SEC Filing | United Community Banks, Inc.

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As filed with the Securities and Exchange Commission on January 31, 1997
Registration No. 33-_______

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________

FORM S-1
Registration Statement
Under
The Securities Act of 1933
_________________________

UNITED COMMUNITY BANKS, INC.
(Exact name of Registrant as specified in its charter)
_________________________

Georgia 6712 58-1807304
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification
incorporation or Classification Code Number)
organization) Number)

P.O. Box 398 Mr. Christopher J. Bledsoe
59 Highway 515 Chief Financial Officer
Blairsville, Georgia 30512 United Community Banks, Inc.
(706) 745-2151 P.O. Box 398
(Address, including zip code, 59 Highway 515
and telephone number, Blairsville, Georgia 30512
including (706) 745-2151
area code, of registrant's (Name, address, including zip
principal executive offices) code, and telephone number,
including area code, of agent
for service)

With copies to:
Richard R. Cheatham, Esq.
Kilpatrick & Cody, L.L.P.
Suite 2800
1100 Peachtree Street
Atlanta, Georgia 30309
(404) 815-6500

Approximate date of commencement of the proposed sale to the
public: AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT
BECOMES EFFECTIVE.

If any of the securities being registered on this Form arebeing
offered on a delayed or continuous basis pursuant to Rule
415 under the Securities Act of 1933 check the following box.

If this Form is filed to register additional securities for
an offering pursuant to Rule 462(b) under the Securities Act,
please check the following box and list the Securities Act
registration number of the earlier effective registration
statement for the same offering. ________________

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

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

| Offering Price Per Share | Aggregate Offering Price | Registration Fee
- -----------------------------|----------------|----------------------------|---------------------------|----------------------

Common Stock, par value | 250,000 | $20.00 | 5,000,000 | $1,515.15
$1.00 per share | | | |
==============================================================================================================================

Estimated solely for the purpose of computing the registration fee

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

SUBJECT TO COMPLETION, DATED JANUARY 31, 1997

PROSPECTUS
- ----------
UNITED COMMUNITY BANKS, INC.
250,000 Shares of Common Stock

______________________________

United Community Banks, Inc. ("United") hereby offers for sale on a
best efforts basis 250,000 shares of its common stock (the "Common
Stock") at a price of $20.00 per share (the "Offering"). In the State of
Georgia, the Common Stock offered hereby will be sold by certain
executive officers of United, and no commissions will be paid on such
sales. In order to comply with securities requirements of the State of
North Carolina, United has engaged The Carson Medlin Company ("Carson
Medlin") to act as a broker dealer for the account of United in effecting
offers and sales of the Common Stock to investors in North Carolina.
Carson Medlin will receive a fee of $30,000 for these services.
Subscription proceeds for 25,000 shares must be deposited in an interest
bearing account with SunTrust Bank in Atlanta, Georgia by the date that
is 30 days from the date of this Prospectus unless extended to the date
that is 90 days from the date of this Prospectus, or the Offering will
terminate and subscription funds, together with interest actually earned
thereon, will be returned to subscribers. The Common Stock offered
hereby will be offered to members of the general public who are residents
of the States of Georgia and North Carolina.

Prior to the Offering, there has been no established public market
for the Common Stock, and it is not expected that an active trading
market for the Common Stock will develop as a result of completing the
Offering. The offering price of $20.00 per share of Common Stock was set
by United. For information relating to the factors considered in
determining the offering price to the public, see "Determination of
Offering Price."
______________________________

See "Risk Factors" for a discussion of certain factors that should be
considered in connection with an investment in the securities offered
hereby.
______________________________

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

The securities offered hereby are not savings or
deposit accounts or other obligations of a
bank and are not insured by the Bank Insurance Fund
of the Federal Deposit Insurance Corporation
or any other government agency.

=========================================================================================================================
Price to Public | Underwriting Discounts and | Proceeds to United (1)
| Commissions |
- ---------------------------------------------------------------|-------------------------------|-------------------------

Per Share of Common Stock $20.00 | | $19.60
Minimum $500,000 | | $400,000
Maximum $5,000,000 | | $4,900,000
==========================================================================================================================

Before deducting expenses payable by United, estimated at $70,000.
Carson Medlin will receive a fee of $30,000 for effecting sales of
Common Stock on behalf of United in the State of North Carolina.

The date of this Prospectus is January 31, 1997.
PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more
detailed information and financial statements, and the notes related
thereto, appearing elsewhere in this Prospectus.

The Company

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 ("UCB"). United is a
registered bank holding company. 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, Blue Ridge, Georgia ("Peoples"), which United acquired in
1992, Towns County Bank, Hiawassee, Georgia ("Towns"), which United
acquired in 1992, and White County Bank, Cleveland, Georgia ("White"),
which United acquired in 1995, (collectively with UCB, Carolina, Peoples,
Towns and White, the "Banks").

In August 1995, United completed an offering to the public of 215,515
shares of United Common Stock registered under the Securities Act of 1933
pursuant to which $2,434,000 in additional capital was raised. United
used the proceeds of that offering primarily to invest additional capitalin
Carolina and Towns.

On July 1, 1996, UCB established a branch in Dahlonega, Lumpkin
County, Georgia, and on September 28, 1996, UCB purchased and assumed
certain assets and liabilities and established a branch in Cornelia,
Habersham County, Georgia.

On December 31, 1996, United completed a Private Placement of
$3,500,000 of Floating Rate Convertible Subordinated Payable-in-Kind
Debentures due December 31, 2006, the proceeds of which were used to
invest additional capital in Carolina, and for general corporate
purposes. See "DESCRIPTION OF SECURITIES - Debentures."

United's executive offices are located at 59 Highway 515,
Blairsville, Georgia 30512, and its telephone number is (706) 745-2151.

Risk Factors

Prospective investors should carefully consider the matters discussed
under "Risk Factors" elsewhere in this Prospectus.

The Offering

Common Stock

Common Stock offered ....................... 250,000 shares.

Common Stock deemed outstanding before the
Offering ............................... 6,637,248 shares, 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 58,400
shares (the "Options") issued
pursuant to the United's Stock Option
Plan.

Common Stock deemed outstanding after the
Offering .............................. 6,887,248 shares (including shares
underlying the 2006 Debentures and
the Options).

Use of Proceeds .............................. To invest additional capital in UCB
and Carolina, and for general
corporate purposes. See "Use of
Proceeds."

United Community Banks, Inc.
Summary Consolidated Financial Information
(Dollars in thousands, except per share amounts)

Pro Forma
Consolidated
December 31 As Adjusted
--------------------------------------------------- Sept. 30, Sept. 30,
1991 1992 1993 1994 1995 1996 1996
---- ---- ---- ---- ---- ---- ----

Balance Sheet Data
Total assets . . . . . . . . . . . . . $269,684 $332,013 $393,632 $456,936 659,669 779,565 787,965
Loans, gross . . . . . . . . . . . . . 180,254 224,057 283,611 341,621 456,140 564,685 564,685
Deposits . . . . . . . . . . . . . . . 242,957 300,020 349,765 393,270 590,656 680,337 680,337
Long term debt . . . . . . . . . . . . 5,277 7,800 7,400 9,400 11,309 10,736 10,736
Stockholders' equity . . . . . . . . . 17,968 20,942 25,449 30,217 44,027 48,766 54,666

Pro Forma Consolidated
As Adjusted
As of December 31, -----------
------------------------------------------------ Sept. 30, Sept. 30, Dec. 31,
1991 1992 1993 1994 1995 1996 1996 1995
---- ---- ---- ---- ---- ---- ---- ----

Statement of Earnings Data
Net interest income . . . . . . . . . $9,322 $11,131 $14,516 $18,217 22,919 22,632 22,739 23,063
Provision for loan losses . . . . . . 834 472 842 935 1,040 915 915 1,040
Noninterest income . . . . . . . . . . 1,551 2,157 3,700 3,762 4,264 3,740 3,740 4,264
Noninterest expense . . . . . . . . . 7,377 8,635 11,705 13,902 17,854 16,803 16,803 17,854
Net earnings . . . . . . . . . . . . . 2,082 3,126 4,202 5,200 6,051 5,724 5,796 6,146

Per Share Data
Book value (period end) . . . . . . 3.29 3.81 4.55 5.41 7.03 7.79 8.17 7.46
Net earnings . . . . . . . . . . . . . 0.38 0.57 0.76 0.93 1.04 0.91 0.87 0.98
Weighted average outstanding shares . 5,454,040 5,492.435 5,545,110 5,589,365 5,813,615 6,260,280 6,688,848 6,242,183
Dividends . . . . . . . . . . . . . . 0.03 0.05 0.04 0.04 0.07 0.04 0.04 0.04

Ratios
Return on average assets . . . . . . . 0.82% 1.04% 1.16% 1.22% 1.08% 1.05% 1.06% 1.07%
Return on average stockholders' equity 12.23% 16.07% 18.12% 18.68% 16.30% 16.49% 15.70% 15.34%
Net interest margin . . . . . . . . 4.27% 4.27% 4.57% 4.88% 4.60% 4.64% 4.60% 4.56%
Average stockholders' equity to average
assets 6.73% 6.47% 6.41% 6.51% 6.60% 6.45% 6.77% 7.01%

______________

Represents stockholders' equity divided by the number of outstanding
shares at period end.
Represents net interest income as a percentage of average
interest-earning assets.
Gives effect to the application of the net proceeds of the Offering,
issuance of the 2006 Debentures and conversion of the 2000 Debentures
as of December 31, 1996. See Management's Discussion and Analysis of
Financial Condition and Results of Operations - Financial Information
for the Nine Months Ended September 30, 1996 - Developments Since
September 30, 1996.

3
RISK FACTORS

Investors should carefully consider the following risk factors, in
addition to the other information contained in this Prospectus, before
purchasing any of the securities offered hereby.

Government Regulation
- ---------------------

United and the Banks are subject to extensive government regulation
and control. This regulation not only imposes cost and compliance
burdens, but also limits and defines the scope and nature of United's and
the Banks' activities. See "BUSINESS" and "SUPERVISION AND REGULATION."

Determination of Offering Price of Common Stock
- -----------------------------------------------

Because there is no active market for the Common Stock, the offering
price for the Common Stock has been determined by the Board of Directors
of United and represents the most favorable terms for United upon which
the Board of Directors believes it can anticipate attracting additional
capital in the amounts needed by United. When setting the price for the
securities offered hereby, the Board of Directors considered recent sales
of the Common Stock, prevailing area and national economic conditions,
the prices of securities of other financial institutions in comparison to
the earnings and book values of those institutions, and the historical
and potential future financial results of United. See "DETERMINATION OF
OFFERING PRICE."

Monetary Policy and Economic Conditions
- ---------------------------------------

The operating income and net earnings of the Banks depend to a
substantial extent on the difference between the 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 which are beyond the control of the
Banks, including national and international economic conditions and the
monetary policies of various governmental and regulatory authorities.

Absence of Trading Market
- -------------------------

The shares of Common Stock offered hereby will not be subject to any
specific restrictions on transfer (with the exception of securities
purchased by United's directors, officers and other affiliates) and will
be freely transferable immediately upon issuance. However, prior to the
Offering, there has been no public or other established, active market
for the Common Stock, and it is not expected that any active public
market for the Common Stock will develop as a result of the completion of
the Offering or otherwise.

No Firm Commitment
- ------------------

The Offering is being conducted on a best-efforts basis. As a
consequence, the Offering's success is dependent on the willingness of
current shareholders of United to invest additional funds and the ability
of the officers of United to attract new investors. The Offering will be
conducted by certain executive officers of United in Georgia. North
Carolina securities regulations require that offers and sales of Common
Stock in the State of North Carolina must be made by a broker-dealer who
is registered in North Carolina. United has engaged The Carson Medlin
Company ("Carson Medlin") to act as a broker dealer for the account of
United in effecting offers and sales of the Common Stock to investors in
North Carolina. Carson Medlin will receive a fee of $30,000 for these
services. Carson Medlin will not be obligated to purchase any of the
Common Stock for its own account.

DETERMINATION OF OFFERING PRICE

The offering price for the Common Stock was determined by United.
Among the factors considered were recent sales of the Common Stock and
the earnings of United during the year ended December 31, 1995 and the
nine months ended September 30, 1996, as well as United's prospective
earnings, an assessment of United's management, the nature of United's
assets and liabilities, the future prospects of United and the banking
industry in general, area and national economic conditions, interest rate
environment, market prices of and demand for securities of institutions
engaged in activities similar to those of United and a comparison of
prices of securities of other financial institutions to the earnings and
book value of those institutions and of United.

No assurance can be given that investors in the Offering will be
able to resell their shares of Common Stock at a price equal to or
greater than the offering price set forth on the cover page of this
Prospectus or that such price necessarily indicates the fair market value
of the Common Stock.

MARKET FOR AND PRICE RANGE OF COMMON STOCK

Since United began operations as a holding company in 1988, there
has been no established market for the Common Stock. As of December 31,
1996, 6,637,248 shares of Common Stock were issued and outstanding,
including 140,000 shares deemed outstanding pursuant to the 2006
Debentures and presently exercisable options to acquire 58,400 shares.
United has not agreed to register any other shares of Common Stock nor is
United presently contemplating any other public offering of Common Stock.

United is aware of approximately 256 sales of Common Stock in 1996
in blocks ranging from one share to 2,500 shares at prices ranging from
$10.00 per share to $42.00 per share and of approximately 29 sales of
Common Stock in 1995, in blocks ranging from 15 shares to 1,000 shares at
prices ranging from $10.00 per share to $11.50 per share. At December
31, 1996, there were 1,704 holders of record of Common Stock.

It is not expected that any active public market for the Common
Stock will develop as a result of the completion of the Offering or
otherwise.

USE OF PROCEEDS

The net proceeds to be received by United from the sale of the
shares of Common Stock offered hereby are estimated to be $4.9 million,
after the deduction of estimated offering expenses payable by United.
United intends to use such proceeds to invest additional capital in UCB
and Carolina, and for working capital because of the asset growth which
both of those banks are experiencing. United frequently evaluates
acquisition opportunities and from time to time enters into discussions
regarding possible acquisitions. Pending the application of the net
proceeds of the Offering, United currently anticipates that the net
proceeds will be deposited into a money market account with UCB.

CAPITALIZATION

The following table sets forth the consolidated capitalization of
United at September 30, 1996, and as adjusted at that date to give effect
to the sale by United of the 2006 Debentures, conversion of the 2000
Debentures and the 250,000 shares of Common Stock and the application of
the estimated net proceeds therefrom as described in "USE OF PROCEEDS"
and as further adjusted to give effect to the application of the net
proceeds of the Offering. This table should be reviewed in conjunction
with the United's Consolidated Financial Statements and the related notes
thereto appearing elsewhere in this Prospectus.
5

September 30, 1996
------------------
Actual As Adjusted
------ ---------------

($ in thousands)
Long-Term Debt . . . . . . . . . . . . . . . . . . . $10,736 $10,736
Convertible Subordinated Debentures . . . . . . . . . 1,000 3,500
Stockholders' Equity:
Preferred Stock, $1.00 par value; 10,000,000 shares
authorized, no shares issued and outstanding . . - -
Common Stock, $1.00 par value; 10,000,000 shares
authorized, 6,260,280 shares issued and outstanding,
6,688,748 shares issued and outstanding, as adjusted 6,260 6,689
Capital surplus . . . . . . . . . . . . . . . . . 14,520 19,991
Retained earnings . . . . . . . . . . . . . . . . 28,471 28,471
Unrealized losses on securities available
for sale . . . . . . . . . . . . . . . . . . (485) (485)
Total stockholders' equity . . . . . . . . . . . . . 48,766 54,666
Total capitalization . . . . . . . . . . . . . . . . 60,502 68,902

_________________________

Gives effect to the application of the net proceeds of the Offering,
proceeds from issuance of 2006 Debentures and conversion of the 2000
Debentures as of December 31, 1996. See Management's Discussion and
Analysis of Financial Condition and Results of Operations - Financial
Information for the Nine Months Ended September 30, 1996 - Developments
Since September 30, 1996.

DIVIDENDS

United paid semi-annual cash dividends of $.08 per share of Common
Stock to shareholders of record in 1996 and $.07 per share of Common
Stock to shareholders of record in 1995. United presently intends to
continue paying cash dividends on a semi-annual basis with respect to the
Common Stock.

The amount and frequency of dividends will be determined by United's
Board of Directors in light of the earnings, capital requirements and the
financial condition of United, and no assurance can be given that
dividends on the Common Stock will be declared in the future. Further,
United's ability to pay cash dividends on the Common Stock will be
dependent on cash dividends paid to it by the Banks. The ability of the
Banks to pay dividends to United is restricted by applicable regulatory
requirements. See "BUSINESS," "SUPERVISION AND REGULATION" and
"DESCRIPTION OF SECURITIES."

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

GENERAL

The following discussion focuses on significant changes in the
financial condition and results of operations of United and the Banks
during the past three years ended December 31, 1995 and the nine months
ended September 30, 1996. The discussion and analysis is intended to
supplement and highlight, and should be in conjunction with, information
contained in the accompanying consolidated financial statements and the
summary financial information presented elsewhere in this Prospectus.

FINANCIAL HIGHLIGHTS

YEAR ENDED DECEMBER 31, 1995. Net earnings totaled over $6 million
for the year ended December 31, 1995, an increase of over 16% from the
$5.2 million earned in 1994. Net earnings per common share were $1.04
for 1995 compared to $0.93 reported for 1994, an increase of 12%. Return
on assets and return on equity for the year ended December 31, 1995, was
1.08% and 16.30%, respectively. The 1994 return on assets and return on
equity was 1.22% and 18.68%, respectively.

United's balance sheet grew 44.3% during the year as assets ended
the year at $660 million. Net loans increased 34.5% during the year and
deposits grew over 50%. The increases in both loans and deposits reflect
a strengthening economic environment as well as market share gains from
competition. Stockholders' equity increased to $44 million and
represented 6.67% of year end assets.

On October 26, 1995, the United board of Directors declared a five-
for-one stock split, effected in the form of a share dividend, payable to
shareholders of record November 6, 1995. Share and per share data for
all periods presented have been restated to reflect the additional shares
outstanding resulting from the stock split.

NINE MONTHS ENDED SEPTEMBER 30, 1996. Net earnings for the nine
months ended September 30, 1996 increased to $5.7 million or 38% over net
earnings for the first nine months of 1995. Net earnings per common
share for the first nine months also increased 25% from the same period
in 1995 to $.91. Net interest income increased 39% for the nine months
ended September 30, 1996 over the same period of 1995 to $23.6 million.
For the first half of 1996, the provision for loan losses increased 23%
to $915,000 for the nine month period. Noninterest income and expense
rose 21% and 33%, respectively, over the first three quarters of 1995.

Total assets at September 30, 1996 were $780 million representing a
$120 million or an 18% increase from December 31, 1995 and a $158 million
or a 25% increase from September 30, 1995. The growth from prior year is
primarily attributed to an increase in market share of approximately $109
million and $49 from acquisitions. The primary purpose of this Offering
is to provide more capital to UCB and Carolina which have seen their
assets grow $61 million (25%) and $36 million (20%), respectively, in
1996. At September 30, 1996, earning assets totaled $722 million, an
increase of $111 million from December 31, 1995. The earning assets mix
improved slightly in the first nine months with loans representing 77% of
the total earning assets as compared to 73% at December 31, 1995.

MERGERS AND BRANCH ACQUISITIONS

In 1995, United's subsidiary, Carolina, assumed deposits totaling
$32 million and purchased certain assets totaling $12 million of three
branch banks in the western North Carolina cities of Andrews, Franklin
and Waynesville.

Effective August 31, 1995, United completed the acquisition of White
County Bancshares, Inc., the parent company of the $71 million asset,
White County Bank in Cleveland, Georgia. United issued 455,400 shares of
its common stock in addition to a previously issued exchangeable payable
in kind debenture for all of the issued and outstanding shares of White.
This transaction was accounted for as a purchase.

7
On September 28, 1996, UCB assumed deposits of $23.7 million and
purchased certain assets totalling $33.2 million of a branch bank located
in Cornelia, Habersham County, Georgia. Participation interests in
$12 million of those loans were repurchased by the seller, so that the
net assets purchased by UCB was $21.2 million. On July 1, 1996, UCB
established a de novo branch in Dahlonega, Lumpkin County, Georgia.

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 the largest possible amount of income while
balancing interest rate, credit, and liquidity risks.

Net interest income, on a taxable equivalent basis, was $24.1
million in 1995, compared to $19.3 million in 1994 and $15.4 million in
1993. The 25% increase in 1995 was the result of increased volume of net
earning assets partially offset by a decline in interest rate spreads.

Interest income increased over 44% in 1995 and 20% in 1994, respectively.
The increase in 1995 was again primarily a result of an
increase in interest and fees on loans of over $12.5 million, of which
$2.7 million was contributed as a result of the White County acquisition.
Interest on investment securities and other earning assets increased $2.9
million or 49%.

Average earning assets in 1995 increased over 33% when compared to
1994 due to increases in average loans of over $86 million and average
investment securities of $28 million. Increases in average earning
assets of 17% were experienced in 1994 over 1993 primarily due to
increases in average loans of $59 million. Table 1 represents net
interest income, yields and rates on a taxable-equivalent basis and
average balances for the years 1995, 1994 and 1993.

8
Table 1 - Consolidated Average Balances, Interest and Rates
Taxable Equivalent Basis
(dollars in thousands)

Years Ended December 31,
------------------------
1995 1994 1993
---- ---- ----
Average Yield/ Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate Balance Interest Rate
-----------------------------------------------------------------------------------------

ASSETS
Interest earning assets:
Federal funds sold $17,467 1,113 6.37% $3,270 135 4.13% $3,674 107 2.91%
Interest bearing deposits
with other banks 286 3 1.05% 502 20 3.98% 1,350 4 93.63%
Investment securities:
Taxable 78,684 4,791 6.09% 51,194 2,924 5.71% 57,104 3,276 5.74%
Tax-exempt 31,605 2,797 8.85% 30,662 2,747 8.96% 24,324 2,330 9.58%
------- ------ ------ ------ ------- ------
Total investment securities 110,289 7,588 6.88% 81,856 5,671 6.93% 81,428 5,606 6.88%
------- ------ ------ ------ ------- ------
Loans:
Taxable 389,565 40,943 10.51% 304,961 28,683 9.41% 247,092 23,153 9.37%
Tax-exempt 5,938 653 11.00% 4,532 424 9.36% 3,387 306 9.04%
------- ------ ------ ------ ------- ------
Total loans 395,503 41,596 10.52% 309,493 29,107 9.40% 250,479 23,459 9.37%
------- ------ ------ ------ ------- ------
Total interest earning assets 523,545 50,300 9.61% 395,121 34,933 8.84% 336,931 29,221 8.67%
------- ------ ------ ------ ------- ------
Allowance for loan losses (5,367) (3,712) (2,934)
Cash and due from banks 15,891 13,504 11,141
Premises and equipment 13,456 11,086 7,897
Other assets 14,867 11,696 8,965
-------- -------- --------
Total assets $562,392 $427,695 $362,000
======== ======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing liabilities:
Deposits:
Demand $ 97,103 3,585 3.69% $ 86,224 2,874 3.33% $ 66,195 2,080 3.14%
Savings 33,057 1,023 3.09% 30,172 926 3.07% 24,464 788 3.22%
Time 317,938 19,735 6.21% 225,872 10,572 4.68% 208,954 10,229 4.90%
Federal funds purchased 975 56 5.74% 2,476 122 4.93% 1,297 42 3.24%
FHLB advances 11,889 899 7.56% 8,096 415 5.13% 1,876 99 5.28%
Long-term debt 9,537 820 8.60% 8,754 639 7.30% 7,657 459 6.00%
Convertible subordinated
debentures 1,000 90 9.00% 1,000 90 9.00% 1,248 112 9.00%
------- ------ ------ ------ ------- ------
Total interest bearing liabilities 471,499 26,208 5.56% 362,594 15,638 4.31% 311,691 13,809 4.43%
------- ------ ------- ------ ------- ------
Noninterest bearing demand
deposits 50,149 34,101 24,847
Other liabilities 3,621 3,167 2,266
Stockholders' equity 37,123 27,833 23,196
------- ------- -------
Total liabilities and
stockholders' equity $562,392 $427,695 $362,000
======== ======== ========
Net interest income 24,092 19,295 15,412
====== ====== ======
Net interest spread 4.05% 4.53% 4.24%
==== ==== ====
Net interest margin 4.60% 4.88% 4.57%
==== ==== ====
Taxable equivalent adjustments:
Loans $ 222 144 104
Investment securities 951 934 792
------- ------- -------
Total taxable equivalent
adjustments 1,173 1,078 896
------- ------- -------
Net interest income $ 22,919 $18,217 $14,516
======== ======= =======

CONSOLIDATED AVERAGE BALANCES, INTEREST AND RATES

The banking industry uses two key ratios to measure relative
profitability of net interest income. The net interest rate spread
measures the difference between the average yield on earning assets and
the average rate paid on interest bearing sources of funds. 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 4.05% in 1995, 4.53% in 1994 and 4.24%
in 1993, while the net interest margin was 4.60% in 1995, 4.88% in 1994
and 4.57% in 1993. The decrease in the margin and spread are primarily
due to competitive pricing for time deposit accounts and a rising rate
environment. In addition, the acquisition of White County contributed
unfavorably to the net interest margin for 1995. The increase in 1994
compared to 1993 was a result of changes in the overall asset and
liability mix, combined with a favorable rate environment. Table 2 shows
the change in net interest income for the past two years due to changes
in volumes and rate.

Table 2 - Rate/Volume Variance Analysis
Taxable Equivalent Basis
(dollars in thousands)

1995 Compared to 1994 1994 Compared to 1993
Increase (decrease) due to changes in Increase (decrease) due to changes in
------------------------------------- -------------------------------------
Yield/ Net Yield/ Net
Volume Rate Change Volume Rate Change
------ ------ ------ ------ ------ ------

Interest earned on:
Federal funds sold $ 905 73 978 $ (13) 41 28
Interest bearing deposits
with other banks (2) (15) (17) (34) 5 (29)
Investment securities:
Taxable 1,674 193 1,867 (336) (16) (352)
Tax-exempt 83 (33) 50 576 (159) 417

Loans:
Taxable 8,892 3,368 12,260 5,438 92 5,530
Tax-exempt 155 74 229 107 11 118

Total interest income 11,707 3,660 15,367 5,738 (26) 5,712
Interest paid on:
Deposits:
Demand 402 309 711 662 132 794
Savings 89 8 97 177 (39) 138
Time 5,715 3,448 9,163 811 (468) 343
Federal funds purchased (86) 20 (66) 51 29 80
FHLB advances 287 197 484 319 (3) 316
Long-term debt 67 114 181 72 108 180
Convertible subordinated
debentures -- -- -- (22) -- (22)

Total interest expense 6,474 4,096 10,570 2,070 (241) 1,829

Net interest income $5,233 (436) 4,797 $3,668 215 3,883

10
NONINTEREST INCOME

Noninterest income consists primarily of revenues generated from
service charges and fees on deposit accounts, mortgage loan and related
fees and profits earned through sales of credit life insurance. In
addition, gains or losses realized from the sale of investment portfolio
securities are included in non-interest income. Total non-interest
income for 1995 increased 13% or $502,000, $235,000 of which was
contributed as a result of the White County acquisition. Noninterest
income for 1994 showed a modest increase of 2% from 1993. The growth in
non-interest income was the result of United's continuing efforts to
build stable sources of fee income, which includes services charges on
deposits and mortgage loan and related fees. This growth is being
accomplished through the building of customer market share and expansion
of United's locations together with $135,000 resulting from the White
acquisition.

The primary contributor to non-interest income growth in both 1995
and 1994 was the continued growth in service charges on deposits. Fee
income from service charges on deposit accounts increased over 32% in
1995 following a 9% increase in 1994. Continued emphasis on low cost
checking account services, appropriate pricing for transaction deposit
accounts and fee collection practices for other deposit services
contributed to the increased levels of income for both years. Increases
during 1995 and 1994 were further influenced by the increase in both the
number of accounts and balances outstanding in transaction deposit
accounts.

Net gains on sales of investment securities decreased $34,000 from
1994 levels as management liquidated fewer investment securities to meet
loan demand.

Mortgage loan and related fee income decreased almost 4% or $57,000
during 1995 as compared to 1994 as the volume of loans refinanced
remained relatively flat.

NONINTEREST EXPENSE

Noninterest expenses for 1995 increased 28% following an increase of
19% in 1994. The increase was primarily due to the acquisition of White
County Bank which added an additional $1.6 million or 40% of the total
increase. Salaries and employee benefits increased 26% from 1994 due to
employee additions resulting from the White and Carolina branch
acquisitions together with the increases required to maintain continued
growth and cost of living raises.

Net occupancy expense increased $685,000 or 34% in 1995 following a
25% increase in 1994. The 1995 increase in occupancy expense was due
primarily to increased depreciation related to new banking facilities
located in Blue Ridge, Georgia and costs to operate the banking
facilities in White County, Georgia and the branch banking facilities
acquired by Carolina.

Deposit insurance premiums decreased $302,000 or 37% as a result of
the FDIC refunds from a recalculated FDIC assessment.

Other non-interest expenses, including advertising, stationery and
supplies, increased $1.5 million or 48% compared to a 11% increase in
1994. Management continues to emphasize the importance of expense
management productivity throughout United in order to further decrease
the cost of providing expanded banking services to a growing market base.

INVESTMENT SECURITIES

The composition of the investment securities portfolio reflects
United's investment strategy of maintaining an appropriate level of
liquidity while providing a relatively stable source of income. The
investment 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.

11
During 1995, gross investment securities sales were $15 million as
compared to $19 million during 1994. Maturities and paydowns were $23
and $13 million, representing 21% and 12%, respectively, of the average
total portfolio for the year. Net gains associated with the sales were
approximately $4,000 and $38,000, respectively, accounting for less than
1% of non-interest income. Gross unrealized gains in the total portfolio
amounted to approximately $1.8 million at year end 1995 and gross
unrealized losses amounted to approximately $470,000.

Total average investment securities, including those available for
sale, increased 35% during 1995 largely due to the White acquisition.
Average investment securities during 1994 increased 0.5% from the 1993
average levels.

In December 1995, United transferred securities with amortized costs
of $11 million from the held to maturity category to the available for
sale category. At the date of transfer, the unrealized gain related to
the transfer amounted to $312,500. These transfers were made as a result
of United's reassessment of the appropriateness of its securities
classifications as allowed by the Financial Accounting Standards Board's
special report "A Guide to Implementation of Statement 115 on Accounting
for Certain Investments in Debt and Equity Securities."

Table 3 reflects the carrying amount of the investment securities
portfolio for the past three years.

Table 3 - Carrying Value of Investments
(dollars in thousands) December 31,
---------------------------------------------
1995 1994 1993
==============================================================================================

Securities held to maturity:
U.S. Treasury $ 6,624 4,250 1,320
U.S. Government agencies 37,736 20,556 12,435
State and political subdivisions 26,524 32,039 27,648
Mortgage backed securities 7,937 6,103 5,756
----------------------------------------------
78,821 62,948 47,159
----------------------------------------------
Securities available for sale:
U.S. Treasury 23,239 5,781 13,766
U.S. Government agencies 28,341 6,733 18,548
State and political subdivisions 6,321 - -
Mortgage backed securities 4,290 569 1,364
Other 2,855 1,864 1,372
----------------------------------------------
65,046 14,947 35,050
----------------------------------------------
Total $143,867 77,895 82,209
==============================================

CARRYING VALUE OF INVESTMENTS

The December 31, 1995, market value of securities held to maturity,
as a percentage of amortized cost was 101%, up from 96% at December 31,
1994. 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 earnings statement unless the related
securities are called at prices which differ from the carrying value at
the time of call.

United utilizes its investment portfolio to offset some of the
natural mismatch of interest rate risk inherent in the loan and deposit
portfolios. United is fortunate to experience strong loan demand at all
the Banks so there is little need for investments solely to augment
income or utilize uninvested deposits. Accordingly, United must maintain
a conservative posture with respect to the types of securities in which
it invests. The investment portfolio consists primarily of U.S.
Treasuries, U.S. Government agencies and tax-free municipal securities
with little principal risk.

12
LOANS

During 1995, average loans increased $86 million, or 28% and
represented 75% of average interest earning assets and 70% of average
total assets. This growth generally occurred proportionally among the
various loan categories and can be attributed to additional products and
services marketed to existing customers and the successful business
development efforts which resulted in market share gains from
competitors. In addition, the acquisition of White as well as the branch
acquisitions contributed approximately $50 million.

The level of loans, when compared to the level of deposits, has been
relatively strong over the last three years. The average loan to deposit
ratio was 79%, 82% and 77% in 1995, 1994 and 1993, respectively. The
decrease noted in 1995 is attributed to the infusion of deposits acquired
from the White acquisition together with the branch acquisitions.

Table 4 breaks down the composition of the loan portfolio for each
of the past five years while Table 5 shows the amount of loans
outstanding for selected categories as of December 31, 1995, with
maturities based on the remaining scheduled repayments of principal.

Table 4 - Loan Portfolio
(dollars in thousands)
December 31,
==================================================================================================
1995 1994 1993 1992 1991
==================================================================================================================================
Percent Percent Percent Percent Percent
Amount of Total Amount of Total Amount of Total Amount of Total Amount of Total
==================================================================================================================================

Commercial, financial and
agricultural $120,876 27.2% 105,644 32.1% 82,424 30.5% 67,208 30.7% 51,765 28.8%
Real estate - construction 29,538 6.7% 19,707 6.0% 21,984 8.1% 9,768 4.5% 8,601 4.8%
Real estate - mortgage 216,649 48.8% 144,971 44.0% 115,822 42.9% 98,427 45.0% 80,859 44.9%
Installment loans to 77,029 17.3% 58,904 17.9% 49,770 18.5% 43,425 19.8% 38,700 21.5%
------ ------- ----- ------- ----- ------- ------ -------- ------
individual
Total loans 444,092 100.0% 329,226 100.0% 270,000 100.0% 218,828 100.0% 179,925 100.0%
Less: Allowance for loan 6,545 3,950 3,237 2,592 2,091
------- ------- ------- -------
losses
$437,547 325,276 266,763 216,236 177,834
======= ======= ======= ======= =======

Table 5 - Loan Portfolio Maturity
(dollars in thousands)
Rate Structure for Loans
Maturity Maturing Over One Year
============================================================================================
Over One Year Floating or
One Year Through Over Five Predetermined Adjustable
or Less Five Years Years Total Interest Rate Rate
============================================================================================================================

Commercial, financial and
agricultural $103,378 12,796 4,702 120,876 15,330 2,168
Real estate - construction 28,828 710 - 29,538 261 449
-------- ------ ----- ------- ------ -----
$132,206 13,506 4,702 150,414 15,591 2,617
=========================================================================================

PROVISION AND ALLOWANCE FOR LOAN LOSSES

United manages asset quality and controls 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 across United.

13
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.

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 made on a regular
basis during the year. These reviews are made by the responsible lending
officers, as well as a separate credit administration 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, and other factors, including
prevailing and anticipated economic conditions.

Whenever a loan, or portion thereof, is considered by management to
be uncollectible, it is charged against the allowance for loan losses.
Management believes that 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 the
Banks' allowance for loan losses. Such agencies may require the Banks to
recognize additions to the allowances based on their judgments about
information available to them at the time of their examination.

The provision for loan losses increased 11% in 1995 compared to an
11% increase in 1994 although the allowance for loan losses as a
percentage of total loans increased from 1.19% in 1994 to 1.47% at year
end 1995 due to the $1.8 million allowance acquired from White.

Net loan charge-offs increased 16% in 1995 after increasing 13% in
1994. The slight increase in 1995 is largely due to net charge-offs
within the White loan portfolio. United does not currently allocate the
allowance for loan losses to the various loan categories. Net charge-
offs during 1996 are expected to approximate those experienced during
1995.

14
Table 6 sets forth information with respect to United's loan and the
allowance for loan losses for each of the last five years.

Table 6 - Analysis of the Allowance for Loan Losses
(dollars in thousands) Years Ended December 31,
--------------------------------------------------------------
1995 1994 1993 1992 1991
=====================================================================================================================

Allowance for loan losses at beginning of year $ 3,950 3,237 2,592 2,091 1,816
Charge-offs:
Commercial, financial and agricultural 148 27 6 25 236
Real estate - construction 24 - - - 3
Real estate - mortgage 337 49 54 58 126
Installment loans to individuals 166 238 227 226 250
--------------------------------------------------------------
Total charge-offs 675 314 287 309 615
--------------------------------------------------------------
Recoveries:
Commercial, financial and agricultural 157 6 1 43 6
Real estate - construction - - - - -
Real estate - mortgage 189 1 28 23 10
Installment loans to individuals 71 85 61 60 40
--------------------------------------------------------------
Total recoveries 417 92 90 126 56
--------------------------------------------------------------
Net charge-offs 258 222 197 183 559
--------------------------------------------------------------
Provisions charged to earnings 1,040 935 842 472 834
Allowance for loan losses acquired from White 1,813 - - - -
Allowance for loan losses acquired from Towns - - - 212 -
--------------------------------------------------------------
Balance at end of year $6,545 3,950 3,237 2,592 2,091
==============================================================
Ratio of net charge-offs to average loans
outstanding during the period 0.07% 0.07% 0.08% 0.09% 0.33%

ASSET QUALITY

Non-performing assets, comprised of nonaccrual loans, other real
estate owned and loans for which payments are more than 90 days past due
totaled $2.2 million compared to $599,000 at year end 1994. The increase
from 1994 is directly attributable to certain non-performing assets
resulting from the acquisition of White.

It is the general policy of the Banks to stop accruing interest
income and place the recognition of interest on a cash basis when a loan
is placed on nonaccrual status and any interest previously accrued but
not collected is reversed against current income unless the collateral
for the loan is sufficient to cover the accrued interest or a guarantor
assures payment of interest. Loans made by United's Bank Subsidiaries to
facilitate the sale of other real estate are made on terms comparable to
loans of similar risk. An adequate investment by the buyer is required
prior to the removal of other real estate from non-performing assets.

There were no commitments to lend additional funds on nonaccrual
loans at December 31, 1995. Table 7 summarizes United's non-performing
assets for each of the last five years.

Table 7 - Risk Elements
(dollars in thousands) December 31,
--------------------------------------------------------------------
1995 1994 1993 1992 1991
==========================================================================================================

Loans on nonaccrual $1,914 514 567 542 874
Loans 90 days past due 226 85 197 36 751
Other real estate 65 - - 41 609
-------------------------------------------------------------------
Total non-performing assets $2,205 599 764 619 2,234
===================================================================

Total non-performing loans as a
percentage of loans 0.48% 0.18% 0.21% 0.25% 0.49%
Loans 90 days past due as a
percentage of loans 0.05% 0.03% 0.07% 0.02% 0.42%

Risk Elements

There may be additional loans within United's portfolio that may
become classified as conditions dictate; however, management was not
aware of any such loans that are material in amount at December 31, 1995.
At December 31, 1995, management was unaware of any known trends, events
or uncertainties that will have, or that are reasonably likely to have a
material effect on United's liquidity, capital resources or operations.

Deposits

All major categories of average interest bearing deposits increased
during 1995. The largest dollar increase in average interest bearing
deposits was in the time deposit category, rising over $92 million or 41%
from 1994 followed by the increase in average interest bearing demand
deposits of $11 million or 13%. Average non-interest bearing demand
deposits increased over $16 million or 47% after increasing 37% during
1994. The increases were primarily a result of internally generated
growth, as well as the previously discussed acquisitions. Savings
deposits, interest bearing demand deposits and non-interest bearing
demand deposits accounted for 36% of total average deposits during 1995.
For 1994, these lower cost deposits, including certificates of deposit
over $100,000, were almost $318 million or 64% of total average deposits.
The maturities of time deposits of $100,000 or more issued by United's
bank subsidiaries at December 31, 1995, are summarized in the following
table:

Table 8 - Maturities of Time Deposits Over $100,000
(dollars in thousands)
Three months or less $30,477
Over three months through six months 14,784
Over six months through twelve months 21,395
Over twelve months 23,803
--------
$90,459
========

At December 31, 1995, four of United's bank subsidiaries were
shareholders in the Federal Home Loan Bank of Atlanta. Through this
affiliation, advances totaling $9 million were outstanding at rates
competitive with time deposits of like maturities. United anticipates
further utilization of this short and long term source of funds to
minimize interest rate risk and provide competitive, long-term fixed rate
loans to its customers.

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 time frame, thereby minimizing the effect of interest rate
movements on net interest income.

16
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 or five years, over five years, and on
a cumulative basis. The differences are known as interest sensitivity
gaps. Table 9 shows interest sensitivity gaps for these different
intervals as of December 31, 1995.

Table 9 - Interest Rate Sensitivity Analysis
(dollars in thousands) December 31, 1995
--------------------------------------------------------------------------
One Four One Over Five
Through Through Through Years and
Three Twelve Five Non-Rate
Immediate Months Months Years Sensitive Total
==================================================================================================================

Interest earning assets:
Federal funds sold $ 11,230 - - - - 11,230
Investment securities - 19,695 25,883 64,295 33,994 143,867
Mortgage loans held for sale - 12,048 - - - 12,048
Loans 93,766 68,069 182,408 72,307 27,542 444,092
-------------------------------------------------------------------------
Total interest earning assets 104,996 99,812 208,291 136,602 61,536 611,237
-------------------------------------------------------------------------
Interest bearing liabilities:
Deposits:
Demand - 114,825 - - - 114,825
Savings - - 38,947 - - 8,947
Time - 107,893 155,377 110,861 - 374,131
FHLB advances 1,000 83 3,218 1,831 2,869 9,001
Long-term debt 11,309 - - - - 11,309
Convertible subordinated
debentures - - - 1,000 - 1,000
-------------------------------------------------------------------------
Total interest bearing
liabilities 12,309 222,801 197,542 113,692 2,869 549,213
Noninterest bearing sources of funds -
net - - - - 62,753 62,753
-------------------------------------------------------------------------
Interest sensitivity gap 92,687 (122,989) 10,749 22,910 (4,086) (729)
-------------------------------------------------------------------------
Cumulative interest sensitivity gap $92,687 (30,302) (19,553) 3,357 (729) -
=========================================================================

As seen in the preceding table, for the first 365 days 78% of
earning asset funding sources will reprice compared to 67% 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 which are not reflected in
the interest rate sensitivity analysis report. These prepayments may
have significant effects on United's net interest margin. Because of
these factors an interest sensitivity gap report may not provide a
complete assessment of United's exposure to changes in interest rates.

Table 9 indicates United is in a liability sensitive or negative gap
position at 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 shifts in interest rates.
Management also evaluates the condition of the economy, the pattern of

17
market interest rates and other economic data to determine the
appropriate mix and repricing characteristics of assets and liabilities
required to produce an optimal net interest margin.

Table 10 represents the expected maturity of the total investment
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, 1995. It should be noted that the composition and
maturity/repricing distribution of the investment portfolio is subject to
change depending on rate sensitivity, capital needs, and liquidity needs.

Table 10 - Expected Maturity of Investment Securities
(dollars in thousands)

======================================================================================================================
After One But After Five But
Within One Year Within Five Years Within Ten Years After Ten Years Totals
=============================================================================================
Amount Yield Amount Yield Amount Yield Amount Yield
=====================================================================================================================

Securities held to
maturity:
U.S. Treasury
securities $5,249 5.84% 1,375 6.01% - - - - 6,624
U.S. Government
agencies 8,275 5.45% 28,961 5.71% 250 7.71% 250 9.60% 37,736
State and political
subdivisions 1,134 6.07% 6,605 5.63% 12,724 5.28% 6,061 5.54% 26,524
Mortgage backed
securities - - 4,496 7.13% 1,427 6.99% 2,014 6.04% 7,937
-------------------------------------------------------------------------------------------
14,658 5.64% 41,437 5.86% 14,401 5.49% 8,325 5.79% 78,821
-------------------------------------------------------------------------------------------
Securities available

for sale:
U.S. Treasury
securities 10,606 6.18% 12,522 5.84% - - - - 23,128
U.S. Government
agencies 10,475 6.25% 17,740 6.33% - - - - 28,215
State and political
subdivisions 1,382 6.63% 4,521 6.63% 104 6.00% - - 6,007
Mortgage backed
securities - - 9 7.96% 1,848 5.99% 2,453 5.08% 4,310
Other - - - - - - 2,912 5.28% 2,912
-------------------------------------------------------------------------------------------
22,463 5.83% 34,792 5.33% 1,952 5.67% 5,365 5.19% 64,572
-------------------------------------------------------------------------------------------
Total $37,121 5.76% 76,229 5.62% 16,353 5.51% 13,690 5.55 143,393
===========================================================================================

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 high level of liquidity in all economic
environments. Liquidity is defined as the ability of a company 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 day to day
cash flow requirements of the Banks' customers, whether they are
depositors wishing to withdraw funds or borrowers requiring funds to meet
their credit needs. Without proper liquidity management, United would
not be able to perform the primary functions of a financial intermediary
and would, therefore, not be able to meet the needs of the communities it
serves.

The primary function of asset and liability management is not only
to assure adequate liquidity in order for United to meet the needs of its
customer base, but to maintain an appropriate balance between interest-
sensitive assets and interest-sensitive liabilities so that the Company
can also meet the investment requirements of its shareholders. Daily
monitoring of the sources and use of funds is necessary to maintain an
acceptable cash position that meets both requirements. In a banking
environment, both assets and liabilities are considered sources of
liquidity funding and both are, therefore, monitored on a daily basis.

The asset portion of the balance sheet provides liquidity primarily
through loan principal repayments, maturities of investment securities
and, to a lesser extent, sales of securities. Installment loan payments
are becoming an increasingly important source of liquidity for United as
this portfolio continues to grow. Mortgage loans held for sale totaled
just over $12 million at year end and typically turn over every 45 days.
Real estate-construction and commercial, financial and agricultural loans
that mature in one year or less amounted to $132 million or 30% of the
total loan portfolio at December 31, 1995. Investment securities
maturing in the same time frame totaled $37 million or 26% of the total
investment securities portfolio at year end 1995. Other short-term
investments such as federal funds sold and maturing interest bearing
deposits with other banks are additional sources of liquidity funding.

The liability portion of the balance sheet provides liquidity
through various customers' interest bearing and non-interest bearing
deposit accounts. Federal funds purchased and securities sold under
agreements to repurchase are additional sources of liquidity and
basically 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 short-term liquidity needs.

As disclosed in United's Consolidated Statements of Cash Flows
included elsewhere herein, net cash provided by operating activities, net
of the decrease in mortgage loans held for sale, increased over $8
million primarily due to the increase in net earnings coupled with
increases in noncash expenses - depreciation and amortization and
provision for loan losses. Net cash used in investing activities of $87
million consisted primarily of net loans originated of $63 million and
securities purchased of $85 million funded largely by sales, maturities
and paydowns of investment securities of over $37 million and cash
acquired from acquisitions and branch purchases of $26 million. This
resulted from management's continued efforts to reinvest new funds in
higher-yielding loans rather than investment securities. Net cash
provided by financing activities provided the remainder of funding
sources for 1995. The $96 million of net cash provided consisted
primarily of a $104 million net increase in demand, savings and time
deposits net of Federal Home Loan Bank repayments of $3 million.

Management considers United's liquidity position at the end of 1995
to be sufficient to meet its foreseeable cash flow requirements.
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.

19
CAPITAL RESOURCES AND DIVIDENDS

Stockholders' equity at December 31, 1995, increased 45% from
December 31, 1994. Net earnings after dividends for 1995 accounted for
over $6 million of the increase in stockholders' equity augmented by $5.3
million resulting from the acquisition of White, $2.4 million realized
from the issuance of common stock and $460,000 in unrealized gains on
available for sale investment securities.

Dividends of $418,000 or $0.07 per share were declared on the Common
Stock in 1995, which represented a 75% increase from the $0.04 declared
in 1994. United has historically retained the majority of its earnings
in order to keep pace with the rate at which assets have grown.

Average stockholders' equity as a percentage of total average assets
is one measure used to determine capital strength. The ratio of average
stockholders' equity to average assets for 1995 was 6.60% compared to
6.51% in 1994. United's asset growth has continued to exceed the rate at
which capital has been retained. Table 11 summarizes these and other key
ratios for United for each of the last three years.

Table 11 - Equity Ratios
Years Ended December 31,
----------------------------------------------------------
1995 1994 1993
==============================================================================================

Return on average assets 1.08% 1.22% 1.16%
Return on average equity 16.30% 18.68% 18.12%
Dividend payout ratio 6.91% 4.30% 4.62%
Average equity to average assets 6.60% 6.51% 6.41%

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 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 less
goodwill and deposit-based intangibles, amounted to $37.3 million at
December 31, 1995. 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 $43.7
million at year end 1995. The percentage ratios, as calculated under the
guidelines, were 8.59% and 10.07% for Tier I and Total Risk-based
Capital, respectively, at year end 1995.

A minimum leverage ratio is required in addition to the risk-based
capital standards and is defined as period end stockholders' equity
adjusted for 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 ratio in tandem with the risk-
based capital ratios to assess capital adequacy of banks and bank holding
companies. United's leverage ratios at December 31, 1995 and 1994 were
6.74% and 6.28%, respectively. Risk-based and leverage capital positions
as of December 31, 1995 and 1994 are presented in Table 12.

Table 12 - Analysis of Capital Adequacy
(dollars in thousands) Years Ended December 31,
-------------------------------------------------
1995 1994
Amount Percent Amount Percent
==================================================

Tier 1 risk-based capital:
Tier I capital $37,287 8.59% 26,440 8.48%
Minimum required 17,371 4.00% 12,479 4.00%
- -----------------------------------------------------------------------------------------
Excess 19,916 4.59% 13,961 4.48%
- -----------------------------------------------------------------------------------------
Total risk-based capital:
Actual 43,715 10.07% 31,340 10.05%
Minimum required 34,741 8.00% 24,958 8.00%
- -----------------------------------------------------------------------------------------
Excess 8,974 2.07% 6,382 2.05%
- -----------------------------------------------------------------------------------------
Tier 1 capital leverage ratio:
Actual 37,287 6.74% 26,440 6.28%
Minimum required 22,126 4.00% 16,847 4.00%
- ------------------------------------------------------------------------------------------
Excess 15,161 2.74% 9,593 2.28%
- ------------------------------------------------------------------------------------------
Total risk-adjusted assets $434,263 311,969
======= =======

All three of the capital ratios of United's bank subsidiaries
currently exceed the minimum ratios required in 1995 as defined by
federal regulators. United monitors these ratios to ensure that the bank
subsidiaries remain within regulatory guidelines. Increased regulatory
activity in the financial industry as a whole will continue to impact the
structure of the industry; however, management does not anticipate any
negative impact on the capital resources or operations of United.

INCOME TAX EXPENSE

Income tax expense increased 15% for 1995 and 32% for 1994. The
effective tax rate as a percentage of pretax income was 27% in 1995 and
1994. These tax rates are lower than the statutory Federal tax rate of
34% primarily due to interest income on tax exempt loans and securities.
See United's consolidated financial statements for an analysis of income
taxes.

FINANCIAL INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996

The following discussion reviews significant changes in the
financial condition and results of operations of United and the Banks for
the nine months ended September 30, 1996 as compared to the nine months
ended September 30, 1995.

NET INTEREST INCOME. Net interest income for the nine months ended
September 30, 1996 increased $6.4 million over the first three quarters
of 1995. This increase was the result of a $10.6 million, or 30%
increase, in interest income, offset by a $4.2 million increase in
interest expense. The increase in interest income was primarily due to
an increase in average earning assets of $146 million.

Interest expense for the nine months ended September 30, 1996,
increased $4.2 million, or 23% from the prior year, due primarily to a
29% increase in average core deposits, offset slightly by a decrease in
the average yield on source of funds from 4.93% to 4.68%.

NET INTEREST MARGIN. The difference between the overall interest
income on earning assets and the interest expense paid on all funding
sources, including non-interest bearing deposits, is referred to as the
net interest margin. For the first three quarters of 1996 the net
interest margin was 4.64% compared to 4.32% for the same period in 1995.
This 32 basis point increase resulted from a stable rate environment as
well as a favorable change in the
core deposit mix.

21
NONINTEREST INCOME. Noninterest income for the first nine months of
1996 increased $642,000, or 21% over the same period in 1995. Service
charges on deposits increased over $559,000, or 40% during the first nine
months, principally as a result of an increased number of deposit
accounts being serviced. This increase is a result of continued growth
and the White and the Carolina branch acquisitions. Mortgage loan and
related fees increased $114,000, or 10% as a result of declining rate
environment for a majority of the first nine months of 1996. Gains on
investment securities sold during the first three quarter of 1996 were
not material.

NONINTEREST EXPENSE. Noninterest expenses increased $4.2 million
during the first nine months of 1996 over the same period in 1995.
Salaries and employee benefits increased $2.3 million, or 33%, for the
first three quarters. The increase in salaries and benefits was the
result of an additional 72 employees compared to the same period in 1995.
The number of employees increased primarily as a result of the White
acquisition as well as the branch banking facilities acquired by Carolina
as discussed earlier. Net occupancy expense increased $446,000 due
primarily to an increase in the depreciation and other occupancy expenses
associated with the increased number of banking facilities. FDIC deposit
insurance premiums decreased $433,000 as a result of the recalculated
FDIC assessment. Other non-interest expense, including stationary and
supplies and advertising, increased $1.8 million during the first three
quarters of 1996.

PROVISION AND ALLOWANCE FOR LOAN LOSSES. The provision for loan
losses for the nine months ended September 30, 1996 increased 23% to
$915,000 from the $746,000 reported for the same period in 1995.
Management considers the size and character of the loan portfolio,
changes in non-performing and past due loans, historical loan loss
experience, the existing risk of individual loans, concentrations of
loans to specific borrowers and existing and prospective economic
conditions when determining the adequacy of the allowance for loan
losses. The allowance for loan losses at September 30, 1996 was $7.4
million compared to $6.5 million at December 31, 1995. The ratio of the
allowance for loan losses to loans outstanding at September 30, 1996 was
1.32% compared to 1.48% at December 31, 1995. The reduction in the ratio
reflects the improvement in the quality of United's loan portfolio. It
is management's belief that the allowance for loan losses is adequate to
absorb probable loss in the portfolio.

ASSET QUALITY. Non-performing assets, comprised of nonaccrual
loans, other real estate owned and loans for which payments are more than
90 days past due, decreased $1.3 million to $850,000 at September 30,
1996 from $2.2 million at December 31, 1995. In addition, non-performing
assets as a percentage of total loans and other real estate owned
improved to .15% at September 30, 1996 from .48% at December 31, 1995.

United regularly monitors selected accruing loans for which general
economic conditions or changes within a particular industry could cause
the borrowers financial difficulties. This regular monitoring of the
loan portfolio and the related identification of loans with a high degree
of credit risk are essential parts of United's credit management.
Management continues to emphasize maintaining a low level of non-
performing assets and returning current non-performing assets to an
earning status.

At September 30, 1996, management was unaware of any known trends,
events or uncertainties that will have or that are reasonably likely to
have a material effect on United's liquidity, capital resources or
operations.

DEPOSITS. Interest bearing deposits at September 30, 1996 increased
$79 million from December 31, 1995, while non-interest bearing deposits
increased over $11 million since December 31, 1995. At September 30,
1996, deposits accounted for 87% of United's funding, from 90% at
December 31, 1995.

22
LIQUIDITY MANAGEMENT AND CAPITAL RESOURCES. Net cash provided by
operating activities totaled $14 million for the nine months ended
September 30, 1996. For the three quarters of 1996, net cash used from
investing activities of $96 million consisted of proceeds from maturities
of investment securities of $34 million, proceeds from sales of
investment securities of $12 million, cash acquired from acquisitions of
$3 million and offset by cash outflows of $47 million in investment
securities purchases, a $95 million increase in loans outstanding and
purchase of bank premises and equipment of $1.5 million. Net cash
provided by financing activities consisted largely of a $66 million
increase in deposit and time accounts, $22 million from additional FHLB
advances, and were offset slightly by payments of $811,000 on United's
long-term debt and FHLB repayments.

Total stockholders' equity at September 30, 1996, was 6.26% of total
assets compared to 6.67% at December 31, 1995. The slight decrease since
year end 1995 reflects the asset growth of $120 million and the change of
$736,000 in the unrealized loss in United's available for sale investment
portfolio offset by retained earnings from the first nine months of 1996.

INCOME TAX EXPENSE. Income tax expense increased during the first
three quarters of 1996 compared to the same period in 1995 by $1.1
million. The effective tax rates for the nine months ended September 30,
1996 and 1995 were 35% and 30%, respectively. The increases are due
primarily to the combined effect of increased levels of pretax income,
and a lower mix of tax-exempt securities held in the investment
portfolio. Management expects the trend of an increasing effective tax
rate to continue.

DEVELOPMENTS SINCE SEPTEMBER 30, 1996. On December 31, 1996, the
holders of convertible debentures of the Company due July 1, 2000
(the"2000 Debentures"), which bore interest at a 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 the Company in order to
comply with certain obligations of the Company to provide the holders
with notice of the conversion termination date. On December 31, 1996,
the Company also completed a private placement of $3,500,000 in payable
in kind debentures due 2006 (the "2006 Debentures"). See "Business -
Recent Developments."

IMPACT OF INFLATION AND CHANGING PRICES. A bank's asset and
liability structure is substantially different from that of an industrial
company in that primarily all assets and liabilities of a bank are
monetary in nature and therefore differ greatly from most commercial and
industrial companies that have significant investments in fixed assets or
inventories. Inflation does have 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. Cost cutting and cost controlling
measures have been implemented, including the constant search for
technological advancements in order to improve efficiency and
productivity.

23
BUSINESS

GENERAL

United was incorporated under the laws of Georgia in 1987 and
commenced operations in 1988 by acquiring 100% of the outstanding shares
of UCB. United is a registered bank holding company. 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 and White, which United
acquired in 1995.

RECENT DEVELOPMENTS

PRIVATE PLACEMENT OF $3,500,000 CONVERTIBLE SUBORDINATED PAYABLE-IN-
KIND DEBENTURES DUE DECEMBER 31, 2006. On December 31, 1996, United
completed a private placement of convertible subordinated payable-in-kind
debentures due December 31, 1996 (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 April 1, July 1, October 1, and January 1 of each year
commencing on April 1, 1997, to holders of record at the close of
business on the 15th day of the month immediately preceding the interest
payment date. Interest is computed on the basis of actual number of days
elapsed in a year of 365 or 366 days, as applicable.

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 not redeemed 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.

BRANCHING TO NEW MARKETS. 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 would be
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 a tradename filing to
permit it to conduct its operations in Union County, Georgia under the
tradename Union County Bank. On September 28, 1996, UCB assumed deposits
of $23.7 million and purchased assets of $33.2 million in Cornelia,
Habersham County, Georgia, from a banking institution which sold all of
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. On July 1, 1996, Carolina opened
a loan production office in Sylva, North Carolina.

PUBLIC STOCK OFFERING. In August 1995 United completed an offering
to the public of 215,515 shares of United Common Stock registered under
the Securities Act of 1933 pursuant to which $2,434,000 in additional
capital was raised. United used the proceeds of the offering primarily
to invest additional capital in Carolina and Towns. The additional
capital for Towns was to support the asset growth experienced by Towns.
The additional capital for Carolina was necessitated by Carolina's asset
growth and the acquisition of the Franklin and Waynesville branch banking
offices.

ACQUISITION OF WHITE. In 1994, United acquired a payable-in-kind
debenture in the principal amount of $2,846,240 of White County
Bancshares, Inc. ("WC Holding Company"), at that time the holder of a
majority of the outstanding common stock of White. White had entered
into a Cease and Desist Order with the Georgia Department of Banking and
Finance (the "DBF") on July 15, 1993 which required it to raise $3
million in additional capital. WC Holding Company initially gave its
shareholders the right to subscribe for the entire amount of additional
capital by offering them $3 million of Common Stock of White and stock
rights for additional shares of White Common Stock. United agreed to
acquire the debenture to the extent the offering was not successful in
raising the additional capital. The principal amount of the debenture
was exchangeable for White Common Stock held by WC Holding Company at the

24
rate of $40 per share of White Common Stock, and the debenture accrued
interest at 9.75% compounded annually. Because WC Holding Company was
not able to pay interest in cash on the debentures, it made interest
payments in the form of additional exchangeable debentures.

On April 11, 1995, United and WC Holding Company entered into an
Agreement and Plan of Reorganization providing for the merger of United
and WC Holding Company (the "Holding Company Merger") and the merger of
White County Bank and White Interim Bank (the "Bank Merger"), a wholly-owned
subsidiary of United. Subsequently, on April 17, 1995, United
converted the debentures into 77,452 shares of White Common Stock. On
August 31, 1995, the Holding Company Merger and the Bank Merger were
consummated. Pursuant to the Holding Company Merger, each share of WC
Holding Company Common Stock was converted into 0.04 shares of United's
Common Stock (as restated to reflect the five-for-one stock split).
United issued 455,400 shares of its common stock and approximately
$10,000 in cash for fractional shares in exchange for all the outstanding
common shares of WC Holding Company. Pursuant to the Bank Merger, each
share of White County Bank Common Stock, other than those shares owned by
United, were converted into 0.25697 shares of United's Common Stock (as
restated to reflect the five-for-one stock split). United was the
surviving entity in the Holding Company Merger, and White Interim Bank,
which changed its name to "White County Bank," was the surviving entity
in the Bank Merger.

SERVICES

UCB, Carolina, Peoples, Towns and White (collectively, the "Banks")
are community-oriented, with an emphasis on retail banking, and offer
such customary banking services as customer and commercial checking
accounts, NOW accounts, savings accounts, certificates of deposit, lines
of credit, Mastercard and VISA accounts, money transfers and trust
services. The Banks finance commercial and consumer transactions, make
secured and unsecured loans, including residential mortgage loans, and
provide a variety of other banking services. UCB also offers travel
agency services for the Banks' customers.

The Mortgage People Company ("MPC"), a division of UCB, is a full-
service 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.

United Family Finance Company ("UFFC"), which United purchased in
1996, is a traditional consumer finance company. UFFC, formerly known as
Mountain Mortgage and Loan Company, is based in Hiawassee, Georgia and
also has been granted a license to conduct business in Blue Ridge,
Georgia.

MARKETS

United conducts banking activities primarily through UCB in Union
County, Lumpkin County and Habersham County and surrounding counties of
Georgia, through Peoples in Fannin County and surrounding counties of
Georgia and Polk County, Tennessee, through Towns in Towns County and
surrounding counties of Georgia, through Carolina in Cherokee County,
Macon County, Haywood County, Graham County and Clay County and
surrounding counties in North Carolina, and through White in White County
and surrounding counties in Georgia. MPC makes mortgage loans both
inside the Banks market areas and outside this market areas through
affiliations with other community banks in Georgia, North Carolina and
Tennessee. Customers of the Banks are primarily consumers and small
businesses.

DEPOSITS

The Banks offer a full range of depository accounts and services to
both consumers and businesses. At September 30, 1996, United's deposit
base, totaling approximately $680,000,000, consisted of approximately
$73,500,000 in non-interest-bearing demand deposits (11% of total
deposits), approximately $170,000,000 in interest-bearing demand deposits
(including money market accounts) (25% of total deposits), approximately
$40,000,000 in savings deposits (6% of total deposits), approximately
$306,000,000 in time deposits in amounts less than $100,000 (45% of total
deposits), and approximately $90,500,000 in time deposits of $100,000

25
or more (13% of total deposits). Certificates of deposit in excess of
$100,000 may be more volatile than other deposits since those deposits,
to the extent that they exceed $100,000, are not insured by the FDIC.
Management of United is of the opinion that its time deposits of $100,000
or more are customer-relationship oriented and represent a reasonably
stable source of funds.

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 September 30, 1996,
consumer, real estate (including mortgage and construction loans) and
commercial loans represented approximately 16%, 56% (14% of which are
acquisition loans and 86% of which are commercial or consumer loans), and
28%, respectively, of United's total loan portfolio.

Specific risk elements associated with each of the Banks' lending
categories are as follows:

Commercial, financial and Industry concentrations,
agricultural inability to monitor the
condition of collateral (inventory,
accounts receivable and vehicles),
lack, of borrower management
expertise, increased
competition, and specialized
or obsolete equipment as
collateral

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

Real estate - mortgage Changes in local economy and
rate limits on variable rate
loans

Installment loans to Loss of borrower's employment,
individuals changes in local economy, the
inability to monitor
collateral (vehicle, 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
guidelines, subject to an allowable amount of non-conforming loans. The
Banks had similar guidelines in place and adopted the federal guidelines
as their maximum allowable limits, but had in the past and now have in
place loan policies that are, in some cases, more conservative than the
federal guidelines. The federal guidelines establish maximum allowable
loan-to-value ratios for various types of real estate loans as set forth
below:

Maximum Allowable
Loan Category Loan-To-Value Percent
------------- ---------------------

Land 65%
Land development 75
Construction:
Commercial, multi-family and other 80
nonresidential
One-to-four family residential 85
Improved property 85
Owner-occupied one-to-four family and home equity
___________________________________

Multi-family construction includes condominiums and cooperatives.
A loan-to-value limit has not been established for permanent
mortgage or home equity loans on owner-occupied, one-to-four family
residential property. However, for any such loan with a loan-to-
value ratio that equals or exceeds 90% at origination, appropriate
credit enhancement in the form of either mortgage insurance or
readily marketable collateral is required.

Lending Policy
- --------------

The current lending strategy of the Banks is to make loans primarily
to persons who reside, work or own property in their primary trade areas,
except that United makes mortgage loans in the trade areas of the
community banks in which United has affiliations or in the areas in which
United has a loan origination office. See "Markets." Unsecured loans
normally are 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.

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. All unsecured loans in
excess of $10,000 must have the approval of the President or a Senior
Vice President of the appropriate Bank prior to being committed.
Generally, secured loans above $100,000 and unsecured loans over $35,000
require Board approval.

Loan Review and Non-performing Assets
- -------------------------------------

The loan review officer of United reviews each of the Banks' loan
portfolios to determine any deficiencies and corrective action to be
taken. 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 and United. On at least a semi-annual basis, reviews are conducted
at Towns for all loans over $50,000; at Peoples, Carolina and White for
all loans over $100,000; and at UCB for all loans over $200,000. Past
due loans are reviewed at least weekly by lending officers of the Bank
involved and by the Chief Credit Officer of United, and a summary report
is reviewed monthly by the Boards of Directors of each Bank. The Boards
of Directors of the relevant Bank review all loans over $50,000, whether
current or past due, at least once annually.

27
Asset/Liability Management
- --------------------------

Committees composed of officers of each of the Banks and the Chief
Financial Officer and Controller 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, as well as 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 deposit growth within specified
categories, regulatory changes, monetary policy adjustments and the
overall state of the economy.

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 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 implement the policy and report information to the full
Board of Directors of each of the Banks on a monthly 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, 1996, the Banks had an aggregate of 402 full-time
equivalent employees, and United had 12 employees. Neither United nor
any of the Banks is a party to any collective bargaining agreement, and
the Banks believe that their employee relations are good. None of the
Banks' executive officers is employed pursuant to an employment contract.

Competition
- -----------

The banking business is highly competitive. UCB competes with one
other depository institution in Union County, Georgia, and three other
depository institutions in each of Lumpkin and Habersham Counties.
Carolina competes with six other depository institutions in Graham,
Cherokee, Macon, Haywood and Clay Counties, North Carolina, the majority
of which are branches of regional or North Carolina state-wide
institutions. Peoples competes with two other depository institutions in
Fannin County, Georgia. Towns competes with one depository institution
in Towns County, Georgia. White competes with two other depository
institutions in White County, Georgia. The Banks also compete with other
financial service organizations, including savings and loan associations,
finance companies, credit unions and certain governmental agencies. To
the extent that banks must maintain non-interest-earning reserves against
deposits, they may be at a competitive disadvantage when compared with
other financial service organizations that are not required to maintain
reserves against substantially equivalent sources of funds.

Properties
- ----------

The executive offices of United and the main banking office of UCB
are located in adjacent buildings, the former a 17,000 square-foot
facility at 59 Highway 515, Blairsville, Georgia and the latter a 19,000
square-foot operations center located adjacent to its executive offices
and main banking office. Both the building and the land, which includes
parking and four drive-in teller stations, are owned by UCB. UCB also
has a branch at an Ingles supermarket in Blairsville. The Ingles branch
property, consisting of 350 square feet, is leased. UCB's branch office
in Cornelia, which it owns, is 5,000 square feet. UCB also maintains a
branch office on rented land in Dahlonega, which consists of 1,309-square
feet of property owned by the Company and a 1,020-square foot building
leased by UCB.

28
The main banking office of Carolina is located at 300 Peachtree
Street, Murphy, North Carolina, and contains 12,000 square feet. Both
the building and the land, which includes parking and drive-in teller
stations, are owned by Carolina. Carolina has branches located at 1
Sanderson Street in Hayesville, North Carolina containing 1,680 square
feet, 129 Bypass, in Robbinsville, North Carolina containing
approximately 3,300 square feet, Second and Fairview, in Andrews, North
Carolina, containing 1,680 square feet, 409 North Main Street in
Waynesville, North Carolina, containing approximately 2,000 square feet
and 128 East Main Street in Franklin, North Carolina, containing
approximately 2,670 square feet. Carolina also has a branch at an Ingles
supermarket in Hayesville. The Ingles branch premises, consisting of 150
square feet, is leased.

Peoples owns its main banking office located at 4000 Appalachian
Highway, Blue Ridge, Georgia. The office contains 19,000 square feet and
four drive-in teller stations. Peoples owns a branch at West Tennessee
Avenue and Blue Ridge Drive in McCaysville, Georgia, which contains 2,800
square feet and has three drive-in teller stations. Peoples also leases
a 335 square foot branch at an Ingles supermarket on Appalachian Highway
in Blue Ridge, Georgia.

Towns owns its banking facility, containing 3,594 square feet and
two drive-in teller stations. The facility is located at 214 North Main
Street, Hiawassee, Georgia.

The main banking office of White is located at 153 East Kytle
Street, Cleveland, Georgia and contains approximately 14,000 square feet
and four drive-in teller stations. White also has a branch office
located on Highway 75 North in Helen, Georgia which contains
approximately 2,200 square feet. White owns both its main and branch
office.

29
United Family Finance, Inc., a finance company wholly owned by
United, leases property in Hiawassee, Georgia and Blue Ridge, Georgia.
The Hiawassee and Blue Ridge properties consist of 1,800 and 2,800 square
feet, respectively.

None of the properties owned by United or the Banks is subject to
encumbrances.

30
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 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
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 and
Towns, as state banking associations organized under Georgia law, are
subject to the supervision of, and are regularly examined by, by DBF.
Carolina is subject to the supervision of, and is regularly examined by,
the NCBC, in addition to the FDIC. Both the FDIC and the DBF must grant
prior approval of any merger, consolidation or other corporation
reorganization involving UCB, Peoples, White or Towns, 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.

31
UCB, Peoples, Towns and White 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

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 expedient, so long as Citizen'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, 1995, net assets available from the Banks to pay
dividends without prior approval from regulatory authorities totaled
approximately $5.4 million. For 1995, United's cash dividend payout to
stockholders was 7% 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 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
earnings 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
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,

32
requiring banks with greater interest rate risk to maintain adequate
capital for the risk. The revised standards are not expected to have 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. Under the FDIC's regulations, all of the Banks were
"well capitalized" institutions at December 31, 1995 and September 30,
1996.

Set forth below are pertinent capital ratios for each of the Banks
as of September 30, 1996:

Minimum Capital Requirement UCB Carolina Peoples Towns White
-------------------------- --- -------- ------- ----- -----

Tier One Capital to 8.18% 9.31% 9.96% 8.61% 11.20%
Risk Based
Assets: 4.00%

Total Capital to 9.21% 10.56% 11.16% 9.61% 12.47%
Risk Based
Assets: 8.00%

Leverage Ratio (Tier One 7.18% 6.19% 7.08% 6.49% 8.37%
Capital to Average Total
Assets): 3.00%
__________________________

Minimum required ratio for "well capitalized" banks is 6%
Minimum required ratio for "well capitalized" banks is 10%
Minimum required ratio for "well capitalized" banks is 5%

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

33
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. The rule became effective on
January 1, 1996, at which time evaluation under streamlined procedures
began for institutions with assets of less than $250 million that are
owned by a holding company with total assets of less than $1 billion. It
is not expected that these regulations will have any appreciable impact
upon United and the Banks.

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 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, and 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 prior to 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 are removed. Prior to 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"). In the first six months of 1995, the Banks were assessed
$.23 per $100 of deposits based upon a risk-based system whereby banks
are assessed on a sliding scale depending upon their placement in nine
separate supervisory categories, from $.23 per $100 of deposits for the

34
healthiest banks (those with the highest capital, best management and
best overall condition) to as much as $.31 per $100 of deposits for the
less-healthy institutions, for an average $.259 per $100 of deposits.

On August 8, 1995, the FDIC lowered the BIF premium for healthy
banks 83% from $.23 per $100 in deposits to $.04 per $100 in deposits,
while retaining the $.31 level for the riskiest banks. The average
assessment rate was therefore reduced from $.232 to $.044 per $100 of
deposits. The new rate took effect on September 29, 1995. On September
15, 1995, the FDIC refunded $564,000 to the Banks for premium
overpayments in the second and third quarter of 1995. On November 14,
1995, the FDIC again lowered the BIF premium for healthy banks from $.04
per $100 of deposits to zero for the highest rated institutions (92% of
the industry). As a result, each of the Banks paid only the legally
required annual minimum payment of $2,000 per year for insurance
beginning in January 1996. Had the current rates been in effect for all
of 1994 and 1995, the annual FDIC insurance premiums paid by the Banks
would have been reduced by $504,000 and $564,000, respectively.

On September 29, 1996, the Economic Growth and Regulatory Paperwork
Reduction Act of 1996 was enacted. This Act's chief accomplishment was
to provide for the recapitalization of the Savings Association Insurance
Fund ("SAIF") by levying a one-time special assessment on SAIF deposits
to bring the fund to a reserve ratio equal to $.25 per $100 of insured
deposits and to provide that beginning in 1997, BIF assessments would be
used to help pay off the $780 million in annual interest payments on the
$8 billion Financing Corporation ("FICO") bonds issued in the late 1980s
as part of the government rescue of the thrift industry. The law
provides that BIF assessments for FICO bond payments must be set at a
rate equal to 20% of the SAIF rates for such assessments in for 1997,
1998 and 1999. After 1999, all FDIC insured institutions will pay the
same assessment rates. For the first six months of 1997, the assessment
for the FICO bond payments will be $.0132 per $100 of deposits for BIF
deposits and $.0648 per $100 of deposits for SAIF deposits. The FDIC
announced on November 26th that the premium for the first six months for
deposit insurance assessments would range from zero to $.27 per $100 of
deposits with 94% of banks paying nothing for deposit insurance. One of

35
the provisions of the 1996 Act was to eliminate the minimum $2,000 per
year charge for deposit insurance. As a result, the Banks will pay no
premium for deposit insurance in the first six months of 1997 and a first
quarter FICO bond assessment of $19,000. The Bill also provided for
certain limited regulatory relief and modifications to certain out-of-
date regulations.

MANAGEMENT

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, 1996, are as
follows:

Name (age) Principal Position Officer of United Since
---------- ------------------ -----------------------

Jimmy C. Tallent President and Director of UCB and United; 1984
(44) Director of Carolina, White and Peoples;
Chairman of the Board of Towns.

Billy M. Decker President and Director of Carolina; Director 1988
(53) of United and UCB; Secretary and Treasurer
of United.

Stephen L. Cockerham Vice President and Chief Credit Officer of 1990
(35) UCB and United. From 1985 through 1990, Mr.
Cockerham was a Bank Liquidation Specialist
with the Federal Deposit Insurance
Corporation.

Guy Freeman Vice President of United since March, 1995, 1995
(61) Executive Vice President of Carolina since
July, 1996, and Director of Carolina since
December 1996. Mr. Freeman served as
President and Chief Executive Officer of
White from 1993 until February 1995. Since
February 1995, Mr. Freeman has been Chairman
of the Board of White, of which he has been
a member since January 1993. Mr. Freeman
also served as Chairman of the Board of WC
Holding Company from February 1995 until its
acquisition by United. From 1992 until
1993, Mr. Freeman served as President and
Chief Executive Officer of East Side Bank,
Snellville, Georgia, and from 1987 to 1992,
he served in the same capacity at First
American Bank, Atlanta, Georgia.

Thomas C. Gilliland President and Chief Executive Officer of 1993
(48) Peoples; Vice Chairman of the Peoples Board;
Executive Vice President and Director of
United; Executive Vice President of United
since April 1994. From 1986 through 1992,
Mr. Gilliland was a partner in the law firm
of Hurt, Richardson, Garner, Todd &
Cadenhead in Atlanta, Georgia.

36
Name (age) Principal Position Officer of United Since
---------- ------------------ -----------------------

Eugene B. White President and Director of White and Vice 1995
(52) President of United since March, 1995. Mr.
White served as Executive Vice President of
First National Bank of Habersham, Cornelia,
Georgia from 1982 to 1995.

Richard E. Martin, Jr. Vice President of United since 1993; 1992
(48) President and Director of Towns. From 1989
through 1992, Mr. Martin was Senior Vice
President of First Colony Bank, Alpharetta,
Georgia.

L. Gene Sprayberry Executive Vice President of UCB; Assistant 1973
(51) Secretary of United.

Christopher J. Bledsoe Vice President and Chief Financial Officer 1993
(33) of UCB and United. A certified public
accountant, from 1988 through 1993, Mr.
Bledsoe was a Supervisor at Evans, Porter,
Bryan & Co., an accounting firm in Atlanta,
Georgia.

Robert L. Cochran Assistant Vice President and Controller of 1995
(32) UCB; Controller of United since 1996. A
certified public accountant, from 1989
through 1995, Mr. Cochran was an accounting
manager with PNC Bank in Cincinnati, Ohio.

COMMITTEES OF THE BOARD

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 Banks.
The compensation committee makes compensation decisions for executive
officers and key employees and administers the Profit Sharing Plan.

EXECUTIVE COMPENSATION

United did not pay any remuneration to its executive officers during
the year ended December 31, 1995. The following table sets forth the
annual and other compensation paid by the Banks to Jimmy Tallent,
President and Chief Executive Officer of United and UCB, Billy M. Decker,
President and Chief Executive Officer of Carolina, and Thomas C.
Gilliland, President and Chief Executive Officer of Peoples (each, a
"Named Executive Officer"). No other executive officer of United or the
Banks was paid $100,000 or more during 1995.

Summary Compensation Table
Long-term
Annual Compensation Compensation
------------------- ------------
Securities
Name and Underlying All Other
Principal Position Year Salary Bonus Other Options Compensation
------------------ ---- ------ ----- ----- ----------- ------------

Jimmy C. Tallent . . . 1995 $167,200 $57,000 $9,000 12,500 $ 21,085
President and 1994 151,251 50,000 8,100 - 19,101
Chief Executive 1993 125,000 40,000 8,100 - 15,250
Officer of
United and UCB;
Director of UCB,
Peoples,
Carolina, Towns
and United;
Chairman of the
Board of Towns

Thomas C. Gilliland . . 1995 $132,563 $ 30,000 $5,400 7,500 $ 6,628
President and 1994 121,395 25,000 5,400 - 4,249
Chief Executive 1993 108,000 13,500 5,400 - 5,192
Officer of
Peoples;
Executive Vice
President of
United; Director
of Peoples and
United

Billy M. Decker . . . . 1995 $ 98,010 $ 30,000 $8,100 5,000 $ 11,957
President and 1994 90,905 23,000 8,100 - 11,090
Chief Executive 1993 87,500 18,000 8,100 - 10,675
Officer of
Carolina; Vice
President of
United; Director
of UCB, Carolina
and United

____________________

Directors' fees for service on United's and the Banks' boards of
directors. Other perquisites do not meet the Securities and Exchange
Commission threshold for disclosure.

Represents a contribution by United of $20,398 on behalf of Mr.
Tallent to United's Profit Sharing Plan and insurance premiums of
approximately $699 paid by United on behalf of Mr. Tallent on a life
insurance policy.

United's contribution on behalf of the named individual to United's
Profit Sharing Plan.

United has not 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 (the "Stock Option Plan").

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth information concerning stock options
granted to the Named Executive Officers (as defined in the Stock Option
Plan) under the Stock Option Plan during fiscal year 1995 and the
projected value of those options at assumed annual rates of appreciation.

Potential Realizable Value
at Assumed Annual Rates
of Stock Price
Appreciation for
Individual Grants Option Term
------------------------------------------------------------------------------------------------------------
Percent of
Number of Total
Securities Options
Underlying Granted to
Options Employees Exercise or
Granted in Fiscal Base Price Expiration
Name Year ($/Share) Date 0% 5% 10%
---- -------- -------- ----------- ---------- ------ ------ --------

Jimmy C. Tallent 12,500 25% $10.00 1/1/05 $0 $78,625 $199,250

Thomas C. Gilliland 7,500 15% $10.00 1/1/05 $0 $47,175 $119,550

Billy M. Decker 5,000 10% $10.00 1/1/05 $0 $31,450 $ 79,700
____________________

All options are currently exercisable.
"Potential Realizable Value" is disclosed in accordance with
Securities and Exchange Commission 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 0%, 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.
No gain to the optionee is possible without appreciation in the
value of the Common Stock, which will benefit all shareholders
commensurately. Zero percent appreciation in the stock price would
result in zero dollars for the optionees if the options were
exercised.

OPTION FISCAL YEAR-END VALUES

Shown below is information with respect to unexercised options to
purchase the Common Stock granted under the Stock Option Plan to the
Named Executive Officers and held by them at December 31, 1995. No
options were exercised during 1995 by a Named Executive Officer.

Fiscal Year-End Option Values

Number of Unexercised Options at Value of Unexercised in the Money
Fiscal Year End Options at Fiscal
Name Exercisable/Unexercisable (#) Year End ($)
---- ---------------------------- ---------------------------------

Jimmy C. Tallent 12,500/0 $75,000

Thomas C. Gilliland 7,500/0 $45,000

Billy M. Decker 5,000/0 $30,000

39
DIRECTOR COMPENSATION

Directors of United, other than a President of a Bank who serves on
United's Board of Directors, received $500 per meeting attended during
1995. Certain members of United's Board of Directors also serve as
members of one or more of the Boards of Directors of the Banks, for which
they are compensated by such Bank.

PRINCIPAL SHAREHOLDERS

The following table lists information concerning the beneficial
ownership of United's Common Stock at December 31, 1996 by (i) each
person known to United to beneficially own more than 5% of the Common
Stock, (ii) each director and Named Executive Officer and (iii) all
directors and executive officers as a group. Except as set forth below,
the stockholders named below have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by
them.

Name and Address of Common Stock
Beneficial Owner Beneficially Owned Percent of Shares
- -------------------- ------------------ -----------------

Robert L. Head, Jr. 716,513 11.1%
P.O. Box 147
Blairsville, Georgia 30514

W.C. Nelson, Jr. 686,463 10.6%
P.O. Box 127
Blairsville, Georgia 30514

James A. Brackett, Jr. 167,855 2.6%

Charles E. Hill 174,792 2.7%

Clarence W. Mason, Sr. 81,190 1.3%

Hoyt O. Holloway 47,985 *

P. Deral Horne 27,500 *

Jimmy C. Tallent 145,272 2.3%

Thomas C. Gilliland 176,449 2.7%

Billy M. Decker 130,002 2.0%

All Executive Officers 2,465,372 37.3%
and Directors as a
Group (17 persons)

* Less than 1%.

Includes 52,758 shares beneficially owned by Mr. Head as custodian
for his children and 10,000 shares owned pursuant to Debentures.
Does not include 16,965 shares owned by Mr. Head's wife, for which
he disclaims beneficial ownership.
Includes 11,250 shares owned by a trust over which Mr. Nelson has
voting power and 10,000 shares owned pursuant to Debentures. Does
not include 5,000 shares owned by Mr. Nelson's wife, for which he
disclaims beneficial ownership.
Includes 10,000 shares beneficially owned pursuant to Debentures.
Does not include 59,710 shares owned by Mr. Brackett's wife, for
which he disclaims beneficial ownership.

40
Includes 10,000 shares beneficially owned pursuant to Debentures.
Does not include 87,105 shares owned by Mr. Hill's wife for which he
disclaims beneficial ownership.
Includes 10,000 shares beneficially owned pursuant to Debentures.
Includes 10,000 shares beneficially owned pursuant to 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.
Includes 10,000 shares beneficially owned pursuant to Debentures.
Includes 10,000 shares beneficially owned pursuant to Debentures and
14,250 shares beneficially owned pursuant to currently exercisable
stock options. Does not include 15 shares owned by Mr. Tallent's
daughter, for which he disclaims beneficial ownership.
Includes 6,270 shares beneficially owned by Mr. Gilliland as
custodian for his children, 10,000 shares beneficially owned
pursuant to Debentures and 8,550 shares beneficially owned pursuant
to currently exercisable stock options.
Includes 10,000 shares beneficially owned pursuant to Debentures and
5,700 shares beneficially owned pursuant to currently exercisable
stock options; does not include 9,040 shares owned by Mr. Decker's
wife for which he disclaims beneficial ownership.
Includes presently exercisable options to acquire 54,100 shares and
122,000 shares beneficially owned pursuant to Debentures.

CERTAIN TRANSACTIONS

Carolina, UCB, Towns and Peoples have retained the services
of a construction company operated by Robert L. Head, Jr., who is
Chairman of the Board of Directors of United and a director of
UCB. During 1995, Carolina, Peoples and UCB made payments
totaling approximately $719,000 in exchange for such services,
which included construction by Carolina of a new branch office in
Robbinsville, North Carolina, by UCB of a new operations center
adjacent to its principal office and by Peoples of a new
principal office. During 1996, UCB and Towns made payments of
approximately $89,900 to such construction company for a
leasehold improvement in Dahlonega and remodeling of Towns'
existing facilities.

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) 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.

DESCRIPTION OF SECURITIES

The following is a summary of certain provisions of the
Common Stock, Preferred Stock and the 2006 Debentures.
Additional information about the 2006 Debentures is set forth in
the form of the 2006 Debentures included as an exhibit to the
Registration Statement of which this Prospectus forms a part.

GENERAL

The authorized capital stock of United consists of
10,000,000 shares of Common Stock, $1.00 par value per share, and
10,000,000 shares of preferred stock, $1.00 par value per share.
As of December 31, 1996, 6,637,248 shares, including 140,000
shares deemed outstanding pursuant to the 2006 Debentures and
presently exercisable options to acquire 58,400 shares of
United's Common Stock were issued and outstanding and no shares
of preferred stock were issued and outstanding. At the same
date, 2006 Debentures in the principal amount of $3,500,000 were
outstanding.

PREFERRED STOCK

United is authorized to issue 10,000,000 shares of preferred
stock, issuable in such series and bearing such voting, dividend,
conversion, liquidation and other rights and preferences as the
Board of Directors may determine. The preferred stock could be
issued for any lawful corporate purpose without further action by
the shareholders. The issuance of any preferred stock having
conversion rights might have the effect of diluting the interests
of the other shareholders. Shares of preferred stock could be
issued with such rights, privileges and preferences as would
deter a further tender or exchange offer or to discourage the
acquisition of control of the Company. The Board of Directors
presently has no plans to issue any preferred stock.

COMMON STOCK

All voting rights are vested in the holders of the Common
Stock. Each holder of Common Stock is entitled to one vote per
share on any issue requiring a vote at any meeting. The shares
do not have cumulative voting rights in the election of
directors. All shares of Common Stock are entitled to share
equally in such dividends as the Board of Directors of United may
declare on United's Common Stock from sources legally available
therefor. The determination and declaration of dividends is
within the discretion of the Board of Directors of United.
United's Common Stock will be entitled to receive on a pro rata
basis, after payment or provision for payment of all debts and
liabilities of United, all assets of United available for
distribution, in cash or in kind.

The outstanding shares of Common Stock are, and the shares
of Common Stock to be issued by United in connection with the
Offering will be, duly authorized, validly issued, fully paid and
nonassessable.

DEBENTURES

Debentures in the principal amount of $3,500,000 which are
due on December 31, 2006 are outstanding as of the date hereof.
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 April 1, July 1, October 1,
and January 1 of each year commencing on April 1, 1997, to
holders of record at the close of business on the 15th day of the
month immediately preceding the interest payment date. Interest
is computed on the basis of actual number of days elapsed in a
year of 365 or 366 days, as applicable. Interest on the 2006
Debentures is payable, at the option of the Board of Directors of
United, in cash or in an additional debenture with the same terms
as the 2006 Debentures.

The holder of any 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.

The 2006 Debentures are unsecured obligations of United and
are subordinate in right of payment to all obligations of United
to its other creditors, except obligations ranking on a parity
with or junior to such debentures. The 2006 Debentures were not
issued pursuant to an indenture nor is there a trustee to act on
behalf of debentureholders.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for United's Common Stock
and Debentures is SunTrust Bank, Atlanta, 58 Edgewood Avenue,
Room 200, Atlanta, Georgia 30303.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, there will be 6,887,248
shares of Common Stock outstanding (including the Options and
140,000 shares issuable upon conversion of the 2006 Debentures).
All of the shares offered hereby will be freely transferable,
without restriction, under the Securities Act of 1933, as amended
(the "Securities Act"), unless acquired by an affiliate (as that
term is defined under the Securities Act) of United. Sales of
substantial amounts of shares in the limited trading market
following the Offering could adversely affect the market price of
the Common Stock. Since such stock is not listed on a stock
exchange or quoted in the over-the-counter market, nor are there
any existing plans to so list or to have the stock quoted, no
shares can be sold under Rule 144 promulgated under the
Securities Act nor is it likely that any shares can be sold under
Rule 144 in the future.

THE OFFERING

United is offering for sale to the public 250,000 shares of
Common Stock at a price of $20.00 per share. In the State of
Georgia, the Common Stock offered hereby will be sold by certain
executive officers of United and no commission will be paid on
such sales. In order to comply with securities requirements of
the State of North Carolina, United has engaged Carson Medlin,
pursuant to the terms of a broker dealer agreement dated January
28, 1997 (the "Broker Dealer Agreement"), to act as a broker
dealer for the account of United in effecting offers and sales of
the Common Stock to investors in North Carolina at the public
offering price. Under the Broker-Dealer Agreement, Carson Medlin
has no financial obligation to purchase any of the Common Stock.
Carson Medlin will receive a fee of $30,000 for these services.
If the Offering is terminated for any reason prior to acceptance
by the Company of the Common Stock offered hereby to residents of
North Carolina, the Company will pay to Carson Medlin a fee of
$20,000. The Broker Dealer Agreement provides that the Company
will indemnify Carson Medlin against certain liabilities,
including civil liabilities under the Securities Act. A minimum
of 25,000 shares must be sold in the Offering or the Offering
will terminate. The Offering will terminate on the date that is
30 days from the date of this Prospectus, subject to termination
at an earlier date upon acceptance of subscriptions for all of
the securities offered hereby or to extension for an additional
period or periods up to 90 days from the date of this Prospectus
at the sole discretion of United (such offering termination date
as it may be shortened or extended pursuant to the terms hereof
is referred to herein as the "Offering Termination Date"). On
the Offering Termination Date, subscription funds will be
returned to subscribers with interest actually earned thereon if
25,000 shares have not been subscribed. Officers of United will
receive no compensation for selling the shares of Common Stock,
but they will be reimbursed for reasonable expenses incurred by
them in connection with the Offering, such as travel, telephone
and similar expenses.

HOW TO SUBSCRIBE

United will offer shares of Common Stock to members of the
public who are residents of the State of Georgia and North
Carolina, including United shareholders, who may subscribe for
blocks of whole shares of Common Stock consisting of at least 100
shares (unless otherwise agreed to by United) by submitting a
Subscription Agreement and making an appropriate payment to Union
County Bank as escrow agent any time before the Offering
Termination Date, subject to acceptance by United.

Persons who wish to subscribe for shares of Common Stock
must, prior to the Offering Termination Date:

(1) Complete the appropriate portions and sign the
Subscription Agreement which is attached to this
Prospectus as Exhibit A to subscribe for at least 100
shares of Common Stock;

(2) Make full payment of the aggregate purchase price
for the shares subscribed in United States currency by
check, bank draft or money order payable to United
Community Banks, Inc.; and

44
(3) Deliver the Subscription Agreement together with
full payment of the purchase price, to SunTrust Bank,
58 Edgewood Avenue, Room 200, Atlanta, Georgia 30303.

Subscriptions are not binding until accepted by United.
United reserves the right to accept or reject subscriptions, in
whole or in part, or to cancel the Offering, in its sole
discretion. All subscription payments received by United for the
first 25,000 shares subscribed will be deposited in an interest-
bearing escrow account at SunTrust and will be available to
United once it accepts subscriptions for 25,000 shares. If
subscription funds for 25,000 shares are not received by the
Offering Termination Date, all proceeds will be returned promptly
to investors, together with interest actually earned thereon. No
assurance can be given that subscription funds can or will be
invested at the highest rate of return available or that any
profits will be realized from the investment of subscription
funds. Once subscription funds for 25,000 shares have been
received and placed in the escrow account, such proceeds and any
interest earned thereon will be made available to United, as will
the proceeds of any subsequent sales of shares.

Certificates representing the Common Stock purchased in the
Offering will be issued by United and mailed to subscribers as
soon as practicable after acceptance of subscriptions. Rejected
subscription payments will be returned to subscribers by mail in
full, with any interest actually earned on collected funds, as
soon as possible, but in no event later than 30 days after the
occurrence of such rejection.

PRO FORMA CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)

The following unaudited pro forma consolidated statements of
earnings have been prepared from the historical results of
operations of United, and reflect adjustments for the 2006
Debentures. These statements should be read in conjunction with
the historical consolidated financial statements of United,
including the notes thereto, which financial statements are
included elsewhere in this Prospectus. The pro forma combined
results are not necessarily indicative of the combined results of
further operations.

UNITED COMMUNITY BANKS, INC. & SUBSIDIARIES
Pro Forma Consolidated Statement of Earnings
For the Year Ended December 31, 1995
(Unaudited)

2006 Debenture Pro Forma
Actual Adjustments Consolidated
------ -------------- ------------

Interest income:
Interest and fees on loans $41,374 - $41,374
Interest on deposits with other banks 3 - 3
Interest on federal funds sold 1,113 184 1,297

Interest on investment securities:
U.S. Treasuries and U.S. Gov't agencies 4,791 - 4,791
State, county and municipal 1,846 - 1,846
------- ----- ------
Total interest income 49,127 184 49,311

Interest expense:
Interest on deposits:
Demand 3,585 - 3,585
Savings 1,023 - 1,023
Time 19,735 - 19,735
------- ----- ------
24,343 - 24,343
------- ----- ------
Long-term debt, subordinated debentures and
federal funds purchased 1,865 298 2,163
------- ----- ------
Total interest expense 26,208 298 26,506
------- ----- ------
Net interest income 22,919 (114) 22,805
------- ----- ------
Provision for loan losses 1,040 - 1,040
------- ----- ------
Net interest income after provision for
loan losses 21,879 (114) 21,765
------- ----- ------
Noninterest income:
Service charges and fees 1,937 - 1,937
Securities gains, net 4 - 4
Mortgage loan and related fees 1,582 - 1,582
Other noninterest income 741 - 741
------- ----- ------
Total noninterest income 4,264 - 4,264
------- ----- ------
Noninterest expense:
Salaries and employee benefits 9,890 - 9,890
Occupancy 2,695 - 2,695
Deposit insurance premiums 514 - 514
Other noninterest expenses 4,755 - 4,755
------- ----- ------
Total noninterest expenses 17,854 - 17,854
------- ----- ------
Earnings before income taxes 8,289 (114) 8,175

Income taxes 2,238 (39) 2,199
------- ----- ------
Net earnings $ 6,051 (75) $5,976
======= ===== ======

Assumes proceeds from debenture invested in federal funds sold
at an average rate of 5.25%.
Assumes rate paid on $3,500,000 2006 Debenture Offering of
8.50%.
Tax effect of net interest income at 34% tax rate.

UNITED COMMUNITY BANKS, INC. & SUBSIDIARIES
Pro Forma Consolidated Statement of Earnings
For the Nine Months Ended September 30, 1996
(Unaudited)

2006 Debenture Pro Forma
Actual Adjustments Consolidated
------ --------------- ------------

Interest income:
Interest and fees on loans $38,786 - $38,786
Interest on deposits with other banks 47 - 47
Interest on federal funds sold 660 137 797
Interest on investment securities:
U.S. Treasuries and U.S. Gov't agencies 4,588 - 4,588
State, county and municipal 1,413 - 1,413
------- ---- -------
Total interest income 45,494 137 45,631
------- ---- -------
Interest expense:
Interest on deposits:
Demand 3,647 - 3,647
Savings 783 - 783
Time 17,214 - 17,214
------- ---- -------
21,644 - 21,644
------- ---- -------
Long-term debt, subordinated debentures and
federal funds purchased 1,218 223 1,441
------- ---- -------
Total interest expense 22,862 223 23,085
------- ---- -------
Net interest income 22,632 (86) 22,546
------- ---- -------
Provision for loan losses 915 - 915
------- ---- -------
Net interest income after provision for loan 21,717 (86) 21,631
losses ------- ---- -------

Noninterest income:
Service charges and fees 1,940 - 1,940
Securities gains, net 17 - 17
Mortgage loan and related fees 1,218 - 1,218
Other noninterest income 565 - 565
------- ---- -------
Total noninterest income 3,740 - 3,740
------- ---- -------
Noninterest expense:
Salaries and employee benefits 9,380 - 9,380
Occupancy 2,402 - 2,402
Deposit insurance premiums 20 - 20
Other noninterest expenses 5,001 - 5,001
------- ---- -------
Total noninterest expenses
16,803 - 16,803
------- ---- -------
Earnings before income taxes 8,654 (86) 8,568

Income taxes 2,930 (29) 2,901
------- ---- -------
Net earnings $ 5,724 (57) $5,667
======= ==== =======

Assumes proceeds from debenture invested in federal funds sold

at an average rate of 5.25% for 273 days.
Assumes rate paid on $3,500,000 2006 Debenture Offering of 8.50%
for 273 days.
Tax effect of net interest income at 34% tax rate.

PRO FORMA CONSOLIDATED BALANCE SHEET
(Unaudited)

The following unaudited pro forma consolidated balance sheet as of
September 30, 1996 has been prepared based upon the historical
consolidated balance sheets for United and reflects the adjustments for
the 2006 Debenture. This statement should be read in conjunction with
the historical financial statements of United, including the notes
thereto, which financial statements are included elsewhere in this
Prospectus.

UNITED COMMUNITY BANKS, INC.
Pro Forma Consolidated Balance Sheet
September 30, 1996
(Unaudited)

2006 Pro Forma
Actual Debenture Consolidated
Adjustments

ASSETS
Cash and due from banks $ 26,467 - $ 26,467
Federal funds sold 12,855 3,500 16,355
---------- ------- ----------
Cash and cash equivalents 39,322 3,500 42,822

Investment securities 74,626 - 74,626
Investment securities available for sale 70,012 - 70,012

Mortgage loans held for sale 6,360 - 6,360

Loans 558,325 - 558,325
Less: Allowance for loan losses (7,369) - (7,369)
---------- ------- ----------
Loans, net 550,956 - 550,956

Premises and equipment 17,615 - 17,615
Accrued interest receivable 7,667 - 7,667
Other assets 13,007 - 13,007
---------- ------- ----------
$ 779,565 3,500 $ 783,065
========== ======= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand $ 73,553 - $ 73,553
Interest-bearing demand 170,284 - 170,284
Savings 40,068 - 40,068
Time 396,432 - 396,432
---------- ------- ----------
Total deposits 680,337 - 680,337

Repurchase agreements 2,000 - 2,000
Accrued expenses and other liabilities 5,588 - 5,588
Federal Home Loan Bank advances 31,138 - 31,138
Long-term debt 10,736 - 10,736
Convertible subordinated debentures 1,000 3,500 4,500
---------- ------- ----------
Total liabilities $ 730,799 3,500 734,299
---------- ------- ----------
Stockholders' equity:
Preferred stock - - -
Common stock, $1 par value; 10,000,000
shares authorized; 6,260,280 issued and 6,260 - 6,260
outstanding
Capital surplus 14,520 - 14,520
Unrealized loss on investment securities
available for sale, net of tax (485) - (485)
Retained earnings 28,471 - 28,471
---------- ------- ----------
Total stockholders' equity 48,766 - 48,766
---------- ------- ----------
$ 779,565 3,500 $ 783,065
========== ======= ==========

Assumes proceeds of 2006 Debenture offering invested in federal
funds sold.

48
LEGAL MATTERS

The legality of the shares of Common Stock offered by this
Prospectus will be passed upon for United by Kilpatrick & Cody, L.L.P.,
Atlanta, Georgia.

EXPERTS

The consolidated audited financial statements of United, included
herein and elsewhere in the Registration Statement, have been included
herein and in the Registration Statement in reliance upon the reports of
Porter Keadle Moore, LLP, independent certified public accountants,
successor to the practice of Evans, Porter, Bryan & Co., and upon the
authority of said firm as experts in accounting and auditing.

AVAILABLE INFORMATION

United has filed with the Securities and Exchange Commission,
Washington, D.C. 20549, a Registration Statement on Form S-1 under the
Securities Act with respect to the securities offered hereby. This
Prospectus, which is part of the Registration Statement, does not contain
all of the information set forth in the Registration Statement and the
exhibits and schedules thereto. For further information with respect to
United and the securities offered hereby, reference is made to the
Registration Statement and the exhibits and schedules filed therewith.
Statements contained in this Prospectus as to the contents of any
contract or any other document to which reference is made are not
necessarily complete, and in each instance reference is made to the copy
of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all
respects by such reference. A copy of the Registration Statement may be
inspected without charge at the offices of the Securities and Exchange
Commission in Washington, D.C. 20549, and copies of all or any part of
the Registration Statement may be obtained from the Public Reference
Section of the Securities and Exchange Commission at 450 Fifth Street,
N.W. Washington, D.C. 20549, upon the payment of the fees prescribed by
the Securities and Exchange Commission.

United is subject to certain informational reporting requirements
of the Securities Exchange Act of 1934 (the "Exchange Act") and in
accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the
"Commission"). Such periodic reports, proxy statements and other
information filed by United with the Commission can be inspected and
copied at the public reference facilities maintained by the Commission's
regional offices in New York (7 World Trade Center, Suite 1300, New York,
New York 10048) and Chicago (Citicorp Center, 500 W. Madison, Suite
1400, Chicago, Illinois 60661), and copies of such material can be
obtained from the public reference section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, or at the Commission's web site at
http://www.sec.gov.

UNITED INTENDS TO FURNISH ITS SHAREHOLDERS WITH ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS AUDITED BY INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS AND SUCH OTHER REPORTS AS MAY BE REQUIRED BY APPLICABLE LAW.

INDEX TO FINANCIAL STATEMENTS

United Community Banks, Inc. and Subsidiaries
- ---------------------------------------------

Report of Independent Certified Public Accountants ................. F-1

Consolidated Balance Sheets at December 31, 1995 and 1994 .......... F-2

Consolidated Statements of Earnings for the Years Ended
December 31, 1995, 1994 and 1993 .............................. F-3

Consolidated Statements of Changes in Stockholders' Equity
for the Years Ended December 31, 1995, 1994 and 1993 .......... F-4

Consolidated Statements of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993 ............................. F-5

Notes to the Consolidated Financial Statements for the Years
Ended December 31, 1995, 1994 and 1993 ....................... F-6

Consolidated Balance Sheets at September 30, 1996 (unaudited)
and December 31, 1995 ......................................... F-23

Consolidated Statements of Earnings for the Nine Months
Ended September 30, 1996 and 1995 (unaudited) ................ F-24

Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1996 and 1995 (unaudited) ................. F-25

Notes to Unaudited Financial Statements ........................... F-26

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, 1995
and 1994 and the related statements of earnings, changes in
stockholders' equity, and cash flows for each of the three years
in the period ended December 31, 1995. These financial statements
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of United Community Banks, Inc. and subsidiaries as of
December 31, 1995 and 1994, and the results of their operations
and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted
accounting principles.

As disclosed in the Summary of Significant Accounting Policies to
the financial statements, the Company changed its method of
accounting for mortgage servicing rights during 1995.

______/s/___________________________
Evans, Porter, Bryan & Company

Atlanta, Georgia
February 16, 1996

F-1

UNITED COMMUNITY BANKS, INC. & SUBSIDIARIES
Consolidated Balance Sheets
(dollars in thousands)

December 31,
1995 1994
---- ----

ASSETS

Cash and due from banks, including reserve requirements of $ 20,758 11,995
$3,217 and $2,073
Federal funds sold 11,230 2,575
---------- ---------

Cash and cash equivalents 31,988 14,570
---------- ---------

Securities held to maturity (estimated fair value of $79,650 78,821 62,948
and $60,421)
Securities available for sale 65,046 14,947

Mortgage loans held for sale 12,048 12,395

Loans 444,092 329,226
Less: Allowance for loan losses 6,545 3,950
---------- ---------
Loans, net 437,547 325,276
---------- ---------

Bank premises and equipment 15,997 11,468
Accrued interest receivable 6,462 4,299
Other assets 11,760 11,033
---------- ---------
$ 659,669 456,936
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits:
Demand $ 62,753 35,465
Interest-bearing demand 114,825 88,433
Savings 38,947 30,672
Time 374,131 238,700
---------- ---------
Total deposits 590,656 393,270

Federal funds purchased - 8,300
Accrued expenses and other liabilities 3,676 2,600
FHLB advances 9,001 12,149
Long-term debt 11,309 9,400
Convertible subordinated debentures 1,000 1,000
---------- ---------
Total liabilities 615,642 426,719
---------- ---------

Stockholders' equity:
Preferred stock - -
Common stock, $1 par value; 10,000,000 shares authorized; 6,260 5,589
6,260,280 and 5,589,365 shares issued and outstanding
Capital surplus 14,520 7,474
Net unrealized gain (loss) on securities available for 251 (209)
sale, net of tax
Retained earnings 22,996 17,363
---------- ---------
Total stockholders' equity 44,027 30,217
---------- ---------
$ 659,669 456,936
========== ========

See accompanying notes to consolidated financial statements.

F-2
UNITED COMMUNITY BANKS, INC. & SUBSIDIARIES
Consolidated Statements of Earnings
(dollars in thousands except per share data)

For the Years Ended December 31,
1995 1994 1993
--------------------------------------------

INTEREST INCOME:
Interest and fees on loans $ 41,374 28,963 23,355
Interest on deposits with other banks 3 20 49
Interest on federal funds sold 1,113 135 107
Interest on investment securities:
U.S. Treasury and U.S. Government agencies 4,791 2,924 3,276
State and political subdivisions 1,846 1,813 1,538
--------------------------------------------
Total interest income 49,127 33,855 28,325
--------------------------------------------

INTEREST EXPENSE:
Interest on deposits:
Demand 3,585 2,874 2,080
Savings 1,023 926 788
Time 19,735 10,572 10,229
--------------------------------------------
24,343 14,372 13,097
--------------------------------------------
Long-term debt, subordinated debentures, federal funds
purchased, and FHLB advances 1,865 1,266 712
--------------------------------------------
Total interest expense 26,208 15,638 13,809
--------------------------------------------
Net interest income 22,919 18,217 14,516
Provision for loan losses 1,040 935 842
--------------------------------------------
Net interest income after provision for loan losses 21,879 17,282 13,674
--------------------------------------------

NONINTEREST INCOME:
Service charges and fees 1,937 1,470 1,346
Gains on sales of investment securities 4 38 152
Mortgage loan and other related fees 1,582 1,639 1,757
Other noninterest income 741 615 445
--------------------------------------------
Total noninterest income 4,264 3,762 3,700
--------------------------------------------

NONINTEREST EXPENSE:
Salaries and employee benefits 9,890 7,856 6,487
Occupancy 2,695 2,010 1,608
Deposit insurance premiums 514 816 717
Other noninterest expense 4,755 3,220 2,893
--------------------------------------------
Total noninterest expense 17,854 13,902 11,705
--------------------------------------------
Earnings before income taxes 8,289 7,142 5,669

Income taxes 2,238 1,942 1,467
--------------------------------------------
NET EARNINGS $ 6,051 5,200 4,202
=========== ========= =========
Net earnings per common share $ 1.04 0.93 0.76
=========== ========= =========
Weighted average common shares outstanding 5,813,615 5,589,365 5,545,110
=========== ========= =========
See accompanying notes to consolidated financial statements.

F-3

UNITED COMMUNITY BANKS, INC. & SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
For the Years Ended December 31, 1995, 1994 and 1993
(dollars in thousands, except per share data)

Net
Unrealized
Gain (Loss)
On
Investment
Securities
Available
Common Stock Capital Retained for Sale,
------------- Net
Shares Amount Surplus Earnings of Tax Total
-------------------------------------------------------------------------

Balance, December 31, 1992 as previously 1,100,022 $ 1,100 7,063 12,779 - 20,942
reported

Effect of five-for-one stock split 4,400,088 4,400 - (4,400) - -
-------------------------------------------------------------------------

Balance, December 31, 1992 as adjusted 5,500,110 5,500 7,063 8,379 - 20,942

Cash dividends declared ($0.035 per share) - - - (195) - (195)

Common stock issued in conversion of 89,255 89 411 - - 500
debentures

Net earnings - - - 4,202 - 4,202
-------------------------------------------------------------------------
Balance, December 31, 1993 5,589,365 5,589 7,474 12,386 - 25,449

Cumulative effect of accounting change for - - - - 428 428
investment securities, net of tax of $262

Change in unrealized loss on securities - - - - (637) (637)
available for sale, net of tax

Cash dividends declared ($0.040 per share) - - - (223) - (223)

Net earnings - - - 5,200 - 5,200
-------------------------------------------------------------------------
Balance, December 31, 1994 5,589,365 5,589 7,474 17,363 (209) 30,217

Issuance of common shares for bank 455,400 455 4,828 - - 5,283
acquisition

Proceeds from common stock offering, 215,515 216 2,218 - - 2,434
net of offering cost

Change in unrealized losses on securities - - - - 460 460
available for sale, net of tax

Cash dividends declared ($0.072 per share) - - - (418) - (418)

Net earnings - - - 6,051 - 6,051
-------------------------------------------------------------------------
Balance, December 31, 1995 6,260,280 $ 6,260 14,520 22,996 251 44,027
========= ======== ====== ====== ==== ======

See accompanying notes to consolidated financial statements.

F-4

UNITED COMMUNITY BANKS, INC. & SUBSIDIARIES
Consolidated Statements of Cash Flows
(dollars in thousands)

FOR THE YEARS ENDED DECEMBER 31,
1995 1994 1993
---------------------------------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 6,051 5,200 4,202
Adjustments to reconcile net earnings to net cash provided (used)
by operating activities:
Depreciation, amortization and accretion 1,715 1,471 1,418
Provision for loan losses 1,040 935 842
Provision for deferred tax benefit (83) (3) (194)
Gain on sale of investment securities (4) (38) (152)
Change in assets and liabilities, net of the effects of
acquisitions:
Interest receivable (1,658) (910) 181
Interest payable 1,286 407 (398)
Other assets 792 (483) (631)
Accrued expenses and other liabilities (1,315) (150) 719
Change in mortgage loans held for sale 347 1,216 (8,382)
---------------------------------------
Net cash provided (used) by operating activities 8,171 7,645 (2,395)
---------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES, NET OF THE EFFECTS OF
ACQUISITIONS:
Cash acquired from acquisitions and branch purchases 25,867 - -
Proceeds from sales of securities held to maturity - - 22,594
Proceeds from maturities and calls of securities held to maturity 11,465 4,232 11,553
Purchases of securities held to maturity (24,899) (20,021) (33,166)
Proceeds from sales of securities available for sale 14,718 19,074 -
Proceeds from maturities and calls of securities available for sale 11,299 8,660 -
Purchases of securities available for sale (60,366) (8,290) -
Purchase of exchangeable payable in kind debenture - (2,846) -
Purchases of mortgage servicing rights - (2,022) -
Net change in interest-bearing deposits with other banks 299 693 199
Net increase in loans (63,387) (59,488) (51,383)
Proceeds from sale of other real estate 243 119 33
Purchase of bank premises and equipment (2,178) (3,673) (2,384)
---------------------------------------
Net cash used in investing activities (86,939) (63,562) (52,554)
---------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES, NET OF THE EFFECTS OF
ACQUISITIONS:
Net change in demand and savings deposits 18,599 21,577 33,787
Net change in time deposits 85,110 21,928 15,958
Net change in federal funds purchased (8,300) 7,000 1,300
Proceeds from long-term debt 2,539 2,800 -
Proceeds from FHLB advances 8,596 5,956 6,489
Repayments of long-term debt (630) (800) (413)
Repayments of FHLB advances (11,744) (283) -
Proceeds from sale of common stock 2,434 - -
Cash paid for dividends (418) (223) (195)
---------------------------------------
Net cash provided by financing activities 96,186 57,955 56,926
---------------------------------------
Net change in cash and cash equivalents 17,418 2,038 1,977
Cash and cash equivalents at beginning of period 14,570 12,532 10,555
---------------------------------------
Cash and cash equivalents at end of period $ 31,988 14,570 12,532
========== ======== ========

See accompanying notes to consolidated financial statements.

F-5

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

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
------------
United is a five 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 Bank Subsidiaries are commercial banks which serve
markets throughout north Georgia and western North Carolina.
The Bank Subsidiaries are insured and subject to the
regulation of the Federal Deposit Insurance Corporation. The
Bank Subsidiaries also provide a full range of customary
banking services.

Basis of Presentation
---------------------
The consolidated financial statements include the accounts
of United and its wholly-owned commercial bank subsidiaries,
Union County Bank, Blairsville, Georgia (UCB), Citizens
Bank-Murphy, North Carolina (Citizens), Peoples Bank, Blue
Ridge, Georgia (Peoples) Towns County Bank, Hiawassee,
Georgia (Towns), and White County Bank, Cleveland, Georgia
(White) (collectively, the "Bank Subsidiaries"). 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.

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 collection 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
---------------------
Effective January 1, 1994, United adopted the provisions of
Statement of Financial Accounting Standards (SFAS) No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities." Under SFAS No. 115, 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

F-6
effect, on securities available for sale are excluded from
earnings and are reported as a separate component of
stockholders' equity until realized. Transfers of securities
between categories are recorded at fair value at the date of
transfer. 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 earnings 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 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 earnings 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
earnings 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 earnings of the period in which
the change occurs. No market valuation allowances were
required at December 31, 1995 or 1994.

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.

Effective January 1, 1995, United adopted SFAS No. 114,
"Accounting by Creditors for Impairment of a Loan" as
amended by SFAS No. 118, "Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosures."
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. The adoption of SFAS No. 114 and
No. 118 had no significant impact on the consolidated
financial statements.

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 collection 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.

Management's judgment in determining the adequacy of the
allowance is based on evaluations of the probability of
collection 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.

Management believes that 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

F-7

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.

Bank Premises and Equipment
---------------------------
Bank premises and equipment are stated at cost less
accumulated depreciation. Depreciation is computed using
primarily 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 building 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 1995 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
-------------------------
Effective April 1, 1995, United adopted the provisions of
SFAS No. 122 "Accounting for Mortgage Servicing Rights."
SFAS No. 122 amends SFAS No. 65, "Accounting for Certain
Mortgage Banking Activities." SFAS No. 122 requires a
mortgage banking enterprise to recognize as a separate
asset, the rights to service mortgage loans regardless of
whether the servicing rights are acquired through either
purchase or origination. Prior to SFAS No. 122, SFAS No. 65
prohibited the capitalization of mortgage servicing rights
except where the rights to service loans were acquired from
another organization. Additionally, the new standard
requires impairment analysis of mortgage servicing rights
regardless of whether purchased or originated.

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, 1995, no valuation allowances
were required for United's mortgage servicing rights.

Income Taxes
------------
United recognizes deferred tax assets and liabilities based
on future tax consequences attributable to differences
between the financial statement carrying amounts of existing
assets and liabilities and their respective tax basis. The
recognition of future tax benefits, such as net operating
loss carryforwards, is based on 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 basis and the tax basis of
United's assets and liabilities result in deferred tax
assets, an evaluation of the probability of being able to

F-8

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 realization of the deferred
tax assets, management considers the scheduled reversals of
deferred tax liabilities, projected future taxable income
and tax planning strategies.

Net Earnings Per Common Share
-----------------------------
Net earnings per common share are based on the weighted
average number of common shares outstanding during each
period. The assumed conversion of the convertible
subordinated debentures and exercise of stock options do not
result in material dilution. All share and per share data
have been adjusted to reflect the October 1995, five-for-one
split, effected in the form of a stock dividend, paid on
November 6, 1995.

Recent Accounting Pronouncements
--------------------------------
During 1995, the Financial Accounting Standards Board (FASB)
issued SFAS No. 123, "Accounting for Stock-Based
Compensation." This new standard will become effective
January 1, 1996, and will require United to disclose the
fair value of employee stock options granted in 1995 and
subsequent years. Since United will not be required to
record the options at fair value, management does not expect
this new standard to have a material impact on the
consolidated financial statements.

F-9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) MERGERS AND ACQUISITIONS
On August 31, 1995, United acquired all the outstanding
common stock of White County Bancshares, Inc., (White Bancshares)
the parent company of White County Bank, Cleveland, Georgia.
United issued 455,400 shares of its common stock and
approximately $10,000 in cash for fractional shares, in exchange
for all the outstanding common shares of White Bancshares.
Additionally, United exercised its option to convert the
exchangeable payable in kind debenture, previously acquired
during 1994, and the related accrued interest into a majority
interest in White County Bank. At the date of acquisition, White
County Bank had total assets of $71 million and liabilities of
$63 million. The original purchase price was allocated to assets
and liabilities acquired based on their fair values at the date
of acquisition. This transaction was accounted for as a purchase
and, therefore, is not included in United's results of operations
or statements of financial position prior to the date of
acquisition. The following summarized pro forma unaudited
financial information is presented as if the purchase had
occurred on January 1, 1994. The unaudited pro forma financial
information is not necessarily indicative either of the results
of the operations that would have occurred had the two companies
actually combined during the period presented or of future
results of the combined companies:

For the Years Ended December 31,
--------------------------------------------
1995 1994
--------------------------------------------
(dollars in thousands except per share data)

Net interest income $ 24,207 20,903
========== ======
Noninterest income 4,418 4,173
===== =====
Noninterest expense 6,197 17,381
===== ======
Net earnings 6,288 4,898
===== =====
Net earnings per share $ 1.03 0.81
========== ====
Weighted average shares outstanding 6,116,800 6,044,765
========= =========

In 1995, United's subsidiary, Citizens, assumed deposits
totaling $32 million and purchased certain assets totaling
$12 million of three branch banks in the western North Carolina
cities of Andrews, Franklin and Waynesville.

F-10

(2) CASH FLOWS
United paid approximately $25 million, $15 million and $14
million in interest on deposits and other liabilities during
1995, 1994 and 1993, respectively.

In connection with United's 1995 acquisition of White,
assets having fair value of $71 million were acquired and
liabilities totaling $63 million were assumed.

For the Years Ended December 31,
-----------------------------------
1995 1994 1993
-----------------------------------
(dollars in thousands)

Schedule of noncash investing and financing
activities:
Change in dividends payable $ -- -- 2
Transfers of loans to other real estate $ 821 1,041 308
Financed sales of other real estate $ 826 925 321
Conversion of convertible subordinated debentures
into 89,255 shares of common stock $ -- -- 500
Common stock issued and conversion of
exchangeable payable in kind debenture in
connection with the acquisition of White $ 8,864 -- --
Change in unrealized gain (loss) on securities $ 460 (209) --
available for sale, net of tax

F-11

(3) INVESTMENT SECURITIES
Investment securities at December 31, 1995 and 1994 are as
follows (dollars in thousands):

-----------------------------------------------------
December 31, 1995
-----------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-----------------------------------------------------

Securities Available for Sale:
U S Treasuries $23,128 112 1 23,239
U S Government agencies 28,215 137 11 28,341
State and Municipal 6,007 314 - 6,321
Mortgage-backed securities 4,310 14 34 4,290
Other 2,912 - 57 2,855
-----------------------------------------------------
Total 64,572 577 103 65,046
=====================================================
Securities Held to Maturity:
U S Treasuries 6,624 31 4 6,651
U S Government agencies 37,736 202 268 37,670
State and Municipal 26,524 864 76 27,312
Mortgage-backed securities 7,937 99 19 8,017
-----------------------------------------------------
Total $78,821 1,196 367 79,650
=====================================================

-----------------------------------------------------
December 31, 1994
-----------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-----------------------------------------------------
Securities Available for Sale:
U S Treasuries $5,875 - 94 5,781
U S Government agencies 6,961 11 239 6,733
Mortgage-backed securities 567 4 2 569
Other 1,881 - 17 1,864
-----------------------------------------------------
Total 15,284 15 352 14,947
=====================================================
Securities Held to Maturity:
U S Treasuries 4,250 - 88 4,162
U S Government agencies 20,556 - 1,474 19,082
State and Municipal
securities 32,039 395 1,152 31,282
Mortgage-backed securities 6,103 - 208 5,895
-----------------------------------------------------
Total $62,948 395 2,922 60,421
=====================================================

The amortized cost and fair value of the securities portfolio at
December 31, 1995, 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.

F-12

-------------------------------------------------------
Securities Held Securities Available
to Maturity for Sale
December 31, 1995 December 31, 1995
-------------------------------------------------------
AMORTIZED ESTIMATED AMORTIZED ESTIMATED
COST FAIR VALUE COST FAIR VALUE
-------------------------------------------------------

U S TREASURIES: (DOLLARS IN THOUSANDS)
Within 1 year $5,249 5,260 10,606 10,624
1 to 5 years 1,375 1,391 12,522 12,615
-----------------------------------------------------
$6,624 6,651 23,128 23,239
=====================================================
U S GOVERNMENT AGENCIES:
Within 1 year $8,275 8,260 10,475 10,500
1 to 5 years 28,961 28,909 17,740 17,841
5 to 10 years 250 249 - -
More than 10 years 250 252 - -
-----------------------------------------------------
$37,736 37,670 28,215 28,341
=====================================================

STATE AND MUNICIPAL:
Within 1 year $1,134 1,136 1,382 1,418
1 to 5 years 6,605 6,839 4,521 4,791
5 to 10 years 12,724 13,105 104 112
More than 10 years 6,061 6,232 - -
-----------------------------------------------------
$26,524 27,312 6,007 6,321
=====================================================
OTHER:
More than 10 years - - 2,912 2,855
-----------------------------------------------------
$ - - 2,912 2,855
=====================================================

TOTAL SECURITIES OTHER THAN MORTGAGE-BACKED SECURITIES:
Within 1 year $14,658 14,656 22,463 22,542
1 to 5 years 36,941 37,139 34,783 35,247
5 to 10 years 12,974 13,354 104 112
More than 10 years 6,311 6,484 2,912 2,855

Mortgage-backed securities 7,937 8,017 4,310 4,290
-----------------------------------------------------
$78,821 79,650 64,572 65,046
=====================================================

In December 1995, United transferred securities with
amortized costs of $11 million from the held to maturity category
to the available for sale category. At the date of transfer, the
unrealized gain related to that transfer amounted to $312,500.
These transfers were made as a result of United's reassessment of
the appropriateness of its securities classifications as allowed
by the Financial Accounting Standards Board's special report "A
Guide to Implementation of Statement 115 on Accounting for
Certain Investments in Debt and Equity Securities".

F-13
There were no sales of securities held to maturity during
1995 and 1994. Proceeds from sales of securities held to maturity
during 1993 were $22.6 million. Gross gains of $190,000 along
with gross losses of $38,000 were realized on those sales.

Proceeds from sales of securities available for sale during
1995 and 1994 were $14.7 million and $19.1 million, respectively.
Gross gains were $113,000 and $143,000 for 1995 and 1994, along
with gross losses of $109,000 and $105,000 for 1995 and 1994,
were realized on those sales.

Securities with a carrying value of $38.9 and $29.4 at
December 31, 1995 and 1994, respectively, were pledged to secure
public deposits as required by law.

(4) LOANS AND ALLOWANCE FOR LOAN LOSSES
Major classifications of loans at December 31, 1995 and 1994
are summarized as follows:

1995 1994
---------------------------
(dollars in thousands)

Commercial, financial and agricultural $120,876 105,644
Real estate - construction 29,538 19,707
Real estate - mortgage 216,649 144,971
Consumer loans 77,029 58,904
---------------------------
Total loans 444,092 329,226

Less: Allowance for loan losses 6,545 3,950
---------------------------
Loans, net $437,547 325,276
===========================

During 1995 and 1994, certain executive officers and directors of
United and its Bank Subsidiaries, including their immediate families and
companies with which they are associated, maintained a variety of banking
relationships with the Bank Subsidiaries. Total loans outstanding to
these persons at December 31, 1995 and 1994, amounted to $8,528,000 and
$5,902,000, respectively. The change from December 31, 1994, to December
31, 1995, reflects payments amounting to $3,580,000 and advances of
$6,206,000. 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:

-------------------------------
1995 1994 1993
-------------------------------
(dollars in thousands)

Balance at beginning of year $3,950 3,237 2,592
Allowance for loan losses acquired from White 1,813 - -
Provisions charged to earnings 1,040 935 842
Loans charged off (675) (314) (287)
Recoveries of loans previously charged off 417 92 90
-------------------------------
Balance at end of year $6,545 3,950 3,237
===============================

United serviced approximately $244.8 and $199.4 million of loans for
others at December 31, 1995, and December 31, 1994, respectively.

F-14
(5) BANK PREMISES AND EQUIPMENT
Bank premises and equipment at December 31, 1995 and 1994 are
summarized as follows:

--------------------
1995 1994
(dollars in thousands)
----------------------

Land and land improvements $ 3,332 2,672
Buildings and improvements 10,122 6,539
Furniture and equipment 8,005 6,371
Construction in progress 616 -
--------------------
22,075 15,582

Less accumulated depreciation 6,078 4,114
--------------------
$15,997 11,468
====================

Depreciation expense was approximately $1,313,000, $927,000 and
$725,000 in 1995, 1994 and 1993, respectively.

During 1995 and 1994, payments under cost plus contracts were made
totaling approximately $719,000 and $1,784,000, respectively, to the
business interest of a shareholder and director of United as the general
contractor for the construction of certain new banking facilities.

(6) FHLB ADVANCES
United has 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 4.50% to
7.81% at December 31, 1995. The majority of the advances
represent draws to fund mortgage loans to customers over payment
terms longer than those normally given. The FHLB advances are
collateralized by certain qualifying real estate loans having
Lendable Collateral Value equal to at least 100% of the balance
of advances outstanding under a blanket floating lien security
agreement with the FHLB. The Lendable Collateral Value is
calculated by discounting the total unpaid principal balances of
the loans at 75%. Additionally, all stock of the FHLB owned by
United and other U.S. agency investment securities are pledged as
collateral for the advances.

(7) LONG-TERM DEBT
Long-term debt at December 31, 1995 and 1994, totalled
$11,309,000 and $9,400,000, respectively. Long-term debt at
December 31, 1995 consisted of notes payable to a bank due in
quarterly installments of $282,725, plus interest, through
January 2005, secured by common stock of the Bank Subsidiaries.
Interest is based on the prime rate less fifty (50) basis points.
The loan agreement 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.

Aggregate maturities are approximately $1,130,900 for each
of the next five years and $5,654,500, thereafter.

(8) CONVERTIBLE SUBORDINATED DEBENTURES
Effective July 1, 1993, $500,000 of United's 9% convertible
subordinated debentures were converted at a conversion price of
$5.60 per share into 89,255 shares of common stock plus cash paid
for fractional shares totalling $172. The remaining $1,000,000 of
debentures, subordinate to United's other indebtedness, are
convertible into common stock of United at a conversion price of
$5.60 per share at any time on or before July 1, 1996, unless
previously redeemed. United may redeem the debentures in whole or
in part at anytime after January 1, 1993 at redemption prices,
expressed as a percentage of the principal amount, ranging from
105% in 1993 to 101% in 1997. The debentures mature on July 1,
2000 and bear interest at 9%, payable semi-annually on January 1
and July 1 of each year.

F-15

Certain directors and executive officers of United hold
convertible debentures totaling $700,000 at December 31, 1995 and
1994.

(9) INCOME TAXES
During 1995, 1994 and 1993, United made income tax payments
of approximately $2,315,000, $2,147,000 and $1,745,000,
respectively. Applicable income tax expense of $1,000, $13,000
and $52,000 on net securities gains for 1995, 1994 and 1993,
respectively, is included in the provision for income tax
expense.

The components of income tax expense for the years ended
December 31, 1995, 1994 and 1993 are as follows:

-----------------------------
1995 1994 1993
-----------------------------
(dollars in thousands)

Current $ 2,321 1,945 1,661
Deferred (83) (3) (194)
------- ----- -----
$ 2,238 1,942 1,467
======= ===== =====

The differences between the provision for income taxes and the amount
computed by applying the statutory federal income tax rate of 34 percent to
earnings before taxes are as follows:

Pretax income at statutory rates $ 2,818 2,428 1,927
Add (deduct):
Tax-exempt interest income (767) (704) (609)
Nondeductible interest expense 126 91 71
Other 61 127 78
------- ----- -----
$ 2,238 1,942 1,467
======= ===== =====

The following summarizes the sources and expected tax consequences of future
taxable deductions (income) which comprise the net deferred tax asset at
December 31:

Deferred tax assets:
Allowance for loan losses $ 1,833 1,213
Mortgage loans 63 52
Net operating loss carryforward and credit carryforwards 1,044 8
Unrealized loss on securities available for sale - 128
------- ------
Gross deferred tax assets 2,940 1,401

Deferred tax liabilities:
Premises and equipment (1,074) (682)
Unrealized gain on securities available for sale (184) -
Other (88) (47)
------- ------
Gross deferred tax liabilities (1,346) (729)
------- ------
Net deferred tax asset $ 1,594 672
======= ======

F-16

At December 31, 1995, United had remaining loss
carryforwards of approximately $2 million and $4 million for
Federal and State income taxes, respectively, which begin to
expire in 2008. The use of these carry forwards is limited to
future taxable earnings of United and to annual limitations
imposed by the Internal Revenue Code. United may use no more
than approximately $600,000 annually of its remaining Federal
operating loss carryforwards.

(10) 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
$556,000, $396,000 and $343,000 in 1995, 1994, and 1993,
respectively.

(11) COMMITMENTS
The Bank Subsidiaries 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, standby 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 Bank
Subsidiaries 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 standby letters of credit and financial
guarantees written is represented by the contractual amount of
these instruments. The Bank Subsidiaries 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, the
contract or notional amount of off-balance sheet instruments:

-----------------------
Financial instruments whose contact amounts represent credit risk: 1995 1994
-----------------------
(dollars in thousands)

Commitments to extend credit $47,173 23,993
Standby letters of credit and financial $1,760 1,501
guarantees written

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 Bank
Subsidiaries 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.

Standby letters of credit and financial guarantees written
are conditional commitments issued by the Bank Subsidiaries 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 Bank Subsidiaries 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.

F-17
(12) STOCKHOLDER'S EQUITY
Dividends paid by the Bank Subsidiaries are the primary
source of funds available to United for payment of dividends to
its shareholders and other needs. Applicable Federal and State
statutes and regulations impose restrictions on the amount of
dividends that may be declared by the Bank Subsidiaries. At
December 31, 1995, approximately $5.4 million of the Bank
Subsidiaries' 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 Subsidiary'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 Bank Subsidiaries.

On October 25, 1995, United's Board of Directors declared a
five-for-one stock split effected in the form of a stock
dividend, payable to shareholders of record November 6, 1995.
Share and per share data for all periods presented have been
retroactively restated to reflect the additional shares
outstanding resulting from the stock split.

In 1995, the Board of Directors adopted the Key Employee
Stock Option Plan. Under this plan, options can be granted for up
to 150,000 shares of United's common stock. During 1995, options
for 50,000 shares were granted which are exercisable at $10 per
share, the fair market value at the date of grant. At December
31, 1995, 100,000 shares were available for grant under this
plan.

In 1995, United's Board of Directors amended the Articles of
Incorporation to authorize 10,000,000 shares of preferred stock,
$1.00 par value. At December 31, 1995, there were no preferred
shares issued or outstanding.

(13) SUPPLEMENTAL FINANCIAL DATA
Components of other operating expenses in excess of 1% of
total interest and other noninterest income for the years ended
December 31, 1995, 1994 and 1993 are as follows:

-----------------------------
1995 1994 1993
-----------------------------
(dollars in thousands)

Stationery and supplies $ 439 410 327
Advertising $ 627 379 277

F-18

(14) United Community Banks, Inc. (Parent Company Only) Financial Information

BALANCE SHEETS December 31
----------------------
1995 1994
----------------------

ASSETS (dollars in thousands)

Cash $ 200 83
Investment in Bank Subsidiaries 51,761 32,941
Other assets 4,735 7,937
--------------------
56,696 40,961
====================
LIABILITIES AND STOCKHOLDERS' EQUITY

Other liabilities $ 360 344
Long-term debt 11,309 9,400
Convertible subordinated debentures 1,000 1,000
Stockholders' equity 44,027 30,217
--------------------
$ 56,696 40,961
=====================

STATEMENTS OF EARNINGS Years Ended December 31,
-----------------------------------------
1995 1994 1993
=========================================
(dollars in thousands)

Income:
Dividends from Bank Subsidiaries $ 1,510 1,770 1,323
Other 163 174 -
-----------------------------------------
Total income 1,673 1,944 1,323
-----------------------------------------
Expenses:
Interest on long-term debt and subordinated
debentures 910 729 572
Other 410 209 283
-----------------------------------------
Total expense 1,320 938 855
-----------------------------------------
Earnings before income taxes and equity in
undistributed earnings of Bank Subsidiaries 353 1,006 468
Income tax benefit 346 228 247
-----------------------------------------
Earnings before equity in undistributed
earnings of Bank Subsidiaries 699 1,234 715
-----------------------------------------
Equity in undistributed earnings of Bank Subsidiaries 5,352 3,966 3,487
-----------------------------------------
Net earnings $ 6,051 5,200 4,202
=========================================

F-19

STATEMENTS OF CASH FLOWS Years Ended December 31,
-------------------------------------
1995 1994 1993
-------------------------------------
(dollars in thousands)

Cash flows from operating activities:
Net earnings $ 6,051 5,200 4,202
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Equity in undistributed earnings of Bank (5,352) (3,966) (3,487)
Subsidiaries
Amortization and accretion 185 184 191
Change in:
Other assets (203) 97 198
Accrued interest payable 39 81 (22)
Other liabilities (18) (270) (143)
-------------------------------------
Net cash provided by operating activities 702 1,326 939
-------------------------------------

Cash flows from investing activities:
Purchase of exchangeable payable in kind - (2,846) -
debenture
Cash paid in lieu of fractional shares (10) - -
Capital contribution to Bank Subsidiaries (4,500) (200) (350)
Net cash used in investing activities (4,510) (3,046) (350)

Cash flows from financing activities:
Proceeds from long-term debt 2,539 2,800 -
Repayments of long-term debt (630) (800) (400)
Proceeds from sale of common stock 2,434 - -
Dividends paid (418) (223) (195)
-------------------------------------
Net cash provided (used) by financing 3,925 1,777 (595)
activities
-------------------------------------
Net increase (decrease) in cash 117 57 (6)
Cash at beginning of year 83 26 32
-------------------------------------
Cash at end of year $ 200 83 26
=====================================

F-20

(15) 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 Bank Subsidiaries, 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 Short-Term Investments
-------------------------------
For cash, due from banks and federal funds sold, the carrying amount
is a reasonable estimate of fair value.

Investment Securities
---------------------
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.

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
-----------------------
The carrying value of federal funds purchased approximates their
fair value.

FHLB 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.

Long-Term Debt and Convertible Subordinated Debentures
------------------------------------------------------
Rates currently available to United for debt with similar terms and
remaining maturities are used to estimate fair value of existing
debt.

Commitments to Extend Credit and Standby Letters of Credit
----------------------------------------------------------
Because commitments to extend credit and standby letters of credit
are made using variable rates, the contract value is a reasonable
estimate of fair value.

Limitations
-----------
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial
instrument. These estimates do not reflect any premium or discount
that could result from offering for sale at one time 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.

F-21

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, 1995 and 1994, are as
follows:

December 31, 1995 December 31, 1994
------------------------ ------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
-------- ---------- ------- ----------
(dollars in thousands)

Assets:
Cash and short term investments $31,988 31,988 14,570 14,570
Securities held to maturity 78,821 79,650 62,948 60,421
Securities available for sale 65,046 65,046 14,947 14,947
Mortgage loans held for sale 12,048 12,048 12,395 12,395
Loans, net 437,547 437,053 325,276 323,894

Liabilities:
Deposits 590,656 596,307 393,270 391,609
Federal funds purchased - - 8,300 8,300
FHLB advances 9,001 8,771 12,149 11,034
Long term-debt 11,309 11,309 9,400 9,265
Convertible subordinated debentures 1,000 946 1,000 921

Unrecognized financial instruments:
Commitments to extend credit 47,173 47,173 23,993 23,993
Standby letters of credit 1,760 1,760 1,501 1,501

F-22

UNITED COMMUNITY BANKS, INC. & SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)

September 30, December 31,
1996 1995
------------- ------------
ASSETS (In Thousands)

Cash and due from banks $ 26,467 20,758
Federal funds sold 12,855 11,230
---------- ---------
Cash and cash equivalents 39,322 31,988
---------- ---------

Securities held to maturity (estimated fair value of
$74,346 and $79,650) 74,626 78,821
Securities available for sale 70,012 65,046

Mortgage loans held for sale 6,360 12,048

Loans 558,325 444,092
Less: Allowance for loan losses (7,369) (6,545)
---------- ---------
Loans, net 550,956 437,547

Premises and equipment 17,615 15,997
Accrued interest receivable 7,667 6,462
Other assets 13,007 11,760
---------- ---------
$ 779,565 659,669
========== =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand $ 73,553 62,753
Interest-bearing demand 170,284 114,825
Savings 40,068 38,947
Time 396,432 374,131
---------- ---------
Total deposits 680,337 590,656

Repurchase agreements 2,000 -
Accrued expenses and other liabilities 5,588 3,676
Federal Home Loan Bank advances 31,138 9,001
Long-term debt 10,736 11,309
Convertible subordinated debentures 1,000 1,000
---------- ---------
Total liabilities 730,799 615,642
---------- ---------

Stockholders' equity:
Preferred Stock - -
Common stock, $1 par value; 10,000,000 shares authorized;
6,260,280 shares issued and outstanding 6,260 6,260
Capital surplus 14,520 14,520
Net unrealized gain (loss) on investment securities available
for sale, net of tax (485) 251
Retained earnings 28,471 22,996
---------- ---------
Total stockholders' equity 48,766 44,027
---------- ---------
$ 779,565 659,669
========== =========

See accompanying notes to consolidated financial statements. F-23

UNITED COMMUNITY BANKS, INC. & SUBSIDIARIES
Consolidated Statements of Earnings
(Unaudited)

For the Three Months Ended For the Nine Months Ended
September 30, September 30,
-------------------------- -------------------------
1996 1995 1996 1995
---- ---- ---- ----
(In Thousands Except Per Share Data)

INTEREST INCOME:
Interest and fees on loans $ 13,856 10,525 38,786 29,520
Interest on deposits with other banks 13 14 47 37
Interest on federal funds sold 243 340 660 837
Interest on investment securities:
U.S. Treasury and U.S. Government agencies 1,499 1,158 4,588 3,128
State, county and municipal 480 458 1,413 1,375
--------- --------- --------- ---------
Total interest income 16,091 12,495 45,495 34,897
--------- --------- --------- ---------

INTEREST EXPENSE:
Interest on deposits:
Demand 1,629 859 3,647 2,587
Savings 263 241 783 740
Time 5,647 5,243 17,214 13,856
--------- --------- --------- ---------
7,539 6,343 21,644 17,183
--------- --------- --------- ---------
Long-term debt, subordinated debentures and
federal funds purchased 493 446 1,218 1,439
--------- --------- --------- ---------
Total interest expense 8,032 6,789 21,644 18,622
--------- --------- --------- ---------

Net interest income 8,059 5,706 22,633 16,275
--------- --------- --------- ---------
Provision for loan losses 348 326 915 746
--------- --------- --------- ---------
Net interest income after provision for
loan losses 7,711 5,380 21,718 15,529
--------- --------- --------- ---------
NONINTEREST INCOME:
Service charges and fees 667 481 1,940 1,381
Securities gains, net 2 (1) 17 2
Mortgage loan and related fees 361 475 1,218 1,104
Other noninterest income 215 212 565 611
--------- --------- --------- ---------
Total noninterest income 1,245 1,167 3,740 3,098
--------- --------- --------- ---------

NONINTEREST EXPENSE:
Salaries and employee benefits 3,279 2,434 9,380 7,042
Occupancy 775 677 2,402 1,956
Deposit insurance premiums 3 (36) 20 453
Other noninterest expense 1,732 1,244 5,001 3,160
--------- --------- --------- ---------
Total noninterest expense 5,789 4,319 16,803 12,611
--------- --------- --------- ---------

Earnings before income taxes 3,167 2,228 8,655 6,015

Income taxes 1,013 704 2,930 1,857
--------- --------- --------- ---------
NET EARNINGS $ 2,154 1,524 5,725 4,158
========= ========= ========= =========

Net earnings per common share $ 0.34 0.26 0.91 0.73

Weighted average shares outstanding 6,260 280 5,815,430 6,260,280 5,665,545

See accompanying notes to consolidated financial statements. F-24

UNITED COMMUNITY BANKS, INC. & SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)

For the Nine Months Ended
September 30,
--------------------------
1996 1995
---- ----
(In Thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 5,725 4,158
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation, amortization and accretion 1,636 1,280
Provision for loan losses 915 746
Gain on sale of investment securities (17) (2)
Change in assets and liabilities:
Interest receivable (1,205) (1,170)
Interest payable (174) 611
Other assets (163) (719)
Accrued expenses and other liabilities 1,513 (114)
Change in mortgage loans held for sale 5,688 (119)
-------- -------
Net cash provided by operating activities 13,918 4,671
-------- -------

CASH FLOWS FROM INVESTING ACTIVITIES:
Cash acquired from acquisitions 2,685 8,508
Proceeds from maturities and calls of securities held to maturity 12,531 5,900
Purchases of securities held to maturity (8,413) (13,175)
Proceeds from sales of securities available for sale 12,185 9,800
Proceeds from maturities and calls of securities available for sale 21,038 6,776
Purchases of securities available for sale (39,486) (45,340)
Net change in interest-bearing deposits with other banks - 299
Net increase in loans (95,136) (52,792)
Proceeds from sales of other real estate 54 69
Purchase of bank premises and equipment (1,562) (1,981)
-------- -------
Net cash used in investing activities (96,104) (81,936)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in demand and savings deposits 57,368 19,231
Net change in time deposits 8,838 78,336
Net increase in federal funds purchased and repurchase agreements 2,000 (8,300)
Proceeds from long-term debt - 539
Repayments of long-term debt (573) 7,346
Proceeds from FHLB advances 22,375 (630)
Repayments of FHLB advances (238) (7,571)
Proceeds from sale of common stock, net of costs 2434
Dividends paid (250) (279)
-------- -------
Net cash provided by financing activities 89,520 91,106
-------- -------

Net increase in cash and cash equivalents 7,334 13,841
Cash and cash equivalents at beginning of period 31,988 14,570
-------- -------
Cash and cash equivalents at end of period $ 39,322 28,411
======== =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 23,036 18,011
Income taxes $ 2,750 1,645
SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Change in dividends payable $ - 110
Transfers of loans to other real estate owned $ 388 195
Change in unrealized gain (loss) on securities available for sale $ (1,162) 302

See accompanying notes to consolidted financial statements. F-25

UNITED COMMUNITY BANKS, INC. & SUBSIDIARIES

Notes to Consolidated Financial Statements

The accompanying consolidated financial statements have not
been audited. The results of operations are not necessarily
indicative of the results of operations for the full year or any
other interim periods.

The accounting principals followed by United Community Banks,
Inc. ("United") and its bank subsidiaries and the methods of
applying these principals conform with generally accepted
accounting principals and with general practices within the
banking industry. Certain principals which significantly affect
the determination of financial position, results of operation and
cash flows are summarized below and in United's annual report on
Form 10-K for the year ended December 31, 1995.

(1) Basis of Presentation
----------------------
The consolidated financial statements include the accounts of
United and its wholly-owned subsidiaries, Union County Bank
(UCB), Citizens Bank (Citizens), Peoples Bank (Peoples), Towns
County Bank (Towns) and White County Bank (White) . All
significant intercompany accounts and transactions have been
eliminated in consolidation. Certain items in prior period's
financial statements have been reclassified to conform with the
current financial statement presentation.

The consolidated financial information furnished herein
reflects all adjustments which are, in the opinion of management,
necessary to present a fair statement of the results of
operations and financial position for the periods covered herein
and are normal and recurring in nature. For further information,
refer to the consolidated financial statements and footnotes
included in United's annual report on Form 10-K for the year
ended December 31, 1995.

(2) Earnings Per Share
------------------
Net earnings per common share are based on the weighted
average number of common shares outstanding during each period.
The assumed conversion of the convertible subordinated debentures
and exercise of stock options do not result in material dilution.
All share and per share data have been adjusted to reflect the
October 1995, five-for-one split, effected in the form of a stock
dividend, paid on November 6, 1995.

(3) Acquisition of Branch Offices
-----------------------------
On May 25, 1995, United executed a Purchase and Assumption
Agreement to acquire certain assets and deposit liabilities of
the Franklin and Waynesville, North Carolina branch offices of
Nations Bank, N.A. These branch offices had total assets of $14.8
million, total loans of $11.1 million and total deposits of $26.1
million as of October 19, 1995, the date of closing.

F-26
On June 6, 1996, United executed a Purchase and Assumption
Agreement to acquire certain assets and deposit liabilities of
the Cornelia, Georgia branch office of the First National Bank of
Commerce. This branch office had total assets of $36 million,
total loans of $31 million and total deposits of $24 million as of
September 30, 1996, the date of closing.

(4) Recently Issued Accounting Standards
------------------------------------
During 1995, the Financial Accounting Standards Board (FASB)
issued SFAS No. 123, "Accounting for Stock-Based Compensation."
This new standard became effective January 1, 1996, and will
require United to disclose the fair value of employee stock
options granted in 1995 and subsequent years. Since United will
not be required to record the options at fair market value,
management does not expect this new standard to have a material
impact on the consolidated financial statements.

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations
OVERVIEW
Net earnings for the nine months ended September 30, 1996
increased to $5.7 million or 38 percent over net earnings for the
first nine months of 1995. Net earnings per common share for the
first nine months also increased 25 percent from the same period
in 1995 to $.91. Net interest income increased 39 percent for
the nine months ended September 30, 1996 over the same period of
1995 to $23.6 million. For the first half of 1996, the provision
for loan losses increased 23 percent to $915.000 for the nine
month period. Noninterest income and expense rose 21 percent and
33 percent respectively over the first three quarters of 1995.

NET INTEREST INCOME
Net interest income for the nine months ended September 30, 1996
increased $6.4 million over the first three quarters of 1995.
This increase was the result of a $10.6 million, or 30 percent
increase in interest income, offset by a $4.2 million increase
in interest expense. The increase in interest income was
primarily due to an increase in average earning assets
of $146 million.

Interest expense for the nine months ended September 30, 1996,
increased $4.2 million, or 23 percent from the prior year, due
primarily to a 29% increase in average core deposits, offset
slightly by a decrease in the average yield on source of funds
from 4.93% to 4.68%.

NET INTEREST MARGIN
The difference between the overall interest income on earning
assets and the interest expense paid on all funding sources,
including noninterest bearing deposits, is referred to as the net
interest margin. For the first three quarters of 1996 the net
interest margin was 4.64 percent compared to 4.32 percent for the
same period in 1995. This 32 basis point increase resulted from
a stable rate environment as well as a favorable change in the
core deposit mix.

F-27
NONINTEREST INCOME AND EXPENSE
Noninterest income for the first nine months of 1996 increased
$642 thousand, or 21 percent over the same period in 1995.
Service charges on deposits increased over $559 thousand, or 40
percent during the first nine months, principally as a result of
an increased number of deposit accounts being serviced. This
increase is a result of continued growth and the White County and
the Citizens' branch banking acquisitions. Mortgage loan and
related fees increased $114 thousand, or 10% as a result of
declining rate environment for a majority of the first nine
months of 1996. Gains on investment securities sold during the
first three quarter of 1996 were not material.

Noninterest expenses increased $4.2 million during the first
nine months of 1996 over the same period in 1995. Salaries and
employee benefits increased $2.3 million, or 33 percent, for the
first three quarters. The increase in salaries and benefits was
the result of an additional 72 employees compared to the same
period in 1995. The number of employees increased primarily as a
result of the White County acquisition as well as the branch
banking facilities acquired by Citizens as discussed earlier.
Net occupancy expense increased $446 thousand due primarily to an
increase in the depreciation and other occupancy expenses
associated with the increased number of banking facilities. FDIC
deposit insurance premiums decreased $433 thousand as a result of
the recalculated FDIC assessment. Other noninterest expense,
including stationary and supplies and advertising , increased
$1.8 million during the first three quarters of 1996.

INCOME TAXES
Income tax expense increased during the first three quarters of
1996 compared to the same period in 1995 by $1.1 million. The
effective tax rates for the nine months ended September 30, 1996
and 1995 were 35 percent and 30 percent, respectively. The
increases are due primarily to the combined efforts of increased
levels of pretax income, and a lower mix of tax-exempt
securities held in the investment portfolio. Management expects
the trend of an increasing effective tax rate to continue.

PROVISION AND ALLOWANCE FOR POSSIBLE LOAN LOSSES
The provision for loan losses for the nine months ended September
30, 1996 increased 23 percent to $915 thousand from the $746
thousand reported for the same period in 1995. Management
considers the size and character of the loan portfolio, changes
in nonperforming and past due loans, historical loan loss
experience, the existing risk of individual loans, concentrations
of loans to specific borrowers and existing and prospective
economic conditions when determining the adequacy of the
allowance for loan losses. The allowance for loan losses at
September 30, 1996 was $7.4 million compared to $6.5 million at
December 31, 1995. The ratio of the allowance for loan losses to
loans outstanding at September 30, 1996 was 1.32 percent
compared to 1.48 percent at December 31, 1995. The reduction in
the ratio reflects the improvement in the quality of United's
loan portfolio. It is management's belief that the allowance for
loan losses is adequate to absorb probable loss in the portfolio.

F-28
NONPERFORMING ASSETS AND PAST DUE LOANS
Nonperforming assets, comprised of nonaccrual loans, other real
estate owned and loans for which payments are more than 90 days
past due, decrease $1.3 million to $ 850 thousand at September
30, 1996 from $2.2 million at December 31, 1995. In addition,
Nonperforming assets as a percentage of total loans and other
real estate owned improved to .15 percent at September 30, 1996
from .48 percent at December 31, 1995.

United regularly monitors selected accruing loans for which
general economic conditions or changes within a particular
industry could cause the borrowers financial difficulties. This
continuous monitoring of the loan portfolio and the related
identification of loans with a high degree of credit risk are
essential parts of United's credit management. Management
continues to emphasize maintaining a low level of nonperforming
assets and returning current nonperfroming assets to an earning
status.

At September 30, 1996, management was unaware of any known
trends, events or uncertainties that will have or that are
reasonably likely to have a material effect on United's
liquidity, capital resources or operations.

Financial Condition

OVERVIEW
Total assets at September 30, 1996 were $780 million representing
a $120 million or a 18 percent increase from December 31, 1995
and a $158 million or a 25 percent increase from September 30,
1995. The growth from prior year is primarily attributed to an
increase in market share of approximately $109 million and $49
from acquisitions.

ASSETS AND FUNDING
At September 30, 1996, earning assets totaled $722 million, an
increase of $111 million from December 31, 1995. The earning
assets mix improved slightly in the first nine months with loans
representing 77% of the total earning assets as compared to 73%
percent at December 31, 1995.

Interest bearing deposits at September 30, 1996 increased $79
million from December 31, 1995, while non-interest bearing
deposits increased over $11 million since December 31, 1995. At
September 30, 1996, deposits accounted for 87 percent of United's
funding, from 90 percent at December 31, 1995.

LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities totaled $14 million for
the nine months ended September 30, 1996. For the three quarters
of 1996, net cash used from investing activities of $96 million
consisted of proceeds from maturities of investments securities
of $34 million, proceeds from sales of investment securities of
$12 million, cash acquired from acquisitions of $3 million and
offset by cash outflows of $47 million in investment securities
purchases, a $95 million increase in loans outstanding and purchase

F-29
of bank premises and equipment of $1.5 million. Net cash provided
by financing activities consisted largely of $66 million increase
in deposit and time accounts, $22 million from additional FHLB
advances, and were offset slightly by payments of $811 thousand
on United's long-term debt and FHLB repayments.

Total stockholders' equity at September 30, 1996, was 6.26
percent of total assets compared to 6.67 percent at December 31,
1995. The slight decrease since year end 1995 reflects the asset
growth of $120 million and the change of $736 thousand in the
unrealized loss in United's available for sale investment
portfolio offset by retained earnings from the first nine months
of 1996.

F-30

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

No dealer, sales person or other person has been
authorized to give any information or to make any repre-
sentations other than those contained in this Prospectus,
and, if given or made, such information or representations
must not be relied upon as having been authorized by
United. This Prospectus does not constitute an offer to 250,000 Shares of Common Stock
sell or the solicitation of any offer to buy any security
other than the securities to which it relates or an offer
to sell or the solicitation of an offer to buy such
securities in any circumstances in which such offer or
solicitation is unlawful. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that there has been
no change in the affairs of United since the date hereof
or that the information contained herein is correct as of UNITED COMMUNITY BANKS, INC.
any time subsequent to its date.

_______________ ______________

PROSPECTUS
______________

TABLE OF CONTENTS
Page

Prospectus Summary . . . . . . . . . . . . . . . 1
Risk Factors . . . . . . . . . . . . . . . . . . 4
Determination of Offering Price . . . . . . . . . 5
Market For and Price Range of Common Stock . . . 5
Use of Proceeds . . . . . . . . . . . . . . . . . 5
Capitalization . . . . . . . . . . . . . . . . . 5
Dividends . . . . . . . . . . . . . . . . . . . . 6
Management's Discussion and Analysis of
Financial Condition and Results of JANUARY 31, 1997
Operations . . . . . . . . . . . . . . . . . . 7
Business . . . . . . . . . . . . . . . . . . . . 24
Supervision and Regulation . . . . . . . . . . . 30
Management . . . . . . . . . . . . . . . . . . . 35
Principal Shareholders . . . . . . . . . . . . . 39
Certain Transactions . . . . . . . . . . . . . . 41
Description of Securities . . . . . . . . . . . . 41
Shares Eligible for Future Sale . . . . . . . . . 43
The Offering . . . . . . . . . . . . . . . . . . 43
Pro Forma Consolidating Statements of Earnings . 44
Pro Forma Consolidating Balance Sheet . . . . . 47
Legal Matters . . . . . . . . . . . . . . . . . . 48
Experts . . . . . . . . . . . . . . . . . . . . . 48
Additional Information . . . . . . . . . . . . . 48
Index to Financial Statements . . . . . . . . . . F-1

50
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

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

Securities and Exchange Commission Registration Fee . . . . . . . . . . . . . $ 1,515.15
Blue Sky Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . *
Printing and Engraving Expenses . . . . . . . . . . . . . . . . . . . . . . . *
Legal Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . *
Accounting Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . *

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ *

___________________________________________
* To be filed by amendment

ITEM 14. INDEMNIFICATION

Under Article Seven of United's Bylaws, United is required to
indemnify and hold harmless its directors, officers and agents against
judgments, fines, penalties, amounts paid in settlement, and expenses,
including attorney's fees, resulting from various types of legal actions
or proceedings if the actions of the party being indemnified meet the
standards of conduct specified therein. Determination concerning whether
or not the applicable standard of conduct has been met can be made by (a)
a disinterested majority of the Board of Directors, (b) independent legal
counsel, (c) an affirmative vote of a majority of shares held by the
shareholders. No indemnification may be made to or on behalf of a
corporate director, officer, employee or agent (I) in connection with a
proceeding by or in the right of the corporation in which such person was
adjudged liable on the basis that personal benefit was improperly
received by him. As provided under Georgia law, the liability of a
director may not be eliminated or limited (a) for any appropriation, in
violation of his duties, of any business opportunity of United, (b) for
acts or omissions which involve intentional misconduct or a knowing
violation of law, (c) for unlawful corporate distributions or (d) for any
transaction from which the director received an improper benefit.

United's directors and officers are insured against losses arising
from any claim against them as such for wrongful acts or omissions,
subject to certain limitations.

ITEM 15 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.

51
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

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

3.1 -- Articles of Incorporation of United, as amended
(included on Exhibit 3.1 to United's Registration
Statement on Form S-1, Commission File No. 33-
93286 previously filed with Commission and
incorporated herein by reference).

3.2 -- By-Laws of United, as amended (included as Exhibit
3.2 to United's Annual Report on Form 10-K for the
year ended December 31, 1994, previously filed
with the Commission and incorporated herein by
reference).

4.1 -- See exhibits 3.1 and 3.2 for provisions of
Articles of Incorporation and By-laws, as amended,
which define the rights of the holders of Common
Stock of United.

4.2 -- Form of Floating Rate Convertible Subordinated
Payable In Kind Debenture due December 31, 2006.

5 -- Opinion of Kilpatrick & Cody, L.L.P.

10.1 -- Agreement, dated May 3, 1984, by and between
Cornelia Bank and Union County Bank (included as
Exhibit 10.8 to United's Registration Statement on
Form S-18, Commission File No. 33-32205-A,
previously filed with the Commission and
incorporated herein by reference).

10.2(a) -- Union County Bank Retirement Plan and Trust
Agreement, as amended and restated as of
January 1, 1993 (included as Exhibit 10.4 to
United's Form 10-K for the year ended December 31,
1992, previously filed with the Commission and
incorporated herein by reference).

10.2(b) -- Amendment No. 1 to the Union County Bank
Retirement Plan and Trust, dated December 29, 1993
(included as Exhibit 10.3(b) to United's Annual
Report on Form 10-K for the year ended December
31, 1993, previously filed with the Commission and
incorporated herein by reference).

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

10.4 -- Split-Dollar Agreement between United and Jimmy C.
Tallent dated June 1, 1994 (included as Exhibit
10.11 to United's Annual Report on Form 10-K for
the year ended December 31, 1994, previously filed
with the Commission and incorporated herein by

10.5 -- 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 United's Registration Statement
on Form S-4, Commission File Number 33-93286,
previously filed with the Commission and
incorporated herein by reference).

10.6 -- 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 United's Registration Statement on Form S-
4, Commission File Number 33-93286, previously
filed with the Commission and incorporated herein
by reference).

10.7 -- 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 United's
Registration Statement on Form S-4, Commission
File No. 33-93286, previously filed with the
Commission and incorporated herein by reference).

10.8 -- Purchase and Assumption Agreement by and between
Carolina Bank and NationsBank, N.A. (Carolinas)
dated May 25, 1995 (included as Exhibit 10.16 to
United's Registration Statement on Form S-1,
Commission File Number 33-93278, previously filed
with the Commission and incorporated herein by
reference).

10.9 -- Loan Agreement dated April 26, 1995, by and
between The Bankers Bank and the Registrant,
together with the related Promissory Note in the
principal amount of $15,000,000 and Stock Pledge
Agreement (included as Exhibit 10.17 to United's
Registration Statement on Form S-1, Commission
File Number 33-93278, previously filed with the
Commission and incorporated herein by reference).

10.10 -- Broker Dealer Agreement between the Registrant and
The Carson Medlin Company dated January 28, 1997
and amendment thereto dated January 28, 1997

21 -- Subsidiaries of United.

23.1 -- Consent of Porter Keadle Moore, L.L.P.

23.2 -- Consent of Kilpatrick & Cody, L.L.P. (included as
part of Exhibit 5).

(b) No Financial Statement Schedules are required to
be filed as part of this Registration Statement.

53
ITEM 17. UNDERTAKINGS

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

54
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933,
United Community Banks, Inc. has duly caused this Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Blairsville, State of
Georgia, on January 29, 1997.

UNITED COMMUNITY BANKS, INC.

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

POWER OF ATTORNEY

Know all men by these presents, that each person whose
signature appears below constitutes and appoints Jimmy C. Tallent
or 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 Registration Statement
on Form S-1 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 Act of
1933, as amended, this Registration Statement has been signed by
the following persons in the capacities indicated on January 29,
1997.

Signature Title

/s/ Jimmy C. Tallent President and Director (Principal Executive
Jimmy C. Tallent Officer)

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

/s/ Christopher J. Bledsoe Chief Financial Officer (Principal Accounting
Christopher J. Bledsoe and Financial Officer)

/s/ James A. Brackett
James A. Brackett Director

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

[SIGNATURES CONTINUED ON FOLLOWING PAGE]

55
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]

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

/s/ Charles E. Hill
Charles E. Hill Director

/s/ Hoyt O. Holloway
Hoyt O. Holloway Director

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

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

/s/ W. C. Nelson, Jr.
W. C. Nelson, Jr. Director

EXHIBIT INDEX

Exhibit
No. Description of Exhibit

5 and 23.2 -- Opinion and Consent of Kilpatrick & Cody, L.L.P. *

4.2 -- Form of Floating Rate Convertible Subordinated Payable In
Kind Debenture due December 31, 2006

10.10 -- Broker Dealer Agreement between the Registrant and The
Carson Medlin Company dated January 28, 1997 and amendment
thereto dated January 28, 1997

21 -- Subsidiaries of United

23.2 -- Consent of Porter Keadle Moore, L.L.P.
_________________________________________________________
* To be filed by amendment

57
EXHIBIT A
UNITED COMMUNITY BANKS, INC.

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

SUBSCRIPTION FOR COMMON STOCK

Gentlemen:

United Community Banks, Inc. (the "Company") is offering to sell
shares of Common Stock (the "Shares") at a price of $20.00 per share.

The undersigned hereby tenders this subscription for the purchase of
the number of Shares set forth below, to SunTrust Bank, Atlanta, 58
Edgewood Avenue, Room 200, Atlanta, Georgia 30303. The undersigned has
also enclosed a check, bank draft or money order which represents the
full subscription price, payable to the Company.

The Shares purchased by the undersigned shall be registered as
specified below. If Shares are to be issued in more than one name,
please specify whether ownership is to be as individual owner, tenants in
common, joint tenants with right of survivorship, community property,
etc. If Shares are to be held in joint ownership, all joint owners
should sign this subscription. If Shares are to be issued in the name of
one person for the benefit of another, please indicate whether
registration should be as trustee or custodian for such other person.

The undersigned certifies, acknowledges and agrees that:

1. The undersigned has received a copy of the Company's Prospectus
and has read and considered the Prospectus, and by executing this
subscription agreement, the undersigned acknowledges and agrees to all
the terms and conditions of the offering as described in the Prospectus
and all the terms and conditions of this subscription. The subscriber by
executing this subscription is not waiving any rights available under
applicable federal or state securities laws.

2. A subscription is not binding until accepted by the Company.
The Company reserves the right to accept or reject a subscription, in
whole or in part, in its sole discretion.

3. The undersigned acknowledges that there is no public market for
the Shares, nor is a public market expected to develop after this
offering.

4. The undersigned represents that he/she is (i) either a
shareholder of the Company prior to the date of the Prospectus (ii) a
resident of the State of Georgia or (iii) a resident of the State of
North Carolina.

IN WITNESS WHEREOF, the undersigned has executed this subscription
on the date set forth below and has returned the subscription, with the
full subscription price for the Shares, to the Company.

Date:_______________________________, 1997 _______________________________
Signature of Subscriber

Number of Shares Subscribed _______________________________
for (at $20.00 per Share) ________________ Signature of Subscriber

Total Subscription Price $_______________ _______________________________
Print Name(s) in which Shares
are to be Registered

Home Address and Personal Information
about Person in whose Name the Shares
are to be Registered:

______________________________________ ______________________________
Street Address Social Security/Taxpayer
Identification Number
of Person in whose name the
shares are to be registered

______________________________________ _______________________________
City/State/Zip Code Telephone Number

          THIS DEBENTURE AND THE SHARES INTO WHICH IT IS CONVERTIBLE
(THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "FEDERAL ACT") OR THE GEORGIA SECURITIES
ACT OF 1973, AS AMENDED (THE "GEORGIA ACT"), BUT HAVE BEEN ACQUIRED
BY THE REGISTERED OWNER HEREOF FOR PURPOSES OF INVESTMENT AND IN
RELIANCE ON THE STATUTORY EXEMPTIONS CONTAINED IN SECTION 4(2) OF
THE FEDERAL ACT AND IN SECTION 10-5-9(13) OF THE GEORGIA ACT.  THE
SECURITIES MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR ASSIGNED EXCEPT
IN A TRANSACTION WHICH IS EXEMPT UNDER THOSE ACTS, OR PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT THEREUNDER OR IN A TRANSACTION
OTHERWISE IN COMPLIANCE WITH THE GEORGIA ACT AND OTHER APPLICABLE
STATE AND FEDERAL SECURITIES LAWS, AND IN THE CASE OF AN EXEMPTION,
UNLESS THE CORPORATION HAS RECEIVED AN OPINION OF COUNSEL,
SATISFACTORY TO IT, OR A COMMUNICATION FROM THE SECURITIES AND
EXCHANGE COMMISSION, THAT SUCH TRANSACTION DOES NOT REQUIRE
REGISTRATION OF THE SHARES UNDER THESE ACTS.



____________________, 1996

No.____________________________              $___________________


                    UNITED COMMUNITY BANKS, INC.
  FLOATING RATE CONVERTIBLE SUBORDINATED PAYABLE IN KIND DEBENTURE
                        DUE DECEMBER 31, 2006


          United Community Banks, Inc. (the "Company"), a Georgia
corporation, for value received, hereby promises to pay to the
order of ________________________________________________________
, or registered assigns (the "Record Holder"), __________________
______________________________ DOLLARS ($______________) (the
"principal amount") on December 31, 2006 (the "Maturity Date")
with interest on the outstanding and unpaid principal amount
hereof at the simple interest rate per annum of one quarter of
one percentage point above the Prime Rate as defined herein. 
This Debenture is one of a series of Floating Rate Convertible
Subordinated Payable in Kind Debentures due December 31, 2006
issued by the Company and limited to an aggregate principal
amount of $3,500,000.

          THIS DEBENTURE IS AN UNSECURED DEBT OBLIGATION OF THE
COMPANY ONLY, IS NOT AN OBLIGATION OF, OR A DEPOSIT IN, A BANK,
AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER FEDERAL AGENCY.

          1.   Interest
               --------

               (a)  Accrued interest on this Debenture shall be
     payable quarterly on the first (1st) day of the calendar
     quarter following the quarter in which it accrues,
     commencing on April 1, 1997 and continuing to be due on each
     July 1, October 1, January 1 and April 1 thereafter so long
     as this Debenture is outstanding, together with a final
     payment of interest which shall be due on the date indicated
     herein on which the final payment of principal is due
     hereunder.  Each payment of accrued interest on this
     Debenture payable on any interest payment date shall be made
     to the Record Holder as of the close of business on the 15th
     day of the month immediately preceding such payment date. 
     Such interest shall be calculated on the basis on the actual
     number of days elapsed and a year of 365 or 366 days, as
     applicable.
               (b)  Interest may be payable, at the option of the
     Board of Directors of the Company, in cash or in an
     additional debenture of like kind and tenor herewith with
     the principal amount thereof equal to the amount of interest
     so paid (an "Interest Debenture").

               (c)  When interest in cash is not paid in full on
     the Debenture and on any other indebtedness of the Company
     ranking pari passu as to interest with the Debenture, all
     cash interest paid on the Debenture and such other
     indebtedness shall be paid pro rata so that the amount of
     cash interest paid on the Debenture and such other
     indebtedness shall bear to each other the same ratio that
     unpaid cash interest on the Debenture and such other
     indebtedness, to the date of such interest payment, bear to
     each other.

               (d)  As used herein, the term "Prime Rate" shall
     mean the rate of interest equal to the lowest rate quoted as
     the "Prime Rate" from time to time in the Money Rates column
     of the issue of The Wall Street Journal.  For purposes of
     calculating interest hereunder, the Prime Rate in effect on
     the last business day of each calendar quarter shall be the
     Prime Rate for the entire succeeding calendar quarter;
     provided, however, from the date hereof to, but not
     including January 1, 1997, the Prime Rate shall be 8.25%. 
     In the event the Prime Rate is discontinued as a standard,
     the Company shall designate a comparable reference rate as a
     substitute therefor.  

               2.   Optional Redemption by the Company
                    ----------------------------------

               (a)  The Debenture and the Interest Debentures
     (collectively the "Debentures") shall not be redeemable
     prior to January 1, 1998.  At any time thereafter, subject
     to the following limitations, the Company, at its sole
     option, may redeem the whole or any part of the then
     outstanding Debentures by paying in cash for the Debentures
     an amount equal to 100% of the principal amount of the
     Debentures to be redeemed plus all accrued but unpaid
     interest on the Debentures (the "Redemption Price").

               (b)  Notice of redemption shall be mailed
     (certified mail, postage prepaid) not less than twenty (20)
     days nor more than sixty (60) days prior to the redemption
     date specified in that notice, to the Record Holder of the
     Debentures at the address appearing on the Company's records
     for the Debentures.  Each such notice shall state: (i) the
     redemption date; (ii) the applicable Redemption Price; and
     (iii) the place or places at which the certificates
     representing the Debentures are to be surrendered for
     payment of the Redemption Price.

               (c)  If notice of redemption has been given
     pursuant to Section 2(b) above and if, on or before the
     redemption date specified in such notice, the funds
     necessary for such redemption have been irrevocably
     deposited by the Company with a Paying Agent (as defined in
     Section 2(d) below), then from and after the redemption
     date, notwithstanding that the certificate for the
     Debentures shall not have been surrendered for cancellation
     or that such Debentures may have been transferred (whether

                                  -2-
     with or without the Company's permission), (i) the
     Debentures so called for redemption shall no longer be
     deemed outstanding, (ii) all interest shall cease to accrue
     thereon, and (iii) all other rights with respect to such
     Debentures shall cease and terminate (except the right to
     receive the Redemption Price upon a surrender of the
     Debentures).  Upon surrender, in accordance with said
     notice, of the Debentures, the Debentures shall be redeemed
     by the Company at the Redemption Price.

               (d)  On or before the redemption date, the Company
     shall deposit with an agent that is a bank or a trust
     company (the "Paying Agent"), or otherwise designate or set
     aside as provided in Section 2(c) above, funds sufficient to
     pay the Redemption Price for the Debentures on the
     redemption date.  Any interest earned on funds so
     designated, set aside or deposited with a Paying Agent shall
     be retainable by or payable to the Company, and the holder
     of the Debentures shall have no rights with respect thereto.

               3.   Conversion
                    ----------

               (a)  Subject to and upon compliance with the
     provisions of this Section 3, the Record Holder of the
     Debenture may, at its option, convert any or all of such
     Debenture for shares of common stock of the Company
     ("Company Stock") at the rate of one share of Company Stock
     (the "Conversion Factor") for each $25 (the "Conversion
     Price") of Conversion Value (as defined below) of the
     Debenture so converted, subject to adjustments as set forth
     below.  The "Conversion Value" of the Debenture shall be
     equal to the principal amount thereof.  If a residual amount
     of Conversion Value remains following a conversion of the
     Debenture tendered for conversion (that is, an amount less
     than the then effective Conversion Price for another whole
     share of Company Stock), the Company shall pay to the Record
     Holder in cash such residual amount of Conversion Value in
     lieu of any fractional share of Company Stock.  If the
     Debenture is called for redemption as provided in Section 2
     hereof, the conversion rights pertaining thereto will
     terminate at the close of business five (5) business days
     immediately preceding the redemption date thereof.

               (b)  A Record Holder of the Debentures may
     exercise the conversion right as to any amount of a
     Debenture (but not as to an amount, if less than the full
     amount of the Debenture, of Conversion Value that is less
     than the then-effective Conversion Price for a whole share
     of Company Stock) by delivering to the Company during
     regular business hours, at its principal executive office or
     at any such other place as may be designated by the Company,
     the Debenture to be converted, duly endorsed or assigned in
     blank (or to the Company if required by it), and accompanied
     by written notice stating that the Record Holder elects to
     convert the Debenture, stating the amount thereof to be
     converted if less than the full amount, and stating the name
     or names (with addresses) in which the certificate or
     certificates for the Company Stock are to be issued and a
     completed Internal Revenue Service Form W-9, or any
     successor form or forms substitutable therefor, executed by
     any transferee.  The conversion shall be deemed to have been
     effected on the date when such delivery is made, and such

                                  -3-
     date is referred to herein as the "Conversion Date."  From
     and after the Conversion Date, no further interest shall
     accrue with respect to the Debenture.  As promptly as
     practicable after the Conversion Date, the Company shall
     issue and deliver to or upon the written order of the Record
     Holder a certificate or certificates for the number of full
     shares of Company Stock to which the Record Holder is
     entitled, and a check or cash in respect of any residual
     amount of Conversion Value.  Any person in whose name the
     certificate or certificates for shares of Company Stock are
     to be issued shall be deemed to become a holder of record of
     such shares on the applicable Conversion Date, unless the
     transfer books of the Company are closed on that date, in
     which event such person shall be deemed to have become a
     holder of record of such shares on the next succeeding date
     on which the transfer books are open, but the applicable
     Conversion Factor and Conversion Value shall be those in
     effect on the Conversion Date.

               (c)  No fractional shares of Company Stock, or
     scrip in respect thereof, shall be issued upon conversion of
     the Debenture.  Instead, in any case in which a fractional
     share of Company Stock would otherwise be issuable because
     the amount of remaining Conversion Value is less than the
     then-effective Conversion Price for a whole share of Company
     Stock, the Company shall pay the exchanging Record Holder
     the cash amount of such remaining Conversion Value.

               (d)  The Conversion Factor shall be subject to
     adjustment from time to time as follows, provided, however,
     that no adjustment to the Conversion Factor need be made
     until cumulative adjustments would affect the Conversion
     Factor by more than one percent (1%):

                    (i)  If, at any time or from time to time
          after the date of original issuance of the Debenture,
          the number of shares of Company Stock outstanding is
          increased by a stock dividend payable in shares of
          Company Stock or by a subdivision or split-up of shares
          of Company Stock, then the Conversion Factor in effect
          on the record date fixed for the determination of
          holders of shares of Company Stock entitled to receive
          such stock dividend, or whose shares of Company Stock
          are included as part of such subdivision or split-up,
          shall be adjusted in accordance with the following
          formula:

                          CF/ = CF x 0/ 
                                    ---
                                     0

     where:

          CF/  =    the adjusted Conversion Factor.

          CF   =    the Conversion Factor in effect on
                    such record date.

          O/   =    the number of shares of Company Stock
                    outstanding immediately after such
                    event.

          O    =    the number of shares of Company Stock

                                  -4-
                    outstanding immediately prior to
                    such event.

                    (ii) If, at any time or from time to time
          after the date of original issuance of the Debenture,
          the number of shares of Company Stock outstanding is
          decreased by a combination (whether by reverse stock
          split or otherwise) of the outstanding shares of
          Company Stock, then the Conversion Factor in effect on
          the record date fixed for such combination shall be
          adjusted in accordance with the formula set forth in
          clause (i) above.

                    (iii)       In case, at any time or from time
          to time after the date of original issuance of the
          Debenture, of (A) any capital reorganization,
          reclassification or recapitalization of the capital
          stock of the Company (other than a change in par value,
          or from par value to no par value), (B) a
          consolidation, combination or merger of the Company
          with or into another person (other than a business
          combination or merger in which the Company is the
          continuing entity and which does not result in any
          change in the Company Stock) or (C) a sale or other
          disposition of all or substantially all the assets of
          the Company as an entirety or substantially as an
          entirety to any other person, then the Debenture shall
          immediately upon the consummation of such
          reorganization, reclassification, recapitalization,
          consolidation, combination, merger, or sale or other
          disposition be convertible into the kind and number of
          shares of stock or other securities or property of the
          Company, or of the entity resulting from such business
          combination or surviving such merger or to which such
          assets shall have been sold or otherwise disposed, to
          which a holder of the number of shares of Company Stock
          deliverable upon conversion of the Debenture
          (immediately prior to the consummation of such event)
          would have been entitled upon such consummation.  If
          the Company engages in a transaction set forth in
          clauses (A) to (C) above and the Record Holder of the
          Debenture does not convert its Debenture as provided
          above, then the continuing or surviving entity shall be
          obligated within thirty days of the consummation of
          such transaction to redeem the Debenture, and the
          Record Holder of the Debenture shall surrender the
          Debenture for redemption, all in accordance with the
          redemption provisions otherwise applicable to the
          Debenture as set forth in Section 2 hereof.  The
          adjustments described in this clause (iii) shall be
          subject to further adjustments as appropriate that
          shall be as nearly equivalent as may be practicable to
          the relevant adjustments provided for in the preceding
          clauses and in this clause.  If, in the case of any
          such reorganization, reclassification,
          recapitalization, consolidation, merger, combination,
          sale or other disposition, the stock or other
          securities and property receivable thereupon by a
          holder of shares of Company Stock includes shares of
          stock, securities or other property or assets
          (including cash) of an entity other than the successor
          or acquiring entity, as the case may be, in such

                                  -5-
          reorganization, reclassification, recapitalization,
          consolidation, merger, combination, sale or other
          disposition, then the Company shall enter into an
          agreement with such other entity for the benefit of the
          holder of the Debenture that shall contain such
          provisions to protect the interests of such Record
          Holder as the Board of Directors of the Company shall
          reasonably consider necessary by reason of the
          foregoing.

                    (iv) No adjustment in the Conversion Factor
          shall have any effect upon the Conversion Value of the
          Debenture, although each such adjustment shall affect
          (in the manner described in this Section 3(d)) the
          number of shares of Company Stock issuable in respect
          of any particular amount of Conversion Value and thus
          shall affect the effective Conversion Price as to a
          whole share of Company Stock.

                    (v)  All calculations under this Section 3(d)
          shall be made to the nearest one-tenth (1/10) of a cent
          or to the nearest one-tenth (1/10) of a share, as the
          case may be.

                    (vi) Any adjustment made pursuant to clauses
          (i), (ii) or (iii) above shall become effective on the
          date immediately after the record date referenced
          therein.

               (e)  Whenever the Conversion Factor shall be
     adjusted as provided in Section 3(d), the Company shall
     forthwith mail (first class and postage prepaid) to the
     Record Holder of the Debenture at its address appearing on
     the Company's records for the Debenture, a copy of a
     statement, certified by its chief financial officer, showing
     the facts requiring such adjustment and the Conversion
     Factor and effective Conversion Price per whole share of
     Company Stock that shall be in effect after such adjustment. 
     Where appropriate, such copy may be given in advance and may
     be included as part of a notice required under Section 3(f).

               (f)  If the Company shall propose to take any
     action of the types described in clause (iii) of Section
     3(d) or liquidate, dissolve or wind-up, the Company shall
     give notice to the Record Holder of the Debenture, in the
     manner set forth in Section 3(e), which notice shall specify
     the record date, if any, with respect to any such action and
     the date on which such action is to take place.  Such notice
     shall also set forth such facts with respect thereto as
     shall be reasonably necessary to indicate the effect of such
     action (to the extent such effect may be known at the date
     of such notice) on the Conversion Factor and effective
     Conversion Price per whole share of Company Stock and on the
     number, kind or class of stock or other securities or
     property that shall be deliverable or purchasable upon the
     occurrence of such action or thereafter deliverable upon
     conversion of the Debenture.  In the case of any action that
     would require the fixing of a record date, such notice shall
     be given at least fifteen (15) days prior to the date so
     fixed, and in the case of all other action, such notice
     shall be given at least twenty (20) days prior to the taking
     of such proposed action.  Failure to give such notice, or

                                  -6-
     any defect therein, shall not affect the legality or
     validity of any such action.

               (g)  All shares of Company Stock which may be
     delivered upon conversion of the Debenture shall upon
     delivery be duly and validly issued, fully paid and non-
     assessable, free of all claims, liens, charges, and
     encumbrances.

          4.   Subordination
               -------------

               (a)  The Company agrees, and the holder of this
     Debenture by accepting such Debenture agrees, that the
     indebtedness evidenced by the Debenture and the payment of
     the principal amount and any interest on this Debenture is
     subordinated in right of payment, to the extent and in the
     manner provided hereinbelow, to the prior payment in full of
     all Senior Indebtedness and that the subordination is for
     the benefit of the holders of Senior Indebtedness.  "Senior
     Indebtedness" means any indebtedness of any kind of the
     Company including claims of depositors in the Company's
     banking subsidiaries, or any guarantee by the Company of
     such indebtedness outstanding at any time, except for this
     Debenture and any other debenture issued by the Company that
     by its terms is expressly subordinated to all other
     indebtedness of the Company or any deferrals, renewals or
     extensions of the foregoing.

               (b)  Upon any distribution of Company assets to
     creditors of the Company in a liquidation or dissolution of
     the Company or in a bankruptcy, reorganization, insolvency,
     receivership or similar proceeding relating to the Company
     or its property:

               Holders of Senior Indebtedness shall be
          entitled to receive payment in full of the
          principal and interest (including interest
          accruing after the commencement of any such
          proceeding) to the date of payment on the
          Senior Indebtedness before the holder hereof
          shall be entitled to receive any payment of
          principal of or interest on this Debenture; and

               Until the Senior Indebtedness is paid in
          full, any distribution to which the holder
          hereof would be entitled but for this provision
          shall be made to holders of Senior Indebtedness
          as their interests may appear, except that the
          holder hereof may receive securities that are
          subordinated to Senior Indebtedness at least to
          the same extent as this Debenture.

               (c)  The Company may not pay interest in cash on
     this Debenture if, at the time of such payment or
     immediately after giving effect thereto, there exists with
     respect to any Senior Indebtedness any event of default
     permitting the holders thereof to accelerate the maturity
     thereof or any event which, with notice or lapse of time or
     both, would become such an event of default.

               (d)  The Company may not pay the principal of this
     Debenture if, at the time of such payment or immediately

                                  -7-
     after giving effect thereto, there exists with respect to
     any Senior Indebtedness any event of default permitting the
     holders thereof to accelerate the maturity thereof, or any
     event which, with notice or lapse of time or both, would
     become such an event of default.

               (e)  If payment of this Debenture is accelerated
     because of an Event of Default (hereinafter defined), the
     Company shall promptly notify holders of Senior Indebtedness
     of the acceleration.  Holders of Senior Indebtedness shall
     be entitled to receive payment in full of all amounts due or
     to become due in respect of Senior Indebtedness before the
     holder of this Debenture shall be entitled to receive any
     payment (including any payment which may be payable by
     reason of the payment of any other indebtedness of the
     Company being subordinated to the payment of the Debentures)
     by the Company on account of the principal or interest on
     the Debentures or on account of the purchase or other
     acquisition of the Debentures.  The Company may pay this
     Debenture when one hundred twenty days pass after the
     acceleration occurs if such payment is otherwise permitted
     at that time.

               (f)  If a distribution is made to the holder of
     this Debenture that, because of the subordination provisions
     hereof, should not have been made, the holder hereof shall
     hold it in trust for the holders of Senior Indebtedness and
     pay it over to them as their interests may appear.

               (g)  Subject to the payment in full of all Senior
     Indebtedness, the holder hereof shall be subrogated to the
     extent of the payments or distributions made to the holders
     of Senior Indebtedness pursuant to these subordination
     provisions to the rights of holders of Senior Indebtedness
     until the principal amount of and interest on this Debenture
     shall be paid in full.  For purposes of such subrogation, no
     distributions to holders of Senior Indebtedness to which the
     holder hereof would be entitled except for these
     subordination provisions, and no payments to the holders of
     Senior Indebtedness by the holder hereof, shall, as between
     the Company, its creditors other than holders of Senior
     Indebtedness and the holder hereof, be deemed to be a
     payment or distribution by the Company to or on account of
     the Senior Indebtedness.

               (h)  These subordination provisions define the
     relative rights of the holder hereof and holders of Senior
     Indebtedness.  Nothing in this Debenture shall:

               Impair, as between the Company and the
          holder hereof, the obligation of the Company,
          which is absolute and unconditional, to pay
          principal and interest on this Debenture in
          accordance with its terms.

               Prevent the holder hereof from exercising
          his available remedies upon an Event of
          Default, subject to the rights of holders of
          Senior Indebtedness to receive distributions
          otherwise payable to the holder hereof.

               No right of any holder of Senior Indebtedness to

                                  -8-
     enforce the subordination of the indebtedness evidenced by
     this Debenture shall be impaired by any act or failure to
     act by the Company.

          5.   Event of Default
               ----------------

          An "Event of Default" occurs if:

     (1)  The Company, pursuant to or within the meaning
          of any Bankruptcy Law:

          (a)  Commences a voluntary case, or

          (b)  Consents to the entry of an order for relief
               against it in an involuntary case, or

          (c)  Files a petition or answer or consent seeking
               reorganization or relief under any Bankruptcy
               Law, or

          (d)  Consents to the appointment of a custodian of
               it or for all or any substantial part of its
               property, or

          (e)  Makes an assignment for the benefit of its
               creditors, or

          (f)  Admits in writing its inability to pay its
               debts generally as they become due, or

          (g)  Takes any corporate action in furtherance of
               any of the above actions.

     (2)  A court of competent jurisdiction enters an order
          or decree under any Bankruptcy Law that:

          (a)  Is for relief against the Company in an
               involuntary case, or

          (b)  Appoints a custodian of the Company for all or
               any substantial part of its property, or

          (c)  Orders the liquidation of the Company, and the
               order or decree remains unstayed and in effect
               for sixty days.

     (3)  A default in payment of any interest on the
          Debenture when such interest becomes due and
          payable and such default continues for a period of
          thirty (30) days.

     (4)  A default in the performance of any covenant by the
          Company in this Debenture and such default
          continues for a period of sixty (60) days after there
          has been given written notice to the Company by a
          holder thereof.

          The term "Bankruptcy Law" means Title 11, U.S. Code or
any similar federal or state law for the relief of debtors.  The
term "Custodian" means any receiver, trustee, assignee,
liquidator or similar official under any Bankruptcy Law.


                                  -9-
          If an Event of Default occurs and is continuing, the
Record Holder by notice to the Company may declare the principal
amount and any accrued interest on this Debenture to be due and
payable.  Upon such declaration such principal amount and accrued
interest shall be due and payable immediately.

          If an Event of Default occurs and is continuing, the
Record Holder may pursue any available remedy to collect the
payment of principal and accrued interest on this Debenture.  A
delay or omission by the holder hereof in exercising any right or
remedy accruing upon an Event of Default shall not impair the
right or remedy or constitute a waiver of or acquiescence in the
Event of Default.  All remedies are cumulative to the extent
permitted by law.

          The holder of this Debenture may in his discretion
waive any Event of Default hereunder and its consequences or
rescind any declaration of acceleration of maturity of the
principal of and the interest on this Debenture.  If any such
waiver or rescission occurs, or if any proceeding taken by the
holder hereof on account of any such Event of Default shall have
been discontinued or abandoned or determined adversely to the
holder of this Debenture, then, and in every such case, the
Company and the holder hereof shall be restored to their former
positions and their rights hereunder, respectively, but no waiver
or rescission shall extend to any subsequent or other Event of
Default or impair any right or remedy consequent thereon.

          6.   Certain General Matters
               -----------------------

          (a)  Any action not permitted by this Debenture to be
taken by the Company may nonetheless be taken by it (if otherwise
permitted by applicable law, the articles of incorporation, and
the bylaws of the Company) if the Company obtains the written
consent of the Record Holder.

          (b)   In any case where any interest payment date,
redemption date or the last date on which the Record Holder of
the Debenture has the right to convert such holder's Debenture
into Company Stock shall not be a Business Day (as defined
below), then notwithstanding any other provision hereof, payment
of interest due or a redemption price or conversion of the
Debenture need not be made on such date but may be made on the
next succeeding Business Day with the same force and effect as if
made on the interest payment date or redemption date or the last
day for conversion; provided, that for purposes of computing such
payment, no interest shall accrue for the period from and after
such interest payment date, redemption date or the last day for
conversion, as the case may be.  As used in this instrument,
"Business Day" means any day except a Saturday or Sunday or other
day on which banking institutions in the State of Georgia are
authorized or obligated by law or executive order to close.

          (c)  This Debenture shall be governed by and construed
in accordance with the laws of the State of Georgia.

          (d)  The holder hereof must surrender this Debenture to
the Company to obtain payment of the principal amount, plus any
premium.  The Company will pay principal, and any premium in
money of the United States that at the time of payment is legal
tender for payment of public and private debts; however, the
Company may pay principal and any premium by check payable in

                                 -10-
such money.  The payment of principal at maturity, or upon
redemption or conversion as provided in this Debenture, shall be
made to the Record Holder on the payment date.

          (e)  The registered holder of this Debenture may be
treated as its owner for all purposes.  This Debenture is issued
in registered form without coupons.  The transfer of this
Debenture may be registered and this Debenture may be converted
only upon presentation of this Debenture to the Company.  When
this Debenture is presented to the Company with a request to
register, transfer or to convert it for an equal principal amount
of Debentures of other denominations, the Company shall register
the transfer or make the conversion if, in the Company's
discretion and upon the advice of counsel, such transfer or
conversion is permitted under applicable securities laws and
regulations.

          (f)  If the holder of this Debenture claims that this
Debenture has been lost, destroyed or wrongfully taken, the
Company shall issue a replacement Debenture.  If required by the
Company, the holder must obtain an indemnity bond that is
sufficient in the Company's judgment to protect the Company from
any loss which it may suffer if a Debenture is replaced.

          (g)  A director, officer, employee or shareholder, as
such, of the Company shall not have any liability for any
obligations of the Company under this Debenture or for any claim
based on, in respect of or by reason of such obligation or its
creation.  The holder hereof accepting this Debenture waives and
releases all such liability.  The waiver and release are part of
the consideration for issuance of this Debenture.

          IN WITNESS WHEREOF, the Company has caused this
Debenture to be executed in its name with the manual signature of
its President, its seal to be affixed hereto and attested by the
manual signature of its Secretary as of the day and year first
above set forth.

                              UNITED COMMUNITY BANKS, INC.



                              By:____________________________
                                   President

(CORPORATE SEAL)


Attest:____________________
          Secretary









                                 -11-


                       UNITED COMMUNITY BANKS, INC.

                               Common Stock



                         BROKER DEALER AGREEMENT


                                           January 28, 1997




The Carson Medlin Company
1307 Glenwood Avenue
Suite 158
Raleigh, North Carolina  27605

Dear Sirs:

     SECTION 1.  Broker Dealer Agreement.  United Community
Banks, Inc., a Georgia corporation (the "Company) proposes to
issue and sell 250,000 shares of its authorized but unissued
Common Shares (the "Common Shares").  Said aggregate of 250,000
shares are herein called the "Common Shares."  

     The Carson Medlin Company ("Carson Medlin") has advised the
Company that pursuant to Chapter 78A of the North Carolina
General Statutes, Carson Medlin proposes to act as a Dealer for
the account of the Company in connection with a public offering
of the Common Shares on behalf of the Company in the State of
North Carolina after the effective date of the registration
statement hereinafter referred to.  Carson Medlin shall have no
financial commitment to purchase any of the Common Shares. 
Carson Medlin will act as Dealer on behalf of the Company in
connection with effecting the offer and sale of the Common Shares
in North Carolina to residents of North Carolina who are not
already shareholders of the Company.  Carson Medlin will not be
obligated to purchase any of the Common Shares for its own
account.  In North Carolina, Carson Medlin will effect the sale
of the Common Shares for the account of the Company at a price of
$20.00 per share, unless and until the Company establishes
another price.  Carson Medlin has not and will not be involved
with determining the price of the shares to be sold in the public
offering.  The Company will pay to Carson Medlin at the closing
of the offering a fee of $30,000 for Carson Medlin's services
performed hereunder.  If the offering is terminated for any
reason prior to acceptance by the Company of the Common Shares
offered hereby to residents of North Carolina, the Company will
pay to Carson Medlin a fee of $20,000 for services performed
hereunder.

     SECTION 2.  Representations and Warranties of the Company. 
The Company hereby represents and warrants to Carson Medlin that:

          (a)  A registration statement on Form S-1 has been or
     will be filed with respect to the Common Shares has been
     prepared by the Company in conformity with the requirements
     of the Securities Act of 1933, as amended (the "Act"), and
     the rules and regulations (the "Rules and Regulations") of
     the Securities and Exchange Commission (the "Commission")
     thereunder, and has been filed with the Commission.  The
     Company has prepared and has  filed or proposes to file
     prior to the effective date of such registration statement
     an amendment or amendments to such registration statement,
     which amendment or amendments have been or will be similarly
     prepared.  There have been delivered to Carson Medlin a copy
     of such registration statement and amendments, together with
     a copy of each exhibit filed therewith.  The Company will
     next file with the Commission one of the following:  (i)
     prior to effectiveness of such registration statement, a
     further amendment thereto, including the form of final
     prospectus, or (ii) a final prospectus in accordance with
     Rule 424(b) of the Rules and Regulations.

          (b)  The Commission has not issued any order preventing
     or suspending the use of the Prospectus and the Prospectus
     has conformed in all material respects to the requirements
     of the Act and the Rules and Regulations and, as of its
     date, has not included any untrue statement of a material
     fact or omitted to state a material fact necessary to make
     the statements therein, in light of the circumstances under
     which they were made, not misleading; and at the time the
     Registration Statement becomes effective, and at all times
     subsequent thereto up to and including each Closing Date
     hereinafter mentioned, the Registration Statement and the
     Prospectus, and any amendments or supplements thereto, will
     contain all material statements and information required to
     be included therein by the Act and the Rules and Regulations
     and will in all material respects conform to the
     requirements of the Act and the Rules and Regulations, and
     neither the Registration Statement nor the Prospectus, nor
     any amendment or supplement thereto, will include any untrue
     statement of a material fact or omit to state a material
     fact required to be stated therein or necessary to make the
     statements therein not misleading; provided, however, no
     representation or warranty contained in this subsection 2(b)
     shall be applicable to information contained in or omitted
     from the Registration Statement, the Prospectus or any such
     amendment or supplement in reliance upon and in conformity
     with written information furnished to the Company by or on
     behalf of Carson Medlin, specifically for use in the
     preparation thereof.

          (c)  The Company and each of Union County Bank ("UCB"),
     Carolina Community Bank ("Carolina"), Peoples Bank of Fannin
     County ("Peoples"), White County Bank ("White") and Towns
     County Bank ("Towns") (UCB, Carolina, Peoples, White and
     Towns hereinafter referred to as the "Subsidiaries") have
     been duly organized and are validly existing and in good
     standing under the laws of their respective jurisdictions of
     organization, with full power and authority to own and lease

                                -2-

     their properties and conduct their respective businesses as
     described in the Prospectus; except as disclosed in the
     Prospectus and the financial statements of the Company, the
     Company, directly or indirectly, owns all of the outstanding
     capital stock of its Subsidiaries free and clear of all
     claims, liens, charges and encumbrances; the Company and
     each of its Subsidiaries are in possession of and operating
     in compliance with all authorizations, licenses, permits,
     consents, certificates and orders material to the conduct of
     their respective businesses, all of which are valid and in
     full force and effect.

          (d)  The Company has authorized and outstanding capital
     stock as set forth under the heading "Capitalization" in the
     Prospectus; the issued and outstanding shares of Common
     Shares have been duly authorized and validly issued, are
     fully paid and nonassessable, have been issued in compliance
     with all federal and state securities laws, were not issued
     in violation of or subject to any preemptive rights or other
     rights to subscribe for or purchase securities, and conform
     to the description thereof contained in the Prospectus.  All
     issued and outstanding shares of capital stock of each
     Subsidiary have been duly authorized and validly issued and
     are fully paid and nonassessable.  Except as disclosed in or
     contemplated by the Prospectus and the financial statements
     of the Company and the related notes thereto included in the
     Prospectus, neither the Company nor any Subsidiary has
     outstanding any options to purchase, or any preemptive
     rights or other rights to subscribe for or to purchase, any
     securities or obligations convertible into, or any contracts
     or commitments to issue or sell, shares of its capital
     stock, or any such options, rights, convertible securities
     or obligations.  The description of the Company's stock
     option, stock bonus and other stock plans or arrangements,
     and the options or other rights granted and exercised
     thereunder, set forth in the Prospectus accurately and
     fairly presents the information required to be shown with
     respect to such plans, arrangements, options and rights.

          (e)  The Common Shares to be sold by the Company have
     been duly authorized and, when issued, delivered and paid
     for in the manner set forth in this Agreement, will be duly
     authorized, validly issued, fully paid and nonassessable,
     and will conform to the description thereof contained in the
     Prospectus.  No preemptive rights or other rights to
     subscribe for or purchase exist with respect to the issuance
     and sale of the Common Shares by the Company pursuant to
     this Agreement.  No shareholder of the Company has any right
     which has not been waived to require the Company to register
     the sale of any share owned by such shareholder under the
     Act in the public offering contemplated by this Agreement. 
     No further approval or authority of the shareholders or the
     Board of Directors of the Company will be required for the
     issuance and sale of the Common Shares to be sold by the
     Company as contemplated herein.

          (f)  The Company has full legal right, power and
     authority to enter into this Agreement and perform the
     transactions contemplated hereby.  This Agreement has been
     duly authorized, executed and delivered by the Company and
     constitutes a valid and binding obligation of the Company in
     accordance with its terms, except to the extent

                               -3-
     enforceability may be limited by bankruptcy, insolvency,
     moratorium, reorganization or other laws affecting the
     rights of creditors generally and by principles of equity,
     whether considered at law or equity.  The making and
     performance of this Agreement by the Company and the
     consummation of the transactions herein contemplated will
     not violate any provisions of the articles of incorporation
     or bylaws, or other organizational documents, of the Company
     and will not conflict with, result in the breach or
     violation of, or constitute, either by itself or upon notice
     or the passage of time or both, a default under any
     agreement, mortgage, deed of trust, lease, franchise,
     license, indenture, permit or other instrument to which the
     Company is a party or by which the Company or any of its
     properties may be bound or affected, any statute or any
     authorization, judgment, decree, order, rule or regulation
     of any court or any regulatory body, administrative agency
     or other governmental body applicable to the Company or any
     of its properties.  No consent, approval, authorization or
     other order of any court, regulatory body, administrative
     agency or other governmental body is required for the
     execution and delivery of this Agreement or the consummation
     of the transactions contemplated by this Agreement, except
     for compliance with the Act and Blue Sky securities laws
     applicable to the public offering of the Common Shares by
     the Company.

          (g)  Porter Keadle Moore, LLP, who have expressed their
     opinion with respect to the financial statements and
     schedules filed with the Commission as a part of the
     Registration Statement and included in the Prospectus and in
     the Registration Statement, are independent accountants as
     required by the Act and the Rules and Regulations.

          (h)  The combined financial statements and schedules of
     the Company and the related notes thereto included in the
     Registration Statement and the Prospectus present fairly the
     financial position of the Company as of the respective dates
     of such financial statements and schedules, and the results
     of operations and changes in financial position of the
     Company for the respective periods covered thereby.  Such
     statements, schedules and related notes have been prepared
     in accordance with generally accepted accounting principles
     applied on a consistent basis as certified by Porter Keadle
     Moore, LLP.  No other financial statements or schedules are
     required to be included in the Registration Statement.  The
     selected financial data set forth in the Prospectus under
     the captions "Capitalization" and "Selected Combined
     Historical Financial Data" fairly present the information
     set forth therein on the basis stated in the Registration
     Statement.  The pro forma financial information (including
     the related notes) included in the Prospectus complies as to
     form in all material respects to the applicable accounting
     requirements of the Act and the Rules and Regulations, and
     management of the Company believes that the assumptions
     underlying the pro forma adjustments are reasonable.  Such
     pro forma adjustments have been properly applied to the
     historical amounts in the compilation of the information and
     such information fairly represents with respect to the
     Company the financial position, results of operations and
     other information purported to be shown therein at the
     respective dates and for the respective periods specified.

                                -4-
          (i)  The Company has disclosed in the Registration
     Statement and Prospectus all information it is required to
     disclose therein, and such Registration Statement and
     Prospectus are true and correct in every material respect
     and do not fail to disclose any information which if not
     disclosed would cause the Registration Statement and/or
     Prospectus to be materially misleading in any respect.

          (j)  The Company and each of its Subsidiaries maintains
     a system of internal accounting controls sufficient to
     provide reasonable assurances that (i) transactions are
     executed in accordance with management's general or specific
     authorization, (ii) transactions are recorded as necessary
     to permit preparation of financial statements in conformity
     with generally accepted accounting principles and to
     maintain accountability for assets, (iii) access to assets
     is permitted only in accordance with management's general or
     specific authorization, and (iv) the recorded accountability
     for assets is compared with existing assets at reasonable
     intervals and appropriate action is taken with respect to
     any differences.

     For purposes of this Section 2, "the best of the Company's
knowledge" or a similar phrase means the knowledge of each of
Jimmy C. Tallent, Christopher J. Bledsoe, Richard R. Cheatham,
Neil D. Falis and F. Sheffield Hale, after diligent inquiry of
persons who should have knowledge of the facts relevant to such
representations.

     SECTION 3.  Representations and Warranties of Carson Medlin. 
Carson Medlin hereby represents and warrants to the Company that:

          (a)  The information set forth in the Prospectus that
     was furnished to the Company by and on behalf of Carson
     Medlin for use in connection with the preparation of the
     Registration Statement and the Prospectus is correct in all
     material respects;

          (b)  Carson Medlin is registered as a broker-dealer in
     the State of North Carolina.

          (c)  Carson Medlin will make all necessary filings with
     the National Association of Securities Dealers in connection
     with its services provided hereunder.

     SECTION 4.  Covenants of the Company.  The Company covenants
and agrees that:

          (a)  The Company will use its best efforts to cause the
     Registration Statement and any amendment thereof, if not
     effective at the time and date that this Agreement is
     executed and delivered by the parties hereto, to become
     effective.  Carson Medlin will have the opportunity to
     review and approve the Registration Statement and any
     amendment thereto.  The Company will promptly advise Carson
     Medlin in writing (i) of the receipt of any comments of the
     Commission, (ii) of any request of the Commission for
     amendment of or supplement to the Registration Statement
     (either before or after it becomes effective) or the
     Prospectus or for additional information, (iii) when the
     Registration Statement shall have become effective, and (iv)
     of the issuance by the Commission of any stop order

                                -5-
     suspending the effectiveness of the Registration Statement
     or of the institution of any proceedings for that purpose. 
     If the Commission shall enter any such stop order at any
     time, the Company will use its best efforts to obtain the
     lifting of such order at the earliest possible moment.  The
     Company will not file any amendment or supplement to the
     Registration Statement (either before or after it becomes
     effective) or the Prospectus of which Carson Medlin has not
     been furnished with a copy a reasonable time prior to such
     filing or to which Carson Medlin reasonably objects or which
     is not in compliance with the Act and the Rules and
     Regulations.

          (b)  The Company will prepare and file with the
     Commission, promptly upon Carson Medlin's request, any
     amendment or supplements to the Registration Statement or
     the Prospectus which in Carson Medlin's judgment may be
     necessary or advisable to enable Carson Medlin to continue
     the distribution of the Common Shares, and will use its best
     efforts to cause the same to become effective as promptly as
     possible.

          (c)  If at any time within the nine-month period
     referred to in Section 10(a)(3) of the Act during which a
     prospectus relating to the Common Shares is required to be
     delivered under the Act any event occurs, as a result of
     which the Prospectus, including any amendments or
     supplements, would include an untrue statement of a material
     fact, or omit to state any material fact required to be
     stated therein or necessary to make the statements therein
     not misleading, or if it is necessary at any time to amend
     the Prospectus, including any amendments or supplements, to
     comply with the Act or the Rules and Regulations, the
     Company will promptly advise Carson Medlin thereof and will
     promptly prepare and file with the Commission, at its own
     expense, an amendment or supplement which will correct such
     statement or omission or an amendment or supplement which
     will effect such compliance and will use its best efforts to
     cause the same to become effective as soon as possible; and,
     in case Carson Medlin is required to deliver a prospectus
     after such nine-month period, the Company upon request, but
     at the expense of Carson Medlin, will promptly prepare such
     amendment or amendments to the Registration Statement and
     such Prospectus or Prospectuses as may be necessary to
     permit compliance with the requirements of Section 10(a)(3)
     of the Act.

          (d)  The Company will timely file such reports pursuant
     to the Exchange Act as are necessary in order to make
     generally available to its security holders as soon as
     practicable an earnings statement for the purposes of, and
     to provide the benefits contemplated by, the last paragraph
     of Section 11(a) of the Act.

          (e)  During such period as a prospectus is required by
     law to be delivered in connection with sales by Carson
     Medlin, the Company, at its expense, but only for the nine-
     month period referred to in Section 10(a)(3) of the Act,
     will furnish to Carson Medlin or mail to the order of Carson
     Medlin copies of the Registration Statement and the
     Prospectus and all amendments and supplements to any such

                                -6-
     documents, in each case as soon as available and in such
     quantities as Carson Medlin may request, for the purposes
     contemplated by the Act.

          (f)  The Company shall qualify or register the Common
     Shares for sale under (or obtain exemptions from the
     application of) the Blue Sky securities law of North
     Carolina, will comply with such law and will continue such
     qualification, registration and exemption in effect so long
     as reasonably required for the distribution of the Common
     Shares.  The Company will advise Carson Medlin promptly of
     the suspension of the qualification or registration of (or
     any such exemption relating to) the Common Shares for
     offering, sale or trading in any jurisdiction or any
     initiation or threat of any proceeding for any such purpose,
     and in the event of the issuance of any order suspending
     such qualification, registration or exemption, the Company,
     with Carson Medlin's cooperation, will use its best efforts
     to obtain the withdrawal thereof.

          (g)  The Company will apply the net proceeds of the
     sale of the Common Shares sold by it substantially in
     accordance with its statements under the caption "Use of
     Proceeds" in the Prospectus.

     Carson Medlin may, in its sole discretion, waive in writing
the performance by the Company of any one or more of the
foregoing covenants or extend the time for their performance.

     SECTION 5.  Payment of Fees and Expenses.  Whether or not
the transactions contemplated hereunder are consummated or this
Agreements becomes effective or is terminated, the Company agrees
to pay all costs, fees and expenses incurred in connection with
the performance of its obligations hereunder and in connection
with the transactions contemplated hereby and all reasonable fees
and expenses of Carson Medlin, including reasonable fees and
disbursements of Carson Medlin's counsel, not to exceed $10,000.

     SECTION 6.  Effectiveness of Registration Statement.  Carson
Medlin and the Company will use their best efforts to cause the
Registration Statement to become effective, to prevent the
issuance of any stop order suspending the effectiveness of the
Registration Statement and, if such stop order be issued, to
obtain as soon as possible the lifting thereof.

     SECTION 7.  Indemnification.  

          (a)  The Company agrees to indemnify and hold harmless
     Carson Medlin and each person, if any, who controls Carson
     Medlin within the meaning of the Act against any losses,
     claims, damages, liabilities or expenses, joint or several,
     to which Carson Medlin or such controlling person may become
     subject, under the Act, the Exchange Act or other federal or
     state statutory law or regulation, or at common law or
     otherwise (including in settlement of any litigation, if
     such settlement is effected with the written consent of the
     Company), insofar as such losses, claims, damages,
     liabilities or expenses (or actions in respect thereof as
     contemplated below) arise out of or are based upon any
     untrue statement or alleged untrue statement of any material
     fact contained in the Registration Statement, the
     Prospectus, or any amendment or supplement thereto, or arise

                               -7-
     out of or are based upon the omission or alleged omission to
     state in any of them a material fact required to be stated
     therein or necessary to make the statements in any of them
     not misleading, or arise out of or are based in whole or in
     part on any inaccuracy in the representations and warranties
     of the Company contained herein or any failure of the
     Company to perform its obligations hereunder or under law;
     and will reimburse Carson Medlin and each such controlling
     person for any legal and other expenses as such expenses are
     reasonably incurred by Carson Medlin or such controlling
     person in connection with investigating, defending,
     settling, compromising or paying any such loss, claim,
     damage, liability, expense or action; provided, however,
     that the Company will not be liable in any such case to the
     extent that any such loss, claim, damage, liability or
     expense arises out of or is based upon an untrue statement
     or alleged untrue statement or omission or alleged omission
     made in the Registration Statement, the Prospectus or any
     amendment or supplement thereto in reliance upon and in
     conformity with the information furnished to the Company
     pursuant to Section 3 hereof.

          (b)  Carson Medlin will indemnify and hold harmless the
     Company, each of the Company's directors, each of the
     Company's officers who signed the Registration Statement,
     and each person, if any, who controls the Company within the
     meaning of the Act, against any losses, claims, damages,
     liabilities or expenses to which the Company or any such
     director, officer or controlling person may become subject,
     under the Act, the Exchange Act, or other federal or state
     statutory law or regulation, or at common law or otherwise
     (including in settlement of any litigation, if such
     settlement is effected with the written consent of Carson
     Medlin), insofar as such losses, claims, damages,
     liabilities or expenses (or actions in respect thereof as
     contemplated below) arise out of or are based upon any
     untrue or alleged untrue statement of any material fact
     contained in, the Registration Statement, the Prospectus, or
     any amendment or supplement thereto, or arise out of or are
     based upon the omission or alleged omission to state therein
     a material fact required to be stated therein or necessary
     to make the statements therein not misleading in each case
     to the extent, but only to the extent, that such untrue
     statement or alleged untrue statement or omission or alleged
     omission was made in the Registration Statement, the
     Prospectus, or any amendment or supplement thereto, in
     reliance upon and in conformity with the information
     furnished to the Company pursuant to Section 3 hereof; and
     will reimburse the Company or any such director, officer or
     controlling person for any legal and other expense
     reasonably incurred by the Company, or any such director,
     officer, or controlling person in connection with
     investigating, defending, settling, compromising or paying
     any such loss, claim, damage, liability, expense or action. 
     This indemnity agreement will be in addition to any
     liability which Carson Medlin may otherwise have.

          (c)  It is agreed that any controversy arising out of
     the operation of the interim reimbursement arrangements set
     forth in Sections 7(a) and 7(b) hereof, including the
     amounts of any requested reimbursement payments and the
     method of determining such amounts, shall be settled by

                               -8-
     arbitration conducted by the American Arbitration
     Association.  Any such arbitration must be commenced by
     service of a written demand for arbitration or written
     notice of intention to arbitrate, therein electing the
     arbitration tribunal.  In the event the party demanding
     arbitration does not make such designation of an arbitration
     tribunal in such demand or notice, then the party responding
     to said demand or notice is authorized to do so.

     SECTION 8.  Termination.  Without limiting the right to
terminate this Agreement pursuant to any other provision hereof:

          (a)  This Agreement may be terminated by the Company by
     notice to Carson Medlin or by Carson Medlin by notice to the
     Company at any time prior to the time this Agreement shall
     become effective as to all its provisions, and any such
     termination shall be without liability on the part of the
     Company to Carson Medlin (except for the fees and expenses
     to be paid or reimbursed by the Company, pursuant to
     Sections 1, 5 and 7 hereof and except to the extent provided
     in Section 9 hereof) or of Carson Medlin to the Company
     (except for the expenses to be paid or reimbursed by Carson
     Medlin, pursuant to Section 7 hereof and except to the
     extent provided in Section 9 hereof).

          (b)  This Agreement may also be terminated by Carson
     Medlin by notice to the Company (i) if any adverse event
     shall have occurred or shall exist which makes untrue or
     incorrect in any material respect any statement or
     information contained in the Registration Statement or
     Prospectus or which is not reflected in the Registration
     Statement or Prospectus but should be reflected therein in
     order to make the statements or information contained
     therein not misleading in any material respect, or (ii) if
     there shall be any action, suit or proceeding pending or
     threatened; or there shall have been any development or
     prospective development involving particularly the business
     or properties or securities of the Company or any of its
     Subsidiaries or the transactions contemplated by this
     Agreement which, in the reasonable judgment of Carson
     Medlin, may materially and adversely affect the Company's
     business or earnings and makes it impracticable or
     inadvisable to offer or sell the Common Shares.  Any
     termination pursuant to this subsection (b) shall be without
     liability on the part of Carson Medlin to the Company or on
     the part of the Company to Carson Medlin (except for the
     fees and expenses to be paid or reimbursed by the Company
     pursuant to Sections 1, 5 and 7 hereof and except to the
     extent provided in Section 9 hereof).

     SECTION 9.  Representations and Indemnities to Survive
Delivery.  The respective indemnities, agreements,
representations, warranties and other statements of the Company,
of the Company's officers and of Carson Medlin set forth in or
made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of
Carson Medlin, the Company, or any of its or their partners,
officers or directors or any controlling person, as the case may
be, and will survive delivery of and payment for the Common
Shares sold hereunder and any termination of this Agreement.

                               -9-

     SECTION 10.  Notices.  All communications hereunder shall be
in writing and, if sent to Carson Medlin shall be mailed,
delivered or telegraphed and confirmed to The Carson Medlin
Company, 1307 Glenwood Avenue, Suite 158, Raleigh, North Carolina
27605, with a copy to The Sanford Law Firm, P.O. Box 2447,
Raleigh, North Carolina 27602, Attention:  Alfred P. Carlton,
Jr., Esq.; and if sent to the Company shall be mailed, delivered
or telegraphed and confirmed to the Company at P.O. Box 398, 59
Highway 515, Blairsville, Georgia 30512, with a copy to
Kilpatrick & Cody, L.L.P., 1100 Peachtree Street, Suite 2800,
Atlanta, GA 30309, Attention:  Richard R. Cheatham, Esq.  The
Company or Carson Medlin may change the address for receipt of
communications hereunder by giving notice to the others.

     SECTION 11.  Successors.  This Agreement will inure to the
benefit of and be binding upon the parties hereto, and to the
benefit of the officers and directors and controlling persons
referred to in Section 7, and in each case their respective
successors, personal representatives and assigns, and no other
person will have any right or obligation hereunder.  No such
assignment shall relieve any party of its obligations hereunder. 
The term "successors" shall not include any purchaser of the
Common Shares as such from Carson Medlin merely by reason of such
purchase.

     SECTION 12.  Partial Unenforceability.  The invalidity or
unenforceability of any Section, paragraph or provision of this
Agreement shall not affect the validity or enforceability of any
other Section, paragraph or provision hereof.  If any Section,
paragraph or provision of this Agreement is for any reason
determined to be invalid or unenforceable, there shall be deemed
to be made such minor changes (and only such minor changes) as
are necessary to make it valid and enforceable.

     SECTION 13.  Applicable Law.  This Agreement shall be
governed by and construed in accordance with the internal laws
(and not the laws pertaining to conflicts of laws) of the State
of North Carolina.

     SECTION 16.  General.  This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all
prior written or oral and all contemporaneous oral agreements,
understandings and negotiations with respect to the subject
matter hereof.  This Agreement may be executed in several
counterparts, each one of which shall be an original, and all of
which shall constitute one and the same document.

     In this Agreement, the masculine, feminine and neuter
genders and the singular and the plural include one another.  The
section headings in this Agreement are for the convenience of the
parties only and will not affect the construction or
interpretation of this Agreement.  This Agreement may be amended
or modified, and the observance of any term of this Agreement may
be waived, only by a writing signed by the Company.

                                -10-
     If the foregoing is in accordance with Carson Medlin's
understanding of our agreement, kindly sign and return to us the
enclosed copies hereof, whereupon it will become a binding
agreement among the Company and Carson Medlin, all in accordance
with its terms.

                              Very truly yours,

                              UNITED COMMUNITY BANKS, INC.


                              By:/s/ Billy M. Decker
                                        Secretary

                              THE CARSON MEDLIN COMPANY


                              By: /s/ W. Gary Medlin
                                        President



THE CARSON MEDLIN COMPANY
INVESTMENT BANKERS

January 28, 1997


Jimmy C. Tallent
President and CEO
United Community Banks, Inc.
59 Highway 515
Blairsville, GA  30512

Dear Mr. Tallent:

With respect to that certain agreement between United Community Banks,
Inc. (the "Company") and The Carson Medlin Company ("Carson Medlin")
dated January 28, 1997 (the "Broker Dealer Agreement"), Carson Medlin
agrees hereby to the following changes to the Broker Dealer Agreement. 
The third sentence of the second paragraph of Section 1.  BROKER DEALER
AGREEMENT shall be deleted and in its place the following sentence shall
be substituted:

     Carson Medlin will act as Dealer on behalf of the company
     in connection with effecting the offer and sale of the
     Common Shares in North Carolina to residents of North
     Carolina.

All other terms of the Broker Dealer Agreement shall remained unchanged.

If the foregoing is in accordance with the Company's understanding of
our agreement, as hereby amended, please sign and return to us one copy
of this letter, whereupon it will become a binding agreement between
Carson Medlin and the Company.


                    Sincerely,


                    THE CARSON MEDLIN COMPANY


                    /s/ W. Gray Medlin
                    Chairman


                    UNITED COMMUNITY BANKS, INC.


                    By: /s/ Billy M. Decker
                    Its:  /s/ Secretary

                   Subsidiaries of United Community Banks, Inc.


Carolina Community Bank
Peoples Bank
Towns County Bank
United Community Bank
United Family Finance, Inc.
White County Bank



         CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



We have issued our report dated February 16, 1996, accompanying the
financial statements of United Community Banks, Inc. and Subsidiaries
contained in the Registration Statement on Form S-1 and Prospectus.  We
consent to the use of the aforementioned report in the Registration
Statement on Form S-1 and Prospectus, and to the use of our name as it
appears under the caption "Experts".


                                PORTER KEADLE MOORE, LLP



                                /s/ Porter Keadle Moore, LLP
                                Successor to the practice of
                                Evans, Porter, Bryan & Co.

Atlanta, Georgia
January 29, 1997