SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

         ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934.

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999.

                           COMMISSION FILE NO. 2-94292

                               FNB Banking Company

        (Exact name of Small Business Issuer as specified in its charter)

                Georgia                              58-1479370
        ----------------------------------------------------------------
           (State or other jurisdiction            (I.R.S. Employer
         of incorporation or organization)       Identification Number)

             318 South Hill Street
             Post Office Drawer F
             Griffin, Georgia                              30224
            -------------------------------------------------------
            (Address of principal executive offices)    (Zip Code)

                    Issuer's telephone number: (770) 227-2251

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

Securities registered pursuant to Section 12(g) of the Act:   None.

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

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B not contained in this form, and no disclosure  will be contained,
to the best of  registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB.  NOT APPLICABLE. REGISTRANT IS NOT REQUIRED TO BE
REGISTERED UNDER THE SECURITIES EXCHANGE ACT OF 1934.

State the Issuer's revenue for its most recent fiscal year:  $20,118,182


State the aggregate market value of the voting stock held by non-affiliates:  AS
OF MARCH 14, 2000,  294,363 SHARES OF COMMON STOCK, $1.00 PAR VALUE (THE "COMMON
STOCK"),  WITH AN AGGREGATE VALUE OF $11,774,520  (BASED UPON APPROXIMATE MARKET
VALUE OF $40.00 /SHARE AND INCLUDING SHARES HELD BY THE REGISTRANT'S AFFILIATES)
(THE LAST SALE PRICE KNOWN TO THE  REGISTRANT  FOR THE COMMON  STOCK,  FOR WHICH
THERE IS NO ESTABLISHED TRADING MARKET).

State the number of shares outstanding of each of the issuer's classes of Common
Stock as of the  latest  practicable  date:  AS OF MARCH 14,  2000,  THERE  WERE
788,924 SHARES OUTSTANDING OF THE REGISTRANT'S COMMON STOCK.



<PAGE>

                                      INDEX

                                                                        PAGE

    PART I ................................................................1

    Item 1.   Description Of Business......................................1
    Item 2.   Description Of Property......................................7
    Item 3.   Legal Proceedings ...........................................8
    Item 4.   Submission of Matters to a Vote of
                   Security Holders........................................8

    PART II ...............................................................9

    Item 5.   Market for Common Equity and Related
                   Stockholder Matters.....................................9
    Item 6.   Management's Discussion and Analysis or
                  Plan of Operation........................................9
    Item 7.   Financial Statements........................................22
    Item 8.   Changes in and Disagreements with
                   Accountants on Accounting and Financial
                   Disclosure.............................................22

    PART III..............................................................23

    Item 9.   Directors, Executive Officers, Promoters
                   and Control Persons; Compliance with
                   Section 16(A) of the Exchange Act......................23
    Item 10.  Executive Compensation......................................24
    Item 11.  Security Ownership of Certain Beneficial
                    Owners and Management ................................24
    Item 12.  Certain Relationships and Related
                   Transactions...........................................26
    Item 13.  Exhibits and Reports on Form 8-K............................27






                                       -i-


<PAGE>


                                     PART I

                         ITEM 1. DESCRIPTION OF BUSINESS

THE REGISTRANT

         FNB Banking  Company,  a Georgia  corporation (the "Company" or "FNB"),
was  organized on July 13, 1982. On March 1, 1983,  the Company  acquired all of
the 200,000 issued and outstanding shares of common stock of First National Bank
of  Griffin  (the  "Bank").  As  a  result  of  this  transaction,   the  former
shareholders of the Bank became the  shareholders  of the Company,  and the Bank
became the wholly-owned subsidiary of the Company.

         Certain  statements  included or incorporated by reference in this Form
10-KSB are  forward-looking  (as such term is defined in the Securities Exchange
Act of 1934,  as amended).  Such  statements  may relate to the Company's or the
Bank's operations,  performance,  and financial condition.  These statements are
based upon a number of assumptions and estimates that are inherently  subject to
significant  uncertainties,  many of which are beyond the control of the Company
and the Bank.  Actual  results may differ  materially  from those  expressed  or
implied by such forward-looking statements.

         The Company operates a full-service  commercial  banking business based
in Griffin,  Georgia,  providing such customary banking services as checking and
savings accounts, various types of time deposits, safe deposit facilities, money
transfers,  and  individual  retirement  accounts.  The  Company  also  finances
commercial  transactions,  makes secured and unsecured loans, and provides other
financial services,  including corporate,  pension, and personal trust services,
to its customers through the Bank. Through its subsidiary,  Griffin Loans, Inc.,
a consumer finance company,  the Company engages in the business of small making
loans to individuals under the trade name "First Credit."


SERVICES

         The Bank is community oriented, with an emphasis on retail banking, and
offers such  customary  banking  services as consumer  and  commercial  checking
accounts,  NOW accounts,  savings  accounts,  certificates of deposit,  lines of
credit,  MasterCard and Visa accounts,  and money  transfers.  The Bank finances
commercial and consumer  transactions,  makes secured and unsecured  loans,  and
provides a variety of other banking services.

DEPOSITS

         The Bank offers a full range of  depository  accounts  and  services to
both  consumers and  businesses.  At December 31, 1999, the Bank's deposit base,
totaling  approximately $177 million,  consisted of approximately $29 million in
non-interest bearing demand deposits (16% of total deposits),  approximately $44
million in interest  bearing demand deposits  (including  money market accounts)
(24% of total deposits),  approximately  $19 million in savings deposits (10% of
total deposits), approximately $61 million in time deposits in amounts less than
$100,000 (34% of total deposits), and approximately $24 million in time deposits
of $100,000 or more (13% of total  deposits).  Management  of the Bank is of the
opinion   that  its   time   deposits   of   $100,000   or  more  are   customer
relationship-oriented and represent a reasonably stable source of funds.


                                      -1-
<PAGE>



LOANS

         The Bank makes both secured and unsecured loans to individuals,  firms,
and  corporations,  and both its  consumer  and  commercial  lending  operations
include various types of credit for the Bank's customers.  Secured loans include
first  and  second  real  estate  mortgage  loans.  The Bank also  makes  direct
installment  loans to  consumers  on both a  secured  and  unsecured  basis.  At
December 31, 1999,  consumer,  real estate (including  mortgage and construction
loans),  and  commercial  loans  represented  approximately  19%,  33%, and 48%,
respectively,  of the  Bank's  total  loan  portfolio.  The Bank owns a consumer
finance  company,  Griffin Loans,  Inc.  ("Griffin  Loans"),  which owns another
consumer finance company, Zebulon Finance Corporation ("Zebulon Finance").  Most
loans made by the finance  company are for less than $1,000,  but Griffin  Loans
also makes real estate loans for larger amounts. On June 17, 1999, the assets of
Zebulon  Finance were sold or incorporated  into Griffin Loans,  and the Zebulon
operation is no longer run by Griffin Loans.

LENDING POLICY

         The  current  lending  strategy  of the Bank is to make  loans  only to
persons who reside,  work, or own property in its primary trade area  consisting
of Spalding and Henry Counties,  Georgia. Unsecured loans normally are made only
to persons who maintain  depository  relationships  with the Bank. Secured loans
are made to persons who are well-established and have net worth, collateral, and
cash flow to support the loan.  Real estate  loans are  normally  made when such
loans are secured by real property located in the Bank's primary trade area.

         The Bank  provides  each lending  officer with written  guidelines  for
lending activities.  Lending authority is delegated by the Board of Directors of
the Bank to loan officers,  each of whom is limited in the amount of secured and
unsecured  loans which they can make to a single  borrower  or related  group of
borrowers.  All  unsecured  loans in excess of $50,000 must have the approval of
the loan committee.

         Making loans to  businesses  to fund working  capital is a  traditional
function of  commercial  banks.  Such loans are expected to be repaid out of the
cash flow of the commercial  entity,  and the ability of the borrower to service
its debt is dependent upon the success of the commercial  enterprise.  It is the
Bank's  policy  to  secure  these  loans  with  collateral.  Many of the  Bank's
commercial loans are secured by real estate  collateral  because such collateral
is superior to other types of collateral  available to small  businesses.  Loans
secured  by  commercial  real  estate,   however,   particularly  if  collateral
dependent,  are subject to certain inherent risks. Commercial real estate may be
substantially  illiquid,  and  commercial  real estate  values are  difficult to
ascertain and subject to wide fluctuation depending upon economic conditions.

         Inter-agency  guidelines adopted by federal bank regulators,  including
the  Office  of the  Comptroller  of the  Currency  (the  "OCC"),  mandate  that
financial  institutions  establish  real estate  lending  policies and establish
certain minimum real estate loan-to-value  standards. The Bank has adopted these
federal  standards as its minimum  standards.  These  standards  require maximum
loan-to-value  ratios for various types of real estate loans as set forth below.
The  Bank  may,  however,  make  exceptions  to  the  minimum  standards,  which
exceptions must be accounted for and tracked.


                                      -2-
<PAGE>


                                                                   Loan-to-
                                                                  Value Limit
         Loan category                                             (percent)
         -------------                                             ---------

         Raw land                                                      65
         Land development                                              75
         Construction:
         Commercial, multifamily <F1> and
            other nonresidential                                       80
         1- to 4-family residential                                    85
         Improved Property                                             85
         Owner-occupied 1- to 4-family and
         home equity                                                  <F2>

-----------------------
[FN]
<F1>     Multifamily construction includes condominiums and cooperatives.
<F2>     A loan-to-value limit has not been established  for permanent  mortgage
or home equity loans on owner-occupied,  1-to 4-family residential property. For
any such loan with a  loan-to-value  ratio that  equals or exceeds 90 percent at
origination,  appropriate  credit  enhancement  in the form of  either  mortgage
insurance or readily marketable collateral is required.
</FN>

LOAN REVIEW AND NON-PERFORMING ASSETS

         The  loan  review  officer  of the  Company  reviews  the  Bank's  loan
portfolio to  determine  deficiencies  and  corrective  action to be taken.  The
results of the reviews by the loan review officer are presented to the President
and the Executive  Committee of the Bank.  On at least an annual basis,  reviews
are conducted  for all loans over $50,000.  Past due loans are reviewed at least
weekly by lending officers and by the chief credit officer, and a summary report
is reviewed  monthly by the Board of Directors.  The Board of Directors  reviews
all new loans over $25,000 whether current or past due each month.

ASSET/LIABILITY MANAGEMENT

         A committee  composed of the Bank's  officers is charged with  managing
the Bank's  assets and  liabilities.  The  committee  attempts  to manage  asset
growth, liquidity, and capital to maximize income and reduce interest rate risk.
The committee directs the Bank's overall acquisition and allocation of funds. At
monthly  meetings,  the  committee  reviews and  discusses the monthly asset and
liability  funds budget in relation to the actual flow of funds, as well as peer
group  comparisons;  the  ratio of the  amount of  rate-sensitive  assets to the
amount of rate-sensitive liabilities; the ratio of the allowance for loan losses
to outstanding and non-performing  loans; and other variables,  such as expected
loan demand,  investment  opportunities,  core deposit  growth within  specified
categories,  regulatory changes,  monetary policy  adjustments,  and the overall
state of the economy.

COMPETITION

         The  banking  business is highly  competitive.  The  Company's  primary
market area  consists  of  Spalding  County,  Georgia.  The Company  competes in
Spalding  County with five other  commercial  banks and in Henry  County with 12
commercial banks. The deposit range of its competitors in Spalding County is $31
million to $138 million and $6 million to $352 million in Henry County. The Bank
is the largest bank in Spalding County in terms of assets and deposit size, with
assets and deposits at December 31, 1999, of approximately $219 million and $177
million,  respectively,  and the  second  smallest  in Henry  County in terms of
deposits located in that county.

         In addition to the Company's  competitors in Spalding and Henry County,
the Company competes with commercial banks, thrifts, and various other financial
institutions  and brokerage  houses located outside the market area. To a lesser
extent, the Company also competes for loans with insurance companies,  regulated


                                      -3-

<PAGE>

small loan  companies,  credit unions,  and certain  governmental  agencies.  In
addition,  the Company and any non-banking  subsidiaries it may establish in the
future  compete and will compete with  numerous  other  companies  and financial
institutions  engaged in similar  lines of business,  such as other bank holding
companies, leasing companies, and insurance companies.

YEAR 2000 COMPLIANCE

         The  Bank  did  not  experience  any  material   disruptions  in  their
operations  or activities  as a result of the "Year 2000"  problem.  Nor did the
Bank incur  material  expenses in  correcting  perceived or suspected  Year 2000
problems.  In  addition,  the Bank is not  aware  that any of its  suppliers  or
customers  has  experienced  any material  disruptions  in their  operations  or
activities.  The Bank does not  expect to  encounter  any such  problems  in the
foreseeable future, although it continues to monitor its computer operations for
signs or indications of such problem.

         It is possible, however, that if Year 2000 problems are incurred by the
customers  of the Bank,  such  problems  could have a negative  impact on future
operations and financial performance of the Bank, although the Bank has not been
able to specifically  identify any such problems among its clients or suppliers.
Furthermore, the Year 2000 problem may impact other entities with which the Bank
transacts  business  and the Bank  cannot  predict  the  effect of the Year 2000
problem on such entities or the resulting effect on the Bank.

EMPLOYEES

         As of December 31, 1999, the Company and the Bank had 111 full-time and
25 part-time employees.  The Company is not a party to any collective bargaining
agreement.  Management believes that the Company has satisfactory relations with
its employees.

SUPERVISION AND REGULATION

GENERAL

         The Company is a registered  bank holding company subject to regulation
by the Board of Governors of the Federal  Reserve (the "Federal  Reserve") under
the Bank Holding  Company Act of 1956,  as amended  (the "Act").  The Company is
required  to  file  financial  information  with,  and is  subject  to  periodic
examination by, the Federal Reserve.

         The Act  requires  every bank  holding  company  to obtain the  Federal
Reserve's prior approval before (1) it may acquire direct or indirect  ownership
or  control  of more than 5% of the  voting  shares of any bank that it does not
already control;  (2) it or any of its non-bank  subsidiaries may acquire all or
substantially  all of the assets of a bank;  and (3) it may merge or consolidate
with any other bank  holding  company.  In addition,  a bank holding  company is
generally prohibited from engaging in, or acquiring,  direct or indirect control
of the voting  shares of any company  engaged in  non-banking  activities.  This
prohibition  does not  apply  to  activities  listed  in the Act or found by the
Federal  Reserve,  by order or regulation,  to be closely  related to banking or
managing or controlling  banks as to be a proper incident  thereto.  Some of the
activities  that the Federal Reserve has determined by regulation or order to be
closely related to banking are:

    o     making or servicing loans and certain types of leases;
    o     performing certain data processing services;
    o     acting as fiduciary or investment or financial advisor;
    o     providing brokerage services;
    o     underwriting bank eligible securities;
    o     underwriting  debt  and  equity securities on a  limited basis through
          separately capitalized subsidiaries; and
    o     making investments in corporations or projects designed  primarily  to
          promote community welfare.


                                      -4-

<PAGE>

         In addition,  effective  March 11, 2000,  bank holding  companies whose
banking  subsidiaries  are all  well-capitalized  and  well-managed may apply to
become  a  financial  holding  company.  Financial  holding  companies  have the
authority to engage in  activities  that are  "financial in nature" that are not
permitted for other bank holding companies.  Some of the activities that the Act
provides are financial in nature are:

    o    lending, exchanging, transferring, investing for others or safeguarding
         money or securities;
    o    insuring,  guaranteeing, or indemnifying  against  loss,  harm, damage,
         illness,  disability, or death, or providing and issuing annuities, and
         acting as principal,  agent, or broker with respect  thereto;
    o    providing   financial,   investment,  or  economic  advisory  services,
         including advising an investment company;
    o    issuing  or  selling  instruments  representing  interests  in pools of
         assets permissible for a bank to hold directly; and
    o    underwriting,  dealing in, or making a market in securities.

         We have no immediate plans to register as a financial holding company.

         The laws of Georgia require annual  registration with the Department of
Banking and Finance  (the "DBF") by all Georgia  bank  holding  companies.  Such
registration  includes  information  with  respect to the  financial  condition,
operations, management, and intercompany relationships of a bank holding company
and its subsidiaries  and related  matters.  The DBF may also require such other
information as is necessary to keep itself informed as to whether the provisions
of Georgia law and the regulations and orders issued  thereunder by the DBF have
been complied with. The DBF may make  examinations  of each bank holding company
and each bank subsidiary thereof, other than a national bank.

         The Bank is a national bank  chartered  under the National Bank Act and
is subject to the supervision of, and is regularly examined by, the OCC. The OCC
regulates  or  monitors  all  areas of the  Bank's  operations  and  activities,
including  reserves,  loans,  mergers,  issuance  of  securities,   payments  of
dividends,  interest rates, and establishment of branches.  Interest and certain
other charges  collected or contracted for by the Bank are also subject to state
usury laws or certain federal laws concerning interest rates.

         The Bank is insured by the Federal Deposit  Insurance  Corporation (the
"FDIC").  The major  functions of the FDIC with respect to insured banks include
paying  depositors  to the extent  provided by law if an insured  bank is closed
without adequate provisions having been made to pay claims of depositors, acting
as a receiver of state banks placed in receivership  when appointed  receiver by
state authorities,  and preventing the development or continuance of unsound and
unsafe banking practices.

         The Company is an  "affiliate"  of the Bank under the  Federal  Reserve
Act, which imposes certain restrictions on (i) loans by the Bank to the Company,
(ii)  investments  in the stock or securities of the Company by the Bank,  (iii)
the Bank's taking the stock or securities of an  "affiliate"  as collateral  for
loans by the Bank to a borrower and (iv) the purchase of assets from the Company
by the Bank. Further, a bank holding company and its subsidiaries are prohibited
from engaging in certain tie-in arrangements in connection with any extension of
credit, lease or sale of property or furnishing of services.

PAYMENT OF DIVIDENDS

         The Company is a legal entity separate and distinct from the Bank. Most
of the  revenues of the Company  result from  dividends  paid to it by the Bank.
There are statutory  and  regulatory  requirements  applicable to the payment of
dividends by the Bank, as well as by the Company to its shareholders.

         As a national  bank,  the Bank is required by federal law to obtain the
prior  approval  of the  OCC for  payments  of  dividends  if the  total  of all
dividends  declared  by the Board of  Directors  in any year will exceed (i) the
total of the Bank's net profits (as defined and  interpreted by regulation)  for
that year, plus (ii) the Bank's retained net profits (as defined and interpreted
by  regulation)  of the  preceding  two years,  less any  required  transfers to
surplus.


                                      -5-

<PAGE>

         The  payment  of  dividends  by the  Company  and the  Bank may also be
affected  or limited  by other  factors,  such as the  requirement  to  maintain
adequate capital above regulatory guidelines. In addition, if, in the opinion of
the applicable regulatory authority, a bank under its jurisdiction is engaged in
or is about to engage in an unsafe or unsound  practice  (which,  depending upon
the financial condition of a bank, could include the payment of dividends), such
authority may require, after notice and hearing, that such bank cease and desist
from such practice. The FDIC and the OCC have issued policy statements providing
that insured banks should generally only pay dividends out of current  operating
earnings.  At  December  31,  1999,  the  Bank's  retained  earnings  from which
dividends  could be paid  totaled  approximately  $22  million.  For  1999,  the
Company's cash dividend  payout to stockholders  was forty-seven  percent of net
income.

MONETARY POLICY

         The results of operations of the Bank,  and therefore the Company,  are
affected by credit policies of monetary  authorities,  particularly  the Federal
Reserve.  The  instruments of monetary  policy  employed by the Federal  Reserve
include open market  operations in U.S.  government  securities,  changes in the
discount rate on bank  borrowings  and changes in reserve  requirements  against
bank deposits. In view of changing conditions in the national economy and in the
money  markets,  as well  as the  effect  of  actions  by  monetary  and  fiscal
authorities,  including the Federal  Reserve,  no  prediction  can be made as to
possible future changes in interest rates,  deposit levels,  loan demand, or the
business and earnings of the Bank.

CAPITAL ADEQUACY

         The  Federal  Reserve  and  the  OCC  have  implemented   substantially
identical  risk-based  rules for assessing bank and bank holding company capital
adequacy.  These regulations  establish minimum capital standards in relation to
assets and off-balance  sheet  exposures as adjusted for credit risk.  Banks and
bank holding companies are required to have (1) a minimum level of total capital
(as defined) to  risk-weighted  assets of eight percent;  (2) a minimum Tier One
Capital (as defined) to risk-weighted assets of four percent; and (3) a Tier One
Capital to average assets of four percent. In addition,  the Federal Reserve and
the OCC have  established  a minimum three  percent  leverage  ratio of Tier One
Capital  to  total  assets  for the most  highly-rated  banks  and bank  holding
companies.  "Tier One Capital" generally consists of common equity not including
unrecognized  gains  and  losses on  securities,  minority  interests  in equity
accounts of consolidated  subsidiaries,  and certain  perpetual  preferred stock
less certain  intangibles.  The Federal  Reserve and the OCC will require a bank
holding company and a bank,  respectively,  to maintain a leverage ratio greater
than three percent if either is experiencing or anticipating  significant growth
or is  operating  with less than  well-diversified  risks in the  opinion of the
Federal  Reserve.  The  Federal  Reserve and the OCC use the  leverage  ratio in
tandem with the  risk-based  ratio to assess the  capital  adequacy of banks and
bank holding  companies.  The capital  adequacy  standards  also provide for the
consideration  of interest  rate risk in the overall  determination  of a bank's
capital  ratio,  requiring  banks with  greater  interest  rate risk to maintain
adequate capital for the risk.

         In addition,  Section 38 of the Federal Deposit  Insurance  Corporation
Act's "prompt  corrective  action" provisions set forth five regulatory zones in
which all banks are placed largely based on their capital positions.  Regulators
are permitted to take increasingly harsh action as a bank's financial  condition
declines.  Regulators are also empowered to place in receivership or require the
sale of a bank to another depository  institution when a bank's capital leverage
ratio reaches two percent. Better capitalized institutions are generally subject
to less onerous  regulation  and  supervision  than banks with lesser amounts of
capital.

         The OCC has adopted regulations concerning the prompt corrective action
provisions  that place  financial  institutions in the following five categories
based upon  capitalization  ratios: (1) a "well  capitalized"  institution has a
total  risk-based  capital ratio of at least ten percent,  a Tier One risk-based
ratio of at least six percent and a leverage ratio of at least five percent; (2)
an "adequately  capitalized" institution has a total risk-based capital ratio of
at least eight percent, a Tier One risk-based ratio of at least four percent and
a leverage ratio of at least four percent; (3) an "undercapitalized" institution
has a total  risk-based  capital  ratio  of  under  eight  percent,  a Tier  One
risk-based  ratio  of under  four  percent  or a  leverage  ratio of under  four
percent;  (4)  a  "significantly   undercapitalized"  institution  has  a  total
risk-based  capital ratio of under six percent,  a Tier One risk-based  ratio of
under  three  percent  or a leverage  ratio of under  three  percent;  and (5) a
"critically undercapitalized" institution has a leverage ratio of two percent or
less.  Institutions  in any of the three  undercapitalized  categories  would be
prohibited  from declaring  dividends or making capital  distributions.  The OCC

                                      -6-

<PAGE>

regulations  also  establish  procedures for  "downgrading"  an institution to a
lower capital  category based on supervisory  factors other than capital.  Under
the OCC's regulations, the Bank was a "well capitalized" institution at December
31, 1999.

Set forth below are pertinent  capital ratios for the Company and the Bank as of
December 31, 1999.


MINIMUM CAPITAL REQUIREMENTS                 COMPANY            BANK
----------------------------                 -------            ----

Tier 1 Capital to Risk-based                 14.3%             13.7%<F1>
   Assets:  4.00%
Total Capital to Risk-based                  15.6%             15.0%<F2>
   Assets:  8.00%

Leverage Ratio (Tier 1 Capital               10.8%             10.5%<F3>
   to Average Assets): 4.00%
----------------------
[FN]
<F1>  Minimum for "Well Capitalized" Banks = 6%
<F2>  Minimum for "Well Capitalized" Banks = 10%
<F3>  Minimum for "Well Capitalized" Banks = 5%
</FN>

RECENT LEGISLATIVE AND REGULATORY ACTION

         On November 12, 1999,  President Clinton signed the  Gramm-Leach-Bliley
Act, a  significant  piece of  legislation  intended to modernize  the financial
services industry. The bill repeals the anti-affiliation  provisions of the 1933
Glass-Steagall   Act  to  allow  for  the  merger  of  banking  and   securities
organizations   and  permits  banking   organizations  to  engage  in  insurance
activities including insurance  underwriting.  The bill also allows bank holding
companies to engage in financial  activities  that are  "financial  in nature or
complementary  to a financial  activity."  The act lists the expanded areas that
are financial in nature and includes  insurance and securities  underwriting and
merchant banking among others. The bill also:

    o    prohibits  non-financial  entities  from  acquiring or  establishing  a
         thrift while  grandfathering  existing  thrifts owned by  non-financial
         entities.

    o    establishes state regulators as the appropriate  functional  regulators
         for  insurance  activities  but provides that state  regulators  cannot
         "prevent or significantly  interfere" with  affiliations  between banks
         and insurance firms.

     o   contains  provisions  designed to protect  consumer  privacy.  The bill
         requires financial institutions to disclose their policy for collecting
         and protecting  confidential  information and allows  consumers to "opt
         out" of information  sharing except with unaffiliated third parties who
         market the institutions' own products and services or pursuant to joint
         agreements between two or more financial institutions.

    o    provides for functional regulation of a bank's securities activities by
         the Securities and Exchange Commission.

         Various portions of the bill have different  effective  dates,  ranging
from immediately to more than a year for implementation.

ITEM 2.  DESCRIPTION OF PROPERTY

         The Company's main office is located at 318 South Hill Street, Griffin,
Georgia, 30224, and its telephone number at that office is (770) 227-2251.


                                      -7-

<PAGE>

         The Company distributes its services through four full-service  banking
offices and one limited-service banking office as follows:

          MAIN OFFICE
          -----------

          318 South Hill Street
          Griffin, Georgia 30224

          NORTHSIDE BANK BRANCH
          ---------------------

          1475 West McIntosh Road
          Griffin, Georgia  30223

          SOUTHSIDE BANK BRANCH
          ---------------------

          1103 Zebulon Road
          Griffin, Georgia  30224

          KROGER GRIFFIN BRANCH
          ---------------------
          LIMITED SERVICE OFFICE
          ----------------------

          100 Spalding Village
          Griffin, Georgia  30223

          HENRY COUNTY BRANCH
          -------------------

          996 Bear Creek Boulevard
          Hampton, Georgia 30228

         The  executive  offices of the  Company and the main office of the Bank
are located in a 33,000 square-foot  facility,  318 South Hill Street,  Griffin,
Georgia.  The  Company's  main office is subject to a mortgage in the  principal
amount of $277,779 at December 31,  1999.  None of the other  properties  of the
Company are subject to encumbrances. The Company owns a building adjacent to its
main office in Griffin  which is used for storage of bulk  supplies and to house
the  offices  of  Griffin  Loans,  Inc.  The  Company  or the  Bank  owns  these
properties,  except the Kroger Griffin Branch Limited  Office,  which is leased.
The Bank owns the Henry County Branch property.

ITEM 3.  LEGAL PROCEEDINGS

         The Company is not aware of any material  pending legal  proceedings to
which the  Company or the Bank is a party or to which any of their  property  is
subject.

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

         No matters were submitted to a vote of security  holders of the Company
during the fourth quarter of its fiscal year.


                                      -8-

<PAGE>


                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

STOCK

         There is no established  public trading market for the Common Stock. As
of March 14, 2000, the Company had 407  shareholders of record.  At December 31,
1999, there were  approximately 408 shareholders of record.  Management is aware
of sales of the Company's stock in 1998, aggregating approximately 11,425 shares
in blocks  ranging from 35 shares to 3,019 shares at prices  ranging from $30 to
$42 per  share.  Management  is aware of sales of the  Company's  stock in 1999,
aggregating  approximately 5439 shares in blocks ranging from 17 shares to 1,353
shares at prices ranging from $40 to $42 per share.

DIVIDENDS

         In 1999 and 1998,  the Company  declared  cash  dividends of $1,009,750
($1.25 per share) and  $990,459  ($1.25 per  share),  respectively.  The Company
intends to continue paying cash dividends on a semi-annual basis. The amount and
frequency of dividends,  however,  will be determined by the Company's  Board of
Directors in light of earnings, capital requirements and the financial condition
of the Company,  and no assurances  can be given that  dividends will be paid in
the future.  Information on restrictions  on the amount of dividends  payable by
the  Company  appears  in  Note  10  to  the  Company's  consolidated  financial
statements set forth in Item 7 hereof.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

FORWARD-LOOKING STATEMENTS

         This discussion contains  forward-looking  statements under the private
Securities  Litigation Reform Act of 1995 that involve risks and  uncertainties.
Although   the   Company   believes   that  the   assumptions   underlying   the
forward-looking  statements  contained in the discussion are reasonable,  any of
the  assumptions  could be inaccurate,  and therefore,  no assurance can be made
that any of the  forward-looking  statements included in this discussion will be
accurate.  Factors  that  could  cause  actual  results to differ  from  results
discussed  in  forward-looking  statements  include,  but  are not  limited  to:
economic  conditions  (both  generally  and in the  markets  where  the  Company
operates); competition from other providers of financial services offered by the
Company;  government regulation and legislation;  changes in interest rates; and
material  unforeseen  changes in the  financial  stability  and liquidity of the
Company's credit customers,  all of which are difficult to predict and which may
be beyond the control of the Company.  The Company  undertakes  no obligation to
revise forward-looking statements to reflect events or changes after the date of
this discussion or to reflect the occurrence of unanticipated events.

GENERAL

         The Company is a one-bank  holding  company  registered  under the Bank
Holding Company Act of 1956 and was incorporated  under the laws of the state of
Georgia in 1983. All of the Company's  activities are currently conducted by the
Bank.  The Bank owns a consumer  finance  company,  Griffin Loans,  Inc.,  which
engages in the business of making  small loans to  individuals.  Griffin  Loans,
Inc. operates under the trade name of First Credit in Griffin, Georgia.

         The Company's subsidiary bank was most recently examined by its primary
regulatory  authority  in July of 1999.  There  were no  recommendations  by the
regulatory authority that, in management's  opinion,  will have material effects
on the Company's liquidity, capital resources or operations.

         The  following  discussion  is  intended  to provide  insight  into the
financial  condition and results of operations of the Company and should be read
in conjunction  with the  consolidated  financial  statements  and  accompanying
notes.


                                      -9-
<PAGE>


STATEMENTS OF EARNINGS REVIEW

         Net earnings were $2.1 million in 1999, a decrease of 28% from the $2.9
million earned in 1998. Net earnings per share was $2.64 for 1999, compared with
$3.62 reported in 1998, a decrease of 27.1%. Return on average assets and return
on average  stockholders'  equity  for 1999 was 1.00% and  9.67%,  respectively,
compared with 1.49% and 12.90%, respectively, for 1998. The decrease in earnings
per share is due to the increase of  $1,000,000 in the allowance for loan losses
as a result of an  anticipated  loss with a single  borrower.  Net earnings were
$2.9 million in 1998,  an increase of 3.3% from the $2.8  million  earned by the
Company in 1997.  Net earnings per share were $3.62 in 1998,  compared  with the
$3.50  reported in 1997,  an  increase  of 3.4 %.  Return on average  assets and
return  on  average  stockholders'  equity  for  1997  were  1.56%  and  14.75%,
respectively.

         Net interest  income  decreased by $8,000 or .01% in 1999. Net interest
income at December 31, 1999 and 1998 remained stable at $11.3 million. Net yield
(tax  equivalent)  on interest  earning assets (5.99% in 1999 and 6.58% in 1998)
decreased by 59 basis points in 1999 from 1998. Net interest income increased by
$670,000 or 6.3% in 1998 over 1997.  Net  interest  income at December 31, 1998,
was $11.3 million  compared to $10.7 million in 1997. Net yield (tax equivalent)
on  interest  earning  assets  (6.58%  in 1998  and  6.57%  in  1997)  increased
approximately .02% in 1998 over 1997.

         The Company's  operational  results depend primarily on the earnings of
the Bank. Its earnings depend to a large degree on net interest income, which is
the difference  between the interest income received from its investments  (such
as loans,  investment  securities,  federal  funds sold,  etc.) and the interest
expense which is paid on deposits and other liabilities.

         The  banking   industry  uses  two  key  ratios  to  measure   relative
profitability of net interest income.  The net interest rate spread measures the
difference  between the average yield on interest earning assets and the average
rate paid on interest bearing  liabilities.  The interest rate spread eliminates
the impact of non-interest  bearing  deposits and gives a direct  perspective on
the effect of market interest rate movements. The net interest margin is defined
as net interest income as a percent of average total interest earning assets and
takes  into  account  the  positive  impact  of  investing   noninterest-bearing
deposits.

         The net interest  spread was 5.13% in 1999,  5.65% in 1998 and 5.68% in
1997,  while the net interest  margin (on a  tax-equivalent  basis) was 5.99% in
1999,  6.58% in 1998 and 6.57% in 1997.  The  decreases  in the  margin  and the
spread  in  1999  are  primarily  due to  the  decrease  in  loan  rates  due to
competitive  pricing without the same degree of corresponding  rate decreases in
interest bearing liabilities.


                                      -10-
<PAGE>


         The following table shows,  for the past three years,  the relationship
between  interest  income and  interest  expense  and the  average  balances  of
interest earning assets and interest bearing liabilities.

TABLE 1
AVERAGE CONSOLIDATED BALANCE SHEETS AND NET INTEREST ANALYSIS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                  For the Years Ended December 31,
                                                 1999                           1998                             1997
                                    -----------------------------------------------------------------------------------------------
                                     Average             Yield/      Average             Yield/      Average               Yield/
                                     Balance   Interest   Rate       Balance  Interest    Rate       Balance   Interest     Rate
                                     ----------------------------------------------------------------------------------------------
<S>                                 <C>        <C>        <C>       <C>        <C>        <C>        <C>         <C>        <C>
Assets:
Interest earnings assets:
   Loans (including loan fees)      $152,329   15,481    10.16%     142,404    15,704     11.03%     140,193     14,904     10.63%
   Investment securities:
     Taxable                          24,850    1,516     6.10%      20,647     1,352      6.55%      15,101      1,041      6.89%
     Tax exempt                        7,816      624     7.98%       6,366       542      8.51%       6,919        600      8.67%
   Federal funds sold                  7,756      422     5.44%       5,834       328      5.62%       3,532        207      5.86%
                                     -------  -------             ---------   -------                -------     ------
Total interest earning assets        192,751   18,043     9.36%     175,251    17,926     10.23%     165,745     16,752     10.11%
Other non-interest earnings assets             17,185                          20,604                            15,686
                                              -------                         -------                            ------
       Total assets                 $209,936                        195,855                          181,431
                                     =======                        =======                          =======

Liabilities and stockholders' equity:
Interest-bearing liabilities:
   Deposits:
   Interest-bearing demand
     and savings                    $ 59,987    1,407     2.35%      55,789     1,362      2.44%      53,653      1,361      2.54%
   Time                               85,537    4,686     5.48%      78,844     4,758      6.03%      70,801      4,008      5.66%
   FHLB advances                       2,256      145     6.43%       1,344        89      6.62%       5,153        332      6.44%
   Long-term debt                        354       25     7.06%         527        38      7.21%         688         50      7.27%
   Federal funds purchased and
     securities sold under
     repurchase agreements             5,286      229     4.33%       3,169       148      4.67%       2,196        119      5.42%
                                     -------   ------               -------    ------                -------     ------
       Total interest-bearing
         liabilities                 153,420    6,492     4.23%     139,673     6,395      4.58%     132,491      5,870      4.43%
Non-interest bearing deposits         30,652                         28,727                           26,474
Other liabilities                      4,118                          4,815                            3,298
Stockholders' equity                  21,746                         22,640                           19,168
                                     -------                        -------                           ------
       Total liabilities and
         stockholders' equity       $209,936                        195,855                          181,431
                                     =======                        =======                          =======
Excess of interest-earning assets
   over interest-bearing
   liabilities                      $ 39,331                          35,578                          33,254
                                     =======                         =======                         =======
Ratio of interest-earning assets to
   interest-bearing liabilities       125.64%                        125.47%                          125.10%
Net interest income                            11,551                          11,531                            10,882
                                               ======                          ======                            ======
Net interest spread                                       5.13%                            5.65%                             5.68%
                                                          ====                             ====                              ====
Net interest yield on interest
   earning assets                                         5.99%                            6.58%                             6.57%
                                                          ====                             ====                              ====
</TABLE>

Non-accrual  loans and the interest  income that was recorded on these loans, if
any, are included in the yield calculation for loans in all periods reported.

Tax exempt interest income is calculated on a tax equivalent basis.


                                      -11-
<PAGE>


      The following  table shows the relative  impact on net interest  income of
changes in the average outstanding  balances (volume) of interest earning assets
and interest bearing liabilities and the rates earned and paid by the Company on
such assets and liabilities.  Variances  resulting from a combination of changes
in rate and volume are allocated in proportion to the absolute dollar amounts of
the change in each category.

TABLE 2
CHANGES IN INTEREST INCOME AND EXPENSE ON A TAX EQUIVALENT BASIS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                  Increase (decrease) due to changes in:
                                                                   --------------------------------------
                                                               1999 over 1998                      1998 over 1997
                                                               --------------                      --------------
                                                          Volume     Rate   Total           Volume      Rate     Total
                                                          ------     ----   -----           ------      ----     -----
<S>                                                    <C>          <C>      <C>              <C>        <C>    <C>
Interest income on:
   Loans (including loan fees)                         $   610       (833)   (223)            236        564      800
   Investment securities:
     Taxable                                               376       (212)    164             359        (48)     311
     Tax exempt                                            126        (44)     82             (47)       (11)     (58)
   Federal funds sold                                      120        (26)     94             129         (8)     121
                                                         -----      -----     ---             ---        ---    -----
        Total interest earning assets                    1,232     (1,115)    117             677        497    1,174
                                                         -----      -----     ---             ---        ---    -----
Interest expense on:
   Deposits:
     Interest-bearing demand and savings                    88        (43)     45              90        (89)       1
     Time                                                  967     (1,039)    (72)            476        274      750
   FHLB advances                                            58         (2)     56            (253)        10     (243)
   Long-term debt                                          (12)        (1)    (13)            (12)         -      (12)
   Federal funds purchased and securities sold
     under repurchase agreements                            91        (10)     81              42        (13)      29
                                                         -----     ------    ----             ---        ---    -----
Total interest-bearing liabilities                       1,192     (1,095)     97             343        182      525
                                                         -----      -----    ----             ---        ---    -----
Increase (decrease) in net interest income                  40        (20)     20             334        315      649
                                                         =====      ======   ====             ===        ===    =====
</TABLE>

         Other operating  income in 1999 of $2.3 million  decreased from 1998 by
$58,000 or 2.5%. The decrease is primarily  attributable  to a decrease in trust
department  fees and losses on securities.  Other operating  expenses  increased
$336,000  (3.8%) in 1999 over 1998  principally  due to the increase in employee
costs related to an increase in salaries of key employees,  insurance  increases
and an increase in  depreciation  expense related to the Year 2000 purchases and
capital improvements.  Income taxes expressed as a percentage of earnings before
income taxes  decreased as tax exempt income as a percentage of earnings  before
taxes increased.

      Other  operating  income in 1998 of $2.4  million  increased  over 1997 by
$87,000 or 3.8%. The increase is primarily  attributable to an increase in gains
on  mortgage  loans sold  during  1998 of $79,000  over  1997.  Other  operating
expenses  increased  $831,000  (10%) in 1998  over 1997  principally  due to the
increase in employee costs of  approximately  $346,000 related to an increase in
the number of employees necessary to handle the asset growth. Also, the increase
in other operating  expenses  relates to an increase of $88,000 in equipment and
software  maintenance  and security costs  associated with a new branch in Henry
County,  Georgia and a special  contribution to Habitat for Humanity of $40,000.
Income taxes  expressed as a percentage of earnings before income taxes remained
relatively stable at 34% in 1997 and 33% in 1998.

BALANCE SHEET REVIEW

      During 1999,  average total assets  increased  $14.1  million  (7.2%) over
1998. Average deposits increased $12.8 million (7.8%) in 1999 over 1998. Average
loans  increased  $9.9 million  (7.0%) in 1999 over 1998.  During 1998,  average
total  assets  increased  $14.4  million  (8.0%)  over  1997.  Average  deposits
increased  $12.4 million (8.2%) in 1998 over 1997.  Average loans increased $2.2
million (1.6%) in 1998 over 1997.

      Total assets at December 31, 1999,  were $219.7  million,  representing  a
$16.9 million (8.4%) increase from December 31, 1998.  Total deposits  increased
$8.2  million  (4.8%) from 1998 to 1999 while total gross loans  increased  $7.5
million (5.0%) during 1999. Time deposits  increased  $596,000 from 1998 to 1999
while all other deposit  accounts  increased  $7.6 million in 1999. As the local
economy remains strong,  loan demand  increased and the Bank showed increases in


                                      -12-

<PAGE>

the commercial,  financial,  agricultural and construction  lending areas. These
loan increases were funded principally with increases in deposit accounts.

         Total assets at December 31, 1998, were $202.8 million,  representing a
$10.0 million (5.2%) increase from December 31, 1997.  Total deposits  increased
$5.2  million  (3.2%) from 1997 to 1998 while total gross loans  increased  $8.4
million  (6.1%) during 1998.  Time deposits  increased $4.6 million from 1997 to
1998 while all other deposit accounts increased $648,000 in 1998.

INVESTMENTS

      The  investment  portfolio  consists  of debt  securities  and to a lesser
extent equity  securities,  which provide the Company with a source of liquidity
and  a  long-term,   relatively  stable  source  of  income.  Additionally,  the
investment  portfolio  provides a balance to  interest  rate and credit  risk in
other  categories  of the  balance  sheet  while  providing  a  vehicle  for the
investment of available funds, furnishing liquidity, and supplying securities to
pledge as required collateral for certain deposits.

TABLE 3
INVESTMENT PORTFOLIO
(DOLLAR AMOUNTS IN THOUSANDS)

The following  table shows the carrying  value of the Company's  securities,  by
security type, as of December 31, 1999, 1998 and 1997:

<TABLE>
<CAPTION>
HELD TO MATURITY                              1999            1998            1997
                                              ----            ----            ----
<S>                                         <C>              <C>             <C>
United States treasuries and agencies       $      -            500           1,488
State, county and municipal                        -          6,019           6,281
Mortgage-backed securities                         -            560           1,624
                                              ------         ------          ------

      Totals                                $      -          7,079           9,393
                                              ======         ======          ======

AVAILABLE FOR SALE

United States treasuries and agencies       $ 13,345         10,583           3,156
State, county and municipal                    8,332            800           7,865
Mortgage-backed securities                     8,136          8,182               -
Equity securities                              1,367          2,006           1,660
                                              ------         ------          ------

                                            $ 31,180         21,571          12,681
                                              ======         ======          ======


OTHER INVESTMENTS                           $    722            826             826
                                              ======         ======          ======
</TABLE>

         Other  investments  include Federal Reserve Bank stock and Federal Home
Loan Bank stock. During 1999, in connection with the implementation of Statement
of Financial  Accounting  Standards No. 133,  "Accounting  for  Derivatives  and
Hedging Activities," all held to maturity investment securities were transferred
to available for sale. This transfer  increased  stockholders  equity by $4,000.
During 1997, certain equity securities held by the Company, which had previously
been included in other  investments,  were  transferred to available for sale as
these  began  being  traded  on a  national  exchange.  The  transfer  of  these
securities to available for sale resulted in an increase in stockholders' equity
of $703,000 after  consideration  for the tax effects of the unrealized  gain on
these securities.


                                      -13-
<PAGE>


         The  following  table  presents  the  expected  maturity  of the  total
securities by maturity date and average  yields based on amortized cost (for all
obligations on a fully taxable  basis,  assuming a 34% tax rate) at December 31,
1999. The  composition  and  maturity/repricing  distribution  of the securities
portfolio  is subject  to change  depending  on rate  sensitivity,  capital  and
liquidity needs.

TABLE 4
EXPECTED MATURITY OF SECURITIES
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>

                                       United States                                               Weighted
Maturities at                         Treasuries and         Mortgage-        State, County         Average
December 31, 1999                        Agencies        Backed Securities    and Municipal         Yields
-----------------                        --------        -----------------    -------------         ------
<S>                                      <C>                   <C>                <C>                <C>
Within 1 year                            $    500                  -                235              5.61%
After 1 through 5 years                     9,987              1,060              2,660              5.96%
After 5 through 10 years                    3,500              4,001              3,218              6.09%
After 10 years                                  -              3,293              2,319              5.52%
                                           ------              -----              -----
              Totals                     $ 13,987              8,354              8,432
                                           ======              =====              =====
</TABLE>

Mortgage  backed  securities are included in the maturities  categories in which
they are  anticipated  to be repaid based on scheduled  maturities and yields on
tax exempt securities are calculated on a tax equivalent basis.

TABLE 5
LOAN PORTFOLIO
(DOLLAR AMOUNTS IN THOUSANDS)

         The following  table  presents  loans by type at the end of each of the
last five years.
<TABLE>
<CAPTION>
                                                                            December 31,
                                                                            ------------
                                                      1999         1998         1997         1996        1995
                                                      ----         ----         ----         ----        ----
<S>                                               <C>             <C>          <C>          <C>         <C>
Commercial, financial
   and agricultural                               $  76,377       69,821       63,182       52,437      35,761
Real estate - construction                            8,789        5,005        5,634        3,604       2,334
Real estate - mortgage                               42,189       44,170       45,794       44,688      45,273
Installment loans to
   individuals                                       29,042       29,937       26,179       27,302      24,887
                                                    -------      -------      -------      -------     -------
                                                    156,397      148,933      140,789      128,031     108,255

Less:   Unearned interest and fees                     (321)        (361)        (304)        (330)       (287)
        Allowance for loan losses                    (2,589)      (1,708)      (2,013)      (1,422)     (1,273)
                                                    -------      -------      -------      -------     -------
             Loans, net                           $ 153,487      146,864      138,472      126,279     106,695
                                                    =======      =======      =======      =======     =======
</TABLE>


                                      -14-

<PAGE>


         The following table sets forth the maturity distribution of real estate
- construction and commercial,  financial and agricultural loans,  including the
interest  rate  sensitivity  for loans  maturing in greater than one year, as of
December 31, 1999.

TABLE 6
LOAN PORTFOLIO MATURITY
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
                                                      Commercial,          Real
                                                     Financial and        Estate -
      Maturity                                       Agricultural       Construction       Total
      --------                                       ------------       ------------       -----
<S>          <C>                                   <C>                     <C>            <C>
      Within 1 year                                $  24,391               7,403          31,794
      1 to 5 years                                    43,315               1,386          44,701
      After 5 years                                    8,671                   -           8,671
                                                      ------               -----          ------
           Totals                                  $  76,377               8,789          85,166
                                                      ======               =====          ======


                                                       Fixed             Variable
                                                     Interest             Interest
                                                      Rates               Rates            Total
                                                      -----               -----            -----
  Commercial, financial and agricultural:
      1 to 5 years                                 $  39,158               4,157          43,315
      After 5 years                                    3,699               4,972           8,671
                                                      ------               -----          ------
                                                   $  42,857               9,129          51,986
                                                      ======               =====          ======

  Real estate - construction
      1 to 5 years                                 $     384               1,002           1,386
                                                      ======               =====          ======
</TABLE>

         The  provision  for loan  losses in 1999 was $1.5  million  compared to
$530,000 in 1998.  The increase is  primarily  attributable  to one  significant
commercial  relationship of $1.1 million that has been  down-graded to doubtful.
In  addition,  the  finance  company  (a  wholly-owned  subsidiary  of the Bank)
increased its  provision  for loan losses by $190,000  during 1999 due to losses
realized in its  portfolio.  The provision for loan losses  continues to reflect
management's estimate of potential loan losses inherent in the portfolio and the
creation of an allowance  for loan losses  adequate to absorb such  losses.  The
allowance for loan losses represented approximately 1.7% and 1.2% of total loans
outstanding at December 31, 1999 and 1998,  respectively.  Net charge-offs  were
$579,000 and $835,000 during 1999 and 1998,  respectively.  Management  believes
that these levels of allowance are  appropriate  based upon the  Company's  loan
portfolio and the current economic conditions.

         The provision for loan losses in 1998 was $530,000 compared to $718,000
in 1997. The significant decrease in the provision for loan losses was primarily
attributable  to the decline in the rate of loan growth  during 1998 compared to
1997 and due to the significant  decrease in  nonperforming  assets during 1998.
The allowance for loan losses  represented  approximately 1.2% and 1.4% of total
loans outstanding at December 31, 1998 and 1997,  respectively.  Net charge-offs
were $835,000 and $128,000 during 1998 and 1997, respectively.

         The Company has a dedicated loan review function.  All loans of $50,000
or more are reviewed  annually  and placed in various  loan  grading  categories
which assist in developing  lists of potential  problem  loans.  These loans are
constantly  monitored by the loan review function to ensure early identification
of  repayment  problems  so that  adequate  allowances  can be made  through the
provision  for loan  losses.  The formal  allowance  for loss  adequacy  test is
performed at month end before each  calendar  quarter end.  Specific  amounts of
loss are estimated on problem loans and historical loss  percentages are applied
to the  balance  of  the  portfolio  using  certain  portfolio  stratifications.
Additionally, the evaluation takes into consideration such factors as changes in
the  nature  and  volume of the loan  portfolio,  current  economic  conditions,
regulatory examination results, and the existence of loan concentrations.


                                      -15-

<PAGE>

         Management's  judgment in determining  the adequacy of the allowance is
based on evaluations of the collectibility of loans. These evaluations take into
consideration  such  factors  as  changes  in the  nature and volume of the loan
portfolio, current economic conditions that may affect the borrower's ability to
pay,  overall  portfolio  quality,  and review of  specific  problem  loans.  In
determining  the adequacy of the  allowance for loan losses,  management  uses a
loan grading  system that rates loans in six different  categories.  Grades four
though six are assigned  allocations of loss based on  management's  estimate of
potential loss which is generally based on discounted,  collateral deficiencies.
Loans graded one through three are  stratified by type and allocated loss ranges
based on historical  loss  experience for the strata.  The  combination of these
results are compared  quarterly to the  recorded  allowance  for loan losses and
material  differences are adjusted by increasing or decreasing the provision for
loan losses. Management uses a devoted internal loan reviewer who is independent
of the lending function to challenge and corroborate the loan grading system and
provide  additional  analysis in  determining  the adequacy of the allowance for
loan losses and the future provisions for estimated loan losses.

         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.  In addition,  regulators,  as an integral part of their examination
process,  periodically  review the  Company's  allowance  for loan losses.  Such
regulators may require the Company to recognize additions to the allowance based
on  their  judgments  of  information  available  to them at the  time of  their
examination.

         The Company does not allocate the  allowance for loan losses to various
loan categories. The entire allowance is available to absorb losses from any and
all loans. Management anticipates gross charge-offs for 2000 to approximate $1.1
million,  of which  $850,000  would  be  associated  with  loans  classified  as
commercial and the balance with consumer type loans. Anticipated charge-offs are
an estimate based on historical  experience and other judgmental factors and may
be more or less than those that ultimately occur.


                                      -16-
<PAGE>


         The following  table presents a summary of changes in the allowance for
loan losses for each of the past five years.

TABLE 7
ALLOWANCE FOR LOAN LOSSES
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                            December 31,
                                                                            ------------
                                                     1999          1998        1997         1996         1995
                                                     ----          ----        ----         ----         ----

<S>                                              <C>              <C>          <C>          <C>          <C>
Balance at beginning of year                     $   1,708        2,013        1,422        1,273        1,245
Charge-offs:
  Commercial, financial and agricultural               270          663           55           67           62
  Real estate-construction                               -            -            -           -            -
  Real estate-mortgage                                  41           53            8           64           -
  Installment loans to individuals                     528          315          331          342          348
                                                     -----       ------          ---        -----        -----

                                                       839        1,031          394          473          410
                                                     -----        -----          ---        -----        -----
Recoveries:
  Commercial, financial and agricultural                47           19           78           96          223
  Real estate-construction                               -            -            -           -            -
  Real estate-mortgage                                   5           23            -            7           -
  Installment loans to individuals                     208          154          188          154          184
                                                     -----          ---          ---        -----       ------

                                                       260          196          266          257          407
                                                     -----       ------          ---        -----       ------

  Net charge-offs                                      579          835          128          216            3

  Additions charged to operations                    1,460          530          719          365           31
                                                     -----       ------          ---       ------       ------

  Balance at end of year                         $   2,589        1,708        2,013        1,422        1,273
                                                     =====        =====        =====        =====        =====
Ratio of net charge-offs during the period
  to average loans outstanding during
  the period                                           .38%         .59%         .09%         .18%         .00%
                                                       ===          ===           ==          ===          ===
</TABLE>

         Non-performing  assets at December 31, 1999, were $1.6 million compared
to $1.5  million at December 31,  1998.  There were no related  party loans that
were considered nonperforming at December 31, 1999.

         Non-performing  assets at December 31, 1998 were $1.5 million  compared
to  $2.8  million  at  December  31,  1997.  The  majority  of the  decrease  is
attributable to charge-off of a non-accrual  loan of $625,000 during 1998. There
were no related party loans that were considered  nonperforming  at December 31,
1998.


                                      -17-

<PAGE>

           The following table summarizes past due and non-accrual  loans, other
real  estate and  repossessions,  and income  that would have been  reported  on
non-accrual  loans as of December 31, 1999,  1998,  1997, 1996, and 1995 (dollar
amounts in thousands):

Table 8
Non-Performing Assets
(dollar amounts in thousands)
<TABLE>
<CAPTION>
                                                                            December 31,
                                                                            ------------
                                                      1999         1998         1997         1996         1995
                                                      ----         ----         ----         ----         ----
<S>                                                <C>            <C>          <C>            <C>          <C>
Other real estate and repossessions                $     -           33           -            90            -
Accruing loans 90 days or more
  past due                                             281          256          275          216          148
Non-accrual loans                                    1,342        1,259        2,538          477          677
Interest on non-accrual loans which
  would have been reported                              20          209          187           38           67
</TABLE>

         While there may be additional  loans in the  portfolio  that may become
classified  as  conditions  indicate,  management  is not aware of any potential
problem or restructured loans that are not disclosed in the table above.

         A loan is placed on non-accrual status when, in management's  judgment,
the collection of interest appears doubtful. As a result of management's ongoing
review of the loan portfolio, loans are classified as non-accrual generally when
they are past due in principal or interest  payments for more than 90 days or it
is otherwise not reasonable to expect collection of principal and interest under
the original  terms.  Exceptions are allowed for 90 day past due loans when such
loans  are well  secured  and in  process  of  collection.  Generally,  payments
received on non-accrual loans are applied directly to principal.

DEPOSITS

         Time deposits of $100,000 and greater totaled $24.5 million at December
31, 1999, compared with $26.1 million at year-end 1998. The following table sets
forth the  scheduled  maturities  of time  deposits of  $100,000  and greater at
December 31, 1999.

TABLE 9
DEPOSITS
(DOLLAR AMOUNTS IN THOUSANDS)

      Within 3 months                                $  5,959
      After 3 through 6 months                          4,847
      After 6 through 12 months                         7,682
      After 12 months                                   5,994
                                                        -----
                 Total                               $ 24,482
                                                       ======

LIQUIDITY

         The Bank must maintain, on a daily basis, sufficient funds to cover the
withdrawals from depositors' accounts and to supply new borrowers with funds. To
meet these obligations,  the Bank keeps cash on hand, maintains account balances
with its  correspondent  banks,  and purchases and sells federal funds and other
short term  investments.  Asset and  liability  maturities  are  monitored in an
attempt to match these to meet liquidity  needs. It is the policy of the Bank to
monitor its liquidity to meet  regulatory  requirements  and their local funding
requirements.



                                      -18-
<PAGE>

         The Bank  maintains  relationships  with  correspondent  banks that can
provide  funds  to it on  short  notice,  if  needed.  Presently,  the  Bank has
arrangements with a commercial bank for short term unsecured advances up to $5.0
million.

         Cash and cash  equivalents  increased  $10.1  million to a total  $23.3
million at December 31, 1999, as cash flows  increases  generated from financing
and operating  activities  outpaced amounts used by investing  activities.  Cash
inflows  from  operations  totaled  $5.7  million in 1999,  while  inflows  from
financing  activities  totaled  $16.9  million,  most of which were net  deposit
increases  during  1999 of $8.2  million,  increases  in FHLB  advances  of $6.2
million  and $4.4  million  increases  in  repurchase  agreements.  Included  in
financing  activities  were note payable  repayments  of $167,000,  FHLB advance
repayments of $1.3 million,  $1 million of dividends paid to  stockholders,  and
$755,000 for the repurchase and retirement of common stock.

         Investing  activities used $12.6 million of cash and cash  equivalents,
principally  composed of net  advances  of loans to  customers  of $8.0  million
during 1999 and investment security purchases, net of sales, calls, and paydowns
of $4.3 million.

         See the  consolidated  statements  of cash  flows  in the  consolidated
financial statements for a more complete analysis of cash flows.

CAPITAL RESOURCES

         The  Company  continues  to  maintain  adequate  capital  ratios.   The
following tables present the Company's  regulatory  capital position at December
31, 1999.

TABLE 10
CAPITAL RATIOS
<TABLE>
<CAPTION>

                                                                 Actual as of December 31, 1999
                                                                 ------------------------------
<S>                                                                          <C>
           Tier 1 Capital                                                    14.34%
           Tier 1 Capital minimum requirement                                 4.00%
                                                                             -----
           Excess                                                            10.34%
                                                                             =====
           Total Capital                                                     15.59%
           Total Capital minimum requirement                                  8.00%
                                                                             -----
           Excess                                                             7.59%
                                                                             =====
                                                  LEVERAGE RATIO
                                                                     As of December 31, 1999
                                                                     -----------------------
           Tier 1 Capital to adjusted total assets
             ("Leverage Ratio")                                              10.85%
           Minimum leverage requirement                                       3.00%
                                                                             -----
           Excess                                                             7.85%
                                                                             =====
</TABLE>

         For a more complete discussion of the actual and required ratios of the
Company  and its  Bank  subsidiary,  see Note 15 to the  consolidated  financial
statements.

         Average equity to average assets was 10.36% in 1999, 11.56% in 1998 and
10.56% during 1997.  The ratio of dividends  declared to net earnings was 47.08%
during 1999, compared with 34.58% and 31.43% in 1998 and 1997, respectively.

ASSET/LIABILITY MANAGEMENT

         It is the  Company's  objective  to manage  assets and  liabilities  to
provide a satisfactory,  consistent level of profitability  within the framework
of established cash, loan, investment, borrowing and capital policies. Certain

                                      -19-
<PAGE>

officers  are  charged  with the  responsibility  for  monitoring  policies  and
procedures   that  are  designed  to  ensure   acceptable   composition  of  the
asset/liability mix. It is the overall philosophy of management to support asset
growth primarily through growth of core deposits,  which include deposits of all
categories  made  by  local  individuals,  partnerships  and  corporations.  The
objective of the policy is to control interest  sensitive assets and liabilities
so as to minimize  the impact of  substantial  movements  in  interest  rates on
earnings.

         The  asset/liability  mix is  monitored  on a regular  basis.  A report
reflecting the interest sensitive assets and interest  sensitive  liabilities is
prepared and presented to the Board of Directors on a monthly basis.  One method
to measure a bank's interest rate exposure is through its repricing gap. The gap
is  calculated  by taking  all  assets  that  reprice  or mature  within a given
timeframe and  subtracting  all  liabilities  that reprice or mature within that
timeframe.  The  difference  between these two amounts is called the "gap",  the
amount of either liabilities or assets that will reprice without a corresponding
asset or liability repricing.

         A negative  gap (more  liabilities  repricing  than  assets)  generally
indicates  that the bank's net interest  income will decrease if interest  rates
rise and will  increase  if  interest  rates  fall.  A  positive  gap  generally
indicates  that the bank's net interest  income will  decrease if rates fall and
will increase if rates rise.

         The following table summarizes the amounts of  interest-earning  assets
and  interest-bearing  liabilities  outstanding  at  December  31, 1999 that are
expected to mature,  prepay or reprice in each of the future time periods shown.
Except as stated  below,  the  amount of assets or  liabilities  that  mature or
reprice  during a  particular  period  was  determined  in  accordance  with the
contractual terms of the asset or liability.  Adjustable rate loans are included
in the period in which  interest  rates are next scheduled to adjust rather than
in the  period in which they are due,  and fixed rate loans and  mortgage-backed
securities  are  included  in the  periods in which they are  anticipated  to be
repaid  based on  scheduled  maturities.  The  Company's  savings  accounts  and
interest-bearing demand accounts (NOW and money market deposit accounts),  which
are generally subject to immediate withdrawal, are included in the "Three Months
or Less" category,  although historical  experience has proven these deposits to
be more stable over the course of a year.


                                      -20-
<PAGE>

TABLE 11
INTEREST RATE GAP SENSITIVITY
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
                                                              At December 31, 1999
                                                              Maturing or Repricing in
                                                              ------------------------
                                          Three           Four
                                        Months or       Months to         1 to 5          Over 5
                                          Less          12 Months          Years           Years            Total
                                        ----------      ----------        -------         -------           -----
<S>                                   <C>                <C>              <C>              <C>              <C>
Interest-earning assets:
  Interest-bearing deposits with
     other banks                      $     500                -                -                -               500
  Federal funds sold                      7,027                -                -                -             7,027
  Investment securities                     235              500           13,292           17,153            31,180
  Mortgage loans held for sale              694                -                -                -               694
  Loans                                  46,478           15,551           86,420            7,947           156,396
  Other investments                           -                -                -              722               722
                                        -------           ------           ------           ------           -------
Total interest-bearing assets            54,934           16,051           99,712           25,822           196,519
                                        -------           ------           ------           ------           -------

Interest-bearing liabilities:
  Deposits:
     Demand and savings                  62,867                -                -                -            62,867
     Time deposits                       28,097           35,947           21,578               20            85,642
     Securities sold under
       Repurchase agreements              9,391                -                -                -             9,391
  FHLB advances                           7,531               94              500              500             8,625
  Notes payable                              42              125              111                -               278
                                        -------           ------           ------           ------           -------
Total interest-bearing liabilities      107,928           36,166           22,189              520           166,803
                                        -------           ------           ------           ------           -------
Interest sensitive difference
  per period                          $ (52,994)         (20,115)          77,523           25,302            29,716
                                        =======          =======           ======           ======           =======
Cumulative interest sensitivity
  difference                          $ (52,994)         (73,109)           4,414           29,716
Cumulative difference to total
  assets                                 (24.12)%         (33.28)%           2.01%           13.53%
</TABLE>

         At December 31, 1999, the difference between the Company's  liabilities
and assets  repricing or maturing  within one year was $73.1 million.  Due to an
excess of liabilities  repricing or maturing within one year, a rise in interest
rates would cause the Company's net interest income to decline.

         Certain  shortcomings are inherent in the method of analysis  presented
in the foregoing table. For example, although certain assets and liabilities may
have similar  maturities  or periods to  repricing,  they may react in different
degrees or at  different  points in time to changes  in market  interest  rates.
Additionally,  certain assets, such as adjustable-rate  mortgages, have features
that restrict changes in interest rates, both on a short-term basis and over the
life of the asset. Changes in interest rates, prepayment rates, early withdrawal
levels and the ability of borrowers to service their debt,  among other factors,
may change significantly from the assumptions made in the table.

         Inflation  impacts the growth in total  assets in the banking  industry
and causes a need to increase equity capital at higher than normal rates to meet
capital adequacy  requirements.  The Company copes with the effects of inflation
through the  management  of its  interest  rate  sensitivity  gap  position,  by
periodically reviewing and adjusting its pricing of services to consider current
costs,  and through  managing  its level of net income  relative to its dividend
payout policy.


                                      -21-
<PAGE>


ITEM 7.  FINANCIAL STATEMENTS

         The  financial   statements  and  the  report  of  independent   public
accountants are included in this report beginning at page F-1.

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

         For the year ended  December 31, 1999,  the  accounting  firm of Porter
Keadle Moore, LLP was the principal  accountant for the Company. The Company had
no disagreements with its accountants on any matters of accounting  principle or
practices or financial statement disclosure.


                                      -22-

<PAGE>


                                    PART III

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

         THE BOARD OF DIRECTORS

         The  following  table sets forth for each director of the Company as of
January 25, 2000,  (a) the person's  name, (b) his age at December 31, 1999, (c)
the year he was first elected as a director of the Company and (d) his positions
with the  Company  and the Bank,  other than as a  director,  and his  principal
occupation and business experience for the past five years.

<TABLE>
<CAPTION>
                                              Year First      Position with Company; Principal
         Name                       Age        Elected        Occupation; Business Experience
         ----                       ---        -------        -------------------------------
<S>                                 <C>          <C>          <C>
J. Henry Cheatham, III              49           1994         Vice President of Textiles, Inc.

Ernest F. Carlisle, III             68           1997         President and Chief Executive Officer
                                                              of Carlisle & Company, an insurance company

James G. Cheatham                   47           1998         President of the 1888 Group, a textile company

C. A. Knowles                       67           1982         President, Chief Executive Officer, and
                                                              Treasurer of the Company and President
                                                              of the Bank

James A. Mankin                     73           1982         Retired; Merchant and Real Estate Developer

David G. Newton                     52           1990         Real Estate Developer

John T. Newton, Jr.                 53           1993         Chairman of the Board of the Company;
                                                              Chairman of the Board of the Bank; Attorney,
                                                              Newton & Howell, P.C.
</TABLE>

         Directors are elected at each annual meeting of  shareholders  and hold
office until the next annual meeting and until their  successors are elected and
qualified.  John T.  Newton,  Jr. and David G. Newton are brothers and are first
cousins of J. Henry Cheatham,  III and James G. Cheatham, who are also brothers.
There are no other family  relationships  among directors and executive officers
of the Company.

EXECUTIVE OFFICERS

      The following  table sets forth for each executive  officer of the Company
(a) the person's  name,  (b) his age at December  31, 1999,  (c) the year he was
first elected as an executive  officer of the Company and (d) his positions with
the Company and the Bank.
<TABLE>
<CAPTION>
                                      Year First     Principal Occupation;
        Name               Age         Elected       Business Experience
        ----               ---         -------       -------------------

<S>                         <C>         <C>          <S>
C. A. Knowles               67          1982         President, Chief Executive Officer and Treasurer of the
                                                     Company and President of the Bank.

William K. Holmes          49           1974         Assistant Treasurer since 1993, Senior Vice President of
                                                     the Bank since 1974, Principal Accounting and Financial
                                                     Officer.
</TABLE>



                                      -23-
<PAGE>


ITEM 10.  EXECUTIVE COMPENSATION

      The following  table sets forth the annual term  compensation  paid by the
Company and its  subsidiary to C. A.  Knowles,  the  Company's  Chief  Executive
Officer, the Company's only executive officer as of December 31, 1997 whose cash
compensation, including salary and bonus, exceeded $100,000.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                             Annual Compensation
                                            --------------------------------------------------
Name and Principal Position                 Year     Salary<F1>        Bonus            Other
                                            ----     ------            -----            -----

<S>                                         <C>      <C>              <C>                 <C>
C. A. Knowles                               1999     $203,680         $29,367             <F2>
President, Chief Executive                  1998     $193,343         $20,400             <F2>
Officer, and Treasurer                      1997     $193,793         $27,500             <F2>

William K. Holmes                           1999     $111,312         $ 5,000             <F2>
Asst. Treasurer                             1998     $104,197         $13,575             <F2>
                                            1997     $ 97,100         $13,575             <F2>
---------------------
<FN>
<F1>  Includes Director's fees
<F2>  Does not meet Securities and Exchange Commission threshold for disclosure.
</FN>
</TABLE>


DIRECTOR COMPENSATION

         Each  director of the Company  receives a $1,600  annual  retainer plus
$300 per meeting  attended for their service as a director of the Company.  Each
director of the Bank receives an annual retainer of $3,000 plus $300 per meeting
attended  for their  service as a  director  of the Bank and $150 for each Board
committee meeting they attend.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

PRINCIPAL HOLDERS OF STOCK

      The following table provides for each person who, to the best  information
and knowledge of the Company,  beneficially  owned 5% or more of the outstanding
shares of Common Stock on January 25, 1999, the following  information:  (a) the
owner's  name and address,  (b) the number of shares of Common Stock owned,  and
(c) the percentage such number  represents of the outstanding  shares of Company
Stock. Unless otherwise  indicated,  the listed owners are the record owners of,
and have sole voting and investment powers over, their shares.

<TABLE>
<CAPTION>
|------------------------------------------------------------------------------------------------------------------|
|                                        |         Number of Shares             |                                  |
|          Name and Address              |        Beneficially Owned            |        Percentage of Total       |
|----------------------------------------|--------------------------------------|----------------------------------|
|<S>                                     |              <C>                     |                <C>               |
| 435 Associates, Ltd.                   |                                      |                                  |
|  Post Office Box 550787                |               49,920 <F2>            |                 6.33%            |
|  Atlanta, Georgia 30355-0787           |                                      |                                  |
|                                        |                                      |                                  |
|----------------------------------------|--------------------------------------|----------------------------------|
|  Newton Family Partnership             |                                      |                                  |
|  Post Office Drawer F                  |              171,904 <F2>            |                21.79%            |
|  Griffin, Georgia  30224               |                                      |                                  |
|                                        |                                      |                                  |
|----------------------------------------|--------------------------------------|----------------------------------|
|  John T. Newton, Sr.                   |                                      |                                  |
|  1076 Maple Drive                      |              195,655 <F3>            |                24.80%            |
|  Griffin, Georgia  30223               |                                      |                                  |
|------------------------------------------------------------------------------------------------------------------|


                                      -24-
<PAGE>

|------------------------------------------------------------------------------------------------------------------|
|  Harvey M. Cheatham                    |                                      |                                  |
|  Post Office Box 550787                |               71,920 <F4>            |                 9.12%            |
|  Atlanta, Georgia  30355-0787          |                                      |                                  |
|----------------------------------------|--------------------------------------|----------------------------------|
|  John Henry Cheatham, III              |                                      |                                  |
|  2773 Hwy. 16 West                     |               43,452 <F5>            |                 5.51%            |
|  Griffin, Georgia  30223               |                                      |                                  |
|----------------------------------------|--------------------------------------|----------------------------------|
|  EMC Investments Ltd. Partnership      |                                      |                                  |
|  5101 North Casablanca Road, #6        |               42,000 <F6>            |                 5.32%            |
|  Scottsdale, Arizona  85253            |                                      |                                  |
|----------------------------------------|--------------------------------------|----------------------------------|
|  James G. Cheatham                     |                                      |                                  |
|  Post Office Box 506                   |               48,552 <F7>            |                 6.15%            |
|  Griffin, Georgia  30224               |                                      |                                  |
|----------------------------------------|--------------------------------------|----------------------------------|
|  Lelia Cheatham Von Stein              |                                      |                                  |
|  445 Rich Mountain Road                |               48,152<F8>             |                 6.10%            |
|  Brevard, North Carolina  28712        |                                      |                                  |
|                                        |                                      |                                  |
|------------------------------------------------------------------------------------------------------------------|

----------------------
<FN>
<F1>     Harvey M. Cheatham has sole voting and investment power over the shares
         owned  by  the  record  by  the  partnership  under  the  terms  of the
         partnership agreement.

<F2>     John T.  Newton,  Sr.  has sole  voting and  investment  power over the
         shares owned of record by the partnership under the
         terms of the partnership agreement.

<F3>     Of the  indicated  shares,  171,904  shares  are owned of record by the
         Newton  Family  Partnership,   and  Mr.  Newton  has  sole  voting  and
         investment  power with respect to these shares.  Includes  7,932 shares
         owned by the Estate of Virginia Cheatham Newton.

<F4>     Of the  indicated  shares,  16,000  shares  are  subject  to voting and
         investment   power  by  Mr.   Cheatham  as  general  partner  for  Club
         Associates,  L.P.,  the  record  owner of such  shares,  and 49,920 are
         subject  to voting  and  investment  power by Mr.  Cheatham  as general
         partner of 435 Associates, Ltd., the record owner of such shares.

<F5>     Of the  indicated  shares,  Mr.  Cheatham  owns 35,152 shares and 8,300
         shares are owned by his children.

<F6>     Elizabeth  M.  Cheatham  is the  sole  owner  of EMC  Investments  Ltd.
         Partnership.

<F7>     Of the  indicated  shares,  Mr.  Cheatham owns 35,152 shares and 13,400
         shares are owned by his children.

<F8>     Of the  indicated  shares,  Ms. Von Stein owns 35,452 shares and 12,700
         shares are owned by her children.
</FN>
</TABLE>


STOCK OWNED BY MANAGEMENT

      The following  table provides for each director of the Company,  the named
executive officer, and for all directors and officers of the Company as a group,
as of January 25, 2000,  the  following  information:  (a) the name of the named
executive  officer,  director,  or the number of  persons in the group;  (b) the
number of shares of  Company  Stock  beneficially  owned by the named  executive
officer,  director,  or the group; and (c) the percentage such number represents
of the outstanding  shares of Company Stock.  Unless  otherwise  indicated,  the
listed person is the record owner of, and has sole voting and investment  powers
over, his shares.


                                      -25-
<PAGE>

<TABLE>
<CAPTION>
                                              Number of Shares
Name and Address                             Beneficially Owned        Percentage of Total
----------------                             ------------------        -------------------

<S>                                              <C>                          <C>
Ernest F. Carlisle, III                              705                        *

J. Henry Cheatham, III                            43,452 <F1>                  5.51%

C. A. Knowles                                        920                        *

James A. Mankin                                      100 <F2>                   *

David G. Newton                                   21,363 <F3>                  2.71%

James G. Cheatham                                 48,552 <F4>                  6.15%


John T. Newton, Jr.                               13,274 <F5>                  1.68%

All directors and executive officers
as a group (9 persons)                           127,002                      16.10%
------------------------
<FN>
*      Indicates less than one percent.

<F1>   Includes 8,000 shares held by Mr. Cheatham as custodian for his children.

<F2>   Does not include 1,591 shares  owned  by Mr.  Mankin's  wife;  294 shares
       held by his son;  294 shares held by  his  daughter;  294  shares held in
       trust  for  his  daughter  and  4,222  shares   held  in  trust  for  his
       grandchildren, for which Mr. Mankin disclaims beneficial ownership.

<F3>   Includes 6,905 shares are held by Mr. Newton as trustee for his niece and
       nephew.

<F4>   Includes 13,400 shares held by his children.

<F5>   Includes 5,760 shares  held by  Mr. Newton  as trustee  for his niece and
       nephew.
</FN>
</TABLE>


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      The Company's directors and officers and certain companies and individuals
associated  with them have been customers of, and have had banking  transactions
with,  the Bank and are expected to continue such  relationships  in the future.
Pursuant to such transactions, the Company's directors and officers from time to
time  have  borrowed  funds  from the Bank for  various  business  and  personal
reasons.  In the opinion of the  management  of the Company,  the  extensions of
credit made by the Bank to its directors and officers  since January 1, 1999 (a)
were made in the ordinary course of business, (b) were made on substantially the
same terms, including interest rates and collateral,  as those prevailing at the
time for comparable transactions with other persons and (c) did not involve more
than a normal risk of collectibility or present other unfavorable features.  See
Note 12 under Notes to Consolidated Financial Statements in Item 7 hereof.


                                      -26-

<PAGE>


ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

(a)   Exhibits:

      The Company submits herewith as exhibits to this report on Form 10-KSB the
exhibits  required by Item 601 of Regulation  S-B,  subject to Rule 12b-32 under
the Securities Exchange Act of 1934.

Exhibit.
  No.                             Document
  ---                             --------

3.1      Articles of Incorporation of FNB Banking Company, as amended. (Included
         as Exhibit 3.1 to the Company's 1992 annual report on Form 10- K.)

3.2      Bylaws of FNB Banking Company, as amended.  (Included as Exhibit 3.2 to
         the Company's 1992 annual report on Form 10-K.)

4.1      See Exhibits 3.1 and 3.2 for  provisions  of Articles of  Incorporation
         and  Bylaws,  as  amended,  which  define the rights of the  holders of
         Common Stock of FNB Banking Company.

21.0     Subsidiaries of FNB Banking Company.

24.0     A Power of  Attorney is set forth on the  signature  pages to this Form
         10-KSB.

27.0     Financial Data Schedule (for SEC use only)


(b)  Reports on Form 8-K:

None.


                                      -27-
<PAGE>









                       FNB BANKING COMPANY AND SUBSIDIARY


                        CONSOLIDATED FINANCIAL STATEMENTS

                        DECEMBER 31, 1999, 1998 AND 1997

                 (WITH INDEPENDENT ACCOUNTANTS' REPORT THEREON)



<PAGE>




               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


To the Board of Directors and Stockholders
FNB Banking Company and Subsidiary


We have  audited the  accompanying  consolidated  balance  sheets of FNB Banking
Company  and  subsidiary  as of  December  31,  1999 and 1998,  and the  related
statements of earnings,  changes in stockholders'  equity,  comprehensive income
and cash flows for each of the three  years in the  period  ended  December  31,
1999.  These  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the financial position of FNB Banking Company
and  subsidiary  as of  December  31,  1999 and 1998,  and the  results of their
operations  and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with generally accepted accounting principles.







Atlanta, Georgia
January 14, 2000






                                       F-1


<PAGE>


                       FNB BANKING COMPANY AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS

                           DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>
                                     Assets
                                     ------
                                                                                          1999            1998
                                                                                          ----            ----
<S>                                                                             <C>                <C>
  Cash and due from banks, including reserve requirements of
    $1,521,000 and $2,104,000                                                   $   16,298,540      13,000,934
  Federal funds sold                                                                 7,026,547         215,700
                                                                                   -----------     -----------

             Cash and cash equivalents                                              23,325,087      13,216,634
                                                                                   -----------     -----------

  Interest-bearing deposits with other banks                                           500,000         500,000
  Investment securities available for sale                                          31,180,375      21,571,333
  Investment securities held to maturity (market value of $7,439,648)                   -            7,078,893
  Other investments                                                                    721,600         825,700
  Mortgage loans held for sale                                                         693,979       2,549,425
  Loans, net                                                                       153,486,630     146,864,199
  Premises and equipment, net                                                        8,007,718       8,271,551
  Accrued interest receivable and other assets                                       1,795,534       1,904,180
                                                                                   -----------     -----------

                                                                                $  219,710,923     202,781,915
                                                                                   ===========     ===========

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

  Deposits:
    Demand                                                                      $   29,276,860      28,935,817
    Interest-bearing demand                                                         44,077,892      38,966,906
    Savings                                                                         18,789,378      16,654,317
    Time                                                                            85,641,717      85,045,580
                                                                                   -----------     -----------

       Total deposits                                                              177,785,847     169,602,620

  Securities sold under repurchase agreements                                        9,391,076       4,941,781
  FHLB advances                                                                      8,625,000       2,392,857
  Note payable                                                                         277,779         444,446
  Accrued interest payable and accrued liabilities                                     785,833       1,842,081
                                                                                   -----------     -----------

       Total liabilities                                                           196,865,535     179,223,785
                                                                                   -----------     -----------

  Commitments

  Stockholders' equity:
    Common stock, par value $1; 5,000,000 shares authorized; 788,924
      and 807,800 shares issued and outstanding                                        788,924         807,800
    Retained earnings                                                               22,129,812      21,752,798
    Accumulated other comprehensive income (loss)                                      (73,348)        997,532
                                                                                   -----------     -----------

       Total stockholders' equity                                                   22,845,388      23,558,130
                                                                                   -----------     -----------

                                                                                $  219,710,923     202,781,915
                                                                                   ===========     ===========
</TABLE>

See accompanying notes to consolidated financial statements.



                                      F-2
<PAGE>


                       FNB BANKING COMPANY AND SUBSIDIARY

                       CONSOLIDATED STATEMENTS OF EARNINGS

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
                                                                                1999             1998            1997
                                                                                ----             ----            ----
<S>                                                                    <C>                    <C>            <C>
  Interest income:
    Interest and fees on loans                                         $  15,481,198        15,703,957     14,904,480
    Interest on federal funds sold                                           421,559           327,739        206,824
    Interest-bearing deposits in other banks                                  54,205            72,279         20,283
    Interest on investment securities:
     Tax-exempt                                                              411,914           357,792        395,958
     Taxable                                                               1,348,809         1,181,120        943,775
    Dividends on other investments                                           113,083            98,801         76,634
                                                                          ----------        ----------     ----------
             Total interest income                                        17,830,768        17,741,688     16,547,954
                                                                          ----------        ----------     ----------
    Interest expense:
     Deposits                                                              6,092,923         6,120,443      5,368,750
     Note payable                                                             24,854            38,488         50,419
     Other                                                                   373,971           235,907        451,157
                                                                          ----------        ----------     ----------
             Total interest expense                                        6,491,748         6,394,838      5,870,326
                                                                          ----------        ----------     ----------
             Net interest income                                          11,339,020        11,346,850     10,677,628
  Provision for loan losses                                                1,460,332           530,075        718,450
                                                                          ----------        ----------     ----------
              Net interest income after provision for loan losses          9,878,688        10,816,775      9,959,178
                                                                          ----------        ----------     ----------
  Other operating income:
    Service charges                                                        1,529,482         1,459,869      1,533,384
    Fees for trust services                                                  120,000           195,000        180,000
    Securities gains (losses), net                                           (42,720)           11,535          8,171
    Other                                                                    680,652           678,875        537,169
                                                                          ----------        ----------     ----------
              Total other operating income                                 2,287,414         2,345,279      2,258,724
                                                                          ----------        ----------     ----------
  Other operating expenses:
    Salaries and employee benefits                                         5,210,827         4,948,279      4,602,151
    Occupancy and equipment                                                1,633,812         1,546,527      1,297,615
    Miscellaneous                                                          2,266,995         2,281,255      2,045,722
                                                                          ----------        ----------     ----------
             Total other operating expenses                                9,111,634         8,776,061      7,945,488
                                                                          ----------        ----------     ----------

              Earnings before income taxes                                 3,054,468         4,385,993      4,272,414

  Income taxes                                                               950,830         1,465,534      1,445,679
                                                                          ----------        ----------     ----------
             Net earnings                                              $   2,103,638         2,920,459      2,826,735
                                                                          ==========        ==========     ==========

             Net earnings per share                                    $        2.64             3.62            3.50
                                                                          ==========        ========= ===============
</TABLE>


See accompanying notes to consolidated financial statements.


                                      F-3
<PAGE>


                       FNB BANKING COMPANY AND SUBSIDIARY

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
                                                                                     Accumulated
                                                                                        Other
                                                    Common         Retained         Comprehensive
                                                     Stock         Earnings         Income (Loss)       Total
                                                     -----         --------         -------------       -----

<S>                                              <C>               <C>                 <C>            <C>
  Balance, December 31, 1996                     $  807,800        17,903,934          (33,304)       18,678,430

  Net earnings                                            -         2,826,735                -         2,826,735

  Cash dividends declared of $1.10 per share              -          (888,580)               -          (888,580)

  Change in accumulated other comprehensive
    income                                                -                 0          762,987           762,987
                                                    -------        ----------        ---------        ----------

  Balance, December 31, 1997                        807,800        19,842,089          729,683        21,379,572

  Net earnings                                            -         2,920,459                -         2,920,459

  Cash dividends declared of $1.25 per share              -        (1,009,750)               -        (1,009,750)

  Change in accumulated other comprehensive
    income                                                 -                  -        267,849           267,849
                                                    --------       ------------      ---------        ----------

  Balance, December 31, 1998                        807,800        21,752,798          997,532        23,558,130

  Net earnings                                            -         2,103,638                -         2,103,638

  Cash dividends declared of $1.25 per share              -          (990,459)               -          (990,459)

  Shares repurchased and retired                    (18,876)         (736,165)               -          (755,041)

  Change in accumulated other comprehensive
    income (loss)                                         -                 -       (1,070,880)       (1,070,880)
                                                    -------        ----------        ---------        ----------

  Balance, December 31, 1999                     $  788,924        22,129,812          (73,348)       22,845,388
                                                    =======        ==========        ==========       ==========
</TABLE>




See accompanying notes to consolidated financial statements.



                                      F-4
<PAGE>


                       FNB BANKING COMPANY AND SUBSIDIARY

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
                                                                                 1999           1998          1997
                                                                                 ----           ----          ----
<S>                                                                      <C>                  <C>           <C>
    Net earnings                                                         $    2,103,638       2,920,459     2,826,735

    Other comprehensive income, net of tax:
     Unrealized gains (losses) on securities available for sale:
       Holding gains (losses) arising during period, net of tax
         of $672,579, $168,549 and $470,743                                  (1,097,366)        275,000       768,053
       Reclassification adjustment for (gains) losses included
         in net earnings, net of tax of $16,234, $4,384 and $3,105               26,486          (7,151)       (5,066)
                                                                              ---------       ---------     ---------
       Total other comprehensive income (loss)                               (1,070,880)        267,849       762,987
                                                                              ---------       ---------     ---------

       Comprehensive income                                              $    1,032,758       3,188,308     3,589,722
                                                                              =========       =========     =========
</TABLE>



See accompanying notes to consolidated financial statements.


                                      F-5
<PAGE>


                       FNB BANKING COMPANY AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
                                                                              1999             1998           1997
                                                                              ----             ----           ----
<S>                                                                  <C>                   <C>             <C>
  Cash flows from operating activities:
    Net earnings                                                       $  2,103,638        2,920,459       2,826,735
    Adjustments to reconcile net earnings
     to net cash provided by operating activities:
       Depreciation, amortization and accretion                             637,710          556,408         441,298
       Provision for loan losses                                          1,460,332          530,075         718,450
       Provision for losses on sales of other real estate
          owned and repossessed collateral                                        -                -             193
       Provision for deferred income taxes                                 (230,552)         191,748        (282,482)
       Provision for writedown of investment security                        40,000                -               -
       (Gains) losses on sales of investment securities                       2,720          (11,535)         (8,171)
       Losses on disposals of premises and equipment                              -           35,073          10,800
       Gain on sale of other real estate and repossessed collateral         (87,596)               -         (15,925)
        Change in:
         Mortgage loans held for sale                                     1,855,446       (1,899,075)        321,926
         Interest receivable                                               (116,235)         (45,116)        (32,297)
         Interest payable                                                   (28,806)         (11,006)        117,378
         Other, net                                                          88,233         (421,329)         49,958
                                                                         ----------       ----------      ----------

             Net cash provided by operating activities                    5,724,890        1,845,702       4,147,863
                                                                         ----------       ----------      ----------

  Cash flows from investing activities:
    Change in interest-bearing deposits with other banks                          -                -        (500,000)
     Proceeds from sales of investment securities
     available for sale                                                     620,974        1,942,216       3,084,938
    Proceeds from calls and maturities of investment securities
     held to maturity                                                       483,671        2,328,080       2,837,125
    Proceeds from calls and maturities of investment securities
     available for sale                                                   7,348,800        4,599,952       2,054,715
    Purchase of investment securities available for sale                (12,764,523)     (15,030,084)     (6,088,269)
    Purchase of other investments                                                 -                -        (196,800)
    Proceeds from calls of other investments                                104,100                -               -
    Net change in loans                                                  (7,986,794)      (9,096,458)    (12,924,571)
    Proceeds from disposals of premises and equipment                        14,815           10,123           3,260
    Additions to premises and equipment                                    (377,708)      (1,954,813)     (1,235,115)
    Proceeds from sales of other real estate and
     repossessed collateral                                                       -          141,325          59,170
                                                                         ----------       ----------      ----------

             Net cash used by investing activities                   $  (12,556,665)     (17,059,659)    (12,905,547)
                                                                         ----------       ----------      ----------
</TABLE>


                                      F-6


<PAGE>


                       FNB BANKING COMPANY AND SUBSIDIARY

                CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
                                                                              1999             1998           1997
                                                                              ----             ----           ----
<S>                                                                  <C>                      <C>           <C>
  Cash flows from financing activities:
    Net change in demand and savings deposits                        $     7,587,090          648,306       5,705,056
    Net change in time deposits                                              596,137        4,578,246      17,627,638
    Net change in securities sold under repurchase agreements              4,449,295        1,600,281      (1,420,410)
    Proceeds from FHLB advances                                            7,500,000        1,250,000       4,000,000
    Repayments of FHLB advances                                           (1,267,857)        (285,714)     (6,785,715)
    Repayments of note payable                                              (166,667)        (166,666)       (166,667)
    Payment of cash dividends                                             (1,002,729)        (969,360)       (888,580)
    Repurchase and retirement of common stock                               (755,041)               -               -
                                                                          ----------       ----------      ----------

       Net cash provided by financing activities                          16,940,228        6,655,093      18,071,322
                                                                          ----------       ----------      ----------

  Net increase (decrease) in cash and cash equivalents                    10,108,453       (8,558,864)      9,313,638

  Cash and cash equivalents at beginning of year                          13,216,634       21,775,498      12,461,860
                                                                          ----------       ----------      ----------

  Cash and cash equivalents at end of year                           $    23,325,087       13,216,634      21,775,498
                                                                          ==========       ==========      ==========

  Supplemental disclosures of cash flow information:
    Cash paid during the year for:
     Interest                                                        $     6,520,554        6,405,844       5,752,948
     Income taxes                                                    $       993,000        1,488,000       1,645,000

  Noncash investing and financing activities:
    Transfers of other investment securities at cost
     upon application of SFAS 115                                    $             -                -         526,010
    Transfer of investment securities held to maturity
       to available for sale                                         $     6,595,694                -               -
    Change in net unrealized (gains) losses on
     investment securities available for sale,
     net of tax                                                      $     1,070,880         (267,849)       (762,987)
    Transfers of loans to other real estate                          $       236,583          208,372          12,437
    Financed sales of other real estate                              $       332,552           33,983               -
    Change in dividends payable                                      $        12,270           40,390               -
</TABLE>




See accompanying notes to consolidated financial statements.


                                      F-7
<PAGE>


                       FNB BANKING COMPANY AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      The  accounting  and  reporting  policies  of  FNB  Banking  Company  (the
      "Company") and subsidiary,  and the methods of applying those  principles,
      conform with  generally  accepted  accounting  principles  (GAAP) and with
      general practice within the banking  industry.  The following is a summary
      of the significant policies and procedures.

      Basis of Presentation
      ---------------------
      The consolidated  financial statements include the accounts of the Company
      and its  wholly-owned  subsidiary,  First  National  Bank of Griffin  (the
      "Bank"). All significant  intercompany accounts and transactions have been
      eliminated  in  consolidation.  Certain  1997 and 1998  amounts  have been
      reclassified to conform to the 1999 presentation.

      The Bank  commenced  business in 1933 upon receipt of its charter from the
      Georgia  Department  of  Banking  and  Finance.  This  state  charter  was
      converted to a national  charter in 1965. The Bank is primarily  regulated
      by the Office of the  Comptroller of the Currency  ("OCC") and the Company
      is  regulated  by the Federal  Reserve  System and both  undergo  periodic
      examinations  by these  regulatory  authorities.  The Bank provides a full
      range  of  customary  banking  services   throughout  Spalding  and  other
      surrounding counties in Georgia.

      In preparing financial  statements in conformity with GAAP,  management is
      required  to make  estimates  and  assumptions  that  affect the  reported
      amounts  in  the  financial   statements.   Actual  results  could  differ
      significantly  from  these  estimates.  Material  estimates  common to the
      banking industry that are particularly  susceptible to significant  change
      in the near term include, but are not limited to, the determination of the
      allowance  for loan  losses,  the  valuation  of real  estate  acquired in
      connection  with  or in  lieu  of  foreclosure  on  loans,  and  valuation
      allowances  associated  with the  realization of deferred tax assets which
      are based on future taxable income.

      Investment Securities
      ---------------------
      The Company classifies its securities in one of three categories: trading,
      available for sale, or held to maturity. Trading securities are bought and
      held principally for the purpose of selling them in the near term. Held to
      maturity  securities  are those  securities  for which the Company has the
      ability  and  intent  to hold  the  security  until  maturity.  All  other
      securities  not included in trading or held to maturity are  classified as
      available  for sale.  At  December  31,  1999 and 1998 the  Company had no
      trading securities.

      Available for sale securities are recorded at fair value. Held to maturity
      securities  are  recorded  at  cost,  adjusted  for  the  amortization  or
      accretion of premiums or discounts.  Unrealized  holding gains and losses,
      net of the  related  tax  effect,  on  securities  available  for sale are
      excluded  from  earnings  and are  reported  as a  separate  component  of
      stockholders'  equity  until  realized.  Transfers of  securities  between
      categories are recorded at fair value at the date of transfer.  Unrealized
      holding gains or losses  associated with transfers of securities from held
      to maturity to available for sale are recorded as a separate  component of
      stockholders'  equity.  The unrealized holding gains or losses included in
      the separate component of stockholders' equity for securities  transferred
      from  available for sale to held to maturity are  maintained and amortized
      into earnings over the remaining  life of the security as an adjustment to
      yield in a manner consistent with the amortization or accretion of premium
      or discount on the associated security.

      A  decline  in the  market  value  of any  available  for  sale or held to
      maturity  investment  below cost that is deemed  other than  temporary  is
      charged to earnings and establishes a new cost basis for the security.

      Premiums and  discounts  are  amortized  or accreted  over the life of the
      related security as an adjustment to the yield.  Realized gains and losses
      for  securities  classified as available for sale and held to maturity are
      included in earnings  and are derived  using the  specific  identification
      method for determining the cost of securities sold.

      Other Investments
      -----------------
      Other investments  include equity securities with no readily  determinable
      fair value. These investment securities are carried at cost.



                                      F-8

<PAGE>


                       FNB BANKING COMPANY AND SUBSIDIARY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(1)   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
      Mortgage Loans Held for Sale
      ----------------------------
      Mortgage loans held for sale are carried at the lower of aggregate cost or
      market value.  The amount by which cost exceeds  market value is accounted
      for as a  valuation  allowance.  Changes in the  valuation  allowance  are
      included in the  determination  of net earnings of the period in which the
      change occurs.

      Loans, Loan Fees and Interest Income
      ------------------------------------
      Loans are stated at principal amount outstanding, net of the allowance for
      loan losses.  Interest on loans is calculated by using the simple interest
      method on daily balances of the principal amount outstanding.

      Accrual of interest is discontinued  on a loan when  management  believes,
      after considering economic and business conditions and collection efforts,
      that  the  borrower's  financial  condition  is such  that  collection  of
      interest  is  doubtful.  When a  loan  is  placed  on  nonaccrual  status,
      previously accrued and uncollected  interest is charged to interest income
      on  loans.  Generally,   payments  on  nonaccrual  loans  are  applied  to
      principal.

      Loan fees, net of certain  origination  costs,  have been deferred and are
      being amortized over the lives of the respective loans.

      Allowance For Loan Losses
      -------------------------
      The allowance for loan losses is established  through a provision for loan
      losses  charged to expense.  Loans are charged  against the  allowance for
      loan  losses  when  management  believes  that the  collectibility  of the
      principal  is unlikely.  The  allowance  represents  an amount  which,  in
      management's  judgement,  will be  adequate to absorb  probable  losses on
      existing loans that may become uncollectible.

      Management's  judgement in  determining  the adequacy of the  allowance is
      based on evaluations of the  collectibility  of loans.  These  evaluations
      take into  consideration  such factors as changes in the nature and volume
      of the loan  portfolio,  current  economic  conditions that may affect the
      borrower's  ability  to pay,  overall  portfolio  quality,  and  review of
      specific  problem loans.  In determining the adequacy of the allowance for
      loan losses, management uses a loan grading system that rates loans in six
      different  categories.  Grades four though six are assigned allocations of
      loss based on  management's  estimate of potential loss which is generally
      based on  discounted,  collateral  deficiencies.  Loans graded one through
      three are stratified by type and allocated loss ranges based on historical
      loss  experience  for the strata.  The  combination  of these  results are
      compared  quarterly to the recorded allowance for loan losses and material
      differences  are adjusted by increasing  or  decreasing  the provision for
      loan  losses.  Management  uses a devoted  internal  loan  reviewer who is
      independent of the lending  function to challenge and corroborate the loan
      grading system and provide additional analysis in determining the adequacy
      of the allowance for loan losses and the future  provisions  for estimated
      loan losses.

      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.  In  addition,  regulators,  as  an  integral  part  of  their
      examination process,  periodically review the Company's allowance for loan
      losses.  Such regulators may require the Company to recognize additions to
      the allowance based on their  judgements of information  available to them
      at the time of their examination.

      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 at the fair value of the collateral of
      the loan if the loan is  collateral  dependent.  A loan is impaired  when,
      based on current  information and events,  it is probable that all amounts
      due according to the  contractual  terms of the loan agreement will not be
      collected.  The Bank had no material amounts of impaired loans at December
      31, 1999 and 1998.


                                      F-9
<PAGE>


                       FNB BANKING COMPANY AND SUBSIDIARY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(1)   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
      Premises and Equipment
      ----------------------
      Premises and equipment are stated at cost less  accumulated  depreciation.
      Depreciation is computed using the straight-line method over the estimated
      useful lives of the assets.  When assets are retired or otherwise disposed
      of, the cost and related  accumulated  depreciation  are removed  from the
      accounts,  and any gain or loss is  reflected  in income  for the  period.
      Costs incurred for  maintenance  and repairs are expensed  currently.  The
      range of estimated useful lives for premises and equipment are:

             Buildings and improvements                   10 - 40 Years
             Furniture and equipment                       3 - 10 Years

      Securities Sold Under Repurchase Agreements
      -------------------------------------------
      Securities  sold under  repurchase  agreements  are  treated as  financing
      activities and are carried at the amounts at which the securities  will be
      subsequently reacquired as specified in the respective agreements.

      Income Taxes
      ------------
      The Company accounts for income taxes using the asset and liability method
      and  recognizes  deferred  tax assets and  liabilities  for the future tax
      consequences  attributable to differences  between the financial statement
      carrying  amounts of existing assets and liabilities and their  respective
      tax basis.  Additionally,  future tax benefits, such as net operating loss
      carryforwards,  are  recognized  to the extent  that  realization  of such
      benefits is more likely than not.  Deferred tax assets and liabilities are
      measured  using enacted tax rates  expected to apply to taxable  income in
      the years in which the assets and liabilities 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  tax  expense  in the  period  that
      includes the enactment date.

      In the event the  future  tax  consequences  of  differences  between  the
      financial  reporting  bases and the tax bases of the Company's  assets and
      liabilities   results  in  deferred  tax  assets,  an  evaluation  of  the
      probability of being able to realize the future benefits indicated by such
      asset is  required.  A valuation  allowance is provided for the portion of
      the  deferred  tax asset when it is more likely than not that some portion
      or all of the deferred tax asset will not be  realized.  In assessing  the
      realizability  of  the  deferred  tax  assets,  management  considers  the
      scheduled reversals of deferred tax liabilities,  projected future taxable
      income, and tax planning strategies.

      Net Earnings Per Common Share
      -----------------------------
      Earnings  per common  share are based on the  weighted  average  number of
      common shares outstanding during the period while the effects of potential
      common shares outstanding  during the period such as options,  convertible
      securities  and warrants are included in diluted  earnings per share.  The
      Company has no potential common shares and  correspondingly,  earnings per
      share amounts for 1999, 1998 and 1997,  respectively are based on 796,074,
      807,800 and 807,800 shares,  the weighted  average number of common shares
      outstanding.

      Other
      -----
      Property  (other than cash  deposits)  held by the Bank in a fiduciary  or
      agency  capacity for customers is not included in the balance sheets since
      such items are not assets of the Bank.

      Comprehensive Income
      --------------------
      The  Company  has  elected to present  comprehensive  income in a separate
      consolidated   statement  of  comprehensive   income.   Accumulated  other
      comprehensive  income  is  solely  related  to the  net of tax  effect  of
      unrealized gains on securities available for sale.


                                      F-10
<PAGE>


                       FNB BANKING COMPANY AND SUBSIDIARY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(1)   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
      Recent Accounting Pronouncements
      --------------------------------
      In 1998,  the Financial  Accounting  Standards  Board issued  Statement of
      Financial Accounting  Standards No. 133 ("SFAS No. 133"),  "Accounting for
      Derivative  Instruments and Hedging Activities".  SFAS No. 133 establishes
      accounting  and  reporting  standards  for  hedging  derivatives  and  for
      derivative  instruments including derivative instruments embedded in other
      contracts. It requires the fair value recognition of derivatives as assets
      or  liabilities  in the  financial  statements.  At the  date  of  initial
      application, an entity may transfer any held to maturity security into the
      available for sale or trading categories without calling into question the
      entity's  intent to hold other  securities  to maturity in the future.  In
      1999 the Bank  transferred all held to maturity  investment  securities to
      available  for sale  under this  provision  of SFAS No.  133.  The held to
      maturity  securities  had amortized  cost of $6,600,000 and net unrealized
      gains of $6,100. The result of the transfer was to increase  stockholders'
      equity by $4,000 which represented the net of tax effect of the unrealized
      gains associated with the held to maturity investments  transfered.  There
      were no other material impacts due to the adoption of SFAS No. 133.

(2) INVESTMENT SECURITIES
      Investment securities at December 31, 1999 and 1998 are as follows:

<TABLE>
<CAPTION>
                                                                             December 31, 1999
                                                                             -----------------
                                                                           Gross           Gross         Estimated
                                                          Amortized     Unrealized      Unrealized         Fair
     SECURITIES AVAILABLE FOR SALE:                         Cost           Gains          Losses           Value
                                                            ----           -----          ------           -----
<S>                                                  <C>                   <C>          <C>              <C>
       U.S. Government agencies                      $  13,986,476             155        642,096        13,344,535
       State, county and municipal                       8,432,365         136,673        236,356         8,332,682
       Mortgage-backed securities                        8,353,829           6,704        224,082         8,136,451
       Equity securities                                   526,010         840,697              -         1,366,707
                                                        ----------         -------      ---------        ----------
              Total                                  $  31,298,680         984,229      1,102,534        31,180,375
                                                        ==========         =======      =========        ==========


                                                                             December 31, 1998
                                                                             -----------------
     SECURITIES HELD TO MATURITY:                                          Gross           Gross         Estimated
                                                          Amortized     Unrealized      Unrealized         Fair
                                                            Cost           Gains          Losses           Value
                                                            ----           -----          ------           -----

       U.S. Government agencies                      $     500,000          10,780              -           510,780
       State, county and municipal                       6,018,613         343,217              -         6,361,830
       Mortgage-backed securities                          560,280           6,758              -           567,038
                                                         ---------         -------        -------         ---------
             Total                                   $   7,078,893         360,755              -         7,439,648
                                                         =========         =======        =======         =========
</TABLE>


                                      F-11

<PAGE>


                       FNB BANKING COMPANY AND SUBSIDIARY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(2)   INVESTMENT SECURITIES, CONTINUED
<TABLE>
<CAPTION>
                                                                             December 31, 1998
                                                                             -----------------
                                                                           Gross           Gross         Estimated
                                                          Amortized     Unrealized      Unrealized         Fair
     SECURITIES AVAILABLE FOR SALE:                         Cost           Gains          Losses           Value
                                                            ----           -----          ------           -----
<S>                                                  <C>                 <C>               <C>           <C>
       U.S. Government agencies                      $  10,498,769          84,426              -        10,583,195
       State, county and municipal                         795,000           4,736              -           799,736
       Equity securities                                   526,010       1,480,259              -         2,006,269
       Mortgage-backed securities                        8,142,632          51,562         12,061         8,182,133
                                                        ----------      ----------         ------       -----------
              Total                                  $  19,962,411       1,620,983         12,061        21,571,333
</TABLE>

The amortized cost and fair value of investment securities available for sale at
December 31, 1999, by contractual maturity, are shown below. Expected maturities
will differ from contractual maturities because borrowers have the right to call
or prepay obligations with or without call or prepayment penalties.

                                                         Securities Available
                                                              for Sale
                                                              --------
                                                      Amortized        Estimated
                                                        Cost          Fair Value
                                                        ----          ----------
    U.S. Government agencies:
         Within 1 year                          $     500,000            500,155
         1 to 5 years                               9,986,476          9,524,455
         5 to 10 years                              3,500,000          3,319,925
                                                   ----------         ----------

                                                   13,986,476         13,344,535
                                                   ==========         ==========

    State, county and municipal:
         Within 1 year                                235,000            235,000
         1 to 5 years                               2,659,999          2,735,687
         5 to 10 years                              3,218,148          3,214,778
         More than 10 years                         2,319,218          2,147,217
                                                    ---------          ---------

                                                    8,432,365          8,332,682
                                                    =========          =========

    Total securities other than mortgage-
      backed securities:
         Within 1 year                                735,000            735,155
         1 to 5 years                              12,646,475         12,260,142
         5 to 10 years                              6,718,148          6,534,703
         More than 10 years                         2,319,218          2,147,217

    Mortgage-backed securities                      8,353,829          8,136,451

    Equity securities                                 526,010          1,366,707
                                                   ----------         ----------

                                                $  31,298,680         31,180,375
                                                   ==========         ==========

    Call premiums  amounting to $26,762 were received on three called securities
    during 1998 and are included with securities  gains in the 1998 statement of
    earnings.  There were no sales of  investment  securities  held to  maturity
    during 1999, 1998 and 1997.



                                      F-12
<PAGE>


                       FNB BANKING COMPANY AND SUBSIDIARY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(2)   INVESTMENT SECURITIES, CONTINUED
      Proceeds  from sales of securities  available for sale during 1999,  1998,
      and 1997 were $620,974,  $1,942,216 and  $3,084,938,  respectively.  Gross
      losses  of  $2,720,   $15,227  and  $13,729  for  1999,  1998,  and  1997,
      respectively, were realized on those sales.

      Certain  investment  securities  were  written  down  to  their  estimated
      realizable  values because,  in the opinion of management,  the decline in
      value was  considered  other than  temporary.  In late 1999 an  investment
      security  was  considered  in default and written  down  $40,000  which is
      included in securities  losses in the statement of earnings.  During 1997,
      the Company received $21,900 on an investment security that was in default
      and  written  down  prior to 1992.  The amount  received  in excess of the
      remaining  cost basis  resulted  in  recovery  of  $21,900  in 1997.  This
      recovery is included with securities gains in the statements of earnings.

      Securities  with a  carrying  value  of  $23,186,000  and  $19,127,000  at
      December 31, 1999 and 1998,  respectively,  were pledged to secure  public
      deposits and for other purposes.

(3)   LOANS
      Major  classifications  of  loans  at  December  31,  1999  and  1998  are
      summarized as follows:
<TABLE>
<CAPTION>
                                                                    1999             1998
                                                                    ----             ----

<S>                                                         <C>                  <C>
         Commercial, financial and agricultural             $   76,376,867        69,820,797
         Real estate - construction                              8,788,603         5,005,340
         Real estate - mortgage                                 42,188,877        44,170,013
         Consumer                                               29,041,549        29,936,839
                                                               -----------       -----------
                  Total loans                                  156,395,896       148,932,989

                  Less:  Allowance for loan losses               2,588,697         1,707,913
                         Unearned interest and fees                320,569           360,877
                                                               -----------       -----------
                         Net loans                          $  153,486,630       146,864,199
                                                               ===========       ===========
</TABLE>

    The Company  grants  loans and  extensions  of credit to  individuals  and a
    variety  of firms and  corporations  located  in its trade  area,  primarily
    Spalding County, Georgia and surrounding counties.  Although the Company has
    a diversified loan portfolio, a substantial portion of the loan portfolio is
    collateralized  by improved and unimproved real estate and is dependent upon
    the real estate market in this geographical area.

    Changes in the allowance for loan losses are summarized as follows:
<TABLE>
<CAPTION>
                                                                   1999         1998         1997
                                                                   ----         ----         ----

<S>                                                         <C>              <C>           <C>
           Balance at beginning of year                     $   1,707,913    2,012,795     1,422,603
           Amounts charged off                                   (839,010)  (1,031,039)     (394,245)
           Recoveries on amounts previously charged off           259,462      196,082       265,987
           Provision charged to operating expenses              1,460,332      530,075       718,450
                                                                ---------   ----------    ----------
           Balance at end of year                           $   2,588,697    1,707,913     2,012,795
                                                                =========    =========     =========
</TABLE>

    The Company was  servicing  approximately  $15,760,000  and  $19,200,000  of
    mortgage  loans for the Federal Home Loan Mortgage  Corporation  at December
    31, 1999 and 1998, respectively.


                                      F-13
<PAGE>


                       FNB BANKING COMPANY AND SUBSIDIARY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(4)   PREMISES AND EQUIPMENT
      Premises and  equipment at December 31, 1999 and 1998,  are  summarized as
      follows:

                                                       1999            1998
                                                       ----            ----

         Land and improvements                   $   1,385,125      1,385,125
         Buildings and improvements                  7,377,489      6,839,981
         Furniture and equipment                     3,995,361      4,246,150
         Construction in progress                            -        504,173
                                                    ----------     ----------
                                                    12,757,975     12,975,429
         Less:  Accumulated depreciation             4,750,257      4,703,878
                                                    ----------     ----------
                                                 $   8,007,718      8,271,551
                                                    ==========     ==========

      Depreciation  expense was  $626,726,  $504,747  and $434,316 for the years
      ended December 31, 1999, 1998 and 1997, respectively.

(5)   DEPOSITS
      The aggregate amount of time deposit accounts with a minimum  denomination
      of $100,000 was approximately  $24,482,000 and $26,145,000 at December 31,
      1999  and  1998,  respectively.  Deposits  from  related  parties  totaled
      approximately  $3,552,000  and  $2,637,000  at December 31, 1999 and 1998,
      respectively.

      At December 31, 1999,  the  scheduled  maturities of time deposits were as
      follows:

                  2000                           $  64,044,125
                  2001                              11,507,387
                  2002                               3,278,178
                  2003                               4,059,562
                  2004                               2,752,465
                                                    ----------
                                                 $  85,641,717

(6)   NOTE PAYABLE
      Note payable at December 31, 1999 and 1998, consisted of the following:
<TABLE>
<CAPTION>
                                                                   1999           1998
                                                                   ----           ----
<S>                                                              <C>             <C>
        Note payable, due in monthly installments of $13,889
           plus interest at 70% of the prime interest rate
           through August 1, 2001, collateralized by certain
           land and buildings.                                   $ 277,779       444,446
</TABLE>

      Aggregate  maturities  required on the note  payable at December 31, 1999,
      were as follows:


                  2000                                           $ 166,668
                  2001                                             111,111
                                                                   -------
                                                                 $ 277,779


                                      F-14
<PAGE>


                       FNB BANKING COMPANY AND SUBSIDIARY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(7)   FEDERAL HOME LOAN BANK ADVANCES
      The Bank has an agreement  with the Federal Home Loan Bank (FHLB)  whereby
      the FHLB agreed to provide the Bank credit  facilities under the Agreement
      for Advances and Security Agreement.  Any amounts advanced by the FHLB are
      secured  under a Blanket  Floating  Lien  covered by all of the Bank's 1-4
      family first mortgage  loans.  The Bank may draw advances up to 75% of the
      outstanding balance of these loans based on the agreement with the FHLB.

      At December 31, 1999, the Bank has an advance payable of $1,125,000 with a
      fixed  interest  rate of 5.50% and  interest  payable  monthly  with equal
      principal  payments due quarterly  until maturity in 2008. The Bank has an
      advance  payable of  $7,500,000  with a fixed  interest  rate of 5.98% and
      interest payable monthly with principal due at maturity in January 2000.

(8)   EMPLOYEE BENEFIT PLANS
      The  Company  had  a   noncontributory   defined   benefit  plan  covering
      substantially all of its employees who have completed one year of service.
      Effective September 1, 1997, the plan was terminated.  All participants as
      of September 1, 1997,  became  fully vested and no new  participants  were
      allowed to be admitted to the plan. No further  contributions were made to
      the  plan  except  payments  necessary  to  attain  full  funding  of  the
      liabilities  under the plan. As a result of the  curtailment  of benefits,
      the Company  recognized a curtailment  gain of $76,700.  During 1998,  the
      Company  made  a  payment  of  $50,191  to  attain  full  funding  of  the
      liabilities under the plan.  Subsequent to this payment, the assets of the
      plan were  distributed to the  participants  as per their election and the
      plan has been terminated and had no assets as of December 31, 1998.

      The  components of net pension cost for the year ended  December 31, 1997,
      were as follows:

                                                                  1997
                                                                  ----

                  Service cost for benefits earned           $   177,324
                  Interest cost on projected benefit
                     obligations                                 239,764
                  Actual return on plan assets                  (379,899)
                  Net amortization and deferral                  126,335
                                                                 -------
                  Net pension cost                           $   163,524
                                                                 =======

      The following  assumptions were used in determining the actuarial  present
      value of the projected benefit obligations at December 31, 1997:

                  Discount rate                                       7.0%
                  Rate of increase in future compensation levels        -
                  Expected long-term rate of return on assets         8.25%

      The  Company  has  a  profit  sharing  plan  covering   substantially  all
      employees,  subject to minimum service requirements.  Effective January 1,
      1995,  the Company  amended the plan to comply  with the  requirements  of
      Section 401(k) of the Internal  Revenue Code. The Company will match up to
      6% of the participants'  before tax contributions.  The Company's matching
      contributions  amounted to $307,000,  $297,000 and $205,000 in 1999,  1998
      and 1997, respectively.


                                      F-15
<PAGE>


                       FNB BANKING COMPANY AND SUBSIDIARY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(9)   COMMITMENTS
      The Company is a party to  financial  instruments  with  off-balance-sheet
      risk in the normal course of business to meet the  financing  needs of its
      customers.  These  financial  instruments  include  commitments  to extend
      credit,  standby  letters  of  credit  and  financial  guarantees.   Those
      instruments involve, to varying degrees, elements of credit risk in excess
      of the amount  recognized in the balance  sheet.  The contract  amounts of
      those  instruments  reflect the extent of  involvement  the Company has in
      particular classes of financial instruments.

      The Company's  exposure to credit loss in the event of  nonperformance  by
      the other  party for  commitments  to extend  credit,  standby  letters of
      credit and financial  guarantees written is represented by the contractual
      amount of those instruments.  The Company uses the same credit policies in
      making   commitments   and   conditional   obligations   as  it  does  for
      on-balance-sheet instruments.

      In some cases,  the Company does require  collateral or other  security to
      support financial instruments with credit risk.

<TABLE>
<CAPTION>
                                                                                           Approximate
                                                                                           Contractual
                                                                                             Amount
                                                                                             ------
                                                                                      1999            1998
                                                                                      ----            ----
<S>                                                                             <C>                <C>
              Financial  instruments  whose contract  amounts  represent  credit
               risk:
                  Commitments to extend credit                                  $  28,152,000      25,500,000
                  Standby letters of credit and financial guarantees written    $     953,000         873,000
</TABLE>

      Commitments  to extend credit are agreements to lend to a customer as long
      as there is no violation of any  condition  established  in the  contract.
      Commitments  generally have fixed  expiration  dates or other  termination
      clauses and may require  payment of a fee.  Since many of the  commitments
      may expire without being drawn upon, the total  commitment  amounts do not
      necessarily represent future cash requirements. The Company evaluates each
      customer's  credit  worthiness  on a  case-by-case  basis.  The  amount of
      collateral obtained, if deemed necessary by the Company, upon extension of
      credit is based on management's credit evaluation.  Collateral held varies
      but may include  unimproved  and  improved  real estate,  certificates  of
      deposit, or personal property.

      Standby letters of credit and financial guarantees written are conditional
      commitments  issued by the  Company  to  guarantee  the  performance  of a
      customer to a third party.  The credit risk involved in issuing letters of
      credit  is  essentially  the  same  as that  involved  in  extending  loan
      facilities  to  customers.  Letters  of credit at  December  31,  1999 are
      approximately 94% collateralized.

(10)  DIVIDEND LIMITATIONS
      Dividends  paid by the Bank are the primary  source of funds  available to
      the Company. Banking regulations limit the amount of dividends that may be
      paid without prior approval of the regulatory  authorities.  The amount of
      dividends the Bank may pay in 2000 without prior approval is approximately
      $2,208,000 plus 2000 earnings of the Bank.


                                      F-16
<PAGE>


                       FNB BANKING COMPANY AND SUBSIDIARY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(11)  INCOME TAXES
      The  components  of income tax expense for the years  ended  December  31,
1999, 1998 and 1997 are as follows:

<TABLE>
<CAPTION>
                                                                1999          1998         1997
                                                                ----          ----         ----

<S>                                                     <C>                <C>          <C>
                  Current                               $    1,181,382     1,273,786    1,728,161
                  Deferred                                    (230,552)      191,748     (282,482)
                                                             ---------    ----------    ---------
                                                        $      950,830     1,465,534    1,445,679
                                                             =========     =========    =========

      The  differences  between the  provision  for income  taxes and the amount
      computed by applying  the  statutory  federal  income tax rate to earnings
      before taxes are as follows:

                                                                1999          1998         1997
                                                                ----          ----         ----

                  Pretax income at statutory rates      $    1,038,519     1,491,238    1,452,620
                  Add (deduct):
                    Tax-exempt interest income                (140,051)     (130,297)    (139,939)
                    Nondeductible interest expense              16,104        14,539       15,024
                    Other                                       36,258        90,054      117,974
                                                             ---------     ---------    ---------
                                                        $      950,830     1,465,534    1,445,679
                                                             =========     =========    =========

      The  following  summarizes  the sources and expected tax  consequences  of
      future  taxable  deductions  (income)  which comprise the net deferred tax
      asset (liability).

                                                                              1999         1998
                                                                              ----         ----
                  Deferred income tax assets:
                    Allowance for loan losses                            $   827,474      464,807
                    Other                                                     15,165       92,540
                                                                            --------   ----------
                           Total gross deferred income tax assets            842,639      557,347
                                                                             -------   ----------

                  Deferred income tax liabilities:
                    Net unrealized gain on investment securities              44,955     (611,391)
                    Premises and equipment                                  (656,122)    (601,382)
                                                                             -------   -----------
                           Total gross deferred income tax liabilities      (611,167)  (1,212,773)
                                                                             -------   ----------
                  Net deferred income tax asset (liability)              $   231,472     (655,426)
                                                                             =======   ==========
</TABLE>

                                      F-17

<PAGE>


                       FNB BANKING COMPANY AND SUBSIDIARY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(12)  RELATED PARTY TRANSACTIONS
      The Company conducts  transactions with directors and officers,  including
      companies in which they have beneficial interest,  in the normal course of
      business.  It is the policy of the  Company  that loan  transactions  with
      directors  and officers be made on  substantially  the same terms as those
      prevailing  at the  time  for  comparable  loans  to  other  persons.  The
      following is a summary of activity for related party loans for 1999:

                  Beginning balance                                $  6,245,413
                    Loans advanced                                    6,281,849
                    Repayments                                       (5,337,747)
                                                                      ---------
                  Ending balance                                   $  7,189,515
                                                                      =========

(13)  MISCELLANEOUS OPERATING EXPENSES
      Components  of other  operating  expenses  which  are  greater  than 1% of
      interest income and other operating income are as follows:

<TABLE>
<CAPTION>
                                                        1999       1998       1997
                                                        ----       ----       ----
<S>                                                 <C>            <C>        <C>
                  Stationery and supplies           $   244,249    250,151    257,523
                  Data processing                   $   236,970    284,322    337,270
</TABLE>

(14)  FAIR VALUE OF FINANCIAL INSTRUMENTS
      SFAS No. 107,  "Disclosures  about Fair Value of  Financial  Instruments",
      requires disclosure of fair value information about financial instruments,
      whether or not recognized on the face of the balance  sheet,  for which it
      is  practicable  to  estimate  that  value.  The  assumptions  used in the
      estimation of the fair value of the Company's  financial  instruments  are
      detailed  below.  Where quoted prices are not  available,  fair values are
      based on  estimates  using  discounted  cash  flows  and  other  valuation
      techniques. The use of discounted cash flows can be significantly affected
      by the  assumptions  used,  including  the discount  rate and estimates of
      future cash flows.  The following  disclosures  should not be considered a
      surrogate of the liquidation value of the Company, but rather a good-faith
      estimate of the  increase or  decrease in value of  financial  instruments
      held by the Company since purchase, origination, or issuance.

         Cash and Cash Equivalents
         -------------------------
         For cash and due from banks and federal funds sold, the carrying amount
         is a reasonable estimate of fair value.

         Interest-bearing Deposits with Other Banks
         ------------------------------------------
         The carrying value of  interest-bearing  deposits with other banks is a
         reasonable estimate of fair value.

         Investment Securities
         ---------------------
         Fair  values  for  investment  securities  are based on  quoted  market
         prices.

         Other Investments
         -----------------
         The carrying value of other investments approximates fair value.

         Loans and Mortgage Loans Held for Sale
         --------------------------------------
         The fair value of fixed  rate loans is  estimated  by  discounting  the
         future cash flows using the current  rates at which similar loans would
         be made to borrowers  with similar  credit  ratings.  For variable rate
         loans, the carrying amount is a reasonable estimate of fair value.

         Deposits
         --------
         The fair value of demand deposits,  savings accounts,  NOW accounts and
         certain  money market  deposits is the amount  payable on demand at the
         reporting  date.  The  fair  value of fixed  maturity  certificates  of
         deposit is estimated by discounting the future cash flows.

         Securities Sold Under Repurchase Agreements
         -------------------------------------------
         The  carrying  value of  securities  sold under  repurchase  agreements
         approximates fair value.


                                      F-18
<PAGE>


                       FNB BANKING COMPANY AND SUBSIDIARY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(14)  FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED
          FHLB Advances
          -------------
          The fair value of the FHLB fixed rate  borrowings are estimated  using
          discounted  cash  flows,  based on the current  incremental  borrowing
          rates for similar types of borrowing arrangements.

          Note Payable
          ------------
          The Company's note payable bears interest based on a percentage of the
          prime rate and as such,  the  carrying  amount  approximates  the fair
          value.

          Commitments to Extend Credit, Standby Letters of Credit and Financial
          ---------------------------------------------------------------------
          Guarantees Written
          ------------------
          Because commitments to extend credit and standby letters of credit are
          made using variable  rates,  or were recently  executed,  the contract
          value is a reasonable estimate of fair value.

       Limitations
       -----------
       Fair  value  estimates  are made at a  specific  point in time,  based on
       relevant  market   information   and  information   about  the  financial
       instrument.  These  estimates do not reflect any premium or discount that
       could  result from  offering  for sale at one time the  Company's  entire
       holdings of a particular financial  instrument.  Because no market exists
       for a significant  portion of the Company's financial  instruments,  fair
       value  estimates  are  based  on many  judgements.  These  estimates  are
       subjective in nature and involve uncertainties and matters of significant
       judgement and therefore  cannot be determined with precision.  Changes in
       assumptions could significantly affect the estimates.

       Fair value  estimates  are based on  existing  on and  off-balance  sheet
       financial  instruments  without  attempting  to  estimate  the  value  of
       anticipated  future business and the value of assets and liabilities that
       are  not  considered  financial   instruments.   Significant  assets  and
       liabilities  that are not considered  financial  instruments  include the
       mortgage  banking  operation,  deferred  income  taxes and  premises  and
       equipment.  In addition, the tax ramifications related to the realization
       of the unrealized gains and losses can have a significant  effect on fair
       value estimates and have not been considered in the estimates.

       The carrying amount and estimated fair values of the Company's  financial
       instruments at December 31, 1999 and 1998 are as follows:

<TABLE>
<CAPTION>
                                                                   1999                                   1998
                                                                   ----                                   ----
                                                      Carrying             Estimated           Carrying         Estimated
                                                       Amount              Fair Value           Amount          Fair Value
                                                       ------              ----------           ------          ----------
<S>                                              <C>                      <C>                  <C>             <C>
      Assets:
         Cash and cash equivalents               $    23,325,087          23,325,087           13,216,634      13,216,634
         Interest -bearing deposits with
           other banks                                   500,000             500,000              500,000         500,000
         Investment securities                        31,180,375          31,180,375           28,650,226      29,010,981
         Other investments                               721,600             721,600              825,700         825,700
         Loans and mortgage loans held
           for sale                                  154,180,609         154,772,825          149,413,624     148,308,428

       Liabilities:
         Deposits                                    177,785,847         178,193,631          169,602,620     170,384,781
         Securities sold under repurchase
           agreements                                  9,391,076           9,391,076            4,941,781       4,941,781
         FHLB advances                                 8,625,000           8,566,515            2,392,857       2,432,455
         Notes payable                                   277,779             277,779              444,446         444,446

         Unrecognized financial instruments:
         Commitments to extend credit                 28,152,000          28,152,000           25,500,000      25,500,000
         Standby letters of credit               $       953,000             953,000              873,000         873,000
</TABLE>


                                      F-19

<PAGE>


                       FNB BANKING COMPANY AND SUBSIDIARY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(15)  REGULATORY MATTERS
      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-action by regulators that, if undertaken,  could
      have a direct material effect on the Company's financial statements. Under
      capital  adequacy  guidelines  and the  regulatory  framework  for  prompt
      corrective  action,  the Company and the Bank must meet  specific  capital
      guidelines that involve quantitative measures of assets, liabilities,  and
      certain off-balance sheet items as calculated under regulatory  accounting
      practices.  The capital  amounts and  classifications  are also subject to
      qualitative   judgements  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) to
      risk-weighted  assets (as  defined)  and of Tier I capital (as defined) to
      average assets (as defined). Management believes, as of December 31, 1999,
      that the Bank  meets  all  capital  adequacy  requirements  to which it is
      subject.

      As of December 31, 1999 and 1998,  the most recent  notification  from the
      Office of the  Comptroller  of the Currency  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 institution's category.

      The  consolidated and bank only actual capital amounts and ratios for 1999
      and 1998 are also presented in the table.

<TABLE>
<CAPTION>
                                                                                                         To Be Well
                                                                                                     Capitalized Under
                                                                             For Capital             Prompt Corrective
                                                       Actual             Adequacy Purposes          Action Provisions
                                                       -------            -----------------          -----------------
                                                   Amount      Ratio       Amount      Ratio       Amount          Ratio
                                                   ------      -----       ------      -----       ------          -----
<S>                                            <C>             <C>        <C>            <C>        <C>             <C>

AS OF DECEMBER 31, 1999
    Total Risk-Based Capital (to Risk
      Weighted Assets):
       Consolidated                            $ 24,916,880    15.59%    12,788,124      8.00%         N/A          N/A
       FNB Griffin                             $ 23,992,915    15.04%    12,764,096      8.00%     15,955,120      10.00%
    Tier I Capital (to Risk Weighted Assets):
       Consolidated                            $ 22,918,736    14.34%     6,394,062      4.00%         N/A          N/A
       FNB Griffin                             $ 21,998,525    13.79%     6,382,048      4.00%      9,573,072       6.00%
    Tier I Capital (to Average Assets):
       Consolidated                            $ 22,918,736    10.85%     8,449,338      4.00%         N/A          N/A
       FNB Griffin                             $ 21,998,525    10.51%     8,375,017      4.00%     10,468,771       5.00%

  AS OF DECEMBER 31, 1998
    Total Risk-Based Capital (to Risk
        Weighted Assets):
       Consolidated                            $ 24,268,215    16.6%     11,695,525      8.00%          N/A          N/A
       FNB Griffin                             $ 23,432,413    15.1%     12,414,523      8.00%     15,518,154      10.00%
    Tier I Capital (to Risk Weighted Assets):
       Consolidated                            $ 22,560,598    15.4%      5,859,896      4.00%          N/A          N/A
       FNB Griffin                             $ 21,724,795    14.0%      6,207,084      4.00%      9,310,626       6.00%
    Tier I Capital (to Average Assets):
       Consolidated                            $ 22,560,598    11.4%      7,915,999      4.00%          N/A          N/A
       FNB Griffin                             $ 21,724,795    11.1%      7,828,755      4.00%      9,785,944       5.00%
</TABLE>


                                      F-20

<PAGE>


                       FNB BANKING COMPANY AND SUBSIDIARY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(16)   FNB BANKING COMPANY (PARENT COMPANY ONLY) FINANCIAL INFORMATION

                                 Balance Sheets
                           December 31, 1999 and 1998

                                     Assets
                                     ------

<TABLE>
<CAPTION>
                                                                                       1999              1998
                                                                                       ----              ----

<S>                                                                               <C>                 <C>
      Cash                                                                        $    161,203           368,728
      Investment in First National Bank of Griffin                                  21,403,945        21,804,566
      Investment securities available for sale                                       1,366,707         2,006,270
      Other assets                                                                     744,282           467,842
                                                                                    ----------        ----------
                                                                                  $ 23,676,137        24,647,406
                                                                                    ==========        ==========

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

      Other liabilities                                                           $    317,949           564,206
      Dividends payable                                                                512,800           525,070
      Stockholders' equity                                                          22,845,388        23,558,130
                                                                                    ----------        ----------
                                                                                  $ 23,676,137        24,647,406
                                                                                    ==========        ==========
</TABLE>


                             Statements of Earnings

              For the Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
                                                                                1999            1998          1997
                                                                                ----            ----          ----
<S>                                                                       <C>             <C>              <C>
     Income:
        Interest and dividends                                            $    58,311          45,658          31,514
        Other                                                                       -         129,912         220,148
        Dividends from subsidiary                                           1,865,460       1,009,750         888,580
                                                                            ---------       ---------       ---------

                                                                            1,923,771       1,185,320       1,140,242
                                                                            ---------       ---------       ---------

      Other operating expenses                                                 93,863         214,209         239,510
                                                                            ---------       ---------      ----------

        Earnings before income taxes and equity in undistributed
          earnings of bank subsidiary                                       1,829,908         971,111         900,732

      Income tax benefit                                                            -          14,667               -
                                                                            ---------       ---------       ---------

        Earnings before equity in undistributed earnings of
          bank subsidiary                                                   1,829,908         985,778         900,732

      Equity in undistributed earnings of bank subsidiary                     273,730       1,934,681       1,926,003
                                                                            ---------       ---------       ---------

          Net earnings                                                   $  2,103,638       2,920,459       2,826,735
                                                                            =========       =========       =========
</TABLE>


                                      F-21

<PAGE>


                       FNB BANKING COMPANY AND SUBSIDIARY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


(16)  FNB BANKING COMPANY (PARENT COMPANY ONLY) FINANCIAL INFORMATION, CONTINUED

                            Statements of Cash Flows

              For the Years Ended December 31, 1999, 1998 and 1997


<TABLE>
<CAPTION>
                                                                              1999          1998            1997
                                                                              ----          ----            ----
<S>                                                                     <C>              <C>             <C>
  Cash flows from operating activities:
       Net earnings                                                     $    2,103,638    2,920,459       2,826,735
       Adjustments to reconcile net earnings
         to net cash provided by operating activities:
           Equity in undistributed earnings of bank subsidiary                (273,730)  (1,934,681)     (1,926,003)
           Depreciation                                                              -       17,537          35,073
           Change in other assets and liabilities, net                        (279,663)     (24,484)         50,421
                                                                             ---------    ----------      ---------
       Net cash provided by operating activities                             1,550,245      978,831         986,226
                                                                             ---------    ---------       ----------

  Cash flows from financing activities:
       Dividends paid                                                       (1,002,729)    (969,360)       (888,580)
       Purchase and retirement of stock                                       (755,041)           -               -
                                                                            ----------    ---------       ----------
       Net cash provided (used) by financing activities                     (1,757,770)    (969,360)       (888,580)
                                                                             ----------   ----------      ----------

  Net increase (decrease) in cash                                             (207,525)       9,471          97,646
  Cash at beginning of the period                                              368,728      359,257         261,611
                                                                            ----------    ---------       ---------
  Cash at end of the period                                            $       161,203      368,728         359,257
</TABLE>


                                      F-22
<PAGE>

                                   SIGNATURES


      Pursuant  to the  requirements  of Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                              FNB BANKING COMPANY
                                                  (REGISTRANT)


                                              By: /s/ C.A. Knowles
                                                 -------------------------------
                                                    C. A. Knowles
                                                    President

Dated:  March 30, 2000


                        POWER OF ATTORNEY AND SIGNATURES

      KNOW ALL MEN BY THESE PRESENTS,  that each person whose signature  appears
below constitutes and appoints C. A. Knowles and John T. Newton, Jr., or each of
them, his attorney-in-fact, each with full power of substitution, for him in his
name, place and stead, in any and all capacities, to sign any amendments to this
Report on Form 10-KSB,  and to file the same, with exhibits  thereto,  and other
documents in connection therewith,  with the Securities and Exchange Commission,
and hereby ratifies and confirms all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant
to the requirements of the Securities Exchange Act of 1934, this Report has been
signed by the following  persons on behalf of the  Registrant in the  capacities
and on the dates indicated.

<TABLE>
<CAPTION>

         Signature                                Title                                 Date
         ---------                                -----                                 ----

<S>                                   <S>                                           <C>
 /s/ John T. Newton, Jr.              Chairman of the Board of Directors            March 30, 2000
John T. Newton, Jr.

/s/ C.A. Knowles                      President, Treasurer, and                     March 30, 2000
C.A. Knowles                          Director (principal executive officer)

/s/ William K. Holmes                 Assistant Treasurer (principal                March 30, 2000
William K. Holmes                     accounting and financial officer)

/s/ James A. Mankin   _               Director and Secretary                        March 30, 2000
James A. Mankin

/s/ Ernest F. Carlisle, III           Director                                      March 30, 2000
Ernest F. Carlisle, III

/s/ J. Henry Cheatham, III            Director                                      March 30, 2000
J. Henry Cheatham, III

/s/ James G. Cheatham                 Director                                      March 30, 2000
James G. Cheatham

/s/ David G. Newton                   Director                                      March 30, 2000
David G. Newton
</TABLE>


                                      -28-
<PAGE>



                                  EXHIBIT INDEX


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

   21.0          Subsidiaries of FNB Banking Company.

   24.0          A Power of  Attorney is set forth on the signature page to this
                 Form 10-KSB.

   27.0          Financial Data Schedule (for SEC use only)



<PAGE>