EXHIBIT 13

<PAGE>


                                                 QUITMAN BANCORP, INC.

                                                 ANNUAL REPORT
                                                 For the Year Ended
                                                 September 30, 1999




<PAGE>





                              QUITMAN BANCORP, INC.
                                  ANNUAL REPORT



                                TABLE OF CONTENTS



Letter to Stockholders.......................................................1


Company Information..........................................................2


Common Stock Information.....................................................3


Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................................4


Independent Auditors' Report................................................14


Consolidated Financial Statements...........................................15


Notes to Consolidated Financial Statements..................................20


Office Locations and Other Corporate Information............................43


<PAGE>






December 10, 1999

Dear Fellow Stockholders:

This is the second annual  stockholders'  report for Quitman Bancorp,  Inc., the
holding  company  for Quitman  Federal  Savings  Bank.  The bank  completed  its
conversion  from a  federally  chartered  mutual  savings  bank  to a  federally
chartered  stock  savings  bank in April 1998.  The  conversion  generated  $6.2
million  of new  capital,  although  the  bank's  current  financial  safety and
soundness is the result of many years of conservative management. Our successful
management of capital remains a key challenge.

As we wrote  last year,  we  believe  the  company  is well  positioned  to meet
tomorrow's  challenges  and demands as a  community  savings  bank,  and we look
forward to the future with enthusiasm and optimism. Here are some of the reasons
why.

We operate  from our new office that  opened in April  1999.  This new office is
substantially larger than our old office and allows us to focus on our customers
instead of trying to find space for our  employees to work.  Through  time,  our
goal is to more than  offset  the  dramatically  increased  expenses  of our new
office  with  additional  income.  We  correctly  presumed  that  we  would  not
accomplish this goal before the end of our fiscal year. However, we exceeded our
projections  for the fiscal  year.  We are  pleased to report  that this year we
earned more than last year in both the aggregate and on a per share basis.

We still have a loyal  customer  base,  a dedicated  board of  directors  and an
excellent  staff who  recognize  the  importance  of  quality  service.  We will
continue to focus on what we do best. These have been the key ingredients to our
profitability  and growth for more than 60 years and will  continue to shape our
future.

The market for  savings  bank  stocks has not  significantly  improved  from the
decline that occurred in 1998. This market has definitely  affected the price of
your company stock. While we, as fellow stockholders,  can't control the market,
we can  continue to run the bank and trust that our stock price will  eventually
increase because of the actions we are taking now.  However,  we are not sitting
still.  During the fiscal year we  repurchased  common  stock at a total cost of
$1.4 million. We hope that the future proves this to be an investment from which
we all benefit.

Your board of directors and management are committed to protecting and enhancing
the value of your  investment  in the company.  To do so, we are  challenged  to
continue  delivering  high quality  services to our customers and community.  We
appreciate the confidence, support, and loyalty of our customers, employees, and
stockholders.  If you know people who or businesses  that want a better  banking
relationship, then send them to us. You and they will be glad you did.

Sincerely,


/s/Melvin E. Plair                                        /s/Claude R. Butler
-------------------                                       ---------------------
Melvin E. Plair                                           Claude R. Butler
President and CEO                                         Chairman of the Board


<PAGE>




                              QUITMAN BANCORP, INC.

Company Information

Quitman  Bancorp,  Inc.  (the  "Company")  is  a  Georgia-chartered  corporation
organized  at the  direction  of Quitman  Federal  Savings  Bank (the "Bank") in
connection  with  the  Bank's   conversion  from  a  mutual  to  stock  form  of
organization  (the  "Conversion").  On April 2,  1998,  the Bank  completed  the
Conversion and became a wholly owned subsidiary of the Company. The Company is a
unitary savings and loan holding company which,  under existing laws,  generally
is not  restricted  in the types of business  activities  in which it may engage
provided  the Bank retains a specified  amount of its assets in  housing-related
investments.

Because the Company owns the Bank and most of the income and operations that are
being  reported are those of the Bank, in this report  references to "we," "us,"
and "our" refer to the Company and the Bank.

The Bank is a federally  chartered stock savings bank that commenced business in
1936.  The Bank is examined and  regulated  by the Office of Thrift  Supervision
("OTS")  and its  deposits  are  federally  insured by the  Savings  Association
Insurance Fund ("SAIF") of the Federal Deposit Insurance  Corporation  ("FDIC").
The Bank is a member of and owns  capital  stock in the  Federal  Home Loan Bank
("FHLB") of Atlanta, which is one of the 12 regional banks in the FHLB System.

We are  located  in  Quitman,  which is in the  center of the  southern  part of
Georgia,  approximately 15 miles west of Valdosta and Interstate 75 and 10 miles
north of the Florida border.  Our market area is Brooks county (in which Quitman
is  located) as well as parts of Lowndes  county,  both of which are in Georgia.
Our  market  area is based  primarily  on  agricultural  goods  such as  cotton,
peanuts, corn and tobacco and dairy products.

We attract deposits from the general public and use these deposits  primarily to
originate  residential  loans.  Our  principal  sources  of  funds  for  lending
activities are deposits, Federal Home Loan Bank borrowings and the amortization,
repayment,  and maturity of loans and investment  securities.  We do not rely on
brokered  deposits.  Principal  sources  of  income  are  interest  on loans and
investment securities. Our principal expense is interest paid on deposits.

                                       2

<PAGE>



Common Stock Information

Since its  issuance in April 1998,  our common stock  ("Common  Stock") has been
traded in the over-the-counter  market with quotations available through the OTC
Bulletin Board  (symbol:  QTMB).  The following  table reflects high and low bid
quotations  as  published  by  Charles  Schwab  &  Co.  The  quotations  reflect
inter-dealer prices, without retail mark-up,  mark-down, or commission,  and may
not represent actual transactions.

Date                                                High             Low
----                                              --------         --------

April 2, 1998 to June 30, 1998                     $15.125          12.000
July 1, 1998 to September 30, 1998                  13.125           9.000
October 1, 1998 to December 31, 1998                11.125           9.250
January 1, 1999 to March 31, 1999                   11.750          10.000
April 1, 1999 to June 30, 1999                      11.500          10.000
July 1, 1999 to September 30, 1999                  11.500          10.625


The number of  shareholders  of record of Common Stock as of September 30, 1999,
was approximately  195,  exclusive of the number of persons or entities who held
stock in nominee or "street" name through various  brokerage firms. At September
30, 1999, there were 533,960 shares issued and  outstanding.  Our ability to pay
dividends to stockholders  is primarily  dependent upon the dividends we receive
from the Bank.  The Bank may not  declare or pay a cash  dividend  on any of its
stock if that dividend would cause the Bank's  regulatory  capital to be reduced
below  (1) the  amount  required  for the  liquidation  account  established  in
connection  with the  Conversion,  or (2) the  regulatory  capital  requirements
imposed  by the OTS.  We paid  dividends  on the  Common  Stock in the amount of
$112,413 on May 24,  1999.  This  dividend was declared on April 20, 1999 in the
amount of $0.20 per share.


                                       3
<PAGE>



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

General

         We may  from  time  to  time  make  written  or  oral  "forward-looking
statements",  including  statements contained in our filings with the Securities
and  Exchange  Commission,  in our  reports  to  stockholders  and in our  other
communications,  which are made in good  faith  pursuant  to the  "safe  harbor"
provisions of the Private Securities Litigation Reform Act of 1995.

         These forward-looking statements involve risks and uncertainties,  such
as statements  of our plans,  expectations,  and  estimates  that are subject to
change  based on several  factors  (some of which are beyond our  control).  The
following factors, among others, could cause our financial performance to differ
materially  from  the  plans,  expectations,  and  estimates  expressed  in  our
forward-looking  statements:  the strength of the United States  economy and the
strength of the local economies in which we operate; the effects of, and changes
in,  trade,  monetary and fiscal  policies  and laws,  including  interest  rate
policies of the Board of Governors  of the Federal  Reserve  System,  inflation,
interest rate, market and monetary  fluctuations;  the timely development of and
acceptance of our new products and services and the  perceived  overall value of
these  products and services by  customers,  including  the features and pricing
compared to competitors' products and services;  the willingness of customers to
substitute our products and services for those of our competitors; the impact of
changes in financial  services' laws and regulations  (including laws concerning
taxes,  banking,  and  securities);  technological  changes;  disruption in data
processing  caused  by  computer  malfunctions  associated  with the  year  2000
problem;  acquisitions;  changes in consumer spending and saving habits; and our
success in dealing with these factors.

         This list of factors is not  exclusive.  We do not  undertake to update
any  forward-looking  statement,  whether written or oral, that may be made from
time to time by us or on our behalf.

         Our results of  operations  depend  primarily on net  interest  income,
which is determined by (i) the  difference  between rates of interest we earn on
our interest-earning assets and the rates we pay on interest-bearing liabilities
(interest rate spread), and (ii) the relative amounts of interest-earning assets
and interest-bearing liabilities. Our results of operations are also affected by
non-interest income, including,  primarily, income from customer deposit account
service   charges,   gains  and  losses  from  the  sale  of   investments   and
mortgage-backed  securities  and  non-interest  expense,  including,  primarily,
compensation and employee benefits,  federal deposit insurance premiums,  office
occupancy  costs,  and data processing  cost. Our results of operations also are
affected  significantly  by general and  economic  and  competitive  conditions,
particularly  changes in market interest rates,  government policies and actions
of regulatory authorities, all of which are beyond our control.

Market Risk Analysis

         Asset/Liability  Management. Our assets and liabilities may be analyzed
by examining  the extent to which our assets and  liabilities  are interest rate
sensitive and by monitoring the expected effects of interest rate changes on our
net  portfolio  value.  We also use this  information  to analyze  the risk that
changes  in market  interest  rates  will have on our  operations.  Part of this
analysis  of  market  risk is made by  estimating  how our  operations  would be
affected by  instantaneous  changes in market  interest  rates. We discuss these
estimates under "Net Portfolio Value."

         An asset or liability is interest rate sensitive within a specific time
period if it will  mature or

                                       4
<PAGE>

reprice within that time period. If our assets mature or reprice more quickly or
to a  greater  extent  than our  liabilities,  our net  portfolio  value and net
interest  income would tend to increase  during periods of rising interest rates
but decrease during periods of falling interest rates. Conversely, if our assets
mature or reprice more slowly or to a lesser  extent than our  liabilities,  our
net  portfolio  value and net  interest  income  would tend to  decrease  during
periods of rising interest rates but increase during periods of falling interest
rates. As described in the following  paragraph,  our policy has been to address
the interest rate risk inherent in the historical savings  institution  business
of  originating  long-term  loans funded by short-term  deposits by  maintaining
liquid  assets in excess of  regulatory  minimums  for  material  and  prolonged
changes in interest  rates.  At September  30, 1999,  our liquid asset ratio was
14.91%.

         We originate fixed rate real estate loans which  approximated  92.0% of
our loan  portfolio at September  30, 1999.  To manage the interest rate risk of
this type of loan portfolio,  generally we limit  maturities of fixed rate loans
to no more than 5 years and  maintain a portfolio of liquid  assets.  Our liquid
assets   include   cash  and  cash   equivalents   and   investment   securities
available-for-sale.  At September  30, 1999,  these liquid  assets  totaled $8.5
million,  which was 18.9% of our total liabilities of $45.1 million. We maintain
these liquid assets to protect us in the event market interest rates rise and we
experience  losses  because we are paying more for our  liabilities  than we are
earning on our assets.  If this  happens,  we may need liquid assets to continue
paying our liabilities and to continue  operating with required  capital levels.
However,  maintaining liquid assets tends to reduce potential net income because
liquid assets usually provide a lower yield than less liquid assets. In the past
several years we have increased the size of our construction  lending  portfolio
through,  in part, the use of short term borrowings from the FHLB.  Construction
loans  have a shorter  duration  than  most of our other  loans and this type of
lending and borrowing has somewhat  reduced our interest rate risk. At September
30, 1999,  the average  weighted term to maturity of our mortgage loan portfolio
was slightly more than 3 years and the average weighted term of our deposits was
slightly less than 15 months. In the future, we may begin funding parts of loans
originated by other  financial  institutions as a way of increasing our interest
rate spread.  However,  these loan  participations and the method we use to fund
them may result in additional  interest  rate risk as well, as possibly,  credit
risk.

         Net Portfolio  Value.  In recent  years,  we have measured our interest
rate sensitivity by computing the "gap" between the assets and liabilities which
were  expected  to mature or  reprice  within  certain  time  periods,  based on
assumptions  regarding loan prepayment and deposit decay rates formerly provided
by the OTS.  However,  we now receive  computations  of amounts by which our net
interest  income over the next 12 months  ("NII")  would  change in the event of
assumed changes in market interest rates. We use this information to analyze the
risk we face from changes in market  interest rates. We also analyze market risk
in managing our assets and liabilities. See "Asset/Liability  Management." These
computations  indicate  to us how the net  present  value of our cash  flow from
assets,  liabilities  and off balance  sheet items (our net  portfolio  value or
"NPV") would change in the event of assumed  changes in market  interest  rates.
These  computations  estimate  the  effect  on our NII  from  instantaneous  and
permanent increases and decreases in market interest rates. In our interest rate
risk  management  policy we have set  maximum  decreases  in NII and NPV that we
would be willing to tolerate  under these assumed  conditions.  In addition,  we
have also received computations of how these assumed conditions would impact our
NPV.

                                       5
<PAGE>










                       Board Limit of a
                     Percentage Change In         Change in NPV
                   -----------------------  ----------------------------
        Changes                                Dollars
       in Market        NII        NPV      (in thousands)   Percentages
                   ----------   ----------  --------------- ------------
   Interest Rates(1)
   -----------------
    (basis points)
        +400           -60%        -65%       -$1,079        -17.13%
        +300           -60%        -60%       -$  764        -12.13%
        +200           -40%        -40%       -$  476         -7.56%
        +100           -20%        -25%       -$  203         -3.22%
        -100           -25%        -25%         $ 203          3.22%
        -200           -40%        -40%         $ 420          6.67%
        -300           -50%        -50%         $ 728         11.56%
        -400           -60%        -60%        $1,096         17.40%

--------------
(1)      100 basis points equals 1%.

         Because most of our loans have a longer term than most of our deposits,
the  computation  of the impact on our net income  indicated  we would earn more
income if interest  rates were to fall and we would earn less income if interest
rates  were to rise.  Specifically,  the  computation  of an  instantaneous  and
permanent  200 basis  point  decrease  in market  interest  rates  indicated  an
approximately  5% increase in estimated  pre-tax  income.  The computation of an
instantaneous  and permanent 200 basis point  increase in market  interest rates
indicated an  approximately  9% decrease in estimated  pre-tax  income.  Both of
these  computations  (1) were based on financial  information  at September  30,
1999, (2) assumed net income over the 12 months following September 30, 1998 and
(3)  resulted in  financial  results  within the  guidelines  shown in the table
above. These computations  assumed that certain types of our loans,  securities,
and deposit  accounts  would have  certain  interest  rates  during the 12 month
period. For example,  our savings and NOW accounts were assumed to yield no more
than 4.20% and our consumer  loans and fixed rate mortgage loans were assumed to
yield 9.00% and 8.50%, respectively. The use of different assumptions would also
result in different results.

         While we cannot predict  future  interest rates or their effects on our
NPV or net interest income,  we do not expect current  interest rates,  assuming
rates  remain  stable,  to  have a  material  adverse  effect  on our NPV or net
interest income.  Computations of prospective  effects of hypothetical  interest
rate changes are based on numerous  assumptions,  including  relative  levels of
market  interest  rates  resulting  in specific  interest  rates for our various
investment securities,  loan portfolios and liabilities.  These assumptions also
include  estimates of other components of our income and the duration of certain
of our investment securities as well as prepayments, deposit run-offs and growth
rates and should not be relied upon as  indicative  of actual  results.  Certain
shortcomings  are inherent in such  computations.  Although  certain  assets and
liabilities may have similar  maturity or periods of repricing they may react at
different  times and in  different  degrees to  changes  in the market  interest
rates.  The  interest  rates on  certain  types of assets  and  liabilities  may
fluctuate in advance of changes in market interest  rates,  while rates on other
types of

                                       6
<PAGE>

assets and  liabilities  may lag behind changes in market interest rates. In the
event of a change in interest  rates,  prepayments and early  withdrawal  levels
could  deviate  significantly  from those  assumed  in making  the  calculations
discussed  above.  Additionally,  an  increased  credit  risk may  result as the
ability of many  borrowers to service their debt may decrease in the event of an
interest rate increase.

         The board of directors  reviews our asset and liability  policies.  The
board of directors meets  quarterly to review interest rate risk and trends,  as
well as liquidity and capital ratios and  requirements.  Management  administers
the policies and  determinations  of the board of directors  with respect to our
asset and liability goals and strategies. We expect that our asset and liability
policies and strategies  will continue as described so long as  competitive  and
regulatory  conditions in the financial institution industry and market interest
rates continue as they have in recent years.

Financial Condition

         Total  consolidated  assets  increased $8.4 million,  or 18.9% to $52.8
million at September 30, 1999,  from $44.4  million at September  30, 1998.  The
increase in total assets reflects a $4.7 million increase in loans receivable, a
$717,992 increase in investment securities,  and a $144,541 increase in the cash
value of life  insurance.  Our  increase  in loans  receivable  is mainly due to
increased demand for loans in our market area.

         Deposits  increased  $7.0 million or 1.5% to $42.0 million at September
30, 1999 from $35.0 million at September  30, 1998.  The increase in fiscal 1999
was a result of  competitive  pricing  to fund loan  demand.  Advances  from the
Federal  Home Loan Bank  ("FHLB")  of  Atlanta  increased  $2.5  million to $2.5
million.  Other liabilities  increased by $225,000 primarily due to the purchase
of investment  securities in September  1999,  which did not close until October
1999 of $221,000.  As a result of the acquisition of treasury stock,  our equity
decreased $1.3 million.

                                       7
<PAGE>

Average Balance Sheet

         The  following  table sets forth  certain  information  relating to the
Savings  Bank's  average  balance sheet and reflects the average yield on assets
and average cost of liabilities for the periods indicated and the average yields
earned and rates paid.  Such yields and costs are derived by dividing  income or
expense by the average balance of assets or liabilities,  respectively,  for the
periods  presented.  Average  balances  are  derived  from  month-end  balances.
Management does not believe that the use of month-end  balances instead of daily
average  balances  has  caused  any  material  differences  in  the  information
presented.

<TABLE>
<CAPTION>

                                                                              Year Ended September 30,
                                             --------------------------------------------------------------------------------------
                                                                1999                                         1998
                                             ----------------------------------------    ------------------------------------------
                                                Average                       Average         Average                      Average
                                                Balance        Interest     Yield/Cost        Balance       Interest     Yield/Cost
                                                -------        --------     ----------        -------       --------     ----------
                                                                             (Dollars in thousands)
<S>                                          <C>              <C>          <C>             <C>           <C>            <C>
Interest-earning assets:
  Loans receivable(1)........................  $38,759          $3,505          9.04%         $34,577       $3,156           9.13%
  Mortgage-backed securities.................      701              40           5.71             524           30            5.73
  Investment securities......................    5,499             325           5.91           3,490          230            6.59
  Other interest-earning assets..............      488              31           6.35           1,563           99            6.33
                                                ------           -----                          -----        -----
    Total interest-earning assets............   45,447           3,901           8.58          40,154        3,515            8.75
Non-interest-earning assets..................    3,155              --                          1,767           --
                                                ------           -----                         ------        -----
    Total assets.............................  $48,602          $3,901                        $41,921       $3,515
                                                ======           =====                         ======        =====

Interest-bearing liabilities:
  NOW Accounts...............................  $ 1,795            $ 62           3.45         $ 1,464         $ 52            3.55
  Savings accounts...........................    1,847              77           4.17           2,240           87            3.88
  Money market accounts......................       --              --             --              --           --              --
  Certificates of deposit....................   34,671           2,030           5.86          31,783        1,929            6.07
  Other liabilities..........................      634              35           5.52             615           36            5.85
                                                ------           -----           ----          ------        -----
    Total interest-bearing liabilities.......   38,947           2,204           5.66          36,102        2,104            5.83
Non-interest bearing liabilities.............    1,336              --                          1,537           --
                                                ------           -----                         ------        -----
    Total liabilities........................   40,283          $2,204                         37,639       $2,104
                                                                 =====                                       =====
Equity.......................................    8,319                                          4,282
                                                ------                                         ------
    Total liabilities and retained earnings..  $48,602                                        $41,921
                                                ======                                         ======
Net interest income..........................                   $1,697                                      $1,411
Interest rate spread(2)......................                                   2.92%                                        2.92%
Net yield on interest-earning assets(3)......                                   3.73%                                        3.51%
Ratio of average interest-earning assets
 to average interest-bearing liabilities.....                                 116.69%                                      111.22%
---------------------------------
</TABLE>

(1)  Average balances include non-accrual loans.
(2)  Interest-rate spread represents the difference between the average yield on
     interest-earning   assets  and  the   average   cost  of   interest-bearing
     liabilities.
(3)  Net yield on  interest-earning  assets  represents net interest income as a
     percentage  of  average  interest-earning  assets.  (4)  Annualized  (where
     appropriate) for purposes of comparability with year-end data.

                                      8

<PAGE>



         The table below sets forth  certain  information  regarding  changes in
interest  income  and  interest  expense  of the  Savings  Bank for the  periods
indicated.  For each category of  interest-earning  assets and  interest-bearing
liabilities,  information is provided on changes  attributable to (i) changes in
volume (changes in average volume multiplied by old rate); (ii) changes in rates
(changes in rate multiplied by old average volume); (iii) changes in rate-volume
(changes in rate multiplied by the change in average volume).
<TABLE>
<CAPTION>

                                                                     Year Ended September 30,
                                -----------------------------------------------------------------------------------------------
                                       1999     vs.     1998                                   1998     vs.     1997
                                ----------------------------------------------   ----------------------------------------------
                                        Increase (Decrease)                                     Increase (Decrease)
                                              Due to                                                  Due to
                                ----------------------------------------------   ----------------------------------------------
                                                           Rate/                                                Rate/
                                  Volume       Rate       Volume         Net          Volume       Rate        Volume      Net
                                ----------   -------    ---------    ---------   -------------   --------   -----------  ------
                                                                   (Dollars in thousands)
<S>                              <C>         <C>         <C>            <C>           <C>        <C>         <C>         <C>
Interest income:
  Loans receivable..............   $382        $(30)       $ (3)          $349          $231       $(15)       $ (1)       $215
  Investment securities.........    142         (24)        (13)           105            16          9           1          26
  Other interest-earning assets.    (68)          3          (3)           (68)           78         --          (1)         77
                                    ---         ---         ---            ---           ---        ---          --         ---
                                   $456        $(51)       $(19)          $386          $325       $ (6)       $ (1)       $318
                                    ===         ===         ===            ===           ===        ===          ==         ===

Interest expense:
  NOW accounts..................   $ 12        $ (1)       $ (1)          $ 10          $ (1)      $  4        $ --        $  3
  Savings accounts..............    (15)          6          (1)           (10)            2          3          --           5
  Money market accounts.........    ---          --          --             --            --        ---          --         ---
  Certificate of deposit            175         (68)         (6)           101           143          3           1         147
  Other liabilities.............      1          (2)         --             (1)          (31)         4          (2)        (29)
                                    ---         ---         ---            ---           ---        ---          --         ---
    Total interest-bearing
      Liabilities...............   $173        $(65)       $ (8)          $100          $113       $ 14        $ (1)       $126
                                    ===         ===         ===            ===           ===        ===          ==         ===

Net change in interest income...   $283        $ 14        $(11)          $286          $212       $(20)       $ --        $192
                                    ===         ===         ===            ===           ===        ===         ===         ===
</TABLE>
                                       9

<PAGE>



Results of Operations for the Years Ended September 30, 1999 and 1998

         Net Income.  Net income  increased  $44,762 or 14.8% from  $303,537 for
fiscal 1998 to $348,299 for fiscal 1999.  The increase was  primarily the result
of an increase in interest on loans receivable due to an increase in the average
balance of $4.2 million,  an increase in other interest income on other interest
earning assets due to an increase in the average  balance of $1.1 million and an
increase of $141,000 in non-interest  income  partially offset by an increase in
interest  expense due to an increase in the average balance of  interest-bearing
liabilities of $2.8 million and increase in non-interest expenses of $329,000.

         Net Interest  Income.  Our net interest  income  increased  $241,918 or
16.6% to $1,696,116  in fiscal 1999  compared to $1,454,198 in fiscal 1998.  The
increase was due primarily to the growth of average interest-earning assets from
$40.2 million in fiscal 1998 to $45.4 million in fiscal 1999.

         The  increase in our average  interest-earning  assets of $5.2  million
reflects an increase of $4.2 million in average  loans.  Our increase in average
loans receivable is mainly due to increased demand for loans in our market area.

         Our  interest  rate  spread  did not  change  and net  interest  margin
increased in fiscal 1999  compared to fiscal 1998.  This was due to the decrease
in the yield on  interest-earning  assets  from 8.75% in fiscal 1998 to 8.58% in
fiscal 1999 and the  decrease in the interest  cost of average  interest-bearing
liabilities from 5.83% in fiscal 1998 to 5.66% in fiscal 1999.

         The yield on our average  interest-earning  assets  decreased in fiscal
1998 primarily due to a decrease in the yield on loans receivable. This decrease
in yield on our loans receivable  primarily  reflected a decrease in the average
interest rates and, to a lesser degree, the payoff of higher yielding loans.

         The  decrease in the cost of our average  interest-bearing  liabilities
was due primarily to an increase in the average  balance of our  certificates of
deposit from $29.4 million in fiscal 1997 to $31.8 million in fiscal 1998 offset
by a decrease in the average rates.

         Provision  for Loan Losses.  Our  provision  for loan losses  decreased
$4,100 from $24,000 for fiscal 1998 to $19,900 for fiscal 1999.  The decrease in
the provision for fiscal 1999 was the result of management's  review of our loan
portfolio,  the  potential  losses  in our loan  portfolio  and our  history  of
experiencing no losses on loans in recent years.

         Noninterest  Income.  Our non-interest  income increased  approximately
$141,000 in fiscal 1999 as compared to fiscal 1998.  This was  attributable to a
gain on the sale of fixed assets and an increase in other income.

         Noninterest  Expense. Our non-interest expense increased by $329,154 or
32.89%  from  $1,004,035  for fiscal 1998 to  $1,333,189  for fiscal  1999.  The
increase  was  primarily  attributable  to increases  in  compensation  expense,
depreciation expense on equipment additions, and other operating expenses.

                                       10
<PAGE>



         As a result of the conversion,  our expenses have increased  because of
the costs  associated  with our employee stock  ownership plan, and the costs of
being a public  company.  We also  offered  checking  accounts and the use of an
automated  teller  machine (an "ATM") to our customers  during fiscal 1999.  Our
preparation  costs  for these  products  and the  costs of  soliciting  checking
account  funds  has  also  increased  our  expenses.  We have  not yet  received
sufficient  checking  account  funds or other income to offset these  additional
costs.

         Although no definite plans have been made, we are exploring  whether to
purchase  land and  construct a branch.  We would  likely hire  experts or spend
money before we commit to purchasing  land or  constructing a new branch.  If we
decided not to build a new  branch,  the money that we had spent up to that time
would be a noninterest expense and would negatively affect our income.

We   expect  noninterest  expense will  increase as a result of the staffing and
     equipping  of the new bank  building  opened  in April  1999.  We  expect a
     reduction in net income (and possibly  losses) compared to prior periods as
     a result of these expenses until the new building results in higher overall
     levels of loan and deposit activity to offset the additional  expenses.  We
     believe that this expansion should enhance  shareholder value and hope that
     the  decrease in earnings  will not be as great  following  the end of year
     2000.  Our  statement  of beliefs  concerning  our  expansion  is a forward
     looking  statement.  The Private  Securities  Litigation Reform Act of 1995
     (the "Act")  provides  protection to us in making certain  forward  looking
     statements  that are  accompanied  by the factors  that could cause  actual
     results to differ  materially from the forward looking  statement.  As with
     any  expansion,  if a new office or additional  personnel do not ultimately
     result in increased  loan and deposit  activity and  increased  net income,
     these  expenses would continue to have an adverse affect on net income past
     the end of year 2000. Our noninterest  expense would further increase if we
     build the new branch discussed in the prior paragraph.

     Income Tax Expense.Our  income tax expense  increased $12,970 from $177,815
in fiscal 1998 to $190,785 in fiscal 1999 due to the  increase in income  before
taxes.

         Return on Equity and Assets:

                                                     YEAR ENDED SEPTEMBER 30,
                                                    -------------------------
                                                       1999           1998
                                                    ---------       ---------
  Return on Assets (Net income divided
    by average assets)                                   .72%         .70%
  Return on Equity (Net income divided by
    average equity)                                     4.19%        5.08%
  Dividend Payout Ratio (Dividends paid
    divided by net income)                             32.27%          --
  Equity to Assets Ratio (Equity divided by total
    assets)                                            14.52%       20.21%


                                       11
<PAGE>



Liquidity and Capital Resources

         We are required to maintain  minimum levels of liquid assets as defined
by OTS regulations.  This requirement,  which varies from time to time depending
upon economic  conditions and deposit  flows,  is based upon a percentage of our
deposits and short-term borrowings. The required ratio is 4.0% and our liquidity
ratio average was 15% and 14% at September 30, 1999 and 1998, respectively.

         Our  primary  sources  of funds are  deposits,  repayment  of loans and
mortgage-backed  securities,  maturities  of  investments  and  interest-bearing
deposits,  funds provided from operations and advances from the FHLB of Atlanta.
While  scheduled   repayments  of  loans  and  mortgage-backed   securities  and
maturities of investment  securities  are predicable  sources of funds,  deposit
flows,  and loan  prepayments  are greatly  influenced  by the general  level of
interest  rates,  economic  conditions  and  competition.  We use our  liquidity
resources  principally  to fund  existing and future loan  commitments,  to fund
maturing  certificates of deposit and demand deposit  withdrawals,  to invest in
other  interest-earning  assets,  to maintain  liquidity,  and to meet operating
expenses.  We expect that these liquidity needs will continue to exist in future
years.

         Net cash  provided by our  operating  activities  (the cash  effects of
transactions that enter into our  determination of net income -- e.g.,  non-cash
items,  amortization and  depreciation,  provision for loan losses) for the year
ended September 30, 1999 was $275,429 as compared to $402,899 for the year ended
September 30, 1998.

         Net  cash  used  in our  investing  activities  (i.e.,  cash  receipts,
primarily  from  our  investment   securities  and  mortgage-backed   securities
portfolios and our loan portfolio) for the year ended September 30, 1999 totaled
$6.7 million,  an increase of $1.2 million from September 30, 1998. The increase
was  primarily  attributable  to our use of  $3.8  million  in cash to fund  the
purchase of available-for-sale investment securities and the use of $5.0 million
in cash to fund the net increase in loan  originations,  partially offset by the
proceeds from the maturity and sale of investment  securities  and sale of fixed
assets.

         Net cash  provided by our  financing  activities  (i.e.,  cash receipts
primarily  from net increases in deposits and net FHLB advances) for fiscal 1999
totaled $8.0 million  compared to $4.8 million for fiscal 1998. This is a result
of a net  increase in deposits of $7.0  million in fiscal 1999 as compared to an
increase  of $.5 million in fiscal  1998 and  proceeds  of $2.5  million in FHLB
advances.

         We are  taking  necessary  steps  to be  certain  our  data  processing
equipment and software will properly  function on January 1, 2000, the date that
computer  problems  are expected to develop  worldwide on computer  systems that
incorrectly identify the year 2000 and incorrectly compute interest,  payment or
delinquency. Accurate data processing is essential to our operations.

         We have examined our computers to determine  whether they will properly
function on January 1, 2000 and do not believe that we will experience  material
costs to upgrade our computers.  We have ordered and installed an upgrade to our
computer system that is intended to solve the Year 2000 Computer software issue.
We installed this upgrade during the first calendar quarter of 1998.  Testing of
this software is complete.  We believe that all reprogramming  efforts have been
completed and tested.

                                       12
<PAGE>



         If there is a malfunction of the software, we plan to implement "manual
processing"  until our software becomes Y2K compliant.  We have ordered packages
of all forms required to handle loans,  deposits and operations.  Detailed plans
for the manual operation of Quitman Federal Savings Bank are in progress.

         Non-information  technology such as; heating, air conditioning and door
locks have been tested. These areas will not be impacted.

         We have made contact with our Commercial  Borrowers  regarding the Year
2000 issue,  advising them of the potential problem. As the majority of our loan
portfolio is 1 to 4 family  dwellings,  we do not feel our commercial  borrowers
will be an issue.

         During the fiscal year ending September 30, 2000,  approximately  $27.4
million of  certificates  of deposit  (approximately  74% of our total deposits)
will  mature.  We expect  that most of these  certificates  of  deposit  will be
renewed.  Even if many of these  certificates  of deposit  are not  renewed,  we
believe  that we have  sufficient  liquidity  and  other  sources  of  funds  to
successfully manage the outflow of funds.

         A new bank building was constructed during the year ended September 30,
1999,  the cost of the new facility and land was  $1,059,931.  We are  exploring
whether to purchase land and construct a branch. Although no definite plans have
been made, if a new branch is built, the land and construction costs could total
approximately $600,000. We have sufficient liquid assets to pay for these costs.

         Pursuant to FASB No. 130 the Bank is required to record  changes in the
value of its investment portfolio as regards unrealized gains or losses that may
result from movements in interest  rates.  As of September 30, 1999, the Savings
Bank shows  unrealized  losses,  net of tax effect,  totaling $78,000 due to the
recent upward surge in interest rates as the national  money markets  reacted to
actions by the Federal Open Market Committee. Management does not anticipate the
realization  of the above loss.  The  unrealized  loss does  however  negatively
impact the Bank's  capital.  The unrealized  losses  combined with net operating
income of $348,000 yields a net increase in the Bank's capital of $270,000,  net
of applicable  taxes,  and a corresponding  increase in the book value of common
stock from $13.56 on September 30, 1998 to $14.37 as of September 30, 1999.  The
Bank's capital continues to exceed  regulatory  requirements and continues to be
adequate to support future asset growth.

                                       13
<PAGE>












                          INDEPENDENT AUDITOR'S REPORT
                          ----------------------------



To the Board of Directors and Stockholders
Quitman Bancorp, Inc. and Subsidiary
Quitman, Georgia

We have audited the accompanying  consolidated statements of financial condition
of Quitman  Bancorp,  Inc. and Subsidiary as of September 30, 1999 and 1998, and
the  related   consolidated   statements   of  income,   comprehensive   income,
stockholders'  equity and cash flows for the years then ended.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Quitman
Bancorp,  Inc.  and  Subsidiary  as of  September  30,  1999 and  1998,  and the
consolidated  results of their operations and their  consolidated cash flows for
the  years  then  ended  in  conformity  with  generally   accepted   accounting
principles.



                                        /s/Stewart, Fowler & Stalvey, P.C.
-----------------------------------
Valdosta, Georgia
October 15, 1999

                                       14
<PAGE>
                      QUITMAN BANCORP, INC. AND SUBSIDIARY

                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                 ----------------------------------------------

                                     ASSETS
                                     ------
<TABLE>
<CAPTION>
                                                                                           SEPTEMBER 30,
                                                                                   ----------------------------
                                                                                       1999            1998
                                                                                   ------------    ------------
<S>                                                                               <C>                  <C>
Cash and Cash Equivalents, Notes 1 and 2:
   Cash and amounts due from depository
      institutions                                                                 $  1,706,799         168,404
   Interest-bearing deposits in other banks                                             261,896         203,462
                                                                                   ------------    ------------
         Total Cash and Cash Equivalents                                              1,968,695         371,866
Investment securities:
   Available-for-sale (fair value $6,558,701 in 1999
      and $5,640,709 in 1998), Notes 1 and 3                                          6,558,701       5,640,709
   Held-to-maturity (fair value $0 in 1999 and
      $199,936 in 1998), Notes 1 and 3                                                        0         200,000
Loans receivable, Notes 1 and 4                                                      41,120,768      36,397,067
Office properties and equipment, at cost, net of
   accumulated depreciation, Notes 1 and 5                                            1,601,398         681,453
Real estate acquired in settlement of loans, Note 1                                     139,045               0
Accrued interest receivable, Note 6                                                     514,290         447,854
Investment required by law-stock in Federal
   Home Loan Bank, at cost, Note 13                                                     286,700         239,800
Cash value of life insurance, Note 11                                                   482,354         337,813
Other assets, Notes 1 and 9                                                             170,198          45,182
                                                                                   ------------    ------------

         Total Assets                                                              $ 52,842,149      44,361,744
                                                                                   ============    ============


                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------



Liabilities:
   Deposits, Note 7                                                                $ 41,993,095      34,954,584
   Advances from Federal Home Loan Bank, Note 13                                      2,500,000               0
   Accrued interest payable                                                             303,512         275,028
   Income taxes payable, Note 9                                                           1,312          24,660
   Other liabilities                                                                    369,230         143,719
                                                                                   ------------    ------------

      Total Liabilities                                                              45,167,149      35,397,991
                                                                                   ------------    ------------

Stockholders' Equity:
   Common stock,  $.10 par value,  4,000,000 shares  authorized,  661,250 shares
      issued and 533,960 shares outstanding at September 30, 1999 (661,250
      September 30, 1998)                                                                66,125          66,125
   Preferred stock, no par value, 1,000,000 shares
      authorized, no shares issued or outstanding                                             0               0
   Additional paid in capital                                                         6,135,412       6,135,412
   Retained Earnings, Note 8                                                          3,491,984       3,256,097
   Accumulated other comprehensive income (loss)                                        (77,699)         35,119
   Treasury stock, at cost (127,290 shares)                                          (1,438,272)              0
   Receivable from ESOP, Note 11                                                       (502,550)       (529,000)
                                                                                   ------------    ------------

      Total Stockholders' Equity                                                      7,675,000       8,963,753
                                                                                   ------------    ------------

         Total Liabilities and Stockholders' Equity                                $ 52,842,149      44,361,744
                                                                                   ============    ============
</TABLE>

Note:The  accompanying  notes to financial  statements  are an integral  part of
     this statement.
                                       15
<PAGE>

                      QUITMAN BANCORP, INC. AND SUBSIDIARY

                        CONSOLIDATED STATEMENTS OF INCOME
                        ---------------------------------


                                                 YEAR ENDED SEPTEMBER 30,
                                                 ------------------------
                                                    1999         1998
                                                 ----------   ----------
Interest Income:
   Loans receivable:
      First mortgage loans                       $3,290,099    3,029,927
      Consumer and other loans                      214,504      148,753
   Interest on FHLMC Pool                               171          259
   Investment securities                            364,730      280,948
   Interest-bearing deposits                         30,374       98,115
   Federal funds sold                                   481          524
                                                 ----------   ----------

         Total Interest Income                    3,900,359    3,558,526
                                                 ----------   ----------

Interest Expense:
   Deposits, Note 7                               2,169,361    2,067,707
   Interest on Federal Home Loan
      Bank advances                                  34,882       36,621
                                                 ----------   ----------

         Total Interest Expense                   2,204,243    2,104,328
                                                 ----------   ----------

Net Interest Income                               1,696,116    1,454,198

Provision for loan losses, Notes 1 and 4             19,900       24,000
                                                 ----------   ----------

Net Interest Income After Provision for Losses    1,676,216    1,430,198
                                                 ----------   ----------

Non-Interest Income:
   Gain (loss) on sale of securities                  2,594           18
   Gain on sale of fixed assets                      84,019            0
   Gain (loss) on sale of other real estate           6,402        7,102
   Late charges on loans                             35,349       32,811
   Insurance commissions                              1,192        1,584
   Other income                                      66,501       13,674
                                                 ----------   ----------

         Total Non-Interest Income                  196,057       55,189
                                                 ----------   ----------

Non-Interest Expense:
   Compensation                                     464,815      317,778
   Other personnel expenses, Note 11                218,218      231,509
   Occupancy expenses of premises                    33,111       22,048
   Furniture and equipment expenses                 162,272      121,847
   Advertising, Note 1                               42,379       41,529
   Federal deposit insurance                         21,990       22,419
   Other operating expenses                         390,404      246,905
                                                 ----------   ----------

         Total Non-Interest Expense               1,333,189    1,004,035
                                                 ----------   ----------

Income Before Income Taxes                          539,084      481,352

Provision for Income Taxes, Note 9                  190,785      177,815
                                                 ----------   ----------

Net Income                                       $  348,299      303,537
                                                 ==========   ==========

Earnings Per Share, Note 1:
   Basic                                         $      .65   $      .50
                                                 ==========   ==========
   Diluted                                       $      .65   $      .50

                                                 ==========   ==========
Note:The  accompanying  notes to financial  statements  are an integral  part of
     this statement.

                                       16
<PAGE>



                      QUITMAN BANCORP, INC. AND SUBSIDIARY

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


                                                      YEAR ENDED SEPTEMBER 30,
                                                     ---------------------------
                                                        1999         1998
                                                     ---------    ----------

Net Income                                           $ 348,299      303,537
                                                     ---------    ----------

Other comprehensive income (loss), net of tax:
   Unrealized  gains (losses) on securities:
      Unrealized holding gains (losses) arising
         during period                                (111,106)      29,144
      Less:reclassification adjustment for(gains)
         losses included in net income                  (1,712)         (18)
                                                     ---------    ---------
      Other comprehensive income (loss)               (112,818)      29,126
                                                     ---------    ---------
Comprehensive Income                                 $ 235,481      332,663
                                                     =========    =========













Note:The  accompanying  notes to financial  statements  are an integral  part of
     this stateme
                                       17
<PAGE>



                      QUITMAN BANCORP, INC. AND SUBSIDIARY

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                 -----------------------------------------------

<TABLE>
<CAPTION>


                                                                                            ACCUMULATIVE
                                                                                               OTHER
                                 COMMON STOCK       ADDITIONAL                RECEIVABLE   COMPREHENSIVE
                            --------------------     PAID IN      RETAINED       FROM          INCOME          TREASURY
                             SHARES      AMOUNT       CAPITAL     EARNINGS       ESOP          (LOSS)            STOCK      TOTAL
                            --------    --------     --------    ---------   -----------     ----------        --------    -------
<S>                      <C>        <C>          <C>          <C>             <C>           <C>           <C>         <C>
Balances, September
   30, 1997                       0   $         0           0    2,952,560             0          5,993              0    2,958,553

Net Income                        0             0           0      303,537             0              0              0      303,537

Common stock issued         661,250        66,125   6,135,412            0             0              0              0    6,201,537

Change in loan
 receivable from
 stock ownership
 plan                             0             0           0            0      (529,000)             0              0     (529,000)

Change in other
 comprehensive
 income (loss)                    0             0           0            0             0         29,126              0       29,126
                        -----------   ----------- -----------  -----------   -----------    -----------    -----------   ----------

Balances,
 September 30,
 1998                       661,250        66,125   6,135,412    3,256,097      (529,000)        35,119              0    8,963,753

Acquisition of
 shares of treasury
 stock                     (127,290)            0           0            0             0              0     (1,438,272)  (1,438,272)

Net income                        0             0           0      348,299             0              0              0      348,299

Dividends paid                    0             0           0     (112,412)            0              0              0     (112,412)

Change in loan
 receivable from
 employee stock
 ownership plan                   0             0           0            0        26,450              0              0       26,450

Change in other
 comprehensive
 income (loss)                    0             0           0            0             0       (112,818)             0     (112,818)
                        -----------   ----------- -----------  -----------   -----------    -----------    -----------   ----------

Balances,
 September 30,
 1999                       533,960   $    66,125   6,135,412    3,491,984      (502,550)       (77,699)    (1,438,272)   7,675,000
                        ===========   =========== ===========  ===========   ===========    ===========    ===========   ==========

</TABLE>


Note:The  accompanying  notes to financial  statements  are an integral  part of
     this stateme
                                       18
<PAGE>
                      QUITMAN BANCORP, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------
<TABLE>
<CAPTION>
                                                                                       YEAR ENDED SEPTEMBER 30,
                                                                                    -------------------------------
                                                                                        1999                1998
                                                                                    ------------       ------------
<S>                                                                              <C>                <C>
Cash Flows From Operating Activities:
-------------------------------------
   Net income                                                                        $  348,299            303,537
   Adjustments to reconcile net income to net cash
      provided by operating activities:
      Depreciation                                                                      110,046             79,081
      Provision for loan losses                                                          19,900             24,000
      (Increase) Decrease in deferred income tax benefit                                (18,366)             4,532
      Amortization (Accretion) of securities and loans                                   15,715              7,338
      Gain on sale of other real estate                                                  (6,402)            (7,102)
      Gain on sale of securities                                                         (2,594)               (18)
      Gain on sale of fixed assets                                                      (84,019)                 0
   Change in Assets and Liabilities:
      (Increase) Decrease in accrued interest receivable                                (65,367)           (66,636)
      Increase (Decrease) in accrued interest payable                                    28,484              2,682
      Increase (Decrease) in other liabilities                                            4,442             68,023
      Increase (Decrease) in income taxes payable                                       (23,348)           (32,196)
      (Increase) Decrease in other assets                                               (48,531)            19,640
                                                                                     ----------         ----------
         Net cash provided by operating activities                                      278,259            402,881
                                                                                     ----------         ----------

Cash Flows From Investing Activities:
-------------------------------------
   Capital expenditures                                                              (1,220,972)          (438,007)
   Purchase of available-for-sale securities                                         (3,845,382)        (3,634,680)
   Proceeds from sale of foreclosed property                                            139,380            296,710
   Proceeds from maturity of held-to-maturity securities                                200,000            600,000
   Net (increase) decrease in loans                                                  (5,015,624)        (3,321,041)
   Purchase of stock in Federal Home Loan Bank                                          (46,900)           (12,100)
   Principal collected on mortgage-backed securities                                    163,332             36,666
   Proceeds from sale of available-for-sale securities                                  500,000            498,018
   Proceeds from sale of fixed assets                                                   275,000                  0
   Proceeds from maturity of available-for-sale securities                            2,300,000            550,000
   Increase in cash value of life insurance                                            (144,541)          (119,707)
                                                                                     ----------         ----------
         Net cash provided (used) by investing activities                            (6,695,707)        (5,544,159)
                                                                                     ----------         ----------

Cash Flows From Financing Activities:
-------------------------------------
   Net increase (decrease) in deposits                                                7,038,511            483,781
   Proceeds from Federal Home Loan Bank advances                                      2,500,000                  0
   Payments on Federal Home Loan Bank advances                                                0         (1,300,000)
   Issuance of 661,250 shares of common stock                                                 0          6,201,537
   (Increase) Decrease in loan to employee stock ownership plan                          26,450           (529,000)
   Purchase of treasury stock                                                        (1,438,272)                 0
   Dividends paid                                                                      (112,412)                 0
                                                                                     ----------         ----------
         Net cash provided (used) by financing activities                             8,014,277          4,856,318
                                                                                     ----------         ----------
Net Increase (Decrease) in cash and cash equivalents                                  1,596,829           (284,942)

Cash and Cash Equivalents at Beginning of Period                                        371,866            656,808
                                                                                     ----------         ----------
Cash and Cash Equivalents at End of Period                                           $1,968,695            371,866
                                                                                     ==========         ==========

Supplemental Disclosures of Cash Flow Information
-------------------------------------------------
   Cash paid during the year for:
      Income taxes                                                                   $  221,974            205,479
                                                                                     ==========         ==========
      Interest                                                                       $2,175,759          2,101,646
                                                                                     ==========         ==========

Schedule of Non-Cash Investing and Financing Activities
-------------------------------------------------------
   Total increase (decrease) in unrealized gains
      on securities available-for-sale                                               $ (170,937)            47,218
                                                                                     ==========         ==========
   Loans transferred to foreclosed real estate                                       $  272,023            225,693
                                                                                     ==========         ==========
   Securities purchased and closed in subsequent year                                $  221,069                  0
                                                                                     ==========         ==========
</TABLE>
Note:The  accompanying  notes to financial  statements  are an integral  part of
     this stateme
                                       19
<PAGE>

                      QUITMAN BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Summary of Significant Accounting Policies
---------------------------------------------------

Nature of  Operations:  Quitman  Bancorp,  Inc.  (the  "Company") is a Georgia -
chartered corporation organized at the direction of Quitman Federal Savings Bank
(the "Bank") (formerly Quitman Federal Savings & Loan Association) in connection
with the  Bank's  conversion  from a mutual to stock form of  organization  (the
"Conversion").  On April 2, 1998, the Bank completed the conversion and became a
wholly owned subsidiary of the Company.

The Company is engaged in the activity of providing traditional banking services
through its banking  subsidiary,  Quitman  Federal  Savings Bank.  The Bank is a
federally chartered stock savings bank that commenced business in 1936. Business
activities are  predominately  with customers in the Brooks and Lowndes  County,
Georgia area.

Consolidated  financial  statements:  The  accompanying  consolidated  financial
statements  include the accounts of Quitman  Bancorp,  Inc. and its wholly owned
subsidiary,  Quitman Federal Savings Bank. All  inter-company  transactions  and
accounts have been eliminated in consolidation.

Investment  Securities:  Investment  securities for which the management has the
ability and intent to hold to maturity are  classified as  held-to-maturity  and
carried at amortized cost using methods approximating the interest method. Other
securities are classified as  available-for-sale  and are carried at fair value.
Unrealized gains and losses on securities  available-for-sale  are recognized as
direct  increases or decreases in stockholders'  equity.  Cost of any securities
sold is recognized by the specific identification method.

Loans Receivable: Loans receivable are stated at unpaid principal balances, less
the  allowance  for  loan  losses  and net  deferred  loan-origination  fees and
discounts.  Uncollectible  interest on loans that are contractually  past due is
charged  off or an  allowance  is  established  based on  management's  periodic
evaluation. The allowance is established by a charge to interest income equal to
all interest  previously  accrued and income is subsequently  recognized only to
the extent that cash payments are received until, in management's judgement, the
borrower's  ability to make periodic interest and principal  payments is back to
normal, in which case the loan is returned to accrual status.

Office  properties  and equipment  and related  depreciation  and  amortization:
Office properties and equipment,  consisting of land,  buildings,  furniture and
fixtures and automobile are carried at cost, less accumulated depreciation.  The
building,  furniture,  fixtures  and  equipment  are  being  depreciated  on the
straight-line method.

Loan origination  fees:  Commencing with loans originated  during the year ended
September  30, 1988,  mortgage  loan  origination  fees and related  direct loan
origination  costs are deferred and the net amount so deferred is amortized over
the life of the loan by a method that  approximates  the level yield  method and
reflected as an adjustment of interest  income.  Fees for  originating  consumer
loans which do not  materially  exceed the direct  loan  origination  cost,  are
recorded  as income when  received  and the direct  loan  origination  costs are
expensed as incurred.

Real estate and other property  acquired in settlement of loans:  At the time of
foreclosure,  real estate and other property  acquired in settlement of loans is
recorded at fair value,  less estimated costs to sell. Any write-downs  based on
the asset's fair value at date of  acquisition  are charged to the allowance for
loan losses. Subsequent to acquisition,  such assets are carried at the lower of
cost or market value less estimated  costs to sell. Cost incurred in maintaining
such assets and any subsequent write-downs to reflect declines in the fair value
of the property are included in income (loss) on foreclosed assets.

                                       20
<PAGE>



Note - Summary of Significant Accounting Policies (Continued)
-------------------------------------------------------------

Allowance  for losses:  An  allowance  for loan losses is charged to  operations
based  upon  management's  evaluation  of  the  potential  losses  in  its  loan
portfolio.  This  evaluation  includes  a review  of all  loans  on  which  full
collectibility may not be reasonably  assured,  considers the estimated value of
the underlying collateral and such other factors as, in management's  judgement,
deserve recognition under existing economic conditions.

Income  taxes:  Income  taxes have been  computed  under  Statement of Financial
Accounting Standards No. 109. Implementation of Statement No. 109 with regard to
income  taxes  did not  have a  material  effect  on the tax  provisions  of the
Company.  Deferral of income taxes results  primarily  from  differences  in the
provision  for loan  losses,  depreciation  and  unrealized  gains and losses on
available-for-sale securities for tax purposes and financial reporting purposes.
The  deferred  tax  assets  and  liabilities  represent  the  future  tax return
consequences  of those  differences,  which will either be taxable or deductible
when the  assets  and  liabilities  are  recovered  or  settled.  The  financial
statements reflect a net deferred asset of $103,391 and $26,906 at September 30,
1999 and 1998, respectively.

Cash and cash  equivalents:  For purposes of the  statement  of cash flows,  the
Company  considers all highly liquid debt instruments  purchased with a maturity
of three months or less to be cash  equivalents  and  includes  cash on hand and
amounts due from banks (excluding certificates of deposit).

Off balance sheet financial instruments: In the ordinary course of business, the
Bank has entered into off balance  sheet  financial  instruments  consisting  of
commitments  to extend  credit and  standby  letters of credit.  Such  financial
instruments are recorded in the financial statements when they become payable.

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

Certain  significant   estimates:   Material  estimates  that  are  particularly
susceptible to significant  change relate to the  determination of the allowance
for losses on loans and the valuation of real estate acquired in connection with
foreclosures or in  satisfaction of loans. In connection with the  determination
of allowances  for losses on loans and the valuation of foreclosed  real estate,
management obtains independent appraisals for significant properties.

While  management  uses available  information to recognize  losses on loans and
foreclosed  real estate,  future  additions to the  allowances  may be necessary
based on changes in local economic conditions. In addition, regulatory agencies,
as an integral part of their examination process, periodically review the Bank's
allowances  for losses on loans and  foreclosed  real estate.  Such agencies may
require  the  Bank to  recognize  additions  to the  allowances  based  on their
judgements about information available to them at the time of their examination.
It is at least  reasonably  possible that the allowances for losses on loans and
foreclosed real estate may change in the near term.

Advertising  costs:  The Bank expenses  advertising  costs as they are incurred.
Advertising  costs  charged to expenses  were  $42,379 and $41,529 for the years
ended September 30, 1999 and 1998, respectively.

                                       21
<PAGE>



Note 1 - Summary of Significant Accounting Policies (Continued)
---------------------------------------------------------------

Fair  values  of  financial  instruments:   Statement  of  Financial  Accounting
Standards  No.  107,  Disclosure  about  Fair  Value of  Financial  Instruments,
requires  disclosure  of fair value  information  about  financial  instruments,
whether or not  recognized  in the  statement of financial  condition.  In cases
where quoted market prices are not available, fair values are based on estimates
using  present  value  or  other  valuation  techniques.  Those  techniques  are
significantly  affected by the assumptions used, including the discount rate and
estimates of future cash flows. In that regard, the derived fair value estimates
cannot be  substantiated  by comparison  to  independent  markets,  and, in many
cases,  could  not be  realized  in  immediate  settlement  of the  instruments.
Statement No. 107 excludes  certain  financial  instruments and all nonfinancial
instruments from its disclosure  requirements.  Accordingly,  the aggregate fair
value amounts presented do not represent the underlying value of the Company.

The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:

   Cash and cash equivalents:  The carrying amounts reported in the statement of
   financial  condition for cash and cash equivalents  approximate those assets'
   fair values.

   Time deposits: Fair values for time deposits are estimated using a discounted
   cash flow analysis that applies  interest  rates  currently  being offered on
   certificates to a schedule of aggregated  contractual maturities on such time
   deposits.

   Investment  securities:  Fair values for  investment  securities are based on
   quoted  market  prices,  where  available.  If quoted  market  prices are not
   available,  fair  values  are based on  quoted  market  prices of  comparable
   instruments.

   Loans:  For  variable-rate   loans  that  reprice   frequently  and  with  no
   significant change in credit risk, fair values are based on carrying amounts.
   The fair  values for other loans (for  example,  fixed rate  commercial  real
   estate,  mortgage loans and  commercial  and industrial  loans) are estimated
   using discounted cash flow analysis,  based on interest rates currently being
   offered for loans with similar terms to borrowers of similar credit  quality.
   Loan fair value estimates include  judgements  regarding future expected loss
   experience and risk characteristics.  The carrying amount of accrued interest
   receivable approximates its fair value.

   Deposits:  The fair  values  disclosed  for  demand  deposits  (for  example,
   checking accounts,  interest-bearing  checking accounts and savings accounts)
   are, by  definition,  equal to the amount  payable on demand at the reporting
   date (that is, their carrying  amounts).  The fair values for certificates of
   deposit are estimated using a discounted cash flow  calculation  that applies
   interest  rates  currently  being  offered on  certificates  to a schedule of
   aggregated contractual maturities on such time deposits.
   The carrying amount of accrued interest payable approximates fair value.

   Advances from Federal Home Loan Bank:  The carrying  amounts of advances from
   the Federal Home Loan Bank approximate their fair value.

   Other liabilities: Commitments to extend credit were evaluated and fair value
   was estimated using the terms for similar agreements, taking into account the
   remaining  terms of the  agreements and the present  creditworthiness  of the
   counterparties.  For fixed-rate loan  commitments,  fair value also considers
   the  difference  between  current  levels of interest rates and the committed
   rates.

                                       22
<PAGE>



Note 1 - Summary of Significant Accounting Policies (Continued)
---------------------------------------------------------------

   Earnings per share: The following table sets forth the  reconciliation of the
   numerators and denominator of the basic and diluted  earnings per share (EPS)
   computations:
<TABLE>
<CAPTION>

                                                                                         YEAR ENDED SEPTEMBER 30,
                                                                                    ---------------------------------
                                                                                        1999                  1998
                                                                                    -----------           -----------

 <S>                                                                             <C>                     <C>
 (a)   Net income available to shareholders                                         $   348,299               303,537
                                                                                    -----------           -----------

         Denominator:
           Weighted-average shares outstanding                                          584,111               661,250
           Less:  ESOP weighted-average shares
             Unallocated                                                                 50,916                52,900
                                                                                    -----------           -----------

   (b)   Basic EPS weighted-average shares outstanding                                  533,195               608,350

         Effect of dilutive securities:
           Stock options                                                                  1,030                     0
                                                                                    -----------           -----------

   (c)   Diluted EPS weighted-average shares outstanding                                534,225               608,350
                                                                                    ===========           ===========

           Basic earnings per share (a/b)                                           $       .65                   .50
                                                                                    ===========           ===========
           Diluted earnings per share (a/c)                                         $       .65                   .50
                                                                                    ===========           ===========
</TABLE>

   Segment  reporting:  The  Company  is engaged in the  activity  of  providing
   traditional  banking  services  through  its  commercial  banking  subsidiary
   previously discussed under "nature of operations".  The Company does not have
   reportable segments, foreign operations,  assets located in foreign countries
   or major customers, as defined in Statement of Financial Accounting Standards
   No.
   131 (Disclosures About Segments of an Enterprise and Related Information).

   New  accounting  standards:  In June  1996,  the FASB  issued  SFAS  No.  125
   (Accounting   For   Transfers   And   Servicing  Of   Financial   Assets  And
   Extinguishments  Of  Liabilities).  This  statement  provides  accounting and
   reporting  standards  for  transfers  and  servicing of financial  assets and
   extinguishments  of  liabilities.  Those  standards  are based on  consistent
   application of a financial-components approach that focuses on control. Under
   that approach, after a transfer of financial assets, an entity recognizes the
   financial  and  servicing  assets  it  controls  and the  liabilities  it has
   incurred, derecognizes financial assets when control has been surrendered and
   derecognizes   liabilities  when   extinguished.   This  statement   provides
   consistent  standards for  distinguishing  transfers of financial assets that
   are sales from transfers that are secured  borrowings.  The statement applies
   to  transfers  and  servicing  of  financial  assets and  extinguishments  of
   liabilities  occurring  after December 31, 1996.  However,  as a result of an
   amendment to SFAS No. 125 by the FASB in December 1996, certain provisions of
   SFAS  No.  125 are  deferred  for an  additional  year.  Adoption  of the new
   accounting standard did not have a material impact on the Company's financial
   statements.

                                      23
<PAGE>



Note 1 - Summary of Significant Accounting Policies (Continued)
---------------------------------------------------------------

    In February  1997,  the FASB issued SFAS No. 128 (Earnings Per Share).  This
    statement  establishes  standards for computing and presenting  earnings per
    share and applies to entities  with  publicly held common stock or potential
    common stock. This statement simplifies the standards for computing earnings
    per share  previously  found in APB Opinion No. 15 (Earnings  Per Share) and
    makes them  comparable to  international  earnings per share  standards.  It
    replaces the  presentation of primary earnings per share with a presentation
    of basic earnings per share. It also requires dual presentation of basic and
    diluted  earnings  per  share on the face of the  income  statement  for all
    entities with complex capital  structures and requires a  reconciliation  of
    the numerator and denominator of the basic earnings per share computation to
    the numerator and denominator of the diluted earnings per share computation.
    Basic  earnings  per share  excludes  dilution  and is  computed by dividing
    income available to common  stockholders by the  weighted-average  number of
    common  shares  outstanding  for the  period.  Diluted  earnings  per  share
    reflects the  potential  dilution  that could occur if  securities  or other
    contracts  to issue common  stock were  exercised  or converted  into common
    stock or  resulted in the  issuance of common  stock that then shared in the
    earnings of the entity.  Diluted earnings per share is computed similarly to
    fully diluted  earnings per share  pursuant to Opinion 15. This statement is
    effective for financial  statements issued for periods ending after December
    15, 1997. The adoption of this  statement did not have a material  impact on
    the company's financial statements.

    In February  1997,  the FASB issued SFAS No. 129  (Disclosure Of Information
    About  Capital  Structure).   This  statement   establishes   standards  for
    disclosing  information about an entity's capital  structure.  It applies to
    all entities. This statement continues the previous requirements to disclose
    certain  information  about  an  entity's  capital  structure  found  in APB
    Opinions No. 10 (Omnibus  Opinion - 1996),  No. 15 (Earnings  Per Share) and
    FASB No. 47  (Disclosure Of Long-Term  Obligations),  for entities that were
    subject to the requirements of those standards.  This statement is effective
    for financial  statements issued for periods ending after December 15, 1997.
    The  adoption  of this  statement  did not  have a  material  impact  on the
    Company's financial statements.

    In June 1997, the FASB issued SFAS No. 130 (Reporting Comprehensive Income).
    This   statement   establishes   standards  for  reporting  and  display  of
    comprehensive  income  and its  components  (revenues,  expenses,  gains and
    losses)  in  a  full  set  of  general-purpose  financial  statements.  This
    statement  requires that all items that are required to be recognized  under
    accounting  standards as components of comprehensive income be reported in a
    financial  statement  that is displayed  with the same  prominence  as other
    financial statements.  This statement does not require a specific format for
    that financial  statement but requires that an enterprise  display an amount
    representing  total  comprehensive  income for the period in that  financial
    statement.  This statement requires that an enterprise (a) classify items of
    other comprehensive  income by their nature in a financial statement and (b)
    display the accumulated  balance of other  comprehensive  income  separately
    from retained earnings and additional  paid-in capital in the equity section
    of a statement of financial position. This statement is effective for fiscal
    years  beginning after December 15, 1997. The adoption of this statement did
    not have a material impact on the Company's financial statements.


                                       24
<PAGE>



Note 1 - Summary of Significant Accounting Policies (Continued)
---------------------------------------------------------------

    In June 1997, the FASB issued SFAS No. 131 (Disclosures About Segments Of An
    Enterprise And Related  Information).  This statement  establishes standards
    for the way  that  public  business  enterprises  report  information  about
    operating  segments in annual  financial  statements and requires that those
    enterprises report selected  information about operating segments in interim
    financial reports issued to shareholders.  It also establishes standards for
    related disclosures about products and services,  geographic areas and major
    customers.  This statement requires that a public business enterprise report
    financial  and  descriptive   information  about  its  reportable  operating
    segments.  Operating  segments are  components of an enterprise  about which
    separate financial  information is available that is evaluated  regularly by
    the chief operating decision maker in deciding how to allocate resources and
    in assessing performance. Generally, financial information is required to be
    reported  on the basis that it is used  internally  for  evaluating  segment
    performance  and  deciding  how  to  allocate  resources  to  segments.  The
    statement  requires that a public  business  enterprise  report a measure of
    segment  profit or loss,  certain  specific  revenue and  expense  items and
    segment assets. It requires reconciliations of total segment revenues, total
    segment profit or loss, total segment assets and other amounts disclosed for
    segments  to  corresponding  amounts  in  the  enterprise's  general-purpose
    financial  statements.  It  requires  that all public  business  enterprises
    report information about the revenues derived from the enterprise's products
    or  services  (or  groups  of  similar  products  and  services),  about the
    Countries in which the enterprise  earns revenues and holds assets and about
    major  customers  regardless of whether that  information  is used in making
    operating  decisions.  The statement  also  requires that a public  business
    enterprise report  descriptive  information about the way that the operating
    segments  were  determined,  the  products  and  services  provided  by  the
    operating  segments,  differences between the measurements used in reporting
    segment  information  and  those  used in the  enterprise's  general-purpose
    financial  statements and changes in the measurement of segment amounts from
    period to period.  This statement is effective for financial  statements for
    periods  beginning  after  December 15, 1997. The adoption of this statement
    did not have a material impact on the Company's financial statements.

    In February 1998, the FASB issued SFAS No. 132 (Employers' Disclosures About
    Pensions  and  Other  Postretirement   Benefits).   This  statement  revises
    employers' disclosures about pension and other postretirement benefit plans.
    It does not  change  the  measurement  or  recognition  of those  plans.  It
    standardizes   the   disclosure   requirements   for   pensions   and  other
    postretirement  benefits  to  the  extent  practical,   requires  additional
    information  on changes in the benefit  obligations  and fair values of plan
    assets  that  will  facilitate  financial  analysis  and  eliminate  certain
    disclosures  previously  required by FASB Statements No. 87, 88 and 106. The
    statement  suggests  combined  formats for presentation of pension and other
    postretirement  benefit disclosures.  This statement is effective for fiscal
    years  beginning after December 15, 1997. The adoption of this statement did
    not have a material impact on the Company's financial statements.

                                       25
<PAGE>



Note 1 - Summary of Significant Accounting Policies (Continued)
---------------------------------------------------------------

    In June 1998,  the FASB  issued  SFAS No.  133  (Accounting  for  Derivative
    Instruments and Hedging Activities).  This statement establishes  accounting
    and  reporting  standards  for  derivative  instruments,  including  certain
    derivative  instruments embedded in other contracts,  (collectively referred
    to as derivatives)  and for hedging  activities.  It requires that an entity
    recognize all  derivatives  as either assets or liabilities in the statement
    of  financial  position  and measure  those  instruments  at fair value.  If
    certain  conditions are met, a derivative may be specifically  designated as
    (a) a hedge of the  exposure  to changes  in the fair value of a  recognized
    asset or liability or an unrecognized  firm  commitment,  (b) a hedge of the
    exposure to variable cash flows of a forecasted transaction,  or (c) a hedge
    of the foreign currency exposure of a net investment in a foreign operation,
    an  unrecognized  firm  commitment,  an  available-for-sale  security  or  a
    foreign-currency-denominated  forecasted transaction.  Under this statement,
    an entity that elects to apply hedge  accounting is required to establish at
    the  inception  of the  hedge  the  method  it will  use for  assessing  the
    effectiveness  of the hedging  derivative and the  measurement  approach for
    determining  the  ineffective  aspect of the hedge.  Those  methods  must be
    consistent  with the entity's  approach to managing risk.  This statement is
    effective for all fiscal  quarters of fiscal years  beginning after June 15,
    1999. In June 1999, the FASB issued SFAS No. 137  (Accounting for Derivative
    Instruments and Hedging  Activities - Deferral of the Effective Date of SFAS
    No. 133). This statement  deferred the effective date to all fiscal quarters
    of fiscal years beginning after June 15, 2000.  Initial  application of this
    statement  should be as of the beginning of an entity's fiscal  quarter;  on
    that date,  hedging  relationships  must be designated  anew and  documented
    pursuant to the provisions of this statement. The adoption of this statement
    is not  expected  to  have a  material  impact  on the  Company's  financial
    statements.

    In  October   1998,   the  FASB   issued  SFAS  No.  134   (Accounting   for
    Mortgage-Backed  Securities  Retained after the  Securitization  of Mortgage
    Loans Held For Sale by a Mortgage Banking Enterprise). This statement amends
    Statement No. 65 (Accounting  for Certain  Mortgage  Banking  Activities) to
    require that after the  securitization  of a mortgage loan held for sale, an
    entity  engaged  in  mortgage  banking  activities  classify  the  resulting
    mortgage-backed  securities or other retained interests based on its ability
    and intent to sale or hold those  investments.  This statement  conforms the
    subsequent  accounting for securities  retained after the  securitization of
    mortgage  loans  by  a  mortgage  banking  enterprise  with  the  subsequent
    accounting for securities  retained after the  securitization of other types
    of assets by a non-mortgage  banking  enterprise.  This  statement  shall be
    effective for the first fiscal  quarter  beginning  after December 15, 1998.
    The adoption of this statement is not expected to have a material  impact on
    the Company's financial statements.


                                       26
<PAGE>
Note 2 - Cash
-------------

As of September 30, 1999,  the Bank had cash on deposit with certain  commercial
banks in excess of federal depository insurance as follows:
<TABLE>
<CAPTION>
                                                                                          FEDERAL
                                                        BOOK             BANK           DEPOSITORY
                                                       BALANCE          BALANCE          INSURANCE
                                                     ----------       ----------        ---------
<S>                                                <C>                 <C>              <C>
         Total                                       $1,018,659          625,459          323,755
                                                     ==========       ==========        =========
</TABLE>
As of  September  30,  1998,  the  Association  had cash on deposit with certain
commercial banks in excess of federal depository insurance as follows:
<TABLE>
<CAPTION>
                                                                                          FEDERAL
                                                        BOOK             BANK           DEPOSITORY
                                                       BALANCE          BALANCE          INSURANCE
                                                     ----------       ----------        ---------
<S>                                               <C>                 <C>              <C>
         Total                                       $  254,580          389,271          214,982
                                                     ==========       ==========        =========
</TABLE>

Note 3 - Investment Securities
------------------------------

Investment securities are carried in the accompanying balance sheets as follows:

Securities available-for-sale consist of the following:
-------------------------------------------------------
<TABLE>
<CAPTION>

As of September 30, 1999:
                                                                         GROSS             GROSS
                                                     AMORTIZED        UNREALIZED        UNREALIZED          MARKET
                                                       COST             GAINS             LOSSES             VALUE
                                                     ----------       ----------        ----------       ----------
<S>                                                <C>                  <C>             <C>             <C>
U.S. Treasury Obligations                            $  298,413            1,665                0           300,078
Obligations of other U.S.
   Government agencies                                5,091,933                0          112,126         4,979,807
Mortgage-backed securities                              896,081            7,382           12,680           890,783
State, County and Municipal
   securities                                           390,000                0            1,967           388,033
                                                     ----------       ----------       ----------        ----------
                                                      $6,676,427           9,047           126,773         6,558,701
                                                     ==========       ==========       ==========        ==========
</TABLE>

As of September 30, 1998:
<TABLE>
<CAPTION>

                                                                        GROSS             GROSS
                                                     AMORTIZED        UNREALIZED        UNREALIZED          MARKET
                                                       COST             GAINS             LOSSES             VALUE
                                                     ---------        ----------        ---------        ----------
<S>                                               <C>                 <C>               <C>           <C>
U.S. Treasury Obligations                            $  697,263          16,284                 0           713,547
Obligations of other U.S.
   Government agencies                                4,383,021          25,728               145         4,408,604
Mortgage-backed securities                              507,214          11,344                 0           518,558
                                                     ----------       ----------        ---------        ----------
                                                     $5,587,498          53,356               145         5,640,709
                                                     ==========       ==========        =========        ==========
</TABLE>
Securities held-to-maturity consist of the following:
-----------------------------------------------------

As of September 30, 1998:
<TABLE>
<CAPTION>
                                                                        GROSS             GROSS
                                                     AMORTIZED        UNREALIZED        UNREALIZED          MARKET
                                                       COST             GAINS             LOSSES             VALUE
Obligations of other U.S.                            ---------        ----------        ---------        ----------
<S>                                              <C>                <C>               <C>               <C>
   Government agencies                               $ 200,000                0                64           199,936
                                                     =========        ==========        =========        ==========
</TABLE>

                                       27
<PAGE>
Note 3 - Investment Securities (Continued)
------------------------------------------

The amortized  cost and estimated  market value of debt  securities at September
30, 1999, by contractual  maturity,  are shown below.  Expected  maturities will
differ from contractual  maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
                                                                                               SECURITIES
                                                                                           AVAILABLE-FOR-SALE
                                                                                        ---------------------------
                                                                                        AMORTIZED           MARKET
                                                                                           COST              VALUE
                                                                                        ----------       ----------
<S>                                                                                  <C>               <C>
Due in one year or less                                                                 $  725,058          715,790
Due after one year through
   five years                                                                            5,184,466        5,088,687
Due after five years through
   ten years                                                                               766,903          754,224
                                                                                        ----------       ----------
                                                                                        $6,676,427        6,558,701
                                                                                        ==========       ==========
</TABLE>
Proceeds  from sales of  available-for-sale  securities  during the years  ended
September  30, 1999 and 1998 were  $500,000  and  $498,000  with gross gains and
losses of $2,594 and $18 being realized, respectively.  Proceeds from maturities
of  available-for-sale  securities during the years ended September 30, 1999 and
1998 were  $2,300,000 and $550,000,  respectively.  Proceeds from  maturities of
held-to-maturity  securities  during the years ended September 30, 1999 and 1998
were $200,000 and $600,000, respectively.

Securities  with a carrying value of $586,314 and $382,148 at September 30, 1999
and 1998, respectively, were pledged to secure public monies as required by law.


Note 4 - Loans Receivable
-------------------------

A summary of loans receivable is presented below:
<TABLE>
<CAPTION>

                                                                                              SEPTEMBER 30,
                                                                                    -------------------------------
                                                                                       1999                 1998
                                                                                    -----------          ----------
<S>                                                                              <C>                  <C>
First mortgage loans                                                                $38,302,559          33,221,746
Construction loans                                                                    2,801,542           3,433,262
FHLMC pool                                                                                1,787               2,850
Share loans                                                                             469,609             556,740
Consumer loans                                                                        1,812,528           1,089,165
                                                                                    -----------         -----------

                                                                                     43,388,025          38,303,763

Loans in process                                                                     (1,825,400)         (1,488,548)
Allowance for loan losses                                                              (389,000)           (370,000)
Deferred loan origination fees                                                          (52,857)            (48,148)
                                                                                    -----------         -----------
                                                                                    $41,120,768          36,397,067
                                                                                    ===========         ===========
</TABLE>
An analysis of changes in the allowance for loan losses is as follows:
<TABLE>
<CAPTION>
                                                                                        YEAR ENDED SEPTEMBER 30,
                                                                                    ------------------------------
                                                                                       1999                 1998
                                                                                    ----------          ----------
<S>                                                                              <C>                   <C>
   Balance at beginning of period                                                   $  370,000             346,000
   Provision charged to income                                                          19,900              24,000
   Recoveries                                                                                0                   0
   Losses charged to allowance                                                            (900)                  0
                                                                                    ----------          ----------
                                                                                    $  389,000             370,000
                                                                                    ==========          ==========
</TABLE>
                                       28
<PAGE>



Note 4 - Loans Receivable (Continued)
-------------------------------------

First mortgage loans on residential  (one-to-four units) real estate are pledged
to secure  advances  from the Federal Home Loan Bank (See Note 13). The advances
must be fully  secured  after  discounting  the  qualifying  loans at 75% of the
principal balances outstanding.

The Bank  predominately  grants  mortgage and consumer loans to customers in the
immediate  Quitman  and South  Georgia  area.  The Bank has a  diversified  loan
portfolio   consisting   predominately  of  mortgage  loans   collateralized  by
residential properties. The following schedule provides an additional summary of
the Bank's loans:

                                                    SEPTEMBER 30,
                                          --------------------------------
                                              1999                  1998
                                          -----------           ----------
First Mortgage Loans:
   Secured by 1 to 4 family
      residences                          $31,580,020           27,072,746
   Secured by over 4 family
      residences                              612,668              810,000
   Other real estate                        6,109,871            5,339,000
Construction loans                          2,801,542            3,433,262
FHLMC pools                                     1,787                2,850
Share loans                                   469,609              556,740
Consumer loans                              1,812,528            1,089,165
                                          -----------          -----------

                                           43,388,025           38,303,763

Loans in Process                           (1,825,400)          (1,488,548)
Allowance for loan losses                    (389,000)            (370,000)
Deferred loan origination fees                (52,857)             (48,148)
                                          -----------          -----------

         Total                            $41,120,768           36,397,067
                                          ===========          ===========

Loans on which  the  accrual  of  interest  has been  discontinued  amounted  to
$228,113 and $103,213 at September 30, 1999 and 1998, respectively.  If interest
on those loans had been accrued, such income would have approximated $19,745 and
$7,146 for the years ended September 30, 1999 and 1998,  respectively.  Interest
income on those loans, which is recorded only when received,  amounted to $8,392
and $3,372 for the years ended  September  30, 1999 and 1998,  respectively.  No
contractual  modifications  have been made to these loans that would  affect the
interest ultimately due.

There were no loans at September 30, 1999 or 1998,  which the Bank's  management
considered to be impaired.

Loans  receivable  includes loans to officers and directors of the Bank totaling
approximately   $980,056  and   $720,735  at   September   30,  1999  and  1998,
respectively.  Since November 1996,  loans to officers and directors are made at
an  interest  rate equal to two percent  (2.00%)  above the Bank's cost of funds
rate.  All related party loans were made in the ordinary  course of business and
did not involve  more than the normal risk of  collectibility  or present  other
unfavorable features.

                                       29
<PAGE>
Note 5 - Office Properties and Equipment
----------------------------------------

Office properties and equipment, at cost, are summarized as follows:
<TABLE>
<CAPTION>

                                                                         SEPTEMBER 30,             ESTIMATED
                                                                ------------------------------
                                                                   1999                1998      USEFUL LIVES
                                                                ----------          ----------   ------------
<S>                                                           <C>                 <C>         <C>
   Land  $  228,914                                                252,061
   Buildings                                                       831,017             234,087   20-31 years
   Construction in progress                                              0              35,724
   Furniture and fixtures                                          749,315             458,897   5-10 years
   Automobile                                                       31,337              31,337   5 years
                                                                ----------          ----------
                                                                 1,840,583           1,012,106
   Less accumulated depreciation                                   239,185             330,653
                                                                ----------          ----------
                                                                $1,601,398             681,453
                                                                ==========          ==========
</TABLE>
Depreciation  expense  for the  years  ended  September  30,  1999  and 1998 was
$110,046 and $79,081, respectively.

Note 6 - Accrued Interest Receivable
------------------------------------

Accrued interest receivable is summarized as follows:
<TABLE>
<CAPTION>
                                                                                              SEPTEMBER 30,
                                                                                    ------------------------------
                                                                                        1999                  1998
                                                                                    ----------           ----------
<S>                                                                               <C>                    <C>
   Investment securities                                                            $  100,059               97,290
   Loans receivable                                                                    414,231              350,564
                                                                                    ----------           ----------
                                                                                    $  514,290              447,854
                                                                                    ==========           ==========

</TABLE>

Note 7 - Deposit Account Analysis
---------------------------------

An analysis of deposit  accounts and the weighted  average  interest rates as of
the dates indicated is presented below:
<TABLE>
<CAPTION>
                                                                              SEPTEMBER 30,
                                                     --------------------------------------------------------------
                                                                 1999                               1998
                                                      --------------------------         -----------------------
                                                      BOOK VALUE            %             BOOK VALUE           %
                                                      -----------      ---------         -----------     ---------
<S>                                                 <C>                 <C>            <C>                <C>
Type of Account:
   Checking Accounts                                  $   636,751           1.52            220,800           0.63
   N.O.W. Accounts - 3.48%
      (1998 - 3.42%)                                    2,029,835           4.83          1,523,871           4.36
   Passbook - 3.14%
      (1998 - 3.15%)                                    2,068,427           4.93          1,507,207           4.31
   Certificates - 5.86%
      (1998 - 6.07%)                                   37,258,082          88.72         31,702,706          90.70
                                                      -----------      ---------        -----------      ---------
                                                      $41,993,095         100.00%        34,954,584         100.00%
                                                      ===========      =========        ===========      =========
</TABLE>
The aggregate  amount of certificates of deposit in denominations of $100,000 or
more was $9,694,268 and $6,749,622 at September 30, 1999 and 1998, respectively.

At September 30, 1999,  scheduled  maturities of certificates of deposit were as
follows:

       YEAR ENDING
      SEPTEMBER 30,
      -------------
          2000                                        $27,394,949
          2001                                          7,360,167
          2002                                          1,368,842
          2003                                          1,124,124
          2004                                             10,000
                                                      -----------
                                                      $37,258,082
                                                      ===========
                                       30
<PAGE>



Note 7 - Deposit Account Analysis (Continued)
---------------------------------------------

The Bank held deposits of $395,778 and $381,331 for related parties at September
30, 1999 and 1998, respectively.

Interest expense on deposits is summarized as follows:
                                                  YEAR  ENDED SEPTEMBER 30,
                                                 --------------------------
                                                     1999            1998
                                                 ----------       ---------

   Passbook savings                              $   77,195          86,717
   NOW                                               62,406          51,765
   Certificates of deposit                        2,029,760       1,929,225
                                                 ----------      ----------

                                                 $2,169,361       2,067,707
                                                 ==========      ==========


Note 8 - Stockholders' Equity and Regulatory Matters
----------------------------------------------------

On October 14,  1997,  the Bank's Board of  Directors  formally  approved a plan
("Plan")  to  convert  from  a  federally-chartered  mutual  savings  bank  to a
federally-chartered  stock savings bank. The Plan, which included formation of a
holding  company,  was  approved by the Office of Thrift  Supervision  (OTS) and
included the filing of a registration statement with the Securities and Exchange
Commission. The conversion was completed on April 2, 1998.

The Plan called for the common  stock of the Bank to be purchased by the holding
company and for the common stock of the holding company to be offered to various
parties in a subscription offering at a price based on an independent appraisal.
The proceeds received under the conversion were as follows:

   661,250 shares of  common stock issued
      @ $10 per share                            $6,612,500
   Cost of conversion                               410,963
                                                 ----------
   Net Proceeds                                  $6,201,537
                                                 ==========

The Bank may not  declare or pay a cash  dividend  if the effect  thereof  would
cause its net worth to be reduced  below  either the  amounts  required  for the
liquidation  account  discussed  below or the  regulatory  capital  requirements
imposed by federal regulations.

At the time of conversion,  the Bank  established a liquidation  account,  which
will be a memorandum  account that does not appear on the balance  sheet,  in an
amount  equal to its retained  income as  reflected  in the latest  consolidated
balance sheet used in the final conversion  prospectus.  The liquidation account
will be maintained for the benefit of eligible  account  holders who continue to
maintain their deposit accounts in the Bank after conversion.  In the event of a
complete  liquidation  of the  Bank  (and  only  in  such  an  event),  eligible
depositors  who  continue  to maintain  accounts  shall be entitled to receive a
distribution  from the  liquidation  account before any  liquidation may be made
with respect to common stock.

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

                                       31
<PAGE>
Note 8 - Stockholders' Equity and Regulatory Matters (Continued)
----------------------------------------------------------------

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require the Bank to maintain  minimum amounts and ratios (set forth in the table
below) of risk-based  capital (as defined in the  regulations) to  risk-weighted
assets (as defined),  tangible capital (as defined) to adjusted total assets (as
defined) and core capital (as  defined) to adjusted  total assets (as  defined).
Management believes,  as of September 30, 1999 and 1998, that the Bank meets all
capital adequacy requirements to which it is subject.

As of June 30, 1998, the most recent  notification  from the OTS categorized the
Bank as "well capitalized" under the regulatory  framework for prompt corrective
action.  To be categorized as "well  capitalized" the Bank must maintain minimum
total tangible, core and risk-based ratios as set forth in the following tables.
There are no  conditions  or events  since  that  notification  that  management
believes have changed the institution's category.

The following  tables  reconcile  capital under  generally  accepted  accounting
principles (GAAP) to regulatory capital (in thousands).
<TABLE>
<CAPTION>

                                                                     TANGIBLE              CORE              RISK-BASED
                                                                      CAPITAL             CAPITAL             CAPITAL
                                                                    ----------          ----------          ----------
<S>                                                             <C>                    <C>                 <C>
At September 30, 1999:
    Total equity                                                    $    6,108               6,108               6,108
    Unrealized (gains) losses on securities                                 67                  67                  67
    General valuation allowance                                              0                   0                 389
                                                                    ----------          ----------          ----------
    Regulatory Capital                                              $    6,175               6,175               6,564
                                                                    ==========          ==========          ==========

At September 30, 1998:
    Total equity                                                    $    5,839               5,839               5,839
    Unrealized gains on securities                                         (29)                (29)                (29)
    General valuation allowance                                              0                   0                 370
                                                                    ----------          ----------          ----------
    Regulatory Capital                                              $    5,810               5,810               6,180
                                                                    ==========          ==========          ==========
</TABLE>
The  Bank's  actual  capital  amounts  and  ratios  are  presented  (dollars  in
thousands) as follows:
<TABLE>
<CAPTION>
                                                                                                       TO BE WELL
                                                                                                    CAPITALIZED UNDER
                                                                         FOR CAPITAL                PROMPT CORRECTIVE
                                              ACTUAL                  ADEQUACY PURPOSES:            ACTION PROVISIONS:
                                     --------------------------      ----------------------     -------------------------
                                      AMOUNT             RATIO       AMOUNT           RATIO       AMOUNT           RATIO
                                     -------            -------      ------          -------     --------         -------
<S>                                 <C>                <C>        <C>               <C>        <C>             <C>
As of September 30, 1999:
   Tangible Capital
      (to adjusted total assets)      $6,175              11.91%       778              1.5%       2,593             5.0%
   Core Capital
      (to adjusted total assets)       6,175              11.91%     2,074              4.0%       2,593             5.0%
   Risk-Based Capital
      (to risk-weighted assets)        6,564              18.49%     2,840              8.0%       3,550            10.0%

As of September 30, 1998:
   Tangible Capital
      (to adjusted total assets)      $5,810              13.4%        650              1.5%       2,168             5.0%
   Core Capital
      (to adjusted total assets)       5,810              13.4%      1,301              3.0%       2,168             5.0%
   Risk-Based Capital
      (to risk-weighted assets)        6,180              21.3%      2,321              8.0%       2,901            10.0%
</TABLE>

Note 9 - Provision For Income Taxes
-----------------------------------

The income tax provision is as follows:
<TABLE>
<CAPTION>
                                                                                          YEAR ENDED SEPTEMBER 30,
                                                                                       ------------------------------
                                                                                          1999                1998
                                                                                       ----------          ----------

<S>                                                                                 <C>                    <C>
   Taxes payable currently                                                             $  209,151             173,283
   Deferred taxes (benefit)                                                               (18,366)              4,532
                                                                                       ----------          ----------
   Total tax provision                                                                 $  190,785             177,815
                                                                                       ==========          ==========
</TABLE>
                                       32
<PAGE>



Note 9 - Provision for Income Taxes (Continued)
-----------------------------------------------

The provision for income taxes  represents the portion of estimated income taxes
relating to the years ended September 30, 1999 and 1998.

Through 1995, the Bank qualified under  provisions of the Internal  Revenue Code
which  permitted  annual bad debt  deductions  based on a percentage  of taxable
income  before such  deductions.  The maximum  annual bad debt  deduction was 8%
under  the Tax  Reform  Act of  1986.  New tax  legislation  effective  for 1996
eliminates  the  percentage of taxable income method for computing the provision
for bad debts of thrift institutions and requires the recapture of the provision
for bad debts since 1987 to the extent  that the  provision  computed  under the
percentage of taxable  income method exceeds that which would have been computed
under the experience  method.  Such recapture  totals  $142,587 for the Bank and
results in an additional  income tax liability of $48,480.  This  additional tax
may be repaid over a six year period beginning in 1996 or, if certain conditions
are met,  over a six year  period  beginning  in 1998.  The full  amount  of the
recapture was accrued as of September 30, 1996.

Retained earnings at September 30, 1999 include  accumulated bad debt deductions
prior to 1988  amounting  to  approximately  $6,000 for which no  provision  for
income taxes has been made.  If, in the future,  these  amounts are used for any
purpose other than to absorb losses on bad debts,  federal  income taxes will be
imposed at the then applicable  rates.  The amount of unrecognized  deferred tax
liability is approximately $2,040.

Deferred taxes on income result from timing  differences  in the  recognition of
revenue and expense  for tax and  financial  statement  purposes.  Deferred  tax
assets have been recorded.  No valuation allowance was required.  The amount and
sources of these assets were as follows:

<TABLE>
<CAPTION>
                                                                                              SEPTEMBER 30,
                                                                                      -----------------------------
                                                                                         1999                1998
                                                                                      ----------         ----------

<S>                                                                                <C>                  <C>
Deferred Tax Assets:
   Allowance for loan losses                                                          $  122,060            115,600
   Unrealized losses on available-for-sale securities                                     40,027                  0
                                                                                      ----------         ----------
         Total                                                                           162,087            115,600
                                                                                      ----------         ----------

Deferred Tax Liabilities:
   Bad debt deduction recapture                                                           36,788             42,419
   Unrealized gains on available-for-sale securities                                           0             18,092
   Depreciation                                                                           21,908             28,183
                                                                                      ----------         ----------
      Total                                                                               58,696             88,694
                                                                                      ----------         ----------

   Net Deferred Tax Assets (Liabilities)                                              $  103,391             26,906
                                                                                      ==========         ==========
</TABLE>

The following is a summary of the differences  between the income tax expense as
shown in the accompanying  financial statements and the income tax expense which
would  result from  applying the Federal  statutory  tax rate of 34% to earnings
before taxes on income:
<TABLE>
<CAPTION>

                                                                                          YEAR ENDED SEPTEMBER 30,
                                                                                       ------------------------------
                                                                                          1999                 1998
                                                                                       ----------          ----------
<S>                                                                                  <C>                    <C>
   Expected income tax                                                                 $  183,289             163,660
   Increase (decrease) in tax resulting from:
      State and local taxes                                                                18,949              12,459
      Other, net                                                                          (11,453)              1,696
                                                                                       ----------          ----------
   Actual income tax expense                                                           $  190,785             177,815
                                                                                       ==========          ==========
</TABLE>

                                       33
<PAGE>



Note 10 - Commitments, Contingencies and Financial Instruments With Off-Balance-
--------------------------------------------------------------------------------
          Sheet Risk
          ----------

The  consolidated  financial  statements do not reflect various  commitments and
contingent  liabilities  which arise in the normal  course of business and which
involve  elements of credit risk,  interest rate risk and liquidity risk.  These
commitments  and  contingent  liabilities  are  commitments to extend credit and
standby letters of credit.  A summary of the Bank's'  commitments and contingent
liabilities is as follows:

                                                         NOTIONAL AMOUNT
                                                 -----------------------------
                                                           SEPTEMBER 30,
                                                 -----------------------------
                                                    1999               1998
                                                 -----------         ---------

  Commitments to extend credit                   $ 1,825,400         1,488,548
  Standby letters of credit                          109,790                 0

Commitments to extend credit and standby letters of credit all include  exposure
to some credit loss in the event of nonperformance  by the customer.  The Bank's
credit policies and procedures for credit  commitments are the same as those for
extensions  of credit that are  reported in the  financial  statements.  Because
these  instruments  have fixed  maturity  dates and because  many of them expire
without  being  drawn  upon,  they  do not  generally  present  any  significant
liquidity  risk to the  Bank.  The  Bank  has not  incurred  any  losses  on its
commitments in the year ended September 30, 1999 or 1998.


Note 11 - Retirement Plans
--------------------------

401(k) Plan - The Bank has a 401(k) plan,  covering all full-time  employees who
meet the plan's  eligibility  requirements.  The plan is a defined  contribution
plan. The Bank made  contributions to the plan in the amount of $-0- and $12,000
for the years ended September 30, 1999 and 1998, respectively.

Deferred  Compensation  Plan - Effective  December 15, 1996,  the Bank adopted a
deferred  compensation  plan for the  benefit  of its  officers  and  directors.
Although  the plan is to be funded  from the  general  assets of the Bank,  life
insurance  policies  were  acquired  for the  purpose of serving as the  primary
funding  source.  As of  September  30, 1999 and 1998,  the cash values of those
policies  were  $482,354  and $337,813  and the  liability  accrued for benefits
payable under the plan was $-0- and $-0-, respectively.

Employee  Stock  Ownership  Plan - Effective  April 2, 1998, the Bank adopted an
employee  stock   ownership  plan  (ESOP)  for  those  employees  who  meet  the
eligibility requirements of the plan.

The ESOP trust borrowed $529,000 on April 2, 1998 from the Company and purchased
52,900  shares of the  Company's  common stock at a price of $10 per share.  The
loan is a  ten-year  loan with  principal  payments  of  $52,900  annually  plus
interest at 8.5% and is guaranteed by the Bank.

ESOP shares are maintained in a suspense account until released to participants'
accounts.  The release of shares from the suspense  account is based on the debt
service  paid in the  year in  proportion  to the  total  of  current  year  and
remaining debt service.  Allocation of released shares to participants' accounts
is done as of  December  31 based on the then fair  market  value of the shares.
Fair market value is determined from the last published trade on or prior to the
valuation date.

                                       34
<PAGE>
Note 11 - Retirement Plans (Continued)
--------------------------------------

As of September 30, 1999 and 1998,  the ESOP held 52,900 shares of the Company's
common stock as follows:
<TABLE>
<CAPTION>

                                                                                                 SEPTEMBER 30,
                                                                                       -----------------------------
                                                                                            1999             1998
                                                                                       -----------        ----------
<S>                                                                                <C>                   <C>
Number of Shares:
         Released and allocated                                                         $    2,645                 0
   Suspense                                                                                 50,255            52,900

Fair Value:
   Released and allocated                                                               $   28,090                 0
   Suspense                                                                                533,708           529,000
</TABLE>

The  expense  recorded  by the  Company  is based on  contributions  to the ESOP
accrued  during the year in amounts  determined  by the Board of  Directors  and
represents compensation and interest as follows:

<TABLE>
<CAPTION>
                                                                                                  YEAR ENDED
                                                                                        ----------------------------
                                                                                                 SEPTEMBER 30,
                                                                                        ----------------------------
                                                                                           1999              1998
                                                                                        ----------        ----------

<S>                                                                                  <C>                   <C>
Compensation                                                                            $   27,851            37,698
Interest                                                                                    43,459            22,302
                                                                                        ----------        ----------

                                                                                        $   71,310            60,000
                                                                                        ==========        ==========
</TABLE>

Note 12 - Reconciliation of Regulatory Reports
----------------------------------------------

Net  income  and net  worth of the Bank  reported  in  these  audited  financial
statements  differs  from  amounts  in  reports  filed with the Office of Thrift
Supervision (OTS) as follows (In Thousands):

Net Income:
-----------
<TABLE>
<CAPTION>
                                                                                         YEAR ENDED SEPTEMBER 30,
                                                                                   ---------------------------------
                                                                                       1999                  1998
                                                                                   ---------------------------------

<S>                                                                             <C>                           <C>
Net Income reported to OTS                                                         $       338                   334

Reconciling Items                                                                            0                   (48)
                                                                                    ----------            ----------
Net Income for the twelve months ended
   September 30 per audited financial statement                                    $       338                   286
                                                                                    ==========            ==========
</TABLE>

<TABLE>
<CAPTION>

Net Worth:
----------
                                                                                         YEAR ENDED SEPTEMBER 30,
                                                                                    ---------------------------------
                                                                                       1999                  1998
                                                                                    -----------           -----------

<S>                                                                              <C>                         <C>
Net Worth reported to OTS                                                           $     6,108                 5,839

Reconciling Items                                                                             0                     0
                                                                                    -----------           -----------
Total Net Worth on September 30, per audited
   financial statement                                                              $     6,108                 5,839
                                                                                    ===========           ===========
</TABLE>
                                       35
<PAGE>
Note 13 - Advances From Federal Home Loan Bank
----------------------------------------------

Advances consist of the following:
<TABLE>
<CAPTION>
                                                                                             SEPTEMBER 30,
                                                                                      ----------------------------
                                                                                         1999               1998
                                                                                      ----------         ---------
<S>                                                                                 <C>               <C>
Advances payable - Federal Home Loan Bank of Atlanta, bearing interest at 5.75%,
  due October 4, 1999, collateralized by all stock in the Federal Home Loan Bank
  and qualifying first mortgage loans.                                                $2,500,000                  0
                                                                                      ==========         ==========
</TABLE>
Note 14 - Fair Values of Financial Instruments
----------------------------------------------

The estimated fair values of the Company's financial instruments are as follows:
<TABLE>
<CAPTION>
                                                       SEPTEMBER 30, 1999                    SEPTEMBER 30, 1998
                                                --------------------------------      -------------------------------
                                                   CARRYING              FAIR            CARRYING             FAIR
                                                    AMOUNT               VALUE            AMOUNT             VALUE
                                                -------------        -----------      -------------       -----------
<S>                                            <C>                 <C>              <C>               <C>
Financial assets:
   Cash and cash equivalents                      $ 1,968,695          1,968,695            371,866           371,866
   Investment securities                            6,558,701          6,558,701          5,840,709         5,840,645
   Loans, net of allowance
      for loan losses                              41,120,768         41,308,000         36,397,067        36,447,000
   Accrued interest receivable                        514,290            514,290            447,854           447,854
   Investment in Federal Home
      Loan Bank stock                                 286,700            286,700            239,800           239,800

Financial liabilities:
   Deposits                                        41,993,095         42,058,000         34,954,584        35,084,000
   Advances from Federal Home
      Loan Bank                                     2,500,000          2,500,000                  0                 0
   Accrued interest payable                           303,512            303,512            275,028           275,028
</TABLE>
The carrying  amounts in the  preceding  table are included in the  statement of
financial condition under the applicable captions.
<TABLE>
<CAPTION>
                                                       SEPTEMBER 30, 1999                    SEPTEMBER 30, 1998
                                                --------------------------------      -------------------------------
                                                   CARRYING             FAIR            CARRYING              FAIR
                                                    AMOUNT              VALUE            AMOUNT             VALUE
                                                -------------        -----------      -------------       -----------
<S>                                            <C>                  <C>               <C>               <C>
Other:
   Loan commitments                               $ 1,825,400          1,825,400          1,488,548         1,488,548
   Standby letters of credit                          109,790            109,790                  0                 0
</TABLE>

Note 15 - Related Party Transactions
------------------------------------
Related  parties to the Company are  identified  as its officers and  directors.
During  the years  ended  September  30,  1999 and  1998,  the  Company  had the
following related party transactions:
<TABLE>
<CAPTION>
                                                                                         YEAR ENDED SEPTEMBER 30,
                                                                                    -------------------------------
                                                                                        1999                1998
                                                                                    ------------         ----------
<S>                                                                               <C>                 <C>
Loans to officers and directors (balance at
   September 30), Note 4                                                            $   980,056             720,735
Deposits held for officers and directors (balance
   at September 30), Note 7                                                             395,778             381,331
Insurance premiums paid - director                                                       47,664              17,353
Legal fees paid - director                                                                5,616               8,148
Supplies purchased - officers and directors                                               3,369                 321
Furnishings purchased                                                                    78,158                   0
</TABLE>
                                       36
<PAGE>



Note 16 - Year 2000 Issue
-------------------------

The Bank is aware of the issues associated with the programming code in existing
computer  systems as the  Millennium  (Year  2000)  approaches.  The "year 2000"
problem is pervasive and complex as virtually  every computer  operation will be
affected  in some way by the  rollover  of the two digit  year  value to 00. The
issue is  whether  computer  systems  will  properly  recognize  date  sensitive
information  when  the  year  changes  to  2000.  Systems  that do not  properly
recognize such  information  could generate  erroneous data or cause a system to
fail.

The Bank is utilizing external  resources to identify,  correct or reprogram and
test  the  systems  for the  year  2000  compliance.  It is  believed  that  all
reprogramming  efforts have been completed and tested.  Management estimates the
cost of the year 2000 compliance will be $10,000.

                                       37
<PAGE>



Note 17 - Financial Information of Quitman Bancorp, Inc. (Parent Only)
----------------------------------------------------------------------

                        STATEMENT OF FINANCIAL CONDITION
                        --------------------------------

                                     Assets
                                     ------

                                                            SEPTEMBER 30,
                                                    ---------------------------
                                                        1999             1998
                                                    -----------       ---------

Cash on deposit                                      $   22,425       1,553,906
Investment in Quitman Federal Savings Bank            6,108,324       5,839,420
Investment securities available-for-sale                986,400       1,010,200
Loans receivable - subsidiary ESOP                      502,550         529,000
Accrued interest receivable                              50,975          43,702
Other assets                                              5,638               0
                                                     ----------      ----------

         Total Assets                                $7,676,312       8,976,228
                                                     ==========      ==========


                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------

Liabilities:
   Income taxes payable                              $    1,312           9,417
   Deferred income taxes payable                              0           3,058
                                                     ----------      -----------
                                                          1,312          12,475
                                                     ----------      ----------

Stockholders' Equity:
   Capital stock                                         66,125          66,125
   Additional paid in capital                         6,135,412       6,135,412
   Retained earnings                                  3,491,984       3,256,097
   Accumulated other comprehensive income (loss)        (77,699)         35,119
   ESOP loan guaranty of subsidiary                    (502,550)       (529,000)
   Treasury stock                                    (1,438,272)              0
                                                     ----------      -----------
                                                      7,675,000       8,963,753
                                                     ----------      ----------

         Total Liabilities and Stockholders' Equity  $7,676,312       8,976,228
                                                     ==========      ==========


                                       38
<PAGE>



Note 17 - Financia Information of Quitman Bancorp, Inc.(Parent Only) (Continued)
--------------------------------------------------------------------------------

                               STATEMENT OF INCOME
                               -------------------

                                                  YEAR ENDED SEPTEMBER 30,
                                              ------------------------------
                                                 1999                  1998
                                              ----------          ----------
Income:
   Equity in income of subsidiary             $  338,392             238,388
   Interest income                                99,695              43,424
                                              ----------          ----------
                                                 438,087             281,812


Expenses                                         83,416               16,378
                                              ----------          ----------

Income before taxes                              354,671             265,434

Income taxes                                       6,372               9,417
                                              ----------          ----------

Net Income                                    $  348,299             256,017
                                              ==========          ==========

                                       39
<PAGE>



Note 17 - Financial Information of Quitman Bancorp, Inc.(Parent Only)(Continued)
--------------------------------------------------------------------------------

                             STATEMENT OF CASH FLOWS
                             -----------------------
<TABLE>
<CAPTION>


                                                                                        YEAR ENDED SEPTEMBER 30,
                                                                                     ------------------------------
                                                                                        1999                 1998
                                                                                     ----------          ----------
<S>                                                                               <C>                 <C>
Cash Flows From Operating Activities:
   Net income                                                                        $  348,299             256,017
   Adjustments:
      Equity in income of subsidiary                                                   (338,392)           (238,388)
      Amortization of premium on securities                                               3,890                 278
      (Increase) decrease in accrued interest receivable                                 (7,273)            (43,702)
      Increase (decrease) in income taxes payable                                        (8,105)              9,417
                                                                                     ----------          ----------

Net Cash Provided (Used) By Operating Activities                                         (1,581)            (16,378)
                                                                                     ----------          ----------

Cash Flows From Investing Activities:
   Purchase of available-for-sale securities                                           (505,665)         (1,001,484)
   Maturity of available-for-sale securities                                            500,000                   0
   Loan to subsidiary ESOP                                                               26,450            (529,000)
   Investment in subsidiary                                                                   0          (3,100,769)
                                                                                     -----------         ----------

Net Cash Provided (Used) By Investing Activities                                         20,785          (4,631,253)
                                                                                     ----------          ----------

Cash Flows From Financing Activities:
   Issuance of 661,250 shares of common stock                                                 0           6,201,537
   Dividends paid                                                                      (112,413)                  0
   Purchase of treasury stock                                                        (1,438,272)                  0
                                                                                     ----------          ----------

Net Cash Provided By Financing Activities                                            (1,550,685)          6,201,537
                                                                                     ----------          ----------

Net Increase In Cash                                                                 (1,531,481)          1,553,906

Cash And Cash Equivalents At Beginning Of Period                                      1,553,906                   0
                                                                                     ----------          ----------

Cash And Cash Equivalents At End Of Period                                           $   22,425           1,553,906
                                                                                     ==========          ==========

Supplemental Disclosure of Cash Flow Information:
-------------------------------------------------
   Cash Paid During The Period For:
      Interest                                                                       $        0                   0
                                                                                     ==========          ==========
      Income taxes                                                                   $   14,477                   0
                                                                                     ==========          ==========

Schedule Of Non-Cash Investing And Financing Activities:
--------------------------------------------------------
   Total increase (decrease) in unrealized gains on
      Securities available-for-sale                                                  $  (25,576)              8,994
                                                                                     ==========          ==========
</TABLE>

                                       40
<PAGE>



Note 18 - 1999 Stock Option Plan
--------------------------------

The Company  adopted a Stock  Option Plan (the Plan),  which was approved by the
stockholders on April 13, 1999. The purpose of the plan is to attract and retain
qualified  personnel for positions of substantial  responsibility and to provide
additional  incentive to certain  officers,  directors,  key employees and other
persons to promote the success of the business of the Company and the Bank.  The
Plan  authorizes the granting of stock options for up to 66,125 shares of common
stock. Under the Plan, the exercise price of each option equals the market price
of the Company's  stock on the grant date,  and an option's  maximum term is ten
years. Options are granted as administered by the Board of Directors.

The fair  value of each  option  grant is  estimated  on the grant date using an
option-pricing  model with the following  weighted-average  assumptions used for
grants in the year ended  September 30, 1999:  dividend  yield 1.87%,  risk free
interest  rate of  4.81%,  expected  lives  of 5 years  for  the  options  and a
volatility rate of 23.06%.

A summary of the  statement of the  Company's  Stock Option Plan as of September
30, 1999 and the changes during the year then ended is presented below:

                                                   YEAR ENDED SEPTEMBER 30, 1999
                                                   -----------------------------
                                                                      WEIGHTED-
                                                                       AVERAGE
                                                                      EXERCISE
                                                       SHARES           PRICE
                                                   ------------       ----------

   Outstanding at beginning of year                           0                0
   Granted                                               65,788       $    10.50
   Exercised                                                  0                0
   Forfeited                                                  0                0
                                                     ----------

   Outstanding at end of year                            65,788       $    10.50
                                                     ==========

   Exercisable at September 30, 1999                     42,978            10.50
                                                     ==========

   Weighted-average fair value of options
      Granted during the year                        $     2.97
                                                     ==========

The following table summarizes information about fixed stock options outstanding
at September 30, 1999:

                                WEIGHTED-
     RANGE OF                    AVERAGE    WEIGHTED-                 WEIGHTED-
     OR ACTUAL     NUMBER       REMAINING    AVERAGE      NUMBER       AVERAGE
     EXERCISE    OUTSTANDING   CONTRACTUAL  EXERCISE    ESERCISABLE   EXERCISE
      PRICES     AT 9-30-99       LIFE        PRICE     AT 9-30-99      PRICE
      ------     ----------       ----        -----     ----------      -----

      $10.50       65,788       9 YEARS      $10.50      42,978        $10.50
                   ======                                ======

If the Company had used the fair value based method of accounting  for its Stock
Option Plan, as prescribed  by Statement of Financial  Accounting  Standards No.
123, directors and officers compensation cost in net income would have increased
by $127,645,  resulting in net income  $271,712,  net of tax. Basic earnings per
share would have declined from $.65 to $.51 and diluted earnings per share would
have declined from $.65 to $.51.


Note 19 - Restricted Stock Plan
-------------------------------

The Company  adopted a  Restricted  Stock Plan (RSP),  which was approved by the
stockholders  on April 13,  1999.  The RSP was adopted as a method of  providing
directors, officers and key employees of the Bank with a proprietary interest in
the Company in a manner  designed  to  encourage  such  persons to remain in the
employment or service of the Bank.

                                       41
<PAGE>



Note 19 - Restricted Stock Plan (Continued)
-------------------------------------------

The Bank will  contribute  sufficient  funds to the RSP to purchase common stock
representing up to 4% of the aggregate number of shares issued in the conversion
(i.e., 26,450 shares of common stock) in the open market. Alternatively, the RSP
may purchase  authorized but unissued  shares of common stock or treasury shares
from the  Company.  All of the common  stock to be  purchased by the RSP will be
purchased at the fair market value of such stock on the date of purchase.

The  RSP is  administered  by a  Committee  appointed  by the  Bank's  Board  of
Directors.  Plan  share  awards  under  the RSP  will be  determined  by the RSP
Committee.  All 26,449  shares of common  stock were  awarded  to  officers  and
directors by the RSP during the year ended  September  30, 1999.  All plan share
awards  shall be  vested  at the  rate of 20% as of  September  1,  1999 and 20%
annually thereafter.

Contributions  made by the Bank to the RSP for the year ended September 30, 1999
were as follows:

    Number of awards granted                                26,449
    Number of awards earned - 20%                            5,290
    Fair market value of Company's stock,
       per share, on September 1, 1999                     $ 11.00
                                                           -------
    Contributions                                          $58,190
                                                           =======

Stock  issued  under  this plan was  purchased  on the open  market at a cost of
$58,190, which was expensed as compensation.


                                       42

<PAGE>





<TABLE>
<CAPTION>


                              QUITMAN BANCORP, INC.
                             602 East Screven Street
                             Quitman, Georgia 31643
                                 (912) 263-7538

       Board of Directors and Executive Officers of Quitman Bancorp, Inc.


<S><C>                                          <C>
    Claude R. Butler                               John W. Romine
    Chairman of the Board                          President and owner
    Pork Producer                                  Romine Furniture Co., Inc.

    Robert L. Cunningham, III                      Melvin E. Plair
    Vice Chairman of the Board                     President and Chief Executive Officer
    Secretary & Treasurer of                       Quitman Bancorp, Inc. and Quitman
    R.L. Cunningham & Sons, Inc.                   Federal Savings Bank
    Peanut warehouse and peanut seed business
                                                   Peggy L. Forgione
    Walter B. Holwell                              Vice President and Controller
    President and owner                            Quitman Bancorp, Inc. and Quitman
    Holwell & Holwell, Inc.                        Federal Savings Bank
    Insurance agents

    Daniel M. Mitchell, Jr.
    Attorney at Law

                   ---------------------------------------------

Corporate Counsel                                  Independent Auditors
Daniel M. Mitchell, Jr. Esquire                    Stewart, Fowler & Stalvey, P.C.
110 S. Washington Street                           3208 Wildwood Plantation Drive
Quitman, Georgia  31643                            Valdosta, Georgia  31605

Special Counsel                                    Transfer Agent and Registrar
Malizia Spidi & Fisch, PC                          Registrar & Transfer Company
One Franklin Square                                10 Commerce Drive
1301 K Street, N.W., Suite 700 East                Cranford, New Jersey  07016
Washington, D.C. 20005                             (908) 497-2300

                    -------------------------------------------
</TABLE>

Our Annual  Report  for the year  ended  September  30,  1999 on Form  10-KSB is
available without charge upon written request.  For a copy of the Form 10-KSB or
any other investor information,  please write Mr. Melvin E. Plair, President and
Chief  Executive  Officer.  The Annual Meeting of  Stockholders  will be held on
January 18, 2000 at 4:30 p.m. at 602 East Screven Street, Quitman, Georgia.