gaps.  The following table shows interest sensitivity gaps for these
different intervals as of December 31, 1998.



                                  A-17

<PAGE>
Table 13 - Interest Rate Gap Sensitivity
(in thousands)

<TABLE>
<CAPTION>
                                                                  One      Four       One    Over Five
                                                                Through  Through    Through  Years and
                                                                 Three    Twelve     Five    Non-rate
                                                      Immediate  Months   Months     Years   Sensitive    Total
- -----------------------------------------------------------------------------------------------------------------
<S>                                                <C>         <C>        <C>       <C>       <C>      <C>
Interest earning assets:
   Federal funds sold                               $    7,190     -          -        -         -          7,190
   Securities                                             -      18,334     23,190  105,513   224,750     371,787
   Mortgage loans held for sale                           -       8,129       -        -         -          8,129
   Loans                                                  -     231,227    405,104  257,973   105,567     999,871
                                                    -------------------------------------------------------------
     Total interest earning assets                       7,190  257,690    428,294  363,486   330,317   1,386,977
                                                    -------------------------------------------------------------
Interest bearing liabilities:
   Demand deposits                                        -     270,532       -        -         -        270,532
   Savings deposits                                       -        -        59,340     -         -         59,340
   Time deposits                                          -     235,030    347,944  107,126      -        690,100
   Fed funds purchased/repurchase agreements            26,520     -         -         -         -         26,520
   FHLB advances                                         4,000   19,725     11,000  104,798    37,331     176,854
   Notes payable                                          -         400        877     -         -          1,277

   Convertible subordinated debentures                    -        -         -         -        3,500       3,500
   Trust preferred securities                             -        -         -         -       21,000      21,000
                                                    -------------------------------------------------------------
      Total interest bearing liabilities                30,520   525,687   419,161  211,924    61,831   1,249,123
                                                    -------------------------------------------------------------
Non-interest bearing sources of funds                                                         143,152     143,152
                                                    -------------------------------------------------------------
Interest sensitivity gap                              (23,330)  (267,997)    9,133  151,562   125,334     (5,298)
                                                    -------------------------------------------------------------
Cumulative sensitivity gap                          $ (23,330)  (291,327) (282,194)(130,632)   (5,298)      -
                                                    =============================================================
</TABLE>


     As seen in the preceding table, during the first year 78% of
interest bearing liabilities will reprice compared with 50% of all
interest earning assets.  Changes in the mix of earning assets or
supporting liabilities can either increase or decrease the net
interest margin without affecting interest rate sensitivity.  In
addition, the interest rate spread between an asset and its supporting
liability can vary significantly while the timing of repricing for
both the asset and the liability remains the same, thus impacting net
interest income.  This characteristic is referred to as basis risk and
generally relates to the possibility that the repricing
characteristics of short-term assets tied to United's prime lending
rate are different from those of short-term funding sources such as
certificates of deposit.

     Varying interest rate environments can create unexpected changes
in prepayment levels of assets and liabilities that are not reflected
in the interest rate sensitivity analysis. These prepayments may have
significant impact on United's net interest margin.  Because of these
factors, an interest sensitivity gap analysis may not provide an
accurate assessment of United's exposure to changes in interest rates.

     Table 13 indicates United is in a liability sensitive or negative
gap position for the first twelve months.  This liability sensitive
position would generally indicate that United's net interest income
would decrease should interest rates rise and would increase should
interest rates fall.  Due to the factors cited previously, current
simulation results indicate only minimal sensitivity to parallel
<PAGE>
shifts in interest rates; however, no assurance can be given that
United is not at risk from interest rate increases or decreases. 
Management also evaluates the condition of the economy, the pattern of
market interest rates and other economic data to determine the
appropriate mix and repricing characteristics of assets and
liabilities necessary to optimize the net interest margin.  


                                  A-18

<PAGE>

<PAGE>

     The following table presents the expected maturity of the total
securities by maturity date and average yields based on amortized cost
(for all obligations on a fully taxable basis, assuming a 34% tax
rate) at December 31, 1998.  The composition and maturity/repricing
distribution of the securities portfolio is subject to change
depending on rate sensitivity, capital and liquidity needs.

Table 14 - Expected Maturity of Securities
(in thousands)

<TABLE>
<CAPTION>
                                   
                                                      Over One  Over Five
                                                         Year     Years
                                             One Year  Through   Through     Over
                                             or Less Five Years Ten Years  Ten Years     Total
                                          ---------------------------------------------------
<S>                        <C>              <C>       <C>       <C>        <C>        <C>
Securities held to maturity:
    U.S. Treasury                              -         -         -           -          -  
    U.S. Government agencies <F1>               49     2,290        85       1,583      4,007
    State and political subdivisions         2,125    20,594    22,071       8,596     53,386
    Other securities                           -         -         -           -          -  
                                           --------------------------------------------------
       Total securites held to maturity      2,174    22,884    22,156      10,179     57,393
                                           --------------------------------------------------
    Percent of total                           3.8%     39.9%     38.6%       17.7%     100.0%
    Weighted average yield <F2>               7.04%     6.81%     7.54%       7.80%      7.28%

Securities available for sale:
    U.S. Treasury                            5,100    26,990       -           -       32,090
    U.S. Government agencies <F1>            2,450    36,334    10,988     173,985    223,757
    State and political subdivisions           860     5,280     4,991       9,080     20,211
    Other securities <F3>                      -         -         -        36,189     36,189
                                           --------------------------------------------------
       Total securities available for sale   8,410    68,604    15,979     219,254    312,247
    Percent of total                           2.7%     22.0%      5.1%       70.2%     100.0%
    Weighted average yield <F2>               6.55%     6.19%     6.45%       6.00%      6.08%

Total securities                            10,584    91,488    38,135     229,433    369,640
Percent of total                               2.9%     24.7%     10.3%       62.1%     100.0%
Weighted average yield <F2>                   6.65%     6.34%     7.08%       6.08%      6.26%
<FN>
<F1>Includes mortgage-backed securities issued by U.S Government
    sponsored agencies.
<F2>Based on amortized cost.
<F3>Includes privately issued mortgage-backed securities.
</FN>
</TABLE>


     In order to assist in achieving a desired level of interest rate
sensitivity, United has entered into off-balance sheet contracts that
are considered derivative financial instruments during 1998, 1997 and
1996.   Derivative financial instruments can be a cost and capital
effective means of modifying the repricing characteristics of on-
balance sheet assets and liabilities.  These contracts include
interest rate swaps under which United pays a variable rate and
receives a fixed rate and interest rate cap contracts for which United
pays an up-front premium in exchange for a variable cash flow if
interest rates exceed the cap rate.  At December 31, 1998, United had
one outstanding swap contract with a notional amount of $10 million. 

                                  A-19
<PAGE>
This contract provides for United to pay a variable rate in exchange
for receiving a fixed rate on the notional amount and it matured on
January 2, 1999.  In addition, United had two cap contracts as of
December 31, 1998 with a combined notional amount of $20 million that
provide for United to receive payments if the 3 month LIBOR exceeds
the contract rates.   The cost of the cap contracts is included in
other assets in the consolidated balance sheet and is being amortized
on a straight-line basis over the five year term of the contracts.  At
December 31, 1998, the cap contracts had an aggregate book value of
$437 thousand and an aggregate fair market value of $448 thousand.   
In order to minimize the credit risk of derivative financial
instruments, United requires all contract counterparties to have an
investment grade or better credit rating.  Under current accounting
guidelines, the fair value of derivative financial instruments is not
included on the balance sheet; however, SFAS No. 133 requires all
derivative financial instruments be included and recorded at fair
value on the balance sheet.  United adopted SFAS No. 133 effective
January 1, 1999 and management expects all derivative financial
instruments utilized to qualify as effective cash flow hedges, which
will allow any gain or loss in value to be recorded as a component of
other comprehensive income.

Liquidity Management

     The objective of liquidity management is to ensure that
sufficient funding is available, at reasonable cost, to meet the
ongoing operational cash needs of United and to take advantage of
income producing opportunities as they arise.  While the desired level
of liquidity will vary depending upon a variety of factors, it is the
primary goal of United to maintain a sufficient level of liquidity in
all expected economic environments.  Liquidity is defined as the
ability of a bank to convert assets into cash or cash equivalents
without significant loss and to raise additional funds by increasing
liabilities.  Liquidity management involves maintaining United's
ability to meet the daily cash flow requirements of the Banks'
customers, both depositors and borrowers.

     The primary objectives of asset/liability management are to
provide for adequate liquidity in order to meet the needs of customers
and to maintain an optimal  balance between interest-sensitive assets
and interest-sensitive liabilities, so that United can also meet the
investment requirements of its shareholders as market interest rates
change.   Daily monitoring of the sources and use of funds is
necessary to maintain a position that meets both requirements.  

     The asset portion of the balance sheet provides liquidity
primarily through loan principal repayments and the maturities and
sales of securities.  Mortgage loans held for sale totaled $8.1
million at December 31, 1998, and typically turn over every 45 days as
the closed loans are sold to investors in the secondary market.  Real
estate-construction and commercial loans that mature in one year or
less amounted to $146.1 million, or 15%, of the total loan portfolio
at December 31, 1998. Other short-term investments such as federal
funds sold are additional sources of liquidity. 

     The liability section of the balance sheet provides liquidity
through depositors' interest bearing and non-interest bearing deposit
accounts.  Federal funds purchased, FHLB advances  and securities sold
under agreements to repurchase are additional sources of liquidity and
represent United's incremental borrowing capacity.  These sources of
liquidity are short-term in nature and are used as necessary to fund
asset growth and meet other short-term liquidity needs.


<PAGE>
     As disclosed in United's consolidated statements of cash flows
included in the consolidated financial statements, net cash provided
by operating activities was $11.2 million during 1998.  The major
sources of cash provided by operating activities are net income
partially offset by funding of mortgage loans held for sale and
changes in other assets and other liabilities. Net cash used in
investing activities of $321.4 million consisted primarily of a net
increase in loans of $174.1 million and securities purchases of $271.9
million funded largely by sales, maturities and paydowns of securities
of $126.8 million and additional net borrowings from the FHLB of
$133.5 million.  Net cash provided by financing activities provided
the remainder of funding sources for 1998.  The $297.0 million of net
cash provided by financing activities consisted primarily of a $162.6
million net increase in deposits, a net increase in FHLB advances of
$133.5 million and $21.0 million from the issuance of the Trust
Preferred Securities.

     In the opinion of management, United's liquidity position at
December 31,1998, is sufficient to meet its expected cash flow
requirements.  Information regarding the unique liquidity risk
associated with the Year 2000 issue is contained in the Year 2000
section of this discussion.  Reference should be made to the
consolidated statements of cash flows appearing in the consolidated
financial statements for a three-year analysis of the changes in cash
and cash equivalents resulting from operating, investing and financing
activities.


                                  A-20

<PAGE>
Capital Resources and Dividends

     Stockholders' equity at December 31, 1998 was $86.8 million, an
increase of $11.6 million, or 15.5%, from December 31, 1997. 
Dividends of $1.1 million, or $.15 per share, were declared on common
stock in 1998, an increase of 50% per share from the amount declared
per share in 1997. The dividend payout ratios for 1998 and 1997 were
9.13% and 6.51%, respectively.  United has historically retained the
majority of its earnings in order to provide a cost-effective source
of capital for continued growth and expansion.  However, in
recognition that cash dividends are an important component of
shareholder value, management has instituted a dividend program that
provides for increased cash dividends when earnings and capital levels
permit.

     In July 1998, a statutory business trust ("United Community
Capital Trust") was created by United which in July 1998, issued
guaranteed preferred beneficial interests in United's junior
subordinated deferrable interest debentures ("Trust Preferred
Securities") to institutional investors in the amount of $21 million. 
This issuance represented the guaranteed preferred beneficial
interests in $21.7 million in junior subordinated deferrable interest
debentures ("Subordinated Debentures") issued by United to United
Community Capital Trust.  For regulatory purposes, the Trust Preferred
Securities will be treated as Tier I capital of United.  The
subordinated debentures are the sole assets of United Community
Capital Trust and bear an interest rate of 8.125% with a maturity date
of July 15, 2028, which may be shortened to a date not earlier than
July 15, 2018.  If the subordinated debentures are redeemed in part or
in whole prior to July 15, 2008, the redemption price of the
Subordinated Debentures and the Trust Preferred Securities will
include a premium ranging from 4.06% in 2008 to .41% in 2018.

     In March 1997, United completed an offering to the public of
300,000 shares of United common stock registered under the Securities
Act of 1933, pursuant to which $6.5 million in additional capital was
raised after deducting certain issuance costs.  United used the
proceeds of the offering primarily to invest additional capital in
UCB, Carolina and Towns to support the asset growth that the banks
were experiencing.

     On December 31, 1996, United completed a private placement of
convertible subordinated payable-in-kind debentures due December 31,
2006 (the "2006 Debentures").  The 2006 Debentures bear interest at
the rate of one quarter of one percentage point over the prime rate
per annum as quoted in the Wall Street Journal,  payable on a
quarterly basis. 

     The 2006 Debentures may be redeemed, in whole or in part,  from time
to time on or after January 1, 1998, at the option of United upon at
least 20 days and not more than 60 days notice, at a redemption price
equal to 100% of the principal amount of the debentures to be redeemed
plus interest accrued and unpaid as of the date of redemption.  The
holders of the 2006 Debentures have the right, excercisable at any
time up to December 31, 2006, to convert such debentures at the
principal amount thereof into shares of Common Stock of United at the
conversion price of $25 per share, subject to adjustment for stock
splits and stock dividends.

    The Board of Governors of the Federal Reserve System has issued
guidelines for the implementation of risk-based capital requirements
by U.S. banks and bank holding companies.  These risk-based capital
guidelines take into consideration risk factors, as defined by
regulators, associated with various categories of assets, both on and
<PAGE>
off balance sheet.  Under the guidelines, capital strength is measured
in two tiers which are used in conjunction with risk adjusted assets
to determine the risk based capital ratios.  The guidelines require an
8% total risk-based capital ratio, of which 4% must be Tier I capital.

    United's Tier I capital, which consists of stockholders' equity and
qualifying trust preferred securities less other comprehensive income,
goodwill and deposit-based intangibles, totaled to $99.2 million at
December 31, 1998.  Tier II capital components include supplemental
capital components such as a qualifying allowance for loan losses and
qualifying subordinated debt.  Tier I capital plus Tier II capital
components is referred to as Total Risk-based Capital and was $114.6
million at December 31, 1998. The percentage ratios, as calculated
under the guidelines, were 9.52 % and 11.00% for Tier I and Total
Risk-based Capital, respectively, at December 31, 1998.  

                                  A-21
<PAGE>
     A minimum leverage ratio is required in addition to the risk-based
capital standards and is defined as period end stockholders' equity
and qualifying trust preferred securities, less other comprehensive
income, goodwill and deposit-based intangibles divided by average
assets adjusted for goodwill and deposit-based intangibles.  Although
a minimum leverage ratio of 4% is required for the highest-rated bank
holding companies which are not undertaking significant expansion
programs, the Federal Reserve Board requires a bank holding company to
maintain a leverage ratio greater than 4% if it is experiencing or
anticipating significant growth or is operating with less than well-
diversified risks in the opinion of the Federal Reserve Board.  The
Federal Reserve Board uses the leverage and risk-based capital ratios
to assess capital adequacy of banks and bank holding companies. 
United's leverage ratios at December 31, 1998 and 1997 were 7.06 % and
5.76%, respectively.

     The primary reason for improvement of the leverage ratio during 1998
was issuance of $21 million of Trust Preferred Securities discussed
above and the retention of approximately 91% of the net income for the
year.

     All three of the capital ratios of United and the Banks currently
exceed the minimum ratios required in 1998 as defined by federal
regulators.  United monitors these ratios to ensure that the United
and the Banks remain within regulatory guidelines.  Further
information regarding the actual and required capital ratios of United
and the Banks is provided in note 13 to the consolidated financial
statements. 

Impact of Inflation and Changing Prices

     A bank's asset and liability structure is substantially different
from that of an industrial firm in that primarily all assets and
liabilities of a bank are monetary in nature, with relatively little
investments in fixed assets or inventories.  Inflation has an
important impact on the growth of total assets and the resulting need
to increase equity capital at higher than normal rates in order to
maintain an appropriate equity to assets ratio.

     United's management believes the impact of inflation on financial
results depends on United's ability to react to changes in interest
rates and, by such reaction, reduce the inflationary impact on
performance.  United has an asset/liability management program which
attempts to manage United's interest rate sensitivity position.  In
addition, periodic reviews of banking services and products are
conducted to adjust pricing in view of current and expected costs.  


Year 2000

     Overview

     The "Year 2000" issue refers to potential problems that may
result from the improper processing of dates and date-dependent
calculations by computers and other microchip-embedded technology
(like an alarm or telephone system).  In simple terms, problems with
Year 2000 can result from a computer's inability to recognize a two-
digit date field (00) as representing Year 2000 and, incorrectly,
recognize the year as 1900.  Failure to identify and correct this
problem could result in system processing errors that would disrupt
United's normal business operations.  In recognition of the
seriousness of this issue, and in accordance with directives on Year
2000 issued by banking regulatory agencies, United established a Year
2000 Committee in January 1998. The committee is chaired by United's
Chief Information Officer and reports directly to United's board of
directors on a quarterly basis.


                                  A-22

<PAGE>
State of Readiness

     United has adopted a seven-phase action plan to address Year 2000
issues and expects to address all aspects of the action plan in a
timely manner and to be prepared for the impact Year 2000 will have on
United, its systems, vendors and customers.  The seven phases are:

     1. Awareness -  TheYear 2000 committee and committee chairman were
        appointed and authorized to develop an overall strategy for
        addressing the Year 2000 issue.  An on-going awareness program
        has been developed to keep directors, employees and customers
        informed about the Year 2000 issue and apprised of United's
        progress in addressing it.

     2. Inventory  - Entails completion of a specific, detailed inventory
        of all hardware, software and other microchip-embedded
        products used by United.  Procedures are established to ensure
        that any new purchases are properly analyzed for Year 2000
        compliance and then inventoried.  Vendors and suppliers are
        contacted to ascertain Year 2000 compliance status and efforts
        to remediate potential problems.

     3. Assessment  - Mission critical areas are identified and tested to
        address potential problem areas.  Budgets are developed for
        expected expenses and other resources needed to adequately
        address potential problems.  The potential risk exposure posed
        by credit customers and large depositors is also evaluated.

     4. Renovation/Analysis  - Vendors that supply system applications
        are requested to provide certification that their product used
        by United is Year 2000 compliant.  Non-compliant systems are
        renovated or replaced.

     5. Testing  - All replaced or upgraded systems are tested to ensure
        full correction of any Year 2000 issues and then reviewed by a
        third party for validation of corrective action.  Contingency
        plans are tested for effectiveness.

     6. Implementation  - A final review of all systems after the
        renovation of problematic areas is completed.   Management and
        system users will carefully assess the status of corrective
        action.

     7. Post-Implementation  - Utilizing the contingency plans, the Year
        2000 committee will continue to refine backup processes and
        procedures to be used in a worst-case scenario.

     This seven-phase program applies to both information technology
("IT") and non-information technology ("non-IT") systems that are
affected by Year 2000 that have been designated by the Year 2000
Committee as "mission critical."   For purposes of the Year 2000
project, mission critical systems are defined as any technology
element that, if not able to function properly, could result in
financial liability, loss of revenue, significant customer
service/support problems and damage to United's reputation.

The following table identifies some, but not all, IT and non-IT
mission critical systems and elements:

          IT                            Non-IT
         ---                            ------
     Mainframe hardware                 Security systems
     Mainframe software                 HVAC systems
     ATMs                               Vault doors
     PC network hardware                Printed forms
     PC network software                Phone systems


                                  A-23
<PAGE>
     The Federal Financial Institutions Examination Council (FFIEC)
issued a statement entitled "Year 2000 Project Management Awareness"
in May, 1997.   This statement established key milestones that banks
and other financial institutions must meet with regard to Year 2000
testing and remediation. The following table sets forth each deadline
contained in this statement and where United stands, as of December 31,
1998, with respect to meeting each deadline.

<TABLE>
<CAPTION>
    Date                            Task                         United's Status
- --------------------------------------------------------------------------------
<S>                       <C>                                       <C>
June 30, 1998             Complete development of all               Completed
                          written testing strategies, plans
                          and policies; due diligence to 
                          determine Year 2000 risk posed
                          by customers implemented.

September 1, 1998         Commence testing of internal              Completed
                          mission-critical systems; assessment
                          of customers' Year 2000 preparedness
                          and potential impact on the institution
                          substantially complete.

December 31, 1998         Testing of internal mission-critical       Completed
                          systems substantially complete.

March 31, 1999            External testing with material third       Scheduled for completion by
                          parties begins.                            March 31, 1999

June 30, 1999             Testing of all mission-critical systems    Scheduled for completion by
                          completed and corrective actions           June 30, 1999
                          substantively completed.
</TABLE>

         The FFIEC has, under its bank supervisory authority, developed a
multi-phase examination process to determine if banks are complying
with the provisions of the awareness statement described above. United
intends to comply with all regulatory requirements established by
banking regulatory agencies. 

     As is the case with many financial institutions, United is
dependent on third parties to provide systems used in daily
operations.  Examples include, but are not limited to, firms that
provided both mainframe and desktop computer hardware, bank processing
software that tracks loans and deposits, telecommunications services,
check clearing and electrical utilities.  Even though many providers
of these products have advised that they are Year 2000 compliant,
United is performing an independent testing and validation that will
confirm that this is the case for each product as it is installed and
used in United's operations.  Generally speaking, United utilizes
hardware and software providers that are registered under the
Securities and Exchange Act of 1934;  the Commission filings for each
provider are being reviewed by management to determine if any
significant disclosures with regard to the Year 2000 are made.   In
addition, United has requested all providers of hardware, software,
processing services and other systems that are date-sensitive to
provide written certification of the Year 2000 status for their
product or service.  The following table sets forth United's
significant material relationships with third parties that, in the
opinion of management, could potentially result in business
interruption if the product or service provided is not Year 2000
compliant.  This table is not intended to itemize all relationships
with third-party service providers.

                                  A-24
<PAGE>

<TABLE>
<CAPTION>
                 Product/Service                   Year 2000 Assessment Status
                 --------------------------        ------------------------------------------
                 <S>                               <C>
                 Bank processing system            Certified compliant by manufacturer; being 
                                                   tested internally
                 Mainframe                         In final phase of internal testing
                 Telecommunications services       Testing scheduled for first quarter of 1999
                 Wire transfers                    Certified compliant by service provider
                 Check clearing                    Certified compliant by service provider
</TABLE>


         Expected Costs Associated with Addressing Year 2000

         As part of United's initiative to assess its state of readiness
with regard to Year 2000, a budget was developed by the Year 2000
Committee.  The budget is divided into five distinct categories:

                 Consulting     -    costs incurred with the engagement
                                     of third-party consultants and solution
                                     providers assisting management with the
                                     Year 2000 project, to review and
                                     negotiate contracts and insurance coverage
                                     and to perform audits of United's state
                                     of readiness for the Year 2000.

                 Inventory      -    costs associated with the initial inventory
                                     and review of all of United's systems,
                                     including hardware, software and any
                                     other micro-chip embedded products. 

                 Testing        -    costs associated with running tests on
                                     United's systems, both individually and
                                     collectively, to determine if processing
                                     is affected by any of the potential
                                     problem dates associated with the Year
                                     2000 and documenting the results of the
                                     tests.  These costs may also include
                                     costs to upgrade United's computer
                                     systems to provide sufficient system
                                     resources to perform the tests.

                 Remediation    -    costs incurred to repair, upgrade or
                                     replace hardware, software or other
                                     micro-chip embedded technology
                                     that is not Year 2000 compliant.

                 Resources      -    costs associated with staff training
                                     and customer awareness with regard to
                                     the Year 2000 issue.  Examples of this
                                     type of cost are fees for an employee to
                                     attend a seminar on Year 2000 or costs to
                                     produce a pamphlet on Year 2000 for
                                     United's customers.


                                            A-25

<PAGE>
     The following table sets forth United's budget for the Year 2000
issue and actual amounts expended as of December  31, 1998.  All
amounts shown are pre-tax.  In addition, the table indicates the
percentage of each budget line item (as described above) that is
expected to be recognized as current period expense and the percentage
that is expected to be recorded as a new asset with expense recognized
over the useful life of the asset through charges to depreciation
expense.  

Year 2000 Budget
(in thousands)

<TABLE>
<CAPTION>

                                          Acutal Costs      % of Budget
                           % of Total   Incurred as of     Expended as of         % of Cost to Be
                  Budget     Budget        31-Dec-98          31-Dec-98       Expensed    Amortized
                 --------------------------------------------------------    ----------------------
<S>              <C>          <C>                <C>              <C>            <C>         <C>
Consulting       $   175        9%                  29            17%            100%         0%
Inventory             70        4%                  60            86%            100%         0%
Testing               82        4%                  28            34%            100%         0%
Remediation        1,520       80%               1,344            88%             15%        85%
Resouces              53        3%                  18            34%            100%         0%
                 --------------------------------------------------------    ----------------------
   Total         $ 1,900      100%               1,479            78%             12%        88%
                 ========================================================    ======================
</TABLE>


     In accordance with recently issued accounting guidelines on how
Year 2000 costs should be recognized for financial statement purposes,
United intends to recognize as current period expense all costs
associated with the consulting, inventory, testing and resources
components of the Year 2000 budget.  The costs associated with
remediation, which comprise approximately 80% of the Year 2000 budget,
are primarily related to the installation of a new wide-area desktop
computer network (WAN) that will replace virtually all of the desktop
computers, file servers and peripheral equipment currently in use.  In
addition to being Year 2000 compliant, the new WAN will provide United
with a uniform standard desktop computer configuration,  internal and
external e-mail capability, internet access and savings on telephone
communication costs through utilization of the WAN communications
backbone for voice communication.  United intends to leverage this new
WAN technology to increase the levels of employee productivity and
improve operating efficiency.  The costs of the WAN component of the
Year 2000 remediation budget will be recognized over a useful life of
three years at a cost of approximately $450,000 per year starting in
the first quarter of 1999.  This annual cost does not include any of
the anticipated savings that the United expects to achieve through
improved operating efficiency and reduced telecommunications costs
over the next three years.

     United expects to fund the costs associated with preparing for
Year 2000 out of its normal operating cash flows.  No major
information technology initiatives have been postponed as a result of
Year 2000 preparation that would have a material impact on United's
financial condition or results of operations.

<PAGE>
Material Risks Associated with United's Year 2000 Issues

     Credit Risk - United, in the conduct of its ordinary operations,
extends credit to individuals, partnerships and corporations.  The
extension of credit to businesses is based upon an evaluation of the
borrower's ability to generate cash flows from operations sufficient
to repay principal and interest, in addition to meeting the operating
needs of the business.  Failure of one of United's business borrowers
to adequately prepare for the impact a Year 2000 failure could
potentially impair its ability to repay the loan.  An example of this
would be a loan to a building supply store that has computer
accounting systems that fail to recognize Year 2000 and, consequently,
are unable to calculate and bill accounts receivable in January 2000. 
This failure would most likely have a negative impact on the
customer's cash flow and, consequently, their ability to repay the
loan in accordance with its original terms.  United's exposure to Year
2000 credit risk is somewhat mitigated by the fact that only 9% of the
$1 billion in outstanding loans are to commercial enterprises.  


                                  A-26

<PAGE>
     In order to assess the Year 2000 risk within the loan portfolio,
United's credit administration department developed a risk
determination process to determine if any borrower with total debt of
$100 thousand or more is dependent upon computer technology. 
Specifically, this process selectively identified business borrowers 
(including self-employed individuals) that rely on computer technology
or use a supply chain that includes vendors that rely on computer
technology.  After these borrowers were identified, the loan officer
responsible for each account completed a survey that includes 30
questions that examine four key components of Year 2000 preparedness: 
Project Planning; Staffing and Resources; Budget; and Contingency
Planning.  Based on the results of the survey questions the account
officer rated each borrower as a "low," "medium" or "high" risk for
Year 2000.   The completed surveys and ratings were then independently
reviewed by United's Loan Review Department, which had authority to
request additional information from the borrower and, if necessary,
change the Year 2000 risk rating.  As of December 31, 1998, the
survey, rating and review process was substantially completed.  The
survey results and indicated that approximately 45%, 48% and 6% of the
total aggregate credit exposure for surveyed borrowers were rated low,
medium and high Year 2000 risks, respectively.

      Management believes that the allowance for loan losses at
December 31, 1998 is sufficient to absorb losses inherent in the loan
portfolio, including losses related to failure of borrowers to
adequately prepare the direct and indirect impact a Year 2000 computer
failure may have on their business. However, additional charges to the
provision for loan loss will be made if, in the estimation of
management, the increased risk for loan loss related to Year 2000 is
not adequately provided for in the allowance for loan losses as of any
balance sheet date.

     Liquidity Risk - is the risk to United's earnings and capital
arising from an inability to raise sufficient cash to meet obligations
as they come due. This risk is a very significant one for United since
its primary business is banking, which involves taking deposits that
are generally due upon demand.   Since United uses these deposits to
fund loans and purchase investment securities, a dramatic increase in
deposit withdrawals because of Year 2000 problems specific to United
or of a more general nature could have an adverse impact on United. 
Specifically, United could be forced to liquidate investments under
adverse market conditions (that is, to sell at a loss) in order to
fund a significantly higher level of deposit withdrawal activity.
United is assessing its liquidity risk by running various scenarios of
deposit withdrawals coincident with the turn of the century, ranging
from normal activity to what could be reasonably expected in a panic
situation.  As of December 31, 1998, the Banks had available federal
funds lines of credit totaling approximately $19 million and secured
borrowing availability at the FHLB and The Federal Reserve Discount
Window totaling $261 million.  In addition, United has a $15 million
line of credit.  Although estimates of deposit withdrawals related to
Year 2000 vary widely, management expects liquidity sources to be
sufficient to cover deposit withdrawal activity in a variety of
scenarios.

     Transaction Risk  -  is the risk to United's income and capital
resulting from failure to deliver one of its products or services in a
acceptable manner.  An example of transaction risk related to Year
2000 is the ability of United's computer system to properly bill
customers for loan payments due and account for the payments when
received or the ability of a customer to perform a deposit or
withdrawal at an ATM.  In both of these examples,  the individual
customer is directly affected and United is impacted by the collective
impact of all incorrectly processed customer transactions.  Since all

<PAGE>
of United's products and services are processed in some manner by
computer systems, all aspects of product design, delivery and support
are being carefully evaluated in order to determine potential
transaction risks.   

     United's Year 2000 policy also addresses other risks related to
the Year 2000 issue which include, but are not limited to, strategic
risk (adverse impact on business decisions or the implementation of
business decisions, such as acquisitions); reputational risk (impact
of bad publicity on customers and United value); and, legal risk (risk
of litigation related to adverse impact of Year 2000 issues on
United).

                                  A-27
<PAGE>
Contingency Planning For Year 2000

     United's Year 2000 committee has presented the board of directors
with a written Business Remediation and Business Resumption
Contingency Policy.  The purpose of this policy is to ensure that
United is prepared to address any crisis situation(s) that could
result from failure of any of United's systems or third-party vendors
and suppliers to recognize Year 2000 critical dates.  United's Year
2000 contingency policy is modeled after the FFIEC Interagency
Statement on Contingency Planning in Connection with Year 2000 issued
in May, 1997 and is comprised of four key phases:

          1. Organizational Planning - identification of core business
             processes and establishment  of a timeline for a Year
             2000 contingency plan.
          2. Business Impact Analysis - determination of Year 2000
             failure risks for all core business processes and
             identification of failure scenarios.  The minimal level
             of acceptable service in the event of failure is also
             determined.
          3. Development of Contingency Plans - identification and
             selection of the most reasonable and cost-effective
             contingency strategy for each core business process in
             the event of failure.
          4. Contingency Plan Validation - validation of each plan by a
             qualified independent party and final approval by senior
             management and the board of directors.



     A core business process is, for the purposes of United's Year
2000 contingency planning, defined as a group of interrelated tasks
performed as a basic and integral part of United's daily operation. 
Examples of core business processes include posting of payments on
loans and processing of checks, both which require a complex
infrastructure of hardware, software, communications and power.  Core
business processes are further defined by potential impact on United
and its operations.  "Mission Critical" core business processes are
those which, if not functioning properly because of failure to
recognize Year 2000, will most likely cause an immediate loss of
revenue and crisis-level customer service problems that could damage
United's reputation. United's Year 2000 Committee is currently in the
process of developing specific contingency plans that detail precisely
how the "most likely worst-case scenarios" resulting from system
failure will be handled.  The objective of contingency planning is not
to duplicate the complete functionality of failed systems, but, rather
to identify the most economical means of resuming a minimally
acceptable level of service in as short a time as possible.



                                  A-28

<PAGE>
                       MARKET AND DIVIDEND DATA


     Stock.  There is no established public trading market for
United's Common Stock.  At December 31, 1998, there were 2,874
shareholders of record.

     Dividends.  United declared cash dividends of $.15 per common
share in 1998 and $.10 per common share in 1997.  Federal and state
laws and regulations impose restrictions on the ability of United and
the Banks to pay dividends.   Additional information regarding this
item is included in note 16 to the consolidated financial statements
and under the heading of "Supervision and Regulation" in Part I of
this report.








                                  A-29

<PAGE>

<PAGE>


          REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS




The Board of Directors and Stockholders
United Community Banks, Inc.
Blairsville, Georgia

We have audited the consolidated balance sheets of United Community
Banks, Inc. and subsidiaries as of December 31, 1998 and 1997 and the
related statements of income, comprehensive income, changes in
stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of United Community Banks, Inc. and subsidiaries as of December 31,
1998 and 1997, and the results of their operations and their cash
flows for each of the three years in the period ended December 31,
1998, in conformity with generally accepted accounting principles.


/s/ Porter Keadle Moore, LLP.

Atlanta, Georgia
February 26, 1999




                             A-30

<PAGE>

<PAGE>

<TABLE>
<CAPTION>

                                       UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

                                                Consolidated Balance Sheets

                                               December 31, 1998 and 1997

                                                         Assets
                                                         ------
                                                                                       1998                    1997
                                                                                       ----                    ----
                                                                                             (In Thousands)
 <S>                                                                            <C>                        <C>
 Cash and due from banks, including reserve requirements
    of $17,978 and $11,000                                                      $      48,510                  60,414
 Federal funds sold                                                                     7,190                   8,420
                                                                                -------------               ---------
    Cash and cash equivalents                                                          55,700                  68,834

 Securities held to maturity (estimated fair value of $59,106 and $70,845)             57,393                  69,559
 Securities available for sale                                                        314,394                 143,894
 Mortgage loans held for sale                                                           8,129                   3,962
 
 Loans                                                                                999,871                 823,324
    Less allowance for loan losses                                                     11,929                  10,352
                                                                                -------------               ---------
    Loans, net                                                                        987,942                 812,972
                                                                                -------------               ---------

 Premises and equipment, net                                                           38,538                  27,737
 Accrued interest receivable                                                           13,332                  10,985
 Other assets                                                                          23,171                  15,424
                                                                                -------------               ---------
         Total assets                                                           $   1,498,599               1,153,367
                                                                                =============               =========

                                                      Liabilities and Stockholders' Equity
                                                      ------------------------------------
 Liabilities:
    Deposits:
      Demand                                                                    $     143,152                 109,210
      Interest-bearing demand                                                         270,532                 189,280
      Savings                                                                          59,340                  45,280
      Time                                                                            690,100                 633,309
                                                                                -------------               ---------
         Total deposits                                                             1,163,124                 977,079
                                                                                -------------               ---------
    Accrued expenses and other liabilities                                             19,574                   7,274
    Federal funds purchased and repurchase agreements                                  26,520                  33,011
    Federal Home Loan Bank advances                                                   176,854                  43,321
    Long-term debt and other borrowings                                                 1,277                  14,069
    Convertible subordinated debentures                                                 3,500                   3,500
    Guaranteed preferred beneficial interests in company's junior 
      subordinated debentures (Trust Preferred Securities)                             21,000                       -
                                                                                -------------               ---------
         Total liabilities                                                           1,411,849              1,078,254
 Commitments

 Stockholders' equity:
    Preferred stock                                                                         -                       -
    Common stock, $1 par value; 10,000,000 shares authorized;
      7,393,605 and 7,385,105 shares issued and outstanding                             7,394                   7,385
    Capital surplus                                                                    24,808                  24,699
    Retained earnings                                                                  53,240                  42,198
    Accumulated other comprehensive income                                              1,308                     831
                                                                                -------------               ---------
         Total stockholders' equity                                                    86,750                  75,113
                                                                                -------------               ---------
         Total liabilities and stockholders' equity                             $   1,498,599               1,153,367
                                                                                =============               =========
(/TABLE>

See accompanying notes to consolidated financial statements. 


                                                                    A-31

<PAGE>

<PAGE>

</TABLE>


<TABLE>
<CAPTION>
                                                  UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
                                                        Consolidated Statements of Income

                                              For the Years Ended December 31, 1998, 1997 and 1996

                                                                               1998             1997             1996
                                                                               ----             ----             ----
                                                                                  (In Thousands Except Per Share Data)
 <S>                                                                 <C>                     <C>              <C>
 Interest income:
    Interest and fees on loans                                        $        93,133           76,722           57,978
    Interest on federal funds sold                                              1,518            1,642            1,096
    Interest on investment securities:
      Taxable                                                                  11,283            9,097            6,837
      Tax exempt                                                                3,205            2,319            1,995
                                                                             --------         --------         --------
    Total interest income                                                     109,139           89,780           67,906
                                                                             --------         --------         --------
 Interest expense:
    Interest on deposits:
      Demand                                                                    9,353            6,712            5,445
      Savings                                                                   1,478            1,190            1,147
      Time                                                                     39,343           34,966           25,569
                                                                             --------         --------         --------
                                                                               50,174           42,868           32,161
    Other borrowings                                                            6,466            3,680            1,930
                                                                             --------         --------         --------
   Total interest expense                                                      56,640           46,548           34,091
                                                                             --------         --------         --------

    Net interest income                                                        52,499           43,232           33,815
 Provision for loan losses                                                      2,372            2,634            1,597
                                                                             --------         --------         --------
    Net interest income after provision for loan losses                        50,127           40,598           32,218
                                                                             --------         --------         --------
 Non-interest income:
    Service charges and fees                                                    3,962            3,505            2,990
    Securities gain (loss), net                                                   800              742             (13)
    Mortgage loan and other related fees                                        1,822            1,157            1,566
    Other non-interest income                                                   2,127            1,576            1,123
                                                                             --------         --------         --------
    Total non-interest income                                                   8,711            6,980            5,666
                                                                             --------         --------         --------
 Non-interest expense:
    Salaries and employee benefits                                             22,887           17,695           13,373
    Occupancy                                                                   6,676            4,726            3,570
    Other non-interest expense                                                 11,535            9,656            7,900
                                                                             --------         --------         --------
    Total non-interest expense                                                 41,098           32,077           24,843
                                                                             --------         --------         --------

    Income before income taxes                                                 17,740           15,501           13,041
 Income taxes                                                                   5,588            4,766            4,114
                                                                             --------         --------         --------
    Net income                                                        $        12,152           10,735            8,927
                                                                             ========         ========         ========
 Basic income per share                                               $          1.64             1.47             1.29
                                                                             ========         ========         ========
 Diluted income per share                                             $          1.62             1.46             1.26
                                                                             ========         ========         ========
(/TABLE>
See accompanying notes to consolidated financial statements.
                                                                    A - 32
<PAGE>

<PAGE>

</TABLE>


<TABLE>
<CAPTION>
                                                  UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

                                                 Consolidated Statements of Comprehensive Income

                                              For the Years Ended December 31, 1998, 1997 and 1996


                                                                        1998                1997             1996
                                                                        ----                ----             ----
                                                                                       (In Thousands)
<S>                                                                  <C>                    <C>             <C>
Net income                                                           $   12,152             10,735          8,927

Other comprehensive income:
  Unrealized holding gains (losses) on investment securities
    available for sale                                                    1,569              2,224            (606)
  Less reclassification adjustment for gains (losses) on
    sales of investment securities available for sale                       800                742             (13)
                                                                       --------             ------         -------
      Total other comprehensive income (loss), before income taxes          769              1,482            (593)


Income tax expense (benefit) related to other comprehensive
  income:
  Unrealized holding gains (losses) on investment securities
    available for sale                                                      596                845            (230)
  Less reclassification adjustment for gains (losses) on 
    sales of investment securities available for sale                       304                282              (5)
                                                                       --------             ------         -------
      Total income tax expense (benefit) related to other 
         comprehensive income                                               292                563            (225)
                                                                       --------             ------         -------
      Total other comprehensive income (loss), net of tax                   477                919            (368)
                                                                       --------             ------         -------
      Total comprehensive income                                     $   12,629             11,654           8,559
                                                                       ========             ======         =======

(/TABLE>

See accompanying notes to consolidated financial statements.



                                                                   A - 33

<PAGE>

<PAGE>

</TABLE>


<TABLE>
<CAPTION>
                                                  UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

                                           Consolidated Statements of Changes in Stockholders' Equity

                                              For the Years Ended December 31, 1998, 1997 and 1996

                                                                                                   Accumulated
                                                               Common Stock                           Other
                                                               ------------         Capital    Retained   Comprehensive
                                                          Shares         Amount     Surplus    Earnings      Income     Total
                                                          ------         ------     -------    --------      ------     -----
                                                                         (In Thousands Except Share and Per Share Data)
 <S>                                                     <C>            <C>          <C>         <C>          <C>       <C>
 Balance, December 31, 1995                               6,944,783     $ 6,945      18,064      23,912        280      49,201

 Change in unrealized gain (loss) 
    on securities available for sale,
    net of tax                                                   -            -            -          -       (368)       (368)
 Cash dividends declared, ($.10 per share)                       -            -            -       (677)         -        (677)

 Common stock issued in conversion of 
    debentures                                              178,568         179          821          -          -       1,000
 Purchase and retirement of treasury stock 
    of pooled entity                                        (38,730)        (39)        (369)         -          -        (408)

 Net income                                                       -           -            -      8,927          -       8,927
                                                          ---------     -------       ------     ------      -----       ------
 Balance, December 31, 1996                               7,084,621       7,085       18,516     32,162        (88)     57,675

 Change in unrealized gain (loss) 
    on securities available for sale, 
    net of tax                                                    -           -            -          -        919         919
 Cash dividends declared, ($.10 per share)                        -           -            -       (699)         -        (699)

 Net income                                                       -           -            -     10,735          -       10,735
 Proceeds from common stock offering,
    net of offering cost                                    300,000         300        6,177          -          -        6,477

 Proceeds from resale of treasury stock 
    of pooled entity                                            484           -            6          -          -            6
                                                          ---------     -------       ------     ------      -----       ------
 Balance, December 31, 1997                               7,385,105       7,385       24,699     42,198        831       75,113

 Change in unrealized gain on securities 
    available for sale, net of tax                               -            -            -          -        477          477
 Cash dividends declared, ($.15 per share)                       -            -            -     (1,110)         -       (1,110)

 Net income                                                      -            -            -     12,152          -       12,152
 Proceeds from exercise of stock options                      8,500           9          109          -          -          118
                                                          ---------     -------       ------     ------      -----       ------
 Balance, December 31, 1998                               7,393,605     $ 7,394       24,808     53,240      1,308       86,750
                                                          =========     =======       ======     ======      =====       ======
(/TABLE>



                                                                    A - 34
See accompanying notes to consolidated financial statements.

<PAGE>

<PAGE>

</TABLE>


<TABLE>
<CAPTION>

                                                 UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
                                                      Consolidated Statements of Cash Flows

                                              For the Years Ended December 31, 1998, 1997 and 1996

                                                                               1998             1997             1996
                                                                               ----             ----             ----
                                                                                           (In Thousands)
 <S>                                                                      <C>                 (c)              <C>
 Cash flows from operating activities:
    Net income                                                            $    12,152           10,735            8,927
    Adjustments to reconcile net income to net cash provided
      by operating activities:
      Depreciation, amortization and accretion                                  2,846            2,448            2,347
      Provision for loan losses                                                 2,372            2,634            1,597
      Provision for deferred income tax expense (benefit)                       (766)            (404)               82
      (Gain) loss on sale of securities available for sale                      (800)            (742)               13
      Change in assets and liabilities, net of effects of purchase
       acquisitions:
         Other assets and accrued interest receivable                           (256)          (4,729)          (1,439)
         Accrued expenses and other liabilities                                 (142)              681            1,326
         Mortgage loans held for sale                                         (4,167)            2,765            5,321
                                                                          ----------         ---------         --------
 Net cash provided by operating activities                                    11,239            13,388           18,174
                                                                          ----------         ---------         --------
 Cash flows from investing activities, net of effects of purchase
   acquisitions:
    Cash acquired from acquisitions and branch purchases                      20,282                 -            2,650
    Proceeds from maturities and calls of securities held to maturity         25,439            18,009           21,920
    Purchases of securities held to maturity                                 (13,321)          (10,418)         (13,762)
    Proceeds from sales of securities available for sale                       33,002           32,704           18,065
    Proceeds from maturities and calls of securities available for sale       68,363            22,470           32,652
    Purchases of securities available for sale                              (258,550)         (115,501)         (62,631)
    Net increase in loans                                                   (174,124)         (189,157)        (140,507)
    Purchases of premises and equipment                                      (13,385)           (9,702)          (3,143)
    Purchases of life insurance contracts                                     (8,117)                -                -
    Transaction costs associated with Trust Preferred Securities                (959)                -                -
                                                                           ---------         ---------         --------
 Net cash used in investing activities                                      (321,370)         (251,595)        (144,756)
                                                                          ----------         ---------         --------

 Cash flows from financing activities, net of effects of purchase
  acquisitions:
    Net change in demand and savings deposits                                105,856            52,297           49,312
    Net change in time deposits                                               56,790           151,482           62,394
    Net change in federal funds purchased and repurchase agreements           (6,491)           33,011                -
    Proceeds from convertible subordinated debentures                              -                 -            3,500
    Proceeds from notes payable                                                    -             4,747                -
    Proceeds from FHLB advances                                              212,249            15,636           29,375
    Proceeds from Trust Preferred Securities                                  21,000                -                 -
    Repayments of notes payable                                              (12,792)           (1,131)            (856)
    Repayments of FHLB advances                                              (78,716)           (7,389)          (3,302)
    Proceeds from exercise of stock options                                      118                 -                -
    Proceeds from sale of common stock                                             -             6,477                -
    Purchase of treasury stock of pooled entity                                    -                 -             (408)
    Proceeds from resale of treasury stock of pooled entity                        -                 6                -
    Cash paid for dividends                                                   (1,017)             (765)            (677)
                                                                          ----------         ---------         --------
 Net cash provided by financing activities                                   296,997           254,371          139,338
                                                                          ----------         ---------         --------
 Net change in cash and cash equivalents                                    (13,134)            16,164           12,756

 Cash and cash equivalents at beginning of period                             68,834            52,670           39,914
                                                                          ----------         ---------         --------
 Cash and cash equivalents at end of period                               $   55,700            68,834           52,670
                                                                          ==========         =========         ========
 (/TABLE>

 See accompanying notes to consolidated financial statements.



                                                                   A - 35

<PAGE>

<PAGE>
             UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
              Notes to Consolidated Financial Statements

   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   The accounting principles followed by United Community Banks, Inc.
   ("United") and its subsidiaries and the methods of applying these
   principles conform with generally accepted accounting principles
   and with general practices within the banking industry. The
   following is a description of the more significant of those
   policies.

   Organization and Basis of Presentation
   --------------------------------------
   United is a six bank holding company whose business is conducted by
   its wholly-owned bank subsidiaries. United is subject to regulation
   under the Bank Holding Company Act of 1956. The consolidated
   financial statements include the accounts of United Community
   Banks, Inc. and its wholly-owned commercial bank subsidiaries,
   United Community Bank, Blairsville, Georgia ("UCB"), Carolina
   Community Bank, Murphy, North Carolina ("Carolina"), Peoples Bank
   of Fannin County, Blue Ridge, Georgia ("Peoples"), Towns County
   Bank, Hiawassee, Georgia ("Towns"), White County Bank, Cleveland,
   Georgia ("White"), First Clayton Bank and Trust, Clayton, Georgia
   ("Clayton") (collectively, the "Banks") and United Family Finance
   Company, Inc. ("Finance"), a finance company subsidiary. All
   significant intercompany accounts and transactions have been
   eliminated in consolidation. Certain items in prior years'
   financial statements have been reclassified to conform with the
   current financial statement presentations.

   The Banks are commercial banks which serve markets throughout North
   Georgia and Western North Carolina and provide a full range of
   customary banking services. The Banks are insured and subject to
   the regulation of the Federal Deposit Insurance Corporation
   ("FDIC"). 

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

   Material estimates that are particularly susceptible to significant
   change relate to the determination of the allowance for loan losses
   and the valuation of real estate acquired in connection with
   foreclosures or in satisfaction of loans. In connection with these
   valuations, management obtains independent appraisals for
   significant properties.

   A substantial portion of United's loans are secured by real estate
   located in North Georgia and Western North Carolina. Accordingly,
   the ultimate collectibility of a substantial portion of United's
   loan portfolio is susceptible to changes in the real estate market
   conditions of this market area.

   Investment Securities
   ---------------------
   United classifies its securities in one of three categories: held
   to maturity, available for sale, or trading. Trading securities are
   bought and held principally for the purpose of selling them in the
   near term. United does not have investments classified in the
   trading category. Held to maturity securities are those securities
   for which United has the ability and intent to hold until maturity.
   All other securities are classified as available for sale.


   Available for sale securities are recorded at fair value. Held to
   maturity securities are recorded at cost, adjusted for the
   amortization or accretion of premiums or discounts. Unrealized
   holding gains and losses, net of the related tax effect, on
   securities available for sale are excluded from income and are
   reported as a separate component of stockholders' equity until
   realized. Transfers of securities between categories are recorded
   at fair value at the date of transfer. Unrealized holding gains or
   losses associated with transfers of securities from held to
   maturity to available for sale are recorded as a separate component
   of stockholders' equity. The unrealized holding gains or losses
   included in the separate component of stockholders' equity for
   securities transferred from available for sale to held to maturity
   are maintained and amortized into income over the remaining life of
   the security as an adjustment to yield in a manner consistent with
   the amortization or accretion of premium or discount on the
   associated security.

                                  A - 36

<PAGE>

<PAGE>
             UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
         Notes to Consolidated Financial Statements, continued


   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

   Investment Securities, continued
   ----------------------
   A decline in the market value of any available for sale or held to
   maturity investment below cost that is deemed other than temporary
   is charged to income and establishes a new cost basis for the
   security.

   Premiums and discounts are amortized or accreted over the life of
   the related security as an adjustment to the yield. Realized gains
   and losses for securities classified as available for sale and held
   to maturity are included in income and are derived using the
   specific identification method for determining the cost of
   securities sold.

   Mortgage Loans Held for Sale
   ----------------------------
   Mortgage loans held for sale are carried at the lower of aggregate
   cost or market value. The amount by which cost exceeds market value
   is accounted for as a valuation allowance. Changes in the valuation
   allowance are included in the determination of net income of the
   period in which the change occurs. No market valuation allowances
   were required at December 31, 1998 or 1997.

   Loans and Allowance for Loan Losses
   -----------------------------------
   All loans are stated at principal amount outstanding. Interest on
   loans is primarily calculated by using the simple interest method
   on daily balances of the principal amount outstanding.

   Accrual of interest is discontinued on a loan when management
   believes, after considering economic and business conditions and
   collection efforts, that the borrower's financial condition is such
   that collection of interest is doubtful. When a loan is placed on
   nonaccrual status, previously accrued and uncollected interest is
   charged to interest income on loans. Generally, payments on
   nonaccrual loans are applied to principal.

   A loan is impaired when, based on current information and events,
   it is probable that all amounts due, according to the contractual
   terms of the loan, will not be collected. Impaired loans are
   measured based on the present value of expected future cash flows,
   discounted at the loan's effective interest rate, or at the loan's
   observable market price, or the fair value of the collateral if the
   loan is collateral dependent.  Interest income on impaired loans is
   recognized using the cash-basis method of accounting during the
   time within the period in which the loans were impaired. The Banks
   had no material amounts of impaired loans at December 31, 1998 or
   1997.

   The allowance for loan losses is established through a provision
   for loan losses charged to expense. Loans are charged against the
   allowance for loan losses when management believes that the
   collectibility of the principal is unlikely. The allowance
   represents an amount which, in management's judgment, will be
   adequate to absorb probable losses on existing loans that may
   become uncollectible. 


<PAGE>
   Management's judgment in determining the adequacy of the allowance
   is based on evaluations of the collectibility of loans. These
   evaluations take into consideration such factors as changes in the
   nature and volume of the loan portfolio, current economic
   conditions that may affect the borrower's ability to pay, overall
   portfolio quality, and review of specific problem loans. In
   determining the adequacy of the allowance for loan losses,
   management uses a loan grading system that rates loans in eight
   different categories. Grades five through eight are assigned
   allocations of loss based on the standard regulatory loss
   percentages set forth in the FDIC Interagency Policy Statement on
   the Allowance for Loan and Lease Losses issued in 1993. Loans
   graded one through four are allocated loss ranges based on
   historical loss experience for the previous five years. The
   combination of these results are compared quarterly to the recorded
   allowance for loan losses and material deficiencies are adjusted by
   increasing the provision for loan losses. Management has a devoted
   internal loan review department that is independent of the lending
   function to challenge and corroborate the loan grading system and
   provide additional analysis in determining the adequacy of the
   allowance for loan losses and the future provisions for estimated
   loan losses. 

                                  A - 37

<PAGE>

<PAGE>
             UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
         Notes to Consolidated Financial Statements, continued


   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

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

   Premises and Equipment
   ----------------------
   Premises and equipment are stated at cost less accumulated
   depreciation. Depreciation is computed primarily using the
   straight-line method over the estimated useful lives of the related
   assets. Costs incurred for maintenance and repairs are expensed
   currently. The range of estimated useful lives for buildings and
   improvements is 15 to 40 years, and for furniture and equipment, 3
   to 10 years.

   Goodwill and Deposit-Based Intangibles
   --------------------------------------
   Goodwill, arising from the excess cost over the fair value of net
   assets acquired of purchased bank subsidiaries, is amortized on a
   straight-line basis over periods not exceeding 25 years. Deposit
   assumption premiums paid in connection with the branch bank
   purchases are being amortized over 15 years, the estimated life of
   the deposit base acquired. On an ongoing basis, management reviews
   the valuation and amortization periods of goodwill and the deposit
   assumption premiums to determine if events and circumstances
   require the remaining lives to be reduced.

   Mortgage Servicing Rights
   -------------------------
   United's mortgage banking division accounts for mortgage servicing
   rights as a separate asset regardless of whether the servicing
   rights are acquired through purchase or origination. United's
   mortgage servicing rights represent the unamortized cost of
   purchased and originated contractual rights to service mortgages
   for others in exchange for a servicing fee and ancillary loan
   administration income. Mortgage servicing rights are amortized over
   the period of estimated net servicing income and are periodically
   adjusted for actual and anticipated prepayments of the underlying
   mortgage loans. Impairment analysis is performed quarterly after
   stratifying the rights by interest rate. Impairment, defined as the
   excess of the asset's carrying value over its current fair value,
   is recognized through a valuation allowance. At December 31, 1998
   and 1997, no valuation allowances were required for United's
   mortgage servicing rights.

   United recognized approximately $15,000 and $137,000 in servicing
   assets during 1997 and 1996, respectively, and recognized
   amortization expense relating to servicing assets of approximately
   $387,000, $144,000 and $267,000 during 1998, 1997 and 1996,
   respectively.  During 1996, United sold mortgage loan servicing
   rights with a net book value of approximately $1,254,000.  No such
   sales occurred during 1998 or 1997. 
<PAGE>
   Income Taxes
   ------------
   Deferred tax assets and liabilities are recorded for the future tax
   consequences attributable to differences between the financial
   statement carrying amounts of existing assets and liabilities and
   their respective tax bases. Future tax benefits, such as net
   operating loss carryforwards, are recognized to the extent that
   realization of such benefits is more likely than not. Deferred tax
   assets and liabilities are measured using enacted tax rates
   expected to apply to taxable income in the years in which the
   assets and liabilities are expected to be recovered or settled. The
   effect on deferred tax assets and liabilities of a change in tax
   rates is recognized in income tax expense in the period that
   includes the enactment date.

   In the event the future tax consequences of differences between the
   financial reporting bases and the tax bases of United's assets and
   liabilities results in deferred tax assets, an evaluation of the
   probability of being able to realize the future benefits indicated
   by such asset is required. A valuation allowance is provided for
   the portion of the deferred tax asset when it is more likely than
   not that some portion or all of the deferred tax asset will not be
   realized. In assessing the realizability of the deferred tax
   assets, management considers the scheduled reversals of deferred
   tax liabilities, projected future taxable income and tax planning
   strategies.


                                  A - 38

<PAGE>

<PAGE>
             UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
         Notes to Consolidated Financial Statements, continued

   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

   Interest Rate Risk Management
   -----------------------------
   As part of United's overall interest rate risk management, interest
   rate swaps, floors and caps are utilized. These contracts are
   designated by United as hedges of interest rate exposures, and
   interest income or expense derived from these contracts is recorded
   over the life of the contract as an adjustment to interest income
   or expense of the instruments hedged.

   Other
   -----
   Property (other than cash deposits) held by the Banks in a
   fiduciary or agency capacity for customers is not included in the
   consolidated balance sheets since such items are not assets of the
   Banks.
 
   Comprehensive Income
   --------------------
   In 1997, the Financial Accounting Standards Board issued Statement
   of Financial Accounting Standards ("SFAS") No. 130, "Reporting
   Comprehensive Income". SFAS No. 130 established standards for the
   reporting and presentation of comprehensive income and its
   components in a full set of general-purpose financial statements.
   United has elected to present comprehensive income in a separate
   consolidated statement of comprehensive income. Accumulated other
   comprehensive income is solely related to the net of tax effect of
   unrealized gains on securities available for sale.

   Recent Accounting Pronouncements
   --------------------------------
   In 1998, the Financial Accounting Standards Board issued SFAS No.
   133, "Accounting for Derivative Instruments and Hedging
   Activities". SFAS No. 133 establishes accounting and reporting
   standards for hedging activities and for derivative instruments
   including derivative instruments embedded in other contracts.  It
   requires the fair value recognition of derivatives as assets or
   liabilities in the financial statements. The accounting for the
   changes in the fair value of a derivative depends on the intended
   use of the derivative instrument at inception. Instruments used as
   fair value hedges account for the change in fair value in the
   income of the period simultaneous with accounting for the fair
   value change of the item being hedged. Cash flow hedges account for
   the change in fair value of the effective portion in comprehensive
   income rather than income, and foreign currency hedges are
   accounted for in comprehensive income as part of the translation
   adjustment. Derivative instruments that are not intended as a hedge
   account for the change in fair value in the income of the period of
   the change. SFAS No. 133 is effective for all fiscal quarters of
   all fiscal years beginning after June 15, 1999, but initial
   application of the statement must be made as of the beginning of
   the quarter. At the date of initial application, an entity may
   transfer any held to maturity security into the available for sale
   or trading categories without calling into question the entity's
   intent to hold other securities to maturity in the future. United
   adopted SFAS No. 133 as of January 1, 1999, and transferred all
   held to maturity securities to available for sale which increased
   stockholders' equity by $1.1 million for the net of tax effect for
   the unrealized gains.

                                  A - 39
<PAGE>

<PAGE>
             UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
         Notes to Consolidated Financial Statements, continued


   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

   Income Per Share
   ----------------
   United is required to report income per common share with and
   without the dilutive effects of potential common stock issuances
   from instruments such as options, convertible securities and
   warrants to be presented on the face of the statements of income.
   Basic income per common share is based on the weighted average
   number of common shares outstanding during the period while the
   effects of potential common shares outstanding during the period
   are included in diluted income per common share.  Additionally,
   United must reconcile the amounts used in the computation of both
   basic income per share and diluted income per share. Income per
   common share amounts for the years ended December 31, 1998, 1997
   and 1996 are as follows (dollars and shares in thousands, except
   for per share data):


</TABLE>


<TABLE>
<CAPTION>
                                                      For the Year Ended December 31, 1998

                                                                                       Weighted
                                                                                    Average Common
                                                                   Net Income           Shares            Per Share
                                                                   (Numerator)       (Denominator)         Amount
                                                                  ------------       -------------         ------
     <S>                                                          <C>                      <C>            <C>
     Basic income per share                                       $     12,152             7,392          $  1.64
                                                                                                             ====
     Effect of dilutive securities:
      Stock options                                                          -                86
      Convertible debentures                                               187               140
                                                                        ------             -----
     Diluted income per share                                     $     12,339             7,618          $  1.62
                                                                        ======             =====             ====
(/TABLE>

</TABLE>


<TABLE>
<CAPTION>

                                                      For the Year Ended December 31, 1997

                                                                                       Weighted
                                                                                    Average Common
                                                                   Net Income           Shares            Per Share
                                                                   (Numerator)       (Denominator)         Amount
                                                                  ------------       -------------         ------
     <S>                                                          <C>                      <C>            <C>
     Basic income per share                                       $     10,735             7,301          $ 1.47

     Effect of dilutive securities:
      Stock options                                                          -                47
      Convertible debentures                                               189               140
                                                                        ------             -----
     Diluted income per share                                     $     10,924             7,488          $ 1.46
                                                                        ======             =====            ====
(/TABLE>

                                                                    A - 40

<PAGE>
</TABLE>


<TABLE>
<CAPTION>
                                                  UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
                                              Notes to Consolidated Financial Statements, continued


     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

     Income Per Share, continued
     ----------------
                                                      For the Year Ended December 31, 1996

                                                                                       Weighted
                                                                                    Average Common
                                                                   Net Income           Shares            Per Share
                                                                   (Numerator)       (Denominator)         Amount
                                                                   -----------       -------------         ------
      <S>                                                         <C>                      <C>             <C>
      Basic income per share                                      $    8,927               6,919           $ 1.29

      Effect of dilutive securities:
       Stock options                                                       -                  30
       Convertible debentures                                             56                 161
                                                                       -----               -----
      Diluted income per share                                    $    8,983               7,110           $ 1.26
                                                                       =====               =====             ====
</TABLE>

(1) Mergers and Acquisitions
    On January 21, 1999, United entered into a definitive agreement to
    acquire the stock of Adairsville Bancshares, Inc. ("Adairsville"),
    a bank located in Bartow County, Georgia.  As of December 31,
    1998, Adairsville had $37.1 million of total assets and $4.0
    million of total equity.  This acquisition is expected to close
    during the first quarter of 1999 and will be accounted for as a
    purchase transaction.

    On January 30, 1998, Peoples assumed deposits of  $23.4 million and
    purchased certain assets totaling $3.7 million of a branch in
    Ellijay, Georgia.

    Effective September 12, 1997, United acquired, for 646,257 shares
    of its $1 par value common stock and approximately $7,000 paid for
    fractional shares, all of the outstanding common stock of First
    Clayton Bancshares, Inc., a $73 million one bank holding company,
    located in Clayton, Georgia. The acquisition was accounted for as a
    pooling of interests. 

    On September 28, 1996, UCB assumed deposits of $23.7 million and
    purchased certain assets totaling $21.1 million of a branch in
    Cornelia, Georgia.

(2) Cash Flows
    United paid approximately $56 million, $45 million and $34 million
    in interest on deposits and other liabilities during 1998, 1997 and 1996,
    respectively. 

<TABLE>
<CAPTION>
                                                                                 For the Years Ended December 31,
                                                                                 ----------------------------------
                                                                                 1998           1997           1996
                                                                                 ----           ----           ----
      <S>                                                                    <C>                <C>         <C>
      Schedule of noncash investing and financing activities (in thousands):
      Conversion of subordinated debentures into 178,568 shares
         of common stock                                                     $       -             -          1,000
      Change in unrealized gain (loss) on securities available for sale,
         net of tax                                                          $     477           919           (368)
      Change in dividends payable                                            $      93           (66)             -
      Deposit liabilities assumed in branch acquisition                      $  23,399             -         23,762
      Assets acquired in branch acquisition, other than cash and
         cash equivalents                                                    $   3,246             -         21,115
      Investment securities purchase obligations                             $  10,645             -              -
(/TABLE>

                                                             A - 41

<PAGE>

<PAGE>
             UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
         Notes to Consolidated Financial Statements, continued


(3) Investment Securities
    Investment securities at December 31, 1998 and 1997, are as follows
    (in thousands):

</TABLE>


<TABLE>
<CAPTION>
                                                                        December 31, 1998
                                                                        -----------------
                                                                      Gross          Gross        Estimated
                                                      Amortized    Unrealized     Unrealized        Fair
                                                        Cost         Gains          Losses         Value
                                                        ----         -----          ------         -----
      <S>                                        <C>                  <C>               <C>        <C>
      Securities Available for Sale
           U.S. Treasuries                       $       32,090           990              -         33,080
           U.S. Government agencies                      40,559           479              9         41,029
           State and political subdivisions              20,211           365             64         20,512
           Mortgage-backed securities                   208,772           924            480        209,216
           Other                                         10,615             1             59         10,557
                                                       --------        ------            ---        -------
             Total                               $      312,247         2,759            612        314,394
                                                       ========        ======            ===        =======
      Securities Held to Maturity:

           U.S. Government agencies              $        1,885             9              4          1,890
           State and political subdivisions              53,386         1,691             33         55,044
           Mortgage-backed securities                     2,122            55              5          2,172
                                                       --------        ------            ---        -------
             Total                               $       57,393         1,755             42         59,106
                                                       ========        ======            ===        =======

                                                                        December 31, 1997
                                                                        -----------------
                                                                      Gross          Gross        Estimated
                                                      Amortized     Unrealized     Unrealized       Fair
     Securities Available for Sale:                     Cost         Gains          Losses         Value
                                                        ----         -----          ------         -----
 
           U.S. Treasuries                       $       46,304           642              1         46,945
           U.S. Government agencies                      45,317           268             33         45,552
           State and political subdivisions              11,675           189              4         11,860
           Mortgage-backed securities                    32,970           387             10         33,347
           Other                                          6,256             -             66          6,190
                                                       --------        ------            ---        -------
             Total                               $      142,522         1,486            114        143,894
                                                       ========        ======            ====       =======
     Securities Held to Maturity:

           U.S. Treasuries                       $          500             6              -            506
           U.S. Government agencies                      22,361            35             57         22,339
           State and political subdivisions              42,330         1,211              8         43,533
           Mortgage-backed securities                     4,368           109             10          4,467
                                                       --------        ------            ---        -------
             Total                               $       69,559         1,361             75         70,845
                                                       ========        ======            ===        =======
(/TABLE>
    The amortized cost and estimated fair value of the securities portfolio
    at December 31, 1998, by contractual maturity, is presented in the
    following table. Expected maturities may differ from contractual
    maturities because borrowers have the right to call or prepay obligations
    with or without call or prepayment penalties.
                                                        A - 42
<PAGE>

<PAGE>

                                                  UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
                                              Notes to Consolidated Financial Statements, continued

(3) Investment Securities, continued

                                                         Securities Held                   Securities Available
                                                           to Maturity                           for Sale
                                                    Amortized         Estimated          Amortized          Estimated
                                                      Cost            Fair Value            Cost           Fair Value
                                                      ----            ----------            ----           ----------
    <S>                                          <C>                      <C>              <C>                <C>
    U.S. Treasuries:
      Within 1 year                              $          -                  -             5,113              5,173
      1 to 5 years                                          -                  -            26,977             27,907
                                                      -------             ------            ------             ------
                                                 $          -                  -            32,090             33,080
                                                      =======             ======            ======             ======
    U.S. Government agencies: 
      Within 1 year                              $        800                805             4,015              4,033
      1 to 5 years                                        999                998            31,349             31,789
      5 to 10 years                                        86                 87             5,000              5,013
      More than 10 years                                    -                  -               195                194
                                                      -------             ------            ------             ------
                                                 $      1,885              1,890            40,559             41,029
                                                      =======             ======            ======             ======
    State and political subdivisions:
      Within 1 year                              $      3,378              3,398               877                888
      1 to 5years                                      24,909             25,535             6,091              6,202
      5 to 10 years                                    19,204             20,010             6,851              6,980
      More than 10 years                                5,895              6,101             6,392              6,442
                                                      -------             ------            ------             ------
                                                 $     53,386             55,044            20,211             20,512

    Other:
      More than 10 years                         $          -                  -            10,615             10,557
                                                      ========            =======           ======             ======
    Total securities other than mortgage-backed
      securities:
      Within 1 year                              $      4,178              4,203            10,005             10,094
      1 to 5 years                                     25,908             26,533            64,417             65,898
      5 to 10 years                                    19,290             20,097            11,851             11,993
      More than 10 years                                5,895              6,101            17,202             17,193
      Mortgage-backed securities                        2,122              2,172           208,772            209,216
                                                      -------             ------           -------            -------
                                                 $     57,393             59,106           312,247            314,394
                                                      =======             ======           =======            =======
(/TABLE>

   There were no sales of securities held to maturity during 1998,
   1997 and 1996. Proceeds from sales of securities available for sale
   during 1998, 1997 and 1996 were $33 million, $33 million and $18
   million, respectively. Gross gains of $803,000, $767,000 and
   $53,000 for 1998, 1997 and 1996, respectively, along with gross
   losses of $3,000, $25,000 and $66,000 for 1998, 1997 and 1996,
   respectively, were realized on those sales. Income tax expense
   (benefit) recognized on these gains and losses was $312,000,
   $289,000 and ($5,000) in 1998, 1997 and 1996, respectively.

   Securities with a carrying value of $89 million and $65 million at
   December 31, 1998 and 1997, respectively, were pledged to secure
   public deposits as required by law.

                                                        A - 43
<PAGE>

<PAGE>
             UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
         Notes to Consolidated Financial Statements, continued


(4) Loans and Allowance for Loan Losses
    Major classifications of loans at December 31, 1998 and 1997, are
    summarized as follows (in thousands):

                                                            1998           1997
                                                            ----           ----

       Commercial, financial and agricultural         $    89,779        105,462
       Real estate - construction                         116,481         78,699
       Real estate - mortgage                             673,631        523,629
       Consumer                                           119,980        115,534
                                                          -------        -------

       Total loans                                        999,871        823,324

       Less allowance for loan losses                      11,929         10,352
                                                          -------        -------
       Loans, net                                     $   987,942        812,972
                                                          =======        =======

   The Banks grant loans and extensions of credit to individuals and
   a variety of firms and corporations located primarily in counties
   in northern Georgia and western North Carolina. Although the Banks
   have diversified loan portfolios, a substantial portion of the loan
   portfolios is collateralized by improved and unimproved real estate
   and is dependent upon the real estate market.

   During 1998 and 1997, certain executive officers and directors of
   United and its Banks, including their immediate families and
   companies with which they are associated, maintained a variety of
   banking relationships with the Banks. Total loans outstanding to
   these persons at December 31, 1998 and 1997 amounted to $20,222,000
   and $15,811,000, respectively. The change from December 31, 1997 to
   December 31, 1998 reflects payments amounting to $9,526,000 and
   advances of $13,937,000. Such loans are made in the ordinary course
   of business at normal credit terms, including interest rate and
   collateral requirements, and do not represent more than normal
   credit risk.

    Changes in the allowance for loan losses are summarized as follows
   (in thousands):

</TABLE>


<TABLE>
<CAPTION>
                                                          1998         1997             1996
                                                          ----         ----             ----
      <S>                                             <C>              <C>             <C>
      Balance at beginning of year                    $  10,352        8,125           6,884
      Provisions charged to income                        2,372        2,634           1,597
      Loans charged off                                  (1,288)        (797)           (695)
      Recoveries of loans previously charged off            493          390             339
                                                         ------       ------           -----
      Balance at end of year                          $  11,929       10,352           8,125
                                                         ======       ======           =====
(/TABLE>

     United serviced approximately $73.6 and $103.5 million of mortgage loans
     for others at December 31, 1998 and 1997, respectively.

                                                     A - 44

<PAGE>

<PAGE>
                                                  UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
                                              Notes to Consolidated Financial Statements, continued

(5) Premises and Equipment
    Premises and equipment at December 31, 1998 and 1997, are summarized
    as follows (in thousands):
                                                             1998          1997
                                                             ----          ----

               Land and land improvements               $   7,509          6,102
               Building and improvements                   17,678         14,001
               Furniture and equipment                     19,642         15,018
               Construction in progress                     5,907          2,919
                                                         --------        -------
                                                           50,736         38,040
                    Less accumulated depreciation          12,198         10,303
                                                         --------        -------
                                                        $  38,538         27,737
                                                         ========        =======

   Depreciation expense was approximately $2.6 million, $2.1 million
   and $1.6 million in 1998, 1997 and 1996, respectively.

(6) Time Deposits
    The aggregate amount of time deposit accounts with a minimum
    denomination of $100,000 was approximately $208,120,000 and
    $156,803,000 at December 31, 1998 and 1997, respectively.

    At December 31, 1998, contractual maturities of time deposits are
   summarized as follows (in thousands):

                 Maturing In:
                 ------------
                 1999                                      $  582,722
                 2000                                          75,360
                 2001                                          17,759
                 2002                                          11,677
                 2003                                           2,582
                                                            ---------
                                                           $  690,100
                                                            =========

(7) Federal Home Loan Bank Advances
    The Banks have advances from the Federal Home Loan Bank ("FHLB")
    with monthly interest payments and principal payments due at
    various maturity dates and interest rates ranging from 4.29% to
    7.81% at December 31, 1998. The FHLB advances are collateralized
    by first mortgage loans and FHLB stock.
    
    Advances from FHLB outstanding at December 31, 1998 mature as
    follows (in thousands):
    
          Year
          ----

          1999                              $33,083
          2000                                5,807
          2001                               27,307
          2002                               26,432
          2003                               47,671
          2004 and thereafter                36,554
                                           --------
                                         $  176,854
                                           ========
                                  A - 45
<PAGE>

<PAGE>

             UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
         Notes to Consolidated Financial Statements, continued

(8)  Long-Term Debt and Other Borrowings
     Long-term debt and other borrowings at December 31, 1998 and 1997
     consisted of the following (in thousands):

</TABLE>


<TABLE>
<CAPTION>

                                                                                                                1998       1997
                                                                                                                ----       ----
     <S>                                                                                                   <C>           <C>
     Line of credit borrowings, due in quarterly installments of $321,455 during 1997, 
       plus interest,  through January 2005, secured by common stock of the Bank Subsidiaries.
       Interest is variable based on the prime rate less 1.25%. The loan agreement, which expires
       in 2005, contains covenants and restrictions pertaining to the maintenance of certain financial
       ratios,  limitations on the incurrence of additional debt, and the declaration of dividends or 
       other capital transactions and provides for borrowings up to $15 million.                            $       -     12,722
 
     Commercial paper of Finance, due at maturity during 1999 and unsecured. 
       Interest is from 7.00% to 7.25% and is payable monthly.                                                  1,277      1,347
                                                                                                                -----     ------

                                                                                                            $   1,277     14,069
                                                                                                                =====     ======
(/TABLE>

(9) Convertible Subordinated Debentures
    On December 31, 1996, the holders of convertible debentures of
    United due July 1, 2000 (the "2000 Debentures"), which bore
    interest at a fixed rate of 9% per annum, converted the 2000
    Debentures into an aggregate of 178,568 shares of common stock in
    accordance with their terms and pursuant to an additional six month
    period for conversion extended by United in order to comply with
    certain obligations of United to provide the holders with notice of
    the conversion termination date.

    On December 31, 1996, United also completed a private placement of
    convertible subordinated debentures due December 31, 2006 (the
    "2006 Debentures"). The 2006 Debentures bear interest at the rate
    of one quarter of one percentage point over the prime rate per
    annum, payable in quarterly installments commencing on April 1,
    1997. The 2006 Debentures may be redeemed, in whole or in part, on
    or after January 1, 1998, at the option of United upon at least 20
    days and not more than 60 days notice, at a redemption price equal
    to 100% of the principal amount of the Debentures to be redeemed
    plus interest accrued and unpaid as of the date of redemption. The
    holders of the 2006 Debentures not called for redemption will have
    the right, exercisable at any time up to December 31, 2006, to
    convert such Debenture at the principal amount thereof into shares
    of common stock of United at the conversion price of $25 per share,
    subject to adjustment for stock splits and stock dividends.

    Certain directors and executive officers of United held convertible
    debentures totaling $2,875,000 and $3,025,000 at December 31, 1998
    and 1997, respectively.

(10) Trust Preferred Securities
    In July, 1998, United formed a wholly owned Delaware statutory
    business trust, United Community Capital Trust ("United Trust"),
    which issued $21 million of guaranteed preferred beneficial
    interests in United's junior subordinated deferrable interest
    debentures that qualify as Tier 1 capital under Federal Reserve
    Board guidelines. All of the common securities of United Trust are
<PAGE>
    owned by United. The proceeds from the issuance of the Common
    Securities and the Trust Preferred Securities were used by United
    Trust to purchase $21.7 million of junior subordinated debentures
    of United which carry a fixed interest rate of 8.125 percent. The
    proceeds received by United from the sale of the junior
    subordinated debentures were used to prepay line of credit
    borrowings of approximately $11.8 million and for further
    investments in the Banks. The debentures represent the sole asset
    of United Trust. The debentures and related income statement
    effects are eliminated in United's financial statements.

    The Trust Preferred Securities accrue and pay distributions
    semiannually at a fixed rate of 8.125 percent per annum of the
    stated liquidation value of $1,000 per capital security. United
    has entered into contractual arrangements which, taken
    collectively, fully and unconditionally guarantee payment of: (i)
    accrued and unpaid distributions required to be paid on the Trust
    Preferred Securities; (ii) the redemption price with respect to
    any Trust Preferred Securities called for redemption by United
    Trust, and (iii) payments due upon a voluntary or involuntary
    dissolution, winding up or liquidation of United Trust.


                                  A - 46


<PAGE>

<PAGE>
             UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
         Notes to Consolidated Financial Statements, continued

(10) Trust Preferred Securities, continued
     The Trust Preferred Securities are mandatorily redeemable upon
     maturity of the debentures on July 15, 2028, or upon earlier
     redemption as provided in the indenture. United has the right to
     redeem the debentures purchased by United Trust: (i) in whole or
     in part, on or after July 15, 2008, and (ii) in whole (but not in
     part) at any time within 90 days following the occurrence and
     during the continuation of a tax event, investment company event
     or capital treatment time (as defined in the offering circular).
     As specified in the indenture, if the debentures are redeemed
     prior to maturity, the redemption price will be the principal
     amount, any accrued but unpaid interest, plus a premium ranging
     from 4.06 percent in 2008 to 0.41 percent in 2017.

(11) Income Taxes
     During 1998, 1997 and 1996, United made income tax payments of
    approximately $6.1 million, $5.5 million and $4.0 million,
    respectively. 

    The components of income tax expense for the years ended December 31,
    1998, 1997 and 1996 are as follows (in thousands):

</TABLE>


<TABLE>
<CAPTION>
                                                            1998         1997         1996
                                                            ----         ----         ----
               <S>                                     <C>              <C>           <C>
               Current                                 $   6,354        5,170         4,032
               Deferred (reduction)                         (766)        (404)           82
                                                           -----        -----         -----
                                                       $   5,588        4,766         4,114
                                                           =====        =====         =====
(/TABLE>
     The differences between the provision for income taxes and the
     amount computed by applying the statutory federal income tax rate (34
     percent) to income before income taxes are as follows (in thousands):

</TABLE>


<TABLE>
<CAPTION>
                                                            1998        1997          1996
                                                            ----        ----          ----
              <S>                                      <C>             <C>           <C>
              Pretax income at statutory rates         $   6,032       5,270         4,434
              Add (deduct):
              Tax-exempt interest income                  (1,142)       (878)         (828)
                 Nondeductible interest expense              224         147           127
                 Other                                       474         227           381
                                                          ------       -----         -----
                                                       $   5,588       4,766         4,114
                                                         =======       =====         =====
(/TABLE>
<PAGE>
     The following summarizes the sources and expected tax consequences of
     future taxable deductions (income) which comprise the net deferred
     tax asset at December 31, 1998 and 1997 (in thousands):

</TABLE>


<TABLE>
<CAPTION>
                                                                            1998          1997
                                                                            ----          ----
              <S>                                                   <C>                <C>
              Deferred tax assets:
              Allowance for loan losses                             $      4,654         3,531
              Net operating loss and credit carryforwards                      -            42
              Other                                                          122            32
                                                                          ------        ------
                  Gross deferred tax assets                                4,776         3,605
                 Deferred tax liabilities:                                ------        ------
                 Premises and equipment                                   (1,567)       (1,326)
                 Unrealized gain on securities available for sale           (866)         (541)
                 Other                                                      (229)          (65)
                                                                          ------        ------
                     Gross deferred tax liabilities                       (2,662)       (1,932)
                                                                         -------        ------
                     Net deferred tax asset                         $      2,114         1,673
                                                                         =======        ======
(/TABLE>

                                  A - 47

<PAGE>
                   UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
               Notes to Consolidated Financial Statements, continued


(12) Employee Benefit Plans
     United has contributory employee benefit plans covering
     substantially all employees, subject to certain minimum service
     requirements. United's contribution to the plans is determined
     annually by the Board of Directors and amounted to approximately
     $1,025,000, $803,000 and $583,000 in 1998, 1997, and 1996,
     respectively. In December 1998, the Banks purchased life insurance
     contracts totaling $8.1 million. These contracts are to provide
     income and increase in asset value from which benefits will be paid
     to certain officers under a salary continuation program anticipated
     to be completed during 1999.

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

    Quantitative measures established by regulation to ensure capital
    adequacy require the Banks to maintain minimum amounts and ratios
    of total and Tier 1 capital (as defined) to risk-weighted assets
    (as defined), and of Tier 1 capital (as defined) to average assets
    (as defined).  Management believes, as of December 31, 1998, that
    the Banks meet all capital adequacy requirements to which they are
    subject.

    Minimum ratios required by the Banks to ensure capital adequacy
    are 8% for total capital to risk weighted assets and 4% each for
    Tier 1 capital to risk weighted assets and Tier 1 capital to
    average assets. Minimum ratios required by the Banks to be well
    capitalized under prompt corrective action provisions are 10% for
    total capital to risk weighted assets, 6% for Tier 1 capital to
    risk weighted assets and 5% for Tier 1 capital to average assets.
    Minimum amounts required for capital adequacy purposes and to be
    well capitalized under prompt corrective action provisions are
    presented below for United and its most significant subsidiaries
    (in thousands). Prompt corrective action provisions do not apply
    to bank holding companies.

</TABLE>


<TABLE>
<CAPTION>
                                                Minimum                Minimum                   Minimum
                                            Total Risk Based       Tier 1 Risk Based         Tier 1 Leverage
                                            ----------------       -----------------         ---------------
                                                      Prompt                  Prompt                     Prompt
                                        Capital     Corrective   Capital     Corrective     Capital     Corrective
           1998                        Adequacy      Action      Adequacy      Action      Adequacy       Action
           ----                        --------     ----------   --------    ----------    --------      ---------
       <S>                       <C>                 <C>          <C>          <C>           <C>          <C>
       Consolidated              $       83,357         N/A       41,678          N/A        56,221          N/A
       UCB                               27,819      34,774       13,910       20,864        18,811       23,514
       Carolina                          22,814      28,517       11,407       17,110        16,965       21,207

<PAGE>
          1997
          ----
       Consolidated              $       63,520         N/A       31,777          N/A        47,374          N/A
       UCB                               24,391      30,488       12,195       18,293        15,503       19,379
       Carolina                          17,213      21,516        8,606       12,910        12,980       16,226
(/TABLE>

                                 A - 48

<PAGE>

<PAGE>
                                                  UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
                                              Notes to Consolidated Financial Statements, continued


(13)  Regulatory Matters, continued
      Actual capital amounts and ratios for United and its most significant
      Banks as of December 31, 1998 and 1997, are as follows (in
      thousands):

</TABLE>


<TABLE>
<CAPTION>

                                               Actual                    Actual                    Actual
                                          Total Risk Based         Tier 1 Risk Based          Tier 1 Leverage
                                          -----------------        -----------------          ---------------
                                         Actual                   Actual                    Actual
                 1998                    Amount       Ratio       Amount       Ratio        Amount        Ratio
                 ----                    ------       -----       ------       -----        ------        -----
         <S>                       <C>               <C>          <C>          <C>           <C>          <C>
         Consolidated              $    114,637      11.00%       99,209        9.52%        99,209       7.06%
         UCB                             39,272      11.29%       35,209       10.13%        35,209       7.49%
         Carolina                        30,374      10.65%       26,808        9.40%        26,808       6.32%

                1997
                ----
         Consolidated               $    81,614      10.28%       68,184        8.59%        68,184       5.76%
         UCB                             33,303      10.92%       29,733        9.75%        29,733       7.67%
         Carolina                        23,260      10.81%       20,566        9.56%        20,566       6.34%
(/TABLE>

         As of December 31, 1998 and 1997, the most recent notification
   from the Federal Deposit Insurance Corporation categorized each of
   the Banks as well capitalized under the regulatory framework for
   prompt corrective action.

(14) Commitments
     The Banks are parties to financial instruments with off-balance-
    sheet risk in the normal course of business to meet the financing
    needs of their customers. These financial instruments include
    commitments to extend credit, letters of credit and financial
    guarantees. These instruments involve, to varying degrees, elements
    of credit risk in excess of the amount recognized in the balance
    sheets. The contract amounts of these instruments reflect the
    extent of involvement the Banks have in particular classes of
    financial instruments.
    
    The exposure to credit loss in the event of nonperformance by the
    other party to the financial instrument for commitments to extend
    credit and letters of credit and financial guarantees written is
    represented by the contractual amount of these instruments. The
    Banks use the same credit policies in making commitments and
    conditional obligations as for on-balance-sheet instruments. In
    most cases collateral or other security is required to support
    financial instruments with credit risk.
    
    The following table summarizes, as of December 31, 1998 and 1997,
    the contract or notional amount of off-balance sheet instruments
    (in thousands):

</TABLE>


<TABLE>
<CAPTION>
                                                                                             1998          1997
                                                                                             ----          ----
      <S>                                                                          <C>                   <C>
      Financial instruments whose contract amounts represent credit
          risk:
             Commitments to extend credit                                          $      129,111         106,040
             Standby letters of credit                                             $        8,632           2,520
             Interest rate contracts:
               Swap agreements                                                     $       10,000          35,000
               Floors purchased                                                    $            -          50,000
               Rate cap agreements                                                 $       20,000               -
(/TABLE>

     Commitments to extend credit are agreements to lend to a customer
as long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of
the commitments may expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash
requirements. The Banks evaluate each customer's creditworthiness on a
case-by-case basis. The amount of collateral obtained, if deemed
necessary, upon extension of credit is based on management's credit
evaluation. Collateral held varies, but may include unimproved and
improved real estate, certificates of deposit, personal property or
other acceptable collateral.



                               A - 49

<PAGE>

<PAGE>
             UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
         Notes to Consolidated Financial Statements, continued

(14) Commitments, continued
    Standby letters of credit and financial guarantees written are
    conditional commitments issued by the Banks to guarantee the
    performance of a customer to a third party. Those guarantees are
    primarily issued to local businesses. The credit risk involved in
    issuing letters of credit is essentially the same as that involved
    in extending loan facilities to customers. The Banks hold real
    estate, certificates of deposit, equipment and automobiles as
    collateral supporting those commitments for which collateral is
    deemed necessary. The extent of collateral held for those
    commitments varies.
    
    Derivative financial instruments include forwards, futures, swaps,
    options, and other instruments with similar characteristics. In
    general terms, derivative instruments are contracts or agreements
    whose value can be derived from interest rates, currency exchange
    rates and financial indices. The Banks use interest rate contracts
    in balance sheet management activities, the objective of which is
    to minimize the risk inherent in the asset and liability interest
    rate structure. The Banks do not use derivative financial
    instruments for trading purposes. Interest rate contracts include
    an agreement with a counterparty to exchange cash flow based on the
    movement of an underlying interest rate included such as the prime
    rate or the London Interbank Borrowing Rate (LIBOR). A swap
    agreement involves the exchanges of a series of interest payments,
    either at a fixed or variable rate, based on a notional amount
    without the exchange of the underlying principal. An interest rate
    floor contract allows a party, for a purchase premium, to receive
    income if a predetermined interest rate falls below a predetermined
    level. Rate cap agreements are legal contracts that allow the
    purchaser to place a maximum level on a floating index, and for a
    one-time, up-front fee, the purchaser has purchased the right to
    receive income if a predetermined interest rate rises above a
    predetermined level.  Income or expense on interest rate contracts
    used by the Banks to manage interest rate exposure is recorded on
    an accrual basis as an adjustment to the yield of the related
    interest earning asset or interest bearing liability over the
    period covered by the contracts. Amounts accrued relating to such
    contracts are included in accrued expenses and other liabilities
    and amounts prepaid are included in other assets as of the balance
    sheet date.
   
    The Banks' exposure from these interest rate contracts results from
    the possibility that one party may default on its contractual
    obligation (credit risk) or from the movement of interest rates
    (market risk). Credit risk is limited to the positive market value of
    the derivative, which is significantly less than its notional value
    since the notional amount only represents the basis for determining
    the exchange of the cash flows. Credit risk is minimized by performing
    credit reviews of the counterparties to the contract or by conducting
    activities through organized exchanges.
    
(15) Preferred Stock
    United may issue preferred stock in one or more series as
    established by resolution of the Board of Directors, up to a maximum
    of 10,000,000 shares. Each resolution shall include the number of
    shares issued, preferences, special rights and limitations as
    determined by the Board of Directors. At December 31, 1998 and 1997,
    there were no preferred shares issued or outstanding.

<PAGE>
(16) Stockholders' Equity
    Dividends paid by the Banks are the primary source of funds
    available to United for payment of dividends to its stockholders and
    other needs. Applicable federal and state statutes and regulations
    impose restrictions on the amount of dividends that may be declared by
    the Banks. At December 31, 1998, approximately $17.2 million of the
    Banks' net assets were available for payment of dividends without
    prior approval from the regulatory authorities. In addition to the
    formal statutes and regulations, regulatory authorities also consider
    the adequacy of each Bank's total capital in relation to its assets,
    deposits and other such items. Capital adequacy considerations could
    further limit the availability of dividends from the Banks.
   
    During 1997, United issued 300,000 shares of common stock for
    approximately $6,477,000, net of offering costs. The proceeds from
    this sale of stock were used to inject capital into the Banks and for
    general corporate purposes.
   
    During 1995, the Board of Directors adopted the Key Employee Stock
    Option Plan. Under this plan, options can be granted for up to 300,000
    shares of United's common stock at a price equal to the fair market
    value at the date of grant. At December 31, 1998, 76,296 shares were
    available for grant under this plan.

                               A - 50

<PAGE>

<PAGE>
             UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
         Notes to Consolidated Financial Statements, continued

(16)  Stockholders' Equity, continued
    SFAS No. 123, "Accounting for Stock-Based Compensation," ("SFAS No.
    123") became effective for United on January 1, 1996.  This
    statement encourages, but does not require, entities to compute the
    fair value of options at the date of grant and to recognize such
    costs as compensation expense immediately if there is no vesting
    period or ratably over the vesting period of the options. United
    has chosen not to adopt the cost recognition principles of this
    statement and accounts for stock options under Accounting
    Principles Board Opinion No. 25 and its related interpretations. No
    compensation expense has been recognized in 1998, 1997 or 1996
    related to the stock option plan.  Had compensation cost been
    determined based upon the fair value of the options at the grant
    dates consistent with the method of SFAS No. 123, United's income
    and income per share would have been reduced to the pro forma
    amounts indicated below (in thousands, except per share data):

</TABLE>


<TABLE>
<CAPTION>
                                                                                   1998         1997         1996
                                                                                   ----         ----         ----
       <S>                                             <S>                <C>                  <C>           <C>
       Net income                                      As reported        $       12,152       10,735        8,927
                                                       Pro forma          $       11,991       10,526        8,893

       Basic income per share                          As reported        $         1.64         1.47        1 .29
                                                       Pro forma          $         1.62         1.44        1 .29

       Diluted income per share                        As reported        $         1.62         1.46        1 .26
                                                       Pro forma          $         1.60         1.43        1 .25
(/TABLE>

   The fair value of each option granted is estimated on the date of
   grant using the minimum value method with the following weighted
   average assumptions used for grants in 1998, 1997 and 1996: dividend
   yield of 1%, risk free interest rate of  6% and an expected life of 10
   years.
   
    A summary of activity in United's stock option plan is presented
    below:

</TABLE>


<TABLE>
<CAPTION>
                                                                                 Weighted 
                                                                                   Average              Range
                                                                    Option       Option Price          of Price
                                                                    Shares         Per Share           Per Share
                                                                    ------         ---------           ---------
         <S>                                                       <C>          <C>               <C>
         Options outstanding at December 31, 1995                   50,000      $    10.00        $      10.00
         Options granted in 1996                                    42,000      $    18.00        $      18.00
                                                                  --------
         Options outstanding at December 31, 1996                   92,000      $    13.65        $  10.00 - 18.00
         Options granted in 1997                                    79,704      $    22.15        $  22.00 - 22.51
                                                                  --------
         Options outstanding at December 31, 1997                  171,704      $    17.60        $  10.00 - 22.51
         Options granted in 1998                                    55,500      $    30.05        $  30.00 - 32.50
         Options exercised in 1998                                  (8,500)     $    13.95        $  10.00 - 22.00
         Options forfeited in 1998                                  (3,500)     $    20.40        $  18.00 - 22.00
                                                                  --------
         Options outstanding at December 31, 1998                  215,204      $    20.91        $ 10.00 - 32.50 
                                                                  ========


<PAGE>
   Options on 124,404, 102,104 and 58,400 shares were exercisable at
   December 31, 1998, 1997 and 1996, respectively.  The weighted
   average grant-date fair value of options granted in 1998, 1997 and
   1996 was $10.63, $7.93 and $6.45, respectively. Such options have a
   weighted average remaining contractual life of approximately 8
   years as of December 31, 1998.

(17) Supplemental Financial Data
     Components of other non-interest expenses in excess of 1% of total
     interest and non-interest income for the years ended  December 31,
     1998, 1997 and 1996 are as follows (in thousands):

                                              1998     1997   1996
                                              ----     ----   ----
          Stationery and supplies            $1,002     831  1,152
          Advertising                        $1,381   1,486    704

                                     A - 51

<PAGE>

<PAGE>

             UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
         Notes to Consolidated Financial Statements, continued

(18) United Community Banks, Inc. (Parent Company Only) Financial
     Information

</TABLE>


<TABLE>
<CAPTION>
                                                   Balance Sheets
                                             December 31, 1998 and 1997
                                                                                           1998        1997
                                                                                           ----        ----
                                                                                             (In Thousands)
                                                       Assets
                                                       ------
      <S>                                                                            <C>                <C>
      Cash                                                                           $         424         281
      Investment in subsidiaries                                                           102,695      82,902
      Other assets                                                                           8,981       8,995
                                                                                           -------      ------
                                                                                     $     112,100      92,178
                                                                                           =======      ======
 
                                       Liabilities and Stockholders' Equity
                                       ------------------------------------
 
      Other liabilities                                                              $        200          843
      Notes payable                                                                             -       12,722
      Convertible subordinated debentures                                                   3,500        3,500
      Junior subordinated debentures                                                       21,650         -   
      Stockholders' equity                                                                 86,750       75,113
                                                                                          -------       ------
                                                                                     $    112,100       92,178
                                                                                          =======       ======
<CAPTION>
                                                              Statements of Income
                                              For the Years Ended December 31, 1998, 1997 and 1996

                                                                              1998           1997         1996
                                                                              ----           ----         ----
                                                                                       (In Thousands)
      <S>                                                            <C>                     <C>         <C>
      Income:
         Dividends from Banks                                        $        3,855          1,150       5,361
         Other                                                                2,868            730          87
                                                                              -----          -----       -----
                 Total income                                                 6,723          1,880       5,448
                                                                              -----          -----       -----
      Expenses:
         Interest                                                             1,560          1,045         882
         Other                                                                5,638          2,097       1,266
                                                                              -----          -----       -----
                 Total expense                                                7,198          3,142       2,148
                                                                              -----          -----       -----
      Income (loss) before income tax benefit and equity in undistributed
         income of subsidiaries                                                (475)        (1,262)      3,300
      Income tax benefit                                                      1,410            823         739
                                                                              -----          -----       -----
      Income (loss) before equity in undistributed income of subsidiaries       935           (439)      4,039
      Equity in undistributed income of subsidiaries                         11,217         11,174       4,888
                                                                             ------          -----       -----
                 Net income                                          $       12,152         10,735       8,927
                                                                             ======         ======       =====
(/TABLE>
                                                A - 52
<PAGE>

<PAGE>
                                                  UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
                                              Notes to Consolidated Financial Statements, continued

(18) United Community Banks, Inc. (Parent Company Only)
     Financial Information, continued

</TABLE>


<TABLE>
<CAPTION>
                                                            Statements of Cash Flows

                                              For the Years Ended December 31, 1998, 1997 and 1996

                                                                                   1998          1997          1996
                                                                                   ----          ----          ----
                                                                                            (In Thousands)
    <S>                                                                    <C>                  <C>           <C>
    Cash flows from operating activities:
      Net income                                                           $     12,152           10,735        8,927
      Adjustments to reconcile net income to net cash
         provided by (used in) operating activities:
           Equity in undistributed income of the subsidiaries                  (11,217)         (11,174)       (4,888)
           Depreciation, amortization and accretion                                 387              300          203
         Change in:
           Other assets                                                           1,600          (2,567)          (33)
           Accrued interest payable                                                 574               27          (39)
           Other liabilities                                                     (1,310)            (54)         (263)
                                                                               --------         -------        ------

                 Net cash provided by (used in) operating activities              2,186          (2,733)        3,907
                                                                               --------         -------        ------
    Cash flows from investing activities:
      Purchase of premises and equipment                                        (2,173)          (1,273)            -
      Capital contributions to the subsidiaries                                 (7,899)          (5,250)       (4,275)
                                                                               --------         -------        ------

                 Net cash used in investing activities                         (10,072)          (6,523)       (4,275)
                                                                               --------         -------        ------
    Cash flows from financing activities: 
      Proceeds from convertible subordinated debentures                               -               -        3,500
      Proceeds from junior subordinated debentures                               21,650               -            -
      Proceeds from notes payable                                                     -           3,400            -
      Repayments of notes payable                                               (12,722)         (1,131)        (856)
      Proceeds from exercise of stock options                                       118               -            -
      Proceeds from sale of common stock                                              -           6,477            -
      Purchase and retirement of treasury stock of pooled entity                      -               -         (408)
      Proceeds from resale of treasury stock of pooled entity                         -               6            -
      Dividends paid                                                             (1,017)           (765)        (677)
                                                                               --------         -------        ------
                 Net cash provided by financing activities                        8,029           7,987        1,559
                                                                               --------         -------        ------
                 Net change in cash                                                 143         (1,269)        1,191
 
    Cash at beginning of year                                                       281           1,550          359
                                                                               --------         -------       ------
    Cash at end of year                                                    $        424             281        1,550
                                                                               ========         =======       ======
(/TABLE>

                                                                    A - 53

<PAGE>

<PAGE>
             UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
         Notes to Consolidated Financial Statements, continued

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

     Cash and Cash Equivalents
     -------------------------
     For cash, due from banks and federal funds sold the carrying
     amount is a reasonable estimate of fair value.

     Securities Held to Maturity and Securities Available for Sale
     -------------------------------------------------------------
     Fair values for investment securities are based on quoted market
     prices.

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

     Cash Surrender Value of Life Insurance
     --------------------------------------
     The carrying value of cash surrender value of life insurance is a
     reasonable estimate of fair value.

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

     Federal Funds Purchased and Repurchase Agreements
     -------------------------------------------------
     The carrying amount of federal funds purchased and repurchase
     agreements is a reasonable estimate of fair value.

     Federal Home Loan Bank Advances
     -------------------------------
     The fair value of United's fixed rate borrowings are estimated
     using discounted cash flows, based on United's current
     incremental borrowing rates for similar types of borrowing
     arrangements. For variable rate borrowings the carrying amount is
     a reasonable estimate of fair value.

     Long-Term Debt and Convertible Subordinated Debentures
     ------------------------------------------------------
     Long-term debt and convertible subordinated debentures are made
     using variable rates, thus, the carrying amount is a reasonable
     estimate of fair value.

     Trust Preferred Securities
     --------------------------
     The fair value of United's trust preferred securities are
     estimated using discounted cash flows, based on United's current
     incremental borrowing rates for similar types of borrowing
     arrangements.

     Interest Rate Swaps, Floors and Caps
     ------------------------------------
     The fair value of interest rate swaps, floors and caps is
     obtained from dealer quotes. These values represent the estimated
     amount United would receive to terminate the contracts or
     agreements, taking into account current interest rates and, when
     appropriate, the current creditworthiness of the counterparties.

     Commitments to Extend Credit, Standby Letters of Credit and
     Financial Guarantees Written
     ----------------------------
     Because commitments to extend credit and standby letters of
     credit are made using variable rates, the contract value is a
     reasonable estimate of fair value.


                                  A - 54

<PAGE>

<PAGE>
             UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
         Notes to Consolidated Financial Statements, continued


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

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

     The carrying amount and estimated fair values of United's
     financial instruments at December 31, 1998 and 1997 are as follows
     (in thousands):

</TABLE>


<TABLE>
<CAPTION>
                                                                    December 31, 1998                December 31, 1997
                                                                    -----------------                -----------------
                                                                Carrying        Estimated         Carrying      Estimated
                                                                 Amount         Fair Value         Amount       Fair Value
                                                                -------         ----------        --------      ----------
      <S>                                            <C>                       <C>               <C>            <C>
      Assets:
          Cash and cash equivalents                  $            55,700          55,700           68,834         68,834
          Securities held to maturity                             57,393          59,106           69,559         70,845

          Securities available for sale                          314,394         314,394          143,894        143,894
          Mortgage loans held for sale                             8,129           8,129            3,962          3,962
          Loans, net                                             987,942         990,708          812,972        814,855
          Cash surrender value of life insurance                   8,130           8,130                -              -

     Liabilities:
          Deposits                                             1,163,124       1,164,801          977,079        981,580
          Federal funds purchased and
            repurchase agreements                                26,520          26,520           33,011         33,011
          Federal Home Loan Bank advances                        176,854         172,485           43,321         43,087
          Long-term debt and other borrowings                      1,277           1,277           14,069         14,070
          Convertible subordinated debentures                      3,500           3,500            3,500          3,500
          Trust Preferred Securities                              21,000          19,336                -              -

      Unrecognized financial instruments:
          Commitments to extend credit                           129,111         129,111          106,040        106,040
          Standby letters of credit                                8,632           8,632            2,520          2,520
          Swap agreements                                              -               -               12            156
          Floors purchased                                             -               -                3         -     
          Rate cap agreements                        $               437             448                -              -
(/TABLE>

                                                                    A - 55


</TABLE>