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

                                   FORM 10-KSB

(Mark One)

|X|      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934

         FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

|_|      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934

         For the transition period from __________ to __________

                        COMMISSION FILE NUMBER 000-24203

                              GB&T BANCSHARES, INC.
                  ---------------------------------------------
                 (Name of small business issuer in its charter)

               Georgia                                  58-2400756
    ---------------------------------     -----------------------------------
   (State or Other Jurisdiction           (I.R.S. Employer Identification No.)
    of Incorporation or Organization)

       500 Jesse Jewell Parkway, S.E.
           Gainesville, Georgia                                  30501
---------------------------------------                       ----------
(Address of Principal Executive Offices)                      (Zip Code)

Issuer's Telephone Number  (770) 532-1212

Securities Registered pursuant to Section 12(b) of the Act:  None
Securities Registered pursuant to Section 12(g) of the Act:
        Common Stock, par value $5.00

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

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

         State issuer's revenues for its most recent fiscal year: $19,886,172

         State the aggregate  market value of the voting and  non-voting  common
equity held by  non-affiliates  computed by  reference to the price of which the
common equity was sold, or the average bid and asked price of such common equity
as of a specified date within the past 60 days. $23,908,867

         State the number of shares  outstanding at each of the issuer's classes
of common equity as of latest  practicable  date:  February 28, 2000,  2,117,638
shares.
                       DOCUMENTS INCORPORATED BY REFERENCE

         Portions  of the  Annual  Report  to  Shareholders  for the year  ended
December 31, 1999,  are  incorporated  by reference  into Parts I and II of this
report.

         Portions  of the  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 1999 fiscal year end are incorporated by reference into
Part III of this report.


<PAGE>


                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

The Company
-----------

         GB&T  Bancshares,  Inc.  (the  "Company")  was formed in 1998 as a bank
holding  company  existing under the laws of the State of Georgia.  On April 24,
1998, the Company  acquired all of the  outstanding  common stock of Gainesville
Bank & Trust  (the  "Bank") in  exchange  for  1,676,160  shares at $5 par value
common stock. The acquisition was accounted for as a pooling of interests,  and,
accordingly, all prior financial statements reflect the combination. At December
31, 1999, the Company had one wholly-owned subsidiary, the Bank.

         The Company  operates as a one bank  holding  company.  At December 31,
1999,  the Company had invested in two de novo banks in Georgia,  representing a
less than 5%  ownership  in each  bank.  The  Company's  current  plans  include
exploring additional opportunities through mergers and acquisitions.  Currently,
there are no employees of the Company.

Gainesville Bank & Trust
------------------------

         Gainesville   Bank  &  Trust  located  in   Gainesville,   Georgia  was
incorporated  under  the laws of the  State  of  Georgia  on July  20,  1987 and
commenced operations as a Georgia state-chartered bank on February 1, 1988.

         The Bank conducts  business from its main office  facility at 500 Jesse
Jewell Parkway, Gainesville, Hall County, Georgia, which is owned equally by the
Bank and one of its directors.  The Bank currently occupies  sixty-eight percent
of this  facility.  The  remainder of this  facility is available  for lease and
approximately  10,000  square feet in the building is  currently  under lease to
four tenants  unrelated to the Bank. The Bank currently  operates three branches
in Gainesville, Georgia and one branch in Oakwood, Georgia.

         The Bank provides a full range of banking  services to customers within
its primary market area of Hall County. The Bank offers checking accounts, money
market accounts, savings accounts,  certificates of deposit,  commercial,  small
business, real estate, consumer, home equity,  automobile and credit card loans.
The Bank also  offers a variety of other  traditional  banking  services  to its
customers, including drive-up and night depository facilities, 24-hour automated
teller machines, PC banking and limited trust services.

         The Company and Bank have grown from their  initial  capital base of $7
million to a total  asset base of  approximately  $259  million.  The  continued
growth in total assets and loans was generated almost  exclusively from deposits
obtained from the Hall County market area. The loan portfolio of $200 million as
of December 31, 1999 is  comprised  of  commercial  loans ($33  million),  loans
secured  by real  estate  ($147  million),  and  consumer  and other  loans ($20
million).  The  Company  and Bank are not  currently  engaged in any  nonbanking
activities.

Market Area and Competition
---------------------------

         The Bank competes  primarily with ten other commercial  banks,  Bank of
America,  N.A.,  Regions Bank, Georgia First Bank,  N.A.,  Lanier National Bank,
Community  Bank  &  Trust-Habersham,  Premier  Bank,  SunTrust  Bank,  Northeast
Georgia,  NBC Bank, FSB, and Wachovia Bank, N.A. In addition,  the Bank competes
with other  financial  institutions,  including two credit  unions.  The banking
business is very competitive in the Gainesville, Hall County market. The banking
industry  continues  to  experience  increased  competition  for  deposits  from
brokerage firms and money market funds.

                                       1
<PAGE>


         As a whole, the banking industry in Georgia is highly competitive.  The
Bank  competes  with  institutions,  some of which have much  greater  financial
resources  than the Bank,  and which may be able to offer more services to their
customers.  In recent years,  intense market demands,  economic  pressures,  and
increased  customer  awareness of products,  services,  and the  availability of
electronic  services  have forced banks to diversify  their  services and become
more cost effective. The Bank continually faces strong competition in attracting
and retaining deposits and loans.

         The most direct  competition  for deposits comes from other  commercial
banks,  savings banks, credit unions and issuers of securities such as shares in
money market funds.  Interest rates,  convenience,  availability of products and
services,  and marketing are all significant  factors in the Bank's  competition
for deposits.

         Competition for loans comes from other commercial banks, savings banks,
insurance  companies,  consumer  finance  companies,  credit  unions  and  other
institutional  lenders. The Bank competes for loan originations through interest
rates,  loan fees,  efficiency in closing and handling of loans, and the overall
quality of service.  Competition  is affected  by the  general  availability  of
lendable funds, general and local economic  conditions,  current interest rates,
and other factors that are not readily predictable.

         Management  expects that competition will continue in the future due to
the fully phased-in  statewide  branching laws that became effective in 1998 and
the entry of additional bank and nonbank competitors.

Lending Activities
------------------

         The Bank  originates  loans  primarily  secured by single  family  real
estate, residential construction, owner-occupied commercial buildings, and other
loans to small businesses and individuals. In addition, loans are made to small-
and medium-sized commercial businesses, as well as to consumers for a variety of
purposes. The Bank also lends to a limited number of residential contractors and
developers in the Hall County area.

         In addition,  the Bank originates loans to small businesses  secured by
real  estate and other  collateral,  which  loans are in part (up to 75% of each
loan) guaranteed by the U.S. Small Business Administration ("SBA").

         The  Bank's  commercial  lending  includes  loans to  smaller  business
ventures,  credit lines for working capital and short-term seasonal or inventory
financing,  as  well as  occasional  letters  of  credit.  Commercial  borrowers
typically secure their loans with assets of the business, personal guaranties of
their principals, and often secured by mortgages on their personal residences.

         The Bank  provides  commercial  and consumer  installment  loans to its
customers.  Such loans are  typically  of  multiple-year  duration  and,  if not
variable  rate,  bear  interest  at a rate tied to the  Bank's  cost of funds of
equivalent maturity.  Commercial  installment loans generally finance commercial
equipment and real estate,  while consumer  installment  loans typically finance
automobiles, consumer products, or home improvements.

         Risks  associated  with  loans  made by the Bank  include,  but are not
limited to, the real  estate  market in Hall  County,  fraud,  deteriorating  or
non-existing  collateral,  general economic conditions,  interest rate risk, and
deteriorating borrower financial conditions.

         The Company's Board of Directors  establishes and periodically  reviews
the Bank's lending policies and procedures.  State banking  regulations  provide
that no secured loan relationship may exceed 25% of the Bank's statutory capital
and no  unsecured  loan  relationship  may exceed  15% of the  Bank's  statutory
capital,  except in very  limited  circumstances.  The Bank  occasionally  sells
participation interests in loans to other lenders, primarily when a loan exceeds
the Bank's legal lending limits.

                                       2
<PAGE>


Deposits
--------

         Checking,  savings,  money market accounts, and certificates of deposit
are the primary sources of funds for investing in loans and securities. The Bank
obtains most of its deposits from individuals and businesses in its market area.
An alternative  source of funding is through advances from the Federal Home Loan
Bank and other  borrowings  which  enable the Bank to borrow  funds at rates and
terms which at times are more beneficial to the Bank.

         The Bank does not  solicit  deposits by  offering  depositors  rates of
interest on certificates of deposit or money market accounts significantly above
rates paid by other local competitors.  The Bank solicits brokered deposits on a
limited basis.

Securities
----------

         After establishing  necessary cash reserves and funding loans, the Bank
invests its remaining liquid assets in securities allowed under banking laws and
regulations.  The Bank invests  primarily in obligations of the United States or
obligations  guaranteed as to principal and interest by the United States, other
taxable securities and in certain obligations of states and municipalities.  The
Bank also invests  excess  funds in Federal  funds with its  correspondents  and
primarily acts as a net seller of such funds.  The sale of Federal funds amounts
to a short  term loan  from the Bank to  another  bank.  Risks  associated  with
securities include, but are not limited to, interest rate fluctuation, maturity,
and concentration.

Asset/liability Management
--------------------------

         It is the objective of the Bank to manage its assets and liabilities to
provide  a  satisfactory  and  consistent  level  of  profitability  within  the
framework of established cash, loan, securities, borrowing and capital policies.
Certain officers of the Bank are charged with the  responsibility for developing
and monitoring  policies and procedures  that are designed to insure  acceptable
composition  of  the  asset/liability  mix.  It is  the  overall  philosophy  of
management to support asset growth  primarily  through  growth of core deposits,
which  include  deposits of all  categories  from  individuals  and  businesses.
Management of the Bank seeks to invest the largest  portion of the Bank's assets
in loans.

         The Bank's  asset-liability mix is monitored on a periodic basis with a
report reflecting  interest-sensitive assets and interest-sensitive  liabilities
being  prepared  and  presented  to the Bank's  Board of  Directors on a monthly
basis. The objective of this policy is to manage  interest-sensitive  assets and
liabilities  so as to minimize the impact of  substantial  movements in interest
rates on the Bank's earnings.

Employees
---------

         As of  December  31,  1999,  the  Bank had 91  total  employees  and 89
full-time  equivalent  employees.  The  Bank  is not a party  to any  collective
bargaining  agreement  and,  in the  opinion  of  management,  the  Bank  enjoys
satisfactory relations with its employees.

                                       3
<PAGE>


                           REGULATION AND SUPERVISION

General
-------

         We are 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") under the BHC Act and the Georgia
BHC Act, respectively.  As such, we are subject to the supervision,  examination
and reporting  requirements  of the BHC Act and the  regulations  of the Federal
Reserve, and the Georgia BHC Act and the regulations of the Georgia Department.

         The BHC Act  requires  every bank  holding  company to obtain the prior
approval of the Federal Reserve before:

         o        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;

         o        it or any of its subsidiaries,  other than a bank, may acquire
                  all or substantially all of the assets of any bank; or

         o        it may  merge or  consolidate  with  any  other  bank  holding
                  company.

         The BHC Act further  provides that the Federal  Reserve may not approve
any  transaction  that would result in a monopoly or would be in  furtherance of
any  combination  or  conspiracy  to  monopolize  or attempt to  monopolize  the
business of banking in any part of the United States, or the effect of which may
be substantially to lessen competition or to tend to create a monopoly,  or that
in any other manner would be in 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 communities 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 involved
and the convenience and needs of the communities to be served.  Consideration of
financial resources generally focuses on capital adequacy,  and consideration of
convenience and needs issues generally focuses on the parties' performance under
the Community Reinvestment Act of 1977.

         The BHC Act, as amended by the  interstate  banking  provisions  of the
Riegle-Neal  Interstate  Banking  and  Branching  Efficiency  Act of  1994  (the
"Interstate  Banking  Act"),  which  became  effective  on  September  29, 1995,
repealed the prior statutory restrictions on interstate acquisitions of banks by
bank holding  companies,  and any other bank holding company located in Georgia,
may now acquire a bank located in any other state,  and any bank holding company
located  outside  of  Georgia  may  lawfully  acquire  any  Georgia-based  bank,
regardless  of state law to the  contrary,  in either  case  subject  to certain
deposit-percentage,  aging requirements,  and other restrictions. The Interstate
Banking Act also  generally  provides  that,  as of June 1, 1997,  national  and
state-chartered banks may now branch interstate through acquisitions of banks in
other states.

         In response to the Interstate Banking Act, the Georgia General Assembly
adopted the Georgia  Interstate  Banking Act which  became  effective on July 1,
1995. The Georgia Interstate Banking Act provides that

         o        interstate  acquisitions  by  institutions  located in Georgia
                  will  be  permitted  in  states  which  also  allow   national
                  interstate acquisitions, and

         o        interstate  acquisitions  of  institutions  located in Georgia
                  will be  permitted  by  institutions  located in states  which
                  allow national interstate acquisitions.

                                       4
<PAGE>

         Additionally, on January 26, 1996, the Georgia General Assembly adopted
the Georgia Interstate Branching Act which permits  Georgia-based banks and bank
holding  companies  owning  or  acquiring  banks  outside  of  Georgia  and  all
non-Georgia  banks  and bank  holding  companies  owning or  acquiring  banks in
Georgia the right to merge any lawfully  acquired bank into an interstate branch
network.  The Georgia Interstate Branching Act also allows banks to establish de
novo branches on a limited basis beginning July 1, 1996. Beginning July 1, 1998,
the number of de novo branches which may be established is no longer limited.

         Except  as  amended  by the  Gramm-Leach-Bliley  Act of 1999  discussed
below,  the BHC Act generally  prohibits 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  activities
determined  by the  Federal  Reserve  to be so  closely  related  to  banking or
managing or controlling banks as to be a proper incident thereto. In determining
whether a particular activity is permissible,  the Federal Reserve must consider
whether  the  performance  of such an  activity  reasonably  can be  expected to
produce  benefits  to  the  public,  such  as  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.  For example,  factoring
accounts  receivable,  acquiring or servicing loans,  leasing personal property,
conducting discount  securities  brokerage  activities,  performing certain data
processing services,  acting as agent or broker in selling credit life insurance
and certain other types of insurance in connection with credit transactions, and
performing certain insurance underwriting activities all have been determined by
the Federal Reserve to be permissible activities of bank holding companies.  The
BHC Act  does not  place  territorial  limitations  on  permissible  non-banking
activities  of bank  holding  companies.  Despite  prior  approval,  the Federal
Reserve has the power to order a bank  holding  company or its  subsidiaries  to
terminate  any  activity  or to  terminate  its  ownership  or  control  of  any
subsidiary  when it has reasonable  cause to believe that  continuation  of such
activity  or  such  ownership  or  control  constitutes  a  serious  risk to the
financial  safety,  soundness,  or stability of any bank subsidiary of that bank
holding company.

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

         The Bank is subject to regulation,  supervision, and examination by the
FDIC and the Georgia Department.  The FDIC and the Georgia Department  regularly
examine  the  operations  of the Bank and are  given  authority  to  approve  or
disapprove mergers,  consolidations,  the establishment of branches, and similar
corporate  actions.  The 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 law.

Gramm-leach-bliley Act of 1999
------------------------------

         President  Clinton  signed the  Gramm-Leach-Bliley  Act of 1999,  which
reforms financial services  regulation,  into law on November 12, 1999. This new
law covers various topics such as insurance, unitary thrifts, privacy protection
provisions for customers of financial  institutions,  the Federal Home Loan Bank
system's   modernization,   automatic  teller  machine  reform,   the  Community
Reinvestment  Act and certain changes related to the securities  industry.  This
new  law  also  eliminates  legal  barriers  to  affiliations  among  banks  and
securities firms, insurance companies, and other financial services companies.

                                       5
<PAGE>
         The  Gramm-Leach-Bliley  Act amends  the Bank  Holding  Company  Act to
clarify  that a bank  holding  company may hold  shares of any company  that the
Federal  Reserve  determined,  as of the day before the date of enactment of the
Gramm-Leach-Bliley  Act,  to be engaged  in  activities  that were  sufficiently
closely related to banking. This act also amends the Bank Holding Company Act to
establish a new type of bank holding company - the "financial  holding company."
Pursuant to the  Gramm-Leach-Bliley  Act,  financial  holding companies have the
authority  to  engage  in  financial  activities  in which  other  bank  holding
companies may not engage.  Financial  holding  companies may also affiliate with
companies that are engaged in financial  activities.  These financial activities
include activities that are:

         o        financial in nature;

         o        incidental to an activity that's financial in nature; or

         o        complimentary  to a  financial  activity  and  does not pose a
                  substantial  risk to the safety and  soundness  of  depository
                  institutions or the financial system in general.

         The Federal  Reserve and the  Secretary of the  Treasury may  determine
which activities meet these standards. However, the Gramm-Leach-Bliley Act lists
certain  activities  as being  financial in nature.  For example,  some of these
activities are:

         o        lending,  exchanging,  transferring,  investing for others, or
                  safeguarding money or securities;

         o        insuring,  guaranteeing,  or indemnifying  against loss, harm,
                  damage,  illness,  disability,  or  death,  or  providing  and
                  issuing annuities,  and acting as principal,  agent, or broker
                  for these purposes in any state;

         o        providing financial, investment or economic advice;

         o        issuing or selling  interests  in pools of assets  that a bank
                  could hold directly;

         o        underwriting, dealing in or making markets in securities;

         o        engaging in any activity that the Federal  Reserve  determined
                  by an order or  regulation  that's  in  effect  on the date of
                  enactment of the  Gramm-Leach-Bliley Act to be related closely
                  to banking; and

         o        engaging  within the United States in any activity that a bank
                  holding  company could engage in outside of the United States,
                  if the Federal Reserve found before the Gramm-Leach-Bliley Act
                  that the  activity  was usual in  connection  with  banking or
                  other financial operations internationally.

         The  Gramm-Leach-Bliley Act also directs the Federal Reserve to adopt a
regulation  or order  defining  certain  additional  activities  as financial in
nature, to the extent that they are consistent with that act. These include:

         o        lending,  exchanging,  transferring,  investing  for others or
                  safeguarding financial assets other than money or securities;

         o        providing any device or other instrumentality for transferring
                  financial assets; and

         o        arranging,  effecting or facilitating  financial  transactions
                  for third parties.

                                       6
<PAGE>


         Not all bank holding companies may become financial holding  companies.
A bank holding company must meet three requirements  before becoming a financial
holding company:

         o        all of  the  bank  holding  company's  depository  institution
                  subsidiaries must be well capitalized;

         o        all of  the  bank  holding  company's  depository  institution
                  subsidiaries must be well managed; and

         o        the bank holding  company must file with the Federal Reserve a
                  declaration  of its  election  to become a  financial  holding
                  company,   including  a  certification   that  its  depository
                  institution subsidiaries meet the prior two criteria.

         With only a few exceptions,  in order to exercise the powers granted to
them under the  Gramm-Leach-Bliley  Act, a financial  holding company or insured
depository   institution  also  must  meet  the  Community   Reinvestment  Act's
requirements.   If  any  insured  depository  institution,   insured  depository
institution  affiliate,  or  insured  depository  institution  subsidiary  of  a
financial holding company did not receive a Community Reinvestment Act rating of
at least  "satisfactory  record of meeting  community  credit needs" at its most
recent Community  Reinvestment Act examination,  the regulatory  agencies are to
present the insured  depository  institution or financial  holding  company from
exercising the new powers, either directly or through a subsidiary.

         A company that is not a bank  holding company or a foreign bank,  which
becomes  a  financial  holding  company,  may be able to  continue  to engage in
nonfinancial  activities  and the  company  may be able  to keep  its  ownership
interests in other  companies that are engaged in nonfinancial  activities.  The
ability to continue the nonfinancial  activities or keep ownership  interests in
other companies that are engaged in nonfinancial  activities lasts for ten years
after  the  Gramm-Leach-Bliley  Act's  enactment  and  may  be  extended  for an
additional  five-year  term if granted by the  Federal  Reserve  pursuant  to an
application. In order to continue in the nonfinancial activities:

         o        the holding company must have been engaged in the nonfinancial
                  activity or held the shares in the other companies  engaged in
                  nonfinancial activities on September 30, 2000;

         o        the holding company must be predominantly engaged in financial
                  activities; and

         o        the company engaged in the nonfinancial activity must continue
                  to  engage  in  the  same  nonfinancial  activities  it did on
                  September 30, 1999 and engage in other  authorized  activities
                  under the Gramm-Leach-Bliley Act.

         A holding  company is  predominantly  engaged in  financial  activities
where at least 85% of the  consolidated  annual  gross  revenues  of the holding
company and its  subsidiaries,  other than  depository  institutions,  come from
financial activities.

Payment of Dividends
--------------------

         We  are  a  legal  entity   separate  and  distinct  from  our  banking
subsidiary.  Our  principal  source  of cash  flow,  including  cash flow to pay
dividends to our  shareholders,  is dividends from the Bank. There are statutory
and  regulatory  limitations on the payment of dividends by the Bank, as well as
by us to our shareholders.

                                       7
<PAGE>
         If, in the  opinion of the federal  banking  regulators,  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 authority
may require,  after notice and hearing,  that such institution  cease and desist
from such  practice.  The federal  banking  agencies have  indicated that paying
dividends that deplete a depository  institution's capital base to an inadequate
level would be an 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.  See "--Prompt Corrective
Action."  Moreover,  the federal  agencies  have issued policy  statements  that
provide that bank holding  companies and insured banks should generally only pay
dividends out of current operating earnings.

         Our ability to pay  dividends  may also be affected or limited by other
factors,  such as the requirement to maintain  adequate capital above regulatory
guidelines.

Capital Adequacy
----------------

         We  are  required  to  comply  with  the  capital  adequacy   standards
established by the Federal Reserve,  and the FDIC in the case of the Bank. There
are two basic measures of capital adequacy for bank holding  companies that have
been  promulgated by the Federal  Reserve:  a risk-based  measure and 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 profiles among banks
and bank holding  companies,  to account for off-balance sheet exposure,  and to
minimize   disincentives  for  holding  liquid,   low-risk  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,  undivided
profits,  minority interests in the equity accounts of consolidated subsidiaries
and  noncumulative  perpetual  preferred stock,  less goodwill and certain other
intangible assets ("Tier 1 Capital").  The remainder may consist of subordinated
debt, other preferred stock, and a limited amount of loan loss reserves ("Tier 2
Capital"). At December 31, 1999, our consolidated Total Risk-Based Capital Ratio
and its Tier 1 Risk-Based  Capital  Ratio (I.E.,  the ratio of Tier 1 Capital to
risk-weighted assets) were 9.73% and 8.62%, 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 1 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.  Our Leverage Ratio at December 31, 1999 was 6.84%.  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 1 Capital  Leverage Ratio"  (deducting all intangibles) and other
indicia of  capital  strength  in  evaluating  proposals  for  expansion  or new
activities.

         The Bank is subject to  risk-based  and leverage  capital  requirements
adopted by the FDIC,  which are  substantially  similar to those  adopted by the
Federal  Reserve for bank holding  companies.  The Bank was in  compliance  with
applicable  minimum  capital  requirements  as of December 31, 1999. We have not
been advised by any federal banking agency of any specific minimum capital ratio
requirement applicable to it.

                                       8
<PAGE>
         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.  See "--Prompt
Corrective Action."

         The federal bank regulators  continue to indicate their desire to raise
capital  requirements  applicable to banking  organizations beyond their current
levels.  In this  regard,  the Federal  Reserve  and the FDIC have,  pursuant to
FDICIA,  recently  adopted final  regulations  requiring  regulators to consider
interest  rate risk (when the  interest  rate  sensitivity  of an  institution's
assets does not match the  sensitivity  of its  liabilities  or its  off-balance
sheet  position)  in the  evaluation  of a  bank's  capital  adequacy.  The bank
regulatory  agencies have recently  established  a  methodology  for  evaluating
interest rate risk which sets forth guidelines for banks with excessive interest
rate risk exposure to hold additional amounts of capital against such exposures.

Support of Subsidiary Institution
---------------------------------

         Under  Federal  Reserve  policy,  we are expected to act as a source of
financial  strength  for,  and to commit  resources to support,  the Bank.  This
support may be required at times when,  absent such Federal Reserve  policy,  we
may not be inclined to provide such support. In addition, any capital loans by a
bank  holding  company to its banking  subsidiary  are  subordinate  in right of
payment to deposits and to certain other indebtedness of such bank. In the event
of a bank holding company's bankruptcy, any commitment by a 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.

Prompt Corrective Action
------------------------

         FDICIA  establishes a system of prompt corrective action to resolve the
problems of  undercapitalized  institutions.  Under this  system,  which  became
effective  in December  1992,  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  agencies 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 1 Risk-Based Capital Ratio of 6.0% or greater, and a Leverage
Ratio of 5.0% or  greater  and (ii) is not  subject  to any  written  agreement,
order,  capital  directive,  or prompt corrective action directive issued by the
appropriate  federal  banking  agency  is  deemed  to be  well  capitalized.  An
institution with a Total Risk-Based  Capital Ratio of 8.0% or greater,  a Tier 1
Risk-Based  Capital  Ratio of 4.0% or greater,  and a Leverage  Ratio of 4.0% or
greater is considered to be adequately capitalized.  An institution with a Total
Risk-Based Capital Ratio of less than 8.0%, a Tier 1 Risk-Based Capital Ratio of
less than  4.0%,  or a  Leverage  Ratio of less than  4.0% is  considered  to be
undercapitalized.  An institution with a Total Risk-Based  Capital Ratio of less
than 6.0%, a Tier 1 Risk-Based  Capital  Ratio of less than 3.0%,  or a Leverage
Ratio of less than 3.0% is considered to be significantly undercapitalized,  and
an institution  with a tangible  equity capital to assets ratio equal to or less
than 2.0% is deemed  to be  critically  undercapitalized.  For  purposes  of the
regulation, the term "tangible equity" includes core capital elements counted as
Tier 1 Capital for purposes of the risk-based capital standards, plus the amount
of outstanding cumulative perpetual preferred stock (including related surplus),
minus intangible assets with certain exceptions. A depository institution may be
deemed to be in a capitalization 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 agency.
Under FDICIA, a bank holding company must guarantee that a subsidiary depository
institution  will  meet  its  capital   restoration  plan,  subject  to  certain
limitations.  The obligation of a controlling  bank 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
applicable  agency.  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.

                                       9
<PAGE>
         For  those  institutions  that are  significantly  undercapitalized  or
undercapitalized  and either fail to submit an  acceptable  capital  restoration
plan or fail to implement an approved capital  restoration plan, the appropriate
federal  banking agency 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 executive  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 an  officer,  without
regulatory approval.

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

FDIC Insurance Assessments
--------------------------

         Pursuant to FDICIA, the FDIC adopted a 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
risk-based  assessment  system,  which originally went into effect on January 1,
1994,  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.  The supervisory  subgroup to which an institution is
assigned  is  based  on a  supervisory  evaluation  provided  to the FDIC by the
institution's   primary  federal   regulator  and  information  which  the  FDIC
determines to be relevant to the institution's  financial condition and the risk
posed  to the  deposit  insurance  funds  (which  may  include,  if  applicable,
information  provided by the institution's  state supervisor).  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.  Assessment  rates for  members of both the Bank
Insurance Fund ("BIF") and the Savings  Association  Insurance Fund ("SAIF") for
the first  half of 1995,  as they had been  during  1994,  ranged  from 23 basis
points (0.23% of deposits) for an  institution  in the highest  category  (i.e.,
"well  capitalized" and "healthy") to 31 basis points (0.31% of deposits) for an
institution in the lowest category (i.e.,  "undercapitalized"  and  "substantial
supervisory concern").  These rates were established for both funds to achieve a
designated  ratio  of  reserves  to  insured  deposits  (i.e.,  1.25%)  within a
specified period of time.

         Once the designated ratio for the BIF was reached in May 1995, the FDIC
reduced the assessment rate  applicable to BIF deposits in two stages,  so that,
beginning in 1996, the deposit insurance  premiums for 92% of all BIF members in
the highest  capital  and  supervisory  categories  were set at $2,000 per year,
regardless of deposit size.  The FDIC elected to retain the existing  assessment
rate range of 23 to 31 basis points for SAIF members for the foreseeable  future
given the undercapitalized nature of that insurance fund.

                                       10
<PAGE>
         Recognizing  that the disparity  between the SAIF and BIF premium rates
have adverse consequences for the SAIF insured institutions and other banks with
SAIF assessed  deposits,  including  reduced earnings and an impaired ability to
raise funds in capital markets and to attract deposits,  in July 1995, the FDIC,
the  Treasury  Department,   and  the  Office  of  Thrift  Supervision  released
statements  outlining a proposed plan to  recapitalize  the SAIF,  the principal
feature of which was a special  one-time  assessment on depository  institutions
holding SAIF-insured deposits,  which was intended to recapitalize the SAIF at a
reserve ratio of 1.25%. This proposal contemplated  elimination of the disparity
between the assessment rates on BIF and SAIF deposits following recapitalization
of the SAIF.

         A variation of this proposal designated the Deposit Insurance Funds Act
of  1996  ("DIFA")  was  enacted  by  Congress  as part  of the  omnibus  budget
legislation  and signed into law on September 30, 1996. As directed by DIFA, the
FDIC  implemented  a special  one-time  assessment of  approximately  65.7 basis
points (0.657%) on a depository  institution's  SAIF-insured deposits held as of
March 31, 1995 (or approximately  52.6 basis points on SAIF deposits acquired by
banks in certain qualifying transactions). In addition, the FDIC has implemented
a revision in the SAIF assessment rate schedule which effected, as of October 1,
1996 (i) a widening in the  assessment  rate spread  among  institutions  in the
different capital and risk assessment  categories,  (ii) an overall reduction of
the  assessment  rate range  assessable  on SAIF  deposits of from 0 to 27 basis
points,  and (iii) a special interim  assessment rate range for the last quarter
of 1996 of from 18 to 27 basis  points  on  institutions  subject  to  Financing
Corporation ("FICO") assessments. Effective January 1, 1997, assessments to help
pay off the $780  million in annual  interest  payments  on the $8 billion  FICO
bonds issued in the late 1980's as part of the  government  rescue of the thrift
industry were imposed on both BIF- and  SAIF-insured  deposits in annual amounts
presently  estimated at 1.29 basis points and 6.44 basis  points,  respectively.
Beginning in January,  2000, BIF- and SAIF-insured  institutions  share the FICO
interest costs at equal rates currently estimated at 2.43 basis points.

         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 the 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, effective August
9, 1995, 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, asset
quality,  earnings  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   shareholder.   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  acceptable  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  institution  is subject under the "prompt  corrective  action"
provisions of FDICIA. See "--Prompt  Corrective Action." 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.

                                       11
<PAGE>
Community Reinvestment Act
--------------------------

         The  Community  Reinvestment  Act of 1977 ("CRA")  requires the federal
bank regulatory agencies to encourage financial  institutions to meet the credit
needs of low- and moderate-income  borrowers in their local communities.  In May
1995, the federal bank regulatory  agencies published final amended  regulations
promulgated  pursuant  to  the  CRA.  The  final  regulations  eliminate  the 12
assessment factors under the former regulation and replace them with performance
tests.  Institutions  are no  longer  required  to  prepare  CRA  Statements  or
extensively   document   director   participation,   marketing  efforts  or  the
ascertainment of community credit needs.  Under the final rule, an institution's
size and  business  strategy  determines  the type of  examination  that it will
receive.   Large,   retail-oriented   institutions  will  be  examined  using  a
performance-based lending,  investment and service test. Small institutions will
be examined using a streamlined  approach.  All institutions  have the option of
being  evaluated  under a strategic plan  formulated  with  community  input and
pre-approved by the bank regulatory agency.

         CRA  regulations  provide  for  certain  disclosure   obligations.   In
accordance  with the CRA, each  institution  must post a CRA notice advising the
public of the right to  comment  to the  institution  and its  regulator  on the
institution's  CRA performance and to review the  institution's CRA public file.
Each lending  institution must maintain for public inspection a public file that
includes  a listing  of branch  locations  and  services,  a summary  of lending
activity, a map of its communities,  and any written comments from the public on
its performance in meeting community credit needs.  Public disclosure of written
CRA  evaluations  of  financial  institutions  made by  regulatory  agencies  is
required by the CRA. This promotes  enforcement of CRA requirements by providing
the public with the status of a particular  institution's community reinvestment
record.



ITEM 2.  DESCRIPTION OF PROPERTY

         The  Company's  and Bank's main office is owned jointly by the Bank and
Director  Donald J.  Carter.  The three  story  building  is located in downtown
Gainesville at the  intersection  of Jesse Jewell  Parkway and Race Street.  The
Bank occupies over  two-thirds of the building,  with remaining  space presently
leased to other  tenants.  The Bank's main office also has a drive-in  automated
teller machine.

         The Bank has a branch  banking  facility  in Oakwood,  Georgia,  a Hall
County town seven miles south of Gainesville.  This branch also has an automated
teller machine.

         The Bank has three branch locations in Gainesville,  Georgia, the first
located in a leased shopping center facility at 2412 Old Cornelia Highway,  in a
small  community  just  north of  Gainesville,  the  second  located in a leased
shopping  center facility at 1210 Thompson Bridge Road, and the third located in
a leased shopping center facility at 475 Dawsonville  Highway, all of which have
an automated teller machine.

         The Bank  operates  automated  teller  machines in a  Gainesville-based
retail  shopping  center at 975 Dawsonville  Road, at 6800 Aqualand  Marina,  in
Flowery  Branch,  Georgia and in a hospital  atrium at 675 White Sulphur Road in
Gainesville, Georgia.

         In the opinion of management, all properties including improvements and
furnishings are adequately insured.

         The Bank is  currently  in the  process of  completing  a full  service
branch located on Friendship  Road in south Hall County.  Completion is expected
in the third quarter of 2000.

ITEM 3.  LEGAL PROCEEDINGS

         The Company is not a party to, nor is any of its  property  the subject
of,  any  material  pending  legal  proceedings,  other  than  ordinary  routine
proceedings  incidental to the business of the Bank, nor to the knowledge of the
management of the Company are any such  proceedings  contemplated  or threatened
against the Company or Bank.

                                       12
<PAGE>

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

         There were no matters  submitted to a vote of security  holders  during
the fourth quarter of 1999.



                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(a)      The common stock of the Company and its  predecessor  entity was traded
         on the  electronic  bulletin  board market under the symbol "GVLG" from
         September 26, 1996 through January 5, 1999.  Effective January 5, 1999,
         the Company  began listing their stock on The NASDAQ Stock Market under
         the  symbol  "GBTB."  The  following  table sets forth the high and low
         closing sale prices for the  Company's  common stock as reported on the
         respective  markets.  Historical  stock  prices  have been  adjusted to
         reflect the five-for-four  common stock split in the form of a dividend
         declared   August  29,  1998.  The  sales  prices   indicated   reflect
         inter-dealer prices, without mark-up,  mark-down or commission, and may
         not represent actual transactions.
                                                                  Sales Price
                   Calendar Period                      Low             High
                   ----------------------------------------------------------
                   1998
                   First Quarter                 $      17.59    $      18.80
                   Second Quarter                       18.80           21.59
                   Third Quarter                        18.80           21.59
                   Fourth Quarter                       21.50           23.00

                   1999
                   First Quarter                 $      23.00    $      33.00
                   Second Quarter                       24.50           26.00
                   Third Quarter                        20.00           25.00
                   Fourth Quarter                     18.8125          21.625

(b)      As of February 28, 2000, there were approximately 596 holders of record
         of the Company's common stock.

(c)      The Company paid a $.25 and $.16 per share cash  dividend on its common
         stock for the years ended December 31, 1999 and 1998, respectively. The
         Company  anticipates  paying a quarterly  dividend  in the future.  Any
         declaration  and payment of  dividends  will be based on the  Company's
         earnings,  economic conditions,  and the Board of Directors' evaluation
         of other relevant factors.  The Company's ability to pay dividends will
         also be dependent on cash dividends paid to it by the Bank. The ability
         of the Bank to pay dividends to the Company is restricted by applicable
         regulatory  requirements.  See "Supervision and Regulation - Payment of
         Dividends.


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS

General
-------

         The purpose of this  discussion  is to focus on  information  about the
Company's  financial  condition and results of operations which is not otherwise
apparent from the financial statements included in this Annual Report. Reference
should be made to those  statements  and the selected  financial  data presented
elsewhere in this report for an  understanding  of the following  discussion and
analysis.  Historical results of operations and any trends which may appear, are
not necessarily indicative of the results to be expected in future years.

                                       13
<PAGE>


A Warning About Forward-looking Statements
------------------------------------------

         Some of the  statements  made  in  this  annual  report  (and in  other
documents to which we refer) are "forward-looking statements." When used in this
document, the words "anticipate," "believe," "estimate," and similar expressions
generally identify forward-looking statements. These statements are based on the
beliefs,  assumptions,  and  expectations  of the Company's  management,  and on
information  currently  available  to  those  members  of  management.  They are
expressions  of  historical   fact,   not  guarantees  of  future   performance.
Forward-looking  statements include  information  concerning possible or assumed
future results of operations of the Company.

         Forward-looking   statements   involve   risks,   uncertainties,    and
assumptions,  and  certain  factors  could cause  actual  results to differ from
results expressed or implied by the forward-looking statements, including:

         1.       economic  conditions  (both generally and in the markets where
                  the Company operates);

         2.       competition  from  other  companies  that  provide   financial
                  services similar to those offered by the Company;
         3.       government regulation and legislation;

         4.       changes in interest rates; and

         5.       unexpected changes in the financial stability and liquidity of
                  the Company's credit customers

         We believe these forward-looking  statements are reasonable. You should
not, however, place undue reliance on these forward-looking statements,  because
the future results and shareholder  values of the Company may differ  materially
from those expressed or implied by these forward-looking statements.

Summary
-------

         During 1999 and 1998, the Company  continued to experience  significant
growth in  interest-earning  and total assets which has been funded by increases
in deposits,  borrowings,  and the  retention  of net  profits.  The Company has
recorded net income of $2,272,000  and  $1,673,000  for the years ended December
31, 1999 and 1998,  respectively,  increasing  total  equity to  $16,607,000  at
December 31, 1999. Total equity at December 31, 1999 is net of unrealized losses
on securities  available-for-sale  of $656,000  compared to unrealized  gains of
$151,000 for year-end 1998.

Balance Sheets
--------------

         Total assets of the Company  increased  $62.6  million or 31.9% for the
year ended  December  31,  1999  compared  to $23  million or 13.4% for the same
period in 1998. The increase in total assets  consists  primarily of an increase
in interest-earning  assets of $63.1 million or 35.2% compared to an increase of
$22.4  million or 14.3% during 1998.  The overall  growth in 1999 is  considered
above average compared to the Georgia average.

         The Company's  primary focus is to maximize  earnings  through  lending
activities.  Any excess funds are invested according to the Company's investment
policy. Total loans increased 44.4% or $61.3 million for the year ended December
31, 1999. This is compared to an increase of 14.0% or $17.0 million during 1998.
The increase in total loans included a 37.3%  increase in real estate loans,  or
$39.8 million, an increase in commercial loans of $15.9 million, and an increase
in consumer loans of $2.0 million.  The  significant  growth in loans and assets
has exceeded management's expectations for 1999. For the past several years, the

                                       14
<PAGE>

Gainesville/Hall  County area has been experiencing  significant  changes in the
local banking community. This activity continues due to acquisitions by regional
banks of community  banks in the area. In addition,  the economy in Gainesville,
and Georgia as a whole,  continues to be strong.  As of December  31, 1999,  the
Bank's  loan-to-deposit  ratio was 99% compared to 78% in 1998. During 1999, the
bank borrowed $25,000,000 from the Federal Home Loan Bank as additional funds to
support the Bank's loan demand.  These advances have varying  maturities and are
managed as part of the Bank's overall asset/liability mix to be properly matched
against the assets  funded.  Therefore,  as of  December  31,  1999,  the Bank's
loan-to-funds ratio was 83%.

         During 1999,  total deposits grew by $24 million,  or 13.6% compared to
an increase of $20.8 million or 13.4% in 1998. This increase consists  primarily
of an  increase  in time  deposits  of $24.6  million  or 25.0%  compared  to an
increase of $4.0 million or 4.2% during 1998. The  significant  increase in time
deposits  is a  combination  of more  competitive  pricing  and the  movement of
deposits  from regional  banks in the  Gainesville  area. In addition,  the Bank
purchased  $5,484,000  in  brokered  certificates  of deposit  during 1999 as an
additional  funding  source.  The  certificates  have a coupon rate of 5.95% and
mature on October 6, 2000. Noninterest bearing demand,  interest-bearing  demand
and savings deposits  decreased  slightly during the year by approximately  .75%
compared to an increase of 27.7% in 1998.

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

The  Company  attempts to reduce  these  economic  and credit  risks not only by
adherence  to the  Company's  lending  policy,  which  included  loan  to  value
guidelines,  but also by investigating the  creditworthiness of the borrower and
monitoring the borrower's  financial  position.  Also, the Company  periodically
reviews its lending policies and procedures.

Liquidity and Capital Resources
-------------------------------

         Liquidity   management   involves   the   matching  of  the  cash  flow
requirements  of  customers  who may be either  depositors  desiring to withdraw
funds or borrowers  needing assurance that sufficient funds will be available to
meet their credit needs and the ability of the Company to meet those needs.  The
Company seeks to meet liquidity  requirements  primarily  through  management of
short-term investments, monthly amortizing loans, maturing single payment loans,
and  maturities of  securities  and  prepayments.  Also,  the Company  maintains
relationships  with  correspondent  banks  which  could  provide  funds on short
notice.  As of December 31, 1999,  the Company had borrowed  under Federal funds
purchase  lines and  securities  sold under  repurchase  agreements  $12,969,000
compared to  $1,235,000  as of December 31,  1998.  These  borrowings  typically
mature within one to four business days.

         The liquidity  and capital  resources of the Company are monitored on a
periodic basis by management and state and Federal  regulatory  authorities.  At
December 31, 1999,  the Company's  liquidity  ratio was 18.3% which was slightly
below the  Company's  target  ratio of 20%.  Management  reviews  liquidity on a
periodic basis to monitor and adjust liquidity as necessary.  Management has the
ability to adjust liquidity by selling  securities  available for sale,  selling
participations  in loans generated by the Company and accessing  available funds
through various borrowing arrangements. The Company's short-term investments and
available   borrowing   arrangements   are  adequate  to  cover  any  reasonably
anticipated  immediate need for funds. The Company is not aware of any events or
trends likely to result in a material change in liquidity.

                                       15
<PAGE>


         At  December  31,  1999,  the  Company's  capital to asset  ratios were
considered   adequate   based  on  guidelines   established  by  the  regulatory
authorities.  During 1999,  the Company  increased  its capital by retaining net
earnings  of  $1,745,000.  Unrealized  losses on  securities  available-for-sale
decreased  capital  by  $808,000  as a result of a decline  in the bond  market.
Capital also increased during 1999 by the Company's  dividend  reinvestment plan
and from the  exercise of stock  options.  Capital was  increased  approximately
$364,000  from these two sources.  At December 31,  1999,  total  capital of the
Company amounted to $16,607,000 and is considered  adequately-capitalized  based
on regulatory  requirements.  Management  has not  specifically  identified  any
securities for sale in future periods which,  if so designated,  would require a
charge to  operations  if the market value would not be  reasonably  expected to
recover prior to the time of sale.

At December 31, 1999, the Company had outstanding  commitments of $1,259,000 for
construction  of a fourth full  service  branch  facility  located in south Hall
County on Friendship Road.

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

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

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

Results of Operations - for the Years Ended December 31, 1999 and 1998
----------------------------------------------------------------------

         The Company's profitability is determined by its ability to effectively
manage interest  income and expense,  to minimize loan and security  losses,  to
generate  noninterest income, and to control operating expenses.  Since interest
rates are determined by market forces and economic conditions beyond the control
of the  Company,  the  Company's  ability to  generate  net  interest  income is
dependent upon its ability to obtain an adequate net interest spread between the
rate   paid  on   interest-bearing   liabilities   and  the   rate   earned   on
interest-earning  assets.  The net  yield  on  average  interest-earning  assets
decreased  slightly to 4.61% in 1999 from 4.65% in 1998. This slight decrease is
attributable   primarily   to  the   change  in  the  rate   earned  on  average
interest-bearing  assets. In 1999, the average yield on interest-earning  assets
decreased   from   9.26%  in  1998  to  8.94%   while  the   average   yield  on
interest-bearing  liabilities decreased from 5.32% in 1998 to 4.98% in 1999. The
overall  change in the interest rate spread from 1998 to 1999 was an increase of
2 basis points. The minimal change results from the effective  management of the
Bank's asset-liability mix during a period of changing interest rates.

         Net interest income increased by $1,802,000 to $9,537,000 in 1999. This
is compared to an increase of $928,000 in 1998. The increase is directly related
to the  increase  in  interest-earning  assets.  As shown in Table 1 and Table 2
included in this annual report,  the change is the result of the increase in net
volume versus changes in net interest rates.

                                       16
<PAGE>


         Provisions for loan losses  increased by $142,000  during 1999 compared
to an increase of $30,000  during  1998.  The  provision  for loan losses is the
charge to operations  which  management feels is necessary to fund the allowance
for loan losses.  This  provision is based on the growth of the loan  portfolio,
the amount of net charge-offs  incurred,  consideration  of peer group averages,
and the general  economy as well as the local  economy.  The  allowance for loan
loss was  $2,222,000  or 1.11% of total loans at December  31, 1999  compared to
$1,773,000  or 1.28% of total loans at December 31, 1998.  The Bank incurred net
charge offs of $72,000 and  $38,000  for the years ended  December  31, 1999 and
1998,  respectively.   The  percentage  of  net  charge-offs  to  average  loans
outstanding  was .04% and .03% for the years ended  December  31, 1999 and 1998,
and is considered acceptable. Due to the insignificant level of net charge-offs,
the increased provision for loan losses in 1999 is primarily attributable to the
increased  volume in loans.  There were no nonaccrual loans at December 31, 1999
compared to $93,000 at December 31, 1998. Based on management's evaluations, the
allowance  for loan losses is adequate  to absorb  potential  losses on existing
loans.

         Other income  decreased  during 1999 by $95,000 or 6.4%  compared to an
increase of $547,000 or 57.6% during 1998.  The major  component of other income
is service  charges on deposit  accounts which  increased  $104,000  during 1999
compared to a decrease of $8,000 during 1998.  Changes in service  charge income
on deposits are  primarily  due to changes in the volume of deposit  transaction
accounts and changes in the fee structure for these accounts. During 1999, there
was an increase in NSF fees charged by the Bank which resulted in an increase of
$83,000 in NSF  charges.  Other major  components  of other  income are mortgage
origination  fees, gain on sale of loans and trust fees.  During 1999,  mortgage
origination  fees  decreased  $95,000 due to rising  interest  rates creating an
unfavorable  refinance market.  Gain on sale of loans, which consist of sales of
SBA loans to the secondary  market,  decreased  $179,000.  Trust fees  increased
$55,000  due to further  expansion  of the  Bank's  trust  department  which was
established in 1997.  Other operating  income  increased  during 1999 by $21,000
which  is  the  result  of   increased   safe  deposit  box  rentals  and  other
miscellaneous service charges.

         During 1998,  the other major  components of other income were mortgage
origination fees and gain on sale of loans.  Mortgage origination fees increased
$168,000 due to the growth of the mortgage  department  and  declining  interest
rates  during  1998.  Gain on sale of loans  increased  $247,000  as a result of
increased  activity  on sales of SBA loans.  Other  operating  income  increased
$83,000 which is the result of increases in other  miscellaneous fees as well as
increases in cash surrender values on insurance policies owned by the Bank.

         Other  expenses of the Company  increased  $604,000 or 9.4% during 1999
compared to an increase of $1.6 million or 33.4%  during  1998.  The majority of
the increase in 1999 is due to an increase in salaries and employee  benefits of
$417,000 or 12.1% which is the result of an  increase  in  full-time  equivalent
employees  from 79 in 1998 to 89 in 1999.  In addition to base salary  increases
related to the addition of 10 employees,  the Company  incurs  employee  related
expenses  including  social security taxes,  insurance  benefits,  401(k) profit
sharing match contributions,  as well as various other employee benefits.  Other
changes include an increase in equipment and occupancy expenses of $88,000 which
is  primarily  due to  increased  depreciation  and  maintenance  related to the
opening of two branches in the recent years.  Other operating expenses increased
$99,000  primarily as a result of increased  professional  fees of $70,000 which
were offset by decreases in other real estate owned loss provisions of $196,000.
There were no other unusual or significant changes in other expenses as compared
to 1998.

         As noted above, other expenses of the Company increased $1.6 million or
33.4%  during  1998.  The  majority  of the  increase  is due to an  increase in
salaries and employee  benefits of $741,000 or 27.2%.  Base  salaries  increased
$592,000, related payroll taxes increased $41,000, and group insurance increased
$45,000 for the year ended  December 31,  1998.  A new branch was opened  during
1997,  the  trust  department  was  staffed  in 1997,  and  mortgage  department
personnel  increased with the level of business in 1998.  Other changes included
an increase in equipment and occupancy expense of $246,000 due to the opening of
the two branches.  Other operating  expenses  increased  $621,000 primarily as a
result of  increases  in  advertising,  provision  for other real  estate  owned
losses,  public  relations  and  legal and  professional  expenses  of  $75,000,
$229,000, $35,000 and $106,000, respectively.

                                       17
<PAGE>
         Income  tax  expense  increased  $361,000  from  $753,000  in  1998  to
$1,114,000 in 1999.  The effective tax rate increased to 33% in 1999 from 31% in
1998.

         Net income  increased  in 1999 by $599,000 as compared to a decrease of
$30,000 for the year ended  December 31, 1998.  The return on average assets was
1.03% in 1999 compared to 0.93% in 1998. As discussed  previously,  the increase
in net income is attributable to the growth in interest-earning assets.

Business Combination
--------------------

On  October  14,  1999,   the  Company   executed  an  Agreement   and  Plan  of
Reorganization  with UB&T Financial Services  Corporation  ("UB&T"),  a one-bank
holding company located in Rockmart, Georgia. UB&T had consolidated total assets
of $49 million as of December 31,  1999.  The  acquisition  was  consummated  on
February 29, 2000. The Company issued approximately 646,803 shares of its common
shares in exchange for the  outstanding  common shares of UB&T. The  combination
has been accounted for as a pooling of interests.

The  following  unaudited  pro forma data  summarizes  operating  data as if the
combination had been consummated on January 1, 1998.

                                         As of and for the year ended
                                                 December 31,
                                       -------------------------------
                                           1999              1998
                                       ------------     --------------
                                            (Dollars in Thousands)
                                       -------------------------------

          Total assets                 $307,954,530     $239,378,083
          Stockholders' equity           21,517,945       20,262,030
          Net income                      2,469,303        1,953,619
          Basic income per share               0.90             0.71
          Diluted income per share             0.86             0.68


SELECTED FINANCIAL INFORMATION AND STATISTICAL DATA

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

The following  table sets forth the amount of the Company's  interest  income or
interest   expense   for  each   category   of   interest-earning   assets   and
interest-bearing  liabilities  and the  average  interest  yield/rate  for total
interest-earning  assets and total  interest-bearing  liabilities,  net interest
spread and net yield on average interest-earning assets.

                                       18
<PAGE>


TABLE 1 -  DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY
               INTEREST RATES AND INTEREST DIFFERENTIALS
<TABLE>
<CAPTION>

                                                               1999                                     1998
                                                  ------------------------------------  ------------------------------------
                                                  Average      Income/        Yields/    Average          Income/    Yields/
                                                 Balances<F1>  Expense         Rates     Balances<F1>     Expense    Rates
                                                 --------      --------      ---------  ------------      -------------------
                                                                            (Dollars in Thousands)

<S>                                                <C>           <C>            <C>         <C>            <C>        <C>
Taxable securities                                 31,934        1,927          6.03%       27,192         1,707      6.28%
Nontaxable securities <F5>                          4,137          171          4.13         2,902           130      4.48
Unrealized losses on securities                      (240)        --            --             159           --        --
Federal funds sold                                  4,055          202          4.98        10,601           569      5.37
Loans <F2> <F4>                                   166,624       16,185          9.71       125,769        13,006     10.34
Allowance for loan losses                          (1,953)        --                        (1,644)          --
Cash and due from banks                             7,092         --                         5,653           --
Other assets                                        9,398         --                         9,216           --
                                                  ----------------------                  ----------------------

     Total                                        221,047       18,485                     179,848        15,412
                                                  ======================                  ======================

Total interest-earning assets                     206,750                       8.94%      166,464                    9.26%
                                                  ======================                  ======================

Noninterest-bearing demand                         22,184         --            --          18,913          --         --
Interest-bearing demand & savings                  52,924        1,646          3.11        46,513         1,643      3.53
Time                                              108,674        6,305          5.80        95,388         5,916      6.20
                                                  ----------------------                  ----------------------
     Total deposits                               183,782        7,951                     160,814         7,559
Borrowings                                         19,519          997          5.11         2,437           118      4.84
Other liabilities                                   2,334         --                         2,111          --
Stockholders' equity <F3>                          15,412         --                        14,486          --
                                                  ----------------------                  ----------------------

     Total                                        221,047        8,948                     179,848         7,677
                                                  ======================                  ======================

Total interest-bearing liabilities                179,797                      4.98%       144,338                    5.32%
                                                  ======================                  ======================
Net interest income                                             9,537                                      7,735
                                                                =====                                      =====
Net interest spread                                                            3.96%                                  3.94%
Net yield on average interest-earning assets                                   4.61%                                  4.65%
</TABLE>


                                                                      19
<PAGE>
<TABLE>
<CAPTION>

                                                              1997
                                                 ------------------------------------
                                                 Average      Income/        Yields/
                                                Balances<F1>  Expense         Rates
                                                --------      --------      ---------

<S>                                                <C>          <C>           <C>
Taxable securities                                 23,268       1,504         6.46%
Nontaxable securities <F5>                          1,218          58         4.76
Unrealized losses on securities                      (86)         --           --
Federal funds sold                                 6,048          327         5.41
Loans <F2> <F4>                                  108,203       11,449        10.58
Allowance for loan losses                         (1,271)         --           --
Cash and due from banks                            4,782          --           --
Other assets                                       7,420          --           --
                                                 ------------------------

     Total                                       149,582      13,338
                                                 ========================

Total interest-earning assets                    138,737                      9.61%
                                                 ========================

Noninterest-bearing demand                        14,615          --            --
Interest-bearing demand & savings                 34,845        1,243         3.57
Time                                              83,669        5,221         6.24
                                                 ------------------------
   Total deposits                                 133,129       6,464
Borrowings                                          1,470          67         4.56
Other liabilities                                   1,873         --
Stockholders' equity <F3>                          13,110         --
                                                 ------------------------
     Total                                        149,582       6,531
                                                 ========================

Total interest-bearing liabilities                119,982                     5.44%
                                                 ========================
Net interest income                                             6,807
                                                                ======

Net interest spread                                                           4.17%
Net yield on average interest-earning assets                                  4.91%

<FN>

<F1>     Average balances were determined using the daily average balances.
<F2>     Average  balances  of loans  include  nonaccrual  loans  and are net of
         deferred interest and fees.
<F3>     Average unrealized gains (losses) on securities available for sale, net
         of tax,  have been  included  in  stockholders'  equity at  $(149,000),
         $94,000, and $(54,000) for 1999, 1998, and 1997, respectively.
<F4>     Interest and fees on loans include $1,487,000, $1,146,000, and $976,000
         of loan fee income for the years ended  December  31, 1999,  1998,  and
         1997,   respectively.
<F5>     Yields on nontaxable  securities are not presented on a  tax-equivalent
         basis.

</FN>
</TABLE>

TABLE 2 - RATE AND VOLUME ANALYSIS

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

                                       20
<PAGE>

<TABLE>
<CAPTION>

                                                                            Years Ended December 31,
                                                  ------------------------------------------------------------------------------
                                                              1999 to 1998                            1998 to 1997
                                                  ------------------------------------------------------------------------------
                                                           Increase (decrease)                     Increase (decrease)
                                                            due to change in                        due to change in
                                                     Rate         Volume        Total        Rate          Volume        Total
                                                  -----------  ------------ ------------  ------------ ------------  -----------
                                                                             (Dollars in Thousands)
                                                  ------------------------------------------------------------------------------
    <S>                                           <C>          <C>          <C>           <C>          <C>           <C>
   Income from interest-earning assets:
      Interest and fees on loans                  $    (734)   $     3,913  $     3,179   $     (265)  $     1,822   $    1,557
      Interest on taxable securities                    (66)           286          220          (43)          246          203
      Interest on nontaxable securities                  (9)            50           41           (3)           75           72
      Interest on Federal funds sold                    (36)         (331)        (367)           (2)          244          242
                                                  -----------  ------------ ------------  ------------ ------------  -----------
             Total interest income                     (845)         3,918        3,073         (313)        2,387        2,074
                                                  -----------  ------------ ------------  ------------ ------------  -----------

   Expense from interest-bearing
      liabilities:
      Interest on interest-bearing demand
        deposits and savings deposits                   (19)            22            3          (16)          416          400
      Interest on time deposits                        (336)           725          389          (33)          728          695
      Interest on other borrowings                        18           861          879             4           47           51
                                                  -----------  ------------ ------------  ------------ ------------  -----------
             Total interest expense                    (337)         1,608        1,271          (45)        1,191        1,146
                                                  -----------  ------------ ------------  ------------ ------------  -----------

             Net interest income                  $    (508)   $     2,310  $     1,802   $     (268)  $     1,196   $      928
                                                  ===========  ============ ============  ============ ============  ===========
</TABLE>

ASSET/LIABILITY MANAGEMENT

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

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

                                       21
<PAGE>
rates.  Interest rates on certain types of assets and  liabilities  fluctuate in
advance of changes in general market rates,  while interest rates on other types
may lag behind changes in general  market rates.  In addition,  certain  assets,
such as adjustable rate mortgage loans, have features  (generally referred to as
"interest  rate caps and floors")  which limit the amount of changes in interest
rates.  Prepayment and early withdrawal levels also could deviate  significantly
from those  assumed in  calculating  the interest  rate gap. The ability of many
borrowers  to service  their debts also may  decrease  during  periods of rising
interest rates.

          Changes  in  interest  rates  also  affect  the  Company's   liquidity
position.  The Bank currently prices deposits in response to market rates and it
is management's intention to continue this policy. If deposits are not priced in
response to market rates, a loss of deposits could occur which would  negatively
affect the Company's liquidity position.

          At December  31, 1999 the Bank's  cumulative  one year  interest  rate
sensitivity  gap ratio was 67%. The Bank's targeted ratio is 80% to 120% in this
time horizon.  This  indicates that the Company's  interest-earning  assets will
reprice during this period at a rate slower than the Company's  interest-bearing
liabilities.

         The following table sets forth the distribution of the repricing of the
Company's  interest-earning  assets  and  interest-bearing   liabilities  as  of
December 31, 1999,  the  interest  rate  sensitivity  gap (i.e.,  interest  rate
sensitive  assets less  interest rate  sensitive  liabilities),  the  cumulative
interest rate  sensitivity  gap, the interest rate  sensitivity gap ratio (i.e.,
interest rate sensitive  assets divided by interest rate sensitive  liabilities)
and the cumulative interest rate sensitivity gap ratio.

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

                                       22
<PAGE>

<TABLE>
<CAPTION>

                                                                           After
                                                                           Three         After
                                                                          Months       One Year
                                                            Within          But           But
                                                            Three         Within        Within         After
                                                            Months       One Year     Five Years     Five Years      Total
                                                         -------------  ------------  ------------  ------------- -------------
                                                                                (Dollars in Thousands)
                                                         ----------------------------------------------------------------------
<S>                                                      <C>            <C>           <C>           <C>           <C>
Interest-earning assets:
   Interest-bearing deposits                             $        179   $        --   $        --   $         --  $        179
   Federal funds sold                                             120            --            --             --           120
   Securities                                                   4,287           171        32,935          5,279        42,672
   Loans                                                       77,257        37,866        84,409                      199,532
                                                         -------------  ------------  ------------  ------------- -------------

             Total interest earning assets                     81,843        38,037       117,344          5,279       242,503
                                                         -------------  ------------  ------------  ------------- -------------

Interest-bearing liabilities:
   Interest-bearing demand                                     49,962            --            --             --        49,962
   Savings                                                      4,227            --            --             --         4,227
   Time deposits                                               31,353        73,085        18,667             --       123,105
   Federal funds purchased a
      repurchase agreements                                    12,969            --            --             --        12,969
   Other borrowings                                             6,649            51        19,103             --        25,803
                                                         -------------  ------------  ------------  ------------- -------------

             Total interest-bearing liabilities               105,160        73,136        37,770             --       216,066
                                                         -------------  ------------  ------------  ------------- -------------

Interest rate sensitivity gap                            $   (23,317)   $  (35,099)   $    79,574   $      5,279  $     26,437
                                                         =============  ============  ============  ============= =============

Cumulative interest rate sensitivity gap                 $   (23,317)   $  (58,416)   $    21,158   $     26,437
                                                         =============  ============  ============  =============

Interest rate sensitivity gap ratio                              0.78          0.52          3.11             --
                                                         =============  ============  ============  =============

Cumulative interest rate sensitivity gap ratio                   0.78          0.67          1.10           1.12
                                                         =============  ============  ============  =============
</TABLE>

         The Company actively manages the mix of asset and liability  maturities
to control the effects of changes in the general level of interest  rates on net
interest  income.  Except for its effect on the general level of interest rates,
inflation  does  not  have a  material  impact  on  the  Bank  due  to the  rate
variability  and  short-term  maturities of its earning  assets.  In particular,
approximately  58% of the  loan  portfolio  is  comprised  of loans  which  have
variable rate terms or mature within one year. Most mortgage loans are made on a
variable rate basis with rates being adjusted every one to five years.

                              SECURITIES PORTFOLIO

         The carrying value at the dates indicated of securities are as follows:
<TABLE>
<CAPTION>

                                                                                       December 31,
                                                                   -----------------------------------------------------
                                                                          1999               1998              1997
                                                                   -----------------  -----------------  ---------------
                                                                                  (Dollars in Thousands)
                                                                   -----------------------------------------------------

<S>                                                                <C>                <C>                <C>
U. S. Treasury and U. S. government agencies and corporations      $         28,199   $         23,691   $       16,960
Mortgage-backed securities                                                    6,248              3,426            5,376
State and municipal securities                                                6,049              3,608            2,173
Equity securities <F1>                                                        2,176                519              396
                                                                   -----------------  -----------------  ---------------
                                                                   $         42,672   $         31,244   $       24,905
                                                                   =================  =================  ===============
<FN>
<F1>    Equity   securities   consist  of  Federal  Home  Loan  Bank  stock  and
        investments in two de novo banks. For presentation  purposes, the equity
        securities  are not included in the maturity  table below because it has
        no contractual maturity date.
</FN>
</TABLE>
                                       23
<PAGE>
Maturities
----------

        The  amounts of  securities  as of  December  31,  1999 are shown in the
following table according to contractual  maturities classified as; (1) one year
or less; (2) after one year through five years; (3) after five years through ten
years; and (4) after ten years.
<TABLE>
<CAPTION>
                                                               U. S. Treasury
                                                              and Other U. S.
                                                            Government Agencies
                                                             and Corporations               Municipal Securities
                                                                          Yield                               Yield
                                                        Amount            <F1>           Amount            <F1><F2>
                                                       --------        ------------   -----------      -------------
                                                                       (Dollars in Thousands)
                                                       -------------------------------------------------------------
<S>                                                    <C>                            <C>                <C>
Maturity:
   One year or less                                    $         -            - %     $        -            - %
   After one year through five years                        28,241         6.09            3,119         4.44
   After five years through ten years                          277         5.52            2,930         4.69
   After ten years                                           5,929         6.74                -            -
                                                       ------------                   -----------
                                                       $    34,447         6.20 %     $    6,049         4.56 %
                                                       ============                   ===========
<FN>
<F1>     Yields were computed using coupon  interest rates,  including  discount
         accretion and premium amortization. The weighted average yield for each
         maturity  range was computed  using the carrying value of each security
         in that range.
<F2>     Yields on municipal securities are not stated on a tax-equivalent basis.
</FN>
</TABLE>

                                                       LOAN PORTFOLIO

Types of Loans

Loans by type of collateral are presented below:
<TABLE>
<CAPTION>
                                                                        December 31,
                                  -----------------------------------------------------------------------------------------
                                        1999              1998               1997              1996              1995
                                  ----------------   ---------------   ---------------  ----------------   ----------------
                                                                   (Dollars in Thousands)
                                  -----------------------------------------------------------------------------------------
<S>                                        <C>               <C>               <C>               <C>                 <C>
Commercial                        $        32,799    $       16,880    $       15,884   $         9,416    $        14,777
Real estate - construction                 47,753            27,200            25,447            16,049              8,839
Real estate - mortgage <F1>                98,736            79,478            66,895            56,278             43,935
Consumer                                   14,932            12,935            10,934             9,935              7,789
Other                                       5,312             1,730             2,050             1,416                776
                                  ----------------   ---------------   ---------------  ----------------   ----------------
                                          199,532           138,223           121,210            93,094             76,116
Less allowance for loan losses            (2,222)           (1,773)           (1,433)           (1,146)            (1,012)
                                  ----------------   ---------------   ---------------  ----------------   ----------------
Net loans                         $       197,310    $      136,450    $      119,777   $        91,948    $        75,104
                                  ================   ===============   ===============  ================   ================
<FN>

<F1>     Real estate-mortgage loans are net of $19,000, 22,000, $25,000, $40,000
         and $15,000 of  deferred  loan fees for the years  ended  December  31,
         1999, 1998, 1997, 1996 and 1995, respectively.

</FN>
</TABLE>

                                       24
<PAGE>


Maturities and Sensitivities to Changes in Interest Rates

         Total loans as of December  31, 1999 are shown in the  following  table
according  to  remaining  maturity  of (1) one year or less,  (2) after one year
through five years, and (3) after five years.

                                                            (Dollars in
                                                             Thousands)
                                                           ---------------
Maturity:
   One year or less                                        $      105,981
   After one year through five years                               82,862
   After five years                                                10,689
                                                           ---------------
                                                           $      199,532
                                                           ===============

         The following table  summarizes loans at December 31, 1999 with the due
dates  after one year for  predetermined  and  floating or  adjustable  interest
rates.

                                                              (Dollars in
                                                               Thousands)
                                                             -------------

Predetermined interest rates                                 $     68,521
Floating or adjustable interest rates                              25,030
                                                             -------------
                                                             $     93,551
                                                             =============

         Records  were  not  available  to  present  the  above  two  tables  by
individual  categories  and could not be  reconstructed  without undue burden or
cost to the Company.

Risk Elements

         The following table presents the aggregate of  nonperforming  loans for
the categories indicated.
<TABLE>
<CAPTION>
                                                                                         December 31,
                                                                        ------------------------------------------------------------
                                                                            1999        1998        1997        1996         1995
                                                                        ----------- ----------- ----------- ----------- ------------
                                                                                          (Dollars in Thousands)
                                                                        ------------------------------------------------------------
<S>                                                                     <C>         <C>         <C>         <C>         <C>
Loans accounted for on a nonaccrual basis                               $        -  $       93  $        3  $        6  $        11

Loans contractually past due ninety days or more
to interest or principal payments and still
accruing                                                                        76         408         181          60           35

Loans,  the term of which  have been  renegotiated  to  provide a
reduction  or deferral of interest or principal because of
deterioration in the financial position of the borrower                          -           -           -           -            -

Loans now current about which there are serious  doubts as to
the ability of the borrower to comply with present loan
repayment terms                                                                  -           -           -           -            -
</TABLE>
                                                                           25
<PAGE>


         The reduction in interest income associated with nonaccrual loans as of
December 31, 1999 is as follows:

<TABLE>
<CAPTION>
                                                                           (Actual Dollars)

          <S>                                                               <C>
          Interest income that would have been recorded
          on nonaccrual loans under original terms                          $      14,601
                                                                            ==============

          Interest income that was recorded on nonaccrual loans             $      14,601
                                                                             ==============
</TABLE>

         As of December 31, 1999 and 1998,  management included nonaccrual loans
in its  definition  of impaired  loans as  determined  by  Financial  Accounting
Standards Board Statement Numbers 114 and 118.

         The Company's  policy is to discontinue  the accrual of interest income
when,  in the  opinion  of  management,  collection  of  such  interest  becomes
doubtful.   This  status  is  determined   when;  (1)  there  is  a  significant
deterioration  in the financial  condition of the borrower and full repayment of
principal  and interest is not  expected;  and (2) the  principal or interest is
more than ninety days past due, unless the loan is both  well-secured and in the
process of  collection.  Accrual of interest on such loans is resumed  when,  in
management's   judgment,  the  collection  of  interest  and  principal  becomes
probable.   Loans  classified  for  regulatory   purposes  as  loss,   doubtful,
substandard,  or special  mention that have not been included in the table above
do not  represent  or result  from  trends  or  uncertainties  which  management
reasonably expects will materially impact future operating  results,  liquidity,
or capital  resources.  These classified loans do not represent material credits
about which  management  is aware and which  causes  management  to have serious
doubts as to the ability of such  borrowers  to comply  with the loan  repayment
terms.  In the  event of  non-performance  by the  borrower,  these  loans  have
collateral pledged which would prevent the recognition of substantial losses.

Commitments and Lines of Credit

         The Company will,  in the normal  course of business,  commit to extend
credit  in the form of  letters  of  credit or lines of  credit.  The  amount of
outstanding loan commitments and letters of credit at December 31, 1999 and 1998
was $49,942,000 and $38,195,000, respectively. These commitments are recorded in
the financial  statements when funds are disbursed or the financial  instruments
become  payable.  The Company uses the same credit and  collateral  policies for
these off balance sheet  commitments as it does for financial  instruments  that
are  recorded in the  financial  statements.  Commitments  generally  have fixed
expiration dates or other termination  clauses and may require payment of a fee.
Since many of the commitment  amounts expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements.

                         SUMMARY OF LOAN LOSS EXPERIENCE

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

                                       26
<PAGE>

<TABLE>
<CAPTION>
                                                                                 December 31,
                                              -----------------------------------------------------------------------------------
                                                    1999            1998             1997             1996             1995
                                              --------------- ---------------  ---------------  --------------- -----------------
                                                                            (Dollars in Thousands)
                                              -----------------------------------------------------------------------------------

<S>                                           <C>             <C>              <C>              <C>             <C>
Average amount of loans outstanding           $      166,624  $      125,769   $      108,203   $       81,967  $         76,162
                                              =============== ===============  ===============  =============== =================

Balance of allowance for loan losses
   at beginning of year                       $        1,773  $        1,433   $        1,146   $        1,012  $            901
                                              --------------- ---------------  ---------------  --------------- -----------------

Loans charged off:
Real estate                                              (3)            (39)                -                -                 -
Commercial                                              (15)             (6)             (37)             (22)               (5)
Installment                                             (64)            (19)             (48)             (24)             (154)
Credit cards                                             (8)             (6)              (3)              (4)              (10)
                                              --------------- ---------------  ---------------  --------------- -----------------
                                                        (90)            (70)             (88)             (50)             (169)
                                              --------------- ---------------  ---------------  --------------- -----------------

Recoveries of loans previously charged off:
Real estate                                                -               8                -                -                 1
Installment                                               12              13               26               34                 7
Credit cards                                               5               -                -                -                 2
Commercial                                                 2              11                1                -                 -
                                              --------------- ---------------  ---------------  --------------- -----------------
                                                          19              32               27               34                10
                                              --------------- ---------------  ---------------  --------------- -----------------

Net loans charged off during the year                   (71)            (38)             (61)             (16)             (159)
                                              --------------- ---------------  ---------------  --------------- -----------------

Additions to allowance charged
   to expense during year                                520             378              348              150               270
                                              --------------- ---------------  ---------------  --------------- -----------------

Balance of allowance for loan losses
   at end of year                             $        2,222  $        1,773   $        1,433   $        1,146  $          1,012
                                              =============== ===============  ===============  =============== =================

Ratio of net loans charged off during
   the year to average loans
   outstanding                                         0.04%           0.03%            0.06%            0.02%             0.21%
                                              =============== ===============  ===============  =============== =================
</TABLE>

         The  following  table sets forth the allowance for loan losses to total
allowance for loan losses and the percent of loans to total loans in each of the
categories listed at the dates indicated.
<TABLE>
<CAPTION>

                                                                          DECEMBER 31,
                                    1999                  1998                  1997               1996                  1995
                                    -----------------------------------------------------------------------------------------

                                       Percent               Percent               Percent              Percent             Percent
                                      of Loans              of Loans              of Loans             of Loans            of Loans
                                       in Each               in Each               in Each              in Each             in Each
                                      Category              Category              Category             Category            Category
                                      to Total              to Total              to Total             to Total            to Total
                             Amount    Loans     Amount       Loans     Amount      Loans     Amount     Loans   Amount      Loans
                            -------------------------------------------------------------------------------------------------------
                                                                        (Dollars in Thousands)
<S>                          <C>        <C>      <C>          <C>      <C>         <C>       <C>        <C>     <C>         <C>
Commercial and other ...     $  181     19.10%   $  145       13.46%   $  117      14.79     $   94     11.63%  $   83      20.43%
Real estate-construction        299     23.93       239       19.68       193      20.99        154     17.23      136      11.61
Real estate-mortgage ...      1,427     49.49     1,138       57.50       920      55.20        735     60.47      649      57.73
Consumer ...............        315      7.48       251        9.36       203       9.02        163     10.67      144      10.23
                             ------    ------    ------      ------    ------     ------     ------    ------   ------     ------
Total allowance ........     $2,222    100.00%   $1,773      100.00%   $1,433     100.00%    $1,146    100.00%  $1,012     100.00%
                             ======    ======    ======      ======    ======     ======     ======    ======   ======     ======
</TABLE>


                                                                             27
<PAGE>


Allowance for Loan Losses
-------------------------

         The allowance  for loan losses is created by direct  charges to income.
Losses on loans are  charged  against  the  allowance  in the year in which such
loans, in management's opinion, become uncollectible. Recoveries during the year
are credited to this allowance. The factors that influence management's judgment
in  determining  the amount  charged  to income  are past loan loss  experience,
composition  of the loan  portfolio,  evaluation of trends and possible  losses,
current economic conditions and other relevant factors.  The Company's allowance
for loan losses was approximately  $2,222,000 at December 31, 1999, representing
1.11% of total loans,  compared  with  $1,773,000  at December  31, 1998,  which
represented 1.28% of total loans. The allowance for loan losses is evaluated and
adjusted   periodically  based  on  management's   evaluation  of  current  risk
characteristics  of the loan portfolio,  as well as the impact of prevailing and
expected economic business  conditions.  Management  considers the allowance for
loan losses adequate to cover possible losses at December 31, 1999.


                                    DEPOSITS

         Average amounts of deposits and average rates paid thereon,  classified
as to noninterest-bearing  demand deposits,  interest-bearing demand and savings
deposits and time deposits, are presented below. <F1>
<TABLE>
<CAPTION>

                                                                         Year Ended December 31,
                                            ----------------------------------------------------------------------------------
                                                      1999                        1998                        1997
                                            --------------------------  -------------------------   --------------------------
                                                 Amount       Rate           Amount       Rate           Amount      Rate
                                            --------------  ----------  --------------  ---------   -----------------------
                                                                    (Dollars in Thousands)
                                            ----------------------------------------------------------------------------------
<S>                                         <C>                         <C>                         <C>
Noninterest-bearing demand deposits         $      22,184        - %    $      18,913        - %    $      14,615        - %
Interest-bearing demand and
   savings deposits                                52,924     3.11             46,513     3.53             34,845     3.57
Time deposits                                     108,674     5.80             95,388     6.20             83,669     6.24
                                            --------------              --------------              --------------
Total deposits                              $     183,782               $     160,814               $     133,129
                                            ==============              ==============              ==============
<FN>
<F1>     Average balances were determined using the daily average balances.
</FN>
</TABLE>

The  amounts of time  certificates  of deposit  issued in amounts of $100,000 or
more as of December 31, 1999 are shown below by category, which is based on time
remaining until maturity of (1) three months or less, (2) over three through six
months, (3) over six through twelve months, and (4) over twelve months.

                                                                (Dollars in
                                                                Thousands)
                                                              --------------

           Three months or less                               $       3,645
           Over three through six months                             10,982
           Over six through twelve months                            14,422
           Over  twelve months                                        2,583
                                                              --------------
                        Total                                 $      31,632
                                                              ==============


                                        28
<PAGE>


                           RETURN ON EQUITY AND ASSETS

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

                                                     Year Ended December 31,
                                                -------------------------------
                                                  1999       1998        1997
                                                --------   --------    --------

           Return on assets <F1>                  1.03 %      0.93 %     1.14 %
           Return on equity <F2>                 14.74       11.55      12.99
           Dividend payout ratio <F3>            24.75       21.33      22.22
           Equity to assets ratio <F4>            6.97        8.05       8.76
[FN]

<F1>     Net income divided by average total assets.
<F2>     Net income divided by average equity.
<F3>     Dividends declared per share divided by diluted earnings per share.
<F4>     Average equity divided by average total assets.
</FN>

                              SHORT TERM BORROWINGS

Other Borrowings
----------------

         As part of our  operating  strategy,  we have  utilized  Federal  funds
purchased and securities sold under  repurchase  agreements as an alternative to
retail  deposits to fund our operations  when borrowings are less costly and can
be invested at a positive  interest rate spread or when we need additional funds
to satisfy loan demand. By utilizing Federal funds purchased and securities sold
under repurchase  agreements,  which possess varying stated  maturities,  we can
meet our liquidity needs without  otherwise being dependent upon retail deposits
and revising our deposit rates to attract retail deposits,  which have no stated
maturities,  except  for  certificates  of  deposit,  which  are  interest  rate
sensitive and which are subject to  withdrawal  from us at any time. At December
31,  1999,  we had  $12,969,000  in  outstanding  Federal  funds  purchased  and
securities sold under repurchase agreements.

         The following table sets forth certain  information  regarding  Federal
funds  purchased and securities sold under  repurchase  agreements at or for the
years ended on the dates indicated:
<TABLE>
<CAPTION>
                                                                       At or For the Year Ended
                                                                             December 31,
                                                                 ------------------------------------
                                                                    1999         1998          1997
                                                                 ---------    ---------     ---------
                                                                        (Dollars in Thousands)
<S>                                                              <C>          <C>           <C>
Average balance outstanding                                      $   7,261    $   1,804     $     729
Maximum amount outstanding at any month-end during the year         13,859        4,203         1,226
Balance outstanding at end of year                                  12,969        1,235           362
Weighted average interest rate during year                           4.65%        4.70%         3.72%
Weighted average interest rate at end of year                        5.25%        3.94%         4.08%
</TABLE>

Year 2000
---------

         Based  on a review  of the  Bank's  and the  Company's  business  since
January 1, 2000,  the Company has not  experienced  any material  effects of the
Year 2000  problem.  Although the Company has not been  informed of any material
risks associated with the Year 2000 problem from third parties,  there can be no
assurance that the Company will not be impacted in the future.  The Company will
continuously  monitor its business  applications  and maintain  contact with its
third party vendors and key business partners to resolve Year 2000 problems that
may arise in the future.

                                       29
<PAGE>


ITEM 7.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The  financial   statements  and  the  independent   auditor's   report
identified in Item 13(a) are included in this report beginning at page F-1.


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
         AND FINANCIAL DISCLOSURE

           Not applicable



                                    PART III


ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS

         The information set forth under the caption "Election of Directors" and
"Executive  Officers"  in the  Proxy  Statement  used  in  connection  with  the
Company's 2000 Annual Shareholders Meeting is incorporated herein by reference.


ITEM 10. EXECUTIVE COMPENSATION

         The information set forth under the caption "Executive Compensation" in
the  Proxy   Statement  used  in  connection  with  the  Company's  2000  Annual
Shareholders meeting is incorporated herein by reference.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The  information  set forth under the caption  "Security  Ownership  of
Certain  Beneficial  Owners  and  Management"  in the  Proxy  Statement  used in
connection with the Company's 2000 Annual  Shareholders  meeting is incorporated
herein by reference.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information set forth under the caption  "Certain  Transactions" in
the  Proxy   Statement  used  in  connection  with  the  Company's  2000  Annual
Shareholders meeting is incorporated herein by reference.

                                       30
<PAGE>

ITEM 13. EXHIBITS AND REPORTS ON FORM 8K

         (a)      Contents:

              1.  Consolidated financial statements:
                  ----------------------------------

                  The following  financial  statements  and notes thereto of the
                  Registrant are  incorporated  by reference into Item 7 of this
                  report:

                         G B & T Bancshares, Inc. and Subsidiary:

                  (i)      Consolidated  Balance  Sheets - December 31, 1999 and
                           1998

                  (ii)     Consolidated  Statements  of  Income  -  Years  Ended
                           December 31, 1999 and 1998

                  (iii)    Consolidated  Statements  of  Comprehensive  Income -
                           Years Ended December 31, 1999 and 1998

                  (iv)     Consolidated  Statements  of  Stockholders'  Equity -
                           Years Ended December 31, 1999 and 1998

                  (v)      Consolidated  Statements  of Cash Flows - Years Ended
                           December 31, 1999 and 1998

                  (vi)     Notes to Consolidated Financial Statements

              2.  Financial statement schedules:
                  ------------------------------

                         All schedules  are omitted as the required  information
                         is  inapplicable or the information is presented in the
                         financial statements or related notes.

         (b)      Reports of Form 8-K:

                  The  Company did not file a report on Form 8-K during the last
quarter of 1999.

                                       31
<PAGE>



         (c)      Exhibits:

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

                  3.1      Articles   of   Incorporation   of   the   Registrant
                           (incorporated herein by reference to the Registrant's
                           Registration   Statement   on  Form  S-3,   filed  on
                           September 24, 1998).

                  3.2      By-Laws  of the  Registrant  (incorporated  herein by
                           reference to the Registrant's  Registration Statement
                           on Form S-3, filed on September 24, 1998).

                  4.1      See Exhibits 3.1 and 3.2 herein for provisions of the
                           Registrant's  Articles of  Incorporation  and By-Laws
                           which  define  the  rights of the  holders  of Common
                           Stock of the Registrant.

                  10.1     Dividend  Reinvestment and Share Purchase Plan of the
                           Registrant  (incorporated  herein by reference to the
                           Registration's  Registration  Statement  on Form S-3,
                           filed on September 24, 1998).

                  21.1     Subsidiary of the Registrant.

                  23.1     Consent of Mauldin & Jenkins, LLC.

                  27.1     Financial Data Schedule (for SEC use only).


                                       32
<PAGE>


                              GB&T BANCSHARES, INC.
                                 AND SUBSIDIARY

                          CONSOLIDATED FINANCIAL REPORT

                                DECEMBER 31, 1999


--------------------------------------------------------------------------------

                                TABLE OF CONTENTS
                                -----------------


                                                                          Page
                                                                          ----

INDEPENDENT AUDITOR'S REPORT..............................................F-2

CONSOLIDATED FINANCIAL STATEMENTS

     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 and 8
     Notes to consolidated financial statements........................F-9-32


                                      F-1
<PAGE>

                          INDEPENDENT AUDITOR'S REPORT


--------------------------------------------------------------------------------

To the Board of Directors
GB&T Bancshares, Inc. and Subsidiary
Gainesville, Georgia


            We have audited the accompanying consolidated balance sheets of GB&T
BANCSHARES,  INC.  AND  SUBSIDIARY  as of December  31,  1999 and 1998,  and the
related consolidated statements of income,  comprehensive income,  stockholders'
equity and cash flows for the years then ended.  These financial  statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.


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


            In our opinion,  the consolidated  financial  statements referred to
above present fairly, in all material  respects,  the financial position of GB&T
Bancshares,  Inc.  and  subsidiary  as of December  31,  1999 and 1998,  and the
results of their  operations  and their cash flows for the years then ended,  in
conformity with generally accepted accounting principles.

                                                   /s/ MAULDIN & JENKINS, LLC





Atlanta, Georgia
January 27, 2000, except Note 18 as to which
   the date is February 29, 2000


                                      F-2
<PAGE>

                                    GB&T BANCSHARES, INC.
                                        AND SUBSIDIARY

                                 CONSOLIDATED BALANCE SHEETS
                                  DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
============================================================================================


                                   Assets                         1999               1998
                                   ------                    -------------      ------------

<S>                                                          <C>                <C>
Cash and due from banks                                      $   8,151,398      $  9,406,508
Interest-bearing deposits in banks                                 178,692           254,060
Federal funds sold                                                 120,000         9,693,000
Securities available-for-sale                                   42,671,733        31,244,047

Loans                                                          199,532,147       138,223,283
Less allowance for loan losses                                   2,221,668         1,773,187
                                                             -------------      ------------
          Loans, net                                           197,310,479       136,450,096
                                                             -------------      ------------

Premises and equipment                                           5,014,677         4,521,824
Other assets                                                     5,312,970         4,592,051
                                                             -------------      ------------

          Total assets                                       $ 258,759,949      $196,161,586
                                                             =============      ============


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

Deposits
    Noninterest-bearing demand                               $  23,156,982      $ 25,374,358
    Interest-bearing demand                                     49,961,823        48,739,521
    Savings                                                      4,226,941         3,814,887
    Time, $100,000 and over                                     31,631,761        20,354,310
    Other time                                                  91,473,778        78,164,269
                                                             -------------      ------------
          Total deposits                                       200,451,285       176,447,345
                                                             -------------      ------------

Federal funds purchased and securities
   sold under repurchase agreements                             12,969,374         1,234,984
Other borrowings                                                25,802,903         1,182,800
Other liabilities                                                2,929,031         1,990,794
                                                             -------------      ------------
          Total liabilities                                    242,152,593       180,855,923
                                                             -------------      ------------

Commitments and contingent liabilities

STOCKHOLDERS' EQUITY
    Common stock, par value $5; 10,000,000 shares
        authorized, 2,117,146 and 2,099,148 shares
        issued and outstanding, respectively                    10,585,730        10,495,740
    Capital surplus                                                339,260            64,559
    Retained earnings                                            6,338,685         4,594,107
    Accumulated other comprehensive income (loss)                 (656,319)          151,257
                                                             -------------      ------------

          Total stockholders' equity                            16,607,356        15,305,663
                                                             -------------      ------------

          Total liabilities and stockholders' equity         $ 258,759,949      $196,161,586
                                                             =============      ============

</TABLE>

See Notes to Consolidated Financial Statements

                                      F-3
<PAGE>

                                     GB&T BANCSHARES, INC.
                                         AND SUBSIDIARY

                               CONSOLIDATED STATEMENTS OF INCOME
                             YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
==============================================================================================

                                                                      1999             1998
                                                                 ------------      -----------
<S>                                                              <C>               <C>
Interest income
    Loans                                                        $ 16,185,164      $13,006,457
    Taxable securities                                              1,895,120        1,686,437
    Nontaxable securities                                             170,530          129,773
    Federal funds sold                                                202,546          568,761
    Deposits in banks                                                  32,066           20,849
                                                                 ------------      -----------
          Total interest income                                    18,485,426       15,412,277
                                                                 ------------      -----------

Interest expense
    Deposits                                                        7,950,951        7,558,396
    Federal funds purchased, securities sold under repurchase
       agreements, and other borrowings                               997,470          118,361
                                                                 ------------      -----------
          Total interest expense                                    8,948,421        7,676,757
                                                                 ------------      -----------

          Net interest income                                       9,537,005        7,735,520
PROVISION FOR LOAN LOSSES                                             520,000          378,000
                                                                 ------------      -----------
          Net interest income after provision
              for loan losses                                       9,017,005        7,357,520
                                                                 ------------      -----------

Other income
    Service charges on deposit accounts                               676,536          572,851
    Other service charges and fees                                     24,040           22,525
    Security transactions, net                                         (2,071)            --
    Mortgage origination fees                                         209,974          304,754
    Gain on sale of loans                                              96,661          276,001
    Trust fees                                                        100,108           45,484
    Other operating income                                            295,498          274,354
                                                                 ------------      -----------
          Total other income                                        1,400,746        1,495,969
                                                                 ------------      -----------

Other expense
    Salaries and employee benefits                                  3,881,186        3,463,700
    Equipment expenses                                                623,055          536,337
    Occupancy expenses                                                488,982          487,799
    Other operating expenses                                        2,039,280        1,940,201
                                                                 ------------      -----------
          Total other expenses                                      7,032,503        6,428,037
                                                                 ------------      -----------

          Income before income taxes                                3,385,248        2,425,452

Income tax expense                                                  1,113,652          752,517
                                                                 ------------      -----------

          Net income                                             $  2,271,596      $ 1,672,935
                                                                 ============      ===========

Basic earnings per share                                         $       1.08      $      0.80
                                                                 ============      ===========

Diluted earnings per share                                       $       1.01      $      0.75
                                                                 ============      ===========

</TABLE>


See Notes to Consolidated Financial Statements.

                                              F-4
<PAGE>

                                           GB&T BANCSHARES, INC.
                                              AND SUBSIDIARY

                              CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                  YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>

=========================================================================================================

                                                                                 1999             1998
                                                                              -----------      ----------
<S>                                                                           <C>              <C>
Net income                                                                    $ 2,271,596      $1,672,935
                                                                              -----------      ----------

Other comprehensive income (loss):

        Unrealized holding gains (losses) arising during period,
            net of tax (benefits) of $(495,670) and $56,122, respectively        (808,943)         91,567

         Reclassification adjustment for losses realized
            in net income, net of benefit of $704                                   1,367            --

                                                                              -----------      ----------
Other comprehensive income (loss)                                                (807,576)         91,567
                                                                              -----------      ----------

Comprehensive income                                                          $ 1,464,020      $1,764,502
                                                                              ===========      ==========

</TABLE>



See Notes to Consolidated Financial Statements.


                                                   F-5
<PAGE>
<TABLE>
<CAPTION>
                                                      GB&T BANCSHARES, INC.
                                                         AND SUBSIDIARY

                                         CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                             YEARS ENDED DECEMBER 31, 1999 AND 1998

===============================================================================================================================


                                                                                                Accumulated
                                    Common Stock                                                    Other
                              ---------------------------        Capital         Retained       Comprehensive    Stockholders'
                                Shares      Par Value            Surplus         Earnings        Income (Loss)     Equity
                              ----------  ----------------  ---------------- ----------------  --------------  ----------------

<S>                           <C>           <C>              <C>               <C>              <C>             <C>
Balance, December 31, 1997    1,676,160     $   8,380,800    $    2,002,750    $   3,357,703    $     59,690    $   13,800,943
    Net income                        -                 -                 -        1,672,935               -         1,672,935
    Options exercised                13                65                75                -               -               140
    Stock dividend              419,011         2,095,055       (2,002,750)         (92,920)               -             (615)
    Dividends reinvested          3,964            19,820            64,484                -               -            84,304
    Dividends declared,
        $.16 per share                -                 -                 -        (343,611)               -         (343,611)
    Other comprehensive               -                 -                 -                -          91,567            91,567
       income
                              ---------     -------------    --------------    -------------    ------------    --------------
Balance, December 31, 1998    2,099,148        10,495,740            64,559        4,594,107         151,257        15,305,663
    Net income                        -                 -                 -        2,271,596               -         2,271,596
    Options exercised             3,970            19,850             6,526                -               -            26,376
    Dividends reinvested         14,028            70,140           268,175                -               -           338,315
    Dividends declared,
        $.25 per share                -                 -                 -        (527,018)               -         (527,018)
    Other comprehensive loss          -                 -                 -                -       (807,576)         (807,576)
                              ---------     -------------    --------------    -------------    ------------    --------------
Balance, December 31, 1999    2,117,146     $  10,585,730    $      339,260    $   6,338,685    $  (656,319)    $   16,607,356
                              =========     =============    ==============    =============    ===========     ==============
</TABLE>


See Notes to Consolidated Financial Statements.


                                                              F-6
<PAGE>


                                      GB&T BANCSHARES, INC.
                                          AND SUBSIDIARY

                              CONSOLIDATED STATEMENTS OF CASH FLOWS
                              YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>

================================================================================================

                                                                      1999              1998
                                                                  ------------      ------------
<S>                                                               <C>               <C>
OPERATING ACTIVITIES
    Net income                                                    $  2,271,596      $  1,672,935
    Adjustments to reconcile net income to
        net cash provided by operating activities:
        Depreciation                                                   449,043           411,359
        Provision for loan losses                                      520,000           378,000
        Provision for other real estate owned                           92,954           289,000
        Loss on sale of securities available-for-sale                    2,071              --
        Loss on sale of other real estate owned                          7,326             8,224
        Deferred income taxes                                         (238,496)         (246,827)
        Increase in interest receivable                               (279,554)          (55,285)
        Increase (decrease) in interest payable                        908,274          (208,447)
        Other operating activities                                      47,047          (297,339)
                                                                  ------------      ------------

           Net cash provided by operating activities                 3,780,261         1,951,620
                                                                  ------------      ------------

INVESTING ACTIVITIES
    Decrease in interest-bearing deposits in banks                      75,368            84,606
    Purchases of securities available-for-sale                     (30,413,281)      (21,551,745)
    Proceeds from maturities of securities available-for-sale       15,130,665        14,460,252
    Proceeds from sales of securities available-for-sale             2,550,318           900,000
    Net decrease in Federal funds sold                               9,573,000           832,000
    Net increase in loans                                          (61,543,476)      (17,783,403)
    Purchase of premises and equipment                                (941,896)         (601,946)
    Proceeds from sale of other real estate owned                      337,825           462,421
                                                                  ------------      ------------

           Net cash used in investing activities                   (65,231,477)      (23,197,815)
                                                                  ------------      ------------

FINANCING ACTIVITIES
    Net increase in deposits                                        24,003,940        20,836,359
    Net increase in Federal funds purchased and
       securities sold under repurchase agreements                  11,734,390           872,784
    Net increase in other borrowings                                24,620,103           115,370
    Stock options exercised                                             26,376               140
    Dividends reinvested                                               338,315            84,304
    Dividends paid                                                    (527,018)         (344,226)
                                                                  ------------      ------------

         Net cash provided by financing activities                  60,196,106        21,564,731
                                                                  ------------      ------------
</TABLE>



                                               F-7
<PAGE>
<TABLE>
<CAPTION>
                                      GB&T BANCSHARES, INC.
                                          AND SUBSIDIARY

                              CONSOLIDATED STATEMENTS OF CASH FLOWS
                              YEARS ENDED DECEMBER 31, 1999 AND 1998

================================================================================================


                                                                      1999              1998
                                                                  ------------      ------------

<S>                                                                <C>               <C>
Net increase (decrease) in cash and due from banks                 $(1,255,110)      $   318,536

Cash and due from banks at beginning of year                         9,406,508         9,087,972
                                                                   -----------       -----------

Cash and due from banks at end of year                             $ 8,151,398       $ 9,406,508
                                                                   ===========       ===========


SUPPLEMENTAL DISCLOSURES Cash paid for:
        Interest                                                   $ 8,040,147       $ 7,885,204

        Income taxes                                               $ 1,282,000       $   968,718

NONCASH TRANSACTIONS
    Unrealized (gains) losses on securities
        available-for-sale                                         $ 1,302,544       $  (147,689)

    Principal balances of loans transferred to other
        real estate                                                $   163,093       $   732,385
</TABLE>


See Notes to Consolidated Financial Statements



                                               F-8
<PAGE>


                              GB&T BANCSHARES, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


--------------------------------------------------------------------------------



NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business
------------------

GB&T  Bancshares,  Inc. (the "Company") is a bank holding company whose business
is  conducted  by its  wholly-owned  subsidiary,  Gainesville  Bank & Trust (the
"Bank").  The Bank is a  commercial  bank located in  Gainesville,  Hall County,
Georgia  with three  branches  located in  Gainesville,  Georgia  and one branch
located in Oakwood,  Georgia. The Bank provides a full range of banking services
to individual and corporate  customers in its primary market area of Hall County
and surrounding counties.

Basis of Presentation
---------------------

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

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

Cash and Due From Banks
-----------------------

Cash on hand, cash items in process of collection and amounts due from banks are
included in cash and due from banks.

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

Securities
----------

Securities  are  classified  based  on  management's  intention  on the  date of
purchase.  Securities  which  management  has the intent and  ability to hold to
maturity would be classified as held-to-maturity and recorded at amortized cost.
All other securities are classified as  available-for-sale  and recorded at fair
value with net  unrealized  gains and  losses  reported  in other  comprehensive
income.  Equity  securities  without  a  readily  determinable  fair  value  are
classified as available-for-sale securities and recorded at cost.

                                      F-9
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



------------------------------------------------------------------------------



NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Securities (Continued)


Interest and dividends on  securities,  including  amortization  of premiums and
accretion of  discounts,  are included in interest  income.  Realized  gains and
losses  from  the  sales  of  securities  are  determined   using  the  specific
identification method.

Loans
-----

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

Loan  origination fees and costs incurred in origination of loans are recognized
at the time the loan is recorded.  Because net  origination  loan fees and costs
are not material,  the results of operations are not  materially  different than
the results  which would be  obtained by  accounting  for loan fees and costs in
accordance with generally accepted accounting principles.

The accrual of interest on loans is discontinued when, in management's  opinion,
the borrower may be unable to meet  payments as they become due. When accrual of
interest is  discontinued,  all unpaid  accrued  interest  is  reversed  against
interest income.  Interest income is subsequently  recognized only to the extent
cash payments are received.

The allowance for loan losses is maintained at a level that management  believes
to be adequate to absorb potential losses in the loan portfolio. Loan losses are
charged against the allowance when management believes the uncollectibility of a
loan  is  confirmed.  Subsequent  recoveries  are  credited  to  the  allowance.
Management's  determination  of the  adequacy  of the  allowance  is based on an
evaluation  of the  portfolio,  past  loan  loss  experience,  current  economic
conditions,  volume, growth,  composition of the loan portfolio, and other risks
inherent in the  portfolio.  This  evaluation  is  inherently  subjective  as it
requires material estimates that are susceptible to significant change including
the amounts and timing of future cash flows  expected to be received on impaired
loans.  In  addition,   regulatory  agencies,  as  an  integral  part  of  their
examination  process,  periodically  review  the  Company's  allowance  for loan
losses,  and may require the Company to record  additions to the allowance based
on  their  judgment  about  information  available  to them at the time of their
examinations.


                                      F-10
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



-------------------------------------------------------------------------------


NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Loans (Continued)

A loan is considered  impaired when it is probable the Company will be unable to
collect  all  principal  and  interest  payments  due  in  accordance  with  the
contractual terms of the loan agreement.  Individually identified impaired loans
are  measured  based on the present  value of payments  expected to be received,
using the contractual loan rate as the discount rate. Alternatively, measurement
may be based on observable market prices or, for loans that are solely dependent
on the collateral for repayment,  measurement  may be based on the fair value of
the  collateral.  If the recorded  investment  in the impaired  loan exceeds the
measure of fair value,  a valuation  allowance is  established as a component of
the allowance for loan losses.  Changes to the valuation  allowance are recorded
as a component of the provision for loan losses.

Other Real Estate Owned
-----------------------

Other real estate owned  represents  properties  acquired  through  foreclosure.
Other real  estate  owned is held for sale and is  recorded  at the lower of the
recorded  amount  of the loan or fair  value of the  properties  less  estimated
selling  costs.  Any  write-down  to fair value at the time of transfer to other
real estate owned is charged to the allowance for loan losses.  Subsequent gains
or losses on sale and any  subsequent  adjustments  to the value are recorded in
current income from  operations.  The carrying amount of other real estate owned
at December 31, 1999 and 1998 was $293,887 and $569,900, respectively.

Premises and Equipment
----------------------

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

Sale of Loans
-------------

The Company  originates and sells  participations  in certain  loans.  Gains are
recognized at the time the sale is consummated. The amount of gain recognized on
the  sale  of a  specific  loan  is  equal  to  the  percentage  resulting  from
determining  the fair value of the portion of the loan sold relative to the fair
value  of the  entire  loan.  Losses  are  recognized  at the  time  the loan is
identified  as held for sale and the  loan's  carrying  value  exceeds  its fair
value.


                                      F-11
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



-------------------------------------------------------------------------------


NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Income Taxes
------------

Income tax expense  consists of current and deferred  taxes.  Current income tax
provisions  approximate  taxes to be paid or refunded for the  applicable  year.
Deferred  income tax assets and  liabilities  are  determined  using the balance
sheet  method.  Under this  method,  the net  deferred tax asset or liability is
determined based on the tax effects of the differences  between the book and tax
bases of the various  balance  sheet assets and  liabilities  and gives  current
recognition to changes in tax rates and laws.

Recognition  of deferred  tax  balance  sheet  amounts is based on  management's
belief  that it is more likely  than not that the tax  benefit  associated  with
certain temporary  differences will be realized.  A valuation allowance would be
recorded for those  deferred tax items for which it is more likely than not that
realization would not occur.

The Company  and the Bank file a  consolidated  income tax  return.  Each entity
provides for income taxes based on its  contribution to income taxes  (benefits)
of the consolidated group.


Earnings Per Share
------------------

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

Comprehensive Income
--------------------

Statement  of  Financial   Accounting   Standards  ("SFAS")  No.  130  describes
comprehensive  income as the total of all  components of  comprehensive  income,
including net income. Other comprehensive  income refers to revenues,  expenses,
gains and  losses  that  under  generally  accepted  accounting  principles  are
included in comprehensive  income but excluded from net income.  Currently,  the
Company's other comprehensive  income consists of unrealized gains and losses on
available-for-sale securities.



                                      F-12
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



-------------------------------------------------------------------------------


NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent Developments
-------------------

In June 1998,  the  Financial  Accounting  Standards  Board issued SFAS No. 133,
"Accounting for Derivative  Instruments and Hedging  Activities".  The effective
date of this  statement  has been  deferred by SFAS No. 137 until  fiscal  years
beginning after June 15, 2000. However,  the statement permits early adoption as
of the beginning of any fiscal quarter after its issuance.  The Company  expects
to adopt this  statement  effective  January 1, 2001.  SFAS No. 133 requires the
Company to recognize  all  derivatives  as either assets or  liabilities  in the
balance sheet at fair value.  For derivatives that are not designated as hedges,
the gain or loss must be  recognized  in earnings  in the period of change.  For
derivatives  that are  designated  as  hedges,  changes in the fair value of the
hedged assets,  liabilities,  or firm commitments must be recognized in earnings
or recognized in other comprehensive  income until the hedged item is recognized
in earnings,  depending on the nature of the hedge. The ineffective portion of a
derivative's  change in fair value must be recognized  in earnings  immediately.
Management has not yet determined  what effect the adoption of SFAS No. 133 will
have on the Company's earnings or financial position.

There are no other  recent  accounting  pronouncements  that  have  had,  or are
expected to have, a material effect on the Company's financial statements.

Reclassifications
-----------------

Certain balance sheet and income statement items for the year ended December 31,
1998 have been  reclassified,  with no effect to total assets and net income, to
be consistent with classifications adopted for the year ended December 31, 1999.



                                      F-13
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



--------------------------------------------------------------------------------


NOTE 2.  SECURITIES

         The  amortized  cost and fair value of  securities  are  summarized  as
follows:
<TABLE>
<CAPTION>
                                                                GROSS            GROSS
                                              AMORTIZED       UNREALIZED       UNREALIZED          FAIR
                                                 COST           GAINS            LOSSES            VALUE
                                             -----------     -----------      ------------      -----------
          <S>                                 <C>             <C>              <C>               <C>
          Securities Available-for-Sale
          December 31, 1999:
          U. S. Government and agency
          securities                         $29,130,958     $      --        $   (932,508)     $28,198,450
          State and municipal securities       6,113,804           3,247           (67,929)       6,049,122
          Mortgage-backed securities           6,309,110           1,261           (62,650)       6,247,721
          Equity securities                    2,176,440            --                --          2,176,440
                                             -----------     -----------      ------------      -----------
                                             $43,730,312     $     4,508      $ (1,063,087)     $42,671,733
                                             ===========     ===========      ============      ===========

          December 31, 1998:
          U. S. Government and agency
          securities                         $23,559,084     $   160,353      $    (28,611)     $23,690,826
          State and municipal securities       3,512,190          96,111              (284)       3,608,017
          Mortgage-backed securities           3,409,908          33,993           (17,597)       3,426,304
          Equity securities                     518,900            --                --            518,900
                                             -----------     -----------      ------------      -----------
                                             $31,000,082     $   290,457      $    (46,492)     $31,244,047
                                             ===========     ===========      ============      ===========
</TABLE>

The  amortized  cost and fair value of  securities  as of  December  31, 1999 by
contractual  maturity are shown below.  Maturities  may differ from  contractual
maturities of mortgage-backed  securities  because the mortgages  underlying the
securities may be called or prepaid without penalty. Therefore, these securities
and  equity  securities  are not  included  in the  maturity  categories  in the
following summary.

                                              SECURITIES AVAILABLE-FOR-SALE
                                              -----------------------------
                                                AMORTIZED         FAIR
                                                  COST            VALUE
                                               -----------     -----------
          Due within one year                  $   500,000     $   480,965
          Due from one year to five years       31,794,819      30,883,089
          Due from five years to ten years       2,949,943       2,933,518
          Mortgage-backed securities             6,309,110       6,247,721
          Equity securities                      2,176,440       2,176,440
                                               -----------     -----------
                                               $43,730,312     $42,721,733
                                               ===========     ===========


                                      F-14
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



--------------------------------------------------------------------------------


NOTE 2.  SECURITIES (CONTINUED)

Securities  with a carrying value of $17,303,768  and $7,332,475 at December 31,
1999 and 1998,  respectively,  were  pledged to secure  public  deposits and for
other purposes.

Gross realized gains (losses) on securities  available-for-sale  were $8,177 and
$(10,248),  respectively,  for the year ended  December 31, 1999.  There were no
sales of securities for the year ended December 31, 1998.


NOTE 3.  LOANS AND ALLOWANCE FOR LOAN LOSSES

         The composition of loans is summarized as follows:

                                                   DECEMBER 31,
                                         --------------------------------
                                              1999                1998
                                         -------------      -------------
          Commercial                     $  32,799,000      $  16,880,000
          Real estate - construction        47,753,000         27,200,000
          Real estate - mortgage            98,755,000         79,500,000
          Consumer                          14,932,000         12,935,000
          Other                              5,312,441          1,730,166
                                         -------------      -------------
                                           199,551,441        138,245,166
          Unearned income                      (19,294)           (21,883)
          Allowance for loan losses         (2,221,668)        (1,773,187)
                                         -------------      -------------
          Loans, net                     $ 197,310,479      $ 136,450,096
                                         =============      =============

Changes in the allowance for loan losses are as follows:

                                           YEAR ENDED DECEMBER 31,
                                         ----------------------------
                                             1999             1998
                                         -----------      -----------

          Balance, beginning of year     $ 1,773,187      $ 1,432,957
          Provision for loan losses          520,000          378,000
          Loans charged off                  (91,251)         (69,015)
          Recoveries                          19,732           31,245
                                         -----------      -----------
          Balance, end of year           $ 2,221,668      $ 1,773,187
                                         ===========      ===========

                                      F-15
<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



-------------------------------------------------------------------------------


NOTE 3.  LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)

The total recorded  investment in impaired loans was $-- and $92,804 at December
31, 1999 and 1998,  respectively.  There were no impaired  loans at December 31,
1998  which had a specific  reserve  determined  in  accordance  with  generally
accepted  accounting  principles.  The average  recorded  investment in impaired
loans for 1999 and 1998 was $51,952 and $262,938, respectively.  Interest income
of $-- and $9,873 was  recognized on impaired loans for the years ended December
1999 and 1998.

The Company has granted loans to certain related  parties,  including  executive
officers,  directors and their  related  entities.  The interest  rates on these
loans  were  substantially  the  same as  rates  prevailing  at the  time of the
transaction  and repayment  terms are  customary for the type of loan  involved.
Changes  in related  party  loans for the year ended  December  31,  1999 are as
follows:

          Balance, beginning of year     $ 3,644,303
          Advances                         4,370,775
          Repayments                      (3,519,185)
                                         -----------
          Balance, end of yeaR           $ 4,495,893
                                         ===========


NOTE 4.  PREMISES AND EQUIPMENT

             Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>

                                                                          DECEMBER 31,
                                                                 ----------------------------
                                                                     1999             1998
                                                                 -----------      -----------
          <S>                                                    <C>              <C>
          Land                                                   $ 1,139,409      $   770,228
          Buildings                                                1,384,396        1,348,871
          Leasehold improvements                                   1,698,040        1,698,040
          Furniture and equipment                                  3,728,829        3,006,264
          Computer installation and construction in progress          28,200          215,720
                                                                 -----------      -----------
                                                                   7,978,874        7,039,123
          Accumulated depreciation                                (2,964,197)      (2,517,299)
                                                                 -----------      -----------
                                                                 $ 5,014,677      $ 4,521,824
                                                                 ===========      ===========
</TABLE>

At December  31, 1999,  the  Company's  50% interest in the main office  banking
facility with a carrying value  (including  land) of $1,662,330 was pledged to a
bank to  secure a  $877,000  borrowing  of a  director  who is the  owner of the
remaining 50% interest in the building.


                                      F-16
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



-------------------------------------------------------------------------------


NOTE 4.  PREMISES AND EQUIPMENT (CONTINUED)

At  December  31,  1999,  computer  installation  and  construction  in progress
consisted  of costs  incurred in  constructing  a new branch and  installing  an
Internet  banking  system.  At December 31, 1998, in progress items consisted of
equipment related to a new imaging system and network.  Total estimated costs to
complete the computer  installation and construction  project as of December 31,
1999 were approximately $1,259,000.


NOTE 5.  DEPOSITS

Aggregate maturities of time deposits at December 31, 1999 are as follows:

                      2000          $104,439,303
                      2001            12,820,658
                      2002             3,521,967
                      2003             2,323,611
                                    ------------
                                    $123,105,539
                                    ============

At December 31, 1999,  the Company had brokered time  deposits of  approximately
$5,484,000.


NOTE 6.  SECURITIES SOLD UNDER REPURCHASE AGREEMENTS

         Securities sold under  repurchase  agreements,  which are classified as
         secured  borrowings,  generally mature within one to four days from the
         transaction  date.  Securities  sold under  repurchase  agreements  are
         reflected  at the  amount  of cash  received  in  connection  with  the
         transactions.  The Company  monitors  the fair value of the  underlying
         securities on a daily basis.


                                      F-17
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



--------------------------------------------------------------------------------


NOTE 7.  OTHER BORROWINGS

              Other borrowings consist of the following:
<TABLE>
<CAPTION>

                                                                                     DECEMBER 31,
                                                                            --------------------------
                                                                               1999            1998
                                                                            -----------     ----------

           <S>                                                              <C>             <C>
          FHLB advance, interest payable  semi-annually at 6.33%,           $   154,286     $  205,714
          principal due in semi-annual instalments of $25,714
          Advance matures on November 13, 2002.  Advances
          are secured by securities with a carrying value of $497,655
          FHLB advance, interest payable quarterly at 5.98%, principal        6,000,000           --
          due at maturity.  Advance matures on January 31, 2000
          FHLB advance, interest payable quarterly at the three month         5,000,000           --
          LIBOR rate plus six basis points, principal due at maturity
          Advance matures on August 13, 2001
          FHLB advance, interest payable quarterly at 5.715%, principal       4,000,000           --
          due at maturity.  Advance matures on July 30, 2004
          FHLB advance, interest payable quarterly at 5.26%, principal       10,000,000           --
          due at maturity.  Advance matures on April 21, 2009
          Treasury, tax and loan note option account due on demand,             648,617        977,086
          bearing interest equal to the 90 day Treasury bill rate
                                                                            -----------     ----------
                                                                            $25,802,903     $1,182,800
                                                                            ===========     ==========
</TABLE>

Aggregate maturities of other borrowings as of December 31, 1999 are as follows:

                2000               $ 6,700,045
                2001                 5,051,429
                2002                    51,429
                2003                     --
                2004                 4,000,000
                Thereafter          10,000,000
                                   -----------
                                   $25,802,903
                                   ===========

                                      F-18
<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



--------------------------------------------------------------------------------


NOTE 8.  EMPLOYEE BENEFIT PLANS

Profit Sharing Plan

The Company has a 401(k) Employee  Profit-Sharing Plan available to all eligible
employees,  subject  to  certain  minimum  age  and  service  requirements.  The
contributions  expensed were  $117,539 and $69,154 for the years ended  December
31, 1999 and 1998, respectively.

Deferred Compensation Plan

The Company has a deferred  compensation plan providing for death and retirement
benefits  for  certain  officers.  The  estimated  amounts  to be paid under the
compensation  plan are being  funded  through  the  purchase  of life  insurance
policies on the officers.  Accrued deferred  compensation of $65,730 and $33,456
is included in other liabilities as of December 31, 1999 and 1998, respectively.
Cash surrender values of $1,762,666 and $1,680,562 on the insurance  policies is
included in other assets at December 31, 1999 and 1998, respectively.

Dividend Reinvestment and Share Purchase Plan

In 1998, the Company  adopted a dividend  reinvestment  and share purchase plan.
Under  the  plan,  all  holders  of record  of  common  stock  are  eligible  to
participate  in  the  plan.  Participants  in  the  plan  may  direct  the  plan
administrator  to invest  cash  dividends  declared  with  respect to all or any
portion of their common stock. Participants may also make optional cash payments
which will be invested  through the plan.  All cash  dividends  paid to the plan
administrator  are invested  within 30 days of cash dividend  payment date. Cash
dividends and optional  cash  payments will be used to purchase  common stock of
the Company in the open market,  from newly-issued  shares,  from shares held in
treasury,  in negotiated  transactions,  or in any combination of the foregoing.
The purchase  price of the shares of common stock is based on the average market
price. All  administrative  costs are borne by the Company.  For the years ended
December  31, 1999 and 1998,  14,028 and 3,964 shares were  purchased  under the
plan, respectively.


NOTE 9.  LEASES

The  Company  leases its main  office  banking  facility  under a  noncancelable
operating lease agreement from 400 Church Street Properties,  a partnership that
is 50% owned by the Bank and 50% owned by a  director.  The lease had an initial
lease term of 10 years with four five-year renewal options.


                                      F-19
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



-------------------------------------------------------------------------------



NOTE 9.  LEASES (CONTINUED)

The  Company  also  leases  its  Thompson  Bridge and East Hall  branches  under
noncancelable  operating  leases with initial  lease terms of 5 years with three
five  year  renewal  options,   and  its  Dawsonville  Highway  branch  under  a
noncancelable  operating  lease  with an  initial  term of 10 years  with  three
five-year renewal options.

Rental expense under all operating leases amounted to $372,159 and $364,470, for
the years ended December 31, 1999 and 1998, respectively.

Future minimum lease payments on  noncancelable  operating leases are summarized
as follows:

                             2000                    $  393,050
                             2001                       360,132
                             2002                       325,695
                             2003                       331,765
                             2004                       332,632
                             Thereafter                 166,211
                                                     ----------
                                                     $1,909,485
                                                     ==========


NOTE 10. STOCK OPTIONS

The  Company  has a 1992 stock  option  plan for key  employees.  Option  prices
reflect the fair market  value of the  Company's  common  stock on the dates the
options are granted. These options expire five years from the grant date.

In 1997, the Board of Directors  approved a stock option plan reserving  325,000
shares of common stock for the granting of options to directors,  officers,  and
employees.  Option prices reflect the fair market value of the Company's  common
stock on the dates the options are granted.  The options may be exercised over a
period of ten years in accordance with vesting schedules determined by the Board
of Directors.

                                      F-20
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



--------------------------------------------------------------------------------


NOTE 10. STOCK OPTIONS (CONTINUED)
<TABLE>
<CAPTION>

                                                                             1999                       1998
                                                                 ---------------------------  -------------------------
                                                                                 Weighted-                     Weighted-
                                                                                  Average                      Average
                                                                                  Exercise                     Exercise
                                                                   Number          Price        Number          Price
                                                                 --------        ---------    ---------       ---------

                    <S>                                           <C>            <C>           <C>            <C>
                    Under option, beginning of year               264,612        $   10.64     270,250        $   10.38
                       Granted                                      8,000            23.00        --
                       Exercised                                   (3,970)            6.64         (13)           10.80
                       Terminated                                    (775)           13.95      (5,625)            9.02
                                                                  -------                      -------
                    Under option, end of year                     267,867            11.06     264,612            10.64
                                                                  =======                      =======

                    Options exercisable at year-end               103,426        $   10.68      80,163        $   10.70
                    Weighted-average fair value of options
                       granted during the year                                   $    8.37                    $    --
</TABLE>

Information  pertaining  to  options  outstanding  at  December  31,  1999 is as
follows:
<TABLE>
<CAPTION>

                                                        Options Outstanding                  Options Exercisable
                                               --------------------------------------   ----------------------------
                                                             Weighted-
                                                             Average        Weighted-                     Weighted-
                                                            Remaining       Average                       Average
          Range of                            Number       Contractual      Exercise        Number        Exercise
          Exercise Prices                  Outstanding        Life           Price       Exercisable       Price
          ---------------------------      -----------  ---------------  -------------  ------------- ---------------
          <S>                                <C>            <C>               <C>           <C>            <C>
          $6.40 - $8.40                        8,500        1.7 years     $    7.81          4,050     $    7.61
          $ 10.80                            251,567        7.8 years         10.80         99,376         10.80
          $ 23.00                              7,800        9.1 years         23.00           --             --
                                             -------                                       -------
          Outstanding at end of year         267,867        7.6 years     $   11.06        103,426    $
                                             =======                                       =======
</TABLE>

The Company applies APB Opinion 25 and related Interpretations in accounting for
the stock option plan.  Accordingly,  no compensation  cost has been recognized.
Had  compensation  cost for the stock option plan been  determined  based on the
fair value at the grant  dates for  awards  under the plan  consistent  with the
method  prescribed  by FASB  Statement  No. 123, the net income and earnings per
share would have been adjusted to the pro forma amounts indicated below.


                                      F-21
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



-------------------------------------------------------------------------------


NOTE 10. STOCK OPTIONS (CONTINUED)
<TABLE>
<CAPTION>
                                                                            Years Ended December 31,
                                                                     ---------------------------------------
                                                                       1999                   1998
                                                                     ---------------------------------------
                                                                     (In thousands, except per share data)

                    <S>                                              <C>                    <C>
                    Net income           As reported                 $ 2,272                $ 1,673
                                         Pro forma                   $ 2,218                $ 1,619

                    Earnings per share   As reported                 $ 1.08                 $ 0.80
                                         Pro forma                   $ 1.05                 $ 0.77

                    Earnings per share - As reported                 $ 1.01                 $ 0.75
                      assuming dilution  Pro forma                   $ 0.99                 $ 0.73
</TABLE>

The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes   option-pricing   model  with  the   following   weighted-average
assumptions:

                                                        Year Ended December 31,
                                                     ---------------------------
                                                                  1999
                                                     ---------------------------
                       Dividend yield                            .38%
                       Expected life                             10 years
                       Expected volatility                       6.37%
                       Risk-free interest rate                   6.86%


NOTE 11. INCOME TAXES

                  The components of income tax expense are as follows:

                                         YEAR ENDED DECEMBER 31,
                                       --------------------------
                                           1999            1998
                                       -----------      ---------

                Current                $ 1,352,148      $ 999,344
                Deferred                  (238,496)      (246,827)
                                       -----------      ---------
                Income tax expense     $ 1,113,652      $ 752,517
                                       ===========      =========


                                      F-22
<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



-------------------------------------------------------------------------------


NOTE 11. INCOME TAXES (CONTINUED)

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

                                                            Year Ended December 31,
                                              --------------------------------------------------
                                                        1999                       1998
                                              -----------------------    ----------------------
                                                 Amount       Percent      Amount       Percent
                                                 ------       -------      ------       -------


          <S>                                 <C>               <C>      <C>             <C>
          Tax provision at statutory rate     $ 1,150,985       34 %     $ 824,654       34 %
          Tax-exempt interest                     (57,914)      (2)        (43,618)       (2)
          Disallowed interest                      10,474        1           8,313        --
          Life insurance                          (27,527)      (2)        (26,745)       (1)
          State income taxes                       30,357        1           5,594        --
          Merger expenses                           8,500        1            --          --
          Other                                    (1,223)     --          (15,681)       --
                                              -----------      -----     ---------      -----
          Income tax expense                  $ 1,113,652       33 %     $ 752,517       31 %
                                              ==========      ======     =========      =====
</TABLE>


The components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
                                                                 1999          1998
                                                              ----------     --------
                      <S>                                     <C>            <C>
                      Deferred tax assets:
                      Loan loss reserves                      $  760,527     $593,575
                      Other real estate write-down               159,272      141,568
                      Deferred compensation                       42,702         --
                      Organizational expenses                     11,096         --
                      Securities available-for-sale              402,260         --
                      Other                                        1,154        1,153
                                                              ----------     --------
                                                               1,377,011      736,296
                                                              ----------     --------

                      Deferred tax liabilities:
                      Depreciation                                87,479       83,122
                      Accretion of discount on securities          1,133        5,531
                      Securities available-for-sale                 --         92,706
                                                              ----------     --------
                                                                  88,612      181,359
                                                              ----------     --------

                      Net deferred tax assets                 $1,288,399     $554,937
                                                              ==========     ========
</TABLE>




                                      F-23
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



--------------------------------------------------------------------------------



NOTE 12. EARNINGS PER SHARE

                  Presented  below  is a  summary  of  the  components  used  to
calculate basic and diluted  earnings per share for the years ended December 31,
1999 and 1998.
<TABLE>
<CAPTION>

                                                                       YEAR ENDED DECEMBER 31,
                                                                     --------------------------
                                                                        1999            1998
                                                                     -----------     ----------

                   <S>                                               <C>             <C>
                   Basic Earnings Per Share:
                   Weighted average common shares outstanding        $ 2,110,389     $2,095,661
                                                                     ===========     ==========

                   Net income                                        $ 2,271,596     $1,672,935
                                                                     ===========     ==========

                   Basic earnings per share                          $      1.08     $     0.80
                                                                     ===========     ==========

                   Diluted Earnings Per Share:
                   Weighted average common shares outstanding        $ 2,110,389     $2,095,661
                   Net effect of the assumed exercise of stock
                      options based on the treasury stock method
                      using average market prices for the year           128,777        127,937
                                                                     -----------     ----------
                   Total weighted average common shares and
                      common stock equivalents outstanding             2,239,166      2,223,598
                                                                     ===========     ==========

                   Net income                                        $ 2,271,596     $1,672,935
                                                                     ===========     ==========

                   Diluted earnings per share                        $      1.01     $     0.75
                                                                     ===========     ==========
</TABLE>


NOTE 13. COMMITMENTS AND CONTINGENT LIABILITIES

In the normal course of business, the Company has entered into off-balance-sheet
financial instruments which are not reflected in the financial statements. These
financial  instruments  include commitments to extend credit and standby letters
of credit. Such financial  instruments are included in the financial  statements
when funds are disbursed or the instruments  become payable.  These  instruments
involve,  to varying  degrees,  elements  of credit risk in excess of the amount
recognized in the balance sheet.


                                      F-24
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



--------------------------------------------------------------------------------


NOTE 13. COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)

The  Company's  exposure  to credit loss in the event of  nonperformance  by the
other party to the financial  instrument  for  commitments  to extend credit and
standby  letters of credit is  represented  by the  contractual  amount of those
instruments. A summary of the Company's commitments is as follows:

                                                        December 31,
                                                ---------------------------
                                                     1999           1998
                                                -----------     -----------
               Commitments to extend credit     $43,985,000     $32,552,000
               Standby letters of credit          1,941,872       2,257,348
               Credit card commitments            4,015,000       3,386,000
                                                -----------     -----------
                                                $49,941,872     $38,195,348
                                                ===========     ===========

Commitments  to extend credit  generally  have fixed  expiration  dates or other
termination  clauses  and  may  require  payment  of a fee.  Since  many  of the
commitments  are  expected  to  expire  without  being  drawn  upon,  the  total
commitment amounts do not necessarily  represent future cash  requirements.  The
credit risk involved in issuing these  financial  instruments is essentially the
same as that  involved in extending  loans to customers.  The Company  evaluates
each  customer's  creditworthiness  on  a  case-by-case  basis.  The  amount  of
collateral  obtained,  if deemed  necessary  by the Company  upon  extension  of
credit, is based on management's  credit evaluation of the customer.  Collateral
held varies but may include real estate and improvements, marketable securities,
accounts receivable, inventory, equipment and personal property.

Credit card commitments are granted on an unsecured basis.

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

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



                                      F-25
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



--------------------------------------------------------------------------------


NOTE 14. CONCENTRATIONS OF CREDIT

The Company originates primarily  commercial,  residential and consumer loans to
customers in Hall County and surrounding  counties.  The ability of the majority
of the Bank's customers to honor their  contractual  obligations is dependent on
the local and metropolitan Atlanta, Georgia economies.

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

The Company,  as a matter of policy,  does not  generally  extend  credit to any
single  borrower  or group of related  borrowers  in excess of 25% of  statutory
capital, or approximately $3,096,000.


NOTE 15. REGULATORY MATTERS

The Bank is subject to certain  restrictions on the amount of dividends that may
be  declared   without  prior  regulatory   approval.   At  December  31,  1999,
approximately  $1,192,000  of retained  earnings  were  available  for  dividend
declaration without regulatory approval.

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

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require the Company and the Bank to maintain minimum amounts and ratios of Total
and Tier I capital  to  risk-weighted  assets  and of Tier I capital  to average
assets.  Management believes,  as of December 31, 1999, the Company and the Bank
met all capital adequacy requirements to which they are subject.



                                      F-26
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



------------------------------------------------------------------------------


NOTE 15. REGULATORY MATTERS (CONTINUED)

As of December 31, 1999, the most recent  notification  from the Federal Deposit
Insurance Corporation  categorized the Bank as adequately  capitalized under the
regulatory  framework for prompt  corrective  action.  To be categorized as well
capitalized, the Bank must maintain minimum Total risk-based, Tier I risk-based,
and Tier I leverage  ratios as set forth in the  following  table.  There are no
conditions  or events since that  notification  that  management  believes  have
changed the Bank's category.

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

                                                                                                            To be Well
                                                                                     For Capital         Capitalized Under
                                                                                      Adequacy           Prompt Corrective
                                                              Actual                  Purposes           Action Provisions
                                                     -------------------------  ---------------------   -------------------
                                                      Amount         Ratio       Amount       Ratio     Amount        Ratio
                                                     --------       ------      --------      -------   ------        -----
                                                                                 (Dollars in Thousands)
                                                     ----------------------------------------------------------------------
         <S>                                         <C>            <C>         <C>           <C>       <C>           <C>
         As of December 31, 1999:
         Total Capital (to Risk Weighted Assets):
         Consolidated                                $ 19,486       9.73%       $ 16,025      8%        $N/A          N/A
         Bank                                        $ 18,420       8.95%       $ 16,465      8%        $20,581       10%
         Tier I Capital (to Risk Weighted Assets):
         Consolidated                                $ 17,264       8.62%       $ 8,012       4%        $N/A          N/A
         Bank                                        $ 16,198       7.87%       $ 8,233       4%        $12,349       6%
         Tier I Capital (to Average Assets):
         Consolidated                                $ 17,264       6.84%       $ 10,103      4%        $N/A          N/A
         Bank                                        $ 16,198       6.44%       $ 10,061      4%        $12,576       5%

         As of December 31, 1998:
         Total Capital (to Risk Weighted Assets):
         Consolidated                                $ 16,928       11.76%      $ 11,516      8%        $N/A          N/A
         Bank                                        $ 16,421       11.42%      $ 11,505      8%        $14,381       10%
         Tier I Capital (to Risk Weighted Assets):
         Consolidated                                $ 15,154       10.52%      $ 5,762       4%        $N/A          N/A
         Bank                                        $ 14,648       10.19%      $ 5,753       4%        $8,629        6%
         Tier I Capital (to Average Assets):
         Consolidated                                $ 15,154       7.89%       $ 7,683       4%        $N/A          N/A
         Bank                                        $ 14,648       7.65%       $ 7,662       4%        $9,578        5%

</TABLE>

                                      F-27
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



-------------------------------------------------------------------------------


NOTE 16. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial  instruments.  In cases where quoted market
prices are not available,  fair values are based on estimates  using  discounted
cash flow models.  Those models are  significantly  affected by the  assumptions
used,  including the discount rates 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  instrument.  The use of different  methodologies  may have a
material  effect on the  estimated  fair  value  amounts.  Also,  the fair value
estimates  presented  herein are based on  pertinent  information  available  to
management as of December 31, 1999 and 1998. Such amounts have not been revalued
for purposes of these  financial  statements  since those dates and,  therefore,
current  estimates  of fair  value may  differ  significantly  from the  amounts
presented herein.

Cash, Due From Banks, Interest-bearing Deposits in Banks and Federal Funds
--------------------------------------------------------------------------
Sold:
-----

The carrying amounts of cash, due from banks, interest-bearing deposits in banks
and Federal funds sold approximate their fair value.

Securities:
----------

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

Loans:
-----

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

Deposits:
--------

The carrying amounts of demand deposits,  savings  deposits,  and  variable-rate
certificates  of  deposit   approximate  their  fair  values.  Fair  values  for
fixed-rate  certificates  of deposit are estimated  using  discounted  cash flow
models, using current market interest rates offered on certificates with similar
remaining maturities.


                                      F-28
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



--------------------------------------------------------------------------------


NOTE 16. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

Federal Funds Purchased, Repurchase Agreements, and Other Borrowings:
---------------------------------------------------------------------

The fair values of the Company's fixed rate other borrowings are estimated using
discounted cash flow models based on the Company's current incremental borrowing
rates for similar types of borrowing  arrangements.  The carrying amounts of all
other variable rate  borrowings,  Federal funds  purchased,  and securities sold
under repurchase agreements approximate their fair values.

Accrued Interest:
-----------------

The carrying amounts of accrued interest approximate their fair values.

Off-balance Sheet Instruments:
------------------------------

Fair values of the Company's  off-balance sheet financial  instruments are based
on fees charged to enter into similar agreements. However, commitments to extend
credit and standby letters of credit do not represent a significant value to the
Company until such commitments are funded. The Company has determined that these
instruments do not have a distinguishable  fair value and no fair value has been
assigned.

The  carrying  amounts  and  estimated  fair  value of the  Company's  financial
instruments were 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, due from banks, interest-
   bearing deposits in banks
   and Federal funds sold              $  8,450,090     $  8,450,090     $ 19,353,568     $ 19,353,568
   Securities                            42,671,733       42,671,733       31,244,047       31,244,047
   Loans                                197,310,479      198,933,071      136,450,096      138,403,535
   Accrued interest receivable            1,611,542        1,611,542        1,331,988        1,331,988

   Financial liabilities:
   Deposits                             200,451,285      201,181,168      176,447,345      176,953,478
   Federal funds purchased and
   securities sold under
   repurchase agreements                 12,969,374       12,969,374        1,234,984        1,234,984
   Other borrowings                      25,802,903       24,544,401        1,182,800        1,185,985
   Accrued interest payable               2,567,373        2,567,373        1,659,099        1,659,099
</TABLE>


                                      F-29
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



--------------------------------------------------------------------------------



NOTE 17. STOCK DIVIDEND

On August 29, 1998, the Company effected a five-for-four stock split in the form
of a stock  dividend.  Stockholders of record as of August 31, 1998 received one
additional share of common stock for every four shares they owned. Share and per
share data for all periods presented herein have been adjusted to give effect to
the split.


NOTE 18. BUSINESS COMBINATIONS

On April 24, 1998, GB&T Bancshares,  Inc. acquired all of the outstanding common
stock of  Gainesville  Bank & Trust in exchange for  1,676,160  shares of $5 par
value common stock. The acquisition was accounted for as a pooling of interests,
and,  accordingly,  all prior financial  statements were restated to reflect the
combination. Income of the subsidiary prior to acquisition on April 24, 1998 was
$523,580, which was included in the consolidated statement of income.

On February 29, 2000,  the Company  consummated  its merger with UB&T  Financial
Services  Corporation  ("UB&T") subject to a definitive  agreement dated October
14, 1999. Under this agreement,  UB&T will merge with and into the Company. UB&T
stockholders  will receive 646,803 shares of Company stock. The combination will
be accounted for as a pooling of interests.

The  following  unaudited  pro forma data  summarizes  operating  data as if the
combination had been consummated on January 1, 1998.

                                                 As of and for the year ended
                                                         December 31,
                                            ------------------------------------
                                                1999                  1998
                                            ------------          -------------
                                                    (Dollars in Thousands)
                                                         (Unaudited)
                                            ----------------------------------
          Total assets                      $307,954,530          $239,378,083
          Stockholders' equity                21,517,945            20,262,030
          Net income                           2,469,303             1,953,619
          Basic income per share                    0.90                  0.71
          Diluted income per share                  0.86                  0.68

                                      F-30
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


--------------------------------------------------------------------------------


NOTE 19. SUPPLEMENTAL FINANCIAL DATA

Components of other  operating  expenses in excess of 1% of total revenue are as
follows:
<TABLE>
<CAPTION>

                                                                        DECEMBER 31,
                                                                --------------------------
                                                                   1999             1998
                                                                ---------         --------

<S>                                                             <C>               <C>
          Advertising                                           $200,616          $195,904
          Provision for other real estate owned losses            92,954           289,000
</TABLE>

NOTE 20. PARENT COMPANY FINANCIAL INFORMATION

The following  information  presents the condensed balance sheet,  statements of
income and cash flows of GB&T  Bancshares,  Inc. as of and for the periods ended
December 31, 1999 and 1998:
<TABLE>
<CAPTION>
                          CONDENSED BALANCE SHEET
                                                                              1999              1998
                                                                          ------------      ------------
                          <S>                                             <C>               <C>
                          Assets
                            Cash                                          $     95,249      $    423,937
                            Securities available-for-sale                      917,440              --
                            Investment in subsidiary                        15,540,777        14,798,707
                            Other assets                                        53,890            83,019
                                                                          ------------      ------------

                                Total assets                              $ 16,607,356      $ 15,305,663
                                                                          ============      ============

                          Stockholders' Equity                            $ 16,607,356      $ 15,305,663
                                                                          ============      ============

                          CONDENSED STATEMENT OF INCOME
                                                                              1999              1998
                                                                          ------------      ------------
                          Income
                          Dividends from subsidiary                       $    834,778      $    742,207

                          Expenses, Other                                      168,090           122,643
                                                                          ------------      ------------

                          Income before income tax benefit and equity
                            in undistributed income of subsidiary              666,688           619,564

                          Income Tax Benefit                                  (55,262)          (46,604)
                                                                          ------------      ------------

                          Income before equity in undistributed income
                            of subsidiary                                      721,950           666,168

                            Equity in Undistributed Income of Subsidiary     1,549,646           483,187
                                                                          ------------      ------------

                          Net income                                      $  2,271,596      $  1,149,355
                                                                          ============      ============
</TABLE>


                                      F-31
<PAGE>



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



--------------------------------------------------------------------------------


NOTE 20. PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)

<TABLE>
<CAPTION>
          CONDENSED STATEMENT OF CASH FLOWS
                                                                       1999             1998
                                                                  -----------      -----------
<S>                                                               <C>              <C>
          OPERATING ACTIVITIES
          Net income                                              $ 2,271,596      $ 1,149,355
          Adjustments to reconcile net income to net
          cash provided by operating activities:
          Undistributed income of subsidiary                       (1,549,646)        (483,187)
          Amortization                                                 36,416            6,426
          Other operating activities                                   (7,287)         (89,446)
                                                                  -----------      -----------

                    Net cash provided by operating activities         751,079          583,148
                                                                  -----------      -----------

          INVESTING ACTIVITIES
          Purchase of securities available-for-sale                  (917,440)            --
                                                                  -----------      -----------

          Net cash used in investing activities                      (917,440)            --
                                                                  -----------      -----------

          FINANCING ACTIVITIES
          Dividends paid                                             (527,018)        (243,655)
          Proceeds from issuance of common stock                       26,376              140
          Dividends reinvested                                        338,315           84,304
                                                                  -----------      -----------

                  Net cash used in financing activities              (162,327)        (159,211)
                                                                  -----------      -----------

          Net increase (decrease) in cash                            (328,688)         423,937

          Cash at beginning of period                                 423,937             --
                                                                  -----------      -----------

          Cash at end of year                                     $    95,249      $   423,937
                                                                  ===========      ===========
</TABLE>


                                      F-32
<PAGE>

                                   SIGNATURES

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

GB&T BANCSHARES, INC.

By:      /s/ Richard A. Hunt                                      DATE
         ------------------------------------------
         Richard A. Hunt, President, Chief
           Executive Officer and Director

By:      /s/ Gregory L. Hamby                                     DATE
         ------------------------------------------
         Gregory L. Hamby, Senior Vice President
           and Senior Operations Officer

By:      /s/ F. Abit Massey                                       DATE
         -------------------------------------------
         F. Abit Massey, Chairman and Director

By:      /s/ Philip A. Wilheit                                    DATE
         --------------------------------------------
         Philip A. Wilheit, Vice-Chairman and
            Director

By:      /s/ Samuel L. Oliver                                     DATE:  3/27/00
         --------------------------------------------
         Samuel L. Oliver, Secretary and Director

By:      /s/ Donald J. Carter                                     DATE:  3/27/00
         --------------------------------------------
         Donald J. Carter, Director

By:      /s/ J. Grady Coleman                                     DATE:  3/27/00
         --------------------------------------------
         J. Grady Coleman, Director

By:      /s/ Dr. John W. Darden                                   DATE:  3/27/00
         --------------------------------------------
         Dr. John W. Darden, Director

By:      /s/ Bennie E. Hewett                                     DATE:  3/27/00
         --------------------------------------------
         Bennie E. Hewett, Director

By:      /s/ John E. Mansfield, Sr.                               DATE:  3/27/00
         --------------------------------------------
         John E. Mansfield, Sr., Director

By:      /s/ Alan S. Wayne                                        DATE:  3/27/00
         --------------------------------------------
         Alan A. Wayne, Director