<PAGE>

                    U. S. Securities and Exchange Commission

                             Washington, D.C. 20549

                                  FORM 10-KSB

            [X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE
                SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
                  For the fiscal year ended December 31, 1996

            [_] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
                SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
      For the transition period from ________________ to _______________

                        COMMISSION FILE NUMBER 0-19030

                COMMUNITY TRUST FINANCIAL SERVICES CORPORATION
                (Name of small business issuer in its charter)

        Georgia                                        58-1856582
(State of incorporation)                         (I.R.S. Employer
                                                         Identification No.)

                  1784 ATLANTA HIGHWAY, HIRAM, GEORGIA 30141
             (Address of principal executive offices)(Zip Code)50,

                                (770) 445-1014
                (Issuer's telephone number including area code)

                            _______________________
       Securities registered pursuant to Section 12(b) of the Act: None

          Securities registered pursuant to Section 12(g) of the Act:

                         Common Stock, $2.50 par value
                               (Title of Class)

                            _______________________
     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 there is no 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 the 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]

     Revenues for the Registrant's fiscal year ended December 31, 1996, total
$8,000,151.

The aggregate market value of the Registrant's outstanding Common Stock held by
nonaffiliates of the Registrant on March 13, 1997 was $7,694,508.  There were
839,264 shares of Common Stock outstanding as of March 13, 1997.

                      DOCUMENTS INCORPORATED BY REFERENCE
                      -----------------------------------

Portions of the Company's 1996 Annual Report are incorporated by reference in
Part II hereof, and portions of the Company's Proxy Statement for the 1997
Annual Meeting of Stockholders to be held on April 16, 1997 are incorporated by
reference in Part III hereof.

     Transitional Small Business Disclosure Format (check one): Yes ____; No X
                                                                             -
<PAGE>

                 COMMUNITY TRUST FINANCIAL SERVICES CORPORATION
                 ----------------------------------------------
                           ANNUAL REPORT ON FORM 10-K
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996

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

<TABLE>
<CAPTION>
ITEM                                                             PAGE
NUMBER                                                           NUMBER
------                                                           ------

                                     PART I
<S>                                                              <C>
   1.     Description of Business.............................    2

   2.     Description of Property.............................   35

   3.     Legal Proceedings...................................   36

   4.     Submission of Matter to a Vote of
          Security Holders....................................   36

   4(A).  Executive Officers of the Company
          and the Bank........................................   36

                                    PART II

   5.     Market for Common Equity and
          Related Stockholder Matters.........................   37

   6.     Management's Discussion and Analysis
          or Plan of Operation................................   38

   7.     Financial Statements................................   38

   8.     Changes in and Disagreements with Accountants on
          Accounting and Financial Disclosure.................   38

                                   PART III

   9.     Directors, Executive Officers, Promoters
          and Control Persons; Compliance with
          Section 16(a) of the Exchange Act...................   38

   10.    Executive Compensation..............................   39

   11.    Security Ownership of Certain Beneficial Owners
          and Management......................................   39

   12.    Certain Relationships and Related Transactions......   39

   13.    Exhibits and Reports on Form 8-K....................   39

          Signatures..........................................   42

          Index of Exhibits...................................   44
</TABLE>
<PAGE>

                                    PART I
                                    ------


ITEM 1.  DESCRIPTION OF BUSINESS
--------------------------------


THE COMPANY

     Community Trust Financial Services Corporation (the "Company") was
incorporated under the laws of the State of Georgia on October 17, 1988 at the
direction of Community Trust Bank (the "Bank") for the purpose of becoming a
bank holding company for the Bank.  Prior to February 22, 1991, the Company's
business consisted only of taking the actions necessary to effectuate the
holding company reorganization, and the Company conducted no active business
operations.  On February 22, 1991, following the receipt of all requisite
corporate and regulatory approvals, CTFS Interim Corporation, a wholly-owned
subsidiary of the Company, was merged with and into the Bank, and the Company
issued shares of its Common Stock to shareholders of the Bank in exchange for
all of the outstanding Common Stock of the Bank.  As a result, the Bank became a
wholly-owned subsidiary of the Company, and the shareholders of the Bank became
shareholders of the Company, with the same proportional interests in the Company
as they previously held in the Bank (excluding the nominal effect on their
ownership interests of the exercise of dissenter's rights by certain
shareholders of the Bank) (the "Reorganization"). Following the Reorganization,
the Bank has continued its business operations as a Georgia-chartered commercial
bank under the same name, articles of incorporation and bylaws.

     As a bank holding company, the Company is intended to facilitate the Bank's
ability to serve its customers' requirements for financial services.  The
holding company structure provides flexibility for expansion through the
possible acquisition of other financial institutions and the provision of
additional banking-related services which a traditional commercial bank may not
provide under present laws.  The holding company structure also affords
additional flexibility in terms of capital formation and financing
opportunities.  Nevertheless, the primary activity of the Company currently is,
and is expected to remain for the foreseeable future, the ownership and
operation of the Bank.

     In May 1992, the Federal Reserve Bank of Atlanta and the Georgia Department
of Banking and Finance (the "Georgia Department") approved the Company's
formation and operation of a non-bank subsidiary for the purpose of performing
appraisals of real and personal property for the Bank as well as other entities,
such as financial institutions, mortgage companies and insurance companies.  The
subsidiary's name is Metroplex Appraisals, Inc. ("Metroplex") and it is located
in Hiram, Georgia.  The performance of real and personal property appraisals is
a permissible activity for a bank holding company under applicable Federal
Reserve regulations.  Since Metroplex represents less than 5% of the Company's
consolidated assets and consolidated net earnings, the financial data analyzed
herein is not significantly affected by the operations of Metroplex.  Management
anticipates that Metroplex will have only a minimal impact on the Company's
earnings and performance during 1997.

     In August 1995, the Federal Reserve Bank of Atlanta and the Georgia
Department approved the Company's formation and operation of Community Loan
Company ("CLC"), a non-bank subsidiary, for the purpose of engaging in the
consumer finance business.  CLC is structured as a joint venture with the
Company as majority owner of 75% of its outstanding capital stock. The remaining
25% of the subsidiary's outstanding capital stock is owned by an individual who
is employed as President of the subsidiary.  CLC's first office began operations
in September 1995 in Woodstock, Georgia, and two additional consumer finance
offices were acquired April

                                      -2-
<PAGE>

1, 1996 in Rockmart, Georgia, and Rossville, Georgia, respectively. Since CLC
represents less than 5% of consolidated assets and consolidated net earnings,
the financial data analyzed herein is not significantly affected by the
operations of CLC.

     The Company is currently negotiating with a potential joint venture partner
for the purpose of establishing a non-bank subsidiary that would engage in the
business of selling, leasing, or servicing automated teller machines that
provide cash or cash equivalents.  No definitive agreement concerning this joint
venture has yet been entered into.  While the Company may seek in the future to
acquire additional banks or bank holding companies or to engage in other
activities appropriate for bank holding companies under appropriate
circumstances as permitted by law, the Company currently has no plans,
understandings or agreements concerning any other activities other than as
described above.  The results of operations and financial condition of the
Company for the foreseeable future, therefore, will be determined primarily by
the results of operations and financial condition of the Bank.

     The Bank is a Georgia-chartered commercial bank headquartered in Hiram,
Paulding County, Georgia.  The Bank was chartered on February 18, 1987 and
opened for business on February 2, 1988.

     The Bank's business consists primarily of attracting deposits from the
general public and, with these and other funds, making real estate loans,
consumer loans, business loans, residential and commercial construction loans
and other investments.  In addition to deposits, sources of funds for the Bank's
loans and other investments include amortization and prepayment of loans, sales
of loans or participations in loans, and sales of investment securities.  The
principal sources of income for the Bank are interest and fees collected on
loans, fees collected on  deposit accounts and interest and dividends collected
on other investments.  The principal expenses of the Bank are interest paid on
deposits, employee compensation and benefits, office expenses and other overhead
expenses.

     The Company's earnings depend primarily on the Bank's "net interest
income," which is the difference between the interest income it receives from
its assets (primarily its loans and other investments) and the interest expense
(or "cost of funds") which it pays on its liabilities (primarily its deposits).
Net interest income is a function of (I) the difference between rates of
interest earned on interest-earning assets and rates of interest paid on
interest-bearing liabilities (the "interest rate spread" or "net interest
spread") and (ii) the relative amounts of its interest-earning assets and
interest-bearing liabilities.  When interest-earning assets approximate or
exceed interest-bearing liabilities, any positive interest rate spread will
generate net interest income.  The Bank adheres to an asset and liability
management strategy which is intended to control the impact of interest rate
fluctuations upon the Company's earnings and to make the yields on its loan
portfolio and other investments more responsive to its cost of funds, in part by
more closely matching the maturities of its interest-earning assets and its
interest-bearing liabilities, while still maximizing net interest income.
Nevertheless, the Bank is and will continue to be affected by changes in the
levels of interest rates and other factors beyond its control.

     For the fiscal years ended December 31, 1996 and 1995, the Company's
weighted average rate earned on all interest-earning assets was 9.63% and 9.30%,
respectively, and the Company's weighted average rate paid on all interest-
bearing liabilities for the same years was 4.41% and 4.32%, respectively.  The
Company's interest rate spread for the years ended December 31, 1996 and 1995
therefore was 5.22% and 4.98%, respectively, and its net interest income for
such years was $4,187,352 and $3,395,024, respectively.  For fiscal 1996, the
Company recorded net income of $1,057,884 or $1.23 primary earnings per share as
compared with net income of $885,407 or $1.04 primary earnings per share for
fiscal 1995.  The increase in net income was due primarily

                                      -3-
<PAGE>

to the growth in CLC's loan portfolio as a percentage of the Company's average
earning assets, and the interest income produced by those assets. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations."

     Unless specifically noted below, the following information is presented on
a consolidated basis reflecting the Company's performance as a whole.

     The table below sets forth certain additional measures of the Company's
performance for the periods indicated.  Average balances in the table, as well
as all average balances presented elsewhere in this report, were derived based
on daily balances whenever possible.  However, some average balances which
require data from the Company or CLC, as opposed to the Bank, were derived based
on month-end balances since the data processing systems for those entities do
not provide daily average balance information.  The use of month-end averages
does not materially alter any information given, and all averages are still
representative of the operations of the Company.

<TABLE>
<CAPTION>
                                                                        Years Ended December 31,
                                                                --------------------------------------
                                                                  1996            1995          1994
                                                                --------        --------       -------
      <S>                                                       <C>             <C>            <C>
      Net Interest Margin (Net interest
       income divided by average interest-
       earning assets)                                             5.89%           5.66%         5.29%

      Return on Average Assets
       (Net income divided by average
       total assets)...................................            1.36%           1.37%         1.12%

      Return on Average Equity
       (Net income divided by
       average equity).................................           16.65%          15.85%        13.52%

      Equity-to-Assets (Average equity
       divided by average total assets)................            8.18%           8.66%         8.31%

      Return on Average Daily
       Deposits (Net income divided
       by average daily total deposits)................            1.52%           1.51%         1.25%

      Loans to Deposits (Average
       loans divided by average
       daily deposits).................................           65.94%          62.31%        60.13%

      Dividend Payout Ratio (Dividends
       declared by the Company divided by net income)..           19.77%          23.58%        24.65%
</TABLE>

NET INTEREST INCOME
-------------------

     The following table sets forth information with respect to interest income
from average interest-earning assets, expressed both in dollars and yields, and
interest expense on average interest-bearing liabilities, expressed both in
dollars and rates, for the periods indicated.  The table includes loan yields
which reflect the discount accretion attributable to the amortization of
deferred loan origination and commitment fees.  Interest income from investment
securities includes the accretion of discounts and amortization of premiums.

                                      -4-
<PAGE>

<TABLE>
<CAPTION>
                                                                         Years Ended December 31,
                             ---------------------------------------------------------------------------
                                             1996                                    1995
                             ------------------------------------          -----------------------------
                                            Interest     Average                Interest      Average
                               Average       Income/      Yield/     Average    Income/       Yield/
                               Balance      Expense(1)     Rate      Balance    Expense(1)    Rate
                             -----------  --------------  -------  ----------- -------------  --------
<S>                          <C>          <C>             <C>      <C>         <C>            <C>
ASSETS

Interest-earning assets:
  Loans(1)(2)..............  $46,043,727    5,462,059      11.86%  $36,660,129  $4,307,281       11.69%
  Investment securities
   Taxable.................   18,508,042    1,051,039       5.68%   17,834,704     984,611        5.52%
   Tax-exempt(3)...........    2,404,861      114,474       4.76%    1,784,584      79,363        4.45%
  Interest-earning deposits
    in other banks.........          -0-          -0-          -           -0-         -0-           -
  Federal funds sold.......    4,163,525      221,396       5.32%    3,291,110     192,222        5.84%
                             -----------  -----------      -----   -----------  ----------
Total interest-earning
 assets....................   71,120,155    6,848,968       9.63%   59,570,527   5,563,477        9.30%

Cash and other assets......    6,533,382                             4,983,549
                             -----------                           -----------

     Total assets..........  $77,653,537                           $64,554,076
                             ===========                           ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Interest-bearing
 liabilities:
Deposits
   NOW accounts............  $ 8,728,202  $   194,491       2.23%  $ 6,949,988  $  179,261        2.58%
   Money market
    accounts...............    7,747,518      216,441       2.79%    7,014,853     216,839        3.09%
   Savings deposits........   12,200,662      375,845       3.08%   12,064,705     436,236        3.62%
   Time deposits, $100,000
     and
    over...................   11,321,593      663,640       5.86%    7,698,395     409,190        5.32%
   Time deposits, other....   19,834,342    1,173,908       5.92%   16,442,425     926,137        5.63%
                             -----------  -----------      -----   -----------  ----------     -------
     Total deposits........  $59,832,317   $2,624,325       4.39%  $50,170,366  $2,167,663        4.32%

   Other interest-bearing
    liabilities............      489,934       37,291       7.61%       11,507         790        6.87%
                             -----------  -----------      -----   -----------  ----------     -------
     Total interest-bearing
      liabilities..........  $60,322,251  $ 2,661,616       4.41%  $50,181,873  $2,168,453        4.32%

 <CAPTION>
                              -------------------------------------------
                                                  1994
                              -------------------------------------------
                                                Interest        Average
                                Average          Income/         Yield/
                                Balance        Expense(1)         Rate
                              -----------     -------------     --------
<S>                           <C>             <C>               <C>
ASSETS

Interest-earning assets:
  Loans(1)(2)..............   $32,517,178     $3,337,710          10.26%
  Investment securities
   Taxable.................    17,316,015        799,860           4.62%
   Tax-exempt(3)...........     1,847,404         83,363           4.51%
  Interest-earning deposits
    in other banks.........        98,630          3,779           3.83%
  Federal funds sold.......     2,460,055        104,068           4.23%
                              -----------     ----------          ------
Total interest-earning
 assets....................    54,239,282      4,328,780           7.98%

Cash and other assets......     4,972,691
                              -----------

     Total assets..........   $59,211,973
                              ===========

LIABILITIES AND
 STOCKHOLDERS' EQUITY

Interest-bearing
 liabilities:
Deposits
   NOW accounts............   $ 6,107,872     $  140,573           2.30%
   Money market
    accounts...............     6,828,961        173,900           2.55%
   Savings deposits........    13,078,779        406,842           3.11%
   Time deposits, $100,000
   and
    over...................     4,851,713        267,962           5.52%
   Time deposits, other....    15,738,371        465,315           2.96%
                              -----------     ----------        -------
     Total deposits........   $46,605,696     $1,454,592           3.12%

   Other interest-bearing
    liabilities............         5,565            262           4.71%
                              -----------     ----------        -------
     Total interest-bearing
      liabilities..........   $46,611,261     $1,454,854           3.12%
</TABLE>


                                      -5-
<PAGE>

<TABLE>
<S>                          <C>          <C>             <C>      <C>          <C>             <C>
Other liabilities:
  Demand deposits..........  $ 9,991,772                           $ 8,593,281           -           -
  Accrued interest payable
   and
   other liabilities.......      985,766            -          -       574,520           -           -
                             -----------                           -----------
     Total other
      liabilities..........   10,977,538            -          -     9,167,801           -           -

        Total liabilities..  $71,299,789            -          -   $59,349,674           -           -

Stockholders' equity.......    6,353,748            -          -     5,204,402           -           -

    Total liabilities
    and stockholders'
     equity................  $77,653,537            -          -   $64,554,076           -           -
                             ===========                           ===========
Excess of interest-earning
assets over interest-
bearing liabilities........  $10,797,904            -          -   $ 9,388,654           -           -

Ratio of interest-earning
 assets
 to interest-bearing
  liabilities..............                               117.90%                               118.71%

Net interest income........               $ 4,187,352                           $3,395,024

Interest rate spread
 (difference
 between rate earned on
  interest-
 earning assets and rate
  paid on
 interest-bearing
  liabilities).............                                 5.22%                                 4.98%

Net interest margin (net
 interest
 income divided by average
 interest-earning assets)..                                 5.89%                                 5.66%

<CAPTION>
<S>                                <C>               <C>             <C>
Other liabilities:
  Demand deposits..........        $ 7,510,088               -              -
  Accrued interest payable
   and
   other liabilities.......            204,032               -              -
                                   -----------
     Total other
      liabilities..........          7,714,120               -              -

        Total liabilities..        $54,325,381               -              -

Stockholders' equity.......          4,886,592               -              -

    Total liabilities
    and stockholders'
     equity................        $59,211,973               -              -
                                   ===========
Excess of interest-earning
assets over interest-
bearing liabilities........        $ 7,628,021               -              -

Ratio of interest-earning
 assets
 to interest-bearing
  liabilities..............                                            116.26%

Net interest income........        $                 2,873,926

Interest rate spread
 (difference
 between rate earned on
  interest-
 earning assets and rate
  paid on
 interest-bearing
  liabilities).............                                              4.86%

Net interest margin (net
 interest
 income divided by average
 interest-earning assets)..                                              5.29%
</TABLE>

_________________
(1)  Interest income on loans includes amortization of deferred loan fees
     and other discounts of $763,558, $549,535, and $436,796, for the
     fiscal years ended December 31, 1996, 1995, and 1994 respectively.
(2)  Nonperforming loans are included in the computation of average loan
     balances, and interest income on such loans is recognized on a cash
     basis.
(3)  The average yield computed on tax-exempt securities is computed using
     actual yields rather than tax-equivalent yields.

                                      -6-
<PAGE>

     The following table sets forth information regarding the weighted average
contractual yields earned on the Company's interest-earning assets and the
weighted average interest rates paid on the Company's interest-bearing
liabilities outstanding at December 31, 1996.  Investment securities are shown
at the carrying value, which is the fair market value for securities held
available for sale, and the amortized cost for securities held to maturity.

<TABLE>
<CAPTION>
                                                          Average
                                              Amount     Yield/Rate
                                              ------     ----------
<S>                                         <C>          <C>
Interest-earning assets:

  Loans..................................... $49,425,713    11.74%
  Investment securities
    Taxable securities......................  19,701,854     5.48%
    Tax-exempt securities...................   2,716,836     4.73%
  Federal funds sold........................   7,020,000     5.25%
                                             -----------     -----
      Total interest-earning assets......... $78,864,403     9.31%

Interest-bearing liabilities:

  Demand deposits........................... $ 9,731,471     0.00%
  NOW accounts..............................   8,757,099     1.89%
  Money market accounts.....................   8,454,539     2.88%
  Savings deposits..........................  15,546,932     3.17%
  Time deposits.............................  20,541,854      4-6%
                                              13,933,444      6-8%
                                                  15,245     8-10%

  Total certificates of deposit.............  34,490,543     5.91%
                                             -----------     ----
    Total deposits.......................... $76,897,761     4.35%
  Other interest-bearing liabilities........     360,884     7.45%
    Total Interest-bearing liabilities...... $77,258,645     4.36%
</TABLE>

     Changes in interest income and interest expense are attributable to three
factors: (I) a change in volume or amount of an asset or liability; (ii) a
change in interest rates; or (iii) a change caused by the combination of changes
in volume and interest rates.  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 periods indicated.  For each category of interest-earning
assets and interest-bearing liabilities, information is provided as to changes
attributable to change in volume (change in volume multiplied by old rate) and
change in rates (change in rate multiplied by old volume).  The net change
attributable to changes in both volume and rate has been allocated
proportionately to the change due to volume and the change due to rate.

                                      -7-
<PAGE>

<TABLE>
<CAPTION>

                                            Year Ended December 31,             Year Ended December 31,
                                      -----------------------------------  ---------------------------------
                                             1996 Compared to 1995               1995 Compared to 1994
                                      -----------------------------------  ---------------------------------

                                                      Rate/      Net                   Rate/        Net
                                        Volume      Yield       Change      Volume     Yield       Change
                                      ----------  ---------   ----------   --------   --------   ----------
<S>                                   <C>         <C>         <C>          <C>        <C>        <C>
Interest income:

Loans(1)(2).........................  $1,112,767  $  42,011   $1,154,778   $454,058   $515,513   $  969,571
Investment securities(3)............      71,522     30,017      101,539     21,451    159,300      180,751
Interest-earning deposits...........           0          0            0     (3,779)         0       (3,779)
Federal funds sold..................      47,543    (18,369)      29,174     41,449     46,705       88,154
   Total interest income............  $1,231,831  $  53,660   $1,285,491   $513,179   $721,518   $1,234,697
Interest expense:
  NOW accounts......................      41,791    (26,561)      15,230     20,629     18,059       38,688
  Money market accounts.............      21,513    (21,911)        (398)     4,848     38,091       42,939
  Savings deposits..................       4,864    (65,255)     (60,391)   (33,200)    62,594       29,394
  Time deposits, $100,000 and over..     208,832     45,618      254,450    151,665    (10,437)     141,228
  Time deposits, other..............     198,837     48,934      247,771     21,703    439,119      460,822
Total deposits......................  $  475,838   ($19,176)  $  456,662   $165,645   $547,426   $  713,071

Other interest-bearing liabilities..      36,406         95       36,501        369        159          528

   Total interest expense...........     512,244    (19,081)     493,163    166,014    547,585      713,599

Net interest income
  (expense).........................    $719,587    $72,741     $792,328   $347,165   $173,933     $521,098
</TABLE>

____________

     (1)  Loan amounts include nonaccruing loans.

     (2)  Interest income includes the portion of loan fees recognized in the
          respective periods.

     (3)  Changes due to rate and volume on investment securities have been
          computed using actual yields on tax-exempt securities rather than tax-
          equivalent yields. Yields are computed on the carrying value of the
          securities.


     The following table sets forth the repricing of the Company's interest-
earning assets and interest-bearing liabilities as of December 31, 1996.  The
time periods in the table represent the period, following December 31, 1996,
during which an asset or liability matures or can be repriced.  This interest
sensitivity gap table is designed to monitor the Company's interest rate risk
exposure within the designated time period.  In order to control interest rate
risk, management regularly monitors the volume of interest sensitive assets
relative to interest sensitive liabilities over specific time intervals.  The
Company's interest rate management policy is to attempt to maintain a relatively
stable net interest margin in periods of interest rate fluctuations. The
Company's policy is to attempt to maintain a ratio of cumulative gap to total
interest sensitive

                                      -8-
<PAGE>

assets of negative 10.00% to positive 10.00% in the time period of one year or
less. The following table reflects that the Company's interest-earning assets
and interest-bearing liabilities which reprice in the time period of one year or
less are closely matched and within the Company's policy guidelines.

<TABLE>
<CAPTION>

                                          0 to 3       4 to 6      7 to 12      1 to 5       Over 5
                                          Months       Months      Months        Years       Years        Total
                                        -----------  ----------  -----------  -----------  ----------  -----------
<S>                                     <C>          <C>         <C>          <C>          <C>         <C>
Interest Sensitive Assets
-------------------------
Fed Funds Sold........................   7,020,000         -0-          -0-          -0-         -0-    7,020,000
Investment Securities
   Taxable (1)........................   3,573,480     983,840    1,489,179   12,765,424     889,931   19,701,854
   Tax-exempt (1).....................      45,088         -0-      105,770    1,035,840   1,530,138    2,716,836
Loans
   Fixed rate.........................   3,088,741   2,303,983      633,117       81,154         -0-    6,106,995
   Adjustable rate....................  22,213,062     892,145      337,981      610,218         -0-   24,053,406
   Scheduled payments.................   2,218,228   2,310,085    4,324,665   10,504,280      66,832   19,424,090

Total Interest-Sensitive Assets.......  38,158,599   6,490,053    6,890,712   24,996,916   2,486,901   79,023,181

Interest Sensitive Liabilities
------------------------------
NOW...................................   8,757,099         -0-          -0-          -0-         -0-    8,757,099
Money Market..........................   8,454,539         -0-          -0-          -0-         -0-    8,454,539
Savings...............................  15,546,737         -0-          -0-          -0-         -0-   15,546,737
Time Deposits.........................   5,189,754   3,914,906    5,509,729    6,666,588         -0-   21,280,977
Time, in excess of $100,000...........   3,923,863   2,671,508    3,788,609    2,825,584         -0-   13,209,564
Other interest-bearing liabilities....         -0-      50,000          -0-      310,884         -0-      360,884

Total Interest Sensitive Liabilities..  41,871,992   6,636,414    9,298,338    9,803,056         -0-   67,609,800

Interest Sensitivity Gap..............  (3,713,393)   (146,361)  (2,407,626)  15,193,860   2,486,901   11,413,381
Cumulative Gap........................  (3,713,393) (3,859,754)  (6,267,380)   8,926,480  11,413,381

Ratio of cumulative gap to total
   interest sensitive assets..........      (4.70)%      (4.88)%      (7.93)%      11.30%      14.44%
</TABLE>

____________

     (1) All investment securities are shown at the carrying value.


LENDING ACTIVITIES
------------------

     GENERAL

     The Company's loan portfolio consists of real estate loans, consumer loans
to individuals, business loans, construction loans and acquisition and
development loans.  At December 31, 1996, the Company's loan portfolio
constituted approximately 58.01% of the Company's total assets. The following
table sets forth the composition of the Company's gross loan portfolio at the
indicated dates.

                                      -9-
<PAGE>

<TABLE>
<CAPTION>
                                                      At December 31,
                                      --------------------------------------------------------------
                                                1996                                 1995
                                      ---------------------------         --------------------------
                                         Amount         Percent             Amount          Percent
                                      ------------     ---------         ------------      ---------
<S>                                   <C>              <C>               <C>               <C>
Real estate loans:
   Residential and agricultural
   real estate......................  $11,030,936        22.56%          $10,899,163         28.36%

   Non-farm nonresidential
   real estate......................   16,512,202        33.76%           11,978,903         31.17%

Total real estate loans.............  $27,543,138        56.32%          $22,878,066         59.53%

Business loans (secured by
 various collateral)................    5,495,398        11.24%            4,926,363         12.82%

Consumer loans......................    9,305,786        19.03%            5,683,990         14.79%

Construction loans and acquisition
 and development loans..............    7,274,577        14.87%            5,525,507         14.38%

    Gross loans receivable..........  $49,618,899                        $39,013,926
                                      ===========                        ===========

  Less:
   Allowance for loan losses........     (713,518)       (1.46%)            (583,306)        (1.52%)

     Total net loans................  $48,905,381       100.00%          $38,430,620        100.00%
                                      ===========                        ===========
</TABLE>

     The following table sets forth certain information as of December 31, 1996
regarding gross loans in the Company's loan portfolio with fixed interest rates
and with floating or adjustable interest rates.  All loans with floating or
adjustable interest rates reprice at least annually based upon changes in a
"prime" interest rate or other specified index.

<TABLE>
<CAPTION>
                                             Fixed-Rate               Floating or Adjustable Rate
                                      --------------------------     -----------------------------
                                                      Percent of                       Percent of
                                        Amount        Portfolio         Amount         Portfolio
                                      -----------     ----------     ------------     ------------
<S>                                   <C>              <C>              <C>            <C>
Real estate loans...................  $11,440,352        23.06%       $16,102,786        32.45%

Business loans (secured by various
 non-real estate collateral)........    3,443,398         6.94%         2,052,000         4.14%

Consumer loans......................    8,318,173        16.76%           987,613         1.99%

Construction loans and acquisition
 and development loans..............    2,306,691         4.65%         4,967,886        10.01%

    Total...........................  $25,508,614        51.41%       $24,110,285        48.59%
                                      ===========        =====        ===========        =====
</TABLE>

                                      -10-
<PAGE>

     At December 31, 1996, the total amount of loans due after one year which
had fixed rates of interest was $14,658,592, while the total amount of loans due
after one year with floating or adjustable rates of interest was $13,870,227.

     The following table sets forth the scheduled maturities of the gross loans
in the Company's loan portfolio as of December 31, 1996 based on their
contractual terms to maturity.  Overdrafts are reported as due in less than one
year.  Loans unpaid at maturity are renegotiated based on current market rates
and terms.

<TABLE>
<CAPTION>
                                                        Loans Maturing
                                       -------------------------------------------------
                                       Less Than   One to Five   More than
                                        One Year      Years      Five Years     Total
                                       ---------   ----------    ----------  -----------
<S>                                   <C>          <C>          <C>          <C>
Real estate loans...................  $ 7,626,856  $ 8,738,461  $11,177,821  $27,543,138

Business loans (secured by various
 non-real estate collateral)........    2,279,079    2,259,384      956,935    5,495,398

Consumer loans......................    3,909,568    5,386,314        9,904    9,305,786

Construction and acquisition
 and development loans..............    7,274,577            0            0    7,274,577

    Total...........................  $21,090,080  $16,384,159  $12,144,660  $49,618,899
                                      ===========  ===========  ===========  ===========
</TABLE>


     TYPES OF LOANS
     --------------

Real Estate Loans
-----------------

     At December 31, 1996, real estate loans totaled approximately $27,543,138
or 55.51% of the Company's loan portfolio.  All real estate loans are held in
the Bank's loan portfolio.  Of this amount, approximately $10,618,807 or 21.40%
of the Company's loan portfolio was comprised of loans secured by one to four
family residential properties, including home equity loans (loans secured by the
equity in the borrower's residence but not necessarily for the purpose of home
improvement).  Most of these home equity loans are made at fixed interest rates
for terms of one to three years with balloon payment provisions and amortized
over a 10-15 year period. Another product called the "Community Equity Line" is
offered by the Bank which allows consumers to borrow with low closing costs on
the equity in their homes.  This product is a variable rate revolving line of
credit, having an outside maturity of 15 years with 2% of the principal plus all
accrued interest due monthly.  The Bank's experience indicates that real estate
loans normally remain outstanding for much shorter periods (seven years on
average) than their stated maturity because the borrowers repay the loans in
full either upon the sale of the secured property or upon the refinancing of the
original loan.

     In the case of owner occupied single family residences, real estate loans
are made for up to 80% of the value of the property securing the loan, based
upon a certified appraisal if the loan amount is over $25,000.  When the loan is
secured by real estate containing a non-owner occupied dwelling of one to four
family units, loans generally are made for up to 75% of the value, based upon a
certified appraisal if the loan amount is over $25,000.  The Bank also requires
title

                                      -11-
<PAGE>

insurance to insure the priority of the property lien on its real estate loans
over $25,000 and requires fire and casualty insurance on all of its loans.

     The real estate loans originated by the Bank contain a "due-on-sale" clause
which provides that the Bank may declare the unpaid balance of the loan
immediately due and payable upon the sale of the mortgaged property.  Such
clauses are an important means of reducing the average loan life and increasing
the yield on existing fixed-rate real estate loans, and it is the Bank's policy
to enforce due-on-sale clauses.

     At December 31, 1996, the remainder of the real estate loan portfolio,
approximately $16,924,331 or 34.11% of the Company's loan portfolio, was
comprised of non-farm nonresidential real estate loans (including commercial
real estate loans and loans secured by raw land).

Business Loans

     Business loans (including non-real estate loans for agricultural purposes
but excluding commercial construction loans) totaled approximately $5,495,398 or
11.08% of the Company's loan portfolio at December 31, 1996.  All business loans
are held in the Bank's loan portfolio. These loans consist of loans and lines of
credit to individuals, partnerships and corporations for a variety of business
purposes, such as accounts receivable and inventory financing, equipment
financing, business expansion and working capital.  The terms of the Bank's
business loans generally range from three months to seven years, and the loans
generally carry interest rates which adjust in accordance with changes in the
prime rate.  Substantially all of the Bank's business loans are secured.

     Loans secured by marketable equipment are required to be amortized over a
period not to exceed 84 months.  Generally, loans secured by current assets such
as inventory or accounts receivable are revolving loans with annual maturities,
however, loans made for permanent working capital and secured by inventory or
accounts receivable are required to be amortized over a period not to exceed 60
months.  Loans secured by chattel mortgages and accounts receivable may not
exceed 80% of their market value.  Loans secured by listed stocks, bonds and
mutual funds may not exceed 75% of their market value.  Unsecured short-term
loans and lines of credit must be supported by a satisfactory balance sheet and
earnings statement.  All business loans must be supported by an adequate
projected cash flow to meet loan payments.  All loans in excess of $10,000 must
be supported by current financial statements, and such financial statements must
be updated annually.  Business loans generally entail a greater credit risk than
residential mortgage loans but also provide a higher yield than residential
mortgage loans and add diversity to the loan portfolio.

Consumer Loans

     At December 31, 1996, consumer loans totaled approximately $9,305,786 or
18.75% of the Company's loan portfolio.  Approximately $8,036,147 of these loans
are held in the Bank's loan portfolio, with the remainder held in CLC's loan
portfolio.

     The Bank makes both secured and unsecured consumer loans for a variety of
personal and household purposes.  Most of the Bank's consumer loans are
automobile loans, boat loans, property improvement loans and loans to depositors
on the security of their certificates of deposit. These loans are made for terms
of up to seven years at fixed interest rates.  The Bank considers consumer loans
to involve a relatively high credit risk compared to real estate loans.
Consumer loans, therefore, generally yield a relatively high return to the Bank
and provide a relatively short

                                      -12-
<PAGE>

maturity. The Bank believes that the generally higher yields and the shorter
terms available on various types of consumer loans tend to offset the relatively
higher risk associated with such loans, and contribute to a profitable spread
between the Bank's average yield on earning assets and the Bank's cost of funds.

     At December 31, 1996, consumer loans held in CLC's loan portfolio totaled
approximately $1,269,639 or 2.56% of the Company's loan portfolio.  CLC, a
consumer finance company, makes loans for up to $3,000 with original maturities
of up to three years under the Georgia Industrial Loan Act ("GILA").  The
Company considers these loans to involve a relatively high credit risk compared
to other loans in the Company's portfolio.  These consumer loans generally yield
a higher return to the Company than consumer loans originated by the Bank.  The
Company believes that the generally higher yields on CLC's loan portfolio offset
the higher risk associated with such loans and contribute to a profitable spread
between the Company's yield on earning assets and the Company's cost of funds.

     In May 1996, the Bank began to issue MasterCard and VISA credit cards to
applicants who meet the Bank's credit standards.  The credit approval policy is
similar to that which the Bank uses for any consumer loan customer.  As of
December 31, 1996, credit card loans totaled approximately $953,204, or 1.92% of
the Company's gross loan portfolio.  The Bank considers credit card loans to
involve a relatively high credit risk compared to other types of loans offered
by the Bank, even though management considers its credit approval policy to be
conservative. Credit card loans, therefore, generally yield a relatively high
return to the Bank.  The Bank believes that the generally higher yields
available on credit card loans tend to offset the relatively higher risk
associated with such loans, and contribute to a profitable spread between the
Bank's average yield on earning assets and the Bank's cost of funds.

Construction Loans and Acquisition and Development Loans

     Approximately $7,274,577 or 14.66% of the Company's loans outstanding at
December 31, 1996 were construction loans and acquisition and development loans.
All construction and acquisition and development loans are held in the Bank's
loan portfolio.  The Bank makes residential construction loans to owner-
occupants and to persons building residential properties for resale.  The
majority of the Bank's construction loans are made to residential real estate
developers for speculative single-family residential properties.  Construction
loans are usually variable rate loans made for terms of six months, but
extensions are permitted if construction has continued satisfactorily and if the
loan is current and other circumstances warrant the extension. Construction
loans are limited to 75% of the appraised value of the lot and the completed
value of the proposed structure.  In response to competitive conditions, the
Bank permits a portion of its single family residential construction loans
extended to builders to be made without commitments for "take-out" or permanent
financing from third parties.

     Construction financing generally is considered to involve a higher degree
of credit risk than permanent mortgage financing of residential properties, and
this additional risk usually is reflected in higher interest rates.  The higher
risk of loss on construction loans is attributable in large part to the fact
that loan funds are estimated and advanced upon the security of the project
under construction, which is of uncertain value prior to the completion of
construction. Moreover, because of the uncertainties inherent in estimating
construction costs, delays arising from labor problems, material shortages and
other unpredictable contingencies, it is relatively difficult to accurately
evaluate the total loan funds required to complete a project and to accurately
evaluate the related loan-to-value ratios.  If the estimates of construction
costs and the salability of the property upon completion of the project prove to
be inaccurate, the Bank may be required to advance funds beyond the amount
originally committed to permit completion of the project.

                                      -13-
<PAGE>

If the estimate of value proves to be inaccurate, the Bank may be confronted, at
or prior to the maturity of the loan, with a project with a value which is
insufficient to assure full repayment.

     The Bank's underwriting criteria are designed to evaluate and minimize the
risk of each construction loan.  Among other items, the Bank considers evidence
of the availability of permanent financing or a take-out commitment to the
borrower, the financial strength and reputation of the borrower, an independent
appraisal and review of cost estimates, and, if applicable, the amount of the
borrower's equity in the project, pre-construction sale or leasing information
and cash flow projections of the borrower.

     ORIGINATION, PURCHASE AND SALE OF LOANS

     The Bank originates loans primarily in Paulding County, Georgia.  According
to 1996 U.S. census figures, Paulding County had a population of approximately
65,000.

     Loans are originated by eight loan officers who operate from the Bank's
offices in Hiram and Dallas, Georgia.  These loan officers actively solicit loan
applications from existing customers, local manufacturers and retailers,
builders, real estate developers, real estate agents and others.  The Bank also
receives numerous loan applications as a result of customer referrals and walk-
ins to its offices.

     Upon receipt of a loan application and all required supporting information
from a prospective borrower, the Bank obtains a credit report and verifies
specific information relating to the loan applicant's employment, income and
creditworthiness.  In most cases, a certified appraisal of any real estate
intended to secure the proposed loan is undertaken by an independent appraiser
approved by the Bank.  The Bank's loan officers then analyze the loan
applications and any collateral involved.

     The Bank's loan approval process is intended to be conservative but also
responsive to customer needs.  Loans are approved in accordance with the Bank's
written loan policy, which provides for several tiers of approval authority,
based on a borrower's aggregate debt with the Bank.  The President, the
Executive Vice President, the Senior Vice-President of Asset Quality, and the
Vice-President have the authority to approve loans of up to $50,000.  All other
loan officers have the authority to approve loans of up to $25,000.  There is a
Loan Committee comprised of the senior officers of the Bank which must approve
any loan that is above an individual officer's limit, but that is not more than
$100,000.  The Loan Committee of the Board of Directors, comprised of the
President and five non-employee Directors, must approve all loans over $100,000,
and all lending relationships where a borrower's aggregate indebtedness to the
Bank exceeds $100,000.

     From time to time, the Bank may participate in loans with other financial
institutions by either buying or selling part of a loan.  The purchase of a loan
participation allows the Bank to expand its loan portfolio and increase
profitability while still maintaining the high credit standards which are
applied to all extensions of credit made by the Bank.  The sale of loan
participations allows the Bank to make larger loans which it otherwise would be
unable to make due to capital or other funding considerations.  For 1996 and
1995, the bank sold loan participations of approximately $1,230,200 and
approximately $2,285,220 respectively, and purchased loan participations of
approximately $400,000 and $1,207,542, respectively.

     CLC originates loans primarily in Cherokee, Polk, and Walker Counties,
which are all located in northwest Georgia.  Loans are originated by ten lenders
who operate from CLC's offices in Rockmart, Georgia, Rossville, Georgia, and
Woodstock, Georgia.  These lenders

                                      -14-
<PAGE>

actively solicit loan applications from existing customers. CLC also originates
loans through a conditional sales contract program with one retailer at this
time; however, CLC intends to expand the program with similar arrangements
through other retailers. All loans made through this program must meet CLC's
ordinary credit standards. CLC receives numerous loan applications as a result
of customer referrals and walk-ins to its offices.

     LOAN FEE INCOME

     In addition to interest earned on loans, the Bank receives origination fees
for making loans, commitment fees for making certain loans, and other fees for
miscellaneous loan-related services. Such fee income varies with the volume of
loans made, prepaid or sold, and the rates of fees vary from time to time
depending on the supply of funds and competitive conditions.

     Commitment fees are charged by the Bank to the borrower for certain loans
and are calculated as a percentage of the principal amount of the loan.  These
fees normally are deducted from the proceeds of the loan and generally range
from 1/2% to 2% of the principal amount, depending on the type and volume of
loans made and market conditions such as the demand for loans, the availability
of money and general economic conditions.

     The Bank also receives miscellaneous fee income from late payment charges,
overdraft fees, property inspection fees, and miscellaneous services related to
its existing loans.  For the year ended December 31, 1996, the Bank recognized
origination, commitment and other loan fees totaling $651,219, which equaled
15.55% of the Company's net interest income for such year. For the years ended
December 31, 1995 and 1994, the Bank recognized origination, commitment and
other loan fees totaling $537,630 and $436,796, which equaled 15.84% and 15.20%,
respectively, of the Company's net interest income for such years.

     CLC receives miscellaneous fee income from late payment charges, loan fees,
maintenance fees, and miscellaneous services related to its existing loans.  For
the year ended December 31, 1996, CLC recognized loan fees totaling $186,010,
which equaled 4.44% of the Company's net interest income for such year.  For the
year ended December 31, 1995, CLC recognized loan fees totaling $8,835, which
equaled 0.26% of the Company's net interest income for such year.

     PROBLEM LOANS AND ALLOWANCE FOR LOAN LOSSES

Problem Loans

     In originating loans, the Company recognizes that credit losses will be
experienced and that the risk of loss will vary with, among other things, the
type of loan being made, the creditworthiness of the borrower over the term of
the loan and, in the case of a secured loan, the guaranty of the security for
the loan.  The Company has instituted measures at both the Bank and CLC which
are designed to reduce the risk of, and monitor exposure to, credit losses.

     The Bank's loan portfolio is periodically reviewed by the Bank's management
to identify deficiencies and to take corrective actions as necessary.  As
discussed below, each of the Bank's loans is assigned a rating in accordance
with the Bank's internal loan rating system and is reviewed monthly to update
its rating in accordance with the performance of the loan.  All past due loans
are reviewed weekly by the Bank's senior lending officers and monthly by the
Loan Committee of the Board of Directors, and all loans classified as
substandard or doubtful, as well as any "special mention" loans, are reviewed at
least monthly by the Loan Committee.  In addition, all loans to a particular
borrower are reviewed, regardless of classification, each time such borrower
requests a renewal or extension of any loan or requests an additional loan.  All

                                      -15-
<PAGE>

lines of credit are reviewed annually prior to renewal.  Such reviews include,
but are not limited to, the ability of the borrower to repay the loan, the loan
to value ratio, the value of any collateral and the estimated loss to the Bank,
if any.

     The Bank's internal problem loan rating system establishes three
classifications for problem assets:  substandard, doubtful and loss.
Additionally, in connection with regulatory examinations of the Bank, federal
and state examiners have authority to identify problem assets and, if
appropriate, require the Bank to classify them.  Substandard assets have one or
more defined weaknesses and are characterized by the distinct possibility that
the Bank will sustain some loss if the deficiencies are not corrected.  Doubtful
assets have the weaknesses of substandard assets with the additional
characteristic that the weaknesses make collection or liquidation in full, on
the basis of currently existing facts, conditions and values, highly
questionable and improbable. An asset classified as loss is considered
uncollectible and of such little value that continuance as an asset of the Bank
is not warranted.  Consequently, such assets are charged-off in the month they
are classified as loss.  Federal regulations also designate a "special mention"
category, described as assets which do not currently expose the Bank to a
sufficient degree of risk to warrant classification but do possess credit
deficiencies or potential weaknesses deserving management's close attention.

     Assets classified as substandard or doubtful require the Bank to establish
general allowances for loan losses.  If an asset or portion thereof is
classified as loss, the Bank must either establish specific allowances for loan
losses in the amount of 100% of the portion of the asset classified as loss or
charge off such amount.  General loss allowances established to cover possible
losses related to assets classified as substandard or doubtful may be included,
up to certain limits, in determining the Bank's regulatory capital, while
specific valuation allowances for loan losses do not qualify as regulatory
capital.

     The Bank's collection procedures provide that when a loan becomes 10 days
delinquent, the borrower is contacted by mail and payment is requested.  If the
delinquency continues, subsequent efforts are made to contact and request
payment from the delinquent borrower.  Most loan delinquencies are cured within
60 days and no legal action is required.  In certain circumstances, the Bank,
for a fee, may modify the loan, grant a limited moratorium on loan payments or
revise the payment schedule to enable the borrower to restructure his or her
financial affairs.  Generally, the Bank stops accruing interest on delinquent
loans when payment is in arrears for 90 days (unless the obligation is both well
secured and in the process of collection) or when collection otherwise becomes
doubtful.  If the delinquency exceeds 120 days and is not cured through the
Bank's normal collection procedures or through a restructuring, the Bank will
institute measures to enforce its remedies resulting from the default, including
commencing a foreclosure, repossession or collection action.  In certain cases,
the Bank will consider accepting a voluntary conveyance of collateral in lieu of
foreclosure or repossession.  Real property acquired by the Bank as a result of
foreclosure or by deed in lieu of foreclosure is classified as "real estate
owned" until it is sold and is carried at the lower of cost (defined as fair
value at foreclosure) or fair value less estimated costs to dispose.  Accounting
standards define fair value as the amount that is expected to be received in a
current sale between a willing buyer and seller other than in a forced or
liquidation sale.  Fair values at foreclosure are based on appraisals.  Losses
arising from the acquisition of foreclosed properties are charged against the
allowance for loan losses. Subsequent writedowns are provided by a charge to
income through the allowance for losses on other real estate in the period in
which the need arises.

     The Bank attempts to sell real estate owned promptly after foreclosure, and
it sold approximately $102,841 of its real estate owned due to loan foreclosures
during the year ended December 31, 1996.  The book value of real estate owned
that was sold by the Bank during the

                                      -16-
<PAGE>

year ended December 31, 1996 totaled approximately $100,510. As of December 31,
1996, there was no real estate owned as a result of foreclosure.

     CLC's loan portfolio is periodically reviewed by CLC's management to
identify deficiencies and to take corrective actions as necessary.  All past due
loans are reviewed by each CLC Office Manager daily and monthly by CLC's
President.   CLC's Board of Directors reviews the total loans considered over 90
days delinquent in their bi-monthly meetings.  The Board compares delinquency
rates on an office-by-office basis.  CLC's collection procedures provide that
when a loan becomes 5 days delinquent, the borrower is contacted by mail and
payment is requested.  If the delinquency continues, subsequent efforts are made
to contact and request payment from the delinquent borrower.  Most loan
delinquencies are cured within 90 days and no legal action is required.
Generally, when an account reaches 90 to 120 days past due, notice will be
mailed to the customer stating that CLC is taking legal action against them
unless the account is brought to a current status within 10 days.  If the
customer does not respond within that time frame, CLC typically will file suit
against the parties involved in the local Magistrate Court. CLC's policy is to
charge off any loan which becomes 6 months past due.  CLC's loans which are past
due 90 days or more total approximately $92,202 as of December 31, 1996, as
compared to $16,602 as of December 31, 1995.  This increase in past due loans is
primarily attributable to the significant increase in CLC's gross loan portfolio
to $1,074,882 as of December 31, 1996, as compared to $194,757 as of December
31, 1995, due to the purchase of two existing loan companies in Rossville,
Georgia, and Rockmart, Georgia.

     The following table sets forth information regarding the Company's
delinquent and nonperforming assets as of the dates indicated.

<TABLE>
<CAPTION>
                                                At December 31,
                                              --------------------
                                                1996       1995
                                              ---------  ---------
<S>                                           <C>        <C>
Accruing loans which are contractually
past due 90 days or more

    Real estate loans.......................  $ 37,365   $142,079
    Business loans..........................       -0-        -0-
    Consumer loans..........................    99,283      1,857
    Construction and acquisition and
     development loans......................       -0-        -0-
                                              --------   --------

      Total.................................  $136,648   $143,936

Ratio of delinquent but accruing loans to:

      Total loans...........................       .28%       .37%
      Total assets..........................       .16%       .21%
</TABLE>

                                      -17-
<PAGE>

<TABLE>
<CAPTION>
                                                At December 31,
                                              -------------------
                                                1996      1995
                                              --------  ---------
<S>                                           <C>       <C>
Nonaccruing loans:

  Real estate loans.........................  $   432   $154,291
  Business loans............................   23,850        -0-
  Consumer loans............................    5,955     21,222
  Construction and acquisition and
   development loans........................      -0-        -0-
                                              -------   --------

      Total.................................  $30,237   $175,513

Real estate acquired through foreclosure....  $   -0-   $ 97,458
Property acquired through repossession......  $ 3,000   $    725

Ratio of nonperforming assets to:

     Total loans and real estate acquired
     through foreclosure and repossessions..      .07%       .70%

     Total assets...........................      .04%       .41%
</TABLE>

     The Bank recorded interest income on the nonaccruing loans listed above for
the fiscal year ended December 31, 1996 of approximately $1,207.  The gross
interest income that would have been recorded during the fiscal year ended
December 31, 1996 if the nonaccruing loans listed above had been current in
accordance with their original terms would have been approximately $2,926.

Allowance for Loan Losses

     The allowance or reserve for possible loan losses is a means of absorbing
future losses which could be incurred from the current loan portfolio.  Both the
Bank and CLC maintain an allowance for possible loan losses, and management
adjusts the general allowances monthly by charges to income in response to
changes to outstanding loan balances.

The Bank maintains a general allowance equal to approximately 1.50% of the total
principal amount of loans outstanding (less the total principal amount of loans
outstanding that are secured by certificates of deposit), and management adjusts
the general allowance monthly by charges or credits to income in response to
changes in the outstanding loan balance.  Management also may establish specific
loan loss allowances for specific loans after considering such factors as past
delinquencies on the loan, the value of the underlying collateral and the size
of the loan.  The Bank began a special allowance in 1996 equal to 4% of the
outstanding balances in its credit card portfolio, in acknowledgment of the risk
related with this type of credit product.  As of December 31, 1996 management
was not aware of any specific loan problems which necessitated a specific loan
loss reserve.  A loan or portion thereof is charged off against the general
allowance when management has determined that losses on such loans are probable.
Recoveries on any loans charged off in prior fiscal periods are credited to the
allowance.  It is the opinion of the Bank's management that the balance in the
general allowance for loan losses as of December 31, 1996 is adequate to absorb
possible losses from loans currently in the portfolio.

                                      -18-
<PAGE>

     CLC maintains a general allowance for possible loan losses, in addition to
the fact that a majority of the loans in CLC's portfolio are insured in case of
default by the borrower.  CLC may be reimbursed for any covered loan balance
which goes into default.  Management is reviewing the general allowance for loan
loss on a quarterly basis to review its adequacy in covering any future losses
that may be sustained by CLC.

     The following table summarizes the Company's loan loss experience for the
periods indicated.

<TABLE>
<CAPTION>
                                           Years Ended December 31,
                                         --------------------------
                                             1996          1995
                                         -----------   -----------
<S>                                      <C>           <C>
Average loans..........................  $46,043,727   $36,660,129

Allowance for possible loan losses,
 beginning of the period...............      583,306       444,368

Charge-offs for the period:
  Real estate loans....................          -0-           -0-
  Business loans.......................        1,092        31,482
  Consumer loans.......................       89,171        29,393
  Construction loans and acquisition
  and development loans................          -0-           -0-
  Total charge-offs....................  $    90,263   $    60,875

Recoveries for the period:
  Real estate loans....................  $     1,613   $     1,075
  Business loans.......................        1,318         3,805
  Consumer loans.......................       19,703         8,288
  Construction loans and acquisition
  and development loans................          -0-           -0-

  Total recoveries.....................  $    22,634   $    13,168

    Net charge-offs for the period.....  $    67,629   $    47,707

Provision for loan losses..............  $   197,841       186,645

Allowance for possible loan losses,
  end of the period....................  $   713,518   $   583,306

Ratio of allowance for loan losses to
  total average loans outstanding......         1.44%         1.59%

Ratio of net charge-offs during
  the period to average loans
  outstanding during the period........          .14%          .13%
</TABLE>

                                      -19-
<PAGE>

     In addition to the Bank's loan rating system for problem assets described
above (see Problem Loans, above), the Bank has established a loan rating system
for all categories of loans which assists management and the Board of Directors
in determining the adequacy of the Bank's allowance for loan losses.  Each loan
in the Bank's portfolio is assigned a rating which is reviewed by management
periodically to ensure its continued suitability.  An exception is made in the
case of (I) monthly installment loans which are grouped together by delinquency
status such as over ten, thirty, sixty, or ninety days past due and (ii) problem
assets which are rated as substandard, doubtful, or loss as discussed above.
All other loans are assigned a rating of excellent, good, or moderate.  The
total amount of loans in each of these loan rating categories is weighted by a
factor that management believes reasonably reflects losses that can be
anticipated with respect to loans in each of these categories.  Based on these
weightings, management establishes an allowance for loan losses that is reviewed
by the Board each month.

INVESTMENT ACTIVITIES
---------------------

     Interest earned on investments in securities, on interest-bearing deposits
in other banks and on federal funds sold  provides the second largest source of
revenues for the Company after interest on loans, constituting $1,386,909 or
17.34% of total interest and other income for the year ended December 31, 1996.
The Company's investment portfolio totaled approximately $29,693,690 or 34.85%
of total assets at December 31, 1996.  The entire investment portfolio is held
by the Bank.  The portfolio is designed to enhance liquidity while providing
acceptable rates of return.  Bank policy limits securities investments to
securities having a rating of no less than "BAA" by Moody's Investors Service,
Inc. or "BBB" by Standard and Poor's Corporation.

     The following table sets forth the carrying value of the Bank's investments
at the dates indicated.  All securities held available for sale are carried at
fair market value, and all securities held to maturity are carried at amortized
cost.

<TABLE>
<CAPTION>
                                                        At December 31,
                                                    ------------------------
                                                       1996         1995
                                                    -----------  -----------
      <S>                                           <C>          <C>
      U.S. Government and agency
        obligations...............................  $19,701,827  $18,826,654
      Other bonds, notes, debentures
        and securities............................      255,000       50,000
      States & political subdivisions tax-exempt..    2,716,863    1,764,406
      Federal funds...............................    7,020,000    1,680,000
                                                    -----------  -----------
         Total....................................  $29,693,690  $22,321,060
                                                    ===========  ===========
</TABLE>

     The following table sets forth the carrying value of the Bank's investments
at December 31, 1996, the weighted average yields on the Bank's investments at
December 31, 1996 and the periods to maturity of the Bank's investments from
December 31, 1996.

                                      -20-
<PAGE>

<TABLE>
<CAPTION>
                                                            Periods to Maturity from December 31, 1996
                               ----------------------------------------------------------------------------------------------
                               1 year or less                 1 - 5 years             5 - 10 years            Over 10 years
                               --------------------           ----------------       ----------------        -----------------
                                             Weighted                   Weighted              Weighted                  Weighted
                                              Average                    Average               Average                   Average
                               Amount          Yield          Amount      Yield      Amount     Yield        Amount       Yield
                               ------        ---------        ------    --------     ------   --------       ------     --------
<S>                         <C>             <C>              <C>        <C>          <C>      <C>           <C>         <C>
U.S. Government
 and agency
 obligations..............  $ 3,470,310          5.20%       $13,495,540    5.95%     $ 70,647    3.51%     $2,665,358      6.10%
Tax-exempt
Municipal bonds...........      150,857          4.69%(1)      1,035,841    4.58%(1)   415,367    4.51%(1)   1,114,772      5.40%
Other bonds, notes, de-
bentures, and securities..      255,000          6.04%               -0-    -.0-           -0-    -.0-             -0-      -.0-
Federal funds.............    7,020,000          5.32%               -0-    -.0-           -0-    -.0-             -0-      -.0-
                            -----------          ----        -----------    ----      --------    ----      ----------      ----

   Total..................  $10,896,167          5.29%       $14,531,380    5.85%     $486,013    4.36%     $3,780,130      5.89%
</TABLE>

____________
  (1)     The weighted average yields have been computed using actual yields on
          tax-exempt securities rather than tax-equivalent yields.

     The following table sets forth, as of December 31, 1996, the aggregate
amortized cost value and the aggregate estimated fair market value of the
securities of issuers in which the aggregate amortized cost value of the
Company's investment exceeds 10% of the Company's stockholders' equity.

<TABLE>
<CAPTION>
                                               Aggregate    Estimated
                                               Amortized    Aggregate
                                                 Cost      Fair Market
                                                 Value        Value
                                              -----------  -----------
<S>                                           <C>          <C>
Federal Farm Credit Bank....................   $1,216,845   $1,218,547
Federal Home Loan Bank......................    3,493,454    3,459,080
Federal National Mortgage Association.......    3,841,072    3,822,038
Federal Home Loan Mortgage Corporation......    1,944,207    1,930,617
Small Business Administration...............    1,008,578    1,009,170
U. S. Treasuries............................    7,739,666    7,769,621
Georgia Bankers Bank - Agent Federal Funds..    7,020,000    7,020,000
</TABLE>

SOURCES OF FUNDS
----------------

GENERAL

     Time, money market, savings and demand deposits are the major source of the
Company's funds for lending and other investment purposes.  All deposits are
held by the Bank.  In addition, the Company obtains funds from loan principal
repayments and proceeds from sales of loan participations and investment
securities.  Loan repayments are a relatively stable source of funds,

                                      -21-
<PAGE>

while deposit inflows and outflows and sales of loan participations and
investment securities are significantly influenced by prevailing interest rates,
economic conditions and the Company's asset and liability management strategies.
In addition, borrowings may be used on a short-term basis to compensate for
reductions in the availability of other sources of funds or on a longer term
basis to support expanded lending activities and for other general business
purposes.

DEPOSITS

     The Bank offers several types of deposit accounts, with the principal
differences relating to the minimum balances required, the time period the funds
must remain on deposit and the interest rate.  Deposits are obtained primarily
from the Bank's Paulding County market area.  The Bank does not advertise for
deposits outside of this area, and as a result an insignificant amount of the
Bank's deposits are from out-of-state sources.  The Bank does not solicit funds
from brokers, nor does it rely upon any single person or group of related
persons for a material portion of its deposits.

     A principal source of deposits for the Bank consists of short-term money
market and other accounts which are highly responsive to changes in market
interest rates.  Accordingly, the Bank, like all financial institutions, is
subject to short-term fluctuations in deposits in response to customer actions
due to changing short-term market interest rates.  The ability of the Bank to
attract and maintain deposits and the Bank's cost of funds have been and will
continue to be significantly affected by money market conditions.

     The following table sets forth the composition of deposits for the Company,
excluding accrued interest payable, by type of account and interest rate
category at the dates indicated.

<TABLE>
<CAPTION>
                                                                                                 Increase(Decrease)
                                                                                                 During the
                                                 At December 31,                                 Twelve-Month
                         ---------------------------------------------------------------
                                   1996                                 1995                     Period Ended
                    ------------------------------          -----------------------------
                    Interest                                Interest                             December 31,
Type of Account       Rate        Amount       Percent         Rate     Amount       Percent         1996
---------------     --------      ------       -------      --------   ------       -------    -------------
<S>                 <C>          <C>           <C>          <C>      <C>            <C>        <C>
Demand deposits.....   -0-        9,648,648      12.55%      -0-       9,139,735     14.93%       508,913
NOW accounts........  1.89%       8,757,099      11.39%     2.38%      7,216,412     11.78%     1,540,687
Savings deposits....  3.17%      15,546,932      20.22%     3.48%     10,915,179     17.82%     4,631,753
Money market
 deposits...........  2.88%       8,454,539      10.99%     3.04%      6,857,125     11.20%     1,597,414
Certificates of
 deposit............   2-4%             -0-        -0-       2-4%        498,050       .81%      (498,050)
        ............   4-6%      20,541,854      26.71%      4-6%     13,375,536     21.85%     7,166,318
        ............   6-8%      13,933,444      18.12%      6-8%     13,170,104     21.51%       763,340
        ............  8-10%          15,245        .02%     8-10%         63,148       .10%       (47,903)

 Total time
  deposits..........  5.91%      34,490,543      44.85%     5.97%     27,106,838     44.27%     7,383,705
                      ----      -----------                 ----     -----------              -----------
 Total
  deposits..........  4.35%     $76,897,761     100.00%     4.55%    $61,235,289       100%   $15,662,472
</TABLE>

                                      -22-
<PAGE>

     The following table sets forth information with respect to the Company's
interest expense on deposits and the daily average deposit balances for the
periods indicated.

<TABLE>
<CAPTION>
                                                        Years Ended December 31,
                                   ------------------------------------------------------------------
                                               1996                            1995
                                   ---------------------------------   ------------------------------
                                                           Average                            Average
                                     Average     Interest    Rate      Average     Interest      Rate
                                     Balance     Expense    Paid(1)    Balance     Expense      Paid(1)
                                   -----------  ----------  -------  -----------  ----------    -------
<S>                                <C>          <C>        <C>       <C>          <C>         <C>
NOW accounts.....................  $ 8,728,202     194,491  2.23%    $ 6,949,988  $  179,261    2.58%
Money market
 accounts........................    7,747,518     216,441  2.79%      7,014,853     216,839    3.09%
Savings deposits.................   12,200,662     375,845  3.08%     12,064,705     436,236    3.62%
Time deposits, $100,000 and
 over............................   11,321,593     663,640  5.86%      7,698,395     409,190    5.32%
Time deposits,
 other...........................   19,834,342   1,173,908  5.92%     16,442,425     926,127    5.63%
                                   -----------  ----------  ----     -----------  ----------    ----
Total interest-bearing deposits..  $59,832,317  $2,624,325  4.39%    $50,170,366  $2,167,663    4.32%
                                   ===========  ==========  ====     ===========  ==========    ====
</TABLE>

____________

     The following table sets forth the amount of time deposits maturing in the
periods indicated at December 31, 1996.

<TABLE>
<CAPTION>
                                          Amount Maturing
                    ----------------------------------------------------------------
                      Within       Within       Within        After
                      1 Year       2 Years      3 Years      3 Years       Total
                    ----------    ---------    ---------    ---------    ----------
<S>                 <C>           <C>          <C>          <C>          <C>
4% -  6%..........  19,079,327    1,193,373      242,040       27,114    20,541,854
6% -  8%..........   5,941,425    2,060,445    2,420,838    3,510,736    13,933,444
8% - 10%..........         -0-          -0-          -0-       15,245        15,245
</TABLE>

     The following table sets forth the maturity distribution of negotiable time
deposits of $100,000 or more and other time deposits of $100,000 or more at
December 31, 1996.

<TABLE>
<CAPTION>
                                         Negotiable           Other
                                            Time              Time
                                          Deposits          Deposits
                                         ----------        -----------
<S>                                      <C>               <C>
3 months or less.................              $-0-        $ 3,923,863
Over 3 months through 6 months...               -0-          2,671,508
Over 6 months through 12 months..               -0-          3,788,609
Over 12 months...................               -0-          2,825,584
   Total outstanding.............              $-0-        $13,209,564
</TABLE>

BORROWINGS

     The Bank has not borrowed any funds to date, although the Bank has
available two term federal funds lines of credit with correspondent banks, in
the amounts of $2,000,000 and

                                      -23-
<PAGE>

$1,000,000, respectively. In addition, the Bank has the right to borrow from the
Federal Reserve Bank of Atlanta if necessary to supplement its supply of funds
available for lending and to meet deposit withdrawal requirements. Additionally,
in order to enhance liquidity at the holding company holding level, the Company
has obtained a $2,500,000 revolving credit facility. No amounts have been drawn
under this facility to date.

RETAIL SERVICES
---------------

     The Bank provides its customers with a variety of retail banking services.
The Bank is a member of the HONOR(R) and CIRRUS(R) systems of automatic tellers
and point of sale terminals, which provide Bank customers with access to
HONOR(R) and CIRRUS(R) services at approximately 670,000 locations throughout
the world.  The Bank maintains two full-service automatic teller machines
("ATMs"), one at its Kroger branch and one at its Brownsville branch, and
fifteen Mini-ATM locations throughout its market area.  These Mini-ATMs issue
scrip, instead of cash, which may be redeemed by the customer only at the
establishment where the Mini-ATM is located.  The Bank also provides (in
addition to the lending and deposit services described above) a variety of
checking accounts, savings programs, night depository services, safe deposit
facilities and credit card plans (MasterCard and VISA).

SECURITIES BROKERAGE SERVICES
-----------------------------

     The Bank makes securities brokerage execution services available to its
customers through PrimeVest Financial Services, Inc. at commissions which are up
to 50% less than ordinary brokerage commissions.

COMPETITION

     Based on total assets of approximately $83,630,785 at December 31, 1996,
the Bank is one of the smaller financial institutions with offices in Paulding
County as of said date.  The Bank faces strong competition for deposits and
loans from five other financial institutions, two of which are community banks
that expanded their services from adjacent Cobb County into Paulding County in
1996.  Two of the larger financial institutions have greater resources and
lending limits than the Bank, and have several branch offices.  A federal credit
union owned by the employees of a local public utility company has also opened a
branch in Paulding, and has become aggressive in promoting membership with any
resident who purchases electricity from that utility company. Competition from
credit unions is very strong since membership is easily available to almost
anyone through the so-called "common bond" rule.  Also, since credit unions are
not subject to income taxes in the way that commercial banks are taxed, credit
unions have an advantage in offering competitive rates to potential customers.
The Bank also competes for deposits and loans with commercial banks and thrift
institutions in Atlanta and other surrounding areas, some of which are
affiliated with large regional financial institutions.  The Bank also faces
competition in certain areas of its business from mortgage banking companies,
consumer finance companies, insurance companies, money market mutual funds and
investment banking firms, some of which are not subject to the same degree of
regulation as the Bank.

     The Bank competes for deposits principally by offering depositors a variety
of deposit programs with competitive interest rates, quality service and
convenient locations and hours.  The Bank competes for loans by offering
competitive interest rates and loan fees, timely processing and quality service.
The Bank believes that its relatively small size permits it to offer more
personalized services than its competitors.

                                      -24-
<PAGE>

     The competitive pressures among commercial banks, thrift institutions and
other entities have increased significantly in recent years and are expected to
continue to do so.  The establishment of money market accounts and the
elimination of rate controls for interest rates paid on deposits in the early
1980s, for example, have increased the competition for deposits and tend to
increase the Bank's cost of funds, especially during periods of high interest
rates.

     Within Georgia, competition among financial institutions is increasing due
to a number of factors including, but not limited to, the acquisition of
Georgia-based financial institutions by out-of-state financial institutions.
With regard to interstate transactions, recently enacted federal legislation
permits interstate bank acquisitions, without regard to conflicting state laws
which purport to restrict or prohibit such acquisitions.  See "Recent
Legislation" below.  Additionally, the Financial Institutions Reform, Recovery
and Enforcement Act of 1989 ("FIRREA") amended the federal Bank Holding Company
Act of 1956 (the "BHCA") to permit the acquisition of healthy savings
institutions by bank holding companies.  Prior to FIRREA, bank holding companies
could acquire only troubled thrifts.  As a result of FIRREA, Georgia-based
thrift institutions may now be acquired by bank holding companies headquartered
in Georgia or out-of-state.

     In addition to facing increased competition from out-of-state financial
institutions, Georgia-based financial institutions are now likely to face
increased competition from other Georgia-based banks.  The Georgia legislature
recently enacted legislation which, effective July 1, 1996, permits Georgia-
based banks to branch into up to three counties in addition to the county in
which their main office is located.  Under this legislation, multiple banks
owned by a single holding company are treated as though they were one bank,
thereby permitting the holding company to expand its banking operations into
only three additional counties.  This same legislation will eliminate all
branching restrictions, thereby permitting unrestricted state-wide branching,
effective July 1, 1998.

     Consolidations of Georgia banking or thrift institutions with out-of-state
institutions could increase the presence in Georgia of out-of-state financial
institutions with substantially greater assets and resources than the Bank.
Additionally, the erosion of state law restrictions on intrastate branching may
result in the opening of branch banks in Paulding County by banks that
previously had been prohibited from doing so.  Similarly, federal savings
institutions, with which the Bank competes for loans and deposits, are permitted
to branch statewide.  One such institution has recently opened a Paulding County
branch.

EMPLOYEES
---------

     As of December 31, 1996, the Bank had 49 full-time and 22 part-time
employees, Metroplex had one full-time employee, and CLC had ten full-time and 1
part-time employees. No employees are covered by collective bargaining
agreements, and the Company considers its relationship with its employees to be
excellent.

SUPERVISION AND REGULATION
--------------------------

GENERAL

     As a bank holding company, the Company is subject to regulation by the
Board of Governors of the Federal Reserve (the "Federal Reserve") pursuant to
the BHCA and by the Georgia Department pursuant to the Georgia Bank Holding
Company Act (the "GBHCA").  The Company also is required to file certain reports
with, and otherwise comply with the rules and regulations of, the Securities and
Exchange Commission (the "Commission") under federal securities laws.

                                      -25-
<PAGE>

     The Bank is a state bank and is subject to the supervision of, and is
regularly examined by, the Georgia Department.  In addition, the Bank's deposit
accounts are insured up to applicable limits by the bank insurance fund of the
Federal Deposit Insurance Corporation (the "FDIC") and the Bank, therefore, is
subject to regulation by the FDIC.

     FIRREA was signed into law on August 9, 1989.  FIRREA primarily affected
the regulation of savings associations ("thrifts") and savings and loan holding
companies rather than the regulation of state banks and bank holding companies
such as the Bank and the Company. However, FIRREA did contain certain provisions
affecting banks and bank holding companies, including without limitation,
provisions affecting deposit insurance premiums, acquisitions of thrifts by
banks and bank holding companies, liability of commonly controlled depository
institutions, receivership and conservatorship rights and procedures and
substantially increased penalties for violation of banking statutes, regulations
and orders.

     Additionally, on December 19, 1991, the FDIC Improvement Act of 1991
("FDICIA") became law which resulted in extensive changes to the federal banking
laws. The primary purpose of the law was to authorize additional borrowings by
the FDIC in order to provide funds for the resolution of failing financial
institutions.  However, the law also instituted certain changes to the
supervisory process and contained various provisions affecting the operations of
banks and bank holding companies like the Bank and the Company.  Certain of
these changes are discussed below under the caption "Enactment of FDICIA."

     To the extent that the following information describes statutory and
regulatory provisions, it is qualified in its entirety by reference to the
particular statutory and regulatory provisions.  Any change in applicable laws
or regulations may have a material effect on the business and prospects of the
Company and the Bank.

REGULATION OF THE COMPANY

     General.  As the bank holding company for the Bank, the Company is subject
to the supervision and regulation of the Federal Reserve and the Georgia
Department.  As a bank holding company, the Company is required to file with the
Federal Reserve an annual report and such additional information as the Federal
Reserve may require pursuant to the BHCA.  The Federal Reserve and the Georgia
Department also may make examinations of the Company and each of its
subsidiaries.

     Regulatory Capital Requirements. The Federal Reserve has adopted risk-based
capital adequacy guidelines for use in its examination and regulation of bank
holding companies.  Under the Federal Reserve's risk-based standards, an
entity's assets and off-balance sheet activities are categorized into one of
four risk categories, with either a 0%, 20%, 50% or 100% amount of capital to be
held against those assets.  In addition, the guidelines divide capital
instruments into Tier 1 (core) capital and Tier 2 (supplemental) capital.  The
risk-based capital adequacy guidelines require that: (I) Tier 2 capital may not
exceed 100% of Tier 1 capital, although certain Tier 2 capital elements are
subject to additional limitations; (ii) assets and off balance sheet items be
weighted according to risk; and (iii) the total capital to risk-weighted assets
ratio must be at least 8%.  At December 31, 1996, the Company was in compliance
with these risk-based capital guidelines.  See "Capital Resources and Liquidity"
in the Management's Discussion and Analysis section of the Company's 1996 Annual
Report to Shareholders.

     If the capital of a bank holding company falls below minimum required
levels, the bank holding company may be denied approval to acquire or establish
additional banks or non-bank businesses, as discussed below.  Bank holding
companies may be compelled by bank regulatory

                                      -26-
<PAGE>

authorities to invest additional capital in a bank subsidiary in the event the
subsidiary bank experiences either significant loan losses or rapid growth of
loans or deposits. In addition, the company may be required to provide
additional capital to any additional banks it acquires as a condition to
obtaining the approvals and consents of regulatory authorities in connection
with such acquisitions.

     Change of Control and Permissible Activities. Bank holding companies are
required by the BHCA to obtain approval from the Federal Reserve prior to
acquiring, directly or indirectly, ownership or control of more than 5% of the
outstanding shares of any class of voting stock of any bank or bank holding
company.

     The BHCA also prohibits bank holding companies, with certain exceptions,
from acquiring more than 5% of the voting shares of any company that is not a
bank, and from engaging in any business other than banking or managing or
controlling banks or other permissible subsidiaries. The Federal Reserve is
authorized to approve, among other things, the ownership of shares by a bank
holding company in any company the activities of which the Federal Reserve has
determined to be so closely related to banking or to managing or controlling
banks as to be a proper incident thereto.  Additionally, the Federal Reserve, by
regulation, has deemed certain nonbanking activities to be permissible
activities and has exempted such activities from the prior approval
requirements, although notice to and review by the Federal Reserve of such
activities would be necessary before the Company could engage de novo in such
activities.  The Federal Reserve is empowered to differentiate between
activities that are initiated de novo by a bank holding company or a subsidiary
and activities commenced by acquisition of a going concern.

     Additionally, the Federal Change in Bank Control Act ("CIBCA") requires 60
days' prior written notice to the appropriate federal bank regulatory agency
before any person may acquire "control" of a bank or bank holding company.  The
appropriate federal bank regulatory agency with respect to acquisitions of
control of a state non-member bank, such as the Bank, is the FDIC, and the
appropriate federal bank regulatory agency with respect to acquisitions of
control of a bank holding company, such as the Company, is the Federal Reserve.

     Under existing Federal Reserve regulations, "control" is presumed to exist
where the acquiring party (which includes a group "acting in concert") (a) owns,
controls, or holds with power to vote 25% or more of any class of voting
securities of the institution, or (b) owns, controls, or holds with power to
vote 10% or more of any class of voting securities of the institution, if (I)
the institution has registered securities under Section 12 of the Securities
Exchange Act of 1934, or (ii) no other person will own a greater percentage of
that class of voting securities immediately following the transaction.

     The activities of the Company also are restricted by the provisions of the
Glass-Steagall Act of 1933 (the "Act").  The Act restricts the ability of the
Company to own subsidiaries engaged principally in the issue, flotation,
underwriting, public sale or distribution of securities.  The interpretation,
scope and application of the provisions of the Act currently are being reviewed
by regulators and legislators.  The outcome of the current examination and
appraisal of the provisions in the Act and the effect of such outcome on the
ability of bank holding companies to engage in securities-related activities
cannot be predicted.

     Supervisory and Enforcement Powers. The Federal Reserve has been granted
enforcement powers over bank holding companies and non-banking subsidiaries to
forestall activities that represent unsafe or unsound practices or constitute
violations of law.  These powers may be exercised through the issuance of cease-
and-desist orders or other actions.  The Federal Reserve also is empowered to
assess civil money penalties against companies or individuals who violate

                                      -27-
<PAGE>

the BHCA or orders or regulations thereunder, to order termination of non-
banking activities of non-banking subsidiaries of bank holding companies and to
order termination of ownership and control of a non-banking subsidiary by a bank
holding company. Certain violations may also result in criminal penalties.

     The status of the Company as a registered bank holding company under the
BHCA does not exempt it from certain federal and state laws and regulations
applicable to corporations generally, including, without limitation, certain
provisions of the federal securities laws.

     Restrictions on Transactions with Affiliates. The Bank and the Company are
"affiliated" within the meaning of the Federal Reserve Act.  Certain provisions
of the Federal Reserve Act establish standards for the terms of, limit the
amount of and establish collateral requirements with respect to any loans or
extensions of credit to, and investments in, affiliates by the Bank, as well as
set arms-length criteria for such transactions and for certain other
transactions (including payment by the Bank for services and under any contract)
between the Bank and its affiliates.  In addition, related provisions of the
Federal Reserve Act and the Federal Reserve regulations limit the amounts of,
and establish required procedures and credit standards with respect to, loans
and other extensions of credit to officers, directors and principal shareholders
of the Bank, the Company and any subsidiary of the Company, and to related
interests of such persons.

     Miscellaneous. Under Section 106(b) of the Bank Holding Company Act
Amendments of 1970 (12 U.S.C. (S) 1972), the Bank is prohibited from extending
credit, selling or leasing property or furnishing any service to any customer on
the condition or requirement that the customer (I) obtain any additional
property, service or credit from the Company, the Bank (other than a loan,
discount, deposit, or trust service) or any other subsidiary of the Company,
(ii) refrain from obtaining any property, credit or service from any competitor
of the Company, the Bank or any subsidiary of the Company or (iii) provide any
credit, property or service to the Company, the Bank (other than those related
to and usually provided in connection with a loan, discount, deposit or trust
service) or any subsidiary of the Company.

     Most bank holding companies are required to give the Federal Reserve prior
written notice of any purchase or redemption of their outstanding equity
securities if the gross consideration for the purchase or redemption, when
combined with the net consideration paid for all such purchases or redemptions
during the preceding 12 months, is equal to 10% or more of the bank holding
company's consolidated net worth.  The Federal Reserve may disapprove such a
purchase or redemption if it determines that the proposal constitutes an unsafe
or unsound practice, would violate any law, regulation, Federal Reserve order or
directive or any condition imposed by, or written agreement with, the Federal
Reserve.  The prior notice requirement does not apply to certain "well-
capitalized" bank holding companies that meet specified criteria.

     In November 1985, the Federal Reserve adopted its Policy Statement on Cash
Dividends Not Fully Covered by Earnings.  The Policy Statement sets forth
various guidelines that the Federal Reserve believes that a bank holding company
should follow in establishing its dividend policy.  In general, the Federal
Reserve stated that bank holding companies should not pay dividends except out
of current earnings and unless the prospective rate of earnings retention by the
holding company appears consistent with its capital needs, asset quality and
overall financial condition.

     Georgia Law.  The Company also is a bank holding company within the meaning
of the GBHCA, which provides without limitation that, without the prior approval
of the Georgia Department, it is unlawful (I) for any action to be taken that
causes a company to become a bank holding company, (ii) for any bank holding
company to acquire direct or indirect ownership or

                                      -28-
<PAGE>

control of more than 5% of the voting shares of any bank, (iii) for any bank
holding company or subsidiary thereof, other than a bank, to acquire all or
substantially all of the assets of a bank, (iv) for any action to be taken that
causes a bank to become a subsidiary of a bank holding company or (v) for any
bank holding company to merge or consolidate with any other bank holding
company. It also is unlawful for any company to acquire direct or indirect
ownership or control of more than 5% of the voting shares of any bank in Georgia
unless such bank has been in existence and continuously operating as a bank for
a period of five years or more prior to the date of application to the Georgia
Department for approval of such acquisition. One bank holding companies, such as
the Company, are prohibited from acquiring another bank until their initial bank
subsidiary has been incorporated for a period of at least two years.

     In addition, the Georgia Department has established a minimum level of
capital to total assets of 5%, with certain adjustments, on a consolidated basis
for bank holding companies.  The capital guidelines assume adequate liquidity
and a moderate degree of risk in the loan and investment portfolios as well as
any off balance sheet activities.  In assessing compliance with the guidelines,
therefore, the Georgia Department reviews the relationship of on and off balance
sheet risks to capital and requires those institutions with high or inordinate
levels of risk to adhere to higher capital standards.  Bank holding companies
whose operations involve, or are exposed to, high or inordinate degrees of risk
are expected to hold additional capital to compensate for such risks.  In
addition, bank holding companies engaging in significant nonbanking activities
typically require higher capital ratios than do banks alone.

REGULATION OF THE BANK

     General.  The Bank is a commercial bank chartered under the laws of the
State of Georgia and its deposit accounts are insured up to applicable limits by
the Bank Insurance Fund ("BIF") of the FDIC.  The Bank is subject to the
regulation, examination and supervision of the Georgia Department and the FDIC.
Both the Georgia Department and the FDIC issue regulations and require the
filing of reports describing the activities and financial condition of the banks
under their jurisdiction.  Each agency conducts periodic examinations to test
compliance with various regulatory requirements and generally supervises the
operation of such banks.  This supervision and regulation is intended primarily
for the protection of depositors.  As an FDIC-insured, state-chartered bank, the
Bank may not enter into certain transactions unless applicable regulatory tests
are met or it obtains the prior approval of the regulatory agencies.  For
instance, the approval of the Georgia Department and the FDIC are required prior
to any merger or consolidation or the establishment of an office at which
banking business is conducted.  The Bank also is regulated in certain respects
by the Federal Reserve.

     Georgia Law.  The Bank derives its lending and investment authority
primarily from the applicable provisions of the Financial Institutions Code of
Georgia and the rules and regulations promulgated thereunder by the Georgia
Department.  Under these laws and regulations, commercial banks, including the
Bank, may invest in real estate mortgages, commercial and consumer loans,
certain types of securities, including certain corporate debt and equity
securities, asset backed securities, and obligations of federal, state and local
governments and agencies, and certain other assets.  A Georgia chartered bank's
lending powers generally are subject to certain restrictions, including limits
on amounts loaned to one borrower.  Additionally, the exercise by an FDIC
insured commercial bank of the lending and investment powers of a commercial
bank under the Financial Institutions Code may be limited by FDIC regulations.

     Under the Financial Institutions Code, the maximum interest rate a bank may
charge on a loan depends on the amount of the loan.  If the principal amount of
the loan is $3,000 or less, banks may charge a maximum of 16% per annum simple
interest, unless the loan is made pursuant

                                      -29-
<PAGE>

to another law. Borrowers and banks may agree in writing on any rate of
interest, expressed in simple interest terms, on loans of more than $3,000 but
less than $250,000. In addition, banks and borrowers may agree in writing on any
rate of interest, expressed in simple interest terms or otherwise, on loans of
$250,000 or more, provided that all charges to be paid by the borrower are
disclosed in a written agreement. There is, however, a criminal penalty for
charging interest rates greater than 5% per month.

     Georgia commercial banks also have the power to invest in subsidiaries.  A
commercial bank may use this power to invest in corporations that engage in
various service activities that banks are authorized to carry on, plus
additional activities authorized by the Georgia Department. Additional
activities may from time to time be authorized by the Georgia Department.
Investment by a bank in the stock of such corporations engaged in activities
described above is limited to the lesser of 10% of the bank's total assets or
100% of the bank's statutory capital base, and such investments must be approved
by the Georgia Department.

     Currently, a Georgia chartered bank may establish additional offices within
the county in which its main office is located and in up to three additional
counties.  Recent legislation enacted by the Georgia legislature will eliminate
all branching restrictions, thereby permitting unrestricted state-wide banking
effective July 1, 1998.  See "Recent Legislation" below.

     Georgia commercial banks may, with the approval of the Georgia Department,
merge or consolidate with another bank, trust company or other corporation as
long as the resulting institution is a bank or trust company engaged only in the
business of a bank or trust company. Additionally, a bank may sell, lease,
exchange or otherwise dispose of all or substantially all of its property and
assets with the approval of the Georgia Department.

     The Financial Institutions Code prohibits the payment of dividends by a
state chartered bank if such bank is insolvent or would thereby be rendered
insolvent, if such dividend is contrary to restrictions contained in the bank's
articles of incorporation, if the dividend would be paid from other than
retained earnings or if the bank does not have the required amount of paid-in
capital and appropriated retained earnings.  In addition, pursuant to
regulations adopted by the Georgia Department, a Georgia-chartered bank must
have the approval of the Georgia Department to pay cash dividends, unless at the
time of such payment (I) the total classified assets at the most recent
examination of the bank do not exceed 80% of the bank's equity capital and
reserves as reflected by such examination; (ii) the aggregate amount of
dividends declared or anticipated to be declared in the calendar year does not
exceed 50% of the net profits, after taxes but before dividends, of the bank for
the previous calendar year; and (iii) the ratio of the bank's equity capital, as
defined, to adjusted total assets, as defined, is not less than 6%.  The Georgia
Department also requires the Bank to maintain a ratio of capital, as defined in
the Georgia Department's statement of policy on capital adequacy, to adjusted
total assets of not less than 8% during the first three years of operations.

     Under the Financial Institutions Code, the Georgia Department may issue
orders to a Georgia chartered bank to submit to an investigation by the Georgia
Department, to discontinue unauthorized or unsafe practices or to keep
prescribed books and accounts.  If the Georgia Department finds that any
director or officer of any banking organization has violated any law or duly
enacted regulation, or has continued unauthorized or unsafe practices in
conducting the business of the banking organization after being notified by the
Georgia Department to discontinue such practices, or has been indicted for any
crime involving moral turpitude or breach of trust, or has filed for bankruptcy
protection from creditors, the Georgia Department may remove such director or
officer from office.  No director or officer of the Bank has been found by the
Georgia

                                      -30-
<PAGE>

Department to have engaged in, or has been investigated by the Georgia
Department with respect to, any of such activities.

REGULATION OF CLC

     As a consumer finance company, CLC is subject to regulation by the
Commissioner of Insurance of the State of Georgia, also known as the Georgia
Industrial Loan Commissioner, (the "Commissioner") pursuant to the Georgia
Industrial Loan Act (the "GILA").  CLC is required to file certain reports and
such additional information as the Commissioner may require pursuant to the
GILA, and is subject to periodic examinations of its books, accounts, and
records by the Commissioner's duly authorized representatives.  Each office of
CLC is licensed by the Commissioner separately, and, if CLC wishes to move an
office within a county, written notice must be given to the Commissioner
supplying facts and circumstances showing how the removal to a new location will
promote the convenience and advantage of that community.  Licenses must be
renewed on an annual basis.  CLC may loan any sum of money not to exceed $3,000
for a period not to exceed 36 months and 15 days and may charge, contract for,
collect, and receive interest and fees on said loans, pursuant to the GILA.

     As a subsidiary of the Company, CLC also is subject to examination by the
Federal Reserve pursuant to the BHCA and by the Georgia Department pursuant to
the GBHCA.  The Federal Reserve and the Georgia Department also may make
examinations of CLC.

INSURANCE OF ACCOUNTS

     Deposits of the Bank are insured by the FDIC to a maximum of $100,000 for
each insured depositor through the Bank Insurance Fund ("BIF"), one of the two
deposit insurance funds established by FIRREA.  As an insurer, the FDIC issues
regulations, conducts examinations and generally supervises the operations of
its insured institutions (institutions insured by the FDIC hereinafter are
referred to as "insured institutions").  Any insured institution which does not
operate in accordance with or conform to FDIC regulations, policies and
directives may be sanctioned for non-compliance.  For example, proceedings may
be instituted against an insured institution if the institution or any director,
officer or employee thereof engages in unsafe and unsound practices, is
operating in an unsafe or unsound condition, or has violated any applicable law,
regulation, rule, order or condition imposed by the FDIC.  If insurance of
accounts is terminated by the FDIC, the deposits in the institution will
continue to be insured by the FDIC for a period of two years following the date
of termination.  The FDIC requires an annual audit by independent accountants
and also periodically makes its own examinations of insured institutions.  The
FDIC may revalue assets of an institution, based upon appraisals, and require
establishment of specific reserves in amounts equal to the difference between
such reevaluation and the book value of the assets.

     On September 15, 1992, the FDIC approved final regulations adopting a risk-
related deposit insurance system.  The risk-related regulations, which became
effective January 1, 1993, resulted in a significant spread between the highest
and lowest deposit insurance premiums. Under the risk-related insurance
regulations, each insured depository institution is assigned to one of three
risk classifications: "well capitalized," "adequately capitalized," or "under
capitalized". Within each risk classification, there are three subgroups.  Each
insured depository institution is assigned to one of these subgroups within its
risk classification based upon supervisory evaluations submitted to the FDIC by
the institution's primary federal regulator.  Depending upon a BIF member's risk
classification and subgroup, applicable regulations provide that its deposit
insurance premium may be as low as .04% of insured deposits or as high as .31%
of insured deposits. Additionally, because the BIF has exceeded its designated
reserve ratio, the FDIC has now

                                      -31-
<PAGE>

reduced to zero the assessment rate that is applicable to the most highly rated
BIF members. The Bank has been notified that, based on its risk classification
and supervisory subgroup, its BIF assessment rate is zero percent of insured
deposits for the period from January 1, to June 30, 1997. This is the most
favorable assessment rate applicable to any insured institution. However, the
Deposit Insurance Funds Act of 1996 ("DIFA") requires that a Financing
Corporation ("FICO") assessment be paid by the Bank in 1997. The annual FICO
assessment rate for banks is .01296% of deposits.

     The Bank paid approximately $2,000 in deposit insurance assessments, which
was the minimum set by the FDIC for that period, during the year ended December
31, 1996.

     Subsequent to the enactment of FIRREA, the FDIC issued risk-based bank
capital guidelines which went into effect in stages through 1992.  In accordance
with the FDIC's risk-based standards, an institution's assets and off-balance
sheet activities are categorized into one of four risk categories, with either a
0%, 20%, 50%, or 100% amount of capital to be held against these assets.  In
addition, the guidelines divide capital instruments into Tier 1 (core) capital
and Tier 2 (supplementary) capital.  The risk-based capital adequacy guidelines
require that (I) Tier 1 capital equal or exceed 4% of risk-weighted assets; (ii)
Tier 2 capital may not exceed 100% of Tier 1 capital, although certain Tier 2
capital elements are subject to additional limitations; (iii) assets and off-
balance sheet items be weighted according to risk; and (iv) the total capital to
risk-weighted assets ratio must be at least 8.0%.  The FDIC's current leverage
capital requirement requires banks receiving the highest regulatory rating based
upon the FDIC's routine examination process, to maintain Tier 1 capital equal to
3.0% of the bank's total assets.  Banks receiving lower regulatory ratings are
required to maintain Tier 1 capital in an amount that is at least 100 to 200
basis points higher than 3.0% of total assets.

     At December 31, 1996, the Bank had Tier 1 capital of $5,342,676, or 6.41%
of total average assets.

     Certain provisions of the Federal Reserve Act, made applicable to the Bank
by Section 18(j) of the Federal Deposit Insurance Act (12 U.S.C. (S)1828(j)) and
administered with respect to the Bank by the FDIC, establish standards for the
terms of, limit the amount of and establish collateral requirements with respect
to any loans or extensions of credit to, and investments in, affiliates by the
Bank as well as set arms-length criteria for such transactions and for certain
other transactions (including payment by the Bank for services) between the Bank
and its affiliates.  In addition, related provisions of the Federal Reserve Act
and the Federal Reserve regulations (also administered with respect to the Bank
by the FDIC) limit the amounts of, and establish required procedures and credit
standards with respect to, loans and other extensions of credit to officers,
directors and principal shareholders of the Bank and to related interests of
such persons.

     The FDIC may impose sanctions on any insured bank that does not operate in
accordance with FDIC regulations, policies and directives.  Proceedings may be
instituted against any insured bank or any director, officer or employee of the
bank that is believed by the FDIC to be engaged in unsafe or unsound practices,
including violation of applicable laws and regulations.  The FDIC may revalue
assets of an institution, based upon appraisals, and may require the
establishment of specific reserves in amounts equal to the difference between
such revaluation and the book value of the assets.  The FDIC also is empowered
to assess civil penalties against companies or individuals who violate certain
federal statutes, orders or regulations.  In addition, the FDIC has the
authority to terminate insurance of accounts, after notice and hearing, upon a
finding by the FDIC that the insured institution is or has engaged in any unsafe
or unsound practice that has not been corrected, or is in an unsafe or unsound
condition to continue operations or has violated any applicable law, regulation,
rule or order of, or condition imposed by, the FDIC.  The Bank does

                                      -32-
<PAGE>

not know of any past or current practice, condition or violation that might lead
to termination of its deposit insurance or to any proceeding by the FDIC against
the Bank or any of its directors, officers or employees.

     Federal Reserve.  Although the Bank is not a member of the Federal Reserve
System, it is subject to Federal Reserve regulations that require it to maintain
reserves against its transaction accounts (primarily checking accounts).
Because reserves generally must be maintained in cash or in non-interest bearing
accounts, the effect of the reserve requirements is to increase the Bank's cost
of funds.  The Federal Reserve Board regulations currently require that average
daily reserves be maintained against transaction accounts in the amount of 3% of
the aggregate of such net transaction accounts up to $49.3 million, plus 10% of
the total in excess of $49.3 million.

ENACTMENT OF FDICIA

     On December 19, 1991, then President Bush signed FDICIA into law, which
resulted in extensive changes to the federal banking laws.  The primary purpose
of the law was to authorize additional borrowings by the FDIC in order to
provide funds for the resolution of failing financial institutions.  The law
instituted certain changes to the supervisory process and contained various
provisions that may affect the operations of financial institutions like the
Bank.  Certain of these changes are discussed below.

     Prompt Corrective Regulatory Action. FDICIA requires the federal banking
regulators to take prompt corrective action if an institution fails to satisfy
certain minimum capital requirements.  Under FDICIA, capital requirements
include a leverage limit, a risk-based capital requirement, and any other
measure of capital deemed appropriate by the federal banking regulators for
measuring the capital adequacy of an insured depository institution.  All
institutions, regardless of their capital levels, are restricted from making any
capital distribution or paying any management fees that would cause the
institution to fail to satisfy the minimum levels for any of its capital
requirements.  An institution that fails to meet the minimum level for any
relevant capital measure (an "undercapitalized institution") may be:  (I)
subject to increased monitoring by the appropriate federal banking regulator;
(ii) required to submit an acceptable capital restoration plan within 45 days;
(iii) subject to asset growth limits; and (iv) required to obtain prior
regulatory approval for acquisitions, branching and new lines of businesses.
The capital restoration plan must include a guarantee by the institution's
holding company that the institution will comply with the plan until it has been
adequately capitalized on average for four consecutive quarters, under which the
holding company would be liable up to the lesser of 5% of the institutions's
total assets or the amount necessary to bring the institution into capital
compliance as of the date it failed to comply with its capital restoration plan.
A "significantly undercapitalized" institution, as well as any undercapitalized
institution that does not submit an acceptable capital restoration plan, may be
subject to regulatory demands for recapitalization, broader application of
restrictions on transactions with affiliates, limitations on interest rates paid
on deposits, asset growth and other activities, possible replacement of
directors and officers, and restrictions on capital distributions by any bank
holding company controlling the institution.  Any company controlling the
institution may also be required to divest the institution.  The senior
executive officers of the institution could not receive bonuses or increases in
compensation without prior approval and the institution would be prohibited from
making payments of principal or interest on its subordinated debt.  If an
institution's ratio of tangible capital to total assets falls below a level
established by the appropriate federal banking regulator, which may not be less
than 2% tangible equity nor more than 65% of the minimum leverage capital level
otherwise required (the "critical capital level"), the institution will be
subject to conservatorship or receivership within 90 days unless periodic
determinations are made that forbearance from such action would better protect
the deposit insurance fund.  Unless appropriate findings and certifications are
made

                                      -33-
<PAGE>

by the appropriate federal bank regulatory agencies, a critically
undercapitalized institution must be placed in receivership if it remains
critically undercapitalized on average during the calendar quarter beginning 270
days after the date it became undercapitalized.

     Conservatorship and Receivership Amendments.  FDICIA amended the grounds
for the appointment of a conservator or receiver for any insured depository
institution to include the following events:  (I) consent by the board of
directors of the institution; (ii)  cessation of the institution's status as an
insured depository institution; (iii) the institution is undercapitalized and
has no reasonable prospects of becoming adequately capitalized when required to
do so, fails to submit an acceptable capital plan or materially fails to
implement an acceptable capital plan; or (iv) the institution is critically
undercapitalized or otherwise has substantially insufficient capital. FDICIA
provides that an institution's directors shall not be liable to its stockholders
or creditors for acquiescing in or consenting to the appointment of the FDIC or
RTC as receiver or conservator or to a supervisory acquisition of the
institution.

     Standards for Safety and Soundness.  FDICIA also required the federal bank
regulatory agencies to prescribe, by regulation, standards for all insured
depository institutions and depository institution holding companies relating
to, among other things,:  (I) internal controls, information systems and
internal audit systems; (ii) loan documentation; (iii) credit underwriting; (iv)
interest rate risk exposure; (v) asset growth; and (vi) compensation, fees and
benefits.

     Other Deposit Insurance Reforms.  FDICIA amended the Federal Deposit
Insurance Act to prohibit insured depository institutions that are not well-
capitalized from accepting brokered deposits unless a waiver has been obtained
from the FDIC.  Deposit brokers are required to register with the FDIC.  FDICIA
authorized the FDIC to privately reinsure up to 10% of its risk of loss with
respect to an institution and base its assessment on the cost of such
reinsurance.  With certain exceptions, state chartered banks are limited to the
activities of national banks.  The federal bank regulatory agencies are required
to biannually review risk-based capital standards to ensure that they adequately
address interest rate risk, concentration of credit risk and risks from non-
traditional activities.

     Consumer Protection Provisions.  FDICIA also sought to encourage
enforcement of existing consumer protection laws and enacted new consumer
oriented provisions including a requirement of notice to regulators and
customers for any proposed branch closing and provisions intended to encourage
the offering of "lifeline" banking accounts and lending in distressed
communities.  FDICIA also required depository institutions to make additional
disclosures to depositors with respect to the rate of interest and the terms of
their deposit accounts.

RECENT LEGISLATION

     In September 1994, the federal Riegle-Neal Interstate Banking and Branching
Efficiency Act was enacted.  The Act allows bank holding companies, beginning
one year following enactment of the legislation, to acquire existing banks
across state lines, regardless of state statutes.  Beginning in June 1997, a
bank may consolidate interstate subsidiaries into branches and merge with a bank
across state lines to the extent that the applicable states have not "opted out
of interstate branching" prior to the effectiveness of the branching provisions.
States may elect to permit interstate mergers prior to June 1997.  The Act also
would permit de novo branching to the extent that a particular state opts into
the de novo branching provisions.  The Act provides a concentration limitation
with a nationwide limitation of 10% of total deposits of insured depository
institutions in the United States and 30% of total deposits of insured
depository institutions in a specific state.

                                      -34-
<PAGE>

     The Riegle Community Development and Regulatory Improvement Act of 1994
also was enacted in September 1994, and provides for the creation of a community
development financial institutions fund to promote economic revitalization in
community development.  Banks and savings institutions are allowed to
participate in such community development banks.  The Act also contains
provisions designed to enhance small business capital formation and to enhance
disclosure with regard to high cost mortgages for the protection of consumers.
The Act also contains more than 50 regulatory relief provisions that apply to
banks and savings institutions including the coordination of examinations by
various federal agencies, coordination of frequency and types of reports
financial institutions are required to file and reduction of examinations for
well-capitalized institutions.

     The Georgia legislature recently enacted legislation which, effective July
1, 1996, allows Georgia-based banks to branch into up to three counties in
addition to the county in which their main office is located.  Under this
legislation, multiple banks owned by a single holding company are treated as
though they were one bank, thereby permitting the holding company to expand its
banking operations into only three additional counties.  This same legislation
will eliminate all branching restrictions, thereby permitting unrestricted
state-wide branching, effective July 1, 1998.

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

     The Company and the Bank operate from a main office and two branch offices
in Paulding County, Georgia.  The main office, built in 1988 and located at 1784
Atlanta Highway in Hiram, Georgia, contains approximately 16,000 square feet.
The Bank owns the land and the building at this location.  The Company uses the
premises, equipment and furniture of the Bank without payment of any fees to the
Bank.  Metroplex rents office space in this building and pays a monthly rent
which is intended to approximate a fair rental value for the space utilized by
Metroplex. CLC leases office space in Woodstock, Georgia, Rockmart, Georgia, and
Rossville, Georgia.

     The Bank opened a full service branch office at 100 Hardee Street, Dallas,
Paulding County, Georgia in June 1991.  The Bank leases the land and owns the
building at this location, which contains approximately 1,150 square feet and
includes three teller stations and two drive-in window teller stations.  The
lease on this property has been extended until June 1997.  In December 1991, the
Bank also opened a full service office located in the Kroger grocery store of
the Paulding Commons Shopping Center, 2205 Atlanta Highway in Hiram, Georgia.
The Bank leases its office space in the grocery store and owns the furniture,
fixtures and equipment used in the Bank office.  In January 1996, the Bank
opened a full service office at 5860 Brownsville Road, Powder Springs, Georgia
which is located in the Brownsville Crossing Shopping Center. The Bank leases
its office space in the shopping center and owns the furniture, fixtures, and
equipment used in the Bank office.

     At December 31, 1996, the cost of office properties and equipment (less
allowances for depreciation and amortization) owned by the Company was
$2,296,111.  Data processing services are provided by an outside service bureau.

     The Company believes that its facilities are adequate and suitable for the
Company's current business and its anticipated business for the foreseeable
future.

     The Company is unaware of any potential environmental liability that it may
incur in connection with any properties or other assets owned by it.

                                      -35-
<PAGE>

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

     There are no material legal proceedings to which the Company or the Bank is
a party or to which any of their properties is subject.  The Bank is
periodically involved as a plaintiff or defendant in various legal actions in
the ordinary course of its business.

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

     No matters were submitted to a vote of shareholders of the Company during
the fourth quarter of the Company's fiscal year ended December 31, 1996.

ITEM 4(A).  EXECUTIVE OFFICERS OF THE COMPANY AND BANK
------------------------------------------------------

     Set forth below is information as of January 31, 1997 regarding the
executive officers of the Company and the Bank:

                                     Principal Occupation
     Name              Age       During The Past Five Years
     ----              ---       --------------------------


Ronnie L. Austin       47        Mr. Austin is a Director and the President and
                                 Chief Executive Officer of the Company and the
                                 Bank. He has served as the President and Chief
                                 Executive Officer of the Company since its
                                 organization in October 1988. Before assuming
                                 his position as President and Chief Executive
                                 Officer of the Bank in December 1986, Mr.
                                 Austin served as Executive Vice President and
                                 Senior Loan Officer of the Peoples Bank of
                                 Bartow County from January 1985 to November
                                 1986 and as Vice President and Senior Loan
                                 Officer of the First National Bank of Paulding
                                 County from June 1975 to January 1985 .

Angel J. Byrd          41        Ms. Byrd has served as Senior Vice President
                                 and Chief Financial Officer of the Bank and
                                 Comptroller of the Company since April 1996,
                                 having served as Vice President and Chief
                                 Financial Officer of the Bank and Assistant
                                 Secretary of the Company since December 1991.
                                 She has served as Cashier of the Bank since
                                 October 1987. Prior to her employment by the
                                 Bank, she served as Loan Accounting Supervisor
                                 of Barnett Bank, N.A. in Marietta from March
                                 1986 to October 1987 and as Operations Officer
                                 of The Citizens Bank in Dallas, Georgia from
                                 May 1985 to March 1986.

Genevieve B. Cole      41        Ms. Cole has served as Executive Vice President
                                 and Chief Administrative Officer of the Bank
                                 since April 1996, having served as Vice
                                 President and Chief Administrative Officer

                                      -36-
<PAGE>

                                 of the Bank since July 1995. She served as Vice
                                 President and Chief Lending Officer of the Bank
                                 since August 1988 and as Assistant Secretary of
                                 the Company since July 1991. Prior to her
                                 employment by the Bank, she was Assistant Vice
                                 President and Senior Loan Officer of First
                                 National Bank in Dallas, Georgia from December
                                 1987 to August 1988; Assistant Vice President
                                 of First National Bank from March 1986 to
                                 December 1987; and Loan Officer of First
                                 National Bank from September 1983 to March
                                 1986.

Michael Low            39        Mr. Low has served as Senior Vice President
                                 and Chief Credit Officer of the Bank since
                                 April 1996, having served as Vice President
                                 and Chief Lending Officer of the Bank since
                                 September 1995. Prior to his employment with
                                 the Bank, he served as Vice President
                                 Commercial Lending from 1991 and Commercial
                                 Lender and Special Asset Manager from 1989 with
                                 West Georgia National Bank in Carrollton,
                                 Georgia. From 1980 until 1989, he served at the
                                 Jasper Banking Company in Jasper, Georgia, as
                                 Vice President, Lending Officer, and
                                 Collections Manager, Collateral Manager, and
                                 Collector.

     The executive officers of the Company and the Bank are elected annually by
the respective Boards of Directors for terms of one year or until their
successors are elected and qualified, subject to removal by the respective
Boards of Directors at any time.



                                    PART II
                                    -------

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

     Information relating to the market for, holders of and dividends paid on
the Company's Common Stock is set forth under the captions "Selected
Consolidated Financial Data" and "Management's Discussion and Analysis of
Results of Operations and Financial Condition" on pages 9 through 15 of the
Company's 1996 Annual Report.  Such information is incorporated herein by
reference.

     The Company's ability to pay dividends is dependent on dividends paid by
the Bank, if any.  Additionally, Georgia law imposes certain restrictions on the
payment of cash dividends by the Bank.  See "Item 1. Business - Supervision and
Regulation."

                                      -37-
<PAGE>

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

     Selected consolidated financial data for the Company for each of the five
fiscal years ending December 31, 1996, 1995, 1994, 1993 and 1992 are set forth
under the caption "Selected Consolidated Financial Data" on page 6 of the
Company's 1996 Annual Report.  Such information is incorporated herein by
reference.  A discussion of the Company's financial condition and results of
operations at and for the dates and periods covered by the consolidated
financial statements of the Company and the Bank set forth in the Company's 1996
Annual Report is set forth under the caption "Management's Discussion and
Analysis of Results of Operations and Financial Condition" on pages 10 through
15 of the Company's 1996 Annual Report.  Such discussion is incorporated herein
by reference.

ITEM 7.  FINANCIAL STATEMENTS
-----------------------------

     The following consolidated financial statements of the Company, together
with the Report of Independent Certified Public Accountants thereon, which are
set forth on pages 17 through 36 of the Company's 1996 Annual Report, are
incorporated herein by reference:

     Consolidated Balance Sheets as of December 31, 1996 and 1995

     Consolidated Statements of Earnings for the years ended
       December 31, 1996, 1995 and 1994

     Consolidated Statements of Changes in Stockholders' Equity for
       the years ended December 31, 1996, 1995 and 1994

     Consolidated Statements of Cash Flows for the years ended
       December 31, 1996, 1995 and 1994

     Notes to Consolidated Financial Statements

     The Company is not required to furnish the supplementary financial
     information specified by Item 302 of Regulation S-K.

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

     Neither the Company nor the Bank had any change in accountants or
disagreements with accountants on accounting and financial disclosure during the
two most recent fiscal years or subsequently.


                                    PART III
                                    --------

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

     Information relating to the Directors of the Company is set forth under the
caption "Proposal 3 - Election of Directors" on pages 7 through 10 of the Proxy
Statement for the Company's 1997 Annual Meeting of Shareholders ("1997 Proxy
Statement").  Such information is incorporated herein by reference.  Pursuant to
Instruction 3 of Item 401(b) of Regulation S-K and General Instruction G(3) of
Form 10-K, information relating to the executive officers of the

                                      -38-
<PAGE>

Company is set forth in Item 4(A) of this report under the caption "Executive
Officers of the Company and the Bank." Such information is incorporated herein
by reference. To the knowledge of the Company, each person who, at any time
during the year ended December 31, 1996, was a Director, executive officer, or
beneficial owner of more than ten percent of the Company's Common Stock filed,
on a timely basis, all reports required to be filed by them, during such year,
pursuant to Section 16(a) of the Securities Exchange Act of 1934.


ITEM 10.  EXECUTIVE COMPENSATION
--------------------------------

     Information relating to executive compensation is set forth under the
caption "Proposal 3 -Election of Directors - Compensation of Directors" on page
11 of the 1997 Proxy Statement and under the caption "Proposal 3 - Election of
Directors - Executive Compensation" on pages 12 and 13 of the 1997 Proxy
Statement.  Such information is incorporated herein by reference.  Because the
Company qualifies as a "small business issuer" (as defined by Item 10(a)(1) of
Regulation S-B), pursuant to Item 402(a) of Regulation S-K, the Company has
provided only that information required by Regulation S-K Item 402(b), (c)(1),
(c)(2)(I)-(v), (d), (e), (g), (h), (I)(1) and (I)(2).

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
------------------------------------------------------------------------

     Information regarding ownership of the Company's $2.50 par value Common
Stock by certain persons is set forth under the captions "Voting - Principal
Stockholders" and "Proposal 3 - Election of Directors - Nominees" on pages 7
through 10 of the 1997 Proxy Statement.  Such information is incorporated herein
by reference.

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

     Information regarding certain transactions between the Company and
Directors, executive officers and certain shareholders, and their affiliates, is
set forth under the caption "Proposal 3 - Election of Directors - Transactions
of Management with Community Trust Bank" on page 13 of the 1997 Proxy Statement.
Such information is incorporated herein by reference.


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

     (a) Documents Filed as Part of This Report.

     1.   Financial Statements

               The following consolidated financial statements of the Company,
               together with the Report of Independent Certified Public
               Accountants thereon, are set forth on pages 11 through 31 of the
               Company's 1996 Annual Report and are incorporated herein by
               reference:

               Consolidated Balance Sheets as of December 31, 1996 and 1995

               Consolidated Statements of Earnings for the years ended
               December 31, 1996, 1995 and 1994

                                      -39-
<PAGE>

               Consolidated Statements of Changes in Stockholders' Equity for
               the years ended December 31, 1996, 1995 and 1994

               Consolidated Statements of Cash Flows for the years ended
               December 31, 1996, 1995 and 1994

               Notes to Consolidated Financial Statements

     2.   Financial Statement Schedules

               All financial statement schedules for which provision is made in
               the Securities and Exchange Commission's Regulation S-X have been
               omitted because such schedules are not required under the related
               instructions or are inapplicable or because the information
               required is included in the above-referenced financial statements
               or notes thereto.

     3.   Exhibits

               The following exhibits are filed as a part of or incorporated by
               reference in this report:

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

      3.1*     Articles of Incorporation of the Company

      3.2+     Bylaws of the Company as amended through October 1996

      3.3*     Articles of Incorporation of the Bank

      3.4*     Bylaws of the Bank

      10.1*@   1988 Stock Option Plan and related specimen copy of option

      10.2@    1992 Employee Stock Option Plan
               (Filed as Exhibit 10.2 to the Company's Annual Report on Form 10-
                K for the year ended December 31, 1992)

      10.3@    1992 Directors Stock Option Plan
               (Filed as Exhibit 10.3 to the Company's Annual Report on Form 10-
               K for the year ended December 31, 1992)

      10.4*    Agreement and Plan of Merger and Reorganization dated October 7,
               1990 among the Company, the Bank and CTFS Interim Corporation, as
               amended by the First Amendment to Agreement and Plan of Merger
               and Reorganization dated October 24, 1990

      10.5     Lease dated June 9, 1989 by and between First Baptist Church of
               Dallas, Georgia and the Bank relating to lease of real property
               (Filed as Exhibit 10.5 to the Company's Annual Report on Form 10-
               k for the year ended December 31, 1992)

                                      -40-
<PAGE>

      10.6     License and Equipment Purchase Agreement dated as of July 27,
               1991 by and between Bank South, National Association and
               Community Trust Bank relating to branch in Paulding Commons
               Kroger store (Filed as Exhibit 10.6 to the Company's Annual
               Report on Form 10-K for the year ended December 31, 1992)

      10.7     Lease dated May 25, 1995 by and between Brock Investments, Inc.,
               of Hiram, Georgia and the Bank relating to lease of real property
               (Filed as Exhibit 10.7 to the Company's Annual Report on Form 10-
               K for The year ended December 31, 1995)

      10.8+    Lease Extension Agreement dated September 30, 1996 by and between
               First Baptist Church of Dallas, Georgia and the Bank relating to
               lease of real property

      13+      1996 Annual Report**

      21+      Subsidiaries

      22+      Proxy Statement for 1997 Annual Meeting of Stockholders

      24+      Powers of Attorney

_________

*Incorporated herein by reference to the exhibit of the same number in the
Company's Registration Statement on Form S-4, as amended (No. 33-37601).

** Certain sections of the Company's 1996 Annual Report, as indicated in this
report, are incorporated herein by reference.  Other than as noted herein, the
Company's 1996 Annual Report is furnished to the Commission solely for its
information and is not deemed to be "filed" with the Commission or subject to
the liabilities of Section 18 of the Securities Exchange Act of 1934.

+ Filed herewith.

@ The referenced exhibit is a compensatory management contract, plan, or
arrangement.


      (b) Reports on Form 8-K

          No Current Reports on Form 8-K were filed by the Company with the
          Commission   during the quarter ended December 31, 1996.

                                      -41-
<PAGE>

                                   SIGNATURES


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


                    COMMUNITY TRUST FINANCIAL SERVICES CORPORATION
                                                   (Registrant)


Date: March 25, 1997     By:  /s/Ronnie L. Austin
                              -------------------------------------------
                                          Ronnie L. Austin
                                          President and Chief
                                          Executive Officer



                         By:  /s/Angel J. Byrd
                              -------------------------------------------
                                          Angel J. Byrd
                                          Comptroller
                                          (principal accounting officer)



     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on March 25, 1997.

            Signature                    Title
            ---------                    -----



*W. A. Foster III                   Chairman of the Board
---------------------------
W. A. Foster III



/s/Ronnie L. Austin                 President, Chief Executive Officer and
---------------------------
Ronnie L. Austin                    Director (principal executive officer and
                                    principal financial officer)



*Tommie R. Graham                   Secretary/Treasurer and Director
---------------------------
Tommie R. Graham

                                      -42-
<PAGE>

*R. Alan Bullock                      Director
----------------------------
R. Alan Bullock



*Bobbie P. Cooper                     Director
----------------------------
Bobbie P. Cooper



*J. Calvin Earwood                    Director
----------------------------
J. Calvin Earwood



*John C. Helms                        Director
----------------------------
John C. Helms



*C. D. Rampley                        Director
----------------------------
C. D. Rampley



* By /s/Ronnie L. Austin
     -----------------------
     Ronnie L. Austin
     as attorney-in-fact

                                      -43-
<PAGE>

                               INDEX OF EXHIBITS
                               -----------------

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


     3.1*      Articles of Incorporation of the Company

     3.2+      Bylaws of the Company as amended through October 1996

     3.3*      Articles of Incorporation of the Bank

     3.4*      Bylaws of the Bank

     10.1*@    1988 Stock Option Plan and related specimen
               copy of option

     10.2@     1992 Employee Stock Option Plan
               (Filed as Exhibit 10.2 to the Company's Annual Report on
               Form 10K for the year ended December 31, 1992)

     10.3@     1992 Directors Stock Option Plan
               (Filed as Exhibit 10.3 to the Company's Annual Report on
               Form 10K for the year ended December 31, 1992)

     10.4*     Agreement and Plan of Merger and Reorganization
               dated October 7, 1990 among the Company, the
               Bank and CTFS Interim Corporation, as amended
               by the First Amendment to Agreement and Plan of
               Merger and Reorganization dated October 24, 1990

     10.5      Lease dated June 9, 1989 by and between First
               Baptist Church of Dallas, Georgia and the Bank
               relating to lease of real property
               (Filed as Exhibit 10.5 to the Company's Annual Report on
               Form 10K for the year ended December 31, 1992)

     10.6      License and Equipment Purchase Agreement dated as
               of July 27, 1991 by and between Bank South,
               National Association and Community Trust Bank
               relating to branch in Paulding Commons Kroger store
               (Filed as Exhibit 10.6 to the Company's Annual Report on
               Form 10K for the year ended December 31, 1992)

     10.7      Lease dated May 25, 1995 by and between
               Brock Investments, Inc., of Hiram, Georgia and
               the Bank relating to lease of real property

     10.8+     Lease Extension Agreement dated September 30, 1996 by and between
               First Baptist Church of Dallas, Georgia and the Bank relating to
               lease of real property

     13+       1996 Annual Report**

                                      -44-
<PAGE>

     21+       Subsidiaries

     22+       Proxy Statement for 1997 Annual Meeting of Stockholders

     24+       Powers of Attorney

__________

*Incorporated herein by reference to the exhibit of the same number in the
Company's registration statement on Form S-4, as amended, No. 33-37601.

** Certain sections of the Company's 1996 Annual Report, as indicated in this
report, are incorporated herein by reference.  Other than as noted herein, the
Company's 1996 Annual Report is furnished to the Commission solely for its
information and is not deemed to be "filed" with the Commission or subject to
the liabilities of Section 18 of the Securities Exchange Act of 1934.

+ Filed herewith.

@ The referenced exhibit is a compensatory management contract, plan, or
arrangement.

                                      -45-