UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

    X    Annual report  pursuant to Section 13 or 15(d) of the  Securities
  ----   Exchange Act of 1934 for the fiscal year ended December 31, 2000 or

         Transition report pursuant to Section 13 or 15(d) of the Securities
  ----   Exchange Act of 1934

                        Commission File Number: 000-30273

                           CHESTATEE BANCSHARES, INC.
                 ------------------ ---------------------------
        (Exact name of small business issuer as specified in its Charter)

Georgia                                                               58-2535333
----------------                                                ----------------
(State or other                                                    (IRS Employer
jurisdiction of                                                   Identification
incorporation or                                                         Number)
organization)

6639 Highway 53 East
Dawsonville, Georgia 30534                                        (706) 216-2265
--------------------------                                   -------------------
(Address of principal                                        (Issuer's telephone
executive offices)                                                       number)

         Securities registered under Section 12(b) of the Exchange Act:


                                                                Name of Exchange
Title of each class:                                        on which registered:
--------------------                                        --------------------
None                                                                        None

          Securities registered under Section 12(g) of the Exchange Act


                                                                Name of Exchange
Title of each class:                                        on which registered:
--------------------                                        --------------------
Common Stock                                                                None
no par value per share

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


Indicate by mark if  disclosure  of  delinquent  filers  pursuant to Item 405 of
Regulation  S-B is not  contained  in  this  form,  and no  disclosure  will  be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.

The  issuer's  revenues  for  the  fiscal  year  ended  December 31, 2000  were:
$6,611,986

There were 1,900,000 outstanding shares of common stock, no par value per share,
as of December 31, 2000.  The aggregate  market value of the voting stock of the
Registrant held by  non-affiliates  of the Registrant,  as of December 31, 2000,
was $19,000,000 based on the last sales price on such date.


<PAGE>
                                     PART I
                                     ------

ITEM 1.  BUSINESS
-----------------

History
-------

         The Company is a bank  holding  company  incorporated  October 13, 1999
under the laws of the State of Georgia. The Company was formed for the principal
purpose of acquiring Chestatee State Bank, a state banking institution chartered
under the laws of the State of Georgia on December 31, 1997.  Pursuant to a Plan
of  Reorganization,  effective  March 31, 2000, the Company  acquired all of the
issued and outstanding shares of common stock, $5.00 par value of the Bank. As a
result of this  transaction,  the  former  stockholders  of the Bank  became the
stockholders  of the Company,  and the Bank became a wholly-owned  subsidiary of
the  Company.  The Company  has also formed  Chestatee  Insurance  Agency,  Inc.
("Insurance"), Chestatee Securities, Inc. ("Securities"),  Chestatee Residential
Mortgage,  Inc.  ("Mortgage")  and  Chestatee  Systems,  Inc.  ("Systems").  The
Company's  principal  place of  business  is  located  at 6639  Highway 53 East,
Dawsonville, Dawson County, Georgia.

     The Bank has conducted its general  banking  business  since opening on May
15, 1998,  from its main office  located at 6639  Highway 53 East,  Dawsonville,
Dawson County,  Georgia. The Bank has two full-service  branches: one located in
the Ingles  Supermarket at the  intersection  of Georgia Highway 400 and Georgia
Highway 53, also in  Dawsonville,  Dawson County,  Georgia;  a second located in
downtown Dawsonville at 86 Highway 53 West, Dawsonville, Dawson County, Georgia.
As of December 31,  2000,  Insurance,  Securities,  Systems and Mortgage had not
conducted operations.

Business
--------

         The Company, through the Bank, operates a full-service banking business
and  engages  in a broad  range  of  commercial  banking  activities,  including
accepting  customary  types of demand  and timed  deposits,  making  individual,
consumer,  commercial,  and installment  loans,  money  transfers,  safe deposit
services, and making investments in U. S. government and municipal services. The
Bank does not offer trust services.  The Company may offer brokerage services in
the foreseeable future through its other wholly-owned  subsidiaries,  Insurance,
Securities,  Mortgage in connection  with the sale of insurance,  securities and
mortgages,  respectively.  The Company  may offer  systems  consulting  services
through Systems in the future.

         The data  processing  work of the Bank is processed  with the Intercept
Group f/k/a Provesa, Inc. of Thomson, Georgia. The Bank issues credit cards. The
Bank also offers its customers a variety of checking and savings  accounts.  The
installment  loan department makes both direct consumer loans and also purchases
retail installment contracts from sellers of consumer goods.

         The Bank  principally  serves the residents of  Dawsonville  and Dawson
County which have,  collectively,  a population of approximately 15,000 persons.
Dawsonville  and  Dawson  County  have a  diverse  commerce,  including  retail,
manufacturing,  service and farming sector economies. Dawsonville also serves as
the  county  seat for  Dawson  County,  Georgia,  with a  significant  number of
residents employed in government.  Dawsonville,  located  approximately 15 miles
north of Cumming, Georgia and 22 miles west of Gainesville, Georgia, is situated

                                       2
<PAGE>
in the center of the development  corridor  extending north from Atlanta between
Interstate  75 and  Interstate  85.  The Bank will also  seek  deposit  and loan
business from outside its primary service area,  including the adjacent counties
of Cherokee, Forsyth, Gilmer, Hall, Lumpkin and Pickens.

         As of December 31, 2000, the Bank has a correspondent relationship with
the Bankers Bank of Atlanta,  Georgia.  The correspondent  bank provides certain
services to the Bank, such as investing its excess funds,  processing checks and
other items, buying and selling federal funds, handling money fund transfers and
exchanges,  shipping coins and currency,  providing  security and safekeeping of
funds and other  valuable  items,  handling loan  participation  and  furnishing
management investment advice on the Bank's securities portfolio.

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

         The  banking  business  in  Dawsonville  and  Dawson  County  is highly
competitive.  The Bank competes with several other financial institutions in the
market it  represents.  Within the primary  service area, the Bank competes with
Bank of America,  N.A.,  First Community Bank of Dawsonville,  owned by regional
banking company Century South Banks, Inc. of Dahlonega,  and Dawson County Bank,
a closely held locally  owned  institution.  While there are no other  financial
institutions  with offices in Dawson  County,  numerous  financial  institutions
within the Atlanta  metropolitan  area market their  services to its  residents,
including Bank of America, N.A., First Union, SunTrust and Wachovia. In addition
to these banks, there are several finance companies,  credit union offices,  and
other non-traditional providers of service that compete in the Bank's market.

Employees
---------

         As of December 31, 2000,  the Company had 34 full-time  and 4 part-time
employees.  In the  opinion of  management,  the  Company  and the Bank enjoy an
excellent  relationship with its respective  employees.  Neither the Company nor
the Bank is a party to any collective bargaining agreement.

Selected Financial Information
------------------------------

         A history of the  Company's  financial  position  for the period  ended
December 31, 2000, is as follows (audited,  dollar amounts in thousands,  except
for per share information):

Total Assets...............................................$       82,430
Total Deposits.............................................$       72,178
Total Shareholders Equity..................................$        9,585
Net Income.................................................$          550
Number of Issued and Outstanding Shares....................$    1,900,000
Book Value Per Share.......................................$         5.04
Net Income Per Share.......................................$         0.29

A history of the Company's  financial  position for the year ended  December 31,
1999, is as follows (audited, dollar amounts in thousands,  except for per share
information):

                                       3
<PAGE>
Total Assets.................................................$       51,031
Total Deposits...............................................$       41,816
Total Shareholders Equity....................................$        9,027
Net Income ..................................................$          297
Number of Issued and Outstanding Shares......................$      950,000
Book Value Per Share Adjusted for Stock Split................$         4.75
Net Income Per Share Adjusted for Stock Split................$         0.16

Monetary Policies
-----------------

     The results of  operations  of the Company and the Bank are affected by the
credit policies of monetary authorities,  particularly the Federal Reserve, even
though neither the Company nor the Bank is a member of the Federal Reserve.  The
instruments  of monetary  policy  employed by the Federal  Reserve  include open
market operations in U. S. government  securities,  changes in discount rates on
member bank borrowings,  and changes in reserve requirements against member bank
deposits.  In view of changing  conditions  in the  national  economy and in the
money  markets,  as  well  as the  effect  of  action  by  monetary  and  fiscal
authorities,  including the Federal Reserve System, no prediction can be made as
to possible future changes in interest rates,  deposit levels,  loan demand,  or
the business and earnings of the Bank.

Supervision and Regulation
--------------------------

     The Company is subject to state and federal governmental  regulations.  The
Financial  Institutions  Code of Georgia  (the  "Financial  Institutions  Code")
limits the ability of the Company to acquire  direct or  indirect  ownership  or
control of a material  percentage  of voting  shares of any bank.  The Financial
Institutions Code also restricts the Company from acquiring substantially all of
the  assets of a bank.  Finally,  the  Financial  Institutions  Code  limits the
ability  of the  Company  to merge or  consolidate  with  another  bank  holding
company. These provisions are not anticipated to have a material impact upon the
operations of the Company.

     The Financial  Institutions  Code also  requires a bank holding  company to
register  with  the  Department  of  Banking  and  Finance  (the  "Department"),
providing information  regarding financial condition,  operation and management.
The Financial  Institutions  Code also requires the Company to file such reports
confirming compliance with state regulations and orders. The Department may also
make  examinations  of  the  Company,  at the  Company's  expense,  as it  deems
necessary.

     The Georgia Interstate Banking Act (the "Georgia Act") permits bank holding
companies  located in any state outside of Georgia to acquire  Georgia banks, or
bank holding companies owning Georgia banks, if the state in which the acquiring
company's  principal  place of business is located  permits Georgia bank holding
companies to make acquisitions in that state. However, the Georgia Act prohibits
the acquisition of banks in operation less than five years.  Further,  the board
of directors of a Georgia bank or bank holding company may adopt a resolution to
exempt its bank holding company or bank from acquisition  under the Georgia Act.
Finally, acquisition of a bank requires the prior approval of the Department and

                                       4
<PAGE>
the  Federal  Reserve.  The Board of  Directors  of the Company and the Board of
Directors  of the Bank have not  adopted  to date a  resolution  to  exempt  the
Company or the Bank from acquisition under the Georgia Act.

     The Bank Holding Company Act of 1956, as amended (the "BHCA") restricts the
ability  of a  bank  holding  company  to  redeem  its  stock.  The  regulations
promulgated  under the BHCA provide  that a bank holding  company may not redeem
its shares  without  prior written  notice to the Federal  Reserve under certain
circumstances.  Unless a bank holding company, both before and immediately after
the  redemption,  is  well-capitalized,  well-managed,  and not  subject  to any
unresolved  supervisory  issues, a bank holding company is obligated to give the
Federal  Reserve prior written notice before  purchasing or redeeming its equity
securities  if the gross  consideration  for the  purchase or  redemption,  when
aggregated with the net consideration paid by the company for all such purchases
or redemptions during the preceding 12 months, is equal to 10 percent or more of
the  company's  consolidated  net worth.  Further,  any notice  filed under this
section  must  contain  the purpose of the  transaction,  a  description  of the
securities  to be  purchased  or  redeemed,  the  total  number  of  each  class
outstanding,  the gross  consideration  to be paid, and the terms and sources of
funding for the  transaction,  a description of all equity  securities  redeemed
within the preceding 12 months,  the net consideration paid and the terms of any
debt incurred in  connection  with those  transactions,  and if the bank holding
company has consolidated assets of $150 million or more,  consolidated pro forma
risk-based  capital and leverage ratio calculations for the bank holding company
as of the most recent  quarter,  and, if the redemption is to be debt funded,  a
parent-only  pro forma balance sheet of the most recent  quarter (or if the bank
holding company has consolidated  assets of less than $150 million,  a pro forma
balance  sheet as of the most recent  quarter,  and, if the  redemption is to be
debt funded,  one-year income statement and cash flow projections).  The Federal
Reserve is  authorized  to  disapprove a proposed  purchase or  redemption if it
would  constitute  an unsafe or  unsound  practice,  or would  violate  any law,
regulation,  order,  directive,  or condition  imposed by, or written  agreement
with, the Federal Reserve.

     The BHCA also  regulates  any change in control of a state member bank or a
bank holding company.  Generally,  any person acting directly or in concert with
other persons must provide 60 days written notice before acquiring  control of a
bank  holding  company.  "Control"  is deemed  found if,  immediately  after the
transaction,  the acquiring person owns,  controls or holds power to vote 25% or
more of the voting  securities  of the  institution.  "Control" may be found if,
immediately after the transaction,  the acquiring person owns, controls or holds
power  to vote  10% or more of the  voting  securities  of an  institution  with
securities registered under the Securities Exchange Act of 1934, as amended (the
"Exchange  Act"),  or no other  person  owns,  controls or holds power to vote a
greater  percentage of those voting  securities.  The person may  consummate the
acquisition 60 days after notice absent disapproval by the Federal Reserve.

     The Riegle  Community  Development  and Regulatory  Improvement Act of 1994
("RCDRIA")  promotes  economic   revitalization  and  community  development  to
"investment  areas." The RCDRIA provides  procedures for expediting bank holding
company applications,  eliminating prior approval of the Federal Reserve for the
acquisition of control of a bank in a  reorganization  in which persons exchange
their shares for shares of a newly-formed bank holding company provided the bank
holding  company  immediately  after the  acquisition  meets  capital  and other
financial  standards  and the  bank is  "adequately  capitalized,"  the  holding

                                       5
<PAGE>
company  does not engage in any  activities  other than  those of  managing  and
controlling  banks,  company  provides 30 days prior  notice to the board of the
transaction,  and the holding company will not acquire control of any additional
bank. The RCDRIA also provides for reduction of  post-approval  waiting periods,
decreasing  the waiting  period from 30 days to 15 days in most  instances.  The
RCDRIA also exempts from federal  securities  registration  securities issued in
connection with the formation of a one-bank holding company.

     The RCDRIA also  permits a bank  holding  company to engage in  non-banking
activities or acquire or retain  ownership or control of the shares of a company
engaged  in  non-banking  activities  if prior  written  notice of the  proposed
transaction  or activity  is  provided  to the Federal  Reserve at least 60 days
before the  transaction  or  activity  occurs or  commences.  In  assessing  the
proposed transaction or activity, the board will consider whether performance of
the  activity  by a bank  holding  company or a  subsidiary  can  reasonably  be
expected  to  produce  benefits  to the  public,  such as  greater  convenience,
increased  competition or gains in efficiency  that outweighs  possible  adverse
effects.

     The  Riegle-Neal  Interstate  Banking and Branching  Efficiency Act of 1994
(the  "Interstate  Banking Act")  permits bank holding  companies to merge their
multi-state bank  subsidiaries  into a single bank by June 1, 1997, unless state
legislators  act to "opt-out" of this  provision,  to acquire banks in any state
one year after the  effective  date of the  Interstate  Banking  Act, and permit
banks to establish de novo branches across state lines so long as the individual
states into which a potential  de novo entrant  proposes to branch  specifically
passes legislation to "opt-in."

     Under the  Interstate  Banking  Act, a bank may merge  beginning on June 1,
1997, with a bank in another state so long as the transaction does not involve a
bank in a home state which has enacted a law after the date of  enactment of the
Interstate  Banking Act and before June 1, 1997, that applies equally to all out
of state banks and expressly prohibits such interstate merger transactions. Such
a law would have no effect on merger transactions  approved before the effective
date of such state law.  States  may also  elect to permit  merger  transactions
before June 1, 1997. The Interstate  Banking Act authorizes  interstate  mergers
involving the  acquisition of a branch of a bank without the  acquisition of the
bank only as state law  permits  an out of state  acquired  to  acquire a branch
without acquiring the bank. State minimum age laws for banks to be acquired will
be  preserved  unless  state law  provides for a minimum age period of more than
five years. After consummation of any interstate merger transaction, a resulting
bank may establish or operate additional branches at any location where any bank
involved in the  transaction  could have  established or operated a branch under
applicable federal or state law.

     The Federal  Reserve is  authorized  to approve the  acquisition  by a well
capitalized  and  adequately  managed  bank  holding  company  of a bank that is
located  in  another  state  without  regard as to whether  the  acquisition  is
prohibited under the laws of any state.  Again, state minimum age laws for banks
to be acquired will be preserved unless the state law provides for a minimum age
period  of more  than  five  years.  The  Federal  Reserve  may not  approve  an
interstate  acquisition  which would result in the acquirer's  controlling  more
than 10% of the total amount of deposits of insured  depository  institutions in
the  United  States  with 30% or more of the  deposits  in the home state of the
target  bank.  A state may waive the 30% limit based on  criteria  that does not
discriminate against out of state institutions.  The limitations do not apply to

                                       6
<PAGE>
the initial entry into a state by a bank holding  company unless the state has a
deposit concentration cap that applies on a nondiscriminatory  basis to in state
or  out  of  state  bank  holding  companies  making  an  initial   acquisition.
Notwithstanding  the  foregoing,   anti-trust  laws  are  not  affected  by  the
Interstate Banking Act.

     The Bank is also subject to state and federal governmental regulations. The
Bank operates as a banking institution  incorporated under the laws of the State
of Georgia  and subject to  examination  by the  Department.  The Bank must also
comply with the state usury laws which limit the rates of interest  which may be
charged on certain  types of loans.  The Bank is also,  as a  nonmember  insured
bank,  subject  to the  powers,  functions  and  duties of the  Federal  Deposit
Insurance Corporation ("FDIC").

     The  Department  regulates  all  areas  of the  Bank's  commercial  banking
operations,  including de novo branching,  banking ------- facilities,  mergers,
interest  rate  ceilings and holding  companies.  The Bank must also comply with
state  usury  laws that  limit the rates of  interest  which may be  charged  on
certain types of loans. For example, the Financial  Institutions Code limits the
establishment and operation of bank offices and bank facilities generally within
the county in which the parent bank or branch bank is  situated.  State law also
limits, upon approval by the Department, the merger or consolidation of banks.

     In addition to state banking laws and regulations applicable to the Bank as
a  state  banking  institution,  the  Bank  is  also  regulated,  as an  insured
institution not a member bank of the Federal  Reserve  System,  by the FDIC. The
major  functions of the FDIC with respect to insured  banks  include  paying off
depositors to the extent  provided by law in the event a bank is closed  without
adequate provisions having been made to pay the claims of depositors,  acting as
the receiver of state banks placed in  receivership  when appointed  receiver by
state authorities,  and preventing the continuance or development of unsound and
unsafe banking practices. In addition, the FDIC is authorized to examine insured
banks which are not  members of the  Federal  Reserve  System to  determine  the
condition of such banks for insurance  purposes.  The FDIC is also authorized to
approve mergers, consolidations and assumption of deposit liability transactions
between  insured banks and  non-insured  banks or  institutions,  and to prevent
capital or surplus diminution in such transactions whether resulting, continued,
or assumed  bank is an insured  non-member  state bank.  Also,  the FDIC closely
examines  non-member  banks for compliance with certain federal statutes such as
the Community Reinvestment Act and the Truth-and-Lending Act.

     The Federal  Deposit  Insurance  Act (the "Act"),  including  the Financial
Institutions  Reform,  Recovery and  Enforcement  Act of 1989 ("FIRREA") and the
Federal  Deposit  Insurance  Corporation  Improvement  Act of  1991  ("FDICIA"),
generally  regulates the Bank's  operations and compliance  with federal banking
laws.  FIRREA was  enacted  primarily  in an attempt to address  problems in the
savings and loan industry.  However,  FIRREA has had a substantial effect on the
environment  in which  commercial  banks  operate.  The Bank is required to meet
certain core,  tangible and risk-based  capital ratios. In addition,  the annual
assessment  rates for banks insured by the FDIC  increased from .083% of insured
deposits to .12% of insured  deposits in 1990, to .195% in 1991,  and to .23% of
insured  deposits  in  1992.  Banks  will be  entitled  to a rebate  of  deposit
insurance  premiums when the FDIC's insurance  reserves equal 1.25% of estimated
insured  deposits (unless the FDIC determines  future losses are probable).  The
increase in deposit  premiums is directly  attributable  to the large  number of
insured banks which have failed in recent years.

                                       7
<PAGE>
     FDICIA  was  enacted  in large  measure  to  improve  the  supervision  and
examination of insured depository institutions in an effort to reduce the number
of bank  failures and the  resulting  demands on the deposit  insurance  system.
FDICIA generally  divides insured  financial  institutions into five categories:
(1) well capitalized  institutions having a total risk-based capital ratio of at
least 10%, a Tier One risk-based ratio of at least 6% and a leverage ratio of at
least 5%; (2)  adequately  capitalized  institutions  having a total  risk-based
capital ratio of at least 8%, a Tier One  risk-based  ratio of at least 4% and a
leverage ratio of at least 4%; (3) undercapitalized  institutions having a total
risk-based capital ratio of under 8%, a Tier One risk-based ratio of under 4% or
a leverage ratio of under 4%; (4)  significantly  undercapitalized  institutions
having a total risk-based capital ratio of under 6%, a Tier One risk-based ratio
of under 3% or a leverage ratio of under 3%; and (5) critically undercapitalized
institutions having a ratio of tangible equity to total assets of 2% or less. As
an institution drops below the well capitalized  category, it becomes subject to
increasing scrutiny, decreasing management flexibility, and increasingly onerous
regulatory control.

     For example, the FDICIA requires all depository institutions with assets in
excess of $150 million,  or such larger  threshold as may be  established by the
FDIC,  prepare and submit to the FDIC an  appropriate  federal and state banking
regulators  annual  financial  statements  that have been audited by independent
public  accountants,  file  reports  repaired  by  the  depository  institutions
containing  a  statement  by  management  of  its  responsibilities  and  by the
depository institutions' independent public accountant attesting to the accuracy
of management's annual assessment of its financial reporting,  internal controls
and regulatory compliance,  and establish an audit committee composed of members
of the  board of  directors  who are  independent  of  management.  The FDIC has
provided  by  regulation  that  these  provisions  of the FDICIA do not apply to
depository  institutions with assets less than $500 million. An enactment of the
FDICIA has also  resulted  in the  promulgation  of  regulations  by  regulatory
agencies  that will tend to  restrict  to some  degree the real  estate  lending
practices of financial institutions. FDICIA also provides a ban on acceptance of
brokered  deposits  except by well  capitalized  institutions  and by adequately
capitalized  institutions  with the permission of the FDIC, and for restrictions
on  activities  engaged  in by state  banks  and their  subsidiaries,  including
insurance  underwriting,  to the same activities  permissible for national banks
and  their  subsidiaries,  unless  the  state  bank  is well  capitalized  and a
determination  is made by the FDIC that the activities do not pose a significant
risk to the  insurance  fund.  The  FDICIA  otherwise  provides  for  additional
supervision  and  regulation of financial  institutions,  the effect of which is
likely to increase the operating expenses of the Bank.

     The FDICIA also contains  provisions  requiring prompt corrective action by
financial  institutions which are characterized as "under capitalized" or worse.
The action required to be taken by such institutions includes the requirement of
filing a capital plan with the bank's primary federal regulator,  prohibition on
the  payment  of  dividends  and  management  fees,  restrictions  on  executive
compensation,  and increased supervisory  monitoring.  Other restrictions may be
imposed on the  institution  either by its primary  federal  regulator or by the
FDIC,  including  requirements to raise additional  capital,  sell assets, or to
sell the  institution.  At December 31, 2000,  the Bank  exceeded  those minimum
capital requirements.

     The RCDRIA establishes a Community Development Financial  Institutions Fund
to  achieve  these  objectives.  The fund is  authorized  to  provide  financial
assistance  through a  variety  of  mechanisms,  including  equity  investments,

                                       8
<PAGE>
grants,  loans,  credit union shares and deposits.  The amount of assistance any
community  development financial institution and its subsidiaries and affiliates
may receive is generally limited to $5,000,000.00.  A qualifying institution may
receive an  additional  $3.75  million for the purpose of serving an  investment
area in another state.

     The RCDRIA also provides certain regulatory relief,  requiring each federal
agency  to  streamline  and  modify  its   regulations   and  policies,   remove
inconsistencies and eliminate outmoded and duplicative requirements.  The RCDRIA
also directs the federal  agencies to coordinate  examinations  among  affiliate
banks,  coordinate examinations with other federal banking agencies, and work to
coordinate with state banking  agencies.  The federal banking  agencies are also
directed  to  work  jointly  in  developing  a  system  for  banks  and  savings
associations to file reports and statements electronically and to adopt a single
form for filing core information in reports and statements.

     The Interstate  Banking Act now provides that banks may establish  branches
across state lines upon  approval of the  appropriate  federal  regulator if the
state  "opts-in"  by  enacting   legislation  that  expressly  permits  de  novo
interstate  branching.  The  establishment of the initial branch in a host state
which permits de novo interstate  branching is subject to the same  requirements
which apply to the initial acquisition of a bank in a host state, other than the
deposit  concentration  limits, since the bank would not control any deposits in
the host state at the time of entry.  Once a branch has been  established  by de
novo branching,  the bank may establish and acquire  additional  branches at any
location  in the host  state in the same  manner  as any bank in the host  state
could have established or acquired under applicable federal or state law.

Regulatory and Legislative Changes
----------------------------------

     The Gramm-Leach-Bliley Act (the "Gramm Act"), adopted November 12, 1999, is
intended to enhance  competition in the financial services industry by providing
a framework for the affiliation of banks,  brokerage firms,  insurance companies
and other  financial  service  providers.  If the bank  holding  company and its
subsidiaries   have  a  satisfactory   or  better  rating  under  the  Community
Reinvestment  Act of 1977,  then the Gramm Act permits a bank holding company to
become a financial holding company.

     The Gramm Act also  streamlines the Federal  Reserve's  supervision of bank
holding  companies,  liberalizing the reporting and examination  requirements of
the BHCA.  The Gramm Act prohibits  regulations of the capital of a bank holding
company,  so long as the bank holding company is not a bank and is in compliance
with the capital  regulations  of the Securities  and Exchange  Commission  (the
"Commission") and the appropriate state authority.

     The Gramm Act generally limits the Federal  Reserve's ability to regulate a
bank holding company subsidiary  directly.  For example, the Gramm Act prohibits
the Federal  Reserve from requiring  bank holding  companies to provide funds or
other assets to  subsidiary  banks,  so long as the bank holding  company or its
affiliate  is an  insurance  company,  broker  or  dealer  registered  under the
Exchange Act and providing  such funds would have a material  adverse  effect on
the financial condition of the company. The Federal Reserve may, however,  order
the bank  holding  company  to divest of the bank  subsidiary  within  180 days.
Moreover,  the  Federal  Reserve  (or FDIC or Office of the  Comptroller  of the
Currency) may impose certain  "prudential  safeguards"  regulating  transactions

                                       9
<PAGE>
between a bank and its  affiliates  if  consistent  with the purposes of certain
banking laws.  The Gramm Act also amends  previous  legislation  permitting  the
Federal  Reserve to order a bank holding  company to terminate  all  non-banking
activities  or divest itself of control in the  non-banking  subsidiary in cases
where the  Federal  Reserve  found the  activities  to be a serious  risk to the
subsidiary  bank.  The Gramm Act now  allows the bank  holding  company to elect
whether to terminate the activity or divest, as before,  or terminate  ownership
and control of the bank itself.

ITEM 2.  DESCRIPTION OF THE PROPERTY
------------------------------------

     The Company is located at 6639 Highway 53 East, Dawsonville, Georgia 30534.
The property is owned by the Bank.  The Bank  conducts its  operations  from its
main office  location at 6639 Highway 53 East,  Dawsonville,  Georgia  30534 and
from two branches: its supermarket branch at 120 South Center Lane, Dawsonville,
Georgia 30534. The supermarket  branch and the downtown branch are leased by the
Bank. The Bank is presently  developing property at 34 Holcomb Way, Marble Hill,
Georgia 30148 in Pickens County for a future branch.

     The Bank's main office  consists of  approximately  11,000  square  feet, 4
drive-up  windows,  an automated  teller machine ("ATM") and an adjacent parking
lot. The supermarket branch has been in continuous  operation since it opened in
September, 1998. The branch lease space is approximately 1,000 square feet, with
an ATM but no drive-up  windows.  The monthly  lease rental is $2,500,  with the
lease  expiring in 2003.  The downtown  branch has been in continuous  operation
since it opened in October,  2000. The branch lease space is approximately 3,000
square feet,  with an ATM and one drive-up  window.  The monthly lease rental is
$3,500, with the lease expiring in 2003. The Bank's new branch in Pickens County
is expected  to consist of  approximately  3,300  square  feet,  with 2 drive-up
windows, an ATM and adjacent parking lot. The new branch is scheduled to open in
May, 2001.

ITEM 3.  LEGAL PROCEEDINGS
--------------------------

         Neither  the Company  nor the Bank is a party to any  material  pending
legal  proceedings  other than  ordinary  routine  litigation  incidental to the
business of the Company. The Company is not a party to any legal, administrative
or judicial  proceeding  under  Section 8 of the BHCA.  To the  knowledge of the
management of the Company,  no such  proceedings are  contemplated or threatened
against the Company or the Bank.

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

         The Company did not submit any matter during the fourth  quarter of the
fiscal year ending  December 31, 2000 to a vote of security  holders through the
solicitation  of proxies or  otherwise.  The Bank did hold a special  meeting of
shareholders  on  March  21,  2000  for the  purpose  of  considering  a plan of
reorganization  pursuant to which the Bank would become and thereafter  operated
as a wholly-owned  subsidiary of the Company. The reorganization was approved by
more than two-thirds (2/3) of the outstanding shares of common stock of the Bank
entitled to vote and present at the special meeting of shareholders.

                                       10
<PAGE>
                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
-----------------------------------------------------------------

         There is no  established  trading market for shares of the common stock
of the Company. Further,  management of the Company has no reason to expect that
an established  trading market will develop in the common shares of the Company.
The following  table reflects the trades of shares of the Company from inception
May 15, 1998 through December 31, 2000 based on limited available information.

<TABLE>
<CAPTION>

           YEAR              NUMBER OF SHARES TRADED#       HIGH SELLING PRICE*           LOW SELLING PRICE*
           ----              ------------------------       -------------------           ------------------
<S>                                    <C>                         <C>                          <C>
1998
    First Quarter                       N/A                         N/A                           N/A
    Second Quarter                      N/A                         N/A                           N/A
    Third Quarter                      1,100                       $12.00                       $10.00
    Fourth Quarter                     2,000                       $16.00                       $14.00

1999
    First Quarter                      5,000                       $16.00                       $16.00
    Second Quarter                     2,000                       $16.00                       $16.00
    Third Quarter                      2,600                       $16.00                       $16.00
    Fourth Quarter                     4,000                       $16.00                       $16.00

2000
    First Quarter                      1,000                       $16.00                       $16.00
    Second Quarter                     1,750                       $16.00                       $16.00
    Third Quarter                      5,350                       $18.00                       $16.00
    Fourth Quarter                     1,400                       $20.00                       $18.00
</TABLE>


# According to  information  available to Management  of the Company,  the above
Table  includes  trades  between  family  members with respect to 10,000  shares
during the years ended  December 31, 2000 and 1999.  There were no shares traded
between family members during the year ended December 31, 1998.

* The Company is not generally made aware of the number of shares of the Company
stock trades or the prices at which such shares have traded. The prices reported
are best upon the best available information.

As of December 31,  2000,  the Company had  approximately  740  shareholders  of
record of the Company's common stock.

         The Company is also allowed to declare and pay  dividends in authorized
but unissued shares of its stock, provided there is transferred to capital stock
an amount equal to the value of the shares distributed and provided further that
after payment of the dividend the Company  continues to maintain required levels
of paid-in capital and appropriated retained earnings. The Company did not pay a
stock dividend to its shareholders in 1999 or 2000.

                                       11
<PAGE>
         In the absence of other activities  conducted by the Company  following
the  reorganization,  its ability to pay dividends will depend upon the earnings
of the Bank.  The Board of Directors of the Company  hopes future  operations of
the Company result in a payment of dividends to its shareholders.  However,  the
Company  can not assure the future  payment of  dividends,  either in cash or in
stock, in the foreseeable future.

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

The  following is a discussion  of our  financial  condition  and the  financial
condition of our bank subsidiary, Chestatee State Bank, at December 31, 2000 and
1999 and the results of operations for the years then ended. The purpose of this
discussion is to focus on information about our financial  condition and results
of  operations  that  are not  otherwise  apparent  from our  audited  financial
statements.  Reference  should  be made to  those  statements  and the  selected
financial data presented  elsewhere in this report for an  understanding  of the
following discussion and analysis.

Forward-Looking Statements

We may  from  time to time  make  written  or oral  forward-looking  statements,
including  statements  contained in our filings with the Securities and Exchange
Commission and reports to  stockholders.  Statements  made in the Annual Report,
other  than  those  concerning  historical  information,  should  be  considered
forward-looking   and  subject  to  various   risks  and   uncertainties.   Such
forward-looking  statements are made based upon  management's  belief as well as
assumptions made by, and information currently available to, management pursuant
to "safe harbor" provisions of the Private  Securities  Litigation Reform Act of
1995. Our actual results may differ  materially from the results  anticipated in
forward-looking  statements due to a variety of factors,  including governmental
monetary and fiscal  policies,  deposit  levels,  loan demand,  loan  collateral
values, securities portfolio values, interest rate risk management,  the effects
of competition in the banking  business from other  commercial  banks,  thrifts,
mortgage banking firms,  consumer finance companies,  credit unions,  securities
brokerage  firms,  insurance  companies,  money market funds and other financial
institutions operating in our market area and elsewhere,  including institutions
operating through the Internet,  changes in governmental  regulation relating to
the  banking  industry,   including   regulations   relating  to  branching  and
acquisitions,  failure of assumptions  underlying the  establishment of reserves
for loan losses,  including the value of collateral  underlying delinquent loans
and other  factors.  We caution that such factors are not  exclusive.  We do not
undertake to update any forward-looking  statement that may be made from time to
time by us, or on our behalf.

Overview

The year  2000 was  highlighted  by  significant  loan and  deposit  growth.  We
completely recouped accumulated deficits incurred through 1999, and reported net
income of $550,000.  Our primary market area of Dawson County, Georgia continues
to grow, and we are strategically positioned to take advantage of the growth. We
are expanding  geographically by adding a new branch in downtown  Dawsonville in

                                       12
<PAGE>
2000, and adding a new branch in neighboring Pickens County to open in mid-2001.
The area's growth should provide a base for continued profitability.

Financial Condition at December 31, 2000 and 1999

The following is a summary of our balance sheets for the periods indicated:

<TABLE>
<CAPTION>
                                                December 31,
                                         2000                1999
                                           (Dollars in Thousands)

<S>                              <C>                <C>
Cash and due from banks          $       5,032      $        2,264
Federal funds sold                       2,730               2,420
Securities                               3,639               3,492
Loans, net                              66,329              39,245
Premises and equipment                   3,632               2,970
Other assets                             1,068                 640
                                       -------             -------

                                 $      82,430      $       51,031
                                        ======              ======

Total deposits                   $      72,178      $       41,816
Other borrowings                            50                  --
Other liabilities                          617                 188
Stockholders' equity                     9,585               9,027
                                       -------             -------

                                 $      82,430      $       51,031
                                        ======              ======
</TABLE>

Financial Condition at December 31, 2000 and 1999

As of December 31, 2000,  we had total assets of $82.4  million,  an increase of
62% over December 31, 1999. Total interest-earning  assets were $73.4 million at
December  31,  2000 or 89.09% of total  assets  as  compared  to 89.27% of total
assets at December 31, 1999. Our primary interest-earning assets at December 31,
2000 were loans, which made up 91% of total interest-earning  assets as compared
to 87% at December 31, 1999.  Our loan to deposit  ratio was 93% at December 31,
2000 as compared to 95% at December 31, 1999.  Deposit  growth of $30.3 million,
has been used primarily to fund loan growth of $27.4 million. The balance of the
deposit growth funded an increase in cash and due from banks of $2.7 million.

Our securities  portfolio,  consisting of U.S. Agency  securities and restricted
equity  securities,  amounted to $3.6 million at December  31, 2000.  Unrealized
losses on securities available-for-sale decreased to $2,000 at December 31, 2000
from  $9,000  at   December   31,   1999.   Unrealized   losses  on   securities
held-to-maturity  decreased  to $9,000 at  December  31,  2000 from  $39,000  at
December 31, 1999. We have not  specifically  identified any securities for sale
in future periods, which, if so designated, would require a charge to operations
if the market  value would not be  reasonably  expected to recover  prior to the
time of sale.

                                       13
<PAGE>
We have 61% of our loan portfolio  collateralized  by real estate located in our
primary market area of Dawson County, Georgia and surrounding counties. Our real
estate mortgage portfolio consists of loans collateralized by one to four-family
residential  properties  (41%),  construction  loans to build one to four-family
residential properties (19%), and nonresidential properties consisting primarily
of small business  commercial  properties (40%). We generally require that loans
collateralized by real estate not exceed 80% of the collateral value.

The remaining 39% of the loan portfolio  consists of commercial,  consumer,  and
other loans. We require  collateral  commensurate with the repayment ability and
creditworthiness of the borrower.

The  specific  economic  and credit risks  associated  with our loan  portfolio,
especially the real estate portfolio, include, but are not limited to, a general
downturn in the  economy  which could  affect  unemployment  rates in our market
area,  general real estate market  deterioration,  interest  rate  fluctuations,
deteriorated or non-existing collateral,  title defects,  inaccurate appraisals,
financial  deterioration  of  borrowers,  fraud,  and any  violation  of banking
protection laws.  Construction  lending can also present other specific risks to
the lender  such as whether  developers  can find  builders to buy lots for home
construction,  whether the builders can obtain  financing for the  construction,
whether  the  builders  can sell the home to a buyer,  and whether the buyer can
obtain permanent financing.  Currently, real estate values and employment trends
in our market area are stable with no indications  of a significant  downturn in
the local economy.

We attempt to reduce  these  economic  and credit  risks not only by adhering to
loan to value guidelines,  but also by investigating the creditworthiness of the
borrower and monitoring the borrower's  financial  position.  Also, we establish
and  periodically  review our lending  policies and  procedures.  State  banking
regulations limit exposure by prohibiting secured loan relationships that exceed
25% of the Bank's statutory capital and unsecured loan relationships that exceed
15% of the Bank's statutory capital.

Liquidity and Capital Resources

The purpose of liquidity  management is to ensure that there are sufficient cash
flows to satisfy demands for credit,  deposit withdrawals,  and our other needs.
Traditional  sources of liquidity  include asset  maturities  and growth in core
deposits.  A company  may  achieve its  desired  liquidity  objectives  from the
management of assets and  liabilities  and through funds provided by operations.
Funds invested in short-term marketable  instruments and the continuous maturing
of other earning assets are sources of liquidity from the asset perspective. The
liability  base  provides  sources of  liquidity  through  deposit  growth,  the
maturity structure of liabilities, and accessibility to market sources of funds.

Scheduled  loan  payments  are a  relatively  stable  source of funds,  but loan
payoffs and deposit flows fluctuate significantly,  being influenced by interest
rates and  general  economic  conditions  and  competition.  We attempt to price
deposits  to  meet  asset/liability  objectives  consistent  with  local  market
conditions.

                                       14
<PAGE>
Our  liquidity  and  capital  resources  are  monitored  on a periodic  basis by
management,  State and  Federal  regulatory  authorities.  As  determined  under
guidelines  established  by  regulatory  authorities  and internal  policy,  our
liquidity was considered satisfactory.

At December 31, 2000,  we had loan  commitments  outstanding  of $15.4  million.
Because these  commitments  generally have fixed  expiration dates and many will
expire without being drawn upon, the total commitment amounts do not necessarily
represent  future  cash  requirements.  If  needed,  we have  the  ability  on a
short-term  basis to borrow and  purchase  federal  funds  from other  financial
institutions.  At December 31, 2000, we had  arrangements  with three commercial
banks for additional short-term advances of $4,000,000.

At December 31,  2000,  our capital  ratios were  considered  adequate  based on
regulatory minimum capital  requirements.  Stockholders' equity increased due to
net income in 2000 of $550,000 and the increase in the fair value of  securities
available-for-sale,  net of  tax,  in  the  amount  of  $8,000.  For  regulatory
purposes,  the net unrealized gains and losses on securities  available-for-sale
are excluded in the computation of the capital ratios.

In the future,  the primary source of funds  available to Chestatee  Bancshares,
Inc. will be the payment of dividends by the Bank. Banking regulations limit the
amount of the dividends  that may be paid without  prior  approval of the Bank's
regulatory agency.  Currently,  the Bank could pay $154,000 in dividends without
regulatory approval.

The minimum capital  requirements to be considered well capitalized under prompt
corrective  action  provisions  and the  actual  capital  ratios  for  Chestatee
Bancshares, Inc. and the Bank as of December 31, 2000 are as follows:

<TABLE>
<CAPTION>
                                                                      Actual
                                                       ------------------------------------

                                                                                   Regulatory
                                              Consolidated           Bank          Requirements
                                              ------------           ----          ------------

     <S>                                          <C>               <C>              <C>
     Leverage capital ratio                       11.97%            12.03%            5.00%
     Risk-based capital ratios:
        Core capital                              13.97             14.06             6.00
        Total capital                             15.05             15.13            10.00
</TABLE>

At December 31, 2000, we had no material  commitments for capital  expenditures.
We anticipate  spending  approximately  $330,000 on the  construction of our new
branch.

These ratios may decline as asset growth  continues,  but are expected to exceed
the regulatory minimum requirements.  Anticipated future earnings will assist in
keeping these ratios at satisfactory levels.

We believe that our liquidity  and capital  resources are adequate and will meet
our  foreseeable  short and long-term  needs.  We  anticipate  that we will have
sufficient  funds  available  to meet current  loan  commitments  and to fund or
refinance, on a timely basis, our other material commitments and liabilities.

                                       15
<PAGE>
Management  is not aware of any other  known  trends,  events or  uncertainties,
other than those discussed above,  that will have or that are reasonably  likely
to have a material  effect on our  liquidity,  capital  resources or operations.
Management is also not aware of any current  recommendations  by the  regulatory
authorities that, if they were implemented, would have such an effect.

Effects of Inflation
--------------------

The  impact of  inflation  on banks  differs  from its  impact on  non-financial
institutions. Banks, as financial intermediaries, have assets that are primarily
monetary in nature and that tend to fluctuate in concert with inflation.  A bank
can reduce the impact of  inflation if it can manage its rate  sensitivity  gap.
This gap  represents  the  difference  between  rate  sensitive  assets and rate
sensitive  liabilities.  We, through our asset-liability  committee,  attempt to
structure  the assets and  liabilities  and  manage  the rate  sensitivity  gap,
thereby seeking to minimize the potential effects of inflation.  For information
on the management of the Bank's interest rate sensitive  assets and liabilities,
see the "Asset/Liability Management" section.

Results of Operations For The Years Ended December 31, 2000 and 1999

 The following is a summary of our operations for the years indicated.

<TABLE>
<CAPTION>
                                              Years Ended December 31,
                                             2000                1999
                                              (Dollars in Thousands)

<S>                                       <C>                  <C>
Interest income                           $  6,180             $ 3,426

Interest expense                             2,824               1,330
                                             -----               -----

Net interest income                          3,356               2,096

Provision for loan losses                      347                 245

Other income                                   432                 335

Other expenses                               2,881               1,889
                                             -----               -----

Pretax income                                  560                 297

Income taxes                                    10                   -
                                           -------              ------

Net income                                $    550             $   297
                                            ======               =====
</TABLE>

                                       16
<PAGE>
Net Interest Income
-------------------

Our results of  operations  are  determined  by our  ability to manage  interest
income and expense  effectively,  to minimize  loan and  investment  losses,  to
generate  non-interest  income,  and  to  control  operating  expenses.  Because
interest  rates are determined by market forces and economic  conditions  beyond
our control,  our ability to generate net interest income depends on our ability
to  obtain  an  adequate  net  interest  spread  between  the  rate  we  pay  on
interest-bearing liabilities and the rate we earn on interest-earning assets.

The net yield on average  interest-earning  assets was 5.45% in 2000 as compared
to 5.43% in 1999.  Average  loans  increased  by $23.1  million  which  were the
primary  change in average  interest-earning  assets that  increased  overall by
$23.0 million. Average  interest-bearing  liabilities increased by $18.6 million
with average time deposits  accounting  for the vast majority of this  increase.
The rate earned on average  interest-earning  assets increased to 10.03% in 2000
from  8.87%  in 1999.  The rate  paid on  average  interest-bearing  liabilities
increased to 5.53% in 2000 as compared to 4.08% in 1999.

Provision for Loan Losses
-------------------------

The  provision  for loan losses was  $347,000 in 2000 as compared to $245,000 in
1999. The amounts provided were due primarily to the growth of the portfolio and
to our  assessment  of the  inherent  risk  in the  portfolio.  Based  upon  our
evaluation of the loan portfolio, we believe the allowance for loan losses to be
adequate  to  absorb   possible   losses  on  existing  loans  that  may  become
uncollectible.   This  evaluation  considers  past  due  and  classified  loans,
historical  experience,  underlying  collateral  values,  and  current  economic
conditions  that may affect the borrower's  ability to repay. As of December 31,
2000 and 1999, we had no nonperforming  loans or assets.  The allowance for loan
losses as a  percentage  of total loans at December  31, 2000 and 1999 was 1.10%
and 1.00%, respectively.

Other Income
------------

Other operating income consists of service charges on deposit accounts and other
miscellaneous  revenues and fees. Other operating income was $432,000 in 2000 as
compared  to  $335,000  in 1999.  The  increase is due to an increase in service
charges on deposit accounts of $123,000 related to overall deposit growth offset
by a decrease in mortgage loan origination fees of $38,000.

Other Expenses
--------------

Other  expenses  were  $2,881,000  in 2000 as compared to $1,889,000 in 1999, an
increase of $992,000.  Salaries and employees benefits increased by $361,000 due
to an increase in the number of full time equivalent employees to 37 at December
31,  2000 from 25 at  December  31,  1999 and  other  annual  salary  increases.
Equipment  and  occupancy  expenses  increased  by  $173,000  due  primarily  to
increased  depreciation  costs of $59,000 and increased  repairs and maintenance
costs of $49,000.  Other operating  expenses increased by $458,000 due primarily
to increased data processing costs of $133,000, increased legal and professional
fees of $77,000, increased stationery and supplies expense of $70,000, increased

                                       17
<PAGE>
advertising  costs of $44,000 and increased  other  operating costs of $134,000.
The  increases in other  operating  expenses are  directly  attributable  to the
overall growth of the Bank.

Income Tax
----------

We have  reported  income tax expense in 2000 of  $10,000.  The rate of tax as a
percentage of pretax income was 2% as compared to the Federal  statutory rate of
34%.  The  significant  difference  is due to the  recognition  of  $168,000  of
deferred tax assets that had been previously accorded a valuation allowance.  No
income tax expense was  reported in 1999 due to  accumulated  deficits  incurred
through 1999.

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

Our objective is to manage  assets and  liabilities  to provide a  satisfactory,
consistent  level of  profitability  within the framework of  established  cash,
loan, investment,  borrowing, and capital policies. Certain officers are charged
with the  responsibility  for  monitoring  policies and  procedures  designed to
ensure acceptable  composition of the asset/liability mix.  Management's overall
philosophy is to support asset growth primarily  through growth of core deposits
of all categories made by local individuals, partnerships, and corporations.

Our asset/liability mix is monitored on a regular basis with a report reflecting
the interest rate-sensitive assets and interest rate-sensitive liabilities being
prepared and presented to the Bank's Board of Directors on a monthly basis.  The
objective  of this  policy is to  monitor  interest  rate-sensitive  assets  and
liabilities  so as to minimize the impact of  substantial  movements in interest
rates  on  earnings.  An  asset  or  liability  is  considered  to  be  interest
rate-sensitive  if it will  reprice or mature  within the time period  analyzed,
usually one year or less.  The interest  rate-sensitivity  gap is the difference
between the interest-earning  assets and interest-bearing  liabilities scheduled
to mature or reprice within such time period. A gap is considered  positive when
the amount of  interest  rate-sensitive  assets  exceeds  the amount of interest
rate-sensitive  liabilities.  A gap is  considered  negative  when the amount of
interest rate-sensitive  liabilities exceeds the interest rate-sensitive assets.
During a period of rising  interest  rates,  a negative gap would tend to affect
net interest income  adversely,  while a positive gap would tend to result in an
increase in net interest income. Conversely, during a period of falling interest
rates,  a  negative  gap would  tend to result in an  increase  in net  interest
income, while a positive gap would tend to affect net interest income adversely.
If our assets and liabilities were equally flexible and moved concurrently,  the
impact of any  increase or decrease in  interest  rates on net  interest  income
would be minimal.

A simple interest rate "gap" analysis by itself may not be an accurate indicator
of how net  interest  income  will be  affected  by changes in  interest  rates.
Accordingly,  we also  evaluate  how the  repayment  of  particular  assets  and
liabilities is impacted by changes in interest  rates.  Income  associated  with
interest-earning  assets and costs associated with interest-bearing  liabilities
may not be affected  uniformly by changes in interest  rates.  In addition,  the
magnitude  and  duration  of changes in  interest  rates may have a  significant
impact  on net  interest  income.  For  example,  although  certain  assets  and
liabilities may have similar maturities or periods of repricing,  they may react

                                       18
<PAGE>
in different  degrees to changes in market  interest  rates.  Interest  rates on
certain  types of assets  and  liabilities  fluctuate  in  advance of changes in
general market rates, while interest rates on other types may lag behind changes
in general market rates. In addition,  certain  assets,  such as adjustable rate
mortgage loans, have features  (generally referred to as "interest rate caps and
floors") that limit changes in interest rates.  Prepayment and early  withdrawal
levels also could deviate  significantly  from those assumed in calculating  the
interest rate gap. The ability of many borrowers to service their debts also may
decrease during periods of rising interest rates.

Changes in interest rates also affect our liquidity position. We currently price
deposits  in  response  to market  rates  and it is  management's  intention  to
continue this policy.  If deposits are not priced in response to market rates, a
loss of  deposits  could  occur  that  would  negatively  affect  our  liquidity
position.

At December 31, 2000,  our  cumulative  one year interest  rate-sensitivity  gap
ratio was 85%.  Our  targeted  ratio is 80% to 120% in this time  horizon.  This
indicates that our interest-bearing  liabilities will reprice during this period
at a rate faster than our interest-earning assets.

The  following  table  sets  forth  the  distribution  of the  repricing  of our
interest-earning  assets and  interest-bearing  liabilities  as of December  31,
2000,   the   interest   rate-   sensitivity   gap,  the   cumulative   interest
rate-sensitivity gap, the interest rate-sensitivity gap ratio and the cumulative
interest  rate-sensitivity gap ratio. The table also sets forth the time periods
in which interest-earning assets and interest-bearing liabilities will mature or
may reprice in accordance with their contractual terms.  However, the table does
not  necessarily  indicate the impact of general  interest rate movements on the
net  interest  margin as the  repricing  of  various  categories  of assets  and
liabilities is subject to competitive  pressures and the needs of our customers.
In addition,  various assets and liabilities  indicated as repricing  within the
same period may in fact,  reprice at  different  times within such period and at
different rates.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       19
<PAGE>
<TABLE>
<CAPTION>
                                                                  After             After
                                                                  Three              One
                                                                 Months            Year but
                                                 Within            but             Within             After
                                                  Three           Within            Five              Five
                                                 Months          One Year           Years             Years          Total
                                                                   (Dollars in Thousands)


<S>                                         <C>                <C>               <C>             <C>              <C>
Interest-earning assets:
     Federal funds sold                     $      2,730       $        --       $        --     $        --      $      2,730
     Securities                                      596             1,894             1,149              --             3,639
     Loans                                        29,961            10,261            22,013           4,831            67,066
                                                  ------            ------            ------           -----            ------

                                                  33,287            12,155            23,162           4,831            73,435
                                                  ------            ------            ------           -----            ------

Interest-bearing liabilities:
     Interest-bearing demand
          deposits                                19,987                --                --              --            19,987
     Savings                                       1,411                --                --              --             1,411
     Certificates of deposit                       8,467            23,260            11,497               8            43,232
     Note payable                                     --                50                --              --                50
                                               ---------           -------          --------         -------           -------

                                                  29,865            23,310            11,497               8            64,680
                                                  ------            ------            ------        --------            ------

Interest rate sensitivity

     gap                                    $      3,422       $   (11,155)      $    11,665     $     4,823      $      8,755
                                                 =======           ========           ======           =====             =====
Cumulative interest rate

     sensitivity gap                        $      3,422       $    (7,733)      $     3,932     $     8,755
                                                   =====         ==========            =====           =====
Interest rate sensitivity

     gap ratio                                     1.11             .52               2.01            603.88
                                                 ======        ========           ========            ======
Cumulative interest rate

     sensitivity gap ratio                         1.11             .85               1.06             1.14
                                                 ======        ========           ========          =======
</TABLE>
               SELECTED FINANCIAL INFORMATION AND STATISTICAL DATA

The tables and  schedules on the following  pages set forth certain  significant
financial  information and statistical data with respect to: the distribution of
our  assets,  liabilities  and  stockholders'  equity;  the  interest  rates  we
experience;  our investment  portfolio;  our loan portfolio,  including types of
loans,  maturities,  and sensitivities of loans to changes in interest rates and
information  on  nonperforming  loans;  summary of the loan loss  experience and
allowance  for loan  losses;  types of  deposits  and the  return on equity  and
assets.

                                       20
<PAGE>


                    DISTRIBUTION OF ASSETS, LIABILITIES, AND
                              STOCKHOLDERS' EQUITY:
                    INTEREST RATES AND INTEREST DIFFERENTIALS

Average Balances

The  condensed  average  balance  sheet  for  the  year indicated  is  presented
below.(1)

<TABLE>
<CAPTION>
                                                             Years Ended December 31,
                                                              2000              1999
                                                             (Dollars in Thousands)
                   ASSETS

     <S>                                               <C>                <C>
     Cash and due from banks                           $      2,185       $    1,383
     Taxable securities                                       3,767            4,728
     Securities valuation account                                (7)              (6)
     Federal funds sold                                       3,964            3,138
     Loans (2)                                               53,874           30,764
     Allowance for loan losses                                 (526)            (294)
     Other assets                                             3,803            3,282
                                                            -------          -------
                                                       $     67,060       $   42,995
                                                             ======           ======

     Total interest-earning assets                     $     61,605       $   38,630
                                                             ======           ======

          LIABILITIES AND STOCKHOLDERS' EQUITY

     Deposits:
          Noninterest-bearing demand                   $      6,214       $    1,422
          Interest-bearing demand                            19,654           20,572
          Savings                                               828              420
          Time                                               30,605           11,473
                                                             ------        ---------
                   Total deposits                            57,301           33,887

          Federal funds purchased                                --               91
          Note payable                                           26               --
          Other liabilities                                     371              184
                                                           --------         --------
                   Total liabilities                         57,698           34,162
          Stockholders' equity                                9,362            8,833
                                                            -------        ---------
                                                       $     67,060       $   42,995
                                                             ======           ======

          Total interest-bearing liabilities           $     51,113       $   32,556
                                                             ======         ========
</TABLE>
[FN]
(1)  For each category, average balances were determined using the daily average
     balances during the year.

(2)  Nonaccrual loans included in average balances for 1999 were $53,000.  There
     was no nonaccrual loans included in average balances for 2000.
</FN>

                                       21
<PAGE>
Interest Income and Interest Expense

The  following  tables set forth the amount of our interest  income and interest
expense  for each  category  of  interest-earning  assets  and  interest-bearing
liabilities and the average interest rate for total interest-earning  assets and
total interest-bearing liabilities, net interest spread and net yield on average
interest-earning assets.

<TABLE>
<CAPTION>
                                                                   Years Ended December 31,
                                                              2000                            1999
                                                                     Average                        Average
                                                     Interest         Rate            Interest       Rate
                                                                    (Dollars in Thousands)

<S>                             <C>                  <C>              <C>            <C>              <C>
INTEREST INCOME:
     Interest and fees on loans (1)                  $  5,702         10.58%         $   3,014        9.80%
     Interest on taxable securities                       216          5.73                248        5.25
     Interest on federal funds sold                       262          6.62                164        5.23
                                                       ------                           ------
     Total interest income                              6,180         10.03              3,426        8.87
                                                        -----                            -----

INTEREST EXPENSE:
     Interest on interest-bearing
       demand deposits                                    824          4.20                671        3.26
     Interest on savings deposits                          25          2.97                 13        2.97
     Interest on time deposits                          1,973          6.45                641        5.59
     Interest on federal funds purchased                   --            --                  5        5.46
     Interest on note payable                               2          9.00                 --          --
                                                        -----                            -----
     Total interest expense                             2,824          5.53              1,330        4.08
                                                        -----                            -----

NET INTEREST INCOME                                  $  3,356                        $   2,096
                                                        =====                            =====

     Net interest spread                                               4.50%                          4.78%
                                                                       ====                           ====
     Net yield on average interest-earning assets                      5.45%                          5.43%
                                                                       ====                           ====
</TABLE>
[FN]
(1)  Interest  and fees on loans  includes  $452,000  and  $281,000  of loan fee
     income for the years ended December 31, 2000 and 1999, respectively.  There
     was no interest income recognized on nonaccrual loans during 2000 or 1999.
</FN>

                                       22
<PAGE>
Rate and Volume Analysis

The following  table describes the extent to which changes in interest rates and
changes in volume of interest-earning  assets and  interest-bearing  liabilities
have affected our interest  income and expense  during the year  indicated.  For
each  category  of  interest-earning  assets and  interest-bearing  liabilities,
information is provided on changes  attributable to (1) change in volume (change
in volume multiplied by old rate); (2) change in rate (change in rate multiplied
by old volume);  and (3) a  combination  of change in rate and change in volume.
The changes in interest income and interest expense  attributable to both volume
and rate have been allocated proportionately on a consistent basis to the change
due to volume and the change due to rate.

<TABLE>
<CAPTION>
                                                    Year Ended December 31,
                                                        2000 vs. 1999
                                                       Changes Due To:

                                                    Rate      Volume      Net
                                                       (Dollars in Thousands)
<S>                                                <C>       <C>        <C>
Increase (decrease) in:
     Income from interest-earning assets:
     Interest and fees on loans                    $   260   $ 2,428    $ 2,688
     Interest on taxable securities                     21       (53)       (32)
     Interest on federal funds sold                     49        49         98
                                                   -------   -------    -------
              Total interest income                    330     2,424      2,754
                                                   -------   -------    -------

     Expense from interest-bearing liabilities:
     Interest on interest-bearing
              demand deposits                          184       (31)       153
     Interest on savings deposits                       --        12         12
     Interest on time deposits                         112     1,220      1,332
     Interest on note payable                           --         2          2
     Interest on federal funds purchased                --        (5)        (5)
                                                   -------   -------    -------
              Total interest expense                   296     1,198      1,494
                                                   -------   -------    -------

              Net interest income                  $    34   $ 1,226    $ 1,260
                                                   =======   =======    =======
</TABLE>

                                       23
<PAGE>
                              INVESTMENT PORTFOLIO

Types of Investments

The  carrying  amounts  of  securities  at the  dates  indicated,  which are all
classified as available-for-sale, are summarized as follows:

                                                December 31,
                                      2000                      1999
                                          (Dollars in Thousands)

     U.S. Government agencies     $   3,543                 $    3,396
     Equity securities                   96                         96
                                    -------                    -------
                                  $   3,639                 $    3,492
                                      =====                      =====

Maturities

The amounts of debt  securities  in each  category  as of December  31, 2000 are
shown in the following table according to contractual  maturity  classifications
(1) one year or less,  (2) after one through five years,  (3) after five through
ten years and (4) after ten years.

<TABLE>
<CAPTION>
                                                               After one                  After five
                                 One year or less            through five years        through ten years
                                Amount    Yield (1)        Amount    Yield (1)      Amount      Yield (1)

<S>                         <C>            <C>              <C>          <C>       <C>             <C>
U.S. Government agencies    $    2,394      5.79% $         1,149        6.53%     $     --        -
                                 =====                      =====                    ======
</TABLE>

<TABLE>
<CAPTION>
                                   After ten years               Total
                                 Amount    Yield (1)       Amount      Yield (1)

<S>                         <C>                          <C>             <C>
U.S. Government agencies    $       --         -         $  3,543        6.03%
                              ========                      =====
</TABLE>

[FN]
(1)      The weighted average yields were computed using coupon interest, adding
         discount accretion or subtracting premium amortization, as appropriate,
         on a ratable basis over the life of each security.
</FN>

                                       24
<PAGE>
                                 LOAN PORTFOLIO

Types of Loans

The  amounts  of loans  outstanding  at the  indicated  dates  are  shown in the
following table according to the type of loan.

<TABLE>
<CAPTION>
                                               December 31,
                                          2000            1999
                                          (Dollars in Thousands)

<S>                                    <C>             <C>
Commercial                             $ 16,896        $  5,104
Real estate-construction                  7,707           4,900
Real estate-mortgage                     33,451          23,713
Consumer installment and other            9,012           5,925
                                         -------        -------
                                         67,066          39,642
Less allowance for loan losses             (737)           (397)
                                        -------         -------
              Net loans                $ 66,329        $ 39,245
                                         ======          ======
</TABLE>

Maturities and Sensitivities of Loans to Changes in Interest Rates

Total loans as of December 31, 2000 are shown in the following  table  according
to  contractual  maturity  classifications  (1) one year or less,  (2) after one
through five years, and (3) after five years.

<TABLE>
<CAPTION>
                                               (Dollars in Thousands)
<S>                                               <C>
Commercial
     One year or less                             $   8,237
     After one through five years                     6,408
     After five years                                 2,251
                                                   --------
                                                     16,896
                                                   --------

Construction
     One year or less                                 7,707
     After one through five years                         -
     After five years                                     -
                                                   --------
                                                      7,707

Other
     One year or less                                24,367
          After one through five years               14,728
          After five years                            3,368
                                                    -------
                                                     42,463
                                                    -------

                                                  $  67,066
                                                  =========
</TABLE>

                                       25
<PAGE>
The  following  table  summarizes  loans at December 31, 2000 with the due dates
after one year that have  predetermined  and  floating  or  adjustable  interest
rates.

                                                  (Dollars in Thousands)

Predetermined interest rates                              $    18,463
Floating or adjustable interest rates                           8,292
                                                              -------
                                                          $    26,755

Risk Elements

Information with respect to nonaccrual, past due, restructured and other problem
loans at December 31, 2000 and 1999 is as follows:


<TABLE>
<CAPTION>
                                                              December 31,
                                                           2000        1999
                                                         (Dollars in Thousands)


<S>                                                          <C>        <C>
Nonaccrual loans                                             $0         $0
Loans contractually past due ninety
     days or more as to interest or
     principal payments and still accruing                    1          3
Restructured loans                                            0          0
Loans, now current about which there are
     serious doubts as to the ability of the
     borrower to comply with loan repayment terms             0          0
Interest income that would have been recorded
     on nonaccrual and restructured loans under
     original terms                                           0          5
Interest income that was recorded on
     nonaccrual and restructured loans                        0          0
</TABLE>


It is our policy to  discontinue  the accrual of interest  income  when,  in the
opinion of management,  collection of interest becomes doubtful.  This status is
accorded interest when (1) there is a significant deterioration in the financial
condition of the borrower  and full  repayment of principal  and interest is not
expected  and (2) the  principal  or interest is more than ninety days past due,
unless the loan is both well-secured and in the process of collection.

Loans  classified for regulatory  purposes as loss,  doubtful,  substandard,  or
special  mention that have not been included in the table above do not represent
or result from trends or uncertainties  that management  reasonably expects will
materially impact future operating  results,  liquidity,  or capital  resources.
These classified loans do not represent  material credits about which management
is aware of any information that causes  management to have serious doubts as to
the ability of such borrowers to comply with the loan repayment terms.

                                       26
<PAGE>
                         SUMMARY OF LOAN LOSS EXPERIENCE

The following  table  summarizes  average loan balances for the year  determined
using the daily average  balances during the year;  changes in the allowance for
loan losses  arising from loans  charged  off;  recoveries  on loans  previously
charged  off;  additions to the  allowance  which have been charged to operating
expense; and the ratio of net charge-offs during the year to average loans.

<TABLE>
<CAPTION>
                                                     Years Ended December 31,
                                                       2000           1999
                                                    (Dollars in Thousands)

<S>                                                <C>             <C>
Average amount of loans outstanding                $  53,874       $  30,764
                                                      ======          ======

Balance of allowance for loan losses
     at beginning of year                          $     397       $     152
                                                    --------         -------

Loans charged off

     Commercial and financial                             --              --
     Real estate- mortgage                                 7              --
     Installment                                          --              --
                                                     -------          ------
                                                           7              --
                                                      ------          ------

Loans recovered

     Commercial and financial                             --              --
     Real estate mortgage                                 --              --
     Installment                                          --              --
                                                     -------         -------
                                                          --              --
                                                     -------         -------

Net charge-offs                                            7              --
                                                      ------         -------

Additions to allowance charged to operating
     expense during year                                 347             245
                                                        ----           -----

Balance of allowance for loan losses
     at end of year                                $     737        $    397
                                                        ====           =====

Ratio of net loans charged off during the
year to average loans outstanding                         .01%            --%
                                                      =======          =====
</TABLE>


Allowance for Loan Losses

The  allowance  for  loan  losses  is  maintained  at a  level  that  is  deemed
appropriate  by management to adequately  cover all known and inherent  risks in
the loan  portfolio.  Management's  evaluation of the loan portfolio  includes a
periodic review of loan loss experience,  current  economic  conditions that may
affect the borrower's ability to pay and the underlying  collateral value of the
loans.

As of December 31, 2000 and 1999,  we had made no  allocations  of our allowance
for loan losses to specific categories of loans. Based on our best estimate, the
allocation  of the  allowance  for loan  losses  to types  of  loans,  as of the
indicated dates, is as follows:

                                       27
<PAGE>
<TABLE>
<CAPTION>
                                    December 31, 2000                     December 31, 1999
                                  Percent of loans in                  Percent of of loans in
                                      each category                        each category
                                  Amount to total loans                 Amount to total loans
                                                   (Dollars in Thousands)

<S>                                 <C>       <C>                        <C>         <C>
Commercial                          $221        25%                       120         13%
Real estate - construction            74        12                         40         12
Real estate - mortgage               368        50                        197         60
Consumer installment
         loans and other              74        13                         40          15
                                    ----      ----                       ----        ----
                                    $737       100%                      $397         100%
                                     ===       ===                        ===         ===
</TABLE>

                                    DEPOSITS

Average  amount of deposits and average  rates paid  thereon,  classified  as to
noninterest-bearing  demand deposits,  interest-bearing demand deposits, savings
deposits, and time deposits is presented below. (1)

<TABLE>
<CAPTION>
                                                                    Years Ended December 31,
                                                        2000                                   1999
                                                Amount         Percent                 Amount          Percent
                                                                     (Dollars in Thousands)

<S>                                          <C>                 <C>                  <C>                <C>
Noninterest-bearing demand deposits          $  6,214             -- %                $   1,422           -- %
Interest-bearing demand deposits               19,654            4.20                    20,572          3.26
Savings deposits                                  828            2.97                       420          2.97
Time deposits                                  30,605            6.45                    11,473          5.59
                                               ------                                    ------
                                              $57,301                                   $33,887
                                               ======                                    ======
</TABLE>
[FN]
(1)  Average  balances were determined  using the daily average  balances during
     the year.
</FN>

The  amounts of time  certificates  of deposit  issued in amounts of $100,000 or
more as of December 31, 2000 are shown below by category, which is based on time
remaining until maturity of (1) three months or less, (2) over three through six
months, (3) over six through twelve months, and (4) over twelve months.

                                              (Dollars in Thousands)

Three months or less                            $      5,309
Over three months through six months                   3,762
Over six through twelve months                         4,519
Over twelve months                                     4,767
                                                     -------
              Total                             $     18,357
                                                      ======

                                       28
<PAGE>
                    RETURN ON ASSETS AND STOCKHOLDERS' EQUITY

The following  rate of return  information  for the year  indicated is presented
below.

                                                Years Ended December 31,
                                                2000               1999

     Return on assets (1)                       .82%                 .69%
     Return on equity (2)                      5.87                 3.37
     Dividend payout ratio (3)                 -                    -
     Equity to assets ratio (4)               13.96                20.54


(1)       Net income divided by average total assets.
(2)       Net income divided by average equity.
(3)       Dividends declared per share of common stock divided by net income per
          share.
(4)       Average equity divided by average total assets.


ITEM 7 - FINANCIAL STATEMENTS





                    [FINANCIAL STATEMENTS BEGIN ON NEXT PAGE]

                                       29
<PAGE>



                           CHESTATEE BANCSHARES, INC.
                                 AND SUBSIDIARY

                          CONSOLIDATED FINANCIAL REPORT

                                DECEMBER 31, 2000


<PAGE>


                           CHESTATEE BANCSHARES, INC.
                                 AND SUBSIDIARY

                          CONSOLIDATED FINANCIAL REPORT
                                DECEMBER 31, 2000

                                Table of Contents
                                -----------------

                                                                       Page
                                                                       ----

INDEPENDENT AUDITOR'S REPORT............................................F-1

FINANCIAL STATEMENTS

     Consolidated balance sheets........................................F-2
     Consolidated statements of income..................................F-3
     Consolidated statements of comprehensive income ...................F-4
     Consolidated statements of stockholders' equity....................F-5
     Consolidated statements of cash flows..............................F-6
     Notes to consolidated financial statements.........................F-7



<PAGE>
                          INDEPENDENT AUDITOR'S REPORT

To the Board of Directors
Chestatee Bancshares, Inc. and Subsidiary
Dawsonville, Georgia

                  We have audited the accompanying  consolidated  balance sheets
of Chestatee  Bancshares,  Inc. and subsidiary as of December 31, 2000 and 1999,
and  the  related  consolidated  statements  of  income,  comprehensive  income,
stockholders'  equity and cash flows for the years then ended.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

                  In our opinion, the consolidated financial statements referred
to above present fairly,  in all material  respects,  the financial  position of
Chestatee Bancshares,  Inc. and subsidiary as of December 31, 2000 and 1999, and
the results of their  operations  and their cash flows for the years then ended,
in conformity with generally accepted accounting principles.

                                              /s/ MAULDIN & JENKINS, LLC





Atlanta, Georgia
January 12, 2001

                                      F-1
<PAGE>
                    CHESTATEE BANCSHARES, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2000 AND 1999

                                     Assets                                               2000                  1999
                                     ------
                                                                                  ---------------------  --------------------

<S>                                                                               <C>                    <C>
Cash and due from banks                                                           $          5,031,994   $         2,264,288
Federal funds sold                                                                           2,730,000             2,420,000
Securities available-for-sale                                                                2,240,056               586,381
Securities held-to-maturity, fair value of $1,390,057
   and $2,866,480, respectively                                                              1,399,315             2,905,919

Loans                                                                                       67,066,299            39,642,439
Less allowance for loan losses                                                                 736,898               397,262
                                                                                  ---------------------  --------------------
          Loans, net                                                                        66,329,401            39,245,177

Premises and equipment                                                                       3,631,474             2,969,556
Other assets                                                                                 1,067,412               639,587
                                                                                  ---------------------  --------------------

          Total assets                                                            $         82,429,652   $        51,030,908
                                                                                  =====================  ====================

                      Liabilities and Stockholders' Equity
                      ------------------------------------

Deposits

    Noninterest-bearing                                                           $          7,547,972   $         5,102,347
    Interest-bearing                                                                        64,630,121            36,713,632
                                                                                  ---------------------  --------------------
          Total deposits                                                                    72,178,093            41,815,979
Other borrowings                                                                                50,000                     -
Other liabilities                                                                              616,423               187,837
                                                                                  ---------------------  --------------------
          Total liabilities                                                                 72,844,516            42,003,816
                                                                                  ---------------------  --------------------

Commitments and contingencies

Stockholders' equity

    Common stock; no par value; 10,000,000 shares authorized;
        1,900,000 and 950,000 shares issued and outstanding, respectively                    9,482,364             9,482,364
    Retained earnings (deficit)                                                                103,907              (446,053)
    Accumulated other comprehensive loss                                                        (1,135)               (9,219)
                                                                                  ---------------------  --------------------
          Total stockholders' equity                                                         9,585,136             9,027,092
                                                                                  ---------------------  --------------------

          Total liabilities and stockholders' equity                              $         82,429,652   $        51,030,908
                                                                                  =====================  ====================
</TABLE>

See Notes to Consolidated Financial Statements.

                                      F-2
<PAGE>

                    CHESTATEE BANCSHARES, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
                         CONSOLIDATED STATEMENTS OF INCOME
                     YEARS ENDED DECEMBER 31, 2000 AND 1999

                                                                            2000                    1999
                                                                    ---------------------    --------------------
<S>                                                                 <C>                      <C>
Interest income
    Loans                                                           $          5,701,920     $         3,013,558
    Taxable securities                                                           215,785                 248,082
    Federal funds sold                                                           262,527                 163,962
                                                                    ---------------------    --------------------
          Total interest income                                                6,180,232               3,425,602
                                                                    ---------------------    --------------------

Interest expense

    Deposits                                                                   2,822,070               1,324,791
    Other borrowings                                                               2,355                   4,942
                                                                    ---------------------    --------------------
          Total interest expense                                               2,824,425               1,329,733
                                                                    ---------------------    --------------------

          Net interest income                                                  3,355,807               2,095,869
Provision for loan losses                                                        347,200                 245,442
                                                                    ---------------------    --------------------
          Net interest income after provision for loan losses                  3,008,607               1,850,427
                                                                    ---------------------    --------------------

Other income

    Service charges on deposit accounts                                          304,606                 181,453
    Other operating income                                                       127,148                 154,277
                                                                    ---------------------    --------------------
          Total other income                                                     431,754                 335,730
                                                                    ---------------------    --------------------

Other expense

    Salaries and employee benefits                                             1,376,752               1,015,372
    Equipment and occupancy expense                                              399,647                 226,674
    Other operating expenses                                                   1,104,152                 646,694
                                                                    ---------------------    --------------------
          Total other expense                                                  2,880,551               1,888,740
                                                                    ---------------------    --------------------

          Income before income taxes                                             559,810                 297,417

Income tax expense                                                                 9,850                       -
                                                                    ---------------------    --------------------

          Net income                                                $            549,960     $           297,417
                                                                    =====================    ====================

Basic and diluted earnings per share                                $               0.29     $              0.16
                                                                    =====================    ====================
</TABLE>

See Notes to Consolidated Financial Statements.

                                      F-3

<PAGE>
                    CHESTATEE BANCSHARES, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                     YEARS ENDED DECEMBER 31, 2000 AND 1999

                                                                             2000                   1999
                                                                       ------------------     ------------------

<S>                                                                    <C>                    <C>
Net income                                                             $         549,960      $         297,417

Other comprehensive income (loss):
        Unrealized holding gains (losses) on securities
           available-for-sale arising during period, net of
           tax (benefits) of $(696) and $- -, respectively                         8,084                 (9,219)
                                                                       ------------------     ------------------

Comprehensive income                                                   $         558,044      $         288,198
                                                                       ==================     ==================
</TABLE>


See Notes to Consolidated Financial Statements.

                                      F-4
<PAGE>
                    CHESTATEE BANCSHARES, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                     YEARS ENDED DECEMBER 31, 2000 AND 1999


                                               Common Stock                                  Accumulated
                                      --------------------------------      Retained            Other              Total
                                                          Amount            Earnings        Comprehensive      Stockholders'
                                         Shares          Paid In            (Deficit)       Income (Loss)         Equity
                                      -------------- ----------------   ----------------- ------------------  ----------------

<S>                                   <C>            <C>                <C>               <C>                 <C>
Balance, December 31, 1998                  950,000  $     9,482,364    $       (743,470) $               -   $     8,738,894
    Net income                                    -                -             297,417                  -           297,417
    Other comprehensive loss                      -                -                   -             (9,219)           (9,219)
                                      -------------- ----------------   ----------------- ------------------  ----------------
Balance, December 31, 1999                  950,000        9,482,364            (446,053)            (9,219)        9,027,092
    Net income                                    -                -             549,960                  -           549,960
    Stock split                             950,000                -                   -                  -                 -
    Other comprehensive income                    -                -                   -              8,084             8,084
                                      -------------- ----------------   ----------------- ------------------  ----------------
Balance, December 31, 2000                1,900,000  $     9,482,364    $        103,907  $          (1,135)  $     9,585,136
                                      ============== ================   ================= ==================  ================

See Notes to Consolidated Financial Statements.
</TABLE>

                                      F-5
<PAGE>
                    CHESTATEE BANCSHARES, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 2000 AND 1999

                                                                                   2000                  1999
                                                                         -------------------     -------------------
<S>                                                                      <C>                   <C>
OPERATING ACTIVITIES
    Net income                                                           $         549,960     $        297,417
    Adjustments to reconcile net income to net cash
        provided by operating activities:
        Depreciation                                                               167,190              108,047
        Deferred taxes                                                            (223,784)              (7,240)
        Provision for loan losses                                                  347,200              245,442
        Loss on sale of other real estate owned                                      4,538                    -
        Increase in interest receivable                                           (403,594)            (141,908)
        Increase in interest payable                                               227,265               65,567
        Other operating activities                                                 196,606             (118,610)
                                                                         ------------------    -----------------
          Net cash provided by operating activities                                865,381              448,715
                                                                         ------------------    -----------------

INVESTING ACTIVITIES
    Purchase of securities available-for-sale                                   (2,828,205)          (1,304,613)
    Proceeds from maturities of securities available-for-sale                    1,181,918              751,513
    Purchase of securities held-to-maturity                                              -             (898,750)
    Proceeds from maturities of securities held-to-maturity                      1,506,604            2,970,623
    Net (increase) decrease in federal funds sold                                 (310,000)           5,090,000
    Net increase in loans                                                      (27,477,786)         (24,150,525)
    Purchase of premises and equipment                                            (829,108)            (307,411)
    Proceeds from sale of other real estate owned                                  246,788                    -
                                                                         ------------------    -----------------
              Net cash used in investing activities                            (28,509,789)         (17,849,163)
                                                                         ------------------    -----------------

FINANCING ACTIVITIES

    Net increase in deposits                                                    30,362,114           18,761,531
    Proceeds from other borrowings                                                  50,000                    -
                                                                         ------------------    -----------------
              Net cash provided by financing activities                         30,412,114           18,761,531
                                                                         ------------------    -----------------
Net increase in cash and due from banks                                          2,767,706            1,361,083

Cash and due from banks at beginning of year                                     2,264,288              903,205
                                                                         ------------------    -----------------
Cash and due from banks at end of year                                   $       5,031,994     $      2,264,288
                                                                         ==================    =================

SUPPLEMENTAL DISCLOSURES Cash paid for:
        Interest                                                         $       2,597,160     $      1,264,166
        Income taxes                                                     $          47,254     $          6,000

NONCASH TRANSACTIONS
     Principal balance of loans transferred
         to other real estate owned                                      $          46,362     $        204,964

See Notes to Consolidated Financial Statements.
</TABLE>

                                      F-6
<PAGE>
                   CHESTATEE BANCSHARES, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          Nature of Business

          Chestatee  Bancshares,  Inc. (the "Company") is a bank holding company
          whose business is conducted by its wholly-owned subsidiary,  Chestatee
          State Bank (the  "Bank").  The Bank is a  commercial  bank  located in
          Dawsonville, Dawson County, Georgia. The Bank provides a full range of
          banking  services in its primary  market area of Dawson County and the
          surrounding counties.

          Basis of Presentation

          The  consolidated  financial  statements  include the  accounts of the
          Company and its subsidiary.  Significant intercompany transactions and
          accounts are eliminated in consolidation.

          The  preparation of financial  statements in conformity with generally
          accepted  accounting  principles requires management to make estimates
          and  assumptions  that  affect  the  reported  amounts  of assets  and
          liabilities  as of the balance sheet date and the reported  amounts of
          revenues and expenses  during the  reporting  period.  Actual  results
          could  differ  from  those  estimates.  Material  estimates  that  are
          particularly susceptible to significant change in the near term relate
          to the  determination of the allowance for loan losses,  the valuation
          of foreclosed real estate, and deferred taxes.

          Cash, Due From Bank and Cash Flows

          For purposes of reporting cash flows, cash and due from banks includes
          cash on hand, cash items in process of collection and amounts due from
          banks.  Cash flows from loans,  federal  funds sold and  deposits  are
          reported net.

          The Company  maintains  amounts due from banks  which,  at times,  may
          exceed federally  insured limits.  The Company has not experienced any
          losses in such accounts.

          Securities

          Debt securities that management has the positive intent and ability to
          hold to maturity are  classified as  held-to-maturity  and recorded at
          amortized  cost.   Securities  not  classified  as   held-to-maturity,
          including equity securities with readily determinable fair values, are
          classified  as  available-for-sale  and  recorded  at fair  value with
          unrealized  gains and losses  excluded  from  earnings and reported in
          other comprehensive  income.  Equity securities,  including restricted
          stock,  without a readily  determinable  fair value are  classified as
          available-for-sale and recorded at cost.

          Interest  and  dividends,   including  amortization  of  premiums  and
          accretion of discounts,  are recognized in interest income.  Gains and
          losses on the sale of  securities  are  determined  using the specific
          identification method.  Declines in the fair value of held-to-maturity
          and available-for-sale  securities below their cost that are deemed to
          be other than temporary are reflected in earnings as realized losses.

          Loans

          Loans are reported at their outstanding unpaid principal balances less
          unearned income and the allowance for loan losses.  Interest income is
          accrued on the unpaid balance.

          Nonrefundable   loan  fees  and  costs  for  loans  are  deferred  and
          recognized in income over the life of the loans.

                                      F-7
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

          Loans (Continued)

          The accrual of interest on loans is discontinued when, in management's
          opinion,  the borrower  may be unable to meet  payments as they become
          due,  unless the loan is  well-secured.  All interest  accrued but not
          collected  for loans that are placed on  nonaccrual  or charged off is
          reversed against interest income.  Interest income on nonaccrual loans
          is  subsequently  recognized  only to the  extent  cash  payments  are
          received until the loan is returned to accrual status.

          The allowance for loan losses is  established  through a provision for
          loan  losses  charged  to  expense.  Loans  are  charged  against  the
          allowance when management believes the collectibility of the principal
          is unlikely. Subsequent recoveries are credited to the allowance.

          The allowance is an amount that  management  believes will be adequate
          to absorb  estimated  losses in the loan portfolio.  The allowance for
          loan losses is evaluated on a regular basis by management and is based
          upon management's  periodic review of the  collectibility of the loans
          in light of historical  experience,  the nature and volume of the loan
          portfolio,  adverse  situations that may affect the borrower's ability
          to repay,  estimated value of any underlying collateral and prevailing
          economic  conditions.  This evaluation is inherently  subjective as it
          requires  estimates that are  susceptible  to significant  revision as
          more information becomes available. In addition,  regulatory agencies,
          as an integral part of their examination process,  periodically review
          the Company's  allowance for loan losses,  and may require the Company
          to make  additions  to the  allowance  based on their  judgment  about
          information available to them at the time of their examinations.

          A loan is considered  impaired when it is probable the Company will be
          unable  to  collect  all  principal  and  interest   payments  due  in
          accordance with the contractual terms of the loan agreement.  Impaired
          loans are measured based on the present value of expected  future cash
          flows  discounted at the loan's  effective  interest  rate, the loan's
          observable  market price,  or the fair value of the  collateral if the
          loan is collateral  dependent.  The amount of impairment,  if any, and
          any subsequent changes are included in the allowance for loan losses.

          Premises and Equipment

          Land is carried at cost.  Premises and  equipment  are carried at cost
          less accumulated depreciation. Depreciation is computed principally by
          straight-line  methods over the estimated  useful lives of the assets.
          Other Real Estate Owned

          Other  real  estate  owned  represents   properties  acquired  through
          foreclosure.  Other real estate  owned is held for sale and is carried
          at the lower of cost or fair value less  estimated  costs of disposal.
          Any  write-down  to fair value at the time of  transfer  to other real
          estate owned is charged to the allowance for loan losses.  Revenue and
          expenses from  operations  and changes in the valuation  allowance are
          included in net expenses from foreclosed  assets.  The carrying amount
          of other real estate owned at December 31, 2000 and 1999 was $ - - and
          $204,964, respectively.

          Transfers of Financial Assets

          Transfers of financial assets are accounted for as sales, when control
          over the assets has been surrendered.  Control over transferred assets
          is deemed to be  surrendered  when (1) the assets  have been  isolated
          from the  Company,  (2) the  transferee  obtains  the  right  (free of
          conditions  that constrain it from taking  advantage of that right) to
          pledge or exchange the  transferred  assets,  and (3) the Company does
          not maintain  effective control over the transferred assets through an
          agreement to repurchase them before their maturity.

                                      F-8
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

          Income Taxes

          Deferred income tax assets and  liabilities  are determined  using the
          balance sheet method. Under this method, the net deferred tax asset or
          liability  is  determined  based on the tax  effects of the  temporary
          differences  between  the book and tax  bases of the  various  balance
          sheet assets and liabilities and gives current  recognition to changes
          in tax rates and laws.

          Stock Options

          Statement  of  Financial   Accounting   Standards  ("SFAS")  No.  123,
          Accounting for  Stock-Based  Compensation,  encourages all entities to
          adopt a fair value  based  method of  accounting  for  employee  stock
          options, whereby compensation cost is measured at the grant date based
          on the value of the award and is recognized  over the service  period,
          which is usually the vesting period. However, it also allows an entity
          to measure  compensation  cost for stock  options  using the intrinsic
          value based method of accounting  prescribed by Accounting  Principles
          Board  Opinion  No.  25,  Accounting  for Stock  Issued to  Employees,
          whereby  compensation  cost is the excess, if any, of the market price
          of the stock at the grant  date (or other  measurement  date) over the
          amount an  employee  must pay to acquire  the stock.  The  Company has
          elected to measure compensation cost in accordance with the accounting
          methodology in Opinion No. 25.

          Earnings Per Share

          Basic  earnings  per share are  computed by dividing net income by the
          weighted-average number of shares of common stock outstanding. Diluted
          earnings  per share are  computed by dividing net income by the sum of
          the weighted-average  number of shares of common stock outstanding and
          potential  common  shares.  Potential  common shares  consist of stock
          options.

          Comprehensive Income

          Accounting  principles  generally  require  that  recognized  revenue,
          expenses, gains and losses be included in net income. Although certain
          changes in assets and liabilities, such as unrealized gains and losses
          on available-for-sale securities, are reported as a separate component
          of the equity section of the balance sheet, such items, along with net
          income, are components of comprehensive income.

          Recent Developments

          In June 1998, the Financial Accounting Standards Board issued SFAS No.
          133,  Accounting for Derivative  Instruments  and Hedging  Activities,
          effective  for  fiscal  years  beginning  after  June 15,  2000.  This
          Statement   establishes   accounting   and  reporting   standards  for
          derivative  instruments  and  hedging  activities,  including  certain
          derivative instruments embedded in other contracts,  and requires that
          an entity  recognize all  derivatives  as assets or liabilities in the
          balance  sheet and measure them at fair value.  If certain  conditions
          are met, an entity may elect to designate a derivative as follows: (a)
          a hedge of the  exposure to changes in the fair value of a  recognized
          asset or liability or an unrecognized firm commitment,  (b) a hedge of
          the exposure to variable  cash flows of a forecasted  transaction,  or
          (c) a hedge of the foreign currency  exposure of an unrecognized  firm
          commitment,   an  available-for-sale   security,  a  foreign  currency
          denominated forecasted  transaction,  or a net investment in a foreign
          corporation.  The Statement generally provides for matching the timing
          of the  recognition of the gain or loss on  derivatives  designated as
          hedging  instruments  with the  recognition of the changes in the fair
          value of the item being hedged.  Depending on the type of hedge,  such
          recognition  will be in  either  net  income  or  other  comprehensive
          income.  For a  derivative  not  designated  as a hedging  instrument,
          changes in fair value will be  recognized  in net income in the period
          of change.  Management is currently  evaluating the impact of adopting
          this  Statement on the financial  statements,  but does not anticipate
          that it will have a material impact.

                                      F-9
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

          Reclassifications

          Certain expenses on the consolidated  statement of income for the year
          ended December 31, 1999 have been reclassified,  with no effect on net
          income, to be consistent with the classifications adopted for the year
          ended December 31, 2000.

NOTE 2.  SECURITIES

          The  amortized  cost and fair value of  securities  are  summarized as
          follows:

<TABLE>
<CAPTION>
                                                                    Gross          Gross
                                                  Amortized       Unrealized    Unrealized         Fair
                                                    Cost            Gains         Losses           Value
                                                --------------    ----------    -----------    -------------
           <S>                                  <C>               <C>           <C>            <C>
           Securities Available-for-Sale
             December 31, 2000:
             U.S. Government and
               agency securities                $   2,146,287     $   1,798     $  (3,629)     $  2,144,456
             Restricted equity securities              95,600           -              -             95,600
                                                --------------    ----------    -----------    -------------
                                                --------------    ----------    -----------    -------------
                                                $                 $                (3,629)     $
                                                ==============    ==========    ===========    =============
             December 31, 1999:
             U.S. Government and
               agency securities                $     500,000     $      -      $  (9,219)     $    490,781
             Restricted equity securities              95,600            -              -            95,600
                                                --------------    ----------    -----------    -------------
                                                --------------    ----------    -----------    -------------
                                                $     595,600     $      -         (9,219)     $    586,381
                                                ==============    ==========    ===========    =============
                                                ==============    ==========    ===========    =============
            Securities Held-to-Maturity
             December 31, 2000:
             U. S. Government and agency
                securities                      $   1,399,315     $     -       $  (9,258)     $  1,390,057
                                                ==============    ==========    ===========    =============
                                                ==============    ==========    ===========    =============

             December 31, 1999:
             U. S. Government and agency
                securities                      $   2,905,919     $      -      $ (39,439)     $  2,866,480
                                                ==============    ==========    ===========    =============
</TABLE>

          Securities  with a carrying value of $399,000 at December 31, 2000 and
          1999 were pledged to secure  public  deposits  and for other  purposes
          required or permitted by law.

          The  amortized  cost and fair value of debt  securities as of December
          31, 2000 by contractual maturity are shown below.

<TABLE>
<CAPTION>
                               Securities Available-for-Sale   Securities Held-to-Maturity
                                ---------------------------   -----------------------------
                                 Amortized         Fair         Amortized         Fair
                                   Cost           Value            Cost           Value
                                -------------   ------------   ------------    ------------

<S>                             <C>             <C>            <C>             <C>
Due in one year or less         $  1,396,287    $ 1,394,456    $ 1,000,000     $   994,432
Due from one to five years           750,000        750,000        399,315         395,625
                                -------------   ------------   ------------    ------------
                                $  2,146,287    $ 2,144,456    $ 1,399,315     $ 1,390,057
                                =============   ============   ============    ============
</TABLE>


                                      F-10
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3.  LOANS

          The composition of loans is summarized as follows:

<TABLE>
<CAPTION>
                                                                            December 31,
                                                                ------------------------------------
                                                                     2000                1999
                                                                -----------------    ---------------

            <S>                                              <C>                  <C>
            Commercial and industrial                        $    16,896,000      $   5,104,000
            Real estate - construction                             7,707,000          4,902,000
            Real estate - mortgage                                33,542,000         23,802,000
            Consumer  and other                                    9,014,673          5,930,007
                                                             -----------------    ---------------
                                                                                     39,738,007
            Unearned income                                          (93,374)           (95,568)
            Allowance for loan losses                               (736,898)          (397,262)
                                                             -----------------    ---------------
            Loans, net                                       $    66,329,401     $   39,245,177
                                                             =================    ===============
</TABLE>

          Changes in the allowance for loan losses are as follows:

<TABLE>
<CAPTION>
                                                                    Years Ended December 31,

                                                               -----------------------------------
                                                                     2000               1999
                                                               ----------------   ----------------

            <S>                                              <C>                <C>
            Balance, beginning of year                       $      397,262     $       151,820
            Provision for loan losses                               347,200             245,442
            Loans charged off                                        (7,564)                 -
            Recoveries of loans previously charged off                  -                    -
                                                             ----------------   ----------------
            Balance, end of year                             $      736,898     $       397,262
                                                             ================   ================
</TABLE>

          Management has identified no material  amounts of impaired loans as of
          December  31, 2000 or 1999 as defined by SFAS No. 114,  Accounting  by
          Creditors for Impairment of a Loan. The average recorded investment in
          impaired loans for 2000 and 1999 was $ - - and $52,913,  respectively.
          Interest  income  recognized  for cash  payments  received on impaired
          loans was not material for the years ended December 31, 2000 and 1999.

          In the ordinary  course of business,  the Company has granted loans to
          certain related parties, including directors,  executive officers, and
          their affiliates. The interest rates on these loans were substantially
          the  same as  rates  prevailing  at the  time of the  transaction  and
          repayment terms are customary for the type of loan. Changes in related
          party loans for the year ended December 31, 2000 are as follows:

                      Balance, beginning                  $   4,595,013
                      Advances                                3,720,117
                      Repayments                             (3,311,778)
                                                           -------------
                      Balance, ending                     $   5,003,352
                                                           =============

                                      F-11
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4.  PREMISES AND EQUIPMENT

         Premises and equipment are summarized as follows:

<TABLE>
<CAPTION>
                                                            December 31,
                                                  --------------------------------
                                                       2000              1999
                                                  --------------   ---------------

           <S>                                    <C>              <C>
           Land                                   $    732,454     $     416,725
           Buildings                                 2,129,005         2,090,616
           Equipment                                 1,122,498           647,507
                                                  --------------   ---------------
                                                                       3,154,848
           Accumulated depreciation                   (352,483)         (185,292)
                                                  --------------   ---------------
                                                  $  3,631,474     $   2,969,556
                                                  ==============   ===============
</TABLE>

NOTE 5.  DEPOSITS

          The aggregate  amount of time deposits in denominations of $100,000 or
          more at December  31, 2000 and 1999 was  $18,356,708  and  $7,604,393,
          respectively.  The  scheduled  maturities of time deposits at December
          31, 2000 are as follows:

          2001                   $ 31,726,669
          2002                      8,715,505
          2003                      1,326,564
          2004                      1,099,461
          2005                        355,722
          Thereafter                    7,880
                                -------------
                                 $ 43,231,801
                                =============

NOTE 6.  LEASE

          The Company leases its branch  facilities under various  noncancelable
          operating lease agreements. The initial terms of the leases range from
          three to five  years.  The leases  require  the  Company to pay normal
          maintenance costs.

          Future minimum lease payments on noncancelable leases based on initial
          terms are summarized as follows:

          2001                $     52,333
          2002                      54,333
          2003                      31,667
                              -------------
                              $    138,333
                              =============

          Rental  expense  under all  operating  leases  amounted to $41,170 and
          $31,576 for the years ended December 31, 2000 and 1999, respectively.

                                      F-12
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7.  OTHER BORROWINGS

          Other  borrowings  consist of a $75,000  unsecured line of credit with
          another financial  institution.  The balance of the line of credit was
          $50,000 as of December 31, 2000. Principal is due on June 7, 2001 with
          interest  payable  semi-annually at prime minus .5% (9.00% at December
          31, 2000).

NOTE 8.  EMPLOYEE BENEFIT PLANS

          401(K) Plan

          The Company has a 401(K) plan  available  to all  eligible  employees,
          subject to certain minimum age and service requirements. Contributions
          charged  to expense  were  $19,165  and  $19,748  for the years  ended
          December 31, 2000 and 1999, respectively.

          Stock Option Plan and Agreements

          In 2000, the Company adopted employee and director stock option plans,
          reserving a total of 300,000  options for future grant.  The plans are
          subject to the approval of the Company shareholders at the 2001 annual
          meeting of shareholders.

          The Company also has employee agreements with certain of its executive
          officers  whereby stock options are earned based upon the  performance
          of the Company.  As of December 31, 2000,  options  earned under these
          agreements  totaled 20,000.  A liability and an expense of $21,100 has
          been  recorded  as of and for the  year  ended  December  31,  2000 to
          reflect the difference  between the grant price of the options and the
          fair value of the Company's  common stock. The options have a weighted
          average  exercise price of $4.89 and expire in ten years. The weighted
          average fair value of the options earned was $4.35.

          The  Company  applies  Opinion  25  and  related   Interpretations  in
          accounting for the stock options.  Had compensation cost for the stock
          options  been  determined  based  on the  fair  value  of  the  awards
          consistent  with the method  prescribed by FASB Statement No. 123, net
          income and  earnings  per share for the year ended  December  31, 2000
          would have been adjusted to the pro forma amounts indicated below.

          Net income                 As reported         $   549,960
                                     Pro forma           $   508,936

          Earnings per share         As reported         $      0.29
                                     Pro forma           $      0.27

          Earnings per share -       As reported         $      0.29
            assuming dilution        Pro forma           $      0.27

          The fair value of the options is  estimated on the date of grant using
          the   Black-Scholes    option-pricing   model   with   the   following
          weighted-average assumptions for the year ended December 31, 2000.

          Dividend yield (as a percent of the fair value of the stock)       0%
          Expected life                                                10 years
          Expected volatility                                                0%
          Risk-free interest rate                                         6.23%


                                      F-13
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9.  INCOME TAXES

          Income tax expense consists of the following:

<TABLE>
<CAPTION>
                                                    Years Ended December 31,
                                                ----------------------------
                                                  2000              1999
                                                ------------    ------------

           <S>                                   <C>              <C>
           Current                              $  233,634       $ 100,326
           Deferred                                (55,328)        (17,781)
           Change in valuation allowance          (168,456)        (82,545)
                                                ------------    ------------
                Income tax expense              $    8,850       $        -
                                                ============    ============
</TABLE>

          The Company's  income tax expense differs from the amounts computed by
          applying  the  Federal  income tax  statutory  rates to income  before
          income taxes. A reconciliation of the differences is as follows:

<TABLE>
<CAPTION>
                                                                 Years Ended December 31,
                                                 ----------------------------------------------------------
                                                          2000                            1999
                                                 ---------------------------    ---------------------------
                                                     Amount        Percent        Amount          Percent
                                                 -------------  ------------    ------------   ------------

<S>                                              <C>                <C>        <C>                 <C>
          Income taxes at statutory rate         $   190,336         34  %     $   101,122         34  %
          Change in valuation allowance             (168,456)       (30)           (82,545)       (28)
          Tax-free interest on loans                    (790)        -             (10,190)        (3)
          Surtax exemption                                -          -              (9,170)        (3)
          Other items                                (11,240)        (2)               783          -
                                                 -------------  ------------   -------------   ------------
               Income tax expense                $     9,850          2%       $         -          -  %
                                                 =============  ============   =============   ============
</TABLE>
          The components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
                                                                December 31,
                                                        ----------------------------
                                                            2000            1999
                                                        -------------   ------------
          <S>                                           <C>             <C>
          Deferred tax assets:
             Loan loss reserves                         $    174,244    $   67,804
             Deferred loan fees                               34,220        30,970
             Preopening and organization costs                83,887        88,997
             Other                                             7,962        23,364
             Securities available-for-sale                       696         3,134
             Valuation allowance                                 -        (171,590)
                                                        -------------   ------------
                                                             301,009        42,679
            Deferred tax liabilities, depreciation            69,289        35,439
                                                        -------------   ------------
                      Net deferred tax assets            $   231,720    $    7,240
                                                       =============   ============
</TABLE>

                                      F-14
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10. EARNINGS PER SHARE

          Presented below is a summary of the components used to calculate basic
          and diluted earnings per share.
<TABLE>
<CAPTION>
                                                                     Years Ended December 31,
                                                                 ------------------------------
                                                                     2000             1999
                                                                 -------------   --------------

          <S>                                                   <C>             <C>
          Basic Earnings Per Share:
             Weighted average common shares outstanding            1,900,000        1,900,000
                                                                ==============  ===============
                                                                ==============  ===============


             Net income                                         $    549,960    $     297,417
                                                                ==============  ===============
                                                                ==============  ===============


             Basic earnings per share                           $       0.29    $        0.16
                                                                ==============  ===============
                                                                ==============  ===============


          Diluted Earnings Per Share:
             Weighted average common shares outstanding            1,900,000        1,900,000
             Net effect of the assumed exercise of stock
                options based on the treasury stock method
                using average market prices for the year               6,607              -
                                                                --------------  ---------------
             Total weighted average common shares and
                common stock equivalents outstanding               1,906,607        1,900,000
                                                                ==============  ===============
                                                                ==============  ===============


             Net income                                         $    549,960    $     297,417
                                                                ==============  ===============
                                                                ==============  ===============


             Diluted earnings per share                         $       0.29    $        0.16
                                                                ==============  ===============
</TABLE>

NOTE 11. COMMITMENTS AND CONTINGENCIES

          The Company is party to financial  instruments with off-balance  sheet
          risk in the normal course of business to meet the  financing  needs of
          its customers.  These financial instruments may include commitments to
          extend credit and standby letters of credit.  They involve, to varying
          degrees,  elements of credit risk and interest  rate risk in excess of
          the amount recognized in the balance sheets.

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

                                                           December 31,
                                                 -------------------------------
                                                       2000             1999
                                                 -------------     -------------

               Commitments to extend credit      $  15,435,000     $  12,984,000
                                                 =============     =============

          Commitments  to extend credit are  agreements to lend to a customer as
          long as there is no  violation  of any  condition  established  in the
          contract. Since many of the commitments are expected to expire without
          being  drawn upon,  the total  commitment  amounts do not  necessarily
          represent  future  cash  requirements.   The  Company  evaluates  each
          customer's  creditworthiness  on a case-by-case  basis.  The amount of
          collateral obtained, if deemed necessary by the Company upon extension
          of credit, is based on management's credit evaluation of the customer.

                                      F-15
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11. COMMITMENTS AND CONTINGENCIES (Continued)

          Standby  letters of credit are conditional  commitments  issued by the
          Company to guarantee the  performance  of a customer to a third party.
          Those  guarantees  are primarily  issued to support public and private
          borrowing arrangements. The credit risk involved in issuing letters of
          credit is essentially  the same as that involved in extending loans to
          customers. Collateral is required in instances which the Company deems
          necessary. There were no outstanding letters of credit at December 31,
          2000.

          In the normal  course of business,  the Company is involved in various
          legal  proceedings.  In  the  opinion  of  management,  any  liability
          resulting from such  proceedings  would not have a material  effect on
          the Company's financial statements.

NOTE 12. CONCENTRATIONS OF CREDIT

          The Company originates primarily commercial, residential, and consumer
          loans to  customers in Dawson  County and  surrounding  counties.  The
          ability of the  majority  of the  Company's  customers  to honor their
          contractual loan obligations is dependent on the economy in the Dawson
          County area.

          Sixty-one  percent of the Company's loan portfolio is  concentrated in
          real estate loans,  of which a substantial  portion is secured by real
          estate in the Company's primary market area. Accordingly, the ultimate
          collectibility  of the loan  portfolio  is  susceptible  to changes in
          market  conditions in the  Company's  primary  market area.  The other
          significant  concentrations of credit by type of loan are set forth in
          Note 3.

          The Company,  as a matter of policy,  does not generally extend credit
          to any single borrower or group of related  borrowers in excess of 25%
          of statutory capital, or approximately $2,370,000.

NOTE 13. Regulatory Matters

          The Bank is subject to certain restrictions on the amount of dividends
          that may be declared  without prior regulatory  approval.  At December
          31, 2000,  approximately  $154,000 of dividends  could be paid without
          regulatory approval.

          The  Company and the Bank are  subject to various  regulatory  capital
          requirements administered by the federal banking agencies.  Failure to
          meet minimum capital requirements can initiate certain mandatory,  and
          possibly  additional  discretionary  actions by  regulators  that,  if
          undertaken,  could  have a direct  material  effect  on the  financial
          statements.  Under  capital  adequacy  guidelines  and the  regulatory
          framework for prompt corrective  action, the Company and the Bank must
          meet specific capital guidelines that involve quantitative measures of
          the  assets,  liabilities,  and  certain  off-balance  sheet  items as
          calculated under regulatory accounting practices.  The capital amounts
          and  classification  are also subject to qualitative  judgments by the
          regulators  about  components,  risk  weightings,  and other  factors.
          Prompt  corrective  provisions  are not  applicable  to  bank  holding
          companies.

          Quantitative  measures  established  by regulation  to ensure  capital
          adequacy  require the Bank to maintain  minimum  amounts and ratios of
          Total and Tier I capital to risk-weighted assets and of Tier I capital
          to average assets.  Management believes,  as of December 31, 2000, the
          Company and the Bank met all capital  adequacy  requirements  to which
          they are subject.

          As of December 31, 2000, the most recent notification from the Federal
          Deposit Insurance Corporation categorized the Bank as well capitalized
          under the regulatory  framework for prompt  corrective  action.  To be
          categorized as well capitalized,  the Bank must maintain minimum Total
          risk-based, Tier I risk-based, and Tier I leverage ratios as set forth
          in the following  table.  There are no conditions or events since that
          notification   that  management   believes  have  changed  the  Bank's
          category.

                                      F-16
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13. REGULATORY MATTERS (Continued)

          The  Company  and the Bank's  actual  capital  amounts  and ratios are
          presented in the following table.

<TABLE>
<CAPTION>
                                                                                                To Be Well
                                                                          For Capital        Capitalized Under
                                                                           Adequacy          Prompt Corrective
                                                     Actual                Purposes          Action Provisions
                                            ----------------------   -------------------     ------------------------
                                              Amount        Ratio      Amount      Ratio     Amount     Ratio
                                              ------        -----      ------      -----     ------     -----
                                                                        (Dollars in Thousands)
                                            -----------------------------------------------------------------------------

<S>                                         <C>             <C>      <C>             <C>    <C>           <C>
 December 31, 2000:
 Total Capital to Risk Weighted Assets
    Consolidated                            $  10,323       15.05%   $  5,488        8%     $   N/A       N/A
    Bank                                    $  10,374       15.13%   $  5,486        8%     $ 6,857       10%
 Tier I Capital to Risk Weighted Assets
    Consolidated                            $   9,586       13.97%   $  2,744        4%     $   N/A       N/A
    Bank                                    $   9,637       14.06%   $  2,743        4%     $ 4,114        6%
 Tier I Capital to Average Assets
    Consolidated                            $   9,586       11.97%   $  3,205        4%     $   N/A       N/A
    Bank                                    $   9,637       12.03%   $  3,205        4%     $ 4,006        5%
December 31, 1999:

Bank Only

Total Capital to Risk Weighted Assets       $   9,433       22.72%   $  3,322        8%     $ 4,152       10%
Tier I Capital to Risk Weighted Assets      $   9,036       21.76%   $  1,661        4%     $ 2,492        6%
Tier I Capital to Average Assets            $   9,036       17.94%   $  2,015        4%     $ 2,519        5%
</TABLE>


NOTE 14. FAIR VALUE OF FINANCIAL INSTRUMENTS

          The fair value of a financial  instrument  is the current  amount that
          would be exchanged  between  willing  parties,  other than in a forced
          liquidation.  Fair value is best  determined  based upon quoted market
          prices. However, in many instances,  there are no quoted market prices
          for the Company's various financial instruments. In cases where quoted
          market  prices are not  available,  fair values are based on estimates
          using present value or other valuation  techniques.  Those  techniques
          are  significantly  affected by the  assumptions  used,  including the
          discount  rate and  estimates of future cash flows.  Accordingly,  the
          fair value estimates may not be realized in an immediate settlement of
          the  instrument.  SFAS No.  107,  Disclosures  about  Fair  Values  of
          Financial Instruments,  excludes certain financial instruments and all
          nonfinancial    instruments   from   its   disclosure    requirements.
          Accordingly,  the  aggregate  fair  value  amounts  presented  may not
          necessarily represent the underlying fair value of the Company.

          Cash, Due From Banks and Federal Funds Sold:

          The carrying  amounts of cash,  due from banks and federal  funds sold
          approximate fair values.

                                      F-17
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

          Securities:

          Fair  values  for  securities  are based on  available  quoted  market
          prices.  The  carrying  values of equity  securities  with no  readily
          determinable fair value approximate fair values.

          Loans:

          For   variable-rate   loans  that  reprice   frequently  and  have  no
          significant  change in credit risk,  fair values are based on carrying
          values.   For  other  loans,  the  fair  values  are  estimated  using
          discounted  cash flow analyses,  using interest rates  currently being
          offered for loans with similar terms to borrowers  with similar credit
          quality. Fair values for impaired loans are estimated using discounted
          cash flow analyses or underlying collateral values.

          Deposits:

          The  carrying  amounts  of  demand  deposits,  savings  deposits,  and
          variable-rate  certificates of deposit  approximate their fair values.
          Fair values for fixed-rate certificates of deposit are estimated using
          a  discounted  cash  flow  calculation  that  applies  interest  rates
          currently  being offered on  certificates  to a schedule of aggregated
          expected monthly maturities on time deposits.

          Other Borrowings:

          The  carrying  amounts  of other  borrowings  approximate  their  fair
          values.

          Accrued Interest:

          The  carrying  amounts  of  accrued  interest  approximate  their fair
          values.

          Off-Balance Sheet Instruments:

          Fair values of the Company's  off-balance sheet financial  instruments
          are based on fees currently charged to enter into similar  agreements.
          Since the  majority of the  Company's  off-balance  sheet  instruments
          consist of nonfee-producing,  variable-rate  commitments,  the Company
          has determined they do not have a distinguishable fair value.

                                      F-18
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

          Off-Balance Sheet Instruments (Continued):

          The  carrying  amounts  and  estimated  fair  values of the  Company's
          financial instruments are as follows:
<TABLE>
<CAPTION>

                                                                        December 31,
                                         ----------------------------------------------------------------------------
                                                         2000                                   1999
                                         -------------------------------   -------------------------------------
                                             Carrying          Fair          Carrying           Fair
                                              Amount           Value          Amount            Value
                                              ------           -----          ------            -----
<S>                                      <C>             <C>              <C>             <C>
Financial assets:
   Cash, due from banks, and federal
      funds sold                         $   7,761,994   $    7,761,994   $  4,684,288    $   4,684,288
   Securities available-for-sale             2,240,056        2,240,056        586,381          586,381
   Securities held-to-maturity               1,399,315        1,390,057      2,905,919        2,866,480
   Loans                                    66,329,401       66,720,191     39,245,177       39,660,330
   Accrued interest receivable                 686,239          686,239        282,645          282,645

Financial liabilities:
   Deposits                                 72,178,093       72,334,783     41,815,979       41,971,850
   Other borrowings                             50,000           50,000            -                -
   Accrued interest payable                    317,805          317,805         90,540           90,540
</TABLE>

NOTE 15. STOCK DIVIDEND

          The  Company  declared  a  two-for-one  common  stock  split  in 2000.
          Earnings  per  share  and all per  share  amounts  for the year  ended
          December 31, 1999 have been  retroactively  adjusted for the increased
          number of shares of common stock.

NOTE 16. SUPPLEMENTARY FINANCIAL DATA

          Components  of other  income  and  expenses  in  excess of 1% of total
          revenue are as follows:

<TABLE>
<CAPTION>
                                                     Years Ended December 31,
                                                    --------------------------
                                                        2000          1999
                                                    -----------    -----------
          <S>                                       <C>            <C>
          Other income:
             Mortgage loan origination fees         $   86,944     $ 125,364
          Other expenses:
             Advertising                                87,977        43,922
             Stationery and supplies                   138,871        68,874
             Data processing                           138,952        61,515
             Legal and professional                    149,162        72,291
</TABLE>

                                      F-19

<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 17. PARENT COMPANY FINANCIAL INFORMATION

          The  following  information  presents  the  condensed  balance  sheet,
          statements of income and cash flows of Chestatee  Bancshares,  Inc. as
          of December  31,  2000 and for the period from March 31, 2000  through
          December 31, 2000:

<TABLE>
<CAPTION>
                             CONDENSED BALANCE SHEET

          <S>                                                      <C>
          Assets
            Cash                                                    $      3,961
            Investment in subsidiary                                   9,635,885
            Other assets                                                  30,755
                                                                   -------------
                  Total assets                                      $  9,670,601
                                                                   =============

          Liabilities
            Other borrowings                                        $     50,000
            Other                                                         35,465
                                                                   -------------
                                                                    $     85,465
                                                                   -------------
          Stockholders' equity                                      $  9,585,136
                                                                   -------------
          Total liabilities and                                     $  9,670,601
          stockholders' equity                                     =============

                          CONDENSED STATEMENT OF INCOME

         Expenses:
           Employee benefits                                        $     21,100
           Interest                                                        2,355
           Other                                                          58,049
                                                                    -------------
                                                                    $     81,504
                                                                    -------------

                                                                    -------------
                                                                    $    (81,504)
                                                                    -------------

           Loss before income tax benefits and equity in
              undistributed income of subsidiary                         (81,504)

         Income tax benefits                                             (30,755)
                                                                   -------------

                        Loss before equity in undistributed
                          income of subsidiary                           (50,749)

         Equity in undistributed income of subsidiary                    443,415
                                                                    ------------

                        Net income                                  $    392,666                                                   =
                                                                    ============
</TABLE>

                                      F-20
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 NOTE 17.         PARENT COMPANY FINANCIAL INFORMATION (Continued)

<TABLE>
<CAPTION>
                        CONDENSED STATEMENT OF CASH FLOWS

        <S>                                                      <C>
        OPERATING ACTIVITIES
          Net income                                             $  392,666
          Adjustments to reconcile net income to
             net cash used in operating activities:
             Undistributed income of subsidiary                    (443,415)
             Other operating activities                               4,710
                                                                 -----------

                  Net cash used in operating activities             (46,039)
                                                                 -----------
        FINANCING ACTIVITIES

          Proceeds from other borrowings                             50,000
                                                                 -----------

                  Net cash provided by financing activities          50,000
                                                                 -----------
           Net increase in cash                                       3,961

        Cash at beginning of year                                       -
                                                                 -----------

        Cash at end of year                                      $    3,961
                                                                 ===========
</TABLE>


NOTE 18. BUSINESS COMBINATION

          On March 31, 2000, the Company  acquired all of the outstanding  stock
          of the Bank in exchange  for 950,000  shares of the  Company's  common
          stock.  The  acquisition  has  been  accounted  for  as a  pooling  of
          interest.  The net  income of the Bank  prior to the  acquisition  was
          $157,294  and has  been  included  in the  consolidated  statement  of
          income.

          Common  stock and capital  surplus as of  December  31, 1999 have been
          restated  to reflect  the change  from the Bank's $5 par value  common
          stock to the Company's no par value common stock. This restatement had
          no effect on total stockholders' equity.

                                      F-21
<PAGE>
ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE
         ----------------------------------------------------------------------
     The Company  has had no changes in or  disagreements  with its  independent
auditors,  Mauldin & Jenkins,  LLC, since its inception on October 13, 1999. The
Bank has had no  changes  in or  disagreements  with its  independent  auditors,
Mauldin & Jenkins,  LLC,  since its  inception  on December  31,  1997,  through
December 31, 2000.

                                    PART III

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

     The following paragraphs set forth for each director, principal officer and
significant employee:  the name of each director of the Company; the year he was
first  elected a director;  a  description  of his position and offices with the
Company (other than as a director), if any; a brief description of his principal
occupation  and  business  experience  during at least the last five years;  and
certain  other  information.  Each  Director  of the  Company  also  serves as a
director  of the  Bank.  Except  as  otherwise  disclosed,  there  are no family
relationships between any directors or executive officers of the Company, and no
director is a member of the board of directors of a publicly  held company which
is required to file  reports with the  Commission.  A director of the Company is
elected by a majority  of votes cast at an annual  meeting of the  shareholders,
and serve until the next annual meeting of shareholders and until a successor is
duly elected and qualified.

Directors
---------

     Ralph  Millard  Bowen,  born April 6,  1942,  is the owner of Bowen & Bowen
Construction.  He is a member of the Board of Directors  of the Georgia  Housing
Financial  Authority and the Georgia  Department of Community  Affairs.  He is a
principal  of several real estate  related  business  entities.  He attended the
University of Georgia and Rheinhardt College. Mr. Bowen has served as a director
of the Company and the Bank since their inception.

     Marcus Calvin Byrd, Jr., born June 1, 1953, is owner of Byrd's Mini-Storage
and Byrd's U-Haul.  His is a member of the Executive  Board of the Boy Scouts of
America.  Mr.  Byrd has served as a director  of the  Company and the Bank since
their inception.

     Glennon C. Grogan,  born July 20, 1939,  is President of Grogan & Co., Inc.
(25% owner) engaged in commercial  sanitation  services and sawdust sales. He is
the  Secretary/Treasurer  of Etowah Environment Group, Inc. (50% owner) involved
in waste  management . He is a principal of several  real estate  ventures.  Mr.
Grogan  has  served  as a  director  of the  Company  and the Bank  since  their
inception.  Mr. Grogan's brother,  James H. Grogan, also serves as a director of
the Company and the Bank.

                                       32
<PAGE>
     James H. Grogan,  born July 14, 1943, is Corporate  Secretary/Treasurer  of
Grogan & Co., Inc. (50% owner)  engaged in  commercial  sanitation  services and
sawdust  sales.  He is the President of Etowah  Environmental  Group,  Inc. (50%
owner)  engaged in waste  management.  He is a principal  of several real estate
ventures.  Mr. Grogan has served as a director of the Company and the Bank since
their inception.  Mr. Grogan's brother, Glennon C. Grogan, is also a director of
the Company and the Bank.

     Andrew M. Head,  born May 22, 1953, is President and majority owner of Head
Distributing  Company  (wholesale  groceries)  and is  involved  as an  owner or
director or both in the wholesale lumber and restaurant franchise businesses. He
is a graduate of the University of Georgia. Mr. Head has served as a director of
the Company and the Bank since their inception.

     John Philip Hester,  Sr., born January 23, 1953, is the President and Chief
Executive Officer of the Company in addition to serving as a member of the Board
of Directors.  He served as President,  Chief Executive Officer, and Director of
the  Waycross  Company  & Trust  from 1987 to 1990 and has been  engaged  in the
Banking  business in various  capacities  since 1975.  He was  President,  Chief
Executive  Officer,  and Director of the First Community  Company of Dawsonville
until his  resignation to participate in  organization  of the Company.  He is a
graduate of the University of Georgia and ahs completed courses at the School of
Banking of the South (Louisiana State University) and the University of Oklahoma
Commercial  Lending  Scholl.  Mr. Hester has served as a director of the Company
and the Bank since their inception.

     Bruce Todd Howard,  born March 17, 1967,  is President  and co-owner of H&H
Custom  Homes  and his is the  Operations  Manager  for Coal  Mountain  Builders
Supply. He is a member of the Forsyth Homebuilders  Association.  Mr. Howard has
served as a director of the Company and the Bank since their inception.

     David E.  Johnson,  born May 9, 1942,  is President  and owner of Sleeveco,
Inc. (manufacturer of plastic packaging materials).  Mr. Johnson has served as a
director of the Company and the Bank since their inception.

     William Alan McRae, born July 22, 1952, is an owner of McRae & Stolz, Inc.,
a real estate  development firm. He received his  undergraduate  degree from the
University of Georgia and a masters degree from the University of Tennessee. Mr.
McRae  has  served  as a  director  of the  Company  and the  Bank  since  their
inception.

     Kim M. Mills,  born  February  11,  1962,  is the  principal  of Mills Fuel
Service,  Inc. He is a member of the Dawson  County  Rotary Club.  Mr. Mills has
served as a director since December 1998.

     James Wyman Walden,  born January 6, 1948, is co-owner of C&W Ace Hardware,
Inc. He is a member of the Board of Directors of the  Dahlonega  Rotary Club and
he was the 1996 Chairman of the Dahlonega  Lumpkin  County  Chamber of Commerce.
Mr.  Walden has served as a director  of the  Company  and the Bank since  their
inception.

                                       33
<PAGE>
     Russell M. Wallace, born June 3, 1954, is President and co-owner of Country
Cupboard Food Stores,  Inc. He is a past Chairman of the Georgia  Association of
Convenience  Stores and he is a member of the Board of Directors of the National
Association  of  Convenience  Stores.  He is past  Chairman of the Dawson County
Heart Fund  Association  and the Dawson County Chamber of Commerce,  and he is a
member of the Dawson County Chamber of Commerce Board of Directors.  He attended
the  University of Georgia.  Mr. Wallace has served as a director of the Company
and the Bank since their inception.

     During the previous five years,  no Director of the Company was the subject
of a legal  proceeding  (as defined  below) that is material to an evaluation of
the ability or integrity of the Director.  "Legal proceeding" Includes:  (a) any
bankruptcy  petition filed by or against any business of which such person was a
general partner or executive  officer either at the time of bankruptcy or within
two years prior to that time;  (b) any  conviction  in a criminal  proceeding or
being subject to a pending criminal proceeding (excluding traffic violations and
other  minor  offenses);  (c) any  order,  judgment  or  decree  of any court of
competent   jurisdiction,   permanently  or  temporarily   enjoining,   barring,
suspending  or  otherwise  limiting  his  involvement  in any type of  business,
securities  or banking  activities;  and (d) any finding by a court of competent
jurisdiction  (in a civil  action),  the  Commission  or the  Commodity  Futures
Trading Commission to have violated a federal or state securities or commodities
law, such judgment having not been reversed, suspended or vacated.

Executive Officers
------------------

     John Philip  Hester,  Sr., (see  paragraph in preceding  section  regarding
directors).  Mr. Hester has served as the President and Chief Executive  Officer
of the Company and the Bank since their inception.

     Robert W.  Coile,  born  April 24,  1966,  resides at 4545  Shannon  Court,
Suwanee,  Georgia  30024.  Mr. Coile  previously  was employed by Century  South
Banks,  Inc.  since 1990 until joining the Bank.  He attended the  University of
Georgia  and has  completed  courses  at the  School  of  Banking  of the  South
(Louisiana  State  University).  Mr.  Coile has  served  as the Chief  Financial
Officer,  the principal  accounting  officer,  of the Company and the Bank since
their inception.

     During the previous five years, no Executive  Officer of the Company or the
Bank was the subject of a legal  proceeding  (as defined above) that is material
to an evaluation of the ability or integrity of the Executive Officer.

Compliance with Section 16(a) of the Exchange Act
-------------------------------------------------

     Based  solely upon a review of Forms 3, 4, and 5, and  amendments  thereto,
furnished  to the  Company  pursuant  to Rule  16a-3(d)  during  the year  ended
December  31, 2000,  no person,  who at any time during the year was a director,
executive  officer or  beneficial  owner of more than 10% of any class of equity
securities of the Company,  failed to file on a timely basis reports required by
Section 16(a) of the Exchange Act.

                                       34
<PAGE>
ITEM 10.  EXECUTIVE COMPENSATION
--------------------------------

     The  following  table  sets  forth  the cash and cash  equivalent  forms of
compensation  received  by the chief  executive  officer of the  Company and its
named  executive  officers  (in excess of  $100,000)  in the  fiscal  year ended
December  31,  2000,  and all  cash and cash  equivalent  forms of  compensation
received by the chief executive officer and all named executive  officers of the
Company as a group.

<TABLE>
<CAPTION>
                            SUMMARY COMPENSATION TABLE

                                                                                        LONG TERM COMPENSATION

                                                                                         AWARDS    PAYOUTS
  (a)                   (b)       (c)        (d)        (e)            (f)         (g)     (h)       (i)

NAME AND                                             OTHER ANNUAL    RESTRICTED   OPTION   LTIP      OTHER
PRINCIPAL POSITION      YEAR     SALARY     BONUS   COMPENSATION   STOCK AWARDS   SARs   PAYOUTS  COMPENSATION

<S>                     <C>    <C>          <C>          <C>             <C>        <C>     <C>    <C>
J. Philip Hester, Sr.   2000   $ 136,500    $5,688       -               -          -       -      $61,633 1
CEO, President,         1999   $ 123,971    $5,417       -               -          -       -      $58,264 2
Director                1998   $ 108,633    $  500       -               -          -       -      $12,418 3
</TABLE>
[FN]
1    The Company has accrued a deferred  bonus under the terms of his Employment
     Agreement  totaling  $54,600,  provided an  automobile  allowance  totaling
     $2,938,  and contributed to its 401(k) plan for eligible  employees  $4,095
     for Mr. Hester during the fiscal year ended December 31, 1999.

2    The Bank has  accrued a deferred  bonus  under the terms of his  Employment
     Agreement  totaling  $51,755,  provided an  automobile  allowance  totaling
     $2,938 and contributed to its 401(k) plan for eligible employees $3,571 for
     Mr. Hester during the fiscal year ended December 31, 1999.

3    The Company  contributed to its 401(k) plan for eligible  employees  $3,541
     for Mr. Hester during the fiscal year ended December 31, 1999.
</FN>

                                       35
<PAGE>
Compensation of Directors
-------------------------

     The  Company  is  prohibited  under  the  terms of its  charter  to pay any
compensation  or remuneration to the directors of the Company until such time as
the Company has a surplus in its accumulated retained earnings.

Employment Agreements and Change in Control Agreements
------------------------------------------------------

     J. Philip Hester,  Sr., President and Chief Executive Officer, as well as a
Director, of the Company and the Bank, entered into an Employment Agreement with
the Bank  effective  May 17,  1997 for a term  ending at the close of the Bank's
fifth  full  calendar  year after  commencement  of  banking  operations  (i.e.,
December  31,  2003).  Mr.  Hester's  base  salary  from the  effective  date is
$110,000,  increasing  5% annually on the first  anniversary  of the  Employment
Agreement. In addition to the base salary, Mr. Hester will receive a performance
bonus  based upon the Bank's  CAMEL  rating and the  evaluation  by the Board of
Directors of the Bank's  "current"  condition at the end of each calendar  year.
Mr.  Hester is also  entitled  to  certain  benefits,  including  an  automobile
allowance,  a term life  insurance  policy,  annual  paid  vacation,  healthcare
insurance and disability insurance. As a condition of employment, Mr. Hester was
required to purchase at least  10,000  shares of the Bank's  common  stock.  The
shares  were  converted  to shares of the Company by virtue of the merger of the
Company and the Bank on March 31, 2000. He may earn an option to purchase  5,000
shares of the common stock of the Company each year during the Bank's first five
years of operation,  up to a maximum of 25,000 shares. The exercise price of the
options is the book value per share of the Company's common stock at the time of
exercise,  payable in cash.  The option expires ten years after the date earned.
The  Employment  Agreement  contains no provision for a change in control of the
Company or the Bank nor is Mr. Hester a party to any Change in Control Agreement
with the Company or the Bank.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       36
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
-----------------------------------------------------------------------

     The table below sets forth the name of each director of the Company, number
of shares of the Company's  Common Stock  beneficially  owned by him on December
31, 2000 and the  percentage of the total shares of the  Company's  Common Stock
outstanding on December 31, 2000 which such beneficial ownership represents.

Name and Address                 Amount and Nature of     Percent of Class
of Beneficial Owner*                 Beneficial              Ownership
--------------------                 ----------              ---------

Ralph Millard Bowen                  44,189 1                   4.65%
430 Fairmont Drive
Norcross, Georgia  33071

Marcus C. Byrd, Jr.                  43,566 2                   4.59%
1661 Highway 9 South
Dawsonville, Georgia  30534

Glennon C. Grogan                    22,243 3                   2.34%
6060 Jewell Bennett Road
Dawsonville, Georgia  30534

James H. Grogan                      19,483 4                   2.05%
4215 Dahlonega Highway
Cumming, Georgia  30130

Andrew M. Head                       25,608 5                   2.70%
5270 Woodridge Forest Trail
Atlanta, Georgia  30327

[FN]
1    The figure includes 10,000 shares owned by Mr. Bowen's spouse, 1,500 shares
     each owned by Mr.  Bowen's  two  daughters  and 1,000  shares  owned by Mr.
     Bowen's son, for which he disclaims beneficial ownership.

2    Includes  4,700 shares held in trust by Mr. Byrd for the benefit of BT Alex
     Brown FBO and 5,300  shares held in trust by Mr. Byrd for the benefit of BT
     Alex Brown FBO. The figure also  includes  1,000 shares owned by Mr. Byrd's
     spouse,  1,100 shares owned by Mr. Byrd's son and 1,100 shares owned by Mr.
     Byrd's daughter, for which he disclaims beneficial ownership.

3    The figure  includes 1,000 shares owned jointly by Mr.  Grogan's spouse and
     son, 1,000 shares owned jointly by Mr. Grogan's spouse and daughter,  2,600
     shares owned by Mr. Grogan's son, and 2,500 owned by Mr. Grogan's daughter,
     for which he disclaims beneficial

4    The figure includes 1,500 shares owned by Mr. Grogan's  spouse,  100 shares
     owned by Mr.  Grogan's son and 2,700  shares owned by Chris N. Grogan,  for
     which Mr. Grogan disclaims beneficial ownership.

5    The figure includes 100 shares owned by Mr. Head's son and 100 shares owned
     each by Mr. Head's two daughters,  for which Mr. Head disclaims  beneficial
     ownership.
</FN>

                                       37
<PAGE>
J. Philip Hester, Sr.                     10,000                  1.05%
32 Lakeshore Circle
Dawsonville, Georgia  30534

Bruce T. Howard                           25,608                  2.67%
4975 Bagley Terrace Drive
Alpharetta, Georgia  30201

David E. Johnson                          32,808 6                3.45%
6775 Polo Drive
Cumming, Georgia  30130

William A. McRae                          17,808 7                1.87%
499 Johnson Ferry Road
Atlanta, Georgia  30328

Kim Mills                                 4,408 8                 0.46%
5015 Oak Grove Circle
Cumming, Georgia 30041

James W. Walden                           20,408 9                2.15%
262 Jack Walker Road
Dahlonega, Georgia  30533

Russell M. Wallace                        46,783 10               4.92%
77 Old River Road
Dahlonega, Georgia  30533

All executives officers and directors    312,664                 32.91%
as a group


None of the  persons  listed  in the  above  table  have the  right  to  acquire
beneficial  ownership  of any  shares  of  the  Company  as  specified  in  Rule
13d-3(d)(1) of the Exchange Act.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------

[FN]
6    The figure  includes  1,000 shares owned by Mr.  Johnson's  son, 500 shares
     owned  by Mr.  Johnson's  daughter  and  1,000  shares  owned  by a  second
     daughter, for which he disclaims beneficial ownership.


7    The figure includes 2,500 shares held in the McRae and Stolz Pension Plan.

8    The figure includes 500 shares owned each by Ms. Mills' two daughters,  for
     which Ms. Mills disclaims beneficial ownership.

9    The figure includes 100 shares owned by Mr. Walden's daughter, for which he
     disclaims beneficial ownership.

10   Includes  2,000  shares  held in trust by Mr.  Wallace  for the  benefit of
     Stearne Agee Leach FBO. The figure also  includes  1,600 shares held by Mr.
     Wallace's  spouse,  1,000 shares owned by Mr. Wallace's  daughter and 1,000
     shares  owned  by  Mr.  Wallace's  son  for  which  Mr.  Wallace  disclaims
     beneficial ownership.
</FN>

                                       38
<PAGE>
     The Company has had and expects to have in the future banking  transactions
in the ordinary course of its business with its directors,  principal  officers,
principal shareholders,  certain relatives of such persons, and their associates
including  corporations,  partnerships,  and other  organizations  in which such
directors  and  officers  have an  interest,  on  substantially  the same terms,
including  interest rates and  collateral,  as those  prevailing at the time for
comparable  transactions  with unrelated  parties.  Such  transactions  have not
involved  more  than  the  normal  risk of  collectibility  or  presented  other
unfavorable features. As of December 31, 2000, the Company had outstanding loans
to certain of its directors,  executive  officers and certain  relatives of such
persons and their associates,  which aggregated approximately  $5,002,000.  This
represented  approximately  52%  of  the  Company's  $9,585,000  equity  capital
accounts.

     The Company has not otherwise transacted within the previous two years, nor
does it expect to  transact  in the  immediate  future,  any  business  with any
director,  principal officer, or principal  shareholder which exceeds 10% of the
Company's equity capital accounts or $5 million, whichever is less.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       39
<PAGE>
                                     PART IV
                                     -------

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K
------------------------------------------

Index to Exhibits
-----------------

Number            Description                                        Page
------            -----------                                        ----

   3.1   Articles of Incorporation                                    43
   3.2   Bylaws                                                       46
  10.1   Lease Agreement                                              *
  10.2   Data Processing Contract                                     *
  10.3   International Services Agreement                             *
  10.4   Employment Agreement                                         *
  10.5   Lease Agreement                                              60
  23.1   Consent of Independent Auditor                               74
  24.1   Power of Attorney                                            75

   *     Previously Filed Document

Description
of Exhibits
-----------

  3.1*   Articles of Incorporation of Chestatee Bancshares, Inc.
  3.2*   Bylaws of Chestatee Bancshares, Inc.
 10.1 1  Lease Agreement between Ingles Markets, Inc. and Chestatee State
         Bank, dated April 16, 1998
 10.2 1  Data Processing Contract between Chestatee State Bank and its
         successors, dated January 20, 1998
 10.3 1  International  Services  Agreement  between Chestatee State Bank and
         The Bankers Bank, dated April, 27, 1998
 10.4 1  Employment Agreement dated May 18, 1997 between John Philip Hester, Sr.
         and Chestatee State Bank
 10.5    Lease Agreement between BDR Properties, LLC and Chestatee  State  Bank,
         dated November 1, 2000.
 23.1    Consent of Mauldin & Jenkins, LLC.
 24.1    Power of Attorney  dated  March 30, 2000  executed  by  officers  and a
         majority  of  directors  of
         Chestatee State Bank
 27.1    Financial Data Schedule for Chestatee State Bank

  1      Incorporated by  reference to  Form 10-K12G3 filed with  the Securities
         and Exchange Commission effective April 10, 2000.

Reports On Form 8-K
-------------------

         There was no Form 8-K filings during the last quarter of the year ended
December 31, 2000.

                                     40
<PAGE>
                                   SIGNATURES

     In  accordance  with Section 13 or 15(d) of the  Exchange  Act, the Company
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                             CHESTATEE STATE BANK


                             BY: /s/ J. Philip Hester, Sr.
                             -----------------------------------------------
                             J. Philip Hester, Sr., Chief Executive Officer,
                             President and Director

                             DATE:    March 30, 2001



                             BY: /s/ Robert W. Coile
                             ----------------------------------------
                             Robert W. Coile Chief Financial Officer,

                             DATE:    March 30, 2000



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

/s/ J. Philip Hester, Sr.
-------------------------
Chief Executive Officer, President and
Director (principal executive officer)
March 30, 2001



-----------------------
Director
March 30, 2001

                                       41
<PAGE>
/s/ Marcus C. Byrd, Jr.                       /s/ David E. Johnson
-----------------------                       --------------------
Director                                      Director
March 30, 2001                                March 30, 2001


/s/ Glennon C. Grogan                         /s/ William A. McRae
---------------------                         --------------------
Director                                      Director
March 30, 2001                                March 30, 2001


/s/ James H. Grogan                           /s/ Kim Mills
-------------------                           -------------
Secretary and Director                        Director
March 30, 2001                                March 30, 2001


/s/ Robert W. Coile                           /s/ Russell M. Wallace
-------------------                           ----------------------
Chief Financial Officer                       Chairman of the Board of Directors
(principal accounting officer)                March 30, 2001
March 30, 2001


/s/ Andrew M. Head                            /s/ James W. Walden
------------------                            -------------------
Director                                      Director
March 30, 2001                                March 30, 2001


/s/ Bruce T. Howard
-------------------
Director
March 30, 2001

                                       42