**UNITED STATES SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

**FORM 10-Q**

 

**MarkOne**

|                                        |   |                                                                                                                                                                                                                               |
|---------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **ý**                                  |   | **QUARTERLY REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                       |
|                                        |   |                                                                                                                                                                                                                               |
|                                        |   | **For the quarterly period ended June  30, 2003**                                                                                                                                                                             |
|                                        |   |                                                                                                                                                                                                                               |
| **o**                                       |   | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                      |
|                                        |   |                                                                                                                                                                                                                               |
|                                        |   | **For the transition period from                   to                ** |
|                                        |   |                                                                                                                                                                                                                               |
| **Commission File Number:  000-24203** |

 

**GB&T Bancshares, Inc.**

(Exact name of registrant as specified in its charter)

 

| **Georgia**                                                                         |   | **58-2400756**                     |
|-------------------------------------------------------------------------------------|--------|------------------------------------|
| (State or other jurisdiction of  incorporation or organization)                     |   | (IRS Employer  Identification No.) |
|                                                                                |   |                               |
| **500 Jesse Jewell Parkway, S.E.**                                                  |
| **Gainesville, Georgia  30501**                                                |
| (Address of principal executive offices)                                            |
|                                                                                |   |                               |
| **(770) 532-1212**                                                                  |
| (Registrant’s telephone number, including area code)                           |
|                                                                                |
| **N/A**                                                                             |
| (Former name, former address and former fiscal year, if changed since  last report) |

 

Indicate by check mark whetherthe registrant (1) filed all reports required to be filed by Section 13 or15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (orfor such shorter period that the registrant was required to file such reports)and (2) has been subject to such filing requirements for the past 90 days.    Yes ý      No o

 

Indicate by check mark whetherthe registrant is an accelerated filer (as defined in Rule 12b-2 of theExchange Act).

Yes  o      No ý

 

**APPLICABLE ONLY TO CORPORATE ISSUERS**

 

State the number of sharesoutstanding of each of the issuer’s classes of common stock, as of August 4,2003:    5,391,200 shares; no par value

 

 

----

 

**GB&T BANCSHARES, INC.**

 

**TABLEOF CONTENTS**

 
| **PART I.**  |   | **FINANCIAL INFORMATION**                                                                                            |
|--------------|--------|----------------------------------------------------------------------------------------------------------------------|
|         |   |                                                                                                                 |
|         |   | **Item 1.   FINANCIAL STATEMENTS**                                                                              |
|         |   |                                                                                                                 |
|         |   | **Consolidated Balance Sheets  - June 30, 2003 (Unaudited)  and December 31, 2002**                                  |
|         |   |                                                                                                                 |
|         |   | **Consolidated  Statements of Income (Unaudited)-  Three and six months ended June 30, 2003 and 2002**               |
|         |   |                                                                                                                 |
|         |   | **Consolidated  Statements of Comprehensive Income (Unaudited)-  Three and six months ended June 30, 2003 and 2002** |
|         |   |                                                                                                                 |
|         |   | **Consolidated  Statements of Stockholders’ Equity (Unaudited)  Six months ended June 30, 2003**                |
|         |   |                                                                                                                 |
|         |   | **Consolidated  Statements of Cash Flows (Unaudited) -  Six months ended June 30, 2003 and 2002**                    |
|         |   |                                                                                                                 |
|         |   | **Notes to  Consolidated Financial Statements (Unaudited)**                                                          |
|         |   |                                                                                                                 |
|         |   | **Item 2.   Management’s Discussion and Analysis of Financial Condition and  Results of Operations**       |
|         |   |                                                                                                                 |
|         |   | **Item 3.   Quantitative and Qualitative Disclosures About Market Risk**                                        |
|         |   |                                                                                                                 |
|         |   | **Item 4.   Controls and Procedures**                                                                           |
|         |   |                                                                                                                 |
| **PART II.** |   | **OTHER INFORMATION**                                                                                                |
|         |   |                                                                                                                 |
|         |   | **Item 4.   Submission of Matters to a Vote of Security Holders**                                               |
|         |   |                                                                                                                 |
|         |   | **Item 6.  Exhibits  and Reports on Form 8-K**                                                                  |
|         |   |                                                                                                                 |
|         |   | **Signatures**                                                                                                       |

 

2

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**PART I****- FINANCIAL INFORMATION**

**ITEM 1****- FINANCIAL STATEMENTS**

 

**GB&T BANCSHARES,INC. AND SUBSIDIARIES**

**ConsolidatedBalance Sheets**

**(Unaudited)**

 
|                                                                                                                                                                                      |   | **June 30,  2003**                              |    | **December  31,  2002** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------|---------|-------------------------|--------|
|                                                                                                                                                                                      |   | **(amounts  in thousands,  except share data)** |    |
| Assets                                                                                                                                                                                    |   |                                            |    |                    |   |
| Cash and due from banks                                                                                                                                                                   |   | $                                               | 17,092  |                    | $      | 18,113 |   |
| Interest-bearing deposits in banks                                                                                                                                                        |   | 4,778                                           |    | 8,205                   |   |
| Federal funds sold                                                                                                                                                                        |   | 15,607                                          |    | 25,170                  |   |
| Securities available for sale, at fair  value                                                                                                                                             |   | 115,988                                         |    | 106,843                 |   |
| Restricted equity securities                                                                                                                                                              |   | 3,531                                           |    | 3,784                   |   |
|                                                                                                                                                                                      |   |                                            |    |                    |   |
| Loans, net of unearned income                                                                                                                                                             |   | 565,055                                         |    | 542,834                 |   |
| Less allowance for loan losses                                                                                                                                                            |   | 7,527                                           |    | 7,538                   |   |
| Loans, net                                                                                                                                                                                |   | 557,528                                         |    | 535,296                 |   |
| Premises and equipment                                                                                                                                                                    |   | 20,576                                          |    | 20,774                  |   |
| Goodwill and intangible assets                                                                                                                                                            |   | 9,493                                           |    | 9,522                   |   |
| Other assets                                                                                                                                                                              |   | 13,455                                          |    | 14,265                  |   |
| **Total assets**                                                                                                                                                                          |   | $                                               | 758,048 |                    | $      | 741,972 |   |
|                                                                                                                                                                                      |   |                                            |    |                    |   |
| Liabilities and Stockholders’ Equity                                                                                                                                                 |   |                                            |    |                    |   |
| Liabilities:                                                                                                                                                                              |   |                                            |    |                    |   |
| Deposits:                                                                                                                                                                                 |   |                                            |    |                    |   |
| Noninterest-bearing demand deposits                                                                                                                                                       |   | $                                               | 66,894  |                    | $      | 56,795 |   |
| Interest-bearing deposits                                                                                                                                                                 |   | 538,169                                         |    | 523,453                 |   |
| Total deposits                                                                                                                                                                            |   | 605,063                                         |    | 580,248                 |   |
|                                                                                                                                                                                      |   |                                            |    |                    |   |
| Federal funds purchased and securities sold  Under repurchase agreements                                                                                                                  |   | 11,451                                          |    | 11,538                  |   |
| Federal Home Loan Bank advances                                                                                                                                                           |   | 57,585                                          |    | 63,654                  |   |
| Other borrowings                                                                                                                                                                          |   | 822                                             |    | 820                     |   |
| Other liabilities                                                                                                                                                                         |   | 4,802                                           |    | 9.935                   |   |
| Company guaranteed trust preferred  securities                                                                                                                                            |   | 15,000                                          |    | 15,000                  |   |
| **Total liabilities**                                                                                                                                                                     |   | 694,723                                         |    | 681,195                 |   |
|                                                                                                                                                                                      |   |                                            |    |                    |   |
| Stockholders’ Equity:                                                                                                                                                                |   |                                            |    |                    |   |
| Capital Stock-no par value. Authorized  20,000,000 shares.  5,390,807 shares  issued and outstanding at June 30, 2003; 5,356,946 shares issued and  outstanding at December 31, 2002 |   | 35,976                                          |    | 35,658                  |   |
| Retained earnings                                                                                                                                                                         |   | 25,635                                          |    | 23,130                  |   |
| Accumulated other comprehensive income, net  of tax                                                                                                                                       |   | 1,714                                           |    | 1,989                   |   |
| **Total stockholders’ equity**                                                                                                                                                       |   | 63,325                                          |    | 60,777                  |   |
| **Total liabilities and stockholders’ equity**                                                                                                                                       |   | $                                               | 758,048 |                    | $      | 741,972 |   |

 

See accompanying notes toconsolidated financial statements.

 

3

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**GB&T BANCSHARES,INC. AND SUBSIDIARIES**

**ConsolidatedStatements of Income**

**(Unaudited)**

** **
|                                                                     |   | **Three  months ended  June 30,**                   |   | **Six months  ended  June 30,**                     |   |
|--------------------------------------------------------------------------|--------|-----------------------------------------------------|--------|-----------------------------------------------------|--------|
|                                                                     |   | **2003**                                            |   | **2002**                                            |   | **2003** |   | **2002** |   |
|                                                                     |   | **(amounts  in thousands, except per  share data)** |   | **(amounts  in thousands, except per  share data)** |   |
| Interest income:                                                         |   |                                                |   |                                                |   |   |   |   |   |
| Loans, including fees                                                    |   | $                                                   | 9,967  |                                                | $      | 8,390 |   | $ | 19,705 |   | $ | 16,590 |   |
| Investment securities:                                                   |   |                                                |   |                                                |   |   |   |   |   |
| Taxable                                                                  |   | 950                                                 |   | 998                                                 |   | 1,935 |   | 1,990 |   |
| Nontaxable                                                               |   | 158                                                 |   | 177                                                 |   | 326 |   | 353 |   |
| Federal funds sold                                                       |   | 52                                                  |   | 18                                                  |   | 106 |   | 38 |   |
| Interest-bearing deposits in banks                                       |   | 6                                                   |   | 9                                                   |   | 17 |   | 18 |   |
| Total interest income                                                    |   | 11,133                                              |   | 9,592                                               |   | 22,089 |   | 18,989 |   |
|                                                                     |   |                                                |   |                                                |   |   |   |   |   |
| Interest expense:                                                        |   |                                                |   |                                                |   |   |   |   |   |
| Deposits                                                                 |   | 2,899                                               |   | 2,798                                               |   | 5,876 |   | 5,888 |   |
| Federal funds purchased and securities sold  under repurchase agreements |   | 42                                                  |   | 53                                                  |   | 83 |   | 133 |   |
| Federal Home Loan Bank advances                                          |   | 637                                                 |   | 745                                                 |   | 1,365 |   | 1,450 |   |
| Other borrowings                                                         |   | 214                                                 |   | 31                                                  |   | 427 |   | 54 |   |
| Total interest expense                                                   |   | 3,792                                               |   | 3,627                                               |   | 7,751 |   | 7,525 |   |
|                                                                     |   |                                                |   |                                                |   |   |   |   |   |
| Net interest income                                                      |   | 7,341                                               |   | 5,965                                               |   | 14,338 |   | 11,464 |   |
|                                                                     |   |                                                |   |                                                |   |   |   |   |   |
| Provision for loan losses                                                |   | 176                                                 |   | 204                                                 |   | 390 |   | 387 |   |
|                                                                     |   |                                                |   |                                                |   |   |   |   |   |
| Net interest income after Provision for  loan losses                     |   | 7,165                                               |   | 5,761                                               |   | 13,948 |   | 11,077 |   |
|                                                                     |   |                                                |   |                                                |   |   |   |   |   |
| Other income:                                                            |   |                                                |   |                                                |   |   |   |   |   |
| Service charges on deposit accounts                                      |   | 1,182                                               |   | 928                                                 |   | 2,274 |   | 1,756 |   |
| Mortgage origination fees                                                |   | 726                                                 |   | 232                                                 |   | 1,283 |   | 536 |   |
| Insurance commissions                                                    |   | 149                                                 |   | 151                                                 |   | 293 |   | 295 |   |
| Gain on sale of securities                                               |   | 49                                                  |   | —                                              |   | 77 |   | 137 |   |
| Other operating income                                                   |   | 286                                                 |   | 296                                                 |   | 817 |   | 765 |   |
| Total other income                                                       |   | 2,392                                               |   | 1,607                                               |   | 4,744 |   | 3,489 |   |
|                                                                     |   |                                                |   |                                                |   |   |   |   |   |
| Other expense:                                                           |   |                                                |   |                                                |   |   |   |   |   |
| Salaries and employee benefits                                           |   | 4,171                                               |   | 2,950                                               |   | 8,295 |   | 5,906 |   |
| Net occupancy and equipment expense                                      |   | 1,030                                               |   | 878                                                 |   | 2,034 |   | 1,646 |   |
| Other operating expenses                                                 |   | 2,090                                               |   | 1,351                                               |   | 3,763 |   | 2,626 |   |
| Total other expense                                                      |   | 7,291                                               |   | 5,179                                               |   | 14,092 |   | 10,178 |   |
|                                                                     |   |                                                |   |                                                |   |   |   |   |   |
| Income before income taxes                                               |   | 2,266                                               |   | 2,189                                               |   | 4,600 |   | 4,388 |   |
|                                                                     |   |                                                |   |                                                |   |   |   |   |   |
| Income tax expense                                                       |   | 533                                                 |   | 710                                                 |   | 1,156 |   | 1,412 |   |
|                                                                     |   |                                                |   |                                                |   |   |   |   |   |
| Net income                                                               |   | $                                                   | 1,733  |                                                | $      | 1,479 |   | $ | 3,444 |   | $ | 2,976 |   |
|                                                                     |   |                                                |   |                                                |   |   |   |   |   |
| Earnings per share:                                                      |   |                                                |   |                                                |   |   |   |   |   |
| Basic                                                                    |   | $                                                   | 0.32   |                                                | $      | 0.31 |   | $ | 0.64 |   | $ | 0.63 |   |
| Diluted                                                                  |   | $                                                   | 0.31   |                                                | $      | 0.30 |   | $ | 0.62 |   | $ | 0.61 |   |
|                                                                     |   |                                                |   |                                                |   |   |   |   |   |
| Weighted average shares                                                  |   |                                                |   |                                                |   |   |   |   |   |
| Basic                                                                    |   | 5,382                                               |   | 4,761                                               |   | 5,371 |   | 4,759 |   |
| Diluted                                                                  |   | 5,578                                               |   | 4,915                                               |   | 5,547 |   | 4,898 |   |
|                                                                     |   |                                                |   |                                                |   |   |   |   |   |
| Cash dividends per common share                                          |   | $                                                   | 0.090  |                                                | $      | 0.085 |   | $ | 0.175 |   | $ | 0.165 |   |

 

See accompanying notes toconsolidated financial statements.

 

4

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**GB&T BANCSHARES, INC. AND SUBSIDIARIES**

**ConsolidatedStatements of Comprehensive Income**

 
|                                                                                                         |   | **Three months ended June 30,** |       | **Six months ended June 30,** |   |
|--------------------------------------------------------------------------------------------------------------|--------|---------------------------------|------------|-------------------------------|--------|
|                                                                                                         |   | **2003**                        |       | **2002**                      |   | **2003** |   | **2002** |   |
|                                                                                                         |   | **(Dollars in thousands)**      |       |
|                                                                                                         |   | **(unaudited)**                 | ** ** |
|                                                                                                         |   |                            |       |                          |   |   |   |   |   |
| **Net Income**                                                                                               |   | $                               | 1,733      |                          | $      | 1,479 |   | $ | 3,444 |   | $ | 2,976 |   |
|                                                                                                         |   |                            |       |                          |   |   |   |   |   |
| Unrealized gains (losses) on  securities  Available-for-sale  arising during period, net of tax              |   | 142                             |       | 831                           |   | (227 | ) | 482 |   |
|                                                                                                         |   |                            |       |                          |   |   |   |   |   |
| Reclassification adjustment for  gains realized on  Securities  available-for-sale in net income, net of tax |   | (30                             | )          | —                        |   | (48 | ) | (85 | ) |
|                                                                                                         |   |                            |       |                          |   |   |   |   |   |
| Other comprehensive income  (loss)                                                                           |   | 112                             |       | 831                           |   | (275 | ) | 397 |   |
|                                                                                                         |   |                            |       |                          |   |   |   |   |   |
| **Comprehensive income**                                                                                     |   | $                               | 1,845      |                          | $      | 2,310 |   | $ | 3,169 |   | $ | 3,373 |   |

 

See accompanying notes toconsolidated financial statements.

 

**Consolidated Statements of Stockholders’Equity**

**Six Months Ended June 30, 2003**

 
|                                                                                                   |   | **(Dollars in thousands)** |    |
|--------------------------------------------------------------------------------------------------------|--------|----------------------------|---------|
|                                                                                                   |   | **Shares**                 |    | **Capital  Stock** |   | **Retained  Earnings** |   | **Accumulated  Other  Comprehensive  Income** |   | **Total****Stockholders’  Equity** |   |
|                                                                                                   |   |                       |    |   |   |   |   |   |   |   |   |
| Balance, December 31, 2002                                                                             |   | 5,357                      |    | $ | 35,658 |   | $ | 23,130 |   | $ | 1,989 |   | $ | 60,777 |   |
|                                                                                                   |   |                       |    |   |   |   |   |   |   |   |   |
| Net income                                                                                             |   | —                     |    | — |   | 3,444 |   | — |   | 3,444 |   |
|                                                                                                   |   |                       |    |   |   |   |   |   |   |   |   |
| Options excercised                                                                                     |   | 35                         |    | 325 |   | — |   | — |   | 325 |   |
|                                                                                                   |   |                       |    |   |   |   |   |   |   |   |   |
| Dividends declared  $0.175 per share                                                                   |   | —                     |    | — |   | (939 | ) | — |   | (939 | ) |
|                                                                                                   |   |                       |    |   |   |   |   |   |   |   |   |
| Payment for fractional shares  in Connection with the HomeTown Bank of Villa Rica business Combination |   | (1                         | )  | (7 | )  | — |   | — |   | (7 | ) |
|                                                                                                   |   |                       |    |   |   |   |   |   |   |   |   |
| Other comprehensive loss                                                                               |   | —                     |    | — |   | — |   | (275 | ) | (275 | ) |
|                                                                                                   |   |                       |    |   |   |   |   |   |   |   |   |
| Balance, June 30, 2003                                                                                 |   | 5,391                      |    | $ | 35,976 |   | $ | 25,635 |   | $ | 1,714 |   | $ | 63,325 |   |

 

See accompanying notes toconsolidated financial statements.

 

5

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**GB&T BANCSHARES, INC. AND SUBSIDIARIES**

**CondensedConsolidated Statements of Cash Flows**

**(Unaudited)**

 
|                                                                                            |   | **Six months  ended  June 30,** |       |
|-------------------------------------------------------------------------------------------------|--------|---------------------------------|------------|
|                                                                                            |   | **2003**                        |       | **2002** |   |
|                                                                                            |   | **(amounts  in thousands)**     | ** ** |
| **Operating Activities**                                                                        |   |                            |       |   |   |
| Net income                                                                                      |   | $                               | 3,444      |   | $ | 2,976 |   |
| Adjustments to reconcile net income to net  cash Provided by operating activities:              |   |                            |       |   |   |
| Depreciation                                                                                    |   | 906                             |       | 662 |   |
| Provision for loan losses                                                                       |   | 390                             |       | 387 |   |
| Amortization and (accretion), net                                                               |   | 358                             |       | 67 |   |
| Securities (gains) losses, net                                                                  |   | (77                             | )          | (137 | ) |
| Net (increase) decrease in other assets                                                         |   | 1,072                           |       | (1,003 | ) |
| Net decrease in other liabilities                                                               |   | (4,895                          | )          | (570 | ) |
| Net cash provided by operating activities                                                       |   | 1,198                           |       | 2,382 |   |
|                                                                                            |   |                            |       |   |   |
| **Investing Activities**                                                                        |   |                            |       |   |   |
| Purchase of investment securities available  for sale                                           |   | (55,826                         | )          | (21,661 | ) |
| Purchase of Federal Home Loan Bank stock                                                        |   | (2,013                          | )          | (1,766 | ) |
| Proceeds from sales of investment  securities available for sale                                |   | 4,298                           |       | 12,116 |   |
| Principal collections and maturities of  investment securities available for sale               |   | 43,870                          |       | 10,677 |   |
| Net (increase) decrease in interest-bearing  deposits in other banks                            |   | 3,427                           |       | (494 | ) |
| Net (increase) decrease in federal funds  sold                                                  |   | 9,563                           |       | (965 | ) |
| Net increase in loans                                                                           |   | (23,644                         | )          | (28,299 | ) |
| Proceeds from sales of real estate acquired  through foreclosure                                |   | 767                             |       | 383 |   |
| Purchases of premises and equipment                                                             |   | (2,189                          | )          | (1,963 | ) |
| Sales of premises and equipment                                                                 |   | 1,481                           |       | — |   |
| Net cash used in investing activities                                                           |   | (20,266                         | )          | (31,972 | ) |
|                                                                                            |   |                            |       |   |   |
| **Financing Activities**                                                                        |   |                            |       |   |   |
| Net increase in deposits                                                                        |   | 24,815                          |       | 27,112 |   |
| Net decrease in federal funds purchased and  securities sold under repurchase agreements        |   | (87                             | )          | (7,203 | ) |
| Proceeds from issuance of long-term debt,  other borrowings and Federal Home Loan Bank advances |   | 5,913                           |       | 19,500 |   |
| Payments on long-term debt, other  borrowings and Federal Home Loan Bank advances               |   | (11,980                         | )          | (8,303 | ) |
| Dividends paid to stockholders                                                                  |   | (939                            | )          | (786 | ) |
| Proceeds from issuance of common stock                                                          |   | 325                             |       | 129 |   |
| Net cash provided by financing activities                                                       |   | 18,047                          |       | 30,449 |   |
|                                                                                            |   |                            |       |   |   |
| Net increase (decrease) in cash and due  from banks                                             |   | (1,021                          | )          | 859 |   |
|                                                                                            |   |                            |       |   |   |
| Cash and due from banks at beginning of  period                                                 |   | 18,113                          |       | 18,097 |   |
|                                                                                            |   |                            |       |   |   |
| Cash and due from banks at end of period                                                        |   | $                               | 17,092     |   | $ | 18,956 |   |
|                                                                                            |   |                            |       |   |   |
| Supplemental disclosure of cash paid during  the period for:                                    |   |                            |       |   |   |
| Interest                                                                                        |   | $                               | 7,727      |   | $ | 8,807 |   |
| Income taxes                                                                                    |   | $                               | 1,480      |   | $ | 1,816 |   |

 

See accompanying notes toconsolidated financial statements.

 

6

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**GB&T BANCSHARES, INC. AND SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**(Unaudited)**

 

**NOTE 1.        BASISOF PRESENTATION**

 

The unaudited consolidatedfinancial statements include the accounts of GB&T Bancshares, Inc. and itswholly-owned banking subsidiaries, Gainesville Bank & Trust, United Bank& Trust, Community Trust Bank and HomeTown Bank of Villa Rica, (“HTB”) andits consumer finance company, Community Loan Company (collectively “theCompany”).  Significant intercompanytransactions and balances have been eliminated in consolidation.

 

The accompanying unaudited consolidatedfinancial statements have been prepared in accordance with accountingprinciples generally accepted in the United States of America, for interimfinancial information and with instructions for Form 10-Q.  Accordingly, they do not include all of theinformation and footnotes required by generally accepted accounting principlesfor complete financial statements.  Inthe opinion of management, all adjustments (consisting of normal and recurringadjustments) considered necessary for a fair presentation have been included.The results of operations for the three and six-month periods ended June 30,2003 is not necessarily indicative of the results that may be expected for theyear ending December 31, 2003.

 

**NOTE 2.        STOCKCOMPENSATION PLANS**

 

The Company has a stock optionplan for granting of options to directors, officers and employees.  The options may be exercised over a periodof ten years in accordance with vesting schedules determined by the Board ofDirectors.  The Company accounts for theplan under the recognition and measurement principles of APB Opinion No. 25, *Accountingfor**Stock Issued to Employees*, and related Interpretations.  No stock-based employee compensation cost isreflected in net income, as all options granted under the plan had an exerciseprice equal to the market value of the underlying stock on the date ofgrant.  The following table illustratesthe effect on net income and earnings per share if the Company had applied thefair value recognition provisions of SFAS No. 123, *Accounting for Stock-Based Compensation*,to stock-based employee compensation.

 
|                                                                                                                                                |   | **June 30,**                |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|--------|
|                                                                                                                                                |   | **2003**                    |   | **2002** |   |
|                                                                                                                                                |   | **(Dollars  in thousands)** |   |
|                                                                                                                                                |   |                        |   |   |   |
| Net income, as reported                                                                                                                             |   | $                           | 3,444  |   | $ | 2,976 |   |
| Deduct:   Total stock-based employee compensation expense determined under fair  value based method for all awards, net of related tax effects |   | 52                          |   | 39 |   |
| Pro forma net income                                                                                                                                |   | $                           | 3,392  |   | $ | 2,937 |   |
|                                                                                                                                                |   |                        |   |   |   |
| Earnings per share:                                                                                                                                 |   |                        |   |   |   |
| Basic - as reported                                                                                                                                 |   | $                           | 0.64   |   | $ | 0.63 |   |
| Basic - pro forma                                                                                                                                   |   | $                           | 0.63   |   | $ | 0.62 |   |
| Diluted - as reported                                                                                                                               |   | $                           | 0.62   |   | $ | 0.61 |   |
| Diluted - pro forma                                                                                                                                 |   | $                           | 0.61   |   | $ | 0.60 |   |

 

7

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**NOTE 3.        EARNINGSPER COMMON SHARE**(in thousands, except per share data)

 

Presented below is a summary ofthe components used to calculate basic and diluted earnings per share for thethree and six month periods ended June 30, 2003 and 2002.

 
|                                                                                                                                |   | **Quarters ended June 30,** |   |
|-------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|--------|
|                                                                                                                                |   | **2003**                    |   | **2002** |   |
| Basic Earnings Per Share:                                                                                                           |   |                        |   |   |   |
| Weighted average common shares  outstanding                                                                                         |   | 5,382                       |   | 4,761 |   |
|                                                                                                                                |   |                        |   |   |   |
| Net income                                                                                                                          |   | $                           | 1,733  |   | $ | 1,479 |   |
|                                                                                                                                |   |                        |   |   |   |
| Basic earnings per share                                                                                                            |   | $                           | 0.32   |   | $ | 0.31 |   |
|                                                                                                                                |   |                        |   |   |   |
| Diluted Earnings Per Share:                                                                                                         |   |                        |   |   |   |
| Weighted average common shares  outstanding                                                                                         |   | 5,382                       |   | 4,761 |   |
| Net effect of the assumed  exercise of stock Options based on the treasury stock method Using average  market prices for the period |   | 196                         |   | 154 |   |
| Total weighted average common  shares and Common stock equivalents outstanding                                                      |   | 5,578                       |   | 4,915 |   |
|                                                                                                                                |   |                        |   |   |   |
| Net income                                                                                                                          |   | $                           | 1,733  |   | $ | 1,479 |   |
|                                                                                                                                |   |                        |   |   |   |
| Diluted earnings per share                                                                                                          |   | $                           | 0.31   |   | $ | 0.30 |   |

 
|                                                                                                                                |   | **Six Months ended June 30,** |   |
|-------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|--------|
|                                                                                                                                |   | **2003**                      |   | **2002** |   |
| Basic Earnings Per Share:                                                                                                           |   |                          |   |   |   |
| Weighted average common shares  outstanding                                                                                         |   | 5,371                         |   | 4,759 |   |
|                                                                                                                                |   |                          |   |   |   |
| Net income                                                                                                                          |   | $                             | 3,444  |   | $ | 2,976 |   |
|                                                                                                                                |   |                          |   |   |   |
| Basic earnings per share                                                                                                            |   | $                             | 0.64   |   | $ | 0.63 |   |
|                                                                                                                                |   |                          |   |   |   |
| Diluted Earnings Per Share:                                                                                                         |   |                          |   |   |   |
| Weighted average common shares  outstanding                                                                                         |   | 5,371                         |   | 4,759 |   |
| Net effect of the assumed  exercise of stock Options based on the treasury stock method using average  market prices for the period |   | 176                           |   | 139 |   |
| Total weighted average common  shares and Common stock equivalents outstanding                                                      |   | 5,547                         |   | 4,898 |   |
|                                                                                                                                |   |                          |   |   |   |
| Net income                                                                                                                          |   | $                             | 3,444  |   | $ | 2,976 |   |
|                                                                                                                                |   |                          |   |   |   |
| Diluted earnings per share                                                                                                          |   | $                             | 0.62   |   | $ | 0.61 |   |

 

8

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**NOTE 4.        MERGERAGREEMENT WITH BALDWIN BANCSHARES, INC.**

 

On April 28, 2003, the Companysigned a definitive agreement with Baldwin Bancshares, Inc., the parent companyof First National Bank of the South, Milledgeville, Georgia.  The agreement calls for the exchange of 2.895shares of GB&T Bancshares, Inc. stock for each of the outstanding shares ofBaldwin Bancshares, Inc.  Theacquisition is initially valued at $25.9 million and will be accounted for as apurchase. The merger is subject to approval of the shareholders of both BaldwinBancshares and GB&T Bancshares and is expected to be completed in the thirdquarter of 2003.

 

**NOTE 5.        RECENTDEVELOPMENTS**

 

In November 2002, the FinancialAccounting Standards Board (“FASB”) issued FASB Interpretation No. 45,“Guarantor’s Accounting and Disclosure Requirements for Guarantees, IncludingIndirect Guarantees of Indebtedness of Others”.  The interpretation addresses the disclosures to be made by aguarantor in its interim and annual financial statements about its obligationsunder guarantees.  The interpretationalso clarifies the requirements related to the recognition of a liability by aguarantor at the inception of a guarantee, for the fair value of the obligationundertaken in issuing the guarantee. The initial recognition and initial measurement provisions of theinterpretation are to be applied to guarantees issued or modified afterDecember 31, 2002.  As of June 30, 2003,the interpretation has not had a material effect on the financial condition orresults of operations, and there are no guarantees required to disclosed.

 

9

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**GB&TBANCSHARES, INC. AND SUBSIDIARIES**

 

**Item 2****.****           MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

The following is management’sdiscussion and analysis of certain significant factors which have affected ourfinancial position and operating results including our wholly-ownedsubsidiaries, Gainesville Bank & Trust, United Bank & Trust, CommunityTrust Bank, HomeTown Bank of Villa Rica and Community Loan Company during theperiods included in the accompanying consolidated financial statements.

 

**CautionaryNotice Regarding Forward-Looking Statements**

 

Some of the statements in thisReport, including, without limitation, matters discussed under the caption“Management’s Discussion and Analysis of Financial Condition and Results ofOperation,” GB&T Bancshares, Inc. (the “Company”) are “forward-lookingstatements” within the meaning of the federal securities laws.  Forward-looking statements includestatements about the competitiveness of the banking industry, potentialregulatory obligations, our entrance and expansion into other markets, ourproposed acquisition of Baldwin Bancshares, Inc., our other businessstrategies, our expectations with respect to our allowance for loan losses andimpaired loans, and other statements that are not historical facts.  When we use words like “anticipate”,“believe”, “intend”, “expect”, “estimate”, “could”, “should”, “will”, andsimilar expressions, you should consider them as identifying forward-lookingstatements, although we may use other phrasing.  These forward-looking statements involve risks and uncertaintiesand are based on our beliefs and assumptions, and on the information availableto us at the time that these disclosures were prepared.  Factors that may cause actual results todiffer materially from those expressed or implied by such forward-lookingstatements include, among others, the following possibilities: (1) competitivepressures among depository and other financial institutions may increasesignificantly; (2) changes in the interest rate environment may reduce margins;(3) general economic conditions may be less favorable than expected, resultingin, among other things, a deterioration in credit quality and/or a reduction indemand for credit; (4) legislative or regulatory changes, including changes inaccounting standards, may adversely affect the businesses in which we areengaged; (5) costs or difficulties related to the integration of ourbusinesses, may be greater than expected; (6) deposit attrition, customer lossor revenue loss following acquisitions may be greater than expected; (7)competitors may have greater financial resources and develop products thatenable such competitors to compete more successfully than us; and (8) adversechanges may occur in the equity markets.

 

Many of such factors are beyondour ability to control or predict, and readers are cautioned not to put unduereliance on such forward-looking statements. We disclaim any obligation to update or revise any forward-lookingstatements contained in this Report, whether as a result of new information,future events or otherwise.

 

**BalanceSheets**

 

Our total assets increased$16.0 million or 2.17% for the period ended June 30, 2003 compared to December31, 2002.  The increase consistsprimarily of an increase in loans of $22.2 million and an increase insecurities of $9.1 million.  Thisincrease is partially offset by decreases in federal funds sold of $9.6 millionand interest-earning deposits of $3.4 million.

 

Total deposits have increased$24.8 million, or 4.28% during the period ended June 30, 2003 compared toDecember 31, 2002.  Noninterest-bearingdeposits increased $10.1 million and interest-bearing deposits increased $14.7million during the period.   Depositgrowth was slightly ahead of loan growth resulting in a loan to deposit ratioof 93.39% at June 30, 2003 compared to 93.55% at December 31, 2002.

 

10

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**Liquidityand Capital Resources**

 

Liquidity management involvesthe matching of the cash flow requirements of customers who may be eitherdepositors desiring to withdraw funds or borrowers needing assurance thatsufficient funds will be available to meet their credit needs and our abilityto meet those needs.  We seek to meetliquidity requirements primarily through management of short-term investments,monthly amortizing loans, maturing single payment loans, and maturities ofsecurities and prepayments.  Also wemaintain relationships with correspondent banks which could provide funds onshort notice.  As of June 30, 2003, wehad borrowed under Federal funds purchase lines and securities sold underagreement to repurchase, $11.5 million, an amount which is relatively flat whencompared to December 31, 2002.

 

Our liquidity and capitalresources are monitored on a periodic basis by management, State and Federalregulatory authorities.  Managementreviews liquidity on a periodic basis to monitor and adjust liquidity asnecessary.  Management has the abilityto adjust liquidity by selling securities available for sale, sellingparticipations in loans we generate and accessing available funds throughvarious borrowing arrangements.  Ourshort-term investments and available borrowing arrangements are adequate tocover any reasonably anticipated immediate need for funds.

 

Our liquidity ratio was 21.09%at June 30, 2003, above our policy minimum ratio of 15%.  Liquidity is measured by the ratio of netcash, Federal funds sold and securities to net deposits and short-termliabilities. In the event the banks need to generate additional liquidity,funding plans would be implemented as outlined in the liquidity policy of thebanks. The subsidiary banks have lines of credit available to meet anyunforeseen liquidity needs.  Also, theBanks have relationships with the Federal Home Loan Bank of Atlanta, whichprovide funding for loan growth on an as needed basis.

 

We purchased a piece ofproperty in May 2003 in Gainesville, Georgia for the purpose of locating anoperations center for the Company’s operations and data processing.   The approximate cost of the property is$1,150,000.   We anticipate theconstruction of the operations center to be completed in 2004.

 

In May 2003 we sold a buildinglocated in Hiram, Georgia which had been acquired in 2001 as part of the mergerwith Community Trust Financial Services. The Company recorded an after-tax loss of $192,000 on the sale.

 

11

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As of June 30, 2003, theCompany and the Banks were considered to be well-capitalized as defined in theFDIC Improvement Act and based on regulatory minimum capital requirements.  The Company and its bank subsidiaries’actual capital ratios are presented in the following table.

 
|                                     |   | **ACTUAL** |   | **FOR CAPITAL  ADEQUACY  PURPOSES** |   | **TO BE  WELL  CAPITALIZED** |   |
|------------------------------------------|--------|------------|--------|-------------------------------------|--------|------------------------------|--------|
|                                     |   |       |   |                                |   |                         |   |
| As of June 30, 2003                      |   |       |   |                                |   |                         |   |
| Total Capital to Risk Weighted  Assets:  |   |       |   |                                |   |                         |   |
| Consolidated                             |   | 12.84      | %      | 8                                   | %      | N\A                          |   |
| Gainesville Bank & Trust             |   | 10.39      | %      | 8                                   | %      | 10                           | %      |
| United Bank & Trust                  |   | 13.03      | %      | 8                                   | %      | 10                           | %      |
| Community Trust Bank                     |   | 12.37      | %      | 8                                   | %      | 10                           | %      |
| HomeTown Bank of Villa Rica              |   | 11.08      | %      | 8                                   | %      | 10                           | %      |
| Tier I Capital to Risk Weighted  Assets: |   |       |   |                                |   |                         |   |
| Consolidated                             |   | 11.59      | %      | 4                                   | %      | N\A                          |   |
| Gainesville Bank & Trust             |   | 9.23       | %      | 4                                   | %      | 6                            | %      |
| United Bank & Trust                  |   | 11.78      | %      | 4                                   | %      | 6                            | %      |
| Community Trust Bank                     |   | 11.12      | %      | 4                                   | %      | 6                            | %      |
| HomeTown Bank of Villa Rica              |   | 9.83       | %      | 4                                   | %      | 6                            | %      |
| Tier I Capital to Average  Assets:       |   |       |   |                                |   |                         |   |
| Consolidated                             |   | 8.93       | %      | 4                                   | %      | N\A                          |   |
| Gainesville Bank & Trust             |   | 7.00       | %      | 4                                   | %      | 5                            | %      |
| United Bank & Trust                  |   | 8.61       | %      | 4                                   | %      | 5                            | %      |
| Community Trust Bank                     |   | 8.55       | %      | 4                                   | %      | 5                            | %      |
| HomeTown Bank of Villa Rica              |   | 8.07       | %      | 4                                   | %      | 5                            | %      |

 

**Resultsof Operations**

 

Our profitability is determinedby our ability to effectively manage interest income and expense, to minimizeloan and security losses, to generate noninterest income, and to controloperating expenses.  Since interestrates are determined by market forces and economic conditions beyond ourcontrol, our ability to generate net interest income is dependent upon ourability to obtain an adequate net interest spread between the rate paid oninterest-bearing liabilities and the rate earned on interest-earningassets.  The net interest margin was4.17% for the six months ended June 30, 2003, compared to 4.41% for the sameperiod in 2002, a decrease of 24 basis points. This decrease resulted from an 87 basis point decrease in the yield onearning assets and a 68 basis point decrease in the effective cost offunds.  The decreased yield on earningassets was primarily due to lower yields on loans.  This was largely due to a 50 basis point decrease in the averagePrime rate as compared to the prior year to date.  The decreased effective cost of funds was due to lower averagerates paid on interest-bearing funding.

 

The results of operations forthe three and six months ended June 30, 2003, includes HomeTown Bank of VillaRica which became part of the Company in November 2002.  The merger was accounted for as a purchase,therefore results for HTB have been included since November 2002.

 

Net interest income increased$1,376,000 or 23.07% for the three months ended June 30, 2003 compared to thesame period in 2002.  The net increaseconsists of an increase in interest income of $1,541,000 or 16.07% less anincrease in interest expense of $165,000 or 4.55% for the three monthperiod.  Net interest income increased$2,874,000 or 25.07% for the six months ended June 30, 2003 compared to thesame period in 2002.  The net increaseconsists of an increase in interest income of $3,100,000 or 16.33% less anincrease in interest expense of $226,000 or 3.00% for the six monthperiod.   The majority of the increaseis due to increases in volume.

 

12

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Our provision for loan lossesdecreased by $28,000 or 13.73% during the three months ended June 30, 2003 ascompared to the same period in 2002. Our provision for loan losses increased by $3,000 or 0.78% during thesix months ended June 30, 2003 as compared to the same period in 2002.  The analysis below indicates an increase of$208,000 in net charge-offs for the six months ended June 30, 2003 as comparedto the same period in 2002 which is directly attributable to the acquisition ofHTB with net charge-offs of $254,000 for the six months ended June 30, 2003.  Other changes compared to 2002 include adecrease in recoveries at one affiliate bank and a decrease in net charge-offsat Community Loan Company, our consumer finance company.  The allowance for loan losses at June 30,2003 was $7,527,000 or 1.33% of total loans compared to 1.28% at June 30,2002.  Based on management’s evaluation,the allowance is adequate to absorb any potential loan losses at June 30,2003.  The allowance for loan losses isevaluated monthly and adjusted to reflect the risk in the portfolio.

 

The following table summarizesthe allowance for loan losses for the six-month period ended June 30, 2003 and2002.  

 
|                                                              |   | **2003**                   |        | **2002**   |       |
|-------------------------------------------------------------------|--------|----------------------------|-------------|------------|------------|
|                                                              |   | **(Dollars in Thousands)** |        |
| **Average amount of loans outstanding**                           |   | $                          | **559,991** |       | $          | 428,483 |   |
|                                                              |   |                       |        |       |       |
| **Allowance   for loan losses balance, beginning of period** |   | $                          | **7,538**   |       | $          | 5,522 |   |
|                                                              |   |                       |        |       |       |
| **Less charge-offs**                                              |   |                       |        |       |       |
| Commercial loans                                                  |   | **—**                 | ** **  | **—** | ** ** |
| Real estate loans                                                 |   | **—**                 | ** **  | **—** | ** ** |
| Consumer  loans                                              |   | **(567**                   | **)**       | (495       | )          |
| Total Charge-offs                                                 |   | **(567**                   | **)**       | (495       | )          |
|                                                              |   |                       |        |       |       |
| **Plus recoveries**                                               |   |                       |        |       |       |
| Commercial loans                                                  |   | **—**                 |        | 1          |       |
| Real estate loans                                                 |   | **2**                      |        | 170        |       |
| Consumer loans                                                    |   | **164**                    |        | 131        |       |
| Total recoveries                                                  |   | **166**                    |        | 302        |       |
| **Net charge-offs**                                               |   | **(401**                   | **)**       | (193       | )          |
|                                                              |   |                       |        |       |       |
| **Plus provision for loan losses**                                |   | **390**                    |        | 387        |       |
|                                                              |   |                       |        |       |       |
| **Allowance   for loan losses balance, end of period**       |   | $                          | **7,527**   |       | $          | 5,716 |   |
|                                                              |   |                       |        |       |       |
| **Net charge-offs to average loans**                              |   | **0.072**                  | **%**       | 0.045      | %          |

 

13

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The following table is asummary of nonaccrual, past due and restructured debt. The numbers indicate anincrease of $2,240,000 in nonaccrual loans which was partially due to theacquisition of HTB, which represented $821,000 of the increase.  The remaining increase represents one loanfor $1,408,000 which is secured by real estate.  The Company believes there is sufficient collateral to cover thisloan, therefore any loss on this loan is expected to be minimal.  In addition, we are currently assessing aloan relationship at HTB of approximately $4,467,000 recently commented on byits regulators as subject to a write-down, thus increasing the Company’sreserve.  The loan is performing and issecured by real estate.  The Companybelieves that there is sufficient collateral to cover this loan.   Approximately 71%, or $430,000 of thenonaccrual consumer loan balance at June 30, 2003, is related to Community LoanCompany.  The table presents a decreaseof $19,000 in past due loans over 90 days. This decrease consists of net decreases at two of the affiliate banks of$169,000 offset by an increase of $134,000 at Community Loan Company.  Community Loan Company accounts forapproximately 68%, or $405,000 of the past due loan balance at June 30,2003.  Due to the nature of the consumerfinance business, the level of nonaccrual loans and past due loans over 90 daysis normal and will consistently remain higher than those seen in the bankingindustry.  Community Loan Company’sreserve for loan loss is also higher to cover these higher levels of nonaccrualand past due loans.   There is minimalor no loss anticipated on the remaining real estate loans in nonaccrual andpast due loans due to the value of the underlying collateral.

 
|              |   | **June 30, 2003**          |   |
|-------------------|--------|----------------------------|--------|
|              |   | **Nonaccrual  Loans**      |   | **Past Due  90 Days  Still Accruing** |   | **Restructured  Debt** |   |
|              |   | **(Dollars in Thousands)** |
|              |   |                       |   |   |   |   |   |
| Real estate loans |   | $                          | 2,446  |   | $ | 160 |   | $ | — |   |
| Commercial loans  |   | 284                        |   | — |   | — |   |
| Consumer loans    |   | 602                        |   | 437 |   | — |   |
| Total             |   | $                          | 3,332  |   | $ | 597 |   | $ | — |   |

 
|              |   | **June 30, 2002**          |   |
|-------------------|--------|----------------------------|--------|
|              |   | **Nonaccrual  Loans**      |   | **Past Due  90 Days  Still Accruing** |   | **Restructured  Debt** |   |
|              |   | **(Dollars in Thousands)** |
|              |   |                       |   |   |   |   |   |
| Real estate loans |   | $                          | 514    |   | $ | 344 |   | $ | — |   |
| Commercial loans  |   | —                     |   | — |   | — |   |
| Consumer loans    |   | 578                        |   | 272 |   | — |   |
| Total             |   | $                          | 1,092  |   | $ | 616 |   | $ | — |   |

 

Our banking subsidiary policyis to discontinue the accrual of interest income when, in the opinion ofmanagement, collection of such interest becomes doubtful.  This status is determined when; (1) there isa significant deterioration in the financial condition of the borrower and fullrepayment of principal and interest is not expected; and (2) the principal orinterest is more than 90 days past due, unless the loan is both well-securedand in the process of collection.  Ourconsumer finance company accrues interest until management determines that fullrepayment of principal and interest is not probable, which in some casesexceeds 90 days past due.  Accrual ofinterest on such loans is resumed when, in management’s judgment, thecollection of interest and principal becomes probable.

 

14

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Loans classified for regulatorypurposes as loss, doubtful, substandard, or special mention that have not beenincluded in the table above do not represent or result from trends oruncertainties which management reasonably expects will materially impact futureoperating results, liquidity or capital resources.  These classified loans do not represent material credits aboutwhich management is aware of any information which causes management to haveserious doubts as to the ability of such borrowers to comply with their loanrepayment terms, except as noted above.

 

Other income for the threemonths ended June 30, 2003, increased by $785,000 or 48.85% compared to thesame period in 2002.  Service chargesincreased by $254,000 and mortgage origination fees increased by $494,000. Theincrease in service charges is directly related to the increase in depositaccounts and the inclusion of HTB for the six months ended June 30, 2003.  Other income for the six months ended June30, 2003, increased $1,255,000 or 35.97% compared to the same period in2002.  Mortgage origination feesincreased by $747,000, service charges increased by $518,000 and otheroperating income increased by $52,000. Mortgage origination fees increased as a result of refinancing activityspurred by the continued decline in mortgage rates.

 

Other expenses increased byapproximately $2,112,000 or 40.78% for the three months ended June 30, 2003compared to the same period in 2002. The increase is due primarily to an increase in salaries and employeebenefits of $1,221,000 and an increase in other operating expenses of$739,000.  Other expenses increased byapproximately $3,914,000 or 38.46% for the six months ended June 30, 2003compared to the same period in 2002. The increase is due primarily to an increase in salaries and employeebenefits of $2,389,000, an increase in net occupancy and equipment expense of$388,000, an increase in marketing and public relations of $141,000, and anincrease of $188,000 in supplies, postage and telephone.  Also, a loss of $309,000 recorded on thesale of a building in Hiram, Georgia resulted in an increase to other operatingexpenses.  The increase in salaries andemployee benefits is partially due to HTB, which accounted for $994,000 of theincrease and also an increase of 31 employees, exclusive of HTB, as of June 30,2003, compared to the same period in 2002.

 

Income tax expense decreased by$256,000 for the six-month period ended June 30, 2003, compared to the sameperiod last year. The effective tax rate for the period ended June 30, 2003 was25.13%, compared to 32.18% for the same period in 2002.  The decrease in the effective tax rate isprimarily due to the tax effect of the net operating loss carry forward at HTB.

 

Net income increased by$254,000 or 17.17%, for the three months ended June 30, 2003 compared to thesame period in 2002.  Net incomeincreased by $468,000 or 15.73% for the six months ended June 30, 2003 comparedto the same period in 2002.   Theseincreases are attributable to the continued growth in interest-earning assetsand are consistent with our current budget.

 

We are not aware of any otherknown trends, events or uncertainties, other than the effect of events asdescribed above, that will have or that are reasonably likely to have amaterial effect on its liquidity, capital resources or operations.  We are not aware of any currentrecommendations by the regulatory authorities, which, if they were implemented,would have such an effect, except as noted above.

 

15

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**Item 3****.    QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

Our net interest income and thefair value of our financial instruments (interest earning assets and interestbearing liabilities) are influenced by changes in market interest rates. Weactively manage our exposure to interest rate fluctuations through policiesestablished by the Asset/Liability Management Committee (the “ALCO”). The ALCOmeets regularly and is responsible for approving asset/liability managementpolicies, developing and implementing strategies to improve balance sheetpositioning and net interest income and assessing the interest rate sensitivityof the Banks.  See “Item 7A” of theCompany’s Annual Report on Form 10-K for a more complete discussion.

 

**Item 4****.    CONTROLS ANDPROCEDURES**

 

As of the end of the periodcovered by this report, we carried out an evaluation, under the supervision andwith the participation of our Chief Executive Officer and the Chief FinancialOfficer, of the design and operation of our disclosure controls and procedures.  Based on this evaluation, our ChiefExecutive Officer and Chief Financial Officer concluded that our disclosurecontrols and procedures are effective for gathering, analyzing and disclosingthe information that we are required to disclose in the reports we file under theSecurities Exchange Act of 1934, within the time periods specified in the SEC’srules and forms.  Our Chief ExecutiveOfficer and Chief Financial Officer also concluded that our disclosure controlsand procedures are effective in timely alerting them to material informationrelating to our company required to be included in our periodic SECfilings.  In connection with the rules,we continually review and document our disclosure controls and procedures,including our internal controls and procedures for financial reporting, and mayfrom time to time make changes designed to enhance their effectiveness and toensure that our systems evolve with our business.

 

There have been no changes inour internal control over financial reporting identified in connection withthis evaluation that has materially affected, or is reasonably likely tomaterially affect, our internal control over financial reporting.

 

**PARTII****- OTHERINFORMATION**

 

**Item 4.       SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS**

 

The annual meeting of theStockholders of GB&T Bancshares, Inc. was held on May 19,2003.  The meeting had been called pursuant towritten notice for (1) the purpose of considering and voting upon the electionof nine directors to constitute the Board of Directors to serve until the nextannual meeting and until their successors are elected and qualified and (2) toconsider such other business as might properly come before the Annualmeeting.  The results of the voting wereas follows:

 
| **(1) Election of Directors** |   | **FOR**   |   | **AGAINST** |   | **WITHHELD** |   |
|-------------------------------|--------|-----------|--------|-------------|--------|--------------|--------|
|                          |   |      |   |        |   |         |   |
| Larry B. Boggs                |   | 3,558,553 |   | 0           |   | 50,407       |   |
| Dr. John W. Darden            |   | 3,604,244 |   | 0           |   | 4,715        |   |
| W.A. Foster, III              |   | 3,604,088 |   | 0           |   | 4,871        |   |
| Bennie E. Hewett              |   | 3,604,244 |   | 0           |   | 4,715        |   |
| Richard A. Hunt               |   | 3,559,419 |   | 0           |   | 49,541       |   |
| James L. Lester               |   | 3,604,231 |   | 0           |   | 4,728        |   |
| Samuel L. Oliver              |   | 3,602,986 |   | 0           |   | 5,973        |   |
| Alan A. Wayne                 |   | 3,602,986 |   | 0           |   | 5,973        |   |
| Philip A. Wilheit             |   | 3,604,244 |   | 0           |   | 4,715        |   |

 

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**Item 6****.    EXHIBITS ANDREPORTS ON FORM 8-K**

 

(a)          Exhibits

31.1      Rule13a-14(a) Certification of Principal Executive Officer

31.2      Rule13a-14(a) Certification of Principal Financial Officer

32.1      Section1350 Certification of Principal Executive Officer

32.2      Section1350 Certification of Principal Financial Officer

 

(b)         Reports on Form 8-K

 

We filed a report on Form 8-K on April 29, 2003 to report earnings forthe quarter ending March 31, 2003.

 

17

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**SIGNATURES**

 

Pursuant to the requirements ofthe Securities Exchange Act of 1934, the Registrant has duly caused this reportto be signed on its behalf by the undersigned, thereunto duly authorized.

 

 
| GB&T  BANCSHARES, INC. |      |
|----------------------------|-----------|
|                       |      |
|                       |      |
| DATE:                      | 8/14/2003 |   | BY: | /s/  Richard A. Hunt |   |
|                       |      |   |   Richard  A. Hunt |
|                       |      |   President  and Chief Executive Officer |
|                       |      |   |
|                       |      |   |
| DATE:                      | 8/14/2003 |   | BY: | /s/  Gregory L. Hamby |   |
|                       |      |   Gregory  L. Hamby |
|                       |      |   Executive  Vice President & |
|                       |      |   Chief  Financial Officer |
|                            |           |  |  |  |  |  |

 

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