<PAGE>


                                   EXHIBIT 13
<PAGE>

                       HABERSHAM BANCORP AND SUBSIDIARIES

                        Consolidated Financial Statements

                           December 31, 2001 and 2000

                   (With Independent Auditors' Report Thereon)
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Habersham Bancorp:

We have audited the accompanying consolidated balance sheets of Habersham
Bancorp and subsidiaries (the Company) as of December 31, 2001 and 2000 and the
related consolidated statements of income, shareholders' equity and
comprehensive income, and cash flows for each of the years in the three-year
period ended December 31, 2001. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Habersham Bancorp
and subsidiaries at December 31, 2001 and 2000 and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2001 in conformity with accounting principles generally
accepted in the United States of America.

As discussed in note 2 to the consolidated financial statements, the Company
changed its method of accounting for derivative instruments in 2001.


/s/ KPMG LLP
--------------------
KPMG LLP


Atlanta, Georgia
February 1, 2002
<PAGE>

                       HABERSHAM BANCORP AND SUBSIDIARIES
                           Consolidated Balance Sheets
                           December 31, 2001 and 2000

<TABLE>
<CAPTION>
                                    ASSETS                                    2001                    2000
                                                                          -------------           ------------
<S>                                                                       <C>                       <C>
Cash and due from banks (note 4)                                          $  16,550,323             13,565,897
Investment securities available for sale (note 5)                            47,620,391             42,986,274
Investment securities held to maturity (estimated fair
     values of $9,767,274 in 2001 and $13,044,717 in 2000) -
     (note 6)                                                                 9,646,138             13,124,402
Other investments (notes 7 and 13)                                            9,604,106             10,133,924
Loans held for sale                                                         115,463,760             59,714,160
Loans (notes 8, 13, and 20)                                                 325,063,726            382,135,489
    Less allowance for loan losses (note 8)                                  (3,835,811)            (3,454,007)
                                                                          -------------           ------------
                 Loans, net                                                 321,227,915            378,681,482
                                                                          -------------           ------------
Premises and equipment, net (note 9)                                          8,739,776              9,219,733
Accrued interest receivable                                                   2,886,423              3,879,325
Other real estate (note 10)                                                   5,104,658              2,368,559
Goodwill and other intangible assets, net of accumulated
     amortization of $1,701,800 in 2001 and $1,529,712 in 2000 -
     (note 3)                                                                 2,507,713              2,679,801
Other assets (note 14)                                                        7,151,733              6,754,748



                                                                          -------------           ------------
                 Total assets                                             $ 546,502,936            543,108,305
                                                                          =============           ============
</TABLE>

See accompanying notes to consolidated financial statements


                                       2
<PAGE>

<TABLE>
<CAPTION>

                     LIABILITIES AND SHAREHOLDERS' EQUITY                         2001           2000
                                                                              ------------   ------------
<S>                                                                           <C>              <C>
Deposits (notes 11 and 20):
     Noninterest-bearing demand                                               $ 31,136,412     27,786,744
     Money market and NOW accounts                                              61,122,544     47,362,669
     Savings                                                                     7,380,280      7,306,451
     Time ($100,000 and over)                                                   79,832,236     83,268,118
     Other time                                                                156,888,814    175,308,308
                                                                              ------------   ------------
                 Total deposits                                                336,360,286    341,032,290

Short-term borrowings (note 11)                                                    269,446        849,855
Other borrowings (note 11)                                                       5,773,000      1,950,000
Federal funds purchased and securities sold
     under repurchase agreements (note 12)                                      30,450,666     35,995,395
Federal Home Loan Bank advances (note 13)                                      100,415,644    108,094,938
Accrued interest payable                                                         3,377,728      4,375,172
Other liabilities                                                               25,873,840     12,059,538
                                                                              ------------   ------------
                 Total liabilities                                             502,520,610    504,357,188
                                                                              ------------   ------------
Shareholders' equity (notes 15 and 17):
     Common stock, $1.00 par value; 10,000,000 shares
        authorized; 2,698,746 shares issued and outstanding                      2,698,746      2,698,746
     Additional paid-in capital                                                 12,417,064     12,417,064
     Retained earnings                                                          28,361,211     23,666,118
     Accumulated other comprehensive income (loss)                                 505,305        (30,811)
                                                                              ------------   ------------
                 Total shareholders' equity                                     43,982,326     38,751,117

Commitments (notes 8 and 9)
                                                                              ------------   ------------
                 Total liabilities and shareholders' equity                   $546,502,936    543,108,305
                                                                              ============   ============
</TABLE>


                                       3
<PAGE>

                       HABERSHAM BANCORP AND SUBSIDIARIES
                        Consolidated Statements of Income
                  Years ended December 31, 2001, 2000, and 1999

<TABLE>
<CAPTION>
                                                                                2001              2000              1999
                                                                            ------------       -----------       -----------
<S>                                                                         <C>                 <C>               <C>
Interest income:
    Loans                                                                   $ 37,617,280        37,982,792        28,487,996
    Investments:
       Taxable securities                                                      1,902,153         1,943,371         1,844,174
       Tax exempt securities                                                   1,012,499         1,174,087         1,186,506
       Other investments                                                         689,773           712,639           506,235
    Federal funds sold                                                            55,009            13,119           119,229
                                                                            ------------       -----------       -----------
               Total interest income                                          41,276,714        41,826,008        32,144,140
                                                                            ------------       -----------       -----------
Interest expense:
    Time deposits, $100,000 and over                                           5,189,132         5,158,051         3,441,025
    Other deposits                                                            11,869,731        11,922,850         9,113,763
    Federal funds purchased and securities sold under
        repurchase agreements                                                    448,720         1,180,078           559,299
    Short-term and other borrowings, primarily FHLB advances                   5,659,671         6,659,672         3,402,819
                                                                            ------------       -----------       -----------
               Total interest expense                                         23,167,254        24,920,651        16,516,906
                                                                            ------------       -----------       -----------
               Net interest income                                            18,109,460        16,905,357        15,627,234

Provision for loan losses (note 8)                                             1,605,258         1,295,445           985,800
                                                                            ------------       -----------       -----------
               Net interest income after provision for loan losses            16,504,202        15,609,912        14,641,434
                                                                            ------------       -----------       -----------
Noninterest income:
    Gain on sale of loans                                                     23,632,431        12,717,857         9,818,658
    Loan fee income                                                            3,740,044         2,551,383         2,892,289
    Brokerage fee income                                                         536,418         1,202,805           584,965
    Service charges on deposit accounts                                          677,668           713,672           665,859
    Other service charges and commissions                                        282,102           330,630           295,615
    Securities gains, net (note 5)                                               191,033            36,524            19,898
    Realized gain on trading securities                                               --                --             7,378
    Unrealized loss on trading securities                                             --          (306,200)       (1,190,820)
    Equity in earnings of investee (note 7)                                      120,336           153,348           211,279
    Travel service income                                                             --                --           765,858
    Gain on change in fair value of forward commitments to
       sell mortgage-backed securities                                           235,000                --                --
    Other income                                                               1,817,092         1,697,856         1,406,511
                                                                            ------------       -----------       -----------
               Total noninterest income                                       31,232,124        19,097,875        15,477,490
                                                                            ------------       -----------       -----------
Noninterest expense:
    Salaries and employee benefits (note 17)                                  28,279,614        20,259,504        18,225,097
    Occupancy expenses                                                         3,164,747         3,316,001         3,010,796
    Travel service expense                                                            --                --           684,818
    Computer services                                                            720,894           597,180           516,616
    Provision for losses on other real estate owned                              511,345                --            89,348
    Other (note 18)                                                            7,081,509         6,257,999         5,890,773
                                                                            ------------       -----------       -----------
               Total noninterest expense                                      39,758,109        30,430,684        28,417,448
                                                                            ------------       -----------       -----------
               Income before income taxes                                      7,978,217         4,277,103         1,701,476

Income tax expense (benefit) - (note 14)                                       2,473,041         1,249,795           (52,493)
                                                                            ------------       -----------       -----------
               Income before cumulative effect of change
                 in accounting principle                                       5,505,176         3,027,308         1,753,969
Cumulative effect of change in accounting
    principle, net of tax                                                       (162,385)               --                --
                                                                            ------------       -----------       -----------
               Net income                                                   $  5,342,791         3,027,308         1,753,969
                                                                            ============       ===========       ===========
</TABLE>


                                       4                             (Continued)
<PAGE>

                       HABERSHAM BANCORP AND SUBSIDIARIES
                        Consolidated Statements of Income
                  Years ended December 31, 2001, 2000, and 1999

<TABLE>
<CAPTION>
                                                                                2001              2000              1999
                                                                            ------------       -----------       -----------
<S>                                                                         <C>                 <C>               <C>
Income before cumulative effect of change in
    accounting principle per common share - basic                           $       2.04              1.12              0.67
Cumulative effect of change in accounting principle
    per common share - basic                                                       (0.06)               --                --
                                                                            ------------       -----------       -----------
               Net income per common share - basic                          $       1.98              1.12              0.67
                                                                            ============       ===========       ===========
Income before cumulative effect of change in
    accounting principle per common share - diluted                         $       2.02              1.12              0.67
Cumulative effect of change in accounting principle
    per common share - diluted                                                     (0.06)               --                --
                                                                            ------------       -----------       -----------
               Net income per common share - diluted                        $       1.96              1.12              0.67
                                                                            ============       ===========       ===========
Weighted average number of common shares outstanding                           2,698,746         2,698,746         2,609,360
Weighted average number of common and common
    equivalent shares outstanding                                              2,729,291         2,699,949         2,609,360
</TABLE>


See accompanying notes to consolidated financial statements.


                                       5
<PAGE>

                       HABERSHAM BANCORP AND SUBSIDIARIES
    Consolidated Statements of Shareholders' Equity and Comprehensive Income
                  Years ended December 31, 2001, 2000, and 1999

<TABLE>
<CAPTION>
                                                                                                                       ADDITIONAL
                                                                               COMPREHENSIVE        COMMON               PAID-IN
                                                                                   INCOME            STOCK               CAPITAL
                                                                              --------------      -----------          ----------
<S>                                                                           <C>                 <C>                  <C>
Balance at December 31, 1998                                                                      $ 2,448,267           9,444,576
Comprehensive income:
    Net income                                                                $    1,753,969               --                  --
    Unrealized losses on investment securities, net of taxes (note 16)            (1,236,754)              --                  --
                                                                              --------------
              Total comprehensive income                                      $      517,215
                                                                              ==============
Cash dividends, $0.20 per share                                                                            --                  --
Issuance of common stock in business acquisition                                                      207,713           2,640,170
Purchase and retirement of common stock                                                               (10,500)           (153,560)
Issuance of common stock upon exercise of stock options                                                53,266             485,878
                                                                                                  -----------          ----------
Balance at December 31, 1999                                                                        2,698,746          12,417,064
Comprehensive income:
    Net income                                                                $    3,027,308               --                  --
    Unrealized gain on investment securities, net of taxes (note 16)                 942,827               --                  --
                                                                              --------------
              Total comprehensive income                                      $    3,970,135
                                                                              ==============
Cash dividends, $0.24 per share                                                                            --                  --
                                                                                                  -----------          ----------
Balance at December 31, 2000                                                                        2,698,746          12,417,064
Comprehensive income:
    Net income                                                                $    5,342,791               --                  --
    Unrealized gains on investment securities, net of taxes (note 16)                536,116               --                  --
                                                                              --------------
              Total comprehensive income                                      $    5,878,907
                                                                              ==============
Cash dividends, $0.24 per share                                                                            --                  --
                                                                                                  -----------          ----------
Balance at December 31, 2001                                                                      $ 2,698,746          12,417,064
                                                                                                  ============         ==========

<CAPTION>
                                                                                                 ACCUMULATED
                                                                                                    OTHER
                                                                                RETAINED        COMPREHENSIVE
                                                                                EARNINGS        INCOME (LOSS)             TOTAL
                                                                               ----------       -------------          ----------
<S>                                                                            <C>              <C>                    <C>
Balance at December 31, 1998                                                   20,057,968            263,116           32,213,927
Comprehensive income:
    Net income                                                                  1,753,969                 --            1,753,969
    Unrealized losses on investment securities, net of taxes (note 16)                 --         (1,236,754)          (1,236,754)

              Total comprehensive income

Cash dividends, $0.20 per share                                                  (525,428)                --             (525,428)
Issuance of common stock in business acquisition                                       --                 --            2,847,883
Purchase and retirement of common stock                                                --                 --             (164,060)
Issuance of common stock upon exercise of stock options                                --                 --              539,144
                                                                               ----------         ----------           ----------
Balance at December 31, 1999                                                   21,286,509           (973,638)          35,428,681
Comprehensive income:
    Net income                                                                  3,027,308                 --            3,027,308
    Unrealized gain on investment securities, net of taxes (note 16)                   --            942,827              942,827

              Total comprehensive income

Cash dividends, $0.24 per share                                                  (647,699)                --             (647,699)
                                                                               ----------         ----------           ----------
Balance at December 31, 2000                                                   23,666,118            (30,811)          38,751,117
Comprehensive income:
    Net income                                                                  5,342,791                 --            5,342,791
    Unrealized gains on investment securities, net of taxes (note 16)                  --            536,116              536,116

              Total comprehensive income

Cash dividends, $0.24 per share                                                  (647,698)                --             (647,698)
                                                                               ----------         ----------           ----------
Balance at December 31, 2001                                                   28,361,211            505,305           43,982,326
                                                                               ==========         ==========           ==========
</TABLE>

See accompanying notes to consolidated financial statements


                                       6
<PAGE>

                       HABERSHAM BANCORP AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                  Years ended December 31, 2001, 2000, and 1999

<TABLE>
<CAPTION>
                                                                                2001                  2000                 1999
                                                                          ---------------         ------------         ------------
<S>                                                                       <C>                     <C>                  <C>
Cash flows from operating activities:
    Net income                                                            $     5,342,791            3,027,308            1,753,969
    Cumulative effect of change in accounting principle                           162,385                   --                   --
    Adjustments to reconcile net income to net cash (used in)
       provided by operating activities:
         Provision for loan losses                                              1,605,258            1,295,445              985,800
         Provision for loss on other real estate owned                            511,345                   --               89,348
         Depreciation expense                                                   1,332,890            1,279,120            1,277,252
         Gain on sale of premises and equipment                                   (19,302)              (2,845)                  --
         Gain on sale of securities                                              (191,033)             (36,524)             (19,898)
         Gain on change in fair value of forward commitments
            to sell mortgage-backed securities                                   (235,000)                  --                   --
         Write-down of other investment                                                --                   --                1,000
         Unrealized holding loss on trading securities                                 --              306,200            1,190,820
         Equity in earnings of investee                                          (120,336)            (153,348)            (211,279)
         Proceeds from sale of trading securities                                      --                   --              597,378
         Gain on sale of trading securities                                            --                   --               (7,378)
         Loss (gain) on sale of other real estate                                  75,150               19,750               (9,887)
         Net gain on sale of loans                                            (23,632,431)         (12,717,857)          (9,818,658)
         Amortization of intangible assets                                        257,300              297,653              518,834
         Deferred income tax expense (benefit)                                    433,117             (127,552)            (760,613)
         Proceeds from sale of loans held for sale                          1,187,970,103          620,733,810          577,364,770
         Net increase in loans held for sale                               (1,221,501,304)        (619,645,307)        (543,784,495)
         Changes in assets and liabilities:
            Decrease (increase)  in accrued interest receivable                   992,902           (1,027,200)            (552,133)
            (Increase) decrease in other assets                                  (883,669)            (607,287)           1,066,565
            (Decrease) increase in accrued interest payable                      (997,444)           1,199,488                7,373
            Increase (decrease) in other liabilities                           13,814,302            5,291,499           (4,815,528)
                                                                          ---------------         ------------         ------------
               Net cash (used in) provided by operating activities            (35,082,976)            (867,647)          24,873,240
                                                                          ---------------         ------------         ------------
Cash flows from investing activities:
    Investment securities available for sale:
       Proceeds from maturity                                                   7,756,772            5,920,620            9,377,232
       Proceeds from sale and calls                                            10,533,516            2,439,787            5,663,079
       Purchases                                                              (20,922,074)          (9,653,285)          (9,373,851)
Investment securities held to maturity:
   Proceeds from maturity                                                       2,479,264            1,576,050            1,607,827
   Purchases                                                                           --             (498,750)            (198,966)
Other investments:
   Proceeds from sale                                                          11,881,600              711,600            7,854,400
   Purchases                                                                  (11,378,700)          (3,251,400)          (8,205,574)
Business acquisitions                                                                  --                   --             (390,031)
Loans:
   Proceeds from sale of loans                                                110,783,850           16,820,426           36,443,223
   Net increase in loans                                                      (57,550,304)         (83,638,855)        (144,980,474)
Purchases of premises and equipment                                              (886,851)          (1,568,405)          (1,751,531)
Proceeds from sales of premises and equipment                                      53,220                2,845                   --
Dividends received from other investment                                           62,042               27,575                   --
Purchase of company-owned life insurance                                         (150,000)                  --             (300,000)
Net additions of other real estate                                               (364,061)                  --                   --
Proceeds from sale of other real estate                                         1,070,262              356,603              450,457
                                                                          ---------------         ------------         ------------
           Net cash provided by (used in) investing activities                 53,368,536          (70,755,189)        (103,804,209)
                                                                          ---------------         ------------         ------------
</TABLE>


                                       7                             (Continued)
<PAGE>

                       HABERSHAM BANCORP AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                  Years ended December 31, 2001, 2000, and 1999

<TABLE>
<CAPTION>
                                                                                2001                  2000                 1999
                                                                          ---------------         ------------         ------------
<S>                                                                       <C>                     <C>                  <C>
Cash flows from financing activities:
    Net (decrease) increase in deposits                                   $    (4,672,004)          23,611,981           36,967,010
    Net (decrease) increase in short-term borrowings                             (580,409)             157,670              552,526
    Proceeds from other borrowings                                              4,000,000                   --                   --
    Repayment of other borrowings                                                (177,000)                  --             (750,000)
    Net (decrease) increase in federal funds purchased and
       securities sold under repurchase agreements                             (5,544,729)          16,705,395           19,290,000
    (Repayment of) proceeds from Federal Home Loan Bank
       advances, net                                                           (7,679,294)          30,844,103           23,440,264
    Payment of cash dividends                                                    (647,698)            (647,699)            (525,428)
    Purchase and retirement of common stock                                            --                   --             (164,060)
    Issuance of common stock upon exercise of stock options                            --                   --              539,144
                                                                          ---------------         ------------         ------------
               Net cash (used in) provided by financing activities            (15,301,134)          70,671,450           79,349,456
                                                                          ---------------         ------------         ------------
               Increase (decrease) in cash and cash equivalents                 2,984,426             (951,386)             418,487

Cash and cash equivalents at beginning of year                                 13,565,897           14,517,283           14,098,796
                                                                          ---------------         ------------         ------------
Cash and cash equivalents at end of year                                  $    16,550,323           13,565,897           14,517,283
                                                                          ===============         ============         ============
Supplemental disclosures of cash flow information:
    Cash paid during the year for:
       Interest                                                           $    24,164,698           23,721,163           16,509,533
       Income taxes                                                             1,148,510            1,400,000              515,000
Supplemental disclosures of noncash investing activities:
    Other real estate acquired through loan foreclosures                  $     4,223,795            1,439,774              870,701
    Loans granted to facilitate the sale of other real estate                     195,000              365,945              209,600
    Unrealized gain (loss) on investment securities available
       for sale, net of tax effect                                                536,116              942,827           (1,236,754)
    Common stock issued for purchase of CB Financial Corp.
       common stock                                                                    --                   --            2,847,883
    Transfer of trading securities to available for sale                               --            1,408,520                   --
    Transfer of held to maturity securities to available for sale
       upon adoption of SFAS No. 133                                              999,000                   --                   --
</TABLE>

See accompanying notes to consolidated financial statements


                                       8
<PAGE>

(1)      ORGANIZATION AND BASIS OF PRESENTATION

         The consolidated financial statements of Habersham Bancorp and
         subsidiaries (the Company) include the financial statements of
         Habersham Bancorp and its wholly owned subsidiaries: Habersham Bank
         (the Bank) and The Advantage Group, Inc. The following are wholly owned
         subsidiaries of the Bank: BancMortgage Financial Corp. (BancMortgage),
         Advantage Insurers, Inc. and Appalachian Travel Service, Inc. All
         intercompany accounts and transactions have been eliminated in
         consolidation.

         Effective June 30, 1999, the Company consolidated the charters of
         Habersham Bank and Security State Bank, a former separate subsidiary.
         As a result, the assets and liabilities of Security State Bank now are
         maintained as a division of Habersham Bank. Effective September 30,
         1999, the Bank ceased operations of its travel agency subsidiary,
         Appalachian Travel Service, Inc. Net income of such business for all
         periods presented is not significant.

         During 1999, BancMortgage formed a wholly owned subsidiary,
         BancMortgage Reinsurance Ltd., a reinsurance company incorporated in
         Turks and Caicos. The subsidiary provides reinsurance to companies
         offering private mortgage insurance.

         The Company's primary business is the operation of banks in rural and
         suburban communities in Habersham, White, Cherokee, and Warren counties
         in Georgia and of a full-service, single-family mortgage and
         construction lender located primarily in the north Atlanta metropolitan
         area. The Company also does business in the mid-Atlantic area as
         BancFinancial Services Corporation, which specializes in subprime
         mortgage lending. The Company's primary source of revenue is providing
         loans to businesses and individuals in its market area.

         (A)      USE OF ESTIMATES

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

                  Material estimates that are particularly susceptible to
                  significant change in the near term relate to the
                  determination of the allowance for loan losses and the
                  valuation of real estate acquired in connection with
                  foreclosures or in satisfaction of loans. In connection with
                  the determination of the allowance for loan losses and the
                  valuation of other real estate, management obtains independent
                  appraisals for significant properties. A substantial portion
                  of the Company's loans is secured by real estate in the
                  Atlanta, Georgia metropolitan area and in Habersham and
                  Cherokee Counties. Accordingly, the ultimate collectibility of
                  a substantial portion of the Company's loan portfolio is
                  susceptible to changes in real estate market conditions in
                  these areas.

         (B)      INTEREST RATE RISK

                  The Company's assets and liabilities are generally monetary in
                  nature and interest rates have an impact on the Company's
                  performance. The Company decreases the effect of interest
                  rates on its performance by striving to match maturities and
                  interest sensitivity between loans, investment securities,
                  deposits, and other borrowings. However, a significant change
                  in interest rates could have an effect on the Company's
                  results of operations.
<PAGE>

(2)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         The accounting and reporting policies of the Company conform with
         accounting principles generally accepted in the United States of
         America and with general practice within the banking industry. The
         following is a summary of the more significant accounting policies:

         (A)      CASH AND CASH EQUIVALENTS

                  For purposes of reporting cash flows, cash and cash
                  equivalents include cash on hand, amounts due from banks, and
                  Federal funds sold. Federal funds are generally sold for
                  one-day periods.

         (B)      INVESTMENT SECURITIES

                  The Company classifies its investment securities into one of
                  three categories: available for sale, held to maturity, or
                  trading.

                  Investment securities classified as available for sale are
                  carried at fair value. The related unrealized gain or loss,
                  net of deferred income taxes, is included as a separate
                  component of shareholders' equity. Gains and losses from
                  dispositions are based on the net proceeds and the adjusted
                  carrying amounts of the securities sold, using the specific
                  identification method.

                  Investment securities classified as held to maturity are
                  stated at cost, adjusted for amortization of premiums and
                  accretion of discounts. The Company has the intent and ability
                  to hold these investment securities to maturity.

                  Investment securities that are bought and held principally for
                  the purpose of selling them in the near term are classified as
                  trading securities. Unrealized holding gains and losses are
                  included in earnings.

                  Purchase premiums and discounts on investment securities are
                  amortized and accreted to interest income using the level
                  yield method on the outstanding principal balances, taking
                  into consideration prepayment assumptions.

                  A decline in the fair value of any security below cost that is
                  deemed other than temporary is charged to income resulting in
                  the establishment of a new cost basis for the security.

         (C)      OTHER INVESTMENTS

                  Other investments are primarily comprised of stock of the
                  Federal Home Loan Bank of Atlanta and an investment in common
                  stock of CB Financial Corp., a bank holding company, which is
                  not publicly traded.

                  Investment in stock of a Federal Home Loan Bank is required of
                  every federally insured institution that utilizes its
                  services. Federal Home Loan Bank stock is considered
                  restricted stock, as defined in Statement of Financial
                  Accounting Standards (SFAS) No. 115; accordingly, the
                  provisions of SFAS No. 115 are not applicable to this
                  investment. The Federal Home Loan Bank stock is reported in
                  the consolidated financial statements at cost. Dividend income
                  is recognized when earned.

                  The Company's investment in CB Financial Corp. is accounted
                  for using the equity method. Under the equity method, the
                  investment was initially recorded at cost. Subsequently, the
                  carrying amount of the investment is increased to reflect the
                  Company's share of income of the investee and reduced to
                  reflect the Company's share of losses of the investee or
                  dividends received from the investee.
<PAGE>

         (D)      DERIVATIVE INSTRUMENTS

                  The Company adopted SFAS No. 133, "Accounting for Derivative
                  Instruments and Hedging Activities," as amended, on January 1,
                  2001. In accordance with the transition provisions of SFAS No.
                  133, the Company recorded a net-of-tax cumulative effect loss
                  of $162,000 on January 1, 2001 to reflect the fair value of
                  its forward commitments to sell mortgage-backed securities.
                  The provisions of SFAS No. 133 allow for a one-time transfer
                  of investment securities previously classified as held to
                  maturity to available for sale upon adoption. As a result, the
                  Company transferred approximately $999,000 of investment
                  securities previously classified as held to maturity to its
                  available for sale portfolio on January 1, 2001.

                  In the normal course of business, the Company extends interest
                  rate lock commitments to borrowers who apply for loan funding
                  and meet certain credit and underwriting criteria. Such
                  commitments are typically for short terms. With the exception
                  of such commitments to originate fixed-rate mortgage loans for
                  resale and forward commitments to sell mortgage-backed
                  securities, the Company does not hold any derivative
                  instruments.

                  The Company's objective in entering into forward commitments
                  to sell mortgage-backed securities is to mitigate the interest
                  rate risk associated with mortgage loans held for sale and
                  commitments to originate fixed-rate mortgage loans for resale.
                  If the fair value of the Company's commitments to originate
                  fixed-rate mortgage loans for resale results in an asset, such
                  asset is recorded only to the extent of losses in the forward
                  commitments to sell mortgage-backed securities. Losses are
                  recorded on the Company's commitments to originate fixed-rate
                  mortgage loans for resale when fair values are less than the
                  carrying values. The Company records its forward commitments
                  to sell mortgage-backed securities at fair value and does not
                  account for these as hedges.

         (E)      LOANS HELD FOR SALE

                  Mortgage loans held for sale are carried at the lower of cost
                  or market determined on an aggregate basis. Market values are
                  determined on the basis of open purchase commitments from
                  independent buyers for committed loans. For uncommitted loans,
                  market is determined on the basis of relevant delivery prices
                  in the secondary mortgage market. At December 31, 2001 and
                  2000, there were no valuation allowances relating to mortgage
                  loans held for sale.

         (F)      LOANS

                  Loans are stated at the amount of unpaid principal, reduced by
                  unearned income and the allowance for loan losses. Unearned
                  income, primarily arising from discount basis installment
                  loans, is recognized as interest income over the terms of the
                  loans by the interest method.

                  Interest on loans is generally recorded over the term of the
                  loans using the simple interest method on the unpaid principal
                  balance. Accrual of interest is discontinued when either
                  principal or interest becomes 90 days past due, unless the
                  loan is both well secured and in the process of collection, or
                  when in management's opinion, reasonable doubt exists as to
                  the full collection of interest or principal. Income on such
                  loans is then recognized only to the extent that cash is
                  received and where the future collection of principal is
                  probable.

                  Loan origination fees and certain direct origination costs are
                  deferred and capitalized, respectively, and recognized over
                  the life of the loan as an adjustment of the yield on the
                  related loan based on the interest method.

                  Impaired loans are measured based on the present value of
                  expected future cash flows, discounted at the loan's effective
                  interest rate, or at the loan's observable market price, or
                  the fair value of the collateral if the loan is collateral
                  dependent. Loans that are determined to be impaired require a
<PAGE>

                  valuation allowance equivalent to the amount of the
                  impairment. The valuation allowance is established through the
                  provision for loan losses.

                  A loan is considered impaired when, based on current
                  information and events, it is probable that the Company will
                  be unable to collect all amounts due according to the
                  contractual terms of the note agreement. Cash receipts on
                  impaired loans which are accruing interest are applied to
                  principal and interest under the contractual terms of the loan
                  agreement. Cash receipts on impaired loans for which the
                  accrual of interest has been discontinued are applied to
                  reduce the principal amount of such loans until the required
                  principal payments have been brought current and, if the
                  future collection of principal is probable, are recognized as
                  interest income thereafter.

         (G)      ALLOWANCE FOR LOAN LOSSES

                  The allowance for loan losses is maintained at a level
                  estimated to be adequate to provide for probable losses in the
                  loan portfolio. Management follows a consistent procedural
                  discipline and accounts for loan loss contingencies in
                  accordance with SFAS No. 5, "Accounting for Contingencies."
                  The following is a description of how each portion of the
                  allowance for loan losses is determined.

                  For the purposes of determining the required allowance for
                  loan losses and resulting periodic provisions, the Company
                  segregates the loan portfolio into broad segments, such as:
                  commercial real estate; residential real estate; construction;
                  commercial business; and consumer loans. The Company provides
                  for a general allowance for losses inherent in the portfolio
                  by the above categories. The general allowance for losses on
                  problem loans in these categories is based on a review and
                  evaluation of these loans, taking into consideration financial
                  condition and strengths of the borrower, related collateral,
                  cash flows available for debt repayment, and known and
                  expected economic trends and conditions. General loss
                  percentages for the problem loans are determined based upon
                  minimum loss percentages by loan classification as well as
                  historical loss experience. Specific allowances are provided
                  in the event that the specific collateral analysis on each
                  problem loan indicates that the probable loss upon liquidation
                  of collateral would be in excess of the general percentage
                  allocation. For the remainder of the portfolio, general
                  allowances for losses are calculated based on estimates of
                  inherent losses which probably exist as of the evaluation date
                  even though they might not have been identified by the more
                  objective processes used for the portion of the allowance
                  described above. Loss percentages used for this portion of the
                  portfolio are generally based on historical loss factors
                  adjusted where necessary for qualitative factors. This portion
                  of the allowance is particularly subjective and requires
                  judgments based on qualitative factors which do not lend
                  themselves to exact mathematical calculations, such as: trends
                  in delinquencies and nonaccruals; migration trends in the
                  portfolio; trends in volume, terms, and portfolio mix; changes
                  in lending policies and procedures; evaluations of the risk
                  identification process; changes in the outlook for local and
                  regional economic conditions; concentrations of credit; and
                  peer group comparisons.

                  Loans deemed uncollectable are charged to the allowance.
                  Provisions for loan losses and recoveries on loans previously
                  charged off are added to the allowance.

                  Management believes that the allowance for loan losses is
                  adequate. While management uses available information to
                  recognize losses on loans, future additions to the allowance
                  may be necessary based on changes in economic conditions, the
                  financial condition of borrowers and other factors. In
                  addition, various regulatory agencies, as an integral part of
                  their examination process, periodically review the Company's
                  allowance for loan losses. Such agencies may require the
                  Company to recognize additions to the allowance based on their
                  judgments about information available to them at the time of
                  their examination.
<PAGE>

         (H)      OTHER REAL ESTATE

                  Other real estate includes real estate acquired through
                  foreclosure. Other real estate is carried at the lower of its
                  recorded amount at date of foreclosure or estimated fair value
                  less costs to sell. Any excess of carrying value of the
                  related loan over the fair value of the real estate at date of
                  foreclosure is charged against the allowance for loan losses.
                  Any expense incurred in connection with holding such real
                  estate or resulting from any writedowns subsequent to
                  foreclosure is included in other noninterest expense.

         (I)      PREMISES AND EQUIPMENT

                  Premises and equipment are stated at cost less accumulated
                  depreciation. Depreciation is computed using primarily the
                  straight-line method over the estimated useful lives of the
                  assets. Useful lives for depreciation are three years for
                  computer software and automobiles; primarily 40 years for
                  buildings; ten years for furniture, fixtures, and equipment;
                  and the lease term or the life of the property, whichever is
                  shorter, for leasehold improvements.

         (J)      GOODWILL AND OTHER INTANGIBLE ASSETS

                  Goodwill represents the excess of acquisition costs over the
                  fair value of net assets of businesses acquired and has been
                  amortized on a straight-line basis primarily over 25 years.
                  Other intangible assets consist of an amount assigned to core
                  deposits representing the difference between fair value at
                  date of acquisition and recorded amounts which has been
                  amortized on a straight-line basis over five years. Carrying
                  values of goodwill and other intangible assets are
                  periodically reviewed to assess recoverability based on
                  expected undiscounted cash flows for the related business
                  unit. Impairments would be recognized in operating results if
                  a permanent diminution in value was expected. The Company also
                  evaluates the amortization periods of intangible assets to
                  determine whether events or circumstances warrant revised
                  estimates of useful lives. The Company believes that no
                  material impairment of goodwill or other intangible assets
                  exists at December 31, 2001.

         (K)      INCOME TAXES

                  Income taxes are accounted for under the asset and liability
                  method. Provisions for income taxes are based upon amounts
                  reported in the statements of income (after exclusion of
                  nontaxable income such as interest on state and municipal
                  securities) and include deferred taxes on temporary
                  differences between financial statement and tax bases of
                  assets and liabilities measured using enacted tax rates
                  expected to apply to taxable income in the year in which the
                  differences are expected to be recovered or settled. The
                  effect on deferred tax assets and liabilities of a change in
                  tax rates is recognized in income in the period that includes
                  the enactment date.

         (L)      EARNINGS PER SHARE

                  Basic earnings per share excludes dilution and is computed by
                  dividing net income by weighted-average shares outstanding.
                  Diluted earnings per share is computed by dividing net income
                  by weighted-average shares outstanding plus common share
                  equivalents resulting from dilutive stock options, determined
                  using the treasury stock method.

         (M)      COMPREHENSIVE INCOME

                  Other comprehensive income for the Company consists of items
                  recorded directly in equity under SFAS No. 115, "Accounting
                  for Certain Investments in Debt and Equity Securities."

         (N)      SEGMENT INFORMATION

                  SFAS No. 131 requires that certain disclosures be made by
                  public business enterprises to report information about
                  operating segments in annual financial statements and requires
                  those enterprises
<PAGE>

                  to report selected information about operating segments in
                  interim financial reports issued to shareholders. It also
                  establishes standards for related disclosures about products
                  and services, geographic areas, and major customers. The
                  Company's principal segments are banking and mortgage banking.

         (O)      RECENT ACCOUNTING PRONOUNCEMENTS

                  In September 2000, SFAS No. 140, "Accounting for Transfers and
                  Servicing of Financial Assets and Extinguishments of
                  Liabilities," was issued. SFAS No. 140 is effective for all
                  transfers and servicing of financial assets and
                  extinguishments of liabilities after March 31, 2001. SFAS No.
                  140 is effective for recognition and reclassification of
                  collateral and disclosures relating to securitization
                  transactions and collateral for fiscal years ending after
                  December 15, 2000. The adoption of SFAS No. 140 did not have a
                  material impact on the Company's consolidated financial
                  statements.

                  In June 2001, the Financial Accounting Standards Board (FASB)
                  issued SFAS No. 141, "Business Combinations," which is
                  effective for all business combinations initiated after June
                  30, 2001. SFAS No. 141 requires companies to account for all
                  business combinations using the purchase method of accounting
                  and recognize intangible assets if certain criteria are met,
                  as well as provide detail disclosures regarding business
                  combinations and allocation of purchase price. Since the
                  Company has not initiated any business combinations during
                  2001, this pronouncement has not impacted the Company's
                  consolidated financial statements.

                  In June 2001, the FASB issued SFAS No. 142, "Goodwill and
                  Other Intangible Assets," which eliminates amortization of
                  goodwill and intangible assets that have indefinite useful
                  lives and requires annual tests of impairments of those
                  assets. Upon adoption of SFAS No. 142, the Company will be
                  required to reassess the useful lives and residual values of
                  all intangible assets and make any necessary amortization
                  period adjustments by the end of the first interim period
                  after adoption. In addition, to the extent an intangible asset
                  is identified as having an indefinite useful life, the Company
                  will be required to test the intangible asset for impairment
                  in accordance with the provisions of SFAS No. 142 within the
                  first interim period. Any impairment loss will be measured as
                  of the date of adoption and recognized as the cumulative
                  effect of a change in accounting principle in the first
                  interim period.

                  To accomplish this, the Company must identify its reporting
                  units and determine the carrying value of each reporting unit
                  by assigning the assets and liabilities, including the
                  existing goodwill and intangible assets, to those reporting
                  units as of the date of adoption. The Company will then have
                  up to six months from the date of adoption to determine the
                  fair value of each reporting unit and compare it to the
                  reporting unit's carrying amount. To the extent a reporting
                  unit's carrying amount exceeds its fair value, an indication
                  exists that the reporting unit's goodwill may be impaired and
                  the Company must perform the second step of the transitional
                  impairment test. In the second step, the Company must compare
                  the implied fair value of the reporting unit's goodwill,
                  determined by allocating the reporting unit's fair value to
                  all of its assets (recognized and unrecognized) and
                  liabilities in a manner similar to a purchase price allocation
                  in accordance with SFAS No. 141, to its carrying amount, both
                  of which would be measured as of the date of adoption. This
                  second step is required to be completed as soon as possible,
                  but no later than the end of the year of adoption. Any
                  transitional impairment loss will be recognized as the
                  cumulative effect of a change in accounting principle in the
                  Company's statement of earnings.

                  The Company had net unamortized goodwill of approximately
                  $2,508,000 at December 31, 2001 and net unamortized equity
                  method goodwill of approximately $1,058,000 at December 31,
                  2001. The Company recorded total amortization expense of
                  $257,300 and $256,053 related to these goodwill amounts for
                  the years ended December 31, 2001 and 2000, respectively.
<PAGE>

                  Because of the extensive effort needed to comply with adopting
                  SFAS No. 142, it is not practicable to reasonably estimate the
                  impact of adopting these statements on the Company's financial
                  statements at the date of this report, including whether any
                  transitional impairment losses will be required to be
                  recognized as the cumulative effect of a change in accounting
                  principle.

                  In June 2001, the FASB issued SFAS No. 143, "Accounting for
                  Asset Retirement Obligations." SFAS No. 143 requires that
                  entities record the fair value of a liability for an asset
                  retirement obligation in the period in which it is incurred.
                  When the liability is initially recorded, the entity is to
                  capitalize the cost by increasing the carrying amount of the
                  related long-lived asset. SFAS No. 143 requires that the
                  liability be accreted to its present value at each subsequent
                  reporting period-end, and the capitalized cost be depreciated
                  over the useful life of the related asset. Upon settlement of
                  the liability, an entity either settles the obligations for
                  its recorded amount or incurs a gain or loss upon settlement.
                  SFAS No. 143 is effective for fiscal years beginning after
                  June 15, 2002, with earlier application encouraged. The
                  adoption of SFAS No. 143 is not expected to have a material
                  impact on the consolidated financial statements of the
                  Company.

                  In August 2001, the FASB issued SFAS No. 144, "Accounting for
                  the Impairment or Disposal of Long-Lived Assets," which
                  addresses financial accounting and reporting for the
                  impairment of long-lived assets and for long-lived assets to
                  be disposed of. The provisions of SFAS No. 144 are effective
                  for financial statements issued for fiscal years beginning
                  after December 15, 2001. The adoption is not expected to have
                  a material effect on the Company's consolidated results of
                  operations, financial position, or cash flows.

(3)      BUSINESS ACQUISITIONS

         During the fourth quarter of 1999, BancMortgage acquired the assets of
         Fidelity Group. This acquisition was accounted for as a purchase with a
         purchase price of $390,031. The fair value of net assets acquired
         approximated $350,000, resulting in goodwill of approximately $40,000
         which is being amortized over 15 years.

         In 1997, Advantage Insurers, Inc., a subsidiary of Habersham Bank,
         acquired substantially all of the assets of Dillard-Scruggs Insurance
         Services of Cornelia, Inc. d/b/a Cornelia Insurance Agency. This
         acquisition was accounted for as a purchase with a purchase price of
         $380,000. The fair values of assets acquired and liabilities assumed
         were not significant, resulting in goodwill and other intangible assets
         of approximately $300,000 and $80,000, respectively, which are being
         amortized over 15 and five years, respectively. During 1999, as a
         result of an assessment of projected cash flows of this business unit,
         the Company wrote off $150,000 of the then remaining goodwill.

(4)      RESERVE REQUIREMENTS

         At December 31, 2001 and 2000, the Federal Reserve Bank required that
         the Bank maintain average reserve balances of $2,243,000 and
         $2,900,000, respectively.
<PAGE>

(5)      INVESTMENT SECURITIES AVAILABLE FOR SALE

         Amortized cost, estimated fair values, and gross unrealized gains and
         losses of investment securities available for sale are as follows:

<TABLE>
<CAPTION>
                                                                    GROSS               GROSS                ESTIMATED
                                         AMORTIZED COST       UNREALIZED GAINS    UNREALIZED LOSSES         FAIR VALUE
                                         --------------       ----------------    -----------------         ----------
         <S>                             <C>                  <C>                 <C>                       <C>
         December 31, 2001:
             U.S. Treasuries               $ 1,501,212               42,853                  --              1,544,065
             U.S. Government
               agencies                     31,047,476              252,856            (168,897)            31,131,435
             States and
               political
               subdivisions                 12,147,569              174,225            (144,965)            12,176,829
             Equity investments              2,158,520              673,640             (64,098)             2,768,062
                                           -----------            ---------            --------             ----------

                       Total               $46,854,777            1,143,574            (377,960)            47,620,391
                                           ===========            =========            ========             ==========

         December 31, 2000:
             U.S. Treasuries               $ 2,509,203               19,772                  --              2,528,975
             U.S. Government
               agencies                     23,274,531              198,906            (177,157)            23,296,280
             States and
               political
               subdivisions                 14,255,704              211,524             (75,506)            14,391,722
             Equity investments              2,993,520                   --            (224,223)             2,769,297
                                           -----------            ---------            --------             ----------

                       Total               $43,032,958              430,202            (476,886)            42,986,274
                                           ===========            =========            ========             ==========
</TABLE>

         Proceeds from sales and calls of available for sale securities during
         2001, 2000, and 1999 were $10,533,516, $2,439,787, and $5,663,079,
         respectively.

         Gross gains of $194,870, $36,524, and $19,898 were recognized on those
         sales for 2001, 2000, and 1999, respectively. Gross losses of $3,837
         were recognized on those sales for 2001. There were no gross losses on
         sales of investment securities during 2000 and 1999.

         During 2000, the Company transferred its trading securities with a fair
         value of $1,408,520 to its available for sale portfolio. Unrealized
         losses on the trading securities from the beginning of the year until
         the transfer date of $306,200 are included in earnings.
<PAGE>

         The amortized cost and estimated fair values of investment securities
         available for sale, exclusive of equity investments, at December 31,
         2001, by contractual maturity, are shown below. Expected maturities
         will differ from contractual maturities because borrowers may have the
         right to call or prepay obligations with or without call or prepayment
         penalties. Callable securities and mortgage-backed securities are
         included in the year of their contractual maturity date.

<TABLE>
<CAPTION>
                                                                                         ESTIMATED
                                                                 AMORTIZED COST          FAIR VALUE
                                                                 --------------         ----------
         <S>                                                     <C>                    <C>
         Due in one year or less                                  $ 2,348,597             2,391,804
         Due after one year through five years                      4,213,709             4,288,734
         Due after five years through ten years                     6,492,413             6,570,671
         Due after ten years                                       31,641,538            31,601,120
                                                                  -----------            ----------

                       Total                                      $44,696,257            44,852,329
                                                                  ===========            ==========
</TABLE>

         Investment securities available for sale with carrying values of
         approximately $38,217,000 and $21,968,000 were pledged as collateral at
         December 31, 2001 and 2000, respectively, for Federal Home Loan Bank
         advances, public deposits, and other deposits, as required by law.

(6)      INVESTMENT SECURITIES HELD TO MATURITY

         Amortized cost, estimated fair values, and gross unrealized gains and
         losses of investment securities held to maturity are as follows:

<TABLE>
<CAPTION>
                                            AMORTIZED          GROSS UNREALIZED    GROSS UNREALIZED          ESTIMATED
                                              COST                  GAINS               LOSSES              FAIR VALUE
                                           -----------         ----------------    ----------------         ----------
         <S>                               <C>                 <C>                 <C>                      <C>
         December 31, 2001:
             U.S. Government
               agencies                    $ 2,100,963               30,916             (20,757)             2,111,122
             States and
               political
               subdivisions                  7,545,175              154,323             (43,346)             7,656,152
                                           -----------            ---------            --------             ----------

                       Total               $ 9,646,138              185,239             (64,103)             9,767,274
                                           ===========            =========            ========             ==========

         December  31, 2000:
             U.S. Government
               agencies                    $ 3,466,302                8,808            (158,660)             3,316,450
             States and
               political
               subdivisions                  9,658,100              113,618             (43,451)             9,728,267
                                           -----------            ---------            --------             ----------

                       Total               $13,124,402              122,426            (202,111)            13,044,717
                                           ===========            =========            ========             ==========
</TABLE>

<PAGE>

         The amortized cost and estimated fair values of securities held to
         maturity at December 31, 2001, by contractual maturity, are shown
         below. Expected maturities will differ from contractual maturities
         because borrowers may have the right to call or prepay obligations with
         or without call or prepayment penalties. Callable securities and
         mortgage-backed securities are included in the year of their
         contractual maturity date.

<TABLE>
<CAPTION>
                                                                   AMORTIZED              ESTIMATED
                                                                     COST                FAIR VALUE
                                                                  -----------            ----------
         <S>                                                      <C>                    <C>
         Due in one year or less                                  $   560,000               563,908
         Due after one year through five years                      3,044,228             3,156,501
         Due after five years through ten years                     2,172,877             2,200,859
         Due after ten years                                        3,869,033             3,846,006
                                                                  -----------            ----------

                       Total                                      $ 9,646,138             9,767,274
                                                                  ===========            ==========
</TABLE>

         Investment securities held to maturity with book values of
         approximately $7,123,000 and $4,897,000 were pledged as collateral at
         December 31, 2001 and 2000, respectively, for public deposits and other
         deposits, as required by law.

(7)      OTHER INVESTMENTS

         Other investments at December 31, 2001 and 2000 are summarized as
         follows:

<TABLE>
<CAPTION>
                                                                      2001                  2000
                                                                  -----------            ----------
         <S>                                                      <C>                     <C>
         Federal Home Loan Bank stock                             $ 6,113,100             6,616,000
         CB Financial Corp. common stock                            3,138,972             3,165,890
         Georgia Community Life Insurance Company common stock         27,000                27,000
         Community Financial Services, Inc. common stock              100,000               100,000
         Southeast Bankcard Association, Inc. common stock             25,000                25,000
         Forsyth Bancshares, Inc. common stock                        100,000               100,000
         Greater Rome Bancshares, Inc. common stock                   100,000               100,000
         Federal National Mortgage Association common stock                34                    34
                                                                  -----------            ----------

                       Total                                      $ 9,604,106            10,133,924
                                                                  ===========            ==========
</TABLE>

         In May 1999, the Company exercised its previously acquired option to
         purchase a 45.91% interest in CB Financial Corp., Warrenton, Georgia,
         at a total cost of $2,963,757, including direct costs of acquisition of
         $115,468. In connection with this purchase, the Company issued 207,713
         shares of its common stock valued at $2,847,883 and cash of $406 in
         exchange for 27,574 shares of common stock of CB Financial Corp. The
         investment in CB Financial Corp. is accounted for using the equity
         method. Included in the initial investment in CB Financial Corp common
         stock was approximately $1,278,000 in excess cost over the Company's
         underlying equity in the net assets of this investee. For the years
         ended December 31, 2001, 2000, and 1999, the Company recorded $120,336,
         $153,348, and $211,279, respectively, as equity in earnings of CB
         Financial Corp. Amortization of related excess cost over basis in CB
         Financial Corp. common stock for 2001, 2000, and 1999 totaled $85,212,
         $85,212, and $49,707, respectively. The assets of CB Financial Corp. as
         of December 31, 2001 and 2000 totaled approximately $44,901,000
         (unaudited) and $40,816,000 (unaudited), respectively, and net income
         for the years ended December 31, 2001 and 2000 totaled approximately
         $267,000 (unaudited) and $334,000 (unaudited), respectively.

<PAGE>
(8)      LOANS

         Loans at December 31, 2001 and 2000 are summarized as follows:

<TABLE>
<CAPTION>
                                                                                     2001                    2000
                                                                                 ------------            -----------
         <S>                                                                     <C>                     <C>
         Real estate:
             Construction                                                        $119,663,535            113,201,531
             Other                                                                156,413,690            218,895,443
         Commercial, financial, and agricultural                                   23,921,875             25,566,931
         Consumer installment                                                      25,531,911             25,287,734
                                                                                 ------------            -----------

                                                                                  325,531,011            382,951,639
         Less:
             Unamortized loan origination fees, net                                   379,470                675,073
             Unearned credit life premiums                                             75,796                 84,469
             Unamortized discount on SBA loans sold                                    12,019                 56,608
             Allowance for loan losses                                              3,835,811              3,454,007
                                                                                 ------------            -----------

                       Total                                                     $321,227,915            378,681,482
                                                                                 ============            ===========
</TABLE>

         Changes in the allowance for loan losses are as follows:

<TABLE>
<CAPTION>
                                                            2001                     2000                   1999
                                                         -----------             ------------            -----------
         <S>                                             <C>                     <C>                     <C>
         Balance, January 1                              $ 3,454,007                3,181,553              2,709,570
         Provision for loan losses                         1,605,258                1,295,445                985,800
         Loans charged off                                (1,430,284)              (1,059,963)              (640,859)
         Recoveries                                          206,830                   36,972                127,042
                                                         -----------             ------------            -----------

         Balance, December 31                            $ 3,835,811                3,454,007              3,181,553
                                                         ===========             ============            ===========
</TABLE>

         The Company considers a loan to be impaired when it is probable that it
         will be unable to collect all amounts due according to the original
         terms of the loan agreement. The Company measures impairment of a loan
         on a loan-by-loan basis for commercial real estate, commercial
         business, and agricultural loans. Residential mortgages, installment
         and other consumer loans are considered smaller balance, homogenous
         loans which are not evaluated individually for impairment. Amounts of
         impaired loans that are not
<PAGE>

         probable of collection are charged off immediately. The Company had
         impaired loans, which included all of its nonaccrual loans, of
         $3,112,413 and $1,850,843 as of December 31, 2001 and 2000,
         respectively, with related valuation allowances of $675,000 and
         $479,000 at December 31, 2001 and 2000, respectively. The average
         amount of impaired loans during 2001, 2000, and 1999 was $2,722,780,
         $1,424,603, and $1,887,609, respectively. The interest income
         recognized on such loans was $187,335 in 2001, $140,261 in 2000, and
         $112,990 in 1999, which approximated the amount of interest received on
         the cash basis.

         As of December 31, 2001 and 2000, Habersham Bank's loans to customers
         for agribusiness purposes in the poultry industry were approximately $9
         million. There is no other significant concentration of loans to
         customers in a particular industry.

         The Company is a party to financial instruments with off-balance-sheet
         risk in the normal course of its lending activities to meet the
         financing needs of its customers. These financial instruments include
         commitments to extend credit and standby letters of credit. The
         Company's exposure to credit loss in the event of nonperformance by the
         other party to the financial instrument for commitments to extend
         credit and standby letters of credit is represented by the contractual
         amount of those instruments. The Company uses the same credit policies
         in making these commitments as it does for on-balance-sheet instruments
         and evaluates each customer's creditworthiness on a case-by-case basis.
         At December 31, 2001 and 2000, the Company had outstanding loan
         commitments exclusive of mortgage loan commitments of BancMortgage
         approximating $86,135,000 and $100,351,000, respectively, and standby
         letters of credit approximating $5,050,000 and $2,100,000,
         respectively. The amount of collateral obtained, if deemed necessary,
         for these financial instruments by the Company, upon extension of
         credit, is based on management's credit evaluation of the customer.
         Collateral held, if any, varies but may include inventory, equipment,
         real estate, or other property. The accounting loss the Company would
         incur if any party to the financial instrument failed completely to
         perform according to the terms of the contract and the collateral
         proved to be of no value is equal to the face amount of the financial
         instrument.

         At December 31, 2001, the Company has commitments, primarily at a fixed
         rate, to originate mortgage loans in the amount of approximately
         $24,767,000. At December 31, 2001, the Company has forward commitments
         to sell mortgage-backed securities in the amount of $102,759,000.

(9)      PREMISES AND EQUIPMENT

         Premises and equipment are summarized as follows:

<TABLE>
<CAPTION>
                                                                                   DECEMBER 31,
                                                                        ---------------------------------
                                                                           2001                   2000
                                                                        -----------            ----------
         <S>                                                            <C>                    <C>
         Land                                                           $   801,169               801,169
         Buildings                                                        6,576,544             6,555,885
         Furniture and equipment                                         11,108,649            10,640,079
                                                                        -----------            ----------

                       Total                                             18,486,362            17,997,133

         Less accumulated depreciation                                    9,746,586             8,777,400
                                                                        -----------            ----------

                       Premises and equipment, net                      $ 8,739,776             9,219,733
                                                                        ===========            ==========
</TABLE>

<PAGE>

         The Company has entered into operating lease agreements for property
         and equipment through 2006. Approximate minimum rentals under such
         leases are as follows:

<TABLE>
                            <S>                       <C>
                            2002                      $1,021,998
                            2003                       1,020,038
                            2004                         767,191
                            2005                         551,882
                            2006                         196,841
                                                      ----------

                                                      $3,557,950
                                                      ==========
</TABLE>

         Rental expense was $1,351,637 in 2001, $1,422,843 in 2000, and
         $1,248,932 in 1999.

(10)     OTHER REAL ESTATE OWNED

         Other real estate owned at December 31, 2001 and 2000 consists of the
         following:

<TABLE>
<CAPTION>
                                                                 2001             2000
                                                              -----------       ---------
         <S>                                                  <C>               <C>
         Commercial real estate                               $ 2,986,504         846,286
         Residential properties                                 2,268,554       1,522,273
                                                              -----------       ---------
                                                                5,255,058       2,368,559

         Valuation allowance                                     (150,400)             --
                                                              -----------       ---------

                                                              $ 5,104,658       2,368,559
                                                              ===========       =========
         </TABLE>

         The following is a summary of the activity in the allowance for other
         real estate owned:

<TABLE>
<CAPTION>
                                                              2001           2000           1999
                                                           ---------     -----------     ---------
         <S>                                               <C>           <C>             <C>
         Balance, beginning of year                        $      --              --            --
         Provision for losses                                511,345              --        89,348
         Charge-offs                                        (360,945)             --       (89,348)
                                                           ---------     -----------     ---------

         Balance, end of year                              $ 150,400              --            --
                                                           =========     ===========     =========
</TABLE>

(11)     DEPOSITS AND BORROWINGS

         At December 31, 2001, the scheduled maturities of certificates of
         deposit are as follows:

<TABLE>
                  <S>                                 <C>
                  6 months or less                    $   140,242,661
                  Over 6 through 12 months                 54,958,830
                  Over 1 year through 5 years              41,519,559
                                                      ---------------

                  Total                               $   236,721,050
                                                      ===============
</TABLE>

<PAGE>

         Short-term borrowings of $269,446 and $849,855 at December 31, 2001 and
         2000, respectively, consists of a U.S. Treasury, tax, and loan deposit
         note.

         Other borrowings of $5,773,000 and $1,950,000 at December 31, 2001 and
         2000 consists of notes due to the National Bank of Commerce,
         Birmingham, Alabama. A note totaling $1,950,000 bears interest at a
         variable rate (3.62% and 8.53% at December 31, 2001 and 2000,
         respectively) and matures on September 2, 2002. The note requires
         monthly interest payments and the principal is due at maturity.

         On July 29, 2001, the Company borrowed an additional $4,000,000 on a
         separate note. This note requires monthly payments of principal and
         interest and bears interest at a variable rate (3.95% at December 31,
         2001).

         Required principal payments under the notes for the next five years and
         thereafter are as follows:



<TABLE>
                  <S>                                 <C>
                  For the year ending December 31:
                            2002                      $2,316,600
                            2003                         393,600
                            2004                         423,000
                            2005                         454,200
                            2006                         487,800
                            Thereafter                 1,697,800
                                                      ----------

                                                      $5,773,000
                                                      ==========
</TABLE>

(12)     FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER REPURCHASE AGREEMENTS

         The Company's activity related to securities sold under repurchase
         agreements is summarized as follows:

<TABLE>
<CAPTION>
                                                                          2001              2000
                                                                      ------------       ----------
         <S>                                                           <C>               <C>
         Balance at year-end                                           $ 7,686,666       17,295,395
         Maximum outstanding during year                                13,700,000       17,305,000
         Average outstanding during year                                   765,083        9,288,639
         Weighted average interest rate during year                           4.61%            6.08%
         Weighted average interest rate at end of year                        1.75%            6.25%
</TABLE>

         At December 31, 2001, the Company had available repurchase agreement
         line of credit commitments with Compass Bank totaling $6,700,000 of
         which none was advanced. All securities sold under repurchase
         agreements are held by independent trustees. The Company also had
         available repurchase agreement line of credit commitments with the
         National Bank of Commerce totaling $850,000 at December 31, 2001. No
         amounts were outstanding under that commitment at December 31, 2001.

         Federal funds purchased at December 31, 2001 amounted to $22,764,000.
<PAGE>

         At December 31, 2000, the Company had available repurchase agreement
         line of credit commitments with Compass Bank totaling $12,000,000 of
         which $10,200,000 was advanced. The securities sold under repurchase
         agreements mature in 2001 and bear interest at a variable rate. All
         securities sold under repurchase agreements are held by independent
         trustees. The Company also had available repurchase agreement line of
         credit commitments with the National Bank of Commerce totaling
         $4,000,000 at December 31, 2000. No amounts were outstanding under that
         commitment at December 31, 2000.

         Federal funds purchased at December 31, 2000 amounted to $18,700,000.

(13)     FHLB ADVANCES

         At December 31, 2001, the Company had available line of credit
         commitments with the Federal Home Loan Bank (FHLB) totaling
         $230,833,000 of which $100,415,644 was advanced (weighted average
         interest rate of 3.53%) and $130,417,356 was available.

         The advances outstanding at December 31, 2001 consist of three fixed
         rate advances of $10,000,000 that bear interest at 6.72%, 6.02%, and
         4.93% and mature in 2005, 2010, and 2011 (callable each year),
         respectively, and one variable rate short-term advance of $70,415,644
         with a weighted average rate of 2.56%.

         At December 31, 2000, the Company had available line of credit
         commitments with the Federal Home Loan Bank (FHLB) totaling
         $163,000,000 of which $108,094,938 was advanced (weighted average
         interest rate of 6.75%) and $54,905,062 was available.

         At December 31, 2001, the Company has pledged, with the FHLB, all stock
         of the FHLB and certain qualifying first mortgage loans with an
         outstanding balance of $122,003,486.

(14)     INCOME TAXES

         Income tax expense (benefit) for the years ended December 31, 2001,
         2000, and 1999 are as follows:

<TABLE>
<CAPTION>
                                                  2001                2000                1999
                                               ----------          ----------           --------
         <S>                                   <C>                 <C>                  <C>
         Current:
             Federal                           $1,772,013           1,267,463            629,665
             State                                267,911             109,884             78,455
                                               ----------          ----------           --------

                       Total current            2,039,924           1,377,347            708,120
                                               ----------          ----------           --------

         Deferred:
             Federal                              433,117            (127,552)          (760,613)
             State                                     --                  --                 --
                                               ----------          ----------           --------

                       Total deferred             433,117            (127,552)          (760,613)
                                               ----------          ----------           --------

                       Total                   $2,473,041           1,249,795            (52,493)
                                               ==========          ==========           ========
</TABLE>

         In addition, income tax benefit of $72,615 has been recorded in 2001 to
         reflect the tax effect of the cumulative effect of a change in
         accounting principle as of January 1, 2001.
<PAGE>

         The provision for income taxes is less than that computed by applying
         the Federal statutory rate of 34% to income before income taxes as
         indicated by the following:

<TABLE>
<CAPTION>
                                                                              2001                  2000                 1999
                                                                          ------------           ----------           ---------
         <S>                                                              <C>                    <C>                  <C>
         Income tax at statutory rate                                     $  2,712,594            1,454,215             578,502
         Effect of tax-exempt income                                          (456,183)            (479,985)           (456,850)
         Earnings on cash surrender value of life
             insurance                                                         (65,979)             (74,800)                 --
         Amortization of intangible assets                                      73,459               96,796             150,637
         State income tax, net of Federal tax effect                           176,822               72,523              51,780
         Reduction of prior years' overaccrual                                      --                   --            (409,477)
         Other                                                                  32,328              181,046              32,915
                                                                          ------------           ----------           ---------

                  Income tax expense (benefit)                            $  2,473,041            1,249,795             (52,493)
                                                                          ============           ==========           =========
</TABLE>

         At December 31, 2001 and 2000, the significant components of the
         Company's net deferred tax assets and liabilities are as follows:

<TABLE>
<CAPTION>
                                                                                               2001                  2000
                                                                                            -----------           ----------
         <S>                                                                                <C>                   <C>
         Deferred tax assets:
           Unrealized loss on investment securities available for sale                      $        --               15,873
           Unrealized loss on trading securities                                                346,348              346,348
           Allowance for loan losses                                                          1,128,226            1,161,105
           Allowance for other real estate                                                      115,547              124,456
           Deferred loan fees                                                                        --              168,869
           Deferred compensation                                                                 69,275               49,397
           Unearned credit life commissions                                                      25,772               28,720
                                                                                            -----------           ----------

                                                                                              1,685,168            1,894,768
                                                                                            -----------           ----------

         Deferred tax liabilities:
           Unrealized gain on investment securities available for sale                         (260,309)                  --
           Equity in earnings of investee                                                      (164,887)            (123,973)
           Deferred loan fees                                                                   (39,244)                  --
           Prepaid expenses                                                                    (282,562)            (223,482)
           Furniture, fixtures, and equipment due to differences in
             depreciation methods                                                              (175,960)             (89,457)
           Other                                                                                (44,067)             (30,418)
                                                                                            -----------           ----------

                                                                                               (967,029)            (467,330)
                                                                                            -----------           ----------

                  Net deferred tax asset                                                    $   718,139            1,427,438
                                                                                            ===========           ==========
         </TABLE>

         The net deferred tax asset is included in other assets in the
         consolidated balance sheets.


<PAGE>

         No valuation allowance has been recorded by the Company as management
         considers it more likely than not that all deferred tax assets will be
         realized. In assessing the realizability of deferred tax assets,
         management considers whether it is more likely than not that some
         portion or all of the deferred tax assets will not be realized. The
         ultimate realization of deferred tax assets is dependent upon the
         generation of future taxable income during the periods in which those
         temporary differences become deductible. Management considers the
         scheduled reversal of tax liabilities, projected future taxable income,
         and tax planning strategies in making this assessment.

(15)     SHAREHOLDERS' EQUITY

         The approval of the Georgia Department of Banking and Finance is
         required if dividends declared by the Bank to the Company in any year
         will exceed 50% of the net income of the Bank for the previous calendar
         year. As of December 31, 2001, the Bank could declare dividends to the
         Company up to approximately $2,920,000 without regulatory approval.

         The Company and the Bank are subject to various regulatory capital
         requirements administered by the Federal banking agencies. Failure to
         meet minimum capital requirements can initiate certain mandatory and
         possibly additional discretionary actions by regulators that, if
         undertaken, could have a direct material effect on the Company's
         consolidated financial statements. Under capital adequacy guidelines,
         the Company and the Bank must meet specific capital guidelines that
         involve quantitative measures of the Company's and the Bank's assets,
         liabilities, and certain off-balance-sheet items as calculated under
         regulatory accounting practices. The Company's and the Bank's capital
         amounts and the Bank's classifications under the regulatory framework
         for prompt corrective action are also subject to qualitative judgments
         by the regulators about components, risk weightings, and other factors.

         Quantitative measures established by regulation to ensure capital
         adequacy require the Company and the Bank to maintain minimum amounts
         and ratios (set forth in the table below) of total and Tier I capital
         (as defined in the regulations) to risk-weighted assets (as defined),
         and of Tier I capital (as defined) to average assets (as defined).
         Management believes, as of December 31, 2001, that the Company and the
         Bank meet all capital adequacy requirements to which they are subject.

         As of December 31, 2001, the most recent notifications from both the
         Federal Deposit Insurance Corporation and the Federal Reserve Bank of
         Atlanta categorized the Bank as well-capitalized under the regulatory
         framework for prompt corrective action. To be categorized as well
         capitalized, the Bank must maintain minimum total risk-based, Tier I
         risk-based, and Tier I leverage ratios as set forth in the table. There
         are no conditions or events since that notification that management
         believes have changed the Bank's capital categories.


<PAGE>

         The Company's and the Bank's actual capital amounts and ratios as of
         December 31, 2001 and 2000 are as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                                                                           TO BE WELL CAPITALIZED
                                                                                  FOR CAPITAL ADEQUACY     UNDER PROMPT CORRECTIVE
                                                                ACTUAL                  PURPOSES              ACTION PROVISIONS
                                                          -------------------     --------------------     -----------------------
                                                           AMOUNT       RATIO      AMOUNT        RATIO     AMOUNT            RATIO
                                                          --------      -----     --------       -----     ------            -----
         <S>                                              <C>           <C>       <C>            <C>       <C>               <C>
         As of December 31, 2001:
           Total capital (to risk-weighted assets):
             Company                                      $ 45,159      11.12%    $ 32,696         8%         N/A             N/A
             Habersham Bank                                 43,594      10.84%      32,164         8%      40,205              10%

           Tier I Capital (to risk-weighted assets):
             Company                                        41,323      10.11%      16,348         4%         N/A             N/A
             Habersham Bank                                 39,758       9.89%      16,082         4%      24,123               6%

           Tier I Capital (to average assets):
             Company                                        41,323       7.67%      21,554         4%         N/A             N/A
             Habersham Bank                                 39,758       7.48%      21,262         4%      26,578               5%

         As of December 31, 2000:
           Total capital (to risk-weighted assets):
             Company                                      $ 39,399       9.83%    $ 32,080         8%         N/A             N/A
             Habersham Bank                                 34,931       8.85%      31,570         8%      39,738              10%

           Tier I Capital (to risk-weighted assets):
             Company                                        35,945       8.96%      16,040         4%         N/A             N/A
             Habersham Bank                                 31,477       7.98%      15,785         4%      23,843               6%

           Tier I Capital (to average assets):
             Company                                        35,945       6.65%      21,609         4%         N/A             N/A
             Habersham Bank                                 31,477       5.90%      21,346         4%      26,682               5%
</TABLE>


<PAGE>

(16)     COMPREHENSIVE INCOME

         Comprehensive income includes net income and other comprehensive income
         which is defined as non-owner related transactions in shareholders'
         equity. The following table sets forth the amounts of other
         comprehensive income included in shareholders' equity along with the
         related tax effect for the years ended December 31, 2001, 2000, and
         1999.

<TABLE>
<CAPTION>
                                                                                                                        NET OF
                                                                             PRETAX            TAX (EXPENSE)             TAX
                                                                             AMOUNT               BENEFIT               AMOUNT
                                                                          ------------         -------------         -----------
         <S>                                                              <C>                  <C>                   <C>
         2001:
             Net unrealized holding gains on investment
               securities available for sale arising
               during the year                                            $  1,003,331            (341,133)              662,198
             Less reclassification adjustment for net
               gains realized in net income                                    191,033             (64,951)              126,082
                                                                          ------------           ---------           -----------

             Other comprehensive income                                   $    812,298            (276,182)              536,116
                                                                          ============           =========           ===========

         2000:
             Net unrealized holding gains on investment
               securities available for sale arising
               during the year                                            $  1,465,050            (498,117)              966,933
             Less reclassification adjustment for net
               gains realized in net income                                     36,524             (12,418)               24,106
                                                                          ------------           ---------           -----------

             Other comprehensive income                                   $  1,428,526            (485,699)              942,827
                                                                          ============           =========           ===========

         1999:
             Net unrealized holding losses on
               investment securities available for sale
               arising during the year                                    $ (1,853,971)            630,350            (1,223,621)
             Less reclassification adjustment for net
               gains realized in net income                                     19,898              (6,765)               13,133
                                                                          ------------           ---------           -----------

             Other comprehensive loss                                     $ (1,873,869)            637,115            (1,236,754)
                                                                          ============           =========           ===========
</TABLE>

(17)     EMPLOYEE BENEFIT AND STOCK OPTION PLANS

         The Company has a contributory profit sharing plan under Internal
         Revenue Code Section 401(k) - (the 401(k) Plan). The 401(k) Plan covers
         substantially all employees. Employees may contribute up to 15% of
         their annual salaries not to exceed the amount allowed by the IRS. At
         its discretion, the Company may make matching contributions in an
         amount not to exceed 100% of each participant's first 3% of
         compensation contributed. The Company's contributions to the plan
         totaled $390,592 in 2001, $350,478 in 2000, and $269,521 in 1999.


<PAGE>

         During 1998, the Bank's board of directors approved the Director's
         Retirement Plan (the Plan), a noncontributory retirement plan. In
         connection with the implementation of the Plan, the Bank purchased
         company-owned life insurance at a cost of $3,150,000. In 2001 and 1999,
         the Bank purchased additional life insurance at a cost of $150,000 and
         $300,000, respectively. Amounts earned on the life insurance policies
         purchased by the Bank over the rate, as defined in the Plan, to be
         retained for the benefit of the Bank are to be deferred and paid to the
         directors upon retirement. As of December 31, 2001 and 2000, the cash
         surrender values of the life insurance policies totaled $4,122,342 and
         $3,763,827, respectively.

         The Company has an Incentive Stock Option Plan that provides that
         officers and certain employees of the Company may be granted options to
         purchase shares of common stock of the Company at an amount equal to
         the fair market value of the stock at the date of grant. The options,
         which may be exercised immediately, expire five years from the date of
         grant.

         The Company's Outside Directors Stock Option Plan provides that outside
         directors of Habersham Bancorp and its subsidiaries may be granted
         options to purchase shares of common stock of the Company at an amount
         equal to the fair market value of the stock at the date of grant. The
         options are fully vested on the date of grant, exercisable six months
         from the date of grant, and expire ten years from the date of grant.
         Shares reserved for future grants under this plan are approximately
         266,000 at December 31, 2001.

         A summary of the status of the Company's stock option plans and changes
         during 2001, 2000, and 1999 is presented below:

<TABLE>
<CAPTION>
                                                                 2001                     2000                     1999
                                                        ----------------------    ---------------------    ---------------------
                                                                      WEIGHTED                 WEIGHTED                 WEIGHTED
                                                                       AVERAGE                  AVERAGE                  AVERAGE
                                                                      EXERCISE                 EXERCISE                 EXERCISE
                                                          SHARES        PRICE      SHARES        PRICE      SHARES       PRICE
                                                        ---------     --------    --------     --------    --------     --------
         <S>                                            <C>           <C>         <C>          <C>         <C>          <C>
         Outstanding at
           beginning of year                              416,022     $  13.94     357,522     $  14.94     413,226     $  14.79
         Granted                                           99,000        16.50      87,500         9.69      70,000        12.75
         Exercised                                             --           --          --           --     (53,266)       10.12
         Terminated                                      (100,750)       15.72     (29,000)       13.50     (72,438)       15.46
                                                        ---------     --------    --------     --------    --------     --------

         Outstanding and
           exercisable at
           end of year                                    414,272     $  14.22     416,022     $  13.94     357,522     $  14.94
                                                         ========                 ========                 ========
</TABLE>


<PAGE>

         The following table summarizes information about stock options
         outstanding at December 31, 2001:

<TABLE>
<CAPTION>
                                                                                               WEIGHTED
                                                                         NUMBER                 AVERAGE
                                                                     OUTSTANDING AT            REMAINING               WEIGHTED
              RANGE OF                                                 DECEMBER 31,        CONTRACTUAL LIFE             AVERAGE
          EXERCISE PRICES                                                 2001                 IN YEARS             EXERCISE PRICE
         -----------------                                           --------------        -----------------        --------------
         <S>                                                         <C>                   <C>                      <C>
         $            9.69                                               84,500                   4.00                 $   9.69
             10.00 - 11.00                                               25,272                   1.45                    10.63
                     12.75                                               65,000                   3.00                    12.75
             13.50 - 14.00                                                7,500                   4.00                    13.50
                     14.25                                               57,000                   2.00                    14.25
             16.50 - 16.88                                              106,500                   4.97                    16.53
             18.75 - 19.00                                               68,500                   1.05                    18.98
                                                                       --------                  -----                 --------

                                                                        414,272                   3.17                 $  14.22
                                                                       ========
</TABLE>

         The estimated fair value of options granted during 2001, 2000, and 1999
         was $6.63, $3.48, and $4.37, respectively, per share. The Company
         applies Accounting Principles Board Opinion No. 25, "Accounting for
         Stock Issued to Employees," and related interpretations in accounting
         for its stock option plans. Accordingly, no compensation cost has been
         recognized for its Incentive Stock Option Plan and its Outside
         Directors Stock Option Plan. Had compensation cost for the Company's
         incentive stock option plan and its outside directors stock option plan
         been determined based on the fair value at the grant dates for awards
         under those plans consistent with a method included in SFAS No. 123,
         "Accounting for Stock-Based Compensation," the Company's net income and
         income per share for 2001, 2000, and 1999 would have been reduced to
         the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                                              2001                 2000                1999
                                                                          ------------          ----------          ----------
         <S>                                                              <C>                   <C>                 <C>
         Net income:
             As reported                                                  $  5,342,791           3,027,308           1,753,969
             Pro forma                                                       4,909,725           2,826,251           1,548,422

         Net income per common share - basic:
             As reported                                                          1.98                1.12                0.67
             Pro forma                                                            1.82                1.05                0.59

         Net income per common share - diluted:
             As reported                                                          1.96                1.12                0.67
             Pro forma                                                            1.80                1.05                0.59
</TABLE>


<PAGE>

         The fair value of options granted under the Company's fixed stock
         option plans during 2001, 2000, and 1999 was estimated on the date of
         grant using the Black-Scholes option-pricing model with the following
         weighted average assumptions used: expected dividend yield of less than
         1%; expected volatility of 36% in 2001, 30% in 2000, and 35% in 1999;
         weighted average risk-free interest rate of 4.41%, 6.50%, and 6.25% in
         2001, 2000, and 1999, respectively; and an expected weighted average
         life of 4.5 years in 2001, 2000, and 1999.

(18)     OTHER EXPENSES

         Items comprising other expenses for the years ended December 31, 2001,
         2000, and 1999 are as follows:

<TABLE>
<CAPTION>
                                                                              2001                 2000                1999
                                                                          ------------          ----------          ----------
         <S>                                                              <C>                   <C>                 <C>
         Outside services                                                 $  1,419,723           1,066,643           1,077,184
         Advertising and public relations                                      893,737             816,838             992,019
         Office supplies                                                       948,234             854,137             853,039
         Other                                                               3,819,815           3,520,381           3,057,879
                                                                          ------------          ----------          ----------

                       Total                                              $  7,081,509           6,257,999           5,980,121
                                                                          ============          ==========          ==========
</TABLE>

         Outside services include charges for FDIC insurance, legal and
         professional services, insurance, director fees, and State of Georgia
         Department of Banking fees.

<PAGE>
(19)     FAIR VALUE OF FINANCIAL INSTRUMENTS

         The following disclosure of the estimated fair value of financial
         instruments is made in accordance with the requirements of SFAS No.
         107, "Disclosures about Fair Value of Financial Instruments." The
         estimated fair value amounts have been determined by the Company using
         available market information and appropriate valuation methodologies.
         However, considerable judgment is necessarily required to interpret
         market data to develop the estimates of fair value. Accordingly, the
         estimates presented herein are not necessarily indicative of the
         amounts the Company could realize in a current market exchange. The use
         of different market assumptions and/or estimation methodologies may
         have a material effect on the estimated fair value amounts.

<TABLE>
<CAPTION>
                                                                                                     DECEMBER 31, 2001
                                                                                           -------------------------------------
                                                                                           CARRYING AMOUNT            FAIR VALUE
                                                                                           ---------------           -----------
         <S>                                                                               <C>                       <C>
         Assets:
             Cash and due from banks                                                        $   16,550,323            16,550,323
             Investment securities available for sale                                           47,620,391            47,620,391
             Investment securities held to maturity                                              9,646,138             9,767,274
             Other investments                                                                   9,604,106             9,604,106
             Loans held for sale                                                               115,463,760           117,133,586
             Loans                                                                             321,227,915           335,417,074
             Commitments to originate fixed rate mortgage loans for resale                              --               150,000

         Liabilities:
             Deposits                                                                          336,360,286           342,410,488
             Short-term borrowings                                                                 269,446               269,446
             Other borrowings                                                                    5,773,000             5,773,000
             Federal funds purchased and securities sold under repurchase agreements            30,450,666            30,450,666
             FHLB advances                                                                     100,415,644           100,415,644
             Forward commitments to sell mortgage-backed securities                                     --                    --
</TABLE>

<TABLE>
<CAPTION>
                                                                                                     DECEMBER 31, 2000
                                                                                           -------------------------------------
                                                                                           CARRYING AMOUNT            FAIR VALUE
                                                                                           ---------------           -----------
         <S>                                                                               <C>                       <C>
         Assets:
             Cash and due from banks                                                        $   13,565,897            13,565,897
             Investment securities available for sale                                           42,986,274            42,986,274
             Investment securities held to maturity                                             13,124,402            13,044,717
             Other investments                                                                  10,133,924            10,133,924
             Loans held for sale                                                                59,714,160            59,885,134
             Loans                                                                             378,681,482           382,124,560

         Liabilities:
             Deposits                                                                          341,032,290           347,018,185
             Short-term borrowings                                                                 849,855               849,855
             Other borrowings                                                                    1,950,000             1,950,000
             Federal funds purchased and securities sold under repurchase agreements            35,995,395            35,995,395
             FHLB advances                                                                     108,094,938           108,094,938
         </TABLE>


<PAGE>


         The carrying amounts of cash and due from banks, Federal funds sold,
         interest-bearing demand and savings accounts, short-term borrowings,
         other borrowings, Federal funds purchased and securities sold under
         repurchase agreements, and FHLB advances are a reasonable estimate of
         their fair value due to the short-term nature or short term to maturity
         of these financial instruments. The fair value of investment securities
         available for sale and investment securities held to maturity is based
         on quoted market prices and dealer quotes. The fair value of loans and
         time deposits is estimated by discounting the future cash flows using
         interest rates currently charged/paid by the Bank for such financial
         instruments with similar credit risks and maturities. The fair value
         for loans held for sale is determined on the basis of open commitments
         from independent buyers for committed loans. For uncommitted loans,
         fair value is determined on the basis of relevant delivery prices in
         the secondary mortgage market.

         The fair value of Federal Home Loan Bank stock approximates carrying
         value. The common stock in CB Financial Corp. is not publicly traded;
         therefore, it is not practical to estimate its value. Management
         expects that the fair value would exceed the carrying value.

         As required by SFAS No. 107, demand deposits are shown at their
         carrying value. No value has been ascribed to core deposits, which
         generally bear a low rate of interest or no interest and do not
         fluctuate in response to changes in interest rates.

         The carrying values and fair values of commitments to extend credit and
         standby letters of credit are not significant.

         The fair value estimates presented herein are based on pertinent
         information available to management as of December 31, 2001 and 2000.
         Although management is not aware of any factors that would
         significantly affect the estimated fair value amounts, such amounts
         have not been comprehensively revalued for purposes of these financial
         statements since that date and, therefore, current estimates of fair
         value may differ significantly from the amounts presented herein.

(20)     RELATED PARTY TRANSACTIONS

         In the ordinary course of business, the Company extends loans to its
         directors, executive officers, and principal stockholders and their
         affiliates at terms and rates comparable to those prevailing at the
         time for comparable transactions with other customers. In the opinion
         of management, these loans do not involve more than the normal credit
         risk nor present other unfavorable features. An analysis of the
         activity during 2001 and 2000 of loans to executive officers,
         directors, and principal shareholders is as follows:

<TABLE>
<CAPTION>
                                                 2001                    2000
                                             -------------           -----------
         <S>                                 <C>                     <C>
         Balance, January 1                  $   2,663,027             2,810,972
         Amounts advanced                       10,440,343             3,882,984
         Repayments                             (7,289,295)           (4,030,929)
                                             -------------           -----------

         Balance, December 31                $   5,814,075             2,663,027
                                             =============           ===========
</TABLE>

         At December 31, 2001,a time deposit of $930,000 of a business
         controlled by the principal shareholders of the Company was pledged as
         collateral for a loan with aggregate principal balance of $930,000 made
         to unrelated parties.


<PAGE>

         On January 2, 1996, a Mortgage Banking Agreement (the Agreement) was
         entered into between Habersham Bank, BancMortgage, Habersham Bancorp,
         and BancMortgage's two principal executives/inside directors. The
         Agreement details the terms of the organization of the Company,
         including, among other things, capital structure, directors and
         officers, certain compensation terms, right of first refusal to fund
         loans, agreement to provide a warehouse line, performance criteria, and
         buy-out arrangements. In accordance with the Agreement, the principals
         are entitled to 50% of BancMortgage's net income (as defined) as a
         bonus. For the years ended December 31, 2001 and 2000, the Company
         accrued incentive compensation expense of $5,046,336 and $734,326,
         respectively, related to the Agreement.

(21)     CONDENSED FINANCIAL STATEMENTS OF HABERSHAM BANCORP (PARENT ONLY)

         The parent company only condensed financial statements are presented
         below:

                            CONDENSED BALANCE SHEETS

                           December 31, 2001 and 2000

<TABLE>
<CAPTION>
                                     ASSETS                                                     2001                   2000
                                                                                            -------------          -----------
         <S>                                                                                <C>                    <C>
         Cash                                                                               $     503,916              280,453
         Investment in subsidiaries, primarily banks                                           42,429,155           34,347,346
         Investment securities available for sale                                               2,082,160            1,255,425
         Investment in CB Financial Corp.                                                       3,138,972            3,165,890
         Other investments                                                                        200,000              200,000
         Equipment, net                                                                           122,516              121,394
         Other assets                                                                           1,438,585            1,520,461
                                                                                            -------------          -----------

                       Total assets                                                         $  49,915,304           40,890,969
                                                                                            =============          ===========

                       LIABILITIES AND SHAREHOLDERS' EQUITY

         Borrowings                                                                         $   5,773,000            1,950,000
         Accounts payable                                                                         159,978              189,852
                                                                                            -------------          -----------

                       Total liabilities                                                        5,932,978            2,139,852
                                                                                            -------------          -----------

         Shareholders' equity:
             Common stock                                                                       2,698,746            2,698,746
             Additional paid-in capital                                                        12,417,064           12,417,064
             Retained earnings                                                                 28,361,211           23,666,118
             Accumulated other comprehensive income (loss)                                        505,305              (30,811)
                                                                                            -------------          -----------

                       Total shareholders' equity                                              43,982,326           38,751,117
                                                                                            -------------          -----------

                       Total liabilities and shareholders' equity                           $  49,915,304           40,890,969
                                                                                            =============          ===========
</TABLE>
<PAGE>
                         CONDENSED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                                          YEARS ENDED DECEMBER 31,
                                                                          ------------------------------------------------------
                                                                              2001                 2000                  1999
                                                                          ------------          ----------           -----------
         <S>                                                              <C>                   <C>                  <C>
         Income:
             Dividends from banks                                         $  1,737,750           1,380,000               832,750
             Equity in earnings of investee                                    120,336             153,348               211,279
             Management fees from subsidiaries                               1,341,936           1,342,716             1,278,816
             Gain on sale of trading securities                                     --                  --                 7,378
             Unrealized loss on trading securities                                  --            (306,200)           (1,190,820)
             Dividend income                                                    58,791              58,789                84,108
             Other income                                                       12,316               4,917                 1,922
                                                                          ------------          ----------           -----------

                       Total income                                          3,271,129           2,633,570             1,225,433

         Expenses - general and administrative                               2,220,716           2,160,727             2,232,833
                                                                          ------------          ----------           -----------

                       Income (loss) before income taxes
                         and equity in undistributed
                         earnings of subsidiaries                            1,050,413             472,843            (1,007,400)

         Income tax benefit                                                    201,041             249,623               574,034
                                                                          ------------          ----------           -----------

                       Income (loss) before equity in
                         undistributed earnings of
                         subsidiaries                                        1,251,454             722,466              (433,366)

         Equity in undistributed earnings of subsidiaries                    4,091,337           2,304,842             2,187,335
                                                                          ------------          ----------           -----------

                       Net income                                         $  5,342,791           3,027,308             1,753,969
                                                                          ============          ==========           ===========
</TABLE>


<PAGE>
                       CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                          YEARS ENDED DECEMBER 31,
                                                                          --------------------------------------------------------
                                                                              2001                  2000                   1999
                                                                          ------------           -----------           -----------
         <S>                                                              <C>                    <C>                   <C>
         Cash flows from operating activities:
             Net income                                                   $  5,342,791             3,027,308             1,753,969
             Depreciation                                                       74,215                73,360                57,958
             Gain on sale of premises and equipment                            (11,544)               (4,917)                   --
             Write-down of other investments                                        --                    --                 1,000
             Amortization of intangible assets                                  85,212                85,212               167,097
             Proceeds from sale of trading securities                               --                    --               597,378
             Gain on sale of trading securities                                     --                    --                (7,378)
             Unrealized loss on trading securities                                  --               306,200             1,190,820
             Increase in other assets                                         (199,215)             (253,843)             (529,238)
             (Decrease) increase in other liabilities                          (29,874)              104,806               (82,024)
             Equity in earnings of investee                                   (120,336)             (153,348)             (211,279)
             Equity in undistributed earnings of
               subsidiaries                                                 (4,091,337)           (2,304,842)           (2,187,335)
                                                                          ------------           -----------           -----------

                       Net cash provided by operating
                         activities                                          1,049,912               879,936               750,968
                                                                          ------------           -----------           -----------

         Cash flows from investing activities:
             Dividends received from other investment                           62,042                27,575                    --
             Net cash paid in connection with
               acquisition of CB Financial Corp. common
               stock                                                                --                    --               (15,874)
             Capital contribution to subsidiary                             (4,000,000)              (15,000)                   --
             Purchase of equipment                                             (76,539)              (77,235)              (46,631)
             Proceeds from sale of premises and
               equipment                                                        12,746                 6,000                    --
                                                                          ------------           -----------           -----------

                       Net cash used in investing
                         activities                                         (4,001,751)              (58,660)              (62,505)
                                                                          ------------           -----------           -----------
</TABLE>


<PAGE>

<TABLE>
<CAPTION>
                                                                                          YEARS ENDED DECEMBER 31,
                                                                          --------------------------------------------------------
                                                                              2001                   2000                  1999
                                                                          ------------           -----------           -----------
         <S>                                                              <C>                    <C>                   <C>
         Cash flows from financing activities:
             Proceeds from borrowings                                        4,000,000                    --                    --
             Payment of borrowings                                            (177,000)                   --              (750,000)
             Payment of cash dividends                                        (647,698)             (647,699)             (525,428)
             Purchase and retirement of common stock                                --                    --              (164,060)
             Proceeds from issuance of common stock upon
               exercise of stock options                                            --                    --               539,144
                                                                          ------------           -----------           -----------

                       Net cash provided by (used in)
                         financing activities                                3,175,302              (647,699)             (900,344)
                                                                          ------------           -----------           -----------

                       Increase (decrease) in cash                             223,463               173,577              (211,881)

         Cash at beginning of year                                             280,453               106,876               318,757
                                                                          ------------           -----------           -----------

         Cash at end of year                                              $    503,916               280,453               106,876
                                                                          ============           ===========           ===========

         Supplemental disclosures of noncash investing activities:
               Common stock issued for purchase of CB
                 Financial Corp. common stock                             $         --                    --             2,847,883

               Pushdown of intangible assets to bank
                 subsidiary                                                         --                    --             2,783,634

               Transfer of trading securities to
                 available for sale                                                 --             1,408,520                    --
</TABLE>

         At December 31, 2001, approximately $39,509,000 of the parent company's
         investment in the Bank is restricted as to dividend payments from the
         Bank to the parent company.


<PAGE>
(22)     SEGMENT AND RELATED INFORMATION

         The Company has two significant reportable segments: banking and
         mortgage banking. The Company offers traditional banking services
         through the bank subsidiary, Habersham Bank. The Company originates and
         sells loans in the secondary market through its mortgage banking
         segment, BancMortgage Financial Corp.

         The accounting policies of the segments are the same as those described
         in the summary of significant accounting policies. The Company
         evaluates performance based on net income of the respective segments.

<TABLE>
<CAPTION>
                                                                 MORTGAGE
                                                BANKING           BANKING   ELIMINATIONS(B)   OTHER(A)   ELIMINATIONS  CONSOLIDATED
                                        ---------------------   ----------- --------------- -----------  ------------ -------------
         <S>                            <C>      <C>            <C>         <C>             <C>          <C>          <C>
         Interest income                2001     $ 36,808,876     7,008,927    (2,599,880)      58,791           --    41,276,714
                                        2000       39,503,565     4,509,161    (2,245,507)      58,789           --    41,826,008
                                        1999       30,525,558     3,933,973    (2,399,499)      84,108           --    32,144,140

         Interest expense               2001       20,184,166     3,626,871      (862,591)     218,808           --    23,167,254
                                        2000       22,621,628     3,134,547      (995,024)     159,500           --    24,920,651
                                        1999       14,807,323     2,356,038      (811,594)     165,437         (298)   16,516,906

         Provision for loan losses      2001        1,423,000       182,258            --           --           --     1,605,258
                                        2000          955,000       340,445            --           --           --     1,295,445
                                        1999          500,000       485,800            --           --           --       985,800

         Gain on sale of loans          2001          550,087    23,082,344            --           --           --    23,632,431
                                        2000          102,128    12,615,729            --           --           --    12,717,857
                                        1999          397,782     9,420,876            --           --           --     9,818,658

         Other noninterest income       2001        2,988,165     5,007,505      (965,996)   1,928,375   (1,358,356)    7,599,693
                                        2000        2,686,784     4,831,595    (1,472,465)   1,700,777   (1,366,673)    6,380,018
                                        1999        2,365,625     5,574,065    (2,290,556)      26,234      (16,536)    5,658,832

         Depreciation on premises       2001          589,514       665,078            --       78,298           --     1,332,890
           and equipment                2000          704,579       493,823            --       80,718           --     1,279,120
                                        1999          785,965       424,454            --       66,833           --     1,277,252

         Other noninterest expense      2001       13,355,112    25,846,032    (1,824,578)   2,407,009   (1,358,356)   38,425,219
                                        2000       12,066,001    17,495,341    (1,442,178)   2,399,073   (1,366,673)   29,151,564
                                        1999       11,297,644    15,731,164    (3,174,871)   3,300,227      (13,968)   27,140,196

         Income tax expense (benefit)   2001        1,234,004     1,734,833      (298,705)    (197,091)          --     2,473,041
                                        2000        1,891,204        34,584      (435,463)    (240,530)          --     1,249,795
                                        1999        1,205,249        56,637      (674,789)    (639,590)          --       (52,493)

         Net income (loss)              2001        3,367,465     3,033,935      (580,001)    (478,608)          --     5,342,791
                                        2000        4,089,593       422,217      (845,311)    (639,191)          --     3,027,308
                                        1999        4,222,809       344,795    (1,309,887)  (1,503,748)          --     1,753,969

         Total assets                   2001      439,307,021   121,478,469   (19,570,411)   6,062,078     (774,221)  546,502,936
                                        2000      495,497,850    65,941,425   (23,148,550)   5,144,215     (326,635)  543,108,305
                                        1999      425,758,743    52,115,055   (21,171,084)   5,418,649     (145,630)  461,975,733
</TABLE>

         (a)      Segment information below the quantitative thresholds for
                  significance are attributable to four business units
                  (Advantage Insurers, Inc., Appalachian Travel Service, Inc.,
                  The Advantage Group, Inc., and the corporate headquarters).
                  The Company offers a full range of home, life, auto, and
                  health insurance through Advantage Insurers, Inc. Appalachian
                  Travel Service, Inc. provides travel services to the community
                  and The Advantage Group, Inc. provides marketing and
                  advertising services. The corporate headquarters includes
                  primarily the elimination of inter-business unit transactions
                  and certain investments in other bank holding companies.

         (b)      BancMortgage Financial Corp., the mortgage banking segment, is
                  a subsidiary of Habersham Bank which is a portion of the
                  banking segment. BancMortgage Financial Corp. originates and
                  sells certain loans to Habersham Bank and Habersham Bank funds
                  the origination of those loans through a warehouse line. The
                  amounts eliminated in total assets, interest income, and
                  interest expense relate primarily to the warehouse line and
                  the related interest income and expense. The amounts
                  eliminated in other noninterest income and other noninterest
                  expense relate to the loan fees associated with the loans sold
                  to Habersham Bank, which are recorded in income by
                  BancMortgage Financial Corp. and deferred and amortized into
                  income for consolidated purposes through entries on Habersham
                  Bank's records.


<PAGE>



(23)     QUARTERLY FINANCIAL DATA (UNAUDITED)

         The supplemental quarterly financial data for the years ended December
         31, 2001 and 2000 is summarized as follows:

<TABLE>
<CAPTION>
                                                                                      QUARTER ENDED
                                                            -----------------------------------------------------------------
                                                              MARCH 31          JUNE 30         SEPTEMBER 30      DECEMBER 31
                                                                2001              2001              2001              2001
                                                            -----------        ----------       ------------      -----------
         <S>                                                <C>                <C>              <C>               <C>
         Interest income                                    $10,999,244        11,025,393        10,131,329        9,120,748
         Interest expense                                     6,686,805         6,458,501         5,438,883        4,583,065
         Net interest income                                  4,312,439         4,566,892         4,692,446        4,537,683
         Provision for loan losses                              284,347           431,788           404,193          484,930
         Net income                                           1,106,179         1,706,406         1,070,415        1,459,791
         Net income per share - basic                              0.41              0.63              0.40             0.54
         Net income per share - diluted                            0.41              0.63              0.39             0.53

</TABLE>

<TABLE>
<CAPTION>
                                                                                      QUARTER ENDED
                                                            -----------------------------------------------------------------
                                                              MARCH 31          JUNE 30         SEPTEMBER 30      DECEMBER 31
                                                                2000              2000              2000             2000
                                                            -----------        ----------       ------------      -----------
         <S>                                                <C>                <C>              <C>               <C>
         Interest income                                      9,410,885        10,223,681        10,968,497       11,222,945
         Interest expense                                     5,117,598         5,891,056         6,742,160        7,169,837
         Net interest income                                  4,293,287         4,332,625         4,226,337        4,053,108
         Provision for loan losses                              120,000           220,000           375,472          579,973
         Net income                                             678,964           589,759         1,079,553          679,032
         Net income per share - basic                              0.25              0.22              0.40             0.25
         Net income per share - diluted                            0.25              0.22              0.40             0.25
</TABLE>