<PAGE>

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                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D. C.  20549
                                _______________

                                   FORM 10-K

         ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

  For the fiscal year ended December 31, 1999 - Commission File Number 0-25422
                                _______________


                                 PAB BANKSHARES, INC.
            (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                               <C>
                          Georgia                                            58-1473302
--------------------------------------------------------------    ---------------------------------
(State or other jurisdiction of incorporation or organization)    (IRS Employer Identification No.)

             3102 North Oak Street Extension
                   Valdosta, Georgia                                           31602
--------------------------------------------------------------    ---------------------------------
          (Address of principal executive office)                            (Zip Code)

                     (912) 241-2775
-------------------------------------------------------------
  (Registrant's telephone number, including area code)
</TABLE>

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

       Title of each class             Name of each exchange on which registered
Common Stock, no par value per share           The American Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:  NONE

Indicate by check mark whether Registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
                            Yes    X         No
                                 -----          -----

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the best
of Registrant's knowledge, in definitive Proxy or Information Statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [X]

The aggregate market value of the voting stock held by non-affiliates of
Registrant at March 1, 2000 was $86,747,638 based on a recent trading price of
$12.625 per share.  The number of shares outstanding of Registrant's common
stock at March 1, 2000 was 9,571,525 shares.

  The Registrant's definitive Proxy Statement for the 2000 Annual Meeting of
Shareholders to be filed with the Securities and Exchange Commission within 120
days of the Registrant's fiscal year end is incorporated by reference in answer
to Part III of this Report.

                      DOCUMENTS INCORPORATED BY REFERENCE

     The Registrant's definitive Proxy Statement for the 2000 Annual Meeting of
Shareholders to be filed with the Securities and Exchange Commission within 120
days of the Registrant's fiscal year end is incorporated by reference in answer
to Part III of this Report.

===============================================================================
<PAGE>

            Cautionary Notice Regarding Forward-Looking Statements

     This Annual Report on Form 10-K contains forward-looking statements,
including statements regarding, among other items, the plans, expectations or
intentions of PAB Bankshares, Inc. (the "Company") or one or more of the
Company's banks.  The words "expect," "anticipate," "intend," "plan," "believe,"
"estimate," and similar expressions are intended to identify such forward-
looking statements.  This notice is intended to take advantage of the "safe
harbor" provided by the Private Securities Litigation Reform Act of 1995 with
respect to such forward-looking statements. These forward-looking statements
involve a number of risks and uncertainties.  Many possible events or factors
could affect the Company's actual future financial results and performance.
This could cause future financial results to differ materially from those
expressed in the Company's forward-looking statements.  Factors that may cause
actual results to differ materially from those contemplated by the Company's
forward-looking statements include the following:

    . The Company's operating costs after recent acquisitions may be greater
      than expected, and the Company's cost savings from recent acquisitions may
      be less than expected, or PAB may be unable to obtain those cost savings
      as soon as expected;

    . The Company may be unable to successfully integrate its acquired
      businesses or may have more trouble integrating acquired businesses than
      expected;

    . The Company could lose its key personnel or spend a greater amount of
      resources attracting, retaining and motivating them than it has in the
      past;

    . Competition among financial institutions may increase significantly;

    . Changes in the interest rate environment may reduce operating margins;

    . General economic or business conditions, including acquisition and growth
      opportunities, may be worse than expected; and

    . Legislative or regulatory changes may adversely affect our businesses.

     The Company has based its forward-looking statements on its current
expectations about future events. Although the Company believes that the
expectations reflected in its forward-looking statements are reasonable, the
Company cannot guarantee that these expectations will actually be achieved.  By
making these forward-looking statements, the Company does not undertake to
update them in any manner except as may be required by the Company's disclosure
obligations in filings it makes with the Securities and Exchange Commission
under the Federal securities laws.  In evaluating these forward-looking
statements, you should consider various factors, including the risk factors
outlined from time to time in the Company's Registration Statements filed with
the Securities and Exchange Commission.  These factors may cause the Company's
actual results to differ materially from the Company's forward-looking
statements.

                                       2
<PAGE>

                                     PART I
                                     ------


ITEM 1.   DESCRIPTION OF BUSINESS.

Business Development

     The primary business of the Company, as a bank holding company, is to
manage the business and affairs of its four commercial banking subsidiaries, The
Park Avenue Bank in Valdosta, Georgia, Farmers & Merchants Bank in Adel,
Georgia, First Community Bank of Southwest Georgia in Bainbridge, Georgia, and
Eagle Bank and Trust in Statesboro, Georgia, as well as its one thrift
subsidiary, Baxley Federal Savings Bank in Baxley, Georgia.  The five banking
subsidiaries are sometimes individually and collectively referred to herein as
the "Banks."  In addition to its five banking subsidiaries, the Company recently
began providing investment services through PAB Financial Services, LLC ("PAB
Financial"), an operating subsidiary of the Company located in Valdosta,
Georgia.  Unless otherwise indicated by the context, the term "Company" shall
collectively refer to PAB Bankshares, Inc. and its subsidiaries.

     The Company was organized in 1982 to own 100% of the stock of The Park
Avenue Bank, a state-chartered commercial bank.  Effective December 31, 1982,
the Company became a bank holding company, registered with the Board of
Governors of the Federal Reserve System (the "Federal Reserve") and the Georgia
Department of Banking and Finance (the "Georgia Department").  In 1985, the
Company completed its acquisition of Farmers & Merchants Bank, a state-chartered
commercial bank ("Farmers & Merchants).  In 1995, the Company completed its
acquisition of First Federal Savings Bank of Bainbridge, a federal stock savings
bank ("First Federal").  First Federal was converted to a commercial bank and
its name was changed to First Community Bank of Southwest Georgia ("First
Community") in 1997.  In 1998, the Company completed its acquisition of
Investors Financial Corporation and its wholly-owned subsidiary, Bainbridge
National Bank.  Bainbridge National Bank was merged into First Community in
1998.  In late 1998, the Company completed its acquisition of Eagle Bancorp,
Inc., and its wholly-owned subsidiary, Eagle Bank and Trust.  In 1999, the
Company completed its acquisition of Baxley Federal Savings Bank, a federal
stock savings bank ("Baxley").

     The Company's offices are located in The Park Avenue Bank's main office at
3102 North Oak Street Extension, Valdosta, Georgia 31602, and its telephone
number is (912) 241-2775.

Business of the Company

     The Company is authorized to engage in any activity permitted by law to a
corporation, subject to applicable federal and state regulatory restrictions on
the activities of bank holding companies.  The Company's holding company
structure provides it with greater flexibility than the respective Banks would
otherwise have to expand and diversify their business activities.  For example,
in the fourth quarter of 1999, the Company formed PAB Financial, an operating
subsidiary of the Company engaged in investment advisory services.  Management
from time to time studies the feasibility of establishing or acquiring
subsidiaries to engage in non-banking activities to the extent permitted by law.

Banking Subsidiaries

     The Park Avenue Bank

     The Park Avenue Bank commenced operations in 1971 as a state-chartered
commercial bank.  The main office of the bank is located in Valdosta, Georgia.
The bank has three branch offices in Valdosta, as well as one branch office in
Lake Park, Georgia.  In 1999, The Park Avenue Bank formed PAB Holdings, Inc., a
holding company, and PAB Investments, Inc., a Real Estate Investment Trust
("REIT").  These companies were established in order to enhance and strengthen
the capital position of The Park Avenue Bank.  The establishment of a REIT
subsidiary is expected to allow The Park Avenue Bank to increase the effective
yield on its real estate related assets and residential mortgage loan portfolios
by transferring a portion of those assets and loans to an entity that receives
favorable tax treatment.  At December 31, 1999, The Park Avenue Bank had
approximately $242.9 million in assets and approximately $195.7 million in
deposits.

                                       3
<PAGE>

     The Valdosta Chamber of Commerce estimates the current population of
Valdosta to be approximately 50,000 and the population of Lowndes County to be
approximately 100,000.  Valdosta is the county seat of Lowndes County and is
approximately 18 miles north of the Georgia-Florida border.

     Farmers & Merchants

     Farmers & Merchants commenced operations in 1947 as a state-chartered
commercial bank.  The main office of the bank is located in Adel, Georgia.  At
December 31, 1999, Farmers & Merchants had approximately $56.6 million in assets
and approximately $41.9 million in deposits.

     The Cook County Chamber of Commerce estimates the current population of
Adel to be approximately 5,000 and the population of Cook County to be
approximately 14,700.  Adel is approximately 25 miles north of Valdosta,
Georgia.

     First Community

     First Community was chartered in 1934 as a federal mutual savings and loan
association.  In June 1990, the bank was converted from a federal mutual savings
and loan association to a federal stock savings bank through the sale and
issuance of common stock.  First Community today is a state-chartered commercial
bank, with its main office located in Bainbridge, Georgia.  The bank has a
branch office in Bainbridge, as well as a branch office in Cairo, Georgia.
First Community owns 50% of the issued and outstanding capital stock of Empire
Financial Services, Inc., an originator and servicer of commercial real estate
loans.  In 1999, First Community formed FCB Holdings, Inc., a holding company,
and FCB Investments, Inc., a REIT.  Like those established by The Park Avenue
Bank, these companies were established to allow First Community to increase the
effective yield on its real estate related assets and residential mortgage loan
portfolios.  At December 31, 1999, First Community had approximately $168.5
million in assets and approximately $130.9 million in deposits.

     The Decatur County Chamber of Commerce estimates the current population of
Bainbridge to be approximately 11,000 and the population of Decatur County to be
approximately 26,217.  Bainbridge is approximately 90 miles west of Valdosta,
Georgia.

     Eagle Bank and Trust

     Eagle Bank and Trust commenced operations in 1991 as a state-chartered
commercial bank.  The main office of the bank is located in Statesboro, Georgia.
The bank also has two branch offices in Statesboro.  At December 31, 1999, Eagle
Bank and Trust had approximately $83.9 million in assets and approximately $69.9
million in deposits.

     The Bulloch County Chamber of Commerce estimates the current population of
Statesboro be approximately 22,000 and the population of Bulloch County to be
approximately 52,000.  Statesboro is approximately 155 miles northeast of
Valdosta, Georgia.

     Baxley

     Baxley was chartered in 1934 as a federal mutual savings and loan
association.  In June 1991, the bank was converted from a federal mutual savings
and loan association to a federal stock savings bank through the sale and
issuance of common stock.  The main office of the bank is located in Baxley,
Georgia.  The bank also has a branch office in Hazlehurst, Georgia.  At December
31, 1999, Baxley had approximately $111.2 million in assets and approximately
$91.0 million in deposits.

     The Appling County Chamber of Commerce estimates the current population of
Baxley to be approximately 5,000 and the population of Appling County to be
approximately 16,500.  Baxley is approximately 90 miles northeast of Valdosta,
Georgia.

                                       4
<PAGE>

Banking Services and Operations

     Each of the Company's four commercial banking subsidiaries offer a full
range commercial banking services to individuals, professionals and business
customers in their respective primary service areas.  These services include
personal and business checking accounts and savings and other types certificates
of deposit.  The Park Avenue Bank issues credit cards and acts as a merchant
depository for cardholder drafts under both VISA/(R)/ and MasterCard/(R)/. Eagle
Bank and Trust provides credit cards in association with The Bankers Bank and
acts as a merchant depository for cardholder drafts under both VISA/(R)/ and
MasterCard/(R)/.  The Company's commercial banking subsidiaries offer night
depository and bank-by-mail services and sell bank drafts and travelers checks
(issued by an independent entity).  These commercial banking subsidiaries do not
presently offer trust and fiduciary services.

     Baxley, the Company's thrift subsidiary, also offers checking accounts,
savings accounts and certificates of deposit to customers in its primary
service.  Baxley invests these deposits primarily in adjustable rate mortgages
("ARMs") secured by one to four family residences and commercial real estate.
Baxley does not offer trust and fiduciary services.

     The principal sources of income for the Banks are interest and fees
collected on loans and interest on investment securities.  The principal
expenses of the Banks are interest paid on savings deposits, interest paid on
other borrowings by the Banks, employee compensation, office expenses, and other
operating expenses.

Lending

     The Banks seek to attract deposits from the general public and use such
deposits, together with borrowings and other sources of funds, to originate and
purchase loans.  Each of the Company's commercial banking subsidiaries offer a
full range of short and medium commercial, consumer and real estate loans.
Commercial lending activities are directed principally toward businesses whose
demand for funds falls within the respective Bank's lending limits. Consumer
lending has been oriented primarily to the needs of the respective commercial
bank's customers for such purposes as home remodeling, education and
automobiles.  Real estate lending is oriented toward construction loans and
short-term commercial loans.  Each commercial bank also originates fixed and
variable-residential and other mortgage loans for its own account.  Baxley, the
Company's thrift subsidiary, principally originates and underwrites ARMs secured
by one to four family residences.  Baxley also originates and underwrites
consumer, commercial real estate and residential construction loans, all
primarily for retention in its portfolio.  To a lesser extent, Baxley originates
long-term, fixed rate one to four family residential mortgages.  The lending
policies and procedures of Baxley, as well as each of the commercial banks are
established and periodically reviewed by each Bank's Board of Directors.

     The Park Avenue Bank's loan portfolio totaled $182.7 million at December
31, 1999, which was comprised of approximately 49.82% commercial loans,
commercial real estate and agri-business loans, 17.03% consumer loans, 24.47%
residential real estate mortgage loans and 8.68% construction loans.  The Park
Avenue Bank's loan to deposit ratio at December 31, 1999 was approximately
93.31%.

     Farmers & Merchants' loan portfolio totaled $40.0 million at December 31,
1999, which was comprised of approximately 60.44% commercial loans, commercial
real estate and agri-business loans, 10.52% consumer loans, 24.01% residential
real estate mortgage loans and 5.03% construction loans.  Farmers & Merchants'
loan to deposit ratio at December 31, 1999 was approximately 95.63%.

     First Community's loan portfolio totaled $118.2 million at December 31,
1999, which was comprised of approximately 31.57% residential real estate
mortgage loans, 48.06% commercial loans, commercial real estate and agri-
business loans, 13.10% consumer loans and 7.27% construction loans.  First
Community's loan to deposit ratio at December 31, 1999 was approximately 90.27%.

                                       5
<PAGE>

     Eagle Bank and Trust's loan portfolio totaled $61.9 million at December 31,
1999, which was comprised of approximately 34.96% residential real estate
mortgage loans, 34.39% commercial loans, commercial real estate and agri-
business loans, 8.37% consumer loans and 22.28% construction loans.  Eagle Bank
and Trust's loan to deposit ratio at December 31, 1999 was approximately 88.54%.

     Baxley's loan portfolio totaled $91.7 million at December 31, 1999, which
was comprised of approximately 88.50% single family mortgage loans, 5.58%
commercial real estate loans, .61% commercial business loans and 5.31% consumer
loans.  Baxley's loan to deposit ratio of December 31, 1999 was approximately
100.73%.

Deposits

     Checking, savings, money market accounts, and other time deposits are the
principal sources of the Banks' funds for loans and investments.  Most of the
Banks' deposits are obtained from individuals and small businesses.  At December
31, 1999, The Park Avenue Bank had deposits of approximately $195.7 million,
Farmers & Merchants had deposits of approximately $41.9 million, First Community
had deposits of approximately $130.9 million, Eagle Bank and Trust had deposits
of approximately $69.9 million and Baxley had deposits of approximately $91.0
million.

     The Banks seek to attract new deposits by paying rates of interest on
certificates of deposit and money market accounts which are competitive in their
respective primary service areas.  The Banks generally do not pay brokers'
commissions in connection with the obtaining of deposits.

Asset and Liability Management

     The primary assets of each Bank consist of its loan portfolio and
investment account.  Consistent with the requirements of prudent banking
necessary to maintain liquidity, management seeks to match maturities and rates
of loans and the investment portfolio with those of deposits, although exact
matching generally is not possible. Management seeks to invest the largest
portion of each of the commercial banks' assets in commercial and agri-business,
consumer and residential real estate loans.  The largest portion of Baxley's
assets are invested in residential mortgage loans.  Each Bank anticipates that
loans will be limited to approximately 75% to 85% of deposits, capital funds and
other borrowings.  The Company anticipates that each Bank's investment account
will consist primarily of marketable securities of the United States government,
federal agencies and state and municipal governments, generally with varied
maturities.

     The investment policy of each Bank provides for a portfolio divided among
issues purchased to meet one or more of the following objectives:  (i) to
complement strategies developed in assets/liquidity management, including
desired liquidity levels; (ii) to maximize after tax income from funds not
needed for day-to-day operations and loan demands; and (iii) to provide
collateral necessary for acceptance of public funds.  Management anticipates
that this policy will allow each Bank to deal with seasonal deposits
fluctuations and to provide for basic liquidity consistent with the Bank's loan
demand.  When possible, maturation will match anticipated liquidity demands.
Longer term securities may be selected for a combination of yield and exemption
from federal income taxation when appropriate.

     Deposit accounts are expected to represent the majority of the liabilities
of the Banks.  These will include transaction accounts, savings accounts, time
deposits and certificates of deposit.

     The Banks derive their income principally from interest charged on loans
and, to a lesser extent, from interest earned on investments, from fees received
in connection with the origination of loans and from other services. The Banks'
principal expenses are anticipated to be interest expense on deposits and
operating expenses. The funds for such activities are provided principally by
operating revenues, deposit growth, purchase of federal funds from other banks,
repayment of outstanding loans and sale of loans and investment securities.

                                       6
<PAGE>

Nonbanking Activities

     PAB Financial commenced operations in the fourth quarter of 1999 as an
operating subsidiary of the Company. PAB Financial provides agency transactional
services for customer investments as permitted under the regulations of the
Federal Reserve.  PAB Financial provides its customers with securities brokerage
services, including securities execution services on national securities
exchanges.  PAB Financial's brokerage activities are restricted to buying and
selling securities solely as an agent for the account of its customers, and do
not include underwriting or dealing in securities.  In addition, PAB Financial
is permitted to act as an agent for the private placement of securities in
accordance with federal securities laws.  PAB Financial also provides investment
advisory services to its customers, such as furnishing general economic
information and investment advice, and providing instructional materials for
customers on individual financial management matters.

Supervision and Regulation

     General

     The following discussion summarizes material elements of the federal and
state regulatory framework applicable to commercial banks, federal savings
banks, and bank holding companies.  Such discussion is qualified in its entirety
by reference to applicable federal and state statutes and regulations.
Furthermore, the statutes and regulations affecting the Company and the Banks
may change after the date of this Annual Report on Form 10-K, and any such
changes may have a material adverse effect on the Company or the Banks.

     Regulation of the Company

     The Company is a bank holding company registered with the Federal Reserve
Board and the Georgia Department under the federal Bank Holding Company Act of
1956 (the "BHC Act") and the Financial Institutions Code of Georgia (the
"FICG").  As such, the Company is subject to the supervision, examination, and
reporting requirements of the BHC Act and the FICG, and the regulations of the
Federal Reserve and the Georgia Department.

     The BHC Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before: (i) it may acquire direct or indirect
ownership or control of any voting shares of any bank if, after such
acquisition, the bank holding company will directly or indirectly own or control
more than 5% of the voting shares of the bank; (ii) it or any of its
subsidiaries, other than a bank, may acquire all or substantially all the assets
of any bank; or (iii) it may merge or consolidate with any other bank holding
company.  Similar federal statutes require a savings and loan holding company to
obtain prior approval of the Office of Thrift Supervision (the "OTS") before
acquiring direct or indirect ownership or control of a savings bank or savings
association.

     The BHC Act further provides that the Federal Reserve may not approve any
transaction that would result in monopoly or would be in furtherance of any
combination or conspiracy to monopolize or attempt to monopolize the business of
banking in any section of the United States, or the effect of which may be
substantially to lessen competition or to tend to create a monopoly in any
section of the United States, or that in any other manner would be a restraint
of trade, unless the anticompetitive effects of the proposed transaction are
clearly outweighed by the public interest in meeting the convenience and needs
of the community to be served.  The Federal Reserve is also required to consider
the financial and managerial resources and future prospects of the bank holding
companies and banks concerned and the convenience and needs of the community to
be served.  Consideration of financial resources generally focuses on capital
adequacy, which is discussed below.

     Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994 ("Riegle-Neal"), the restrictions on interstate acquisitions of banks by
bank holding companies were repealed.  As a result, the Company, and any other
bank holding company located in Georgia is able to acquire a bank located in any
other state, and a bank holding company located outside of Georgia can acquire
any Georgia-based bank, in either case subject to certain deposit percentage and
other restrictions.  The legislation provides that unless an individual state
has elected to prohibit out-of-state banks from operating interstate branches
within its territory, adequately capitalized and managed bank holding companies
will be able to consolidate their multistate banking operations into a single
bank subsidiary and to branch interstate through acquisitions.  De novo
branching by an out-of-state bank is permitted only if it is expressly permitted
by  the laws of the host state.  Georgia does not permit de novo branching by an
out-

                                       7
<PAGE>

of-state bank.  Therefore, the only method by which an out-of-state bank or
bank holding company may enter Georgia is through an acquisition. Georgia has
adopted an interstate banking statute that removes the existing restrictions on
the ability of banks to branch interstate through mergers, consolidations and
acquisitions.

     The provisions of Riegle-Neal and Georgia's restrictions on branching are
not applicable to a federal savings banks, such as Baxley.  Under OTS
regulations, any federal savings bank may open a branch office in any state
within the United States, subject to OTS approval.

     The BHC Act has generally prohibited a bank holding company from engaging
in activities other than banking or managing or controlling banks or other
permissible subsidiaries and from acquiring or retaining direct or indirect
control of any company engaged in any activities other than those determined by
the Federal Reserve to be closely related to banking or managing or controlling
banks as to be a proper incident thereto.  Provisions of the Gramm-Leach-Bliley
Act of 1999, discussed below, have expanded the permissible activities of a bank
holding company and its subsidiaries.  In determining whether a particular
activity is permissible, the Federal Reserve must consider whether the
performance of such an activity can be reasonably expected to produce benefits
to the public, such as a greater convenience, increased competition, or gains in
efficiency, that outweigh possible adverse effects such as undue concentration
of resources, decreased or unfair competition, conflicts of interest, or unsound
banking practices.

     Gramm-Leach-Bliley Act of 1999

     On November 12, 1999, President Clinton signed into law the Gramm-Leach-
Bliley Act of 1999 (the "GLB Act") which makes major changes to the statutory
framework for providing banking and other financial services in the United
States.  The GLB Act, among other things, repeals the provisions of the Glass-
Steagall Act which prohibited affiliations of commercial banks and securities
underwriting firms.  In addition, the GLB Act amends the BHC Act to allow for
the affiliation of commercial banks and insurance underwriting companies.

     The GLB Act amends the BHC Act to allow for a holding company structure
that engages in a full range of financial activities through a new entity known
as a "financial holding company."  A financial holding company may engage in not
only banking, securities, and insurance activities, but also merchant banking
and additional activities that the Federal Reserve, in consultation with the
Department of the Treasury, determines to be financial in nature, or activities
that are incidental or complimentary to such financial activities and that do
not pose a substantial risk to the safety and soundness of the holding company
or its banking subsidiaries.  In order for a bank holding company to become
affiliated with securities and insurance firms, the bank holding company must
become a financial holding company.  To become a financial holding company, a
bank holding company must file a declaration with the Federal Reserve, electing
to engage in activities permissible for financial holding companies and must
certify that it is eligible to do so because all of its insured depository
institution subsidiaries are well-capitalized and well-managed.  In addition,
the Federal Reserve must also determine that each insured depository institution
subsidiary of the bank holding company has at least a "satisfactory" rating
under the Community Reinvestment Act.

     The GLB Act is considered to be one of the most significant banking laws
since Depression-era statutes were enacted.  The Company does not believe that
the GLB Act will have a material adverse impact on the Company's operations.
However, to the extent that it allows banks, securities firms, and insurance
firms to affiliate, the financial services industry may experience further
consolidation.  The GLB Act may have the result of increasing the amount of
competition that the Company faces from larger institutions and other companies
offering financial products and services, many of which may have substantially
more financial resources than the Company.

     Regulation of the Banks

     Each of the Banks is a member of the FDIC, and as such, its deposits are
insured to the maximum extent provided by law.  Each of the Banks are also
subject to numerous state and federal statutes and regulations that affect their
business, activities and operations and each is supervised and examined by one
or more state or federal bank regulatory agencies.

                                       8
<PAGE>

     The Company's four commercial bank subsidiaries, The Park Avenue Bank,
Farmers & Merchants, First Community and Eagle Bank and Trust are subject to
regulation, supervision and examination by the FDIC and the Georgia Department.
The Federal Reserve and the Georgia Department regularly examine the operations
of the Company's commercial banks and are given authority to approve or
disapprove mergers, consolidations, the establishment of branches, and similar
corporate actions.  The Federal Reserve, FDIC and the Georgia Department also
have the power to prevent the continuance or development of unsafe or unsound
banking practices or other violations of the law.

     Baxley, a federal savings bank, is subject to regulation, supervision and
examination by the OTS.  The OTS regularly examines the operations of Baxley and
is given authority to approve or disapprove mergers, consolidations, the
establishment of branches, and similar corporate actions.  Baxley is a member of
the Savings Association Insurance Fund ("SAIF") and its deposits are insured by
the FDIC to the maximum extent provided by law.  As a result, the FDIC has
certain regulatory and examination authority over Baxley.  Baxley is also
subject to reserve requirements promulgated by the Federal Reserve.  Baxley is
subject to the provisions of the Federal Home Loan Bank Act (the "FHLB Act") and
the Home Owners Loan Act (the "HOLA").  Under the FHLB Act, all federal savings
banks are required to be members of the Federal Home Loan Bank System, until May
12, 2000 when membership becomes voluntary.   In addition, the HOLA requires all
federal savings banks to meet a qualified thrift lender ("QTL") test to avoid
certain restrictions on their operations.   A federal savings bank that fails to
meet the QTL test must convert to a national bank or limit its new investments
and activities to those permissible for a national bank.

     Payment of Dividends

     The Company is a legal entity separate and distinct from its subsidiaries.
The principal sources of revenues to the Company, including cash flow to pay
dividends to its shareholders, are dividends from the Banks.  There are
statutory and regulatory limitations on the payment of dividends by the Banks,
as well as by the Company to its shareholders.

     If, in the opinion of a federal banking regulator, a depository institution
under its jurisdiction is engaged in or is about to engage in an unsafe or
unsound practice (which, depending on the financial condition of the depository
institution could include the payment of dividends), such regulator may require,
after notice and hearing, that such institution cease and desist from such
practice.  The federal banking regulators have indicated that paying dividends
that deplete a depository institution's capital base to an inadequate level
would be unsafe and unsound banking practice. Under the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA"), a depository
institution may not pay any dividend if payment would cause it to become
undercapitalized or if it already is undercapitalized. Moreover, the federal
banking regulators have issued policy statements that provide that bank holding
companies and insured banks should generally only pay dividends out of current
operating earnings.  The payment of dividends by the Company and its banking
subsidiaries may also be affected or limited by other factors, such as the
requirement to maintain adequate capital above regulatory guidelines.

     Federal savings banks, such as Baxley, are subject to additional
restrictions on the payment of dividends.  Prior to April 1, 1999, a federal
savings bank was required to provide 30 days advance notice to the OTS before
declaring a dividend.  Under OTS regulations that became effective on April 1,
1999, a savings bank that would remain adequately capitalized following payment
of a dividend, and that meets other specified requirements, is not required to
file a notice or application for the payment of a dividend below specified
amounts.  Only undistributed net income for the prior two years may be
distributed, in addition to the current year's undistributed net income, unless
a notice and application is filed with the OTS.  In addition to the notice
requirement for certain dividend payments, Baxley may not declare or pay a cash
dividend if the effect thereof would be to reduce the regulatory capital of
Baxley below the amount required for the liquidation account established
pursuant to Baxley's conversion from a mutual to stock association.

     Capital Adequacy

     The Company is required to comply with capital adequacy standards
established by the Federal Reserve. Each of the Banks are required to comply
with capital adequacy standards established by their primary federal banking
regulator.  There are two basic measures of capital adequacy for bank holding
companies that have been

                                       9
<PAGE>

promulgated by the Federal Reserve: (i) a risk-based measure, and (ii) a
leverage measure. All applicable capital standards must be satisfied for a bank
holding company to be considered in compliance.

     The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profile among banks and bank
holding companies, to account for off-balance-sheet exposure, and to minimize
disincentives for holding liquid assets.  Assets and off-balance-sheet items are
assigned to broad risk categories, each with appropriate weights.  The resulting
capital ratios represent capital as a percentage of total risk-weighted assets
and off-balance-sheet items.

     The minimum guideline for the ratio (the "Total Risk-Based Capital Ratio")
of total capital ("Total Capital") to risk-weighted assets (including certain
off-balance-sheet items, such as standby letters of credit) is 8%.  At least
half of Total Capital must be comprised of common stock, minority interests in
the equity accounts of consolidated subsidiaries, noncumulative perpetual
preferred stock, and a limited amount of cumulative perpetual preferred stock,
less goodwill and certain other intangible assets ("Tier I Capital").  The
remainder may consist of subordinated debt, other preferred stock, and a limited
amount of loan loss reserves ("Tier II Capital").  At December 31, 1999, the
Company's consolidated Total Risk-Based Capital Ratio and its Tier I Risk-Based
Capital Ratio (i.e., the ratio of Tier I Capital to risk-weighted assets) were
15.0% and 14.0 % respectively.

     In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies.  These guidelines provide for a minimum
ratio (the "Leverage Ratio") of Tier I Capital to average assets, less goodwill
and certain other intangible assets, of 3% for bank holding companies that meet
certain specified criteria, including those having the highest regulatory
rating.  All other bank holding companies generally are required to maintain a
Leverage Ratio of at least 3%, plus an additional cushion of 100 to 200 basis
points.  The Company's Leverage Ratio at December 31, 1999 was 11.8%.  The
guidelines also provide that bank holding companies experiencing internal growth
or making acquisitions will be expected to maintain strong capital positions
substantially above the minimum supervisory levels without significant reliance
on intangible assets.  Furthermore, the Federal Reserve has indicated that it
will consider a "Tangible Tier I Capital Leverage Ratio" (deducting all
intangibles) and other indicia of capital strength in evaluating proposals for
expansion or new activities.

     The Banks are subject to risk-based and leverage capital requirements
adopted by their federal banking regulator, which are substantially similar to
those adopted by the Federal Reserve for bank holding companies.

     Each of the Banks was in compliance with applicable minimum capital
requirements as of December 31, 1999. The Company has not been advised by any
regulator of any specific minimum capital ratio requirement applicable to it or
any Bank.

     Failure to meet capital guidelines could subject a bank to a variety of
enforcement remedies, including issuance of a capital directive, the termination
of deposit insurance by the FDIC, a prohibition on the taking of brokered
deposits, and certain other restrictions on its business.  As described below,
substantial additional restrictions can be imposed upon FDIC-insured depository
institutions that fail to meet applicable capital requirements.

     Prompt Corrective Action

     FDICIA establishes a system of prompt corrective action to resolve the
problems of undercapitalized institutions.  Under this system the federal
banking regulators are required to establish five capital categories (well
capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized) and to take certain mandatory
supervisory actions, and are authorized to take other discretionary actions,
with respect to institutions in the three undercapitalized categories, the
severity of which will depend upon the capital category in which the institution
is placed.  Generally, subject to a narrow exception, FDICIA requires the
banking regulator to appoint a receiver or conservator for an institution that
is critically undercapitalized.  The federal banking regulators have specified
by regulation the relevant capital level for each category.

     Under the final agency rules implementing the prompt corrective action
provisions, an institution that (i) has a Total Risk-Based Capital Ratio of 10%
or greater, a Tier I Risk-Based Capital Ratio of 6% or greater, and a Leverage
Ratio of 5% or greater and (ii) is not subject to any written agreement, order,
capital directive, or prompt

                                       10
<PAGE>

corrective action directive issued by the appropriate federal banking regulator
is deemed to be well capitalized. An institution with a total Risk-Based Capital
Ratio of 8% or greater, a Tier I Risk-Based Capital Ratio of 4% or greater, and
a Leverage Ratio of 4% or greater is considered to be adequately capitalized. A
depository institution that has a Total Risk-Based Capital Ratio of less than
8%, a Tier I Risk-Based Capital Ratio of less than 4%, or a Leverage Ratio of
less than 4% is considered to be undercapitalized. A depository institution that
has a Total Risk-Based Capital Ratio of less than 6%, a Tier I Risk-Based
Capital Ratio of less than 3%, or a Leverage Ratio of less than 3% is considered
to be significantly undercapitalized, and an institution that has a tangible
equity capital to assets ratio equal to or less than 2% is deemed to be
critically undercapitalized. For purposes of the regulation, the term "tangible
equity" includes core capital elements counted as Tier I Capital for purposes of
the risk-based capital standards, plus the amount of outstanding cumulative
perpetual preferred stock (including related surplus), minus all intangible
assets with certain exceptions. A depository institution may be deemed to be in
a capitalized category that is lower than is indicated by its actual capital
position if it receives an unsatisfactory examination rating.

     An institution that is categorized as undercapitalized, significantly
undercapitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking
regulator. Under FDICIA, a bank holding company must guarantee that a subsidiary
depository institution meets its capital restoration plan, subject to certain
limitations.  The obligation of a controlling holding company under FDICIA to
fund a capital restoration plan is limited to the lesser of 5% of an
undercapitalized subsidiary's assets or the amount required to meet regulatory
capital requirements.  An undercapitalized institution is also generally
prohibited from increasing its average total assets, making acquisitions,
establishing any branches, or engaging in any new line of business, except in
accordance with an accepted capital restoration plan or with the approval of the
FDIC.  In addition, the appropriate federal banking regulator is given authority
with respect to any undercapitalized depository institution to take any of the
actions it is required to or may take with respect to a significantly
undercapitalized institution as described below if it determines "that those
actions are necessary to carry out the purpose" of FDICIA.

     For those institutions that are undercapitalized or significantly
undercapitalized and either fail to submit an acceptable capital restoration
plan or fail to implement an approved capital restoration plan, the appropriate
federal banking regulator must require the institution to take one or more of
the following actions:  (i) sell enough shares, including voting shares, to
become adequately capitalized; (ii) merge with (or be sold to) another
institution (or holding company), but only if grounds exist for appointing a
conservator or receiver; (iii) restrict certain transactions with banking
affiliates as if the "sister bank" exception to the requirements of Section 23A
of the Federal Reserve Act did not exist; (iv) otherwise restrict transactions
with bank or non-bank affiliates; (v) restrict interest rates that the
institution pays on deposits to "prevailing rates" in the institution's
"region;" (vi) restrict asset growth or reduce total assets; (vii) alter,
reduce, or terminate activities; (viii) hold a new election of directors; (ix)
dismiss any director or senior executive officer who held office for more than
180 days immediately before the institution became undercapitalized, provided
that in requiring dismissal of a director or senior officer, the regulator must
comply with certain procedural requirements, including the opportunity for an
appeal in which the director or officer will have the burden of proving his or
her value to the institution; (x) employ "qualified" senior executive officers;
(xi) cease accepting deposits from correspondent depository institutions; (xii)
divest certain nondepository affiliates which pose a danger to the institution;
or (xiii) be divested by a parent holding company.  In addition, without the
prior approval of the appropriate federal banking regulator, a significantly
undercapitalized institution may not pay any bonus to any senior executive
officer or increase the rate of compensation for such officer.

     At December 31, 1999, each Bank had the requisite capital levels to qualify
as "well capitalized."

     Support of Subsidiary Institutions

     Under Federal Reserve policy, the Company is expected to act as a source of
financial strength for, and to commit resources to support each of its banking
subsidiaries.  This support may be required at times when, absent such Federal
Reserve policy, the Company may not be inclined to provide it.  In addition, any
capital loans by a bank holding company to any of its banking subsidiaries are
subordinate in right of payment to deposits and to certain other indebtedness of
such banks.  In the event of a bank holding company's bankruptcy, any commitment
by the bank holding company to a federal bank regulatory agency to maintain the
capital of a banking subsidiary will be assumed by the bankruptcy trustee and
entitled to a priority of payment.

                                       11
<PAGE>

     Under the Federal Deposit Insurance Act ("FDIA"), a depository institution
insured by the FDIC can be held liable for any loss incurred by, or reasonably
expected to be incurred by, the FDIC in connection with (i) the default of a
commonly controlled FDIC-insured depository institution or (ii) any assistance
provided by the FDIC to any commonly controlled FDIC-insured depository
institution "in danger of default."  "Default" is defined generally as the
appointment of a conservator or receiver, and "in danger of default" is defined
generally as the existence of certain conditions indicating that a default is
likely to occur in the absence of regulatory assistance.  The FDIC's claim for
damages is superior to claims of shareholders of the insured depository
institution or its holding company, but is subordinate to claims of depositors,
secured creditors, and holders of subordinated debt (other than affiliates) of
the commonly controlled insured depository institution.  As a result, any loss
suffered by the FDIC in respect of any of these subsidiaries would likely result
in assertion of the cross-guarantee provisions, the assessment of such estimated
losses against the depository institution's banking affiliates, and a potential
loss of the investment in such other subsidiary depository institution.

     FDIC Insurance Assessments

     Pursuant to FDICIA, the FDIC adopted risk-based assessment system for
insured depository institutions that takes into account the risks attributable
to different categories and concentrations of assets and liabilities.  The
system assigns an institution to one of three capital categories:  (i) well
capitalized; (ii) adequately capitalized; and (iii) undercapitalized.  These
three categories are substantially similar to the prompt corrective action
categories described above, with the "undercapitalized" category including
institutions that are undercapitalized, significantly undercapitalized, and
critically undercapitalized for prompt corrective action purposes.  An
institution is also assigned by the FDIC to one of three supervisory subgroups
within each capital group.  An institution's insurance assessment rate is then
determined based on the capital category and supervisory category to which it is
assigned. Under the final risk-based assessment system, there are nine
assessment risk classifications (i.e., combinations of capital groups and
supervisory subgroups) to which different assessment rates are applied.
Assessments range from 0 to 27 cents per $100 of deposits, depending on the
institution's capital group and supervisory subgroup.

     Under the FDIA, insurance of deposits may be terminated by the FDIC upon a
finding that the institution has engaged in unsafe and unsound practices, is in
an unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, rule, order, or condition imposed by the FDIC.

     Safety and Soundness Standards

     The FDIA, as amended by FDICIA and the Riegle Community Development and
Regulatory Improvement Act of 1994, requires the federal bank regulatory
agencies to prescribe standards, by regulations or guidelines, relating to
internal controls, information systems and internal audit systems, loan
documentation, credit underwriting, interest rate risk exposure, asset growth,
asset quality, earnings, stock valuation and compensation, fees and benefits,
and such other operational and managerial standards as the agencies deem
appropriate.  The federal bank regulatory agencies have adopted a set of
guidelines prescribing safety and soundness standards pursuant to FDICIA, as
amended.  The guidelines establish general standards relating to internal
controls and information systems, internal audit systems, loan documentation,
credit underwriting, interest rate exposure, asset growth and compensation,
fees, and benefits.  In general, the guidelines require, among other things,
appropriate systems and practices to identify and manage the risks and exposures
specified in the guidelines.  The guidelines prohibit excessive compensation as
an unsafe and unsound practice and describe compensation as excessive when the
amounts paid are unreasonable or disproportionate to the services performed by
an executive officer, employee, director, or principal shareholders.  The
federal banking agencies determined that stock valuation standards were not
appropriate.  In addition, the agencies adopted regulations that authorize, but
do not require an agency to order an institution that has been given notice by
an agency that it is not satisfying any of such safety and soundness standards
to submit a compliance plan.  If, after being so notified, an institution fails
to submit an acceptable compliance plan or fails in any material respect to
implement an accepted compliance plan, the agency must issue an order directing
action to correct the deficiency and may issue an order directing other actions
of the types to which an undercapitalized association is subject under the
"prompt corrective action" provisions of FDICIA.  If an institution fails to
comply with such an order, the agency may seek to enforce such order in judicial
proceedings and to impose civil money penalties.  The federal bank regulatory
agencies also proposed guidelines for asset quality and earnings standards.

                                       12
<PAGE>

     Community Reinvestment Act

     Under the Community Reinvestment Act ("CRA") each of the Banks, as an FDIC
insured institution, has a continuing and affirmative obligation to help meet
the credit needs of its entire community, including low- and moderate-income
neighborhoods, consistent with safe and sound banking practices.  The CRA
requires the appropriate federal regulator, in connection with its examination
of an insured institution, to assess the institution's record of meeting the
credit needs of its community and to take such record into account in its
evaluation of certain applications, such as applications for a merger or the
establishment of a branch.  An unsatisfactory rating may be used as the basis
for the denial of an application by the federal banking regulator.  Each of the
Banks received a satisfactory rating in its last CRA examination.

Competition

     The Banks experience competition in attracting and retaining business and
personal checking and savings accounts and in making commercial, consumer and
real estate loans in their respective primary service area.  Direct competition
for such accounts comes from other commercial banks, savings institutions,
credit unions, brokerage firms and money market funds.  The primary factors in
competing for loans are interest rates, loan origination fees and the range of
lending services offered.  The competition for origination of loans normally
comes from other commercial banks, savings institutions, credit unions and
mortgage banking firms.  Such entities may have competitive advantages as a
result of greater resources and higher lending limits (by virtue of greater
capitalization) or being subject to different regulations.

     In order to compete with other financial institutions in their respective
primary service areas, each Bank relies principally upon personal contacts of
their officers and directors, and upon local advertising and promotional
activities, to attract potential customers with the personalized and wide range
of financial services offered by an independent, locally-owned and managed
financial institution.

Employees

     As of December 31, 1999, the Company employed 24 full-time and seven part-
time employees, while the Banks, collectively, employed 226 full-time and 23
part-time employees.  PAB Financial employed one full-time employee and no part-
time employees.  The Company, and each of its subsidiaries, considers its
relationships with its employees to be good.

ITEM 2.   DESCRIPTION OF PROPERTY.

     The Company's offices are located in The Park Avenue Bank's main office at
3102 North Oak Street Extension, Valdosta, Georgia 31602, and its telephone
number is (912) 241-2775.  Each of the Company's subsidiaries own all of their
office locations, as listed below.

The Park Avenue Bank's business is conducted at the following locations:

    . Main office - 3102 North Oak Street Extension, Valdosta, Georgia  31602;

    . Downtown branch - 124 West Hill Avenue, Valdosta, Georgia  31601;

    . Francis Lake Shopping Center branch - 1012 Lakes Blvd., Lake Park, Georgia
      31636; and

    . Baytree branch - 1517 Baytree Road, Valdosta, Georgia  31602

Farmers & Merchants' business is conducted at 301 West Fourth Street, Adel,
Georgia  31620.

First Community's business is conducted at the following locations:

    . Main office - 226 South Broad Street, Bainbridge, Georgia  31717;


                                       13
<PAGE>

    . Cairo branch - 800 N. Broad Street, Cairo, Georgia  31728;

    . Shotwell branch - 400 E. Shotwell Street, Bainbridge, Georgia  31717; and

    . Westside branch - 1510 Dothan Road, Bainbridge, Georgia 31717

Eagle Bank and Trust's business is conducted at the following locations:

    . Main office - 335 South Main Street, Statesboro, Georgia  30458; and

    . Northside Drive branch - 726 Northside Drive East, Statesboro,
      Georgia  30458

Baxley's business is conducted at the following locations:

    . Main office - 198 East Parker Street, Baxley, Georgia  31513; and

    . Hazlehurst branch - 100 East Jarmon Street, Hazlehurst, Georgia  31539

Baxley also owns and maintains a lake lodge in  Baxley, Georgia where management
work sessions take place and community groups meet.

PAB Financial's business is conducted at The Park Avenue Bank's main offices at
3102 North Oak Street Extension, Valdosta, Georgia,  31602.


ITEM 3. LEGAL PROCEEDINGS.

     Neither the Company, nor any of the Company's subsidiaries, is a party to
any pending legal proceedings, other than routine litigation incidental to each
Bank's business, which management believes would have a material effect upon the
operations or financial condition of the Company or its subsidiaries.


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

     None.

                                     PART II
                                     -------

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

     As of December 31, 1999 there were approximately 2,375 shareholders of
record of the Company's common stock.  Prior to July 9, 1996, there was no
established trading market for the Company's common stock. The Company's common
stock trades on the American Stock Exchange under the symbol "PAB."  The
following table shows the high and low prices for each quarter of the 1998 and
1999 fiscal year:

                                       14
<PAGE>

                                Sales Prices Per
                                  Share of PAB
                                  Common Stock
                              --------------------
                                High        Low
                              --------------------
1998
First Quarter                 $27.38       $11.75
Second Quarter                 23.75        20.00
Third Quarter                  23.38        18.13
Fourth Quarter                 21.50        17.25

1999
First Quarter                 $19.68       $15.38
Second Quarter                 17.38        14.63
Third Quarter                  19.00        13.00
Fourth Quarter                 18.25        13.25

     The Company has declared and paid cash dividends on its common stock since
1983 (its first full year of operations).  The Company paid cash dividends of
$0.275 per share ($1,997,476 in the aggregate) in the fiscal year 1998 and
$.3875 per share ($3,339,028 in the aggregate) in the fiscal year 1999.  Per
share amounts have been adjusted to reflect a two-for-one stock split in 1998.

     The primary source of funds available for the payment of cash dividends by
the Company is dividends from the Banks.  The ability of the Company's
commercial banks to pay dividends are subject to the provisions of the FICG and
the regulations of the Georgia Department.  The ability of Baxley to pay
dividends is subject to the provisions of the HOLA and the regulations of the
OTS.

     If, in the opinion of a federal banking regulator, a depository institution
under its jurisdiction is engaged in or is about to engage in an unsafe or
unsound practice (which, depending on the financial condition of the depository
institution could include the payment of dividends), such regulator may require,
after notice and hearing, that such institution cease and desist from such
practice.  The federal banking regulators have indicated that paying dividends
that deplete a depository institution's capital base to an inadequate level
would be unsafe and unsound banking practice.  Under the FDICIA, a depository
institution may not pay any dividend if payment would cause it to become
undercapitalized or if it already is undercapitalized.  Moreover, the federal
banking regulators have issued policy statements that provide that bank holding
companies and insured banks should generally only pay dividends out of current
operating earnings.  The payment of dividends by the Company and its banking
subsidiaries may also be affected or limited by other factors, such as the
requirement to maintain adequate capital above regulatory guidelines.

Recent Sales of Unregistered Securities

     Pursuant to the PAB Bankshares, Inc. 1994 Directors' Deferred Stock
Purchase Plan, directors of the Company and the Banks may elect to receive
Company common stock in lieu of cash compensation otherwise payable to the
directors for their service as members of the Board of Directors of the Company
and any Bank, or any committee thereof.  The table below sets forth the number
of shares of common stock the Company issued on January 15, 1999 in lieu of fees
payable in connection with meetings held in 1998.

                                       15
<PAGE>

<TABLE>
<CAPTION>

     Name                       Total Number of Shares of  Price per
                                      Common Stock           Share
                                -------------------------  ---------
<S>                             <C>                        <C>
     Walter W. Carroll, II              1,216               $12.06
     James L. Dewar, Jr.                1,139                12.06
     F. Ferrell Scruggs, Sr.            1,108                12.06
     D. Ramsay Simmons, Jr.               538                12.06
     Joe P. Singletary, Jr              1,218                12.06
     Charles O. Templeton                 406                12.06
     Kenneth Scruggs, Sr.                 397                12.06
     T. Lavelle Webb                      406                12.06
     David Brown                          304                12.06
     Joseph Durrenberger                  323                12.06
     W.F. Bozeman                         132                12.06
     Howard McClain                       256                12.06
     Larry Griner                         232                12.06
     Roger Watson                         182                12.06
     Fleming Williams                     190                12.06
     Raleigh Rollins                      323                12.06
     Ethridge Branch                      240                12.06
     Thompson Kurrie, Jr.                 893                12.06
                                        -----
                                        9,503
                                        =====
</TABLE>
     All of the shares of common stock were acquired by the directors described
above for investment purposes and with no present intention toward resale or
distribution thereof.  The sales were made without public solicitation, and the
stock certificates bear restrictive legends.  No underwriter was involved in the
transactions, and no commissions were paid.  As a result, each of the
transactions was exempt from registration under Section 4(2) of the Securities
Act of 1933, as amended.

                                       16
<PAGE>

ITEM 6.   SELECTED FINANCIAL DATA.

                            SELECTED FINANCIAL DATA
                 (Dollars in thousands, except per share data)
                 ---------------------------------------------

Operating Results:
-----------------
<TABLE>
<CAPTION>
                                                       YEARS ENDED DECEMBER 31,
                                         ----------------------------------------------------
                                           1999       1998       1997       1996       1995
                                         --------   --------   --------   --------   --------
<S>                                      <C>        <C>        <C>        <C>        <C>
Total revenues                           $ 55,555   $ 53,650   $ 48,823   $ 44,639   $ 40,787
                                         ========   ========   ========   ========   ========

Interest income                          $ 48,789     47,609     44,086     40,379     37,249
Interest expense                          (22,907)   (23,439)   (21,225)   (20,139)   (18,048)
                                         --------   --------   --------   --------   --------
Net interest income before
 provision for loan losses                 25,882     24,170     22,861     20,240     19,201
Provision for loan losses                    (985)      (903)      (793)      (633)      (593)
Securities gains (losses)                     (34)        11        (13)       131        127
Other income                                6,800      6,030      4,750      4,130      3,411
Depreciation and amortization              (1,769)    (1,545)    (1,501)    (1,371)    (1,226)
Merger related expenses                      (535)      (620)      (119)       -0-        -0-
SAIF assessment                               -0-        -0-        -0-       (878)       -0-
Other expenses                            (16,661)   (15,058)   (13,655)   (12,774)   (12,217)
                                         --------   --------   --------   --------   --------
Income before taxes                        12,698     12,085     11,530      8,845      8,703
Income taxes                               (4,005)    (4,098)    (4,022)    (3,012)    (2,896)
                                         --------   --------   --------   --------   --------
Net income                               $  8,693      7,987      7,508      5,833      5,807
                                         ========   ========   ========   ========   ========
Basic earnings per share:/(1)/
 Net income                              $    .90        .83        .79        .62        .61
 Merger related expenses                      .04        .04        .01        .00        .00
 SAIF assessment                              .00        .00        .00        .05        .00
 Depreciation and amortization                .12        .11        .10        .10        .09
                                         --------   --------   --------   --------   --------
 Cash earnings before merger expenses
  and SAIF assessment                    $   1.06        .98        .90        .77        .70
                                         ========   ========   ========   ========   ========
Diluted earnings per share:/(1)/
 Net income                              $    .89        .81        .78        .62        .61
 Merger related expenses                      .03        .04        .01        .00        .00
 SAIF assessment                              .00        .00        .00        .05        .00
 Depreciation and amortization                .12        .11        .10        .10        .09
                                         --------   --------   --------   --------   --------
Cash earnings before merger expenses
  and SAIF assessment                    $   1.04   $    .96   $    .89   $    .77   $    .70
                                         ========   ========   ========   ========   ========
Dividends per share/(1)/                 $  .3875   $   .275   $   .175   $   .135   $   .103
                                         ========   ========   ========   ========   ========

Financial Condition:
-------------------
                                                             DECEMBER 31,
                                         ----------------------------------------------------
                                           1999       1998       1997       1996       1995
                                         --------   --------   --------   --------   --------
Loans, net                               $489,380   $435,343   $404,909   $366,517   $327,206
Interest-bearing deposits                  11,716     11,913     10,985     14,350     11,348
Investments                                78,926    100,458     88,759     94,972     98,873
Federal funds sold and securities
 purchased under agreements to
 resell                                    21,405     16,405     16,248     17,559     10,992
Assets                                    664,969    620,111    572,172    535,102    492,636
Deposits                                  516,204    504,087    472,556    452,048    422,068
Federal funds purchased                     4,673      3,824        -0-        200        -0-
Advances from Federal Home
 Loan Bank                                 60,112     39,058     31,812     17,645      8,941
Other long-term indebtedness                  -0-        -0-      2,184      3,430      5,250
Other borrowed funds                        9,155      2,339      1,005        170        -0-
Stockholders' equity                       69,611     66,063     59,763     56,779     51,546
</TABLE>

                                       17
<PAGE>

<TABLE>
<CAPTION>
Asset Quality:
-------------
                                                             DECEMBER 31,
                                         ----------------------------------------------------
                                           1999       1998       1997       1996       1995
                                         --------   --------   --------   --------   --------
<S>                                      <C>        <C>        <C>        <C>        <C>
Foreclosed real estate                    $  763     $  438     $  440     $  371     $  443
Non-accrual loans                          2,395      1,567        825        730        356
Loans 90 days or more past due and
  still accruing                             465        199        178        265        722
                                          ------     ------     ------     ------     ------
Total non-performing assets and loans
  90 days or more past due                $3,623     $2,204     $1,443     $1,366     $1,521
                                          ======     ======     ======     ======     ======
</TABLE>
-------------------
/(1)/ Per share information has been adjusted to reflect a 2-for-1 stock split
     in 1996 and 1998.
/(2)/ All data for prior periods has been restated to reflect merger accounted
     for as pooling of interests occurring in 1999.

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS.

     This analysis has been prepared to provide insight into the consolidated
financial condition of the Company and to address the factors which the Company
believes have affected the Company's results of operations.  Unless otherwise
noted, the financial and other information presented with respect to the Company
in this discussion and elsewhere in this annual report generally includes the
accounts of the Banks.  The Company's consolidated financial statements and
accompanying notes which follow are an integral part of this review and should
be read in conjunction with it.

Results of Operations

     The Company, including operations of the Banks, reported consolidated net
income of $8,692,876 ($.90 and $.89 basic and diluted earnings per share) for
the year ended December 31, 1999 compared to $7,986,802 ($.83 and $.81 basic and
diluted earnings per share) for the year ended December 31, 1998 and $7,507,933
($.79 and $.78 basic and diluted earnings per share) for the year ended December
31, 1997.   Net interest income after provision for loan losses was $24,897,585,
$23,267,516 and $22,067,792 for the three years ended December 31, 1999, 1998,
and 1997, respectively.  The provision for loan losses was $985,188, $903,404
and $792,900 for the three years ended December 31, 1999, 1998 and 1997,
respectively. Non-interest income totaled $6,765,896, $6,040,789 and $4,736,800
for the three years ended December 31, 1999, 1998 and 1997, respectively and
non-interest expenses totaled $18,965,551, $17,223,579 and $15,274,680 for the
three years ended December 31, 1999, 1998 and 1997, respectively.

     During the three years ended December 31, 1999, the Company incurred merger
related expenses related to the mergers of Baxley Federal Savings Bank,
Investors Financial Corp. and Eagle Bancorp, Inc., all of which were accounted
for by the pooling of interests method of accounting.  These expenses aggregated
approximately $535,000 for 1999, $620,000 for 1998 and $119,000 for 1997.
Excluding the effects of these expenses, including related tax benefits, the
Company's earnings per share would have increased by of $.04 for 1999, $.04 for
1998 and $.01 for 1997. This would have resulted in basic and diluted earnings
per share of $.94 and $.92 for 1999, $.87 and $.85 for 1998 and $.80 and $.79
for 1997. Additionally, excluding the effects of depreciation and amortization,
including related tax benefits, the Company's earnings per share would have
increased by $.12 for 1999, $.11 for 1998 and $.10 for 1997. Combined with the
additional earnings associated with excluding the effects of merger expenses,
this would have resulted in basic and diluted earnings per share of $1.06 and
$1.04 for 1999, $.98 and $.96 for 1998 and $90 and $.89 for 1997.

     The following table summarizes the results of operations of the Company for
the three years ended December 31, 1999.
<TABLE>
<CAPTION>
                                           YEARS ENDED DECEMBER 31,
                                  -----------------------------------------
                                           (Dollars in thousands)
                                    1999            1998             1997
                                  -------         --------         --------
<S>                               <C>             <C>              <C>
Interest income                  $ 48,789         $ 47,609         $ 44,086
Interest expense                  (22,907)         (23,439)         (21,225)
                                 --------         --------         --------
Net interest income                25,882           24,170           22,861
Provision for loan losses            (985)            (903)            (793)
Non-interest income                 6,766            6,041            4,737
Other non-interest expense        (18,965)         (17,223)         (15,275)
                                 --------         --------         --------
Income before taxes                12,698           12,085           11,530
Income taxes                       (4,005)          (4,098)          (4,022)
                                 --------         --------         --------
 Net income                      $  8,693         $  7,987         $  7,508
                                 ========         ========         ========
</TABLE>
                                       18
<PAGE>

<TABLE>

                                                  YEARS ENDED DECEMBER 31,
                                          -----------------------------------------
                                            1999            1998             1997
                                          -------         --------         --------
<S>                                       <C>             <C>              <C>
Return on assets (net income divided
 by average total assets)                  1.35%            1.34%            1.36%

Return on equity (net income divided
 by average equity)                       12.81%           12.69%           12.88%

Dividend payout ratio (dividends
 declared per share divided by diluted
 net income per share)                    43.54%           33.95%           22.44%

Equity to assets ratio at December 31
 (average equity divided by average
 total assets)                            10.56%           10.55%           10.53%

Book value per share at December 31       $7.24            $6.88            $6.23

Net interest margin as percentage of
 average interest-earning assets           4.49%            4.40%            4.49%

Efficiency ratio, excluding
 merger expenses                          56.00%           54.37%           54.47%

Non-performing assets and loans
 90 days or more past due as
 percentage of total loans at
 December 31                                .73%             .50%             .35%
</TABLE>

Comparison of Years Ended December 31, 1999 and 1998


  Operations for the year ended December 31, 1999 resulted in net income of
approximately $8.7 million compared to a net income of approximately $8.0
million for the year ended December 31, 1998.

  Interest Income

  Total interest income increased approximately $1.2 million for 1999 compared
to 1998.  This increase is attributed to the factors explained in the following
paragraphs.

  Interest earned on loans increased from approximately $40.5 million in 1998 to
approximately $42.5 million in 1999, an increase of $2.0 million.  This increase
was the net effect of an increase in the average loan portfolio balance from
approximately $425.2 million in 1998 to $467.5 million in 1999 and a decrease in
the rate earned on the loan portfolio from 9.53% in 1998 to 9.08% in 1999.

  Interest earned on taxable investment securities decreased from approximately
$4.9 million in 1998 to approximately $4.8 million in 1999, a decrease of $.1
million.  This decrease was the net effect of a decrease in the average taxable
investment portfolio balance from approximately $85.3 million in 1998 to
approximately $81.4 million in 1999 and an increase in the rate earned on the
taxable investment portfolio from 5.77% in 1998 to 5.96% in 1999.

  Interest earned on nontaxable investment securities decreased from
approximately $316,000 in 1998 to approximately $249,000 in 1999, a decrease of
$97,000.  This decrease was the combined effect of a decrease in the average
non-taxable investment portfolio balance from approximately $7.5 million in 1998
to approximately $7.3 million in 1999 and a decrease in the rate earned on the
non-taxable investment portfolio from 4.20% in 1998 to 3.41% in 1999.

  Interest earned on interest-bearing deposits in banks increased from
approximately $456,000 in 1998 to approximately $606,000 in 1999, an increase of
$150,000.  This increase was the combined effect of an increase in the average
interest-bearing deposits balance from $11.4 million in 1998 to $11.8 million in
1999 and an increase in the rate earned on the interest-bearing deposits from
3.98% in 1998 to 5.13% in 1999.

  Interest earned on federal funds sold decreased from approximately $1.4
million in 1998 to approximately $.6 million in 1999, a decrease of $.8 million.
This decrease was the combined effect of a decrease in the average federal funds
sold balance from approximately $24.6 million in 1998 to approximately $11.9
million in 1999 and a decrease in the rate earned on the federal funds sold from
5.69% in 1998 to 5.25% in 1999.

                                       19
<PAGE>

  Interest Expense

  Total interest expense decreased approximately $.5 million in 1999 compared to
1998.  This decrease is attributed to the factors explained in the following
paragraphs.

  The decrease in total interest expense was the net effect of an increase in
the average balance of interest-bearing deposits from approximately $417.4
million in 1998 to approximately $441.7 million in 1999 and a decrease in the
average rate paid on deposits from 4.95% in 1998 to 4.51% in 1999.  The
Company's interest expense on interest-bearing deposits decreased $.8 million
from approximately $20.7 million for the year ended December 31, 1998 to
approximately $19.9 million for the year ended December 31, 1999.  The increase
in interest-bearing deposits came from the local communities served by the
Banks.

  All other interest expense consisting principally of interest on notes and
mortgages payable, increased from approximately $2.8 million for the year ended
December 31, 1998 to approximately $3.0 million for the year ended December 31,
1999, an increase of  $.2 million.  This increase was the net effect of an
increase in the average balance of Federal Home Loan Bank advances from
approximately $35.4 million in 1998 to approximately $49.6 million in 1999 and a
decrease in the average rate from 6.75% in 1998 to 5.06% in 1999.  These
advances were to match fund mortgage loans made.  Additionally, the Company had
a note payable to a correspondent bank which had a balance of approximately $2.2
million at December 31, 1997, which was repaid prior to maturity during the year
ended December 31, 1998.  As a result, interest on notes payable decreased from
approximately $152,000 for the year ended December 31, 1998 with no interest for
the year ended December 31, 1999, a decrease of $152,000.

  Interest of approximately $128,000 was paid on federal funds purchased during
the year ended December 31, 1998 and approximately $223,000 during the year
ended December 31, 1999, an increase of $95,000.  This increase was the net
effect of an increase in the average balance of federal funds purchased from
approximately $1.9 million for the year ended December 31, 1998 to approximately
$4.2 million for the year ended December 31, 1999 and a decrease in the average
rate paid from 6.70% for the year ended December 31, 1998 to 5.25% for the year
ended December 31, 1999.

  Interest of approximately $98,000 was paid on other borrowed funds during the
year ended December 31, 1998 and approximately $262,000 during the year ended
December 31, 1999, an increase of $164,000.  This represented interest expense
on sweep agreements.  This increase was the net effect of an increase in the
average balance of sweep agreements from approximately $1.7 million for the year
ended December 31, 1998 to approximately $5.7 million for the year ended
December 31, 1999 and a decrease in the average rate paid from 5.84% for the
year ended December 31, 1998 to 4.56% for the year ended December 31, 1999.

  Provision for Loan Losses

  The provision for loan losses for the year ended December 31, 1999 as compared
to 1998 increased approximately $82,000.  The balance of the allowance for loan
losses was approximately $5.0 million at December 31, 1999 and approximately
$5.2 million at December 31, 1998.  Actual loan charge-offs net of recoveries
were approximately $1.1 million for the year ended December 31, 1999 and
approximately $.7 million for the year ended December 31, 1998.  Non-accrual
loans were approximately $2.4 million at December 31, 1999 as compared to $1.6
million at December 31, 1998.  Loans 90 days or more past due and still accruing
amounted to approximately $465,000 at December 31, 1999 and $199,000 at December
31, 1998.  In determining an adequate level of loan loss reserves, such loans
were included in such consideration. The amount of the provision for loan losses
is a result of the amount of loans charged-off, the amount of loans recovered
and management's conclusion concerning the level of the allowance for loan
losses.  The level of the allowance for loan losses is based upon a number of
factors including the Banks' past loan loss experience, management's evaluation
of the collectibility of loans, the general state of the economy, specific
impaired loans and other relevant factors.

                                       20
<PAGE>

  Non-Interest Income

  The following table presents the principal components of non-interest income
for the years ended December 31, 1999 and 1998.
<TABLE>
<CAPTION>

                                                    YEARS ENDED DECEMBER 31,
                                                    -------------------------
                                                      1999             1998
                                                    -------           -------
                                                     (Dollars in thousands)
<S>                                                  <C>              <C>
  Service charges on deposit accounts                $3,630           $3,280
  Insurance commissions                                 220              235
  Fees on mortgage loans originated for sale            569              725
  Late charges and other loan fees                      706              775
  Equity in earnings of unconsolidated subsidiary       681              368
  Securities gains (losses)                             (34)              11
  Gain (loss) on sale of loans                            0                2
  Gain (loss) on sale of other real estate                3               (6)
  Gain (loss) on sale of assets                           8              109
  Other income                                          983              542
                                                     ------           ------
    Total non-interest income                        $6,766           $6,041
                                                     ======           ======

</TABLE>

  Non-interest income for the year ended December 31, 1999 as compared to 1998,
increased approximately $.7 million.  Service charges on deposit accounts for
the year ended December 31, 1999 as compared to 1998 increased approximately
$350,000.  This increase was related primarily to an increase in the number of
transactional accounts with NSF charges.  Fees on mortgage loans originated for
sale decreased approximately $156,000 reflecting a decrease in mortgage loan
originations due to changes in interest rates.  Late charges and other
miscellaneous loan fees decreased approximately $69,000 primarily reflecting a
decline due to the rebate of fees associated with certain government guaranteed
loans.  Equity in earnings of unconsolidated subsidiary increased approximately
$313,000.  This represents the Company's 50% interest in the earnings of Empire
Financial Services, Inc. ("Empire"), an unconsolidated subsidiary which is 50%
owned by First Community.  All other income increased from approximately
$893,000 for the year ended December 31, 1998 to approximately $1,180,000 in
1999, an increase of $287,000.

  Non-Interest Expenses

  The following table presents the principal components of non-interest expenses
for the years ended December 31, 1999 and 1998:
<TABLE>
<CAPTION>

                                                    YEARS ENDED DECEMBER 31,
                                                    -------------------------
                                                      1999             1998
                                                    -------           -------
                                                     (Dollars in thousands)
<S>                                                 <C>               <C>
  Compensation                                      $ 8,278           $ 7,364
  Other personnel expenses                            2,219             1,760
  Occupancy expense of bank premises                    983               880
  Furniture and equipment expense                     1,441             1,417
  Federal deposit insurance                             139               142
  Postage and courier services                          467               388
  Supplies                                              512               547
  Amortization                                          357               357
  Other operating expenses                            4,569             4,368
                                                    -------           -------
    Total non-interest expenses                     $18,965           $17,223
                                                    =======           =======
</TABLE>
  Non-interest expenses for the year ended December 31, 1999 as compared to
1998, increased approximately $1.7 million or 10.1%.

  Compensation and other personnel expenses increased approximately $1.4 million
reflecting an increase in the number of employees, in wage levels and in the
cost of employee benefits.  Merger related expenses for the year ended December
31, 1999 as compared to 1998 decreased approximately $85,000.  These expenses
were incurred by the Company and subsidiaries in connection with acquisitions by
merger in 1999 and 1998, which were accounted for as poolings of interest. All
other expenses increased approximately $454,000 or 6.07%.  The increases were
primarily attributed to a larger volume of business.

                                       21
<PAGE>

  Income Taxes

  The effective tax rate for the year ended December 31, 1999 was 31.5% compared
to 33.9% for the year ended December 31, 1998.

Comparison of Years Ended December 31, 1998 and 1997

  Operations for the year ended December 31, 1998 resulted in a net income of
approximately $8.0 million compared to a net income of approximately $7.5
million  for the year ended December 31, 1997.

  Interest Income

  Total interest income increased approximately $3.5 million for 1998 compared
to 1997.  This increase is attributed to the factors explained in the following
paragraphs.

  Interest earned on loans increased from approximately $37.3 million in 1997 to
approximately $40.5 million in 1998, an increase of $3.2 million.  This increase
was the net effect of an increase in the average loan portfolio balance from
approximately $390.5 million in 1997 to $425.2 million in 1998 and a decrease in
the rate earned on the loan portfolio from 9.55% in 1997 to 9.53% in 1998.

  Interest earned on taxable investment securities decreased from approximately
$5.4 million in 1997 to approximately $4.9 million in 1998, a decrease of $.5
million.  This decrease was the effect of a decrease in the rate earned on the
taxable investment portfolio from 6.35% in 1997 to 5.77% in 1998.  The average
balance was unchanged at $85.3 million.

  Interest earned on nontaxable investment securities increased from
approximately $247,000 in 1997 to approximately $316,000 in 1998, an increase of
$69,000.  This increase was the net effect of an increase in the average non-
taxable investment portfolio balance from approximately $5.6 million in 1997 to
approximately $7.5 million in 1998 and a decrease in the rate earned on the non-
taxable investment portfolio from 4.41% in 1997 to 4.20% in 1998.

  Interest earned on interest-bearing deposits in banks decreased from
approximately $636,000 in 1997 to approximately $456,000 in 1998, a decrease of
$180,000.  This decrease was the combined effect of a decrease in the average
interest-bearing deposits balance from $12.7 million in 1997 to $11.4 million in
1998 and a decrease in the rate earned on the interest-bearing deposits from
5.02% in 1997 to 3.98% in 1998.

  Interest earned on federal funds sold increased from approximately $485,000
in 1997 to approximately $1.4 million in 1998, an increase of $.9 million.  This
increase was the net effect of an increase in the average federal funds sold
balance from approximately $7.7 million in 1997 to approximately $24.7 million
in 1998 and a decrease in the rate earned on the federal funds sold from 6.32%
in 1997 to 5.69% in 1998.

  Interest Expense

  Total interest expense increased approximately $2.2 million in 1998 compared
to 1997.  This increase is attributed to the factors explained in the following
paragraphs.

  The increase in total interest expense was the combined effect of an increase
in the average balance of interest-bearing deposits from approximately $397.5
million in 1997 to approximately $417.4 million in 1998 and an increase in the
average rate paid on deposits from 4.92% in 1997 to 4.95% in 1998.  The effect
of these changes increased the interest expense on interest-bearing deposits
from approximately $19.5 million for the year ended December 31, 1997 to
approximately $20.7 million for the year ended December 31, 1998, an increase of
$1.2 million.  The increase in interest-bearing deposits came from the local
communities served by the Banks.

  All other interest expense consisting principally of interest on notes and
mortgages payable, increased from approximately $1.7 million for the year ended
December 31, 1997 to approximately $2.8 million for the year ended December 31,
1998, an increase of $1.1 million.  This increase was the combined effect of an
increase in the average balance of Federal Home Loan Bank advances from
approximately $24.7 million in 1997 to approximately $35.4 million in 1998 and
an increase in the average rate from 5.43% in 1997 to 6.75% in 1998.  These
advances were to

                                       22
<PAGE>

match fund mortgage loans made.  Additionally, the Company had notes payable to
correspondent banks which had a balance of approximately $2.2 million at
December 31, 1997 and was repaid during the year ended December 31, 1998.
Interest on notes payable decreased from approximately $240,000 for the year
ended December 31, 1997 to approximately $152,000 for the year ended December
31, 1998, a decrease of $88,000.

  Interest of approximately $128,000 was paid on federal funds purchased during
the year ended December 31, 1998 and approximately $76,000 during the year ended
December 31, 1997, an increase of $52,000.

  Interest of approximately $98,000 was paid on other borrowed funds during the
year ended December 31, 1998 and approximately $30,000 during the year ended
December 31, 1997, an increase of $68,000.  This represented interest expense on
sweep agreements.  This increase was the combined effect of an increase in the
average balance of sweep agreements from approximately $600,000 for the year
ended December 31, 1997 to approximately $1.7 million for the year ended
December 31, 1998 and an increase in the average rate paid from 5.13% for the
year ended December 31, 1997 to 5.84% for the year ended December 31, 1997.

  Provision for Loan Losses

  The provision for loan losses for the year ended December 31, 1998 as compared
to 1997 increased approximately $111,000.  The balance of the allowance for loan
losses was approximately $5.2 million at December 31, 1998 and approximately
$5.0 million at December 31, 1997.  Actual loan charge-offs net of recoveries
were approximately $728,000 for the year ended December 31, 1998 and
approximately $367,000 for the year ended December 31, 1997.  Non-accrual loans
were approximately $1.6 million at December 31, 1998 as compared to $.8 million
at December 31, 1997.  Loans 90 days or more past due and still accruing
amounted to approximately $199,000 at December 31, 1998 and $178,000 at December
31, 1997.  In determining an adequate level of loan loss reserves, such loans
were included in such consideration.  The amount of the provision for loan
losses is a result of the amount of loans charged-off, the amount of loans
recovered and management's conclusion concerning the level of the allowance for
loan losses.  The level of the allowance for loan losses is based upon a number
of factors including the Banks' past loan loss experience, management's
evaluation of the collectibility of loans, the general state of the economy,
specific impaired loans and other relevant factors.

  Non-Interest Income

  The following table presents the principal components of non-interest income
for the years ended December 31, 1998 and 1997.
<TABLE>
<CAPTION>
                                                      YEARS ENDED DECEMBER 31,
                                                     --------------------------
                                                         1998          1997
                                                     ------------  ------------
                                                       (Dollars in thousands)
<S>                                                  <C>           <C>

  Service charges on deposit accounts                  $3,280        $3,081
  Insurance commissions                                   235           169
  Fees on mortgage loans originated for sale              725           244
  Late charges and other loan fees                        775           458
  Equity in earnings of unconsolidated subsidiary         368           256
  Securities gains (losses)                                11           (13)
  Gain (loss) on sale of loans                              2            24
  Gain (loss) on sale of other real estate                 (6)            2
  Gain (loss) on sale of assets                           109            (2)
  Other income                                            542           518
                                                       ------        ------
    Total non-interest income                          $6,041        $4,737
                                                       ======        ======
</TABLE>

  Non-interest income for the year ended December 31, 1998 as compared to 1997,
increased approximately $1.3 million.  Service charges on deposit accounts for
the year ended December 31, 1998 as compared to 1997 increased approximately
$199,000.  This increase was related primarily to an increase in the number of
transaction deposit accounts with NSF charges.  Late charges, other
miscellaneous loan fees and fees on mortgage loans originated for sale increased
approximately $798,000 reflecting an increase in loan volume. Equity in earnings
of unconsolidated subsidiary increased approximately $112,000.  This represents
the Company's 50% interest in the earnings of Empire.  All other income
increased from approximately $698,000 for the year ended December 31, 1997 to
approximately $893,000 in 1998.

                                       23
<PAGE>

  Non-Interest Expenses

  The following table presents the principal components of non-interest expenses
for the years ended December 31, 1998 and 1997:
<TABLE>
<CAPTION>

                                        YEARS ENDED DECEMBER 31,
                                        ------------------------
                                           1998         1997
                                        -----------  -----------
                                         (Dollars in thousands)
<S>                                     <C>          <C>

  Compensation                           $ 7,364      $ 6,690
  Other personnel expenses                 1,760        1,538
  Occupancy expense of bank premises         880          890
  Furniture and equipment expense          1,417        1,347
  Federal deposit insurance                  142          134
  Postage and courier services               388          411
  Supplies                                   547          593
  Amortization                               357          357
  Other operating expenses                 4,368        3,315
                                         -------      -------
    Total non-interest expenses          $17,223      $15,275
                                         =======      =======
</TABLE>
  Non-interest expenses for the year ended December 31, 1998 as compared to
1997, increased approximately $1.9 million or 12.8%.

  Compensation and other personnel expenses increased approximately $896,000
reflecting an increase in the number of employees, in wage levels and in the
cost of employee benefits.  Merger related expenses for the year ended December
31, 1998 as compared to 1997 increased approximately $501,000 in connection with
acquisitions by merger in 1998 which were accounted for as poolings of interest.
All other expenses increased approximately $551,000 or 7.95%.  The increases
were primarily attributed to a larger volume of business.

  Income Taxes

  The effective tax rate for the year ended December 31, 1998 was 33.9% compared
to 34.9% for the year ended December 31, 1997.

Asset/Liability Management and Market Risk (Quantitative and Qualitative
Disclosures About Market Risk)

  The Company's financial performance is impacted by, among other factors,
interest rate risk and credit risk. The Company utilizes no derivative
instruments to mitigate its credit risk, relying instead on strict underwriting
standards, loan review, and an adequate loan loss reserve.

  Interest rate risk is the risk of loss in value due to changes in interest
rates.  This risk is addressed by the Company's Asset Liability Management
Committee (the "ALCO"), which includes senior management representatives. ALCO
monitors and considers methods of managing interest rate risk by monitoring
changes in Economic Value of Equity ("EVE") and net interest income under
various interest rate scenarios.

  Market value has taken on greater interest as a measure of equity risk.  By
marking-to-market the components of its balance sheet, the Company can compute
the market value of equity.  Not unlike a bond analysis, interest rates are
changed at various increments and the new market value is calculated.  The ALCO
attempts to manage the various components of the Company's balance sheet to
minimize the impact of sudden and sustained changes in interest rates on EVE and
net interest income.

  The Company's exposure to interest rate risk is reviewed on at least a
quarterly basis by the Company's Board of Directors and the ALCO.  Rate risk
measurement is undertaken to determine potential loss in the net interest margin
("NIM") and, ultimately, in each Bank's capital ratio.  One of the most popular
methods used to estimate interest rate risk is the rate sensitivity gap.  The
theory states that interest rate risk is due to the volume differences, called
GAP, between repricable assets and liabilities over a specific period of time.
NIM change can be quantified by assuming a rate change and applying it to this
GAP.  If potential changes to EVE and NIM resulting from hypothetical interest
rate swings are not within limits acceptable by the Company's Board of
Directors, the Board of Directors may direct management to adjust its asset and
liability mix to bring interest rate risk within acceptable limits.

  To ensure that the Company's EVE and NIM remain within acceptable limits,
the following strategies have been developed.  First, the Banks have placed
greater emphasis on adjustable rate loans, which generally reprice in one year
or less. Second, the Bank's investment activities involve predominately short-
and medium-term securities.  Third,

                                       24
<PAGE>

the Banks attempt to maintain and increase regular savings and transaction
deposit accounts. Fourth, the Banks strive to utilize long-term borrowings to
match long-term assets.

  The following table presents the Company's projected change in EVE and net
interest income for the various rate shock levels as of December 31, 1999.  EVE
and the impact on net interest income for the Company are regularly calculated
internally.

                     CHANGES IN ECONOMIC VALUE OF EQUITY
                     -----------------------------------
<TABLE>
<CAPTION>

                               MARKET
                              VALUE OF
        CHANGE IN             PORTFOLIO         ACTUAL        PERCENT
     INTEREST RATES            EQUITY           CHANGE         CHANGE
-------------------------    -----------     ------------     --------
<S>                          <C>             <C>              <C>
200 basis point rise         $22,700,000      -$7,440,000      -24.68%
Base rate scenario           $30,140,000              -0-         .00%
200 basis point decline      $36,476,000       $6,336,000      +21.02%
</TABLE>
                       CHANGES IN NET INTEREST INCOME
                       ------------------------------
<TABLE>
<CAPTION>

                                  NET
        CHANGE IN              INTEREST         ACTUAL       PERCENT
     INTEREST RATES             INCOME          CHANGE        CHANGE
-------------------------     -----------      ---------     --------
<S>                           <C>              <C>           <C>
200 basis point rise          $26,680,000      +$291,000       +1.10%
Base rate scenario            $26,389,000            -0-         .00%
200 basis point decline       $25,665,000      -$724,000       -2.74%
</TABLE>

  The preceding table indicates that, at December 31, 1999, in the event of a
sudden and sustained increase in prevailing market interest rates, the Company's
EVE would be expected to decrease and in the event of a decrease in prevailing
market rates, the Company's net interest income would be expected to decrease.
At December 31, 1999, the Company's estimated changes in EVE were acceptable to
the Board of Directors.

  Rate risk analysis can be complex and risk can only be estimated.
Computation of forecasted effects of hypothetical interest rate changes are
based on numerous assumptions, including relative levels of market interest
rates, loan prepayments, and deposit decay, and should not be relied upon as
indicative of actual future results.  Further, the computations do not
contemplate any actions the ALCO could undertake in response to changes in
interest rates.

Interest Rate Sensitivity GAP Up to One Year

  As of December 31, 1999, excluding NOW and savings accounts, which the Company
does not consider to be rate sensitive, the Company has a positive interest
sensitivity GAP up to one year.  The following table presents the interest-
sensitivity GAP of the Company, the rate sensitive assets to rate sensitive
liabilities and comfort ranges as of December 31, 1999.
<TABLE>
<CAPTION>
                                                UP TO
                                              ONE YEAR
                                       ----------------------
                                       (Dollars in thousands)
<S>                                    <C>

  Total rate sensitive assets                $ 391,847
  Total rate sensitive liabilities             331,643
                                             ---------

  Interest-sensitivity GAP                   $  60,204
                                             =========

  GAP ratio                                       1.18
                                             =========

  Comfort range                               .80-1.20
                                             =========
</TABLE>

                                       25
<PAGE>

Financial Condition

  The Company reported consolidated total assets of approximately $665.0 million
at December 31, 1999 and $620.1 million at December 31, 1998 representing an
increase of approximately $44.9 million for the year ended December 31, 1999.
Loan growth exceeded deposit growth as loans increased approximately $55.3
million and deposits increased approximately $12.2 million.  Additionally, funds
were provided by operations of $10.4 million, sale of stock of $.2 million,
Federal Home Loan Bank advances of $21.1 million, decrease in interest-bearing
deposits of $.2 million, increase in federal funds purchased and other
borrowings of $7.7 million and decrease in investment securities of $18.9
million.  These funds were used to purchase additional bank premises and
equipment of $2.3 million, pay dividends of $3.8 million, increase cash by $4.3
million and increase federal funds sold by $5.0 million.  The growth in loans
and deposits is attributable to several factors including growth in the customer
base due to the business development efforts of the management team, the pricing
of loans and deposits and the favorable economic conditions experienced in the
markets served by the Banks.

  The changes in interest rates as previously discussed are reflective of
interest rates in general and market conditions including competition.  Changes
in short-term funds including cash and due from banks, federal funds sold,
interest-bearing deposits and investment securities are reflective of the
liquidity position of the Company.

  The Company's capital to assets ratio as of December 31, 1999 and 1998 was
10.47% and 10.65%, respectively.

  The Company and the Banks are subject to various regulatory capital
requirements administered by the state and 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 Company's and the Banks' financial statements.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Company and the Banks must meet specific capital
guidelines that involve quantitative measures of assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory accounting
practices.  The capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk weightings and
other factors.

  Quantitative measures established by regulation to ensure capital adequacy
require the maintenance of minimum amounts and ratios (set forth in the table
below) of total and Tier I capital (as defined in the regulations) to risk-
weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined).  Management believes, as of December 31, 1999 and 1998,
that the Company and the Banks meet all capital adequacy requirements to which
they are subject.

  As of December 31, 1999, the most recent notification from banking
regulators categorized the Company and the Banks as well capitalized under the
regulatory framework for prompt corrective action.  To be categorized as
adequately capitalized, the Company and the Banks must maintain minimum total
risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the
table.  There have been no conditions or events since that notification that
management believes have changed the institutions' category.

                                       26
<PAGE>

  The Company's consolidated actual capital amounts and ratios and the minimum
amounts and ratios under the capital adequacy and prompt corrective action
provisions are presented below:
<TABLE>
<CAPTION>

                                                                                                   TO BE WELL
                                                                                                CAPITALIZED UNDER
                                                                 FOR CAPITAL                    PROMPT CORRECTIVE
                                      ACTUAL                  ADEQUACY PURPOSES                  ACTION PROVISION
                               ------------------       -----------------------------       -----------------------------
                                AMOUNT     RATIO         AMOUNT            RATIO             AMOUNT            RATIO
                               --------    -----        --------       --------------       --------       --------------
                                                             (Dollars in thousands)
<S>                             <C>        <C>           <C>           <C>                  <C>            <C>
As of December 31, 1999:
 Total Capital                                                         greater than                        greater than
   (to risk weighted assets)    $72,600     15.0%        $38,720       or equal to 8%        $48,400       or equal to 10%
 Tier I Capital                                                        greater than                        greater than
   (to risk weighted assets)    $67,563     14.0%        $19,304       or equal to 4%        $28,956       or equal to 6%
 Tier I Capital                                                        greater than                        greater than
   (to average assets)          $67,563     11.8%        $22,903       or equal to 4%        $28,628       or equal to 5%

As of December 31, 1998:
 Total Capital                                                         greater than                        greater than
   (to risk weighted assets)    $67,105     15.3%        $35,088       or equal to 8%        $43,859       or equal to 10%
 Tier I Capital                                                        greater than                        greater than
   (to risk weighted assets)    $61,933     14.4%        $17,204       or equal to 4%        $25,805       or equal to 6%
 Tier I Capital                                                        greater than                        greater than
   (to average assets)          $61,933     10.2%        $24,287       or equal to 4%        $30,359       or equal to 5%

</TABLE>

Liquidity and Capital Resources

  Liquidity management involves the matching of the cash flow requirements of
customers, for the withdrawal of funds or the funding of additional loans, and
the ability of the Banks to meet those requirements.  Management monitors and
maintains appropriate levels of assets and liabilities so that maturities of
assets are such that adequate funds are provided to meet estimated customer
withdrawals and loan requests.

  The Banks' liquidity position depends primarily upon the liquidity of its
assets relative to its need to respond to short-term demand for funds caused by
withdrawals from deposit accounts and loan funding commitments.  Primary sources
of liquidity are scheduled payments on its loans and interest on the Banks'
investments.  The Banks may also utilize their cash and due from banks, short-
term deposits with financial institutions, federal funds sold and investment
securities to meet liquidity requirements.  At December 31, 1999, the Banks'
cash and due from banks were approximately $29.4 million (after reduction for
their required reserves of $2.1 million), their short-term deposits with
financial institutions were $11.7 million, and their federal funds sold were
$21.4 million. The effect of the required reserves is to reduce available
liquidity.  All of the above can be converted to cash on short notice.  The sale
of investments, which had a market value of approximately $78.9 million at
December 31, 1999, can also be used to meet liquidity requirements, to the
extent the investments are not pledged to secure public funds on deposit as
required by law.  Securities with a market value of $42.2 million were pledged
as of December 31, 1999.

  The Banks' funding needs are based primarily on the volume of lending.  The
primary funding source is from new deposits.  The Banks seek to attract new
deposits by paying rates of interest on deposit accounts which are competitive
in their respective primary service areas.  The Banks generally do not pay
brokers' commissions in connection with the obtaining of deposits or have
deposits outside the primary service area.  The Banks do not pay premiums to
attract deposits.  As of December 31, 1999, the average cost for deposit
liabilities was approximately 4.6%.  The Banks continue to expect that new
deposits will serve as its primary funding source.

  The Banks also have the ability, on a short-term basis, to borrow and purchase
federal funds from other financial institutions.  The Banks are members of the
Federal Home Loan Bank of Atlanta and as such have the ability to secure
advances therefrom, although the cost of such advances exceed lower cost
alternatives such as deposits from the local communities.  The Banks had
advances outstanding from the Federal Home Loan Bank of Atlanta of $60.1 million
at December 31, 1999 at an average rate of 5.68%.

  The average loan to deposit ratio for the Company at December 31, 1999 was
95.8% compared to 87.4% at December 31, 1998.

                                       27
<PAGE>

<TABLE>
<CAPTION>

Average Balance Sheets

   The following table presents average balance sheets for the three years ended December 31, 1999.

                                                                                 YEARS ENDED DECEMBER 31,
                                                                     ----------------------------------------------
                            ASSETS                                     1999              1998                1997
                                                                     --------          --------            --------
                                                                                 (Dollars in thousands)
<S>                                                                  <C>               <C>                 <C>
Cash and cash equivalents:
  Cash and due from banks                                            $ 36,378          $ 18,738            $ 30,856
  Interest-bearing deposits in other banks                             11,567             9,552              10,122
                                                                     --------          --------            --------
Total cash and cash equivalents                                        47,945            28,290              40,978
Time deposits                                                             247             1,897               2,546
Federal funds sold and securities purchased under
  agreement to resell                                                  11,900            24,639               7,675
Investment securities                                                  89,692            94,609              91,866
Investment in unconsolidated subsidiary                                    38                51                  99
Loans, net of allowance for loan losses and unearned
  interest                                                            462,361           420,126             385,713
Bank premises and equipment                                            15,601            14,255              12,907
Other REO                                                                 601               436                 402
Land and building of former banking offices                               313               319                 380
Land and building held for lease                                          587               295                 183
Accrued interest receivable                                             6,364             5,899               5,440
Goodwill and other intangible assets                                    2,535             2,892               3,249
Cash value of life insurance                                            3,159             2,836               2,371
Other assets                                                            1,197               917               1,155
                                                                     --------          --------            --------
Total assets                                                         $642,540          $597,461            $554,964
                                                                     ========          ========            ========
              LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
  Demand                                                             $ 68,495          $ 70,956            $ 64,825
  NOW                                                                 118,334           102,390              91,707
  Savings                                                              28,282            29,358              30,173
  Time                                                                295,035           285,618             275,597
                                                                     --------          --------            --------
                                                                      510,146           488,322             462,302
Federal funds purchased                                                 4,249             1,912               1,200
Notes payable                                                               0             2,184               2,807
Other borrowed funds                                                    5,747             1,672                 587
Advances from Federal Home Loan Bank                                   49,585            35,435              24,728
Accrued interest                                                        1,788             1,694               1,720
Other liabilities                                                       3,125             3,329               3,349
                                                                     --------          --------            --------
Total liabilities                                                     574,640           534,548             496,693
                                                                     --------          --------            --------
Preferred stockholders' equity in subsidiaries                             63                 0                   0
Stockholders' equity:                                                --------          --------            --------
  Common stock                                                          1,217             1,240               1,264
  Additional paid in capital                                           31,166            31,343              31,212
  Retained earnings                                                    34,835            29,705              26,231
  Accumulated other comprehensive income                                  619             1,117                 593
  Treasury stock                                                            0              (492)             (1,029)
                                                                     --------          --------            --------
Total stockholders' equity                                             67,837            62,913              58,271
                                                                     --------          --------            --------
Total liabilities and stockholders' equity                           $642,540          $597,461            $554,964
                                                                     ========          ========            ========
</TABLE>


                                       28
<PAGE>

Average Yields Earned and Rates Paid

    The following tables presents the average balances, average yields and
interest earned on interest-earning assets and average rates and interest paid
on interest-bearing liabilities for the three years ended December 31, 1999.

<TABLE>
<CAPTION>

                                                                   YEARS ENDED DECEMBER 31,
                                         ----------------------------------------------------------------------------
                                                    1999                     1998                       1997
                                         ------------------------  ------------------------  ------------------------
                                         AVERAGE   INCOME/  YIELD  AVERAGE   INCOME/  YIELD  AVERAGE   INCOME/  YIELD
                                         BALANCES  EXPENSE  RATES  BALANCES  EXPENSE  RATES  BALANCES  EXPENSE  RATES
                                         --------  -------  -----  --------  -------  -----  --------  -------  -----
                                                                  (Dollars in thousands)
<S>                                      <C>       <C>      <C>    <C>       <C>      <C>    <C>       <C>      <C>
Average yield on loans/(1)//(3)/         $467,466  $42,460  9.08%  $425,210  $40,515  9.53%  $390,496  $37,304  9.55%
Average yield on taxable
  investment securities                    81,412    4,849  5.96%    85,324    4,921  5.77%    85,296    5,414  6.35%
Average yield on non-taxable
  investment securities/(2)/                7,302      249  3.41%     7,505      316  4.20%     5,599      247  4.41%
Average yield on interest-
  bearing deposits in banks                11,814      606  5.13%    11,449      456  3.98%    12,668      636  5.02%
Average yield on federal
  funds sold                               11,900      625  5.25%    24,639    1,402  5.69%     7,675      485  6.32%
                                         --------  -------  ----   --------  -------  ----   --------  -------  ----
Average yield on all
  interest-earning assets                $579,894  $48,789  8.41%  $554,127  $47,610  8.59%  $501,734  $44,086  8.79%
                                         ========  =======  ====   ========  =======  ====   ========  =======  ====
Average rate paid on now
  account deposits                       $118,334  $ 2,978  2.52%  $102,390  $ 3,083  3.01%  $ 91,707  $ 2,657  2.90%
Average rate paid on savings
  deposits                                 28,282      805  2.85%    29,358      907  3.09%    30,173      971  3.22%
Average rate paid on time deposits        295,035   16,131  5.47%   285,618   16,680  5.84%   275,597   15,909  5.77%
Average rate paid on federal funds
  purchased                                 4,249      223  5.25%     1,912      128  6.70%     1,200       76  6.32%
Average rate paid on notes
  payable                                       0        0   .00%     2,184      152  6.94%     2,807      240  8.54%
Average rate paid on other
  borrowed funds                            5,747      262  4.56%     1,672       98  5.84%       587       30  5.13%
Federal Home Loan Bank advances            49,585    2,507  5.06%    35,435    2,391  6.75%    24,728    1,342  5.43%
                                         --------  -------  ----   --------  -------  ----   --------  -------  ----
Average rate paid on all interest-
  bearing liabilities                    $501,232  $22,906  4.57%  $458,569  $23,439  5.11%  $426,799  $21,225  4.97%
                                         ========  =======  ====   ========  =======  ====   ========  =======  ====
Average net yield on interest-
  earning assets (net interest
  income as a percentage of
  average interest-earning assets)                          4.49%                     4.40%                     4.49%
                                                            ====                      ====                      ====
</TABLE>
-------------------
/(1)/ Non-accruing loans have been included in the "average amount outstanding"
      and average loans have not been reduced by the allowance for loan losses.
/(2)/ Interest income on tax exempt securities has not been calculated on a tax
      equivalent basis.
/(3)/ Loan fees included in interest income amounted to approximately $1,142,000
      in 1999, $1,100,000 in 1998, and $1,137,000 in 1997.

                                       29
<PAGE>

    The table below sets forth certain information regarding changes in interest
income and interest expense for the periods indicated.  For each category of
interest-earning assets and interest-bearing liabilities, information is
provided on changes attributable to (i) changes in volume (changes in volume
multiplied by old rate); (ii) changes in rates (change in rate multiplied by old
volume); (iii) changes in rate-volume (changes in rate multiplied by the change
in volume).  The net change attributable to both volume and rate, which cannot
be segregated, has been allocated proportionately to change due to volume and
change due to rate.

<TABLE>
<CAPTION>

                                                             YEARS ENDED DECEMBER 31,
                                         ------------------------------------------------------------
                                                  1998 VS. 1999                  1997 VS. 1998
                                         ----------------------------    ----------------------------
                                              INCREASE (DECREASE)            INCREASE (DECREASE)
                                                    DUE TO                          DUE TO
                                         ----------------------------    ----------------------------

                                         VOLUME      RATE        NET      VOLUME    RATE       NET
                                         -------    -------    ------    -------   -------    -------
                                                             (Dollars in thousands)
<S>                                      <C>        <C>        <C>       <C>       <C>        <C>
Interest income:
 Loans                                    $3,670    $(1,725)   $1,945    $3,307    $   (96)   $3,211
 Taxable investment securities              (251)       179       (72)        2       (495)     (493)
 Non-taxable investment securities            (8)       (59)      (67)       80        (11)       69
 Interest-bearing deposits in banks           15        135       150       (57)      (123)     (180)
 Federal funds sold                         (676)      (101)     (777)      960        (43)      917
                                          ------    -------    ------    ------    -------    ------
  Total                                   $2,750    $(1,571)   $1,179    $4,292    $  (768)   $3,524
                                          ------    -------    ------    ------    -------    ------

Interest expense:
 NOW account deposits                     $1,927    $(2,032)   $ (105)   $  319    $   107    $  426
 Savings deposits                            (32)       (70)     (102)      (26)       (38)      (64)
 Time deposits                               587     (1,136)     (549)      584        187       771
 Federal funds purchased                     115        (20)       95        47          5        52
 Advances from Federal Home Loan Bank        312       (196)      116       672        377     1,049
 Other borrowed funds                        180        (16)      164        63          5        68
 Other long-term debt                        (76)       (76)     (152)      (48)       (40)      (88)
                                          ------    -------    ------    ------    -------    ------
  Total                                    3,013     (3,546)     (533)    1,611        603     2,214
                                          ------    -------    ------    ------    -------    ------
Net interest income                       $ (263)   $ 1,975    $1,712    $2,681    $(1,371)   $1,310
                                          ======    =======    ======    ======    =======    ======
</TABLE>

                                       30
<PAGE>

Investment Portfolio

    The following table presents investments in obligations of (i) U.S. Treasury
and other U.S. government agencies and corporations, (ii) states of the U.S. and
political subdivisions and (iii) other securities as of December 31, 1999, 1998
and 1997.

<TABLE>
<CAPTION>
                                                                              DECEMBER  31,
                                       -----------------------------------------------------------------------------------------
                                                    1999                          1998                         1997
                                       -----------------------------  ----------------------------  ----------------------------
                                         SECURITIES     SECURITIES     SECURITIES     SECURITIES     SECURITIES     SECURITIES
                                         AVAILABLE        HELD TO       AVAILABLE       HELD TO       AVAILABLE       HELD TO
                                       FOR SALE/(1)/   MATURITY/(1)/  FOR SALE/(1)/  MATURITY/(1)/  FOR SALE/(1)/  MATURITY/(1)/
                                       --------------  -------------  -------------  -------------  -------------  -------------
                                                                        (Dollars in thousands)
<S>                                    <C>             <C>            <C>            <C>            <C>            <C>
 U.S. Treasury and other
   U.S. government agencies
   and corporations                      $67,543             -0-       $ 83,443            -0-        $71,034         $4,542
 States of the U.S. and
   political subdivisions                  5,508             -0-          9,097            -0-          5,914            -0-
 Other securities                          6,155             -0-          5,684            -0-          5,945            -0-
                                         -------            ----       --------            ---        -------         ------
   Total                                  79,206             -0-         98,224            -0-         82,893          4,542

 Unrealized gains (losses)
   on available-for-sale-securities         (280)            -0-          2,234            -0-          1,324            -0-
                                         -------            ----       --------            ---        -------         ------
   Total                                 $78,926             -0-       $100,458            -0-        $84,217         $4,542
                                         =======            ====       ========            ===        =======         ======
</TABLE>
-------------------
/(1)/ Securities available-for-sale are carried at market value and securities
      held-to-maturity are carried at amortized cost.


    The following table presents the amortized cost (cost for equity securities)
of investments in obligations of (i) U.S. Treasury and other U.S. government
agencies and corporations, (ii) states of the U.S. and political subdivisions
and (iii) other securities as of December 31, 1999 that are due (a) in one year
or less, (b) after one year through five years, (c) after five years through ten
years and (d) after ten years.  In addition, the table provides the weighted
average yield for each range of maturities.

<TABLE>
<CAPTION>

                                                           AMOUNT AT DECEMBER 31, 1999 DUE IN
                                    -------------------------------------------------------------------------------------
                                                          AFTER ONE       AFTER FIVE
                                                        THROUGH FIVE     THROUGH TEN
                                    ONE YEAR OR LESS        YEARS           YEARS       AFTER TEN YEARS        TOTAL
                                    -----------------  ---------------  --------------  ----------------  ---------------
                                     AMOUNT    YIELD   AMOUNT   YIELD   AMOUNT  YIELD    AMOUNT   YIELD   AMOUNT   YIELD
                                    --------  -------  -------  ------  ------  ------  --------  ------  -------  ------
                                                                   (Dollars in thousands)
<S>                                 <C>       <C>      <C>      <C>     <C>     <C>     <C>       <C>     <C>      <C>
U.S. Treasury and other U.S.
  government agencies and
  corporations                       $8,107    5.94%   $41,820   5.58%  $3,397   6.24%   $14,163   5.85%  $67,487   5.71%
States of the U.S. and political
  subdivisions/(1)(2)/                  775    5.99%     3,535   6.66%     645   6.03%       553   8.03%    5,508   6.63%
  Other securities/(2)(3)/                0     .00          0    .00        0    .00      6,211   7.22%    6,211   7.22%
                                     ------    ----    -------   ----   ------   ----    -------   ----   -------   ----
        Total                        $8,882    5.94%   $45,355   5.66%  $4,042   6.21%   $20,927   6.31%  $79,206   5.89%
                                     ======    ====    =======   ====   ======   ====    =======   ====   =======   ====
</TABLE>

-------------------
/(1)/ Yields on tax exempt obligations have been computed on a tax equivalent
      basis.
/(2)/ As of December 31, 1999, there was no aggregate book values of any issuer
      which exceeded 10% of the Company's stockholders' equity.
/(3)/ Consists of domestic corporate notes, stocks and mutual funds which are
      comprised of Federal Home Loan Bank of Atlanta stock, Community Financial
      Services, Inc. stock, Federal Home Loan Mortgage Corporation stock and
      mutual funds consisting predominately of U.S. government securities. Yield
      represents yield earned for 1999.

                                       31
<PAGE>

Loan Portfolio

    Before reduction for the allowance for loan losses, the loan portfolio
totaled approximately $494.4 million at December 31, 1999 which was an increase
of approximately $53.9 million from December 31, 1998 or 12.24%.  During the
year ended December 31, 1999, average net loans were approximately $462.4
million compared to $420.1 million in 1998, an increase of approximately $42.3
million.  During the year ended December 31, 1997, average net loans were
approximately $385.7 million.  These average loan levels reflected a faster rate
of growth from 1998 to 1999 of $42.3 million compared to the rate of growth from
1997 to 1998 of $34.4 million.

    The following table sets forth information summarizing the composition of
the loan portfolio at December 31, 1999, 1998 and 1997:

<TABLE>
<CAPTION>

                                                                                     DECEMBER 31,
                                                                  ---------------------------------------------
                                                                     1999                1998           1997
                                                                  ----------          ----------     ----------
                                                                                (Dollars in thousands)
<S>                                                               <C>                  <C>            <C>
Commercial and financial                                          $ 59,328             $ 56,531       $ 71,355
Agricultural                                                         8,198                6,759          7,340
Real estate - construction                                          31,858               22,567         19,519
Real estate - mortgage                                             332,008              298,211        262,041
Installment loans to individuals and other                          62,987               56,478         49,841
Overdrafts                                                             436                  347            302
                                                                  --------             --------       --------
                                                                   494,815              440,893        410,398
Deferred loan fees and unearned interest, net                         (398)                (378)          (493)
                                                                  --------             --------       --------
                                                                   494,417              440,515        409,905
Allowance for loan losses                                           (5,037)              (5,172)        (4,996)
                                                                  --------             --------       --------
  Loans, net                                                      $489,380             $435,343       $404,909
                                                                  ========             ========       ========
</TABLE>

  The following table sets forth certain information at December 31, 1999
regarding the dollar amount of all loans based on their contractual terms to
maturity for fixed rate loans and repricing frequency for adjustable rate loans.
Demand loans, loans having no stated schedule of repayments and no stated
maturity and overdrafts are reported for one year or less.

<TABLE>
<CAPTION>

                                                                    TOTAL LOANS AT DECEMBER 31, 1999 DUE FOR REPRICING IN
                                                                   -------------------------------------------------------
                                                                                       AFTER ONE
                                                                                         YEAR
                                                                       ONE YEAR        THROUGH      DUE AFTER
                                                                        OR LESS       FIVE YEARS    FIVE YEARS   TOTAL
                                                                   ---------------   ------------   ----------  ---------
                                                                                    (Dollars in thousands)
    <S>                                                               <C>              <C>          <C>         <C>
    Total Loans                                                       $208,815         $207,617     $78,383     $494,815
                                                                      ========         ========     =======     ========

</TABLE>

    The following table sets forth certain information at December 31, 1999
regarding the dollar amount of all loans based on their contractual terms to
maturity.  Demand loans, loans having no stated schedule of repayments and no
stated maturity and overdrafts are reported as due in one year or less.

                                TOTAL LOANS AT DECEMBER 31, 1999 DUE IN
                                ----------------------------------------
                                  ONE YEAR      AFTER ONE
                                  OR LESS         YEAR         TOTAL
                                ----------      ---------      -----
                                         (Dollars in thousands)

    Total Loans                  $144,945       $349,870     $494,815
                                 ========       ========     ========

                                       32
<PAGE>

    The following table presents information concerning outstanding balances of
nonperforming loans at December 31, 1999, 1998 and 1997.  Nonperforming loans
consists of loans which have been placed on nonaccrual status or are past due
more than 90 days with respect to principal or interest.
<TABLE>
<CAPTION>

                                                        DECEMBER 31,
                                                  -----------------------
                                                   1999     1998    1997
                                                  -------  -------  -----
                                                   (Dollars in thousands)
<S>                                               <C>      <C>      <C>

Loans accounted for on a nonaccrual basis/(1)/     $2,395   $1,567   $825
Accruing loans which are contractually past
 due 90 days or more as to principal or
 interest payments/(1)/                               465      199    178
Other loans which are "troubled debt
 restructuring"/(1)/                                    0        0      0

</TABLE>
-------------------
/(1)/  There are no foreign loans.

    For the year ended December 31, 1999 for loans accounted for on a nonaccrual
basis and other loans which are "troubled debt restructurings" as defined in
Statement of Financial Accounting Standards No. 15, the gross interest income
that would have been reported if the loans had been current in accordance with
their original terms and had been outstanding throughout the period or since
origination, if held for part of the period, was approximately $221,344 and the
amount of interest income on those loans that was included in net income for the
period was approximately $116,707.

    A loan is placed on non-accrual status when the loan has been delinquent for
90 days except where an analysis of related collateral values reflects
sufficient collateral to secure principal and accrued interest.  When accrual of
interest is discontinued, all unpaid accrued interest is reversed.

    As of December 31, 1999, in the opinion of management, there are no
additional problem loans of significance which are not now disclosed under
information concerning nonaccrual, past due and restructured loans.

    As of December 31, 1999, there are no loan concentrations exceeding 10% of
total loans which are not otherwise disclosed previously as a category of loans.

    As of December 31, 1999, there are no other interest-bearing assets that
would be required to be disclosed as nonaccrual, past due or restructured loans
if such assets were loans.

Reserve For Possible Loan Losses

    An allowance for loan losses is established through a provision for loan
losses charged to expenses.  Loans are charged against the allowance for loan
losses when management believes that the collectibility of the principal is
unlikely.  The allowance is an amount that management believes will be adequate
to absorb possible losses on existing loans that may become uncollectible based
on evaluations of the collectibility of loans and prior loan loss experience.
The evaluations take into consideration such factors as changes in the nature
and volume of the loan portfolio, overall portfolio quality, review of specific
problem loans, specific impaired loans and current economic conditions that may
affect the borrowers' ability to pay.

    The reserve for possible loan losses was approximately 1.02% of outstanding
loans at December 31, 1999 and 1.17% at December 31, 1998.  The reserve was
approximately $5.0 million at December 31, 1999 and approximately $5.2 million
at December 31, 1998.  Nonperforming loans increased from approximately $1.6
million at December 31, 1998 to approximately $2.4 million at December 31, 1999,
representing .48% of total loans.  Management believes that the reserve for loan
losses of approximately $5.0 million at December 31, 1999 is adequate due to the
$1.1 million of net charge-offs in the year ended December 31, 1999 and the fact
that approximately $363.9 million or 73.5% of the Banks' loan portfolio
consisted of loans secured by real estate.

                                       33
<PAGE>

    The following table sets forth an analysis of loss experience for the
periods indicated:
<TABLE>
<CAPTION>

                                                   YEARS ENDED DECEMBER 31,
                                                 ----------------------------
                                                   1999      1998      1997
                                                 --------  --------  --------
                                                    (Dollars in thousands)
<S>                                              <C>       <C>       <C>

Balance at beginning of period                    $5,172    $4,996    $4,570
                                                  ------    ------    ------
Charge-offs:
  Domestic:
   Commercial, financial and agricultural            444       207        97
   Real estate construction                           13       -0-       -0-
   Real estate mortgage                              191        45        36
   Installment loans to individuals                  568       571       314
   Overdrafts                                        -0-       -0-       -0-
                                                  ------    ------    ------
                                                   1,216       823       447
                                                  ------    ------    ------

Recoveries:
  Domestic:
   Commercial, financial and agricultural             10        16        14
   Real estate - construction                        -0-       -0-       -0-
   Real estate - mortgage                            -0-        22        16
   Installment loans to individuals                   86        58        50
   Overdrafts                                        -0-       -0-       -0-
                                                  ------    ------    ------
                                                      96        96        80
                                                  ------    ------    ------

Net charge-offs                                    1,120       727       367
                                                  ------    ------    ------
Additions charged to operations                      985       903       793
                                                  ------    ------    ------
Balance at end of period                          $5,037    $5,172    $4,996
                                                  ======    ======    ======
Ratio of net charge-offs during the period to
 average loans outstanding during the period         .24%      .18%      .09%
                                                  ======    ======    ======
</TABLE>

    The Banks have allocated the reserve for possible loan losses according to
the amounts deemed to be reasonably necessary at each year end to provide for
the possibility of losses being incurred within the categories of loans set
forth in the table below based on management's evaluation of the loan portfolio.
The amounts and percentages of such components of the reserve for possible loan
losses at December 31, 1999, 1998 and 1997 and the percent of loans in each
category to total loans are presented below.
<TABLE>
<CAPTION>

                                                                       DECEMBER 31,
                                             -----------------------------------------------------------------
                                                     1999                   1998                  1997
                                             --------------------  ---------------------  --------------------
                                                       PERCENT                PERCENT               PERCENT
                                                       OF LOANS              TO LOANS               TO LOANS
                                                       IN EACH                IN EACH               IN EACH
                                                     CATEGORY TO            CATEGORY TO           CATEGORY TO
                                             AMOUNT  TOTAL LOANS   AMOUNT   TOTAL LOANS   AMOUNT  TOTAL LOANS
                                             ------  ------------  ------  -------------  ------  ------------
                                                                  (Dollars in thousands)
<S>                                          <C>     <C>           <C>     <C>            <C>     <C>
 Domestic:
   Commercial, financial and agricultural    $  687     13.65%     $  742      14.35%     $  958     19.18%
   Real estate - construction                   324      6.44         265       5.12         237      4.76
   Real estate - mortgage                     3,380     67.10       3,498      67.64       3,190     63.85
   Installment loans to individuals             642     12.73         663      12.81         607     12.14
   Overdrafts                                     4       .08           4        .08           4       .07
 Foreign                                        -0-       .00         -0-        .00         -0-       .00
 Unallocated                                    -0-       .00         -0-        .00         -0-       .00
                                             ------    ------      ------     ------      ------    ------
   Total                                     $5,037    100.00%     $5,172     100.00%     $4,996    100.00%
                                             ======    ======      ======     ======      ======    ======
</TABLE>

                                       34
<PAGE>

  The following table sets forth an analysis of the average amount outstanding
and the average rate paid for all deposits for the categories and periods
indicated.
<TABLE>
<CAPTION>

                                                               YEARS ENDED DECEMBER 31,
                                           ----------------------------------------------------------------
                                                  1999                  1998                  1997
                                           --------------------  --------------------  --------------------
                                                      AVERAGE               AVERAGE               AVERAGE
                                            AMOUNT   RATE PAID    AMOUNT   RATE PAID    AMOUNT   RATE PAID
                                           --------  ----------  --------  ----------  --------  ----------
                                                                (Dollars in thousands)
<S>                                        <C>       <C>         <C>       <C>         <C>       <C>
 Deposits in domestic bank offices:

   Non-interest-bearing demand deposits    $ 68,495     .00%     $ 70,956     .00%     $ 64,825      .00%
   Interest-bearing demand deposits         118,334    2.52       102,390    3.01        91,707     2.90
   Savings deposits                          28,282    2.85        29,358    3.09        30,173     3.22
   Time deposits                            295,035    5.47       285,618    5.84       275,597     5.77
 Deposits in foreign banking offices              0     .00             0     .00             0      .00
                                           --------              --------              --------
     Total                                 $510,146              $488,322              $462,302
                                           ========              ========              ========

</TABLE>
Deposit Maturities

    The principal sources of funds for the Banks' loans and investments are
demand, time, savings and other deposits and borrowings.  The Banks offer a
variety of deposit accounts including checking and NOW accounts, savings and
time accounts, certificates of deposit and money market accounts.  As of
December 31, 1999, total deposits were approximately $516.2 million compared to
approximately $504.1 million at December 31, 1998 and compared to approximately
$472.6 million at December 31, 1997.  Although, in some instances, time deposits
greater than $100,000 may be more sensitive to changes in interest rates,
substantially all the Banks' deposits are derived from within their primary
service areas which management believes are not as interest rate sensitive as
are more urban service areas.  The Banks do not have any brokered deposits.

    The following table summarizes maturity information for time deposits
greater than $100,000 at December 31, 1999.
<TABLE>
<CAPTION>

                                                 DEPOSIT
                                               MATURITIES
                                         ----------------------
                                         (Dollars in thousands)
<S>                                      <C>
Three months or less                            $ 25,254
 Over three through six months                    22,681
 Over six through 12 months                       36,430
 Over 12 months                                   16,322
                                                --------
   Total                                        $100,687
                                                ========
</TABLE>

                                       35
<PAGE>

Advances From Federal Home Loan Bank

   The following table shows the Company's borrowings from the Federal Home Loan
Bank and the weighted average interest rates thereon at the end of the last
three years.  Also provided are the maximum amount of borrowings and the average
amounts outstanding as well as weighted average interest rates for the three
years.

                                             FEDERAL HOME
                                               LOAN BANK
                                                ADVANCES
                                       ----------------------
                                       (Dollars in thousands)

 Balance at December 31:
     1999                                     $60,112
     1998                                      39,058
     1997                                      31,812

Weighted average interest
   rate at year end:
     1999                                        5.68%
     1998                                        5.79%
     1997                                        6.25%

 Maximum amount outstanding
   at any month's end:
     1999                                     $62,821
     1998                                      39,440
     1997                                      31,812

 Average amount outstanding
   during the year:
     1999                                     $49,585
     1998                                      35,435
     1997                                      24,728

Weighted average interest
   rate during the year:
     1999                                        5.06%
     1998                                        6.75%
     1997                                        5.43%

Interest Rate Sensitivity

    The relative interest rate sensitivity of the Banks' assets and liabilities
indicates the extent to which the Banks' net interest income may be affected by
interest rate movements.  The Banks' ability to reprice assets and liabilities
in the same dollar amounts and at the same time minimizes interest rate risks.
One method of measuring the impact of interest rate changes on net interest
income is to measure, in a number of time frames, the interest-sensitivity gap,
by subtracting interest-sensitive liabilities from interest-sensitive  assets,
as reflected in the following table.  Such interest-sensitivity gap represents
the risk, or opportunity, in repricing.  If more assets than liabilities are
repriced at a given time in a rising rate environment, net interest income
improves; in a declining rate environment, net interest income deteriorates.
Conversely, if more liabilities than assets are repriced while interest rates
are rising, net interest income deteriorates; if interest rates are falling, net
interest income improves.

                                       36
<PAGE>

    The following table presents the interest-sensitivity gap of the Banks as of
December 31, 1999.
<TABLE>
<CAPTION>

                                                           OVER          OVER
                                              THREE    THREE MONTHS    ONE YEAR
                                              MONTHS      THROUGH      THROUGH       OVER
                                             OR LESS     12 MONTHS    FIVE YEARS  FIVE YEARS   TOTAL
                                             --------  -------------  ----------  ----------  -------
                                                              (Dollars in thousands)
<S>                                          <C>       <C>            <C>         <C>         <C>
Interest-earning assets:
 Short-term deposits and interest-bearing
   cash                                      $117,057           0           99           0    117,156
 Loans                                        182,746      58,302      164,241      89,526    494,815
 Investment securities                         10,670       1,667       52,307      14,562     79,206
 Federal funds sold                            21,405           0            0           0     21,405
                                             --------    --------      -------     -------    -------
   Total interest-earning assets              331,878      59,969      216,647     104,088    712,582
                                             --------    --------      -------     -------    -------

Interest-bearing liabilities:
 NOW and savings/(1)/                               0           0            0           0          0
 Super NOW and money market                    59,845           0            0           0     59,845
 Time deposits                                 73,890     159,398       70,255         838    304,381
 Federal funds purchased                        4,673           0            0           0      4,673
 Other borrowed funds                           9,155           0            0           0      9,155
 Advances from Federal Home
   Loan Bank                                   13,742      10,940        7,850      27,580     60,112
                                             --------    --------      -------     -------    -------
   Total interest-bearing liabilities         161,305     170,338       78,105      28,418    438,166
                                             --------    --------      -------     -------    -------

Interest-sensitivity GAP                     $170,573    (110,369)     138,542      75,670    274,416
                                             ========    ========      =======     =======    =======

Cumulative interest sensitivity GAP          $170,573      60,204      198,746     274,416
                                             ========    ========      =======     =======

Interest-sensitivity GAP ratio                   2.06         .35         2.77        3.66
                                             ========    ========      =======     =======

Cumulative interest-
 sensitivity GAP ratio                           2.06        1.18         1.49        1.63
                                             ========    ========      =======     =======
Comfort range .80 - 1.20
</TABLE>

-------------------
/(1)/ Not considered rate sensitive.

Impact of Inflation and Changing Prices

    The majority of assets and liabilities of a financial institution are
monetary in nature and therefore differ greatly from most commercial and
industrial companies that have significant investments in fixed assets, such as
property, plant and equipment, and inventories and therefore are primarily
impacted by interest rates rather than changing prices.  While the general level
of inflation underlies most interest rates, interest rates react more to change
in the expected rate of inflation and to changes in monetary and fiscal policy.
Net interest income and the interest rate spread are good measures of the
company's ability to react to changing interest rates.  This information is
presented in further detail in the section entitled "Average Yields Earned and
Rates Paid."

Year 2000

    The Year 2000 issue refers generally to the data structure and processing
problem that may prevent systems from properly processing date-sensitive
information as a result of computer programs using two digits rather than four
digits to define the applicable year.  As a result, these programs do not
properly recognize dates in any year that begins with "20" rather than "19" and
may malfunction when presented with such dates.  The Year 2000 problem may
affect not only our software systems, but also critical software used by
customers or third party service providers.

    The Company did not experience any significant malfunctions or errors in
its operating business systems when the date changed from 1999 to 2000.  Based
on operations since January 1, 2000, the Company does not expect any significant
impact to its ongoing business as a result of the Year 2000 issue.  However, it
is possible that the full impact of the date change has not been fully
recognized.  For example, it is possible that Year 2000 issues may occur with
billing, payroll, or financial closings at month, quarter, or year end.  The
Company believes any

                                       37
<PAGE>

such problems are likely to be minor and correctable. In addition, the Company
could still be negatively affected if its customers or third party service
providers are adversely affected by Year 2000 issues. The Company currently is
not aware of any significant Year 2000 or similar problems that have arisen for
its customers or third party service providers.

     The Company expended approximately $440,000 on Year 2000 readiness efforts
from 1997 through 1999 with approximately $216,000 representing current
expenditures and approximately $224,000 representing capital expenditures.
These efforts included replacing some outdated, noncompliant hardware and
noncompliant software, as well as identifying and remediating Year 2000
problems.


ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     See "Item 7.  Management's Discussion and Analysis of Financial Condition
and Results of Operations - Asset/Liability Management and Market Risk."


ITEM 8.   FINANCIAL STATEMENTS.

     The Company's consolidated financial statements, notes thereto and
auditor's report thereon are set forth beginning on page F-1 of this report and
are incorporated herein by reference.

                  Index to Consolidated Financial Statements
                  ------------------------------------------

Financial Statements                               Page
--------------------                               ----

Independent Auditor's Report.....................   F-2

Consolidated Balance Sheets......................   F-3

Consolidated Statements of Income................   F-4

Consolidated Statements of Comprehensive Income..   F-5

Consolidated Statements of Stockholders' Equity..   F-6

Consolidated Statements of Cash Flows............   F-7

Notes to Financial Statements....................   F-8

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE.

     None.

                                 PART III
                                 --------

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS.

     The information set forth under the headings "Proposal One: Election of
Directors" and "Executive Officers" in the Company's definitive Proxy Statement
for the 2000 Annual Meeting of Shareholders is incorporated herein by reference.

                                       38
<PAGE>

ITEM 11.  EXECUTIVE COMPENSATION.

     The information set forth under the heading "Executive Compensation" in the
Company's definitive Proxy Statement for the 2000 Annual Meeting of Shareholders
is incorporated herein by reference.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The information set forth under the heading "Principal Shareholders" in the
Company's definitive Proxy Statement for the 2000 Annual Meeting of Shareholders
is incorporated herein by reference.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The information set forth under the headings "Certain Transactions" and
"Executive Compensation - Compensation Committee Interlocks and Insider
Participation" in the Company's definitive Proxy Statement for the 2000 Annual
Meeting of Shareholders is incorporated herein by reference.

                                    PART IV
                                    -------

ITEM 14.  EXHIBITS AND REPORTS ON FORM 8-K.

(a)  1.   Financial Statements.

     The consolidated financial statements, notes thereto and auditor's report
thereon, filed as part hereof, are listed in the Index to Item 8 of this Report.

     2.   Financial Statement Schedules.

     All schedules have been omitted as the required information is not
applicable.

     3.   Exhibits.

     Exhibit No.  Description
     -----------  -----------

        2.1       Agreement and Plan of Merger, dated as of June 3, 1999, by and
                  between Baxley Federal Savings Bank and the Registrant, and
                  joined into as of November 2, 1999 by PAB Interim Association
                  No. 1 (previously filed as Exhibit 2(a) to the Registrant's
                  Registration Statement No. 333-83907 on Form S-4 and
                  incorporated herein by this reference).

        3.1       Amended and Restated Articles of Incorporation (previously
                  filed as Exhibit 3(a) to the Registrant's Registration
                  Statement No. 333-83907 on Form S-4 and incorporated herein by
                  this reference).

        3.2       Amended and Restated Bylaws (previously filed as Exhibit 3(a)
                  to the Registrant's Registration Statement No. 333-74819 on
                  Form S-8 and incorporated herein by this reference).

       10.1       Form of Employment Agreement with Schedule of Parties and
                  Terms.

       10.2.1     PAB Bankshares, Inc. First Amendment to First Restated and
                  Amended Dividend Reinvestment and Common Stock Purchase Plan
                  (previously filed as Exhibit 28.2 to the Registrant's
                  Registration Statement No. 33-74080 on Form S-3 and
                  incorporated herein by this reference).


                                       39
<PAGE>

     Exhibit No.  Description
     -----------  -----------

       10.2.2     PAB Bankshares, Inc. Third Amended and Restated Dividend
                  Reinvestment and Common Stock Purchase Plan (previously filed
                  as Exhibit 28.1 to the Registrant's Registration Statement No.
                  33-74080 on Form S-3, and incorporated herein by this
                  reference).

       10.3       PAB Bankshares, Inc. 1994 Employee Stock Option Plan, as
                  amended (previously filed as Exhibit 10.3 to the Registrant's
                  Annual Report on Form 10-K for the fiscal year ended December
                  31, 1998 and incorporated herein by this reference).

       10.4       PAB Bankshares, Inc. 1994 Directors Deferred Stock Purchase
                  Plan (previously filed as Exhibit 10.4 to the Registrant's
                  Annual Report on Form 10-K for the fiscal year ended December
                  31, 1998 and incorporated herein by this reference).

       10.5       Form of Executive Salary Continuation Agreement, with attached
                  Schedule of Terms (previously filed as Exhibit 10.5 to the
                  Registrant's Annual Report on Form 10-K for the fiscal year
                  ended December 31, 1998 and incorporated herein by this
                  reference).

       10.6       PAB Bankshares, Inc. 1999 Stock Option Plan (previously filed
                  as Exhibit 99 to the Registrant's Registration Statement No.
                  333-89527 on Form S-8 and incorporated herein by this
                  reference).

       11.1       Statement Re: Computation of Per Share Earnings.

       21.1       Subsidiaries of the Registrant.

       23.1       Consent of Stewart, Fowler & Stalvey, P.C.

       27.1       Financial Data Schedule - 1999.

       27.2       Financial Data Schedule - 1998.

       27.3       Financial Data Schedule - 1997.


                                       40


<PAGE>


(b)  Reports on Form 8-K.

     On December 6, 1999, the Registrant filed a Current Report on Form 8-K
under Item 2 regarding consummation of the acquisition of Baxley on November 30,
1999.  On February 11, 2000, the Registrant filed Amendment No. 1 to the Current
Report on Form 8-K filed on December 6, 1999 to include the financial statements
required under such Report.  On February 18, 2000, the Registrant filed
Amendment No. 2 to the Current Report on Form 8-K filed on December 6, 1999 to
amend certain financial statements contained in Amendment No. 1 to the Current
Report on Form 8-K filed on February 11, 2000.

                                      41
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.


Date:  March 20, 2000            PAB BANKSHARES, INC.

                                 By:  /s/ R. Bradford Burnette
                                    ---------------------------------------
                                    R. Bradford Burnette, President and
                                    Chief Executive Officer

                                 By:  /s/ Michael E. Ricketson
                                    ---------------------------------------
                                    Michael E. Ricketson, Chief Financial
                                    Officer



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

<TABLE>
<CAPTION>
          Signature                        Title                                 Date
          ---------                        -----                                 ----
<S>                              <C>                                         <C>
/s/ James L. Dewar, Sr.          Director                                    March 20, 2000
-----------------------------
James L. Dewar, Sr.

/s/ R. Bradford Burnette         President/Chief Executive Officer           March 20, 2000
-----------------------------    and Chairman of the Board of Directors
R. Bradford Burnette             (Principal Executive Officer)

/s/ Walter W. Carroll, II        Director                                    March 20, 2000
-----------------------------
Walter W. Carroll, II

/s/ William S. Cowart            Director                                    March 20, 2000
-----------------------------
William S. Cowart

                                 Director                                    March --, 2000
-----------------------------
James L. Dewar, Jr.

/s/ Tracy A. Dixon               Director                                    March 20, 2000
-----------------------------
Tracy A. Dixon

/s/ Bill J. Jones                Director                                    March 20, 2000
-----------------------------
Bill J. Jones

/s/ Thompson Kurrie, Jr.         Director                                    March 20, 2000
-----------------------------
Thompson Kurrie, Jr.

                                 Director                                    March --, 2000
-----------------------------
James B. Lanier, Jr.

/s/ Kennith D. McLeod            Director                                    March 20, 2000
-----------------------------
Kennith D. McLeod

                                 Director                                    March --, 2000
-----------------------------
Paul E. Parker
</TABLE>

                                       42
<PAGE>

<TABLE>
<S>                              <C>                                         <C>
/s/ Michael E. Ricketson         Chief Financial Officer                     March 20, 2000
-----------------------------    (Principal Financial Officer)
Michael E. Ricketson

/s/ F. Ferrell Scruggs, Sr.      Director                                    March 20, 2000
-----------------------------
F. Ferrell Scruggs, Sr.

/s/ D. Ramsay Simmons, Jr.       Director                                    March 20, 2000
-----------------------------
D. Ramsay Simmons, Jr.

/s/ John M. Simmons              Director                                    March 20, 2000
-----------------------------
John M. Simmons

/s/ Joe P. Singletary, Jr.       Director                                    March 20, 2000
-----------------------------
Joe P. Singletary, Jr.

/s/ Alvin R. Tuten, Jr.          Director                                    March 20, 2000
-----------------------------
Alvin R. Tuten, Jr.

/s/ C. Larry Wilkinson           Executive Vice President and Director       March 20, 2000
-----------------------------
C. Larry Wilkinson
</TABLE>

                                       43
<PAGE>

                         Index to Financial Statements


                                                                      Page
                                                                      ----
PAB Bankshares, Inc. and Subsidiaries

  Independent Auditors' Report......................................  F-2

  Consolidated Balance Sheets - December 31, 1999 and 1998..........  F-3

  Consolidated Statements of Income - Years ended December 31,
     1999, 1998 and 1997............................................  F-4

  Consolidated Statements of Comprehensive Income - Years Ended
     December 31, 1999, 1998 and 1997...............................  F-5

  Consolidated Statements of Stockholders' Equity - Years ended
     December 31, 1999, 1998 and 1997...............................  F-6

  Consolidated Statements of Cash Flows - Years Ended December 31,
     1999, 1998 and 1997............................................  F-7

  Notes to Consolidated Financial Statements - Years Ended
     December 31, 1999, 1998 and 1997...............................  F-8

                                      F-1
<PAGE>

                         INDEPENDENT AUDITOR'S REPORT
                         ----------------------------



Board of Directors and Stockholders
PAB Bankshares, Inc. and Subsidiaries


We have audited the accompanying consolidated balance sheet of PAB Bankshares,
Inc. and its Subsidiaries as of December 31, 1999 and the related consolidated
statements of income, comprehensive income, stockholders' equity and cash flows
for the year then ended. These financial statements are the responsibility of
the Company's management.  Our responsibility is to express an opinion on these
financial statements based on our audit.

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

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

We previously audited and reported on the consolidated balance sheet of PAB
Bankshares, Inc. and its Subsidiaries as of December 31, 1998 and the related
consolidated statements of income, comprehensive income, stockholders' equity
and cash flows for the two years ended December 31, 1998, prior to their
restatement for the 1999 pooling of interests.  The contribution of PAB
Bankshares, Inc. and Subsidiaries to total assets as of December 31, 1998 and
revenues and net income for the year ended December 31, 1998 represented 83%,
84% and 83% of the respective restated totals.  The contribution of PAB
Bankshares, Inc. and Subsidiaries to revenues and net income for the year ended
December 31, 1997 represented 57% and 55% of the respective restated totals.
Separate financial statements of the other companies included in the 1998
restated consolidated balance sheet and 1998 and 1997 restated consolidated
statements of income, comprehensive income, stockholders' equity and cash flows
were audited and reported on separately by other auditors.  We also audited the
combination of the accompanying consolidated balance sheet as of December 31,
1998 and consolidated statements of income, comprehensive income, stockholders'
equity and cash flows for the two years ended December 31, 1998, after
restatement for the 1999 and 1998 pooling of interests; in our opinion, such
consolidated statements have been properly combined on the basis described in
Note 1 of the notes to consolidated financial statements.


/s/ Stewart, Fowler & Stalvey, P.C.
-----------------------------------
Certified Public Accountants

Valdosta, Georgia
January 25, 2000

                                      F-2
<PAGE>

                     PAB BANKSHARES, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                          ---------------------------

<TABLE>
<CAPTION>

                                                        ASSETS
                                                       ---------
                                                                                                  DECEMBER 31,
                                                                                    -----------------------------------------
                                                                                        1999                          1998
                                                                                    ------------                  -----------
<S>                                                                                 <C>                           <C>
Cash and Cash Equivalents:
 Cash and due from banks                                                            $ 31,524,206                   27,222,696
 Interest-bearing deposits in other banks                                             11,616,628                   11,517,164
 Federal funds sold and securities purchased under agreement to resell                21,405,000                   16,405,000
                                                                                    ------------                  -----------
     Total Cash and Cash Equivalents                                                  64,545,834                   55,144,860

Time Deposits                                                                             99,000                      396,000
Investment securities available-for-sale, at fair value, Notes 1 and 2                78,925,871                  100,457,861
Investment in unconsolidated subsidiary, Notes 1 and 18                                   40,391                       34,814
Loans, net of allowance for loan losses ($5,037,074 - 1999; $5,171,905 - 1998)
 and unearned interest, Notes 1,5,7 and 15                                           489,380,093                  435,342,618
Bank Premises and equipment, Notes 1 and 3                                            16,076,124                   15,126,670
Property Acquired in Settlement of Loans and Other Real Estate Owned:
 Land and building of former banking offices, Notes 1 and 4                              302,759                      322,920
 Land and building held for lease, Notes 1 and 4                                         584,333                      590,486
 Property acquired in settlement of loans, Note 1                                        762,667                      438,474
Accrued interest receivable                                                            6,666,640                    6,062,115
Cash value of life insurance, Note 9                                                   3,429,167                    2,888,472
Goodwill and other intangible assets, Note 1                                           2,357,098                    2,713,762
Other assets, Note 1                                                                   1,798,716                      592,026
                                                                                    ------------                  -----------
     Total Assets                                                                   $664,968,693                  620,111,078
                                                                                    ============                  ===========

                                           LIABILITIES AND STOCKHOLDERS' EQUITY
                                           ------------------------------------
Deposits:
 Noninterest-bearing deposits, Note 6                                               $ 64,915,579                   72,073,495
 Interest-bearing deposits, Note 6                                                   451,288,404                  432,013,633
                                                                                    ------------                  -----------
     Total Deposits                                                                  516,203,983                  504,087,128

Federal funds purchased and securities sold under agreement to repurchase              4,673,036                    3,824,095
Advances from Federal Home Loan Bank, Note 7                                          60,112,240                   39,057,723
Other borrowed funds                                                                   9,155,058                    2,339,170
Accrued interest payable                                                               1,914,285                    1,662,309
Advance payments by borrowers for taxes and insurance                                     30,402                       52,672
Dividends payable                                                                        986,417                    1,114,654
Other Liabilities, Note 9                                                              2,156,012                    1,909,863
                                                                                    ------------                  -----------
     Total Liabilities                                                               595,231,433                  554,047,614
                                                                                    ------------                  -----------
Preferred Stockholders' Equity in Subsidiaries, Note 1                                   126,000                            0
                                                                                    ------------                  -----------
Stockholders' Equity:
 Common stock, no par value, 98,500,000 shares authorized,
   9,617,407 shares (1998 - 9,604,028) issued and 9,617,407
   shares (1998 - 9,604,028) outstanding                                               1,217,065                    1,217,065
 Preferred stock, no par value, 1,500,000 shares authorized,
   no shares issued or outstanding                                                             0                            0
 Additional paid in capital                                                           31,236,921                   31,095,359
 Retained earnings                                                                    37,336,119                   32,334,269
 Accumulated other comprehensive income (loss)                                          (178,845)                   1,416,771
                                                                                    ------------                  -----------
                                                                                      69,611,260                   66,063,464
                                                                                    ------------                  -----------
     Total Liabilities and Stockholders' Equity                                     $664,968,693                  620,111,078
                                                                                    ============                  ===========

</TABLE>
Note: The accompanying notes to consolidated financial statements are an
      integral part of this statement.

                                      F-3
<PAGE>

                     PAB BANKSHARES, INC. AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF INCOME
                       ---------------------------------

<TABLE>
<CAPTION>

                                                                                    YEAR ENDED DECEMBER 31,
                                                                      ------------------------------------------------
                                                                          1999               1998            1997
                                                                      -----------         ----------       ----------
<S>                                                                   <C>                 <C>              <C>
Interest Income:
Interest and fees on loans, Note 1                                    $42,459,938         40,514,800       37,303,921
Interest on investment securities:
 Taxable                                                                4,849,344          4,921,212        5,414,050
 Tax exempt                                                               249,259            315,524          247,061
Interest on federal funds sold                                            624,774          1,401,957          485,055
Interest on deposits in banks                                             606,012            455,972          635,629
                                                                      -----------         ----------       ----------
 Total                                                                 48,789,327         47,609,465       44,085,716
                                                                      -----------         ----------       ----------
Interest Expense:
Interest on deposits                                                   19,914,138         20,669,846       19,537,259
Interest on federal funds purchased                                       222,879            128,131           75,815
Interest on notes and mortgages                                                 0            151,582          239,779
Interest on other borrowed funds                                          262,114             97,709           30,127
Interest on advances from Federal Home Loan Bank, Note 7                2,507,423          2,391,277        1,342,044
                                                                      -----------         ----------       ----------
 Total                                                                 22,906,554         23,438,545       21,225,024
                                                                      -----------         ----------       ----------
Net Interest Income                                                    25,882,773         24,170,920       22,860,692

Provision for Loan Losses, Notes 1 and 5                                  985,188            903,404          792,900
                                                                      -----------         ----------       ----------
Net Interest Income After Provision for Loan Losses                    24,897,585         23,267,516       22,067,792
                                                                      -----------         ----------       ----------
Other Income:
Service charges on deposit accounts                                     3,629,687          3,280,408        3,080,730
Insurance commissions                                                     219,893            234,679          168,747
Fees on mortgage loans originated for sale                                569,121            725,439          243,904
Late charges and other loan fees                                          705,796            775,120          457,797
Equity in earnings of unconsolidated subsidiary,
 Note 18                                                                  680,578            368,064          255,877
Gain (Loss) on sale of loans                                                    0              1,989           23,955
Gain (Loss) on sale of other real estate                                    2,666             (6,036)           2,154
Gain (Loss) on sale of assets                                               8,223            109,063           (1,854)
Securities gains (losses), Note 1                                         (33,629)            11,313          (12,532)
Other income                                                              983,561            540,750          518,022
                                                                      -----------         ----------       ----------
 Total                                                                  6,765,896          6,040,789        4,736,800
                                                                      -----------         ----------       ----------
Other Expenses:
Compensation                                                            8,278,290          7,364,263        6,689,931
Other personnel expenses, Notes 8 and 9                                 2,218,671          1,760,304        1,538,491
Occupancy expense of bank premises                                        982,977            879,907          889,812
Furniture and equipment expense                                         1,440,998          1,416,560        1,347,018
Federal deposit insurance                                                 138,792            141,942          134,024
Postage and courier services                                              467,113            388,080          411,101
Supplies                                                                  512,247            547,060          592,802
Amortization, Note 1                                                      356,664            356,664          356,664
Other operating expenses                                                4,569,799          4,368,799        3,314,837
                                                                      -----------         ----------       ----------
 Total                                                                 18,965,551         17,223,579       15,274,680
                                                                      -----------         ----------       ----------
Income Before Income Taxes                                             12,697,930         12,084,726       11,529,912

Income Taxes, Notes 1 and 12                                            4,005,054          4,097,924        4,021,979
                                                                      -----------         ----------       ----------
Net Income                                                            $ 8,692,876          7,986,802        7,507,933
                                                                      ===========         ==========       ==========
Earnings Per Share, Note 1:
 Basic                                                                $       .90                .83              .79
                                                                      ===========         ==========       ==========
 Diluted                                                              $       .89                .81              .78
                                                                      ===========         ==========       ==========

</TABLE>

Note: The accompanying notes to consolidated financial statements are an
      integral part of this statement.

                                      F-4
<PAGE>

                     PAB BANKSHARES, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                -----------------------------------------------

<TABLE>
<CAPTION>
                                                                                    YEAR ENDED DECEMBER 31,
                                                                   -------------------------------------------------
                                                                       1999                1998              1997
                                                                   ------------         ----------         ---------
<S>                                                                <C>                  <C>                <C>
Net income                                                         $  8,692,876         7,986,802          7,507,933
                                                                   ------------         ---------          ---------
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities:
 Unrealized holding gains (losses) arising during period            (1,616,553)          606,898            440,759
 Less: reclassification adjustment for (gains) losses
  included in net income                                                 20,937            (7,043)             7,802
                                                                   ------------         ---------          ---------
 Other comprehensive income (loss)                                   (1,595,616)          599,855            448,561
                                                                   ------------         ---------          ---------
Comprehensive Income                                               $  7,097,260         8,586,657          7,956,494
                                                                   ============         =========          =========
</TABLE>

Note: The accompanying notes to consolidated financial statements are an
      integral part of this statement.

                                      F-5
<PAGE>

                     PAB BANKSHARES, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                -----------------------------------------------
<TABLE>
<CAPTION>
                                                                                             ACCUMULATED
                                                                                               OTHER
                              COMMON STOCK                      ADDITIONAL                  COMPREHENSIVE
                         -----------------------   PREFERRED      PAID IN       RETAINED        INCOME       TREASURY
                           SHARES       AMOUNT       STOCK        CAPITAL       EARNINGS        (LOSS)         STOCK        TOTAL
                         ----------   ----------   ---------    ----------     ----------  -------------   -----------   ----------
<S>                      <C>          <C>          <C>          <C>            <C>          <C>            <C>           <C>
Balances, December 31,
 1996, as previously
 reported                8,224,559    $1,263,745           0    25,902,632     14,873,848      (91,000)     1,074,547    40,874,678
Adjustment for
pooling of interests:
 Issuance of shares
  to shareholders of
  Baxley Federal
  Savings Bank           1,323,533             0           0     4,930,707     10,513,136      459,355              0    15,903,198
                         ---------    ----------    --------    ----------     ----------   ----------      ---------    ----------
Balances, December 31,
 1996, as restated       9,548,092     1,263,745           0    30,833,339     25,386,984      368,355      1,074,547    56,777,876
Issuance of shares
 to directors in lieu
 of fees                    15,268             0           0         4,069              0            0        (91,358)       95,427
Issuance of shares
 through dividend
 reinvestment plan          26,150             0           0       270,062              0            0              0       270,062
Issuance of shares
 through common stock
 purchase plan               4,810             0           0        50,732              0            0              0        50,732
Stock issued by pooled
 companies                       0             0           0       432,029              0            0              0       432,029
Net income                       0             0           0             0      7,507,933            0              0     7,507,933
Dividends                        0             0           0             0       (988,423)           0              0      (988,423)
Dividends-pooled
 companies                       0             0           0             0     (4,831,107)           0              0    (4,831,107)
Other comprehensive
 income (loss)                   0             0           0             0              0      448,561              0       448,561
                         ---------    ----------    --------    ----------     ----------   ----------      ---------    ----------
Balances, December 31,
 1997, as restated       9,594,320     1,263,745           0    31,590,231     27,075,387      816,916        983,189    59,763,090
Issuance of shares
 to directors in lieu
 of fees                     7,808             0           0        81,240              0            0              0        81,240
Issuance of shares
 through dividend
 reinvestment plan           1,650             0           0        19,685              0            0              0        19,685
Issuance of stock upon
 exercise of employee
 stock options                 250             0           0         2,515              0            0              0         2,515
Net income                       0             0           0             0      7,986,802            0              0     7,986,802
Dividends                        0             0           0             0     (1,997,476)           0              0    (1,997,476)
Dividends-pooled company         0             0           0             0       (730,444)           0              0      (730,444)
Stock issued by pooled
 companies                       0             0           0       338,197              0            0              0       338,197
Cancellation of
 treasury stock                  0       (46,680)          0      (936,509)             0            0       (983,189)            0
Other comprehensive
 income (loss)                   0             0           0             0              0      599,855              0       599,855
                         ---------    ----------    --------    ----------     ----------   ----------      ---------    ----------
Balances, December 31,
 1998, as restated       9,604,028     1,217,065           0    31,095,359     32,334,269    1,416,771              0    66,063,464
Issuance of shares
 to directors in lieu
 of fees                     9,503             0           0       114,630              0            0              0       114,630
Issuance of stock upon
 exercise of employee
 stock options               3,876             0           0        26,932              0            0              0        26,932
Net income                       0             0           0             0      8,692,876            0              0     8,692,876
Dividends                        0             0           0             0     (3,339,028)           0              0    (3,339,028)
Dividends-pooled
 company                         0             0           0             0       (341,918)           0              0      (341,918)
Dividends on preferred
 stock of subsidiaries           0             0           0             0        (10,080)           0              0       (10,080)
Other comprehensive
 income (loss)                   0             0           0             0              0   (1,595,616)             0    (1,595,616)
                         ---------    ----------    --------    ----------     ----------   ----------      ---------    ----------
Balances, December 31,
 1999                    9,617,407    $1,217,065           0    31,236,921     37,336,119     (178,845)             0    69,611,260
                         =========    ==========    ========    ==========     ==========   ==========      =========    ==========
</TABLE>
Note: The accompanying notes to consolidated financial statements are an
      integral part of this statement.
                                      F-6
<PAGE>

                     PAB BANKSHARES, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                     -------------------------------------
<TABLE>
<CAPTION>
                                                                                        YEAR ENDED DECEMBER 31,
                                                                       --------------------------------------------------------
                                                                           1999                   1998                 1997
                                                                       ------------            -----------          -----------
<S>                                                                    <C>                     <C>                  <C>
Cash Flows From Operating Activities:
Net income                                                             $  8,692,876              7,986,802            7,507,933
Adjustments to reconcile net income to net cash
 provided by operating activities:
  Depreciation                                                            1,412,249              1,185,923            1,144,058
  Deferred income taxes                                                    (184,024)              (108,625)            (139,553)
  Provision for loan losses                                                 985,188                903,404              792,900
  Amortization                                                              356,664                356,664              356,664
  Amortization (accretion) of securities                                     73,336                (90,462)             (45,690)
  (Gain) loss on sale of assets                                              (8,223)              (109,063)               1,854
  (Gain) loss on sale of loans                                                    0                 (1,989)             (23,955)
  (Gain) loss on sale of other real estate owned                             (2,666)                 6,036               (2,154)
  Securities (gains) losses                                                  33,629                (11,313)              12,532
  Minority interests                                                            823                    741                  595
  Equity in earnings of unconsolidated subsidiary                          (680,578)              (368,064)            (255,877)
  Dividend received from unconsolidated subsidiary                          675,000                400,000              320,000
  Increase in cash value of life insurance                                 (540,695)              (104,634)                   0
  Other non-cash expenses                                                         0                  8,263               98,286
  FHLB stock dividend                                                             0                (36,800)             (50,300)
Change in assets and liabilities:
 (Increase) decrease in accrued interest receivable                        (604,525)              (344,727)            (451,772)
 Increase (decrease) in accrued interest payable                            251,976                (62,383)             (49,682)
 (Increase) decrease in other assets                                        (54,681)              (163,723)            (352,562)
 Increase (decrease) in income taxes payable                                      0                (71,693)              11,986
 Increase (decrease) in other liabilities                                   359,956                214,131              606,238
                                                                       ------------            -----------          -----------
Net cash provided (used) by operating activities                         10,766,305              9,588,488            9,481,501
                                                                       ------------            -----------          -----------
Cash Flows From Investing Activities:
 Capital expenditures                                                    (2,343,484)            (3,537,656)          (1,600,443)
 Proceeds from sale of assets                                                16,318                331,794                    0
 (Increase) decrease in time deposits                                       297,000              3,002,000           (1,703,000)
 (Increase) decrease in loans                                           (55,344,190)           (31,495,210)         (39,239,555)
 Purchase of life insurance policies                                              0                      0             (826,540)
 Principal payments on mortgage-backed securities                         7,435,628             10,209,655            1,286,558
 Purchase of available-for-sale securities                              (16,695,894)           (55,613,823)         (23,016,202)
 Proceeds from sales and calls of available-for-sale
  securities                                                             12,842,700             20,576,316           14,273,949
 Purchase of held-to-maturity securities                                          0                      0           (1,245,625)
 Proceeds from maturities of available-for-sale
  securities                                                             15,278,991             13,127,793           15,223,371
 Proceeds from maturities of held-to-maturity
  securities                                                                      0              1,050,000              500,000
                                                                       ------------            -----------          -----------
Net cash provided (used) by investing activities                        (38,512,931)           (42,349,131)         (36,347,487)
                                                                       ------------            -----------          -----------
Cash Flows From Financing Activities:
 Increase (Decrease) in federal funds purchased                             848,941              3,824,095                    0
 Proceeds of additional stock issued                                         26,932                340,712              351,412
 Increase (decrease) in time deposits                                    14,311,045              8,903,388            7,411,200
 Increase (decrease) in other deposits                                   (2,194,190)            22,627,579           13,931,580
 Advances from Federal Home Loan Bank                                    33,027,000             19,136,000           25,030,000
 Payments on long-term indebtedness                                     (11,972,483)           (14,073,950)         (12,063,076)
 Increase (Decrease) other borrowings                                     6,815,888              1,334,316             (243,075)
 Dividends paid                                                          (3,819,263)            (2,588,387)          (5,619,595)
 Proceeds of preferred stock issued by subsidiaries                         126,000                      0                    0
 (Increase) Decrease in advance payments by borrowers
  for taxes and insurance                                                   (22,270)              (127,650)              20,817
                                                                       ------------            -----------          -----------
Net cash provided (used) by financing activities                         37,147,600             39,376,103           28,819,263
                                                                       ------------            -----------          -----------
Net Increase (Decrease) in Cash and Cash
 Equivalents                                                              9,400,974              6,615,460            1,953,277
Cash and Cash Equivalents at Beginning of Period                         55,144,860             48,529,400           46,576,123
                                                                       ------------            -----------          -----------
Cash and Cash Equivalents at End of Period                             $ 64,545,834             55,144,860           48,529,400
                                                                       ============            ===========          ===========
Supplemental Disclosures of Cash Flow Information
-------------------------------------------------
Cash Paid During The Period For:
 Interest                                                              $ 22,654,578             23,500,928           21,274,706
                                                                       ============            ===========          ===========
 Income taxes                                                          $  4,262,579              4,443,569            4,109,240
                                                                       ============            ===========          ===========
Schedule of Non-Cash Investing and Financing Activities
-------------------------------------------------------
Total increase (decrease) in unrealized losses on
 securities available-for-sale                                         $  2,514,112               (909,933)            (722,094)
                                                                       ============            ===========          ===========
Stock issued to directors in payment of fees and
 stock issued through dividend reinvestment plan                       $    114,630                100,925              365,489
                                                                       ============            ===========          ===========
</TABLE>
Note: The accompanying notes to consolidated financial statements are an
      integral part of this statement.
                                            F-7
<PAGE>

                     PAB BANKSHARES, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  ------------------------------------------

Note 1 - Summary of Significant Accounting Policies
---------------------------------------------------

Nature of operations:  PAB Bankshares, Inc. is engaged in the activity of
providing traditional banking services through its banking subsidiaries
consisting of Park Avenue Bank (Valdosta, Georgia), Farmers and Merchants Bank
(Adel, Georgia), First Community Bank of Southwest Georgia (Bainbridge,
Georgia), Eagle Bank and Trust (Statesboro, Georgia) and Baxley Federal Savings
Bank (Baxley, Georgia).  All are state-chartered banks, except for Baxley which
is a federally chartered stock savings bank.  The Banks primarily grant
agribusiness, commercial, consumer and real estate loans with a market area that
includes predominately Lowndes County, Cook County, Decatur County, Grady
County, Bulloch County, Appling County and Jeff Davis County and the immediate
outlying areas.  The composition of the Banks' loan portfolio is detailed in
Note 5 of these financial statements.  The Banks limit investment securities to
U.S. Treasury obligations, obligations of other U.S. Government agencies and
corporations, obligations of state and political subdivisions and selected
mutual funds.  The Banks also purchase time deposits with other banks in
denominations generally not exceeding $100,000 per bank and sells federal funds
to major correspondent banks.

Through First Community Bank of Southwest Georgia, PAB Bankshares, Inc. also
owns one-half of the issued and outstanding stock of an unconsolidated service
corporation subsidiary, Empire Financial Services, Inc., which is primarily
engaged in the origination and servicing of commercial real estate loans.

In December 1999, the Company formed PAB Financial Services, LLC.  Through this
subsidiary, the Company began providing investment services.  Additionally,
during 1999, Park Avenue Bank and First Community Bank of Southwest Georgia
formed the subsidiaries PAB Holdings, Inc., PAB Investments, Inc., FCB Holdings,
Inc. and FCB Investments, Inc.  PAB Investments, Inc. and FCB Investments, Inc.
were formed as Real Estate Investment Trusts(REITs).  PAB Holdings, Inc. and FCB
Holdings, Inc. each own 100% of the common stock and 87% of the preferred stock
of the REITs.  Park Avenue Bank and First Community Bank of Southwest Georgia
own 100% of the common stock of PAB Holdings, Inc. and FCB Holdings, Inc.  The
new subsidiaries were capitalized with the transfer of qualifying mortgage loans
from the Park Avenue Bank and First Community Bank of Southwest Georgia in the
approximate amount of $43.2 million and $29.9 million, respectively, and through
the issuance of 1,000 shares of preferred stock by each of PAB Investments, Inc.
and FCB Investments, Inc.  The preferred stock is 8% with a par value of $500
per share. The REITs were established to enable the banks to readily gain access
to the capital markets and to enable the banks to realize State tax benefits.
The holding companies were established to assist the banks in managing their
investment in the REITS.

Consolidated financial statements:  The accompanying consolidated financial
statements include the accounts of PAB Bankshares, Inc. and its subsidiaries
including subsidiaries of Park Avenue Bank and First Community Bank of Southwest
Georgia, as discussed previously.  All subsidiaries are 100% owned by the
respective entity except for Farmers and Merchants Bank which is 99.9% owned.
Intercompany transactions and balances have been eliminated in consolidation.

Investment securities:  Effective January 1, 1994, debt securities that
management has the ability and intent to hold to maturity are classified as
held-to-maturity and carried at cost adjusted for amortization of premiums and
accretion of discounts using methods approximating the interest method.  Other
securities are classified as available-for-sale and are carried at fair value.
Unrealized gains and losses on securities available-for-sale are recognized as
direct increases or decreases in stockholders' equity.  Cost of securities sold
is determined using the specific identification method.

                                      F-8
<PAGE>

Note 1 - Summary of Significant Accounting Policies (Continued)
---------------------------------------------------------------

Bank premises and equipment and related depreciation:  Assets are stated at
cost, less depreciation.  Depreciation of bank premises and equipment, including
a building of a former banking office and a building acquired for lease, is
computed using the straight-line method over the estimated useful lives of the
assets.  Expenditures for maintenance, repairs, removals and betterment's which
do not materially prolong the useful lives of the assets are charged to income
as incurred.  The cost of property retired or sold, and the related accumulated
depreciation, is removed from the accounts, and any gain or loss, after taking
into consideration proceeds from sale, is transferred to income.

Loans and allowance for losses on loans:  Loans are stated at the amount of
unpaid principal, reduced by unearned interest and an allowance for loan losses.
Unearned interest on installment loans is recognized as income over the terms of
the loans by the interest method.  Interest on other loans is calculated by
using the simple interest method on daily balances of the principal amount
outstanding. The Banks provide for possible loan losses in amounts based upon
management's evaluation of the collectibility of loans and other relevant
factors including the nature of the portfolio, credit concentrations, trends in
historical loss experience, specific impaired loans and economic conditions.
Allowances for impaired loans are generally determined based on collateral
values or the present value of estimated cash flows.  The allowance is increased
by a provision for loan losses, which is charged to expense, and reduced by
charge-offs, net of recoveries.  Accrual of interest is discontinued when
management believes that the borrowers' financial condition is such that
collection of interest is doubtful.

Loan fees:  For longer term loans secured by real estate that are originated and
retained in the Banks' loan portfolios, loan origination fees and certain direct
loan origination costs are deferred and amortized to interest income over the
contractual life of the loan using the interest method.  For other loans, fees
are included in income as charged to the customer and the direct costs of
origination are expensed as incurred.  Such method of accounting for loan fees
is in conformity with generally accepted accounting principles in all material
respects.

Other real estate owned:  Real estate acquired in settlement of loans is
initially recorded at market value at acquisition less estimated costs to sell
and subsequently carried at the lower of cost or market value less estimated
costs to sell.  Costs related to holding and maintaining real estate are charged
to operations and costs relating to improvement of the real estate are
capitalized.  Land acquired and held for future development is carried at cost.

Amortization:  Goodwill is being amortized over periods ranging from fifteen to
twenty-five years by the straight-line method.  Core deposit intangibles are
being amortized over a period of ten years.  The Company continually reviews
goodwill and other intangible assets on an objective and subjective basis for
any impairment which might effect the carrying value or remaining life of the
intangible asset.  Subjective factors considered include the legal and
regulatory environment, demand, competition and other economic factors.  On an
objective basis, the Company computes the discounted present value of projected
subsidiary net income and compares the result with the carrying value of
intangible assets.  If the carrying value exceeds the discounted present value
of projected net income, the Company records a write-down or reduces the
remaining period of amortization.  To date, the Company has not had to make any
such adjustments.

                                      F-9
<PAGE>

Note 1 - Summary of Significant Accounting Policies (Continued)
---------------------------------------------------------------

Earnings per share:  Earnings per share are computed on the weighted average
number of shares and common equivalent shares outstanding.  Weighted average
shares used in the computation of earnings per share were as follows:
<TABLE>
<CAPTION>

                                  YEAR ENDED DECEMBER 31, 1999   YEAR ENDED DECEMBER 31, 1998   YEAR ENDED DECEMBER 31, 1997
                                  -----------------------------  -----------------------------  ----------------------------
                                              WEIGHTED    PER-               WEIGHTED    PER-              WEIGHTED    PER-
                                               AVERAGE   SHARE                AVERAGE   SHARE               AVERAGE   SHARE
                                    INCOME     SHARES    AMOUNT    INCOME     SHARES    AMOUNT   INCOME     SHARES    AMOUNT
                                  ----------  ---------  ------  ----------  ---------  ------  ---------  ---------  ------
<S>                               <C>         <C>        <C>     <C>         <C>        <C>     <C>        <C>        <C>
Basic Earnings Per Share:
  Net Income                      $8,692,876  9,612,634   $ .90   7,986,802  9,602,946   $ .83  7,507,933  9,544,959   $ .79
                                                          =====                          =====                         =====

Effect of Dilutive Securities:
  Stock Options                            0    136,528                   0    210,879                  0     82,710
                                  ----------  ---------          ----------  ---------          ---------  ---------

Diluted Earning Per Share:
  Net Income                      $8,692,876  9,749,162   $ .89  $7,986,802  9,813,825   $ .81  7,507,933  9,627,669   $ .78
                                  ==========  =========   =====  ==========  =========   =====  =========  =========   =====
</TABLE>

The weighted average shares used in calculating earnings per share information
has been adjusted to reflect a two-for-one stock split in 1998 and 1996.  No
transactions occurred after December 31, 1999 and before issuance of the
financial statements that would have changed materially the number of common
shares or potential common shares outstanding at December 31, 1999 if the
transaction had occurred before the end of the period.

Income taxes:  Deferred income taxes are reported for temporary differences
between items of income or expense reported in the financial statements and
those reported for income tax purposes.  At December 31, 1999 and 1998, other
assets included a deferred income tax charge of $1,171,251 and $19,242,
respectively.

Cash and cash equivalents:  For purposes of the statements of cash flows, cash
and cash equivalents include cash on hand, amounts due from banks and Federal
Funds sold.

Investment in unconsolidated subsidiary:  Investment in unconsolidated
subsidiary is accounted for under the equity method.

Off balance sheet financial instruments:  In the ordinary course of business,
the Banks have entered into off balance sheet financial instruments consisting
of commitments to extend credit and standby letters of credit.  Such financial
instruments are recorded in the financial statements when they become payable.

Use of estimates:  The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period.  Actual results could differ from those estimates.

Certain significant estimates:  Material estimates that are particularly
susceptible to significant change relate to the determination of the allowance
for losses on loans and the valuation of real estate acquired in connection with
foreclosures or in satisfaction of loans.  In connection with the determination
of allowances for losses on loans and the valuation of foreclosed real estate,
management obtains independent appraisals for significant properties.

                                      F-10
<PAGE>

Note 1 - Summary of Significant Accounting Policies (Continued)
---------------------------------------------------------------

While management uses available information to recognize losses on loans and
foreclosed real estate, future additions to the allowances may be necessary
based on changes in local economic conditions.  In addition, regulatory
agencies, as an integral part of their examination process, periodically review
the Banks' allowances for losses on loans and foreclosed real estate.  Such
agencies may require the Banks to recognize additions to the allowances based on
their judgements about information available to them at the time of their
examination.  It is at least reasonably possible that the allowances for losses
on loans and foreclosed real estate may change in the near term.

Stock-based compensation:  In October 1995, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards (SFAS) No. 123,
Accounting for Stock-Based Compensation.  The Company has elected to disclose
the proforma effect on net income as if the fair value based method of
accounting for stock options had been used.

Fair values of financial instruments:  Statement of Financial Accounting
Standards No. 107, Disclosures about Fair Value of Financial Instruments,
requires disclosure of fair value information about financial instruments,
whether or not recognized in the statement of financial condition.  In cases
where quoted market prices are not available, fair values are based on estimates
using present value or other valuation techniques.  Those techniques are
significantly affected by the assumptions used, including the discount rate and
estimates of future cash flows. In that regard, the derived fair value estimates
cannot be substantiated by comparison to independent markets, and, in many
cases, could not be realized in immediate settlement of the instruments.
Statement No. 107 excludes certain financial instruments and all nonfinancial
instruments from its disclosure requirements.  Accordingly, the aggregate fair
value amounts presented do not represent the underlying value of the Company.

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

 Cash and cash equivalents:  The carrying amounts reported in the balance sheet
 for cash and cash equivalents approximate those assets' fair values.

 Time deposits:  Fair values for time deposits are estimated using a discounted
 cash flow analysis that applies interest rates currently being offered on
 certificates to a schedule of aggregated contractual maturities on such time
 deposits.

 Investment securities:  Fair values for investment securities are based on
 quoted market prices, where available.  If quoted market prices are not
 available, fair values are based on quoted market prices of comparable
 instruments.

 Loans:  For variable-rate loans that reprice frequently and with no significant
 change in credit risk, fair values are based on carrying amounts.  The fair
 values for other loans (for example, fixed rate commercial real estate and
 rental property mortgage loans and commercial and industrial loans) are
 estimated using discounted cash flow analysis, based on interest rates
 currently being offered for loans with similar terms to borrowers of similar
 credit quality.  Loan fair value estimates include judgements regarding future
 expected loss experience and risk characteristics.  The carrying amount of
 accrued interest receivable approximates its fair value.

                                      F-11
<PAGE>

Note 1 - Summary of Significant Accounting Policies (Continued)
---------------------------------------------------------------

 Deposits:  The fair values disclosed for demand deposits (for example, checking
 accounts, interest-bearing checking accounts and savings accounts) are, by
 definition, equal to the amount payable on demand at the reporting date (that
 is, their carrying amounts).  The fair values for certificates of deposit are
 estimated using a discounted cash flow calculation that applies interest rates
 currently being offered on certificates to a schedule of aggregated contractual
 maturities on such time deposits.  The carrying amount of accrued interest
 payable approximates fair value.

 Short-term borrowings, notes payable and advances from Federal Home Loan Bank:
 The fair value of short-term borrowings, notes payable and advances from
 Federal Home Loan Bank are estimated using rates currently available for debt
 with similar terms and remaining maturities.

 Other liabilities:  Commitments to extend credit were evaluated and fair value
 was estimated using the terms for similar agreements, taking into account the
 remaining terms of the agreements and the present creditworthiness of the
 counterparties.  For fixed-rate loan commitments, fair value also considers the
 difference between current levels of interest rates and the committed rates.

Advertising:  The Company expenses advertising costs as they are incurred.
Advertising costs charged to expense were $332,882, $313,374 and $302,399 for
the years ended December 31, 1999, 1998 and 1997, respectively.

Capital structure:  During 1996 and 1998, the Company had a two-for-one stock
split.  The effect of the stock split was applied retroactively to previous
years. During 1999, the number of authorized shares of common stock was
increased from 15,000,000 to 98,500,000 shares.  Also, during 1997, the Articles
of Incorporation were restated to authorize the issuance of 1,500,000 shares of
preferred stock.  As of December 31, 1999, no shares of preferred stock had been
issued.

Segment reporting:  The Company is engaged in the activity of providing
traditional banking services through its commercial and savings bank
subsidiaries and investment services (beginning December 1999) through PAB
Financial Services, LLC as previously discussed under "nature of operations".
The Company does not have reportable segments, foreign operations, assets
located in foreign countries or major customers, as defined in Statement of
Financial Accounting Standards No. 131 (Disclosures About Segments of an
Enterprise and Related Information).

Reclassifications:  Certain amounts in the 1998 and 1997 consolidated financial
statements have been reclassified to conform with the presentation adopted in
1999.

New accounting standards: In June 1996, the FASB issued SFAS No. 125 (Accounting
For Transfers And Servicing Of Financial Assets And Extinguishments Of
Liabilities).  This statement provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishments of liabilities.
Those standards are based on consistent application of a financial-components
approach that focuses on control.  Under that approach, after a transfer of
financial assets, an entity recognizes the financial and servicing assets it
controls and the liabilities it has incurred, derecognizes financial assets when
control has been surrendered and derecognizes liabilities when extinguished.
This statement provides consistent standards for distinguishing transfers of
financial assets that are sales from transfers that are secured borrowings.  The
statement applies to transfers and servicing of financial assets and
extinguishments of liabilities occurring after December 31, 1996.  However, as a
result of an amendment to SFAS No. 125 by the FASB in December 1996, certain
provisions of SFAS No. 125 are deferred for an additional year.  Adoption of the
new accounting standard did not have a material impact on the Company's
financial statements.

                                      F-12
<PAGE>

Note 1 - Summary of Significant Accounting Policies (Continued)
---------------------------------------------------------------

In February 1997, the FASB issued SFAS No. 128 (Earnings Per Share).  This
statement establishes standards for computing and presenting earnings per share
and applies to entities with publicly held common stock or potential common
stock. This statement simplifies the standards for computing earnings per share
previously found in APB Opinion No. 15 (Earnings Per Share) and makes them
comparable to international earnings per share standards.  It replaces the
presentation of primary earnings per share with a presentation of basic earnings
per share.  It also requires dual presentation of basic and diluted earnings per
share on the face of the income statement for all entities with complex capital
structures and requires a reconciliation of the numerator and denominator of the
basic earnings per share computation to the numerator and denominator of the
diluted earnings per share computation.  Basic earnings per share excludes
dilution and is computed by dividing income available to common stockholders by
the weighted-average number of common shares outstanding for the period.
Diluted earnings per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity.  Diluted earnings per share is computed similarly
to fully diluted earnings per share pursuant to Opinion 15.  This statement is
effective for financial statements issued for periods ending after December 15,
1997.  The adoption of this statement did not have a material impact on the
company's financial statements.

In February 1997, the FASB issued SFAS No. 129 (Disclosure Of Information About
Capital Structure).  This statement establishes standards for disclosing
information about an entity's capital structure.  It applies to all entities.
This statement continues the previous requirements to disclose certain
information about an entity's capital structure found in APB Opinions No. 10
(Omnibus Opinion - 1996), No. 15 (Earnings Per Share) and FASB No. 47
(Disclosure Of Long-Term Obligations), for entities that were subject to the
requirements of those standards.  This statement is effective for financial
statements issued for periods ending after December 15, 1997.  The adoption of
this statement did not have a material impact on the Company's financial
statements.

In June 1997, the FASB issued SFAS No. 130 (Reporting Comprehensive Income).
This statement establishes standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains and losses) in a full set
of general-purpose financial statements.  This statement requires that all items
that are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements.  This statement does not
require a specific format for that financial statement but requires that an
enterprise display an amount representing total comprehensive income for the
period in that financial statement.  This statement requires that an enterprise
(a) classify items of other comprehensive income by their nature in a financial
statement and (b) display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the equity
section of a statement of financial position.  This statement is effective for
fiscal years beginning after December 15, 1997.  The adoption of this statement
did not have a material impact on the Company's financial statements.

                                      F-13
<PAGE>

Note 1 - Summary of Significant Accounting Policies (Continued)
---------------------------------------------------------------

In June 1997, the FASB issued SFAS No. 131 (Disclosures About Segments Of An
Enterprise And Related Information).  This statement establishes standards for
the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders.  It also establishes standards for related
disclosures about products and services, geographic areas and major customers.
This statement requires that a public business enterprise report financial and
descriptive information about its reportable operating segments.  Operating
segments are components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance.  Generally, financial information is required to be reported on the
basis that it is used internally for evaluating segment performance and deciding
how to allocate resources to segments.  The statement requires that a public
business enterprise report a measure of segment profit or loss, certain specific
revenue and expense items and segment assets.  It requires reconciliations of
total segment revenues, total segment profit or loss, total segment assets and
other amounts disclosed for segments to corresponding amounts in the
enterprise's general-purpose financial statements.  It requires that all public
business enterprises report information about the revenues derived from the
enterprise's products or services (or groups of similar products and services),
about the  Countries in which the enterprise earns revenues and holds assets and
about major customers regardless of whether that information is used in making
operating decisions.  The statement also requires that a public business
enterprise report descriptive information about the way that the operating
segments were determined, the products and services provided by the operating
segments, differences between the measurements used in reporting segment
information and those used in the enterprise's general-purpose financial
statements and changes in the measurement of segment amounts from period to
period.  This statement is effective for financial statements for periods
beginning after December 15, 1997.  The adoption of this statement did not have
a material impact on the Company's financial statements.

In February 1998, the FASB issued SFAS No. 132 (Employers' Disclosures About
Pensions and Other Postretirement Benefits).  This statement revises employers'
disclosures about pension and other postretirement benefit plans.  It does not
change the measurement or recognition of those plans.  It standardizes the
disclosure requirements for pensions and other postretirement benefits to the
extent practical, requires additional information on changes in the benefit
obligations and fair values of plan assets that will facilitate financial
analysis and eliminate certain disclosures previously required by FASB
Statements No. 87, 88 and 106.  The statement suggests combined formats for
presentation of pension and other postretirement benefit disclosures.  This
statement is effective for fiscal years beginning after December 15, 1997.  The
adoption of this statement did not have a material impact on the Company's
financial statements.

In June 1998, the FASB issued SFAS No. 133 (Accounting for Derivative
Instruments and Hedging Activities).  This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities.  It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value.  If certain conditions are
met, a derivative may be specifically designated as (a) a hedge of the exposure
to changes in the fair value of a recognized asset or liability or an
unrecognized firm commitment, (b) a hedge of the exposure to variable cash flows
of a forecasted transaction, or (c) a hedge of the foreign currency exposure of
a net investment in a foreign operation, an unrecognized firm commitment, an
available-for-sale security or a foreign-currency-denominated forecasted
transaction.  Under this statement, an entity that elects to apply hedge
accounting is required to establish at the inception of the

                                      F-14
<PAGE>

Note 1 - Summary of Significant Accounting Policies (Continued)
---------------------------------------------------------------

hedge the method it will use for assessing the effectiveness of the hedging
derivative and the measurement approach for determining the ineffective aspect
of the hedge.  Those methods must be consistent with the entity's approach to
managing risk.  As a result of an amendment by SFAS No. 137, this statement is
effective for all fiscal quarters of fiscal years beginning after June 15, 2000.
Initial application of this statement should be as of the beginning of an
entity's fiscal quarter; on that date, hedging relationships must be designated
anew and documented pursuant to the provisions of this statement.  The adoption
of this statement is not expected to have a material impact on the Company's
financial statements.

In October 1998, the FASB issued SFAS No. 134 (Accounting for Mortgage-Backed
Securities Retained after the Securitization of Mortgage Loans Held For Sale by
a Mortgage Banking Enterprise).  This statement amends Statement No. 65
(Accounting for Certain Mortgage Banking Activities) to require that after the
securitization of a mortgage loan held for sale, an entity engaged in mortgage
banking activities classify the resulting mortgage-backed securities or other
retained interests based on its ability and intent to sale or hold those
investments.  This statement conforms the subsequent accounting for securities
retained after the securitization of mortgage loans by a mortgage banking
enterprise with the subsequent accounting for securities retained after the
securitization of other types of assets by a non-mortgage banking enterprise.
This statement shall be effective for the first fiscal quarter beginning after
December 15, 1998.  The adoption of this statement did not have a material
impact on the Company's financial statements.

Proposed accounting standards:  In April of 1999, the FASB voted unanimously to
eliminate pooling of interest as a method of accounting for business
combinations. An exposure draft of a proposed statement of financial accounting
standards on business combinations and intangible assets was issued in December
1999.  This proposed statement would eliminate use of the pooling of interest
method to account for business combinations and require the purchase method to
be used to account for all business combinations.  Under the proposed standard,
an acquiring enterprise shall allocate the cost of an acquired enterprise to
assets acquired and liabilities assumed.  Prior to that allocation, the
acquiring enterprise shall review the purchase consideration, if other than
cash, to ensure that it has been valued in accordance with the requirements of
Accounting Principles Board Opinion No. 16 and identify all of the assets
acquired and liabilities assumed, including intangible assets.  The excess of
the cost of the acquired enterprise over the sum of the amounts assigned to
identifiable assets acquired less liabilities assumed shall be recognized as an
asset, commonly referred to as goodwill.  Acquired identifiable intangible
assets that cannot be reliably measured shall be included in the amount recorded
as goodwill.  If at the date of acquisition more than one of the following
factors is present in the business combination transaction, goodwill shall be
tested for recoverability no later than two years after the acquisition date.
Those factors include (a) a significant premium was paid over the market
capitalization of the acquired enterprise prior to the start of acquisition
discussions, (b) the acquisition involved a clearly visible auction or bidding
process, (c) the amount of goodwill was significant relative to the cost of the
acquired enterprise or (d) the purchase consideration was primarily in the form
of the acquiring enterprise's shares.  With certain exceptions, the proposed
statement will require that the reliably measurable identifiable intangible
assets and goodwill be amortized over their useful economic lives but not over a
period longer than twenty years.  The proposed statement will require the use of
the straight-line basis for goodwill and a method for intangibles that reflects
the pattern in which the economic benefits of the intangible assets have been
consumed or, if that pattern cannot be reliably determined, a straight-line
amortization method shall be used.  The provisions of the proposed statement
shall be effective for business combinations initiated after the issuance date
of the statement.  Since the provisions of the proposed statement will be
applied prospectively, the

                                      F-15
<PAGE>

Note 1 - Summary of Significant Accounting Policies (Continued)
---------------------------------------------------------------

effect of the proposed statement on the Company's financial statements cannot
currently be determined.  However, future possible business combinations that
would otherwise qualify for the pooling of interest method of accounting, will
no longer qualify for such method of accounting.


Note 2 - Investment Securities
------------------------------

Investment securities are carried in the accompanying balance sheets as follows:

                                                          DECEMBER 31,
                                                 -----------------------------
                                                    1999              1998
                                                 -----------       -----------
Available-for-sale                               $78,925,871       100,457,861
Held-to-maturity                                           0                 0
                                                 -----------       -----------

                                                 $78,925,871       100,457,861
                                                 ===========       ===========

Securities available-for-sale consist of the following:
---------------------------------------------------------

As of December 31, 1999:

<TABLE>
<CAPTION>
                                                                          GROSS        GROSS
                                                            AMORTIZED   UNREALIZED  UNREALIZED     MARKET
                                                              COST        GAINS       LOSSES        VALUE
                                                           -----------  ----------  -----------  -----------
<S>                                                        <C>           <C>        <C>          <C>
U.S. Treasury Obligations                                  $ 4,355,199      12,842        5,134    4,362,907
Obligations of other U.S. Government agencies
  and corporations                                          41,593,298         742      799,249   40,794,791
Obligations of state and political subdivisions              5,508,114      20,986       42,829    5,486,271
Mortgage backed securities                                  21,594,772       9,101      487,153   21,116,720
Federal Home Loan Bank stock                                 3,854,800           0            0    3,854,800
Mutual Funds                                                 1,062,194           0      215,090      847,104
Community Financial Services, Inc. stock                       811,034           0            0      811,034
Other stocks                                                   426,312   1,240,932       15,000    1,652,244
                                                           -----------   ---------  -----------  -----------
                                                           $79,205,723   1,284,603    1,564,455   78,925,871
                                                           ===========   =========  ===========  ===========
</TABLE>
As of December 31, 1998:
<TABLE>
<CAPTION>

                                                                          GROSS        GROSS
                                                            AMORTIZED   UNREALIZED  UNREALIZED     MARKET
                                                              COST        GAINS       LOSSES        VALUE
                                                           -----------  ----------  -----------  -----------
<S>                                                        <C>          <C>         <C>          <C>
U.S. Treasury Obligations                                  $ 9,904,609     194,079            0   10,098,688
Obligations of other U.S. Government agencies
  and corporations                                          44,183,715     350,127       11,964   44,521,878
Obligations of state and political subdivisions              9,096,559     119,448        2,676    9,213,331
Mortgage backed securities                                  29,355,123     178,645      136,820   29,396,948
Federal Home Loan Bank stock                                 3,509,000           0            0    3,509,000
Mutual Funds                                                   287,194           0        3,813      283,381
Federal Reserve Bank stock                                     696,794           0            0      696,794
Community Financial Services, Inc. stock                     1,025,000           0      146,572      878,428
Other stocks                                                   165,607   1,708,806       15,000    1,859,413
                                                           -----------   ---------  -----------  -----------
                                                           $98,223,601   2,551,105      316,845  100,457,861
                                                           ===========   =========  ===========  ===========
</TABLE>

                                      F-16
<PAGE>

Note 2 - Investment Securities (Continued)
------------------------------------------

The amortized cost and estimated market value of debt securities at December 31,
1999, by contractual maturity, are shown below.  Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call of prepayment penalties.
<TABLE>
<CAPTION>

                                      SECURITIES
                                  AVAILABLE-FOR-SALE
                                -----------------------
                                               MARKET
                                   COST        VALUE
                                -----------  ----------
<S>                             <C>          <C>
Due in one year or less         $ 7,714,533   7,711,067
Due after one year through
 five years                      46,559,265  45,733,311
Due after five years through
 ten years                        4,057,841   4,027,573
Due after ten years              14,719,744  14,288,738
                                -----------  ----------
                                $73,051,383  71,760,689
                                ===========  ==========
</TABLE>

Proceeds from sales and calls of available-for-sale securities during 1999 were
$12,842,700 with gross gains of $7,827 and gross losses of $41,456 being
recognized.

Proceeds from sales and calls of available-for-sale securities during 1998 were
$20,576,316 with gross gains of $42,524 and gross losses of $31,211 being
recognized.

Proceeds from sales and calls of available-for-sale securities during 1997 were
$14,273,949 with gross gains of $11,484 and gross losses of $24,016 being
recognized.

During 1998, debt securities with an amortized cost of $3,495,036 were
transferred from held-to-maturity to available-for-sale.  The securities had an
unrealized gain of $34,964.

Securities with a carrying value of approximately $42,195,456 and $39,070,766 at
December 31, 1999 and 1998, respectively, were pledged to secure public monies
as required by law.


Note 3 - Bank Premises and Equipment
------------------------------------

Bank premises and equipment are stated at cost less accumulated depreciation,
and include the following:
<TABLE>
<CAPTION>

                                              DECEMBER 31,
                                      --------------------------   ESTIMATED
                                          1999          1998      USEFUL LIVES
                                      -------------  -----------  ------------
<S>                                   <C>            <C>          <C>
 Land                                  $ 3,880,781    3,625,781
 Bank premises and improvements         10,830,098   10,725,407   5-40 years
 Furniture, fixtures and equipment       8,194,104    7,307,601   5-15 years
 Automobiles                               201,951      201,951   3-5 years
 Deposit on equipment                            0       41,988
 Construction in progress                1,059,008            0
                                       -----------   ----------
                                        24,165,942   21,902,728
 Less accumulated depreciation          (8,089,818)  (6,776,058)
                                       -----------   ----------

                                       $16,076,124   15,126,670
                                       ===========   ==========
</TABLE>
Depreciation expense amounted to $1,412,249, $1,185,923 and $1,144,058 for the
years ended December 31, 1999, 1998 and 1997, respectively.

                                      F-17
<PAGE>

Note 3 - Bank Premises and Equipment (Continued)
------------------------------------------------

As of December 31, 1999, construction activities included the construction of a
new office building for the Company and various improvements at certain of the
bank subsidiaries.  Construction in progress as of December 31, 1999 amounted to
$1,059,008 and total construction cost for these projects amounts to
approximately $2,022,000.


Note 4 - Land and Building of Former Banking Office and Land and Building Held
------------------------------------------------------------------------------
For Lease
---------

Land and building of former banking office is stated at cost less accumulated
depreciation and include the following:
<TABLE>
<CAPTION>

                                                             DECEMBER 31,
                                                    --------------------------------      ESTIMATED
                                                        1999               1998           USEFUL LIFE
                                                    -------------      -------------      ------------
<S>                                                 <C>                <C>                <C>
 Land                                                  $  41,000             41,000
 Building                                                489,760            489,760         30 years
                                                       ---------           --------
                                                         530,760            530,760
 Less accumulated depreciation                          (228,001)          (207,840)
                                                       ---------           --------

                                                       $ 302,759            322,920
                                                       =========           ========

</TABLE>


The building is currently being leased. Fair value of these assets exceeds book
value.

Land and building acquired for lease is stated at cost less accumulated
deprecation and include the following:

<TABLE>
<CAPTION>
                                                             DECEMBER 31,
                                                    --------------------------------       ESTIMATED
                                                        1999               1998           USEFUL LIFE
                                                    -------------      -------------      ------------
<S>                                                 <C>                <C>                <C>
 Land                                                 $ 354,589            354,589
 Building                                               240,000            240,000          39 years
                                                      ---------            -------
                                                        594,589            594,589
 Less accumulated depreciation                          (10,256)            (4,103)
                                                      ---------            -------
                                                      $ 584,333            590,486
                                                      =========            =======
</TABLE>
The building is currently being leased. Fair value of these assets exceeds book
value.


Note 5 - Loans
--------------

Major classifications of loans are as follows:

<TABLE>
<CAPTION>

                                                                                    DECEMBER 31,
                                                                          ------------------------------
                                                                              1999              1998
                                                                          ------------       -----------
<S>                                                                      <C>                <C>
 Commercial and financial                                                 $ 59,328,217        56,531,030
 Agricultural                                                                8,197,422         6,759,273
 Real estate - construction                                                 31,858,224        22,566,857
 Real estate - mortgage                                                    332,007,520       298,210,946
 Installment loans to individuals and other                                 62,987,091        56,477,522
 Overdrafts                                                                    436,416           346,766
                                                                          ------------       -----------
                                                                           494,814,890       440,892,394
 Deferred loan fees and unearned interest, net                                (397,723)         (377,871)
                                                                          ------------       -----------
                                                                           494,417,167       440,514,523
 Allowance for loan losses                                                  (5,037,074)       (5,171,905)
                                                                          ------------       -----------
   Loans, Net                                                             $489,380,093       435,342,618
                                                                          ============       ===========

</TABLE>

                                      F-18
<PAGE>

Note 5 - Loans (Continued)
--------------------------

At December 31, 1999 and 1998, the total recorded investment in impaired loans,
all of which had allowances determined in accordance with SFAS No. 114 and No.
118, amounted to approximately $2,395,379 and $1,567,635, respectively.  The
average recorded investment in impaired loans amounted to approximately
$1,981,379, $1,196,082 and $514,264 for the years ended December 31, 1999, 1998
and 1997, respectively.  The allowance for loan losses related to impaired loans
amounted to approximately $368,513 and $213,617 at December 31, 1999 and 1998,
respectively.  Interest income on impaired loans of $116,707, $19,126 and
$19,528 was recognized for cash payments received in 1999, 1998 and 1997,
respectively.  The Banks have no commitments to loan additional funds to
borrowers whose loans are classified as impaired.

First mortgage loans on residential (one-to-four units) real estate are pledged
to secure advances from the Federal Home Loan Bank (See Note 7).  The advances
must be fully secured after discounting the qualifying loans at 75% of the
principal balances outstanding.

At December 31, 1997, the Company was servicing mortgage loans for the benefit
of others totaling approximately $21,346,000.  While such loans were originated
by the Company, the entire cost of originating the loans has been allocated to
the loans with no cost being allocated to the mortgage servicing rights, since
management believes the amount to be immaterial.  During 1998, the Company
suspended its mortgage servicing activities and sold its mortgage servicing
rights, realizing a gain of $102,131.  Revenue from mortgage servicing
activities amounted to $42,592 for the year ended December 31, 1997.

Transactions in the allowance for losses on loans were as follows:
<TABLE>
<CAPTION>

                                              YEAR ENDED DECEMBER 31,
                                    ----------------------------------------
                                       1999           1998           1997
                                    ----------      ---------      ---------
<S>                                 <C>             <C>            <C>
 Balance, January 1                 $5,171,905      4,996,243      4,570,127
 Provision for losses charged to
   operating expenses                  985,188        903,404        792,900
 Recoveries                             96,643         95,271         80,272
                                    ----------      ---------      ---------
     Total                           6,253,736      5,994,918      5,443,299
 Less loans charged off              1,216,662        823,013        447,056
                                    ----------      ---------      ---------

 Balance, December 31               $5,037,074      5,171,905      4,996,243
                                    ==========      =========      =========
</TABLE>

Note 6 - Deposits
-----------------

Deposit account balances at December 31, 1999 and 1998 are summarized as
follows:
<TABLE>
<CAPTION>

                                     DECEMBER 31,
                            -----------------------------
                                1999             1998
                            ------------      -----------
<S>                         <C>               <C>
 Non-interest bearing       $ 64,915,579       72,073,495
 Interest-bearing demand     119,240,927      113,044,945
 Savings deposits             27,666,315       28,898,571
 Certificates of deposit     304,381,162      290,070,117
                            ------------      -----------

                            $516,203,983      504,087,128
                            ============      ===========
</TABLE>

                                      F-19
<PAGE>

Note 6 - Deposits (Continued)
-----------------------------

At December 31, 1999, the scheduled maturities of certificates of deposit are as
follows:


         2000           $233,287,814
         2001             42,409,067
         2002              7,852,560
         2003             13,501,826
         2004              6,491,429
      Thereafter             838,466
                        ------------

                         304,381,162
                        ============


Note 7 - Advances From Federal Home Loan Bank
---------------------------------------------

Advances from the Federal Home Loan Bank consists of the following:
<TABLE>
<CAPTION>

                                                             DECEMBER 31,
                                                     --------------------------
                                                         1999          1998
                                                     ------------  -------------
<S>                                                  <C>           <C>
Advances payable, interest payable monthly or
 quarterly, combination of fixed and variable
 interest rates which averaged 5.68% and 5.79%
 at December 31, 1999, and 1998, respectively,
 various repayment options, maturities through
 August 2, 2010.                                     $60,112,240    39,057,723
                                                     ===========    ==========

</TABLE>
Maturities of the advances for the succeeding five years are as follows:

                  YEAR ENDING
                  DECEMBER 31,
                  ------------
                      2000                          $24,681,522
                      2001                            2,641,729
                      2002                            1,931,941
                      2003                            2,763,824
                      2004                              512,380

The advances are collateralized as provided in Note 5.


Note 8 - Profit Sharing Plan and 401(k) Plan
--------------------------------------------

An employee profit sharing plan and 401(k) plan is provided for qualified
employees.  The plans are qualified under the Internal Revenue Code.  The Board
of Directors makes an annual determination of the contribution to the profit
sharing plan.  By law and pursuant to the terms and provisions of the employee
profit sharing plan, a contribution up to a maximum of 15% of the total
qualified employee compensation may be made.  Under the 401(k) plan, employees
may make salary deferral contributions of 1% to 15% of qualified employee
compensation.  The Company will make matching contributions at a level
determined by the Board of Directors.  Amounts contributed to the plans for the
years ended December 31, 1999, 1998 and 1997 totaled $433,458, $338,469 and
$297,293, respectively.

                                      F-20
<PAGE>

Note 9 - Deferred Compensation Plan
-----------------------------------

Effective January 1, 1994, the Company adopted a deferred compensation plan for
the benefit of key employees.  While the plan is to be funded from the general
assets of the Company, life insurance policies were acquired for the purpose of
serving as the primary funding source.  As of December 31, 1999 and 1998, the
cash values of these policies were $3,382,190 and $2,849,483, respectively, and
the liability accrued for benefits payable under the plan was $785,064 and
$403,749, respectively.


Note 10 - Employee Stock Option Plan
------------------------------------

On April 18, 1994 the Company's shareholders approved the 1994 Employee Stock
Option Plan (the "1994 Plan"), which provides for the grant of options to
purchase shares of the Company's common stock to the employees of the Company.
The 1994 Plan serves as an employee incentive and encourages the continued
employment of key personnel by facilitating their purchase of an equity interest
in the Company. The 1994 Plan covers 400,000 shares of the Company's common
stock.

On April 16, 1999, the Company's shareholders approved the 1999 Stock Option
Plan (the "1999 Plan"), which provides for the grant of options to purchase
shares of the Company's common stock to the Company's and its affiliates'
directors, employees, consultants and advisors.  The purpose of the 1999 Plan is
to maximize the long-term success of the Company, to ensure a balanced emphasis
on both current and long-term performance, to enhance participants'
identification with shareholders' interests and to facilitate the attraction and
retention of key individuals with outstanding abilities.  The 1999 Plan covers
600,000 shares of the Company's common stock.

Both plans are administered by the Board of Directors of the Company, which has
the authority to select recipients, designate the number of shares to be covered
by each option, and, subject to certain restrictions, specify the terms of the
options.  Both plans provide for the granting of both "incentive stock options"
and "non-qualified stock options".  Under both plans, the exercise price for
each incentive stock option granted shall in no event be less than 100% of the
fair market value of the Company's common stock on the date of grant and no
stock option shall be exercisable after the expiration of 10 years from the date
of grant.  Additionally, with limited exceptions, vesting is on a straight-line
basis over a five year period beginning one year following the date of the
grant.

During the years ended December 31, 1999, 1998 and 1997, the Company granted
options to acquire an aggregate of 49,750 shares, 54,500 shares and 152,000
shares under the 1994 Plan.  As of December 31, 1999, 27,717 shares of the
Company's common stock was still available for grants under the 1994 Plan.

During the year ended December 31, 1999, the Company granted options to acquire
an aggregate of 72,000 shares under the 1999 Plan.  As of December 31, 1999,
528,000 shares of the Company's common stock were still available for grants
under the 1999 Plan.

The fair value of each option grant is estimated on the grant date using an
option-pricing model with the following weighted-average assumptions used for
grants in 1999: dividend yield of 2.50%, risk free interest rate of 5.39%,
expected lives of ten years for the options and a volatility rate of 34.2%.

Weighted-average assumptions used for grants in 1998 are as follows:  dividend
yield of 1.37%, risk-free interest rate of 5.0%, expected lives of five years
for the options and a volatility rate of 30.00%.

                                      F-21
<PAGE>

Note 10 - Stock Option Plans (Continued)
---------------------------------------

Weighted-average assumptions used for grants in 1997 are as follows:  dividend
yield of 1.65%, risk-free interest rate of 5.57%, expected lives of five years
for the options and a volatility rate of 14.2%.

A summary of the status of the Company's stock option plan as of December 31,
1999, 1998 and 1997, and the changes during the years then ended is presented
below:
<TABLE>
<CAPTION>

                                         YEAR ENDED DECEMBER 31, 1999   YEAR ENDED DECEMBER 31, 1998   YEAR ENDED DECEMBER 31, 1997
                                         -----------------------------  -----------------------------  -----------------------------
                                                           WEIGHTED-                     WEIGHTED-                       WEIGHTED-
                                                            AVERAGE                       AVERAGE                         AVERAGE
             FIXED                                         EXERCISE                       EXERCISE                       EXERCISE
            OPTIONS                          SHARES          PRICE         SHARES          PRICE           SHARES          PRICE
            -------                      --------------  -------------  -------------  --------------  --------------  -------------
<S>                                      <C>             <C>            <C>            <C>             <C>             <C>
Outstanding at beginning of year            347,103        $   8.76       328,588        $  8.04          188,118         $ 6.35
Granted                                     121,750           16.84        54,500          12.06          152,000          10.58
Exercised                                    (3,876)           6.95       (33,985)         10.03          (11,030)         14.00
Forfeited                                   (24,820)           9.21        (2,000)          8.59             (500)         10.06
                                            -------                      --------                        --------
Outstanding at end of year                  440,157           11.19       347,103           8.76          328,588           8.04
                                            =======                      ========                        ========

Exercisable at December 31                  246,959           10.62       162,603           8.09          162,388           8.59
Weighted-average fair value of
  options granted during the year                          $   6.59                         3.71                            2.91
                                                           ========                      =======                          ======




</TABLE>
The following table summarizes information about fixed stock options outstanding
at December 31, 1999:

<TABLE>
<CAPTION>

                                            OUTSTANDING OPTIONS                    EXERCISABLE OPTIONS
                                ------------------------------------------    -----------------------------
                                                  WEIGHTED-
       RANGE OF                                    AVERAGE       WEIGHTED                       WEIGHTED-
      OR ACTUAL                    NUMBER         REMAINING      AVERAGE          NUMBER         AVERAGE
      EXERCISE                   OUTSTANDING     CONTRACTUAL     EXERCISE      EXERCISABLE      EXERCISE
       PRICES                    AT 12/31/99        LIFE          PRICE        AT 12/31/99        PRICE
------------------              -------------   -------------  ------------   --------------  -------------
<S>                             <C>             <C>            <C>            <C>             <C>
       $ 6.25                     128,000        6.16 years       $ 6.25           92,800         $ 6.25
         6.67                       3,677         .62 years         6.67            3,677           6.67
        10.06                     131,000        7.07 years        10.06           61,682          10.06
        12.06                      44,680        8.00 years        12.06            9,000          12.06
        14.00                       6,000        3.00 years        14.00            6,000          14.00
        14.88                       1,000        9.92 years        14.88              -0-            .00
        15.88                       1,000        9.79 years        15.88              -0-            .00
        16.25                      72,000        9.80 years        16.25           72,000          16.25
        17.81                      46,800        9.11 years        17.81              600          17.81
        18.44                       2,000        8.94 years        18.44              400          18.44
        21.63                       3,000        8.47 years        21.63              600          21.63
        23.13                       1,000        8.55 years        23.13              200          23.13
                                  -------                                        --------
       $ 6.25 to
       $23.13                     440,157                                         246,959
                                  =======                                        ========
</TABLE>

If the Company had used the fair value based method of accounting for its
employee stock option plan, as prescribed by Statement of Financial Accounting
Standards No. 123, compensation cost in net income for the year ended December
31, 1999 would have increased by $741,218, resulting in net income of
$7,951,658.  Basic earnings per share would have declined from $.90 to $.83 and
diluted earnings per share would have declined from $.89 to $.82.

                                      F-22
<PAGE>

Note 10 - Stock Option Plans (Continued)
----------------------------------------

If the Company had used the fair value based method of accounting for its
employee stock option plan for the year ended December 31, 1998, compensation
cost in net income would have increased by $136,754, resulting in net income of
$7,850,048.  Basic earnings per share would have declined from $.83 to $.82 and
diluted earnings per share would have declined from $.81 to $.80.

If the Company had used the fair value based method of accounting for its
employee stock option plan for the year ended December 31, 1997, compensation
cost in net income would have increased by $170,487, resulting in net income of
$7,337,446.  Basic earnings per share would have declined from $.79 to $.77 and
diluted earnings per share would have declined from $.78 to $.76.

Note 11 - Directors Deferred Stock Purchase Plan
------------------------------------------------

On April 18, 1994, the Company's shareholders approved the Directors Deferred
Stock Purchase Plan (the "Director Plan"), which provides that a director of the
Company or any subsidiary may elect to receive shares of common stock of the
Company in lieu of the cash compensation otherwise payable as director's fees
for services as a member of the Board of Directors or any committee thereof.
The shares of common stock issuable to an electing director shall be issued on
January 15 following each fiscal year in a whole number (rounded down) resulting
from the amount of such director's fees (or a portion thereof as determined by
such director) for such previous fiscal year divided by 100% of the fair market
value of the common stock as of January 1 of such previous fiscal year.  The
Director Plan covers 100,000 shares of common stock, which may be authorized for
issuance and delivery thereunder.  The Director Plan shall remain in effect for
five years (through January 15, 1999) or until termination by the Board,
whichever occurs first.  The Director Plan is administered by the Board of
Directors of the Company.  The Company has issued 9,503, 7,808 and 15,268 shares
of common stock under the Director Plan for the years ended December 31, 1999,
1998 and 1997, respectively.  The Plan expired January 15, 1999.

Note 12 - Income Taxes
----------------------

Income tax expense is comprised of federal and state income taxes as follows:
<TABLE>
<CAPTION>
                                                                      YEAR ENDED DECEMBER 31,
                                                          ---------------------------------------------
                                                             1999              1998             1997
                                                          -----------       ----------       ----------
<S>                                                       <C>               <C>              <C>
 Current expense                                          $4,189,078        4,206,549        4,161,532
 Deferred (credit)                                          (184,024)        (108,625)        (139,553)
                                                          ----------        ---------        ---------
                                                          $4,005,054        4,097,924        4,021,979
                                                          ==========        =========        =========

</TABLE>

Income tax at the statutory rate of 34% is reconciled to the Company's actual
provision as follows:
<TABLE>
<CAPTION>


                                                                      YEAR ENDED DECEMBER 31,
                                                          ---------------------------------------------
                                                             1999              1998             1997
                                                          -----------       ----------       ----------
<S>                                                       <C>               <C>              <C>
 Tax at statutory rate                                    $4,317,296        4,108,807        3,920,170
 State income taxes                                          261,302          444,777          341,230
 Benefit of State income tax deduction                       (88,843)        (151,224)        (116,018)
 Tax exempt interest and dividend exclusion                 (358,884)        (330,206)        (250,911)
 Amortization of goodwill                                     43,746           43,746           43,746
 Increase in cash value of life
  insurance policies                                        (196,283)         (38,984)         (27,038)
 Other                                                        26,720           21,008          110,800
                                                          ----------        ---------        ---------

 Actual income tax expense                                $4,005,054        4,097,924        4,021,979
                                                          ==========        =========        =========
</TABLE>

                                      F-23
<PAGE>

Note 12 - Income Taxes (Continued)
----------------------------------

Deferred tax liabilities have been provided for taxable temporary differences
related to accumulated depreciation, stock dividends and unrealized gains on
available-for-sale securities.  Deferred tax assets have been provided for
deductible temporary differences related to unrealized losses on available-for-
sale securities, the allowance for loan losses, deferred compensation and
purchase accounting adjustments.  The net deferred tax assets in the
accompanying balance sheets include the following components:
<TABLE>
<CAPTION>

                                                  DECEMBER 31,
                                              ------------------------
                                                 1999          1998
                                              ----------     ---------
<S>                                           <C>            <C>
 Deferred tax assets:
   Allowance for loan losses                  $1,593,140     1,609,888
   Purchase accounting adjustments                     0        18,984
   Deferred compensation plan                    294,807       152,359
   Unrealized losses on available-for-sale
     securities                                  100,360             0
   Other                                          34,237        63,484
                                              ----------     ---------
                                               2,022,544     1,844,715
                                              ----------     ---------
 Deferred tax liabilities:
   Bank premises and equipment and
     depreciation                                648,807       647,282
   Stock dividends                                     0        77,057
   Unrealized gains on available-for-sale
     securities                                        0       867,625
   Amortization of core deposits                  35,711        65,138
   Deferred loan origination cost                166,775       159,314
   Other                                               0         9,057
                                              ----------     ---------
                                                 851,293     1,825,473
                                              ----------     ---------

Net deferred tax assets                       $1,171,251        19,242
                                              ==========     =========
</TABLE>

No valuation allowance was established in view of the Company's tax strategies
coupled with anticipated future taxable income as evidenced by the Company's
earnings potential.

Through 1995, thrift institutions were allowed, for tax purposes, a special
deduction for bad debts based on a percentage of taxable income before such
deduction, subject to various limitations provided by the Internal Revenue Code.
One of the Company's subsidiaries (converted from a thrift subsidiary) had an
allowable percentage of 8%.  Effective January 1, 1996, only the experience
method is allowable for computing the provision for bad debts for tax purposes.
Additionally, any excess bad debt deductions taken after December 31, 1987, must
be recaptured over a six year period.  The effect of changing the method of
computing bad debts had no effect upon the income tax provision of the Company's
subsidiary inasmuch as the excess deductions had been subjected to the deferred
income tax provision.

For tax purposes, included in retained earnings at December 31, 1999, is
approximately $4,570,220 of accumulated bad debt deductions related to current
or former thrift subsidiaries for which no deferred income tax liability has
been recorded.  This amount represents an allocation of income to bad debt
deductions for tax purposes only.  Reduction of amounts so allocated for
purposes other than tax bad debt losses or adjustments arising from carry-back
of net operating losses would give rise to income for tax purposes only, which
would be subject to income taxes at the then prevailing corporate rate.

                                      F-24
<PAGE>

Note 13 - Dividend Reinvestment and Common Stock Purchase Plan
--------------------------------------------------------------

On December 20, 1993, the Company's Board of Directors approved a dividend
reinvestment and common stock purchase plan.  The purpose of the plan is to
provide shareholders of record of the Company's common stock, who elect to
participate in the plan, with a simple and convenient means to reinvest
automatically cash dividends and make additional voluntary cash purchases of
shares of common stock without the expense of brokerage commissions or other
fees. Eligible participants may purchase common stock through automatic
reinvestment of common stock dividends on all of their shares or not less than
50% of their shares and make additional voluntary cash payments of not less than
$50 nor more than $5,000, in the aggregate, for each calendar year.  The price
of common stock purchased with dividends or voluntary cash payments will be 100%
of the fair market value of the stock as determined by the average of all shares
purchased by the Company in the market place for an investment period. During
the years ended December 31, 1999, 1998 and 1997, the plan resulted in the
incremental issuance of -0-, 1,650 and 30,960 shares, respectively.  The decline
in the incremental shares issued is due to the current policy of acquiring
shares in the market place to fill orders for dividend reinvestment and stock
purchases rather than issuing additional shares.


Note 14 - Commitments, Contingencies and Financial Instruments With Off-Balance-
--------------------------------------------------------------------------------
Sheet Risk
----------

The consolidated financial statements do not reflect various commitments and
contingent liabilities which arise in the normal course of business and which
involve elements of credit risk, interest rate risk and liquidity risk.  These
commitments and contingent liabilities are commitments to extend credit and
standby letters of credit.  A summary of the Banks' commitments and contingent
liabilities is as follows:
<TABLE>
<CAPTION>

                                         NOTIONAL AMOUNT
                                  ---------------------------
                                          DECEMBER 31,
                                  ---------------------------
                                     1999             1998
                                  -----------      ----------
<S>                               <C>              <C>
  Commitments to extend credit    $46,366,452      49,938,264
  Standby letters of credit         2,004,312       1,768,132

</TABLE>

Commitments to extend credit and standby letters of credit all include exposure
to some credit loss in the event of nonperformance by the customer.  The Banks'
credit policies and procedures for credit commitments are the same as those for
extensions of credit that are reported in the financial statements.  Because
these instruments have fixed maturity dates and because many of them expire
without being drawn upon, they do not generally present any significant
liquidity risk to the Banks.  The Banks' have not incurred any losses on their
commitments in either 1999 or 1998.

The nature of the business of the Company and the Banks is such that they are
ordinarily subjected to a certain amount of litigation.  On September 23, 1999,
a bankruptcy trustee filed a complaint against one the Company's subsidiaries
seeking the sum of $1,479,725 for the debtor's payment of an antecedent debt
during the preference period.  The issue is whether overdrafts in the debtor's
account are covered by subsequent deposits.  The Bank's analysis is that the
material portion of the claim does not relate to overdrafts inasmuch as deposits
were made each day prior to the deadline for dishonoring draws for insufficient
funds.  The matter is being vigorously defended and while management believes
there are adequate defenses to the action, discovery is in the early stages and,
no definitive statement can be made about the possible outcome.  In the opinion
of management and counsel, there is no litigation in which the outcome will have
a material effect on the financial statements.

                                      F-25
<PAGE>

Note 15 - Related Party Transactions
------------------------------------

At December 31, 1999 and 1998, loans to all officers, directors and employees
and their associates aggregated approximately $16,833,538 and $11,939,584,
respectively.

The following is a summary of the activity in loans to executive officers,
directors and principal shareholders for the year ended December 31, 1999:
<TABLE>
<CAPTION>

<S>                                          <C>
     Balance, beginning of year              $ 12,414,041
     Amounts advanced                          11,091,397
     Repayments                               (10,152,949)
                                             ------------

     Balance, end of year                    $ 13,352,489
                                             ============
</TABLE>

Employees, officers, directors and principal shareholders maintained customary
deposit relationship with the Banks.  The aggregate of such deposits was
approximately $20,004,880 at December 31, 1999.

Management believes that all of the above transactions were entered into in the
normal course of business on substantially the same terms and conditions,
including interest rates and collateral, as those prevailing at the same time
for comparable transactions with other customers and did not involve more than
normal credit risk or present other unfavorable features.


Note 16 - Regulatory Matters
----------------------------

The primary source of funds available for the payment of cash dividends are
dividends received  by PAB Bankshares, Inc. from subsidiary Banks.  The Banks
are limited by banking regulations as to the amount of dividends that may be
paid without prior approval of the Banks' regulatory agency.  Retained earnings
of the Banks against which dividends may be charged is approximately $12,067,000
at December 31, 1999 and the amount of dividends which may be paid within one
year is approximately $4,930,000.

The Banks are required to maintain average balances with the Federal Reserve
Bank. The average amount of those reserve balances for the year ended December
31, 1999 was approximately $2,099,000.

The Company and the Banks are subject to various regulatory capital requirements
administered by the state and 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 Company's and the Banks' financial statements.  Under
capital adequacy guidelines and the regulatory framework for prompt corrective
action, the Company and the Banks must meet specific capital guidelines that
involve quantitative measures of assets, liabilities, and certain off-balance-
sheet items as calculated under regulatory accounting practices.  The capital
amounts and classification are also subject to qualitative judgements by the
regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy
require the maintenance of minimum amounts and ratios (set forth in the table
below) of total and Tier I capital (as defined in the regulations) to risk-
weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined).  Management believes, as of December 31, 1999 and 1998,
that the Company and the Banks meet all capital adequacy requirements to which
they are subject.

                                      F-26
<PAGE>

Note 16 - Regulatory Matters (Continued)
----------------------------------------

The most recent notification from Banking regulators categorized the Company and
the Banks as well capitalized under the regulatory framework for prompt
corrective action.  To be categorized as well capitalized, the Company and the
Banks must maintain minimum total risk-based, Tier I risk-based, and Tier I
leverage ratios as set forth in the table.  There have been no conditions or
events since that notification that management believes have changed the
institution's category.

The Company's consolidated actual capital amounts and ratios and the minimum
amounts and ratios under the capital adequacy and prompt corrective action
provisions are presented below:
<TABLE>
<CAPTION>
                                                                                      TO BE WELL
                                                                                   CAPITALIZED UNDER
                                                         FOR CAPITAL               PROMPT CORRECTIVE
                                    ACTUAL            ADEQUACY PURPOSES:           ACTION PROVISIONS:
                                ---------------    ------------------------    --------------------------
                                AMOUNT   RATIO       AMOUNT       RATIO          AMOUNT         RATIO
                                -------  ------    ----------- ------------    -----------  -------------
                                                    (Amounts in thousands)
<S>                             <C>      <C>     <C>          <C>                <C>         <C>
As of December 31, 1999:
 Total Capital                                                 greater than                  greater than
   (to Risk Weighted Assets)    $72,600   15.0%       38,720   or equal to 8%    48,400      or equal to 10%
 Tier 1 Capital                                                greater than                  greater than
   (to Risk Weighted Assets)     67,563   14.0%       19,304   or equal to 4%    28,956      or equal to 6%
 Tier 1 Capital                                                greater than                  greater than
   (to Average Assets)           67,563   11.8%       22,903   or equal to 4%    28,628      or equal to 5%

As of December 31, 1998:
 Total Capital                                                 greater than                  greater than
   (to Risk Weighted Assets)    $67,105   15.3%       35,088   or equal to 8%    43,859      or equal to 10%
 Tier 1 Capital                                                greater than                  greater than
   (to Risk Weighted Assets)     61,933   14.4%       17,204   or equal to 4%    25,805      or equal to 6%
 Tier 1 Capital                                                greater than                  greater than
   (to Average Assets)           61,933   10.2%       24,287   or equal to 4%    30,359      or equal to 5%

</TABLE>

Note 17 - Concentrations of Credit Risk
---------------------------------------

In addition to the concentrations of credit risk disclosures in notes one and
five, the Company and its subsidiaries maintains its cash in bank deposit
accounts which usually exceed federally insured limits and sells federal funds
to correspondent banks on an unsecured basis.  The Company and its subsidiaries
have not experienced any losses in such accounts.  Management believes the
Company and its subsidiaries is not exposed to any significant credit risk on
cash and cash equivalents and federal funds sold.


Note 18 - Investment in Unconsolidated Subsidiary
-------------------------------------------------

On August 14, 1985, the Board of Directors of the Company's subsidiary (First
Community Bank of Southwest Georgia) approved participation in the formation of
a new service corporation, Empire Financial Services, Inc. ("Empire") with its
home office located in Milledgeville, Georgia.  The primary purpose of the
service corporation is the origination and servicing of commercial real estate
loans.  Since the formation of the service corporation, First Community has
participated in loans originated by Empire when deemed appropriate by
management.

First Community owns 50% of the outstanding stock of Empire.  First Community
accounts for its investment in Empire under the equity method.  The investment
in Empire exceeded First Community's share of the underlying net assets by
$45,731 at December 31, 1999, and is being amortized on the straight-line method
over twenty-five years.

                                      F-27
<PAGE>

Note 18 - Investment in Unconsolidated Subsidiary (Continued)
-------------------------------------------------------------

Following is a summary of the unaudited financial position at December 31, 1999
and 1998 and unaudited results of operations of Empire for the three years ended
December 31, 1999:
<TABLE>
<CAPTION>

                                                                            DECEMBER 31,
                                                                     --------------------------
                                                                        1999           1998
                                                                     ----------       --------
<S>                                                                  <C>              <C>
                                    ASSETS
                                    ------
Current assets                                                       $  589,382       1,516,951
Premises and equipment                                                  539,668         584,181
                                                                     ----------       ---------

 Total Assets                                                        $1,129,050       2,101,132
                                                                     ==========       =========

                   LIABILITIES AND STOCKHOLDERS' EQUITY
                   ------------------------------------

Current liabilities                                                  $  600,812       1,325,531
Long-term liabilities                                                   421,172         441,302
                                                                     ----------       ---------
 Total Liabilities                                                    1,021,984       1,766,833
Stockholders' equity                                                    107,066         334,299
                                                                     ----------       ---------

 Total Liabilities and Stockholders' Equity                          $1,129,050       2,101,132
                                                                     ==========       =========
</TABLE>

<TABLE>
<CAPTION>

                                                             YEAR ENDED DECEMBER 31,
                                                     ------------------------------------------
                                                        1999            1998            1997
                                                     ----------      ----------       ---------
<S>                                                  <C>             <C>              <C>
Total revenue                                        $3,324,728       2,999,317       1,724,445
                                                     ==========      ==========       =========
Net income                                           $1,122,766       1,039,334         503,236
                                                     ==========      ==========       =========
First Community Bank of Southwest Georgia's
 proportionate share of net income                   $  561,383         519,667         251,618
                                                     ==========      ==========       =========
</TABLE>

To facilitate the timely closing of its books and preparation of monthly
financial statements, the Company's subsidiary (First Community Bank of
Southwest Georgia) follows a consistent practice of accruing its share of Empire
earnings one month in arrears.  As of December 31, 1999 and 1998, an additional
amount of earnings of approximately $59,000 and $150,000 was recorded in January
2000 and January 1999, respectively.

                                      F-28
<PAGE>

Note 19 - Financial Information of PAB Bankshares, Inc. (Parent Only)
---------------------------------------------------------------------

Condensed balance sheets of PAB Bankshares, Inc. as of December 31, 1999 and
1998 and related statements of income and cash flows for the three years ended
December 31, 1999 are as follows:

                                BALANCE SHEETS
                                --------------
<TABLE>
<CAPTION>

                                                              DECEMBER 31,
                                                        ------------------------
                       ASSETS                               1999         1998
                       ------                           -----------   ----------
<S>                                                     <C>            <C>
Cash on deposit with subsidiary banks                   $13,050,358    4,296,858
Investment in Subsidiaries:
 Park Avenue Bank                                        18,056,297   16,628,190
 Farmers & Merchants Bank                                 4,928,443    4,881,654
 First Community Bank of Southwest Georgia               15,796,222   16,888,997
 Eagle Bank and Trust                                     6,431,686    7,244,621
 Baxley Federal Savings Bank                              9,459,944   14,961,107
 PAB Financial Services, LLC                                 28,054            0
Other investments                                           349,945            0
Property, Plant and Equipment, net of accumulated
 depreciation                                             1,232,783      565,702
Land and building held for lease, net of accumulated
 depreciation                                               584,333      590,486
Income taxes receivable                                     772,835      737,965
Other assets                                                268,632      279,498
                                                        -----------   ----------

   Total Assets                                         $70,959,532   67,075,078
                                                        ===========   ==========

                     LIABILITIES AND STOCKHOLDERS' EQUITY
                     ------------------------------------

Liabilities:
 Dividends payable                                      $   976,337      662,440
 Other liabilities                                          371,935      349,174
                                                        -----------   ----------
                                                          1,348,272    1,011,614
                                                        -----------   ----------
Stockholders' Equity:
 Common stock                                             1,217,065    1,217,065
 Additional paid in capital                              31,236,921   31,095,359
 Retained earnings                                       37,336,119   32,334,269
 Other comprehensive income (loss)                         (178,845)   1,416,771
                                                        -----------   ----------
                                                         69,611,260   66,063,464
                                                        -----------   ----------

   Total Liabilities and Stockholders' Equity           $70,959,532   67,075,078
                                                        ===========   ==========
</TABLE>

                                      F-29
<PAGE>

Note 19 - Financial Information of PAB Bankshares, Inc. (Parent Only)
---------------------------------------------------------------------
(Continued)
-----------

                             STATEMENTS OF INCOME
                             --------------------
<TABLE>
<CAPTION>

                                                                 YEAR ENDED DECEMBER 31,
                                                         ----------------------------------------
                                                             1999          1998          1997
<S>                                                      ------------   -----------   -----------
Income:                                                  <C>            <C>           <C>
 Equity in earnings of subsidiary banks:
  Park Avenue Bank
  Farmers & Merchants Bank                               $  3,678,135     3,273,601     2,791,419
  First Community Bank of Southwest Georgia                   914,155       822,972       654,480
  Eagle Bank and Trust                                      3,207,476     2,930,637     2,533,316
  Baxley Federal Savings Bank                                 892,347       817,794       749,145
  PAB Financial Services                                    1,167,244     1,335,752     1,505,039
 Interest Income:                                             (21,946)            0             0
  Subsidiary banks
 Computer service income, management                           14,132        10,224        15,246
  and other fees from subsidiary banks
 Other income                                               1,256,033       976,459     1,084,887
                                                               36,032        11,183         3,831
                                                         ------------   -----------   -----------
Expenses                                                   11,143,608    10,178,622     9,337,363
                                                            3,131,068     2,925,795     2,243,765
Income before taxes                                      ------------   -----------   -----------
Income taxes (benefit)                                      8,012,540     7,252,827     7,093,598
                                                             (680,336)     (733,975)     (414,335)
                                                         ------------   -----------   -----------
Net Income
                                                         $  8,692,876     7,986,802     7,507,933
                                                         ============   ===========   ===========
</TABLE>

                                      F-30
<PAGE>

Note 19 - Financial Information of PAB Bankshares, Inc. (Parent Only)
---------------------------------------------------------------------
(Continued)
-----------

                           STATEMENTS OF CASH FLOWS
                           ------------------------
<TABLE>
<CAPTION>

                                                                             YEAR ENDED DECEMBER 31,
                                                                   ----------------------------------------
                                                                       1999          1998          1997
                                                                   ------------   -----------   -----------
<S>                                                                <C>            <C>           <C>
Cash Flows From Operating Activities:
 Net income                                                        $  8,692,876     7,986,802     7,507,933
 Adjustments to reconcile net income
   to net cash provided by operating
   activities:
   Depreciation and amortization                                        267,321       245,021       203,094
   Equity in earnings of subsidiary banks                            (9,837,411)   (9,180,756)   (8,233,399)
   (Gains) Loss on sale of assets                                             0        (6,932)            0
   Dividends received from subsidiaries:
    Park Avenue Bank                                                  1,637,000     1,395,708     2,170,812
    Farmers & Merchants Banks                                           735,975       327,245       370,167
    First Community Bank of Southwest Georgia                         3,913,500     5,778,050     1,691,123
    Eagle Bank and Trust                                              1,558,250       382,339             0
    Baxley Federal Savings Bank                                       6,000,000             0             0
   Deferred income taxes                                                 (9,150)        6,539        18,772
 Change in assets and liabilities                                       125,442      (394,048)      204,849
                                                                   ------------   -----------   -----------
 Net cash provided (used) by operating activities                    13,083,803     6,539,968     3,933,351
                                                                   ------------   -----------   -----------

Cash Flows From Investing Activities:
 Proceeds from sale of assets                                                 0        17,600             0
 Capital expenditures                                                  (924,171)     (733,914)     (405,678)
 (Increase) Decrease in cash value of
   life insurance                                                        (7,988)       (2,181)       (6,938)
 Purchase of available-for-sale securities                             (349,945)            0             0
 Investment in subsidiary                                               (50,000)            0             0
                                                                   ------------   -----------   -----------
 Net cash provided (used) by investing activities                    (1,332,104)     (718,495)     (412,616)
                                                                   ------------   -----------   -----------

Cash Flows From Financing Activities:
 Dividends paid                                                      (3,025,131)   (2,141,687)   (1,335,932)
 Repayment of notes payable                                                   0    (2,184,000)   (1,200,000)
 Proceeds from issuance of stock                                         26,932       340,712       124,302
 Acquisition of treasury stock                                                0             0             0
                                                                   ------------   -----------   -----------
 Net cash provided (used) by financing activities                    (2,998,199)   (3,984,975)   (2,411,630)
                                                                   ------------   -----------   -----------

Net Increase (Decrease) in Cash                                       8,753,500     1,836,498     1,109,105

Cash and Cash Equivalents at Beginning of Period                      4,296,858     2,460,360     1,351,255
                                                                   ------------   -----------   -----------

Cash and Cash Equivalents at End of Period                         $ 13,050,358     4,296,858     2,460,360
                                                                   ============   ===========   ===========

Supplemental Disclosures of Cash Flow Information
-------------------------------------------------

Cash paid during the period for:
 Interest                                                          $          0       151,582       240,184
                                                                   ============   ===========   ===========
 Income taxes (received)                                           $   (636,316)     (364,208)     (467,814)
                                                                   ============   ===========   ===========
</TABLE>

                                      F-31
<PAGE>

Note 20 - Fair Values of Financial Instruments
----------------------------------------------

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

                                                                DECEMBER 31, 1999           DECEMBER 31, 1998
                                                           --------------------------   -------------------------
                                                             CARRYING        FAIR        CARRYING        FAIR
                                                              AMOUNT        VALUE         AMOUNT         VALUE
                                                           ------------  ------------   -----------   -----------
<S>                                                        <C>           <C>            <C>           <C>
Financial assets:
 Cash and cash equivalents                                 $ 64,545,834    64,545,834    55,144,860    55,144,860
 Time deposits                                                   99,000        99,000       396,000       396,000
 Investment securities                                       78,925,871    78,925,871   100,457,861   100,457,861
 Loans, net of allowance for loan losses                    489,380,093   486,121,093   435,342,618   427,486,000
 Accrued interest receivable                                  6,666,640     6,666,640     6,062,115     6,062,115

Financial liabilities:
 Deposits                                                   516,203,983   517,330,983   504,087,128   514,336,000
 Advances from Federal Home Loan Bank                        60,112,240    59,014,790    39,057,723    35,390,000
 Accrued interest payable                                     1,914,285     1,914,285     1,662,309     1,662,309
 Other borrowed funds                                         9,155,058     9,155,058     2,339,170     2,339,170
 Federal funds purchased                                      4,673,036     4,673,036     3,824,095     3,824,095

</TABLE>
The carrying amounts in the preceding table are included in the balance
 sheet under the applicable captions.

<TABLE>
<CAPTION>
                                                             NOTIONAL        FAIR        NOTIONAL        FAIR
                                                              AMOUNT        VALUE         AMOUNT         VALUE
                                                           ------------  ------------   -----------   -----------
<S>                                                        <C>           <C>            <C>           <C>
Other:
 Commitments to extend credit                              $ 46,366,452    46,366,452    49,938,264    49,938,264
 Standby letters of credit                                    2,004,312     2,004,312     1,768,132     1,768,132

</TABLE>

Note 21 - Mergers and Acquisitions
----------------------------------

On November 30,1999, the Company acquired all of the outstanding common stock of
Baxley Federal Savings Bank (Baxley) in exchange for 1,323,533 shares of the
Company's common stock and a nominal amount of cash in lieu of fractional
shares. Immediately following the merger, Baxley became a wholly-owned
subsidiary of the Company.  Baxley Federal Savings Bank is a federally chartered
stock savings bank operating in Baxley and Hazelhurst, Georgia.

                                      F-32
<PAGE>

Note 21 - Mergers and Acquisitions (Continued)
----------------------------------------------

The merger of Baxley has been accounted for as a pooling of interests and,
accordingly, all prior financial statements have been restated to include the
accounts and operations of the pooled companies.  The following table presents a
reconciliation of net interest income and net income, as previously reported by
the Company, to those presented in the accompanying consolidated financial
statements and reflects the net interest income and net income of the previously
separate company for the periods before the mergers.
<TABLE>
<CAPTION>

                                      YEAR ENDED DECEMBER 31,
                                -----------------------------------
                                   1999         1998        1997
                                -----------  ----------  ----------
<S>                             <C>          <C>         <C>

Net Interest Income:
 PAB Bankshares, Inc.           $22,317,279  20,693,482  19,093,573
 Baxley Federal Savings Bank      3,565,494   3,477,438   3,767,119
                                -----------  ----------  ----------

     Combined                   $25,882,773  24,170,920  22,860,692
                                ===========  ==========  ==========

Net Income:
 PAB Bankshares, Inc.           $ 7,525,632   6,651,050   6,002,894
 Baxley Federal Savings Bank      1,167,244   1,335,752   1,505,039
                                -----------  ----------  ----------

     Combined                   $ 8,692,876   7,986,802   7,507,933
                                ===========  ==========  ==========
</TABLE>

                                      F-33
<PAGE>

Note 22 - Quarterly Results of Operations (Unaudited)
-----------------------------------------------------

The following is a summary of the quarterly results of operations for the two
years ended December 31, 1999:
<TABLE>
<CAPTION>

                                              QUARTERLY PERIOD ENDED
                                 ----------------------------------------------
                                 MARCH 31   JUNE 30   SEPTEMBER 30   DECEMBER 31
                                 ---------  --------  -------------  ----------
                                      (In Thousands, Except Per share Data)
<S>                              <C>        <C>       <C>            <C>
Year Ended December 31, 1999:
 Interest income                  $11,713    12,022     12,262        12,792
 Interest expense                  (5,702)   (5,574)    (5,597)       (6,033)
                                  -------    ------     ------        ------
 Net interest income                6,011     6,448      6,665         6,759
 Provision for loan losses           (162)     (198)      (224)         (401)
                                  -------    ------     ------        ------
 Net interest income
   after provision for
   loan losses                      5,849     6,250      6,441         6,358
 Other income                       1,686     1,529      1,580         1,970
 Other expenses                    (4,518)   (4,516)    (4,661)       (5,270)
                                  -------    ------     ------        ------
 Income before income taxes         3,017     3,263      3,360         3,058
 Income taxes                        (974)   (1,132)    (1,099)         (800)
                                  -------    ------     ------        ------
 Net income                       $ 2,043     2,131      2,261         2,258
                                  =======    ======     ======        ======

 Basic earnings per share         $   .21       .22        .24           .23
                                  =======    ======     ======        ======
 Diluted earnings per share       $   .21       .22        .23           .23
                                  =======    ======     ======        ======

Year Ended December 31, 1998:
 Interest income                  $11,598    11,903     12,094        12,015
 Interest expense                  (5,657)   (5,905)    (5,952)       (5,926)
                                  -------    ------     ------        ------
 Net interest income                5,941     5,998      6,142         6,089
 Provision for loan losses           (292)     (174)      (166)         (271)
                                  -------    ------     ------        ------
 Net interest income
   after provision for
   loan losses                      5,649     5,824      5,976         5,818
 Other income                       1,547     1,460      1,500         1,534
 Other expenses                    (3,949)   (4,265)    (4,448)       (4,562)
                                  -------    ------     ------        ------
 Income before income taxes         3,247     3,019      3,028         2,790
 Income taxes                      (1,075)   (1,058)    (1,051)         (914)
                                  -------    ------     ------        ------
 Net income                       $ 2,172     1,961      1,977         1,876
                                  =======    ======     ======        ======

 Basic earnings per share         $   .22       .21        .21           .19
                                  =======    ======     ======        ======
 Diluted earnings per share       $   .22       .21        .20           .18
                                  =======    ======     ======        ======
</TABLE>

                                      F-34