<PAGE>

                                                                      Exhibit 13


                                                      QUITMAN BANCORP, INC.

                                                      ANNUAL REPORT
                                                      For the Year Ended
                                                      September 30, 2001

<PAGE>

                              Quitman Bancorp, Inc.
                                  Annual Report



                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
<S>                                                                                                <C>
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.................................................................      13

Consolidated Financial Statements............................................................      14

Notes to Consolidated Financial Statements...................................................      19

Office Locations and Other Corporate Information.............................................      44
</TABLE>

<PAGE>

Date

Dear Fellow Stockholders:

This is the fourth 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.

Since the date of our last report, we signed a merger agreement with Colony
Bankcorp, Inc. This agreement is dated October 22, 2001 and it and other
information about the proposed merger is contained in other documents that all
of our stockholders will receive.

We have a loyal customer base, a dedicated board of directors and an excellent
staff who recognize the importance of quality service.

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,



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, 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.

As discussed in Note 19 to our consolidated financial statements that are
included in this report, we have signed a merger agreement with Colony Bankcorp,
Inc. If this merger occurs, the Bank will become a subsidiary of Colony
Bankcorp, Inc. and our stockholders will become stockholders of Colony Bankcorp,
Inc.

                                       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
           ----                                              ----          ---
           October 1, 1999 to December 31, 1999             10.625        9.250

           January 1, 2000 to March 31, 2000                10.110        9.500

           April 1, 2000 to June 30, 2000                   10.500        8.000

           July 1, 2000 to September 30, 2000               9.0625        8.750

           October 1, 2000 to December 31, 2000             10.000        8.875

           January 1, 2001 to March 31, 2001                9.9375        7.750

           April 1, 2001 to June 30, 2001                    9.000        8.000

           July 1, 2001 to September 30, 2001               8.5000       13.000

The number of shareholders of record of Common Stock as of September 30, 2001,
was approximately 189. At September 30, 2001, there were 507,262 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 $1,481,204 on January 11, 2001. These dividends
were declared on December 19, 2000 in the amount of $2.92 per share. We paid
dividends on the Common Stock in the amount of $101,452 on May 31, 2000. These
dividends were declared on April 4, 2000 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, 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 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 rising

                                       4

<PAGE>
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, 2001, our
liquid asset ratio was 12.83%.

     We originate fixed rate real estate loans which approximated 91% of our
loan portfolio at September 30, 2001. 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, 2001, these liquid assets totaled $8.7 million, which was 15%
of our total liabilities of $58.2 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 and
consumer lending portfolio through, in part, the use of short-term borrowings
from the FHLB. Construction loans and consumer 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, 2001, 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>

<TABLE>
<CAPTION>
                                   Board Limit of a
                                 Percentage Change In                 Change in NPV
                          --------------------------------   ---------------------------------
        Changes                                                   Dollars
       in Market                 NII              NPV          (in thousands)      Percentages
                          ---------------  ---------------   -----------------  --------------
   <S>                    <C>              <C>               <C>                <C>
   Interest Rates(1)
   -----------------
    (basis points)
                  +400           -60%             -65%             -$3,380            -53.42%
                  +300           -60%             -60%              -2,450            -38.72%
                  +200           -40%             -40%              -1,398            -22.10%
                  +100           -20%             -25%                -565             -8.93%
                  -100           -25%             -25%                 320              5.06%
                  -200           -40%             -40%                 429              6.78%
                  -300           -50%             -50%                 593              9.38%
                  -400           -60%             -60%                 984             15.55%
</TABLE>

________________
(1)  100 basis points equals 1%.

     Management now requires a minimum NPV ratio of 6%.

     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. If interest rates were to rise materially, we could report losses.
Specifically, the computation of an instantaneous and permanent 200 basis point
decrease in market interest rates indicated an approximately 6.6% increase in
estimated pre-tax income. The computation of an instantaneous and permanent 200
basis point increase in market interest rates indicated an approximately 21.7%
decrease in estimated pre-tax income. Both of these computations (1) were based
on financial information at September 30, 2001, (2) assumed net income over the
12 months following September 30, 2000 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 3.56% and our consumer loans and
fixed rate mortgage loans were assumed to yield 9.00% and 7.50%, 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

                                       6

<PAGE>

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 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.

Financial Condition

     Total consolidated assets increased $4.3 million, or 7.11% to $64.8 million
at September 30, 2001, from $60.5 million at September 30, 2000. The increase in
total assets reflects a $3.4 million increase in loans receivable. Our increase
in loans receivable is mainly due to increased demand for loans in our market
area.

     Deposits increased $8.2 million or 17.3% to $55.5 million at September 30,
2001 from $47.3 million at September 30, 2000. The increase in fiscal 2001 was a
result of competitive pricing to fund loan demand. Advances from the Federal
Home Loan Bank ("FHLB") of Atlanta decreased $3.0 million to $2.0 million. Other
liabilities increased by $79,000 primarily due to an increase in accrued
expenses at September 2001. Our equity decreased by $1.0 million primarily due
to the payment of a special dividend of $2.92 per share in January 2001 which
was partially offset by current year net income and a reduction of the
receivable from the Bank's employee stock ownership plan.

                                       7

<PAGE>

Average Balance Sheet

     The following table sets forth certain information relating to the
Company'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,
                                                      ----------------------------------------------------------------------------
                                                                        2001                                    2000
                                                      --------------------------------------       -------------------------------
                                                          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) ..............................     $   50,794       4,752      9.36%       $   45,086     4,113      9.12%
                                                         ----------
  Mortgage-backed securities .......................          1,413          62      4.39               958        60      6.26
  Investment securities ............................          5,547         328      5.92             5,898       336      5.70
  Other interest-earning assets ....................          1,555          71      6.15               580        36      6.21
                                                         ----------   ---------                  ----------  --------
   Total interest-earning assets ...................         58,909       5,213      8.85            52,522     4,545      8.65
Non-interest-earning assets ........................          3,739          --                       4,134        --
                                                         ----------   ---------                  ----------  --------
    Total assets ...................................     $   62,648       5,213                  $   56,656     4,545
                                                         ==========   =========                  ==========  ========

Interest-bearing liabilities:
  NOW Accounts .....................................     $    2,134          63      2.96        $    2,202        67      3.04
  Savings accounts .................................          2,361          95      4.03             2,157        86      3.99
  Money market accounts ............................             --          --        --                --        --        --
  Certificates of deposit ..........................         46,457       3,012      6.49            38,700     2,330      6.02
  Other liabilities ................................                                 5.25                                  6.38
                                                              4,425         232                       4,230       270
                                                         ----------   ---------                  ----------  --------
    Total interest-bearing liabilities .............         55,377       3,402      6.15            47,289     2,753      5.82
Non-interest bearing liabilities ...................            604          --                       1,717        --
                                                         ----------   ---------                  ----------  --------
    Total liabilities ..............................         55,981       3,402                      49,006     2,753
                                                                      ---------                              --------
Equity .............................................          6,667                                   7,650
                                                         ----------                              ----------
    Total liabilities and retained earnings ........     $   62,648                              $   56,656
                                                         ==========                              ==========
Net interest income ................................                  $   1,811                              $  1,792
                                                                      =========                              ========
Interest rate spread(2) ............................                                 2.70%                                 2.83%
Net yield on interest-earning assets(3) ............                                 3.08%                                 3.41%
Ratio of average interest-earning assets
 to average interest-bearing liabilities ...........                               106.38%                               111.07%
</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.

                                        8

<PAGE>

     The table below sets forth certain information regarding changes in
interest income and interest expense of the Company 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,
                                     ----------------------------------------------------------------------------------------------
                                                    2001 vs. 2000                                    2000 vs. 1999
                                     ---------------------------------------------     --------------------------------------------
                                                  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 ................. $     521  $       104  $      14   $     639     $    572  $       31   $        5    $   608
  Investment securities ............         6          (12)        --          (6)          39          (7)          (1)        31
  Other interest-earning assets ....        36           --         (1)         35            6          (1)          --          5
                                     ---------  -----------  ---------   ---------     --------  ----------   ----------    -------

                                     $     563  $        92  $      13   $     668     $    617  $       23   $        4    $   644
                                     ---------  -----------  ---------   ---------     --------  ----------   ----------

Interest expense:
  NOW accounts ..................... $      (2) $        (2) $      --   $      (4)          14  $       (7)  $       (2)   $     5
  Savings accounts .................         8            1         --           9           13          (3)          (1)         9
  Money market accounts ............        --           --         --          --           --          --           --         --
  Certificate of deposit ...........       466          181         35         682          236          57            7        300
  Other liabilities ................        12          (48)        (2)        (38)         199           5           31        235
                                     ---------  -----------  ---------   ---------     --------  ----------   ----------    -------
    Total interest-bearing
      Liabilities .................. $     484  $       132  $      33   $     649     $    462  $       52   $       35    $   549
                                     ---------  -----------  ---------   ---------     --------  ----------   ----------    -------

Net change in interest income ...... $      79  $       (40)       (20)  $      19     $    155  $      (29)  $      (31)   $    95
                                     =========  ===========  =========   =========     ========  ==========   ==========    =======
</TABLE>

                                        9

<PAGE>

Results of Operations for the Years Ended September 30, 2001 and 2000

         Net Income. Net income increased $6,528 or 2.4% from $272,305 for
fiscal 2000 to $278,833 for fiscal 2001. The increase was primarily the result
of a decrease in income tax expense of $6,130.

         Net Interest Income. Our net interest income increased $18,714 or 1.1%
to $1,810,381 in fiscal 2001 compared to $1,791,667 in fiscal 2000. The increase
was due primarily to the growth of average interest-earning assets from $52.5
million in fiscal 2000 to $58.9 million in fiscal 2001.

         The increase in our average interest-earning assets of $6.4 million
reflects an increase of $5.7 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 decreased .13% and net interest margin
decreased .33% in fiscal 2001 compared to fiscal 2000. This was due to the
increase in the yield on interest-earning assets from 8.65% in fiscal 2000 to
8.85% in fiscal 2001 and the increase in the interest cost of average
interest-bearing liabilities from 5.82% in fiscal 2000 to 6.15% in fiscal 2001.

         The yield on our average interest-earning assets increased in fiscal
2001 primarily due to an increase in the yield on loans receivable. This
increase in yield on our loans receivable primarily reflected an increase in the
average interest rates.

         The increase 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 $38.7 million in fiscal 2000 to $46.5 million in fiscal 2001 and a
nominal increase in the average rates.

         Provision for Loan Losses. Our provision for loan losses decreased $150
from $60,150 for fiscal 2000 to $60,000 for fiscal 2001. The decrease in the
provision for fiscal 2001 was the result of management's review of our loan
portfolio, the potential losses in our loan portfolio and our history of
experiencing only nominal losses on loans in recent years.

         Noninterest Income. Our non-interest income increased approximately
$84,000 in fiscal 2001 as compared to fiscal 2000. This was attributable to a
gain on sale of other assets of $3,500, an increase in late charges of $11,000,
service charge income of $45,000 and other income of $37,000 primarily
consisting of cash surrender values of life insurance and refunds of prior year
Georgia income taxes, which was partially offset by a decrease in gain on sale
of other real estate of $10,000 in fiscal 2001.

         Noninterest Expense. Our non-interest expense increased by $102,273 or
6.74% from $1,518,129 for fiscal 2000 to $1,620,402 for fiscal 2001. The
increase was primarily attributable to increases in compensation and other
personnel expense and other operating expenses.

         Non-interest expense has increased as a result of staffing and
equipping the bank building opened in April 1999. These expenses have stabilized
and our operations in the building have now produced a higher overall level of
loan and deposit activity. Our ability to fully offset these increased
non-interest expenses will depend in part on our ability to continue to increase
the size of the loan portfolio without increasing the provision for loan losses
and increase the amount of deposits we hold without substantially increasing
interest expense. Our non-interest expense would further increase if we built
the new branch discussed below.

         We 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 also increased our
expenses in fiscal year 2000 and 2001. Although our checking account funds

                                       10

<PAGE>

have increased, we have not yet received sufficient other income from the ATM to
offset its additional cost.

         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.

         As discussed in Note 19 to our consolidated financial statements, we
have signed a merger agreement with Colony Bankcorp, Inc. Although we and Colony
will remain separate prior to the consummation of the merger, we may begin to
change the way we categorize and account for certain items that are reflected in
our financial statements to reduce the number of changes that are to be made
following the merger. It is not expected that any of these changes will be
material to our operations. Although there could be a one time charge to cover
expenses incurred in preparing for the merger, this charge, if one is taken,
also is not expected to be material.

         Income Tax Expense. Our income tax expense decreased $6,130 from
$136,247 in fiscal 2000 to $130,117 in fiscal 2001 due to the increase in
deferred income tax assets resulting from timing differences in the recognition
of revenue and expense for tax and financial statement purposes.

         Return on Equity and Assets:

<TABLE>
<CAPTION>
                                                                 YEAR ENDED SEPTEMBER 30,
                                                                 -----------------------
                                                                   2001            2000
                                                                   ----            ----
  <S>                                                            <C>               <C>
  Return on Assets (Net income divided
    by average assets)                                             .45%             .48%
  Return on Equity (Net income divided by
    average equity)                                               3.91%            3.56%
  Dividend Payout Ratio (Dividends paid
    divided by net income)                                      531.22%           37.26%
  Equity to Assets Ratio (Equity divided by total
    assets)                                                      10.28%           12.61%
</TABLE>

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 12.8% and 13% at September 30, 2001 and 2000, respectively.

                                       11

<PAGE>

         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, 2001 was $682,047 as compared to $432,766 for the year ended
September 30, 2000.

         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, 2001 totaled
$4 million, a decrease of $4.3 million from September 30, 2000. The decrease was
primarily attributable to a reduction of $4.4 million in cash to fund the net
increase in loan originations, partially offset by the proceeds from the
maturity and call of investment securities and sale of foreclosed property.

         Net cash provided by our financing activities (i.e., cash receipts
                                                        ---
primarily from net increases in deposits and net FHLB advances) for fiscal 2001
totaled $3.7 million compared to $7.5 million for fiscal 2000. This is a result
of a net increase in deposits of $8.1 million in fiscal 2001, as compared to an
increase of $5.3 million in fiscal 2000, offset by payments of $3.0 million on
FHLB advances and $1.5 million in dividends.

         During the fiscal year ending September 30, 2001, approximately $36.0
million of certificates of deposit (approximately 65% 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 Company 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, 2001, the
Company shows unrealized gains, net of tax effect, totaling $113,610 due to the
recent downward surge in interest rates as the national money markets reacted to
actions by the Federal Open Market Committee. The unrealized gains combined with
net operating income of $278,833 yields a net increase in the Company's capital
of $392,443, net of applicable taxes. On January 11, 2001 the Company paid a
special dividend of $1,481,204. This dividend less the net operating income and
unrealized gains caused a decrease in the book value of common stock from $15.03
on September 30, 2000 to $13.13 as of September 30, 2001. The Bank's capital
continues to exceed regulatory requirements and continues to be adequate to
support future asset growth.

                                       12

<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, 2001 and 2000, 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the 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, 2001 and 2000, and the
consolidated results of their operations and their consolidated cash flows for
the years then ended in conformity with accounting principles generally accepted
in the United States of America.



/s/ Stewart, Fowler & Stalvey, P.C.


Valdosta, Georgia
October 17, 2001, except for Note 19, as to which the date is October 22, 2001

                                       13

<PAGE>

                      QUITMAN BANCORP, INC. AND SUBSIDIARY

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

                                     ASSETS
                                     ------

<TABLE>
<CAPTION>
                                                                                           SEPTEMBER 30,
                                                                                ---------------------------------
                                                                                     2001               2000
                                                                                -------------       -------------
<S>                                                                             <C>                 <C>
Cash and Cash Equivalents, Notes 1 and 2:

   Cash and amounts due from depository institutions                            $     792,577             598,471
   Interest-bearing deposits in other banks                                         1,144,567           1,064,984
   Federal funds sold                                                                 100,000                   0
                                                                                -------------       -------------
         Total Cash and Cash Equivalents                                            2,037,144           1,663,455
Investment securities:
   Available-for-sale (fair value $6,682,461 in 2001 and $6,546,404
      in 2000), Notes 1 and 3                                                       6,682,461           6,546,404
Loans receivable, Notes 1 and 4                                                    52,536,279          49,052,004
Office properties and equipment, at cost, net of accumulated
   depreciation, Notes 1 and 5                                                      1,400,845           1,483,607
Real estate acquired in settlement of loans, Note 1                                   137,248                   0
Accrued interest receivable, Note 6                                                   579,296             583,330
Investment required by law-stock in Federal
   Home Loan Bank, at cost, Note 13                                                   372,100             320,300
Cash value of life insurance, Note 11                                                 785,950             626,638
Other assets, Notes 1 and 9                                                           295,164             193,195
                                                                                -------------       -------------

         Total Assets                                                           $  64,826,487          60,468,933
                                                                                =============       =============

                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------
Liabilities:
   Deposits, Note 7                                                             $  55,458,001          47,336,018
   Advances from Federal Home Loan Bank, Note 13                                    2,000,000           5,000,000
   Accrued interest payable                                                           427,435             337,586
   Income taxes payable, Note 9                                                        45,121              14,770
   Other liabilities                                                                  235,592             156,446
                                                                                -------------       -------------
      Total Liabilities                                                            58,166,149          52,844,820
                                                                                -------------       -------------

Stockholders' Equity:
   Common stock, $.10 par value, 4,000,000 shares authorized, 661,250
      shares issued and 507,262 shares outstanding                                     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                                                       5,410,028           6,135,412
   Retained Earnings, Note 8                                                        3,185,849           3,662,836
   Accumulated other comprehensive income (loss)                                      113,610             (72,086)
   Treasury stock, at cost, 153,988 shares                                         (1,718,524)         (1,718,524)
   Receivable from ESOP, Note 11                                                     (396,750)           (449,650)
                                                                                -------------       -------------
      Total Stockholders' Equity                                                    6,660,338           7,624,113
                                                                                -------------       -------------

         Total Liabilities and Stockholders' Equity                             $  64,826,487          60,468,933
                                                                                =============       =============
</TABLE>

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

                                       14

<PAGE>

                      QUITMAN BANCORP, INC. AND SUBSIDIARY

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


<TABLE>
<CAPTION>
                                                                                       YEAR ENDED SEPTEMBER 30,
                                                                                ---------------------------------------
                                                                                    2001                      2000
                                                                                -------------             -------------
<S>                                                                             <C>                       <C>
Interest Income:
   Loans receivable:
      First mortgage loans                                                      $   4,361,091                 3,835,384
      Consumer and other loans                                                        390,380                   277,221
   Interest on FHLMC Pool                                                                  55                       104
   Investment securities                                                              390,155                   396,245
   Interest-bearing deposits                                                           59,969                    33,865
   Federal funds sold                                                                  10,850                     2,119
                                                                                -------------             -------------
         Total Interest Income                                                      5,212,500                 4,544,938
                                                                                -------------             -------------

Interest Expense:
   Deposits, Note 7                                                                 3,169,462                 2,483,483
   Interest on Federal Home Loan Bank advances                                        232,657                   269,788
                                                                                -------------             -------------
         Total Interest Expense                                                     3,402,119                 2,753,271
                                                                                -------------             -------------

Net Interest Income                                                                 1,810,381                 1,791,667
Provision for loan losses, Notes 1 and 4                                               60,000                    60,154
                                                                                -------------             -------------
Net Interest Income After Provision for Losses                                      1,750,381                 1,731,513
                                                                                -------------             -------------

Non-Interest Income:
   Gain (loss) on sale of securities                                                   (7,357)                   (7,387)
   Gain on sale of fixed assets                                                         3,465                         0
   Gain (loss) on sale of other real estate                                            10,444                    20,610
   Late charges on loans                                                               49,703                    38,904
   Insurance commissions                                                                8,595                    10,517
   Service charge income                                                              150,355                   105,556
   Other income                                                                        63,766                    26,968
                                                                                -------------             -------------
         Total Non-Interest Income                                                    278,971                   195,168
                                                                                -------------             -------------

Non-Interest Expense:
   Compensation                                                                       572,427                   540,266
   Other personnel expenses, Note 11                                                  271,863                   255,153
   Occupancy expenses of premises                                                      52,257                    49,873
   Furniture and equipment expenses                                                   194,295                   211,765
   Business occupation and other taxes                                                 69,960                    59,630
   Other operating expenses                                                           459,600                   401,442
                                                                                -------------             -------------
         Total Non-Interest Expense                                                 1,620,402                 1,518,129
                                                                                -------------             -------------

Income Before Income Taxes                                                            408,950                   408,552
Provision for Income Taxes, Note 9                                                    130,117                   136,247
                                                                                -------------             -------------
Net Income                                                                       $    278,833                   272,305
                                                                                =============             =============

Earnings Per Share, Note 1:
   Basic                                                                         $        .60                       .59
         ===                                                                    =============              ============
   Diluted                                                                       $        .58                       .59
                                                                                =============              ============
</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 COMPREHENSIVE INCOME
                 -----------------------------------------------

<TABLE>
<CAPTION>
                                                                                         YEAR ENDED SEPTEMBER 30,
                                                                                ---------------------------------------
                                                                                    2001                      2000
                                                                                -------------             -------------
<S>                                                                             <C>                       <C>

Net Income                                                                      $     278,833                   272,305
                                                                                -------------             -------------

Other comprehensive income, net of tax:
   Unrealized gains on securities:
     Unrealized holding gains arising during period, net of
       tax of $93,160 (2000 - $81)                                                    180,840                       738
     Less:  reclassification adjustment for
       losses included in net income, net of tax benefit
       of $2,502 (2000 - $2,811)                                                        4,856                     4,875
                                                                                -------------             -------------
     Other comprehensive income                                                       185,696                     5,613
                                                                                -------------             -------------

Comprehensive Income                                                            $     464,529                   277,918
                                                                                =============             =============
</TABLE>

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

                                       16

<PAGE>

                      QUITMAN BANCORP, INC. AND SUBSIDIARY

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                -----------------------------------------------
<TABLE>
<CAPTION>
                                                                                         ACCUMULATED
                                                                                            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,
 1999                  533,960    $  66,125   6,135,412      3,491,984       (502,550)       (77,699)   (1,438,272)   7,675,000

Acquisition of
 shares of treasury
 stock                 (26,698)           0           0              0              0              0      (280,252)    (280,252)

Net income                   0            0           0        272,305              0              0             0      272,305

Dividends paid               0            0           0       (101,453)             0              0             0     (101,453)

Change in loan
 receivable from
 employee stock
 ownership plan              0            0           0              0         52,900              0             0       52,900

Change in other
 comprehensive
 income (loss)               0            0           0              0              0          5,613             0        5,613
                    ----------    ---------   ---------    -----------    -----------   ------------     ---------    ---------

Balances,
 September 30,
 2000                  507,262       66,125   6,135,412      3,662,836       (449,650)       (72,086)   (1,718,524)   7,624,113

Net income                   0            0           0        278,833              0              0             0      278,833

Dividends paid               0            0    (725,384)      (755,820)             0              0             0   (1,481,204)

Change in loan
 receivable from
 employee stock
 ownership plan              0            0           0              0         52,900              0             0       52,900

Change in other
 comprehensive

 income (loss)               0            0           0              0              0        185,696             0      185,696
                    ----------    ---------   ---------    -----------    -----------   ------------     ---------    ---------

Balances,
 September 30,
 2001                  507,262    $  66,125   5,410,028      3,185,849       (396,750)       113,610    (1,718,524)   6,660,338
                    ==========    =========   =========    ===========    ===========   ============     =========    =========
</TABLE>

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

                                       17

<PAGE>

                      QUITMAN BANCORP, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------

<TABLE>
<CAPTION>
                                                                                          YEAR ENDED SEPTEMBER 30,
                                                                                ---------------------------------------
                                                                                    2001                      2000
                                                                                -------------             -------------
<S>                                                                             <C>                       <C>
Cash Flows From Operating Activities:
------------------------------------
   Net income                                                                   $     278,833                   272,305
   Adjustments to reconcile net income to net cash
      provided by operating activities:
      Depreciation                                                                    129,608                   142,339
      Provision for loan losses                                                        60,000                    60,154
      Deferred income taxes (benefit)                                                 (12,745)                   12,013
      Amortization (Accretion) of securities                                           14,411                    11,371
      (Gain) Loss on sale of other real estate                                        (10,444)                  (20,610)
      (Gain) Loss on sale of securities                                                 7,357                     7,387
      (Gain) Loss on sale of fixed assets                                              (3,465)                        0
   Change in Assets and Liabilities:
      (Increase) Decrease in accrued interest receivable                                4,034                   (70,109)
      Increase (Decrease) in accrued interest payable                                  89,849                    34,074
      Increase (Decrease) in other liabilities                                         79,146                     8,285
      Increase (Decrease) in income taxes payable                                      30,351                    13,458
      (Increase) Decrease in other assets                                              15,112                   (37,901)
                                                                                -------------             -------------
         Net cash provided by operating activities                                    682,047                   432,766
                                                                                -------------             -------------

Cash Flows From Investing Activities:
------------------------------------
   Capital expenditures                                                               (59,381)                  (24,548)
   Purchase of available-for-sale securities                                       (4,611,490)                 (873,319)
   Proceeds from sale of foreclosed property                                          121,470                   228,057
   Proceeds from call of available-for-sale securities                              3,374,776                         0
   Net (increase) decrease in loans                                                (3,792,549)               (8,059,792)
   Purchase of stock in Federal Home Loan Bank                                        (51,800)                  (33,600)
   Principal collected on mortgage-backed securities                                  420,093                   113,885
   Proceeds from sale of available-for-sale securities                                740,156                   541,477
   Increase in cash value of life insurance                                          (159,312)                 (144,284)
   Proceeds from sale of fixed assets                                                  16,000                         0
                                                                                -------------             -------------
         Net cash provided (used) by investing activities                          (4,002,037)               (8,252,124)
                                                                                -------------             -------------

Cash Flows From Financing Activities:
------------------------------------
   Net increase (decrease) in deposits                                              8,121,983                 5,342,923
   Proceeds from Federal Home Loan Bank advances                                            0                 2,500,000
   Payments on Federal Home Loan Bank advances                                     (3,000,000)                        0
   (Increase) Decrease in loan to employee stock ownership plan                        52,900                    52,900
   Purchase of treasury stock                                                               0                  (280,252)
   Dividends paid                                                                  (1,481,204)                 (101,453)
                                                                                -------------             -------------
         Net cash provided (used) by financing activities                           3,693,679                 7,514,118
                                                                                -------------             -------------
</TABLE>

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

                                       18

<PAGE>

                      QUITMAN BANCORP, INC. AND SUBSIDIARY

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                ------------------------------------------------

<TABLE>
<CAPTION>
                                                                                       YEAR ENDED SEPTEMBER 30,
                                                                                ---------------------------------------
                                                                                    2001                      2000
                                                                                -------------             -------------
<S>                                                                             <C>                       <C>
Net Increase (Decrease) in cash and cash equivalents                                  373,689                  (305,240)

Cash and Cash Equivalents at Beginning of Period                                    1,663,455                 1,968,695
                                                                                -------------             -------------

Cash and Cash Equivalents at End of Period                                      $   2,037,144                 1,663,455
                                                                                =============             =============

Supplemental Disclosures of Cash Flow Information
-------------------------------------------------

   Cash paid during the year for:
      Income taxes                                                              $     103,420                   130,744
                                                                                =============             =============
      Interest                                                                  $   3,312,270                 2,719,197
                                                                                =============             =============

Schedule of Non-Cash Investing and Financing Activities
-------------------------------------------------------

   Total increase (decrease) in unrealized gains
      on securities available-for-sale                                          $     281,360                     8,504
                                                                                =============             =============
   Loans transferred to foreclosed real estate and other property               $     248,274                    68,402
                                                                                =============             =============
</TABLE>

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

                                       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 judgment, 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.

                                       20

<PAGE>

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

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.

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 judgment,
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, deferred compensation, 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 $29,595 and $112,512 at
September 30, 2001 and 2000, 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,
amounts due from banks (excluding certificates of deposit) and federal funds
sold.

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
judgments 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.

                                       21

<PAGE>

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

Advertising costs: The Bank expenses advertising costs as they are incurred.
Advertising costs charged to expenses were $40,032 and $33,678 for the years
ended September 30, 2001 and 2000, respectively.

Stock-based compensation: In October 1995, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards (SFAS) No. 123,
Accounting for Stock-Based Compensation. The Company has elected to disclose the
proforma effect on net income as if the fair value based method of accounting
for stock options had been used.

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 judgments 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.

                                       22

<PAGE>

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

    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.

    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,
                                                                                ---------------------------------------
                                                                                    2001                      2000
                                                                                -------------             -------------
    <S>                                                                         <C>                       <C>
    (a)  Net income available to shareholders                                   $     278,833                   272,305
                                                                                =============             =============

         Denominator:
           Weighted-average shares outstanding                                        507,262                   512,085
           Less:  ESOP weighted-average shares
             Unallocated                                                               40,998                    46,741
                                                                                -------------             -------------

    (b)  Basic EPS weighted-average shares outstanding                                466,264                   465,344

         Effect of dilutive securities:
           Stock options                                                               17,351                         0
                                                                                -------------             -------------

    (c)  Diluted EPS weighted-average shares outstanding                              483,615                   465,344
                                                                                =============             =============

           Basic earnings per share (a/b)                                       $         .60                       .59
                                                                                =============             =============
           Diluted earnings per share (a/c)                                     $         .58                       .59
                                                                                =============             =============
</TABLE>

    Segment reporting: The Company is engaged in the activity of providing
    traditional banking services through its savings 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 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

                                       23

<PAGE>

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

    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 had no material
    impact on the Company's financial statements.

    In June 1999, the FASB issued SFAS No. 136 (Transfers of Assets to a
    Not-for-Profit Organization or Charitable Trust that Raises or Holds
    Contributions for Others). This statement establishes standards for
    transactions in which an entity, the donor, makes a contribution by
    transferring assets to a not-for-profit organization or charitable trust,
    the recipient organization, that accepts the assets from the donor and
    agrees to use those assets on behalf of or transfer those assets, the return
    on investment of those assets, or both to another entity, the beneficiary,
    that is specified by the donor. It also establishes standards for
    transactions that take place in a similar manner but are not contributions
    because the transfers are revocable, repayable or reciprocal. This statement
    is effective for financial statements issued for fiscal periods beginning
    after December 15, 1999. The adoption of this statement had no material
    impact on the Company's financial statements.

    In June 2000, the FASB issued SFAS No. 138 (Accounting for Certain
    Derivative Instruments and Certain Hedging Activities). This statement
    amends the accounting and reporting standards of SFAS No. 133 for certain
    derivative instruments and certain hedging activities. Adoption of this
    statement had no material impact on the Company's financial statements.

    In June 2000, the FASB issued SFAS No. 139 (Rescission of SFAS No. 53 and
    amendments to SFAS No. 63, 89 and 121). This statement rescinds SFAS No. 53
    and amends SFAS No. 63, 89 and 121, which established standards for
    financial reporting by producers and distributors of motion picture films.
    This statement will have no impact on the Company's financial statements.

    In September 2000, the FASB issued SFAS No. 140 (Accounting for Transfers
    and Servicing of Financial Assets and Extinguishments of Liabilities). This
    statement replaces SFAS No. 125. It revises the standards for accounting for
    securitizations and other transfers of financial assets and collateral and
    requires certain disclosures, but it carries over most of Statement 125's
    provisions without reconsideration. 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.
    This statement is effective for transfers and servicing of financial assets
    and extinguishments of liabilities occurring after March 31, 2001. Adoption
    of this statement had no material impact on the Company's financial
    statements.

                                       24

<PAGE>

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

    In June 2001, the FASB issued SFAS No. 141 (Business Combinations). This
    statement addresses financial accounting and reporting for business
    combinations and supersedes APB Opinion No. 16, Business Combinations, and
    FASB Statement No. 38, Accounting for Preacquisition Contingencies of
    Purchased Enterprises. All business combinations in the scope of this
    statement are to be accounted for using one method--the purchase method. The
    provisions of this statement apply to all business combinations initiated
    after June 30, 2001. Adoption of this statement had no material impact on
    the Company's financial statements.

    In June 2001, the FASB issued SFAS No. 142 (Goodwill and Other Intangible
    Assets). This statement addresses financial accounting and reporting for
    acquired goodwill and other intangible assets and supersedes APB Opinion No.
    17, Intangible Assets. It addresses how intangible assets that are acquired
    individually or with a group of other assets (but not those acquired in a
    business combination) should be accounted for in financial statements upon
    their acquisition. This statement also addresses how goodwill and other
    intangible assets should be accounted for after they have been initially
    recognized in the financial statements. This statement is effective in
    fiscal years beginning after December 15, 2001. Adoption of this statement
    is not expected to have a material impact on the Company's financial
    statements.

    In June 2001, the FASB issued SFAS No. 143 (Accounting for Asset Retirement
    Obligations). This statement addresses financial accounting and reporting
    for obligations associated with the retirement of tangible long-lived assets
    and the associated asset retirement costs. This statement applies to all
    entities. It applies to legal obligations associated with the retirement of
    long-lived assets that result from the acquisition, construction,
    development and (or) the normal operations of a long-lived asset, except for
    certain obligations of lessees. As used in this statement, a legal
    obligation is an obligation that a party is required to settle as a result
    of an existing or enacted law, statute, ordinance, or written or oral
    contract or by legal construction of a contract under the doctrine of
    promissory estoppel. This statement amends FASB Statement No. 19, Financial
    Accounting and Reporting by Oil and Gas Producing Companies. This statement
    is effective for fiscal years beginning after June 15, 2002. Adoption of
    this statement is not expected to have a material impact on the Company's
    financial statements.

    In August 2001, the FASB issued SFAS No. 144 (Accounting for the Impairment
    or Disposal of Long-Lived Assets). This statement addresses financial
    accounting and reporting for the impairment or disposal of long-lived
    assets. This statement supersedes SFAS No. 121 (Accounting for the
    Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of)
    and the accounting and reporting provisions of APB Opinion No. 30.
    (Reporting the Results of Operations--Reporting the Effects of Disposal of a
    Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
    Events and Transactions) for the disposal of a segment of a business (as
    previously defined in that Opinion). This statement also amends ARB No. 51
    (Consolidated Financial Statements) to eliminate the exception to
    consolidation for a subsidiary for which control is likely to be temporary.
    This statement is effective for financial statements issued for fiscal years
    beginning after December 15, 2001. Adoption of this statement is not
    expected to have a material impact on the Company's financial statements.

                                       25

<PAGE>

Note 2 - Cash
-------------

As of September 30, 2001, the Bank had cash on deposit with certain commercial
banks in excess of federal depository insurance as follows:

                                                                  FEDERAL
                          BOOK                 BANK             DEPOSITORY
                         BALANCE              BALANCE            INSURANCE
                       ------------         ------------       --------------

        Total          $  1,479,189              387,359              311,434
                       ============         ============       ==============

As of September 30, 2000, the Bank had cash on deposit with certain commercial
banks in excess of federal depository insurance as follows:


                                                                  FEDERAL
                          BOOK                 BANK             DEPOSITORY
                         BALANCE              BALANCE            INSURANCE
                       ------------         ------------       -------------

        Total          $  1,249,905              350,906             331,446
                       ============         ============       =============

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

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

Securities available-for-sale consist of the following:
------------------------------------------------------

As of September 30, 2001:

<TABLE>
<CAPTION>
                                                                         GROSS            GROSS
                                                    AMORTIZED          UNREALIZED        UNREALIZED        MARKET
                                                      COST               GAINS            LOSSES            VALUE
                                                  --------------     -------------    --------------    -------------
<S>                                              <C>                 <C>              <C>               <C>
Obligations of other U.S.
   Government agencies                            $    4,035,186           116,908                 0        4,152,094
Mortgage-backed securities                             1,782,102            20,471                 0        1,802,573
State, County and Municipal securities                   693,036            34,758                 0          727,794
                                                  --------------     -------------    --------------    -------------

                                                  $    6,510,324           172,137                 0        6,682,461
                                                  ==============     =============    ==============    =============

<CAPTION>
As of September 30, 2000:

                                                                         GROSS            GROSS
                                                    AMORTIZED         UNREALIZED        UNREALIZED         MARKET
                                                      COST               GAINS            LOSSES            VALUE
                                                 ---------------  ----------------    --------------    -------------
<S>                                              <C>                 <C>              <C>               <C>
Obligations of other U.S.
   Government agencies                            $    4,928,756                 0            97,773        4,830,983
Mortgage-backed securities                             1,033,594             3,543            12,192        1,024,945
State, County and Municipal securities                   693,277               821             3,622          690,476
                                                  --------------     -------------    --------------    -------------

                                                  $    6,655,627             4,364           113,587        6,546,404
                                                  ==============     =============    ==============    =============
</TABLE>


                                       26

<PAGE>

Note 3 - Investment Securities (Continued)
------------------------------------------

The amortized cost and estimated market value of debt securities at September
30, 2001, by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
                                                                            SECURITIES
                                                                         AVAILABLE-FOR-SALE
                                                               ------------------------------------
                                                                  AMORTIZED              MARKET
                                                                    COST                  VALUE
                                                               --------------         -------------
<S>                                                            <C>                    <C>
Due in one year or less                                        $       99,999               102,844
Due after one year through five years                               2,691,159             2,778,516
Due after five years through ten years                              1,911,041             1,946,669
Due after ten years through fifteen years                             320,000               341,870
Due after fifteen years through twenty years                          203,035               210,958
Due after twenty years                                              1,285,090             1,301,604
                                                               --------------         -------------

                                                               $    6,510,324             6,682,461
                                                               ==============         =============
</TABLE>

Proceeds from sales of available-for-sale securities during the years ended
September 30, 2001 and 2000 were $740,156 and $541,477 with gross gains (losses)
of $(7,357) and $(7,387) being realized, respectively. Proceeds from maturities
of available-for-sale securities during the years ended September 30, 2001 and
2000 were $0 and $0, respectively. Proceeds from calls of available-for-sale
securities during the years ended September 30, 2001 and 2000 were $3,374,776
and $0, respectively.

Securities with an amortized cost of $598,161 and $780,188 at September 30, 2001
and 2000, respectively, were pledged to secure public monies as required by law.

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

A summary of loans receivable is presented below:

                                                      SEPTEMBER 30,
                                           --------------------------------
                                                2001              2000
                                           --------------    --------------
First mortgage loans                       $   47,462,946        43,030,387
Construction loans                              2,765,465         4,155,435
FHLMC pool                                            441             1,044
Share loans                                       672,302           551,954
Consumer loans                                  4,060,859         3,248,972
                                           --------------    --------------

                                               54,962,013        50,987,792

Loans in process                               (1,917,228)       (1,425,127)
Allowance for loan losses                        (450,386)         (438,456)
Deferred loan origination fees                    (58,120)          (72,205)
                                           ---------------   --------------

                                           $   52,536,279        49,052,004
                                           ==============    ==============

                                       27

<PAGE>

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

An analysis of changes in the allowance for loan losses is as follows:

                                                YEAR ENDED SEPTEMBER 30,
                                            --------------------------------
                                                2001                2000
                                            ------------      --------------
   Balance at beginning of period           $    438,456             389,000
   Provision charged to income                    60,000              60,154
   Recoveries                                          0                   0
   Losses charged to allowance                   (48,070)            (10,698)
                                            ------------      --------------

                                            $    450,386             438,456
                                            ============      ==============

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,
                                              --------------------------------
                                                   2001             2000
                                              --------------    --------------
First Mortgage Loans:
   Secured by 1 to 4 family residences        $   39,520,626        36,014,298
   Secured by over 4 family residences             1,277,072           856,130
   Other real estate                               6,665,248         6,159,959
Construction loans                                 2,765,465         4,155,435
FHLMC pools                                              441             1,044
Share loans                                          672,302           551,954
Consumer loans                                     4,060,859         3,248,972
                                              --------------    --------------

                                                  54,962,013        50,987,792

Loans in Process                                  (1,917,228)       (1,425,127)
Allowance for loan losses                           (450,386)         (438,456)
Deferred loan origination fees                       (58,120)          (72,205)
                                              --------------    --------------

         Total                                $   52,536,279        49,052,004
                                              ==============    ==============

Loans on which the accrual of interest has been discontinued amounted to
$223,000 and $193,819 at September 30, 2001 and 2000, respectively. If interest
on those loans had been accrued, such income would have approximated $15,615 and
$14,200 for the years ended September 30, 2001 and 2000, respectively. Interest
income on those loans, which is recorded only when received, amounted to $11,652
and $10,086 for the years ended September 30, 2001 and 2000, respectively. No
contractual modifications have been made to these loans that would affect the
interest ultimately due.

There were no loans at September 30, 2001 or 2000, which the Bank's management
considered to be impaired.

                                       28

<PAGE>

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

Loans receivable includes loans to officers and directors of the Bank totaling
approximately $907,422 and $1,167,543 at September 30, 2001 and 2000,
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.

Note 5 - Office Properties and Equipment
----------------------------------------

Office properties and equipment, at cost, are summarized as follows:

<TABLE>
<CAPTION>
                                                           SEPTEMBER 30,               ESTIMATED
                                                 -----------------------------
                                                     2001             2000           USEFUL LIVES
                                                 ------------      ------------      ------------
   <S>                                           <C>               <C>               <C>
   Land                                          $    228,914           228,914
   Buildings                                          831,017           831,017      20-31 years
   Furniture and fixtures                             797,118           773,862       5-10 years
   Automobile                                          36,126            31,337       5 years
                                                 ------------      ------------
                                                    1,893,175         1,865,130
   Less accumulated depreciation                      492,330           381,523
                                                 ------------      ------------

                                                 $  1,400,845         1,483,607
                                                 ============      ============
</TABLE>

Depreciation expense for the years ended September 30, 2001 and 2000 was
$129,608 and $142,339, respectively.

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

Accrued interest receivable is summarized as follows:

                                                        SEPTEMBER 30,
                                              --------------------------------
                                                   2001             2000
                                              --------------    --------------
   Investment securities                      $       80,929           103,059
   Loans receivable                                  498,367           480,271
                                              --------------    --------------

                                              $      579,296           583,330
                                              ==============    ==============


                                       29


<PAGE>

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,
                                                 ----------------------------------------------------------------
                                                              2001                               2000
                                                 --------------------------------   -----------------------------
                                                     BOOK VALUE             %           BOOK VALUE           %
                                                 -----------------      ---------   -----------------     -------
<S>                                              <C>                    <C>         <C>                   <C>
Type of Account:
   Checking Accounts                                 $   1,030,105          1.86            1,002,609        2.12
   N.O.W. Accounts - 2.96%
      (2000 - 3.04%)                                     2,127,054          3.83            2,062,054        4.35
   Passbook - 3.98%
      (2000 - 4.02%)                                     2,627,571          4.74            1,949,812        4.12
   Certificates - 6.49%
      (2000 - 6.01%)                                    49,673,271         89.57           42,321,543       89.41
                                                     -------------      --------        -------------     -------

                                                     $  55,458,001        100.00%          47,336,018      100.00%
                                                     =============      ========        =============     =======
</TABLE>

The aggregate amount of certificates of deposit in denominations of $100,000 or
more was $12,701,663 and $9,369,333 at September 30, 2001 and 2000,
respectively.

At September 30, 2001, scheduled maturities of certificates of deposit were as
follows:

                      YEAR ENDING
                     SEPTEMBER 30,
                     -------------

                         2002                $  35,563,893
                         2003                   12,172,083
                         2004                    1,208,231
                         2005                      713,531
                         2006                       15,533
                                             -------------
                                             $  49,673,271
                                             =============

The Bank held deposits of $760,740 and $596,776 for related parties at September
30, 2001 and 2000, respectively.

Interest expense on deposits is summarized as follows:

                                                 YEAR ENDED SEPTEMBER 30,
                                            ---------------------------------
                                                 2001                 2000
                                            -------------       -------------
   Passbook savings                         $      93,976              86,747
   NOW                                             63,221              66,839
   Certificates of deposit                      3,012,265           2,329,897
                                            -------------       -------------

                                            $   3,169,462           2,483,483
                                            =============       =============

                                       30

<PAGE>

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.

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, 2001 and 2000, that the Bank meets all
capital adequacy requirements to which it is subject.

As of September 30, 2000, 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.

                                       31

<PAGE>

Note 8 - Stockholders' Equity and Regulatory Matters (Continued)
----------------------------------------------------------------

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, 2001:
    Total equity                                                $ 6,123               6,123                6,123
    Unrealized (gains) losses on securities                        (114)               (114)                (114)
    General valuation allowance                                       0                   0                  446
                                                                -------             -------              -------

    Regulatory Capital                                          $ 6,009               6,009                6,455
                                                                =======             =======              =======

At September 30, 2000:
    Total equity                                                $ 6,317               6,317                6,317
    Unrealized (gains) losses on securities                          66                  66                   66
    General valuation allowance                                       0                   0                  438
                                                                -------             -------              -------

    Regulatory Capital                                          $ 6,383               6,383                6,821
                                                                =======             =======              =======
</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, 2001:
   Tangible Capital
      (to adjusted total assets)           $6,009             9.30%         969           1.5%        3,229            5.0%
   Core Capital
      (to adjusted total assets)            6,009             9.30%       2,583           4.0%        3,229            5.0%
   Risk-Based Capital
      (to risk-weighted assets)             6,455            14.28%       3,615           8.0%        4,519           10.0%

As of September 30, 2000:
   Tangible Capital
      (to adjusted total assets)           $6,383            10.69%         896           1.5%        2,986            5.0%
   Core Capital
      (to adjusted total assets)            6,383            10.69%       2,388           4.0%        2,986            5.0%
   Risk-Based Capital
      (to risk-weighted assets)             6,821            16.53%       3,301           8.0%        4,126           10.0%
</TABLE>

The Company paid dividends on the common stock in the amount of $1,481,204 on
January 11, 2001. These dividends were declared on December 19, 2000 in the
amount of $2.92 per share. $725,384 of this distribution ($1.43 per share) was
treated as a return of capital.

The Company paid dividends on the common stock in the amount of $101,453 on May
31, 2000. These dividends were declared on April 4, 2000 in the amount of $0.20
per share.

                                       32

<PAGE>

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

The income tax provision is as follows:

                                                YEAR ENDED SEPTEMBER 30,
                                           ---------------------------------
                                                2001                2000
                                           -------------       -------------

   Taxes payable currently                 $     142,862             124,234
   Deferred taxes (benefit)                      (12,745)             12,013
                                           -------------       -------------
   Total tax provision                     $     130,117             136,247
                                           =============       =============

The provision for income taxes represents the portion of estimated income taxes
relating to the years ended September 30, 2001 and 2000.

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, 2001 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,
                                                                    --------------------------------
                                                                         2001              2000
                                                                    --------------    --------------
<S>                                                                 <C>               <C>
Deferred Tax Assets:
   Allowance for loan losses                                        $      145,542           138,875
   Unrealized losses on available-for-sale securities                            0            37,135
   Deferred compensation payable                                             8,816             1,331
                                                                    --------------    --------------
      Total                                                                154,358           177,341
                                                                    --------------    --------------

Deferred Tax Liabilities:
   Bad debt deduction recapture                                             18,179            26,259
   Unrealized gains on available-for-sale securities                        58,527                 0
   Depreciation                                                             48,057            38,570
                                                                    --------------    --------------
      Total                                                                124,763            64,829
                                                                    --------------    --------------

   Net Deferred Tax Assets (Liabilities)                            $       29,595           112,512
                                                                    ==============    ==============
</TABLE>

                                       33

<PAGE>

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

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,
                                                          ----------------------------------
                                                               2001                2000
                                                          --------------      --------------
   <S>                                                    <C>                 <C>
   Expected income tax                                    $      139,043             138,908
   Increase (decrease) in tax resulting from:
      State and local taxes                                       17,496              14,088
      Other, net                                                 (26,422)            (16,749)
                                                          --------------      --------------
   Actual income tax expense                              $      130,117             136,247
                                                          ==============      ==============
</TABLE>

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,
                                         -------------------------------------
                                             2001                    2000
                                         -------------           -------------

  Commitments to extend credit           $   1,917,228               1,425,127
  Standby letters of credit                     66,500                  61,300

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, 2000 or 2001.

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 $0 for the
years ended September 30, 2001 and 2000, 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, 2001 and 2000, the cash values of those
policies were $785,950 and $626,638 and the liability accrued for benefits
payable under the plan was $25,930 and $3,914, respectively.

                                       34

<PAGE>

Note 11 - Retirement Plans (Continued)
--------------------------------------

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.

As of September 30, 2001 and 2000, the ESOP held 52,900 shares of the Company's
common stock as follows:

                                                     SEPTEMBER 30,
                                           --------------------------------
                                                2001             2000
                                           --------------    --------------
Number of Shares:
         Released and allocated                    13,225             7,935
   Suspense                                        39,675            44,965

Fair Value:
   Released and allocated                  $      171,925            71,911
   Suspense                                       515,775           407,495

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:

                                                   YEAR ENDED SEPTEMBER 30,
                                              ---------------------------------
                                                  2001                2000
                                              -------------       -------------

Compensation                                  $       7,214              33,605
Interest                                             34,822              39,344
                                              -------------       -------------

                                              $      42,036              72,949
                                              =============       =============

                                       35



<PAGE>

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

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

Net Income:
----------

<TABLE>
<CAPTION>
                                                                 YEAR ENDED SEPTEMBER 30,
                                                            ---------------------------------
                                                                 2001                2000
                                                            -------------       -------------
<S>                                                         <C>                 <C>
Net Income reported to OTS                                  $         305                 256

Reconciling Items                                                       0                   0
                                                            -------------       -------------

Net Income for the twelve months ended
   September 30 per audited financial statement             $         305                 256
                                                            =============       =============
</TABLE>

Net Worth:
---------

<TABLE>
<CAPTION>
                                                                       SEPTEMBER 30,
                                                             --------------------------------
                                                                 2001                2000
                                                             ------------       -------------
<S>                                                         <C>                 <C>
Net Worth reported to OTS                                    $      6,123               6,317

Reconciling Items                                                       0                   0
                                                             ------------       -------------

Total Net Worth on September 30, per audited
   financial statement                                       $      6,123               6,317
                                                             ============       =============
</TABLE>

Note 13 - Advances From Federal Home Loan Bank
----------------------------------------------

Advances consist of the following:

<TABLE>
<CAPTION>
                                                                       SEPTEMBER 30,
                                                             --------------------------------
                                                                  2001               2000
                                                             ------------       -------------
<S>                                                         <C>                 <C>
Advances payable - Federal Home Loan Bank of
   Atlanta, bearing interest at 3.59%,
   due October 4, 2001, collateralized by all
   stock in the Federal Home Loan Bank and
   qualifying first mortgage loans.                          $  2,000,000           5,000,000
                                                             ============       =============
</TABLE>

                                       36


<PAGE>

Note 14 - Fair Values of Financial Instruments
----------------------------------------------

The estimated fair values of the Company's financial instruments are as follows:

<TABLE>
<CAPTION>
                                                    SEPTEMBER 30, 2001                      SEPTEMBER 30, 2000
                                            ----------------------------------      ---------------------------------
                                                CARRYING              FAIR             CARRYING              FAIR
                                                AMOUNT               VALUE              AMOUNT              VALUE
                                            ---------------      -------------      --------------       ------------
<S>                                         <C>                  <C>                <C>                  <C>
Financial assets:
   Cash and cash equivalents                $     2,037,144          2,037,144           1,663,455          1,663,455
   Investment securities                          6,682,461          6,682,461           6,546,404          6,546,404
   Loans, net of allowance
      for loan losses                            52,536,279         53,484,000          49,052,004         49,021,000
   Accrued interest receivable                      579,296            579,296             583,330            583,330
   Investment in Federal Home
      Loan Bank stock                               372,100            372,100             320,300            320,300

Financial liabilities:
   Deposits                                      55,458,001         56,217,776          47,336,018         47,260,000
   Advances from Federal Home
      Loan Bank                                   2,000,000          2,000,000           5,000,000          5,000,000
   Accrued interest payable                         427,435            427,435             337,586            337,586
</TABLE>

The carrying amounts in the preceding table are included in the statement of
financial condition under the applicable captions.

<TABLE>
<CAPTION>
                                                    SEPTEMBER 30, 2001                     SEPTEMBER 30, 2000
                                            ----------------------------------      ---------------------------------
                                                CARRYING              FAIR             CARRYING               FAIR
                                                 AMOUNT              VALUE              AMOUNT               VALUE
                                            ---------------      -------------      --------------       ------------
<S>                                         <C>                  <C>                <C>                  <C>
Other:
   Loan commitments                         $     1,917,228          1,917,228           1,425,127          1,425,127
   Standby letters of credit                         66,500             66,500              61,300             61,300
</TABLE>

Note 15 - Related Party Transactions
------------------------------------

Related parties to the Company are identified as its officers and directors.
During the years ended September 30, 2000 and 1999, the Company had the
following related party transactions:

<TABLE>
<CAPTION>
                                                                                           YEAR ENDED SEPTEMBER 30,
                                                                                      ---------------------------------
                                                                                           2001                2000
                                                                                      -------------        ------------
<S>                                                                                   <C>                  <C>
Loans to officers and directors (balance at September 30), Note 4                     $     907,422           1,167,543
Deposits held for officers and directors (balance at September 30), Note 7                  760,740             596,776
Insurance premiums paid - director                                                           28,243              15,845
Legal fees paid - director                                                                    4,656               3,090
Supplies purchased - officers and directors                                                   4,936               8,295
Furnishings purchased                                                                         1,491               1,011
</TABLE>

                                       37

<PAGE>

Note 16 - Financial Information of Quitman Bancorp, Inc. (Parent Only)
----------------------------------------------------------------------

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

<TABLE>
<CAPTION>
                                     Assets
                                     ------

                                                                                 SEPTEMBER 30,
                                                                       --------------------------------
                                                                            2001             2000
                                                                       --------------    --------------
<S>                                                                    <C>               <C>
Cash on deposit                                                        $       14,724            79,016
Federal funds sold                                                            100,000                 0
Investment in Quitman Federal Savings Bank                                  6,123,112         6,316,975
Investment securities available-for-sale                                            0           739,062
Loans receivable - subsidiary ESOP                                            396,750           449,650
Accrued interest receivable                                                    25,314            42,206
Other assets                                                                      438             3,243
                                                                       --------------    --------------

         Total Assets                                                  $    6,660,338         7,630,152
                                                                       ==============    ==============

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

Liabilities:
   Income taxes payable                                                $            0             6,039
                                                                       --------------    --------------

Stockholders' Equity:
   Capital stock                                                               66,125            66,125
   Additional paid in capital                                               5,410,028         6,135,412
   Retained earnings                                                        3,185,849         3,662,836
   Accumulated other comprehensive income (loss)                              113,610           (72,086)
   ESOP loan guaranty of subsidiary                                          (396,750)         (449,650)
   Treasury stock                                                          (1,718,524)       (1,718,524)
                                                                       --------------    --------------
                                                                            6,660,338         7,624,113
                                                                       --------------    --------------

         Total Liabilities and Stockholders' Equity                    $    6,660,338         7,630,152
                                                                       ==============    ==============
</TABLE>

                                       38

<PAGE>

Note 16 - Financial Information of Quitman Bancorp, Inc. (Parent Only)
---------------------------------------------------------------------
(Continued)
-----------

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

                                                     YEAR ENDED SEPTEMBER 30,
                                                     ------------------------
                                                        2001           2000
                                                     ---------     ----------
Income:
   Equity in income of subsidiary                    $ 305,042        256,239
   Interest income                                      49,008         82,863
         Gain (Loss) on sale of securities              (7,582)        (7,319)
         Miscellaneous                                     253            673
                                                     ---------      ---------
                                                       346,721        332,456

Expenses                                                68,176         50,413
                                                     ---------      ---------

Income before taxes                                    278,545        282,043

Income taxes (benefit)                                    (288)         9,738
                                                     ---------      ---------

Net Income                                           $ 278,833        272,305
                                                     =========      =========

                                       39

<PAGE>

Note 16 - Financial Information of Quitman Bancorp, Inc. (Parent Only)
----------------------------------------------------------------------
(Continued)
-----------

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

                                                                                           YEAR ENDED SEPTEMBER 30,
                                                                                      ---------------------------------
                                                                                        2001                2000
                                                                                      -------------       -------------
<S>                                                                                   <C>                 <C>
Cash Flows From Operating Activities:
   Net income                                                                         $     278,833             272,305
   Adjustments:
      Equity in income of subsidiary                                                       (305,042)           (256,239)
      Amortization of premium on securities                                                     863               4,210
      (Gain) Loss on sale of securities                                                       7,582               7,319
      Dividends received from subsidiary                                                    731,205             101,452
      (Increase) decrease in accrued interest receivable                                     16,892               8,769
      (Increase) decrease in other assets                                                      (438)                  0
      Increase (decrease) in income taxes payable                                            (6,039)              4,727
                                                                                      -------------       -------------

Net Cash Provided (Used) By Operating Activities                                            723,856             142,543
                                                                                      -------------       -------------

Cash Flows From Investing Activities:
   Payments received on loan to subsidiary ESOP                                              52,900              52,900
   Proceeds from sale of available-for-sale securities                                      740,156             242,851
                                                                                      -------------       -------------

Net Cash Provided (Used) By Investing Activities                                            793,056             295,751
                                                                                      -------------       -------------

Cash Flows From Financing Activities:
   Dividends paid                                                                        (1,481,204)           (101,452)
   Purchase of treasury stock                                                                     0            (280,251)
                                                                                      -------------       -------------

Net Cash Provided By Financing Activities                                                (1,481,204)           (381,703)
                                                                                      -------------       -------------

Net Increase In Cash                                                                         35,708              56,591

Cash And Cash Equivalents At Beginning Of Period                                             79,016              22,425
                                                                                      -------------       -------------

Cash And Cash Equivalents At End Of Period                                            $     114,724              79,016
                                                                                      =============       =============

Supplemental Disclosure of Cash Flow Information:
-------------------------------------------------
   Cash Paid During The Period For:
      Interest                                                                        $           0                   0
                                                                                      =============       =============
      Income taxes                                                                    $       6,189               5,011
                                                                                      =============       =============

Schedule Of Non-Cash Investing And Financing Activities:
--------------------------------------------------------
   Total increase (decrease) in unrealized gains on
      Securities available-for-sale                                                   $       9,539               7,042
                                                                                      =============       =============
</TABLE>

                                       40

<PAGE>

Note 17 - 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. During the
year ended September 30, 2001, the exercise price was reduced from $9.75 per
share to $6.83 per share.

The fair value of each option grant is estimated on the grant date using an
options pricing model with the following weighted-average assumptions used for
grants in the year ended September 30, 2000: dividend yield 2.10%, risk-free
interest rate of 6.00%, expected lives of 4 1/2 years for the options and a
volatility rate of 3.05%.

Weighted-average assumptions used for grants in the year ended September 30,
2001 are as follows: dividend yield 16.09%, risk free interest rate of 5.00%,
expected lives of 3 1/2 years for the options and a volatility rate of 46.31%.

A summary of the statement of the Company's Stock Option Plan as of September
30, 2001 and 2000 and the changes during the years then ended is presented
below:

<TABLE>
<CAPTION>
                                            YEAR ENDED SEPTEMBER 30, 2001      YEAR ENDED SEPTEMBER 30, 2000
                                          --------------------------------    ------------------------------
                                                               WEIGHTED-                          WEIGHTED-
                                                                AVERAGE                            AVERAGE
                                                                EXERCISE                           EXERCISE
                                            SHARES               PRICE         SHARES               PRICE
                                          ----------          ------------    --------            -----------
   <S>                                    <C>                 <C>             <C>                    <C>
   Outstanding at beginning of year           66,121          $     9.75        66,121                  9.75
   Granted                                         0                 .00             0                   .00
   Exercised                                       0                 .00             0                   .00
   Forfeited                                       0                 .00             0                   .00
                                          ----------                          --------

   Outstanding at end of year                 66,121          $     6.83        66,121                  9.75
                                          ==========                          ========

   Exercisable at September 30                66,121                            66,121
                                          ==========                          ========

   Weighted-average fair value of
      options granted during the year                         $     3.12                          $     1.20
                                                              ==========                          ==========
</TABLE>

                                       41

<PAGE>

Note 17 - 1999 Stock Option Plan (Continued)
--------------------------------------------

The following table summarizes information about fixed stock options outstanding
at September 30, 2001:

<TABLE>
<CAPTION>
                                                 WEIGHTED-
         RANGE OF                                 AVERAGE             WEIGHTED-                            WEIGHTED-
         OR ACTUAL           NUMBER              REMAINING             AVERAGE           NUMBER             AVERAGE
         EXERCISE         OUTSTANDING          CONTRACTUAL           EXERCISE         EXERCISABLE          EXERCISE
          PRICES           AT 9-30-01              LIFE                 PRICE          AT 9-30-01            PRICE
        -----------       ------------         -------------       -------------     ------------        ------------
       <S>                <C>                  <C>                 <C>               <C>                 <C>
       $     6.83              66,121            7 YEARS           $       6.83            66,121        $       6.83
                          ===========                                                ============
</TABLE>

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 for the year ended
September 30, 2001 would not have been affected.

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 for the year ended
September 30, 2000 would have increased by $25,392, resulting in net income of
$257,070, net of tax. Basic earnings per share would have declined from $.59 to
$.55 and diluted earnings per share would have declined from $.59 to $.55.

Note 18 - 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.

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.

                                       42

<PAGE>

Note 18 - Restricted Stock Plan (Continued)
-------------------------------------------

Contributions made by the Bank to the RSP for the year ended September 30, 2001
and 2000 were as follows:

<TABLE>
<CAPTION>
                                                                                SEPTEMBER 30,
                                                                      --------------------------------
                                                                           2001             2000
                                                                      --------------    --------------
    <S>                                                               <C>               <C>
    Number of awards outstanding at beginning of year                         15,869            21,159
    Number of awards granted                                                       0                 0
    Number of awards earned - 20%                                                  0             5,290
                                                                      --------------    --------------
    Number of awards outstanding at end of year                               15,869            15,869
                                                                      ==============    ==============
    Fair market value of Company's stock, per share,
       on September 1, 2001 and 2000                                  $        13.00             10.00
                                                                      --------------    ---------------
    Contributions                                                     $       54,804            52,900
                                                                      ==============    ==============
</TABLE>

Stock issued under this plan was purchased on the open market at a cost of $0
and $52,900, which was expensed as compensation for the year ended September 30,
2001 and 2000, respectively.

Note 19 - Subsequent Event

On October 22, 2001, Quitman Bancorp, Inc. and Colony Bankcorp, Inc. entered
into an agreement and Plan of Merger and reorganization whereby Colony Bankcorp,
Inc. is to acquire 100% of the outstanding shares of Quitman Bancorp, Inc.'s
common stock. Each share of Quitman Bancorp, Inc. common stock will receive .683
shares of Colony Bankcorp, Inc. common stock and $4.41 in cash. This agreement
is subject to a number of conditions, including receipt of appropriate
regulatory approvals.

                                       43



<PAGE>

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

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

<TABLE>
    <S>                                                <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
    Vice President and co-owner                        Quitman Bancorp, Inc. and Quitman
    Holwell-Fletcher Insurance Agency Inc.             Federal Savings Bank
    Insurance agents

    Daniel M. Mitchell, Jr.
    Attorney at Law
</TABLE>

                        ________________________________

         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
         Manatt, Phelps & Phillips, LLP         Registrar & Transfer Company
         1001 Page Mill Road, Bldg. 2           10 Commerce Drive
         Palo Alto, CA  94304                   Cranford, New Jersey  07016
                                                (908) 497-2300
                        ________________________________

Our Annual Report for the year ended September 30, 2001 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.