SEC Filing | United Community Banks, Inc.

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File No. ________________.

As filed with the Securities and Exchange Commission on July 24, 1997.

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
UNITED COMMUNITY BANKS, INC.
(Exact name of issuer as specified in its charter)

Georgia 6712 58-1827304
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification Number)
incorporation or Classification Code
organization) Number)

P.O. Box 398, 59 Highway 515, Blairsville, Georgia 30512
(706) 745-2151
-------------------------------------------------------------
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

Jimmy C. Tallent
President
UNITED COMMUNITY BANKS, INC.
P.O. Box 398, 59 Highway 515, Blairsville, Georgia 30512
(706) 745-2151
---------------------------------------------------------
(Name, address, including zip code, and telephone number,
including area code, of agent for service)

Copies to:
Richard R. Cheatham Walter G. Moeling, IV
Kilpatrick Stockton LLP Powell Goldstein Frazer & Murphy LLP
1100 Peachtree St., Suite 2800, 191 Peachtree St., Suite 1600
Atlanta, Georgia 30309-4530 Atlanta, Georgia 30303
(404) 815-6500 (404) 572-6600

Approximate date of commencement of the proposed sale of the
securities to the public: The exchange of the Registrant's shares
for shares of Common Stock of First Clayton Bancshares, Inc. will
take place upon consummation of the merger of First Clayton
Bancshares, Inc. into the Registrant.

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

CALCULATION OF REGISTRATION FEE

==========================================================================================================================
Title of Each Class of | Amount to be | Proposed Maximum | Proposed Maximum | Amount of
Securities to be | Registered | Offering Price per | Aggregate Offering | Registration Fee
Registered | | Share | Price |
- ----------------------------|-------------------|-------------------------|-------------------------|---------------------

Common Stock, par value | 646,555 | | | $1,729.04
$1.00 per share | | | |
==========================================================================================================================

The number of shares of United Community Banks, Inc. Common Stock
being registered hereunder is based upon the anticipated maximum number
of such shares required to consummate the proposed merger of First
Clayton Bancshares, Inc. into the Registrant pursuant to the Merger
Agreement. The Registrant will remove from registration by means of a
post-effective amendment any shares being registered which are not issued
in connection with such merger.

In accordance with Rule 457(f)(2), the registration fee is based upon
the maximum number of shares of common stock of First Clayton Bancshares,
Inc. that may be received by the Registrant pursuant to the merger
(400,691 shares) multiplied by the book value per share of First Clayton
Bancshares, Inc. as of June 30, 1997 ($14.24).

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

Dear Shareholder:

This booklet contains the Notice of Meeting and Proxy Statement for
a Special Meeting of the Shareholders (the "Special Meeting") of First
Clayton Bancshares, Inc. ("First Clayton") to be held on
___________________, 1997, commencing at ____ p.m., at Village Shopping
Center, Highway 441, Clayton, Georgia.

The purpose of the meeting is to consider and vote upon the
Agreement and Plan of Merger (the "Merger Agreement") described in the
accompanying Proxy Statement pursuant to which First Clayton would be
merged into United Community Banks, Inc., a Georgia corporation
("United"), with United being the surviving entity (the "Merger"). If
the Merger Agreement is approved, each shareholder of First Clayton will
be entitled to receive 1.6136 shares of common stock of United, $1.00 par
value per share (the "United Stock"), for each share of First Clayton
common stock, $1.00 par value per share ("First Clayton Stock"),
outstanding on the effective date of the Merger. In lieu of the issuance
of fractional shares of the United Stock, there will be paid in cash an
amount (computed to the nearest cent) equal to the fraction multiplied by
$22.00.

The accompanying Proxy Statement includes a description of the terms
and conditions of the proposed merger and a description of the rights of
dissenting First Clayton shareholders. A copy of the Merger Agreement is
attached as Appendix A to the Proxy Statement. Enclosed with this Proxy
Statement is a separately bound booklet containing: (a) the United 1997
Proxy Statement which contains United's 1996 Annual Report, (b) the
United Form 10-Q for the Quarter ended March 31, 1997, (c) the First
Clayton Annual Report on Form 10-KSB for the year ended December 31,
1996, and (d) the First Clayton Form 10-QSB for the Quarter ended March
31, 1997.

Section 14-2-1301 et seq. of the Official Code of Georgia Annotated,
reproduced as Appendix B to the attached Proxy Statement, sets forth the
rights of shareholders who dissent from the Merger. Any First Clayton
shareholder desiring to dissent from the Merger and receive payment of
the fair value of his or her First Clayton Stock must, among other
things, deliver to First Clayton prior to the time of the shareholder
vote on the Merger, a written notice of intent to demand payment for his
or her shares of First Clayton Stock if the Merger is consummated. A
First Clayton shareholder who fails to submit such written notice to
First Clayton prior to the shareholder vote will lose the right to
dissent to the Merger and demand payment for his or her shares of First
Clayton Stock.

YOUR BOARD OF DIRECTORS BELIEVES THAT THE PROPOSED MERGER IS IN THE
BEST INTEREST OF FIRST CLAYTON AND ITS SHAREHOLDERS AND RECOMMENDS A VOTE
FOR THE ADOPTION OF THE MERGER AGREEMENT.

The affirmative vote of the holders of a majority of the outstanding
First Clayton Stock entitled to vote at the Special Meeting is required
to approve the Merger Agreement. Directors and executive officers of
First Clayton who own or control 135,772 shares, or approximately 34% of
the outstanding shares, of First Clayton Stock have agreed to vote their
shares of First Clayton Stock in favor of the Merger.

A form of proxy is enclosed, and you are urged to complete, sign and
return it to First Clayton as soon as possible in the enclosed stamped
envelope. If you attend the Special Meeting you may revoke your proxy at
that time simply by requesting the right to vote in person.

Sincerely,

__________________________________________
John Martin
Chairman of the Board

FIRST CLAYTON BANCSHARES, INC.
Village Shopping Center, Hwy. 441
P.O. Box 1250
Clayton, Georgia 30525
_____________________________________________________

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD _______________, 1997
_____________________________________________________

Notice is hereby given that a Special Meeting of Shareholders of
First Clayton Bancshares, Inc. ("First Clayton") will be held on
______________, 1997, commencing at __:00 p.m., (the "Special Meeting"),
at the offices of First Clayton at Village Shopping Center, Highway 441,
Clayton, Georgia, for the purpose of considering and voting upon:

(1) An Agreement and Plan of Merger, a copy of which is attached
as Appendix A to the Proxy Statement accompanying this
Notice, providing for the merger (the "Merger") of First
Clayton with and into United Community Banks, Inc.
("United"), a Georgia corporation and multi-bank holding
company, with United being the surviving entity; and

(2) Such other business as may lawfully come before the meeting
or any adjournments thereof.

In connection with the Merger, each shareholder of First Clayton
will be entitled to receive 1.6136 shares of common stock of United,
$1.00 par value per share (the "United Stock"), for each share of First
Clayton common stock, $1.00 par value per share ("First Clayton Stock"),
outstanding on the effective date of the Merger. In lieu of the issuance
of fractional shares of United Stock, there will be paid in cash an
amount (computed to the nearest cent) equal to the fraction multiplied by
$22.00.

If the Merger is consummated, shareholders dissenting therefrom
will be entitled to be paid the "fair value" of their shares in cash,
provided that they shall have filed a written notice of intent to demand
payment for their shares before the vote of shareholders is taken
thereon, have not voted their shares in favor of the Merger and have
complied with the provisions of Section 14-2-1301 et seq. of the Official
Code of Georgia Annotated regarding the rights of dissenting
shareholders, all as more fully set forth under "THE PROPOSED MERGER --
Rights of Dissenting Shareholders" and in Appendix B to the attached
Proxy Statement.

Only shareholders of record at the close of business on
____________, 1997 will be entitled to notice of and to vote at the
Special Meeting or any adjournments thereof.

A form of proxy and a Proxy Statement are enclosed. The approval
of the Merger requires the affirmative vote of the holders of at least a
majority of the First Clayton Stock entitled to vote at the Special
Meeting. To assure representation at the Special Meeting, you are
requested to sign, date and return the proxy promptly in the enclosed,
stamped envelope. If you attend the Special Meeting you may revoke your
proxy at that time simply by requesting the right to vote in person.
Prior to the Special Meeting you may withdraw a previously submitted

proxy by notifying the Secretary of First Clayton in writing or
submitting an executed, later dated proxy to First Clayton, as more fully
described under "INTRODUCTION" in the Proxy Statement.

By Order of the Board of Directors,

____________________________________
Ronald E. Vandiver
Secretary
___________, 1997
Clayton, Georgia

First Clayton Bancshares, Inc.

PROXY STATEMENT

Special Meeting of Shareholders to be held on ______________, 1997
[SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS]

United Community Banks, Inc.

PROSPECTUS

646,555 shares of common stock of United Community Banks, Inc. which may
be issued in connection with the merger of First Clayton Bancshares, Inc.
with and into United Community Banks, Inc.

UNITED COMMUNITY BANKS, INC. HAS FILED A REGISTRATION
STATEMENT/PROSPECTUS WITH THE SECURITIES AND EXCHANGE COMMISSION COVERING
THE SHARES OF ITS COMMON STOCK TO BE ISSUED IN CONNECTION WITH THE MERGER
OF FIRST CLAYTON BANCSHARES, INC. WITH UNITED COMMUNITY BANKS, INC. THIS
PROXY STATEMENT ALSO CONSTITUTES A PROSPECTUS OF UNITED COMMUNITY BANKS,
INC. FILED AS PART OF SUCH REGISTRATION STATEMENT.
_____________________

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROXY STATEMENT/
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.

_____________________

ALL INFORMATION CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS WITH RESPECT
TO UNITED COMMUNITY BANKS, INC. AND ITS SUBSIDIARIES WAS SUPPLIED BY
THOSE ENTITIES, AND ALL INFORMATION WITH RESPECT TO FIRST CLAYTON
BANCSHARES, INC. AND ITS SUBSIDIARY WAS SUPPLIED BY THOSE ENTITIES.
_____________________

THE SHARES OF COMMON STOCK OF UNITED COMMUNITY BANKS, INC. TO BE ISSUED
IN CONNECTION WITH THE MERGER HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS, AND ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
_____________________

SHARES OF THE COMMON STOCK OF UNITED COMMUNITY BANKS, INC. ARE EQUITY
SECURITIES AND ARE NOT SAVINGS ACCOUNTS OR DEPOSITS. INVESTMENT IN SUCH
SHARES IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENT AGENCY.

The date of this Proxy Statement/Prospectus is ____________, 1997

TABLE OF CONTENTS

Page

AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 1

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . . . . . . . . . . 1

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Business of First Clayton and United . . . . . . . . . . . . . . . 4
Terms of the Merger . . . . . . . . . . . . . . . . . . . . . . . 5
The Special Meeting of Shareholders; Vote Required . . . . . . . . 5
Rights of Dissenting Shareholders . . . . . . . . . . . . . . . . 6
Federal Income Tax Consequences . . . . . . . . . . . . . . . . . 6
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . 6
Markets for Capital Stock . . . . . . . . . . . . . . . . . . . . 6
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Certain Differences in Shareholders' Rights . . . . . . . . . . . 7
Interests of Management in the Transaction . . . . . . . . . . . . 8
Conditions, Termination and Effective Date . . . . . . . . . . . . 8

COMPARATIVE SHARE DATA . . . . . . . . . . . . . . . . . . . . . . . . 9

SUMMARY CONSOLIDATED FINANCIAL INFORMATION . . . . . . . . . . . . . 10

SELECTED PRO FORMA FINANCIAL DATA . . . . . . . . . . . . . . . . . . 12

PRO FORMA CONSOLIDATED FINANCIAL INFORMATION . . . . . . . . . . . . 13

THE PROPOSED MERGER . . . . . . . . . . . . . . . . . . . . . . . . . 21
Background of and Reasons for the Merger . . . . . . . . . . . . 21
The Agreement and Plan of Reorganization and the Agreement and
Plan of Merger . . . . . . . . . . . . . . . . . . . . . . 23
Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . 26
Conduct of Business of First Clayton Pending Closing . . . . . . 27
Interest of Management in the Transaction; Conduct of Business
After the Merger . . . . . . . . . . . . . . . . . . . . . 28
Effect of the Merger on First Clayton Shareholders and
Comparison of the Securities of First Clayton and United . 29
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . 30
Resales of Common Stock . . . . . . . . . . . . . . . . . . . . 31
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . 31

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Rights of Dissenting Shareholders . . . . . . . . . . . . . . . 31
Certain Federal Income Tax Consequences of the Merger and
Opinion of Tax Counsel . . . . . . . . . . . . . . . . . . 33

INFORMATION ABOUT FIRST CLAYTON BANCSHARES, INC. . . . . . . . . . . 34
Description of Business . . . . . . . . . . . . . . . . . . . . 34

INFORMATION ABOUT UNITED COMMUNITY BANKS, INC. . . . . . . . . . . . 35
Description of Business . . . . . . . . . . . . . . . . . . . . 35
Recent Developments . . . . . . . . . . . . . . . . . . . . . . 35
Description of Securities of United . . . . . . . . . . . . . . 36

LEGAL OPINIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

APPENDICES
Agreement and Plan of Merger . . . . . . . . . . . . . . . Appendix A
Georgia Dissenters' Rights Statutes (O.C.G.A. Sec. 14-2-1301
et seq.) . . . . . . . . . . . . . . . . . . Appendix B

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AVAILABLE INFORMATION

United has filed with the Securities and Exchange
Commission, Washington, D.C. 20549, a Registration Statement on
Form S-4 under the Securities Act with respect to the securities
offered hereby. This Proxy Statement/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 Proxy
Statement/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 and First Clayton are subject to certain
informational reporting requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith file 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 and First Clayton 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.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents previously filed by United and
First Clayton under the Exchange Act are incorporated herein by
reference:

(a) United's and First Clayton's annual reports on
Form 10-K and 10-KSB, respectively, for the fiscal year ended
December 31, 1996;

(b) All other reports filed by United or First Clayton
pursuant to sections (13)(a), or 15(d) of the Exchange Act since
December 31, 1996.

Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes hereof to the extent that
a statement contained herein (or any subsequently filed document
that is or is deemed to incorporated by reference herein)

-1-

modifies or supersedes such previous statement. Any statement so
modified or superseded shall not be deemed to constitute a part
hereof except as so modified or superseded.

THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY
REFERENCE THE AGREEMENT AND PLAN OF REORGANIZATION, DATED AS OF
JUNE 12, 1997, (THE "ACQUISITION AGREEMENT") BETWEEN UNITED AND
FIRST CLAYTON BANCSHARES, INC., A GEORGIA CORPORATION ("FIRST
CLAYTON"), AND THE AGREEMENT AND PLAN OF MERGER, DATED AS OF JUNE
12, 1997, (THE "MERGER AGREEMENT") BETWEEN FIRST CLAYTON AND
UNITED, BOTH OF WHICH WERE FILED WITH THE SEC ON JULY __, 1997 AS
EXHIBITS TO UNITED'S REGISTRATION STATEMENT ON FORM S-4 WITH
RESPECT TO THE MERGER, AS DEFINED BELOW, COMMISSION FILE NO.
____________. ALTHOUGH THE ACQUISITION AGREEMENT IS NOT
PRESENTED HEREIN, OR DELIVERED HEREWITH, COPIES, OTHER THAN
EXHIBITS ATTACHED THERETO, MAY BE OBTAINED BY WRITING CHRIS
BLEDSOE, CHIEF FINANCIAL OFFICER, UNITED COMMUNITY BANKS, INC.,
P.O. BOX 398, 59 HIGHWAY 515, BLAIRSVILLE, GEORGIA 30512.
TELEPHONE REQUESTS MAY BE DIRECTED TO (706) 745-2151. IN ORDER
TO ASSURE TIMELY DELIVERY, ANY REQUEST SHOULD BE MADE BY
____________, 1997.

INTRODUCTION

This Proxy Statement/Prospectus is furnished in
connection with the solicitation by the Board of Directors of
First Clayton of proxies for use at the special meeting of
shareholders of First Clayton (the "Special Meeting"), at the
time, date and place set forth in the Notice of Special Meeting
and at any adjournments thereof. The Special Meeting has been
called for the purpose of considering and acting upon the
proposed merger of First Clayton with and into United (the
"Merger") pursuant to the Merger Agreement, a copy of which is
attached as Appendix A hereto and incorporated herein by
reference, and the related Acquisition Agreement which is
incorporated herein by reference.

HOLDERS OF COMMON STOCK OF FIRST CLAYTON ARE REQUESTED
TO COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY AND RETURN IT
PROMPTLY TO FIRST CLAYTON IN THE POSTAGE PAID ENVELOPE PROVIDED.

Any proxy given pursuant to this solicitation may be
revoked at any time before it is voted by so notifying Ronald E.
Vandiver, Secretary, in writing or by submitting an executed,
later-dated proxy to First Clayton: P.O. Box 1250, Clayton,
Georgia 30525, Attention: Ronald E. Vandiver, Secretary, prior to
the Special Meeting or by appearing at the Special Meeting and
requesting the right to vote in person, without compliance with
any other formalities. If the proxy is properly signed and
returned by a shareholder and is not revoked, it will be

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voted at the Special Meeting in the manner specified therein. IF
NO INSTRUCTIONS ARE INDICATED, SUCH PROXIES WILL BE VOTED FOR THE
APPROVAL OF THE MERGER AGREEMENT, AND IN THE DISCRETION OF THE
PROXY HOLDER AS TO ANY OTHER MATTER WHICH MAY PROPERLY COME
BEFORE THE SPECIAL MEETING.

All of the expenses incurred by United in connection
with the authorization, preparation, execution and performance of
the Acquisition Agreement and the Merger Agreement including,
without limitation, all fees and expenses of its agents,
representatives, counsel and accountants and the fees and
expenses related to filing regulatory applications with state and
federal authorities in connection with the transactions
contemplated thereby, will be paid by United. All expenses
incurred by First Clayton in connection with the authorization,
preparation, execution and performance of the Acquisition
Agreement and the Merger Agreement, including, without
limitation, all fees and expenses of agents, representatives,
counsel and accountants for First Clayton and the cost of
reproducing and mailing this Proxy Statement/Prospectus, will be
paid by First Clayton.

As of June 30, 1997, First Clayton had issued and
outstanding 400,691 shares of common stock, par value $1.00 per
share ("First Clayton Stock"). Each holder of First Clayton
Stock is entitled to one vote per share owned. Only shareholders
of record at the close of business on _____________, 1997 are
entitled to notice of and to vote at the Special Meeting or any
adjournments thereof.

Statements contained in this Proxy Statement/Prospectus
as to the contents of any agreement or other document, or similar
statements as to the content of any agreement or other document
contained in any document incorporated by reference herein, are
in each such instance qualified in their entirety by reference to
each such agreement or other document.

-3-

PROSPECTUS SUMMARY

The following is a summary of certain features of, and
information relating to, the proposed Merger, which is qualified
in its entirety by reference to the Merger Agreement, the
Acquisition Agreement and the other more detailed textual
information and financial data set forth elsewhere in this
Prospectus/Proxy Statement and in the accompanying booklet which
contains additional information about First Clayton and United.

BUSINESS OF FIRST CLAYTON AND UNITED

First Clayton is a one-bank holding company
headquartered in Clayton, Georgia. First Clayton's subsidiary,
First Clayton Bank & Trust Company ("First Clayton Bank"), is a
full-service commercial bank with its office located in Clayton,
Georgia. First Clayton Bank provides customary types of banking
services such as checking accounts, savings accounts and time
deposits. It also engages in commercial and consumer lending,
makes secured and unsecured loans and provides other financial
services. The mailing address of the principal executive offices
of First Clayton is P.O. Box 1250, Clayton, Georgia 30525 and
its telephone number is (706) 782-7100. At June 30, 1997, First
Clayton had total assets of $64 million, net loans of
approximately $48 million, total deposits of approximately $58
million and shareholders' equity of approximately $6 million.

United Community Banks, Inc. ("United") is a registered
bank holding company headquartered in Blairsville, Georgia. All
of United's activities are conducted by its wholly-owned
subsidiaries, United Community Bank (formerly Union County Bank)
("UCB"), Carolina Community Bank, Murphy, North Carolina
("Carolina"), which United acquired in 1990, Towns County Bank,
Hiawassee, Georgia ("Towns"), which United acquired in 1992,
Peoples Bank, Blue Ridge, Georgia ("Peoples"), which United
acquired in 1992, and White County Bank, Cleveland, Georgia
("White") which United acquired in 1995 (UCB, Carolina, Peoples,
Towns and White are collectively referred to herein as the
"Banks"). United operates a finance company United Family
Finance, Inc. with offices in Blue Ridge and Hiawassee.

In May 1997, United completed an offering to the public
of 300,000 shares of United Common Stock registered under the
Securities Act of 1933, as amended (the "Securities Act")
pursuant to which $6,476,000 in additional capital was raised.
United used the proceeds of that offering to invest additional
capital in UCB and Carolina and for general corporate purposes.

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."

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.

In August 1995, United completed an offering to the
public of 215,515 shares of United Stock registered under the

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Securities Act pursuant to which $2,434,000 in additional capital
was raised. United used the proceeds of that offering primarily
to invest additional capital in Carolina and Towns.

At June 30, 1997, United had total assets of
approximately $989 million, net loans of approximately $679
million, total deposits of approximately $859 million and
shareholders' equity of approximately $63 million. The principal
executive office of United is located at 59 Highway 515,
Blairsville, Georgia 30512, and its telephone number at that
address is (706) 745-2151. See "UNITED COMMUNITY BANKS, INC."

Additional information on United and First Clayton is
included in the booklet accompanying this Proxy
Statement/Prospectus which contains the 1997 Proxy Statement and
March 31, 1997 10-Q Quarterly Report for United and the 1996 10-
KSB Annual Report and March 31, 1997 10-QSB Quarterly Report for
First Clayton.

TERMS OF THE MERGER

Pursuant to the Acquisition Agreement, First Clayton
will be merged with and into United with United as the surviving
entity. As a result of the Merger, each share of First Clayton
Stock outstanding on the effective date of the Merger will be
converted into 1.6136 shares of common stock of United, $1.00 par
value per share (the "United Stock").

In lieu of the issuance of fractional shares of United
Stock, there will be paid in cash an amount (computed to the
nearest cent) equal to such fraction multiplied by $22.00. The
number of shares of the United Stock to be received pursuant to
the Merger is subject to appropriate adjustment in the event of
any stock dividend, stock split, recapitalization or
reclassification of United Stock.

THE SPECIAL MEETING OF SHAREHOLDERS; VOTE REQUIRED

The Special Meeting of First Clayton will be held on
____________, 1997, commencing at ____ p.m., at the office of
First Clayton at Village Shopping Center, Highway 441, Clayton,
Georgia for the purpose of voting on the Merger. Only First
Clayton shareholders of record at the close of business on
____________, 1997 will be entitled to notice of and to vote at
the Special Meeting or any adjournments thereof. The approval of
the Merger requires the affirmative vote of the holders of a
majority of the outstanding First Clayton Stock entitled to vote
at the Special Meeting. Directors and executive officers of
First Clayton who have agreed to vote their shares of First
Clayton Stock in favor of the Merger own or control 135,772
shares or approximately 34% of the outstanding shares of First
Clayton Stock (based on 400,691 shares outstanding).
Shareholders of United are not required to approve of the Merger.

-5-

RIGHTS OF DISSENTING SHAREHOLDERS

If the Merger is consummated, First Clayton
shareholders dissenting therefrom will be entitled to be paid the
"fair value" of their shares in cash, provided that they comply
with certain statutory provisions regarding the rights of
dissenting shareholders. See "THE PROPOSED MERGER -- Rights of
Dissenting Shareholders." Under the Acquisition Agreement,
United has the right not to consummate the Merger if the holders
of more than 15,000 shares (4%) of the outstanding shares of
First Clayton Stock dissent therefrom. See "THE PROPOSED MERGER
- -- Reasons for the Merger".

FEDERAL INCOME TAX CONSEQUENCES

First Clayton has received an opinion from Kilpatrick
Stockton LLP to the effect that, assuming that the Merger is
consummated in accordance with the terms of the Acquisition
Agreement and the Merger Agreement under applicable provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), no
gain or loss will be recognized for federal income tax purposes
by First Clayton or the shareholders of First Clayton who receive
United Stock in connection with the proposed Merger. No ruling
to that effect will be requested from the Internal Revenue
Service. Cash received by holders of First Clayton Stock in lieu
of fractional shares and by holders exercising their dissenters'
rights will be treated as amounts distributed in redemption of
their First Clayton Stock and will be taxable under the
provisions of Section 302 of the Code as either ordinary income
or capital gain or loss, depending upon the circumstances of the
individual shareholder. See "THE PROPOSED MERGER -- Certain
Federal Income Tax Consequences of the Merger."

ACCOUNTING TREATMENT

United will account for the Merger as a "pooling of
interests" transaction in accordance with generally accepted
accounting principles.

MARKETS FOR CAPITAL STOCK

United Stock is not currently traded on an established
public market. From January 1, 1997 through June 30, 1997,
management of United is aware of 139 trades aggregating 59,700
shares of United Stock, ranging from a block of 5 shares to a
block of 10,000 shares, at prices ranging from $22 to $25 per
share. On March 7, 1997, United commenced an offering of 250,000
shares of United Stock to the public at $22.00 per share pursuant
to a registration statement filed with the SEC which offering was
subsequently increased to 300,000 shares. The offering
terminated in May 1997 with all of the offered shares sold at the
offering price. Management of United is aware of approximately
256 trades of United Stock during 1996, ranging from one share to
a block of 2,500 shares, at prices ranging from $10.00 to $42.00
per share. Management of United is aware of 29 trades of United
Stock during 1995, ranging from a block of 15 shares to a block
of 1,000 shares, at prices ranging from $10.00 to $11.50 per
share. The last sales price of United Stock known to United's
management prior to the announcement of the Merger on June 23,
1997 was $22 per share on June 17, 1997.

-6-
First Clayton Stock is not traded on an established
public trading market. As of June 30, 1997, there were 400,691
shares of First Clayton Stock outstanding and 402 holders of such
shares. From January 1, 1997 through June 30, 1997, management
of First Clayton is aware of 24 trades aggregating 8,047 shares
of First Clayton Stock, ranging from a block of 11 shares to a
block of 6,000 shares, at prices ranging from $20.00 per share to
$21.00 per share. Management is aware of 30 trades of First
Clayton Stock during 1996 ranging from a block of 58 shares to a
block of 15,000 shares with prices ranging from $17.00 per share
to $20.00 per share. In 1995 management is aware of 27 trades of
First Clayton Stock ranging from a block of 23 shares to a block
of 1,000 shares with prices ranging from $15.00 per share to
$17.00 per share. The last sale of First Clayton Stock known to
management prior to the announcement of the Merger on June 23,
1997 was $21.00 per share on June 3, 1997.

DIVIDENDS

In each of the first two quarters of 1997 United
declared cash dividends of $.025 per share. United paid semi-
annual cash dividends of $.08 per share of United Stock to
shareholders of record in 1996 and $.07 per share of United Stock
to shareholders of record in 1995. For information with respect
to cash dividends paid in each of the last five years, see
"SUMMARY CONSOLIDATED FINANCIAL INFORMATION." Although United
intends to continue paying cash dividends, the amount and
frequency of cash dividends will be determined by United's Board
of Directors after consideration of earnings, capital
requirements and the financial condition of United. No
assurances can be given that cash dividends will be declared in
the future. Additionally, United's ability to pay cash dividends
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.

First Clayton paid a per share cash dividend of $.44
during 1996 and $.40 during 1995. No assurances can be given
that dividends will be declared in the future.

Whether or not the Merger Agreement is approved by the
shareholders of First Clayton and the Merger is consummated,
future dividend policy for United and First Clayton will depend
upon each company's earnings, financial condition, appropriate
legal restrictions and other factors relevant at the time the
respective Boards of Directors considers such dividends.

CERTAIN DIFFERENCES IN SHAREHOLDERS' RIGHTS

Upon consummation of the Merger, First Clayton
shareholders, whose rights are governed by First Clayton's
Articles of Incorporation and Bylaws, will automatically become
United shareholders, and their rights as United shareholders will
be governed by United's Articles of Incorporation and Bylaws.
Certain differences exist between the rights of First Clayton
shareholders and United Shareholders. See "THE PROPOSED MERGER -
Effect of the Merger on Clayton Shareholders and Comparison of
Securities of Clayton and United."

-7-

INTERESTS OF MANAGEMENT IN THE TRANSACTION

After the consummation of the Merger, J. Mark Smith,
President of First Clayton, and Rodney Hickox, Executive Vice
President of First Clayton, will each be granted options to
purchase 12,102 shares of United Stock at the market price as of
the date of grant. In addition, Messrs. Smith and Hickox have
entered into deferred compensation agreements with First Clayton
which will be assumed by United in the Merger and which provide
that they will each receive deferred compensation in the amount
of $108,750. See "THE PROPOSED MERGER -- Interest of Management
in the Transaction."

CONDITIONS, TERMINATION AND EFFECTIVE DATE

The Merger is subject to a number of conditions and may
be terminated by any of the parties upon the occurrence or
failure of certain events. See "THE PROPOSED MERGER -- The
Agreement and Plan of Reorganization and The Agreement and Plan
of Merger." The Merger is subject to approval by the First
Clayton shareholders and the receipt of required approval by the
Board of Governors of the Federal Reserve System (the "Federal
Reserve") and the Department of Banking and Finance of the State
of Georgia (the "DBF"). See "THE PROPOSED MERGER -- Regulatory
Approvals."

The closing of the Merger (the "Effective Date") will
occur following approval of the Merger Agreement by First
Clayton's shareholders, approval of the transaction by the
regulators referenced above and the expiration of any waiting or
similar period required by applicable law or such other time as
the parties may mutually agree.

-8-

COMPARATIVE SHARE DATA

The following table sets forth selected comparative
unaudited per share data for United on a historical basis (the
"United Historical"), for First Clayton on a historical basis
(the "First Clayton Historical"), for United and First Clayton on
a pro forma basis assuming the Merger had been effective for the
periods indicated (the "United and First Clayton Pro Forma"), and
for First Clayton on a pro forma equivalent basis (the "First
Clayton Pro Forma Equivalent"). The Merger will be accounted for
as a "pooling of interests" transaction in accordance with
generally accepted accounting principles. See "THE PROPOSED
MERGER - Accounting Treatment."

Equivalent earnings per share amounts for First Clayton
have been calculated by multiplying the pro forma combined
earnings per share by the exchange ratio (1.6136 shares of the
United Stock for each share of First Clayton Stock). The First
Clayton pro forma equivalent cash dividends per common share
represent historical dividends declared by United multiplied by
the applicable exchange ratio. The purpose of the pro forma
equivalent per-share amounts is for informational purposes only
to show the pro forma net earnings that would have been earned
for each share of First Clayton had the Merger been consummated
for the periods indicated. This data should be read in
conjunction with the historical financial statements of First
Clayton and United, including the respective notes thereto
included elsewhere herein and incorporated by reference. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."

As of and For the As of and For the
Year Ended Year Ended
March 31, 1997 December 31,
----------------- ------------
1996 1995 1994
---- ---- ----

NET EARNINGS PER COMMON SHARE
United Historical $0.33 1.31 1.04 0.93
First Clayton Historical 0.48 1.78 1.46 1.18
United and First Clayton Pro Forma Combined 0.32 1.29 1.03 0.91
First Clayton Pro Forma Equivalent 0.52 2.08 1.66 1.47

CASH DIVIDENDS PER COMMON SHARE
United Historical $0.025 0.080 0.072 0.040
First Clayton Historical - 0.440 0.400 0.350
United and First Clayton Pro Forma Combined 0.025 0.080 0.072 0.040
First Clayton Pro Forma Equivalent 0.040 0.129 0.116 0.065

BOOK VALUE PER COMMON SHARE (END OF PERIOD)
United Historical $8.37 8.14 7.03 5.41
First Clayton Historical 13.57 13.19 12.21 10.95
United and First Clayton Pro Forma Combined 8.38 8.14 7.09 5.56
First Clayton Pro Forma Equivalent 13.52 13.13 11.44 8.97

Computed giving effect to the Merger.
Computed based on the First Clayton per share exchange ratio
of 1.6136 shares of United Stock for each share of First
Clayton Stock.
Represents historical dividends paid by United as it is
assumed that United willnot change its dividend policy
as a result of the Merger.
Represents historical dividends paid per share by United
multiplied by the exchange ratio of 1.6136 shares of United
Stock for each share of First Clayton Stock.

-9-

SUMMARY CONSOLIDATED FINANCIAL INFORMATION

The following tables present certain selected historical
financial information for United and First Clayton. The data
should be read in conjunction with the historical financial
statements, including the respective notes thereto, and other
financial information concerning United and First Clayton
incorporated by reference in or accompanying this Proxy
Statement/Prospectus. Interim unaudited data for the three
months ended March 31, 1997 and 1996, of United and First Clayton
reflect, in the opinion of the respective management of United
and First Clayton, all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of such
data. Results for the three months ended March 31, 1997, are not
necessarily indicative of results which may be expected for any
other interim period or for the year as a whole. See "AVAILABLE
INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."

-10-
SUMMARY CONSOLIDATED FINANCIAL INFORMATION

(Dollars in thousands, except per share amounts)

Three Months
Ended March 31, As of and For the Year Ended December 31,
---------------- --------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

BALANCE SHEET DATA
Total assets $ 891,516 682,718 828,030 659,669 456,936 393,632 332,013
Loans 635,457 464,846 591,398 449,595 341,621 283,611 224,057
Deposits 778,898 611,374 720,726 590,656 393,270 349,765 300,020
Long term debt 10,170 11,026 10,453 11,309 9,400 7,400 7,800
Stockholders' equity 53,912 45,327 52,401 44,027 30,217 25,449 20,942

STATEMENT OF EARNINGS DATA
Net interest income 8,954 6,892 31,368 22,919 18,217 14,516 11,131
Provision for loan losses 564 279 1,411 1,040 935 842 472
Noninterest income 1,462 1,320 5,368 4,264 3,762 3,700 2,157
Noninterest expense 3,767 5,351 23,313 17,854 13,902 11,705 8,635
Net earnings 2,100 1,673 8,201 6,051 5,200 4,202 3,126

PER SHARE DATA
Book value (period end) 8.37 7.24 8.14 7.03 5.41 4.55 3.81
Net earnings 0.33 0.27 1.31 1.04 0.93 0.76 0.57
Dividends 0.025 - 0.080 0.072 0.040 0.036 0.046
Total shares outstanding 6,438,848 6,260,280 6,438,848 6,260,280 5,589,365 5,589,365 5,500,110
Weighted average shares outstanding 6,438,848 6,260,280 6,260,769 5,813,615 5,589,365 5,545,110 5,492,435

RATIOS
Return on average assets 1.00% 1.00% 1.10% 1.08% 1.22% 1.16% 1.04%
Return on average stockholders' equity 16.00% 15.03% 17.01% 16.30% 18.68% 18.12% 16.07%
Average equity to average assets 6.18% 6.69% 6.60% 6.60% 6.51% 6.41% 6.47%
Average loans to average deposits 81.81% 78.54% 79.49% 79.38% 82.23% 77.20% 74.46%

FIRST CLAYTON BANCSHARES, INC. AND SUBSIDIARY

BALANCE SHEET DATA
Total assets $ 63,273 52,078 58,073 52,629 39,591 33,851 29,397
Loans, net 44,940 32,734 41,778 30,426 25,015 21,560 17,986
Deposits 57,570 46,482 52,574 47,176 34,728 29,155 25,169
Long term debt - - - - - - -
Stockholders' equity 5,432 5,326 5,280 5,180 4,654 4,427 4,116

STATEMENT OF EARNINGS DATA
Net interest income 697 564 2,448 2,096 1,850 1,508 1,193
Provision for loan losses 33 25 186 77 63 89 104
Noninterest income 76 67 298 259 200 218 216
Noninterest expense 447 350 1,531 1,350 1,223 1,106 1,090
Net earnings 192 174 726 618 501 407 215

PER SHARE DATA
Book value (period end) 13.57 12.55 13.19 12.21 10.95 10.36 9.62
Net earnings 0.48 0.41 1.78 1.46 1.18 0.92 0.48
Dividends - - 0.44 0.40 0.35 0.30 -
Total shares outstanding 400,391 424,393 400,391 424,393 424,850 427,327 427,827
Weighted average shares outstanding 400,391 424,393 408,198 424,919 424,850 441,916 448,710

SELECTED RATIOS
Return on average assets 1.28% 1.35% 1.36% 1.36% 1.35% 1.29% 0.77%
Return on average stockholders' equity 14.54% 13.43% 13.80% 12.39% 10.82% 9.37% 5.37%
Average equity to average assets 8.83% 10.03% 9.85% 10.96% 12.49% 13.77% 14.29%
Average loans to average deposits 78.73% 67.44% 75.84% 70.65% 72.19% 72.86% 71.98%

Represents stockholders' equity divided by the number of outstanding
shares at period end.
1993 and 1992 amounts include effect of 159,257 shares of common stock
represented by warrants which expired June 1, 1993 without being
exercised.

-11-
SELECTED PRO FORMA FINANCIAL DATA

The following unaudited pro forma financial data gives
effect to the acquisition of First Clayton as of the date or at
the beginning of the period indicated, assuming the acquisition
is accounted for as a pooling of interests. The pro forma
balance sheet information has been prepared as if the acquisition
had been consummated on March 31, 1997. The pro forma operating
data has been prepared as if the acquisition had been consummated
on January 1, 1994. The unaudited pro forma financial data is
presented for informational purposes only and is not necessarily
indicative of the combined financial position or results of
operation which actually would have occurred if the transaction
had been consummated at the date and for the periods indicated or
which may be obtained in the future.

SELECTED PRO FORMA FINANCIAL DATA
(Dollars in thousands, except per share amounts)

As of and For the For The Year Ended
Three Months Ended March 31, December 31,
---------------------------- -----------------------------
1997 1996 1996 1995 1994

BALANCE SHEET DATA
Total assets $954,789 - - - -
Federal funds sold 18,470 - - - -
Investment securities 178,292 - - - -
Loans 680,397 - - - -
Deposits 836,468 - - - -
Other borrowings 43,424 - - - -
Long-term debt 10,170 - - - -
Stockholders' equity 59,344 - - - -

EARNINGS DATA
Interest income $19,811 $15,524 $67,907 $53,209 $36,844
Interest expense 10,160 8,068 34,091 28,194 16,776
Net interest income 9,651 7,456 33,816 25,015 20,068
Provision for loan losses 597 304 1,597 1,116 998
Noninterest income 1,538 1,387 5,666 4,523 3,962
Noninterest expense 7,184 5,701 24,844 19,204 15,125
Income taxes 1,117 991 4,114 2,549 2,206
Net earnings 2,291 1,847 8,927 6,669 5,701
Earnings per common share 0.32 0.27 1.29 1.03 0.91

-12-

PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

The following unaudited pro forma consolidated balance sheet
(the "pro forma balance sheet") as of March 31, 1997, and the
unaudited pro forma consolidated statements of earnings (the "pro
forma earnings statements") for the three months ended March 31,
1997, and for each of the three years in the period ended
December 31, 1996, combine the historical financial statements of
United with First Clayton after giving effect to the Merger to
using the pooling of interests method of accounting. Pro forma
adjustments to the balance sheet are computed as if the
transaction occurred at March 31, 1997, while the pro forma
adjustments to the statements of earnings are computed as if the
transactions were consummated on January 1994, the earliest
period presented. In addition, the following financial
statements do not reflect any anticipated cost savings, which may
be realized by United after consummation of the Merger.

The pro forma information does not purport to represent what
United's and First Clayton's combined results of operations
actually would have been if the Merger had occurred on January 1,
1994.

-13-

UNITED COMMUNITY BANKS, INC.
Unaudited Pro Forma Consolidated Balance Sheet
March 31, 1997

Historical Historical Pro Forma
United First Clayton Adjustments Consolidated
---------- ------------- ----------- ------------

ASSETS
Cash and due from banks $ 27,562 2,486 - 30,048
Federal funds sold 17,170 1,300 - 18,470
------------- ----------- ---------- ---------
Cash and cash equivalents 44,732 3,786 - 48,470

Investment securities 166,357 11,935 - 178,292
Mortgage loans held for sale 5,523 - - 5,523
Loans 643,613 45,399 - 689,012
Less: Allowance for loan (8,156) (459) - (8,615)
------------- ----------- ---------- ---------
Loans, net 635,457 44,940 - 680,397

Premises and equipment 19,297 1,436 - 20,733
Other assets 20,150 1,176 - 21,326
------------- ----------- ---------- ---------
$ 891,516 63,273 - 954,789
============= =========== ========== =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest bearing $ 80,737 5,527 - 86,264
Interest-bearing 698,161 52,043 - 750,204
------------- ----------- ---------- ---------
Total deposits 778,898 57,570 - 836,468

Borrowed funds 43,424 - - 43,424
Long-term debt 10,170 - - 10,170
Other liabilities 5,112 271 - 5,383
------------- ----------- ---------- ---------
Total liabilities 837,604 57,841 - 895,445

Stockholders' equity:
Preferred stock - - - -
Common stock 6,439 428 (428) 7,085
646
Capital surplus 15,341 3,850 (3,850) 18,522
3,180
Retained earnings 32,634 1,658 34,292
Unrealized securities losses (502) (53) - (555)
------------- ----------- ---------- ---------
53,912 5,883 (451) 59,344
Less: Cost of 27,436 shares of treasury - (451) 451 -
stock ------------- ----------- ---------- ---------
Total stockholders' equity 53,912 5,432 - 59,344
------------- ----------- ---------- ---------
$ 891,516 63,273 - 954,789
============= =========== ========== =========

Outstanding common shares 6,438,848 400,391 7,084,919
Book value per common share 8.37 13.57 8.38

See accompanying notes to pro forma consolidated financial statements.

-14-

UNITED COMMUNITY BANKS, INC. & SUBSIDIARIES
Unaudited Pro Forma Consolidated Statement of Earnings
For the Three Months Ended March 31, 1997

Historical Historical Pro Forma
United First Clayton Adjustments Consolidated
---------- ------------- ----------- ------------

Interest income $ 18,449 1,362 - 19,811
Interest expense 9,495 665 - 10,160
---------- -------- -------- -------
Net interest income 8,954 697 - 9,651
---------- -------- -------- -------

Provision for loan losses 564 33 - 597
---------- -------- -------- -------

Net interest income after provision
for loan losses 8,390 664 - 9,054
---------- -------- -------- -------

Noninterest income 1,462 76 - 1,538
Noninterest expense 6,737 447 - 7,184
---------- -------- -------- -------

Earnings before income taxes 3,115 293 - 3,408

Income taxes 1,015 102 - 1,117
---------- -------- -------- -------

Net earnings $ 2,100 191 - 2,291
========== ======== ======== =======

Earnings per common share 0.33 0.48 0.32
Weighted average shares outstanding 6,438,848 400,391 7,084,919

See accompanying notes to pro forma consolidated financial statements.

-15-

UNITED COMMUNITY BANKS, INC. & SUBSIDIARIES
Unaudited Pro Forma Consolidated Statement of Earnings
For the Three Months Ended March 31, 1996

Historical Historical Pro Forma
United First Clayton Adjustment Consolidated
---------- ------------- ---------- ------------

Interest income $ 14,379 1,145 - 15,524
Interest expense 7,487 581 - 8,068
----------- ---------- -------- --------
Net interest income 6,892 564 - 7,456
----------- ---------- -------- --------

Provision for loan losses 279 25 - 304
----------- ---------- -------- --------

Net interest income after provision for loan 6,613 539 - 7,152
----------- ---------- -------- --------

Noninterest income 1,320 67 - 1,387
Noninterest expense 5,351 350 5,701
----------- ---------- -------- --------

Earnings before income taxes 2,582 256 - 2,838

Income taxes 909 82 - 991
----------- ---------- -------- --------
Net earnings $ 1,673 174 - 1,847
=========== ========== ======== ========

Earnings per common share 0.27 0.41 0.27

Weighted average shares outstanding 6,260,280 424,393 6,945,081

See accompanying notes to pro forma consolidated financial statements.

-16-

UNITED COMMUNITY BANKS, INC. & SUBSIDIARIES
Unaudited Pro Forma Consolidated Statement of Earnings
For the Year Ended December 31, 1996

Historical Historical Pro Forma
United First Clayton Adjustments Consolidated
---------- ------------- ----------- ------------

Interest income 63,126 4,781 - 67,907
Interest expense 31,758 2,333 - 34,091
---------- -------- ---------- ---------

Net interest income 31,368 2,448 - 33,816
---------- -------- ----------- ---------
Provision for loan losses 1,411 186 - 1,597
---------- -------- ----------- ---------
Net interest income after provision for 29,957 2,262 - 32,219
loan losses

Noninterest income 5,368 298 - 5,666
Noninterest expense 23,313 1,531 24,844
---------- -------- ----------- ---------
Earnings before income taxes 12,012 1,029 - 13,041

Income taxes 3,811 303 - 4,114
---------- -------- ----------- ---------

Net earnings $ 8,201 726 - 8,927
========== ======== =========== =========

Earnings per common share 1.31 1.78 1.29
Average shares outstanding 6,260,769 408,198 6,919,437

See accompanying notes to pro forma consolidated financial statements.

-17-
UNITED COMMUNITY BANKS, INC. & SUBSIDIARIES
Unaudited Pro Forma Consolidated Statement of Earnings
For the Year Ended December 31, 1995

Historical Historical Pro Forma
United First Clayton Adjustments Consolidated
---------- ------------- ------------ ------------

Interest income $ 49,127 4,082 - 53,209
Interest expense 26,208 1,986 - 28,194
------------ ----------- ---------- ---------
Net interest income 22,919 2,096 - 25,015
------------ ----------- ---------- ---------
Provision for loan losses 1,040 76 - 1,116
------------ ----------- ---------- ---------
Net interest income after provision for 21,879 2,020 - 23,899
loan losses ------------ ----------- ---------- ---------

Noninterest income 4,264 259 - 4,523
Noninterest expense 17,854 1,350 19,204
------------ ----------- ---------- ---------
Earnings before income taxes 8,289 929 - 9,218

Income taxes 2,238 311 - 2,549
------------ ----------- ---------- ---------
Net earnings $ 6,051 618 - 6,669
============ =========== ========== =========

Earnings per common share 1.04 1.46 1.03
Average shares outstanding 5,813,615 424,919 259,703 6,499,264

See accompanying notes to pro forma consolidated financial statements.

-18-

UNITED COMMUNITY BANKS, INC. & SUBSIDIARIES
Unaudited Pro Forma Consolidated Statement of Earnings
For the Year Ended December 31, 1994

Historical Historical Pro Forma
United First Clayton Adjustments Consolidated
---------- ------------- ------------ ------------

Interest income $ 33,855 2,989 - 36,844
Interest expense 15,638 1,138 - 16,776
------------ ----------- ---------- ---------
Net interest income 18,217 1,851 - 20,068
------------ ----------- ---------- ---------

Provision for loan losses 935 63 - 998
------------ ----------- ---------- ---------

Net interest income after provision for 17,282 1,788 - 19,070
loan losses ------------ ---------- ---------- ---------

Noninterest income 3,762 200 - 3,962
Noninterest expense 13,902 1,223 15,125
------------ ----------- ---------- ---------

Earnings before income taxes 7,142 765 - 7,907

Income taxes 1,942 264 - 2,206
------------ ----------- ---------- ---------

Net earnings $ 5,200 501 - 5,701
============ =========== ========== =========

Earnings per common share 0.93 1.18 0.91
Average shares outstanding 5,589,365 424,919 6,275,014

See accompanying notes to pro forma consolidated financial statements.

-19-

NOTES TO PRO FORMA CONDENSED FINANCIAL INFORMATION

(1) The unaudited pro forma consolidated balance sheet as of March
31, 1997 and consolidated statements of earnings for the three
months ended March 31, 1997 and 1996 and for the years ended
December 31, 1996, 1995 and 1994 have been prepared based on the
historical consolidated balance sheets and statements of
earnings, which give effect to the merger of United with First
Clayton accounted for as a pooling of interests, based on the
exchange of 1.6136 shares of United for each outstanding common
share of First Clayton.
(2) In the opinion of management of the respective companies
included above, all adjustments considered necessary for a fair
presentation of the financial position and results for the
period presented have been included. Adjustments, if any, are
normal and recurring in nature.

-20-
THE PROPOSED MERGER

BACKGROUND OF AND REASONS FOR THE MERGER

During the first quarter of 1997, the Chief Executive
Officer of United and the Chief Executive Officer of First
Clayton began to explore the possibility of combining First
Clayton with United. On April 17, 1997 at the regularly
scheduled quarterly meeting of the Board of Directors of United,
United's management presented to United's Board an analysis of
certain strategic options of United, one of which pertained to a
possible merger with First Clayton Bank. After a discussion by
and among United's management and directors, United's Chief
Executive Officer was authorized to submit a preliminary proposal
to First Clayton.

On April 11, 1997, after the regularly scheduled Annual
Shareholder Meeting for First Clayton, the full board of First
Clayton reviewed publicly filed information pertaining to United
after which meeting the board issued an invitation for the Chief
Executive Officer of United to make a presentation to the full
board of First Clayton.

On April 29, 1997, at a called meeting of the board of
First Clayton, the Chief Executive Officer of United submitted a
proposal. This proposal, which generally outlined the terms of
the Merger, was discussed at length together with the benefits of
the Merger. Subsequent to his presentation, the Chief Executive
Officer of United was excused and the Board continued its
discussion of the Merger. The board of directors of First
Clayton authorized the Chairman of the Board and the Chief
Executive Officer and any other interested board member to meet
with the First Clayton's legal counsel to further discuss the
terms of the merger as well as the benefits.

On May 22, 1997, both parties executed a
Confidentiality Agreement as the final terms of the Merger were
being negotiated.

On June 9, 1997 the Board of United approved the
execution of the Acquisition Agreement, subject to satisfactory
completion of its due diligence examination of First Clayton. On
June 11, 1997, on site due diligence of First Clayton was
conducted by representatives of United. Similarly, off-site due
diligence of United was conducted by financial advisors of First
Clayton on June 20, 1997. Subsequently, both companies undertook
additional off-site due diligence and discussions with legal
counsel and financial advisors.

At a Board of Directors meeting held on June 12, 1997,
the Board of First Clayton considered a number of factors in
evaluating the Merger. Without assigning any relative or specific
weights to the factors, the Board of Directors of First Clayton
considered the following material factors:

(a) The alternatives to the Merger, including
remaining an independent institution in light of
the current economic condition of the market and

-21-

the competitive disadvantages as compared to the
larger financial institutions operating in the
market;

(b) The value of the consideration to be received by
First Clayton shareholders relative to the book
value and earnings per share of First Clayton
Common Stock;

(d) The financial terms of recent business
combinations in the financial services industry
and a comparison of the multiples of selected
combinations with the terms of the proposed
transaction with United;

(e) The marketability of First Clayton Common Stock;

(f) The competitive and regulatory environment for
financial institutions generally;

(g) The fact that the Merger will enable First Clayton
shareholders to exchange their shares of First
Clayton Common shareholders to exchange their
shares of First Clayton Common Stock, in a tax-
free transaction, for shares of common stock of a
regional company; and

(h) United's ability to provide comprehensive
financial services through First Clayton Bank to
its market;

On June 12, 1997, the parties executed the Acquisition
Agreement and on June 23, 1997 after completion of due diligence
and the delivery of the disclosure memorandum by both parties, a
joint press release announcing the execution of the Acquisition
Agreement was issued.

The Board of Directors of First Clayton believes the
Merger is in the best interest of its shareholders because the
Merger will permit them to exchange their ownership interest in
First Clayton for an equity interest in United, which has greater
financial resources than First Clayton. The Board of Directors
of First Clayton also believes that the terms of the Merger,
including the basis of exchange, 1.6136 shares of United Stock
for each share of First Clayton Stock, which was determined
through arms-length negotiations between United and the Board of
Directors of First Clayton, are fair and equitable and take into
account the relative earning power of United and First Clayton,
historic and anticipated operations, the economies of scale to be
achieved through the Merger, the trading prices of the stocks of
the respective companies and other pertinent factors. The
exchange ratio of 1.6136 shares of United Stock for each share of
First Clayton Stock represents a multiple of 2.616 times First
Clayton's book value as of March 31, 1997 and 19.19 times
trailing twelve months earning per share if United Stock is
valued at $22 a share.

-22

The Board of Directors of First Clayton believes that
the size of the combined organization, approximately
$1,053,000,000 in assets as of June 30, 1997, is sufficiently
large to take advantage over time of significant economies of
scale, but is still small enough to maintain the competitive
advantages management believes are afforded community-oriented
banks over the larger regional and super-regional banks. It has
become increasingly apparent to the management of First Clayton
that in the current regulatory and competitive environment,
larger organizations with their greater economies of scale,
including their ability to spread largely fixed regulatory
compliance costs over a larger gross income base and their
ability to attract management talent who are able to compete in a
more sophisticated financial-services environment, will be more
successful than smaller organizations such as First Clayton
separately. Management of United and First Clayton believe that
there is a future for community banks in the banking industry,
but that community banks will be required to achieve a critical
size to maintain above-average economic performance.

THE AGREEMENT AND PLAN OF REORGANIZATION AND THE AGREEMENT AND
PLAN OF MERGER

The material features of the Acquisition Agreement and
the Merger Agreement are summarized below. This summary does not
purport to be complete and is subject in all respects to the
provisions of, and is qualified in its entirety by reference to,
the Acquisition Agreement which is incorporated herein and the
Merger Agreement which is attached as Appendix A hereto.

EFFECTIVE DATE. The Merger Agreement provides that the
Merger will be effective on the first business day following the
receipt of all required approvals from any governmental
authorities and following the expiration of any waiting period
required by law or at such other time as the parties may mutually
agree. The Merger is subject to approval by the Federal Reserve
and the DBF. See "THE PROPOSED MERGER -- Regulatory Approvals."
It is anticipated that the Merger will become effective prior to
__________________, 1997.

TERMS OF THE MERGER. On the Effective Date, each
outstanding share of First Clayton Stock first will be converted
into and exchanged for 1.6136 shares of United Stock. If, prior
to the Effective Date, the outstanding shares of the United Stock
are increased by means of any stock dividend, stock split,
subdivision, recapitalization or reclassification of shares, or
are combined into a lesser number of shares by reclassification,
recapitalization or reduction of capital, the number of shares of
United Stock to be delivered pursuant to the Merger in exchange
for a share of First Clayton Stock will be proportionately
adjusted.

No scrip or fractional share certificate of United
Stock will be issued in connection with the Merger, and an
outstanding fractional share interest will not entitle the owner
thereof to vote, to receive dividends or to any rights of a
shareholder of United with respect to such fractional interest.

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In lieu of the issuance of any fractional shares of United Stock,
United will pay in cash an amount (computed to the nearest cent)
equal to such fraction multiplied by $22.00 per share.

If the Merger is consummated, shareholders of First
Clayton will become shareholders of United, and First Clayton
will be merged with and into United. The Articles of
Incorporation, Bylaws, corporate identity and existence of United
will not be changed as a result of the Merger, but First Clayton
will cease to exist as a separate entity following the Merger.

TERMINATION AND CONDITIONS OF CLOSING. The Merger
Agreement and the Acquisition Agreement may be terminated and the
Merger abandoned at any time either before or after approval of
the Merger Agreement by the shareholders of First Clayton, but
not later than the Effective Date:

(i) by United, if there is any material adverse change
in the financial condition or business of First Clayton
which change would reasonably be expected to have a material
adverse effect on the market price of First Clayton Stock,
or if First Clayton suffers a material loss or damage to any
of its properties or assets, which change, loss or damage
materially affects or impairs the ability of First Clayton
to conduct its business; or by First Clayton, if there is
any material adverse change in the financial condition or
business of United which change would reasonably be expected
to have a material adverse effect on the market price of
United Stock, or if United suffers a material loss or damage
to any of its properties or assets, which change, loss or
damage materially affects or impairs United's ability to
conduct its business;

(ii) by United, if the terms, covenants or conditions
of the Acquisition Agreement are not complied with or
performed by First Clayton at or before the closing of the
transactions contemplated therein and such noncompliance or
nonperformance is not waived by United; or by First Clayton,
if the terms, covenants and conditions of the Acquisition
Agreement are not complied with or performed by United at or
before the closing of the transactions contemplated therein
and such noncompliance or nonperformance is not waived by
First Clayton;

(iii) by United, if it learns of any fact or
condition not disclosed in the Acquisition Agreement, or the
documents delivered in connection therewith, which was
required to be disclosed by First Clayton pursuant to the
provisions of the Acquisition Agreement at or prior to the
date of execution thereof with respect to the business,
properties, assets or earnings of First Clayton, which
materially and adversely affects such business, properties,
assets or earnings or the ownership, value or continuance
thereof; or by First Clayton, if it learns of any fact or
condition not disclosed in the Acquisition Agreement, or the
documents delivered in connection therewith, which was
required to be disclosed by United pursuant to the
provisions of the Acquisition Agreement at or prior to the
date of execution thereof with respect to the business,

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properties, assets or earnings of United, which materially
and adversely affects such business, properties, assets or
earnings or the ownership, value or continuance thereof;

(iv) by First Clayton or United, if any action, suit or
proceeding is instituted or threatened against any party to
restrain or prohibit, or to obtain substantial damages in
respect of, the Acquisition Agreement, or the consummation
of the transactions contemplated therein, which, in the good
faith opinion of First Clayton or United, makes consummation
of the transactions contemplated therein inadvisable;

(v) by any party, if the date of Closing of the Merger
does not occur on or before November 30, 1997.

(vi) by United, if the holders of more than 15,000 of
the outstanding shares of First Clayton Stock elect to
exercise their statutory right to dissent from the Merger
and demand payment in cash;

(vii) by either party, if the Merger Agreement is
not approved by the vote of the holders of First Clayton
Stock as required by applicable law;

(viii) by United, if it learns of any potential
liability of First Clayton arising from non-compliance with
any federal, state or local environmental law by First
Clayton, or any potential liability of First Clayton arising
from any environmental condition of the properties or assets
of First Clayton, including any properties or assets in
which First Clayton holds a security interest; and

(ix) by First Clayton, if it learns of any potential
liability of United arising from non-compliance with any
federal, state or local environmental law by United, or any
potential liability of United arising from any environmental
condition of the properties or assets of United, including
any properties or assets in which United holds a security
interest.

Among the required conditions of closing are:

(i) the accuracy and veracity, in all material
respects, of the representations and warranties of all
parties contained in the Acquisition Agreement or in any
certificate, schedule or other document delivered in
connection therewith as of the date when made and the
Effective Date;

(ii) the performance of all agreements and conditions
required by the Acquisition Agreement;

(iii) the delivery of certain officers
certificates, resolutions and legal opinions to First
Clayton and United.

(iv) approval of the Merger by the vote of the holders
of a majority of the First Clayton Stock entitled to vote at
the Special Meeting;

-25-

(v) the obtaining from any and all governmental
authorities, bodies or agencies having jurisdiction over the
transactions contemplated in the Acquisition Agreement and
the Merger Agreement, including, but not limited to the
Federal Reserve (or its lawful delegate) and the DBF, such
consents, authorizations and approvals as are necessary for
the consummation thereof and all applicable waiting or
similar periods required by law shall have expired;

(vi) the declaration by the Securities and Exchange
Commission of the effectiveness of the Registration
Statement of United, of which this Proxy Statement is a
part, and the absence of any stop order entered with respect
thereto;

(vii) the receipt by First Clayton of the tax
opinion of Kilpatrick Stockton LLP as described in the
Acquisition Agreement; and

(viii) the issuance of a certificate of merger by
the Secretary of State of Georgia with respect to the Merger
in accordance with the provisions of Georgia law.

Surrender of Certificates. As soon as practicable
after the Effective Date, each holder as of the Effective Date of
any shares of First Clayton Stock will, upon presentation and
surrender of the certificates representing such shares to
United's transfer agent, SunTrust Bank, Atlanta, be entitled to
receive in exchange therefor a certificate or certificates
representing the number of whole shares of United Stock to which
such holder shall be entitled based upon the above-described
basis of exchange, together with the amount of cash payable in
lieu of a fractional interest in United Stock. Until so
surrendered, the certificates representing shares of First
Clayton Stock will be deemed to represent the number of shares of
United Stock into which the same shall have been converted. A
SHAREHOLDER OF FIRST CLAYTON WHO IS ENTITLED TO RECEIVE COMMON
STOCK IN EXCHANGE FOR HIS FIRST CLAYTON STOCK WILL NOT BE
ENTITLED TO RECEIVE PAYMENT OF ANY DIVIDENDS OR OTHER
DISTRIBUTIONS ON SHARES OF UNITED STOCK INTO WHICH HIS SHARES OF
FIRST CLAYTON STOCK HAVE BEEN CONVERTED OR TO RECEIVE ANY NOTICES
SENT BY UNITED TO ITS SHAREHOLDERS WITH RESPECT TO, OR TO VOTE,
SUCH SHARES, UNTIL THE CERTIFICATES REPRESENTING HIS SHARES OF
FIRST CLAYTON STOCK HAVE BEEN SURRENDERED TO UNITED. Upon
surrender of any certificate which prior to the Merger
represented shares of First Clayton Stock, the holder thereof
shall be entitled to receive any dividends or other distributions
(without interest) which shall have become payable after the
Merger but prior to the surrender of such shares and which shall
not have been paid with respect to the number of shares of United
Stock represented by the certificate issued upon such surrender.

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SHAREHOLDER APPROVAL

The affirmative vote of the holders of at least a
majority of the outstanding shares of First Clayton Stock
entitled to vote at the Special Meeting is required for approval
of the Merger. Abstentions from voting and broker non-votes will
be included in determining whether a quorum is present and will
have the effect of a vote against the Merger Agreement.

On __________________, 1997, the record date for the
determination of shareholders entitled to notice of, and to vote
at, the Special Meeting, the outstanding voting securities of
First Clayton consisted of 400,691 shares of First Clayton Stock
with registered holders thereof being entitled to one vote per
share. Certain executive officers and members of the First
Clayton's Board of Directors, who have entered into agreements
with United to vote their shares of First Clayton Stock in favor
of the Merger, own or control 135,772 shares or the approximately
34% of the outstanding shares of First Clayton.

CONDUCT OF BUSINESS OF FIRST CLAYTON PENDING CLOSING

The Acquisition Agreement provides that, pending
consummation of the Merger, First Clayton, except with the
written consent of United, will:

(i) conduct its business only in the ordinary course,
without the creation of any indebtedness for borrowed money
(other than deposit and similar accounts and customary
credit arrangements between banks in the ordinary course of
business);

(ii) maintain its properties and assets in good
operating condition, ordinary wear and tear excepted;

(iii) maintain and keep in full force and effect
all of its current insurance policies or other insurance
policies equivalent thereto in all material respects;

(iv) not make any change in the authorized or issued
capital stock or other securities of First Clayton, and
First Clayton will not issue or grant any right or option to
purchase or otherwise acquire any of the capital stock or
other securities of First Clayton;

(v) not declare or make any dividend, distribution or
payment will be declared or made in respect to the capital
stock of First Clayton, and First Clayton will not, directly
or indirectly, redeem, purchase or otherwise acquire any of
its capital stock;

(vi) not amend its Articles of Incorporation or Bylaws,
and will maintain its corporate existence and powers;

(vii) not acquire by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation,
partnership, association or other entity or division thereof
or otherwise acquire or agree to acquire any assets which

-27-

are material, individually or in the aggregate, to it;

(viii) not sell, mortgage, lease, buy or otherwise
acquire, transfer or dispose of any real property or
interest therein (except for sales in the ordinary course of
business) and will not, except in the ordinary course of
business, sell or transfer, mortgage, pledge or subject to
any lien, charge or other encumbrance any other tangible or
intangible asset;

(ix) not change any of its banking arrangements;

(x) not enter into any new material contracts;

(xi) maintain its books and records in the usual,
regular and ordinary course; and

(xii) advise United of any material adverse change
in First Clayton's business.

INTEREST OF MANAGEMENT IN THE TRANSACTION; CONDUCT OF BUSINESS
AFTER THE MERGER

Except as set forth below, no director or officer of
First Clayton, or any of their associates has any direct or
indirect material interest in the Merger, except that such
persons may own shares of First Clayton Stock which will be
converted in the Merger into United Stock. The directors of
United currently anticipate that after the Merger, one director
of First Clayton will be elected to serve on United's Board of
Directors. It is not anticipated that the Merger will result in
any material change in compensation to employees of First
Clayton. After the consummation of the Merger, each of J. Mark
Smith, President of First Clayton, and Rodney Hickox, Executive
Vice President of First Clayton, will be granted an option to
purchase 12,102 shares of United Stock at the market price on the
date of grant. Each option will expire on the earlier of the
tenth anniversary of the date of grant or three months following
the date the optionee terminates employment unless the optionee
dies while employed, in which case the option will continue for
the original term and may be exercised to the extent exerciseable
by the optionee's estate. The options are exercisable
immediately and can be exercised for cash, certified check or by
cashless exercise. Messrs. Smith and Hickox have also entered
into deferred compensation agreements with First Clayton which
provide that they will each receive deferred compensation in the
amount of $108,750. These agreements are the unfunded
obligations of First Clayton which will be assumed by United in
the Merger. The payment for this obligation will be made in cash
in a lump sum after the earliest to occur of the following
events: (1) passage of ten years; (2) termination of employment
other than for "Cause;" and (3) a change in control (other than a
change in control of First Clayton). "Cause" for the purposes of
this obligation means (1) conviction of the employee of a felony
or (2) conduct of the employee that results in the removal from
his position as employee of First Clayton pursuant to a written
order of any regulatory agency with authority or jurisdiction
over First Clayton or United or its subsidiaries. In addition,
the Acquisition Agreement provides an explicit agreement by
United to continue employee benefits for First Clayton employees
that are substantially similar to those United currently provides
to its employees and that United will indemnify each person

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entitled to indemnification by First Clayton or First Clayton
Bank for liabilities arising from acts or omissions arising prior
to the effective date of the Merger.

EFFECT OF THE MERGER ON FIRST CLAYTON SHAREHOLDERS AND COMPARISON
OF THE SECURITIES OF FIRST CLAYTON AND UNITED

At the Effective Time, holders of First Clayton Stock
(other than dissenting shareholders) will become shareholders of
United. The following is a summary of material differences
between the rights of holders of United Stock and holders of
First Clayton Stock. Since United and First Clayton are both
organized under the laws of Georgia, any such differences arise
from differing provisions of the corporations' respective
articles of incorporation and bylaws.

The following summary does not purport to be a complete
statement of the provisions affecting, and differences between,
the rights of holders of United Stock and those of holders of
First Clayton Stock. This summary is qualified in its entirety
by reference to the governing corporate instruments of United and
First Clayton, to which the shareholders of First Clayton are
referred.

DIRECTORS

UNITED. The United Bylaws, as amended, provide for a
board of directors consisting of eleven (11) members. Under the
United Bylaws, United directors may be removed with or without
cause by the vote of a majority of the outstanding shares of the
corporation.

FIRST CLAYTON. The First Clayton Bylaws provide for a
board of directors consisting of nine (9) members. The First
Clayton Articles provide for the board to be divided into three
classes serving staggered terms as long as the board consists of
nine or more members. Under the First Clayton Articles, a
director may be removed without cause only by the vote of the
holders of not less than sixty-six and two-thirds percent (66
2/3%) of the outstanding common stock of the corporation.

NOTICE OF SHAREHOLDER NOMINATIONS AND SHAREHOLDER PROPOSALS

UNITED. The United Articles and the United Bylaws
provide no limitations or procedures relating to shareholders
nominations for directors or shareholder proposals.

FIRST CLAYTON. The First Clayton Articles provide that
any shareholder entitled to vote for the election of directors
may make nominations for the election of directors only by giving
written notice to the secretary of the corporation at least 30
days but not more than 60 days prior to the annual meeting at
which directors are to be elected.

MERGERS, SHARE EXCHANGES AND SALES OF ASSETS

United. Neither the United Articles nor the United
Bylaws provide for procedures relating to mergers, share
exchanges or sales of assets. In general, the Georgia Business

-29-

Corporation Code requires that any merger, share exchange or
transfer of substantially all the assets other than in the
ordinary course of business of a Georgia corporation be approved
by a majority of the votes entitled to be cast within each voting
group entitled to vote on the proposed transaction.

FIRST CLAYTON. The First Clayton Articles provide that
the vote of the holders of not less than sixty-six and two-thirds
percent (66 2/3%) of the outstanding common stock of First
Clayton is required to approve (i) the merger or consolidation
with any other corporation, partnership, trust, estate or
association if such other corporation and its affiliates in the
aggregate are directly or indirectly the beneficial owners of
more than five percent (5%) of the outstanding shares of common
stock of First Clayton (a "Related Entity"), (ii) the sale or
exchange by First Clayton of all or a substantial part of its
assets to or with such Related Entity, (iii) the issuance or
delivery by First Clayton of any stock or other securities issued
by it in exchange or payment for any properties or assets of such
Related Entity or securities issued by such Related Entity, or
any merger of any affiliate of First Clayton with or into such
Related Entity or any of its affiliates, or (iv) the dissolution
of First Clayton. The above voting requirement shall not apply
to any transaction which was approved by the affirmative vote of
not less than sixty-six and two-thirds percent (66 2/3%) of the
directors.

AMENDMENTS TO ARTICLES OF INCORPORATION AND BYLAWS

UNITED. In general, the Georgia Business Corporation
Code provides that the bylaws or articles of a Georgia
corporation may be amended by a majority of the votes entitled to
be cast within each voting group entitled to vote.

FIRST CLAYTON. The First Clayton Articles provide that
the affirmative vote of not less than sixty-six and two-thirds
percent (66 2/3%) of the shareholders shall be required to amend
the portions of such articles relating to classification and
staggered terms of the board, removal of directors, shareholder
notice of nomination of directors, or any requirement for a
supermajority vote on such amendment, unless such proposed
amendment is approved by eighty percent (80%) of the directors.

ACCOUNTING TREATMENT

United will account for the Merger as a "pooling of
interests" transaction in accordance with generally accepted
accounting principles. Under this accounting method, holders of
First Clayton Stock will be deemed to have combined their
existing voting common stock interests with the holders of United
Stock by exchanging their shares for shares of United Stock, and
as a result, the assets and liabilities of First Clayton will be
added to those of United at their recorded book value and the

-30-

stockholders' equity accounts of First Clayton and United would
be combined on United's consolidated balance sheet. The
unaudited pro forma financial information contained in this proxy
statement prospectus has been prepared using the pooling of
interests accounting method to account for the Merger. See "Pro
Forma Consolidated Financial Information".

RESALES OF UNITED STOCK

Although the United Stock to be issued upon
consummation of the Merger has been registered under the
Securities Act, the directors, officers and shareholders of First
Clayton who are deemed to be affiliates of First Clayton may not
resell the United Stock received by them unless such sales are
made pursuant to an effective registration statement under the
Securities Act or pursuant to Rule 144 promulgated under the
Securities Act or another exemption from registration under such
Act. Rule 144 limits the amount of United Stock or other equity
securities of United that such persons may sell during any three
month period and requires that there be available certain current
public information with respect to United and that the United
Stock be sold in a broker's transaction or directly to a market
maker in the United Stock. Because the United Stock is not
publicly traded and is not listed on a stock exchange or quoted
in the over-the-counter market, affiliates will not be able to
sell the United Stock pursuant to Rule 144.

REGULATORY APPROVALS

The Merger is subject to the approval of the Federal
Reserve and the DBF. The Federal Reserve and the DBF consider
the effect on the financial and managerial resources and future
prospects of the companies and banks concerned and the
convenience and needs of the communities served.

RIGHTS OF DISSENTING SHAREHOLDERS

Any shareholder of record of First Clayton Stock who
objects to the Merger and who fully complies with Section 14-2-
1301 et seq. of the Georgia Business Corporation Code will be
entitled to demand and receive payment in cash of an amount equal
to the fair value of all, but not less than all, of his or her
shares of First Clayton Stock if the Merger is consummated. A
shareholder of record may assert dissenters' rights as to fewer
than the shares registered in such shareholder's name only if he
or she dissents with respect to all shares beneficially owned by
any one beneficial owner and notifies First Clayton in writing of
the name and address of each person on whose behalf he asserts
dissenters' rights. For the purpose of determining the amount to
be received in connection with the exercise of statutory
dissenters' rights under the Georgia Business Corporation Code,
the fair value of a dissenting shareholder's First Clayton Stock
equals the value of the shares immediately before the Effective
Date of the Merger, excluding any appreciation or depreciation in
anticipation of the Merger.

Any First Clayton shareholder desiring to receive
payment of the fair value of his or her First Clayton Stock in
accordance with the requirements of the Georgia Business

-31-

Corporation Code: (a) must deliver to First Clayton prior to the
time the shareholder vote on the Merger Agreement is taken, a
written notice of his or her intent to demand payment for his
shares if such Merger is consummated; (b) must not vote his or
her shares in favor of the Merger Agreement; and (c) must demand
payment and deposit stock certificates representing First Clayton
Stock in accordance with the terms of a notice which will be sent
to the shareholder by First Clayton no later than 10 days after
such Merger Agreement is consummated. A filing of the written
notice of intent to dissent with respect to either Merger
Agreement should be sent to: Ronald E. Vandiver, Secretary,
First Clayton Bancshares, Inc., P. O. Box 1250, Clayton, Georgia
30525-9723. A VOTE AGAINST THE MERGER AGREEMENT ALONE WILL NOT
SATISFY THE REQUIREMENTS FOR THE SEPARATE WRITTEN NOTICE OF
INTENT TO DISSENT TO THE MERGER, THE SEPARATE WRITTEN DEMAND FOR
PAYMENT OF THE FAIR VALUE OF SHARES OF FIRST CLAYTON STOCK AND
THE DEPOSIT OF THE STOCK CERTIFICATES, WHICH ARE REFERRED TO IN
CONDITIONS (A) AND (C) ABOVE. RATHER, A DISSENTING SHAREHOLDER
MUST SEPARATELY COMPLY WITH ALL OF THOSE CONDITIONS.

Within 10 days of the later of the Effective Date or
receipt of a payment demand by a shareholder who deposits his or
her stock certificates in accordance with the First Clayton's
dissenters' notice sent to those shareholders who notified First
Clayton of their intent to dissent, described in (c) above, First
Clayton must offer to pay to each dissenting shareholder the
amount First Clayton estimates to be the fair value of the
dissenting shareholder's shares, plus accrued interest. Such
notice and offer must be accompanied by: (a) First Clayton's
balance sheet as of the end of a fiscal year ending not more than
16 months before the date of making an offer, an income statement
for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements,
if any; (b) an explanation of how the interest was calculated;
(c) a statement of the dissenting shareholder's right to demand
payment of a different amount under Section 14-2-1327 of the
Georgia Business Corporation Code; and (d) a copy of the
dissenters' rights provisions of the Georgia Business Corporation
Code.

If the dissenting shareholder accepts First Clayton's
offer, by written notice to such entity, within 30 days after
First Clayton's offer or is deemed to have accepted the offer by
reason of failing to respond to such offer, First Clayton must
make payment for his or her shares within 60 days after the
making of the offer or the Effective Date, whichever is later.
Upon payment of the agreed value, the dissenting shareholder will
cease to have any interest in his shares of First Clayton Stock.

If within 30 days after First Clayton offers payment
for the shares of a dissenting shareholder, the dissenting
shareholder does not accept the estimate of fair value of his or
her shares and interest due thereon and demands payment of his or
her own estimate of the fair value of the shares and interest due
thereon, then First Clayton, within 60 days after receiving the
payment demand of a different amount from a dissenting
shareholder, must file an action in a court of competent
jurisdiction in Rabun County, Georgia, requesting that the fair
value of such shares be found and determined. First Clayton must

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make all dissenting shareholders whose demands remain unsettled
parties to the proceeding. If First Clayton does not commence
the proceeding within such 60-day period, it shall be required to
pay each dissenting shareholder whose demand remains unsettled
the amount demanded by the dissenting shareholder.

The foregoing does not purport to be a complete
statement of the provisions of the Georgia Business Corporation
Code relating to statutory dissenters' rights and is qualified in
its entirety by reference to the Dissenters' Rights provisions of
the Georgia Business Corporation Code, which are reproduced in
full in Appendix B to this Proxy Statement and which are
incorporated herein by reference.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER AND OPINION
OF TAX COUNSEL

First Clayton has received an opinion from Kilpatrick
Stockton LLP, Atlanta, Georgia (the "Tax Opinion") to the effect
that, assuming the Merger is consummated in accordance with the
terms of the Acquisition Agreement and the Merger Agreement:

(a) The merger of First Clayton into United and
the issuance of shares of United Stock in connection
therewith, as described herein and in the Merger
Agreement, will constitute a tax-free reorganization
under Section 368(c)(1)(A) of the Internal Revenue Code
of 1986 (the "Code"), as amended.

(b) No gain or loss will be recognized by holders
of First Clayton Stock upon the exchange of such stock
for United Stock as a result of the Merger.

(c) Gain or loss will be recognized pursuant to
Section 302 of the Code by holders of First Clayton
Stock upon their receipt of cash in lieu of fractional
shares of United Stock and upon their exercise of
dissenter's rights.

(d) No gain or loss will be recognized by First
Clayton as a result of the Merger.

(e) The aggregate tax basis of the United Stock
received by shareholders of First Clayton pursuant to
the Merger will be the same as the tax basis of the
shares of First Clayton Stock exchanged therefor
decreased by any portion of each tax basis allocated to
fractional shares of United Stock that are treated as
redeemed by United.

(f) The holding period of the shares of United
Stock received by the shareholders of First Clayton
will include the holding period of the shares of First
Clayton Stock exchanged therefor, provided that the
First Clayton Stock is held as a capital asset on the
date of the consummation of the Merger.

No ruling will be requested from the Internal Revenue
Service with respect to any Federal income tax consequences of
the Merger.

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The Tax Opinion and the preceding discussion relate to
the material federal income tax consequences of the Merger to
First Clayton Shareholders. The First Clayton shareholders are
advised to consult their own tax advisors as to any state, local
or other tax consequences of the Merger.

INFORMATION ABOUT FIRST CLAYTON BANCSHARES, INC.

DESCRIPTION OF BUSINESS

First Clayton is a one-bank holding company which
engages through its subsidiary, First Clayton Bank, in providing
banking services to customers of First Clayton Bank from its main
office in Clayton, Georgia. The Company's executive office is
located at U.S. 441, Village Center, Clayton, Georgia 30525, and
its telephone number is (706) 782-7100.

First Clayton was incorporated on February 3, 1989 as a
Georgia business corporation. On February 2, 1990, First Clayton
purchased all of the shares of common stock of First Clayton Bank
which was organized as a Georgia banking corporation in 1990.
First Clayton's primary business is to manage the business and
affairs of its bank subsidiary. First Clayton's subsidiary bank
provides a full range of banking services to its customers,
except for trust services. Additional information about First
Clayton is included in the Form 10-KSB for the year ended
December 31, 1996 and the Form 10-QSB for the quarter ended March
31, 1997, that are contained in the separately bound document
which accompanies this Proxy Statement/Prospectus.

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INFORMATION ABOUT UNITED COMMUNITY BANKS, INC.

DESCRIPTION OF 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. Additional information with respect to
United is included in its 1997 Proxy Statement (which includes
its 1996 Annual Report to Shareholders) and Form 10-Q quarterly
report for the period ended March 31, 1997, which are contained
in the separately bound document which accompanies these proxy
materials.

RECENT DEVELOPMENTS

PUBLIC STOCK OFFERINGS. In May 1997, United completed
an offering to the public of 300,000 shares of United Common
Stock registered under the Securities Act pursuant to which
$6,476,000 in additional capital was raised. The additional
capital was invested in UCB and Carolina. In August 1995 United
completed an offering to the public of 215,515 shares of United
Stock registered under the Securities Act 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 used
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.

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, 2006 (the "2006 Debentures"). The 2006 Debentures bear
interest at the rate of one quarter of one percentage point over
the prime rate per annum as quoted in The Wall Street Journal,
payable on 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. For additional information on the 2006
Debentures, see "Description of Securities of United."

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 counties 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,

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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. In July 1996, Carolina opened
a loan production office in Sylva, North Carolina, and in June
1997 Carolina opened a branch in Bryson City, North Carolina.

DESCRIPTION OF SECURITIES OF UNITED

The following is a summary of certain provisions of the
United Stock, Preferred Stock and the 2006 Debentures.

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 June 30, 1997, 6,956,748 shares,
including 140,000 shares deemed outstanding pursuant to the 2006
Debentures and presently exercisable options to acquire 77,900
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, of United dividend, conversion, liquidation
and other rights and preferences as the Board of Directors of
United 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 United 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 United Stock are, and the
shares of United Stock to be issued by United in connection with
the Merger will be, duly authorized, validly issued, fully paid
and nonassessable.

-36-

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"). 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 the 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 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 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 United 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 the Debentures is
SunTrust Bank, Atlanta, 58 Edgewood Avenue, Room 2000, Atlanta,
Georgia 30303.

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LEGAL OPINIONS

The legality of the common stock to be issued in
connection with the Merger will be passed on by Kilpatrick
Stockton LLP, Suite 2800, 1100 Peachtree Street, Atlanta, Georgia
30309-4530, counsel to United. Certain income tax consequences
of the Merger will be passed upon by Kilpatrick Stockton LLP As
of the date of this Proxy Statement/Prospectus, certain members
of Kilpatrick Stockton LLP own an aggregate of 2,000 shares of
United Stock.

EXPERTS

The audited consolidated financial statements of United
and its subsidiaries included or incorporated by reference in
this Proxy Statement/Prospectus and elsewhere in the registration
statement have been audited by Porter Keadle Moore LLP,
independent certified public accountants, as indicated in their
reports with respect thereto, and are included herein upon the
authority of said firm as experts in giving said reports.

The audited consolidated financial statements of First
Clayton included or incorporated by reference in this Proxy
Statement/Prospectus and elsewhere in the registration statement
have been audited by Mauldin & Jenkins, LLC independent certified
public accountants, as indicated in their reports with respect
thereto, and are included herein upon the authority of said firm
as experts in giving said reports.

OTHER MATTERS

Management of First Clayton knows of no other matters
which may be brought before the Special Meeting. If any matter
other than the proposed Merger or matters incident thereto should
properly come before such Special Meeting, however, the persons
named in the enclosed proxies will vote such proxy in accordance
with their judgment on such matters.

Clayton, Georgia By Order of the Board of Directors,

________________, 1997 Ronald E. Vandiver
Secretary

-38-
APPENDIX A

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is
made and entered into as of this 12th day of June, 1997, by and
between UNITED COMMUNITY BANKS, INC. ("United") and FIRST CLAYTON
BANCSHARES, INC. ("Clayton"), both Georgia corporations (said
corporations are hereinafter collectively referred to as the
"Constituent Corporations").

R E C I T A L S:

WHEREAS, the authorized capital stock of United
consists of 10,000,000 shares of Common Stock, $1.00 par value
per share (the "United Stock"), of which 6,738,848 shares are
issued and outstanding; and

WHEREAS, the authorized capital stock of Clayton
consists of 10,000,000 shares of Common Stock, $1.00 par value
per share, of which 400,691 shares are issued and outstanding and
5,000,000 shares of special stock $1.00 par value per share, none
of which is issued and outstanding ("Clayton Stock"); and

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

WHEREAS, the respective Boards of Directors of the
Constituent Corporations, by resolutions duly adopted, have
unanimously approved and adopted this Agreement, and the Board of
Directors of Clayton, by resolution duly adopted, has directed
that this Agreement be submitted to the shareholders of Clayton
for their approval; and

WHEREAS, United has agreed to issue shares of United
Stock which shareholders of Clayton will be entitled to receive,
according to the terms and conditions contained herein, on or
after the Effective Date (as defined herein) of the merger
provided for herein.

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

1. MERGER.

Pursuant to and with the effects provided in the
applicable provisions of Article 11 of the Georgia Business
Corporation Code, as amended (Chapter 2 of Title 14 of the
Official Code of Georgia), Clayton (hereinafter sometimes
referred to as the "Merged Corporation") shall be merged with and
into United (the "Merger"). United shall be the surviving

A-1

corporation (the "Surviving Corporation") and shall continue
under the name "United Community Banks, Inc.". On the Effective
Date (as defined herein) of the Merger, the individual existence
of the Merged Corporation shall cease and terminate.

2. ACTIONS TO BE TAKEN.

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

3. EFFECTIVE DATE.

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

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

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

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

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

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

(a) Upon the Effective Date each of the shares of
Clayton Stock outstanding on the Effective Date shall be
converted into fully paid and nonassessable shares of United
Stock at the rate of 1.6136 shares of United Stock for each
outstanding share of Clayton Stock. If either party should
change the number of its outstanding shares as a result of a
stock split, stock dividend, or similar recapitalization with
respect to such shares prior to the Effective Date then the
shares to be issued hereunder to holders of Clayton Stock shall
be proportionately adjusted.

(b) No scrip or fractional share certificates of
United Stock shall be issued in connection with the Merger and an
outstanding fractional share interest will not entitle the owner
thereof to vote, to receive dividends or to have any of the
rights of a shareholder with respect to such fractional interest.
In lieu of any fractional interest, there shall be paid in cash

A-2

an amount (computed to the nearest cent) equal to such fraction
multiplied by $22.00.

(c) As soon as practicable after the Effective Date,
each holder as of the Effective Date of any of the shares of
Clayton Stock, upon presentation and surrender of the
certificates representing such shares to United, shall be
entitled to receive in exchange therefor a certificate
representing the number of shares of United Stock to which such
shareholder shall be entitled according to the terms of this
Agreement. Until such surrender, each such outstanding
certificate which prior to the Effective Date represented Clayton
Stock shall be deemed for all corporate purposes to evidence
ownership of the number of shares of United Stock into which the
same shall have been converted and the right to receive payment
for fractional shares.

(d) Upon the Effective Date, each share of United
Stock issued and outstanding immediately prior to the Effective
Date shall continue unchanged and shall continue to evidence a
share of common stock of the Surviving Corporation.

6. TERMINATION OF SEPARATE EXISTENCE.

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

7. FURTHER ASSIGNMENTS.

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

A-3

rights in the Surviving Corporation, and otherwise to carry out
the purposes of this Agreement.

8. CONDITIONS PRECEDENT TO CONSUMMATION OF THE MERGER.

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

(a) Approval of this Agreement by the affirmative vote
of the holders of a majority of the outstanding voting shares of
Clayton Stock; and

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

9. TERMINATION.

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

10. COUNTERPARTS; TITLE; HEADINGS.

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

11. AMENDMENTS; ADDITIONAL AGREEMENTS.

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

A-4

which shares of Clayton Stock shall be converted in the Merger
pursuant to Section 5 hereof.

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

UNITED COMMUNITY BANKS, INC.

(CORPORATE SEAL)

By: /s/ Jimmy Tallent

ATTEST: Jimmy Tallent
President

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

FIRST CLAYTON BANCSHARES, INC.

(CORPORATE SEAL)

By: /s/ J. Mark Smith
J. Mark Smith
ATTEST: President

/s/ Ronald E. Vandiver
Ronald E. Vandiver
Secretary

A-5

APPENDIX B

Georgia Dissenters' Rights Statutes

14-2-1301. DEFINITIONS.

As used in this article, the term:

(1) "Beneficial shareholder" means the person who is a
beneficial owner of shares held in a voting trust or by a nominee
as the record shareholder.

(2) "Corporate action" means the transaction or other
action by the corporation that creates dissenters' rights under
Code Section 14-2-1302.

(3) "Corporation" means the issuer of shares held by a
dissenter before the corporate action, or the surviving or
acquiring corporation by merger or share exchange of that issuer.

(4) "Dissenter" means a shareholder who is entitled to
dissent from corporate action under Code Section 14-2-1302 and
who exercises that right when and in the manner required by Code
Sections 14-2-1320 through 14-2-1327.

(5) "Fair value," with respect to a dissenter's shares,
means the value of the shares immediately before the effectuation
of the corporate action to which the dissenter objects, excluding
any appreciation or depreciation in anticipation of the corporate
action.

(6) "Interest" means interest from the effective date of
the corporate action until the date of payment, at a rate that is
fair and equitable under all the circumstances.

(7) "Record shareholder" means the person in whose name
shares are registered in the records of a corporation or the
beneficial owner of shares to the extent of the rights granted by
a nominee certificate on file with a corporation.

(8) "Shareholder" means the record shareholder or the
beneficial shareholder. (Code 1981, Section 14-2-1301, enacted by Ga.
L. 1988, p. 1070, Section 1; Ga. L. 1993, p. 1231, Section 16.)

14-2-1302. RIGHT TO DISSENT.

(a) A record shareholder of the corporation is entitled to
dissent from, and obtain payment of the fair value of his shares
in the event of, any of the following corporate actions:

(1) Consummation of a plan of merger to which the
corporation is a party:

(A) If approval of the shareholders of the
corporation is required for the merger by Code Section
14-2-1103 or the articles of incorporation and the
shareholder is entitled to vote on the merger; or

B-1

(B) If the corporation is a subsidiary that is
merged with its parent under Code Section 14-2-1104;

(2) Consummation of a plan of share exchange to which
the corporation is a party as the corporation whose shares
will be acquired, if the shareholder is entitled to vote on
the plan;

(3) Consummation of a sale or exchange of all or
substantially all of the property of the corporation if a
shareholder vote is required on the sale or exchange
pursuant to Code Section 14-2-1202, but not including a sale
pursuant to court order or a sale for cash pursuant to a
plan by which all or substantially all of the net proceeds
of the sale will be distributed to the shareholders within
one year after the date of sale;

(4) An amendment of the articles of incorporation that
materially and adversely affects rights in respect of a
dissenter's shares because it:

(A) Alters or abolishes a preferential right of
the shares;

(B) Creates, alters, or abolishes a right in
respect of redemption, including a provision respecting
a sinking fund for the redemption or repurchase, of the
shares;

(D) Excludes or limits the right of the shares to
vote on any matter, or to cumulate votes, other than a
limitation by dilution through issuance of shares or
other securities with similar voting rights;

(E) Reduces the number of shares owned by the
shareholder to a fraction of a share if the fractional
share so created is to be acquired for cash under Code
Section 14-2-604; or

(F) Cancels, redeems, or repurchases all or part
of the shares of the class; or

(5) Any corporate action taken pursuant to a
shareholder vote to the extent that Article 9 of this
chapter, the articles of incorporation, bylaws, or a
resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain
payment for their shares.

(b) A shareholder entitled to dissent and obtain payment
for his shares under this article may not challenge the corporate
action creating his entitlement unless the corporate action fails
to comply with procedural requirements of this chapter or the
articles of incorporation or bylaws of the corporation or the
vote required to obtain approval of the corporate action was

B-2

obtained by fraudulent and deceptive means, regardless of whether
the shareholder has exercised dissenter's rights.

(c) Notwithstanding any other provision of this article,
there shall be no right of dissent in favor of the holder of
shares of any class or series which, at the record date fixed to
determine the shareholders entitled to receive notice of and to
vote at a meeting at which a plan of merger or share exchange or
a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national
securities exchange or held of record by more than 2,000
shareholders, unless:

(1) In the case of a plan of merger or share exchange,
the holders of shares of the class or series are required
under the plan of merger or share exchange to accept for
their shares anything except shares of the surviving
corporation or another publicly held corporation which at
the effective date of the merger or share exchange are
either listed on a national securities exchange or held of
record by more than 2,000 shareholders, except for scrip or
cash payments in lieu of fractional shares; or

(2) The articles of incorporation or a resolution of
the board of directors approving the transaction provides
otherwise. (Code 1981, Sec. 14-2-1302, enacted by Ga. L. 1988,
p. 1070, Section 1; Ga. L. 1989, p. 946, Section 58.)

14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.

A record shareholder may assert dissenters' rights as
to fewer than all the shares registered in his name only if he
dissents with respect to all shares beneficially owned by any one
beneficial shareholder and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of a partial dissenter under this
Code section are determined as if the shares as to which he
dissents and his other shares were registered in the names of
different shareholders. (Code 1981, Section 14-2-1303, enacted by Ga.
L. 1988, p. 1070, Section 1.)

14-2-1320. NOTICE OF DISSENTERS' RIGHTS.

(a) If proposed corporate action creating dissenters'
rights under Code Section 14-2-1302 is submitted to a vote at a
shareholders' meeting, the meeting notice must state that
shareholders are or may be entitled to assert dissenters' rights
under this article and be accompanied by a copy of this article.

(b) If corporate action creating dissenters' rights under
Code Section 14-2-1302 is taken without a vote of shareholders,
the corporation shall notify in writing all shareholders entitled
to assert dissenters' rights that the action was taken and send
them the dissenters' notice described in Code Section 14-2-1322
no later than ten days after the corporate action was taken.
(Code 1981, Section 14-2-1320, enacted by Ga. L. 1988, p. 1070,
Section 1; Ga. L. 1993, p. 1231, Section 17.)

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14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT.

(a) If proposed corporate action creating dissenters'
rights under Code Section 14-2-1302 is submitted to a vote at a
shareholders' meeting, a record shareholder who wishes to assert
dissenters' rights:

(1) Must deliver to the corporation before the vote is
taken written notice of his intent to demand payment for his
shares if the proposed action is effectuated; and

(2) Must not vote his shares in favor of the proposed
action.

(b) A record shareholder who does not satisfy the
requirements of subsection (a) of this Code section is not
entitled to payment for his shares under this article. (Code
1981, Section 14-2-1321, enacted by Ga. L. 1988, p. 1070, Section 1.)

14-2-1322. DISSENTERS' NOTICE.

(a) If proposed corporate action creating dissenters'
rights under Code Section 14-2-1302 is authorized at a
shareholders' meeting, the corporation shall deliver a written
dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.

(b) The dissenters' notice must be sent no later than ten
days after the corporate action was taken and must:

(1) State where the payment demand must be sent and
where and when certificates for certificated shares must be
deposited;

(2) Inform holders of uncertificated shares to what
extent transfer of the shares will be restricted after the
payment demand is received;

(3) Set a date by which the corporation must receive
the payment demand, which date may not be fewer than 30 nor
more than 60 days after the date the notice required in
subsection (a) of this Code section is delivered; and

(4) Be accompanied by a copy of this article. (Code
1981, Section 14-2-1322, enacted by Ga. L. 1988, p. 1070, Section 1.)

14-2-1323. DUTY TO DEMAND PAYMENT.

(a) A record shareholder sent a dissenters' notice
described in Code Section 14-2-1322 must demand payment and
deposit his certificates in accordance with the terms of the
notice.

(b) A record shareholder who demands payment and deposits
his shares under subsection (a) of this Code section retains all
other rights of a shareholder until these rights are canceled or

B-4

modified by the taking of the proposed corporate action.

(c) A record shareholder who does not demand payment or
deposit his share certificates where required, each by the date
set in the dissenters' notice, is not entitled to payment for his
shares under this article. (Code 1981, Section 14-2-1323, enacted by
Ga. L. 1988, p. 1070, Section 1.)

14-2-1324. SHARE RESTRICTIONS.

(a) The corporation may restrict the transfer of
uncertificated shares from the date the demand for their payment
is received until the proposed corporate action is taken or the
restrictions released under Code Section 14-2-1326.

(b) The person for whom dissenters' rights are asserted as
to uncertificated shares retains all other rights of a
shareholder until these rights are canceled or modified by the
taking of the proposed corporate action. (Code 1981, Section 14-2-
1324, enacted by Ga. L. 1988, p. 1070, Section 1.)

14-2-1325. OFFER OF PAYMENT.

(a) Except as provided in Code Section 14-2-1327, within
ten days of the later of the date the proposed corporate action
is taken or receipt of a payment demand, the corporation shall by
notice to each dissenter who complied with Code Section 14-2-1323
offer to pay to such dissenter the amount the corporation
estimates to be the fair value of his or her shares, plus accrued
interest.

(b) The offer of payment must be accompanied by:

(1) The corporation's balance sheet as of the end of a
fiscal year ending not more than 16 months before the date
of payment, an income statement for that year, a statement
of changes in shareholders' equity for that year, and the
latest available interim financial statements, if any;

(2) A statement of the corporation's estimate of the
fair value of the shares;

(3) An explanation of how the interest was calculated;

(4) A statement of the dissenter's right to demand
payment under Code Section 14-2-1327; and

(5) A copy of this article.

(c) If the shareholder accepts the corporation's offer by
written notice to the corporation within 30 days after the
corporation's offer or is deemed to have accepted such offer by
failure to respond within said 30 days, payment for his or her
shares shall be made within 60 days after the making of the offer
or the taking of the proposed corporate action, whichever is
later. (Code 1981, Section 14-2-1325, enacted by Ga. L. 1988, p. 1070,
Section 1; Ga. L. 1989, p. 946, Section 59; Ga. L. 1993, p. 1231, Section 18.)

B-5

14-2-1326. FAILURE TO TAKE ACTION.

(a) If the corporation does not take the proposed action
within 60 days after the date set for demanding payment and
depositing share certificates, the corporation shall return the
deposited certificates and release the transfer restrictions
imposed on uncertificated shares.

(b) If, after returning deposited certificates and
releasing transfer restrictions, the corporation takes the
proposed action, it must send a new dissenters' notice under Code
Section 14-2-1322 and repeat the payment demand procedure. (Code
1981, Section 14-2-1326, enacted by Ga. L. 1988, p. 1070, Section 1; Ga. L.
1990, p. 257, Section 20.)

14-2-1327. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR
OFFER.

(a) A dissenter may notify the corporation in writing of
his own estimate of the fair value of his shares and amount of
interest due, and demand payment of his estimate of the fair
value of his shares and interest due, if:

(1) The dissenter believes that the amount offered
under Code Section 14-2-1325 is less than the fair value of
his shares or that the interest due is incorrectly
calculated; or

(2) The corporation, having failed to take the
proposed action, does not return the deposited certificates
or release the transfer restrictions imposed on
uncertificated shares within 60 days after the date set for
demanding payment.

(b) A dissenter waives his or her right to demand payment
under this Code section and is deemed to have accepted the
corporation's offer unless he or she notifies the corporation of
his or her demand in writing under subsection (a) of this Code
section within 30 days after the corporation offered payment for
his or her shares, as provided in Code Section 14-2-1325.

(1) The shareholder may demand the information
required under subsection (b) of Code Section 14-2-1325, and
the corporation shall provide the information to the
shareholder within ten days after receipt of a written
demand for the information; and

(2) The shareholder may at any time, subject to the
limitations period of Code Section 14-2-1332, notify the
corporation of his own estimate of the fair value of his
shares and the amount of interest due and demand payment of
his estimate of the fair value of his shares and interest
due. (Code 1981, Section 14-2-1327, enacted by Ga. L. 1988, p.
1070, Section 1; Ga. L. 1989, p. 946, Section 60; Ga. L. 1990, p. 257,
Section 21; Ga. L. 1993, p. 1231, Section 19.)

B-6

14-2-1330. COURT ACTION.

(a) If a demand for payment under Code Section 14-2-1327
remains unsettled, the corporation shall commence a proceeding
within 60 days after receiving the payment demand and petition
the court to determine the fair value of the shares and accrued
interest. If the corporation does not commence the proceeding
within the 60 day period, it shall pay each dissenter whose
demand remains unsettled the amount demanded.

(b) The corporation shall commence the proceeding, which
shall be a nonjury equitable valuation proceeding, in the
superior court of the county where a corporation's registered
office is located. If the surviving corporation is a foreign
corporation without a registered office in this state, it shall
commence the proceeding in the county in this state where the
registered office of the domestic corporation merged with or
whose shares were acquired by the foreign corporation was
located.

(c) The corporation shall make all dissenters, whether or
not residents of this state, whose demands remain unsettled
parties to the proceeding, which shall have the effect of an
action quasi in rem against their shares. The corporation shall
serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the
manner provided by law for the service of a summons and
complaint, and upon each nonresident dissenting shareholder
either by registered or certified mail or by publication, or in
any other manner permitted by law.

(d) The jurisdiction of the court in which the proceeding
is commenced under subsection (b) of this Code section is plenary
and exclusive. The court may appoint one or more persons as
appraisers to receive evidence and recommend decision on the
question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except
as otherwise provided in this chapter, Chapter 11 of Title 9,
known as the "Georgia Civil Practice Act," applies to any
proceeding with respect to dissenters' rights under this chapter.

(e) Each dissenter made a party to the proceeding is
entitled to judgment for the amount which the court finds to be
the fair value of his shares, plus interest to the date of
judgment. (Code 1981, Section 14-2-1330, enacted by Ga. L. 1988, p.
1070, Section 1; Ga. L. 1989, p. 946, Section 61; Ga. L. 1993, p. 1231,
Section 20.)

14-2-1331. COURT COSTS AND COUNSEL FEES.

(a) The court in an appraisal proceeding commenced under
Code Section 14-2-1330 shall determine all costs of the
proceeding, including the reasonable compensation and expenses of
appraisers appointed by the court, but not including fees and
expenses of attorneys and experts for the respective parties.

B-7

The court shall assess the costs against the corporation, except
that the court may assess the costs against all or some of the
dissenters, in amounts the court finds equitable, to the extent
the court finds the dissenters acted arbitrarily, vexatiously, or
not in good faith in demanding payment under Code Section 14-2-
1327.

(b) The court may also assess the fees and expenses of
attorneys and experts for the respective parties, in amounts the
court finds equitable;

(1) Against the corporation and in favor of any or all
dissenters if the court finds the corporation did not
substantially comply with the requirements of Code Sections
14-2-1320 through 14-2-1327; or

(2) Against either the corporation or a dissenter, in
favor of any other party, if the court finds that the party
against whom the fees and expenses are assessed acted
arbitrarily, vexatiously, or not in good faith with respect
to the rights provided by this article.

(c) If the court finds that the services of attorneys for
any dissenter were of substantial benefit to other dissenters
similarly situated, and that the fees for those services should
not be assessed against the corporation, the court may award to
these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited. (Code 1981, Section 14-2-
1331, enacted by Ga. L. 1988, p. 1070, Section 1.)

14-2-1332. LIMITATION OF ACTIONS.

No action by any dissenter to enforce dissenters'
rights shall be brought more than three years after the corporate
action was taken, regardless of whether notice of the corporate
action and of the right to dissent was given by the corporation
in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322. (Code 1981, Section 14-2-1332, enacted by Ga.
L. 1988, p. 1070, Section 1.)

B-8

PART II.

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS

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, or (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 (a)
in connection with a proceeding by or in the right of the
corporation in which such person was adjudged liable to the
corporation or (b) in connection with any other proceeding 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 21. Exhibits and Financial Statement Schedules.

(a) Exhibits. Description of Exhibit
--------- ----------------------

2.1 -- Agreement and Plan of Reorganization by and
between United and First Clayton, dated as of June
12, 1997.

2.2 -- Agreement and Plan of Merger between United and
First Clayton, dated as of June 12, 1997.

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

3.2 -- Bylaws of United, as amended (included as Exhibit
3.2 to 10.12 Annual Report on Form 10-K for the
year ended December 31, 1993, previously filed
with the Commission and incorporated herein by
reference).

II-1
4.1(a) -- Form of 9% Convertible Subordinated Debenture
due 2000 (included as Exhibit 4.1 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).

4.1(b) -- Form of Floating Rate Convertible
Subordinated Payable In Kind Debenture due
December 31, 2006 (included as Exhibit 4.2 to
United's Registration Statement on Form S-1,
Commission File Number 33-93278, previously filed
with the Commission and incorporated herein by
reference).

4.2 -- See exhibits 3.1 and 3.2 for provisions of
Articles of Incorporation and Bylaws, as amended,
which define the rights of the holders of United
Stock of United.

5 -- Opinion and Consent of Kilpatrick Stockton LLP.

8 -- Opinion and Consent of Kilpatrick Stockton LLP as
to the federal income tax consequences to the
merger.

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
Ownership 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 -- Loan Agreement dated April 26, 1995 by and between
the Bankers Bank and United, together with the
related Promissory Note in the principal amount of
$12,000,000 and Stock Pledge Agreement (included
as Exhibit 10.17 to United's Registration
Statement on Form S-1, Commission File Number 33-

II-2
93278, previously filed with the Commission and
incorporated herein by reference.)

10.5 -- 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 of
the year ended December 31, 1994, previously filed
with the Commission and incorporated herein by
reference).

10.6 -- 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).

10.7 -- Agreement and Plan of Merger by and between United
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).

10.8 -- 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).

10.9 -- 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).

10.10 -- Loan Agreement dated April 26, 1995, by and
between The Bankers Bank and United, together with
the related Promissory Note in the principal
amount of $15,000,000 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).

10.11 -- Broker Dealer Agreement between United and
The Carson Medlin Company (included as Exhibit
10.10 to United' Registration Statement on Form S-
1, Commission File Number 33-93278, previously
filed with the Commission and incorporated herein
by reference).

10.12 -- Amendment to Broker Dealer Agreement between

II-3

United and The Carson Medlin Company dated March
3, 1997 (included as Exhibit 10.11 to United's
Registration Statement on Form S-1, Commission
File Number 33-93278, previously filed with the
Commission and incorporated herein by reference).

21 -- Subsidiaries of United.

23.1 -- Consent of Porter Keadle Moore, LLP.

23.2 -- Consent of Mauldin & Jenkins, LLC.

23.3 -- Consent of Kilpatrick Stockton LLP (included as
part of Exhibits 5 and 8).

24 -- Power of Attorney (included on the Signature Page
to the Registration Statement).

99.1 -- Proxy Statement for the 1997 Annual Meeting of
Shareholders of United previously filed by United
and incorporated herein by reference.

99.2 -- Quarterly Report on Form 10-Q for the quarter
ended March 31, 1997 for United previously filed
by United and incorporated herein by reference

99.3 -- Annual Report on Form 10-KSB for the year ended
December 31, 1996 for First Clayton previously
filed by First Clayton and incorporated herein by
reference.

99.4 -- Quarterly Report on Form 10-QSB for the quarter
ended March 31, 1997 for First Clayton previously
filed by First Clayton and incorporated herein by
reference

_______________

* To be filed by amendment.

(b) Financial Statement Schedules.

No financial statements schedules are required to be filed
as part of this Registration Statement.

ITEM 22. UNDERTAKINGS

(a) The undersigned registrant hereby undertakes as
follows: that prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a part
of this registration statement, by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such reoffering prospectus will
contain the information called for by the applicable registration
form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the
other items of the applicable form.

II-4
(b) The undersigned registrant hereby undertakes that
every prospectus (i) that is filed pursuant to paragraph (a)
immediately preceding, or (ii) that purports to meet the
requirements of section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415,
will be filed as a part of an amendment to the registration
statement and will not be used until such amendment is effective,
and that, for purposes of determining any liability under the
Securities Act of 1933, as amended, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.

(c) The undersigned registrant hereby undertakes to
respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or
13 of this Form S-4, within one business day of receipt of such
request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of
the registration statement through the date of responding to the
request.

(d) The undersigned registrant hereby undertakes to
supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved
therein, that was not the subject of and included in the
registration statement when it became effective.

II-5

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 July 24, 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
and Robert L. Head, or either of them, as attorney-in-fact, with
each having the power of substitution, for him in any and all
capacities, to sign any amendments to this Registration Statement
on Form S-4 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 JULY 24,
1997.

Signature Title

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

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

[SIGNATURES CONTINUED ON FOLLOWING PAGE]

II-6

[SIGNATURES CONTINUED FROM PREVIOUS PAGE]

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

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

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

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

/s/ Charles Hill
Charles Hill Director

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

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

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

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

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

II-7

                   AGREEMENT AND PLAN OF REORGANIZATION

          THIS AGREEMENT AND PLAN OF REORGANIZATION (the
"Agreement") is made and entered into as of this 12th day of
June, 1997, by and between FIRST CLAYTON BANCSHARES, INC., a
Georgia business corporation (hereinafter "Clayton," and unless
the context otherwise requires, the term "Clayton" shall include
both First Clayton Bancshares, Inc. and its subsidiary First
Clayton Bank & Trust Company ("Clayton Bank")), and UNITED
COMMUNITY BANKS, INC., a Georgia business corporation
(hereinafter "United," and unless the context otherwise requires,
the term "United" shall include United Community Banks, Inc. and
its subsidiaries, United Community Bank, a Georgia banking
corporation, Peoples Bank of Fannin County, a Georgia banking
corporation, White County Bank, a Georgia banking corporation,
Towns County Bank, a Georgia banking corporation, Carolina
Community Bank, a North Carolina banking corporation, and United
Family Finance Company, a Georgia business corporation).

                         R E C I T A L S:

          WHEREAS, the respective boards of directors of Clayton
and United deem it advisable and in the best interests of each
such entity and their respective shareholders that Clayton merge
with United (the "Merger"), with United being the surviving
corporation and with all of the issued and outstanding shares of
common stock, $1.00 par value per share, of Clayton ("Clayton
Stock") being converted into the right to receive shares of the
authorized common stock, $1 par value per share, of United
("United Stock"), all upon the terms and conditions hereinafter
set forth and as set forth in the Agreement and Plan of Merger
attached hereto as Exhibit A and incorporated herein by reference
(the "Merger Agreement"); and

          WHEREAS, the boards of directors of the respective
entities believe that the merger of Clayton and United and the
synergies produced thereby will greatly enhance and strengthen
the franchises and future prospects of both companies;

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

                            ARTICLE I

                             CLOSING

          The transactions contemplated herein shall be
consummated (the "Closing") at the offices of Kilpatrick Stockton
LLP, Suite 2800, 1100 Peachtree Street, Atlanta, Georgia, on the
first business day following receipt of all approvals from any
governmental authorities having jurisdiction over the
transactions contemplated by this Agreement and the Merger
Agreement, and the expiration of any waiting or similar period
required by applicable law (the "Closing Date"), or at such other
time and place as may be mutually satisfactory to the parties
hereto.


                            ARTICLE II

                              MERGER

          Pursuant to the terms and conditions provided herein,
on the Closing Date Clayton and United shall be merged in
accordance with and in the manner set forth in the Merger
Agreement.  The surviving corporation following the Merger will
operate under the Articles of Incorporation of United and will be
the parent holding company of First Clayton Bank & Trust Company,
a Georgia banking corporation, United Community Bank, a Georgia
banking corporation, Peoples Bank of Fannin County, a Georgia
banking corporation, White County Bank, a Georgia banking
corporation, Towns County Bank, a Georgia banking corporation,
Carolina Community Bank, a North Carolina banking corporation,
and United Family Finance Company, a Georgia business
corporation, the latter six of which are currently wholly-owned
subsidiaries of United.  Upon the terms and conditions of this
Agreement and the Merger Agreement, United shall make available
on or before the Effective Date (as defined in the Merger
Agreement) for delivery to the holders of Clayton Stock (i) the
number of shares of United Stock to be issued upon conversion of
the shares of Clayton Stock and (ii) sufficient funds to provide
for cash payments in lieu of the issuance of fractional shares as
provided in the Merger Agreement, provided, however, that unless
and until a holder of Clayton Stock entitled to receive United
Stock pursuant to the Merger shall have surrendered his Clayton
Stock certificate(s) or unless otherwise required by law, the
holder of such certificate(s) shall not have any right to receive
payment of any dividends or other distributions on the shares of
United Stock or receive any notices sent by United to its
shareholders or to vote such shares.

                           ARTICLE III

                         OTHER AGREEMENTS

          3.1  REGISTRATION OF UNITED STOCK.  United agrees to
file with the Securities and Exchange Commission (the "SEC") as
soon as reasonably possible a registration statement (the "United
Registration Statement") under the Securities Act of 1933, as
amended (the "1933 Act"), on Form S-4 or some other appropriate
form covering the issuance of the shares of United Stock to the
shareholders of Clayton pursuant to this Agreement and the Merger
Agreement and to use its best efforts to cause the United
Registration Statement to become effective and to remain
effective through the Closing Date.  United agrees to take any
action required to be taken under the applicable state securities
laws in connection with the issuance of shares of United Stock
upon consummation of the Merger.  Clayton agrees to provide
United reasonable assistance as necessary in the preparation of
the United Registration Statement, including, without limitation,
providing United with all material facts regarding the opera-
tions, business, assets, liabilities and personnel of Clayton,
together with the audited financial statements of Clayton, all as
required by the 1933 Act and the rules, regulations and practices
of the SEC, for inclusion in the United Registration Statement. 
The United Registration Statement shall not cover resales of
United Stock by any of the shareholders of Clayton, and United
shall have no obligation to cause the United Registration
Statement to continue to be effective after the Closing or to


                                   -2-

prepare or file any post-effective amendments to the United
Registration Statement after the Closing.

          3.2  MEETING OF SHAREHOLDERS OF CLAYTON.  Clayton shall
call a special meeting of its shareholders (the "Special
Meeting") to be held not more than forty-five (45) days after the
United Registration Statement becomes effective under the 1933
Act for the purpose of submitting the Merger Agreement to such
shareholders for their approval.  In connection with the Special
Meeting, Clayton shall prepare and submit to its shareholders a
notice of meeting, proxy statement and proxy (the "Clayton Proxy
Materials"), which shall include the final prospectus from the
United Registration Statement in the form filed with the SEC.

          3.3  ABSENCE OF BROKERS.  Each party hereto represents
and warrants to the other that no broker, finder or other
financial consultant has acted on its behalf in connection with
this Agreement or the transactions contemplated hereby.  Each
party agrees to indemnify the other and hold and save it harmless
from any claim or demand for commissions or other compensation by
any broker, finder, financial consultant or similar agent
claiming to have been employed by or on behalf of such party.

          3.4  ACCESS TO PROPERTIES, BOOKS, ETC.  Each party
hereto shall allow the other party and its authorized repre-
sentatives full access during normal business hours from and
after the date hereof and prior to the Closing Date to all of the
respective properties, books, contracts, commitments and records
of such party and its subsidiaries and shall furnish the other
party and its authorized representatives such information
concerning its affairs and the affairs of its subsidiaries as the
other party may reasonably request provided that such request
shall be reasonably related to the transactions contemplated by
this Agreement and shall not interfere unreasonably with normal
operations.  Each party shall cause its and its subsidiaries'
personnel, employees and other representatives to assist the
other party in making any such investigation.  During such
investigation, the investigating party and its authorized
representatives shall have the right to make copies of such
records, files, tax returns and other materials as it may deem
advisable and shall advise the other party of those items of
which copies are made.  No investigation made heretofore or
hereafter by either party and its authorized representatives
shall affect the representations and warranties of either such
party hereunder.

          3.5  CONFIDENTIALITY.  Prior to consummation of the
Merger, the parties to this Agreement will provide one another
with information which may be deemed by the party providing the
information to be confidential.  Each party agrees that it will
hold confidential and protect all information provided to it by
the other party to this Agreement or such party's affiliates,
except that the obligations contained in this Section 3.5 shall
not in any way restrict the rights of any party or person to use
information that (i) was known to such party prior to the
disclosure by the other party; (ii) is or becomes generally
available to the public other than by breach of this Agreement;
(iii) is provided by one party for disclosure concerning such
party in the United Registration Statement; or (iv) otherwise be-
comes lawfully available to a party to this Agreement on a
nonconfidential basis from a third party who is not under an


                                   -3-

obligation of confidence to the other party to this Agreement. 
If this Agreement is terminated prior to the Closing, each party
hereto agrees to return all documents, statements and other
written materials, whether or not confidential, and all copies
thereof, provided to it by or on behalf of the other party to
this Agreement.  The provisions of this Section 3.5 shall survive
termination, for any reason whatsoever, of this Agreement, and,
without limiting the remedies of the parties hereto in the event
of any breach of this Section 3.5, the parties hereto will be
entitled to seek injunctive relief against the other party in the
event of a breach or threatened breach of this Section 3.5.

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

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

          3.8  PRESERVATION OF GOODWILL.  Each party hereto shall
use its best efforts to preserve its business organization and
the business organization of its subsidiaries, to keep available
the services of its present employees and of the present
employees of its subsidiaries, and to preserve the goodwill of
customers and others having business relations with such party or
its subsidiaries.

          3.9  APPROVALS AND CONSENTS.  Each party hereto
represents and warrants to and covenants with the other that it
will use its best efforts, and will cause its officers,
directors, employees and agents and its subsidiaries and any
subsidiary's officers, directors, employees and agents to use
their best efforts, to obtain as soon as is reasonably
practicable all approvals and consents of state and federal
departments or agencies required or deemed necessary for
consummation of the transactions contemplated by this Agreement
and the Merger Agreement.

          3.10 AGREEMENT BY CLAYTON EXECUTIVE OFFICERS AND
DIRECTORS.  Contemporaneously with the execution of this
Agreement, each of the directors and executive officers of
Clayton will execute and deliver to United an agreement, the form
of which is attached hereto as Exhibit B, pursuant to which each
of them agrees (i) to recommend to Clayton shareholders approval
of the Merger, (ii) to vote the capital stock of Clayton owned or
controlled by them in favor of the Merger, and (iii) to transfer
or assign shares of United Stock received by them in connection


                                   -4-

with the Merger only in compliance with the 1933 Act, applicable
state securities laws and the rules and regulations promulgated
under either.

          3.11 PRESS RELEASES.  Prior to the Effective Date,
Clayton and United shall agree with each other as to the form and
substance of any press release or other public disclosure
materially related to this Agreement or any other transaction
contemplated hereby; provided, however, that nothing in this
Section 3.11 shall be deemed to prohibit any Party from making
any disclosure which its counsel deems necessary or advisable in
order to satisfy such Party's disclosure obligations imposed by
law.

          3.12 EMPLOYEE BENEFITS AND CONTRACTS.  Following the
Effective Date, United or any Affiliate (within the meaning of
Section 6.5.2(f) below) of United (collectively, the "United
Group") shall provide generally to officers, employees and former
employees of Clayton who continue employment with the United
Group employee benefits on terms and conditions which, when taken
as a whole, are substantially similar to those then currently
provided by the United Group to its other similarly situated
officers, employees and former employees.  For purposes of
eligibility to participate and any vesting determinations in
connection with the provision of any such employee benefits,
service with Clayton prior to the Effective Date shall be
counted.  The United Group shall also honor in accordance with
their terms all employment, severance, consulting, option and
other contracts of a compensatory nature to the extent disclosed
in the Clayton Disclosure Memorandum between Clayton and any
current or former director, officer or employee thereof and no
other contracts of a compensatory nature to the extent disclosed
in the Clayton Disclosure Memorandum between Clayton and any
current or former director, officer or employee thereof and no
other contracts of the types described that are not so disclosed
shall be deemed to be assumed by the United Group by reason of
this Section 3.12.  If, during the calendar year in which falls
the Effective Date, the United Group shall terminate any "group
health plan", within the meaning of Section 4980B(g)(2) of the
Internal Revenue Code, in which one or more Clayton employees
participated immediately prior to the Effective Date (a "Clayton
Plan"), United shall cause any successor group health plan to
waive any underwriting requirements; to give credit for any such
Clayton employee's participation in the Clayton Plan prior to the
Effective Date for purposes of applying any pre-existing
condition limitations set forth therein; and to give credit for
covered expenses paid by any such Clayton employee under a
Clayton Plan prior to the Effective Date towards satisfaction of
any annual deductible limitation and out-of pocket maximum
applied under such successor group health plan.  The United Group
also shall be considered a successor employer for and shall
provide to "qualified beneficiaries", determined immediately
prior to the Effective Date, under any Clayton Plan appropriate
"continuation coverage" (as those terms are defined in Section
4980B of the Internal Revenue Code) following the Effective Date
under either the Clayton Plan or any successor group health plan
maintained by the United Group.

          3.13 INDEMNIFICATION.  (a)  Subject to the conditions
set forth in paragraph (b) below, for a period of six (6) years
after the Effective Date, United shall indemnify, defend, and


                                   -5-

hold harmless each person entitled to indemnification from
Clayton or Clayton Bank (each, an "Indemnified Party") against
all Liabilities arising out of actions or omissions occurring at
or prior to the Effective Date (including, without limitation,
the transactions contemplated by this Agreement) to the full
extent permitted by Georgia Law and Clayton's articles of
incorporation and bylaws, in each case as in effect on the date
hereof, including provisions relating to advances of expenses
incurred in the defense of any litigation.  Without limiting the
foregoing, in any case in which approval by Clayton is required
to effectuate any indemnification, United shall cause Clayton to
direct, at the election of the Indemnified Party, that the
determination of any such approval shall be made by independent
counsel mutually agreed upon between United and the Indemnified
Party.

          (b)  Any Indemnified Party wishing to claim
indemnification under paragraph (a), upon learning of any such
liability or litigation, shall promptly notify United thereof. 
In the event of any such litigation (whether arising before or
after the Effective Date), (i) United or Clayton shall have the
right to assume the defense thereof and United shall not be
liable to such Indemnified Parties for any legal expenses of
other counsel or any other expenses subsequently incurred by such
Indemnified Parties in connection with the defense thereof,
except that if United or Clayton elects not to assume such
defense or counsel for the Indemnified Parties advises that there
are substantive issues which raise conflicts of interest between
United or Clayton and the Indemnified Parties, the Indemnified
Parties may retain counsel satisfactory to them, and United or
Clayton shall pay all reasonable fees and expenses of such
counsel for the Indemnified Parties promptly as statements
therefor are received; provided, however, that United shall be
obligated pursuant to this paragraph (b) to pay for only one firm
of counsel for all Indemnified Parties in any jurisdiction, (ii)
the Indemnified Parties will cooperate in the defense of any such
litigation, and (iii) United shall not be liable for any
settlement effected without its prior written consent and
provided further that Clayton shall not have any obligation
hereunder to any Indemnified Party when and if a court of
competent jurisdiction shall determine, and such determination
shall have become final, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited
by applicable law.

          (c)  For purposes of this Section 3.13, "liability"
shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost, or expense
(including, without limitation, costs of investigation,
collection, and defense), claim, deficiency, guaranty, or
endorsement of or by any Person (other than endorsements of
notes, bills, checks, and drafts presented for collection or
deposit in the ordinary course of business) of any type, whether
accrued, absolute, or contingent, liquidated or unliquidated,
matured or unmatured, or otherwise.

          (d)  For purposes of this Section 3.13, "litigation"
shall mean any action, arbitration, cause of action, claim,
complaint, criminal prosecution, demand letter, governmental or
other examination or investigation, hearing, inquiry,
administrative or other proceeding or notice (written or oral) by


                                   -6-

any Person alleging potential liability, but shall not include
regular, periodic examinations of depository institutions and
their affiliates by regulatory authorities.

          3.14 STOCK OPTION AWARDS AND DEFERRED COMPENSATION. 
Clayton and United agree that (i) Clayton will grant incentive
stock options to J. Mark Smith and Rodney R. Hickox in the same
amounts and on substantially the same terms as described in
Exhibit C and (ii) Clayton will execute a Deferred Compensation
Agreement with each of J. Mark Smith and Rodney R. Hickox on
substantially the same terms as described in Exhibit C.

                            ARTICLE IV

            REPRESENTATIONS AND WARRANTIES OF CLAYTON

          As an inducement to United to enter into this Agreement 
and to consummate the transactions contemplated hereby, Clayton
represents, warrants, covenants and agrees as follows:

          4.1  CLAYTON DISCLOSURE MEMORANDUM.  By June 19,
Clayton will deliver to United a memorandum (the "Clayton
Disclosure Memorandum") containing certain information regarding
Clayton as indicated at various places in this Agreement.  All
information set forth in the Clayton Disclosure Memorandum or in
documents incorporated by reference in the Clayton Disclosure
Memorandum is true, correct and complete, does not omit to state
any fact necessary in order to make the statements therein not
misleading, and shall be deemed for all purposes of this
Agreement to constitute part of the representations and
warranties of Clayton under this Article IV.  The information
contained in the Clayton Disclosure Memorandum shall be deemed to
be part of and qualify all representations and warranties
contained in this Article IV and the covenants in Article V to
the extent applicable.  All information in each of the documents
and other writings furnished to United pursuant to this Agreement
or the Clayton Disclosure Memorandum is or will be true, correct
and complete and does not and will not omit to state any fact
necessary in order to make the statements therein not misleading. 
Clayton shall promptly provide United with written notification
of any event, occurrence or other information necessary to
maintain the Clayton Disclosure Memorandum and all other
documents and writings furnished to United pursuant to this
Agreement as true, correct and complete in all material respects
at all times prior to and including the Closing.  Clayton agrees
that upon receipt of the Clayton Disclosure Memorandum, United
shall have until June 23 to review the Clayton Disclosure
Memorandum and to terminate this Agreement if for any reason in
its sole discretion United believes that proceeding with the
Merger in light of the contents of such memorandum would be
detrimental to United.

          4.2  CORPORATE AND FINANCIAL.

               4.2.1     AUTHORITY.  Subject to the approval of
various state and federal regulators and Clayton Shareholders,
the execution, delivery and performance of this Agreement and the
other transactions contemplated or required in connection
herewith will not, with or without the giving of notice or the
passage of time, or both, (a) violate any provision of federal or
state law applicable to Clayton, the violation of which could be


                                   -7-

reasonably expected to have a material adverse effect on the
business, operations, properties, assets, financial condition or
prospects of Clayton; (b) violate any provision of the articles
of incorporation or bylaws of Clayton; (c) conflict with or
result in a breach of any provision of, or termination of, or
constitute a default under any instrument, license, agreement, or
commitment to which Clayton is a party, which, singly or in the
aggregate, could reasonably be expected to have a material
adverse effect on the business, operations, properties, assets,
financial condition or prospects of Clayton; or (d) constitute a
violation of any order, judgment or decree to which Clayton is a
party, or by which Clayton or any of its assets or properties are
bound.  Assuming this Agreement constitutes the valid and binding
obligation of United, this Agreement constitutes the valid and
binding obligation of Clayton, and is enforceable in accordance
with its terms, except as limited by laws affecting creditors'
rights generally and by the discretion of courts to compel
specific performance.

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

               4.2.3     CAPITAL STRUCTURE.  (a)  Clayton has an
authorized capital stock consisting of 10,000,000 shares, $1.00
par value of common stock, of which 400,691 shares of common
stock are issued and outstanding as of the date hereof, and
5,000,000 shares, $1.00 par value of special stock, none of which
is issued and outstanding.  Clayton Bank has an authorized
capital stock consisting solely of 5,000,000 shares of Common
Stock, par value $2.00 ("Clayton Bank Stock"), of which 1 share
is issued and outstanding as of the date hereof.  All of the
outstanding shares of Clayton Stock and Clayton Bank stock are
duly and validly issued, fully paid and non-assessable and were
offered, issued and sold in compliance with all applicable
federal and state securities laws.  No person has any right of
rescission or claim for damages under federal or state securities
laws with respect to the issuance of any shares of Clayton Stock
or Clayton Bank Stock previously issued.  None of the shares of
Clayton Stock or Clayton Bank Stock has been issued in violation
of any preemptive or other rights of its shareholders.  All of
the issued and outstanding shares of Clayton Bank Stock are owned
by Clayton.

               (b)  Except as set forth in the Clayton Disclosure
Memorandum, Clayton does not have outstanding any securities
which are either by their terms or by contract convertible or
exchangeable into capital stock of Clayton, or any other securi-
ties or debt, of Clayton, or any preemptive or similar rights to
subscribe for or to purchase, or any options or warrants or
agreements or understandings for the purchase or the issuance
(contingent or otherwise) of, or any calls, commitments or claims
of any character relating to, its capital stock or securities


                                   -8-

convertible into its capital stock.  Clayton is not subject to
any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire, or to register, any shares of its
capital stock.

               (c)  There is no agreement, arrangement or under-
standing to which Clayton is a party restricting or otherwise
relating to the transfer of any shares of capital stock of
Clayton.

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

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

          4.2.5     TAX RETURNS; TAXES.  (a)  Clayton has duly
filed (i) all required federal and state tax returns and reports,
and (ii) all required returns and reports of other governmental
units having jurisdiction with respect to taxes imposed upon its
income, properties, revenues, franchises, operations or other
assets or taxes imposed which might create a material lien or
encumbrance on any of such assets or affect materially and
adversely its business or operations.  To the knowledge of the
officers of Clayton (the "Clayton Management"), such returns or
reports are, and when filed will be, true, complete and correct,
and Clayton has paid, to the extent such taxes or other
governmental charges have become due, all taxes and other
governmental charges set forth in such returns or reports.  To
the knowledge of the Clayton Management, all federal, state and
local taxes and other governmental charges paid or payable by
Clayton have been paid, or have been accrued or reserved on its
books in accordance with generally accepted accounting principles
applied on a basis consistent with prior periods.  To the


                                   -9-

knowledge of the Clayton Management, adequate reserves for the
payment of taxes have been established on the books of Clayton
for all periods through the date hereof, whether or not due and
payable and whether or not disputed.  Until the Closing Date,
Clayton shall continue to provide adequate reserves for the
payment of expected tax liabilities in accordance with generally
accepted accounting principles applied on a basis consistent with
prior periods.  Clayton has not received any notice of a tax
deficiency or assessment of additional taxes of any kind and, to
the knowledge of the Clayton Management, there is no threatened
claim against Clayton, or to the knowledge of the Clayton
Management, any basis for any such claim, for payment of any
additional federal, state, local or foreign taxes for any period
prior to the date of this Agreement in excess of the accruals or
reserves with respect to any such claim shown in the 1996 Clayton
Financial Statements described in Section 4.2.6 below or
disclosed in the notes with respect thereto.  There are no
waivers or agreements by Clayton for the extension of time for
the assessment of any taxes.  The federal income tax returns of
Clayton have not been examined by the Internal Revenue Service
for any period since January 1, 1993.

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

          4.2.6     FINANCIAL STATEMENTS.  Clayton has delivered
to United true, correct and complete copies of (i) the audited
financial statements of Clayton for the years ended December 31,
1994, 1995 and 1996, including balance sheets, statements of
income, statements of shareholders' equity, statements of cash
flows and related notes (the audited financial statements for the
year ended December 31, 1996 being referred to as the "1996
Clayton Financial Statements") and (ii) unaudited financial
statements of Clayton for the period ended March 31, 1997,
including a balance sheet, statement of income and related notes. 
All of such financial statements have been prepared in accordance
with generally accepted accounting principles consistently
applied and present fairly the assets, liabilities and financial
condition of Clayton as of the dates indicated therein and the
results of its operations for the respective periods then ended.

          4.2.7     REGULATORY REPORTS.  Clayton has made
available to United for review and inspection the year-end Report
of Condition and year-end Report of Income and Dividends as filed
by Clayton Bank with the Federal Deposit Insurance Corporation
(the "FDIC") for each of the three years ended December 31, 1996,
1995 and 1994, together with all such other reports filed for the
same three-year period with the FDIC, and the Department of
Banking and Finance of the State of Georgia (the "Department of
Banking"), and other applicable regulatory agencies and the Form
F.R. Y-6 filed by Clayton with the Board of Governors of the
Federal Reserve System (the "Federal Reserve") for each of the
three years ended December 31, 1996, 1995 and 1994 (collectively,


                                   -10-

the "Clayton Reports").  All of the Clayton Reports, as amended,
have been prepared in accordance with applicable rules and
regulations applied on a basis consistent with prior periods and
contain in all material respects all information required to be
presented therein in accordance with such rules and regulations.

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

          4.2.9     NOTES AND OBLIGATIONS.  (a) Except as set
forth in the Clayton Disclosure Memorandum or as provided for in
the loss reserve described in subsection (b) below, all notes
receivable or other obligations owned by Clayton or due to it
shown in the 1996 Clayton Financial Statements and any such notes
receivable and obligations on the date hereof and on the Closing
Date are and will be genuine, legal, valid and collectible
obligations of the respective makers thereof and are not and will
not be subject to any offset or counterclaim.  Except as set
forth in subsection (b) below, all such notes and obligations are
evidenced by written agreements, true and correct copies of which
will be made available to United for examination prior to the
Closing Date.  All such notes and obligations were entered into
by Clayton in the ordinary course of its business and in
compliance with all applicable laws and regulations.

          (b)  Clayton has established a loss reserve in the 1996
Clayton Financial Statements and as of the date of this Agreement
and will establish a loan loss reserve as of the Closing Date
which is adequate to cover anticipated losses which might result
from such items as the insolvency or default of borrowers or
obligors on such loans or obligations, defects in the notes or
evidences of obligation (including losses of original notes or
instruments), offsets or counterclaims properly chargeable to
such reserve, or the availability of legal or equitable defenses
which might preclude or limit the ability of Clayton to enforce
the note or obligation, and the representations set forth in
subsection (a) above are qualified in their entirety by the
aggregate of such loss reserve.  Except as described in the
Clayton Disclosure Memorandum, at the Closing Date, the ratio of
the loss reserve, established on such date in good faith by
Clayton, to total loans outstanding at such time shall not exceed
the ratio of the loan loss reserve to the total loans outstanding
as reflected in the 1996 Clayton Financial Statements,
established on or before such date in good faith by Clayton, in
accordance with generally accepted accounting principles.

          4.2.10    LIABILITIES.  Clayton has no debt, liability
or obligation of any kind required to be shown pursuant to
generally accepted accounting principles on the consolidated
balance sheet of Clayton, whether accrued, absolute, known or
unknown, contingent or otherwise, including, but not limited to
(a) liability or obligation on account of any federal, state or
local taxes or penalty, interest or fines with respect to such
taxes, (b) liability arising from or by virtue of the distri-
bution, delivery or other transfer or disposition of goods,
personal property or services of any type, kind or variety, (c)
unfunded liabilities with respect to any pension, profit sharing


                                   -11-

or employee stock ownership plan, whether operated by Clayton or
any other entity covering employees of Clayton, or (d)
environmental liabilities, except (i) those reflected in the 1996
Clayton Financial Statements, and (ii) as disclosed in the
Clayton Disclosure Memorandum.

          4.2.11    ABSENCE OF CHANGES.  Except as specifically
provided for in this Agreement or specifically set forth in the
Clayton Disclosure Memorandum, since December 31, 1996:

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

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

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

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

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

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

          (g)  there has been no increase in the compensation or
in the rate of compensation or commissions payable or to become
payable by Clayton to any director or executive officer, or to
any employee earning $25,000 or more per annum, or any general
increase in the compensation or in the rate of compensation
payable or to become payable to employees of Clayton earning less
than $25,000 per annum ("general increase" for the purpose hereof
meaning any increase generally applicable to a class or group of
employees, but not including increases granted to individual
employees for merit, length of service, change in position or
responsibility or other reasons applicable to specific employees
and not generally to a class or group thereof), or any director,
officer, or employee hired at a salary in excess of $25,000 per
annum, or any increase in any payment of or commitment to pay any
bonus, profit sharing or other extraordinary compensation to any
employee;

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

          (i)  there has been no labor dispute, unfair labor
practice charge or employment discrimination charge, nor, to the
knowledge of Clayton, any organizational effort by any union, or
institution or threatened institution, of any effort, complaint


                                   -12-

or other proceeding in connection therewith, involving Clayton,
or affecting its operations;

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

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

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

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

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

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

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

          4.2.13    PROXY MATERIALS.  Neither the Clayton Proxy
Materials nor other materials furnished by Clayton to the Clayton
shareholders in connection with the transactions contemplated by
this Agreement or the Merger Agreement, or in any amendments
thereof or supplements thereto, will, at the times such documents


                                   -13-

are distributed to the holders of shares of Clayton Stock and
through the acquisition of shares of Clayton Stock by United
pursuant to the Merger, contain with respect to Clayton any
untrue statement of a material fact or omit to state any
information required to be stated therein or omit to state any
material fact necessary in order to make the statements therein,
in light of the circumstances under which they are made with
respect to Clayton, not misleading.

     4.3  BUSINESS OPERATIONS.

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

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

          (b)  Clayton has complied with all laws, regulations,
and orders applicable to it or its business, except for any non-
compliance which would not have a material adverse effect on
Clayton.  The Clayton Disclosure Memorandum contains a list of
any known violations of such laws, regulations, ordinances or
rules by any present officer, director, or employee of Clayton
which occurred since December 31, 1991, and which resulted in any
order, proceeding, judgment or decree which would be required to
be disclosed pursuant to Item 401(f) of Regulation S-K
promulgated by the Securities and Exchange Commission if Clayton
had been subject to the reporting requirements under the 1933 Act
or the Securities Exchange Act of 1934.  No past violation of any
such law, regulation, ordinance or rule has occurred which could
impair the right or ability of Clayton to conduct its business.

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

          4.3.3     ENVIRONMENTAL.  (a) Except as set forth in
the Clayton Disclosure Memorandum, Clayton 

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


                                   -14-

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

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

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

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

          4.3.4     INSURANCE.  The Clayton Disclosure Memorandum
contains a complete list and description (including the expira-
tion date, premium amount and coverage thereunder) of all
policies of insurance and bonds presently maintained by, or
providing coverage for, Clayton or any of its officers, directors
and employees, all of which are, and will be maintained through
the Closing Date, in full force and effect, together with a
complete list of all pending claims under any of such policies or
bonds.  All terms, obligations and provisions of each of such
policies and bonds have been complied with, all premiums due
thereon have been paid, and no notice of cancellation with
respect thereto has been received.  Except as set forth in the
Clayton Disclosure Memorandum, such policies and bonds provide
adequate coverage to insure the properties and businesses of
Clayton and the activities of its officers, directors and
employees against such risks and in such amounts as are prudent
and customary.  Clayton will not as of the Closing Date have any
liability for premiums or for retrospective premium adjustments
for any period prior to the Closing Date.  Clayton has heretofore


                                   -15-

made, or will hereafter make, available to United a true, correct
and complete copy of each insurance policy and bond in effect
since January 1, 1991 with respect to the business and affairs of
Clayton.

     4.4  PROPERTIES AND ASSETS.

          4.4.1     CONTRACTS AND COMMITMENTS.  The Clayton
Disclosure Memorandum contains a list identifying and briefly
describing all written contracts, purchase orders, agreements,
security deeds, guaranties or commitments to which Clayton is a
party or by which it may be bound involving the payment or
receipt, actual or contingent, of more than $25,000 or having a
term or requiring performance over a period of more than ninety
(90) days.  Each such contract, agreement, guaranty and
commitment of Clayton is in full force and effect and is valid
and enforceable in accordance with its terms, and constitutes a
legal and binding obligation of the respective parties thereto
and is not the subject of any notice of default, termination,
partial termination or of any ongoing, pending, completed or
threatened investigation, inquiry or other proceeding or action
that may give rise to any notice of default, termination or
partial termination.  Clayton has complied in all material
respects with the provisions of such contracts, agreements,
guaranties and commitments.  A true and complete copy of each
such document has been or will be made available to United for
examination.

          4.4.2     LICENSES; INTELLECTUAL PROPERTY.  Clayton has
all patents, trademarks, trade names, service marks, copyrights,
trade secrets and know-how reasonably necessary to conduct its
business as presently conducted and, except as described in the
Clayton Disclosure Memorandum, Clayton is not a party, either as
licensor or licensee, to any agreement for any patent, process,
trademark, service mark, trade name, copyright, trade secret or
other confidential information and there are no rights of third
parties with respect to any trademark, service mark, trade
secrets, confidential information, trade name, patent, patent
application, copyright, invention, device or process owned or
used by Clayton or presently expected to be used by either of
them in the future.  All patents, copyrights, trademarks, service
marks, trade names, and applications therefor or registrations
thereof, owned or used by Clayton, are listed in the Clayton
Disclosure Memorandum.  Clayton has complied with all applicable
laws relating to the filing or registration of "fictitious names"
or trade names.

          4.4.3     PERSONAL PROPERTY.  Clayton has good and
marketable title to all of its personalty, tangible and
intangible, reflected in the 1996 Clayton Financial Statements
(except as since sold or otherwise disposed of by it in the
ordinary course of business), free and clear of all encumbrances,
liens or charges of any kind or character, except (i) those
referred to in the notes to the 1996 Clayton Financial Statements
as securing specified liabilities (with respect to which no
default exists or, to the knowledge of Clayton, is claimed to
exist), (ii) those described in the Clayton Disclosure Memorandum
and (iii) liens for taxes not due and payable.

          4.4.4     CLAYTON LEASES.  (a)  All leases (the
"Clayton Leases") pursuant to which Clayton is lessor or lessee


                                   -16-

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

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

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

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

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

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

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

          (e)  Clayton is not aware of any proposed or pending


                                   -17-
  
change in the zoning of, or of any proposed or pending
condemnation proceeding with respect to, any of the Clayton
Realty or the Clayton Leased Real Properties which may adversely
affect the Clayton Realty or the Clayton Leased Real Properties
or the current or currently contemplated use thereof.

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

     4.5  EMPLOYEES AND BENEFITS.

          4.5.1     DIRECTORS OR OFFICERS OF OTHER CORPORATIONS. 
Except as set forth in the Clayton Disclosure Memorandum, no
director, officer, or employee of Clayton serves, or in the past
five years has served, as a director or officer of any other
corporation on behalf of or as a designee of Clayton or any of
its subsidiaries.

          4.5.2     EMPLOYEE BENEFITS. (a)  Except as set forth
in the Clayton Disclosure Memorandum, Clayton does not provide
and is not obligated to provide, directly or indirectly, any
benefits for employees, including, without limitation, any
pension, profit sharing, stock option, retirement bonus,
hospitalization, medical, insurance, vacation or other employee
benefits under any practice, agreement or understanding.

          (b)  The Clayton Disclosure Memorandum lists separately
any employee benefit plan within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA") sponsored by Clayton (collectively, "ERISA Plans"). 
True, correct and complete copies of all ERISA Plans and, to the
extent applicable, all related trust agreements, insurance
contracts, summary plan descriptions, Internal Revenue Service
determination letters and filings, the past three years of
actuarial reports and valuations, annual reports and Form 5500
filings (including attachments), and any other related documents
requested by United or its counsel have been, or prior to the
Closing Date will be, made available to United.

          (c)  Clayton is not currently and has never been in the
past required to contribute to a multiemployer plan as defined in
Section 3(37)(A) of ERISA.  Clayton does not maintain or
contribute to, nor within the past six years has it maintained or
contributed to, an employee pension benefit plan as defined in
Section 3(2) of ERISA that is or was subject to Title IV of
ERISA.

          (d)  Each ERISA Plan has been operated and administered
in all material respects in accordance with, and has been amended
to comply with (unless such amendment is not yet required), all
applicable laws, rules and regulations, including, without
limitation, ERISA, the Internal Revenue Code of 1986, as amended
("Code"), and the regulations issued under ERISA and the Code. 
With respect to each ERISA Plan, other than routine claims for
benefits submitted in the ordinary course of the benefits
process, no litigation or administrative or other proceeding is
pending or, to the knowledge of Clayton, threatened involving
such ERISA Plan or any of its fiduciaries.  With respect to each


                                   -18-
  
ERISA Plan, neither Clayton nor any of its directors, officers,
employees or agents, nor to Clayton's knowledge, any "party in
interest" or "disqualified person" (as such terms are defined in
Section 3(14) of ERISA and Section 4975 of the Code) has been
engaged in or been a party to any transaction relating to the
ERISA Plan which would constitute a breach of fiduciary duty
under ERISA or a "prohibited transaction" (as such term is
defined in Section 406 of ERISA or Section 4975 of the Code),
unless such transaction is specifically permitted under Sections
407 or 408 of ERISA, Section 4975 of the Code or a class or
administrative exemption issued by the Department of Labor.  Each
ERISA Plan that is a group health plan within the meaning of
Section 607(l) of ERISA and Section 4980B of the Code is in
material compliance with the continuation coverage requirements
of Section 501 of ERISA and Section 4980B of the Code. 

          (e)  Of the ERISA Plans, the "employee pension benefit
plans" within the meaning of Section 3(2) of ERISA (collectively,
the Employee Pension Benefit Plans") are separately identified on
the Clayton Disclosure Memorandum.  With respect to each Employee
Pension Benefit Plan, except as set forth on the Clayton
Disclosure Memorandum: (i) such Employee Pension Benefit Plan
constitutes a qualified plan within the meaning of Section 401(a)
of the Code and the trust is exempt from federal income tax under
Section 501(a) of the Code; (ii) all contributions required by
such plan have been made or will be made on a timely basis; and
(iii) no termination, partial termination or discontinuance of
contributions has occurred without a determination by the IRS
that such action does not affect the tax-qualified status of such
plan.

          (f)  As of the Closing Date, with respect to each ERISA
Plan, Clayton will have provided adequate reserves, or insurance
or qualified trust funds, to provide for all payments and
contributions required, or reasonably expected to be required, to
be made under the provisions of such ERISA Plan or required to be
made under applicable laws, rules and regulations, with respect
to any period prior to the Closing Date to the extent reserves
are required under generally accepted accounting principles,
based on an actuarial valuation satisfactory to the actuaries of
Clayton representing a projection of claims expected to be
incurred under such ERISA Plan.

          (g)  Except as disclosed on the Clayton Disclosure
Memorandum, Clayton does not provide and has no obligation to
provide benefits, including, without limitation, death, health or
medical benefits (whether or not insured) with respect to current
or former employees of Clayton beyond their retirement or other
termination of service with Clayton other than (i) coverage
mandated by applicable Law, (ii) benefits under the Employee
Pension Benefit Plans, or (iii) benefits the full cost of which
is borne by the current or former employee or his beneficiary.

          (h)  Neither this Agreement nor any transaction
contemplated hereby will (i) entitle any current or former
employee, officer or director of Clayton to severance pay,
unemployment compensation or any similar or other payment, or
(ii) accelerate the time of payment or vesting of, or increase
the amount of compensation or benefits due any such employee,
officer or director.



                                   -19-
  
          4.5.3     LABOR-RELATED MATTERS.  Except as described
in the Clayton Disclosure Memorandum, Clayton is not, and has not
been, a party to any collective bargaining agreement or agreement
of any kind with any union or labor organization or to any
agreement with any of its employees which is not terminable at
will or upon ninety (90) days notice at the election of, and
without cost or penalty to, Clayton.  Clayton has not received at
any time in the past five (5) years, any demand for recognition
from any union, and no attempt has been made, or will have been
made as of the Closing Date, to organize any of its employees. 
Clayton has complied in all material respects with all obliga-
tions under the National Labor Relations Act, as amended, the Age
Discrimination in Employment Act, as amended, and all other
federal, state and local labor laws and regulations applicable to
employees.  There are no unfair labor practice charges pending or
threatened against Clayton, and there are, and in the past three
(3) years there have been, no charges, complaints, claims or
proceedings, no slowdowns or strikes pending or threatened
against, or involving, as the case may be, Clayton with respect
to any alleged violation of any legal duty (including but not
limited to any wage and hour claims, employment discrimination
claims or claims arising out of any employment relationship) by
Clayton as to any of its employees or as to any person seeking
employment therefrom, and no such violations exist.

          4.5.4     RELATED PARTY TRANSACTIONS.  Except for (a)
loans and extensions of credit made on substantially the same
terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions by Clayton
with other persons who are not affiliated with Clayton, and which
do not involve more than the normal risk of repayment or present
other unfavorable features, (b) deposits, all of which are on
terms and conditions identical to those made available to all
customers of Clayton at the time such deposits were entered into,
and (c) transactions specifically described in the Clayton
Disclosure Memorandum, there are no contracts with or commitments
to present or former 5% or greater shareholders, directors,
officers, or employees involving the expenditure after December
31, 1991 of more than $60,000 as to any one individual, including
with respect to any business directly or indirectly controlled by
any such person, or $100,000 for all such contracts or
commitments in the aggregate for all such individuals (other than
contracts or commitments relating to services to be performed by
any officer, director or employee as a currently-employed
employee of Clayton).

     4.6  OTHER MATTERS.

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

          4.6.2     APPROVALS, CONSENTS AND FILINGS.  Except for
the approval of the Federal Reserve and the Department of
Banking, or as set forth in the Clayton Disclosure Memorandum,
neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby or thereby


                                   -20-
  
will (a) require any consent, approval, authorization or permit
of, or filing with or notification to, any governmental or
regulatory authority, or (b) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to Clayton, or any
of Clayton's assets.

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

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

          4.6.4     REPRESENTATIONS AND WARRANTIES.  No repre-
sentation or warranty contained in this Article IV or in any
written statement delivered by or at the direction of Clayton
pursuant hereto or in connection with the transactions contem-
plated hereby contains or shall contain any untrue statement, nor
shall such representations and warranties taken as a whole omit
any statement necessary in order to make any statement not
misleading.  Copies of all documents that have been or will be
furnished to United in connection with this Agreement or pursuant
hereto are or shall be true, correct and complete.

                            ARTICLE V

          CONDUCT OF BUSINESS OF CLAYTON PENDING CLOSING

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

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

          5.2  MAINTENANCE OF PROPERTIES.  Clayton will maintain
its properties and assets in good operating condition, ordinary
wear and tear excepted.

          5.3  INSURANCE.  Clayton will maintain and keep in full
force and effect all of the insurance referred to in Section
4.3.4(b) hereof or other insurance equivalent thereto in all
material respects.

          5.4  CAPITAL STRUCTURE.  No change will be made in the
authorized or issued capital stock or other securities of


                                   -21-
  
Clayton, and Clayton will not issue or grant any right or option
to purchase or otherwise acquire any of the capital stock or
other securities of Clayton.

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

          5.6  AMENDMENT OF ARTICLES; CORPORATE EXISTENCE. 
Clayton will not amend its articles of incorporation or bylaws,
and Clayton will maintain its corporate existence and powers.

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

          5.8  NO DISPOSITIONS.  Clayton will not sell, mortgage,
lease, buy or otherwise acquire, transfer or dispose of any real
property or interest therein (except for sales in the ordinary
course of business) and Clayton will not, except in the ordinary
course of business, sell or transfer, mortgage, pledge or subject
to any lien, charge or other encumbrance any other tangible or
intangible asset.

          5.9  BANKING ARRANGEMENTS.  No change will be made in
the banking and safe deposit arrangements referred to in Section
4.2.8 hereof.

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

          5.11 BOOKS AND RECORDS.  The books and records of
Clayton will be maintained in the usual, regular and ordinary
course.

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

                            ARTICLE VI

             REPRESENTATIONS AND WARRANTIES OF UNITED

          As an inducement to Clayton to enter into this
Agreement  and to consummate the transactions contemplated
hereby, United represents, warrants, covenants and agrees as
follows:

          6.1  UNITED DISCLOSURE MEMORANDUM.  By June 19, United
will deliver to Clayton a memorandum (the "United Disclosure
Memorandum") containing certain information regarding United as


                                   -22-
  
indicated at various places in this Agreement.  All information
set forth in the United Disclosure Memorandum or in documents
incorporated by reference in the United Disclosure Memorandum is
true, correct and complete, does not omit to state any fact
necessary in order to make the statements therein not misleading,
and shall be deemed for all purposes of this Agreement to
constitute part of the representations and warranties of United
under this Article VI.  The information contained in the United
Disclosure Memorandum shall be deemed to be part of and qualify
all representations and warranties contained in this Article VI
and the covenants in Article VII to the extent applicable.  All
information in each of the documents and other writings furnished
to Clayton pursuant to this Agreement or the United Disclosure
Memorandum is or will be true, correct and complete and does not
and will not omit to state any fact necessary in order to make
the statements therein not misleading.  United shall promptly
provide Clayton with written notification of any event,
occurrence or other information necessary to maintain the United
Disclosure Memorandum and all other documents and writings
furnished to Clayton pursuant to this Agreement as true, correct
and complete in all material respects at all times prior to and
including the Closing.  United agrees that upon receipt of the
United Disclosure Memorandum, Clayton shall have until June 23 to
review the United Disclosure Memorandum and to terminate this
Agreement if for any reason in its sole discretion Clayton
believes that proceeding with the Merger in light of the contents
of such memorandum would be detrimental to Clayton.

     6.2  CORPORATE AND FINANCIAL.

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

          6.2.2     CORPORATE STATUS.  United is a business
corporation duly organized, validly existing and in good standing
under the laws of the State of Georgia and has no direct or
indirect subsidiaries, which are material to United, other than
United Community Bank, Blairsville, Georgia ("United Bank"),
Towns County Bank, Hiawassee, Georgia ("Towns"), Peoples Bank of


                                   -23-
  
Fannin County, Blue Ridge, Georgia ("Fannin"), White County Bank,
Cleveland, Georgia ("White"), Carolina Community Bank, Murphy,
North Carolina ("Carolina"), and United Family Finance Company,
Blairsville, Georgia (the "Finance Company") (collectively the
"United Subsidiaries.")  The United Subsidiaries are banking
corporations, except for the Finance Company, which is a business
corporation, all of which are duly organized, validly existing
and in good standing under the laws of the State of Georgia with
respect to United Bank, Towns, Fannin, White, and the Finance
Company, and the State of North Carolina with respect to
Carolina.  United and the United Subsidiaries are entitled to own
or lease their respective properties and to carry on their
respective businesses in the places where such properties are now
owned, leased or operated and such businesses are now conducted.

          6.2.3     CAPITAL STRUCTURE.  (a)  United has an
authorized capital stock consisting solely of 10,000,000 shares
of common stock, par value $1.00 per share, of which 6,956,748
shares are issued and outstanding as of the date hereof including
140,000 deemed outstanding pursuant to United's prime plus 1/4%
Convertible Subordinated Debentures due December 31, 2006 (the
"2006 Debentures") and presently exercisable options to acquire
77,900 shares (the "Stock Options") and 10,000,000 shares of
Preferred Stock, none of which is outstanding.  All of the issued
and outstanding shares of United Stock and the United
Subsidiaries capital stock (the "United Subsidiaries Stock") is
duly and validly issued, fully paid and nonassessable and was
offered, issued and sold in compliance with all applicable
federal or state securities laws.  No person has any right of
rescission or claim for damages under federal or state securities
laws with respect to the issuance of shares of United Stock or
any of the shares of United Subsidiaries Stock previously issued. 
None of the shares of United Stock has been issued in violation
of the preemptive or other rights of any shareholder of United. 
None of the shares of the United Subsidiaries Stock was issued in
violation of the preemptive or other rights of any shareholder of
the United Subsidiaries.  All of the issued and outstanding
shares of the United Subsidiaries Stock are owned by United.

          (b)  Except for the 2006 Debentures and the Stock
Options and as set forth in the United Disclosure Memorandum,
United does not have outstanding any securities which are either
by their terms or by contract convertible or exchangeable into
United Stock, or any other securities or debt, of United, or any
preemptive or similar rights to subscribe for or to purchase, or
any options or warrants or agreements or understandings for the
purchase or the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to, its
capital stock or securities convertible into its capital stock. 
United is not subject to any obligation (contingent or otherwise)
to repurchase or otherwise acquire or retire, or to register, any
shares of its capital stock.

          (c)  There is no agreement, arrangement or under-
standing to which United is a party restricting or otherwise
relating to the transfer of any shares of United Stock.

          (d)  All shares of common stock or other capital stock,
or any other securities or debt, of United, which have been
purchased or redeemed by United have been purchased or redeemed
in accordance with all applicable federal, state and local laws,


                                   -24-
  
rules, and regulations, including, without limitation, all
federal and state securities laws and rules and regulations of
any securities exchange or system on which such stock, securities
or debt are, or at such time were, traded, and no such purchase
or redemption has resulted or will, with the giving of notice or
lapse of time, or both, result in a default or acceleration of
the maturity of, or otherwise modify, any agreement, note,
mortgage, bond, security agreement, loan agreement or other
contract or commitment of United.

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

          6.2.5     TAX RETURNS; TAXES.  (a)  United has duly
filed (i) all required federal and state tax returns and reports,
and (ii) all required returns and reports of other governmental
units having jurisdiction with respect to taxes imposed upon its
income, properties, revenues, franchises, operations or other
assets or taxes imposed which might create a material lien or
encumbrance on any of such assets or affect materially and
adversely its business or operations.  To the knowledge of the
officers of United (the "United Management"), such returns or
reports are, and when filed will be, true, complete and correct,
and United has paid, to the extent such taxes or other
governmental charges have become due, all taxes and other
governmental charges set forth in such returns or reports.  To
the knowledge of the United Management, all federal, state and
local taxes and other governmental charges paid or payable by
United have been paid, or have been accrued or reserved on its
books in accordance with generally accepted accounting principles
applied on a basis consistent with prior periods.  To the
knowledge of the United Management, adequate reserves for the
payment of taxes have been established on the books of United for
all periods through the date hereof, whether or not due and
payable and whether or not disputed.  Until the Closing Date,
United shall continue to provide adequate reserves for the
payment of expected tax liabilities in accordance with generally
accepted accounting principles applied on a basis consistent with
prior periods.  United has not received any notice of a tax
deficiency or assessment of additional taxes of any kind and, to
the knowledge of the United Management, there is no threatened
claim against United, or to the knowledge of the United
Management, any basis for any such claim, for payment of any
additional federal, state, local or foreign taxes for any period
prior to the date of this Agreement in excess of the accruals or


                                   -25-
  
reserves with respect to any such claim shown in the 1996 United
Financial Statements described in Section 6.2.6 below or
disclosed in the notes with respect thereto.  There are no
waivers or agreements by United for the extension of time for the
assessment of any taxes.  The federal income tax returns of
United have not been examined by the Internal Revenue Service for
any period since January 1, 1993.

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

          6.2.6     FINANCIAL STATEMENTS.  United has delivered
to Clayton true, correct and complete copies of (i) the audited
financial statements of United for the years ended December 31,
1994, 1995 and 1996, including balance sheets, statements of
income, statements of shareholders' equity, statements of cash
flows and related notes (the audited financial statements for the
year ended December 31, 1996 being referred to as the "1996
United Financial Statements") and (ii) unaudited financial
statements of United for the period ended March 31, 1997,
including a balance sheet, statement of income and related notes. 
All of such financial statements have been prepared in accordance
with generally accepted accounting principles consistently
applied and present fairly the assets, liabilities and financial
condition of United as of the dates indicated therein and the
results of its operations for the respective periods then ended.

          6.2.7     REGULATORY REPORTS. United has made
available to Clayton for review and inspection the year-end
Report of Condition and year-end Report of Income and Dividends
as filed by the United banking subsidiaries with the FDIC for
each of the three years ended December 31, 1996, 1995 and 1994,
together with all such other reports filed for the same three-
year period with the FDIC, and the Department of Banking, and
other applicable regulatory agencies and the Form F.R. Y-6 filed
by United with the Federal Reserve for each of the three years
ended December 31, 1996, 1995 and 1994 (collectively, the "United
Reports").  All of the United Reports, as amended, have been
prepared in accordance with applicable rules and regulations
applied on a basis consistent with prior periods and contain in
all material respects all information required to be presented
therein in accordance with such rules and regulations.

          6.2.8     ACCOUNTS.  The United Disclosure Memorandum
contains a list of each and every bank and other institution in
which United maintains an account or safety deposit box, the ac-
count numbers, and the names of all persons who are presently
authorized to draw thereon, have access thereto or give in-
structions regarding distribution of funds or assets therein.

          6.2.9     NOTES AND OBLIGATIONS.  (a) Except as set
forth in the United Disclosure Memorandum or as provided for in
the loss reserve described in subsection (b) below, all notes


                                   -26-
  
receivable or other obligations owned by United or due to it
shown in the 1996 United Financial Statements and any such notes
receivable and obligations on the date hereof and on the Closing
Date are and will be genuine, legal, valid and collectible
obligations of the respective makers thereof and are not and will
not be subject to any offset or counterclaim.  Except as set
forth in subsection (b) below, all such notes and obligations are
evidenced by written agreements, true and correct copies of which
will be made available to Clayton for examination prior to the
Closing Date.  All such notes and obligations were entered into
by United in the ordinary course of its business and in
compliance with all applicable laws and regulations. 

          (b)  United has established a loss reserve in the 1996
United Financial Statements and as of the date of this Agreement
and will establish a loan loss reserve as of the Closing Date
which is adequate to cover anticipated losses which might result
from such items as the insolvency or default of borrowers or
obligors on such loans or obligations, defects in the notes or
evidences of obligation (including losses of original notes or
instruments), offsets or counterclaims properly chargeable to
such reserve, or the availability of legal or equitable defenses
which might preclude or limit the ability of United to enforce
the note or obligation, and the representations set forth in
subsection (a) above are qualified in their entirety by the
aggregate of such loss reserve.  Except as described in the
United Disclosure Memorandum, at the Closing Date, the ratio of
the loss reserve, established on such date in good faith by
United, to total loans outstanding at such time shall not exceed
the ratio of the loan loss reserve to the total loans outstanding
as reflected in the 1996 United Financial Statements, established
on or before such date in good faith by United, in accordance
with generally accepted accounting principles.

          6.2.10    LIABILITIES.  United has no debt, liability
or obligation of any kind required to be shown pursuant to
generally accepted accounting principles on the consolidated
balance sheet of United, whether accrued, absolute, known or
unknown, contingent or otherwise, including, but not limited to
(a) liability or obligation on account of any federal, state or
local taxes or penalty, interest or fines with respect to such
taxes, (b) liability arising from or by virtue of the distri-
bution, delivery or other transfer or disposition of goods,
personal property or services of any type, kind or variety, (c)
unfunded liabilities with respect to any pension, profit sharing
or employee stock ownership plan, whether operated by United or
any other entity covering employees of United, or (d)
environmental liabilities, except (i) those reflected in the 1996
United Financial Statements, and (ii) as disclosed in the United
Disclosure Memorandum.

          6.2.11    ABSENCE OF CHANGES.  Except as specifically
provided for in this Agreement or specifically set forth in the
United Disclosure Memorandum, since December 31, 1996:

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


                                   -27-
  
adverse effect on such businesses or properties;

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

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

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

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

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

          (g)  there has been no increase in the compensation or
in the rate of compensation or commissions payable or to become
payable by United to any director or executive officer, or to any
employee earning $25,000 or more per annum, or any general
increase in the compensation or in the rate of compensation
payable or to become payable to employees of United earning less
than $25,000 per annum ("general increase" for the purpose hereof
meaning any increase generally applicable to a class or group of
employees, but not including increases granted to individual
employees for merit, length of service, change in position or
responsibility or other reasons applicable to specific employees
and not generally to a class or group thereof), or any director,
officer, or employee hired at a salary in excess of $25,000 per
annum, or any increase in any payment of or commitment to pay any
bonus, profit sharing or other extraordinary compensation to any
employee;

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

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

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

          (k)  there has been no indebtedness or other liability
or obligation (whether absolute, accrued, contingent or
otherwise) incurred by United which would be required to be
reflected on a balance sheet of United prepared as of the date
hereof in accordance with generally accepted accounting


                                   -28-
  
principles applied on a consistent basis, except as incurred in
the ordinary course of business;

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

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

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

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

     6.3  BUSINESS OPERATIONS.

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

          6.3.2     PERMITS; COMPLIANCE WITH LAW.  (a) United has
all permits, licenses, approvals, authorizations and
registrations under all federal, state, local and foreign laws
required for United to carry on its business as presently
conducted, and all of such permits, licenses, approvals,
authorizations and registrations are in full force and effect,
and no suspension or cancellation of any of them is pending or,
to the knowledge of United, threatened.

          (b)  United has complied with all laws, regulations,
and orders applicable to it or its business, except for any non-
compliance which would not have a material adverse effect on
United.  The United Disclosure Memorandum contains a list of any
known violations of such laws, regulations, ordinances or rules
by any present officer, director, or employee of United which
occurred since December 31, 1991, and which resulted in any
order, proceeding, judgment or decree which would be required to
be disclosed pursuant to Item 401(f) of Regulation S-K
promulgated by the Securities and Exchange Commission if United


                                   -29-
  
had been subject to the reporting requirements under the 1933 Act
or the Securities Exchange Act of 1934.  No past violation of any
such law, regulation, ordinance or rule has occurred which could
impair the right or ability of United to conduct its business.

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

          6.3.3     ENVIRONMENTAL.  (a) Except as set forth in
the United Disclosure Memorandum, United 

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

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

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

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



                                   -30-
  
          (d)  The term hazardous substances or hazardous waste
does not include those substances which are normally and
reasonably used in connection with the occupancy or operation of
office buildings (such as cleaning fluids, and supplies normally
used in the day to day operation of business offices).

          6.3.4     INSURANCE.  The United Disclosure Memorandum
contains a complete list and description (including the expira-
tion date, premium amount and coverage thereunder) of all
policies of insurance and bonds presently maintained by, or
providing coverage for, United or any of its officers, directors
and employees, all of which are, and will be maintained through
the Closing Date, in full force and effect, together with a
complete list of all pending claims under any of such policies or
bonds.  All terms, obligations and provisions of each of such
policies and bonds have been complied with, all premiums due
thereon have been paid, and no notice of cancellation with
respect thereto has been received.  Except as set forth in the
United Disclosure Memorandum, such policies and bonds provide
adequate coverage to insure the properties and businesses of
United and the activities of its officers, directors and
employees against such risks and in such amounts as are prudent
and customary.  United will not as of the Closing Date have any
liability for premiums or for retrospective premium adjustments
for any period prior to the Closing Date.  United has heretofore
made, or will hereafter make, available to Clayton a true,
correct and complete copy of each insurance policy and bond in
effect since January 1, 1991 with respect to the business and
affairs of United.

     6.4  PROPERTIES AND ASSETS.

          6.4.1     CONTRACTS AND COMMITMENTS.  The United
Disclosure Memorandum contains a list identifying and briefly
describing all written contracts, purchase orders, agreements,
security deeds, guaranties or commitments to which United is a
party or by which it may be bound involving the payment or
receipt, actual or contingent, of more than $25,000 or having a
term or requiring performance over a period of more than ninety
(90) days.  Each such contract, agreement, guaranty and
commitment of United is in full force and effect and is valid and
enforceable in accordance with its terms, and constitutes a legal
and binding obligation of the respective parties thereto and is
not the subject of any notice of default, termination, partial
termination or of any ongoing, pending, completed or threatened
investigation, inquiry or other proceeding or action that may
give rise to any notice of default, termination or partial
termination.  United has complied in all material respects with
the provisions of such contracts, agreements, guaranties and
commitments.  A true and complete copy of each such document has
been or will be made available to Clayton for examination.

          6.4.2     LICENSES; INTELLECTUAL PROPERTY.  United has
all patents, trademarks, trade names, service marks, copyrights,
trade secrets and know-how reasonably necessary to conduct its
business as presently conducted and, except as described in the
United Disclosure Memorandum, United is not a party, either as
licensor or licensee, to any agreement for any patent, process,
trademark, service mark, trade name, copyright, trade secret or
other confidential information and there are no rights of third
parties with respect to any trademark, service mark, trade


                                   -31-
  
secrets, confidential information, trade name, patent, patent
application, copyright, invention, device or process owned or
used by United or presently expected to be used by either of them
in the future.  All patents, copyrights, trademarks, service
marks, trade names, and applications therefor or registrations
thereof, owned or used by United, are listed in the United
Disclosure Memorandum.  United has complied with all applicable
laws relating to the filing or registration of "fictitious names"
or trade names.

          6.4.3     PERSONAL PROPERTY.  United has good and
marketable title to all of its personalty, tangible and
intangible, reflected in the 1996 United Financial Statements
(except as since sold or otherwise disposed of by it in the
ordinary course of business), free and clear of all encumbrances,
liens or charges of any kind or character, except (i) those
referred to in the notes to the 1996 United Financial Statements
as securing specified liabilities (with respect to which no
default exists or, to the knowledge of United, is claimed to
exist), (ii) those described in the United Disclosure Memorandum
and (iii) liens for taxes not due and payable.

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

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

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

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

          (b)  Except as set forth in the United Disclosure


                                   -32-
  
Memorandum, the interests of United in the United Realty and in
and under each of the United Leases are free and clear of any and
all liens and encumbrances and are subject to no present claim,
contest, dispute, action or, to the knowledge of United,
threatened action at law or in equity.

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

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

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

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

     6.5  EMPLOYEES AND BENEFITS.

          6.5.1     DIRECTORS OR OFFICERS OF OTHER CORPORATIONS. 
Except as set forth in the United Disclosure Memorandum, no
director, officer, or employee of United serves, or in the past
five years has served, as a director or officer of any other
corporation on behalf of or as a designee of United or any of its
subsidiaries.

          6.5.2     EMPLOYEE BENEFITS.  (a)  Except as set forth
in the United Disclosure Memorandum, United does not provide and
is not obligated to provide, directly or indirectly, any benefits
for employees, including, without limitation, any pension, profit
sharing, stock option, retirement bonus, hospitalization,
medical, insurance, vacation or other employee benefits under any
practice, agreement or understanding.

          (b)  The United Disclosure Memorandum lists separately
any employee benefit plan within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (collectively, "ERISA Plans").  True, correct and
complete copies of all ERISA Plans and, to the extent applicable,
all related trust agreements, insurance contracts, summary plan
descriptions, Internal Revenue Service determination letters and
filings, the past three years of actuarial reports and


                                   -33-
  
valuations, annual reports and Form 5500 filings (including
attachments), and any other related documents requested by
Clayton or its counsel have been, or prior to the Closing Date
will be, made available to Clayton.

          (c)  United is not currently and has never been in the
past required to contribute to a multiemployer plan as defined in
Section 3(37)(A) of ERISA.  United does not maintain or
contribute to, nor within the past six years has it maintained or
contributed to, an employee pension benefit plan as defined in
Section 3(2) of ERISA that is or was subject to Title IV of
ERISA.

          (d)  Each ERISA Plan has been operated and administered
in all material respects in accordance with, and has been amended
to comply with (unless such amendment is not yet required), all
applicable laws, rules and regulations, including, without
limitation, ERISA, the Internal Revenue Code of 1986, as amended
("Code"), and the regulations issued under ERISA and the Code. 
With respect to each ERISA Plan, other than routine claims for
benefits submitted in the ordinary course of the benefits
process, no litigation or administrative or other proceeding is
pending or, to the knowledge of United, threatened involving such
ERISA Plan or any of its fiduciaries.  With respect to each ERISA
Plan, neither United nor any of its directors, officers,
employees or agents, nor to United's knowledge, any "party in
interest" or "disqualified person" (as such terms are defined in
Section 3(14) of ERISA and Section 4975 of the Code) has been
engaged in or been a party to any transaction relating to the
ERISA Plan which would constitute a breach of fiduciary duty
under ERISA or a "prohibited transaction" (as such term is
defined in Section 406 of ERISA or Section 4975 of the Code),
unless such transaction is specifically permitted under Sections
407 or 408 of ERISA, Section 4975 of the Code or a class or
administrative exemption issued by the Department of Labor.  Each
ERISA Plan that is a group health plan within the meaning of
Section 607(l) of ERISA and Section 4980B of the Code is in
compliance with the continuation coverage requirements of Section
501 of ERISA and Section 4980B of the Code. 

          (e)  Of the ERISA Plans, the "employee pension benefit
plans" within the meaning of Section 3(2) of ERISA (collectively,
the Employee Pension Benefit Plans") are separately identified on
the United Disclosure Memorandum.  With respect to each Employee
Pension Benefit Plan, except as set forth on the United
Disclosure Memorandum: (i) such Employee Pension Benefit Plan
constitutes a qualified plan within the meaning of Section 401(a)
of the Code and the trust is exempt from federal income tax under
Section 501(a) of the Code; (ii) all contributions required by
such plan have been made; and (iii) no termination, partial
termination or discontinuance of contributions has occurred
without a determination by the IRS that such action does not
affect the tax-qualified status of such plan.

          (f)  As of the Closing Date, with respect to each ERISA
Plan, United will have provided adequate reserves, or insurance
or qualified trust funds, to provide for all payments and
contributions required, or reasonably expected to be required, to
be made under the provisions of such ERISA Plan or required to be
made under applicable laws, rules and regulations, with respect
to any period prior to the Closing Date to the extent reserves


                                   -34-
  
are required under generally accepted accounting principles,
based on an actuarial valuation satisfactory to the actuaries of
United representing a projection of claims expected to be
incurred under such ERISA Plan.

          (g)  Except as disclosed on the United Disclosure
Memorandum, United does not provide and has no obligation to
provide benefits, including, without limitation, death, health or
medical benefits (whether or not insured) with respect to current
or former employees of United beyond their retirement or other
termination of service with United other than (i) coverage
mandated by applicable Law, (ii) benefits under the Employee
Pension Benefit Plans, or (iii) benefits the full cost of which
is borne by the current of former employee or his beneficiary.

          (h)  Neither this Agreement nor any transaction
contemplated hereby will (i) entitle any current or former
employee, officer or director of United to severance pay,
unemployment compensation or any similar or other payment, or
(ii) accelerate the time of payment or vesting of, or increase
the amount of compensation or benefits due any such employee,
officer or director.

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

          6.5.4     RELATED PARTY TRANSACTIONS.  Except for (a)
loans and extensions of credit made on substantially the same
terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions by United with
other persons who are not affiliated with United, and which do
not involve more than the normal risk of repayment or present
other unfavorable features, (b) deposits, all of which are on
terms and conditions identical to those made available to all
customers of United at the time such deposits were entered into,
and (c) transactions specifically described in the United
Disclosure Memorandum, there are no contracts with or commitments
to present or former 5% or greater shareholders, directors,
officers, or employees involving the expenditure after December


                                   -35-
  
31, 1991 of more than $60,000 as to any one individual, including
with respect to any business directly or indirectly controlled by
any such person, or $100,000 for all such contracts or
commitments in the aggregate for all such individuals (other than
contracts or commitments relating to services to be performed by
any officer, director or employee as a currently-employed
employee of United).

     6.6  OTHER MATTERS.

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

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

          6.6.3     DEFAULT.  (a)  Except for those consents
described in or set forth pursuant to Section 6.6.2 above,
neither the execution of this Agreement nor consummation of the
transactions contemplated herein (i) constitutes a breach of or
default under any contract or commitment to which United is a
party or by which United or its properties or assets are bound,
(ii) does or will result in the creation or imposition of any
security interest, lien, encumbrance, charge, equity or
restriction of any nature whatsoever in favor of any third party
upon any assets of United, or (iii) constitutes an event
permitting termination of any agreement or the acceleration of
any indebtedness of United.

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

          6.6.4     REPRESENTATIONS AND WARRANTIES.  No repre-
sentation or warranty contained in this Article VI or in any
written statement delivered by or at the direction of United
pursuant hereto or in connection with the transactions contem-
plated hereby contains or shall contain any untrue statement, nor
shall such representations and warranties taken as a whole omit
any statement necessary in order to make any statement not
misleading.  Copies of all documents that have been or will be
furnished to Clayton in connection with this Agreement or
pursuant hereto are or shall be true, correct and complete.

          6.6.5     UNITED STOCK.  The shares of United Stock to
be issued and delivered to Clayton Shareholders pursuant to the


                                   -36-
  
terms of the Merger Agreement, when so issued and delivered, will
be validly, authorized and issued, fully paid and non-assessable,
and no shareholder of United will have any preemptive rights with
respect thereto.


                           ARTICLE VII

          CONDUCT OF BUSINESS OF UNITED PENDING CLOSING

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

          7.1  CONDUCT OF BUSINESS.  United will conduct its
business only in the ordinary course, without the creation of any
indebtedness for borrowed money (other than deposit and similar
accounts and customary credit arrangements between banks in the
ordinary course of business).

          7.2  MAINTENANCE OF PROPERTIES.  United will maintain
its properties and assets in good operating condition, ordinary
wear and tear excepted.

          7.3  INSURANCE.  United will maintain and keep in full
force and effect all of the insurance referred to in Section
6.3.4(b) hereof or other insurance equivalent thereto in all
material respects.

          7.4  DIVIDENDS.  Except for quarterly dividends in the
amount of $.025 per share, no other dividend, distribution or
payment will be declared or made in respect to the United Stock.

          7.5  CORPORATE EXISTENCE.  United will maintain its
corporate existence and powers.

          7.6  BANKING ARRANGEMENTS.  No change will be made in
the banking and safe deposit arrangements referred to in Section
6.2.8 hereof.

          7.7  BOOKS AND RECORDS.  The books and records of
United will be maintained in the usual, regular and ordinary
course.

          7.7  ADVICE OF CHANGES. United shall promptly advise
Clayton orally and in writing of any change or event having, or
which the United Management believes could have, a material
adverse effect on the assets, liabilities, business, operations
or financial condition of United.

                           ARTICLE VIII

               CONDITIONS TO OBLIGATIONS OF UNITED

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

          8.1  VERACITY OF REPRESENTATIONS AND WARRANTIES.  The
representations and warranties of Clayton contained herein or in


                                   -37-
  
any certificate, schedule or other document delivered pursuant to
the provisions hereof, or in connection herewith, shall be true
in all material respects as of the date when made and shall be
deemed to be made again at and as of the Closing Date and shall
be true in all material respects at and as of such time, except
as a result of changes or events expressly permitted or
contemplated herein.

          8.2  PERFORMANCE OF AGREEMENTS.  Clayton shall have
performed and complied with all agreements and conditions
required by this Agreement to be performed or complied with by it
prior to or on the Closing Date.

          8.3  CERTIFICATES, RESOLUTIONS, OPINION. Clayton shall
have delivered to United:

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

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

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

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

          (e)  an opinion of Porter Keadle Moore LLP, certified
    public accountants, to the effect that the Merger will be
    accounted for as a "pooling of interests," which opinion will
    be subject only to such qualifications, exceptions and
    factual assumptions as are satisfactory to United.

          (f)  an opinion of Powell, Goldstein, Frazer & Murphy
    LLP, counsel for Clayton, dated the Closing Date, in the form
    attached hereto as Exhibit D.

          8.4  Shareholder Approval. The Merger Agreement shall
have been approved by the vote of the holders of at least a
majority of Clayton Stock.



                                   -38-
  
          8.5  REGULATORY APPROVALS.  United shall have received
from any and all governmental authorities, bodies or agencies
having jurisdiction over the transactions contemplated by this
Agreement and the Merger Agreement, including, but not limited to
the Federal Reserve and the Department of Banking, such consents,
authorizations and approvals as are necessary for the
consummation thereof and all applicable waiting or similar
periods required by law shall have expired.

          8.6  EFFECTIVE REGISTRATION STATEMENT.  The United
Registration Statement shall have been declared effective by the
SEC and no stop order shall have been entered with respect
thereto.

          8.7  CERTIFICATE OF MERGER.  The Secretary of State of
the State of Georgia shall have issued a certificate of merger
with regard to the Merger in accordance with the provisions of
the Georgia Business Corporation Code.

          8.8  ACCOUNTANTS' LETTER.  United shall have received a
letter from Mauldin & Jenkins, dated the Closing Date, to the
effect that:  At the request of Clayton they have carried out
procedures to a specified date not more than five business days
prior to the Closing Date, which procedures did not constitute an
examination in accordance with generally accepted auditing
standards, of the financial statements of Clayton, as follows: 
(a) read the unaudited balance sheets and statements of income of
Clayton from December 31, 1996 through the date of the most
recent monthly financial statements available in the ordinary
course of business; (b) read the minutes of the meetings of
shareholders and Board of Directors of Clayton from December 31,
1996 to said date nor more than five business days prior to the
Closing Date; and (c) consulted with certain officers and
employees of Clayton responsible for financial and accounting
matters and, based on such procedures, nothing has come to their
attention which would cause them to believe that (i) such
unaudited interim balance sheets and statements of income are not
fairly presented in conformity with generally accepted accounting
principles applied on a basis consistent with that of the 1996
Clayton Financial Statements, (ii) as of said date not more than
five business days prior to the Closing Date, the shareholders'
equity, long-term debt, reserve for possible loan losses and
total assets of Clayton, in each case as compared with the
amounts shown in the 1996 Clayton Financial Statements, are not
different except as set forth in such letter, or (iii) for the
period from December 31, 1996 to said date not more than five
business days prior to the Closing Date, the net interest income,
total and per-share amounts of consolidated income (before
extraordinary items) and net income of Clayton, as compared with
the corresponding portion of the preceding 12-month period, are
not different except as set forth in such letter.

                            ARTICLE IX

               CONDITIONS TO OBLIGATIONS OF CLAYTON

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



                                   -39-

          9.1  VERACITY OF REPRESENTATIONS AND WARRANTIES.  The
representations and warranties of United contained herein or in
any certificate, schedule or other document delivered pursuant to
the provisions hereof, or in connection herewith, shall be true
in all material respects as of the date when made and shall be
deemed to be made again at and as of the Closing Date and shall
be true in all material respects at and as of such time, except
as a result of changes or events expressly permitted or
contemplated herein.

          9.2  PERFORMANCE OF AGREEMENTS.  United shall have
performed and complied with all agreements and conditions
required by this Agreement to be performed or complied with by it
prior to or at the Closing Date.

          9.3  CERTIFICATES, RESOLUTIONS, OPINION.  United shall
have delivered to Clayton:

          (a)  a certificate executed by the President and
    Secretary of United, dated the Closing Date, certifying in
    such detail as Clayton may reasonably request to the
    fulfillment of the conditions specified in Sections 9.1 and
    9.2 hereof;

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

          (c)  a certificate of the valid existence of United,
    under the laws of the State of Georgia executed by the
    Secretary of State of the State of Georgia, dated not more
    than five (5) business days prior to the Closing Date;

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

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

          9.4  SHAREHOLDER APPROVAL.  The Merger Agreement shall
have been approved by the vote of the holders of at least a
majority of Clayton Stock.

          9.5  REGULATORY APPROVALS.  Any and all governmental
authorities, bodies or agencies having jurisdiction over the
transactions contemplated by this Agreement and the Merger
Agreement, including, but not limited to the Federal Reserve and
the Department of Banking, shall have granted such consents,
authorizations and approvals as are necessary for the
consummation hereof and thereof, and all applicable waiting or


                                   -40-
  
similar periods required by law shall have expired.

          9.6  EFFECTIVE REGISTRATION STATEMENT.  The United
Registration Statement shall have been declared effective by the
SEC and no stop order shall have been entered with respect
thereto.

          9.7  TAX OPINION.  Clayton shall have received from
Kilpatrick Stockton LLP its opinion, in form and substance rea-
sonably satisfactory to Clayton, to the effect that:

          (1)  The Merger and the issuance of shares of United
    Stock in connection therewith, as described herein and in the
    Merger Agreement, will constitute a tax-free reorganization
    under Section 368(a)(1)(A) of the Code;

          (2)  No gain or loss will be recognized by holders of
    Clayton Stock upon the exchange of such stock solely for
    United Stock as a result of the Merger; 

          (3)  Gain or loss will be recognized pursuant to
    Section 302 of the Code by holders of Clayton Stock upon
    their receipt of cash in lieu of fractional shares of United
    Stock and upon their exercise of dissenters' rights;

          (4)  No gain or loss will be recognized by Clayton as a
    result of the Merger;

          (5)  The aggregate tax basis of United Stock received
    by shareholders of Clayton pursuant to the Merger will be the
    same as the tax basis of the shares of Clayton Stock
    exchanged therefor decreased by any portion of such tax basis
    allocated to fractional shares of United Stock that are
    treated as redeemed by United; and

          (6)  The holding period of the shares of United Stock
    received by the shareholders of Clayton will include the
    holding period of the shares of Clayton Stock exchanged
    therefor, provided that the stock of Clayton is held as a
    capital asset on the date of the consummation of the Merger.

          9.8  CERTIFICATE OF MERGER.  The Secretary of State of
the State of Georgia shall have issued a certificate of merger
with regard to the Merger in accordance with the provisions of
the Georgia Business Corporation Code.

                                   -41-
  
                            ARTICLE X

                    WARRANTIES, NOTICES, ETC.

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

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

          (a)  the opinions of counsel referred to in Sections
    8.3(f) and 9.3(e) of this Agreement;

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

          (c)  the covenant with respect to the confidentiality
    of certain information contained in Section 3.5 hereof.

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

                                   -42-
  
          (a)  To Clayton:         First Clayton Bancshares,Inc.
                                   US 441 & Duval Street
                                   P.O. Box 1250
                                   Clayton, Georgia 30525-9723
                                   Attention:  J. Mark Smith
                                              President
                                   Facsimile:  (706) 782-7107

            With copies to:        Powell, Goldstein, Frazer & Murphy
                                   191 Peachtree Street
                                   Suite 1600
                                   Atlanta, Georgia  30303
                                   Attention:  Walter G. Moeling, IV
                                   Facsimile:  (404) 572-6999

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

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

          10.4 ENTIRE AGREEMENT.  This Agreement and the Merger
Agreement supersede all prior discussions and agreements between
Clayton and United with respect to the Merger and the other
matters contained herein and therein, and this Agreement and the
Merger Agreement contain the sole and entire agreement between
Clayton and United with respect to the transactions contemplated
herein and therein.

          10.5 WAIVER; AMENDMENT.  Prior to or on the Closing
Date, United shall have the right to waive any default in the
performance of any term of this Agreement by Clayton, to waive or
extend the time for the fulfillment by Clayton of any or all of
Clayton' obligations under this Agreement, and to waive any or
all of the conditions precedent to the obligations of United
under this Agreement, except any condition which, if not
satisfied, would result in the violation of any law or applicable
governmental regulation.  Prior to or on the Closing Date,
Clayton shall have the right to waive any default in the
performance of any term of this Agreement by United, to waive or
extend the time for the fulfillment by United of any or all of
United's obligations under this Agreement, and to waive any or
all of the conditions precedent to the obligations of Clayton
under this  Agreement, except any condition which, if not satis-
fied, would result in the violation of any law or applicable
governmental regulation.  This Agreement may be amended by a
subsequent writing signed by the parties hereto, provided,
however, that the provisions of Sections 8.5 and 9.5 requiring


                                   -43-

regulatory approval shall not be amended by the parties hereto
without regulatory approval.

                            ARTICLE XI

                           TERMINATION

          This Agreement may be terminated at any time prior to
or on the Closing Date upon written notice to the other party as
follows, and, upon any such termination of this Agreement,
neither party hereto shall have any liability to the other,
except that the provisions of Section 3.5 hereof shall survive
the termination of this Agreement for any reason.

          11.1 MATERIAL ADVERSE CHANGE.  (a) By United, if, after
the date hereof, a material adverse change in the financial
condition or business of Clayton shall have occurred which change
would reasonably be expected to have a material adverse affect on
the market price of Clayton Stock, or if Clayton shall have
suffered a material loss or damage to any of its properties or
assets, which change, loss or damage materially affects or
impairs its ability to conduct its business.  (b) By Clayton, if,
after the date hereof, a material adverse change in the financial
condition or business of United shall have occurred which change
would reasonably be expected to have a material adverse affect on
the market price of United Stock, or if United shall have
suffered a material loss or damage to any its properties or
assets, which change, loss or damage materially affects or
impairs its ability to conduct its business.

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

          11.3 FAILURE TO DISCLOSE.  (a) By United, if it learns
of any fact or condition not disclosed in this Agreement, the
Clayton Disclosure Memorandum, or the 1996 Clayton Financial
Statements, which was required to be disclosed by Clayton
pursuant to the provisions of this Agreement at or prior to the
date of execution hereof with respect to the business,
properties, assets or earnings of Clayton which materially and
adversely affects such business, properties, assets or earnings
or the ownership, value or continuance thereof.  (b) By Clayton,
if it learns of any fact or condition not disclosed in this
Agreement, the United Disclosure Memorandum, or the 1996 United
Financial Statements, which was required to be disclosed by
United pursuant to the provisions of this Agreement at or prior
to the date of execution hereof with respect to the business,
properties, assets or earnings of United which materially and
adversely affect such business, properties, assets or earnings or
the ownership, value or continuance thereof.

          11.4 ADVERSE PROCEEDINGS.  By either party, if any


                                   -44-
  
action, suit or proceeding shall have been instituted or
threatened against either party to this Agreement to restrain or
prohibit, or to obtain substantial damages in respect of, this
Agreement or the consummation of the transactions contemplated
herein, which, in the good faith opinion of Clayton or United
makes consummation of the transactions herein contemplated
inadvisable.

          11.5 TERMINATION DATE.  By either party, if the Closing
Date shall not have occurred on or before November 30, 1997.

          11.6 DISSENTERS.  By United, if the holders of more
than 15,000 shares of the outstanding Clayton Stock elect to
exercise this statutory right to dissent from the Merger and
demand payment in cash for the "fair value" of their shares

          11.7 SHAREHOLDERS VOTE.  By either party, if the Merger
Agreement is not approved by the Vote of the holders of Clayton
Stock as required by applicable law.

          11.8 ENVIRONMENTAL LIABILITY OF CLAYTON.  By United, if
it learns of any potential liability of Clayton arising from
noncompliance with any federal, state or local environmental law
by Clayton, or any potential liability of Clayton arising from
any environmental condition of the properties or assets of
Clayton, including any properties or assets in which Clayton
holds a security interest.

          11.9 ENVIRONMENTAL LIABILITY OF UNITED.  By Clayton, if
it learns of any potential liability of United arising from
noncompliance with any federal, state or local environmental law
by United, or any potential liability of United arising from any
environmental condition of the properties or assets of United,
including any properties or assets in which United holds a
security interest.

                           ARTICLE XII

                   COUNTERPARTS, HEADINGS, ETC.

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

                           ARTICLE XIII

                          BINDING EFFECT

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


                                   -45-

                           ARTICLE XIV

                          GOVERNING LAW

          The validity and effect of this Agreement and the
Merger Agreement and the rights and obligations of the parties
hereto and thereto shall be governed by and construed and
enforced in accordance with the laws of the State of Georgia.
                                   -46-
  
          IN WITNESS WHEREOF, Clayton and United have caused this
Agreement to be executed by their respective duly authorized
corporate officers and their respective corporate seals to be
affixed hereto as of the day and year first above written.

                                   FIRST CLAYTON BANCSHARES, INC.



(CORPORATE SEAL)                   By: /s/ John R. Martin
                                         John R. Martin
                                         President
Attest:

/s/ Ronald E. Vandiver
Secretary

                                   UNITED COMMUNITY BANKS, INC.



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

/s/ Billy M. Decker
Secretary
                                  -47-

                            EXHIBIT A

                   AGREEMENT AND PLAN OF MERGER


          THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is
made and entered into as of this _____ day of June, 1997, by and
between UNITED COMMUNITY BANKS, INC. ("United") and FIRST CLAYTON
BANCSHARES, INC. ("Clayton"), both Georgia corporations (said
corporations are hereinafter collectively referred to as the
"Constituent Corporations").

                         R E C I T A L S:

          WHEREAS, the authorized capital stock of United
consists of 10,000,000 shares of Common Stock, $1.00 par value
per share (the "United Stock"), of which 6,887,248 shares are
issued and outstanding; and

          WHEREAS, the authorized capital stock of Clayton
consists of 10,000,000 shares of Common Stock, $1.00 par value
per share, of which 400,691 shares are issued and outstanding and
5,000,000 shares of special stock $1.00 par value per share, none
of which is issued and outstanding ("Clayton Stock"); and

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

          WHEREAS, the respective Boards of Directors of the
Constituent Corporations, by resolutions duly adopted, have
unanimously approved and adopted this Agreement, and the Board of
Directors of Clayton, by resolution duly adopted, has directed
that this Agreement be submitted to the shareholders of Clayton
for their approval; and

          WHEREAS, United has agreed to issue shares of United
Stock which shareholders of Clayton will be entitled to receive,
according to the terms and conditions contained herein, on or
after the Effective Date (as defined herein) of the merger
provided for herein.

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

     1.   MERGER.

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



  
Date (as defined herein) of the Merger, the individual existence
of the Merged Corporation shall cease and terminate.

     2.   ACTIONS TO BE TAKEN.

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

     3.   EFFECTIVE DATE.

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

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

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

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

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

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

          (a)  Upon the Effective Date each of the shares of
Clayton Stock outstanding on the Effective Date shall be
converted into fully paid and nonassessable shares of United
Stock at the rate of 1.6136 shares of United Stock for each
outstanding share of Clayton Stock.  If either party should
change the number of its outstanding shares as a result of a
stock split, stock dividend, or similar recapitalization with
respect to such shares prior to the Effective Date then the
shares to be issued hereunder to holders of Clayton Stock shall
be proportionately adjusted.

          (b)  No scrip or fractional share certificates of
United Stock shall be issued in connection with the Merger and an
outstanding fractional share interest will not entitle the owner
thereof to vote, to receive dividends or to have any of the
rights of a shareholder with respect to such fractional interest. 
In lieu of any fractional interest, there shall be paid in cash
an amount (computed to the nearest cent) equal to such fraction
multiplied by $22.00.

          (c)  As soon as practicable after the Effective Date,


                               -2-
  
each holder as of the Effective Date of any of the shares of
Clayton Stock, upon presentation and surrender of the
certificates representing such shares to United, shall be
entitled to receive in exchange therefor a certificate
representing the number of shares of United Stock to which such
shareholder shall be entitled according to the terms of this
Agreement.  Until such surrender, each such outstanding
certificate which prior to the Effective Date represented Clayton
Stock shall be deemed for all corporate purposes to evidence
ownership of the number of shares of United Stock into which the
same shall have been converted and the right to receive payment
for fractional shares.

          (d)  Upon the Effective Date, each share of United
Stock issued and outstanding immediately prior to the Effective
Date shall continue unchanged and shall continue to evidence a
share of common stock of the Surviving Corporation.

     6.   TERMINATION OF SEPARATE EXISTENCE.

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

     7.   FURTHER ASSIGNMENTS.

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

                               -3-
  
     8.   CONDITIONS PRECEDENT TO CONSUMMATION OF THE MERGER.

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

          (a)  Approval of this Agreement by the affirmative vote
of the holders of a majority of the outstanding voting shares of
Clayton Stock; and

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

     9.   TERMINATION.

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

     10.  COUNTERPARTS; TITLE; HEADINGS.

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

     11.  AMENDMENTS; ADDITIONAL AGREEMENTS.

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

                               -4-
  

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

                                   UNITED COMMUNITY BANKS, INC.

(CORPORATE SEAL)

                                   By:____________________________
ATTEST:                               Jimmy Tallent
                                      President

______________________________
Secretary


                                   FIRST CLAYTON BANCSHARES, INC.

(CORPORATE SEAL)

                                   By:_____________________________
                                          J. Mark Smith
ATTEST:                                   President

_______________________________
Secretary



                               -5-
  
                            EXHIBIT B


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

Gentlemen:

          In connection with the proposed merger (the "Merger")
of First Clayton Bancshares, Inc. ("Clayton") with and into
United Community Banks, Inc. ("United"), pursuant to the
Agreement and Plan of Reorganization of even date herewith among
United and Clayton (the "Reorganization Agreement"), the
undersigned hereby covenants, represents and warrants as follows:

          1.   RECOMMENDATION FOR MERGER AND VOTING OF CLAYTON
STOCK.  The undersigned agrees to recommend to all holders of the
capital stock of Clayton ("Clayton Stock") that they vote in
favor of the Merger.  In addition, the undersigned agrees to vote
any and all shares of Clayton Stock owned or controlled by him in
favor of the Merger.

          2.   COMPLIANCE WITH SECURITIES LAWS.  The undersigned
acknowledges that he will be subject to the restrictions on
resales contained in Rule 145 of the Rules and Regulations of the
Securities and Exchange Commission ("SEC") under the Securities
Act of 1933, as amended, and agrees to sell, transfer or
otherwise dispose of any shares of capital stock of United
("United Stock") received by him pursuant to the Merger only in
compliance with the provisions of such Act and Rule.  The
undersigned acknowledges that United is not under any obligation
to file a registration statement with the SEC covering the
disposition of the undersigned's shares of United Stock to be
received pursuant to the Merger.

          3.   RESTRICTIVE LEGEND.  The undersigned agrees that
the certificates representing shares of United Stock to be issued
to the undersigned pursuant to the Merger will be stamped or
otherwise imprinted with a legend in substantially the following
form:

          The shares represented by this certificate may not be
          sold, transferred or otherwise disposed of except in a
          transaction covered by an effective registration
          statement under the Securities Act of 1933, as amended,
          or in accordance with Rule 145 promulgated thereunder,
          or in accordance with a legal opinion satisfactory to
          the Company that such sale or transfer is otherwise
          exempt from the requirements of such Act.

          4.   INITIAL RESTRICTION ON DISPOSITION.  The
undersigned agrees that the undersigned will not, except by
operation of law, by will or under the laws of descent and
distribution, sell, transfer, or otherwise dispose of the
undersigned's interests in, or reduce the undersigned's risk
relative to, any of the shares of United Stock into which the
undersigned's shares of Clayton Stock are converted upon
consummation of the Merger until such time as United notifies the
undersigned that the requirements of SEC Accounting Series
Release Nos. 130 and 135 ("ASR 130 and 135") have been met.  The



  
undersigned understands that ASR 130 and 135 relate to
publication of financial results of post-Merger combined
operations of United and Clayton.  United agrees that it will
publish such results within 45 days after the end of the first
fiscal quarter of United containing the required period of post-
Merger combined operations and that it will notify the
undersigned promptly following such publication.

                              Sincerely,


                              [Director or Executive Officer]



                            EXHIBIT C

                  FIRST CLAYTON BANCSHARES, INC.

            PROPOSED DEFERRED COMPENSATION AGREEMENTS

                    Summary of Material Terms

                          June 11, 1997

ELIGIBILITY

J. Mark Smith and Rodney Hickox.

DEFERRED COMPENSATION AMOUNTS

Each agreement would provide for a deferred compensation
obligation in the amount of $78,750, payable by First Clayton
Bancshares, Inc. ("First Clayton").

ADJUSTMENT TO OBLIGATION AMOUNTS

There would be no earnings or other type of adjustments to either
deferred compensation obligation.

FUNDING OF OBLIGATION

There would be no funding of either deferred compensation
obligation.  Each is payable from general assets.

PAYMENT OF DEFERRED COMPENSATION OBLIGATIONS

Distribution of each deferred compensation obligation would be
made in cash in a lump sum as soon as practicable after the
earliest to occur of the following events:  (1) passage of ten
years; (2) termination of employment other than for Cause, as
defined herein; or (3) a change in control (other than a change
in the control of First Clayton).  If a participant's termination
of employment is due to death, the obligation would be paid to
the designated beneficiary of the obligee.  "Cause" shall mean: 
(1) conviction of the employee of a felony or (2) conduct by the
employee that results in removal from his position as an employee
of First Clayton pursuant to a written order by any regulatory
agency with authority or jurisdiction over First Clayton or
United Community Banks, Inc. or its subsidiaries.

BENEFITS NOT ASSIGNABLE

No amount payable under either agreement would be assignable,
except to the extent benefits may be conveyed pursuant to the
laws of descent and distribution.

BINDING

Each agreement would be binding upon the successors to First
Clayton.


  
                            EXHIBIT C

                  FIRST CLAYTON BANCSHARES, INC.

              PROPOSED INCENTIVE STOCK OPTION AWARDS

                    Summary of Material Terms

                          June 11, 1997

ELIGIBILITY FOR OPTIONS

J. Mark Smith and Rodney Hickox.

TYPE OF OPTIONS

Incentive stock options.

TERMS OF OPTIONS

Number of Shares.  7,500 option shares each for J. Mark Smith and
Rodney Hickox.

Exercise Price.  $31.50 per share.  Incentive stock options must
have an exercise price equal to fair market value (110% of fair
market value in the case of anyone who owns more than 10% of the
outstanding shares of First Clayton Bancshares, Inc. ("First
Clayton")).

Option Period.  Each option would expire on the earlier of the
tenth anniversary (fifth anniversary in the case of anyone who
owns more than 10% of the outstanding shares of First Clayton) of
the date of grant or three months following the date the optionee
terminates employment, unless the optionee dies while employed,
in which case the option would continue for the original term and
may be exercised, to the extent exercisable, by the optionee's
estate.

Exercisability.  Each option would become exercisable
immediately.

*Payment of Exercise Price.  Each optionee could pay for option
shares by cash, by certified check or by delivery of previously
owned shares or, if available, by cashless exercise through a
broker.

*Change in Corporate Structure.  If First Clayton is not the
surviving corporation in a merger or consolidation, the options
would be assumed by the successor entity.

*Items denoted by an asterisk require Board approval of plan
amendments.


  
                            EXHIBIT D


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

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

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

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

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

     (6)  The authorized capital stock of Clayton consists of
10,000,000 shares of Common Stock, $1.00 par value per share, of
which 400,691 shares are issued and outstanding and 5,000,000
shares of special stock, $1.00 par value per share, none of which
is issued and outstanding.  All of the issued and outstanding
capital stock of Clayton has been duly authorized and validly
issued and are fully paid and non-assessable and, to such
counsel's knowledge, there are no outstanding options, warrants,
rights, calls, commitments, conversion rights, plans or other
agreements providing for the purchase or issuance of any
authorized but unissued shares of such capital stock.

  
                            EXHIBIT E


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

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

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

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

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

     (6)  The shares of United Stock to be issued upon
consummation of the Merger have been duly authorized and upon
issuance as contemplated in the Merger Agreement, will be validly
issued, fully paid and non-assessable.

                          FIRST AMENDMENT 
                                 OF 
                AGREEMENT AND PLAN OF REORGANIZATION

          THIS FIRST AMENDMENT (this "Amendment") made and entered
into as of July 24, 1997, by and between FIRST CLAYTON BANCSHARES,
INC., a Georgia business corporation ("Clayton") and UNITED
COMMUNITY BANKS, INC., a Georgia business corporation ("United").

                              RECITALS:

     WHEREAS, Clayton and United entered into a certain Agreement
and Plan of Reorganization dated as of June 12, 1997 pursuant to
which Clayton will merge into United, with United being the
surviving corporation (the "Agreement"); and

     WHEREAS, the parties now desire to amend certain provisions of
the Agreement.

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

                                 1. 

     Section 3.14 of the Agreement is hereby deleted in its entirety
and the following inserted in lieu thereof: 

     3.14 STOCK OPTION AWARDS AND DEFERRED COMPENSATION. 
     Clayton and United agree that (i) after the Merger United
     will grant incentive stock options to J. Mark Smith and
     Rodney R. Hickox in the same amounts and on substantially
     the same terms as described in Exhibit C and (ii) Clayton
     will execute a Deferred Compensation Agreement with each
     of J. Mark Smith and Rodney R. Hickox on substantially the
     same terms as described in Exhibit C.

                                 2. 

     Exhibit C of the Agreement entitled First Clayton Bancshares,
Inc. Proposed Deferred Compensation Agreements and First Clayton
Bancshares, Inc. Proposed Incentive Stock Option Awards is hereby
deleted in its entirety and the attached Exhibit A is substituted in
lieu thereof.  

     Except as modified herein, the terms of the Agreement remain in
full force and effect.

     IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the date first above written. 

                              FIRST CLAYTON BANCSHARES, INC.



(CORPORATE SEAL)                   By: /s/ John R. Martin
                                          John R. Martin
                                           President
Attest:

/s/ Ronald E. Vindiver
Secretary

                                   UNITED COMMUNITY BANKS,  INC.

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

/s/ Billy M. Decker
Billy M. Decker


                              Exhibit A

                              EXHIBIT C

                   FIRST CLAYTON BANCSHARES, INC.

              PROPOSED DEFERRED COMPENSATION AGREEMENTS

                      Summary of Material Terms

ELIGIBILITY

J. Mark Smith and Rodney Hickox.

DEFERRED COMPENSATION AMOUNTS

Each agreement would provide for a deferred compensation obligation
in the amount of $108,750 payable by First Clayton Bancshares, Inc.
("First Clayton").

ADJUSTMENT TO OBLIGATION AMOUNTS

There would be no earnings or other type of adjustments to either
deferred compensation obligation.

FUNDING OF OBLIGATION

There would be no funding of either deferred compensation
obligation.  Each is payable from general assets.

PAYMENT OF DEFERRED COMPENSATION OBLIGATIONS

Distribution of each deferred compensation obligation would be made
in cash in a lump sum as soon as practicable after the earliest to
occur of the following events:  (1) passage of ten years; (2)
termination of employment other than for Cause, as defined herein;
or (3) a change in control (other than a change in the control of
First Clayton).  If a participant's termination of employment is due
to death, the obligation would be paid to the designated beneficiary
of the obligee.  "Cause" shall mean:  (1) conviction of the employee
of a felony or (2) conduct by the employee that results in removal
from his position as an employee of First Clayton pursuant to a
written order by any regulatory agency with authority or
jurisdiction over First Clayton or United Community Banks, Inc. or
its subsidiaries.

BENEFITS NOT ASSIGNABLE

No amount payable under either agreement would be assignable, except
to the extent benefits may be conveyed pursuant to the laws of
descent and distribution.

BINDING

Each agreement would be binding upon the successors to First
Clayton.

                              EXHIBIT C

                    UNITED COMMUNITY BANKS, INC.

               PROPOSED INCENTIVE STOCK OPTION AWARDS

                      Summary of Material Terms


ELIGIBILITY FOR OPTIONS

J. Mark Smith and Rodney Hickox.

TYPE OF OPTIONS

Incentive stock options to be granted as soon as practicable after
the consummation of the merger of United Community Banks, Inc. and
First Clayton Bancshares, Inc.

TERMS OF OPTIONS

Number of Shares.  12,102 option shares of United Community Banks,
Inc. each for J. Mark Smith and Rodney Hickox.

Exercise Price.  The Exercise Price shall be the fair market value
of the shares at the date of grant.

Option Period.  Each option would expire on the earlier of the tenth
anniversary (fifth anniversary in the case of anyone who owns more
than 10% of the outstanding shares of United) of the date of grant
or three months following the date the optionee terminates
employment, unless the optionee dies while employed, in which case
the option would continue for the original term and may be
exercised, to the extent exercisable, by the optionee's estate.

Exercisability.  Each option would become exercisable immediately.


                    AGREEMENT AND PLAN OF MERGER


          THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is
made and entered into as of this 12th day of June, 1997, by and
between UNITED COMMUNITY BANKS, INC. ("United") and FIRST CLAYTON
BANCSHARES, INC. ("Clayton"), both Georgia corporations (said
corporations are hereinafter collectively referred to as the
"Constituent Corporations").

                         R E C I T A L S:

          WHEREAS, the authorized capital stock of United
consists of 10,000,000 shares of Common Stock, $1.00 par value
per share (the "United Stock"), of which 6,887,248 shares are
issued and outstanding; and

          WHEREAS, the authorized capital stock of Clayton
consists of 10,000,000 shares of Common Stock, $1.00 par value
per share, of which 400,691 shares are issued and outstanding and
5,000,000 shares of special stock $1.00 par value per share, none
of which is issued and outstanding ("Clayton Stock"); and

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

          WHEREAS, the respective Boards of Directors of the
Constituent Corporations, by resolutions duly adopted, have
unanimously approved and adopted this Agreement, and the Board of
Directors of Clayton, by resolution duly adopted, has directed
that this Agreement be submitted to the shareholders of Clayton
for their approval; and

          WHEREAS, United has agreed to issue shares of United
Stock which shareholders of Clayton will be entitled to receive,
according to the terms and conditions contained herein, on or
after the Effective Date (as defined herein) of the merger
provided for herein.

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

     1.   MERGER.

          Pursuant to and with the effects provided in the
applicable provisions of Article 11 of the Georgia Business
Corporation Code, as amended (Chapter 2 of Title 14 of the
Official Code of Georgia), Clayton (hereinafter sometimes
referred to as the "Merged Corporation") shall be merged with and
into United (the "Merger").  United shall be the surviving
corporation (the "Surviving Corporation") and shall continue
under the name "United Community Banks, Inc.".  On the Effective
Date (as defined herein) of the Merger, the individual existence
of the Merged Corporation shall cease and terminate.




    2.   ACTIONS TO BE TAKEN.

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

     3.   EFFECTIVE DATE.

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

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

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

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

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

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

          (a)  Upon the Effective Date each of the shares of
Clayton Stock outstanding on the Effective Date shall be
converted into fully paid and nonassessable shares of United
Stock at the rate of 1.6136 shares of United Stock for each
outstanding share of Clayton Stock.  If either party should
change the number of its outstanding shares as a result of a
stock split, stock dividend, or similar recapitalization with
respect to such shares prior to the Effective Date then the
shares to be issued hereunder to holders of Clayton Stock shall
be proportionately adjusted.

          (b)  No scrip or fractional share certificates of
United Stock shall be issued in connection with the Merger and an
outstanding fractional share interest will not entitle the owner
thereof to vote, to receive dividends or to have any of the
rights of a shareholder with respect to such fractional interest. 
In lieu of any fractional interest, there shall be paid in cash
an amount (computed to the nearest cent) equal to such fraction
multiplied by $22.00.

          (c)  As soon as practicable after the Effective Date,
each holder as of the Effective Date of any of the shares of
Clayton Stock, upon presentation and surrender of the
certificates representing such shares to United, shall be

entitled to receive in exchange therefor a certificate
representing the number of shares of United Stock to which such
shareholder shall be entitled according to the terms of this
Agreement.  Until such surrender, each such outstanding
certificate which prior to the Effective Date represented Clayton
Stock shall be deemed for all corporate purposes to evidence
ownership of the number of shares of United Stock into which the
same shall have been converted and the right to receive payment
for fractional shares.

          (d)  Upon the Effective Date, each share of United
Stock issued and outstanding immediately prior to the Effective
Date shall continue unchanged and shall continue to evidence a
share of common stock of the Surviving Corporation.

     6.   TERMINATION OF SEPARATE EXISTENCE.

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

     7.   FURTHER ASSIGNMENTS.

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

     8.   CONDITIONS PRECEDENT TO CONSUMMATION OF THE MERGER.

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

          (a)  Approval of this Agreement by the affirmative vote
of the holders of a majority of the outstanding voting shares of
Clayton Stock; and

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

     9.   TERMINATION.

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

     10.  COUNTERPARTS; TITLE; HEADINGS.

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

     11.  AMENDMENTS; ADDITIONAL AGREEMENTS.

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

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

                                   UNITED COMMUNITY BANKS, INC.

(CORPORATE SEAL)



                                  By:/s/ Jimmy Tallent
ATTEST:                               Jimmy Tallent
                                      President

/s/ Billy M. Decker
Secretary


                                   FIRST CLAYTON BANCSHARES, INC.

(CORPORATE SEAL)

                                   By:/s/ J. Mark Smith
                                          J. Mark Smith
ATTEST:                                   President

/s/ Ronald E. Vindiver
Secretary

                                                           Attorneys at Law
                                                                 Suite 2800
                                                      1100 Peachtree Street
                                               Atlanta, Georgia  30309-4530
                                                    Telephone: 404.815.6500
                                                    Facsimile: 404.815.6555

                                                 E-mail: shale@kilstock.com
          July 24, 1997
                                                  Direct Dial: 404.815.6302



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

     Re:  Agreement and Plan of Merger By and Between United Community
          Banks, Inc. and First Clayton Bancshares, Inc.

Gentlemen:

     At your request, we have examined the registration statement on
Form S-4 (the "Registration Statement") to be filed by United
Community Banks, Inc. ("United"), a Georgia corporation, with the
Securities and Exchange Commission ("SEC") with respect to the
registration under the Securities Act of 1933, as amended, of
646,555 shares of Common Stock, $1.00 par value, of United (the
"Common Stock") to be issued in connection with the merger of First
Clayton Bancshares, Inc. ("First Clayton"), a Georgia corporation,
into and with United pursuant to the terms and conditions of that
certain Agreement and Plan of Merger between United and First
Clayton dated June 12, 1997 (the "Merger Agreement").

     As your counsel we have examined the originals or copies of
such documents, corporate records, certificates of public officials,
officers of United and other instruments relating to the
authorization and issuance of the Common Stock as we consider
necessary for the opinion hereinafter expressed.  Upon the basis of
the foregoing, it is our opinion that the issuance of up to 646,555
shares of Common Stock pursuant to the terms and provisions
described in the Merger Agreement has been duly authorized by the
Board of Directors of United, and when such shares are issued
pursuant to the terms and conditions described in the Merger
Agreement and the Registration Statement such shares will be legally
and validly issued, fully-paid and non-assessable.

     We hereby consent to the use of this opinion as an exhibit to
the Registration Statement and further consent to the use of our
name wherever appearing in the Registration Statement.

                              KILPATRICK STOCKTON LLP


                              By: /s/ F. Sheffield Hale
                                    F. Sheffield Hale
                                    A Partner

                                                           Attorneys at Law
                                                                 Suite 2800
                                                      1100 Peachtree Street
                                               Atlanta, Georgia  30309-4530
                                                    Telephone: 404.815.6500
                                                    Facsimile: 404.815.6555

                                            E-mail: abransford@kilstock.com
          July 24, 1997
                                                  Direct Dial: 404.815.6480



First Clayton Bancshares, Inc.
Village Shopping Center
Highway 441
Clayton, Georgia  30525

     Re:  Agreement and Plan of Merger By and Between United Community
          Banks, Inc. and First Clayton Bancshares, Inc.

Dear Gentlemen:

     We have been requested as counsel for United Community Banks,
Inc. ("United"), a business corporation organized under the laws of
Georgia, to render our opinion expressed  below to First Clayton
Bancshares, Inc. ("First Clayton"), a Georgia corporation, in
connection with the proposed merger (the "Merger") of First Clayton
into and with United, pursuant to the terms and conditions of that
certain Agreement and Plan of Merger (the "Merger Agreement") by and
between First Clayton and United described in that certain
Registration Statement on Form S-4 to be filed by United (the
"Registration Statement").  Unless otherwise indicated, terms used
herein shall have the same meaning as defined in the Registration
Statement.

     In rendering our opinion, we have examined the Acquisition
Agreement and the Merger Agreement, applicable law, regulations,
rulings and decisions.  Our opinion is based upon our understanding
and belief that the facts set forth in the Registration Statement
are true and correct, and that the representations made in the
Acquisition Agreement and the Merger Agreement are true and correct.

     Based on and in reliance on the foregoing, and provided that
the Merger is consummated in accordance with the Acquisition
Agreement and the Merger Agreement, it is our opinion that:

     (1)  The Merger of First Clayton into United and the issuance
of shares of United Stock in connection therewith, as described in
the Acquisition Agreement and the Merger Agreement, will constitute
a tax-free reorganization under Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended.

     (2)  No gain or loss will be recognized for Federal income tax
purposes by holders of First Clayton Stock upon the exchange of such
stock solely for United Stock as a result of the Merger.

     (3)  Gain or loss will be recognized pursuant to Section 302 of
the Code by holders of First Clayton Stock upon their receipt of
cash in lieu of fractional shares of United Stock and upon their
exercise of dissenters rights.


First Clayton Bancshares, Inc.
July 24, 1997
Page 2


     (4)  No gain or loss will be recognized by First Clayton as a
result of the Merger.

     (5)  The aggregate tax basis of the United Stock received by
shareholders of First Clayton pursuant to the Merger will be the
same as the aggregate tax basis of the shares of First Clayton Stock
exchanged therefor, less any portion of such tax basis allocated to
shares of First Clayton Stock for which cash is received in lieu of
fractional shares of United Stock.

     (6)  The holding period of the shares of United Stock received
by the shareholders of First Clayton will include the holding period
of the shares of First Clayton Stock exchanged therefor, provided
that First Clayton Stock is held as a capital asset on the date of
the consummation of the Merger.

     This letter is solely for your information and use and, except
to the extent that such may be referred to in the Registration
Statement, it is not to be used, circulated, quoted, or referred to
for any other purpose or relied upon by any other person for
whatever reason without our prior written consent.

                              KILPATRICK STOCKTON LLP


                              By: /s/ R. Alexander Bransford, Jr.
                                    R. Alexander Bransford, Jr.


                                   Exhibit 21


                  Subsidiaries of United Community Banks, Inc.


 
 
               Subsidiary                 State of Organization
- - ----------------------------------------  ---------------------
                                       
United Community Bank, Blairsville,              Georgia
 Georgia (d/b/a Union County Bank in
 Union County, Georgia; d/b/a First
 Bank of Habersham in Habersham County,
 Georgia; d/b/a United Community Bank
 in Lumpkin County, Georgia)
Carolina Community Bank, Murphy, North       North Carolina
 Carolina
Peoples Bank, Blue Ridge, Georgia                Georgia
Towns County Bank, Hiawassee, Georgia            Georgia
White County Bank, Cleveland, Georgia            Georgia
United Family Finance Co. (formerly              Georgia
 Mountain Mortgage and Loan Company),
 Hiawassee, Georgia, Blue Ridge, Georgia

Exhibit 23.1

           CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


We have issued our report dated March 5, 1997, included in the Annual
Report of United Community Banks, Inc. and subsidiaries, on Form 10-K for
the year ended December 31, 1996 and incorporated by reference in this
Registration Statement on Form S-4.  We consent to the use of the
aforementioned report in the Registration Statement on Form S-4 and
related Prospectus, and to the use of our name as it appears under the
caption "Experts".


               /s/ PORTER KEADLE MOORE, LLP


Atlanta, Georgia
July 24, 1997

Exhibit 23.2

                                  CONSENT OF INDEPENDENT ACCOUNTANTS



     We hereby consent to the incorporation by reference in the
Registration Statement on Form S-4 of our report, dated January 17, 1997,
relating to the consolidated financial statements of First Clayton
Bancshares, Inc. and subsidiary, contained in the annual report on Form
10-KSB for the year ended December 31, 1996, and to the reference of our
Firm under the caption "Experts" in the Proxy Statement/Prospectus.


                    /s/ Mauldin & Jenkins, LLC

                    MAULDIN & JENKINS, LLC


Atlanta, Georgia
July 24, 1997