Exhibit 99.1



HENRY COUNTY BANCSHARES, INC.

AND SUBSIDIARIES



CONSOLIDATED FINANCIAL REPORT



DECEMBER 31,
2003



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HENRY COUNTY BANCSHARES, INC.

AND SUBSIDIARIES



CONSOLIDATED FINANCIAL REPORT

DECEMBER 31, 2003



TABLE OF CONTENTS



|                                                |  |     
|----------------------------------------------- |  | ----
|                                                |  | Page
|INDEPENDENT AUDITORS REPORT                    |  | 3   
|                                                | 
|FINANCIAL STATEMENTS                            |  |     
|                                                | 
|Consolidated balance sheets                     |  | 4   
|                                                | 
|Consolidated statements of income               |  | 5   
|                                                | 
|Consolidated statements of comprehensive income |  | 6   
|                                                | 
|Consolidated statements of stockholders equity |  | 7   
|                                                | 
|Consolidated statements of cash flows           |  | 8   
|                                                | 
|Notes to consolidated financial statements      |  | 9-26



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INDEPENDENT AUDITORS REPORT



To the Board of Directors

Henry
County Bancshares, Inc.

Stockbridge, Georgia



We have audited the accompanying consolidated balance sheets of Henry County Bancshares, Inc. and subsidiariesas of December 31, 2003 and 2002,
and the related consolidated statements of income, comprehensive income, stockholders equity and cash flows for each of the three years in the period ended December 31, 2003. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.



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



In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of Henry County Bancshares, Inc. and subsidiaries as of December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the
period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America.



/s/ MAULDIN & JENKINS, LLC



Atlanta, Georgia

February 6, 2004



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HENRY COUNTY BANCSHARES, INC.

AND SUBSIDIARIES



CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2003 AND 2002



|                                                                                 |  |      |             |   |      |   |             |  
|-------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | -
|                                                                                 |  | 2003 |             |   | 2002 |  
|Assets                                                                           |  |      |             |   |      |   |             |  
|Cash and due from banks                                                          |  | $    | 25,198,796  |   |      | $ | 35,459,970  |  
|Interest-bearing deposits in banks                                               |  |      | 571,884     |   |      |   | 1,148,764   |  
|Federal funds sold                                                               |  |      |            |   |      |   | 22,300,000  |  
|Securities available-for-sale                                                    |  |      | 56,499,855  |   |      |   | 62,088,707  |  
|Securities held-to-maturity, at cost (fair value 2003 $597,702; 2002 $938,323)   |  |      | 572,369     |   |      |   | 899,208     |  
|Restricted equity securities, at cost                                            |  |      | 983,473     |   |      |   | 1,483,473   |  
|Loans held for sale                                                              |  |      | 1,673,368   |   |      |   | 5,796,885   |  
|Loans                                                                            |  |      | 418,637,070 |   |      |   | 350,276,958 |  
|Less allowance for loan losses                                                   |  |      | 4,178,472   |   |      |   | 3,827,270   |  
|                                                                                 |  |      |             |   |      |   |             |  
|Loans, net                                                                       |  |      | 414,458,598 |   |      |   | 346,449,688 |  
|Premises and equipment                                                           |  |      | 9,099,287   |   |      |   | 8,571,401   |  
|Other assets                                                                     |  |      | 6,079,703   |   |      |   | 4,954,606   |  
|                                                                                 |  |      |             |   |      |   |             |  
|Total assets                                                                     |  | $    | 515,137,333 |   |      | $ | 489,152,702 |  
|                                                                                 |  |      |             |   |      |   |             |  
|Liabilities and Stockholders Equity                                             |  |      |             |   |      |   |             |  
|Liabilities:                                                                     |  |      |             |   |      |   |             |  
|Deposits:                                                                        |  |      |             |   |      |   |             |  
|Noninterest-bearing                                                              |  | $    | 81,309,482  |   |      | $ | 81,412,273  |  
|Interest-bearing                                                                 |  |      | 345,723,652 |   |      |   | 338,737,025 |  
|                                                                                 |  |      |             |   |      |   |             |  
|Total deposits                                                                   |  |      | 427,033,134 |   |      |   | 420,149,298 |  
|Other borrowings                                                                 |  |      | 34,835,265  |   |      |   | 20,287,289  |  
|Other liabilities                                                                |  |      | 1,884,542   |   |      |   | 2,048,139   |  
|                                                                                 |  |      |             |   |      |   |             |  
|Total liabilities                                                                |  |      | 463,752,941 |   |      |   | 442,484,726 |  
|                                                                                 |  |      |             |   |      |   |             |  
|Commitments and contingencies                                                    |  |      |             |   |      |   |             |  
|Stockholders equity                                                             |  |      |             |   |      |   |             |  
|Common stock, par value $2.50; 10,000,000 shares authorized; 7,237,065.60 issued |  |      | 18,092,664  |   |      |   | 18,092,664  |  
|Surplus                                                                          |  |      | 739,560     |   |      |   | 739,560     |  
|Retained earnings                                                                |  |      | 33,661,983  |   |      |   | 28,647,251  |  
|Accumulated other comprehensive income                                           |  |      | 283,601     |   |      |   | 581,917     |  
|Treasury stock                                                                   |  |      | (1,393,416  | ) |      |   | (1,393,416  | )
|                                                                                 |  |      |             |   |      |   |             |  
|Total stockholders equity                                                       |  |      | 51,384,392  |   |      |   | 46,667,976  |  
|                                                                                 |  |      |             |   |      |   |             |  
|Total liabilities and stockholders equity                                       |  | $    | 515,137,333 |   |      | $ | 489,152,702 |  
|                                                                                 |  |      |             |   |      |   |             |  



See Notes to Consolidated Financial
Statements.



4



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HENRY COUNTY BANCSHARES, INC.

AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001



|                                                     |  |      |            |      |   |            |  |   |            |  
|---------------------------------------------------- |  | ---- | ---------- | ---- | - | ---------- |  | - | ---------- | -
|                                                     |  | 2003 |            | 2002 |   | 2001       | 
|Interest income:                                     |  |      |            |      |   |            |  |   |            |  
|Loans, including fees                                |  | $    | 23,719,723 |      | $ | 23,037,336 |  | $ | 24,698,187 |  
|Taxable securities                                   |  |      | 1,340,100  |      |   | 3,188,287  |  |   | 6,339,896  |  
|Nontaxable securities                                |  |      | 447,358    |      |   | 700,148    |  |   | 901,210    |  
|Deposits in banks                                    |  |      | 23,390     |      |   | 108,714    |  |   | 3,332      |  
|Federal funds sold                                   |  |      | 217,764    |      |   | 264,191    |  |   | 1,281,392  |  
|                                                     |  |      |            |      |   |            |  |   |            |  
|Total interest income                                |  |      | 25,748,335 |      |   | 27,298,676 |  |   | 33,224,017 |  
|                                                     |  |      |            |      |   |            |  |   |            |  
|Interest expense:                                    |  |      |            |      |   |            |  |   |            |  
|Deposits                                             |  |      | 8,523,860  |      |   | 10,053,245 |  |   | 15,401,525 |  
|Other borrowings                                     |  |      | 905,430    |      |   | 924,061    |  |   | 1,105,027  |  
|                                                     |  |      |            |      |   |            |  |   |            |  
|Total interest expense                               |  |      | 9,429,290  |      |   | 10,977,306 |  |   | 16,506,552 |  
|                                                     |  |      |            |      |   |            |  |   |            |  
|Net interest income                                  |  |      | 16,319,045 |      |   | 16,321,370 |  |   | 16,717,465 |  
|Provision for loan losses                            |  |      | 472,500    |      |   | 540,500    |  |   | 550,000    |  
|                                                     |  |      |            |      |   |            |  |   |            |  
|Net interest income after provision for loan losses  |  |      | 15,846,545 |      |   | 15,780,870 |  |   | 16,167,465 |  
|                                                     |  |      |            |      |   |            |  |   |            |  
|Other income:                                        |  |      |            |      |   |            |  |   |            |  
|Service charges on deposit accounts                  |  |      | 2,350,417  |      |   | 2,144,544  |  |   | 2,244,705  |  
|Other service charges and fees                       |  |      | 875,614    |      |   | 716,566    |  |   | 670,621    |  
|Gain (loss) on sale of securities available-for-sale |  |      |           |      |   | 80,040     |  |   | (100,445   | )
|Gain on sale of land                                 |  |      | 216,905    |      |   | 72,385     |  |   |           |  
|Mortgage banking income                              |  |      | 2,089,031  |      |   | 1,532,635  |  |   | 1,828,653  |  
|                                                     |  |      |            |      |   |            |  |   |            |  
|Total other income                                   |  |      | 5,531,967  |      |   | 4,546,170  |  |   | 4,643,534  |  
|                                                     |  |      |            |      |   |            |  |   |            |  
|Other expenses:                                      |  |      |            |      |   |            |  |   |            |  
|Salaries and employee benefits                       |  |      | 5,762,785  |      |   | 5,679,887  |  |   | 5,580,792  |  
|Equipment and occupancy expenses                     |  |      | 1,468,574  |      |   | 1,369,008  |  |   | 1,307,616  |  
|Other operating expenses                             |  |      | 2,186,163  |      |   | 2,085,590  |  |   | 1,893,229  |  
|                                                     |  |      |            |      |   |            |  |   |            |  
|Total other expenses                                 |  |      | 9,417,522  |      |   | 9,134,485  |  |   | 8,781,637  |  
|                                                     |  |      |            |      |   |            |  |   |            |  
|Income before income taxes                           |  |      | 11,960,990 |      |   | 11,192,555 |  |   | 12,029,362 |  
|Income tax expense                                   |  |      | 4,225,081  |      |   | 3,858,717  |  |   | 4,056,272  |  
|                                                     |  |      |            |      |   |            |  |   |            |  
|Net income                                           |  | $    | 7,735,909  |      | $ | 7,333,838  |  | $ | 7,973,090  |  
|                                                     |  |      |            |      |   |            |  |   |            |  
|Earnings per share                                   |  | $    | 1.08       |      | $ | 1.02       |  | $ | 1.11       |  
|                                                     |  |      |            |      |   |            |  |   |            |  



See Notes to Consolidated Financial
Statements.



5



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HENRY COUNTY BANCSHARES, INC.

AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001



|                                                                                                                                        |  |      |           |   |      |   |           |      |  |   |          
|--------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | ---- |  | - | ---------
|                                                                                                                                        |  | 2003 |           |   | 2002 |   |           | 2001
|Net income                                                                                                                              |  | $    | 7,735,909 |   |      | $ | 7,333,838 |      |  | $ | 7,973,090
|                                                                                                                                        |  |      |           |   |      |   |           |      |  |   |          
|Other comprehensive income (loss):                                                                                                      |  |      |           |   |      |   |           |      |  |   |          
|Unrealized gains (losses) on securities available-for-sale:                                                                             |  |      |           |   |      |   |           |      |  |   |          
|Net unrealized holding gains (losses) arising during period, net of tax (benefits) of $(153,678), $248,308 and $280,267,
respectively   |  |      | (298,316  | ) |      |   | 482,010   |      |  |   | 544,046  
|Reclassification adjustment for (gains) losses realized in net income, net of tax (benefits) of $0, $27,214 and $(34,151),
respectively |  |      |          |   |      |   | (52,826   | )    |  |   | 66,294   
|                                                                                                                                        |  |      |           |   |      |   |           |      |  |   |          
|Other comprehensive income (loss)                                                                                                       |  |      | (298,316  | ) |      |   | 429,184   |      |  |   | 610,340  
|                                                                                                                                        |  |      |           |   |      |   |           |      |  |   |          
|Comprehensive income                                                                                                                    |  | $    | 7,437,593 |   |      | $ | 7,763,022 |      |  | $ | 8,583,430
|                                                                                                                                        |  |      |           |   |      |   |           |      |  |   |          



See Notes to Consolidated Financial
Statements.



6



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HENRY COUNTY BANCSHARES, INC.

AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001



|                                        |  |              |  |           |            |                   |   |         |                                               |   |            |                |  |   |                            |   |  |        |  |   |            |   |  |   |            |  
|--------------------------------------- |  | ------------ |  | --------- | ---------- | ----------------- | - | ------- | --------------------------------------------- | - | ---------- | -------------- |  | - | -------------------------- | - |  | ------ |  | - | ---------- | - |  | - | ---------- | -
|                                        |  | Common Stock |  | Surplus   |            | Retained Earnings |   |         | Accumulated Other Comprehensive Income (Loss) |   |            | Treasury Stock |  |   | Total Stockholders Equity |  
|                                        |  | Shares       |  | Par Value |            |                   |   |         | Shares                                        |   | Cost       |                | 
|Balance, December 31, 2000              |  | 3,640,314    |  | $         | 9,100,784  |                   | $ | 739,560 |                                               | $ | 27,568,474 |                |  | $ | (457,607                   | ) |  | 43,562 |  | $ | (903,620   | ) |  | $ | 36,047,591 |  
|Net income                              |  |             |  |           |           |                   |   |        |                                               |   | 7,973,090  |                |  |   |                           |   |  |       |  |   |           |   |  |   | 7,973,090  |  
|Two-for-one common stock split          |  | 3,596,752    |  |           | 8,991,880  |                   |   |        |                                               |   | (8,991,880 | )              |  |   |                           |   |  |        |  |   |           |   |  |   |           |  
|Cash dividends declared, $.38 per share |  |             |  |           |           |                   |   |        |                                               |   | (2,729,924 | )              |  |   |                           |   |  |       |  |   |           |   |  |   | (2,729,924 | )
|Purchase of treasury stock              |  |             |  |           |           |                   |   |        |                                               |   |           |                |  |   |                           |   |  | 12,024 |  |   | (177,354   | ) |  |   | (177,354   | )
|Other comprehensive income              |  |             |  |           |           |                   |   |        |                                               |   |           |                |  |   | 610,340                    |   |  |       |  |   |           |   |  |   | 610,340    |  
|                                        |  |              |  |           |            |                   |   |         |                                               |   |            |                |  |   |                            |   |  |        |  |   |            |   |  |   |            |  
|Balance, December 31, 2001              |  | 7,237,066    |  |           | 18,092,664 |                   |   | 739,560 |                                               |   | 23,819,760 |                |  |   | 152,733                    |   |  | 55,586 |  |   | (1,080,974 | ) |  |   | 41,723,743 |  
|Net income                              |  |             |  |           |           |                   |   |        |                                               |   | 7,333,838  |                |  |   |                           |   |  |       |  |   |           |   |  |   | 7,333,838  |  
|Cash dividends declared, $.35 per share |  |             |  |           |           |                   |   |        |                                               |   | (2,506,347 | )              |  |   |                           |   |  |       |  |   |           |   |  |   | (2,506,347 | )
|Purchase of treasury stock              |  |             |  |           |           |                   |   |        |                                               |   |           |                |  |   |                           |   |  | 20,488 |  |   | (312,442   | ) |  |   | (312,442   | )
|Other comprehensive income              |  |             |  |           |           |                   |   |        |                                               |   |           |                |  |   | 429,184                    |   |  |       |  |   |           |   |  |   | 429,184    |  
|                                        |  |              |  |           |            |                   |   |         |                                               |   |            |                |  |   |                            |   |  |        |  |   |            |   |  |   |            |  
|Balance, December 31, 2002              |  | 7,237,066    |  |           | 18,092,664 |                   |   | 739,560 |                                               |   | 28,647,251 |                |  |   | 581,917                    |   |  | 76,074 |  |   | (1,393,416 | ) |  |   | 46,667,976 |  
|Net income                              |  |             |  |           |           |                   |   |        |                                               |   | 7,735,909  |                |  |   |                           |   |  |       |  |   |           |   |  |   | 7,735,909  |  
|Cash dividends declared, $.38 per share |  |             |  |           |           |                   |   |        |                                               |   | (2,721,177 | )              |  |   |                           |   |  |       |  |   |           |   |  |   | (2,721,177 | )
|Other comprehensive loss                |  |             |  |           |           |                   |   |        |                                               |   |           |                |  |   | (298,316                   | ) |  |       |  |   |           |   |  |   | (298,316   | )
|                                        |  |              |  |           |            |                   |   |         |                                               |   |            |                |  |   |                            |   |  |        |  |   |            |   |  |   |            |  
|Balance, December 31, 2003              |  | 7,237,066    |  | $         | 18,092,664 |                   | $ | 739,560 |                                               | $ | 33,661,983 |                |  | $ | 283,601                    |   |  | 76,074 |  | $ | (1,393,416 | ) |  | $ | 51,384,392 |  
|                                        |  |              |  |           |            |                   |   |         |                                               |   |            |                |  |   |                            |   |  |        |  |   |            |   |  |   |            |  



See Notes to Consolidated Financial
Statements.



7



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HENRY COUNTY BANCSHARES, INC.

AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001



|                                                                                  |  |      |             |   |      |   |             |      |  |   |             |  
|--------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | ---- |  | - | ----------- | -
|                                                                                  |  | 2003 |             |   | 2002 |   |             | 2001 | 
|OPERATING ACTIVITIES                                                              |  |      |             |   |      |   |             |      |  |   |             |  
|Net income                                                                        |  | $    | 7,735,909   |   |      | $ | 7,333,838   |      |  | $ | 7,973,090   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |      |             |   |      |   |             |      |  |   |             |  
|Depreciation                                                                      |  |      | 456,645     |   |      |   | 549,521     |      |  |   | 535,646     |  
|Provision for loan losses                                                         |  |      | 472,500     |   |      |   | 540,500     |      |  |   | 550,000     |  
|Deferred income taxes                                                             |  |      | (33,587     | ) |      |   | (203,422    | )    |  |   | (265,707    | )
|(Gain) loss on sale of securities available-for-sale                              |  |      |            |   |      |   | (80,040     | )    |  |   | 100,445     |  
|Gain on sale of land                                                              |  |      | (216,905    | ) |      |   | (72,385     | )    |  |   |            |  
|Net (increase) decrease in loans held for sale                                    |  |      | 4,123,517   |   |      |   | (4,221,729  | )    |  |   | (414,294    | )
|(Increase) decrease in interest receivable                                        |  |      | (231,283    | ) |      |   | 331,590     |      |  |   | 1,059,098   |  
|Decrease in interest payable                                                      |  |      | (209,362    | ) |      |   | (301,254    | )    |  |   | (185,818    | )
|Net other operating activities                                                    |  |      | 46,136      |   |      |   | 877,134     |      |  |   | (367,420    | )
|                                                                                  |  |      |             |   |      |   |             |      |  |   |             |  
|Net cash provided by operating activities                                         |  |      | 12,143,570  |   |      |   | 4,753,753   |      |  |   | 8,985,040   |  
|                                                                                  |  |      |             |   |      |   |             |      |  |   |             |  
|INVESTING ACTIVITIES                                                              |  |      |             |   |      |   |             |      |  |   |             |  
|Purchases of securities available-for-sale                                        |  |      | (62,674,779 | ) |      |   | (35,536,158 | )    |  |   | (68,469,392 | )
|Proceeds from sales of securities available-for-sale                              |  |      |            |   |      |   | 16,641,725  |      |  |   | 8,552,785   |  
|Proceeds from maturities of securities available-for-sale                         |  |      | 67,811,637  |   |      |   | 57,811,193  |      |  |   | 82,514,277  |  
|Proceeds from maturities of securities held-to-maturity                           |  |      | 326,839     |   |      |   | 2,623,031   |      |  |   | 5,748,288   |  
|Sales (purchases) of restricted equity securities                                 |  |      | 500,000     |   |      |   | (169,000    | )    |  |   |            |  
|Net (increase) decrease in federal funds sold                                     |  |      | 22,300,000  |   |      |   | 21,500,000  |      |  |   | (21,350,000 | )
|Net (increase) decrease in interest-bearing deposits in banks                     |  |      | 576,880     |   |      |   | 3,783,680   |      |  |   | (4,788,110  | )
|Net increase in loans                                                             |  |      | (68,481,410 | ) |      |   | (45,679,237 | )    |  |   | (33,980,728 | )
|Proceeds from sale of land                                                        |  |      | 275,000     |   |      |   | 355,744     |      |  |   |            |  
|Purchase of premises and equipment                                                |  |      | (1,042,626  | ) |      |   | (1,962,362  | )    |  |   | (954,880    | )
|Net other investing activities                                                    |  |      | (706,920    | ) |      |   | (129,000    | )    |  |   | (600,000    | )
|                                                                                  |  |      |             |   |      |   |             |      |  |   |             |  
|Net cash provided by (used in) investing activities                               |  |      | (41,115,379 | ) |      |   | 19,239,616  |      |  |   | (33,327,760 | )
|                                                                                  |  |      |             |   |      |   |             |      |  |   |             |  
|FINANCING ACTIVITIES                                                              |  |      |             |   |      |   |             |      |  |   |             |  
|Net increase (decrease) in deposits                                               |  |      | 6,883,836   |   |      |   | (16,514,654 | )    |  |   | 49,531,028  |  
|Net proceeds from (repayments of) other borrowings                                |  |      | 14,547,976  |   |      |   | 4,595,659   |      |  |   | (4,510,770  | )
|Dividends paid                                                                    |  |      | (2,721,177  | ) |      |   | (2,506,347  | )    |  |   | (2,729,924  | )
|Purchase of treasury stock                                                        |  |      |            |   |      |   | (312,442    | )    |  |   | (177,354    | )
|                                                                                  |  |      |             |   |      |   |             |      |  |   |             |  
|Net cash provided by (used in) financing activities                               |  |      | 18,710,635  |   |      |   | (14,737,784 | )    |  |   | 42,112,980  |  
|                                                                                  |  |      |             |   |      |   |             |      |  |   |             |  
|Net increase (decrease) in cash and due from banks                                |  |      | (10,261,174 | ) |      |   | 9,255,585   |      |  |   | 17,770,260  |  
|Cash and due from banks at beginning of year                                      |  |      | 35,459,970  |   |      |   | 26,204,385  |      |  |   | 8,434,125   |  
|                                                                                  |  |      |             |   |      |   |             |      |  |   |             |  
|Cash and due from banks at end of year                                            |  | $    | 25,198,796  |   |      | $ | 35,459,970  |      |  | $ | 26,204,385  |  
|                                                                                  |  |      |             |   |      |   |             |      |  |   |             |  
|SUPPLEMENTAL DISCLOSURES                                                          |  |      |             |   |      |   |             |      |  |   |             |  
|Cash paid for:                                                                    |  |      |             |   |      |   |             |      |  |   |             |  
|Interest                                                                          |  | $    | 9,638,652   |   |      | $ | 11,278,560  |      |  | $ | 16,692,370  |  
|Income taxes                                                                      |  | $    | 4,285,607   |   |      | $ | 3,933,164   |      |  | $ | 4,378,028   |  



See Notes to Consolidated Financial
Statements.



8



---

HENRY COUNTY BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Nature of Business



Henry County Bancshares, Inc. (the Company) is a bank holding
company whose principal activity is the ownership and management of its wholly-owned subsidiary, The First State Bank, (the Bank) and the Banks wholly-owned subsidiary, First Metro Mortgage Co. (First Metro). The Bank
is a commercial bank located in Stockbridge, Henry County, Georgia with five other branches located in Henry County. The Bank provides a full range of banking services in its primary market area of Henry County and surrounding counties. First Metro
is also located in Stockbridge and provides mortgage loan origination services in the same primary market area as the Bank.



Basis of Presentation and Accounting Estimates



The consolidated financial statements include the accounts of the Company and its subsidiaries. Significant intercompany transactions and balances have
been eliminated in consolidation.



In preparing the
consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities as of the balance sheet date and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.



Material estimates that are particularly susceptible to significant change
in the near term relate to the determination of the allowance for loan losses, the valuation of foreclosed real estate, and contingent assets and liabilities. The determination of the adequacy of the allowance for loan losses is based on estimates
that are susceptible to significant changes in the economic environment and market conditions. In connection with the determination of the estimated losses on loans and the valuation of foreclosed real estate, management obtains independent
appraisals for significant collateral.



Cash, Due From Banks
and Cash Flows



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



The Bank is required to maintain reserve balances in cash or on deposit
with the Federal Reserve Bank, based on a percentage of deposits. The total of those reserve balances was approximately $93,000 and $151,000 at December 31, 2003 and 2002, respectively.



Securities



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



9



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



Securities (Continued)



The amortization of premiums and accretion of discounts are recognized in
interest income using the interest method over the life of the securities. Realized gains and losses, determined on the basis of the cost of specific securities sold, are included in earnings on the settlement date. Declines in the fair value of
held to maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses.



Loans Held for Sale



Loans held for sale consist of mortgage loans the Company has the intent to sell in the foreseeable future and are carried at the lower of aggregate cost
or fair value. These loans are sold to investors with servicing rights attached.



Mortgage banking income in the statement of income consists of fees received from investors from the sale of servicing rights and miscellaneous fees received from borrowers. These fees are recognized in income at the
time the loans are sold.



Loans



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



Loan origination fees and certain direct costs are netted and recognized in income over the life of the loans using a method which approximates a level yield.



The accrual of interest on loans is discontinued when, in managements
opinion, the borrower may be unable to meet payments as they become due, unless the loan is well-secured. All interest accrued but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income, unless
management believes that the accrued interest is recoverable through the liquidation of collateral. Interest income on nonaccrual loans is recognized on the cost-recovery method, until the loans are returned to accrual status. Loans are returned to
accrual status when all the principal and interest amounts are brought current and future payments are reasonably assured.



A loan is considered impaired when it is probable, based on current information and events, the Company will be unable to collect all principal and
interest payments due in accordance with the contractual terms of the loan agreement. Impaired loans are measured by either the present value of expected future cash flows discounted at the loans effective interest rate, the loans
obtainable market price, or the fair value of the collateral if the loan is collateral dependent. The amount of impairment, if any, and any subsequent changes are included in the allowance for loan losses. Interest on accruing impaired loans is
recognized as long as such loans do not meet the criteria for nonaccrual status.



10



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



Allowance for Loan Losses



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



The allowance is an amount that management believes will be adequate to
absorb estimated losses relating to specifically identified loans, as well as probable credit losses inherent in the balance of the loan portfolio, based on an evaluation of the collectibility of existing loans and prior loss experience. This
evaluation also takes into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans, concentrations and current economic conditions that may affect the
borrowers ability to pay. This evaluation does not include the effects of expected losses on specific loans or groups of loans that are related to future events or expected changes in economic conditions. While management uses the best
information available to make its evaluation, future adjustments to the allowance may be necessary if there are any significant changes in economic conditions. In addition, regulatory agencies, as an integral part of their examination process,
periodically review the Companys allowance for loan losses, and may require the Company to make additions to the allowance based on their judgment about information available to them at the time of their examinations.



The allowance consists of specific, general and unallocated components. The
specific component relates to loans that are classified as either doubtful, substandard or special mention. For such loans that are also classified as impaired, an allowance is established when the discounted cash flows (or collateral value or
observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers non-classified loans and is based on historical experience adjusted for qualitative factors. An unallocated component is
maintained to cover uncertainties that could affect managements estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for
estimating specific and general losses in the portfolio.



Premises and Equipment



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



Other Real Estate Owned



Other real estate owned represents properties acquired through or in lieu
of loan foreclosure and is initially recorded at the lower of cost or fair value less estimated costs to sell. Any write-down to fair value at the time of transfer to other real estate owned is charged to the allowance for loan losses. Costs of
improvements are capitalized, whereas costs relating to holding other real estate owned and subsequent adjustments to the value are expensed. The carrying amount of other real estate owned at December 31, 2003 and 2002 was $8,146 and $116,818,
respectively.



11



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



Income Taxes



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



Earnings Per
Share



Earnings per share are computed by dividing net
income by the weighted average number of shares outstanding. Weighted average shares outstanding was 7,160,992 and 7,161,609 for the years ending December 31, 2003 and 2002, respectively.



Comprehensive Income



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



Recent Accounting Standards



In November 2002, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, an interpretation of FASB Statements No. 5, 57, and 107 and a rescission of FASB
Interpretation No. 34. The interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under guarantees issued. It also clarifies that a guarantor is required to
recognize, at inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing a guarantee. The initial recognition and initial measurement provisions of the interpretation are applicable to guarantees issued or
modified after December 31, 2002. The disclosure requirements in the interpretation are effective for financial statements of interim or annual periods ending after December 15, 2002. The adoption of the interpretation did not have a material effect
on the Companys financial condition or results of operations.



In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities, an interpretation of ARB No. 51, and on December 24, 2003, the FASB issued FASB Interpretation No. 46 (Revised December 2003),
Consolidation of Variable Interest Entities which replaced FIN 46. The interpretation addresses consolidation by business enterprises of variable interest entities. A variable interest entity is defined as an entity subject to
consolidation according to the provisions of the interpretation. The revised interpretation provided for special effective dates for entities that had fully or partially applied the original interpretation as of December 24, 2003. Otherwise,
application of the interpretation is required in financial statements of public entities that have interests in special-purpose entities, or SPEs, for periods ending after December 15, 2003. Application by public entities, other than small business
issuers, for all other types of variable interest entities (i.e., non-SPEs) is required in financial statements for periods ending after March 15, 2004. Application by small business issuers to variable interest entities other than SPEs and by
nonpublic entities to all types of variable interest entities is required at various dates in 2004 and 2005. The interpretations have not had a material effect on the Companys financial condition or results of operations.



12



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



Recent Accounting Standards (Continued)



In May 2003, the FASB issued Statement No. 150, Accounting for
Certain Financial Instruments with Characteristics of both Liabilities and Equity. The statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity.
The statement requires that an issuer classify a financial instrument that is within its scope as a liability. Many of those instruments were previously classified as equity. The statement is effective for financial instruments entered into or
modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003, except for mandatorily redeemable financial instruments of nonpublic entities. Mandatorily redeemable financial
instruments of nonpublic entities are subject to the provisions of the statement for the first fiscal period beginning after December 15, 2003. The adoption of the statement did not have a material effect on the Companys financial conditions
or results of operations.



NOTE 2. SECURITIES



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



|                                      |  |                |            |                        |   |                         |  |   |            |   |  |   |           
|------------------------------------- |  | -------------- | ---------- | ---------------------- | - | ----------------------- |  | - | ---------- | - |  | - | ----------
|                                      |  | Amortized Cost |            | Gross Unrealized Gains |   | Gross Unrealized Losses |  |   | Fair Value
|Securities Available-for-Sale         |  |                |            |                        |   |                         |  |   |            |   |  |   |           
|December 31, 2003:                    |  |                |            |                        |   |                         |  |   |            |   |  |   |           
|U.S. Government and agency securities |  | $              | 33,729,039 |                        | $ | 91,448                  |  | $ | (50,877    | ) |  | $ | 33,769,610
|State and municipal securities        |  |                | 8,619,948  |                        |   | 229,603                 |  |   | (3,461     | ) |  |   | 8,846,090 
|Mortgage-backed securities            |  |                | 13,721,170 |                        |   | 199,156                 |  |   | (36,171    | ) |  |   | 13,884,155
|                                      |  |                |            |                        |   |                         |  |   |            |   |  |   |           
|                                      |  | $              | 56,070,157 |                        | $ | 520,207                 |  | $ | (90,509    | ) |  | $ | 56,499,855
|                                      |  |                |            |                        |   |                         |  |   |            |   |  |   |           
|December 31, 2002:                    |  |                |            |                        |   |                         |  |   |            |   |  |   |           
|U.S. Government and agency securities |  | $              | 22,852,511 |                        | $ | 258,745                 |  | $ |           |   |  | $ | 23,111,256
|State and municipal securities        |  |                | 12,979,605 |                        |   | 246,544                 |  |   | (10,648    | ) |  |   | 13,215,501
|Mortgage-backed securities            |  |                | 25,374,899 |                        |   | 456,369                 |  |   | (69,318    | ) |  |   | 25,761,950
|                                      |  |                |            |                        |   |                         |  |   |            |   |  |   |           
|                                      |  | $              | 61,207,015 |                        | $ | 961,658                 |  | $ | (79,966    | ) |  | $ | 62,088,707
|                                      |  |                |            |                        |   |                         |  |   |            |   |  |   |           
|Securities Held-to-Maturity           |  |                |            |                        |   |                         |  |   |            |   |  |   |           
|December 31, 2003:                    |  |                |            |                        |   |                         |  |   |            |   |  |   |           
|State and municipal securities        |  | $              | 470,000    |                        | $ | 20,343                  |  | $ |           |   |  | $ | 490,343   
|Mortgage-backed securities            |  |                | 102,369    |                        |   | 4,990                   |  |   |           |   |  |   | 107,359   
|                                      |  |                |            |                        |   |                         |  |   |            |   |  |   |           
|                                      |  | $              | 572,369    |                        | $ | 25,333                  |  | $ |           |   |  | $ | 597,702   
|                                      |  |                |            |                        |   |                         |  |   |            |   |  |   |           
|December 31, 2002:                    |  |                |            |                        |   |                         |  |   |            |   |  |   |           
|State and municipal securities        |  | $              | 640,000    |                        | $ | 27,951                  |  | $ |           |   |  | $ | 667,951   
|Mortgage-backed securities            |  |                | 259,208    |                        |   | 11,164                  |  |   |           |   |  |   | 270,372   
|                                      |  |                |            |                        |   |                         |  |   |            |   |  |   |           
|                                      |  | $              | 899,208    |                        | $ | 39,115                  |  | $ |           |   |  | $ | 938,323   
|                                      |  |                |            |                        |   |                         |  |   |            |   |  |   |           



13



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 2. SECURITIES (Continued)



Restricted equity securities are summarized as follows:



|                             |  |              |         |      |   |          
|---------------------------- |  | ------------ | ------- | ---- | - | ---------
|                             |  | December 31,
|                             |  | 2003         |         | 2002
|Federal Home Loan Bank stock |  | $            | 750,000 |      | $ | 1,250,000
|Correspondent bank stock     |  |              | 233,473 |      |   | 233,473  
|                             |  |              |         |      |   |          
|                             |  | $            | 983,473 |      | $ | 1,483,473
|                             |  |              |         |      |   |          



In 2003, the FASB
Emerging Issues Task Force released Issue 03-01, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments.The issue requires disclosure of certain information about other than temporary impairments in the
market value of securities. The market value of securities is based on quoted market values and is significantly affected by the interest rate environment. At December 31, 2003, all unrealized losses in the securities portfolio were for debt
securities. From the December 31, 2003 tables above, 1 out of 29 securities purchased from state and political subdivisions contained unrealized losses and 23 out of 67 securities purchased from U.S. Government agencies and Government sponsored
corporations, including mortgage-backed securities, contained unrealized losses. All securities with an unrealized loss at December 31, 2003 have been in a continuous unrealized loss position for less than twelve months. These unrealized losses are
considered temporary because of acceptable investment grades on each security and the repayment sources of principal and interest are government backed.



Securities with a carrying value of $50,192,000 and $51,344,000 at December 31, 2003 and 2002, respectively, were pledged to secure public deposits and
for other purposes required or permitted by law.



Gains and
losses on sales of securities available-for-sale consist of the following:



|                            |  |                          |   |      |   |        |      |  |   |          |  
|--------------------------- |  | ------------------------ | - | ---- | - | ------ | ---- |  | - | -------- | -
|                            |  | Years Ended December 31, |  
|                            |  | 2003                     |   | 2002 |   |        | 2001 | 
|Gross gains                 |  | $                        |  |      | $ | 86,038 |      |  | $ | 1,233    |  
|Gross losses                |  |                          |  |      |   | (5,998 | )    |  |   | (101,678 | )
|                            |  |                          |   |      |   |        |      |  |   |          |  
|Net realized gains (losses) |  | $                        |  |      | $ | 80,040 |      |  | $ | (100,445 | )
|                            |  |                          |   |      |   |        |      |  |   |          |  



The amortized cost
and fair value of debt securities as of December 31, 2003 by contractual maturity are shown below. Maturities may differ from contractual maturities in mortgage-backed securities because the mortgages underlying the securities may be called or
repaid without penalty. Therefore, these securities are not included in the maturity categories in the following summary.



|                           |  |                               |            |                             |   |                |  |            |         |  |   |        
|-------------------------- |  | ----------------------------- | ---------- | --------------------------- | - | -------------- |  | ---------- | ------- |  | - | -------
|                           |  | Securities Available-for-Sale |            | Securities Held-to-Maturity
|                           |  | Amortized Cost                |            | Fair Value                  |   | Amortized Cost |  | Fair Value
|Due in one year or less    |  | $                             | 958,357    |                             | $ | 970,415        |  | $          |        |  | $ |       
|Due from one to five years |  |                               | 31,546,507 |                             |   | 31,679,010     |  |            | 370,000 |  |   | 386,447
|Due from five to ten years |  |                               | 8,499,436  |                             |   | 8,572,846      |  |            | 100,000 |  |   | 103,896
|Due after ten years        |  |                               | 1,344,687  |                             |   | 1,393,429      |  |            |        |  |   |       
|Mortgage-backed securities |  |                               | 13,721,170 |                             |   | 13,884,155     |  |            | 102,369 |  |   | 107,359
|                           |  |                               |            |                             |   |                |  |            |         |  |   |        
|                           |  | $                             | 56,070,157 |                             | $ | 56,499,855     |  | $          | 572,369 |  | $ | 597,702
|                           |  |                               |            |                             |   |                |  |            |         |  |   |        



14



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 3. LOANS



The composition of loans is summarized as follows:



|                                        |  |              |             |   |      |   |             |  
|--------------------------------------- |  | ------------ | ----------- | - | ---- | - | ----------- | -
|                                        |  | December 31, |            
|                                        |  | 2003         |             |   | 2002 |  
|Commercial, financial, and agricultural |  | $            | 55,075,000  |   |      | $ | 58,994,000  |  
|Real estate  construction              |  |              | 156,821,000 |   |      |   | 102,602,000 |  
|Real estate  mortgage                  |  |              | 191,944,000 |   |      |   | 165,546,000 |  
|Consumer installment and other          |  |              | 14,797,070  |   |      |   | 23,134,958  |  
|                                        |  |              |             |   |      |   |             |  
|                                        |  |              | 418,637,070 |   |      |   | 350,276,958 |  
|Allowance for loan losses               |  |              | (4,178,472  | ) |      |   | (3,827,270  | )
|                                        |  |              |             |   |      |   |             |  
|Loans, net                              |  | $            | 414,458,598 |   |      | $ | 346,449,688 |  
|                                        |  |              |             |   |      |   |             |  



Changes in the
allowance for loan losses are as follows:



|                                           |  |                          |           |   |      |   |           |      |  |   |           |  
|------------------------------------------ |  | ------------------------ | --------- | - | ---- | - | --------- | ---- |  | - | --------- | -
|                                           |  | Years Ended December 31, |          
|                                           |  | 2003                     |           |   | 2002 |   |           | 2001 | 
|Balance, beginning of year                 |  | $                        | 3,827,270 |   |      | $ | 3,376,986 |      |  | $ | 2,884,397 |  
|Provision for loan losses                  |  |                          | 472,500   |   |      |   | 540,500   |      |  |   | 550,000   |  
|Loans charged off                          |  |                          | (162,604  | ) |      |   | (128,849  | )    |  |   | (83,451   | )
|Recoveries of loans previously charged off |  |                          | 41,306    |   |      |   | 38,633    |      |  |   | 26,040    |  
|                                           |  |                          |           |   |      |   |           |      |  |   |           |  
|Balance, end of year                       |  | $                        | 4,178,472 |   |      | $ | 3,827,270 |      |  | $ | 3,376,986 |  
|                                           |  |                          |           |   |      |   |           |      |  |   |           |  



The total recorded
investment in impaired loans, consisting solely of loans on nonaccrual status, was $345,994 and $296,643 at December 31, 2003 and 2002, respectively. There were no impaired loans that had related allowances for loan losses determined in accordance
with SFAS No. 114, Accounting by Creditors for Impairment of a Loan, at December 31, 2003 and 2002. The average recorded investment in impaired loans for 2003 and 2002 was $344,671 and $315,648, respectively. Interest income recognized on
impaired loans for cash payments received was not material for the years ended 2003, 2002 and 2001.



Loans past due ninety days or more and still accruing interest amounted to $1,654,000 and $1,048,000 at December 31, 2003 and 2002, respectively.



In the ordinary course of business, the Company has granted
loans to certain related parties, including directors, executive officers, and their affiliates. The interest rates on these loans were substantially the same as rates prevailing at the time of the transaction and repayment terms are customary for
the type of loan. Changes in related party loans for the year ended December 31, 2003 are as follows:



|                           |  |   |          |  
|-------------------------- |  | - | -------- | -
|Balance, beginning of year |  | $ | 839,273  |  
|Advances                   |  |   | 397,243  |  
|Repayments                 |  |   | (520,860 | )
|                           |  |   |          |  
|Balance, end of year       |  | $ | 715,656  |  
|                           |  |   |          |  



15



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 4. PREMISES AND EQUIPMENT



Premises and equipment are summarized as follows:



|                                                             |  |              |            |   |      |   |            |  
|------------------------------------------------------------ |  | ------------ | ---------- | - | ---- | - | ---------- | -
|                                                             |  | December 31, |           
|                                                             |  | 2003         |            |   | 2002 |  
|Land                                                         |  | $            | 1,900,482  |   |      | $ | 1,569,547  |  
|Buildings                                                    |  |              | 8,903,117  |   |      |   | 7,520,097  |  
|Equipment                                                    |  |              | 3,371,456  |   |      |   | 3,055,073  |  
|Construction in progress, estimated cost to complete $75,000 |  |              |           |   |      |   | 1,080,141  |  
|                                                             |  |              |            |   |      |   |            |  
|                                                             |  |              | 14,175,055 |   |      |   | 13,224,858 |  
|Accumulated depreciation                                     |  |              | (5,075,768 | ) |      |   | (4,653,457 | )
|                                                             |  |              |            |   |      |   |            |  
|                                                             |  | $            | 9,099,287  |   |      | $ | 8,571,401  |  
|                                                             |  |              |            |   |      |   |            |  



NOTE 5. DEPOSITS



The aggregate amount of time deposits in denominations of $100,000 or more
at December 31, 2003 and 2002 was $67,741,000 and $60,365,000, respectively. The scheduled maturities of time deposits at December 31, 2003 are as follows:



|     |  |   |            
|---- |  | - | -----------
|2004 |  | $ | 139,765,031
|2005 |  |   | 40,941,727 
|2006 |  |   | 14,647,840 
|2007 |  |   | 9,671,630  
|2008 |  |   | 11,269,235 
|     |  |   |            
|     |  | $ | 216,295,463
|     |  |   |            



The Company had
deposits from one public depositor totaling $33,938,600 at December 31, 2002.



Overdraft demand deposits reclassified to loans totaled $39,000 and $181,000 at December 31, 2003 and 2002, respectively.



16



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 6. OTHER BORROWINGS



Other borrowings consist of the following:



|                                                                                                                   |  |              |            |      |   |           
|------------------------------------------------------------------------------------------------------------------ |  | ------------ | ---------- | ---- | - | ----------
|                                                                                                                   |  | December 31,
|                                                                                                                   |  | 2003         |            | 2002
|Advance from Federal Home Loan Bank with interest at 5.00%, due March 30, 2009.                                    |  | $            | 5,000,000  |      | $ | 5,000,000 
|Advance from Federal Home Loan Bank with interest at 5.51%, due March 26, 2008.                                    |  |              | 5,000,000  |      |   | 5,000,000 
|Advance from Federal Home Loan Bank with interest at 4.00%, due March 19, 2010.                                    |  |              | 1,000,000  |      |   |          
|Advance from Federal Home Loan Bank with interest at 3.28%, due March 17, 2008.                                    |  |              | 1,000,000  |      |   |          
|Advance from Federal Home Loan Bank with interest at 3.16%, due March 19, 2010.                                    |  |              | 2,785,714  |      |   |          
|Advance from correspondent bank with interest at prime less .25%, unsecured, due December 30, 2003.                |  |              |           |      |   | 2,000,000 
|Treasury, tax and loan note option account, with interest at .25% less than the federal funds rate, due on demand. |  |              | 249,551    |      |   | 3,287,289 
|Federal funds purchased and securities sold under agreements to repurchase                                         |  |              | 19,800,000 |      |   | 5,000,000 
|                                                                                                                   |  |              |            |      |   |           
|                                                                                                                   |  | $            | 34,835,265 |      | $ | 20,287,289
|                                                                                                                   |  |              |            |      |   |           



The advances from the
Federal Home Loan Bank are secured by certain qualifying loans of approximately $16,670,000, Federal Home Loan Bank stock of $750,000 and a Federal Home Loan Bank Agency bond in the amount of $2,000,000.



Securities sold under agreements to repurchase, which are secured
borrowings, generally mature within thirty days from the transaction date. Securities sold under repurchase agreements are reflected at the amount of cash received in connection with the transactions. The Company may be required to provide
additional collateral based on the fair value of the underlying securities. The Company monitors the fair value of the underlying securities on a daily basis.



The Company has available unused lines of credit with various financial institutions totaling $5,000,000 at December 31, 2003.



NOTE 7. MORTGAGE BANKING INCOME



Mortgage banking income consists of the following:



|                                   |  |                          |           |      |   |           |  |   |          
|---------------------------------- |  | ------------------------ | --------- | ---- | - | --------- |  | - | ---------
|                                   |  | Years Ended December 31,
|                                   |  | 2003                     |           | 2002 |   | 2001     
|Fees from sale of servicing rights |  | $                        | 997,390   |      | $ | 761,746   |  | $ | 884,441  
|Other fees from borrowers          |  |                          | 1,091,641 |      |   | 770,889   |  |   | 944,212  
|                                   |  |                          |           |      |   |           |  |   |          
|                                   |  | $                        | 2,089,031 |      | $ | 1,532,635 |  | $ | 1,828,653
|                                   |  |                          |           |      |   |           |  |   |          



17



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 8. EMPLOYEE BENEFIT PLANS



The Company has a noncontributory profit-sharing plan and a 401(k)
retirement plan covering substantially all employees. Contributions to the plans charged to expense during 2003, 2002 and 2001 amounted to $324,051, $320,657, and $320,809, respectively.



The Company also has deferred compensation agreements with certain key officers. Amounts charged to expense under these
agreements totaled $58,082, $51,734, and $59,290 for the years ended December 31, 2003, 2002 and 2001, respectively.



NOTE 9. INCOME TAXES



Income tax expense consists of the following:



|                   |  |                          |           |   |      |   |           |      |  |   |           |  
|------------------ |  | ------------------------ | --------- | - | ---- | - | --------- | ---- |  | - | --------- | -
|                   |  | Years Ended December 31, |          
|                   |  | 2003                     |           |   | 2002 |   |           | 2001 | 
|Current            |  | $                        | 4,258,668 |   |      | $ | 4,062,139 |      |  | $ | 4,321,979 |  
|Deferred           |  |                          | (33,587   | ) |      |   | (203,422  | )    |  |   | (265,707  | )
|                   |  |                          |           |   |      |   |           |      |  |   |           |  
|Income tax expense |  | $                        | 4,225,081 |   |      | $ | 3,858,717 |      |  | $ | 4,056,272 |  
|                   |  |                          |           |   |      |   |           |      |  |   |           |  



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



|                                       |  |                          |           |   |      |   |           |      |  |   |           |  
|-------------------------------------- |  | ------------------------ | --------- | - | ---- | - | --------- | ---- |  | - | --------- | -
|                                       |  | Years Ended December 31, |          
|                                       |  | 2003                     |           |   | 2002 |   |           | 2001 | 
|Income taxes at federal statutory rate |  | $                        | 4,186,347 |   |      | $ | 3,917,396 |      |  | $ | 4,210,277 |  
|Tax-exempt interest                    |  |                          | (141,847  | ) |      |   | (216,604  | )    |  |   | (264,575  | )
|State income taxes                     |  |                          | 278,592   |   |      |   | 256,642   |      |  |   | 239,201   |  
|Surtax exemption                       |  |                          | (100,000  | ) |      |   | (100,000  | )    |  |   | (100,000  | )
|Other items, net                       |  |                          | 1,989     |   |      |   | 1,283     |      |  |   | (28,631   | )
|                                       |  |                          |           |   |      |   |           |      |  |   |           |  
|Income tax expense                     |  | $                        | 4,225,081 |   |      | $ | 3,858,717 |      |  | $ | 4,056,272 |  
|                                       |  |                          |           |   |      |   |           |      |  |   |           |  



The components of
deferred income taxes are as follows:



|                              |  |              |           |      |   |          
|----------------------------- |  | ------------ | --------- | ---- | - | ---------
|                              |  | December 31,
|                              |  | 2003         |           | 2002
|Deferred tax assets:          |  |              |           |      |   |          
|Loan loss reserves            |  | $            | 1,499,017 |      | $ | 1,363,175
|Deferred compensation         |  |              | 199,454   |      |   | 176,989  
|                              |  |              |           |      |   |          
|                              |  |              | 1,698,471 |      |   | 1,540,164
|                              |  |              |           |      |   |          
|Deferred tax liabilities:     |  |              |           |      |   |          
|Depreciation                  |  |              | 148,305   |      |   | 23,585   
|Securities available for sale |  |              | 146,097   |      |   | 299,775  
|                              |  |              |           |      |   |          
|                              |  |              | 294,402   |      |   | 323,360  
|                              |  |              |           |      |   |          
|Net deferred tax assets       |  | $            | 1,404,069 |      | $ | 1,216,804
|                              |  |              |           |      |   |          



18



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 10. COMMITMENTS AND CONTINGENCIES



Loan Commitments



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



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



|                                |  |              |            |      |   |           
|------------------------------- |  | ------------ | ---------- | ---- | - | ----------
|                                |  | December 31,
|                                |  | 2003         |            | 2002
|Commitments to extend credit    |  | $            | 75,343,002 |      | $ | 69,417,280
|Other standby letters of credit |  |              | 4,529,705  |      |   | 3,562,246 
|                                |  |              |            |      |   |           
|                                |  | $            | 79,872,707 |      | $ | 72,979,526
|                                |  |              |            |      |   |           



Commitments to
extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since
many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if deemed necessary by the Company upon extension of
credit, is based on managements credit evaluation of the party. Collateral held varies, but may include accounts receivable, inventory, property and equipment, residential real estate, and income-producing commercial properties.



Standby letters of credit are conditional commitments issued by the Company
to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved
in extending loans to customers. Collateral held varies as specified above and is required in instances which the Company deemed necessary.



At December 31, 2003 and 2002, the carrying amount of liabilities related to the Companys obligation to perform under financial standby letters of
credit was insignificant. The Company has not been required to perform on any financial standby letters of credit, and the Company has not incurred any losses on financial standby letters of credit for the years ended December 31, 2003 and 2002.



19



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 10. COMMITMENTS AND CONTINGENCIES



Contingencies



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



NOTE 11. CONCENTRATIONS OF CREDIT



The Company originates primarily commercial, commercial real estate, residential real estate, and consumer loans to customers in Henry County and
surrounding counties. The ability of the majority of the Companys customers to honor their contractual loan obligations is dependent on the economy in these areas.



Eighty-three percent of the Companys loan portfolio is concentrated in loans secured by real estate, of which a
substantial portion is secured by real estate in the Companys primary market area. In addition, a substantial portion of the other real estate owned is located in those same markets. Accordingly, the ultimate collectibility of the loan
portfolio and recovery of other real estate owned are susceptible to changes in market conditions in the Companys primary market area. The other significant concentrations of credit by type of loan are set forth in Note 3.



The Company, as a matter of policy, does not generally extend credit to any
single borrower or group of related borrowers in excess of 25% of statutory capital, or approximately $8,000,000.



NOTE 12. REGULATORY MATTERS



The Bank is subject to certain restrictions on the amount of dividends that may be declared without prior regulatory approval. At December 31, 2003,
approximately $3,752,000 of retained earnings were available for dividend declaration without regulatory approval.



The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the consolidated financial statements. Under capital adequacy guidelines and
the regulatory framework for prompt corrective action, the Company and Bank must meet specific capital guidelines that involve quantitative measures of the assets, liabilities, and certain off-balance sheet items as calculated under regulatory
accounting practices. Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.



Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain
minimum amounts and ratios of Total and Tier I capital to risk-weighted assets, as defined, and of Tier I capital to average assets, as defined. Management believes, as of December 31, 2003 and 2002, the Company and the Bank met all capital adequacy
requirements to which they are subject.



As of December 31,
2003, the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain
minimum Total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the following table. There are no conditions or events since that notification that management believes have changed the Banks category. Prompt corrective
action provisions are not applicable to bank holding companies.



20



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 12. REGULATORY MATTERS (Continued)



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



|                                        |  |                        |        |       |                              |   |        |                                                               |        |  |      |        |  |       |        |  |       |  
|--------------------------------------- |  | ---------------------- | ------ | ----- | ---------------------------- | - | ------ | ------------------------------------------------------------- | ------ |  | ---- | ------ |  | ----- | ------ |  | ----- | -
|                                        |  | Actual                 |        |       | For CapitalAdequacy Purposes |   |        | To Be WellCapitalized UnderPrompt CorrectiveAction Provisions |       
|                                        |  | Amount                 |        | Ratio |                              |   | Amount |                                                               | Ratio  |  |      | Amount |  | Ratio |       
|                                        |  | (Dollars in Thousands) |       
|As of December 31, 2003:                |  |                        |        |       |                              |   |        |                                                               |        |  |      |        |  |       |        |  |       |  
|Total Capital to Risk Weighted Assets:  |  |                        |        |       |                              |   |        |                                                               |        |  |      |        |  |       |        |  |       |  
|Consolidated                            |  | $                      | 55,280 |       | 12.51                        | % |        | $                                                             | 35,343 |  | 8.00 | %      |  |       | N/A    |  | N/A   |  
|Bank                                    |  | $                      | 54,121 |       | 12.26                        | % |        | $                                                             | 35,324 |  | 8.00 | %      |  | $     | 44,155 |  | 10.00 | %
|Tier I Capital to Risk Weighted Assets: |  |                        |        |       |                              |   |        |                                                               |        |  |      |        |  |       |        |  |       |  
|Consolidated                            |  | $                      | 51,102 |       | 11.57                        | % |        | $                                                             | 17,671 |  | 4.00 | %      |  |       | N/A    |  | N/A   |  
|Bank                                    |  | $                      | 49,943 |       | 11.31                        | % |        | $                                                             | 17,662 |  | 4.00 | %      |  | $     | 26,493 |  | 6.00  | %
|Tier I Capital to Average Assets:       |  |                        |        |       |                              |   |        |                                                               |        |  |      |        |  |       |        |  |       |  
|Consolidated                            |  | $                      | 51,102 |       | 9.74                         | % |        | $                                                             | 20,986 |  | 4.00 | %      |  |       | N/A    |  | N/A   |  
|Bank                                    |  | $                      | 49,943 |       | 9.52                         | % |        | $                                                             | 20,979 |  | 4.00 | %      |  | $     | 26,224 |  | 5.00  | %
|                                        |  |                        |        |       |                              |  
|As of December 31, 2002:                |  |                        |        |       |                              |   |        |                                                               |        |  |      |        |  |       |        |  |       |  
|Total Capital to Risk Weighted Assets:  |  |                        |        |       |                              |   |        |                                                               |        |  |      |        |  |       |        |  |       |  
|Consolidated                            |  | $                      | 49,913 |       | 13.23                        | % |        | $                                                             | 30,183 |  | 8.00 | %      |  |       | N/A    |  | N/A   |  
|Bank                                    |  | $                      | 48,930 |       | 13.01                        | % |        | $                                                             | 30,086 |  | 8.00 | %      |  | $     | 37,607 |  | 10.00 | %
|Tier I Capital to Risk Weighted Assets: |  |                        |        |       |                              |   |        |                                                               |        |  |      |        |  |       |        |  |       |  
|Consolidated                            |  | $                      | 46,086 |       | 12.22                        | % |        | $                                                             | 15,091 |  | 4.00 | %      |  |       | N/A    |  | N/A   |  
|Bank                                    |  | $                      | 45,103 |       | 11.99                        | % |        | $                                                             | 15,043 |  | 4.00 | %      |  | $     | 22,564 |  | 6.00  | %
|Tier I Capital to Average Assets:       |  |                        |        |       |                              |   |        |                                                               |        |  |      |        |  |       |        |  |       |  
|Consolidated                            |  | $                      | 46,086 |       | 9.79                         | % |        | $                                                             | 18,832 |  | 4.00 | %      |  |       | N/A    |  | N/A   |  
|Bank                                    |  | $                      | 45,103 |       | 9.58                         | % |        | $                                                             | 18,824 |  | 4.00 | %      |  | $     | 23,530 |  | 5.00  | %



NOTE 13. FAIR VALUE OF FINANCIAL
INSTRUMENTS



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



21



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 13. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)



The following methods and assumptions were used by the Company in estimating
the fair value of its financial instruments:



Cash, Due
From Banks, Interest-bearing Deposits in Banks and Federal Funds Sold:The carrying amount of cash, due from banks, interest-bearing deposits in banks and federal funds sold approximates fair values.



Securities:Fair values of securities is based on available quoted
market prices. The carrying values of equity securities with no readily determinable fair value approximates fair values.



Loans and Loans Held For Sale:The carrying amount of variable-rate loans that reprice frequently and have no significant change in credit risk
approximates fair value. The fair value of fixed-rate loans is estimated based on discounted contractual cash flows, using interest rates currently being offered for loans with similar terms to borrowers with similar credit quality. The fair value
of impaired loans is estimated based on discounted contractual cash flows or underlying collateral values, where applicable. The carrying amounts of loans held for sale approximate fair value.



Deposits:The carrying amount of demand deposits, savings deposits,
and variable-rate certificates of deposit approximates fair value. The fair value of fixed-rate certificates of deposit is estimated based on discounted contractual cash flows using interest rates currently being offered for certificates of similar
maturities.



Repurchase Agreements and Other Borrowings:The carrying amount of variable rate borrowings and securities sold under repurchase agreements approximate fair value. The fair value of fixed rate other borrowings are estimated based on discounted contractual cash flows using the current
incremental borrowing rates for similar type borrowing arrangements.



Accrued Interest:The carrying amounts of accrued interest approximates their fair value.



Off-Balance Sheet Instruments:The carrying amount of commitments to extend credit and standby letters of credit approximates fair value. The
carrying amount of the off-balance sheet financial instruments is based on fees charged to enter into such agreements.



The carrying amount and estimated fair value of the Companys financial instruments were as follows:



|                                                                                   |  |                   |             |                   |   |                |  |            |             |  |   |            
|---------------------------------------------------------------------------------- |  | ----------------- | ----------- | ----------------- | - | -------------- |  | ---------- | ----------- |  | - | -----------
|                                                                                   |  | December 31, 2003 |             | December 31, 2002
|                                                                                   |  | CarryingAmount    |             | Fair Value        |   | CarryingAmount |  | Fair Value
|Financial assets:                                                                  |  |                   |             |                   |   |                |  |            |             |  |   |            
|Cash and due from banks, interest-bearing deposits in banks and federal funds sold |  | $                 | 25,770,680  |                   | $ | 25,770,680     |  | $          | 58,908,734  |  | $ | 58,908,734 
|Securities available-for-sale                                                      |  |                   | 56,499,855  |                   |   | 56,499,855     |  |            | 62,088,707  |  |   | 62,088,707 
|Securities held-to-maturity                                                        |  |                   | 572,369     |                   |   | 597,702        |  |            | 899,208     |  |   | 938,323    
|Restricted equity securities                                                       |  |                   | 983,473     |                   |   | 983,473        |  |            | 1,483,473   |  |   | 1,483,473  
|Loans held for sale                                                                |  |                   | 1,673,368   |                   |   | 1,673,368      |  |            | 5,796,885   |  |   | 5,796,885  
|Loans                                                                              |  |                   | 414,458,589 |                   |   | 417,474,133    |  |            | 346,449,688 |  |   | 352,375,384
|Accrued interest receivable                                                        |  |                   | 3,024,124   |                   |   | 3,024,124      |  |            | 2,792,841   |  |   | 2,792,841  
|                                                                                   |  |                   |             |                  
|Financial liabilities:                                                             |  |                   |             |                   |   |                |  |            |             |  |   |            
|Deposits                                                                           |  |                   | 427,033,134 |                   |   | 429,237,671    |  |            | 420,149,298 |  |   | 424,142,650
|Other borrowings                                                                   |  |                   | 34,835,265  |                   |   | 35,600,000     |  |            | 20,287,289  |  |   | 20,652,786 
|Accrued interest payable                                                           |  |                   | 1,081,861   |                   |   | 1,081,861      |  |            | 1,291,223   |  |   | 1,291,223  



22



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 14. SUPPLEMENTAL SEGMENT INFORMATION



The Company has two reportable segments: commercial banking and mortgage
loan origination. The commercial banking segment provides traditional banking services offered through the Bank. The mortgage loan origination segment provides mortgage loan origination services offered through First Metro.



The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. The Company evaluates performance based on profit and loss from operations before income taxes not including nonrecurring gains and losses.



The Company accounts for intersegment revenues and expenses as if the
revenue/expense transactions were to third parties, that is, at current market prices.



The Companys reportable segments are strategic business units that offer different products and services. They are managed separately because each segment has different types and levels of credit and interest
rate risk.



|                                           |  |                   |             |          |   |           |           |  |   |              |   |  |       |            |   |  |   |            
|------------------------------------------ |  | ----------------- | ----------- | -------- | - | --------- | --------- |  | - | ------------ | - |  | ----- | ---------- | - |  | - | -----------
|                                           |  | INDUSTRY SEGMENTS
|For the Year Ended December 31, 2003       |  | CommercialBanking |             | Mortgage |   |           | All Other |  |   | Eliminations |   |  | Total
|Interest income                            |  | $                 | 25,854,550  |          | $ | 14,737    |           |  | $ |             |   |  | $     | (120,952   | ) |  | $ | 25,748,335 
|Interest expense                           |  |                   | 9,444,027   |          |   | 106,215   |           |  |   |             |   |  |       | (120,952   | ) |  |   | 9,429,290  
|Net interest income (expense)              |  |                   | 16,410,523  |          |   | (91,478   | )         |  |   |             |   |  |       |           |   |  |   | 16,319,045 
|Intersegment net interest income (expense) |  |                   | 91,478      |          |   | (91,478   | )         |  |   |             |   |  |       |           |   |  |   |           
|Other revenue from external sources        |  |                   | 3,430,336   |          |   | 2,089,031 |           |  |   | 12,600       |   |  |       |           |   |  |   | 5,531,967  
|Intersegment other revenues                |  |                   | 58,840      |          |   | (58,840   | )         |  |   |             |   |  |       |           |   |  |   |           
|Depreciation                               |  |                   | 444,961     |          |   | 2,603     |           |  |   | 9,081        |   |  |       |           |   |  |   | 456,645    
|Provision for loan losses                  |  |                   | 472,500     |          |   |          |           |  |   |             |   |  |       |           |   |  |   | 472,500    
|Segment profit                             |  |                   | 11,585,171  |          |   | 517,663   |           |  |   | (141,844     | ) |  |       |           |   |  |   | 11,960,990 
|Segment assets                             |  |                   | 515,919,324 |          |   | 2,950,400 |           |  |   | 1,157,198    |   |  |       | (4,889,589 | ) |  |   | 515,137,333
|Expenditures for premises and equipment    |  |                   | 1,037,509   |          |   | 5,117     |           |  |   |             |   |  |       |           |   |  |   | 1,042,626  



|                                           |  |                   |             |          |   |           |           |  |   |              |   |  |       |            |   |  |   |            
|------------------------------------------ |  | ----------------- | ----------- | -------- | - | --------- | --------- |  | - | ------------ | - |  | ----- | ---------- | - |  | - | -----------
|                                           |  | INDUSTRY SEGMENTS
|For the Year Ended December 31, 2002       |  | CommercialBanking |             | Mortgage |   |           | All Other |  |   | Eliminations |   |  | Total
|Interest income                            |  | $                 | 27,400,632  |          | $ | 10,614    |           |  | $ |             |   |  | $     | (112,570   | ) |  | $ | 27,298,676 
|Interest expense                           |  |                   | 10,987,920  |          |   | 101,956   |           |  |   |             |   |  |       | (112,570   | ) |  |   | 10,977,306 
|Net interest income (expense)              |  |                   | 16,412,712  |          |   | (91,342   | )         |  |   |             |   |  |       |           |   |  |   | 16,321,370 
|Intersegment net interest income (expense) |  |                   | 91,342      |          |   | (91,342   | )         |  |   |             |   |  |       |           |   |  |   |           
|Other revenue from external sources        |  |                   | 3,001,335   |          |   | 1,532,635 |           |  |   | 12,200       |   |  |       |           |   |  |   | 4,546,170  
|Intersegment other revenues                |  |                   | 58,600      |          |   | (58,600   | )         |  |   |             |   |  |       |           |   |  |   |           
|Depreciation                               |  |                   | 538,433     |          |   | 2,004     |           |  |   | 9,084        |   |  |       |           |   |  |   | 549,521    
|Provision for loan losses                  |  |                   | 540,500     |          |   |          |           |  |   |             |   |  |       |           |   |  |   | 540,500    
|Segment profit                             |  |                   | 11,176,061  |          |   | 176,887   |           |  |   | (160,393     | ) |  |       |           |   |  |   | 11,192,555 
|Segment assets                             |  |                   | 486,961,832 |          |   | 6,653,256 |           |  |   | 216,454      |   |  |       | (4,678,840 | ) |  |   | 489,152,702
|Expenditures for premises and equipment    |  |                   | 1,962,362   |          |   |          |           |  |   |             |   |  |       |           |   |  |   | 1,962,362  



23



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 14. SUPPLEMENTAL SEGMENT INFORMATION (Continued)



|                                           |  |                   |             |          |   |           |           |  |   |              |   |  |       |            |   |  |   |            
|------------------------------------------ |  | ----------------- | ----------- | -------- | - | --------- | --------- |  | - | ------------ | - |  | ----- | ---------- | - |  | - | -----------
|                                           |  | INDUSTRY SEGMENTS
|For the Year Ended December 31, 2001       |  | CommercialBanking |             | Mortgage |   |           | All Other |  |   | Eliminations |   |  | Total
|Interest income                            |  | $                 | 33,413,872  |          | $ | 9,515     |           |  | $ |             |   |  | $     | (199,370   | ) |  | $ | 33,224,017 
|Interest expense                           |  |                   | 16,515,616  |          |   | 190,306   |           |  |   |             |   |  |       | (199,370   | ) |  |   | 16,506,552 
|Net interest income (expense)              |  |                   | 16,898,256  |          |   | (180,791  | )         |  |   |             |   |  |       |           |   |  |   | 16,717,465 
|Intersegment net interest income (expense) |  |                   | 180,340     |          |   | (180,340  | )         |  |   |             |   |  |       |           |   |  |   |           
|Other revenue from external sources        |  |                   | 2,814,881   |          |   | 1,828,653 |           |  |   |             |   |  |       |           |   |  |   | 4,643,534  
|Intersegment other revenues                |  |                   | 43,000      |          |   | (55,000   | )         |  |   | 12,000       |   |  |       |           |   |  |   |           
|Depreciation                               |  |                   | 522,777     |          |   | 3,437     |           |  |   | 9,432        |   |  |       |           |   |  |   | 535,646    
|Provision for loan losses                  |  |                   | 550,000     |          |   |          |           |  |   |             |   |  |       |           |   |  |   | 550,000    
|Segment profit                             |  |                   | 11,792,651  |          |   | 347,560   |           |  |   | (110,849     | ) |  |       |           |   |  |   | 12,029,362 
|Segment assets                             |  |                   | 495,983,128 |          |   | 2,364,647 |           |  |   | 301,848      |   |  |       | (2,464,537 | ) |  |   | 496,185,086
|Expenditures for premises and equipment    |  |                   | 954,880     |          |   |          |           |  |   |             |   |  |       |           |   |  |   | 954,880    



NOTE 15. STOCK DIVIDEND



On January 11, 2001, the Company declared a two-for-one
common stock split in the form of a dividend payable to stockholders of record on January 11, 2001. An amount equal to the par value of common shares declared was transferred from retained earnings to common stock.



NOTE 16. PARENT COMPANY FINANCIAL INFORMATION



The following information presents the condensed balance sheets as of
December 31, 2003 and 2002, statements of income, and cash flows for Henry County Bancshares, Inc. for the periods ended December 31, 2003, 2002, and 2001.



CONDENSED BALANCE SHEETS



|                           |  |              |            |      |   |           
|-------------------------- |  | ------------ | ---------- | ---- | - | ----------
|                           |  | December 31,
|                           |  | 2003         |            | 2002
|Assets                     |  |              |            |      |   |           
|Cash                       |  | $            | 923,085    |      | $ | 28,123    
|Investment in subsidiaries |  |              | 50,227,194 |      |   | 46,389,483
|Premises and equipment     |  |              | 179,249    |      |   | 188,331   
|Other assets               |  |              | 54,864     |      |   | 62,039    
|                           |  |              |            |      |   |           
|Total assets               |  | $            | 51,384,392 |      | $ | 46,667,976
|                           |  |              |            |      |   |           
|Stockholders equity       |  | $            | 51,384,392 |      | $ | 46,667,976
|                           |  |              |            |      |   |           



24



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 16. PARENT COMPANY FINANCIAL INFORMATION (Continued)



CONDENSED STATEMENTS OF INCOME



|                                                                                               |  |                          |           |   |      |   |           |      |  |   |           |  
|---------------------------------------------------------------------------------------------- |  | ------------------------ | --------- | - | ---- | - | --------- | ---- |  | - | --------- | -
|                                                                                               |  | Years Ended December 31, |          
|                                                                                               |  | 2003                     |           |   | 2002 |   |           | 2001 | 
|Income                                                                                         |  |                          |           |   |      |   |           |      |  |   |           |  
|Dividends from bank subsidiary                                                                 |  | $                        | 3,686,863 |   |      | $ | 2,893,789 |      |  | $ | 3,007,278 |  
|Rental income                                                                                  |  |                          | 12,600    |   |      |   | 12,200    |      |  |   | 12,000    |  
|                                                                                               |  |                          |           |   |      |   |           |      |  |   |           |  
|                                                                                               |  |                          | 3,699,463 |   |      |   | 2,905,989 |      |  |   | 3,019,278 |  
|                                                                                               |  |                          |           |   |      |   |           |      |  |   |           |  
|Expense                                                                                        |  |                          |           |   |      |   |           |      |  |   |           |  
|Salaries and employee benefits                                                                 |  |                          | 100,703   |   |      |   | 104,218   |      |  |   | 104,218   |  
|Depreciation                                                                                   |  |                          | 9,081     |   |      |   | 9,084     |      |  |   | 9,431     |  
|Other expenses                                                                                 |  |                          | 44,660    |   |      |   | 59,291    |      |  |   | 9,200     |  
|                                                                                               |  |                          |           |   |      |   |           |      |  |   |           |  
|Total expenses                                                                                 |  |                          | 154,444   |   |      |   | 172,593   |      |  |   | 122,849   |  
|                                                                                               |  |                          |           |   |      |   |           |      |  |   |           |  
|Income before income tax expense (benefits) and equity in undistributed income of subsidiaries |  |                          | 3,545,019 |   |      |   | 2,733,396 |      |  |   | 2,896,429 |  
|Income tax expense (benefits)                                                                  |  |                          | (54,864   | ) |      |   | (62,038   | )    |  |   | (42,876   | )
|                                                                                               |  |                          |           |   |      |   |           |      |  |   |           |  
|Income before undistributed income of subsidiaries                                             |  |                          | 3,599,883 |   |      |   | 2,795,434 |      |  |   | 2,939,305 |  
|Equity in undistributed income of subsidiaries                                                 |  |                          | 4,136,026 |   |      |   | 4,538,404 |      |  |   | 5,033,785 |  
|                                                                                               |  |                          |           |   |      |   |           |      |  |   |           |  
|Net income                                                                                     |  | $                        | 7,735,909 |   |      | $ | 7,333,838 |      |  | $ | 7,973,090 |  
|                                                                                               |  |                          |           |   |      |   |           |      |  |   |           |  



25



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 16. PARENT COMPANY FINANCIAL INFORMATION (Continued)



CONDENSED STATEMENTS OF CASH FLOWS



|                                                                                  |  |                          |            |   |      |   |            |      |  |   |            |  
|--------------------------------------------------------------------------------- |  | ------------------------ | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                                                  |  | Years Ended December 31, |           
|                                                                                  |  | 2003                     |            |   | 2002 |   |            | 2001 | 
|OPERATING ACTIVITIES                                                              |  |                          |            |   |      |   |            |      |  |   |            |  
|Net income                                                                        |  | $                        | 7,735,909  |   |      | $ | 7,333,838  |      |  | $ | 7,973,090  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                          |            |   |      |   |            |      |  |   |            |  
|Depreciation                                                                      |  |                          | 9,081      |   |      |   | 9,084      |      |  |   | 9,431      |  
|Undistributed income of subsidiaries                                              |  |                          | (4,136,026 | ) |      |   | (4,538,404 | )    |  |   | (5,033,785 | )
|Net other operating activities                                                    |  |                          | 7,175      |   |      |   | (19,163    | )    |  |   | (5,730     | )
|                                                                                  |  |                          |            |   |      |   |            |      |  |   |            |  
|Net cash provided by operating activities                                         |  |                          | 3,616,139  |   |      |   | 2,785,355  |      |  |   | 2,943,006  |  
|                                                                                  |  |                          |            |   |      |   |            |      |  |   |            |  
|FINANCING ACTIVITIES                                                              |  |                          |            |   |      |   |            |      |  |   |            |  
|Dividends paid                                                                    |  |                          | (2,721,177 | ) |      |   | (2,506,347 | )    |  |   | (2,729,924 | )
|Purchase of treasury stock                                                        |  |                          |           |   |      |   | (312,442   | )    |  |   | (177,354   | )
|                                                                                  |  |                          |            |   |      |   |            |      |  |   |            |  
|Net cash used in financing activities                                             |  |                          | (2,721,177 | ) |      |   | (2,818,789 | )    |  |   | (2,907,278 | )
|                                                                                  |  |                          |            |   |      |   |            |      |  |   |            |  
|Net increase (decrease) in cash                                                   |  |                          | 894,962    |   |      |   | (33,434    | )    |  |   | 35,728     |  
|Cash at beginning of year                                                         |  |                          | 28,123     |   |      |   | 61,557     |      |  |   | 25,829     |  
|                                                                                  |  |                          |            |   |      |   |            |      |  |   |            |  
|Cash at end of year                                                               |  | $                        | 923,085    |   |      | $ | 28,123     |      |  | $ | 61,557     |  
|                                                                                  |  |                          |            |   |      |   |            |      |  |   |            |  



26