|UNITED STATES                                                                                                                                                                                                                                                                                                                            
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|SECURITIES AND EXCHANGE COMMISSION                                                                                                                                                                                                                                                                                                       
|WASHINGTON, D.C. 20549                                                                                                                                                                                                                                                                                                                   
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|FORM 10-K                                                                                                                                                                                                                                                                                                                                
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|[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934                                                                                                                                                                                                                                                     
|(Fee Required)                                                                                                                                                                                                                                                                                                                           
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|For the Fiscal Year Ended                                                                                                                                                                                                                                                                                                                
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|[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934                                                                                                                                                                                                                                                   
|(No Fee Required)                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                         
|For the Transition Period from _________________ to _______________________                                                                                                                                                                                                                                                              
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|Commission File Number                                                                                                                                                                                                                                                                                                                   
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|SNB BANCSHARES, INC                                                                                                                                                                                                                                                                                                                      
|(Exact Name of Registrant as Specified in its Charter)                                                                                                                                                                                                                                                                                   
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|GEORGIA 58-2107916                                                                                                                                                                                                                                                                                                                       
|State or Other Jurisdiction of Incorporation or Oorganization (I.R.S. Employer Identification No.)                                                                                                                                                                                                                                       
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|2910 RIVERSIDE DRIVE MACON, GEORGIA 31204                                                                                                                                                                                                                                                                                                
|(Address of Principal Executive Offices) (Zip Code)                                                                                                                                                                                                                                                                                      
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|Issuer's Telephone Number                                                                                                                                                                                                                                                                                                                
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|Securities Registered Under Section 12(b) of the Exchange Act: NONE                                                                                                                                                                                                                                                                      
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|Securities Registered Under Section 12(g) of the Exchange Act:                                                                                                                                                                                                                                                                           
|COMMON STOCK, $1.00 PAR VALUE                                                                                                                                                                                                                                                                                                            
|(Title of Class)                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                         
|Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. XYes No                          
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|Check if there is no disclosure of delinquent filers in response to Items 405 of Regulation S-K 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-K or any amendment to this Form 10-K. [ X ]
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|State the aggregate market value of the voting stock held by nonaffiliates computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within the past 60 days. $51,606,426 Based on Prices as of March 8, 2002.                                           
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|State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date.                                                                                                                                                                                                              
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|3,372,969 shares of $1.00 par value common stock as of March 8, 2002.                                                                                                                                                                                                                                                                    
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|DOCUMENTS INCORPORATED BY REFERENCE                                                                                                                                                                                                                                                                                                      
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|Portions of the Registrant's Annual Proxy Statement for the annual meeting of stockholders on April 25, 2002 are incorporated by reference into Part III.                                                                                                                                                                                









Part I

Item 1

BUSINESS

General

SNB Bancshares, Inc. (SNB) is a Georgia corporation formed to act as a bank holding company for Security Bank of Bibb County ("SB-Bibb") under the Federal Bank Holding Company Act of 1956, as amended, and the bank holding company laws of Georgia. SNB was incorporated on February 10, 1994 at the instruction of management of SB-Bibb. At a special meeting of the shareholders of SB-Bibb on August 2, 1994, the shareholders of SB-Bibb voted in favor of a plan of reorganization and agreement of merger pursuant to which SB-Bibb became a wholly-owned subsidiary of SNB. The reorganization was effective on September 30, 1994, as a result of which the shares of common stock of SB-Bibb then issued and outstanding were converted into shares of the common stock of SNB. SB-Bibb has operated as a wholly-owned subsidiary of SNB since that time, although the functions and business of SB-Bibb, its Board of Directors, staff and physical office locations underwent no changes as a result of the reorganization.

On August 8, 1998, SNB acquired a 100 percent interest in Crossroads Bancshares, Inc., the parent holding company of Security Bank of Houston County (formerly Crossroads Bank of Georgia) ("SB-Houston") in Perry and Warner Robins, Georgia. The two companies merged in a pooling of interests stock swap transaction and, accordingly, all prior financial information shown below has been restated as if this business combination had always existed. The parent company of SB-Houston was subsequently dissolved. SB-Houston now operates as a wholly-owned subsidiary of SNB.

On July 31, 2000, SB-Bibb purchased the assets of Group Financial Southeast (dba Fairfield Financial) in a business combination accounted for as a purchase. The assets were placed in a newly formed subsidiary of SB-Bibb incorporated as Fairfield Financial Services, Inc. ("Fairfield"). The purchase transaction involved a combination of SNB stock and cash consideration. Fairfield is a well-established real estate mortgage lending company with a number of production locations throughout Georgia and the Southeast, including offices in Macon, Columbus, Warner Robins, Richmond Hill, Stockbridge, Fayetteville and St. Simons Island. The Company functions as a subsidiary of SB-Bibb.

History and Business of the Subsidiaries

Substantially all of the business of SNB is conducted through its two subsidiary banks. A brief description of each Bank's history and business operations is discussed below.

SB-BIBB

SB-Bibb is a state-chartered bank which engages in the commercial banking business primarily in Bibb County, Georgia. SB-Bibb commenced operations on November 4, 1988. The Bank now operates six full-service and one limited-service banking offices in Macon, Georgia. On March 1, 1999, the Bank converted its banking charter from a national to a state charter and changed its name from Security National Bank to Security Bank of Bibb County.







1

Part I (Continued)

Item 1 (Continued)

The Bank offers a full range of deposit products, lending services (including a specialized mortgage division), internet banking, automated teller machines, safe deposit boxes, credit cards, night depositories and other services for the convenience of its customers. No trust services are currently offered. The Bank provides its own data processing services.

With its purchase of Fairfield during 2000, SB-Bibb expanded its mortgage division to include a number of production locations throughout Georgia and the Southeast.

As of December 31, 2001, SB-Bibb had total assets of $370.9 million, total deposits of $264.4 million and total stockholders' equity of $29.6 million. Net income amounted to $3.2 million for the year ended December 31, 2001.

SB-HOUSTON

SB-Houston commenced operation in 1987 as a state-chartered bank in Perry, Houston County, Georgia. The Bank currently operates four full-service facilities in Houston County, having added two full-service branches in Warner Robins, Georgia. SB-Houston's main office is located at 1208 Washington Street, Perry, Georgia. The Bank established its fourth full-service office during the first quarter of 2000. This office is located on Houston Lake Road in Warner Robins.

SB-Houston operates a full-service commercial banking business and provides a wide range of banking services, including checking and savings accounts, a broad range of certificates of deposit, agricultural, consumer, commercial and real estate loans, internet banking, safe deposit boxes, credit cards, night depositories and 24-hour automated teller machines. SB-Houston's customers reside mainly in the Houston County area. No trust services are currently offered. Data services are provided by SB-Bibb.

As of December 31, 2001, SB-Houston had total assets of $133.7 million, total deposits of $111.8 million, and stockholders' equity of $10.1 million. Net income for the year ended December 31, 2001 totaled $1.5 million.

Market Area

SNB primarily serves the residents of Bibb and Houston Counties, with estimated populations of 155,500 and 89,200, respectively, as of 2001. SNB also conducts business to a lesser extent in the surrounding counties of Jones, Monroe, Twiggs, Crawford, Peach and Wilkinson. The loan portfolio is concentrated in various commercial, real estate and consumer loans to individuals and entities located in middle Georgia, and the ultimate collectiblity of the loans and future growth of the Company are largely dependent upon economic conditions in the middle Georgia area. The Company's agricultural loans are negligible. The economy of the middle Georgia area has been generally favorable in recent years, although population growth has been moderate at best. Robins Air Force Base, located in Houston County, is a major employer in the area, which has survived national base closure mandates and expanded in size in recent years.

The acquisition of Fairfield during 2001 brings a number of well established mortgage production offices to SB-Bibb. Fairfield is primarily engaged in residential real estate mortgage lending in the state of Georgia.

2

Part I (Continued)

Item 1 (Continued)

Competition

The financial services industry in the middle Georgia area is highly competitive. SNB's subsidiary banks compete actively with national and state chartered banks, savings and loan associations and credit unions for loans and deposits. In addition, the Banks compete with other financial service institutions, including brokers and dealers, insurance companies and finance companies, all of which actively engage in marketing various types of loans, deposits and other services. Management believes that competitive pricing and personalized service will provide it with a method to compete effectively in the middle Georgia area.

Employees

As of December 31, 2001, the Company had 224 employees on a full-time equivalent basis. SNB considers its relationship with its employees to be excellent.

Supervision and Regulation

Bank holding companies and banks are regulated under both federal and state law. The following is a brief summary of certain statutes and rules and regulations affecting the Company, the Bank, and, to a more limited extent, the Company's subsidiaries.

This summary is qualified in its entirety by reference to the particular statute and regulatory provision referred to and is not intended to be an exhaustive description of the statutes or regulations applicable to the business of the Company and its subsidiaries. The scope of regulation and permissible activities of the Company and its subsidiaries is subject to change by future federal and state legislation. Supervision, regulation and examination of the Company and the Bank by the bank regulatory agencies are intended primarily for the protection of depositors rather than shareholders of the Company.

Regulation of the Company

SNB is a registered holding company under the Federal Bank Holding Company Act and the Georgia Bank Holding Company Act and is regulated under such Act by the Federal Reserve and by the Georgia Department of Banking and Finance (the "Georgia Department@), respectively. As a bank holding company, the Company is required to file annual reports with the Federal Reserve and the Georgia Department and provide such additional information as the applicable regulator may require pursuant to the Federal and Georgia Bank Holding Company Acts. The Federal Reserve and the Georgia Department may also conduct examinations of the Company to determine whether the Company is in compliance with Bank Holding Company Acts and regulations promulgated thereunder.

In addition, the Federal Bank Holding Company Act requires every bank holding company to obtain the prior approval of the Federal Reserve before: (1) acquiring direct or indirect ownership or control of more than 5 percent of the voting shares of any bank; (2) acquiring all or substantially all of the assets of a bank; and (3) before merging or consolidating with another bank holding company.





3

Part I (Continued)

Item 1 (Continued)



The Georgia Department requires similar approval prior to the acquisition of any additional banks from every Georgia bank holding company. A Georgia bank holding company is generally prohibited from acquiring ownership or control of 5 percent or more of the voting shares of a bank unless the bank being acquired is either a bank for purposes of the Federal Bank Holding Company Act, or a federal or state savings and loan association or savings bank or federal savings bank whose deposits are insured by the Federal Savings and Loan Insurance Corporation and such bank has been in existence and continuously operating as a bank for a period of five years or more prior to the date of application to the Department for approval of such acquisition.

The Federal Reserve (pursuant to regulation and published statements) has maintained that a bank holding company must serve as a source of financial strength to its subsidiary banks. In adhering to the Federal Reserve policy, the Company may be required to provide financial support to the Bank at a time when, absent such Federal Reserve policy, the Company may not deem it advisable to provide such assistance. Similarly, the Federal Reserve also monitors the financial performance and prospects of nonbank subsidiaries with an inspection process to ascertain whether such nonbanking subsidiaries enhance or detract from the Company's ability to serve as a source of strength for the Bank.

Capital Requirements

The holding company is subject to regulatory capital requirements imposed by the Federal Reserve applied on a consolidated basis with the banks owned by the holding company. Bank holding companies must have capital (as defined in the rules) equal to eight (8) percent of risk-weighted assets. The risk weights assigned to assets are based primarily on credit risk. For example, securities with an unconditional guarantee by the United States government are assigned the least risk category. A risk weight of 50 percent is assigned to loans secured by owner-occupied one-to-four family residential mortgages. The aggregate amount of assets assigned to each risk category is multiplied by the risk weight assigned to that category to determine the weighted values, which are added together to determine total risk-weighted assets.

The Federal Reserve also requires the maintenance of minimum capital leverage ratios to be used in tandem with the risk-based guidelines in assessing the overall capital adequacy of bank holding companies. The guidelines define capital as either Tier 1 (primarily shareholder equity) or Tier 2 (certain debt instruments and a portion of the allowance for loan losses). Tier 1 capital for banking organizations includes common equity, minority interest in the equity accounts of consolidated subsidiaries, qualifying noncumulative perpetual preferred stock and qualifying cumulative perpetual preferred stock. (Cumulative perpetual preferred stock is limited to 25 percent of Tier 1 capital.) Tier 1 capital excludes goodwill; amounts of mortgage servicing assets, nonmortgage servicing assets, and purchased credit card relationships that, in the aggregate, exceed 100 percent of Tier 1 capital; nonmortgage servicing assets and purchased credit card relationships that in the aggregate, exceed 25 percent of Tier 1 capital; all other identifiable intangible assets; and deferred tax assets that are dependent upon future taxable income, net of their valuation allowance, in excess of certain limitations.





4



Part I (Continued)

Item 1 (Continued)



Effective June 30, 1998, the Board has established a minimum ratio of Tier 1 capital to total assets of 3.0 percent for strong bank holding companies (rated composite A1@under the BOPEC rating system of bank holding companies), and for bank holding companies that have implemented the Board=s risk-based capital measure for market risk. For all other bank holding companies, the minimum ratio of Tier 1 capital to total assets is 4.0 percent. Banking organizations with supervisory, financial, operational, or managerial weaknesses, as well as organizations that are anticipating or experiencing significant growth, are expected to maintain capital ratios well above the minimum levels. Higher capital ratios may be required for any bank holding company if warranted by its particular circumstances or risk profile. Bank holding companies are required to hold capital commensurate with the level and nature of the risks, including the volume and severity of problem loans, to which they are exposed.

At December 31, 2001, SNB exceeded the minimum Tier 1, risk-based and leverage ratios. The table which follows sets forth certain capital information for SNB as of December 31, 2001.

|CAPITAL ADEQUACY
($ in Thousands)
|---------------------------------
|                                 
|                                 
|                                 
|                                 
|Leverage Ratio                   
|Actual                           
|Minimum Required (1)             
|                                 
|Risked-Based Capital:            
|                                 
|Tier 1 Capital                   
|Actual                           
|Minimum Required                 
|                                 
|Total Capital                    
|Actual                           
|Minimum Required                 

(1) Represents the minimum requirement. Institutions that are contemplating acquisitions or anticipating or experiencing significant growth may be required to maintain a substantially higher leverage ratio.













5

Part I (Continued)

Item 1 (Continued)

The Riegle-Neal Interstate Banking and Branching Efficiency Act

Prior to the enactment of the Interstate Banking and Branching Efficiency Act of 1994 (the "Riegle-Neal Act"), interstate expansion of bank holding companies was prohibited, unless such acquisition was specifically authorized by a statute of the state in which the target bank was located. Pursuant to the Riegle-Neal Act, effective September 29, 1995, an adequately capitalized and adequately managed holding company may acquire a bank across state lines, without regard to whether such acquisition is permissible under state law. A bank holding company is considered to be "adequately capitalized" if it meets all applicable federal regulatory capital standards.

While the Riegle-Neal Act precludes a state from entirely insulating its banks from acquisition by an out-of-state holding company, a state may still provide that a bank may not be acquired by an out-of-state company unless the bank has been in existence for a specified number of years, not to exceed five years. Additionally, the Federal Reserve is directed not to approve an application for the acquisition of a bank across state lines if: (i) the applicant bank holding company, including all affiliated insured depository institutions, controls, or after the acquisition would control, more than ten (10) percent of the total amount of deposits of all insured depository institutions in the United States (the "ten percent concentration limit") or (ii) the acquisition would result in the holding company controlling thirty (30) percent or more of the total deposits of insured depository institutions in any state in which the holding company controlled a bank or branch immediately prior to the acquisition (the "thirty percent concentration limit"). States may waive the thirty percent concentration limit, or may make the limits more or less restrictive, so long as they do not discriminate against out-of-state bank holding companies.

The Riegle-Neal Act also provides that, beginning on June 1, 1997, banks located in different states may merge and operate the resulting institution as a bank with interstate branches. However, a state may (i) prevent interstate branching through mergers by passing a law prior to June 1, 1997 that expressly prohibits mergers involving out-of-state banks, or (ii) permit such merger transactions prior to June 1, 1997. Under the Riegle-Neal Act, an interstate merger transaction may involve the acquisition of a branch of an insured bank without the acquisition of the bank itself, but only if the law of the state in which the branch is located permits this type of transaction.

Under the Riegle-Neal Act, a state may impose certain conditions on a branch of an out-of-state bank resulting from an interstate merger so long as such conditions do not have the effect of discriminating against out-of-state banks or bank holding companies, other than on the basis of a requirement of nationwide reciprocal treatment. The ten (10) percent concentration limit and the thirty (30) percent concentration limit described above, as well as the rights of the states to modify or waive the thirty (30) percent concentration limit, apply to interstate bank mergers in the same manner as they apply to the acquisition of out-of-state banks.

A bank resulting from an interstate merger transaction may retain and operate any office that any bank involved in the transaction was operating immediately before the transaction. After completion of the transaction, the resulting bank may establish or acquire additional branches at any location where any bank involved in the transaction could have established or acquired a branch. The Riegle-Neal Act also provides that the appropriate federal banking agency may approve an application by a bank to establish and operate an interstate branch in any state that has in effect a law that expressly permits all out-of-state banks to establish and operate such a branch.







6

Part I (Continued)

Item 1 (Continued)



In response to the Riegle-Neal Act, effective June 1, 1997, Georgia permitted interstate branching, although only through merger and acquisition. In addition, Georgia law provides that a bank may not be acquired by an out-of-state company unless the bank has been in existence for five years. Georgia has also adopted the thirty percent concentration limit, but permits state regulators to waive it on a case-by-case basis.

The Gramm-Leach-Bliley Act of 1999

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

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

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

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





7

Part I (Continued)

Item 1 (Continued)



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

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

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

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

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

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















8

Part I (Continued)

Item 1 (Continued)

Regulation of the Banks

As state-chartered banks, the Banks are examined and regulated by the Federal Deposit Insurance Corporation ("FDIC") and the Georgia Department.

The major functions of the FDIC with respect to insured banks include paying depositors to the extent provided by law in the event an insured bank is closed without adequately providing for payment of the claim of depositors, acting as a receiver of state banks placed in receivership when so appointed by state authorities, and preventing the continuance or development of unsound and unsafe banking practices. In addition, the FDIC also approves conversions, mergers, consolidations, and assumption of deposit liability transactions between insured banks and noninsured banks or institutions to prevent capital or surplus diminution in such transactions where the resulting, continued or assumed bank is an insured nonmember state bank.

Subsidiary banks of a bank holding company are subject to certain restrictions imposed by the Federal Bank Holding Company Act on any extension of credit to the bank holding company or any of its subsidiaries, on investment in the stock or other securities thereof and on the taking of such stock or securities as collateral for loans to any borrower. In addition, a bank holding company and its subsidiaries are prohibited from engaging in certain tie-in arrangements in connection with any extension of credit or provision of any property or services.

The Georgia Department regulates all areas of the banks' banking operations, including mergers, establishment of branches, loans, interest rates and reserves. The Bank must have the approval of the Commissioner to pay cash dividends, unless at the time of such payment:

(i) the total classified assets at the most recent examination of such banks do not exceed 80 percent of Tier 1 capital plus Allowance for Loan Losses as reflected at such examination;

(ii) the aggregate amount of dividends declared or anticipated to be declared in the calendar year does not exceed 50 percent of the net profits, after taxes but before dividends, for the previous calendar year; and

(iii) the ratio of Tier 1 Capital to Adjusted Total Assets shall not be less than six (6) percent.

The Banks are also subject to State of Georgia banking and usury laws restricting the amount of interest which it may charge in making loans or other extensions of credit.

Expansion through Branching, Merger or Consolidation

With respect to expansion, the Banks were previously prohibited from establishing branch offices or facilities outside of the county in which their main office was located, except:

a. in adjacent counties in certain situations, or

b. by means of merger or consolidation with a bank which has been in existence for at least five years.





9

Part I (Continued)

Item 1 (Continued)

In addition, in the case of a merger or consolidation, the acquiring bank must have been in existence for at least 24 months prior to the merger. However, effective July 1, 1996, Georgia permits the subsidiary bank(s) of any bank holding company then engaged in the banking business in the state of Georgia to establish, de novo, upon receipt of required regulatory approval, an aggregate of up to three additional branch banks in any county within the state of Georgia. Effective July 1, 1998, this same Georgia law permits, with required regulatory approval, the establishment of de novo branches in an unlimited number of counties within the state of Georgia by the subsidiary bank(s) of bank holding companies then engaged in the banking business in the state of Georgia. This law may result in increased competition in the Banks' market area.

Capital Requirements

The FDIC adopted risk-based capital guidelines that went into effect on December 31, 1990 for all FDIC insured state chartered banks that are not members of the Federal Reserve System. Beginning December 31, 1992, all banks were required to maintain a minimum ratio of total capital to risk weighted assets of eight (8) percent of which at least four (4) percent must consist of Tier 1 capital. Tier 1 capital of state chartered banks (as defined by the regulation) generally consists of: (i) common stockholders' equity; (ii) qualifying noncumulative perpetual preferred stock and related surplus; and (iii) minority interests in the equity accounts of consolidated subsidiaries. In addition, the FDIC adopted a minimum ratio of Tier 1 capital to total assets of banks, referred to as the leverage capital ratio of three (3) percent if the FDIC determines that the institution is not anticipating or experiencing significant growth and has well-diversified risk, including no undue interest rate exposure, excellent asset quality, high liquidity, good earnings and, in general, is considered a strong banking organization, rated Composite "1" under the Uniform Financial Institutions Rating System (the CAMEL rating system) established by the Federal Financial Institutions Examination Council. All other financial institutions are required to maintain a leverage ratio of four (4) percent.

Effective October 1, 1998, the FDIC amended its risk-based and leverage capital rules as follows: (1) all servicing assets and purchase credit card relationships ("PCCRs") that are included in capital are each subject to a ninety (90) percent of fair value limitation (also known as a "ten (10) percent haircut"); (2) the aggregate amount of all servicing assets and PCCRs included in capital cannot excess 100 percent of Tier I capital; (3) the aggregate amount of nonmortgage servicing assets ("NMSAs") and PCCRS included in capital cannot exceed 25 percent of Tier 1 capital; and (4) all other intangible assets (other than qualifying PCCRS) must be deducted from Tier 1 capital.

Amounts of servicing assets and PCCRs in excess of the amounts allowable must be deducted in determining Tier 1 capital. Interest-only strips receivable, whether or not in security form, are not subject to any regulatory capital limitation under the amended rule.













10

Part I (Continued)

Item 1 (Continued)

FDIC Insurance Assessments

The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), enacted in December, 1991, provided for a number of reforms relating to the safety and soundness of the deposit insurance system, supervision of domestic and foreign depository institutions and improvement of accounting standards. One aspect of the Act is the requirement that banks will have to meet certain safety and soundness standards. In order to comply with the Act, the Federal Reserve and the FDIC implemented regulations defining operational and managerial standards relating to internal controls, loan documentation, credit underwriting, interest rate exposure, asset growth, director and officer compensation, fees and benefits, asset quality, earnings and stock valuation.

The regulations provide for a risk-based premium system which requires higher assessment rates for banks which the FDIC determines pose greater risks to the Bank Insurance Fund ("BIF"). Under the regulations, banks pay an assessment depending upon risk classification.

To arrive at risk-based assessments, the FDIC places each bank in one of nine risk categories using a two-step process based on capital ratios and on other relevant information. Each bank is assigned to one of three groups: (i) well capitalized, (ii) adequately capitalized, or (iii) under capitalized, based on its capital ratios. The FDIC also assigned each bank to one of three subgroups based upon an evaluation of the risk posed by the bank. The three subgroups include (i) banks that are financially sound with only a few minor weaknesses, (ii) banks with weaknesses which, if not corrected, could result in significant deterioration of the bank and increased risk to the BIF, and (iii) those banks that pose a substantial probability of loss to the BIF unless corrective action is taken. FDICIA imposes progressively more restrictive constraints on operations management and capital distributions depending on the category in which an institution is classified.

Under FDICIA, insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.































11

Part I (Continued)

Item 1 (Continued)

Community Reinvestment Act

The Company and the Banks are subject to the provisions of the Community Reinvestment Act of 1977, as amended (the "CRA") and the federal banking agencies' regulations issued thereunder. Under the CRA, all banks and thrifts have a continuing and affirmative obligation, consistent with its safe and sound operation to help meet the credit needs for their entire communities, including low- and moderate-income neighborhoods. The CRA does not establish specific lending requirements or programs for financial institutions, nor does it limit an institution's discretion to develop the types of products and services that it believes are best suited to its particular community, consistent with the CRA.

The CRA requires a depository institution's primary federal regulator, in connection with its examination of the institution, to assess the institution's record of assessing and meeting the credit needs of the community served by that institution, including low- and moderate-income neighborhoods. The regulatory agency's assessment of the institution's record is made available to the public. In the case of a bank holding company applying for approval to acquire a bank or other bank holding company, the Federal Reserve will assess the records of each subsidiary depository institution of the applicant bank holding company, and such records may be the basis for denying the application.

The evaluation system used to judge an institution's CRA performance consists of three tests: (1) a lending test; (2) an investment test; and (3) a service test. Each of these tests will be applied by the institution's primary federal regulator taking into account such factors as: (i) demographic data about the community; (ii) the institution's capacity and constraints; (iii) the institution's product offerings and business strategy; and (iv) data on the prior performance of the institution and similarly-situated lenders.

In addition, a financial institution will have the option of having its CRA performance evaluated based on a strategic plan of up to five years in length that it had developed in cooperation with local community groups. In order to be rated under a strategic plan, the institution will be required to obtain the prior approval of its federal regulator.

The interagency CRA regulations provide that an institution evaluated under a given test will receive one of five ratings for the test: (1) outstanding; (2) high satisfactory; (3) low satisfactory; (4) needs to improve; and (5) substantial noncompliance. An institution will receive a certain number of points for its rating on each test, and the points are combined to produce an overall composite rating. Evidence of discriminatory or other illegal credit practices would adversely affect an institution's overall rating. Each of SNB's subsidiary banks received a "high satisfactory" CRA rating as a result of their last CRA examination.

Proposed Legislation

Legislation is regularly considered and adopted by both the United States Congress and the Georgia General Assembly. Such legislation could result in regulatory changes and changes in competitive relationships for banks and bank holding companies. The effect of such legislation on the business of the Company and the Banks cannot be predicted.





12

Part I (Continued)

Item 1 (Continued)

Monetary Policy

The results of operations of the Company and the Banks 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 member bank borrowings, changes in reserve requirements against member bank deposits and limitations on interest rates which member banks may pay on time and savings deposits. In view of the changing conditions in the foreign and national economy, as well as the effect of policies and actions taken 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 Company.

Item 2

PROPERTIES

SNB's subsidiaries, SB-Bibb and SB-Houston, owned ten full-service and one limited-service banking locations as of December 31, 2001. Leased properties include one stand alone ATM machine and night depository and SB-Bibb's operations center, which houses its in-house data processing facility and operational support functions. Fairfield Financial Services, Inc., a subsidiary of SB-Bibb, leases a number of mortgage production offices throughout Georgia and the Southeast. The net book value of all facilities including furniture, fixtures and equipment totaled $11,508,000 as of December 31, 2001. Management considers that its properties are well maintained.

Item 3

LEGAL PROCEEDINGS

The Company and its subsidiaries may become parties to various legal proceedings arising from the normal course of business. As of December 31, 2001, there are no material pending legal proceedings to which SNB or its subsidiaries are a party or of which any of its property is the subject.

Item 4

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

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

Part II

Item 5

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

SNB common stock is quoted on the NASDAQ Stock Market under the symbol "SNBJ." Prior to December 1, 1997, SNB common stock was not traded on any public market or exchange, although certain brokerage firms made a market for its common stock. The following table sets forth the high, low and close sale prices per share of the common stock as reported on the NASDAQ Stock Market, and the dividends declared per share for the periods indicated.







13

Part II (Continued)

Item 5 (Continued)

|Year Ended December 31, 2001 |  | High   |  | Low    |  | Close  |  | Dividend Per Share
|---------------------------- |  | ------ |  | ------ |  | ------ |  | ------------------
|                             |  |        |  |        |  |        |  |                   
|Fourth Quarter               |  | $17.00 |  | $14.10 |  | $14.67 |  | $0.080            
|Third Quarter                |  | 16.00  |  | 13.50  |  | 14.00  |  | 0.080             
|Second Quarter               |  | 16.00  |  | 12.75  |  | 14.50  |  | 0.080             
|First Quarter                |  | 15.25  |  | 12.75  |  | 14.25  |  | 0.070             



|Year Ended December 31, 2000 |  |        |  |        |  |        |  |       
|---------------------------- |  | ------ |  | ------ |  | ------ |  | ------
|                             |  |        |  |        |  |        |  |       
|Fourth Quarter               |  | $14.00 |  | $12.36 |  | $13.00 |  | $0.070
|Third Quarter                |  | 15.25  |  | 12.00  |  | 12.88  |  | 0.070 
|Second Quarter               |  | 16.25  |  | 12.00  |  | 15.00  |  | 0.070 
|First Quarter                |  | 16.50  |  | 13.13  |  | 15.50  |  | 0.065 

As of March 11, 2002 the Company had approximately 1,185 shareholders of record.

For a discussion on dividend restrictions, refer to Item 1, Business-Regulation of the Banks.



Item 6

SELECTED FINANCIAL DATA

Refer to page 16 of the Management's Discussion and Analysis for the table of selected financial data for each of the past five years.

Item 7

MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION



SUMMARY

The following discussion reviews the results of operations and assesses the financial condition of SNB Bancshares, Inc. ("SNB", or the "Company") in Macon, Georgia for each of the five most recent years ended December 31, 2001. This discussion should be read in conjunction with the Company's consolidated financial statements and accompanying notes.









14

Part II (Continued)

Item 7 (Continued)

SNB is a Georgia corporation formed to act as a bank holding company for Security Bank of Bibb County (formerly Security National Bank) ("SB-Bibb") under the federal Bank Holding Company Act of 1956, as amended, and the bank holding company laws of Georgia. SNB was incorporated on February 10, 1994 at the instruction of management of SB-Bibb. At a special meeting of the shareholders of SB-Bibb on August 2, 1994, the shareholders of SB-Bibb voted in favor of a plan of reorganization and agreement of merger pursuant to which SB-Bibb became a wholly-owned subsidiary of SNB. The reorganization was effective on September 30, 1994, as a result of which the shares of common stock of SB-Bibb then issued and outstanding were converted into shares of the common stock of SNB. SB-Bibb has operated as a wholly-owned subsidiary of SNB since that time, although the functions and business of SB-Bibb, its Board of Directors, staff and physical office locations underwent no changes as a result of the reorganization.

SB-Bibb is a state-chartered bank that engages in the commercial banking business primarily in Bibb County, Georgia. SB-Bibb commenced operations on November 4, 1988. The bank operates six full-service banking offices and one limited-service office in Macon, Georgia. On March 1, 1999, the bank converted its banking charter from a national to a state charter, and changed its name from Security National Bank to Security Bank of Bibb County.

On August 8, 1998, SNB acquired a 100% interest in Crossroads Bancshares, Inc., the parent holding company of Crossroads Bank of Georgia in Perry and Warner Robins, Georgia. The two companies merged in a pooling of interests stock swap transaction and, accordingly, all prior financial information shown below has been restated as if this business combination had always existed. The parent company of Crossroads Bank was subsequently dissolved. On June 3, 1999, Crossroads Bank changed its name to Security Bank of Houston County ("SB-Houston") and now operates as a wholly-owned subsidiary of SNB, with four full-service banking offices in Perry and Warner Robins.

On July 31, 2000, SB-Bibb purchased the assets of Group Financial Southeast (dba Fairfield Financial) in a business combination accounted for as a purchase. The assets were placed in a newly formed subsidiary of SB-Bibb incorporated as Fairfield Financial Services, Inc. ("Fairfield"). The purchase transaction involved a combination of SNB stock and cash consideration. Fairfield is a well-established real estate mortgage lending company with a number of production locations throughout Georgia and the Southeast, including offices in Macon, Columbus, Warner Robins, Richmond Hill, Stockbridge, Fayetteville and St. Simons Island. The Company functions as a subsidiary of SB-Bibb.

Substantially all of the business of SNB is conducted through its two subsidiary banks. Both banks offer a full range of lending services including the specialized Fairfield mortgage subsidiary, deposit products, internet banking, automated teller machines, safe deposit boxes, credit cards, night depositories, and other services for the convenience of its customers, who mainly reside in Bibb and Houston Counties. As of December 31, 2001, SNB had 224 employees on a full-time equivalent basis.

The following table illustrates selected key financial data of SNB for each of the past five years.







15

Part II (Continued)

Item 7 (Continued)

|TABLE 1                                                           |         |           |           |                          |           |           |          
|----------------------------------------------------------------- | ------- | --------- | --------- | ------------------------ | --------- | --------- | ---------
|SELECTED FIVE YEAR FINANCIAL DATA                                 |         |           |           |                         
|(Dollars in thousands, except per share dataand number of shares)
|                                                                  |         |           |           | Years Ended December 31, |          
|                                                                  |         |           | 2001      | 2000                     | 1999      | 1998      | 1997     
|INCOME STATEMENT                                                  |         |           |           |                          |           |          
|Interest Income                                                   |         | $33,608   | $27,035   | $20,402                  | $18,630   | $16,969  
|Interest Expense                                                  |         | 16,586    | 13,106    | 8,427                    | 7,895     | 7,345    
|Net Interest Income                                               |         | 17,022    | 13,929    | 11,975                   | 10,735    | 9,624    
|Provision for Loan Losses                                         |         | 1,912     | 1,292     | 736                      | 636       | 505      
|Other Income                                                      |         |           | 11,147    | 5,354                    | 3,072     | 2,558     | 1,830    
|Other Expense                                                     |         | 19,397    | 12,655    | 9,537                    | 8,947     | 7,119    
|Income Before Tax                                                 |         | 6,860     | 5,336     | 4,774                    | 3,710     | 3,830    
|Income Taxes                                                      |         |           | 2,518     | 1,857                    | 1,529     | 1,383     | 1,223    
|Net Income                                                        |         |           | $ 4,342   | $ 3,479                  | $ 3,245   | $ 2,327   | $ 2,607  
|                                                                  |         |           |           |                          |           |           |          
|PER SHARE (a)                                                     |         |           |           |                          |           |          
|Earnings Per Common Share                                        
|Basic                                                             |         |           | $1.29     | $1.04                    | $0.97     | $0.73     | $0.88    
|Diluted                                                           |         |           | 1.29      | 1.03                     | 0.96      | 0.69      | 0.80     
|Cash Dividends Paid                                               |         | 0.31      | 0.28      | 0.26                     | 0.22      | 0.16     
|Weighted Average Shares                                           |         | 3,372,969 | 3,354,145 | 3,340,624                | 3,185,014 | 2,950,611
|                                                                  |         |           |           |                          |           |           |          
|RATIOS                                                            |         |           |           |                          |           |           |          
|Return on Average Assets                                          |         | 1.00%     | 1.09%     | 1.27%                    | 1.04%     | 1.30%    
|Return on Average Equity                                          |         | 13.05%    | 12.01%    | 12.08%                   | 9.41%     | 12.17%   
|Dividend Payout Ratio                                             |         | 24.08%    | 26.53%    | 26.25%                   | 30.26%    | 17.95%   
|Average Equity to Average Assets                                  | 7.63%   | 9.06%     | 10.52%    | 11.08%                   | 10.65%   
|Net Interest Margin                                               |         | 4.23%     | 4.79%     | 5.21%                    | 5.34%     | 5.42%    
|                                                                  |         |           |           |                          |           |           |          
|BALANCE SHEET                                                     |         |           |           |                          |           |          
|(at end of period)                                                |         |           |           |                          |           |          
|Assets                                                            |         |           | $ 504,762 | $ 410,230                | $ 283,483 | $ 253,006 | $ 216,393
|Investment Securities                                             |         | 51,041    | 51,498    | 45,087                   | 39,301    | 41,233   
|Loans Held for Sale                                               |         | 41,166    | 13,215    | 1,761                    | 3,121     | 1,181    
|Loans, Net of Unearned Income                                     | 378,139 | 305,264   | 205,668   | 176,041                  | 144,304  
|Reserve for Loan Losses                                           |         | 4,099     | 3,003     | 2,327                    | 2,070     | 1,861    
|Deposits                                                          |         |           | 375,065   | 311,577                  | 237,418   | 217,778   | 188,807  
|Borrowed Funds                                                    |         | 90,418    | 64,057    | 15,824                   | 6,408     | 2,648    
|Stockholders' Equity                                              |         | 34,777    | 31,071    | 27,472                   | 25,736    | 22,750   
|Shares Outstanding                                                |         | 3,372,969 | 3,372,969 | 3,340,624                | 3,340,624 | 2,970,274

1. All per share amounts have been calculated to apply SFAS 128 - "Earnings Per Share".

16

Part II (Continued)

Item 7 (Continued)

The following tables present condensed average balance sheets for the periods indicated, and the percentages of each of these categories to total average assets for each period.

|TABLE 2                              |          |                         |          |          |          |          |        |     
|------------------------------------ | -------- | ----------------------- | -------- | -------- | -------- | -------- | ------ | ----
|AVERAGE BALANCE SHEETS               |          |                         |          |          |          |         
|(In Thousands)                       |          | Years Ended December 31
|                                     |          |                         | 2001     | %        | 2000     | %        | 1999   | %   
|ASSETS                               |          |                         |          |          |          |          |        |     
|Cash and Due From Banks              |          | $ 14,581                | 3.3%     | $ 12,756 | 4.0%     | $ 12,192 | 4.8%  
|Time Deposits-Other Banks            |          | 972                     | 0.2%     | 967      | 0.3%     | 20       | 0.0%  
|Federal Funds Sold                   |          | 2,845                   | 0.7%     | 6,031    | 1.9%     | 4,204    | 1.6%  
|Taxable Investment Securities        | 34,869   | 8.0%                    | 33,930   | 10.6%    | 30,029   | 11.8%   
|Nontaxable Investments Securities    |          | 7,846                   | 1.8%     | 9,116    | 2.9%     | 7,640    | 3.0%  
|Market Adjustment-Securities         | 839      | 0.2%                    | (619)    | (0.2%)   | (162)    | (0.1%)  
|Loans, Net of Interest               |          | 341,995                 | 78.5%    | 244,177  | 76.4%    | 189,306  | 74.1% 
|Loans Held for Sale                  |          | 17,878                  | 4.1%     | 2,365    | 0.7%     | 2,462    | 1.0%  
|Allowance for Loan Losses            |          | (3,479)                 | (0.8%)   | (2,569)  | (0.8%)   | (2,233)  | (0.9%)
|Bank Premises and Equipment          |          | 10,049                  | 2.3%     | 8,641    | 2.7%     | 7,993    | 3.1%  
|Other Real Estate                    |          | 1,818                   | 0.4%     | 270      | 0.1%     | 426      | 0.2%  
|Other Assets                         |          |                         | 5,701    | 1.3%     | 4,727    | 1.5%     | 3,534  | 1.4%
|TOTAL ASSETS                         |          | $435,914                | 100.0%   | $319,792 | 100.0%   | $255,411 | 100.0%
|                                     |          |                         |          |          |          |          |        |     
|LIABILITIES AND STOCKHOLDERS' EQUITY |          |                         |          |         
|Deposits                             |          |                         |          |          |          |          |        |     
|Noninterest-Bearing                  |          | $ 55,960                | 12.8%    | $ 45,518 | 14.2%    | $ 39,414 | 15.4% 
|Interest-Bearing                     |          | 278,901                 | 64.0%    | 211,216  | 66.0%    | 177,779  | 69.6% 
|Federal Funds Purchased and          |          |                         |          |          |          |         
|Repurchase Agreements Sold           | 10,498   | 2.4%                    | 7,278    | 2.3%     | 4,518    | 1.8%    
|Demand Notes-US Treasury             |          | 972                     | 0.2%     | 849      | 0.3%     | 676      | 0.3%  
|Other Borrowed Money and FHLB        | 52,270   | 12.0%                   | 25,158   | 7.9%     | 3,340    | 1.3%    
|Obligations under Capital Leases     | 50       | 0.0%                    | 105      | 0.0%     | 159      | 0.1%    
|Other Liabilities                    |          | 3,982                   | 0.9%     | 698      | 0.2%     | 2,663    | 1.0%  
|Total Liabilities                    |          | 402,633                 | 92.4%    | 290,822  | 90.9%    | 228,549  | 89.5% 
|Common Stock                         |          | 3,373                   | 0.8%     | 3,345    | 1.0%     | 3,341    | 1.3%  
|Surplus                              |          |                         | 12,967   | 3.0%     | 12,725   | 4.0%     | 12,613 | 4.9%
|Undivided Profits                    |          | 16,941                  | 3.9%     | 12,900   | 4.0%     | 10,908   | 4.3%  
|Total Stockholders' Equity           |          | 33,281                  | 7.6%     | 28,970   | 9.1%     | 26,862   | 10.5% 
|TOTAL LIABILITIES AND                |          |                         |          |          |          |          |       
|STOCKHOLDERS' EQUITY                 | $435,914 | 100.0%                  | $319,792 | 100.0%   | $255,411 | 100.0%  







17

Part II (Continued)

Item 7 (Continued)



Consolidated total assets of $504.8 million at December 31, 2001 were up by $94.5 million, or 23.0 percent, over total assets at December 31, 2000. Total assets of $410.2 million at December 31, 2000 were up by $126.7 million, or 44.7 percent, over total consolidated assets at December 31, 1999. On average the balance sheet grew by 36.3 percent during 2001 and 25.2 percent during 2000. These growth rates are significantly higher than the economic growth statistics for the Company's middle Georgia market area. Assets of the Fairfield mortgage lending unit stood at $140.6 million at December 31, 2001, a 190.9 percent increase over assets of $48.3 million at December 31, 2000. In addition to the growth in the Fairfield subsidiary, SNB's strong growth trends are attributed to continued industry consolidations and restructuring efforts of the larger super regional banks in the area, SNB's broader coverage of the geographic area through its expanded branch network, and the synergies among the Bank subsidiaries and the mortgage unit.

Loans

The Banks' loan portfolio constitutes the major interest-earning asset of SNB. To analyze prospective loans, management assesses the Company's objectives for both credit quality and interest rate pricing to determine whether to extend a loan and the appropriate rate of interest for each loan. The loan portfolio is concentrated in various commercial, real estate and consumer loans to individuals and entities located in middle Georgia and in other Georgia markets where the Fairfield mortgage subsidiary operates loan offices. Accordingly, the ultimate collectibility of the loans is largely dependent upon economic conditions in these Georgia markets.

At December 31, 2001 and 2000, loans and loans held for sale, net of unearned income, of $419.3 million and $318.5 million, respectively, amounted to 83.1 percent and 77.6 percent of total assets, and 111.8 percent and 102.2 percent of deposits. Loans amounted to 90.1 percent of all funding sources from interest-bearing liabilities at December 31, 2001 and 84.8 percent at December 31, 2000. The loan portfolio grew by 31.7 percent from December 31, 2000 to December 31, 2001. The most significant increases were in real estate construction loans and mortgage loans held for sale through the activities of the Fairfield mortgage subsidiary. The Company's mortgage activity was brisk during 2001 due to an attractive mortgage interest rate environment. Mortgage refinancing volume accounted for a large portion of the 2001 growth trends. The average yields generated by interest and fees from the entire loan portfolio amounted to 8.57 percent during 2001, compared to 9.75 percent during 2000, and 9.38 percent during 1999. SNB's reserve for loan losses as a percentage of outstanding loans and loans held for sale amounted to 0.98 percent at December 31, 2001, compared to 0.94 percent and 1.12 percent at December 31, 2000 and 1999, respectively.



















18

Part II (Continued)

Item 7 (Continued)

The following table presents the amount of loans outstanding by category, both in dollars and in percentages of the total portfolio, at the end of each of the past five years.

|TABLE 3                                |          |              |          |          |          |          |     
|-------------------------------------- | -------- | ------------ | -------- | -------- | -------- | -------- | ----
|LOANS BY TYPE                          |          |              |          |          |          |         
|(In Thousands)                         |          | December 31,
|                                       |          |              | 2001     | 2000     | 1999     | 1998     | 1997
|                                       |          |              |          |          |         
|Commercial, Financial and Agricultural | $ 44,102 | $ 44,805     | $ 44,194 | $ 37,906 | $ 34,798
|Real Estate-Construction               |          | 134,940      | 62,328   | 16,199   | 17,606   | 6,943   
|Real Estate-Mortgage                   |          |              |          |          |          |         
|Mortgage Loans Held for Sale           | 41,166   | 13,215       | 1,761    | 3,121    | 1,181   
|Other Mortgage                         |          | 179,032      | 176,472  | 127,819  | 103,159  | 88,027  
|Loans to Individuals                   |          | 20,241       | 21,831   | 17,577   | 17,502   | 14,683  
|Total Loans                            |          | 419,481      | 318,651  | 207,550  | 179,294  | 145,632 
|Unearned Income                        |          | (175)        | (172)    | (120)    | (132)    | (147)   
|Total Net Loans                        |          | $419,306     | $318,479 | $207,430 | $179,162 | $145,485
|                                       |          |              |          |          |          |          |     
|Percentage of Total Portfolio          |          |              |          |          |          |         
|Commercial, Financial and Agricultural | 10.5%    | 14.1%        | 21.3%    | 21.2%    | 23.9%   
|Real Estate-Construction               |          | 32.2%        | 19.6%    | 7.8%     | 9.8%     | 4.8%    
|Real Estate-Mortgage:                  |          |              |          |          |          |         
|Mortgage Loans Held for Sale           | 9.8%     | 4.1%         | 0.9%     | 1.7%     | 0.8%    
|Other Mortgage                         |          | 42.7%        | 55.4%    | 61.6%    | 57.6%    | 60.5%   
|Loans to Individuals                   |          | 4.8%         | 6.9%     | 8.5%     | 9.8%     | 10.1%   
|Total Loans                            |          | 100.0%       | 100.1%   | 100.1%   | 100.1%   | 100.1%  
|Unearned Income                        |          | 0.0%         | (0.1%)   | (0.1%)   | (0.1%)   | (0.1%)  
|Total Net Loans                        |          | 100.0%       | 100.0%   | 100.0%   | 100.0%   | 100.0%  





























19

Part II (Continued)

Item 7 (Continued)

The following table provides information on the maturity distribution of selected categories of the loan portfolio and certain interest sensitivity data as of December 31, 2001.

|TABLE 4                                             |         |         |         |                   |                                  |                 |         
|--------------------------------------------------- | ------- | ------- | ------- | ----------------- | -------------------------------- | --------------- | --------
|LOAN MATURITY DISTRIBUTION AND INTEREST SENSITIVITY |         |        
|(In Thousands)                                      |         |         |         |                   |                                  |                
|                                                    |         |         |         |                  
|                                                    |         |         |         | December 31, 2001
|                                                    |         |         |         | One Year or Less  | Over One Year Through Five Years | Over Five Years | Total   
|Selected Loan Categories                            |         |         |         |                   |                                  |                
|Commercial, Financial and Agricultural              | $21,598 | $18,791 | $3,713  | $44,102          
|Real Estate-Construction                            |         |         | 114,699 | 20,241            | 0                                | 134,940        
|Total                                               |         |         |         | $136,297          | $39,032                          | $3,713          | $179,042
|                                                    |         |         |         |                   |                                  |                 |         
|Loans Shown Above Due After One Year                |         |         |         |                  
|Having Predetermined Interest Rates                 |         |         |         |                   | $25,648                         
|Having Floating Interest Rates                      |         |         |         |                   | 17,098                          
|Total                                               |         |         |         |                   |                                  |                 | $42,746 



Investment Securities

The investment securities portfolio is another major interest-earning asset and consists of debt and equity securities categorized as either Available for Sale or Held to Maturity. These securities provide SNB with a source of liquidity and a stable source of income. The investment portfolio provides a resource to help balance interest rate risk and credit risk related to the loan portfolio.

As of December 31, 2001, the securities portfolio amounted to $51.0 million, or 10.1% of total assets, compared to $51.5 million, or 12.6% of assets at December 31, 2000. Over recent years, the shrinkage in the size of the securities portfolio relative to total assets indicates that a higher proportion of earning assets have been deployed into the loan portfolio rather than in investment securities to produce greater yields. Several securities were sold during the year 2001 to obtain liquid funds for use in loan production and to capitalize on favorable market values. For December 31, 2001, net gains on the sale of securities were $100,596, compared to $5,816 for 2000 and ($1,913) for 1999.

The average tax equivalent yield on the portfolio was 6.38% for the year 2001 versus 6.66 percent in 2000 and 6.36 percent in 1999. During the year 2001, the investment securities portfolio represented 10.7 percent of average earning assets and 10.0 percent of average total assets. During 2000, the portfolio averaged 14.3 percent of earning assets and 13.3 percent of total assets. This decrease is attributable to increased mortgage and commercial loan activity from the Fairfield merger and general growth in overall loans at the two subsidiary banks.

20

Part II (Continued)

Item 7 (Continued)

At December 31, 2001, the major portfolio components, based on amortized or accreted cost, included 4.5 percent in U. S. Treasury securities, 72.4 percent in U. S. agency obligations, 16.0 percent in state, county and municipal bonds, and 7.0 percent in stock of the Federal Home Loan Bank. On December 31, 2001, the market value of the total bond portfolio as a percentage of the amortized book value was 102.0 percent, up from 100.7 percent a year earlier. As of December 31, 2001, the entire investment securities portfolio had gross unrealized gains of $1,014,642 and gross unrealized losses of ($26,656), for a net unrealized gain of $987,986. As of December 31, 2000, the portfolio had a net unrealized gain of $338,630. In accordance with SFAS No. 115, stockholders' equity included net unrealized gains of $605,679 for December 31, 2001 and net unrealized gains of $195,498 for December 31, 2000 recorded on the Available for Sale portfolio, net of deferred tax effects.No trading account has been established by SNB and none is anticipated.

The following table summarizes the Available for Sale and Held to Maturity investment securities portfolios as of December 31, 2001, 2000, and 1999. Available for Sale securities are shown at fair value, while Held to Maturity securities are shown at amortized or accreted cost.

|TABLE 5                       |  |             |         |        
|----------------------------- |  | ----------- | ------- | -------
|INVESTMENT SECURITIES         |  |             |         |        
|(In Thousands)                |  | December 31
|                              |  | 2001        | 2000    | 1999   
|Securities Available for Sale |  |             |         |        
|U. S. Treasury                |  | $ 2,360     | $ 1,036 | $ 998  
|U. S. Government Agencies     |  |             |         |        
|Mortgage-Backed               |  | 17,118      | 11,527  | 10,945 
|Other                         |  | 10,157      | 27,663  | 22,973 
|State, County and Municipal   |  | 6,389       | 6,055   | 5,662  
|Other Investments (FHLB)      |  | 3,533       | 3,234   | 1,598  
|                              |  | $39,556     | $49,515 | $42,176
|Securities Held to Maturity   |  |             |         |        
|U. S. Treasury                |  | $ 0         | $ 0     | $ 0    
|U. S. Government Agencies     |  |             |         |        
|Mortgage-Backed               |  | 0           | 0       | 0      
|Other                         |  | 9,708       | 0       | 0      
|State, County and Municipal   |  | 1,778       | 1,983   | 2,911  
|Other Investments (FHLB)      |  | 0           | 0       | 0      
|                              |  | $11,486     | $ 1,983 | $ 2,911
|Total Investment Securities   |  |             |         |        
|U. S. Treasury                |  | $ 2,360     | $ 1,036 | $ 998  
|U. S. Government Agencies     |  |             |         |        
|Mortgage-Backed               |  | 17,118      | 11,527  | 10,945 
|Other                         |  | 19,865      | 27,663  | 22,973 
|State, County and Municipal   |  | 8,167       | 8,038   | 8,573  
|Other Investments (FHLB)      |  | 3,533       | 3,234   | 1,598  
|                              |  | $51,041     | $51,498 | $45,087

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Part II (Continued)

Item 7 (Continued)

The following tables illustrate the contractual maturities and weighted average yields of investment securities held at December 31, 2001. Expected maturities will differ from contractual maturities because certain issuers have the right to call or prepay obligations with or without call or prepayment penalties. No prepayment assumptions have been estimated in the table. The weighted average yields are calculated on the basis of the amortized cost and effective yields of each security weighted for the scheduled maturity of each security. The yield on state, county and municipal securities is computed on a taxable equivalent basis using a statutory federal income tax rate of 34 percent.

|TABLE 6                                                |                       |                    |            |                |               |           
|------------------------------------------------------ | --------------------- | ------------------ | ---------- | -------------- | ------------- | ----------
|MATURITIES OF INVESTMENT SECURITIES AND AVERAGE YIELDS
|(In Thousands)                                         |                       |                    |            |                |               |           
|                                                       | Investment Securities
|                                                       | Held to Maturity      | Available for Sale
|December 31, 2001                                      | Amortized
Cost        | Average Yield      | Fair
Value | Amortized
Cost | Average
Yield | Fair
Value
|U.S. Treasury                                          |                       |                    |            |                |               |           
|Within 1 Year                                          | $ 0                   | 0.00%              | $0         | $ 506          | 4.04%         | $ 512     
|1 to 5 Years                                           | 0                     | 0.00%              | 0          | 1,766          | 5.65%         | 1,847     
|5 to 10 Years                                          | 0                     | 0.00%              | 0          | 0              | 0.00%         | 0         
|More Than 10 Years                                     | 0                     | 0.00%              | 0          | 0              | 0.00%         | 0         
|                                                       | $ 0                   | 0.00%              | $0         | $ 2,272        | 5.29%         | $ 2,359   
|Mortgage-Backed                                        |                       |                    |            |                |               |           
|Government Agencies                                    |                       |                    |            |                |               |           
|Within 1 Year                                          | $ 0                   | 0.00%              | $0         | $ 0            | 0.00%         | $ 0       
|1 to 5 Years                                           | 0                     | 0.00%              | 0          | 0              | 0.00%         | 0         
|5 to 10 Years                                          | 0                     | 0.00%              | 0          | 0              | 0.00%         | 0         
|More Than 10 Years                                     | 0                     | 0.00%              | 0          | 16,865         | 6.39%         | 17,118    
|                                                       | $ 0                   | 0.00%              | $0         | $16,865        | 6.39%         | $17,118   
|Other U.S. Government Agencies                         |                       |                    |            |                |               |           
|Within 1 Year                                          | $9,708                | 4.25%              | $9,708     | $ 1,000        | 5.87%         | $ 1,014   
|1 to 5 Years                                           | 0                     | 0.00%              | 0          | 6,523          | 5.95%         | 6,797     
|5 to 10 Years                                          | 0                     | 0.00%              | 0          | 2,194          | 7.22%         | 2,344     
|More Than 10 Years                                     | 0                     | 0.00%              | 0          | 0              | 5.52%         | 0         
|                                                       | $9,708                | 4.25%              | $9,708     | $ 9,717        | 6.23%         | $10,155   



























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Item 7 (Continued)

|TABLE 6 (Continued)                                    |  |  |  |  |  | 
|------------------------------------------------------ |  |  |  |  |  | 
|MATURITIES OF INVESTMENT SECURITIES AND AVERAGE YIELDS
|(In Thousands)                                         |  |  |  |  |  | 

|                            | Investment Securities
|--------------------------- | ---------------------
|                            | Held to Maturity     
|December 31, 2001           | Amortized
Cost       
|State, County and Municipal |                      
|Within 1 Year               | $374                 
|1 to 5 Years                | 1,064                
|5 to 10 Years               | 340                  
|More Than 10 Years          | 0                    
|                            | $1,778               
|Other Investments (FHLB)    |                      
|Within 1 Year               | $ 0                  
|1 to 5 Years                | 0                    
|5 to 10 Years               | 0                    
|More Than 10 Years          | 0                    
|                            | $ 0                  
|Total Securities            |                      
|Within 1 Year               | $10,082              
|1 to 5 Years                | 1,064                
|5 to 10 Years               | 340                  
|More Than 10 Years          | 0                    
|                            | $11,486              

As of December 31, 2001 and 2000, SNB had no holdings of securities of a single issuer in which the aggregate book value and aggregate market value of the securities exceeded ten percent of stockholders' equity, with the exception of U. S. Government Agency securities.

Other Assets

SNB holds additional earning assets in overnight Federal Funds Sold. Due to liquidity needs from strong loan demand, these balances amounted to only $1,000 at December 31, 2001. Fed Funds Sold balances were $4.4 million at December 31, 2000. Balances in the Company's nonearning assets are comprised of cash and correspondent bank balances, premises and equipment, foreclosed real estate, income receivable on loans and investments and other miscellaneous assets. Management works to minimize nonearning-asset balances in order to maximize profit potential. Nonearning assets represented 7.6 percent of the balance sheet as of December 31, 2001, and 9.5 percent as of December 31, 2000.

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Part II (Continued)

Item 7 (Continued)

Deposits

Deposits are SNB's primary liability and funding source. Total deposits as of December 31, 2001 were $375.1 million, up 20.4 percent from $311.6 million at December 31, 2000. Average deposits in 2001 were $334.9 million, up 30.4 percent from $256.7 million during 2000. The average cost of deposits, with noninterest checking accounts factored in, was 4.11 percent during 2001, down from 4.26 percent during 2000 and up from 3.69 percent for 1999. SNB seeks to set competitive deposit rates in its local markets to retain and grow market share in its geographic regions as the Company's principal funding source. As growth in local market deposit sources proved insufficient to fund 2001 loan demand, SNB's Banks supplemented deposit sources with brokered deposits. As of December 31, 2001 the Banks reported $34.9 million, or 9.3 percent of total deposits, in brokered certificates of deposit attracted by external third parties at a weighted average rate of 4.26 percent during the year. Additionally, the banks use external bulletin board or internet services to obtain out-of-market certificates of deposit at competitive market rates when funding is needed.

On an average basis for the year 2001, 16.7 percent of deposits were held in noninterest-bearing checking accounts, 21.7 percent were in lower yielding interest bearing transaction and savings accounts, and 61.6 percent were in time certificates with higher yields. Comparable average deposit mix percentages during 2000 were 17.7 percent, 23.7 percent and 58.5 percent, respectively. The highest rate of growth in average deposits during 2001 occurred in large certificates of $100,000 or more, which increased by 106.3 percent, or $34.2 million.

The following tables reflect average balances of deposit categories for the years 2001, 2000, and 1999.

|TABLE 7                           |          |       |                         |        |          |        |         
|--------------------------------- | -------- | ----- | ----------------------- | ------ | -------- | ------ | --------
|AVERAGE DEPOSITS                  |          |       |                         |        |          |       
|(In Thousands)                    |          |       | Years Ended December 31 |       
|                                  |          |       | 2001                    | %      | 2000     | %      | 1999    
|Noninterest-Bearing               |          |       |                         |        |          |       
|Demand Deposits                   | $ 55,960 | 16.7% | $ 45,518                | 17.7%  | $ 39,414 | 18.1% 
|Interest-Bearing Demand Deposits  | 30,338   | 9.1%  | 21,148                  | 8.2%   | 19,456   | 9.0%  
|Money Market Accounts             | 35,167   | 10.5% | 33,332                  | 13.0%  | 32,151   | 14.8% 
|Savings Deposits                  |          | 7,207 | 2.2%                    | 6,444  | 2.5%     | 6,465  | 3.0%    
|Time Deposits of $100,000 or More | 66,384   | 19.8% | 32,177                  | 12.5%  | 26,525   | 12.2% 
|Other Time Deposits               | 139,805  | 41.8% | 118,116                 | 46.0%  | 93,182   | 42.9% 
|                                  |          |       | $334,861                | 100.0% | $256,735 | 100.0% | $217,193

The following table summarizes the maturities of time deposits of $100,000 or more as of December 31, 2001, 2000, and 1999.









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Part II (Continued)

Item 7 (Continued)

|TABLE 8                                                    |                                 |        |         |             |        
|---------------------------------------------------------- | ------------------------------- | ------ | ------- | ----------- | -------
|MATURITY DISTRIBUTION OF TIME DEPOSITS OF $100,000 OR MORE
|(In Thousands)                                             |                                 |        |         |             |        
|                                                           |                                 |        |         | December 31
|As of the End of Period                                    |                                 | 2001   | 2000    | 1999       
|                                                           | 3 Months or Less                |        | $21,152 | $ 8,726     | $10,531
|                                                           | Over 3 Months through 6 Months  | 14,585 | 6,532   | 9,198      
|                                                           | Over 6 Months through 12 Months | 35,115 | 19,577  | 5,146      
|                                                           | Over 12 Months                  |        | 14,670  | 2,204       | 7,025  
|                                                           |                                 |        |         | $85,522     | $37,039

Borrowed Money

Other interest-bearing sources of funds at December 31, 2001 totaled $90.4 million. The major component was $70.9 million in various advances from the Federal Home Loan Bank of Atlanta ("FHLB") under two separate programs. FHLB balances at December 31, 2001 represent the highest aggregate indebtedness to FHLB for the year. The first program entails Blanket Agreements for Advances and Security Agreements with the FHLB, under which SNB's Banks have pledged residential first mortgage loans and investment securities as collateral to secure available lines of credit totaling $42.5 million, $42.0 of which was outstanding as of December 31, 2001. These advances have maturities in varying amounts through March 2011 and interest rates ranging from 1.85 percent to 4.55 percent. The second program allows for up to $40.0 million in advances to SNB's Banks under a Warehouse Line secured by the Company's loans held for sale. At December 31, 2001, $28.9 million in borrowings under the Warehouse Line was outstanding at an interest rate of 2.25 percent. Total outstanding advances from the FHLB averaged $48.6 million during the year 2001, with an average interest cost of 4.48 percent. For the year 2000, FHLB advances averaged $25.2 million with an average interest cost of 6.60 percent. FHLB borrowings have been used more extensively during 2001 to supplement traditional deposit sources and provide an additional funding source for higher activity levels in mortgage lending.

SNB carried a $6.0 million outstanding note balance at December 31, 2001 under a line of credit with The Bankers Bank in Atlanta, Georgia. This $10.0 million line is secured with the common stock of SB-Bibb as collateral, and carries a floating interest rate of prime minus 50 basis points. The average balance of debt under this line of credit was $3.7 million for the year 2001 at an average rate of 6.23 percent. Proceeds from line advances were used principally to infuse additional capital to the SB-Bibb Bank to maintain adequate capital levels during peak growth periods. An additional $4.0 million was available against this credit line at December 31, 2001.

As of December 31, 2001, the SB-Bibb Bank had $6.7 million in securities sold under agreements to repurchase. These instruments mature daily and are sold to larger commercial customers of the Bank. Mortgage backed securities sold under these agreements are identified, held and segregated by the investment safekeeping agent. The average balance of these instruments during 2001 was $6.2 million at an average interest rate of 3.36 percent, up from $3.5 million in 2000 at an average rate of 5.94 percent. The maximum month-end balance during the year was $9.0 million in 2001 and $4.5 million in 2000.

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Item 7 (Continued)

Overnight federal funds purchased amounted to $6.6 million at December 31, 2001, up from $5.2 million at December 31, 2000. Average balances in federal funds purchased were $4.3 million in 2001 at rates averaging 4.00%, and $3.7 million in 2000 at rates averaging 6.21%. Demand Notes to the U. S. Treasury of $0.2 million at December 31, 2001 represented accumulated federal tax deposit payments through the Treasury Department's note option program. These Treasury deposit balances averaged $1.0 million during 2001, with an average interest cost of 2.83%, versus $0.8 million on average in 2000 at a rate of 4.84 percent. A small capital lease obligation amounted to $29,998 at year-end 2001.

Other interest bearing sources of funds at December 31, 2000 totaled $64.1 million, up from $15.8 million at December 31, 1999. Of the 2000 year-end balance, $40.5 million consisted of FHLB notes under the Blanket Agreement, $11.9 million was borrowed under the FHLB's Warehouse Line, $5.2 million was in federal funds purchased, $3.5 million was in securities sold under agreements to repurchase, $2.0 million consisted of notes payable to The Bankers Bank, $0.9 million was in treasury, tax and loan note balances, and $0.1 million was in capital lease obligations.

Reliance on other borrowed money as a nondeposit funding source increased on average from $33.4 million during 2000 to $63.8 million during 2001. The principal increase occurred in the use of FHLB notes to match against the Company's growing loan volumes and the Fairfield mortgage production. The cost of all nondeposit borrowed money components averaged 4.43 percent in 2001, down from 6.48 percent in 2000.

Other Liabilities

Other liabilities of $4.5 million at December 31, 2001 and $3.5 million at December 31, 2000 consist of interest payable on deposits and borrowed funds, federal income taxes payable and other accrued but unpaid expenses.

Liquidity

SNB, primarily through the actions of its subsidiary banks, engages in liquidity management to ensure adequate cash flow for deposit withdrawals, credit commitments and repayments of borrowed funds. Needs are met through loan repayments, net interest and fee income, and the sale or maturity of existing assets. In addition, liquidity is continuously provided through the acquisition of new deposits, the renewal of maturing deposits, and external borrowings. Management monitors deposit flow and evaluates alternate pricing structures to retain and grow deposits as needed. To the extent needed to fund loan demand, traditional local deposit funding sources are supplemented by the use of FHLB borrowings, brokered deposits, and other sources outside the Company's immediate market area. High volumes and activity in mortgage and construction lending at the Fairfield subsidiary since its acquisition in 2000 have required higher levels of sophistication and tracking to ensure adequate liquidity throughout the Company. The falling interest rate environment during 2001 accelerated both new and refinancing mortgage activity, placing added pressure on prudent liquidity management. More liquidity measurement tools have been developed for use on a consolidated basis. Internal policies have been updated to monitor the use of various core and noncore funding sources, and to balance ready access with risk and cost. Through various asset/liability management strategies, a balance is maintained among goals of liquidity, safety and earnings potential. Internal policies that are consistent with regulatory liquidity guidelines are monitored and enforced by the banks.

26

Part II (Continued)

Item 7 (Continued)

The investment portfolio provides a ready means to raise cash without loss if liquidity needs arise. As of December 31, 2001, SNB held $35.1 million in bonds (excluding FHLB stock), at amortized or accreted cost, in the Available for Sale portfolio. At December 31, 2000, the Available for Sale bond amounted to $46.8 million. Only marketable investment grade bonds are purchased. Although most of the Banks' bond portfolios are encumbered as pledges to secure various public funds deposits, repurchase agreements, and for other purposes, management can restructure and free up investment securities for a sale if required to meet liquidity needs.

Management continually monitors the relationship of loans to deposits as it relates to SNB's liquidity posture. SNB had ratios of loans and loans for sale to deposits of 111.8 percent as of December 31, 2001 and 102.2 percent at December 31, 2000. The purchase of the Fairfield mortgage company has increased management's emphasis on maintaining adequate resources for liquidity. Management employs alternative funding sources when deposit balances will not meet loan demands. The ratio of loans and loans for sale to all funding sources at December 31, 2001 and 2000 were 90.1 percent and 84.8 percent, respectively. Management continues to emphasize programs to generate local core deposits as the Company's primary funding source. The stability of the Banks' core deposit base is an important factor in the SNB's liquidity position. A heavy percentage of the deposit base is comprised of accounts of individuals and small businesses with comprehensive banking relationships and limited volatility.

At December 31, 2001 and 2000, the Banks had $85.5 million and $37.0 million in certificates of deposit of $100,000 or more. These larger deposits represented 22.8 percent and 11.9 percent of respective total deposits. Management seeks to monitor and control the use of these larger certificates, which tend to be more volatile in nature, to ensure an adequate supply of funds as needed. Relative interest costs to attract local core relationships are compared to market rates of interest on various external deposit sources to help minimize the Company's overall cost of funds.

To compensate for liquidity pressures not satisfied by current deposit balances, the Company and its subsidiaries have established multiple borrowing sources to augment their funds management. The parent company has an unsecured line of credit, and borrowing capacity also exists through the membership of the Banks in the Federal Home Loan Bank program. At December 31, 2001, the Company had a total of $15.6 million available on these lines above the currently outstanding borrowings. Additionally, the Banks have established borrowing lines for federal funds through correspondent banks, and have access to third party deposit brokers and national CD markets for deposit gathering if needed. Management believes that the various funding sources discussed above are adequate to meet the Company's liquidity needs in the future without any material adverse impact on operating results. Interest rates have stabilized at a low level after eleven consecutive prime rate cuts during 2001, from 9.50 percent at January 1, 2001 to 4.75 percent at December 31, 2001. Mortgage refinancing and other loan activity is expected to slow somewhat during 2002, which should lessen future liquidity needs.













27

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Item 7 (Continued)

Capital Resources and Dividends

SNB has always placed emphasis on maintaining an adequate capital base to support the Company's activities in a safe manner, and continues to exceed all minimum regulatory capital requirements as shown in Table 9 below. SNB's equity capital of $34.8 million at December 31, 2001 amounts to 6.9 percent of total assets, compared to 7.6 percent at December 31, 2000, and 9.7 percent at December 31, 1999. On average, the equity capital was 7.6 percent of assets during 2001, compared to 9.1 percent for 2000 and 10.5 percent for 1999. The downward trend in the capital ratios reflect the Company's strong balance sheet growth pattern, which has been most pronounced during the past two years.

During the years 2000 and 2001, SNB's parent holding company has incurred external debt at a correspondent bank to obtain capital infusions for the SB-Bibb Bank. A total of $6.0 million has been infused downward to the lead bank to help support exceptional growth trends caused by the Fairfield acquisition and favorable local economic conditions. Capital levels at the SB-Houston Bank have been self-supporting through earnings retention.

In July 2000, 32,345 new shares of SNB stock were issued in connection with the purchase acquisition of Fairfield Financial Services, Inc., producing $0.4 million in additional capital. In August 1998, 846,743 new shares of the Company's common stock were issued for the pooling of interests stock swap merger with Crossroads Bancshares, Inc. Additionally, 1998 marked the expiration of the outstanding stock warrants held by the Company's organizing directors and executive officers. During 1997 and 1998, the holders completed the exercise of 449,700 warrants, generating a total of $1.5 million in new capital. There are no remaining founders' warrants outstanding.

Capital levels in 1996 and 1997 reflect an influx of $5.4 million in proceeds from the issuance of new stock in two different events. In September 1996, SNB issued a stock offering for the sale of 340,700 new shares of the Company's common stock. The issue, which generated $3.6 million in new capital, was fully subscribed and successfully completed by February 1997. At the beginning of 1996, SNB issued an additional 203,500 shares of its common stock, primarily to newly elected directors and executive officers of the Company. This action produced $1.8 million in new capital.

Principal uses of the Company's capital base in recent years have been (a) sustaining the capital adequacy of the Banks as they continue to grow at a steady pace, (b) expanding the Company's presence in Macon and middle Georgia with more physical locations and improved delivery systems, (c) expanding into contiguous Houston County through the merger with SB-Houston and development of a mortgage loan division, (d) acquiring Fairfield to broaden the Company's mortgage services markets, and (e) enhancing corporate infrastructure support systems to manage SNB's multi-bank environment. Additional acquisitions may occur in the future.













28

Part II (Continued)

Item 7 (Continued)

Regulators use a risk-adjusted calculation to aid them in their determination of capital adequacy by weighting assets based on the degree of risk associated with on- and off-balance sheet assets. The majority of these risk-weighted assets for the Company are on-balance sheet assets in the form of loans. Small portions of risk-weighted assets are considered off-balance sheet assets comprised of letters of credit and loan commitments. Capital is categorized as either core (Tier 1) capital or supplementary (Tier 2) capital. Tier 1 capital consists primarily of stockholders' equity minus any intangible assets, while Tier 2 capital can consist of the reserve for loan losses up to certain limits, certain short term and other preferred stock and certain debt instruments.

Current regulatory standards require bank holding companies to maintain a minimum risk based capital ratio of qualifying total capital to risk weighted assets of 8.0 percent, with at least 4.0 percent of the capital consisting of Tier 1 capital, and a Tier 1 leverage ratio of at least 4.0 percent. Additionally, the regulatory agencies define a well-capitalized bank as one that has a Tier 1 leverage ratio of at least 5.0 percent, a Tier 1 capital ratio of at least 6.0 percent, and a total risk based capital ratio of at least 10 percent. As of December 31, 2001, SNB had a Tier 1 leverage ratio of 7.66 percent, a Tier 1 capital ratio of 8.02 percent, and a total risk based capital ratio of 9.00 percent. The Company's total risk based capital ratio has fallen below the 10.0 percent well-capitalized status at year-end 2001 (9.00 percent) and 2000 (9.75 percent). Due to continuing strong growth trends in the balance sheet, management is currently assessing strategies to produce more Tier 1 and/or Tier 2 capital in the near future to assure adequate capital going forward.

The following table demonstrates capital ratio calculations as of December 31, 2001 and 2000.

|TABLE 9                                     |                      |  |          |          |             | 
|------------------------------------------- | -------------------- |  | -------- | -------- | ----------- | 
|CAPITAL RATIOS                              |                      |  |          |          |            
|(In Thousands)                              |                      |  |          |          |            
|                                            |                      |  |          |          | December 31
|As of End of Period                         |                      |  |          | 2001     | 2000       
|Tier 1 Capital                              |                      |  |          |          |            
|Stockholders' Equity                        |                      |  |          | $ 34,172 | $ 30,875   
|Less Intangible Assets                      |                      |  |          | 848      | 947        
|                                            | Total Tier 1 Capital |  |          | 33,324   | 29,928     
|Tier 2 Capital                              |                      |  |          |          |            
|Eligible Portion of Reserve for Loan Losses |                      |  | 4,098    | 3,003   
|Subordinated and Other Qualifying Debt      |                      |  | 0        | 0       
|                                            | Total Tier 2 Capital |  |          | 4,098    | 3,003      
|                                            |                      |  |          |          |             | 
|Total Risk Based Capital                    |                      |  |          | $ 37,422 | $ 32,931   
|Total Net Risk Weighted Assets              |                      |  | $415,800 | $337,788













29

Part II (Continued)

Item 7 (Continued)

|TABLE 9 (Continued)
|-------------------
|CAPITAL RATIOS     
|(In Thousands)     



|                                 |      |       | Regulatory  |             |            
|-------------------------------- | ---- | ----- | ----------- | ----------- | -----------
|                                 |      |       | Requirement |             |            
|                                 |      |       |             | Well        | December 31
|                                 |      |       | Minimum     | Capitalized | 2001       
|Total Risk Based Capital Ratio   | 8.0% | 10.0% | 9.0%        | 9.7%       
|Tier 1 Capital Ratio             |      | 4.0%  | 6.0%        | 8.0%        | 8.9%       
|Tier 1 Capital to Average Assets | 4.0% | 5.0%  | 7.7%        | 9.4%       



Cash dividends of $1,045,620, or $.31 per weighted average common share, were declared and paid during 2001, up from $923,200, or $.28 per share during 2000, and $851,862, or $.26 per share in 1999. The ratios of cash dividends paid to net income for these years were 24.1 percent, 26.5 percent and 26.3 percent, respectively. Since the commencement of cash dividend payments in 1992, the Company's Board of Directors has consistently declared and paid dividends on a quarterly basis.

On June 1, 1996, a 100 percent stock split was issued and affected in the form of a dividend, and on September 25, 1997, a 25 percent stock split was issued and affected in the form of a dividend. Per share data for all periods presented have been retroactively restated to reflect the additional shares resulting from these stock splits.

Management is not aware of any trends, events, or uncertainties that will have, or that are reasonably likely to have a material impact on SNB's liquidity, capital resources, or operations. Further, management is aware of no current recommendations by regulatory authorities that, if they were to be implemented, would have such an effect.

Acquisitions

On July 31, 2000, SB-Bibb acquired Fairfield Financial Services, Inc. ("Fairfield"), a well-established mortgage loan company based in Macon, Georgia. The purchase transaction involved a combination of SNB stock and cash consideration. Fairfield has a number of production locations throughout Georgia and the Southeast, including offices in Macon, Columbus, Warner Robins, Richmond Hill, Stockbridge, Fayetteville and St. Simons Island. The company now functions as a subsidiary of SB-Bibb.

On January 29, 1998, SNB entered into an Agreement and Plan of Merger with Crossroads Bancshares, Inc. in Perry, Georgia, pursuant to which Crossroads would be merged with and become a wholly-owned subsidiary of SNB. On August 8, 1998, the merger was completed in a 100% stock pooling of interests transaction, and 846,743 shares of SNB common stock were issued to effect the merger. On June 3, 1999, the bank name was changed from Crossroads Bank to Security Bank of Houston County. SB-Houston operates four offices in Houston County - one in Perry, Georgia and three in Warner Robins,



30

Part II (Continued)

Item 7 (Continued)

Georgia. The merger allowed SNB to establish an immediate presence in its primary targeted market for expansion. Houston County is included in the same Macon-Warner Robins metropolitan statistical area as SNB's principal Bibb County market. The Warner Robins Air Force Base is the largest employer in the middle Georgia area and helps to make the two counties a common market.

The Company's overall growth during the past two years is largely attributed to (a) the success of these two acquisitions in developing synergies and market cohesiveness in middle Georgia, and (b) the community banking philosophies of the two subsidiary banks during a period of industry consolidation and merger shake-ups in the local markets.

Expanded Coverage of Market Area

Bibb County:

As the Company grows, it continues to add physical office locations and delivery channels to serve its existing middle Georgia market. Due to continuing growth trends, SB-Bibb has outgrown its current executive offices in Macon and expects to build and occupy a new corporate center and retail banking office on Forsyth Road in Macon by mid-2002. The Company moved its operational and in-house data processing functions to a larger leased facility during 2001, providing ample room for growth in its operational support functions. A major conversion to upgraded banking software will occur during the first half of 2002. During 2001, SB-Bibb opened a limited service office in the Carlyle Place senior community on Zebulon Road in Macon. The Company introduced an Internet banking product for its customers in 1999, and upgraded its Internet services in 2001. In 1998 the Hartley Bridge Road branch was constructed and opened in southwest Bibb County by the lead bank. This was SB-Bibb's sixth full service location in Macon. These and other additional fixed asset purchases were financed through the equity base and retained earnings of the Company with no external borrowing.

Houston County:

During the first quarter of 2000, SB-Houston's fourth full service office in Houston County was established on Houston Lake Road in Warner Robins. The mortgage division in Houston County was merged into the Fairfield administration in 2000 and relocated from leased space into the new branch office on Houston Lake Road. Management of SB-Houston is considering the addition of another full service branch in Houston County with an estimated opening date in 2003.

Mortgage Division:

The acquisition of Fairfield during 2000 brings a number of production locations to SB-Bibb. These offices, located in Macon, Columbus, Warner Robins, Richmond Hill, Stockbridge, Fayetteville, St. Simons Island, and other areas throughout the Southeast, are well established and provide various mortgage, construction and commercial lending services. SNB management may consider converting one or more of the Fairfield offices into full service banking offices in the future. Alternatively, management may consider additional expansion moves into the markets where Fairfield offices are now located.











31

Part II (Continued)

Item 7 (Continued)

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999

SNB's net income was $4,342,168, $3,479,247, and $3,245,174 for the years 2001, 2000, and 1999, respectively. Diluted earnings per share amounted to $1.29 in 2001, $1.03 in 2000, and $0.96 in 1999. The Company's return on average assets amounted to 1.00 percent for 2001, 1.09 percent for 2000, and 1.27 percent for 1999. The return on average equity was 13.05 percent, 12.01 percent, and 12.08 percent, respectively. During 2000, the Company incurred approximately $150,000 in merger costs on the Fairfield acquisition, and expensed an additional $350,000 to increase the loan loss reserve due to the Fairfield merger. Additional overhead costs have been incurred for the periods shown for the establishment of a more extensive branch network and increased technology costs associated with relocating a multi-bank data processing center.

Net Interest Income

Net interest income (the difference between the interest earned on assets and the interest paid on deposits and liabilities) is the principal source of earnings for the Company. SNB's average net interest rate margin, on a taxable equivalent basis, was 4.23 percent in 2001, 4.79 percent in 2000, and 5.21 percent in 1999. The trend of decline reflects the falling interest rate environment, competitive pricing for loans and deposits in SNB's local markets, and changes in the mix of the loan and deposit portfolios. Net interest income before tax equivalency adjustments in 2001 amounted to $17,022,234, up 22.2 percent from $13,928,611 in 2000. The 2000 net interest income was up 16.3 percent from $11,975,079 posted in 1999.

The following table presents interest income, adjusted to a tax equivalent basis, interest expense and the resulting average net interest rate margins for the past three years.

|TABLE 10                      |       |                         |                                    |         |     
|----------------------------- | ----- | ----------------------- | ---------------------------------- | ------- | ----
|NET INTEREST INCOME           |       |                         |                                    |        
|(In Thousands)                |       | Years Ended December 31
|                              |       |                         | 2001                               | 2000    | 1999
|Interest Income               |       | $33,609                 | $27,040                            | $20,403
|Taxable Equivalent Adjustment | 198   | 234                     | 199                               
|Interest Income (1)           |       | 33,807                  | 27,274                             | 20,601 
|Interest Expense              |       | 16,586                  | 13,111                             | 8,428  
|Net Interest Income (1)       |       | $17,221                 | $14,163                            | $12,174
|                              |       |                         |                                    |         |     
|                              |       |                         | Years Ended December 31           
|                              |       |                         | 2001                               | 2000    | 1999
|                              |       |                         | (As a % of Average Earning Assets)
|Interest Income (1)           |       | 8.30%                   | 9.22%                              | 8.82%  
|Interest Expense              |       | 4.07%                   | 4.43%                              | 3.61%  
|Net Interest Rate Margin (1)  | 4.23% | 4.79%                   | 5.21%                             









32

Part II (Continued)

Item 7 (Continued)



2001 Compared to 2000

Tax equivalent net interest income increased by $3,057,000 from 2000 to 2001, spurred mainly by strong growth trends in the loan portfolio. The average net interest margin declined by 56 basis points, from 4.79 percent in 2000 to 4.23 percent in 2001. The prime loan rate posted an unprecedented 475 basis point drop in eleven decreases over the course of 2001, from 9.50 percent at the beginning of the year to 4.75 percent by year-end. Average yields on SNB's loan portfolio declined by a more modest 118 basis points, from 9.75 percent in 2000 to 8.57 percent in 2001. However, average loan balances for 2001 increased by $113.3 million, or 46.0 percent over 2000. The primary growth came in real estate construction loans, commercial loans, and balances in mortgage loans held for sale. The acquisition of the Fairfield mortgage subsidiary in July 2000 added a strong lending team in production offices in lucrative loan markets throughout the state of Georgia. Lending activity at the two subsidiary banks continued to be strong as well. A favorable declining interest rate environment encouraged new construction projects and heavy volumes of refinancing activity to further enhance production in 2001. These trends have started to slow in pace as interest rates appear to be approaching their lows for the current cycle. Mortgage lending is very cyclical in nature and reliant on mortgage interest rates. If rates start to rise in 2002, management anticipates some curtailment of the rate of loan growth in 2002. Yields on the investment portfolio decreased 28 basis points from 6.66 percent to 6.38 percent, and the average balances invested in bonds remained relatively flat from 2000 to 2001, increasing only $1.1 million, or 2.7 percent. The overall yield on earning assets on a tax equivalent basis for 2001 was 8.30 percent, a decrease of 92 basis points from 9.22 percent in 2000.

On the liability funding side of the balance sheet, the overall cost of interest-bearing funds averaged 4.84 percent in 2001, down 52 basis points from 5.36 percent in 2000. Deposits continue to be our primary funding source. Average interest rates on all interest-bearing deposits for 2001 were 4.93 percent, a 25 basis point drop from 5.18 percent for 2000. Deposit balances increased on average by $78.1 million, or 30.4 percent from 2000 to 2001. A portion of this increase came from noncore brokered certificates of deposit of $100,000 or more, but local core deposit growth was strong as well. A faltering stock market, combined with terrorist attacks in September 2001, encouraged many consumer and business depositors to seek the safety of the banking system. Balances continued to grow in spite of the declining rate environment.

Reliance on alternate noncore funding sources became more prevalent in 2001 as management sought ways to meet liquidity demands for lending activities. Average balances in various borrowed funds rose from $33.4 million in 2000 to $63.8 million in 2001. Rates on external borrowings became more attractive, averaging 4.43 percent in 2001 versus 6.48 percent in 2000. The funding mix in 2000 averaged 88.5 percent from deposits and 11.5 percent from borrowed money. This mix changed in 2001 to be 84.0 percent from deposits and 16.0 percent from external borrowings.













33

Part II (Continued)

Item 7 (Continued)

2000 Compared to 1999

Tax equivalent net interest income increased by $1,989,000 from 1999 to 2000. This increase in absolute dollars of margin in 2000 was driven by strong balance sheet growth. The average margin yield declined by 42 basis points, from 5.21 percent in 1999 to 4.79 percent in 2000. Over the course of 2000, the prime lending rate increased by 100 basis points, from 8.50 percent to 9.50 percent by year-end. Management was able to improve loan yields by 38 basis points in spite of intense local competition on loan pricing. Yields on the investment portfolio were also improved by 30 basis points through repricing and purchases at current market rates. However, the margin was negatively impacted by an increase in the overall cost of funds of 84 basis points for the year. Management resorted to higher balances in more costly borrowed funds to support strong loan growth, and deposits repriced rapidly at higher market rates during the year.

Balances in average interest-earning assets rose by 26.8 percent in 2000 over 1999. Growth in higher yielding loan balances accounted for most of the increase. Average loan balances increased 28.6 percent and represented 77.1 percent of the average balance sheet in 2000, up from 75.1 percent of the average balance sheet in 1999. Investment securities, on the other hand, declined from 14.7 percent to 13.3 percent of the average balance sheet. The overall yield on average interest-earning assets, on a taxable equivalent basis, increased by 40 basis points from 8.82 percent in 1999 to 9.22 percent in 2000.

At the same time, the overall average cost of interest-bearing liabilities has increased by 84 basis points, from 4.52 percent in 1999 to 5.36 percent in 2000. Most deposit rates increased in 2000 over 1999, due to increases in general market rates and strong competition for deposits. Average deposit balances also grew, increasing 18.8 percent in 2000 over 1999. This growth is attributed to aggressive marketing in a period of flux for area super regional competition, growing consumer business due to the convenience of a larger branch network, increases in business deposit relationships from larger commercial credit lines, and Fairfield cross-selling synergies. With the increased liquidity needs brought on by strong loan demand and the increased mortgage activity, average balances from other borrowing sources increased by $8.7 million in 1999 to $33.4 million in 2000. Rates paid on these borrowings increased as well, from 4.77 percent in 1999 to 6.48 percent in 2000.































34



Part II

Item 7 (Continued)



The table on this and the following page summarizes average balance sheets, interest and yield information on a taxable equivalent basis for the years ended December 31, 2001, 2000, and 1999.

|TABLE 11                                    |                              |          |                              |  |                              |          |        |   |          |          |        | 
|------------------------------------------- | ---------------------------- | -------- | ---------------------------- |  | ---------------------------- | -------- | ------ | - | -------- | -------- | ------ | 
|AVERAGE BALANCE SHEETS, INTEREST AND YIELDS |                              |          |                              |  |                              |          |        |   |          |         
|(Tax equivalent basis, in thousands)        |                              |          |                              |  |                              |          |        |   |          |          |        | 
|                                            |                              |          |                              |  |                              |          |        |   |          |          |        | 
|                                            | Year Ended December 31, 2001 |          | Year Ended December 31, 2000 |  | Year Ended December 31, 1999 |         
|                                            | Average                      |          | Yield/                       |  | Average                      |          | Yield/ |   | Average  |          | Yield/ | 
|                                            | Balance                      | Interest | Rate                         |  | Balance                      | Interest | Rate   |   | Balance  | Interest | Rate   | 
|ASSETS:                                     |                              |          |                              |  |                              |          |        |   |          |          |        | 
|Loans, Net of Unearned Income (a) (b)       |                              |          |                              |  |                              |          |        |   |          |          |        | 
|Taxable                                     | $341,995                     | $29,721  | 8.69%                        |  | $244,177                     | $23,871  | 9.78%  |   | $189,306 | $17,826  | 9.42%  | 
|Tax Exempt (c)                              | 0                            | 0        | 0.00                         |  | 0                            | 0        | 0.00   |   | 0        | 0        | 0.00   | 
|Loans Held for Sale                         | 17,878                       | 1,134    | 6.34                         |  | 2,365                        | 177      | 7.47   |   | 2,462    | 168      | 6.83   | 
|Net Loans                                   | 359,873                      | 30,855   | 8.57                         |  | 246,542                      | 24,048   | 9.75   |   | 191,768  | 17,994   | 9.38   | 
|Investment Securities (d)                   |                              |          |                              |  |                              |          |        |   |          |          |        | 
|Taxable                                     | 35,708                       | 2,196    | 6.15                         |  | 33,312                       | 2,138    | 6.42   |   | 29,867   | 1,799    | 6.02   | 
|Tax Exempt (c)                              | 7,846                        | 582      | 7.41                         |  | 9,116                        | 689      | 7.55   |   | 7,640    | 586      | 7.67   | 
|Total Investment Securities                 | 43,554                       | 2,778    | 6.38                         |  | 42,428                       | 2,827    | 6.66   |   | 37,507   | 2,385    | 6.36   | 
|Interest Earning Deposits                   | 972                          | 30       | 3.10                         |  | 967                          | 28       | 2.91   |   | 20       | 5        | 23.67  | 
|Federal Funds Sold                          | 2,845                        | 144      | 5.05                         |  | 6,031                        | 371      | 6.15   |   | 4,204    | 218      | 5.19   | 
|                                            |                              |          |                              |  |                              |          |        |   |          |          |        | 
|Total Interest Earning Assets               | 407,244                      | $33,807  | 8.30%                        |  | 295,968                      | $27,274  | 9.22%  | % | 233,499  | $20,602  | 8.82%  | 
|Nonearning Assets                           | 28,670                       |          |                              |  | 23,824                       |          |        |   | 21,912   |          |        | 
|                                            |                              |          |                              |  |                              |          |        |   |          |          |        | 
|Total Assets                                | $435,914                     |          |                              |  | $319,792                     |          |        |   | $255,411 |          |        | 





35

Part II (Continued)

Item 7 (Continued)

|TABLE 11 - Continued                                                                                                                                                                                                                                                                                  | Year Ended December 31, 2001 |          | Year Ended December 31, 2000 |  | Year Ended December 31, 1999
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------- | -------- | ---------------------------- |  | ----------------------------
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                                                                                                                                                                                  |                              |          |                              |  |                             
|                                                                                                                                                                                                                                                                                                      |                              |          |                              |  |                             
|                                                                                                                                                                                                                                                                                                      | Average                      |          | Yield/                       |  | Average                     
|                                                                                                                                                                                                                                                                                                      | Balance                      | Interest | Rate                         |  | Balance                     
|Interest Bearing Demand Deposits                                                                                                                                                                                                                                                                      | $ 30,338                     | $ 383    | 1.26%                        |  | $ 21,148                    
|Money Market Accounts                                                                                                                                                                                                                                                                                 | 35,167                       | 1,085    | 3.09                         |  | 33,332                      
|Savings Deposits                                                                                                                                                                                                                                                                                      | 7,207                        | 87       | 1.21                         |  | 6,444                       
|Time Deposits of $100,000 or More                                                                                                                                                                                                                                                                     | 66,384                       | 4,173    | 6.29                         |  | 32,177                      
|Other Time Deposits                                                                                                                                                                                                                                                                                   | 139,805                      | 8,031    | 5.74                         |  | 118,115                     
|Total Interest Bearing Deposits                                                                                                                                                                                                                                                                       | 278,901                      | 13,759   | 4.93                         |  | 211,216                     
|Federal Funds Purchased and                                                                                                                                                                                                                                                                           |                              |          |                              |  |                             
|Repurchase Agreements Sold                                                                                                                                                                                                                                                                            | 10,498                       | 381      | 3.63                         |  | 7,278                       
|Demand Note U.S. Treasury                                                                                                                                                                                                                                                                             | 972                          | 28       | 2.83                         |  | 849                         
|Other Borrowed Money and FHLB                                                                                                                                                                                                                                                                         | 52,270                       | 2,407    | 4.61                         |  | 25,158                      
|Capital Leases and Mortgage Debt                                                                                                                                                                                                                                                                      | 50                           | 11       | 22.28                        |  | 105                         
|Total Interest Bearing Liabilities                                                                                                                                                                                                                                                                    | 342,691                      | 16,586   | 4.84                         |  | 244,606                     
|                                                                                                                                                                                                                                                                                                      |                              |          |                              |  |                             
|Noninterest Bearing Demand Deposits                                                                                                                                                                                                                                                                   | 55,960                       |          |                              |  | 45,518                      
|Other Liabilities                                                                                                                                                                                                                                                                                     | 3,982                        |          |                              |  | 698                         
|Stockholders' Equity                                                                                                                                                                                                                                                                                  | 33,281                       |          |                              |  | 28,969                      
|Total Liabilities and Stockholders' Equity                                                                                                                                                                                                                                                            | $435,914                     |          |                              |  | $319,791                    
|Interest Rate Spread                                                                                                                                                                                                                                                                                  |                              |          | 3.46%                        |  |                             
|Net Interest Income                                                                                                                                                                                                                                                                                   |                              | $17,221  |                              |  | $14,163                     
|Net Interest Margin                                                                                                                                                                                                                                                                                   |                              |          | 4.23%                        |  |                             
|Notes to Table of Average Balance Sheets, Interest and Yields                                                                                                                                                                                                                                         |                              |          |                              |  |                             
|(a) Interest income includes loan fees as follows (in thousands): 2001-$1,307; 2000-$1,045; 1999-$908.                                                                                                                                                                                               
|(b) Average loans are shown net of unearned income. Nonaccrual loans are included.                                                                                                                                                                                                                    |                              |          |                              | 
|(c) Reflects taxable equivalent adjustments using the statutory income tax rate of 34% in adjusting interest on tax-exempt investment securities to a fully taxable basis. The taxable equivalent adjustment included above amounts to $198 for 2001, $234 for 2000, and $199 for 1999 (in thousands)
|(d) Investment securities are stated at amortized or accreted cost.                                                                                                                                                                                                                                   |                              |          |                              |  |                             

36

Part II (Continued)

Item 7 (Continued)

The following tables provide a detailed analysis of the changes in interest income and interest expense due to changes in rate and volume for the year 2001 compared to the year 2000 and for the year 2000 compared to the year 1999.

|TABLE 12                                                                                                                |                                 |          |                       |  |        |        |       
|----------------------------------------------------------------------------------------------------------------------- | ------------------------------- | -------- | --------------------- |  | ------ | ------ | ------
|RATE / VOLUME ANALYSIS                                                                                                  |                                 |          |                       |  |        |        |       
|(In thousands)                                                                                                          | For the Years Ended December 31
|                                                                                                                        | 2001 Compared to 2000           |          | 2000 Compared to 1999
|                                                                                                                        | Change Due To (a)               |          | Change Due To (a)    
|                                                                                                                        |                                 |          | Net                   |  |        |        | Net   
|                                                                                                                        | Volume                          | Rate     | Change                |  | Volume | Rate   | Change
|INTEREST EARNED ON                                                                                                      |                                 |          |                       |  |        |        |       
|Taxable Loans, Net                                                                                                      | $9,563                          | $(3,714) | $5,849                |  | $5,167 | $ 879  | $6,046
|Tax-Exempt Loans (b)                                                                                                    | 0                               | 0        | 0                     |  | 0      | 0      | 0     
|Loans Held for Sale                                                                                                     | 1,158                           | (201)    | 957                   |  | (7)    | 15     | 8     
|Taxable Investment Securities                                                                                           | 154                             | (96)     | 58                    |  | 207    | 132    | 339   
|Tax-Exempt Investment Securities (b)                                                                                    | (96)                            | (11)     | (107)                 |  | 113    | (10)   | 103   
|Interest-Earning Deposits                                                                                               | 0                               | 2        | 2                     |  | 224    | (201)  | 23    
|Federal-Funds Sold                                                                                                      | (196)                           | (31)     | (227)                 |  | 95     | 58     | 153   
|                                                                                                                        |                                 |          |                       |  |        |        |       
|Total Interest Income                                                                                                   | 10,583                          | (4,051)  | 6,532                 |  | 5,799  | 873    | 6,672 
|                                                                                                                        |                                 |          |                       |  |        |        |       
|INTEREST PAID ON                                                                                                        |                                 |          |                       |  |        |        |       
|Interest-Bearing Demand Deposits                                                                                        | 114                             | 7        | 121                   |  | 18     | 43     | 61    
|Money Market Accounts                                                                                                   | 77                              | (394)    | (317)                 |  | 43     | 184    | 227   
|Savings Deposits                                                                                                        | 13                              | (38)     | (25)                  |  | 0      | (11)   | (11)  
|Time Deposits of $100,000 or More                                                                                       | 2,120                           | 59       | 2,179                 |  | 318    | 186    | 504   
|Other Time Deposits                                                                                                     | 1,318                           | (465)    | 853                   |  | 1,344  | 812    | 2,156 
|Federal Funds Purchased                                                                                                 |                                 |          |                       |  |        |        |       
|and Repurchase Agreements Sold                                                                                          | 196                             | (258)    | (62)                  |  | 130    | 100    | 230   
|Demand Note U.S. Treasury                                                                                               | 6                               | (19)     | (13)                  |  | 5      | 15     | 20    
|Other Borrowed Money-FHLB                                                                                               | 1,789                           | (1,042)  | 747                   |  | 1,091  | 402    | 1,493 
|Capital Leases and Mortgage Debt                                                                                        | (10)                            | 2        | (8)                   |  | (5)    | 10     | 5     
|                                                                                                                        |                                 |          |                       |  |        |        |       
|Total Interest Expense                                                                                                  | 5,623                           | (2,148)  | 3,475                 |  | 2,944  | 1,741  | 4,685 
|                                                                                                                        |                                 |          |                       |  |        |        |       
|Net Interest Income                                                                                                     | $4,960                          | ($1,903) | $3,057                |  | $2,855 | ($868) | $1,987
|                                                                                                                        |                                 |          |                       |  |        |        |       
|(a) The change in interest due to both rate and volume has been allocated to the rate component.                        |                                
|(b) Reflects taxable equivalent adjustments using the statutory federal income tax rate of 34% in adjusting interest on
|tax-exempt investment securities to a fully taxable basis.                                                              |                                 |          |                       |  |       





37

Part II (Continued)

Item 7 (Continued)



Interest Rate Risk Management

The management of interest rate risk is the primary goal of SNB's asset/liability management function. SNB attempts to achieve consistent growth in net interest income while limiting volatility from changes in interest rates. Management seeks to accomplish this goal by balancing the maturity and repricing characteristics of various assets and liabilities. SNB's asset/ liability mix is sufficiently balanced so that the effect on net interest income of interest rate moves in either direction is not expected to be significant over time.

The year 2001 saw one of the most unique interest rate environments in history. During this period of recessionary pressures and rapidly falling interest rates, management had to adapt its strategies for growth, pricing and funding to minimize the negative impact on the net interest margin. As loan balances repriced to the new rates, funding sources (deposits and borrowings) had to be structured to reprice in like fashion. Core deposit balances had to be supplemented with other noncore borrowing sources. The Company experienced net interest margin compression, as did many community-banking companies across the nation.

One tool used by SNB to measure its interest rate sensitivity is a cumulative gap analysis model that seeks to measure the repricing differentials, or gap, between rate sensitive assets and liabilities over various time horizons. Additionally, simulation modeling is used to estimate the impact on net interest income of overall repricing at various levels of increase or decrease in current market interest rates over a range of plus or minus 300 basis points over a 12-month shift horizon. At December 31, 2001, the Company estimates through simulation modeling that net interest income would increase by $2,682,928 if interest rates increased by 300 basis points. This improvement would have amounted to 15.8 percent of the Company's net interest income in 2001. In the case of a 300 basis point decline in interest rates, net interest income would increase by $1,637,506, which would have produced a 9.6 percent improvement in 2001 net interest income.

The following table reflects the gap positions of SNB's consolidated balance sheet as of December 31, 2001 and 2000 at various repricing intervals. This gap analysis indicates that SNB's repricing abilities showed liability sensitivity over a one-year time horizon at December 31, 2001 and December 31, 2000, with negative cumulative one-year gaps of (10.2 percent) at 2001 year-end and (23.0 percent) at 2000 year-end. The Company's cumulative rate sensitive assets as a percentage of cumulative rate sensitive liabilities over a one-year time horizon were 82.7 percent at December 31, 2001, and 66.4 percent at December 31, 2000. The projected deposit repricing volumes reflect adjustments based on management's assumptions of the expected rate sensitivity to current market rates for core deposits without contractual maturity (i.e., interest bearing checking, savings and money market accounts). Adjustments are also made for callable investment securities in the bond portfolio to place these bonds in call date categories. Management believes that these adjustments allow for a more accurate profile of SNB's interest rate risk position. Management is of the opinion that the current degree of interest rate risk is acceptable in the current interest rate environment.









38

Part II (Continued)

Item 7 (Continued)

|TABLE 13                                                                                                             |  |           |                   |                   |          |             |       
|-------------------------------------------------------------------------------------------------------------------- |  | --------- | ----------------- | ----------------- | -------- | ----------- | ------
|INTEREST RATE SENSITIVITY                                                                                            |  |           |                   |                   |         
|(In Thousands)                                                                                                       |  |           | December 31, 2001
|                                                                                                                     |  |           |                   |                   | Over 3   | Over 1 year |       
|                                                                                                                     |  |           |                   | 0 up to 3         | up to 12 | up to       | Over 5
|Amounts Maturing or Repricing                                                                                        |  | months    | months            | 5 years           | years   
|Investment Securities (a)                                                                                            |  |           | $ 10,087          | $ 2,974           | $ 17,146 | $19,917    
|Loans, Net of Unearned Income (b)                                                                                    |  | 81,637    | 133,706           | 171,358           | 29,672  
|Other Earning Assets                                                                                                 |  |           | 1                 | 0                 | 0        | 0          
|Interest-Sensitive Assets                                                                                            |  |           | 91,725            | 136,680           | 188,504  | 49,589     
|Deposits                                                                                                             |  |           |                   | 134,829           | 87,789   | 81,239      | 0     
|Other Borrowings                                                                                                     |  |           | 12,562            | 40,856            | 27,000   | 10,000     
|Interest-Sensitive Liabilities                                                                                       |  | 147,391   | 128,645           | 108,239           | 10,000  
|                                                                                                                     |  |           |                   |                   |          |             |       
|Interest-Sensitivity Gap                                                                                             |  |           | $(55,666)         | $8,035            | $80,265  | $39,589    
|Cumulative Interest-Sensitivity Gap                                                                                  |  | $(55,666) | $ (47,631)        | $32,634           | $72,223 
|Cumulative Interest Sensitivity Gap as a Percentage                                                                  |  |           |                   |                   |         
|of Total Interest-Sensitive Assets                                                                                   |  | (11.9%)   | (10.2%)           | 7.0%              | 15.5%   
|Cumulative Interest-Sensitive Assets as a Percentage                                                                 |  |           |                   |                  
|of Cumulative Interest-Sensitive Liabilities                                                                         |  | 62.2%     | 82.7%             | 108.5%            | 118.3%  
|                                                                                                                     |  |           |                   |                   |          |             |       
|                                                                                                                     |  |           |                   | December 31, 2000
|Amounts Maturing or Repricing                                                                                        |  |           |                   |                   |         
|Investment Securities (a)                                                                                            |  |           | $ 7,886           | $ 2,415           | $ 18,027 | $ 22,874   
|Loans, Net of Unearned Income (b)                                                                                    |  | 57,304    | 97,491            | 131,519           | 30,767  
|Other Earning Assets                                                                                                 |  |           | 4,431             | 0                 | 0        | 0          
|Interest-Sensitive Assets                                                                                            |  |           | 69,621            | 99,906            | 149,546  | 53,641     
|Deposits                                                                                                             |  |           |                   | 77,147            | 127,562  | 41,387      | 0     
|Other Borrowings                                                                                                     |  |           | 32,679            | 18,000            | 5,000    | 8,378      
|Interest-Sensitive Liabilities                                                                                       |  | 109,826   | 145,562           | 46,387            | 8,378   
|                                                                                                                     |  |           |                   |                   |          |             |       
|Interest-Sensitivity Gap                                                                                             |  |           | ($40,205)         | ($45,656)         | $103,159 | $45,263    
|Cumulative Interest-Sensitivity Gap                                                                                  |  | ($40,205) | ($85,861)         | $ 17,298          | $62,561 
|Cumulative Interest-Sensitivity Gap as a Percentage                                                                  |  |           |                   |                   |         
|of Total Interest-Sensitive Assets                                                                                   |  | (10.8%)   | (23.0%)           | 4.6%              | 16.8%   
|Cumulative Interest-Sensitive Assets as a Percentage                                                                 |  |           |                   |                  
|of Cumulative Interest-Sensitive Liabilities                                                                         |  | 63.4%     | 66.4%             | 105.7%            | 120.2%  
|                                                                                                                     |  |           |                   |                   |          |             |       
|(a) Excludes the effect of SFAS No. 115 Accounting for Certain Investments in Debt and Equity Securities, consisting
|of a net unrealized gain of $1,015 in 2001 and a net unrealized loss of $27 in 2001.                                 |  |           |                  
|(b) Includes loans held for sale. Nonaccrual loans are excluded.                                                     |  |           |                   |                  

39

Part II (Continued)

Item 7 (Continued)

Provision for Loan Losses

The general nature of lending results in periodic charge offs, in spite of SNB's continuous loan review process, credit standards, and internal controls. During 2001, The Company also factored in assessments of the economic downturn's effect on the cash flow of some of its borrowers. Amounts of net loans charged off during 2001 and 2000, although higher than the Company's recent history, are reasonable by industry standards. SNB incurred net charge offs of $815,725 during 2001, compared to $616,650 during 2000 and $479,198 in 1999. SNB expensed $1,911,929 in 2001, $1,292,006 in 2000, and $736,125 in 1999 for loan loss provisions. The reserve for loan losses on December 31, 2001 stood at 0.98% of outstanding net loans and loans held for sale, compared to 0.94% and 1.12% at December 31, 2000 and 1999.

The provision for loan losses represents management's determination of the amount necessary to be transferred to the reserve for loan losses to maintain a level that it considers adequate in relation to the risk of future losses inherent in the loan portfolio. It is the policy of SNB's subsidiary banks to provide for exposure to losses principally through an ongoing loan review process. This review process is undertaken to ascertain any probable losses that must be charged off and to assess the risk characteristics of individually significant loans and of the portfolio in the aggregate. This review takes into consideration the judgments of the responsible lending officers and the Loan Committees of the Banks' Boards of Directors, and also those of the regulatory agencies that review the loans as part of their regular examination process. During routine examinations of Banks, the primary banking regulators may, from time to time, require additions to Banks' provisions for loan losses and reserves for loan losses if the regulators' credit evaluations differ from those of management.

In addition to ongoing internal loan reviews and risk assessment, management uses other factors to judge the adequacy of the reserve including current economic conditions, loan loss experience, regulatory guidelines and current levels of nonperforming loans. Management believes that the $4,098,740 balance in the reserve for loan losses at December 31, 2001, and the $3,002,536 balance in the reserve for loan losses at December 31, 2000 were adequate to absorb known risks in the loan portfolio at those dates. No assurance can be given, however, that adverse economic conditions or other circumstances will not result in increased losses in the Company's loan portfolio.

In accordance with SFAS No. 114, Accounting by Creditors for Impairment of a Loan, management, considering current information and events regarding the borrowers' ability to repay their obligations, considers a loan to be impaired when the ultimate collectibility of all amounts due, according to the contractual terms of the loan agreement, is in doubt. When a loan becomes impaired, management calculates the impairment based on the present value of expected future cash flows discounted at the loan's effective interest rate. If the loan is collateral dependent, the fair value of the collateral is used to measure the amount of impairment. The amount of impairment and any subsequent changes are recorded, through a charge to earnings, as an adjustment to the reserve for loan losses. When management considers a loan, or a portion thereof, as uncollectible, it is charged against the reserve for loan losses.

The following tables summarize loans charged off, recoveries of loans previously charged off and additions to the reserve that have been charged to operating expense for the periods indicated. The Company has no lease financing or foreign loans.



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Part II (Continued)

Item 7 (Continued)



|TABLE 14                                            |        |                         |        |        |        |        | 
|--------------------------------------------------- | ------ | ----------------------- | ------ | ------ | ------ | ------ | 
|RESERVE FOR LOAN LOSSES                             |        | Years Ended December 31 |       
|(In Thousands)                                      |        | 2001                    | 2000   | 1999   | 1998   | 1997  
|                                                    |        |                         |        |        |        |        | 
|Reserve for Loan Losses at                          |        |                         |        |        |        |       
|Beginning of Period                                 |        | $3,003                  | $2,327 | $2,070 | $1,861 | $1,759
|Loans Charged Off During the Period                 |        |                         |        |        |       
|Commercial, Financial and Agricultural              | 299    | 109                     | 131    | 35     | 295   
|Real Estate-Construction                            |        | 0                       | 0      | 0      | 58     | 0     
|Real Estate-Mortgage                                |        | 119                     | 0      | 25     | 200    | 150   
|Loans to Individuals                                |        | 457                     | 576    | 431    | 204    | 243   
|Total Loans Charged Off                             |        | 875                     | 685    | 587    | 497    | 688   
|                                                    |        |                         |        |        |        |        | 
|Recoveries During the Period of Loans               |        |                         |        |        |       
|Previously Charged Off                              |        |                         |        |        |        |       
|Commercial, Financial and Agricultural              | 13     | 2                       | 49     | 36     | 205   
|Real Estate-Construction                            |        | 0                       | 0      | 0      | 0      | 0     
|Real Estate-Mortgage                                |        | 0                       | 0      | 5      | 3      | 9     
|Loans to Individuals                                |        | 46                      | 67     | 54     | 31     | 71    
|Total Loans Recovered                               |        | 59                      | 69     | 108    | 70     | 285   
|Net Loans Charged Off During the Period             | 816    | 616                     | 479    | 427    | 403   
|                                                    |        |                         |        |        |        |        | 
|Additions to Reserve-Provision Expense              | 1,912  | 1,292                   | 736    | 636    | 505   
|                                                    |        |                         |        |        |        |        | 
|Reserve for Loan Losses at End of Period            | $4,099 | $3,003                  | $2,327 | $2,070 | $1,861
|                                                    |        |                         |        |        |        |        | 
|Reserve for Loan Losses to Period End Net Loans     | 0.98%  | 0.94%                   | 1.12%  | 1.16%  | 1.28% 
|                                                    |        |                         |        |        |        |        | 
|Ratio of Net Loans Charged Off During the Period to |        |                         |        |        |       
|Average Net Loans Outstanding During the Period     | 0.23%  | 0.25%                   | 0.25%  | 0.27%  | 0.30% 

An allocation of the reserve for loan losses has been made according to the respective amounts deemed necessary to provide for the possibility of incurred losses within the various loan categories. The allocation is based primarily on previous charge-off experience adjusted for risk characteristic changes among each category. Additional reserve amounts are allocated by evaluating the loss potential of individual loans that management has considered impaired. The reserve for loan loss allocation is based on subjective judgment and estimates, and therefore is not necessarily indicative of the specific amounts or loan categories in which charge-offs may ultimately occur. The following table shows a five-year comparison of the allocation of the reserve for loan losses.





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Part II (Continued)

Item 7 (Continued)

|TABLE 15                                                                                |         |      |         |      |             |      |         |      |         |     
|--------------------------------------------------------------------------------------- | ------- | ---- | ------- | ---- | ----------- | ---- | ------- | ---- | ------- | ----
|ALLOCATION OF RESERVE FOR LOAN LOSSES                                                   |         |      |         |      |             |      |        
|(In Thousands)                                                                          |         |      |         |      |             |      |         |      |         |     
|                                                                                        |         |      |         |      | December 31 |      |         |     
|                                                                                        | 2001    | 2000 | 1999    | 1998 | 1997       
|Balance at End of Period                                                                | Reserve | % *  | Reserve | % *  | Reserve     | % *  | Reserve | % *  | Reserve | % * 
|Applicable To                                                                           |         |      |         |      |             |      |         |      |         |     
|Commercial, Financial                                                                   |         |      |         |      |             |      |         |      |         |     
|and Agricultural                                                                        | $ 689   | 11%  | $ 495   | 14%  | $ 332       | 21%  | $ 279   | 21%  | $ 265   | 24% 
|Real Estate-Construction                                                                | 623     | 32%  | 315     | 20%  | 157         | 8%   | 124     | 10%  | 98      | 5%  
|Real Estate-Mortgage                                                                    | 1,312   | 52%  | 901     | 59%  | 733         | 63%  | 776     | 59%  | 726     | 61% 
|Loans to Individuals                                                                    | 656     | 5%   | 541     | 7%   | 524         | 8%   | 373     | 10%  | 307     | 10% 
|Unallocated                                                                             | 820     | -    | 751     | -    | 581         | -    | 518     | -    | 465     | -   
|Total Reserve for Loan Losses                                                           | $4,099  | 100% | $3,003  | 100% | $2,327      | 100% | $2,070  | 100% | $1,861  | 100%
|                                                                                        |         |      |         |      |             |      |         |      |         |     
|* Loan balance in each category expressed as a percentage of total end of period loans. |         |      |        

Asset Quality

Nonperforming assets consist of nonaccrual loans, loans restructured due to debtors' financial difficulties, loans past due 90 days or more as to interest or principal and still accruing, and real estate acquired through foreclosure and repossession. Nonaccrual loans are those loans on which recognition of interest income has been discontinued. Restructured loans generally allow for an extension of the original repayment period or a reduction or deferral of interest or principal because of deterioration in the financial position of the borrower. Loans, whether secured or unsecured, are generally placed on nonaccrual status when principal and/or interest is 90 days or more past due, or sooner if it is known or expected that the collection of all principal and/or interest is unlikely. Any loan past due 90 days or more, if not classified as nonaccrual based on a determination of collectibility, is classified as a past due loan. Other real estate is initially recorded at the lower of cost or estimated market value at the date of acquisition. A provision for estimated losses is recorded when a subsequent decline in value occurs.

Nonperforming assets at December 31, 2001 amounted to $5,933,000, or 1.2 percent of total assets. This compares to $2,202,000 in nonperforming assets at December 31, 2000, which represented 0.54 percent of total assets. Nonperforming assets at December 31, 1999 were $1,431,000, or 0.50 percent of total assets.

















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