UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-KSB

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|X          | Annual Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2003
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|           | Transition Report under Section 13 or 15(d) of the Securities Exchange Act of 1934                                        
|           | For the transition period from _______ to _______                                                                         
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|           | Commission File No. 000-25851                                                                                             
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|           | UNITY HOLDINGS, INC                                                                                                       
|           | (Name of Small Business Issuer in Its Charter)                                                                            
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|           | Georgia                                                                                                                    |  | 
|           | (State or Other Jurisdiction of Incorporation or Organization)                                                             |  | 
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|           | 950 Joe Frank Harris Pkwy, S.E.                                                                                            |  | 
|           | Cartersville, Georgia                                                                                                      |  | 
|           |                                                                                                                            |  | 
|           | (770) 606-0555                                                                                                            
|           | Issuer's Telephone Number, Including Area Code                                                                            
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|           | Securities registered pursuant to Section 12(b) of the Act: None.                                                         
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|           | Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01 par value                                  
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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 past 90 days.

Yes X No

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [ X ]

The issuer's revenues for its most recent fiscal year was $10,519,087. As of March 31, 2004, 1,013,510 shares of Common Stock were issued and outstanding.

The aggregate market value of the Common Stock held by non-affiliates of the Company on December 31, 2003 was $18,243,180. This calculation is based upon an estimate of the fair market value of the Common Stock by the Company's Board of Directors of $18 per share on that date. There is not an active trading market for the Common Stock and it is not possible to identify precisely the market value of the Common Stock.

Transitional Small Business Disclosure Format. (Check one): Yes __ No X

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the information required by Part III of this Annual Report are incorporated by reference from the Registrant's definitive Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Annual Report.

UNITY HOLDINGS, INC.

ANNUAL REPORT ON FORM 10-KSB

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003



|Item     |                                                                          | Page  
|-------- | ------------------------------------------------------------------------ | ------
|Number   |                                                                          | Number
|PART I  
|         |                                                                          |       
|1.       | Description of Business                                                  | 4     
|2.       | Description of Property                                                  | 17    
|3.       | Legal Proceedings                                                        | 17    
|4.       | Submission of Matters to a Vote of Security Holders                      | 17    
|         |                                                                          |       
|PART II 
|         |                                                                          |       
|5.       | Market for Registrant's Common Stock and Related Security Holder Matters | 17    
|6.       | Management's Discussion and Analysis of Financial Condition and          |       
|         | Results of Operations                                                    | 18    
|7.       | Consolidated Financial Report                                            | 38    
|8.       | Changes in and Disagreements with Accountants on Accounting              |       
|         | and Financial Disclosure                                                 | 39    
|8a.      | Controls and Procedures                                                  |       
|         |                                                                          |       
|PART III
|         |                                                                          |       
|9.       | Directors and Principal Officers of the Registrant                       | 39    
|10.      | Executive Compensation                                                   | 43    
|11.      | Security Ownership of Certain Beneficial Owners and Management           | 44    
|12.      | Certain Relationships and Related Transactions                           | 46    
|         |                                                                          |       
|PART IV 
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|13.      | Exhibits and Reports on Form 8-K                                         | 46    
|14.      | Principal Accountant Fees and Services                                   | 47    

Item 1. Description of Business.

General

Unity Holdings, Inc. was incorporated in Georgia on October 8, 1997 as a bank holding company to own and control all of the capital stock of Unity National Bank. Organizing activities for the Company began during the summer of 1997, consisting primarily of preparation and filing of a registration statement for sale of the Company's stock, preparation and filing of the Bank's charter application, acquisition of physical facilities, and hiring of staff. On November 30, 1998, the Federal Deposit Insurance Corporation approved the Bank's application for deposit insurance, and on February 11, 1998, the Office of the Comptroller of the Currency approved the Bank's charter application. The Board of Governors of the Federal Reserve approved the Company to be a bank holding company on November 30, 1998. The Bank began operations as a national bank on November 30, 1998 at its main banking location in Cartersville, Georgia. On January 4, 1999, the Bank opened a branch office in Adairsville, Georgia. On October 9, 2001, the Bank opened another branch office in Rome, Georgia.

Location and Service Area

The Bank conducts a general commercial banking business in its service area, emphasizing the banking needs of small-to-medium sized businesses, professional concerns and individuals. The Bank operates from a main office in Cartersville, Georgia located at the corner of Joe Frank Harris Parkway and Market Place Boulevard, S.E. in Cartersville, Georgia and branch offices located at 7450 Adairsville Highway, NW, Adairsville, Georgia and 42 Three Rivers Drive, Rome, Georgia. See "Description of Property" below. The Bank draws most of its customer deposits and conducts most of its lending transactions from within a primary service area of Bartow County and Floyd County, Georgia, with a secondary market which includes the neighboring counties of Cherokee, Chattooga, Gordon and Polk.

Bartow County is located in northwest Georgia, approximately 40 miles from the city of Atlanta. Bartow County, which had a population of 80,026 in 2001 and a median effective buying income per household of $43,660, includes the cities of Cartersville, Adairsville, Emerson, Kingston, Stilesboro, Taylorville and White. Bartow County is generally rectangular in shape and the main office of the Bank is located in Cartersville, which is close to the southeast corner of the county. To the east and south of Cartersville is Lake Allatoona, which is a natural barrier to the remainder of that part of the county and to a portion of adjacent counties. The primary markets for the main office and the branch located in Bartow County include the cities of Cartersville and Adairsville, which are located in the northern and southern parts of Bartow County and provide access for residents of the entire county.

Floyd County is also located in northwest Georgia and had a population of 91,118 in 2001 and a median effective buying income per household of $35,615. Our branch is located in Rome, Georgia, which is located in the center of Floyd County. The primary market for the bank is the City of Rome, which draws from secondary markets which include Gordon, Polk, Cherokee and Chattooga Counties. Neither the Company nor the Bank generates a material amount of revenue from foreign countries, nor does either have material long-lived assets, customer relationships, mortgages or servicing rights, deferred policy acquisition costs, or deferred tax assets in foreign countries. Thus, the Company has no significant risks attributable to foreign operations.

According to data provided by the Georgia Department of Labor, which was compiled in 2000, there are 3,539 businesses in Bartow and Floyd Counties subject to unemployment insurance laws. Bartow and Floyd Counties, like many small communities, have many small businesses that are not subject to unemployment insurance laws and are not reflected in this data. There are 236 manufacturing companies, 374 construction companies, 895 retail companies, 290 wholesale companies, 157 transportation and public utility companies and 1,063 service companies in Bartow and Floyd Counties. The largest employers in Bartow County include Shaw Industries, Inc. (carpet manufacturer) 1,933; Bartow County Board of Education, 1,400; First Brands Corporation (plastic extruding company), 630; Bartow County Government, 600; Goodyear Tire and Rubber Co. (tire manufacturer), 569; Wal-Mart Stores (retail sales), 529; and nine other businesses with between 110 employees and 493 employees in industries such as beer manufacturing, steel manufacturing, medical facility, public utility, and carpet manufacturing.

Marketing Focus

Most of the banks in the Bartow and Floyd Counties area are now local branches of large regional banks. Although size gives the larger banks certain advantages in competing for business from large corporations, including higher lending limits and the ability to offer services in other areas of Georgia and the Bartow and Floyd Counties area, the Company believes that there has been a void in the community banking market in the Bartow and Floyd Counties area and believes that the Bank successfully fills this void. As a result, the Company generally does not attempt to compete for the banking relationships of large corporations, but concentrates its efforts on small- to medium-sized businesses and on individuals. The Bank advertises to emphasize the Company's local ownership, community bank nature, and ability to provide more personalized service than its competition.

Deposits

The Bank offers a full range of deposit services that are typically available in most banks and savings and loan associations, including checking accounts, commercial accounts, NOW accounts, savings accounts, and other time deposits of various types, ranging from daily money market accounts to longer-term certificates of deposit. The transaction accounts and time certificates are tailored to the Bank's principal market area at rates competitive to those offered in the Bartow County area. In addition, the Bank offers certain retirement account services, such as Individual Retirement Accounts (IRAs). The Bank solicits these accounts from individuals, businesses, associations and organizations, and governmental authorities.

Lending Activities

General. The Bank emphasizes a range of lending services, including real estate, commercial and consumer loans, to individuals and small- to medium-sized businesses and professional concerns that are located in or conduct a substantial portion of their business in the Bank's market area.

Real Estate Loans. One of the primary components of the Bank's loan portfolio is loans secured by first or second mortgages on real estate. These loans generally consist of commercial real estate loans, construction and development loans, and residential real estate loans (but exclude home equity loans, which are classified as consumer loans). Loan terms generally are limited to five years or less, although payments may be structured on a longer amortization basis. Interest rates may be fixed or adjustable, and will more likely be fixed in the case of shorter term loans. The Bank will generally charge an origination fee. Management attempts to reduce credit risk in the commercial real estate portfolio by emphasizing loans on owner-occupied office and retail buildings where the loan-to-value ratio, established by independent appraisals, does not exceed 80%. In addition, the Bank will typically require personal guarantees of the principal owners of the property backed with a review by the Bank of the personal financial statements of the principal owners. The principal economic risk associated with each category of anticipated loans, including real estate loans, is the creditworthiness of the Bank's borrowers. The risks associated with real estate loans vary with many economic factors, including employment levels and fluctuations in the value of real estate. The Bank competes for real estate loans with a number of bank competitors which are well established in the Bartow and Floyd Counties area. Most of these competitors have substantially greater resources and lending limits than the Bank. As a result, the Bank may have to charge lower interest rates to attract borrowers. See "Competition" below. The Bank also originates loans for sale into the secondary market. The Bank intends to limit interest rate risk and credit risk on these loans by locking the interest rate for each loan with the secondary investor and receiving the investor's underwriting approval prior to originating the loan.

Commercial Loans. The Bank makes loans for commercial purposes in various lines of businesses. Equipment loans are typically made for a term of five years or less at fixed or variable rates, with the loan fully amortized over the term and secured by the financed equipment and with a loan-to-value ratio of 80% or less. Working capital loans typically have terms not exceeding one year and usually are secured by accounts receivable, inventory, or personal guarantees of the principals of the business. For loans secured by accounts receivable or inventory, principal will typically be repaid as the assets securing the loan are converted into cash, and in other cases principal will typically be due at maturity. The principal economic risk associated with each category of anticipated loans, including commercial loans, is the creditworthiness of the Bank's borrowers. The risks associated with commercial loans vary with many economic factors, including the economy in the Bartow and Floyd Counties areas. The well-established banks in the Bartow and Floyd Counties area will make proportionately more loans to medium- to large-sized businesses than the Bank. Many of the Bank's anticipated commercial loans will likely be made to small- to medium-sized businesses which may be less able to withstand competitive, economic, and financial conditions than larger borrowers. Commercial loans are generally considered to have greater risk than first or second mortgages on real estate.

Consumer Loans. The Bank makes a variety of loans to individuals for personal and household purposes, including secured and unsecured installment and term loans, home equity loans and lines of credit, and revolving lines of credit such as credit cards. These loans typically carry balances of less than $25,000 and, in the case of non-revolving loans, are amortized over a period not exceeding 60 months or are ninety-day term loans, in each case bearing interest at a fixed rate. The revolving loans typically bear interest at a fixed rate and require monthly payments of interest and a portion of the principal balance. The underwriting criteria for home equity loans and lines of credit generally is the same as applied by the Bank when making a first mortgage loan, as described above, and home equity lines of credit typically expire ten years or less after origination. As with the other categories of loans, the principal economic risk associated with consumer loans is the creditworthiness of the Bank's borrowers, and the principal competitors for consumer loans are the established banks in the Bartow and Floyd Counties area. Consumer loans are generally considered to have greater risk than first or second mortgages on real estate.

Loan Approval and Review. The Bank's loan approval policies provide for various levels of officer lending authority. When the amount of aggregate loans to a single borrower exceeds that individual officer's lending authority, the loan request is considered and approved by an officer with a higher lending limit or the officers' loan committee. The officers' loan committee has lending limits, and any loan in excess of this lending limit is approved by the directors' loan committee. The Bank will not make any loans to any director, officer, or employee of the Bank unless the loan is approved by the board of directors of the Bank and is made on terms not more favorable to such person than would be available to a person not affiliated with the Bank. The Bank currently intends to adhere to Federal National Mortgage Association ("FNMA") and Federal Home Loan Mortgage Corporation ("FHLMC") guidelines in its mortgage loan review process, but may choose to alter this policy in the future. The Bank does not currently sell its mortgage loans on the secondary market, but may choose to do so in the future.

Lending Limits. The Bank's lending activities are subject to a variety of lending limits imposed by federal law. While differing limits apply in certain circumstances based on the type of loan or the nature of the borrower (including the borrower's relationship to the Bank), in general the Bank is subject to a loan-to-one-borrower limit. These limits will increase or decrease as the Bank's capital increases or decreases. Unless the Bank is able to sell participations in its loans to other financial institutions, the Bank will not be able to meet all of the lending needs of loan customers requiring aggregate extensions of credit above these limits.

Other Banking Services

Other bank services include cash management services, safe deposit boxes, travelers checks, direct deposit of payroll and social security checks, and automatic drafts for various accounts. The Bank is associated with a shared network of automated teller machines that may be used by Bank customers throughout Georgia and other regions. The Bank also offers MasterCard and VISA credit card services through a correspondent bank as an agent for the Bank. The Bank does not plan to exercise trust powers during its initial years of operation.

Competition

The banking business is highly competitive. The Bank competes as a financial intermediary with other commercial banks, savings and loan associations, credit unions and money market mutual funds operating in Bartow County and elsewhere. There are currently twenty commercial banks operating in Bartow County, holding approximately $854 million in deposits. There are also four credit unions in the county. There are currently nine commercial banks and five credit lenders operating in Floyd County, holding approximately $1.1 billion in deposits. A number of these competitors are well established in the Bartow and Floyd Counties areas. Most of them have substantially greater resources and lending limits and may have a lower cost of funds than the Bank. These banks offer certain services, such as extensive and established branch networks and trust services, that the Bank either does not expect to provide or does not currently provide. As a result of these competitive factors, the Bank may have to pay higher rates of interest in order to attract deposits.

Employees

As of December 31, 2003, the Bank had 45 full-time employees and 4 part-time employees.



SUPERVISION AND REGULATION

The Company and the Bank are subject to state and federal banking laws and regulations which impose specific requirements or restrictions on, and provide for general regulatory oversight with respect to, virtually all aspects of operations. These laws and regulations are generally intended to protect depositors, not shareholders. To the extent that the following summary describes statutory or 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. Beginning with the enactment of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") and following with the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), numerous additional regulatory requirements have been placed on the banking industry in the past five years, and additional changes have been proposed. The banking industry is also likely to change significantly as a result of the passage of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the "Interstate Banking Act"). The operations of the Company and the Bank may be affected by legislative changes and the policies of various regulatory authorities. The Company is unable to predict the nature or the extent of the effect on its business and earnings that fiscal or monetary policies, economic control or new federal or state legislation may have in the future.



The Company

Because it owns the outstanding common stock of the Bank, the Company is a bank holding company within the meaning of the federal Bank Holding Company Act of 1956 (the "BHCA"). Under the BHCA, the Company is subject to periodic examination by the Federal Reserve and is required to file periodic reports of its operations and such additional information as the Federal Reserve may require. The Company's and the Bank's activities are limited to banking, managing or controlling banks, furnishing services to or performing services for its subsidiaries or engaging in any other activity that the Federal Reserve determines to be so closely related to banking or managing or controlling banks as to be a proper incident thereto.

Investments, Control and Activities. With certain limited exceptions, the BHCA requires every bank holding company to obtain the prior approval of the Federal Reserve before (i) acquiring substantially all the assets of any bank, (ii) acquiring direct or indirect ownership or control of any voting shares of any bank if after such acquisition it would own or control more than 5% of the voting shares of such bank (unless it already owns or controls the majority of such shares), or (iii) merging or consolidating with another bank holding company.

In addition, and subject to certain exceptions, the BHCA and the Change in Bank Control Act, together with regulations thereunder, require Federal Reserve approval (or, depending on the circumstances, no notice of disapproval) prior to any person or company acquiring "control" of a bank holding company, such as the Company. Control is conclusively presumed to exist if an individual or company acquires 25% or more of any class of voting securities of the bank holding company. Control is rebuttably presumed to exist if a person acquires 10% or more but less than 25% of any class of voting securities and either the Company has registered securities under Section 12 of the Exchange Act or no other person will own a greater percentage of that class of voting securities immediately after the transaction. The regulations provide a procedure for challenge of the rebuttable control presumption.

Under the BHCA, the Company is generally prohibited from engaging in, or acquiring direct or indirect control of more than 5% of the voting shares of any company engaged in, nonbanking activities, unless the Federal Reserve, by order or regulation, has found those activities to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. Some of the activities that the Federal Reserve has determined by regulation to be proper incidents to the business of banking include making or servicing loans and certain types of leases, engaging in certain insurance and discount brokerage activities, performing certain data processing services, acting in certain circumstances as a fiduciary or investment or financial advisor, owning savings associations and making investments in certain corporations or projects designed primarily to promote community welfare.

Source of Strength; Cross-Guarantee. In accordance with Federal Reserve policy, the Company is expected to act as a source of financial strength to the Bank and to commit resources to support the Bank in circumstances in which the Company might not otherwise do so. Under the BHCA, the Federal Reserve may require a bank holding company to terminate any activity or relinquish control of a nonbank subsidiary (other than a nonbank subsidiary of a bank) upon the Federal Reserve's determination that such activity or control constitutes a serious risk to the financial soundness or stability of any subsidiary depository institution of the bank holding company. Further, federal bank regulatory authorities have additional discretion to require a bank holding company to divest itself of any bank or nonbank subsidiary if the agency determines that divestiture may aid the depository institution's financial condition. The Bank may be required to indemnify, or cross-guarantee, the FDIC against losses it incurs with respect to any other bank controlled by the Company, which in effect makes the Company's equity investments in healthy bank subsidiaries available to the FDIC to assist any failing or failed bank subsidiary of the Company.

The Bank

General. The Bank operates as a national banking association incorporated under the laws of the United States and is subject to examination by the Office of the Comptroller of the Currency (the "OCC"). Deposits in the Bank are insured by the Federal Deposit Insurance Corporation (the "FDIC") up to a maximum amount (generally $100,000 per depositor, subject to aggregation rules). The OCC and the FDIC regulate or monitor all areas of the Bank's operations, including security devices and procedures, adequacy of capitalization and loss reserves, loans, investments, borrowings, deposits, mergers, issuances of securities, payment of dividends, interest rates payable on deposits, interest rates or fees chargeable on loans, establishment of branches, corporate reorganizations, maintenance of books and records and adequacy of staff training to carry on safe lending and deposit gathering practices. The OCC requires the Bank to maintain certain capital ratios and imposes limitations on the Bank's aggregate investment in real estate, bank premises and furniture and fixtures. The Bank is currently required by the OCC to prepare quarterly reports on the Bank's financial condition and to conduct an annual audit of its financial affairs in compliance with minimum standards and procedures prescribed by the OCC.

Under FDICIA, all insured institutions must undergo periodic on-site examination by their appropriate banking agency. The cost of examinations of insured depository institutions and any affiliates may be assessed by the appropriate agency against each institution or affiliate as it deems necessary or appropriate. Insured institutions are required to submit annual reports to the FDIC and the appropriate agency (and state supervisor when applicable). FDICIA also directs the FDIC to develop with other appropriate agencies a method for insured depository institutions to provide supplemental disclosure of the estimated fair market value of assets and liabilities, to the extent feasible and practicable, in any balance sheet, financial statement, report of condition or other report of any insured depository institution. FDICIA also requires the federal banking regulatory agencies to prescribe, by regulation, standards for all insured depository institutions and depository institution holding companies relating, among other things, to: (i) internal controls, information systems and audit systems; (ii) loan documentation; (iii) credit underwriting; (iv) interest rate risk exposure; and (v) asset quality.

Transactions With Affiliates and Insiders. The Bank is subject to Section 23A of the Federal Reserve Act, which places limits on the amount of loans or extensions of credit to, or investments in, or certain other transactions with, affiliates and on the amount of advances to third parties collateralized by the securities or obligations of affiliates. In addition, most of these loans and certain other transactions must be secured in prescribed amounts. The Bank is also subject to Section 23B of the Federal Reserve Act which, among other things, prohibits an institution from engaging in certain transactions with certain affiliates unless the transactions are on terms substantially the same, or at least as favorable to such institution or its subsidiaries, as those prevailing at the time for comparable transactions with non-affiliated companies. The Bank is subject to certain restrictions on extensions of credit to executive officers, directors, certain principal shareholders and their related interests. Such extensions of credit (i) must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with third parties and (ii) must not involve more than the normal risk of repayment or present other unfavorable features.

Community Reinvestment Act. The Community Reinvestment Act requires that each insured depository institution shall be evaluated by its primary federal regulator with respect to its record in meeting the credit needs of its local community, including low and moderate income neighborhoods, consistent with the safe and sound operation of those institutions. These factors are also considered in evaluating mergers, acquisitions and applications to open a branch or facility.

The Gramm-Leach-Bliley Act of 1999

The Gramm-Leach-Bliley Act (the "GLB Act") dramatically increases the ability of eligible banking organizations to affiliate with insurance, securities, and other financial firms and insured depository institutions. The GLB Act permits eligible banking organizations to engage in activities and to affiliate with nonbank firms engaged in activities that are financial in nature or incidental to such financial activities, and also includes some additional activities that are complementary to such financial activities.

The definition of activities that are financial in nature is handled by the GLB Act in two ways. First, there is a laundry list of activities that are designated as financial in nature. Second, the authorization of new activities as financial in nature or incidental to a financial activity requires a consultative process between the Federal Reserve Board and the Secretary of the Treasury with each having the authority to veto proposals of the other. The Federal Reserve Board has the discretion to determine what activities are complementary to financial activities.

The precise scope of the authority to engage in these new financial activities, however, depends on the type of banking organization, whether it is a holding company, a subsidiary of a national bank, or a national bank's direct conduct. The GLB Act repealed two sections of the Glass-Stegall Act, Sections 20 and 32, which restricted affiliations between securities firms and banks. The GLB Act authorizes two types of banking organizations to engage in expanded securities activities. The GLB Act authorizes a new type of bank holding company called a financial holding company to have a subsidiary company that engages in securities underwriting and dealing without limitation as to the types of securities involved. The GLB Act also permits a national bank to control a financial subsidiary that can engage in many of the expanded securities activities permitted for financial holding companies. However, additional restrictions apply to national bank financial subsidiaries.

Since the Bank Holding Company Act of 1956, and its subsequent amendments, federal law has limited the types of activities that are permitted for a bank holding company, and it is has also limited the types of companies that a bank holding company can control. The GLB Act retains the bank holding company regulatory framework, but adds a new provision that authorizes enlarged authority for the new financial holding company form of organization to engage in any activity of a financial nature or incidental thereto. A new Section 4(k) of the Bank Holding Company Act provides that a financial holding company may engage in any activity, and may acquire and retain shares of any company engaged in any activity, that the Federal Reserve Board in coordination with the Secretary of the Treasury determines by regulation or order to be financial in nature or incidental to such financial activities, or is complementary to financial activities.

The GLB Act also amends the Bank Holding Company Act to prescribe eligibility criteria for financial holding companies, defines the scope of activities permitted for bank holding companies that do not become financial holding companies, and establishes consequences for financial holding companies that cease to maintain the status needed to qualify as a financial holding company.

There are three special criteria to qualify for the enlarged activities and affiliation. First, all the depository institutions in the bank holding company organization must be well-capitalized. Second, all of the depository institutions of the bank holding company must be well managed. Third, the bank holding company must have filed a declaration of intent with the Federal Reserve Board stating that it intends to exercise the expanded authority under the GLB Act and certify to the Federal Reserve Board that the bank holding company's depository institutions meet the well-capitalized and well managed criteria. The GLB Act also requires the bank to achieve a rating of satisfactory or better in meeting community credit needs at the most recent examination of such institution under the Community Reinvestment Act.

Once a bank holding company has filed a declaration of its intent to be a financial holding company, as long as there is no action by the Federal Reserve Board giving notice that it is not eligible, the company may proceed to engage in the activities and enter into the affiliations under the large authority conferred by the GLB Act's amendments to the Bank Holding Company Act. The holding company does not need prior approval from the Federal Reserve Board to engage in activities that the GLB Act identifies as financial in nature or that the Federal Reserve Board has determined to be financial in nature or incidental thereto by order or regulation.

The GLB Act retains the basic structure of the Bank Holding Company Act. Thus, a bank holding company that is not eligible for the expanded powers of a financial holding company is now subject to the amended Section 4(c)(8) of the Bank Holding Company Act which freezes the activities that are authorized and defined as closely related to banking activities. Under this Section, a bank holding company is not eligible for the expanded activities permitted under new Section 4(k) and is limited to those specific activities previously approved by the Federal Reserve Board.

The GLB Act also addresses the consequences when a financial holding company that has exercised the expanded authority fails to maintain its eligibility to be a financial holding company. The Federal Reserve Board may impose such limitations on the conduct or activities of a noncompliant financial holding company or any affiliate of that company as the Board determines to be appropriate under the circumstances and consistent with the purposes of the Act.

The GLB Act is essentially a dramatic liberalization of the restrictions placed on banks, especially bank holding companies, regarding the areas of financial businesses in which they are allowed to compete.

Other Regulations. Interest and certain other charges collected or contracted for by the Bank are subject to state usury laws and certain federal laws concerning interest rates. The Bank's loan operations are also subject to certain federal laws applicable to credit transactions, such as the federal Truth-In-Lending Act governing disclosures of credit terms to consumer borrowers, the Home Mortgage Disclosure Act of 1975 requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves, the Equal Credit Opportunity Act prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit, the Fair Credit Reporting Act of 1978 governing the use and provision of information to credit reporting agencies, the Fair Debt Collection Act governing the manner in which consumer debts may be collected by collection agencies, and the rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws. The deposit operations of the Bank also are subject to the Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records, and the Electronic Funds Transfer Act and Regulation E issued by the Federal Reserve Board to implement that act, which governs automatic deposits to and withdrawals from deposit accounts and customers' rights and liabilities arising from the use of automated teller machines and other electronic banking services.

Deposit Insurance

The deposits of the Bank are currently insured to a maximum of $100,000 per depositor, subject to certain aggregation rules. The FDIC establishes rates for the payment of premiums by federally insured banks and thrifts for deposit insurance. Separate insurance funds (BIF and SAIF) are maintained for commercial banks and thrifts, with insurance premiums from the industry used to offset losses from insurance payouts when banks and thrifts fail. Due to the high rate of failures in the late 1980's and early 1990's, the fees that commercial banks and thrifts pay to BIF and SAIF increased. Since 1993, insured depository institutions like the Bank have paid for deposit insurance under a risk-based premium system. Under this system, until mid-1995 depository institutions paid to BIF or SAIF from $0.23 to $0.31 per $100 of insured deposits depending on its capital levels and risk profile, as determined by its primary federal regulator on a semi-annual basis. Once the BIF reached its legally mandated reserve ratio in mid-1995, the FDIC lowered premiums for well capitalized banks to $0.04 per $100. Subsequently, the FDIC revised the range of premiums from $.00 to $0.31 per $100, subject to a statutory minimum assessment of $2,000 per year. However, the Deposit Insurance Funds Act of 1996 eliminated the minimum assessment required by statute. It also separated, effective January 1, 1997, the Financial Corporation (FICO) assessment to service the interest on its bond obligations. The amount assessed on individual institutions, including the Bank, by FICO will be in addition to the amount paid for deposit insurance according to the risk-related assessment rate schedule. Initially, FICO semiannual assessment rates were set at 1.30 basis points annually for BIF deposits. Increases in deposit insurance premiums or changes in risk classification will increase the Bank's cost of funds, and there can be no assurance that such cost can be passed on the Bank's customers.

Dividends

The principal source of the Company's cash revenues comes from dividends and interest income on its investments. In addition, the Company may receive cash revenues from dividends paid by the Bank. The amount of dividends that may be paid by the Bank to the Company depends on the Bank's earnings and capital position and is limited by federal and state law, regulations and policies. In addition, the Board of Governors has stated that bank holding companies should refrain from or limit dividend increases or reduce or eliminate dividends under circumstances in which the bank holding company fails to meet minimum capital requirements or in which its earnings are impaired.

As a national bank, the Bank may not pay dividends from its paid-in-capital. All dividends must be paid out of undivided profits then on hand, after deducting expenses, including reserves for losses and bad debts. In addition, a national bank is prohibited from declaring a dividend on its shares of common stock until its surplus equals its stated capital, unless there has been transferred to surplus no less than one-tenth of the bank's net profits of the preceding two consecutive half-year periods (in the case of an annual dividend). The approval of the OCC is required if the total of all dividends declared by a national bank in any calendar year exceeds the total of its net profits for that year combined with its retained net profits for the preceding two years, less any required transfers to surplus. Under FDICIA, the Bank may not pay a dividend if, after paying the dividend, the Bank would be undercapitalized. See "Capital Regulations" below.

In addition to the availability of funds from the Bank, the future dividend policy of the Company is subject to the discretion of the Board of Directors and will depend upon a number of factors, including future earnings, financial condition, cash needs and general business conditions. If dividends should be declared in the future, the amount of such dividends presently cannot be estimated and it cannot be known whether such dividends would continue for future periods.

Capital Regulations

The federal bank regulatory authorities have adopted risk-based capital guidelines for banks and bank holding companies that are designed to make regulatory capital requirements more sensitive to differences in risk profile among banks and bank holding companies, account for off-balance sheet exposure and minimize disincentives for holding liquid assets. The resulting capital ratios represent qualifying capital as a percentage of total risk-weighted assets and off-balance sheet items. The guidelines are minimums, and the federal regulators have noted that banks and bank holding companies contemplating significant expansion programs should not allow expansion to diminish their capital ratios and should maintain ratios well in excess of the minimums. The current guidelines require all bank holding companies and federally-regulated banks to maintain a minimum risk-based total capital ratio equal to 8%, of which at least 4% must be Tier 1 capital. Tier 1 capital includes common shareholders' equity, qualifying perpetual preferred stock and minority interests in equity accounts of consolidated subsidiaries, but excludes goodwill and most other intangibles and excludes the allowance for loan and lease losses. Tier 2 capital includes the excess of any preferred stock not included in Tier 1 capital, mandatory convertible securities, hybrid capital instruments, subordinated debt and intermediate term-preferred stock and general reserves for loan and lease losses up to 1.25% of risk-weighted assets.

Under the guidelines, banks' and bank holding companies' assets are given risk-weights of 0%, 20%, 50% and 100%. In addition, certain off-balance sheet items are given credit conversion factors to convert them to asset equivalent amounts to which an appropriate risk-weight will apply. These computations result in the total risk-weighted assets. Most loans are assigned to the 100% risk category, except for first mortgage loans fully secured by residential property and, under certain circumstances, residential construction loans, both of which carry a 50% rating. Most investment securities are assigned to the 20% category, except for municipal or state revenue bonds, which have a 50% rating, and direct obligations of or obligations guaranteed by the United States Treasury or United States Government agencies, which have a 0% rating.

The federal bank regulatory authorities have also implemented a leverage ratio, which is Tier 1 capital as a percentage of average total assets less intangibles, to be used as a supplement to the risk-based guidelines. The principal objective of the leverage ratio is to place a constraint on the maximum degree to which a bank holding company may leverage its equity capital base. The minimum required leverage ratio for top-rated institutions is 3%, but most institutions are required to maintain an additional cushion of at least 100 to 200 basis points.

FDICIA established a new capital-based regulatory scheme designed to promote early intervention for troubled banks and requires the FDIC to choose the least expensive resolution of bank failures. The new capital-based regulatory framework contains five categories of compliance with regulatory capital requirements, including "well capitalized," "adequately capitalized," "undercapitalized," "significantly undercapitalized," and "critically undercapitalized." To qualify as a "well capitalized" institution, a bank must have a leverage ratio of no less than 5%, a Tier 1 risk-based ratio of no less than 6%, and a total risk-based capital ratio of no less than 10%, and the bank must not be under any order or directive from the appropriate regulatory agency to meet and maintain a specific capital level. The Company and the Bank are both currently qualified as "well capitalized." As of December 31, 2003, the Company had Tier 1 and Total Risk-Based Capital Ratios of 11.85% and 13.08%, respectively. For a more detailed analysis of the Company and Bank's regulatory requirements, see Note 12 to the Notes to Consolidated Financial Statements.

Under the FDICIA regulations, the applicable agency can treat an institution as if it were in the next lower category if the agency determines (after notice and an opportunity for hearing) that the institution is in an unsafe or unsound condition or is engaging in an unsafe or unsound practice. The degree of regulatory scrutiny of a financial institution will increase, and the permissible activities of the institution will decrease, as it moves downward through the capital categories. Institutions that fall into one of the three undercapitalized categories may be required to (i) submit a capital restoration plan; (ii) raise additional capital; (iii) restrict their growth, deposit interest rates and other activities; (iv) improve their management; (v) eliminate management fees; or (vi) divest themselves of all or part of their operations. Bank holding companies controlling financial institutions can be called upon to boost the institutions' capital and to partially guarantee the institutions' performance under their capital restoration plans.

These capital guidelines can affect the Company in several ways. If the Bank begins to grow at a rapid pace, a premature "squeeze" on capital could occur making a capital infusion necessary. The requirements could impact the Company's ability to pay dividends. The Company's capital levels are currently more than adequate; however, rapid growth, poor loan portfolio performance or poor earnings performance or a combination of these factors could change the Bank's capital position in a relatively short period of time.

Interstate Banking And Branching Restrictions

On September 29, 1994, the federal government enacted the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the "Interstate Banking Act"). This Act became effective on September 29, 1995, and permits eligible bank holding companies in any state, with regulatory approval, to acquire banking organizations in any other state. Effective June 1, 1997, the Interstate Banking Act allows banks with different home states to merge, unless a particular state opts out of the statute. Consistent with the Interstate Banking Act, Georgia adopted legislation in 1996 which has permitted interstate bank mergers since June 1, 1997.

In addition, beginning June 1, 1997, the Interstate Banking Act has permitted national and state banks to establish de novo branches in another state if there is a law in that state which applies equally to all banks and expressly permits all out-of-state banks to establish de novo branches. However, in 1996, Georgia adopted legislation which opts out of this provision. The Georgia legislation provides that, with the prior approval of the Department of Banking and Finance, after July 1, 1996, a bank may establish three new or additional de novo branch banks anywhere in Georgia and, beginning July 1, 1998, a bank may establish new or additional branch banks anywhere in the state with prior regulatory approval.

Recent Legislative Developments

From time to time, various bills are introduced in the United States Congress and at the state legislative level with respect to the regulation of financial institutions. Certain of these proposals, if adopted, could significantly change the regulation of banks and the financial services industry. The Company cannot predict whether any of these proposals will be adopted or, if adopted, how these proposals would affect the Company.

Item 2. Description of Property.

Cartersville Office. The Bank's main office is located in Cartersville at 950 Joe Frank Harris Parkway, at the corner of Joe Frank Harris Parkway and Market Place Boulevard. This permanent facility has 10,500 square feet in a two story brick facility. This facility has a drive through station consisting of four teller lanes and one with a drive up automated teller service machine.

Adairsville Office. On January 4, 1999, the Bank also opened a temporary branch office in Adairsville at 7450 Adairsville Highway, NW (Highway 140), Adairsville, Georgia 30103. Construction of a permanent facility for this office began in the third quarter of 1999 and it opened in the second quarter of 2000. This branch has approximately 3,500 square feet, three drive through lanes plus one drive through with an automated teller service machine.

Rome Office. On October 9, 2001, the Bank opened a temporary bank office at 42 Three Rivers Drive in Rome, Georgia. Construction on a permanent facility will begin in early 2004 and will be completed in the same year.

Item 3. Legal Proceedings.

Neither the Company nor the Bank is a party to, nor is any of their property the subject of, any material pending legal proceedings incidental to the business of the Company or the Bank.

Item 4. Submission of Matters to a Vote of Security Holders.

No matter was submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report.

Item 5. Market For Common Equity And Related Stockholder Matters.

(a) The Company completed its initial public offering on October 22, 1998. In the offering, the Company sold a total of 838,711 shares at $10.00 per share. There has been virtually no market for the Company's common stock since completion of the offering, and the Company does not anticipate a market to develop in the near future. As of December 31, 2003, there were approximately 1,145 shareholders of record.

All outstanding shares of Common Stock of the Company are entitled to share equally in dividends from funds legally available therefor, when, as and if declared by the Board of Directors. The Company does not plan to declare any dividends in the immediate future.

(b) The following table reflects the high and low trades of shares of the Company for each quarterly period during the last year based on such limited available information.

|Year           | High Selling Price | Low Selling Price
|-------------- | ------------------ | -----------------
|               |                    |                  
|2003           |                    |                  
|First Quarter  | 18.00              | 17.50            
|Second Quarter | 18.00              | 17.00            
|Third Quarter  | 18.00              | 18.00            
|Fourth Quarter | 19.00              | 18.00            



The Company has not paid dividends since its inception. As discussed in Item 1 above, the Bank's ability to pay dividends is subject to numerous statutory conditions. Thus, to the extent the source of dividends to be paid by the Company is dividends from the Bank, the Company may continue not to pay dividends in the near future.

During 2002, the Company sold 170,299 additional shares of common stock at $16.00 per share through a private placement offering. The shares sold pursuant to the private placement were claimed exempt from registration by the issuer pursuant to federal and state securities laws (Regulation D and O.C.G.A. Section 10-5-9(16), respectively). The shares were sold by the executive officers and directors of the Company without commissions, remuneration, or any other compensation. All purchasers executed a subscription agreement in which each represented that he or she met the requirements of an "accredited investor" within the meaning of Regulation D under the Securities Act of 1933. The sale generated additional capital of $2,724,784 during the year.



Item 6. Management's Discussion and Analysis.

Management's Discussion and Analysis

of Financial Condition and Results of Operations

The following discussion describes our results of operations for 2003 and also analyzes our financial condition as of December 31, 2003. Like most community banks, we derive most of our income from interest we receive on our loans and investments. Our primary source of funds for making these loans and investments is our deposits, on which we pay interest. Consequently, one of the key measures of our success is our amount of net interest income, or the difference between the income on our interest-earning assets, such as loans and investments, and the expense on our interest-bearing liabilities, such as deposits. Another key measure is the spread between the yield we earn on these interest-earning assets and the rate we pay on our interest-bearing liabilities.

We have included a number of tables to assist in our description of these measures. For example, the "Average Balances and Interest Income and Interest Expense" tables shows the average balance during 2003 and 2002 of each category of our assets and liabilities, as well as the yield we earned or the rate we paid with respect to each category. A review of this table shows that our loans typically provide higher interest yields than do other types of interest earning assets, which is why we intend to channel a substantial percentage of our earning assets into our loan portfolio. Similarly, the "Rate/Volume Analysis" table helps demonstrate the impact of changing interest rates and changing volume of assets and liabilities during the years shown. We also track the sensitivity of our various categories of assets and liabilities to changes in interest rates, and we have included a tabular illustration of our asset liability management to help explain this. Finally, we have included a number of tables that provide detail about our investment securities, our loans, and our deposits.

There are risks inherent in all loans, therefore, we maintain an allowance for loan losses to absorb probable losses on existing loans that may become uncollectible. We establish and maintain this allowance by charging a provision for loan losses against our operating earnings. In the following section we have included a detailed discussion of this process, as well as several tables describing our allowance for loan losses and the allocation of this allowance among our various categories of loans.

In addition to earning interest on our loans and investments, we earn income through fees and other expenses we charge to our customers. We describe the various components of this noninterest income, as well as our noninterest expense, in the following discussion.

The following discussion and analysis also identifies significant factors that have affected our financial position and operating results during the periods included in the accompanying financial statements. We encourage you to read this discussion and analysis in conjunction with our financial statements and the related notes and the other statistical information also included in this report.



Forward-Looking Statements

We may from time to time make written or oral forward-looking statements, including statements contained in filings with the Securities and Exchange Commission and our reports to stockholders. Statements made in this report, other than those concerning historical information, should be considered forward-looking and subject to various risks and uncertainties. Forward-looking statements are made based upon 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. Our actual results may differ materially from the results anticipated in 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, interest rate risk management, the effects of competition in the banking business from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market funds and other financial institutions operating in our market area and elsewhere, including institutions operating through the Internet, changes in governmental regulation 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. We caution that these factors are not exclusive. We do not undertake to update any forward-looking statement that may be made from time to time by us, or on our behalf.

Critical Accounting Policies

We have adopted various accounting policies which govern the application of accounting principles generally accepted in the United States of America in the preparation of our financial statements. Our significant accounting policies are described in the footnotes to the consolidated financial statements at December 31, 2003 which have been included in Item 7. of this annual report on form 10-KSB.

Certain accounting policies involve significant judgments and assumptions by us which have a material impact on the carrying value of certain assets and liabilities. We consider these accounting policies to be critical accounting policies. The judgments and assumptions we use are based on historical experience and other factors, which we believe to be reasonable under the circumstances. Because of the nature of the judgments and assumptions we make, actual results could differ from these judgments and estimates which could have a material impact on our carrying values of assets and liabilities and our results of operations.

We believe the allowance for loan losses is a critical accounting policy that requires the most significant judgments and estimates used in preparation of our consolidated financial statements. Refer to the portion of this discussion that addresses our allowance for loan losses for a description of our processes and methodology for determining our allowance for loan losses.

Overview

Our 2003 results were highlighted by reporting net income of $1,362,795 in our fifth year of operations. Despite a downturn in the national and state economy exacerbated by the effects of global uncertainties, we continued to have significant loan and deposit growth that should provide a base for continued profitability.

Financial Condition at December 31, 2003 and 2002

The following is a summary of our balance sheets for the years indicated:



|                                              |   | December 31,          
|--------------------------------------------- | - | ----------------------
|                                              |   | 2003                  
|                                              |   | (Dollars in Thousands)
|Cash and due from banks                       | $ | 2,898                 
|Interest-bearing deposits in banks            |   | 59                    
|Federal funds sold                            |   | -                     
|Securities                                    |   | 12,282                
|Loans, net                                    |   | 136,390               
|Premises and equipment                        |   | 4,993                 
|Other assets                                  |   | 3,227                 
|                                              |   | 159,849               
|                                              |   |                       
|Total deposits                                | $ | 129,470               
|Total borrowings                              |   | 16,202                
|Other liabilities and redeemable common stock |   | 964                   
|Stockholders' equity                          |   | 13,213                
|                                              | $ | 159,849               

As of December 31, 2003, we had total assets of $159.8 million, an increase of 22% over December 31, 2002. Total interest-earning assets were $148.7 million at December 31, 2003 or 93% of total assets as compared to 92% of total assets at December 31, 2002. Our primary interest-earning assets at December 31, 2003 were loans, which made up 92% of total interest-earning assets as compared 88% at December 31, 2002. Our gross loans to total funding ratio was 95% at December 31, 2003 as compared to 91% at December 31, 2002. Deposit growth of $11.5 million and total borrowings, which consist of federal funds purchased, Federal Home Loan Bank advances and subordinated debentures, of $16.2 million were used primarily to fund loan growth of $30.4 million.

Our securities portfolio, consisting of U.S. Government and Agency, mortgage-backed, municipal and restricted equity securities, amounted to $12.3 million at December 31, 2003, a 6% decrease from the $13.1 million at December 31, 2002. Proceeds from the sale or maturity of investments during 2003 were utilized in the loan portfolio to achieve favorable yields. We have not specifically identified any securities for sale in future periods that, if so designated, would require a charge to operations if the market value would not be reasonably expected to recover prior to the time of sale.

We have 86% of our loan portfolio collateralized by real estate located in our primary market area of Bartow County, Georgia and surrounding counties. Our real estate mortgage portfolio consists of loans collateralized by one- to four-family residential properties (30%) and construction loans to build one- to four-family residential properties (19%), and nonresidential properties consisting primarily of small business commercial properties (51%). We generally require that loans collateralized by real estate not exceed the collateral values by the following percentages for each type of real estate loan as follows:



|One to four-family residential properties                        | 85%
|---------------------------------------------------------------- | ---
|Construction loans on one- to four-family residential properties | 80%
|Nonresidential property                                          | 80%

The remaining 14% of the loan portfolio consists of commercial, consumer, and other loans. We require collateral commensurate with the repayment ability and creditworthiness of the borrower.

The specific economic and credit risks associated with our loan portfolio, especially the real estate portfolio, include, but are not limited to, a general downturn in the economy which could affect unemployment rates in our market area, general real estate market deterioration, interest rate fluctuations, deteriorated or non-existing collateral, title defects, inaccurate appraisals, financial deterioration of borrowers, fraud, and any violation of banking protection laws. Construction lending can also present other specific risks to the lender such as whether developers can find builders to buy lots for home construction, whether the builders can obtain financing for the construction, whether the builders can sell the home to a buyer, and whether the buyer can obtain permanent financing. Currently, real estate values and employment trends in our market area are stable. However, global uncertainties could negatively impact the local economy.

We attempt to reduce these economic and credit risks not only by adhering to loan to value guidelines, but also by investigating the creditworthiness of the borrower and monitoring the borrower's financial position. Also, we establish and periodically review our lending policies and procedures. National banking regulations limit exposure by prohibiting loan relationships that exceed 15% of the Bank's statutory capital.

Liquidity and Capital Resources

The purpose of liquidity management is to ensure that there are sufficient cash flows to satisfy demands for credit, deposit withdrawals, and other needs. Traditional sources of liquidity include asset maturities and growth in core deposits. A company may achieve its desired liquidity objectives from the management of assets and liabilities and through funds provided by operations. Funds invested in short-term marketable instruments and the continuous maturing of other earning assets are sources of liquidity from the asset perspective. The liability base provides sources of liquidity through deposit growth, the maturity structure of liabilities, and accessibility to external sources of funds.

As our loan demand has continued to increase, we have increased the use of external funding sources in a manner to achieve acceptable net interest margins and to relegate interest rate risk in the balance sheet. Brokered deposits totaled $34 million at December 31, 2003, compared to $29 million as of December 31, 2002. These deposits are readily obtainable at rates not significantly different than rates we pay on deposits in our local market. We also used a mix of FHLB advances and Fed funds purchased of varying maturities to further reduce our cost of funds.

Scheduled loan payments are a relatively stable source of funds, but loan payoffs and deposit flows fluctuate significantly, being influenced by interest rates and general economic conditions and competition. We attempt to price our deposits to meet our asset/liability objectives consistent with local market conditions.

Our liquidity and capital resources are monitored on a periodic basis by management and Federal regulatory authorities. As determined under guidelines established by the Asset/Liability Committee and acceptable current banking practices our core liquidity ratio of 10.44% at December 31, 2003, was within our target range of 10% - 35%.

At December 31, 2003, our capital levels were adequate based on regulatory minimum capital requirements. Our stockholders' equity increased primarily due to net income of $1,362,795. For regulatory purposes, the net unrealized gains on securities available-for-sale are excluded in the computation of the capital ratios.

In the future, our primary source of funds available to Unity Holdings, Inc. will be the payment of dividends by the Bank. Banking regulations limit the amount of the dividends that may be paid without prior approval of the bank's regulatory agency. Currently, the Bank can pay $2,545,000 of dividends without regulatory approval.

The minimum capital requirements to be considered "well capitalized" under prompt corrective action provisions and the actual capital ratios for us and the Bank as of December 31, 2003 are as follows:



|                           |  | Actual       |  |       
|-------------------------- |  | ------------ |  | ------
|                           |  |              |  |       
|                           |  | Consolidated |  | Bank  
|Leverage capital ratio     |  | 10.35%       |  | 8.39% 
|Risk-based capital ratios: |  |              |  |       
|Core capital               |  | 11.85%       |  | 9.60% 
|Total capital              |  | 13.10%       |  | 10.85%

These ratios may decline as asset growth continues, but are expected to exceed the regulatory minimum requirements. Anticipated future earnings will assist in keeping these ratios at satisfactory levels.

We believe that our liquidity and capital resources are adequate and will meet our foreseeable short and long-term needs. We anticipate that we will have sufficient funds available to meet current loan commitments and to fund or refinance, on a timely basis, our other material commitments and liabilities.

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

Off Balance Sheet Arrangements and Borrowing Power

At December 31, 2003, we had loan commitments outstanding of $15.7 million. Because these commitments generally have fixed expiration dates and many will expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. If needed, we have the ability to borrow and purchase federal funds from other financial institutions. At December 31, 2003, we had arrangements with two commercial banks for short-term unsecured advances of $5.5 million. Also in place with a correspondent commercial bank is a security repurchase agreement utilizing securities available for sale as the underlying collateral with a line of secured credit of approximately $5 million. We have a line of credit with the Federal Home Loan Bank equal to 1% of total assets. According to our pledged collateral for the line, we can borrow up to $16.3 million on this line. At December 31, 2003, we had $11 million outstanding on this line. By having this readily available credit, our secondary, or liability, liquidity ratio was 32%, substantially higher than our 20% minimum directive.

At December 31, 2003, we had no material commitments for capital expenditures.

Effects of Inflation

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

Results of Operations For The Years Ended December 31, 2003 and 2002

The following is a summary of our operations for the years indicated.



|                          |   | December 31,          
|------------------------- | - | ----------------------
|                          |   | 2003                  
|                          |   | (Dollars in Thousands)
|Interest income           | $ | 9,450                 
|Interest expense          |   | 3,474                 
|Net interest income       |   | 5,976                 
|Provision for loan losses |   | 495                   
|Other income              |   | 1,070                 
|Other expenses            |   | 4,515                 
|Pretax income             |   | 2,036                 
|Income taxes              |   | 673                   
|Net income                | $ | 1,363                 

Net Interest Income

Our results of operations are determined by our ability to manage interest income and expense effectively, to minimize loan and investment losses, to generate non-interest income, and to control operating expenses. Because interest rates are determined by market forces and economic conditions, our ability to generate net interest income depends on our ability to obtain an adequate net interest spread between the rate we pay on interest-bearing liabilities and the rate we earn on interest-earning assets.

Our tax equivalent net yield on average interest-earning assets was 4.36% in 2003 as compared to 4.20% in 2002. Average loans increased by $24.6 million, which accounted for the majority of a $25.2 million increase in total average interest-earning assets. Average interest-bearing liabilities increased by $20.6 million with average interest-bearing demand and time deposits accounting for the majority of this increase. The rate earned on average interest-earning assets decreased to 6.89% in 2003 from 7.57% in 2002. The rate paid on average interest-bearing liabilities decreased to 2.85% in 2003 from 3.71% in 2002. The increase in the net yield is due primarily to decreases in our cost of funds. We anticipate our funding costs to remain low as time deposits reprice and external funding sources continue to be used in a cost-efficient manner.

Provision for Loan Losses

The provision for loan losses was $495,000 and $529,000 in 2003 and 2002, respectively. The amounts provided were due primarily to the growth of the portfolio, lower loan loss experience, and to our assessment of the inherent risk in the portfolio. Net charge-offs for 2003 were $100,000 as compared to $254,000 for 2002. As of December 31, 2003, we had nonperforming loans and assets of $1,473,000 as compared to $1,008,000 at December 31, 2002. Based upon our evaluation of the loan portfolio, we believe the allowance for loan losses to be adequate to absorb losses on existing loans that may become uncollectible. Our evaluation considers significant factors relative to the credit risk and loss exposure in the loan portfolio, including past due and classified loans, historical experience, underlying collateral values, and current economic conditions that may affect the borrower's ability to repay. The allowance for loan losses is evaluated by segmenting the loan portfolio into unclassified and classified loans. The unclassified loans are further segmented by loan type with an allowance percentage applied to each type in order to establish a general allowance for loan losses. The allowance percentage determined is based upon our experience specifically and the historical experience of the banking industry generally. The classified loans, including impaired loans, are analyzed individually in order to establish a specific allowance for loan losses. The allowance for loan losses as a percentage of total loans was 1.35% at December 31, 2003 as compared to 1.36% at December 31, 2002.

Other Income

Other income consists of service charges on deposit accounts, mortgage loan origination fees, and other miscellaneous revenues and fees. Other income was $1,070,000 in 2003 as compared to $1,072,000. Service charges on deposit accounts increased $144,000 for the year ended December 31, 2003 as compared to the same period in 2002. However, mortgage origination fee income decreased $71,000 for 2003 as compared to 2002. We expect mortgage fees to increase in 2004 if mortgage rates remain low.

Other Expenses

Other expenses of $4,515,000 for 2003 represent an approximate 14% increase over the $3,968,000 posted for 2002. Salaries and employee benefits increased $356,000, as key staff members were added to handle increasing business volumes. Data processing expenses increased $59,000 for 2003 over 2002. As business volumes grow, so do our data processing costs. The increase in total other operating expenses is directly related to the overall growth of the Bank.

Income Tax

Income tax expense was $673,000 in 2003 as compared to $442,000 in 2002. The rate of income tax compared to pretax income was 33% in 2003 as compared to 35% in 2002.

Asset/Liability Management

Our objective is to manage assets and liabilities to provide a satisfactory, consistent level of profitability within the framework of established cash, loan, investment, borrowing, and capital policies. Specific officers are charged with the responsibility for monitoring policies and procedures designed to ensure acceptable composition of the asset/liability mix. Management's overall philosophy is to support asset growth primarily through growth of core deposits of all categories made by local individuals, partnerships, and corporations.

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

A simple interest rate "gap" analysis by itself may not be an accurate indicator of how net interest income will be affected by changes in interest rates. Accordingly, we also evaluate how the repayment of particular assets and liabilities is impacted by changes in interest rates. Income associated with interest-earning assets and costs associated with interest-bearing liabilities may not be affected uniformly by changes in interest rates. In addition, the magnitude and duration of changes in interest rates may have a significant impact on net interest income. For example, although certain assets and liabilities may have similar maturities or periods of repricing, they may react in different degrees to changes in market interest rates. Interest rates on certain types of assets and liabilities fluctuate in advance of changes in general market rates, while interest rates on other types may lag behind changes in general market rates. In addition, certain assets, such as adjustable rate mortgage loans, have features (generally referred to as "interest rate caps and floors") that limit changes in interest rates. Prepayment and early withdrawal levels also could deviate significantly from those assumed in calculating the interest rate gap. The ability of many borrowers to service their debts also may decrease during periods of rising interest rates.

Changes in interest rates also affect our liquidity position. We currently price deposits in response to market rates and it is management's intention to continue this policy. If deposits are not priced in response to market rates, a loss of deposits could occur that would negatively affect our liquidity position.

At December 31, 2003, our cumulative one year interest rate-sensitivity gap ratio was 0.82. Our targeted ratio is 0.75 to 1.25 in this time horizon. If our assets and liabilities were equally flexible and moved concurrently, the impact of any increase or decrease in interest rates on net interest income would be virtually nonexistent. The current ratio indicates that our balance sheet is responsive to interest rates and can be adjusted to take advantage of several interest rate scenarios.

The following table sets forth the distribution of the repricing of our interest-earning assets and interest-bearing liabilities as of December 31, 2003, the interest rate-sensitivity gap, the cumulative interest rate-sensitivity gap, the interest rate-sensitivity gap ratio and the cumulative interest rate-sensitivity gap ratio. The table also sets forth the time periods in which interest-earning assets and interest-bearing liabilities will mature or may reprice in accordance with their contractual terms. However, the table does not necessarily indicate the impact of general interest rate movements on the net interest margin as the repricing of various categories of assets and liabilities is subject to competitive pressures and the needs of our customers. In addition, various assets and liabilities indicated as repricing within the same period may in fact, reprice at different times within such period and at different rates.

|                                               |                                    |          |          | Within                  | Over Three | Over One    | After  |        
|---------------------------------------------- | ---------------------------------- | -------- | -------- | ----------------------- | ---------- | ----------- | ------ | -------
|                                               |                                    |          |          | Three                   | Months To  | Year to     | Three  |        
|                                               |                                    |          |          | Months                  | One Year   | Three Years | Years  | Total  
|                                               |                                    |          |          | ( Dollars in Thousands)
|Interest-earning assets:                       |                                    |          |          |                         |            |            
|                                               | Interest-bearing deposits in banks | 59       | -        | -                       | -          | 59         
|                                               | Securities                         |          |          | 1,300                   | 752        |             | 10,229 | 12,281 
|                                               | Loans                              |          |          | 49,659                  | 20,680     | 26,864      | 41,054 | 138,257
|                                               | Total                              |          |          | 51,018                  | 21,432     | 26,864      | 51,283 | 150,597
|                                               |                                    |          |          |                         |            |             |        |        
|Interest-bearing liabilities:                  |                                    |          |          |                         |           
|                                               | Interest-bearing demand deposits   | 30,690   | -        | -                       | -          | 30,690     
|                                               | Savings & Money Market Deposits    | 2,828    | -        | -                       | -          | 2,828      
|                                               | Time Deposits                      |          | 11,008   | 33,564                  | 27,502     | 12,750      | 84,824
|                                               | Federal Funds Purchased            |          | 2,100    | -                       | -          | -           | 2,100 
|                                               | Other Borrowings                   |          | 2,409    | 2,450                   | 4,800      | 1,350       | 11,009
|                                               | Subordinated Debentures            |          | 3,093    | -                       | -          | -           | 3,093 
|                                               | Total                              |          |          | 52,128                  | 36,014     | 32,302      | 14,100 | 134,544
|                                               |                                    |          |          |                         |            |             |        |        
|Interest rate sensitivity gap                  |                                    | (1,110)  | (14,582) | (5,438)                 | 37,183     | 16,053     
|Cumulative interest rate sensitivity gap       | (1,110)                            | (15,692) | (21,130) | 16,053                  |           
|Interest rate sensitivity gap ratio            | 0.98                               | 0.60     | 0.83     | 3.64                    |           
|Cumulative interest rate sensitivity gap ratio | 0.98                               | 0.82     | 0.82     | 1.12                    |           



SELECTED FINANCIAL INFORMATION AND STATISTICAL DATA

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

DISTRIBUTION OF ASSETS, LIABILITIES, AND STOCKHOLDERS' EQUITY:

INTEREST RATES AND INTEREST DIFFERENTIALS

Average Balances

The condensed average balance sheet for the period indicated is presented below. (1)

|                                                  |                                    |         | December 31,          
|------------------------------------------------- | ---------------------------------- | ------- | ----------------------
|                                                  |                                    |         | 2003                  
|                                                  |                                    |         | (Dollars in Thousands)
|Cash and due from banks                           | $                                  | 2,646   | $                     
|Interest-bearing deposits in banks                |                                    | 218     |                       
|Taxable securities                                |                                    | 8,680   |                       
|Tax exempt securities                             |                                    | 4,414   |                       
|Securities valuation account                      |                                    | 125     |                       
|Federal funds sold                                |                                    | 1,680   |                       
|Loans (2)                                         |                                    | 122,142 |                       
|Allowance for loan losses                         |                                    | (1,689) |                       
|Other assets                                      |                                    | 7,646   |                       
|                                                  |                                    |         | 145,862               
|                                                  |                                    |         |                       
|                                                  | Total interest-earning assets      | $       | 137,134               
|                                                  |                                    |         |                       
|LIABILITIES AND STOCKHOLDERS' EQUITY              |                                    |         |                       
|                                                  |                                    |         |                       
|Deposits:                                         |                                    |         |                       
|                                                  | Noninterest-bearing demand         | $       | 10,613                
|                                                  | Interest-bearing demand            |         | 32,403                
|                                                  | Savings                            |         | 2,359                 
|                                                  | Time                               |         | 78,253                
|                                                  | Total deposits                     |         | 123,628               
|Federal funds purchased and repurchase agreements |                                    | 1,129   |                       
|Other borrowings                                  |                                    | 7,836   |                       
|Other liabilities                                 |                                    | 757     |                       
|Total liabilities                                 |                                    | 133,350 |                       
|Stockholders' equity                              |                                    | 12,512  |                       
|                                                  |                                    | $       | 145,862               
|                                                  |                                    |         |                       
|                                                  | Total interest-bearing liabilities | $       | 121,980               

(1) Average balances were determined using the daily average balances during the year for each category.

(2) Nonaccrual loans included in average loans were $781,000 and $286,000 in 2003 and 2002, respectively.

Interest Income and Interest Expense

The following tables set forth the amount of our interest income and interest expense for each category of interest-earning assets and interest-bearing liabilities and the average interest rate for total interest-earning assets and total interest-bearing liabilities, net interest spread and net yield on average interest-earning assets.

|                    |                                                                                                                                                                                                                                                                                                              | Years Ended December 31,
2003 2002
|------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------------------------------
|                    |                                                                                                                                                                                                                                                                                                              |                                   
|                    |                                                                                                                                                                                                                                                                                                              | Interest                          
|INTEREST INCOME:    |                                                                                                                                                                                                                                                                                                              |                                   
|                    | Interest and fees on loans (1)                                                                                                                                                                                                                                                                               | $ 8,833                           
|                    | Interest on taxable securities                                                                                                                                                                                                                                                                               | 402                               
|                    | Interest on tax exempt securities                                                                                                                                                                                                                                                                            | 194                               
|                    | Interest on federal funds sold                                                                                                                                                                                                                                                                               | 18                                
|                    | Interest on deposits in banks                                                                                                                                                                                                                                                                                | 3                                 
|                    | Total interest income                                                                                                                                                                                                                                                                                        | 9,450                             
|                    |                                                                                                                                                                                                                                                                                                              |                                   
|INTEREST EXPENSE:   |                                                                                                                                                                                                                                                                                                              |                                   
|                    | Interest on interest-bearing demand deposits                                                                                                                                                                                                                                                                 | 385                               
|                    | Interest on savings deposits                                                                                                                                                                                                                                                                                 | 28                                
|                    | Interest on time deposits                                                                                                                                                                                                                                                                                    | 2,883                             
|                    | Interest on Borrowings (2)                                                                                                                                                                                                                                                                                   | 178                               
|                    | Total interest expense                                                                                                                                                                                                                                                                                       | 3,474                             
|                    |                                                                                                                                                                                                                                                                                                              |                                   
|NET INTEREST INCOME | $ 5,976                                                                                                                                                                                                                                                                                                      |                                   
|                    | Net interest spread                                                                                                                                                                                                                                                                                          |                                   
|                    | Net yield on average interest-earning assets                                                                                                                                                                                                                                                                 |                                   
|                    |                                                                                                                                                                                                                                                                                                              |                                   
|                    | (1) Interest and fees on loans includes $822,000 and $758,000 of loan fee income for the years ended December 31, 2003 and 2002, respectively. Interest income recognized on nonaccrual loans during 2003 and 2002 was insignificant.
(2) Includes interest on federal funds purchased and other borrowings. |                                   

Rate and Volume Analysis

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



|                        |                                              | Year Ended December 31,
|----------------------- | -------------------------------------------- | -----------------------
|                        |                                              | 2003 vs. 2002          
|                        |                                              | Changes Due To:        
|                        |                                              | Rate                   
|Increase (decrease) in: |                                              |                        
|                        | Income from interest-earning assets:         |                        
|                        | Interest and fees on loans                   | $ (837)                
|                        | Interest on taxable securities               | 11                     
|                        | Interest on tax exempt securities            | (0)                    
|                        | Interest on federal funds sold               | (13)                   
|                        | Interest on deposits in banks                | (0)                    
|                        | Total interest income                        | (839)                  
|                        |                                              |                        
|                        | Expense from interest-bearing liabilities:   |                        
|                        | Interest on interest-bearing demand deposits | $ (171)                
|                        | Interest on savings deposits                 | (10)                   
|                        | Interest on time deposits                    | (464)                  
|                        | Interest on Borrowings                       | 31                     
|                        | Total interest expense                       | (614)                  
|Net interest income     | (225)                                        |                        

INVESTMENT PORTFOLIO

Types of Investments

The carrying amounts of securities, which include securities available for sale and restricted equity securities, are summarized as follows:



|                                      |       | December 31, 2003     
|------------------------------------- | ----- | ----------------------
|                                      |       |                       
|                                      |       | Amortized             
|                                      |       | Cost                  
|                                      |       | (Dollars in Thousands)
|U.S. Government and agency securities | 4,503 |                       
|Mortgage-backed securities            | 770   |                       
|Municipal securities                  | 5,695 |                       
|Restricted equity securities          | 1,300 |                       
|                                      |       | 12,268                
|                                      |       |                       
|                                      |       | December 31, 2002     
|                                      |       |                       
|                                      |       | Amortized             
|                                      |       | Cost                  
|                                      |       | (Dollars in Thousands)
|U.S. Government and agency securities | 7,087 |                       
|Mortgage-backed securities            | 1,888 |                       
|Municipal securities                  | 3,343 |                       
|Restricted equity securities          | 607   |                       
|                                      |       | 12,925                

(1) The weighted average yields were computed using coupon interest, adding discount accretion or subtracting premium amortization, as appropriate, on a ratable basis over the life of each security.

(2) Yields on Municipal securities are presented on a tax equivalent basis.

Maturities

The amounts of debt securities, including the weighted average yield in each category as of December 31, 2003 are shown in the following table according to contractual maturity classifications (1) one year or less, (2) after one through three years, (3) after three through five years and (4) after five years. Restricted equity securities are not included in the table because they have no contractual maturity.

|                                     |  |     |       | U.S. Treasury       |       |       |       |                      |       |      
|------------------------------------ |  | --- | ----- | ------------------- | ----- | ----- | ----- | -------------------- | ----- | -----
|                                     |  |     |       | And Other U.S.      |       |       |       |                      |       |      
|                                     |  |     |       | Government Agencies |       |       |       |                      |       |      
|                                     |  |     |       | And Corporations    |       |       |       | Municipal Securities
|                                     |  |     |       |                     |       | Yield |       |                      |       | Yield
|                                     |  |     |       | Amount              |       | (1)   |       | Amount               |       | (1)  
|Maturity:                            |  |     |       |                     |       |       |       |                      |       |      
|One year or less                     |  |     | $ -   |                     |       |       | $ -   |                      |      
|After one year through three years   |  | -   |       |                     |       | -     |       |                     
|After three years through five years |  | 536 |       | 4.72%               |       | 340   |       | 4.37%               
|After 5 years                        |  |     | 4,734 |                     | 5.06% |       | 5,372 |                      | 4.60%
|                                     |  |     |       | $ 5,270             |       | 5.02% |       | $ 5,712              |       | 4.59%

(1) The weighted average yields were computed using coupon interest, adding discount accretion or subtracting premium amortization, as appropriate, on a ratable basis over the life of each security.

LOAN PORTFOLIO

Types of Loans

The amounts of loans outstanding at the indicated dates are shown in the following table according to the type of loan.



|                                       | December 31,          
|-------------------------------------- | ----------------------
|                                       | 2003                  
|                                       | (Dollars in Thousands)
|Commercial, financial and agricultural | $ 11,106              
|Real estate - construction             | 21,522                
|Real estate - mortgage                 | 97,263                
|Consumer, installment and other        | 8,683                 
|                                       | 138,574               
|Unearned income                        | (318)                 
|Allowance for loan losses              | (1,866)               
|Loans, net                             | 136,390               



Maturities and Sensitivities of Loans to Changes in Interest Rates

Total loans as of December 31, 2003 are shown in the following table according to contractual maturity.

|                              | Commercial             |  | Construction |  | Other   |  | Total  
|----------------------------- | ---------------------- |  | ------------ |  | ------- |  | -------
|                              | (Dollars in Thousands) |  |             
|Within Three Months           | 2,665                  |  | 13,605       |  | 32,937  |  | 49,207 
|Over Three Months to One Year | 1,870                  |  | 7,876        |  | 10,934  |  | 20,680 
|Over One Year to Three Years  | 1,894                  |  | 41           |  | 24,928  |  | 26,863 
|Over Three Years              | 4,677                  |  | -            |  | 37,148  |  | 41,825 
|                              | 11,106                 |  | 21,522       |  | 105,947 |  | 138,575

The following table summarizes loans at December 31, 2003 with due dates after one year that have predetermined and floating or adjustable interest rates.



|                                      | (Dollars     
|------------------------------------- | -------------
|                                      | in Thousands)
|Predetermined interest rates          | 44,070       
|Floating or adjustable interest rates | 24,618       
|                                      | 68,688       

Risk Elements

Information with respect to nonaccrual, past due, restructured and other problem loans at December 31, 2002 and 2001 is as follows:

|                                                                       |  |    |     |    | December 31,          
|---------------------------------------------------------------------- |  | -- | --- | -- | ----------------------
|                                                                       |  |    |     |    | 2003                  
|                                                                       |  |    |     |    | (Dollars in Thousands)
|Nonaccrual loans                                                       |  |    |     |    | $ 726                 
|Loans contractually past due ninety days or more as to interest or     |  |    |     |   
|more as to interest or principal payments and still accruing           |  |    | 351 |    | 180                   
|Restructured loans                                                     |  |    |     |    | 205                   
|Potential problem loans                                                |  |    |     |    | 1,147                 
|Interest income that would have been recorded on nonaccrual and        |  |    |     |   
|restructured loans under original terms                                |  |    |     | 36 |                       
|Interest income that was recorded on nonaccrual and restructured loans |  | 10 |     | 8 

Potential problem loans are defined as loans about which we have serious doubts as to the ability of the borrower to comply with the present loan repayment terms and which may cause the loan to be placed on nonaccrual status, to become past due more than ninety days, or to be restructured.

It is our policy to discontinue the accrual of interest income when, in the opinion of management, collection of interest becomes doubtful. This status is accorded interest when (1) there is a significant deterioration in the financial condition of the borrower and full repayment of principal and interest is not expected and (2) the principal or interest is more than ninety days past due, unless the loan is both well-secured and in the process of collection.

Loans that are classified for regulatory purposes as loss, doubtful, substandard, or special mention that have not been included in the table above do not represent or result from trends or uncertainties that management reasonably expects will materially impact future operating results, liquidity, or capital resources. These classified loans do not represent material credits about which management is aware of any information that causes management to have serious doubts as to the ability of such borrowers to comply with the loan repayment terms.

SUMMARY OF LOAN LOSS EXPERIENCE

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

|                                                                            |  |         |       |         | Year Ended December 31,
|--------------------------------------------------------------------------- |  | ------- | ----- | ------- | -----------------------
|                                                                            |  |         |       |         | 2003                   
|                                                                            |  |         |       |         | (Dollars in Thousands) 
|Average amount of loans outstanding                                         |  |         |       |         | $122,142               
|                                                                            |  |         |       |         |                        
|Balance of allowance for loan losses at beginning of period                 |  | $ 1,471 |       | $ 1,196
|                                                                            |  |         |       |         |                        
|Loans charged off:                                                          |  |         |       |         |                        
|Installment loans                                                           |  |         |       |         | 101                    
|Real estate-mortgage                                                        |  |         |       |         | 2                      
|Commercial                                                                  |  |         |       |         | 33                     
|                                                                            |  |         |       |         | 136                    
|                                                                            |  |         |       |         |                        
|Loans recovered:                                                            |  |         |       |         |                        
|Installment loans                                                           |  |         |       |         | 22                     
|Real estate mortgage                                                        |  |         |       |         | 9                      
|Commercial                                                                  |  |         |       |         | 5                      
|                                                                            |  |         |       |         | 36                     
|                                                                            |  |         |       |         |                        
|Net charge-offs                                                             |  |         |       |         | 100                    
|                                                                            |  |         |       |         |                        
|Additions to allowance charged to operating expense during year             |  | 495     |       | 529    
|                                                                            |  |         |       |         |                        
|Balance of allowance for loan losses at end of year                         |  |         | 1,866 |         | 1,471                  
|                                                                            |  |         |       |         |                        
|Ratio of net loans charged off during the year to average loans outstanding |  | 0.08%   |       | 0.26%  

Allowance for Loan Losses

The allowance for loan losses is maintained at a level that is deemed appropriate by us to adequately cover all known and inherent risks in the loan portfolio. Our evaluation of the loan portfolio includes a periodic review of loan loss experience, current economic conditions that may affect the borrower's ability to pay and the underlying collateral value of the loans.

As of December 31, 2002 and 2001, our allocations of the allowance for loan losses do not specifically correspond to the categories of loans listed below. Based on our best estimate, the allocation of the allowance for loan losses to types of loans, as of the indicated dates, is as follows:

|                                       | December 31, 2003      |  | December 31, 2002                               
|-------------------------------------- | ---------------------- |  | ------------------------------------------------
|                                       | Amount                 |  | Percent of Loans in each category to total loans
|                                       | (Dollars in Thousands)
|Commercial, financial and agricultural | $ 174                  |  | 8.01%                                           
|Real estate - construction             | 215                    |  | 15.53%                                          
|Real estate - mortgage                 | 1,126                  |  | 70.19%                                          
|Consumer, installment and other        | 87                     |  | 6.27%                                           
|Specific allocation for rated loans    | 264                    |  | N/A                                             
|                                       | 1,866                  |  | 100%                                            

DEPOSITS

Average amount of deposits and average rates paid thereon, classified as to noninterest-bearing demand deposits, interest-bearing demand deposits, savings deposits, and time deposits, for the year is presented below.

|                                    |  | December 31, 2003      |  | December 31, 2002     
|----------------------------------- |  | ---------------------- |  | ----------------------
|                                    |  | Average                |  |                       
|                                    |  | Balance (1)            |  | Percent               
|                                    |  | (Dollars in Thousands) |  | (Dollars in Thousands)
|Noninterest-bearing demand deposits |  | $ 10,613               |  | -                     
|Interest-bearing demand deposits    |  | 32,403                 |  | 1.19                  
|Savings Deposits                    |  | 2,359                  |  | 1.19                  
|Time Deposits                       |  | 78,253                 |  | 3.68                  
|                                    |  | 123,628                |  |                       

(1) Average balances were determined using the daily average balances during the year.

The amounts of time certificates of deposit issued in amounts of $100,000 or more as of December 31, 2003 are shown below by category, which is based on time remaining until maturity of (1) three months or less, (2) over three through six months, (3) over six through twelve months, and (4) over twelve months.



|                                      |  | (Dollars in Thousands) | 
|------------------------------------- |  | ---------------------- | 
|Three months or less                  |  | 6,533                 
|Over three months through six months  |  | 7,861                 
|Over six months through twelve months |  | 11,393                
|Over twelve months                    |  | 19,950                
|                                      |  | 45,737                



RETURN ON ASSETS AND STOCKHOLDERS' EQUITY

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



|                           | Years Ended December 31,
|-------------------------- | ------------------------
|                           | 2003                    
|Return on assets (1)       | 0.93%                   
|Return on equity (2)       | 10.89%                  
|Dividend payout ratio (3)  | -                       
|Equity to assets ratio (4) | 8.58%                   

(1) Net income divided by average total assets.

(2) Net income divided by average equity.

(3) Dividends declared per share of common stock divided by net income per share.

(4) Average equity divided by average total assets.

Item 7. Financial Statements and Supplementary Data.

The following consolidated financial statements of the Registrant and its subsidiaries are included on Exhibit 99.1 of this Annual Report on Form 10-KSB:

Consolidated Balance Sheets - December 31, 2003 and 2002

Consolidated Statements of Earnings - December 31, 2003 and 2002

Consolidated Statements of Comprehensive Income - December 31, 2003 and 2002

Consolidated Statements of Stockholders' Equity - December 31, 2003 and 2002

Consolidated Statements of Cash Flows - December 31, 2003 and 2002

Notes to Consolidated Financial Statements

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

The principal independent accountant of the Company and of the Bank has not resigned, declined to stand for re-election, or been dismissed during the two most recent fiscal years or any later interim period.

Item 8a. Controls and Procedures.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and the Principal Financial and Accounting Officer, of the design and operation of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Principal Financial and Accounting Officer concluded that our disclosure controls and procedures are effective for gathering, analyzing and disclosing the information that we are required to disclose in the reports we file under the Securities Exchange Act of 1934, within the time periods specified in the SEC's rules and forms. Our Chief Executive Officer and Principal Financial and Accounting Officer also concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to our company required to be included in our periodic SEC filings. In connection with the new rules, we are in the process of further reviewing and documenting our disclosure controls and procedures, including our internal controls and procedures for financial reporting, and may from time to time make changes designed to enhance their effectiveness and to ensure that our system evolve with our business.

There have been no significant changes in our internal controls or in other factors that could significantly affect internal controls subsequent to the date of this evaluation and there have been no corrective actions with respect to significant deficiencies or material weaknesses.

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

Code of Ethics

A copy of the Unity Holdings, Inc. Code of Ethics is attached hereto as Exhibit 14.1 and incorporated herein by reference.

The remaining information required by this Item is incorporated by reference to the Company's definitive Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Annual Report.

Item 10. Executive Compensation.

The information required by this Item is incorporated by reference to the Company's definitive Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Annual Report.

Item 11. Security Ownership of Certain Beneficial Owners and Management

The information required by this Item is incorporated by reference to the Company's definitive Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Annual Report.

Item 12. Certain Relationships and Related Transactions.

The information required by this Item is incorporated by reference to the Company's definitive Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Annual Report.

Item 13. Exhibits, List and Reports on Form 8-K.

|(a) The following documents are filed as part of this report:
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(b) Reports on Form 8-K

The Company filed one 8-K in the fourth quarter of the year ended December 31, 2003, specifically on December 17th. The subject of the filing was the issuance of trust preferred securities by a subsidiary trust created expressly for that purpose. The 8-K filing is incorporated by reference herein.

ITEM 14. GENERAL ACCOUNTING FEES AND SERVICES.

The information required by this Item is incorporated by reference to the Company's definitive Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Annual Report.

SIGNATURES

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

UNITY HOLDINGS, INC.



Date: March 30, 2004

By: MICHAEL L. MCPHERSON

Michael L. McPherson

President and Chief Operating Officer



KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Michael L. McPherson, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities indicated on March 30, 2004.



|Signature                                     | Title                                          
|--------------------------------------------- | -----------------------------------------------
|/s/ Kenneth R. Bishop
Kenneth R. Bishop       | Director                                       
|/s/ Jerry W. Braden
Jerry W. Braden           | Director                                       
|/s/ Michael L. McPherson
Michael L. McPherson | Director, President and Chief Executive Officer
|/s/ Donald D. George
Donald D. George         | Director                                       
|/s/ John S. Lewis
John S. Lewis               | Director                                       
|/s/ Sam R. McCleskey
Sam R. McCleskey         | Director                                       
|/s/ Stephen A. Taylor
Stephen A. Taylor       | Director                                       
|/s/ B. Don Temples
B. Don Temples             | Director                                       
|/s/ Eli D. Mullis
Eli D. Mullis               | Chief Financial and Accounting Officer         
|                                              |                                                



EXHIBIT 31.1

CERTIFICATIONS PURSUANT TO RULE 13a-14(a)/15d-14(a) UNDER THE

SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

|I, Michael L. McPherson, Chief Executive Officer, certify that:
|---------------------------------------------------------------
|                                                               
|1.                                                             
|2.                                                             
|3.                                                             
|4.                                                             
|                                                               
|                                                               
|                                                               
|5.                                                             
|                                                               
|                                                               
|                                                               

March 30, 2004

MICHAEL L. MdPHERSON

MICHAEL L. McPHERSON

Chief Executive Officer

EXHIBIT 31.2

CERTIFICATIONS PURSUANT TO RULE 13a-14(a)/15d-14(a) UNDER THE

SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

|I, Eli D. Mullis, Chief Financial and Accounting Officer, certify that:
|-----------------------------------------------------------------------
|                                                                       
|1.                                                                     
|2.                                                                     
|3.                                                                     
|4.                                                                     
|                                                                       
|                                                                       
|                                                                       
|5.                                                                     
|                                                                       
|                                                                       
|                                                                       



March 30, 2004

ELI D. MULLIS

ELI D. MULLIS

Chief Financial and Accounting Officer



INDEX TO EXHIBITS

|Exhibit Number | Description
|-------------- | -----------
|               | 11.1       
|               |            
|               | 14.1       
|               |            
|               | 31.1       
|               |            
|               | 31.2       
|               |            
|               | 32.1       
|               |            
|               | 99.1       
|               |            

EXHIBIT NO. 11.1

STATEMENT OF COMPUTATION OF EARNINGS PER SHARE





|                                            | Years Ended December 31,
|------------------------------------------- | ------------------------
|                                            | 2003                    
|Basic Earnings Per Share:                   |                         
|Weighted average common shares outstanding  |                         
|                                            |                         
|Net income                                  | $                       
|                                            |                         
|Basic earnings per share                    | $                       
|                                            |                         
|Diluted Earnings Per Share:                 |                         
|Weighted average common shares outstanding  |                         
|Net effect of the assumed exercise of stock |                         
|options based on the treasury stock method  |                         
|using average market prices for the year    |                         
|Total weighted average common shares and    |                         
|common stock equivalents outstanding        |                         
|                                            |                         
|Net income                                  | $                       
|                                            |                         
|Diluted earnings per share                  | $                       

EXHIBIT NO. 14.1

Unity National Bank

Code of Ethics

(As taken from the Conflict of Interest section of the Employee Handbook)

Unity National Bank Directors, Executive Officers and employees must at all times observe the highest standards of business ethics and conduct their personal business affairs in such a manner as to avoid any possible conflict of interest with their duties and responsibilities as members of the Unity National Bank organization.

This policy statement relates to Bank policy concerning investments in and personal dealing with individuals and business organizations doing business or seeking to do business with Unity National Bank, proper accounting of funds and assets of the Bank, confidences, providing and acceptance of gift or other benefits, political activities of the Bank and the relationship of the Bank with Bank regulators. Individuals and organizations doing business with Unity National Bank include not only regular customers but also those who furnish facilities and services, such as insurance companies and agents, real estate and business brokers, advertising agencies and media representatives, printers, security dealers and brokers, architects, attorneys, accountants, engineers, contractors and consultants.

All Directors, Executive Officers and Employees of Unity National Bank must comply with the following requirements. The term "Bank" or "Company" when used hereafter refers to Unity National Bank.

|Personal Finances and Business Dealings
|---------------------------------------
|1.                                     
|2.                                     
|3.                                     
|4.                                     
|5.                                     
|6.                                     
|Business and Family Relationships      
|1.                                     
|2.                                     
|Confidences                            
|1.                                     
|2.                                     
|3.                                     

Use of the Unity National Bank Name

No Director, Executive Officer or Employee should, unless authorized, through activities, statements or otherwise, represent or imply Bank sponsorship or approval of any political, social, religious or business activity or cause.

|Providing and Acceptance of Gifts or Other Benefits
|---------------------------------------------------
|1.                                                 
|2.                                                 

Indirect Conflicts

Investments and dealings prohibited to Bank Directors, Executive Officers or Employees should be avoided by the members of the employee's family who act on the information or advice of the employee. Such members include the employee's spouse, children and their spouses, brothers and sisters, and their spouse's parents and parents-in-law.

|Corporate Funds                  
|---------------------------------
|1.                               
|2.                               
|Political Activities             
|1.                               
|2.                               
|Relationship with Bank Regulators
|1.                               
|2.                               

Other

At any time, every Officer and Employee should feel free and is urged to present to the Bank for determination any particular investment or relationship which he/she would like to have reviewed for compliance with the letter and spirit of this policy statement. Such inquiries should be made to the Bank's compliance officer.

Arms-Length Transactions

All business deals to include the purchase or sale of fixed assets and bank services between the bank and Directors, their related interests or employees should be made in the regular course of business upon terms not less favorable to the bank than those offered to others, or when such purchase is authorized by a majority of the Board not interested in the sale of such property or services, and the authority is evidenced by the affirmative vote of written assent of these directors.

Usurpation of Corporate Opportunities

No Employee, Executive Officer or Director shall take for himself an opportunity that belongs to the bank. Whenever the bank has been seeking a particular business opportunity, or the opportunity has been offered to it, or bank funds, facilities or personnel have been used in developing the opportunity, the opportunity shall rightfully be that of the Bank.

Regulation O - Disclosure of Related Interests

According to Regulation O of the Board of Governors of the Federal Reserve System which deals with loans to Executive Officers, Directors and Principal Shareholders, all Directors and Executive Officer are required to identify on an annual basis (or more frequently if requested by the OCC) all "related interests".

The definition of "related interests"comes directly from the Federal Reserve Manual. A "related interest" means any company controlled by a person or any political or campaign committee the funds or services of which will benefit a person or that is controlled by a person.

"Company controlled" means that a person directly or indirectly:



|1. | Owns, controls, or has the power to vote 25% or more of any class of voting securities of the company                                                                                                                                                                                                                              
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | Controls in any manner the election of a majority of the directors of the company,                                                                                                                                                                                                                                                 
|3. | Has the power to exercise a controlling influence over the management of policies of the company.                                                                                                                                                                                                                                  
|A. | A person is presumed to have control, including the power to exercise a controlling influence over the management or policies of a company if the person is an Executive Officer or Director and directly or indirectly owns, controls, or has the power to vote more than 10% of any class of voting securities of the company, or
|B. | The person directly or indirectly owns, controls, or has the power to vote more than 10% of any class voting securities of the company and no other person owns, controls, or has the power to vote a greater percentage of that class of voting securities.                                                                       



Outside Employment

Employees should seek guidance and/or approval from their immediate supervisor before engaging in any activity that might be construed as prohibited.

Loan to Directors and Principal Shareholders and Executive Officers

It is the policy of Unity National Bank not to grant loans or extensions of credit to Directors, Principle Shareholders or Executive Officers with terms or conditions more favorable than those offered to other borrowers. The loans/extensions of credit to Directors, Principal Shareholders and Executive Officers require prior approval by the Board where the amount exceeds 5% of capital in the aggregate with the interested party abstaining from participating directly or indirectly in the voting. Loans shall not exceed 15% of the bank's capital and surplus, or the in-house lending limits to which the bank is subject, whichever is less. Loans must be reported to the next Board of Directors meeting and will be subject to normal review. The terms of any such loans will not be different from those granted on similar transaction by the Bank with its regular loan customers and shall not present more than the normal risk of repayment nor contain any other unfavorable feature.

The Bank may not pay an overdraft on the account of a Director. This rule does not include payment of funds under a written pre-authorized, interest bearing extension of credit plan that specifies a method of repayment. However, the Bank may pay inadvertent overdrafts on an account of a Director in an aggregate amount of $1,000 or less, provided the account is not overdrawn for more than three business days and the Bank charges the Director, Principal Shareholder or Employee the same fee charged any other customer of the Bank in similar circumstances.

The Board of Directors shall be provided, at their monthly meeting, a report of all extensions of credit to Executive Officers, Directors and their related interests.

All loans to Directors, Executive Officers or Employees will comply with the Federal Reserve Regulation O and the Georgia Department of Banking and Finance Regulations.

Deposit Relationships with Directors, Shareholders, and Executive Officers

The Bank shall not pay to any Director, Officer, Attorney, or Employee a greater rate of interest on the deposits of such Director, Officer, Attorney, or Employee than that paid to other depositors on similar deposits with such member banks.

Exhibit 32.1



CERTIFICATION OF CEO AND CFO PURSUANT TO

18 U.S.C. Section 1350,

AS ADOPTED PURSUANT TO

Sect. 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Form 10-KSB of Unity Holdings, Inc. (the "Company") for the year ending December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report)", Michael L. McPherson, Chief Executive Officer of the Company, and Eli D. Mullis, Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of his/her knowledge that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

MICHAEL L. McPHERSON

MICHAEL L. McPHERSON

Chief Executive Officer

March 30, 2004



ELI D. MULLIS

ELI D. MULLIS

Chief Financial and Accounting Officer

March 30, 2004





This certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.