<PAGE>
 
                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549

                                  FORM 10-QSB
                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


For Quarterly Period Ended                             Commission File Number:
   September 30, 1998                                         0-24113


                      ROCKDALE NATIONAL BANCSHARES, INC.
--------------------------------------------------------------------------------
       (Exact name of small business issuer as specified in its charter)


         Georgia                                                 58-2292563
--------------------------------------------------------------------------------
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                               Identification No.)

P.O. Box 82030, Conyers, Georgia                                        30013
--------------------------------------------------------------------------------
(Address of principal executive offices)                              (Zip Code)

Issuer's telephone number:     (770) 785-7880
                            ----------------------------------------------------

                                Not Applicable
--------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last 
report)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 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
                   -----                                      -----  

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:

    Common Stock, $1.00 Par Value                           676,188
---------------------------------------       ----------------------------------
               Class                          Outstanding as of November 5, 1998

Transitional Small Business Disclosure Format:

              Yes                                         No    X
                   -----                                      -----
<PAGE>
 
                        PART I. - FINANCIAL INFORMATION

 
Item 1.    Financial Statements
------     --------------------

                      ROCKDALE NATIONAL BANCSHARES, INC.
                                AND SUBSIDIARY
                          CONSOLIDATED BALANCE SHEET

 
                                                 September 30,      
                                                     1998         December 31,
                                                  (Unaudited)         1997     
                                                 -------------    ------------ 


ASSETS 
------ 
Cash and due from banks.........................  $ 2,798,962      $ 1,344,297
Federal funds sold..............................    1,940,000        4,290,000
Investment securities:
     Securities available-for-sale,          
     at market value............................    8,828,719        5,325,870
Other investments...............................      180,000          180,000
Loans, net......................................   15,187,356        3,599,142
Premises and equipment, net.....................    1,671,695        1,663,678
Accrued interest receivable.....................      215,627          101,073
Other assets....................................       56,799          166,014
                                                  -----------      -----------
     Total assets...............................  $30,879,158      $16,670,074
                                                  ===========      ===========
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
 
Liabilities:

Deposits
     Noninterest-bearing demand.................  $ 4,045,599      $ 1,568,410
     Interest-bearing demand and money market...   14,794,387        6,478,310
     Savings....................................      759,392          629,190
     Time deposits of $100,000 or more..........    2,878,073        1,205,719
     Other time deposits........................    2,527,172          511,002
                                                  -----------      -----------
          Total deposits........................   25,004,623       10,392,631
 
     Federal funds purchased....................         --               --
     Accrued interest payable...................       18,092            6,380
     Other liabilities..........................       60,988            6,000
                                                  -----------      -----------
          Total liabilities.....................   25,083,703       10,405,011
                                                  -----------      -----------
 
                                  (Continued)

      Refer to notes to the consolidated unaudited financial statements.

                                       2
<PAGE>
 
                      ROCKDALE NATIONAL BANCSHARES, INC.
                                AND SUBSIDIARY
                          CONSOLIDATED BALANCE SHEET
                                  (CONTINUED)

                                                    September 30,   
                                                        1998        December 31,
                                                     (Unaudited)        1997
                                                    -------------   ------------
Shareholders' Equity:
Common stock, $1.00 par value,                                            
     10,000,000 shares authorized,
     676,188 shares issued and outstanding.........     676,188        676,188
Surplus............................................   6,051,196      6,060,196
Retained earnings (deficit)........................    (963,443)      (468,628)
Accumulated other comprehensive income (loss)......      31,514         (2,693)
                                                    -----------    -----------
     Total Shareholders' Equity....................   5,795,455      6,265,063
Commitments and contingent liabilities.............        --             --
                                                    -----------    -----------
     Total Liabilities and                          $30,879,158    $16,670,074
          Shareholders' Equity..................... ===========    ===========
 
      Refer to notes to the consolidated unaudited financial statements.

                                       3
<PAGE>
 
                      ROCKDALE NATIONAL BANCSHARES, INC.
                                AND SUBSIDIARY
                       CONSOLIDATED STATEMENTS OF INCOME
         FOR THE THREE-MONTHS AND NINE-MONTHS ENDED SEPTEMBER 30, 1998
             AND FOR THE PERIOD FROM INCEPTION (FEBRUARY 13, 1997)
                          THROUGH SEPTEMBER 30, 1997
                                 (UNAUDITED) 

                                           For the             
                                      Three-Months ended   For the Period ended
                                         September 30,         September 30,
                                      ------------------   --------------------
                                             1998             1998      1997
                                             ----             ----      ----
Interest income
   Loans, including fees.............      $331,583        $  722,577 $    --
   Investment securities:
     U.S. Treasury Securities........          --                --        --
     U.S. Government agencies and 
      corporations...................       136,287           429,989    24,652
     Other investments...............         5,400             5,400      --
   Federal funds sold................        21,851           102,998      --
                                           --------        ---------- ---------
     Total interest income...........       495,121         1,260,964    24,652
                                           --------        ---------- ---------
Interest expense
   Interest bearing demand and money 
    market...........................       117,125           417,269      --
   Savings...........................        16,696            19,518      --
   Time deposits of $100,000 or 
    more.............................        30,691            80,656      --
   Other time deposits...............        26,550            52,147      --
   Federal funds purchased...........         3,097             3,637      --
   Short term debt...................          --                --      27,555
                                           --------        ---------- ---------
     Total interest expense..........       194,159           573,227    27,555
                                           --------        ---------- ---------
     Net interest income (loss)......       300,962           687,737    (2,903)
 
Provision for possible loan losses...        43,125           133,706      --
                                           --------        ---------- ---------
 
Net interest income (loss) after 
 provision for possible loan losses..       257,837           554,031    (2,903)
   
Other income
   Service charges on deposit 
    accounts.........................        33,232            75,623      --
   Investment securities gains 
    (losses), net....................          (824)             (836)     --
   Other income......................         6,608            12,625      --
                                           --------        ---------- ---------
     Total other income..............        39,016            87,412      --
                                           --------        ---------- ---------
 
Other expense
   Salaries and other compensation...       116,282           403,029    10,992
   Employee benefits.................        47,641            68,063      --
   Net occupancy and equipment 
    expense..........................        63,389           177,531      --
 
                                                                     (Continued)

      Refer to notes to the consolidated unaudited financial statements.

                                       4
<PAGE>
 
                      ROCKDALE NATIONAL BANCSHARES, INC.
                                AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF INCOME
        FOR THE THREE-MONTHS AND NINE-MONTHS ENDED SEPTEMBER 30, 1998
            AND FOR THE PERIOD FROM INCEPTION (FEBRUARY 13, 1997)
                          THROUGH SEPTEMBER 30, 1997
                                 (UNAUDITED)
                                 (CONTINUED) 

<TABLE> 
<CAPTION> 
                                                                 For the        
                                                           Three-Months ended    For the Period ended
                                                              September 30,          September 30,
                                                           ------------------ --------------------------
                                                                  1998           1998             1997
                                                                --------      ----------       ---------
  <S>                                                           <C>           <C>              <C>
                                                           
   Professional and other outside services..........            $ 79,176      $  392,140       $    --
   Other expense....................................              15,591          35,576         111,033
                                                                --------      ----------       ---------
 
     Total other expenses...........................             322,079       1,076,339         122,025
                                                                --------      ----------       ---------
 
Net income (loss) before taxes......................             (25,226)       (434,896)       (124,928)
 
Cumulative effect of a change in an accounting                
 principle, net of $30,868 of related tax effect....             (59,920)        (59,920)           --
 
Income taxes........................................                --              --              --
                                                                --------      ----------       ---------
 
Net income (loss)...................................            $(85,146)     $ (494,816)      $(124,928)
                                                                ========      ==========       =========
 
Basic income (loss) per share.......................            $  (0.13)     $    (0.73)      $    (.30)
                                                                ========      ==========       =========
</TABLE>

      Refer to notes to the consolidated unaudited financial statements.

                                       5
<PAGE>
 
                      ROCKDALE NATIONAL BANCSHARES, INC.
                                AND SUBSIDIARY
                CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                 FOR THE NINE-MONTHS ENDED SEPTEMBER 30, 1998
             AND FOR THE PERIOD FROM INCEPTION (FEBRUARY 13, 1997)
                          THROUGH SEPTEMBER 30, 1997
                                  (UNAUDITED)

<TABLE> 
<CAPTION> 
                                                            For the period ended
                                                                 September 30,
                                                            --------------------
                                                            1998            1997
                                                            ----            ----
<S>                                                         <C>            <C> 
 
Net Loss..............................................   $  (494,816)    $  (124,928)
 
Other comprehensive income, before tax:                                   
   Unrealized holding gains (losses) arising during 
    period............................................        47,749            --
 
   Income tax benefit (expense).......................         4,323            --
                                                        ------------     -----------
 
Comprehensive Loss....................................  $   (442,744)    $  (124,928)
                                                        ============     ===========
 
</TABLE> 
Refer to notes to the consolidated unaudited financial statements.

                                       6
<PAGE>
 
                      ROCKDALE NATIONAL BANCSHARES, INC.
                                AND SUBSIDIARY
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE NINE-MONTHS ENDED SEPTEMBER 30, 1998
             AND FOR THE PERIOD FROM INCEPTION (FEBRUARY 13, 1997)
                          THROUGH SEPTEMBER 30, 1997
                                  (UNAUDITED)

<TABLE> 
<CAPTION> 
                                                                                For the period ended
                                                                                    September 30,
                                                                         -----------------------------------
 
                                                                               1998                1997
                                                                              ------              ------
<S>                                                                      <C>                    <C>   
Cash flows from operating activities:
   Net loss......................................................        $   (494,816)         $  (124,928)
   Adjustments to reconcile net loss to net cash used
     by operating activities:
     Net (accretion) amortization of investment                          
      securities.................................................              17,387                   --
     Depreciation and amortization of premises                                 
     and equipment...............................................              83,252                   --
     Provision for loan losses...................................             133,706                   --
     Deferred income tax benefit.................................             (30,868)                  --
     Amortization of organization costs..........................              90,788                   --
     (Increases) decreases in other assets.......................              49,296             (132,350)
     Increase in accrued interest                                 
        receivable...............................................            (114,554)                  --
     Increase in accrued interest payable........................              11,712                   --
     Increase in other liabilities...............................              54,988                   --
                                                                         ------------          -----------
               Net cash used by operating activities.............            (199,109)            (257,278)
                                                                         ------------          -----------
Cash flows from investing activities:
   Purchases of investment securities                            
     available-for-sale..........................................          (9,021,782)          (4,021,010)
   Purchases of Federal Reserve Stock............................                  --             (180,000)
   Sales of investment securities AFS............................           2,964,464                   --
   Calls of investment securities AFS............................           2,097,329                   --
   Maturities of investment securities available-for-sale........             464,960                   --
   Loans originated, net of principal repayments.................         (11,721,919)                  --
   Purchases of premises and equipment...........................             (91,269)          (1,120,377)
                                                                         ------------          -----------
               Net cash used by investing activities.............         (15,308,217)          (5,321,387)
Cash flows from financing activities:
   Proceeds from loans by Organizers.............................                  --                   --
   Repayment of loans by Organizers..............................                  --                   --
   Sale of common stock..........................................                  --            6,595,590
   Increase in deposits..........................................          14,611,991                   --
   Increase in federal funds purchased...........................                  --                   --
                                                                         ------------          -----------
               Net cash provided from financing activities.......          14,611,991            6,595,590
                                                                         ------------          -----------
Net (decrease) increase in cash and cash equivalents.............            (895,335)           1,016,925
Cash and cash equivalents,                                        
   beginning of period...........................................           5,634,297                   -- 
                                                                         ------------          -----------
Cash and cash equivalents,                                              
   end of period.................................................        $  4,738,962          $ 1,016,925
                                                                         ------------          -----------
 
</TABLE>
      Refer to notes to the consolidated unaudited financial statements.

                                       7
<PAGE>
 
Note 1 - Basis of Presentation

     The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions for Form 10-QSB.  Accordingly, they do not
include all the information and footnotes required by generally accepted
accounting principles for complete financial statements.  In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included.  Operating results for the
nine-month period ended September 30, 1998 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1998.   For
further information, refer to the financial statements and footnotes included in
the Company's annual report on Form 10-KSB for the year ended December 31, 1997.


NOTE 2 - ORGANIZATION OF THE BUSINESS

     Rockdale National Bancshares, Inc., Conyers, Georgia (the "Company"), was
incorporated under the laws of the State of Georgia on February 13, 1997, for
the purpose of becoming a bank holding company for a proposed national bank,
Rockdale National Bank (the "Bank").  On August 26, 1997, the Company completed
an initial public offering of its common stock, $1.00 par value per share.  Each
share of common stock was sold for $10.00 per share and 676,188 shares were
sold.  Proceeds from the stock offering amounted to $6,727,384, net of selling
expenses.  The Company injected $6.0 million into the Bank's capital accounts
upon opening on October 14, 1997.


NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Basis of Presentation and Reclassification.  The consolidated unaudited
     ------------------------------------------                             
financial statements include the accounts of the Company and the Bank.  All
significant intercompany accounts and transactions have been eliminated in
consolidation.

     Basis of Accounting.  The accounting and reporting policies of the Company
     -------------------                                                       
conform to generally accepted accounting principles and to general practices
within the banking industry.  The Company uses the accrual basis of accounting
by recognizing revenues when earned and expenses when incurred, without
regarding the time of receipt or payment of cash.

     Organizational Costs.  In accordance with the Financial Accounting
     --------------------                                              
Standards Board ("FASB") Statement No. 7, the Company and the Bank capitalized
all direct organizational costs that were incurred in the expectation that they
would generate future revenues or otherwise be of benefit after the Bank opened
for business.  These capitalized costs are amortized over a sixty-month period
using the straight line method.

     In 1998, the Accounting Standards Executive Committee issued a Statement of
Position (SOP) number 98-5, "Reporting on the Costs of Start-Up Activities."
This SOP requires that the costs of start-up activities, including organization
costs, be expensed as incurred.  The SOP is effective for fiscal years beginning
after December 15, 1998, with earlier application encouraged for fiscal years
for which an annual financial statement has not been issued.  Management
expensed these deferred costs in the quarter ended September 30, 1998, and the
cumulative effect of the change in an accounting principle was $59,920, net of
$30,868 of related tax effect.

                                       8
<PAGE>
 
     Investment Securities.  The Company adopted Statement of Financial
     ---------------------                                             
Accounting Standards No. 115, "Accounting for Certain Investment in Debt and
Equity Securities" ("SFAS 115") on February 13, 1997.  SFAS 115 requires
investments in equity and debt securities to be classified into three
categories:

     1.   Held-to-maturity securities: These are securities which the Company
          has the ability and intent to hold until maturity.  These securities
          are stated at cost, adjusted for amortization of premiums and the
          accretion of discounts.

     2.   Trading securities: These are securities which are bought and held
          principally for the purpose of selling in the near future.  Trading
          securities are reported at fair market value, and related unrealized
          gains and losses are recognized in the income statement.

     3.   Available-for-sale securities: These are securities which are not
          classified as either held-to-maturity or as trading securities.  These
          securities are reported at fair market value.  Unrealized gains and
          losses are reported, net of tax, as separate components of
          shareholders' equity.  Unrealized gains and losses are excluded from
          the income statement.

     Federal Reserve Bank stock is reported at cost.  Earnings are reported when
interest is accrued or when dividends are received.

     Premium and discount on all investment securities are amortized (deducted)
and accredited (added), respectively, to interest income on the effective yield
method over the period to the maturity of the related securities.

     Gains or losses on disposition are computed by the specific identification
method for all securities.

     Property and Equipment.  Furniture and equipment are stated at cost, net of
     ----------------------                                                     
accumulated depreciation.  Depreciation is computed using the straight line
method over the estimated useful lives of the related assets.  Maintenance and
repairs are charged to operations, while major improvements are capitalized.
Upon retirement, sale or other disposition of property and equipment, the cost
and accumulated depreciation are eliminated from the accounts, and gain or loss
is included in income from operations.

     Income Taxes.  The consolidated unaudited financial statements have been
     ------------                                                            
prepared on the accrual basis.  When income and expenses are recognized in
different periods for financial reporting purposes and for purposes of computing
income taxes currently payable, deferred taxes are provided on such temporary
differences.

     Effective February 13, 1997, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109").  Under
SFAS 109, deferred tax assets and liabilities are recognized for the expected
future tax consequences of events that have been recognized in the financial
statements or tax return.  Deferred tax assets and liabilities are measured
using the enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be realized or settled.

     Statement of Cash Flows.  For purposes of reporting cash flows, cash and
     -----------------------                                                 
cash equivalents include cash on hand, amounts due from banks and federal funds
sold.  Generally, federal funds are purchased or sold for one day periods.

                                       9
<PAGE>
 
     Net Income Per Share.  Net income per share was calculated using 676,188 as
     --------------------                                                       
the weighted average number of shares outstanding for the period ended September
30, 1998.  For the nine-month period ended September 30, 1998 net income (loss)
per share was $(.73).

     Accounting for Transfers and Servicing of Financial Assets and
     --------------------------------------------------------------
Extinguishment of Liabilities.  SFAS 125 is effective for transfers and
-----------------------------                                          
servicing of financial assets and extinguishment of liabilities occurring after
December 31, 1996, and is to be applied prospectively.  Earlier or retroactive
application is not permitted.  However, in December 1996, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 127 ("SFAS 127"), "Deferral of the Effective Date of Certain Provisions of
FASB Statement No. 125."  This statement deferred the effective date of certain
provisions for one year (December 31, 1997).  The deferred provisions relate to
repurchase agreements, dollar-roll transactions, securities lending, and similar
transactions.  The effective date for all other transfers and servicing of
financial assets is unchanged.  The adoption of SFAS 125 did not have a material
impact on the Company's financial statements.

     Earnings Per Common Share.  The Financial Accounting Standards Board has
     -------------------------                                               
issued Statement of Financial Accounting Standards No. 128 ("SFAS 128"),
"Earnings Per Share."  This statement is effective for financial statements
issued for periods ending after December 15, 1997.  This statement supersedes
Accounting Principles Board Opinion No. 15 ("APB 15"), "Earnings Per Share," and
simplifies earnings per share computations by replacing primary earnings per
share with basic earnings per share, which shows no effects from dilutive
securities.  Entities with complex capital structures will have to show diluted
earnings per share, which is similar to the fully diluted earnings per share
computation under APB 15.

     Stock-based Compensation.  The Company accounts for stock options under
     ------------------------                                               
Accounting Principles Board option No. 25, "Accounting for Stock Issued to
Employees" (APB 25). Under APB 25, because the exercise price of the Company's
stock options equals the market price of the underlying stock on the date of
grant, no compensation expense is recognized.

     Effective January 1, 1998, the Company adopted the disclosure requirements
of Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting
for Stock-Based Compensation."  As provided by SFAS 123, the Company has elected
to continue applying the provisions of APB 25 in determining its net income
relative to stock-based compensation. The Company has adopted the SFAS 123
requirement that a company disclose the pro forma net income and pro forma
earnings per share, as if the alternative fair-value-based accounting method in
SFAS 123 had been used in determining net income.  The adoption of SFAS 123 did
not have a significant impact on the financial condition or results of
operations of the Company.

     Disclosure of Information About Capital Structure.  The Financial
     -------------------------------------------------                
Accounting Standards Board has issued Statement of Financing Accounting
Standards No. 129 ("SFAS 129"), "Disclosure of Information About Capital
Structure."  This statement is effective for financial statements issued for
periods ending after December 15, 1997.  This statement consolidates existing
disclosure requirements on capital structure.  The adoption of SFAS 129 did not
have a significant impact on the financial condition or results of operations of
the Company.

     Reporting Comprehensive Income.  The Financial Accounting Standards Board
     ------------------------------                                           
has issued Statement of Financial Accounting Standards No. 130 ("SFAS 130"),
"Reporting Comprehensive Income."  SFAS 130 became effective July 1, 1998.
Under SFAS 130, a company will begin showing changes in assets and liabilities
in a new comprehensive income statement or alternative presentation as opposed
to showing some of the items as transactions in shareholders' equity accounts.
Upon adoption, all comparative annual and interim financial statements will
present a comprehensive income statement 

                                       10
<PAGE>
 
or alternative disclosure, for all years presented. The adoption of SFAS 130 did
not have a significant impact on the financial condition or results of
operations of the Company.

     Pending Accounting Pronouncements.  The Financial Accounting Standards
     ---------------------------------                                     
Board has issued Statement of Financial Accounting Standards No. 131 became
("SFAS 131"), "Disclosures about Segments of an Enterprise and Relation
Information."  SFAS 131 is effective July 1, 1998, and requires disclosure of
certain financial information by segments of a company's business.  The adoption
of SFAS 131 did not have a significant impact on the financial condition or
results of operations of the Company.

     The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 132 ("SFAS 132"), "Employers' Disclosures about
Pensions and other Postretirement Benefits."  SFAS 132 is effective for fiscal
years beginning after December 31, 1997.  The adoption of SFAS 132 did not have
a significant impact on the financial condition or results of operations of the
Company.

NOTE 4 - OTHER COMPREHENSIVE INCOME

     Other comprehensive income (loss) is compiled of the following:

                                                    Unrealized
                                                   Gains (Losses)
                                                   on Securities
                                                  ---------------

          Beginning balance - January 1, 1998         $(2,693)
          Current - period change                      34,207
                                                      -------
          Ending balance - September 30, 1998         $31,514
                                                      =======

                                       11
<PAGE>
 
Item 2.  Management's Discussion and Analysis of Financial Condition and Results
------   -----------------------------------------------------------------------
         of Operations
         -------------

     Rockdale National Bancshares, Inc. (the "Company") was incorporated in
Georgia on February 13, 1997 to become a bank holding company and to own and
control all of the outstanding shares of a de novo bank, Rockdale National Bank,
Conyers, Georgia (the "Bank").  In a public offering conducted during 1997, the
Company sold and issued 676,188 shares of its own $1.00 par value common stock
at $10.00 per share.  Proceeds from the stock offering amounted to $6,736,384,
net of selling expenses.  The Company purchased 100% of the Bank's common stock
by injecting $6.0 million into the Bank's capital accounts immediately prior to
commencement of banking operations on October 14, 1997.

     Total consolidated assets increased by $14,209,084 from $16,670,074 at
December 31, 1997 to $30,879,158 during the nine-month period ended September
30, 1998.  The increase was generated primarily through a $14,611,992 increase
in deposits.

                              Financial Condition
                              -------------------

     Management continuously monitors the financial condition of the Bank in
order to protect depositors, increase retained earnings and protect current and
future earnings.  Further discussion of significant items affecting the Bank's
financial condition are discussed in detail below.

Asset Quality
-------------

     A major key to long-term earnings growth is the maintenance of a high-
quality loan portfolio.  The Bank's directive in this regard is carried out
through its policies and procedures for extending credit to the Bank's
customers.  The goal and result of these policies and procedures is to provide a
sound basis for a new credit extensions and an early recognition of problem
assets to allow the most flexibility in their timely disposition.

     Because principal banking operations commenced on October 14, 1997,
management is not yet in a position to determine the composition of non-
performing assets. Additions to the allowance for loan losses will be made
periodically to maintain the allowance at an appropriate level based upon
management's analysis of potential risk in the loan portfolio. The amount of the
loan loss provision is determined by an evaluation of the level of loans
outstanding, the level of non-performing loans, historical loan loss experience,
delinquency trends, the amount of actual losses charged to the reserve in a
given period, and assessment of present and anticipated economic conditions.

Liquidity and Sources of Capital
--------------------------------

     Liquidity is the Company's ability to meet all deposit withdrawals
immediately, while also providing for the credit needs of customers.  The
September 30, 1998 financial statements evidence a satisfactory liquidity
position as total cash and cash equivalents amounted to $4.7 million,
representing 15.0% of total assets.  Investment securities amounted to $8.8
million, representing 29.0% of total assets; these securities provide a
secondary source of liquidity since they can be converted into cash in a timely
manner.  Note that the Company's ability to maintain and expand its deposit base
and borrowing capabilities are a source of liquidity.  For the nine-month period
ended September 30, 1998, total deposits increased from $10.4 million at
December 31, 1997 to $25.0 million, representing an annualized increase of 140%.
Note, however, that the Company does not expect to maintain or duplicate this
growth rate.  The Company's management closely monitors and maintains
appropriate levels of interest earning assets 

                                       12
<PAGE>
 
and interest bearing liabilities so that maturities of assets are such that
adequate funds are provided to meet customer withdrawals and loan demand. There
are no trends, demands, commitments, events or uncertainties that will result
in, or are reasonably likely to result in, the Company's liquidity increasing or
decreasing in any material way.

     Management is committed to maintaining capital at a level sufficient to
protect depositors, provide for reasonable growth, and fully comply with all
regulatory requirements.  Management's strategy to achieve this goal is to
retain sufficient earnings while providing a reasonable return on equity.

     The table below illustrates the Bank's and Company's regulatory capital
ratios at September 30, 1998:
 
                                                             Minimum
                                          September 30,     regulatory
                                             1998           requirement
                                          -------------     ------------
Bank 
----

     Tier 1 Capital                           27.2%              4.0%
     Tier 2 Capital                             .9%               --
                                              ----               ---
 
           Total risk-based capital ratio     28.1%              8.0%
                                              ====               ===
 
     Leverage ratio                           18.8%              3.0%
                                              ====               ===
 
Company - Consolidated
----------------------
 
     Tier 1 Capital                           29.6%              4.0%
     Tier 2 Capital                            1.0%               --
                                              ----               ---
 
           Total risk-based capital ratio     30.6%              8.0%
                                              ====               ===
 
     Leverage ratio                           23.4%              3.0%
                                              ====               ===

     Note that with respect to the leverage ratio, the OCC expects a minimum of
5.0 percent to 6.0 percent ratio for banks that are not rated CAMEL 1.  Although
the Bank is not rated CAMEL 1, its leverage ratio of 18.8% is well above the
required minimum.

                             Results Of Operations
                             ---------------------

     Since principal banking operations only commenced on October 14, 1997, a
comparison of the September 30, 1998 results (when banking operations were in
progress) to those of September 30, 1997 (when banking operations had not
commenced) is not meaningful.  This discussion will therefore concentrate on the
September 30, 1998 results.

     Net income (loss) for the three-month period ended September 30, 1998
amounted to $(85,146), or $(.13) per share.  Net income (loss) for the nine-
month period ended September 30, 1998 amounted to $(494,816), or $(.73) per
share.  The following is a brief discussion of the more significant components
of net income:

                                       13
<PAGE>
 
     a.   Net interest income represents the difference between interest
          received on interest earning assets and interest paid on interest
          bearing liabilities.  The following presents, in a tabular form, the
          main components of interest earning assets and interest bearing
          liabilities.

<TABLE>
<CAPTION>
 
              Interest                                               Interest             
          Earning Assets/                        Average              Income/               Yield/
        Bearing Liabilities                      Balance               Cost                  Cost   
        -------------------                      -------             --------               ------
<S>                                             <C>                   <C>                 <C>
 
Federal funds sold                             $ 2,133,370          $  102,998               6.44%
 
Securities                                       9,871,974             435,389               5.88%
 
Loans                                            9,799,954             722,577               9.83%
                                               -----------          ----------               ----
 
  Total                                        $21,805,298          $1,260,964               7.71%
                                               ===========          ==========               ----
 
Deposits                                       $19,530,680          $  569,590               3.89%
 
Federal funds purchased                             72,527               3,637               6.69%
                                               -----------          ----------
 
  Total                                        $19,603,207          $  573,227               3.90%
                                               ===========          ==========               ====
 
Net interest income                                                 $  687,467               3.81%
                                                                    ==========               ====
 
Net yield on earning assets                                                                  4.20%
                                                                                             ====
</TABLE>

     b.   Other income for the three-month and nine-month periods ended
          September 30, 1998 amounted to $39,016 and $87,412, respectively.  On
          an annualized basis, these amounts represent .19% and .34% of total
          assets for the three-months and nine-months ended September 30, 1998,
          respectively.  This figure is relatively low because in order to
          attract new banking relationships, the Bank's fee structure and
          charges are low when compared to other banks.  The above fees and
          charges may increase in the future.

     c.   Operating expenses for the three-month and nine-month period ended
          September 30, 1998 amounted to $381,999 and $1,076,339, respectively.
          On an annualized basis, these amounts represent 1.83% and 5.7% of
          total assets for the three-months and nine-months ended September 30,
          1998, respectively.  In the future this percentage may increase due to
          costs and expenses associated with the new facility.

     At December 31, 1997, the allowance for loan losses amounted to $45,373.
By September 30, 1998, the allowance had grown to $179,079.  The allowance for
loan losses, as a percentage of total gross loans, decreased from 1.25% for the
year ended December 31, 1997 to 1.16% during the nine-month period ended
September 30, 1998, primarily due to new loan growth.  Management considers the
allowance for loan losses to be adequate and sufficient to absorb possible
future losses; however, there can be no assurance that charge-offs in future
periods will not exceed the allowance for loan losses or that additional
provisions to the allowance will not be required.

     The Company is not aware of any current recommendation by the regulatory
authorities which, if they were to be implemented, would have a material effect
on the Company's liquidity, capital resources, or results of operations.

                                       14
<PAGE>
 
Year 2000
---------

     A critical issue affecting companies that rely extensively on electronic
data processing systems, such as the Company, is the Year 2000 issue.  The Year
2000 issue has arisen due to the widespread use of computer programs that rely
on two-digit date codes to perform computations or decision-making functions.
Many of these programs may fail as a result of their inability to properly
interpret date codes beginning January 1, 2000.  For example, such programs may
misinterpret "00" as the year 1900 rather than 2000.  In addition, some
equipment, being controlled by microprocessor chips, may not deal appropriately
with the year "00."  This could result in a system failure or miscalculations
causing disruptions of operations, including, among other things, a temporary
inability to process transactions or engage in similar normal business
activities.

     During 1998, the Company developed a plan to address the Year 2000 issue,
conduct a comprehensive review of the Company's systems and ensure that the
Company takes any necessary measures. The Company believes that its systems,
those of the Bank and its vendors are currently Year 2000 compliant and does not
believe that material expenditures will be necessary to implement any further
modifications. As of September 30, 1998, the Company had spent approximately
$6,000 to help ensure that its systems would be Year 2000 compliant. 

     The Company uses Fiserv as its primary banking application and data 
processor. Fiserv has responded to the Company that renovation of its program is
substantially complete. Representatives of the Company are scheduled to test the
Fiserv program with the Company's applications in November 1998. All 
transactions are to be tested using the Company's data and procedures and any 
additional corrections are to be made on or before December 31, 1998. Fiserv has
reported to the Company that the progress of its Year 2000 update is on 
schedule. In the event that Fiserv is unable to make the necessary corrections 
to its programs to accomodate the Year 2000, beginning in December 1998, the 
Company will convert its data to one of the other Fiserv programs that has 
currently been certified to operate in the Year 2000.

     There can be no assurance that unforeseen difficulties or costs will not
arise. In addition, there can be no assurance that the systems of other
companies on which the Company's systems rely, such as the Bank's data
processing vendor, will be modified on a timely basis, or that the failure by
another company to properly modify its systems will not negatively impact the
Company's systems or operations.

Cautionary Note Regarding Forward-Looking Statements
----------------------------------------------------

     The Company may, from time to time, make written or oral forward-looking
statements, including statements contained in the Company's filings with the
Securities and Exchange Commission (the "Commission") and its reports to
stockholders.  Such forward-looking statements are made based on management's
belief as well as assumptions made by, and information currently available to,
management pursuant to "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995.  The Company's actual results may differ
materially from the results anticipated in these forward-looking statements due
to a variety of factors, including governmental monetary and fiscal policies,
deposit levels, loan demand, loan collateral values, securities portfolio values
and interest rate risk management; the effects of competition in the banking
business from other commercial banks, savings and loan associations, mortgage
banking firms, consumer finance companies, credit unions, securities brokerage
firms, insurance companies, money market mutual funds and other financial
institutions operating in the Company's market area and elsewhere, including
institutions operating through the Internet; changes in government regulations
relating to the banking industry, including regulations relating to branching
and acquisitions; failure of assumptions underlying the establishment of
reserves for loan losses, including the value of collateral underlying
delinquent loans, and other factors.  The Company cautions that such factors are
not exclusive.  The Company does not undertake to update any forward-looking
statements that may be made from time to time by, or on behalf of, the Company.

                                       15
<PAGE>
 
Part II.  Other Information


Item 6.   Exhibits and Reports on Form 8-K
------    --------------------------------

     (a)  Exhibits.  The following exhibit is filed with this Report.

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

          27.1           Financial Data Schedule (for SEC use only)

     (b)  Reports on Form 8-K.  No report on Form 8-K was filed during the
          quarter ended September 30, 1998.

                                       16
<PAGE>
 
                                 SIGNATURES
                                 ----------

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


Date: November 12, 1998    By:   /s/ William L. Daniel
                               ------------------------------------------------
                               William L. Daniel, President and Chief Executive
                               Officer (principal executive officer)



Date: November 12, 1998    By:   /s/ Brian D. Hawkins
                               ------------------------------------------------
                               Brian D. Hawkins, Chief Financial Officer
                               (principal financial and accounting officer)

                                       17