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U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-QSB

Mark One

|                   |  |                                                                                         
|------------------ |  | ----------------------------------------------------------------------------------------
|(Box with an X)    |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 
|                  
|                  
|                  
|                  
|                   |  | For the quarterly period ended               
September 30, 2001                        
|                  
|                  
|                  
|                  
|(Empty Ballot Box) |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|                  
|                  
|                  
|                  
|                   |  | For the transition period from  to                                                      

Commission File Number: 333-10909

Forsyth Bancshares, Inc.




(Exact name of small business issuer as specified in its charter)


|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|Georgia                                                        |  | 58-2231953                       
|                                                               |  |                                  
|(State or other jurisdiction of
incorporation or organization) |  | (IRS Employer
Identification No.)

501 Tri-County Plaza, Highways 9 and 20, Cumming, Georgia 30040




(Address of principal executive offices)


(770) 886-9500




(Issuers telephone number)


N/A




(Former name, former address and former fiscal year, if changed since last report)


Check whether the issuer (1) filed all reports required 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  (Box with an X)
     No  (Empty Ballot Box)

State the number of shares outstanding of each of the issuers classes of
common equity, as of
November 1, 2001: 800,000; no par value.

Transitional Small Business Disclosure Format           
Yes  (Empty Ballot Box)
     No  (Box with an X)





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TABLE OF CONTENTS



|                               |                                                             |                                                            |  |  |  |  |  | 
|------------------------------ | ----------------------------------------------------------- | ---------------------------------------------------------- |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION
|                               | ITEM 1. FINANCIAL STATEMENTS                               
|                               |                                                             | CONSOLIDATED BALANCE SHEET                                
|                               |                                                             | CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
|                               |                                                             | CONSOLIDATED STATEMENTS OF CASH FLOWS                     
|                               |                                                             | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|PART II  OTHER INFORMATION   
|                               | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|                               | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                   
|                               | SIGNATURES                                                 



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##### Table of Contents



FORSYTH BANCSHARES, INC. AND SUBSIDIARY

INDEX

|        |  |                       |                                                                                                                                                               |  |    |      |  | 
|------- |  | --------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -- | ---- |  | 
|        |  |                       |                                                                                                                                                               |  |    | Page
|PART I  |  | FINANCIAL INFORMATION |                                                                                                                                                               |  |    |     
|       
|       
|       
|       
|        |  | Item 1.               | Financial Statements                                                                                                                                          |  |    |     
|       
|       
|       
|       
|        |  |                       | Consolidated Balance Sheet  September 30, 2001                                                                                                               |  |    | 3    | 
|       
|       
|       
|       
|        |  |                       | Consolidated Statements of Income and Comprehensive Income 
Three Months Ended September 30, 2001 and 2000 and Nine Months Ended September 30, 2001 and 2000 |  |    | 4    | 
|       
|       
|       
|       
|        |  |                       | Consolidated Statement of Cash Flows  Nine Months Ended
September 30, 2001 and 2000                                                                          |  |    | 5    | 
|       
|       
|       
|       
|        |  |                       | Notes to Consolidated Financial Statements                                                                                                                    |  |    | 6    | 
|       
|       
|       
|       
|        |  | Item 2.               | Managements Discussion and Analysis of
Financial Condition and Results of Operations                                                                         |  |    | 7-13 | 
|       
|       
|       
|       
|PART II |  | OTHER INFORMATION     |                                                                                                                                                               |  |    |     
|       
|       
|       
|       
|        |  | Item 4                | Submission of Matters to a Vote of Security Holders                                                                                                           |  |    | 14   | 
|       
|       
|       
|       
|        |  | Item 6                | Exhibits and Reports on Form 8-K                                                                                                                              |  |    | 14   | 
|       
|       
|       
|       
|        |  | Signatures            |                                                                                                                                                               |  | 15 |     

2



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##### Table of Contents



PART I  FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FORSYTH BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2001
(Unaudited)
(Dollars in Thousands)










|                                                |                                                                                                 |                                            |                                      |        |        |  |  | 
|----------------------------------------------- | ----------------------------------------------------------------------------------------------- | ------------------------------------------ | ------------------------------------ | ------ | ------ |  |  | 
|                                                |                                                                                                 |                                            |                                      | Assets |        |  |  | 
|                                               
|                                               
|                                               
|                                               
|Cash and due from banks                         |                                                                                                 | $                                          | 2,396                                |       
|                                               
|                                               
|                                               
|                                               
|Interest-bearing deposits in banks              |                                                                                                 |                                            | 182                                  |       
|                                               
|                                               
|                                               
|                                               
|Federal funds sold                              |                                                                                                 |                                            | 6,211                                |       
|                                               
|                                               
|                                               
|                                               
|Securities available-for-sale, at fair value    |                                                                                                 |                                            | 19,534                               |       
|                                               
|                                               
|                                               
|                                               
|Securities held-to-maturity, fair value of $308 |                                                                                                 |                                            | 300                                  |       
|                                               
|                                               
|                                               
|                                               
|Loans                                           |                                                                                                 |                                            | 58,750                               |       
|                                               
|                                               
|                                               
|                                               
|Less allowance for loan losses                  |                                                                                                 |                                            | 752                                  |       
|                                                |                                                                                                 |                                            |                                      |       
|                                                |                                                                                                 | Loans, net                                 |                                      |        | 57,998 | 
|                                                |                                                                                                 |                                            |                                      |       
|Premises and equipment                          |                                                                                                 |                                            | 2,108                                |       
|                                               
|                                               
|                                               
|                                               
|Other assets                                    |                                                                                                 |                                            | 1,010                                |       
|                                                |                                                                                                 |                                            |                                      |       
|                                                |                                                                                                 | Total assets                               |                                      | $      | 89,739 | 
|                                                |                                                                                                 |                                            |                                      |       
|                                                |                                                                                                 |                                            | Liabilities and Stockholders Equity |        |        |  | 
|                                               
|                                               
|                                               
|                                               
|Deposits                                        |                                                                                                 |                                            |                                      |       
|                                               
|                                               
|                                               
|                                               
|                                                | Noninterest-bearing                                                                             |                                            | $                                    | 10,164 |       
|                                               
|                                               
|                                               
|                                               
|                                                | Interest-bearing                                                                                |                                            |                                      | 69,714 |       
|                                                |                                                                                                 |                                            |                                      |       
|                                                |                                                                                                 | Total deposits                             |                                      |        | 79,878 | 
|                                               
|                                               
|                                               
|                                               
|Other liabilities                               |                                                                                                 |                                            | 478                                  |       
|                                                |                                                                                                 |                                            |                                      |       
|                                                |                                                                                                 | Total liabilities                          |                                      |        | 80,356 | 
|                                                |                                                                                                 |                                            |                                      |       
|Commitments and contingencies                   |                                                                                                 |                                            |                                      |       
|                                               
|                                               
|                                               
|                                               
|Stockholders equity                            |                                                                                                 |                                            |                                      |       
|                                               
|                                               
|                                               
|                                               
|                                                | Common stock, no par value; 10,000,000 shares
shares authorized, 800,000 issued and outstanding |                                            |                                      | 7,960  |       
|                                               
|                                               
|                                               
|                                               
|                                                | Retained earnings                                                                               |                                            |                                      | 1,171  |       
|                                               
|                                               
|                                               
|                                               
|                                                | Accumulated other comprehensive income                                                          |                                            |                                      | 252    |       
|                                                |                                                                                                 |                                            |                                      |       
|                                                |                                                                                                 | Total stockholders equity                 |                                      |        | 9,383  | 
|                                                |                                                                                                 |                                            |                                      |       
|                                                |                                                                                                 | Total liabilities and stockholders equity |                                      | $      | 89,739 | 
|                                                |                                                                                                 |                                            |                                      |       

See Notes to Consolidated Financial Statements

3



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##### Table of Contents



FORSYTH BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
THREE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(Unaudited)
(Dollars in Thousands,
Except Per Share Data)




|                                     |                                                                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |   |      |       |       | 
|------------------------------------ | ----------------------------------------------------------------------------------- | --------------------------------------------------- | ---- | ------------------ | ----- | ----------------- | ---- | ----- | ----- | ---- | ---- | ----- | ----- | - | ---- | ----- | ----- | 
|                                     |                                                                                     |                                                     |      | Three Months Ended |       | Nine Months Ended
|                                     |                                                                                     |                                                     |      | September 30,      |       | September 30,    
|                                     |                                                                                     |                                                     |      |                    |       |                  
|                                     |                                                                                     |                                                     |      | 2001               |       | 2000              |      | 2001  |       | 2000
|                                     |                                                                                     |                                                     |      |                    |       |                   |      |       |       |     
|Interest income                      |                                                                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |   |      |      
|                                    
|                                    
|                                    
|                                    
|                                     | Loans                                                                               |                                                     | $    | 1,314              |       |                   | $    | 1,143 |       |      | $    | 3,827 |       |   | $    | 3,207 |      
|                                    
|                                    
|                                    
|                                    
|                                     | Taxable securities                                                                  |                                                     |      | 270                |       |                   |      | 290   |       |      |      | 890   |       |   |      | 885   |      
|                                    
|                                    
|                                    
|                                    
|                                     | Nontaxable securities                                                               |                                                     |      | 14                 |       |                   |      | 20    |       |      |      | 56    |       |   |      | 60    |      
|                                    
|                                    
|                                    
|                                    
|                                     | Deposits in banks                                                                   |                                                     |      | 6                  |       |                   |      | 6     |       |      |      | 15    |       |   |      | 12    |      
|                                    
|                                    
|                                    
|                                    
|                                     | Federal funds sold                                                                  |                                                     |      | 30                 |       |                   |      | 134   |       |      |      | 169   |       |   |      | 239   |      
|                                     |                                                                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |   |      |      
|                                     |                                                                                     | Total interest income                               |      |                    | 1,634 |                   |      |       | 1,593 |      |      |       | 4,957 |   |      |       | 4,403 | 
|                                     |                                                                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |   |      |      
|Interest expense                     |                                                                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |   |      |      
|                                    
|                                    
|                                    
|                                    
|                                     | Deposits                                                                            |                                                     |      | 811                |       |                   |      | 827   |       |      |      | 2,654 |       |   |      | 2,176 |      
|                                    
|                                    
|                                    
|                                    
|                                     | Other borrowings                                                                    |                                                     |      |                   |       |                   |      |      |       |      |      |      |       |   |      | 2     |      
|                                     |                                                                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |   |      |      
|                                     |                                                                                     | Total interest expense                              |      |                    | 811   |                   |      |       | 827   |      |      |       | 2,654 |   |      |       | 2,178 | 
|                                     |                                                                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |   |      |      
|                                     |                                                                                     | Net interest income                                 |      |                    | 823   |                   |      |       | 766   |      |      |       | 2,303 |   |      |       | 2,225 | 
|                                    
|                                    
|                                    
|                                    
|Provision for loan losses            |                                                                                     |                                                     | 136  |                    |       |                   | 14   |       |       |      | 259  |       |       |   | 87   |      
|                                     |                                                                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |   |      |      
|                                     |                                                                                     | Net interest income after
provision for loan losses |      |                    | 687   |                   |      |       | 752   |      |      |       | 2,044 |   |      |       | 2,138 | 
|                                     |                                                                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |   |      |      
|Other income                         |                                                                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |   |      |      
|                                    
|                                    
|                                    
|                                    
|                                     | Service charges on deposit accounts                                                 |                                                     |      | 57                 |       |                   |      | 39    |       |      |      | 158   |       |   |      | 95    |      
|                                    
|                                    
|                                    
|                                    
|                                     | Gains (losses) on sales of securities
available-for-sale                            |                                                     |      |                   |       |                   |      |      |       |      |      | 6     |       |   |      | (14   | )    
|                                    
|                                    
|                                    
|                                    
|                                     | Other operating income                                                              |                                                     |      | 162                |       |                   |      | 4     |       |      |      | 197   |       |   |      | 18    |      
|                                     |                                                                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |   |      |      
|                                     |                                                                                     | Total other income                                  |      |                    | 219   |                   |      |       | 43    |      |      |       | 361   |   |      |       | 99    | 
|                                     |                                                                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |   |      |      
|Other expenses                       |                                                                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |   |      |      
|                                    
|                                    
|                                    
|                                    
|                                     | Salaries and other employee benefits                                                |                                                     |      | 448                |       |                   |      | 281   |       |      |      | 1,135 |       |   |      | 813   |      
|                                    
|                                    
|                                    
|                                    
|                                     | Occupancy and equipment expenses                                                    |                                                     |      | 127                |       |                   |      | 105   |       |      |      | 358   |       |   |      | 274   |      
|                                    
|                                    
|                                    
|                                    
|                                     | Other operating expenses                                                            |                                                     |      | 224                |       |                   |      | 169   |       |      |      | 670   |       |   |      | 553   |      
|                                     |                                                                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |   |      |      
|                                     |                                                                                     | Total other expenses                                |      |                    | 799   |                   |      |       | 555   |      |      |       | 2,163 |   |      |       | 1,640 | 
|                                     |                                                                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |   |      |      
|                                     |                                                                                     | Income before income taxes                          |      |                    | 107   |                   |      |       | 240   |      |      |       | 242   |   |      |       | 597   | 
|                                    
|                                    
|                                    
|                                    
|Income tax expense                   |                                                                                     |                                                     | 36   |                    |       |                   | 90   |       |       |      | 80   |       |       |   | 226  |      
|                                     |                                                                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |   |      |      
|                                     |                                                                                     | Net income                                          |      |                    | 71    |                   |      |       | 150   |      |      |       | 162   |   |      |       | 371   | 
|                                     |                                                                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |   |      |      
|Other comprehensive income           |                                                                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |   |      |      
|                                    
|                                    
|                                    
|                                    
|                                     | Unrealized gains on securities
available-for-sale arising during
period, net of tax |                                                     |      | 168                |       |                   |      | 210   |       |      |      | 392   |       |   |      | 322   |      
|                                     |                                                                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |   |      |      
|                                     |                                                                                     | Comprehensive income                                |      | $                  | 239   |                   |      | $     | 360   |      |      | $     | 554   |   |      | $     | 693   | 
|                                     |                                                                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |   |      |      
|Basic and diluted earnings per share |                                                                                     | $                                                   | 0.09 |                    |       | $                 | 0.19 |       |       | $    | 0.20 |       |       | $ | 0.46 |      
|                                     |                                                                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |   |      |      
|Cash dividends per share             |                                                                                     | $                                                   |     |                    |       | $                 |     |       |       | $    |     |       |       | $ |     |      
|                                     |                                                                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |   |      |      

See Notes to Consolidated Financial Statements

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##### Table of Contents



FORSYTH BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(Unaudited)
(Dollars in Thousands)




|                                                   |                                                                                   |                                                       |                                           |         |      |        |       |        |      |         |  
|-------------------------------------------------- | --------------------------------------------------------------------------------- | ----------------------------------------------------- | ----------------------------------------- | ------- | ---- | ------ | ----- | ------ | ---- | ------- | -
|                                                   |                                                                                   |                                                       |                                           |         | 2001 |        | 2000 
|                                                   |                                                                                   |                                                       |                                           |         |      |        |      
|OPERATING ACTIVITIES                               |                                                                                   |                                                       |                                           |         |      |        |       |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Net income                                                                        |                                                       | $                                         | 162     |      |        | $     | 371    |     
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Adjustments to reconcile net income to net cash
provided by operating activities: |                                                       |                                           |         |      |        |       |        |     
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Depreciation                                          |                                           |         | 188  |        |       |        | 136  |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Provision for loan losses                             |                                           |         | 259  |        |       |        | 87   |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | (Gain) loss on sales of securities available-for-sale |                                           |         | (6   | )      |       |        | 14   |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Other operating activities                            |                                           |         | (17  | )      |       |        | (161 | )      
|                                                   |                                                                                   |                                                       |                                           |         |      |        |       |       
|                                                   |                                                                                   |                                                       | Net cash provided by operating activities |         |      | 586    |       |        |      | 447     |  
|                                                   |                                                                                   |                                                       |                                           |         |      |        |       |       
|INVESTING ACTIVITIES                               |                                                                                   |                                                       |                                           |         |      |        |       |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Purchases of securities available-for-sale                                        |                                                       |                                           | (9,205  | )    |        |       | (186   | )   
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Proceeds from maturities of securities available-for-sale                         |                                                       |                                           | 11,163  |      |        |       | 396    |     
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Proceeds from sales of securities available-for-sale                              |                                                       |                                           | 4,037   |      |        |       | 987    |     
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Proceeds from maturities held-to-maturity                                         |                                                       |                                           | 557     |      |        |       | 40     |     
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Net increase in interest-bearing deposits in banks                                |                                                       |                                           | (11     | )    |        |       | (168   | )   
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Net increase in federal funds sold                                                |                                                       |                                           | (2,661  | )    |        |       | (5,370 | )   
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Net increase in loans                                                             |                                                       |                                           | (10,542 | )    |        |       | (6,331 | )   
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Purchase of premises and equipment                                                |                                                       |                                           | (721    | )    |        |       | (574   | )   
|                                                   |                                                                                   |                                                       |                                           |         |      |        |       |       
|                                                   |                                                                                   |                                                       | Net cash used in investing activities     |         |      | (7,383 | )     |        |      | (11,206 | )
|                                                   |                                                                                   |                                                       |                                           |         |      |        |       |       
|FINANCING ACTIVITIES                               |                                                                                   |                                                       |                                           |         |      |        |       |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Net increase in deposits                                                          |                                                       |                                           | 6,618   |      |        |       | 11,695 |     
|                                                   |                                                                                   |                                                       |                                           |         |      |        |       |       
|                                                   |                                                                                   |                                                       | Net cash provided by financing activities |         |      | 6,618  |       |        |      | 11,695  |  
|                                                   |                                                                                   |                                                       |                                           |         |      |        |       |       
|Net increase (decrease) in cash and due from banks |                                                                                   |                                                       | (179                                      | )       |      |        | 936   |       
|                                                  
|                                                  
|                                                  
|                                                  
|Cash and due from banks at beginning of period     |                                                                                   |                                                       | 2,575                                     |         |      |        | 1,959 |       
|                                                   |                                                                                   |                                                       |                                           |         |      |        |       |       
|Cash and due from banks at end of period           |                                                                                   | $                                                     | 2,396                                     |         |      | $      | 2,895 |       
|                                                   |                                                                                   |                                                       |                                           |         |      |        |       |       

See Notes to Consolidated Financial Statements

5



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##### Table of Contents



FORSYTH BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)




|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 1. |  | BASIS OF PRESENTATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
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|        |  | The consolidated financial information for Forsyth Bancshares, Inc. (the Company) included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal
recurring adjustments) which are, in the opinion of management,
necessary for a fair statement of results for the interim period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
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|        |  | The results of operations for the three and nine month periods ended
September 30, 2001 are not necessarily indicative of the results to
be expected for the full year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
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|NOTE 2. |  | CURRENT ACCOUNTING DEVELOPMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
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|        |  | In June 1998, the Financial Accounting Standards Board issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging
Activities. The effective date of this statement was deferred by
SFAS No. 137 until fiscal years beginning after June 15, 2000.
However, the statement permitted early adoption as of the beginning
of any fiscal quarter after its issuance. The Company adopted this
statement effective January 1, 2001. SFAS No. 133 requires the
Company to recognize all derivatives as either assets or liabilities
in the balance sheet at fair value. For derivatives that are not
designated as hedges, the gain or loss must be recognized in
earnings in the period of change. For derivatives that are
designated as hedges, changes in the fair value of the hedged
assets, liabilities, or firm commitments must be recognized in
earnings or recognized in other comprehensive income until the
hedged item is recognized in earnings, depending on the nature of
the hedge. The ineffective portion of a derivatives change in fair
value must be recognized in earnings immediately. The adoption of
SFAS No. 133 had no material effect on the Companys earnings or
financial position.
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|        |  | There are no other recent accounting pronouncements that have had,
or are expected to have, a material effect on the Companys
financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

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|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
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|        |  | The following is managements discussion and analysis of certain
significant factors which have affected the financial position and
operating results of Forsyth Bancshares, Inc. and its bank
subsidiary, The Citizens Bank of Forsyth County (the Bank), during
the periods included in the accompanying consolidated financial
statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
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|        |  | SPECIAL CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
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|        |  | Certain of the statements made herein under the caption
Managements Discussion and Analysis of Financial Condition and
Results of Operations (MD&A) are forward-looking statements for
purposes of the Securities Act of 1933, as amended (the Securities
Act) and the Securities Exchange Act of 1934, as amended (the
Exchange Act), and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of Forsyth Bancshares, Inc. to be
materially different from future results, performance or
achievements expressed or implied by such forward-looking
statements. Such forward looking statements include statements
using words such as may, will, anticipate, should, would,
believe, contemplate, expect, estimate, continue, may,
intend, or other similar words and expressions of the future. Our
actual results may differ significantly from the results we discuss
in these forward-looking statements.
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|        |  | These forward-looking statements involve risks and uncertainties and
may not be realized due to a variety of factors, including, without
limitation: the effects of future economic conditions; governmental
monetary and fiscal policies, as well as legislative and regulatory
changes; the risks of changes in interest rates on the level and
composition of deposits, loan demand, and the values of loan
collateral, securities, and other interest-sensitive assets and
liabilities; interest rate risks; the effects of competition from
other commercial banks, thrifts, mortgage banking firms, consumer
finance companies, credit unions, securities brokerage firms,
insurance companies, money market and other mutual funds and other
financial institutions operating in our market area and elsewhere,
including institutions operating regionally, nationally, and
internationally, together with such competitors offering banking
products and services by mail, telephone, computer, and the
Internet.              

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Liquidity and Capital Resources

We consider our liquidity to be adequate to meet operating and loan funding
requirements at September 30, 2001. At September 30, 2001, the liquidity ratio
(i.e. cash, short-term assets and marketable assets divided by deposits) for
the Bank was approximately 36% and the loan to deposit ratio was approximately
74%. As the portfolio grows, we will continue to monitor liquidity and make
adjustments as deemed necessary. Investing our available funds in loans and
other high yielding securities will increase earnings potential.

Requirements by banking regulators include the monitoring of risk-based capital
guidelines for banks and holding companies that are designed to make capital
requirements more sensitive to differences in risk profiles and account for off
balance sheet items. We exceed the regulatory minimums on capital requirements
and ratios. However, as we continue to grow and the loan portfolio increases,
these ratios should adjust downward. We will monitor these amounts and ratios
on a continuous basis. The minimum capital requirements and the actual capital
ratios on a consolidated and Bank-only basis as of September 30, 2001 are as
follows:

|                           |  |              |       |            |  |             |       |   |  |  |      |  
|-------------------------- |  | ------------ | ----- | ---------- |  | ----------- | ----- | - |  |  | ---- | -
|                           |  | Actual       |       | Regulatory
|                           |  |              |       | Minimum   
|                           |  | Consolidated |       | Bank       |  | Requirement
|                           |  |              |       |            |  |            
|Leverage capital ratios    |  |              | 10.65 | %          |  |             | 8.77  | % |  |  | 4.00 | %
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|Risk-based capital ratios: |  |              |       |            |  |             |       |   |  |  |      |  
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|Tier I capital             |  |              | 13.13 |            |  |             | 10.92 |   |  |  | 4.00 |  
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|Total capital              |  |              | 14.21 |            |  |             | 12.03 |   |  |  | 8.00 |  

Financial Condition

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

|                                   |  |                        |        |              |  |   |        | 
|---------------------------------- |  | ---------------------- | ------ | ------------ |  | - | ------ | 
|                                   |  | September 30,          |        | December 31,
|                                   |  | 2001                   |        | 2000        
|                                   |  |                        |        |             
|                                   |  | (Dollars in Thousands)
|Cash and due from banks            |  | $                      | 2,396  |              |  | $ | 2,575  | 
|                                  
|                                  
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|                                  
|Interest-bearing deposits in banks |  |                        | 182    |              |  |   | 172    | 
|                                  
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|Federal funds sold                 |  |                        | 6,211  |              |  |   | 3,550  | 
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|                                  
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|                                  
|Securities                         |  |                        | 19,834 |              |  |   | 25,747 | 
|                                  
|                                  
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|Loans                              |  |                        | 57,998 |              |  |   | 47,715 | 
|                                  
|                                  
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|Premises and equipment             |  |                        | 2,108  |              |  |   | 1,575  | 
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|Other assets                       |  |                        | 1,010  |              |  |   | 1,240  | 
|                                   |  |                        |        |              |  |   |        | 
|                                   |  | $                      | 89,739 |              |  | $ | 82,574 | 
|                                   |  |                        |        |              |  |   |        | 
|Deposits                           |  | $                      | 79,878 |              |  | $ | 73,260 | 
|                                  
|                                  
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|Other liabilities                  |  |                        | 478    |              |  |   | 485    | 
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|Stockholders equity               |  |                        | 9,383  |              |  |   | 8,829  | 
|                                   |  |                        |        |              |  |   |        | 
|                                   |  | $                      | 89,739 |              |  | $ | 82,574 | 
|                                   |  |                        |        |              |  |   |        | 

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Our total assets grew by 8.7% for the first nine months of 2001. Deposit
growth of $6,618,000, combined with decreases in securities was invested
primarily in loans with the majority of the remainder invested in federal funds
sold. Our loan to deposit ratio has increased to 74% at
September 30, 2001 as
compared to 66% at December 31, 2000. Stockholders equity has increased by
$554,000 due to net income of $162,000 and increases in unrealized gains on
securities available-for-sale, net of tax, of $392,000.

We are currently in process of planning our branch expansion into Cherokee
County. We have also entered into a contract to purchase approximately 5-1/2
acres for a future main office site at a cost of $930,000.

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Results of Operations for the Three Months Ended September 30, 2001 and 2000
and for the Nine Months Ended September 30, 2001 and 2000

Following is a summary of our operations for the periods indicated.

|                          |  |                        |       |      |  |   |       | 
|------------------------- |  | ---------------------- | ----- | ---- |  | - | ----- | 
|                          |  | Three Months Ended    
|                          |  | September 30,         
|                          |  |                       
|                          |  | 2001                   |       | 2000
|                          |  |                        |       |     
|                          |  | (Dollars in Thousands)
|Interest income           |  | $                      | 1,634 |      |  | $ | 1,593 | 
|                         
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|Interest expense          |  |                        | 811   |      |  |   | 827   | 
|                          |  |                        |       |      |  |   |       | 
|Net interest income       |  |                        | 823   |      |  |   | 766   | 
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|Provision for loan losses |  |                        | 136   |      |  |   | 14    | 
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|Other income              |  |                        | 219   |      |  |   | 43    | 
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|Other expense             |  |                        | 799   |      |  |   | 555   | 
|                          |  |                        |       |      |  |   |       | 
|Pretax income             |  |                        | 107   |      |  |   | 240   | 
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|Income taxes              |  |                        | 36    |      |  |   | 90    | 
|                          |  |                        |       |      |  |   |       | 
|Net income                |  | $                      | 71    |      |  | $ | 150   | 
|                          |  |                        |       |      |  |   |       | 

|                          |  |                        |       |      |  |   |       | 
|------------------------- |  | ---------------------- | ----- | ---- |  | - | ----- | 
|                          |  | Nine Months Ended     
|                          |  | September 30,         
|                          |  |                       
|                          |  | 2001                   |       | 2000
|                          |  |                        |       |     
|                          |  | (Dollars in Thousands)
|Interest income           |  | $                      | 4,957 |      |  | $ | 4,403 | 
|                         
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|Interest expense          |  |                        | 2,654 |      |  |   | 2,178 | 
|                          |  |                        |       |      |  |   |       | 
|Net interest income       |  |                        | 2,303 |      |  |   | 2,225 | 
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|Provision for loan losses |  |                        | 259   |      |  |   | 87    | 
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|Other income              |  |                        | 361   |      |  |   | 113   | 
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|Other expense             |  |                        | 2,163 |      |  |   | 1,654 | 
|                          |  |                        |       |      |  |   |       | 
|Pretax income             |  |                        | 242   |      |  |   | 597   | 
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|Income taxes              |  |                        | 80    |      |  |   | 226   | 
|                          |  |                        |       |      |  |   |       | 
|Net income                |  | $                      | 162   |      |  | $ | 371   | 
|                          |  |                        |       |      |  |   |       | 

Our net interest income has increased by $57,000 and $78,000 for the third
quarter and first nine months of 2001, respectively, as compared to the same
periods in 2000. Our net interest margin decreased to 3.80% during the first
nine months of 2001 as compared to 4.26% for the first nine months of 2000 and
4.18% for the entire year of 2000. The small increase in net interest income
and the decrease in the net interest margin are due to continued pressures on
the rates that we can earn on our interest-earning assets, as the prime rate
has now been lowered ten times in 2001 to 5.00%. The reduction in the prime
rate immediately lowers the rates we earn on our variable rate loans and
overnight federal funds balances as well as puts pressure on the rates we can
earn on fixed rate loans. We have been able to offset some of the decrease in
our net interest margin by the lowering of rates we pay on our interest-bearing
liabilities. As deposits mature and are repriced, we expect to see our net
interest margin increase. However, the prime rate may continue to drop which
would continue to have a negative impact on our net interest margin.

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The provision for loan losses increased by $122,000 and $172,000 for the third
quarter and first nine months of 2001, respectively, as compared to the same
periods in 2000. The amounts provided are due to increased net loan
charge-offs, loan growth, and our assessment of inherent risk in the loan
portfolio. We do not believe the increases in net charge-offs indicate any
significant trend in the overall quality of the loan portfolio. The allowance
for loan losses as a percentage of total loans amounted to 1.28% at September
30, 2001 as compared to 1.25% at December 31, 2000. The allowance for loan
losses is maintained at a level that is considered appropriate by management to
adequately cover all known and inherent risks in the loan portfolio.
Managements evaluation of the loan portfolio includes a continuing review of
loan loss experience, current economic conditions which may affect the
borrowers ability to repay and the underlying collateral value.

Information with respect to nonaccrual, past due and restructured loans at
September 30, 2001 and 2000 is as follows:

|                                                                                                                              |  |                        |    |      |  |   |    | 
|----------------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | -- | ---- |  | - | -- | 
|                                                                                                                              |  | September 30,         
|                                                                                                                              |  |                       
|                                                                                                                              |  | 2001                   |    | 2000
|                                                                                                                              |  |                        |    |     
|                                                                                                                              |  | (Dollars in Thousands)
|Nonaccrual loans                                                                                                              |  | $                      | 44 |      |  | $ | 16 | 
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Loans contractually past due ninety days or more as to interest
or principal payments and still accruing                      |  |                        | 1  |      |  |   | 8  | 
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Restructured loans                                                                                                            |  |                        | 0  |      |  |   | 0  | 
|                                                                                                                             
|                                                                                                                             
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|Loans, now current about which there are serious doubts as to the
ability of the borrower to comply with loan repayment terms |  |                        | 0  |      |  |   | 0  | 
|                                                                                                                             
|                                                                                                                             
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|Interest income that would have been recorded on nonaccrual
and restructured loans under original terms                       |  |                        | 1  |      |  |   | 2  | 
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Interest income that was recorded on nonaccrual and restructured loans                                                        |  |                        | 0  |      |  |   | 0  | 

It 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 which 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 which causes management to have serious doubts as
to the ability of such borrowers to comply with the loan repayment terms.

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Information regarding certain loans and allowance for loan loss data through
September 30, 2001 and 2000 is as follows:

|                                                                              |                          |   |                        |     |      |   |        |   | 
|----------------------------------------------------------------------------- | ------------------------ | - | ---------------------- | --- | ---- | - | ------ | - | 
|                                                                              |                          |   | Nine Months Ended     
|                                                                              |                          |   | September 30,         
|                                                                              |                          |   |                       
|                                                                              |                          |   | 2001                   |     | 2000
|                                                                              |                          |   |                        |     |     
|                                                                              |                          |   | (Dollars in Thousands)
|Average amount of loans outstanding                                           |                          | $ | 53,489                 |     |      | $ | 42,621 |  
|                                                                              |                          |   |                        |     |      |   |        |  
|Balance of allowance for loan losses at beginning of period                   |                          | $ | 604                    |     |      | $ | 482    |  
|                                                                              |                          |   |                        |     |      |   |        |  
|Loans charged off                                                             |                          |   |                        |     |      |   |        |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Commercial and financial |   | $                      | 15  |      |   | $      | 0 | 
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Real estate mortgage     |   |                        | 0   |      |   |        | 0 | 
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Installment              |   |                        | 100 |      |   |        | 7 | 
|                                                                              |                          |   |                        |     |      |   |        |  
|                                                                              |                          |   | 115                    |     |      |   | 7      |  
|                                                                              |                          |   |                        |     |      |   |        |  
|Loans recovered                                                               |                          |   |                        |     |      |   |        |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Commercial and financial |   |                        | 0   |      |   |        | 0 | 
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Real estate mortgage     |   |                        | 0   |      |   |        | 0 | 
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Installment              |   |                        | 4   |      |   |        | 0 | 
|                                                                              |                          |   |                        |     |      |   |        |  
|                                                                              |                          |   | 4                      |     |      |   | 0      |  
|                                                                              |                          |   |                        |     |      |   |        |  
|Net charge-offs                                                               |                          |   | 111                    |     |      |   | 7      |  
|                                                                              |                          |   |                        |     |      |   |        |  
|Additions to allowance charged to operating expense during period             |                          |   | 259                    |     |      |   | 87     |  
|                                                                              |                          |   |                        |     |      |   |        |  
|Balance of allowance for loan losses at end of period                         |                          | $ | 752                    |     |      | $ | 562    |  
|                                                                              |                          |   |                        |     |      |   |        |  
|Ratio of net loans charged off during the period to
average loans outstanding |                          |   | .21                    | %   |      |   | 0.02   | %
|                                                                              |                          |   |                        |     |      |   |        |  

Other income has increased by $176,000 and $248,000 during the third quarter
and first nine months of 2001, respectively, as compared to the same periods in
2000. The increases are due to increased service charges on deposit accounts
associated with our overall growth and to fees generated from mortgage loan
origination activities that commenced in the second quarter of 2001.

Other expenses increased by $244,000 and $509,000 during the third quarter and
first nine months of 2001, respectively, as compared to the same periods in
2000 due to increases in other expenses in all category classifications.
Salaries and employee benefits have increased due to a gradual increase of full
time equivalent employees to 30 as of September 30, 2001 from 25 as of
September 30, 2000 and to other annual salary increases. Occupancy and
equipment expenses have increased as depreciation and other occupancy costs
have been incurred on our expanding physical facilities. Other operating
expenses have increased due to our overall growth and the opening of a new
branch in 2000.

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The provision for income taxes was $80,000 for the first nine months of 2001
(effective tax rate of 33%) as compared to $226,000 for the first nine months
of 2000 (effective tax rate of 38%). The decrease is due to comparably lower
expected tax liabilities in 2001.

Overall, net income has decreased by $79,000 and $209,000 for the third quarter
and first nine months of 2001, respectively. The decreases are due to lower
than expected net interest income, increased loan loss provisions, and
increased other operating expenses.

The terrorist attacks that occurred in New York City and Washington, D.C. on
September 11, 2001 and the United States subsequent response to these events
have resulted in a general economic slowdown that may adversely effect our
banking business. Economic slowdowns or recessions in our primary market area
of Forsyth County, Georgia may be accompanied by reduced demand for credit,
decreasing interest margins and declining real estate values, which may in turn
result in a decrease in net earnings and an increased possibility of potential
loan losses in the event of default. Any sustained period of decreased
economic activity, increased delinquencies, foreclosures or losses could limit
our growth and negatively effect our results of operations. We cannot predict
the extent, duration of these events or effect upon our business and
operations. We will, however, closely monitor the effect of these events upon
our business, and make adjustments to our business strategy as deemed
necessary.

We are not aware of any known trends, events or uncertainties, other than the
effect of events as described above, that will have or that are reasonably
likely to have a material effect on our liquidity, capital resources or
operations. We are also not aware of any current recommendations by the
regulatory authorities which, if they were implemented, would have such an
effect.

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PART II  OTHER INFORMATION




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




None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K




(a)  Exhibits

None

(b)  Reports on Form 8-K

None

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SIGNATURES




In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

|      |  |                   |  |                                                     
|----- |  | ----------------- |  | ----------------------------------------------------
|      |  |                   |  | FORSYTH
BANCSHARES, INC.
               (Registrant)
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|DATE: |  | November 10, 2001 |  | BY: /s/ Timothy M. Perry                            
|      |  |                   |  |                                                     
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|      |  |                   |  | Timothy M. Perry, President and C.E.O.              
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|      |  |                   |  | (Principal Executive Officer)                       

15