EXHIBIT 99.1



MCINTOSH BANCSHARES, INC.

AND SUBSIDIARIES



Consolidated Financial Statements



December
31, 2003 and 2002

(with Independent Accountants Report thereon)





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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



To the Board of Directors and Stockholders

McIntosh Bancshares, Inc.

Jackson, Georgia



We have audited the accompanying consolidated balance sheets of McIntosh Bancshares, Inc. and
subsidiaries as of December 31, 2003 and 2002, and the related consolidated statements of earnings, comprehensive income, changes in stockholders equity and cash flows for the years then ended. These consolidated financial statements are the
responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.



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



In our opinion, the consolidated financial statements referred to above present fairly, in
all material respects, the financial position of McIntosh Bancshares, Inc. and subsidiaries as of December 31, 2003 and 2002, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.



/s/ PORTER KEADLE MOORE, LLP



Atlanta, Georgia

February 13, 2004



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MCINTOSH BANCSHARES, INC. AND SUBSIDIARIES



Consolidated Balance Sheets



December 31, 2003 and 2002



|                                                                                                     |  |      |             |   |      |             |  
|---------------------------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | ----------- | -
|                                                                                                     |  | 2003 |             |   | 2002 |            
|Assets                                                                                               |  |      |             |   |      |             |  
|Cash and due from banks                                                                              |  | $    | 6,424,715   |   |      | 5,981,108   |  
|Interest bearing deposits with FHLB                                                                  |  |      | 193,151     |   |      | 2,907,833   |  
|Federal funds sold                                                                                   |  |      | 6,512,000   |   |      | 2,636,000   |  
|Investment securities held to maturity (market value of $1,564,292 and $2,612,143)                   |  |      | 1,488,321   |   |      | 2,484,428   |  
|Investment securities available for sale                                                             |  |      | 48,597,595  |   |      | 42,692,053  |  
|Other investments                                                                                    |  |      | 1,284,992   |   |      | 1,234,992   |  
|Loans                                                                                                |  |      | 202,993,089 |   |      | 175,996,572 |  
|Less: Allowance for loan losses                                                                      |  |      | (3,177,816  | ) |      | (2,839,548  | )
|                                                                                                     |  |      |             |   |      |             |  
|Loans, net                                                                                           |  |      | 199,815,273 |   |      | 173,157,024 |  
|                                                                                                     |  |      |             |   |      |             |  
|Premises and equipment, net                                                                          |  |      | 4,165,059   |   |      | 4,519,299   |  
|Accrued interest receivable                                                                          |  |      | 1,778,973   |   |      | 1,742,107   |  
|Other assets                                                                                         |  |      | 6,686,130   |   |      | 6,068,914   |  
|                                                                                                     |  |      |             |   |      |             |  
|Total Assets                                                                                         |  | $    | 276,946,209 |   |      | 243,423,758 |  
|                                                                                                     |  |      |             |   |      |             |  
|                                                                                                     |  |     
|Liabilities and Stockholders Equity                                                                 |  |      |             |   |      |             |  
|Liabilities:                                                                                         |  |      |             |   |      |             |  
|Deposits:                                                                                            |  |      |             |   |      |             |  
|Demand                                                                                               |  | $    | 22,733,363  |   |      | 20,276,906  |  
|Money Market and NOW accounts                                                                        |  |      | 83,848,090  |   |      | 71,525,326  |  
|Savings                                                                                              |  |      | 10,617,592  |   |      | 9,048,828   |  
|Time deposits of $100,000 or more                                                                    |  |      | 52,797,831  |   |      | 39,797,893  |  
|Time deposits                                                                                        |  |      | 64,416,206  |   |      | 64,047,301  |  
|                                                                                                     |  |      |             |   |      |             |  
|Total Deposits                                                                                       |  |      | 234,413,082 |   |      | 204,696,254 |  
|Borrowed funds                                                                                       |  |      | 14,000,000  |   |      | 13,000,000  |  
|Accrued interest payable and other liabilities                                                       |  |      | 1,989,900   |   |      | 1,817,443   |  
|                                                                                                     |  |      |             |   |      |             |  
|Total Liabilities                                                                                    |  |      | 250,402,982 |   |      | 219,513,697 |  
|                                                                                                     |  |      |             |   |      |             |  
|Stockholders equity:                                                                                |  |      |             |   |      |             |  
|Common stock, par value $2.50; 5,000,000 shares authorized, 1,119,409 shares issued and outstanding, |  |      | 2,798,523   |   |      | 2,798,523   |  
|Surplus                                                                                              |  |      | 8,905,393   |   |      | 8,905,393   |  
|Retained earnings                                                                                    |  |      | 14,263,823  |   |      | 11,318,426  |  
|Accumulated other comprehensive income                                                               |  |      | 575,488     |   |      | 887,719     |  
|                                                                                                     |  |      |             |   |      |             |  
|Total stockholders equity                                                                           |  |      | 26,543,227  |   |      | 23,910,061  |  
|                                                                                                     |  |      |             |   |      |             |  
|Total Liabilities and stockholders equity                                                           |  | $    | 276,946,209 |   |      | 243,423,758 |  
|                                                                                                     |  |      |             |   |      |             |  





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MCINTOSH BANCSHARES, INC. AND SUBSIDIARIES



Consolidated Statements of Earnings



For the Years Ended December 31, 2003 and 2002



|                                                                                                                           |  |      |            |   |      |   |            |  
|-------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                                                                                                           |  | 2003 |            |   | 2002 |  
|Interest income:                                                                                                           |  |      |            |   |      |   |            |  
|Loans, including fees                                                                                                      |  | $    | 13,808,066 |   |      | $ | 13,542,782 |  
|Interest on investment securities:                                                                                         |  |      |            |   |      |   |            |  
|U.S. Treasury, U.S. Government agency and Mortgage-backed securities                                                       |  |      | 1,237,575  |   |      |   | 1,485,878  |  
|State, county and municipal                                                                                                |  |      | 517,467    |   |      |   | 554,685    |  
|Other investments                                                                                                          |  |      | 108,836    |   |      |   | 108,990    |  
|Federal funds sold and other short-term investments                                                                        |  |      | 119,272    |   |      |   | 144,594    |  
|                                                                                                                           |  |      |            |   |      |   |            |  
|Total interest income                                                                                                      |  |      | 15,791,216 |   |      |   | 15,836,929 |  
|                                                                                                                           |  |      |            |   |      |   |            |  
|Interest expense:                                                                                                          |  |      |            |   |      |   |            |  
|Interest-bearing demand and money market                                                                                   |  |      | 669,654    |   |      |   | 997,082    |  
|Savings                                                                                                                    |  |      | 42,381     |   |      |   | 99,692     |  
|Time deposits of $100,000 or more                                                                                          |  |      | 1,766,529  |   |      |   | 1,711,060  |  
|Other time deposits                                                                                                        |  |      | 2,336,321  |   |      |   | 2,849,673  |  
|Other                                                                                                                      |  |      | 395,097    |   |      |   | 386,688    |  
|                                                                                                                           |  |      |            |   |      |   |            |  
|Total interest expense                                                                                                     |  |      | 5,209,982  |   |      |   | 6,044,195  |  
|                                                                                                                           |  |      |            |   |      |   |            |  
|Net interest income                                                                                                        |  |      | 10,581,234 |   |      |   | 9,792,734  |  
|Provision for loan losses                                                                                                  |  |      | 427,072    |   |      |   | 437,132    |  
|                                                                                                                           |  |      |            |   |      |   |            |  
|Net interest income after provision for loan losses                                                                        |  |      | 10,154,162 |   |      |   | 9,355,602  |  
|                                                                                                                           |  |      |            |   |      |   |            |  
|Other Income:                                                                                                              |  |      |            |   |      |   |            |  
|Service charges                                                                                                            |  |      | 1,828,588  |   |      |   | 1,635,414  |  
|Investment securities gains (losses)                                                                                       |  |      | 12,600     |   |      |   | 0          |  
|Other real estate owned gains (losses)                                                                                     |  |      | 0          |   |      |   | (22,531    | )
|Fixed assets gains (losses)                                                                                                |  |      | (84        | ) |      |   | (43,965    | )
|Other income                                                                                                               |  |      | 1,428,065  |   |      |   | 1,231,120  |  
|                                                                                                                           |  |      |            |   |      |   |            |  
|Total other income                                                                                                         |  |      | 3,269,169  |   |      |   | 2,800,038  |  
|                                                                                                                           |  |      |            |   |      |   |            |  
|Other expenses:                                                                                                            |  |      |            |   |      |   |            |  
|Salaries and employee benefits                                                                                             |  |      | 5,367,252  |   |      |   | 4,773,576  |  
|Occupancy and equipment                                                                                                    |  |      | 1,016,597  |   |      |   | 995,039    |  
|Other operating                                                                                                            |  |      | 2,015,174  |   |      |   | 1,912,102  |  
|                                                                                                                           |  |      |            |   |      |   |            |  
|Total other expenses                                                                                                       |  |      | 8,399,023  |   |      |   | 7,680,717  |  
|                                                                                                                           |  |      |            |   |      |   |            |  
|Earnings before income taxes                                                                                               |  |      | 5,024,308  |   |      |   | 4,474,923  |  
|Income tax expense                                                                                                         |  |      | 1,575,176  |   |      |   | 1,389,849  |  
|                                                                                                                           |  |      |            |   |      |   |            |  
|Net earnings                                                                                                               |  | $    | 3,449,132  |   |      | $ | 3,085,074  |  
|                                                                                                                           |  |      |            |   |      |   |            |  
|Net earnings per common share based on average outstanding shares of 1,119,409 in 2003 and 1,119,409 in 2002               |  | $    | 3.08       |   |      | $ | 2.76       |  
|                                                                                                                           |  |      |            |   |      |   |            |  
|Fully diluted net earnings per common share based on average outstanding shares of 1,119,409 in 2003 and 1,119,409 in 2002 |  | $    | 3.08       |   |      | $ | 2.76       |  
|                                                                                                                           |  |      |            |   |      |   |            |  





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MCINTOSH BANCSHARES, INC. AND SUBSIDIARIES



Consolidated Statements of Comprehensive Income



For the Years Ended December 31, 2003 and 2002



|                                                                                    |  |      |           |   |      |          
|----------------------------------------------------------------------------------- |  | ---- | --------- | - | ---- | ---------
|                                                                                    |  | 2003 |           |   | 2002
|Net Earnings                                                                        |  | $    | 3,449,132 |   |      | 3,085,074
|Other comprehensive income, net of income taxes:                                    |  |      |           |   |      |          
|Unrealized gains (losses) on securities available for sale:                         |  |      |           |   |      |          
|Holding gains (losses) arising during period, net of tax of ($160,846) and $228,371 |  |      | (312,231  | ) |      | 443,308  
|                                                                                    |  |      |           |   |      |          
|Total other comprehensive income (loss)                                             |  |      | (312,231  | ) |      | 443,308  
|                                                                                    |  |      |           |   |      |          
|Comprehensive income                                                                |  | $    | 3,136,901 |   |      | 3,528,382
|                                                                                    |  |      |           |   |      |          





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MCINTOSH BANCSHARES, INC. AND SUBSIDIARIES



Consolidated Statements of Cash Flows



For the Years ended December 31, 2003 and 2002



|                                                                                           |  |      |             |   |      |   |             |  
|------------------------------------------------------------------------------------------ |  | ---- | ----------- | - | ---- | - | ----------- | -
|                                                                                           |  | 2003 |             |   | 2002 |  
|Cash flows from operating activities:                                                      |  |      |             |   |      |   |             |  
|Net earnings                                                                               |  | $    | 3,449,132   |   |      | $ | 3,085,074   |  
|Adjustments to reconcile net earnings to net cash provided by operating activities:        |  |      |             |   |      |   |             |  
|Depreciation, accretion and amortization                                                   |  |      | 814,955     |   |      |   | 599,028     |  
|(Gain) Loss on call of securities                                                          |  |      | (12,600     | ) |      |   |            |  
|Provision for loan losses                                                                  |  |      | 427,072     |   |      |   | 437,132     |  
|Provision for defered income taxes                                                         |  |      | (171,434    | ) |      |   | (109,600    | )
|Loss on disposal of equipment                                                              |  |      | 84          |   |      |   | 43,965      |  
|Loss on sale of other real estate                                                          |  |      |            |   |      |   | 22,531      |  
|Change in:                                                                                 |  |      |             |   |      |   |             |  
|Accrued interest receivable and other assets                                               |  |      | (321,801    | ) |      |   | (2,479,347  | )
|Accrued interest payable and other liabilities                                             |  |      | 172,457     |   |      |   | (9,111      | )
|                                                                                           |  |      |             |   |      |   |             |  
|Net cash provided by operating activities                                                  |  |      | 4,357,865   |   |      |   | 1,589,672   |  
|                                                                                           |  |      |             |   |      |   |             |  
|Cash flows from investing activities:                                                      |  |      |             |   |      |   |             |  
|Proceeds from maturities and paydowns of securities available for sale                     |  |      | 22,571,281  |   |      |   | 14,196,427  |  
|Proceeds from maturities and paydowns of securities held to maturity                       |  |      | 1,022,000   |   |      |   | 371,000     |  
|Proceeds from redemption of other investments                                              |  |      | 26,300      |   |      |   |            |  
|Proceeds from sales of equipment                                                           |  |      |            |   |      |   | 16,675      |  
|Proceeds from sales of other real estate                                                   |  |      |            |   |      |   | 245,636     |  
|Purchases of securities available for sale                                                 |  |      | (29,266,788 | ) |      |   | (22,056,446 | )
|Purchases of other investments                                                             |  |      | (76,300     | ) |      |   | (128,500    | )
|Change in net loans                                                                        |  |      | (27,085,321 | ) |      |   | (15,951,298 | )
|Purchases of premises and equipment                                                        |  |      | (157,205    | ) |      |   | (600,297    | )
|                                                                                           |  |      |             |   |      |   |             |  
|Net cash used by investing activities                                                      |  |      | (32,966,033 | ) |      |   | (23,906,803 | )
|                                                                                           |  |      |             |   |      |   |             |  
|Cash flows from financing activities:                                                      |  |      |             |   |      |   |             |  
|Net change in deposits                                                                     |  |      | 29,716,828  |   |      |   | 525,905     |  
|Change in other borrowed funds                                                             |  |      | 1,000,000   |   |      |   | 7,000,000   |  
|Dividends paid                                                                             |  |      | (503,735    | ) |      |   | (335,822    | )
|                                                                                           |  |      |             |   |      |   |             |  
|Net cash provided by financing activities                                                  |  |      | 30,213,093  |   |      |   | 7,190,083   |  
|                                                                                           |  |      |             |   |      |   |             |  
|Net increase (decrease) in cash and cash equivalents                                       |  |      | 1,604,925   |   |      |   | (15,127,048 | )
|Cash and cash equivalents at beginning of period                                           |  |      | 11,524,941  |   |      |   | 26,651,989  |  
|                                                                                           |  |      |             |   |      |   |             |  
|Cash and cash equivalents at end of period                                                 |  | $    | 13,129,866  |   |      | $ | 11,524,941  |  
|                                                                                           |  |      |             |   |      |   |             |  
|Supplemental schedule of noncash investing and financing activities:                       |  |      |             |   |      |   |             |  
|Change in net unrealized gain/loss on investment securities available-for-sale, net of tax |  |      | (312,231    | ) |      |   | 443,308     |  
|Supplemental disclosures of cash flow information:                                         |  |      |             |   |      |   |             |  
|Cash paid during the year for                                                              |  |      |             |   |      |   |             |  
|Interest                                                                                   |  |      | 5,260,906   |   |      |   | 6,160,590   |  
|Income taxes                                                                               |  |      | 1,742,000   |   |      |   | 1,540,000   |  





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MCINTOSH BANCSHARES, INC. AND SUBSIDIARIES



Consolidated Statements of Changes in Stockholders Equity



|                                                                     |  |             |  |           |  |                  |   |  |                                     |   |  |            |  
|-------------------------------------------------------------------- |  | ----------- |  | --------- |  | ---------------- | - |  | ----------------------------------- | - |  | ---------- | -
|For The Years Ended December 31, 2003 and 2002                       |  | CommonStock |  | Surplus   |  | RetainedEarnings |   |  | AccumulatedOtherComprehensiveIncome |   |  | Total      |  
|Balance, December 31, 2001                                           |  | 2,798,523   |  | 8,905,393 |  | 8,569,174        |   |  | 444,411                             |   |  | 20,717,501 |  
|Net earnings                                                         |  |            |  |          |  | 3,085,074        |   |  |                                    |   |  | 3,085,074  |  
|Change in unrealized gains on securities available for sale          |  |            |  |          |  |                 |   |  | 443,308                             |   |  | 443,308    |  
|Cash dividend paid, $0.30 per share                                  |  |            |  |          |  | (335,822         | ) |  |                                    |   |  | (335,822   | )
|                                                                     |  |             |  |           |  |                  |   |  |                                     |   |  |            |  
|Balance, December 31, 2002                                           |  | 2,798,523   |  | 8,905,393 |  | 11,318,426       |   |  | 887,719                             |   |  | 23,910,061 |  
|Net earnings                                                         |  |            |  |          |  | 3,449,132        |   |  |                                    |   |  | 3,449,132  |  
|Change in unrealized gains (losses) on securities available for sale |  |            |  |          |  |                 |   |  | (312,231                            | ) |  | (312,231   | )
|Cash dividend paid, $0.45 per share                                  |  |            |  |          |  | (503,735         | ) |  |                                    |   |  | (503,735   | )
|                                                                     |  |             |  |           |  |                  |   |  |                                     |   |  |            |  
|Balance, December 31, 2003                                           |  | 2,798,523   |  | 8,905,393 |  | 14,263,823       |   |  | 575,488                             |   |  | 26,543,227 |  
|                                                                     |  |             |  |           |  |                  |   |  |                                     |   |  |            |  





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McINTOSH BANCSHARES, INC.

AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|NOTE 1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|------- | ------------------------------------------



McIntosh Bancshares, Inc. and subsidiaries provides a full range of banking and bank-related services to individual and corporate customers in the Georgia
counties of Butts, Jasper and Henry and surrounding areas. McIntosh Bancshares, Inc. and subsidiaries are subject to competition from other financial institutions and are also subject to the regulations of certain governmental agencies and undergo
periodic examinations by those regulatory authorities.



The
accounting and reporting policies of McIntosh Bancshares, Inc. and subsidiaries conform to accounting principles generally accepted in the United States of America and to general practices within the banking industry. The following is a summary of
the significant accounting policies.



Basis of Presentation



The consolidated financial statements include the
accounts of McIntosh Bancshares, Inc (the Parent Company) and its wholly-owned subsidiaries, McIntosh State Bank (the Bank) and McIntosh Financial Services, Inc., collectively known as the Company. All significant
intercompany accounts and transactions have been eliminated in consolidation.



The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. In preparing the financial statements, management is required to
make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ significantly from those estimates. Material
estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses and the market valuation reserve on investment securities available for sale. Management believes that
the allowance for loan losses is adequate and the market valuation reserve is appropriate. While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based on changes in economic
conditions. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Banks allowance for loan losses. Such agencies may require the Bank to recognize additions to the allowance based
on their judgments about information available to them at the time of their examination.



Cash and Cash Equivalents



For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, interest-bearing deposits with the Federal Home Loan Bank (FHLB) and federal funds sold. Generally, federal funds are purchased
and sold for one-day periods.



Investment Securities



Investment securities held to maturity are reported at
cost, adjusted for amortization of premium and accretion of discount. Investment securities available for sale are reported at fair value, with unrealized gains and losses reported as a separate component of stockholders equity, net of the
related tax effect. Other investments are reported at cost and, accordingly, earnings are reported when interest is accrued or when dividends are received.





---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|NOTE 1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|------- | ------------------------------------------------------



Investment Securities (Continued)



Premium and discount on all investment securities are amortized and accreted, respectively, to
interest income on the straight-line and interest methods over the period to the maturity of the related investment. Premium and discount on mortgage-backed securities are amortized and accreted, respectively, to interest income using a method which
approximates a level yield over the period to maturity of the related security, taking into consideration assumed prepayment patterns.



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



Gains or losses on disposition are computed by the specific identification method for all securities.



Loans



Loans are reported at the gross amount outstanding net of the valuation allowance for loan losses. Interest income is generally recognized over the terms
of the loans based on the principal amount outstanding. Loan origination fees and direct origination costs, which are approximately the same on most loans, are recognized at the time the loan is recorded on the books. If the collectibility of
interest appears doubtful, accrual is discontinued. Accrued interest, which appears doubtful of collection, is reversed against interest income if accrued in the current year or charged to the allowance for loan losses if accrued in prior years.
Payments received on non-accrual loans are recorded as a reduction to the loans balance. Accrual of interest is resumed if management believes a borrowers financial position has improved.



A loan is considered impaired when, based on current information and events,
it is probable that all amounts due according to the contractual terms of the loan agreement will not be collected. Impaired loans are measured based on the present value of expected future cash flows discounted at the loans effective interest
rate, or at the loans observable market price, or at the fair value of the collateral of the loan if the loan is collateral dependent. Interest income from impaired loans is recognized when received.



Allowance for Loan Losses



The allowance for loan losses is established through a provision for loan
losses charged to expense. The allowance represents an amount which, in managements judgment, will be adequate to absorb probable losses on existing loans that may become uncollectible. The Banks practice is to charge-off loans when they
become 120 days past due or are rated loss. Managements judgment in determining the adequacy of the allowance is based on evaluations of the collectibility of loans and takes into consideration such factors as changes in the nature and volume
of the loan portfolio, current economic conditions that may affect the borrowers ability to pay, overall portfolio quality and review of specific problem loans.



Periodic revisions are made to the allowance when circumstances which necessitate such revisions become known. Recognized
losses are charged to the allowance for loan losses, while subsequent recoveries are added to the allowance.





---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|NOTE 1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|------- | ------------------------------------------------------



Premises and Equipment



Premises and equipment are reported at cost less accumulated depreciation. For financial reporting purposes, depreciation is
computed using primarily the straight-line method over the estimated useful lives of the assets. Expenditures for maintenance and repairs are charged to operations as incurred, while major renewals and betterments are capitalized. For federal tax
reporting purposes, depreciation is computed using primarily accelerated methods.



Income Taxes



Deferred
tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax
credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.



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



Goodwill



Goodwill represents the excess of cost over the fair value of the net assets
purchased in a business combination. Goodwill is required to be tested annually for impairment, or whenever events occur that may indicate that the recoverability of the carrying amount is not probable. In the event of an impairment, the amount by
which the carrying amount exceeds the fair value would be charged to earnings. The carrying amount of goodwill, which is included in other assets in the accompanying consolidated balance sheets, totaled $600,743 at December 31, 2003 and 2002. During
2003 and 2002, there was no charge to earnings for impairment of goodwill.





---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|NOTE 1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|------- | ------------------------------------------------------



Earnings Per Common Share



Earnings per common share has been computed based on the weighted average number of shares outstanding during the period,
which totaled 1,119,409 for the years ended December 31, 2003 and 2002. The basic earnings per share calculation has been adjusted to reflect the impact of dilutive securities in the form of stock options. The basic and diluted earnings per share
for 2003 and 2002 are as follows:



|                                     |  |              |           |              |           |                |   |     
|------------------------------------ |  | ------------ | --------- | ------------ | --------- | -------------- | - | ----
|                                     |  | Net Earnings |           | Common Share |           | PerShareAmount
|For the year ended December 31, 2002 |  |              |           |              |           |                |   |     
|Basic earnings per share             |  | $            | 3,085,074 |              | 1,119,409 |                | $ | 2.76
|Effect of dilutive securities        |  |              |          |              |          |                |   |    
|                                     |  |              |           |              |           |                |   |     
|Diluted earnings per share           |  | $            | 3,085,074 |              | 1,119,409 |                | $ | 2.76
|                                     |  |              |           |              |           |                |   |     
|For the year ended December 31, 2003 |  |              |           |              |           |                |   |     
|Basic earnings per share             |  | $            | 3,449,132 |              | 1,119,409 |                | $ | 3.08
|Effect of dilutive securities        |  |              |          |              |          |                |   |    
|                                     |  |              |           |              |           |                |   |     
|Diluted earnings per share           |  | $            | 3,449,132 |              | 1,119,409 |                | $ | 3.08
|                                     |  |              |           |              |           |                |   |     



Recent Accounting
Pronouncements



In November 2002, the Financial Accounting
Standards Board (FASB) issued Interpretation No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, an interpretation of FASB Statements No. 5, 57, and 107 and a
rescission of FASB Interpretation No. 34. The interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under guarantees issued. It also clarifies that a
guarantor is required to recognize, at inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing a guarantee. The initial recognition and initial measurement provisions of the interpretation are applicable to
guarantees issued or modified after December 31, 2002. The disclosure requirements in the interpretation are effective for financial statements of interim or annual periods ending after December 15, 2002. The adoption of the interpretation did not
have a material effect on the Companys financial condition or results of operations.



In December 2002, the FASB issued Statement No. 148, Accounting for Stock-Based CompensationTransition and Disclosure, an amendment of FASB Statement No. 123. The Statement amends Statement No. 123,
Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, the statement amends the disclosure
requirements of Statement No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based compensation and the effect on reported results of operations. The disclosure
requirements of the statement are required for fiscal years ending after December 15, 2002 and interim periods beginning after December 15, 2002. The Company has not adopted Statement No. 123 for accounting for stock-based compensation as of
December 31, 2003.





---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|NOTE 1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|------- | ------------------------------------------------------



Recent Accounting Pronouncements (Continued)



In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest
Entities, an interpretation of ARB No. 51, and on December 24, 2003, the FASB issued FASB Interpretation No. 46 (Revised December 2003), Consolidation of Variable Interest Entities which replaced FIN 46. The interpretation
addresses consolidation by business enterprises of variable interest entities. A variable interest entity is defined as an entity subject to consolidation according to the provisions of the interpretation. The revised interpretation provided for
special effective dates for entities that had fully or partially applied the original interpretation as of December 24, 2003. Otherwise, application of the interpretation is required in financial statements of public entities that have interests in
special-purpose entities, or SPEs, for periods ending after December 15, 2003. Application by public entities, other than small business issuers, for all other types of variable interest entities (i.e., non-SPEs) is required in financial statements
for periods ending after March 15, 2004. Application by small business issuers to variable interest entities other than SPEs and by nonpublic entities to all types of variable interest entities is required at various dates in 2004 and 2005. The
interpretations have not had a material effect on the Companys financial condition or results of operations.



In May 2003, the FASB issued Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and
Equity. The statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. The statement requires that an issuer classify a financial instrument that
is within its scope as a liability. Many of those instruments were previously classified as equity. The statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the
first interim period beginning after June 15, 2003, except for mandatorily redeemable financial instruments of nonpublic entities. Mandatorily redeemable financial instruments of nonpublic entities are subject to the provisions of the statement for
the first fiscal period beginning after December 15, 2003. The adoption of the statement did not have a material effect on the Companys financial condition or results of operations.



Stock Option Plan



The Company has a Stock Option Plan under which a maximum of 48,125 shares of Common Stock have been reserved. Options are granted with exercise prices
equal to the fair market value of the stock at the date of grant. These options expire 10 years from the grant date and are 20% vested each year for 5 years. The Plan provides that upon exercise, the number of options awarded will be adjusted for
any stock dividends occurring since the grant date. Therefore, the number of shares granted and the weighted average exercise prices have been adjusted for any stock dividends that have been declared since the first options were granted under the
Plan.



SFAS No. 123, Accounting for Stock Based
Compensation, encourages, but does not require, entities to compute the fair value of options at the date of grant and to recognize such costs as compensation expense. As allowed under SFAS No. 123, the Company measures compensation costs for
the option plan using the intrinsic value based method of accounting prescribed by APB Opinion No. 25, Accounting for Stock Issued to Employees. Therefore, no compensation expense has been recognized in 2003 and 2002 related to the stock
option plans.





---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|NOTE 1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|------- | ------------------------------------------------------



Comprehensive Income



Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income.
Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities, are reported as a separate component of the equity section of the balance sheet, such items, along with net income, are
components of comprehensive income.



Reclassifications



Certain expenses on the statement of earnings for the
year ended December 31, 2002 have been reclassified, with no effect on net income, to be consistent with the classifications adopted for the year ended December 31, 2003.



|NOTE 2. | CASH AND DUE FROM BANKS
|------- | -----------------------



The Bank is required to maintain average reserve balances with the Federal Reserve Bank on deposit with national banks or in cash. At December 31, 2003
and 2002, the Banks reserve requirement was approximately $2,343,000 and $1,567,000, respectively. The Bank maintained cash balances which were adequate to meet the requirements.



|NOTE 3. | INVESTMENT SECURITIES
|------- | ---------------------



Investment securities at December 31, 2003 and 2002 are as follows:



|                                           |  |               |            |                 |   |                  |  |              |         |  |   |           
|------------------------------------------ |  | ------------- | ---------- | --------------- | - | ---------------- |  | ------------ | ------- |  | - | ----------
|                                           |  | CarryingValue |            | UnrealizedGains |   | UnrealizedLosses |  | Market Value
|Securities Held to Maturity:               |  |               |            |                 |   |                  |  |              |         |  |   |           
|December 31, 2003:                         |  |               |            |                 |   |                  |  |              |         |  |   |           
|States and political subdivisions          |  | $             | 1,488,321  |                 | $ | 75,971           |  | $            |        |  | $ | 1,564,292 
|                                           |  |               |            |                 |   |                  |  |              |         |  |   |           
|December 31, 2002:                         |  |               |            |                 |   |                  |  |              |         |  |   |           
|States and political subdivisions          |  | $             | 2,484,428  |                 | $ | 127,715          |  | $            |        |  | $ | 2,612,143 
|                                           |  |               |            |                 |   |                  |  |              |         |  |   |           
|Securities Available-for-Sale              |  |               |            |                 |   |                  |  |              |         |  |   |           
|December 31, 2003:                         |  |               |            |                 |   |                  |  |              |         |  |   |           
|U. S. Government Agencies and corporations |  | $             | 22,474,199 |                 | $ | 348,917          |  | $            | 47,624  |  | $ | 22,775,492
|Mortgage-backed securities                 |  |               | 14,805,083 |                 |   | 110,113          |  |              | 95,537  |  |   | 14,819,659
|States and political subdivisions          |  |               | 8,946,361  |                 |   | 552,744          |  |              | 2,161   |  |   | 9,496,944 
|Corporate debt securities                  |  |               | 1,500,000  |                 |   | 5,500            |  |              |        |  |   | 1,505,500 
|                                           |  |               |            |                 |   |                  |  |              |         |  |   |           
|                                           |  | $             | 47,725,643 |                 | $ | 1,017,274        |  | $            | 145,322 |  | $ | 48,597,595
|                                           |  |               |            |                 |   |                  |  |              |         |  |   |           
|December 31, 2002:                         |  |               |            |                 |   |                  |  |              |         |  |   |           
|U. S. Government Agencies and corporations |  | $             | 17,900,901 |                 | $ | 574,380          |  | $            |        |  | $ | 18,475,281
|Mortgage-backed securities                 |  |               | 13,175,208 |                 |   | 239,604          |  |              | 8,215   |  |   | 13,406,597
|States and political subdivisions          |  |               | 9,270,915  |                 |   | 541,778          |  |              | 2,518   |  |   | 9,810,175 
|Corporate debt securities                  |  |               | 1,000,000  |                 |   |                 |  |              |        |  |   | 1,000,000 
|                                           |  |               |            |                 |   |                  |  |              |         |  |   |           
|                                           |  | $             | 41,347,024 |                 | $ | 1,355,762        |  | $            | 10,733  |  | $ | 42,692,053
|                                           |  |               |            |                 |   |                  |  |              |         |  |   |           





---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|NOTE 3. | INVESTMENT SECURITIES (Continued)
|------- | ---------------------------------



In 2003, the FASB Emerging Issues Task Force released Issue 03-01, The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments. The issue requires disclosure of certain information about other than temporary impairments in the market value of investment securities. The market value of investment
securities is based on quoted market values and is significantly affected by the interest rate environment. At December 31, 2003, all unrealized losses in the investment securities portfolio were for debt securities. From the December 31, 2003
tables above, 1 out of 66 securities purchased from state and political subdivisions contained unrealized losses and 14 out of 67 securities purchased from U.S. Government agencies and Government sponsored corporations, including mortgage-backed
securities, contained unrealized losses. All investment securities with an unrealized loss at December 31, 2003 have been in a continuous unrealized loss position for less than twelve months. These unrealized losses are considered temporary because
of acceptable investment grades on each security and the repayment sources of principal and interest are government backed.



Other investments are comprised of the following:



|                                   |  |      |           |      |   |          
|---------------------------------- |  | ---- | --------- | ---- | - | ---------
|                                   |  | 2003 |           | 2002
|Federal Home Loan Bank             |  | $    | 700,000   |      | $ | 650,000  
|Community Financial Services, Inc. |  |      | 335,029   |      |   | 335,029  
|Nexity Financial Corporation       |  |      | 249,963   |      |   | 249,963  
|                                   |  |      |           |      |   |          
|                                   |  | $    | 1,284,992 |      | $ | 1,234,992
|                                   |  |      |           |      |   |          



The carrying value
and estimated market value of investment securities held to maturity and the amortized cost and estimated market value of investment securities available for sale at December 31, 2003, by contractual maturity, are shown below. Expected maturities
will differ from contractual maturities because borrowers may have the right to call or prepay obligations without call or prepayment penalties.



|                           |  |                                        |           |                                          |   |               |  |              |            |  |   |           
|-------------------------- |  | -------------------------------------- | --------- | ---------------------------------------- | - | ------------- |  | ------------ | ---------- |  | - | ----------
|                           |  | Investment Securities Held to Maturity |           | Investment Securities Available for Sale
|                           |  | Amortized Cost                         |           | MarketValue                              |   | AmortizedCost |  | Market Value
|Due in one year or less    |  | $                                      | 399,977   |                                          | $ | 409,504       |  | $            | 3,193,218  |  | $ | 3,272,181 
|Due from one to five years |  |                                        | 1,088,344 |                                          |   | 1,154,788     |  |              | 18,570,141 |  |   | 19,082,341
|Due from five to ten years |  |                                        |          |                                          |   |              |  |              | 9,657,201  |  |   | 9,917,914 
|Due after ten years        |  |                                        |          |                                          |   |              |  |              | 1,500,000  |  |   | 1,505,500 
|Mortgage-backed securities |  |                                        |          |                                          |   |              |  |              | 14,805,083 |  |   | 14,819,659
|                           |  |                                        |           |                                          |   |               |  |              |            |  |   |           
|                           |  | $                                      | 1,488,321 |                                          | $ | 1,564,292     |  | $            | 47,725,643 |  | $ | 48,597,595
|                           |  |                                        |           |                                          |   |               |  |              |            |  |   |           





---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|NOTE 3. | INVESTMENT SECURITIES (Continued)
|------- | ---------------------------------



There were no sales of investment securities during 2003 or 2002.



Investment securities with a carrying value of $36,852,269 and $28,868,212
at December 31, 2003 and 2002, respectively, were pledged to secure public funds and certain other deposits as required by law.



|NOTE 4. | LOANS
|------- | -----



Major classifications of loans at December 31, 2003 and 2002 are summarized as follows:



|                                       |  |      |             |   |      |   |             |  
|-------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | -
|                                       |  | 2003 |             |   | 2002 |  
|Commercial, financial and agricultural |  | $    | 24,868,473  |   |      | $ | 22,854,370  |  
|Real estate - mortgage                 |  |      | 125,729,003 |   |      |   | 106,897,967 |  
|Real estate - construction             |  |      | 36,855,388  |   |      |   | 31,532,974  |  
|Consumer                               |  |      | 13,501,198  |   |      |   | 13,834,551  |  
|Tax-exempt                             |  |      | 2,039,027   |   |      |   | 876,710     |  
|                                       |  |      |             |   |      |   |             |  
|                                       |  |      | 202,993,089 |   |      |   | 175,996,572 |  
|Less: Allowance for loan losses        |  |      | (3,177,816  | ) |      |   | (2,839,548  | )
|                                       |  |      |             |   |      |   |             |  
|                                       |  | $    | 199,815,273 |   |      | $ | 173,157,024 |  
|                                       |  |      |             |   |      |   |             |  



The Bank grants loans
and extensions of credit to individuals and a variety of businesses and corporations located in its general trade area of Butts, Jasper and Henry counties as well as other adjoining counties in Georgia. Although the Bank has a diversified portfolio,
a substantial portion is secured by improved and unimproved real estate and is dependent on the real estate market.



The following is a summary of activity in the allowance for loan losses:



|                                           |  |      |           |   |      |   |           |  
|------------------------------------------ |  | ---- | --------- | - | ---- | - | --------- | -
|                                           |  | 2003 |           |   | 2002 |  
|Balance at beginning of year               |  | $    | 2,839,548 |   |      | $ | 2,477,853 |  
|Provision charged to expense               |  |      | 427,072   |   |      |   | 437,132   |  
|Loans charged off                          |  |      | (114,603  | ) |      |   | (96,929   | )
|Recoveries of loans previously charged off |  |      | 25,799    |   |      |   | 21,492    |  
|                                           |  |      |           |   |      |   |           |  
|                                           |  | $    | 3,177,816 |   |      | $ | 2,839,548 |  
|                                           |  |      |           |   |      |   |           |  



Impaired loans,
consisting solely of loans on nonaccrual status, totaled $782,948 and $722,343 at December 31, 2003 and 2002, respectively. Allocations of the general loan loss reserve related to impaired loans totaled $222,931 and $350,406 at December 31, 2003 and
2002, respectively. The average balance for impaired loans in the years ended December 31, 2003 and 2002 was approximately $655,000 and $219,000, respectively. There was no interest income recognized on impaired loans for the years ended December
31, 2003 and 2002.



Loans past due ninety days or more and
still accruing interest totaled $294,547 and $83,079 at December 31, 2003 and 2002, respectively.





---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|NOTE 5. | PREMISES AND EQUIPMENT
|------- | ----------------------



Premises and equipment are comprised of the following:



|                                  |  |      |            |   |      |   |            |  
|--------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                  |  | 2003 |            |   | 2002 |  
|Land                              |  | $    | 531,512    |   |      | $ | 531,512    |  
|Buildings                         |  |      | 3,803,650  |   |      |   | 3,367,228  |  
|Furniture, fixtures and equipment |  |      | 2,972,209  |   |      |   | 2,833,024  |  
|Construction in process           |  |      |           |   |      |   | 429,931    |  
|                                  |  |      |            |   |      |   |            |  
|                                  |  |      | 7,307,371  |   |      |   | 7,161,695  |  
|Less accumulated depreciation     |  |      | (3,142,312 | ) |      |   | (2,642,396 | )
|                                  |  |      |            |   |      |   |            |  
|                                  |  | $    | 4,165,059  |   |      | $ | 4,519,299  |  
|                                  |  |      |            |   |      |   |            |  



Depreciation expense
totaled approximately $511,000 and $457,000 in 2003 and 2002, respectively.



|NOTE 6. | DEPOSITS
|------- | --------



Maturities of time deposits at December 31, 2003 are as follows:



|             |  |   |            
|------------ |  | - | -----------
|Maturing in: |  |   |            
|2004         |  | $ | 58,885,578 
|2005         |  |   | 25,078,876 
|2006         |  |   | 9,729,199  
|2007         |  |   | 10,961,059 
|2008         |  |   | 12,559,325 
|             |  |   |            
|             |  | $ | 117,214,037
|             |  |   |            



|NOTE 7. | OTHER BORROWED FUNDS
|------- | --------------------



The Bank has invested in FHLB stock for the purpose of establishing credit lines with the FHLB. Any advances on the credit lines are secured by the
Banks one-to-four family residential mortgage loans. Total one-to-four family residential mortgage loans eligible as collateral amounted to $42,985,113 at December 31, 2003. Outstanding borrowings totaled $14,000,000 and $13,000,000 at
December 31, 2003 and 2002, respectively. The advances outstanding at December 31, 2003 carrying fixed interest rates ranging from 2.22 to 5.71 percent per annum, require monthly or quarterly payments of interest only and mature through December 19,
2013. The FHLB has the option to convert $12,000,000 of the advances at dates through December 2008 to advances bearing interest based on the three-month floating LIBOR rate. At December 31, 2003, credit availability for the Bank totaled
$18,238,835.





---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|NOTE 8. | INCOME TAXES
|------- | ------------



The following are the components of income tax expense:



|                         |  |      |           |   |      |   |           |  
|------------------------ |  | ---- | --------- | - | ---- | - | --------- | -
|                         |  | 2003 |           |   | 2002 |  
|Current                  |  | $    | 1,746,610 |   |      | $ | 1,499,449 |  
|Deferred                 |  |      | (171,434  | ) |      |   | (109,600  | )
|                         |  |      |           |   |      |   |           |  
|Total income tax expense |  | $    | 1,575,176 |   |      | $ | 1,389,849 |  
|                         |  |      |           |   |      |   |           |  



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



|                                                    |  |      |           |   |      |   |           |  
|--------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | -
|                                                    |  | 2003 |           |   | 2002 |  
|Income taxes computed at federal statutory tax rate |  | $    | 1,708,265 |   |      | $ | 1,521,473 |  
|Increase (decrease) resulting from:                 |  |      |           |   |      |   |           |  
|Tax-exempt interest                                 |  |      | (177,651  | ) |      |   | (201,534  | )
|Nondeductible interest on tax-exempt investments    |  |      | 17,680    |   |      |   | 21,768    |  
|Other, net                                          |  |      | 26,882    |   |      |   | 48,142    |  
|                                                    |  |      |           |   |      |   |           |  
|                                                    |  | $    | 1,575,176 |   |      | $ | 1,389,849 |  
|                                                    |  |      |           |   |      |   |           |  



The following
summarizes the components of the net deferred tax asset. The deferred tax asset is included as a component of other assets at December 31, 2003 and 2002:



|                                                            |  |      |           |   |      |   |           |  
|----------------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | -
|                                                            |  | 2003 |           |   | 2002 |  
|Deferred income tax assets:                                 |  |      |           |   |      |   |           |  
|Allowance for loan losses                                   |  | $    | 1,156,525 |   |      | $ | 1,049,256 |  
|Pension plan contributions                                  |  |      | 40,389    |   |      |   | 40,389    |  
|Deferred compensation                                       |  |      | 189,679   |   |      |   | 122,401   |  
|Other                                                       |  |      | 24,416    |   |      |   | 43,792    |  
|                                                            |  |      |           |   |      |   |           |  
|Total gross deferred tax assets                             |  | $    | 1,411,009 |   |      | $ | 1,255,838 |  
|                                                            |  |      |           |   |      |   |           |  
|Deferred income tax liabilities:                            |  |      |           |   |      |   |           |  
|Accumulated depreciation on premises and equipment          |  | $    | (204,289  | ) |      | $ | (216,636  | )
|Unrealized gain on investment securities available for sale |  |      | (296,464  | ) |      |   | (457,310  | )
|Deferred loan costs                                         |  |      | 0         |   |      |   | (3,917    | )
|                                                            |  |      |           |   |      |   |           |  
|Total gross deferred tax liabilities                        |  |      | (500,753  | ) |      |   | (677,863  | )
|                                                            |  |      |           |   |      |   |           |  
|Net deferred income tax asset                               |  | $    | 910,256   |   |      | $ | 577,975   |  
|                                                            |  |      |           |   |      |   |           |  





---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|NOTE 9. | EMPLOYEE BENEFIT AND DEFERRED COMPENSATION PLANS
|------- | ------------------------------------------------



Defined Benefit Pension Plan



The Parent Company sponsors a defined benefit pension plan covering substantially all employees. The plan calls for benefits to be paid to eligible
employees at retirement based primarily upon years of service with the Parent Company and compensation rates for the last five years. Contributions to the plan reflect benefits attributed to employees services to date, as well as services
expected to be performed in the future.



Pension expense
includes the following components:



|                                                                            |  |      |         |   |      |   |         |  
|--------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                                                            |  | 2003 |         |   | 2002 |  
|Service cost of the current period                                          |  | $    | 147,048 |   |      | $ | 115,736 |  
|Interest cost on the projected benefit obligation                           |  |      | 90,222  |   |      |   | 75,377  |  
|Return on plan assets                                                       |  |      | (51,403 | ) |      |   | (56,745 | )
|Net amortization of prior service cost, transaction liability, and net gain |  |      | (5,242  | ) |      |   | (14,870 | )
|                                                                            |  |      |         |   |      |   |         |  
|Pension expense, net                                                        |  | $    | 180,625 |   |      | $ | 119,498 |  
|                                                                            |  |      |         |   |      |   |         |  



The following sets
forth the funded status of the plan and the amounts included in the accompanying balance sheet:



|                                                                                                                                                                                                                    |  |      |           |   |      |   |           |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | -
|                                                                                                                                                                                                                    |  | 2003 |           |   | 2002 |  
|Actuarial present value of benefit obligations:                                                                                                                                                                     |  |      |           |   |      |   |           |  
|Vested benefit obligation                                                                                                                                                                                           |  | $    | 765,142   |   |      | $ | 590,028   |  
|                                                                                                                                                                                                                    |  |      |           |   |      |   |           |  
|Accumulated benefit obligation                                                                                                                                                                                      |  |      | 817,375   |   |      |   | 630,011   |  
|                                                                                                                                                                                                                    |  |      |           |   |      |   |           |  
|Projected benefit obligation                                                                                                                                                                                        |  |      | 1,695,032 |   |      |   | 1,340,955 |  
|Fair value of assets held in the plan                                                                                                                                                                               |  |      | 850,593   |   |      |   | 623,661   |  
|                                                                                                                                                                                                                    |  |      |           |   |      |   |           |  
|Unfunded excess of projected benefit obligation over planned assets                                                                                                                                                 |  |      | 844,439   |   |      |   | 717,294   |  
|Net unrecognized gain from changes in assumptions for weighted average discount rate, expected long-term assets, mortality tables, and other
actuarial assumptions, addition of participants and projected earnings |  |      | (744,834  | ) |      |   | (619,287  | )
|Unamortized liability at transition                                                                                                                                                                                 |  |      | 8,967     |   |      |   | 10,565    |  
|                                                                                                                                                                                                                    |  |      |           |   |      |   |           |  
|Accrued pension expense liability                                                                                                                                                                                   |  | $    | 108,572   |   |      | $ | 108,572   |  
|                                                                                                                                                                                                                    |  |      |           |   |      |   |           |  





---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|NOTE 9. | EMPLOYEE BENEFIT AND DEFERRED COMPENSATION PLANS (Continued)
|------- | ------------------------------------------------------------



Defined Benefit Pension Plan (Continued)



The following table includes a reconciliation of projected benefit obligation for 2003 and 2002:



|                                               |  |      |           |   |      |   |           |  
|---------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | -
|                                               |  | 2003 |           |   | 2002 |  
|Projected benefit obligation beginning of year |  | $    | 1,340,955 |   |      | $ | 946,987   |  
|Service cost                                   |  |      | 147,048   |   |      |   | 115,736   |  
|Interest cost                                  |  |      | 90,222    |   |      |   | 75,377    |  
|Distributions                                  |  |      | (61,476   | ) |      |   | (33,553   | )
|Plan amendment                                 |  |      |          |   |      |   | 39,427    |  
|Actuarial (gains)/losses                       |  |      | 178,283   |   |      |   | 196,981   |  
|                                               |  |      |           |   |      |   |           |  
|Projected benefit obligation end of year       |  | $    | 1,695,032 |   |      | $ | 1,340,955 |  
|                                               |  |      |           |   |      |   |           |  



The following table
includes a reconciliation of the fair value of plan assets for 2003 and 2002:



|                               |  |      |         |   |      |   |         |  
|------------------------------ |  | ---- | ------- | - | ---- | - | ------- | -
|                               |  | 2003 |         |   | 2002 |  
|Fair value - beginning of year |  | $    | 623,661 |   |      | $ | 629,799 |  
|Contributions                  |  |      | 180,625 |   |      |   | 119,498 |  
|Return on plan assets          |  |      | 107,783 |   |      |   | (92,083 | )
|Distributions                  |  |      | (61,476 | ) |      |   | (33,553 | )
|                               |  |      |         |   |      |   |         |  
|Fair value  end of year       |  | $    | 850,593 |   |      | $ | 623,661 |  
|                               |  |      |         |   |      |   |         |  



The following table
sets forth the assumptions used to compute the estimated pension liability:



|                                                              |  |      |   |  |      |  
|------------------------------------------------------------- |  | ---- | - |  | ---- | -
|                                                              |  | 2003 |   |  | 2002 |  
|Weighted average discount rate - projected benefit obligation |  | 6.25 | % |  | 6.75 | %
|Increase in future compensation levels                        |  | 5.00 | % |  | 5.00 | %
|Expected long-term rate of return                             |  | 8.25 | % |  | 8.25 | %



In consultation with
the plans investment management company and actuary, the Parent Company, as plan sponsor, arrives at an assumption for the expected long-term rate of return on plan assets. This rate is intended to reflect the average rate of earnings expected
on funds invested given funding obligations, future compensation levels, and inflation. The expected long-term rate of return is not necessarily a reflection of recent experience but rather a historical estimate of future long term rates of return.
Anticipated returns for the plan are not reduced by taxes and assume the plan continues in place for the foreseeable future.





---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|NOTE 9. | EMPLOYEE BENEFIT AND DEFERRED COMPENSATION PLANS (Continued)
|------- | ------------------------------------------------------------



Defined Benefit Pension Plan (Continued)



The Parent Company reviews the plans asset allocation and investment mix at least annually.
Plan assets may be invested in a mix of the following major classes: equity  large cap growth; equity  small cap value; equity  international; intermediate bond; and money market. Investment strategies are based, in part, on the
Companys overall assessment of the state of the economy and its assumed direction, the Federal Reserve Boards bias in setting monetary policy, fiscal policy and its projected impact, and the direction of short and long term interest
rates. Investment strategies are guided by an investment policy that calls for comparing the investment performance of the investment management company to an appropriate benchmark. This evaluation is conducted over a three-year horizon and also
considers the investment managers performance relative to their discipline.



The Parent Company uses the straight-line method of amortization for prior service cost and unrecognized gains and losses. The Parent Company contributed $180,625 and $119,498 to the plan in 2003 and 2002,
respectively.



Profit Sharing and 401(k) Plan



The Parent Company sponsors an Internal Revenue Code
Section 401(k) Employee Savings Plan that permits an employee to defer annual cash compensation. The Parent Companys Board of Directors determines the Parent Companys contribution, which was approximately $264,000 and $294,000 in 2003
and 2002, respectively.



Deferred Compensation Plans



The Bank has entered into salary continuation agreements
with its directors, its chief executive officer and four other officers. In 2003 and 2002, the Bank expensed $166,621 and $98,285, respectively, for the accrual of future salary continuation benefits. The Bank has elected to fund the salary
continuation liability with single premium universal life insurance policies. In 2003 and 2002, cash value income totaled $238,694 and $178,186, respectively. As of December 31, 2003 and 2002, other assets included $4,684,525 and $4,470,456,
respectively, in surrender value, and other liabilities included salary continuation benefits payable of $499,711 and $332,890, respectively.



The Bank also maintains split dollar insurance on its chief executive officer. In 2003 and 2002, the increase in cash surrender value recorded in income
totaled $11,276 and $10,982, respectively. As of December 31, 2003 and 2002, other assets includes accrued cash surrender value of $157,027 and $145,751, respectively.





---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|NOTE 10. | STOCK OPTION PLAN
|-------- | -----------------



A summary status of the Companys Stock Option Plan as of December 31, 2003 and 2002, and changes during the years ending on those dates is as
follows:



|                                                               |  |              |  |                                     |       |              |        |                                     |   |      
|-------------------------------------------------------------- |  | ------------ |  | ----------------------------------- | ----- | ------------ | ------ | ----------------------------------- | - | -----
|                                                               |  | 2003         |  | 2002                               
|                                                               |  | OptionShares |  | WeightedAverageOptionPrice PerShare |       | OptionShares |        | WeightedAverageOptionPrice PerShare
|Outstanding, beginning of year                                 |  | 30,938       |  | $                                   | 32.73 |              | 30,938 |                                     | $ | 32.73
|Granted during the year                                        |  | 17,187       |  |                                     | 32.00 |              |       |                                     |   |     
|                                                               |  |              |  |                                     |       |              |        |                                     |   |      
|Outstanding, end of year                                       |  | 48,125       |  | $                                   | 32.47 |              | 30,938 |                                     | $ | 32.73
|                                                               |  |              |  |                                     |       |              |        |                                     |   |      
|Number of shares exercisable                                   |  | 24,750       |  |                                     |       |              | 18,564 |                                     |   |      
|                                                               |  |              |  |                                     |       |              |        |                                     |   |      
|Weighted-average fair value of options granted during the year |  |              |  | $                                   | 7.42  |              |        |                                     | $ |     



Information pertaining
to options outstanding at December 31, 2003 is as follows:



|                         |  |                     |  |                                          |  |                               |       |                   |        |                               |   |      
|------------------------ |  | ------------------- |  | ---------------------------------------- |  | ----------------------------- | ----- | ----------------- | ------ | ----------------------------- | - | -----
|                         |  | Options Outstanding |  | Options Exercisable                     
|Range of Exercise Prices |  | NumberOutstanding   |  | Weighted-AverageRemainingContractualLife |  | Weighted-AverageExercisePrice |       | NumberExercisable |        | Weighted-AverageExercisePrice
|$32.00 -$32.73           |  | 48,125              |  | 7 years                                  |  | $                             | 32.47 |                   | 24,750 |                               | $ | 32.73



The fair value of each
option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:



|                        |  |                         |   |  |     
|----------------------- |  | ----------------------- | - |  | ----
|                        |  | Years EndedDecember 31,
|                        |  | 2003                    |   |  | 2002
|Dividend yield          |  | 1.40                    | % |  | N/A 
|Expected life           |  | 10 years                |   |  | N/A 
|Expected volatility     |  | 0                       | % |  | N/A 
|Risk-free interest rate |  | 4.55                    | % |  | N/A 





---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|NOTE 11. | RELATED PARTY TRANSACTIONS
|-------- | --------------------------



As of December 31, 2003 and 2002, the Bank had direct and indirect loans outstanding to or for the benefit of certain of the Banks executive
officers, directors, and their related interests of $2,077,607 and $2,716,031, respectively. During 2003 and 2002, $1,855,432 and $11,224,052 of such loans were made and repayments totaled $2,493,856 and $11,363,928, respectively. These loans were
made in the ordinary course of business in conformity with normal credit terms, including interest rates and collateral requirements prevailing at the time for comparable transactions with other borrowers. These individuals and their related
interests also maintain customary demand and time deposit accounts at the Bank which amounted to $3,150,553 at December 31, 2003.



|NOTE 12. | STOCKHOLDERS EQUITY
|-------- | --------------------



The Parent Company and the Bank are subject to various capital requirements administered by the regulatory authorities. Failure to meet minimum capital
requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Companys financial statements. The regulations require the Company to meet
specific capital adequacy guidelines that involve quantitative measures of the Companys assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Companys capital classification is
also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.



Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios (set forth in the
following tables) of Tier 1 capital (as defined in the regulations) to total average assets (as defined), and minimum ratios of Tier 1 and total capital (as defined) to risk-weighted assets (as defined). As of December 31, 2003, the most recent
notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be considered well capitalized and adequately capitalized (as defined) under the regulatory framework for prompt
corrective action, the Company must maintain minimum Tier 1 leverage, Tier 1 risk-based, and total risk-based ratios as set forth in the tables. The Companys actual capital amounts and ratios are also presented in the following tables. Capital
levels at the Parent Company approximate those of the Bank.



|                                       |  |                             |        |       |                                  |   |        |        |        |  |      |        |  |       |        |  |      |  
|-------------------------------------- |  | --------------------------- | ------ | ----- | -------------------------------- | - | ------ | ------ | ------ |  | ---- | ------ |  | ----- | ------ |  | ---- | -
|                                       |  | Well CapitalizedRequirement |        |       | AdequatelyCapitalizedRequirement |   |        | Actual |       
|                                       |  | Amount                      |        | Ratio |                                  |   | Amount |        | Ratio  |  |      | Amount |  | Ratio |       
|                                       |  | (Dollars in Thousands)      |       
|As of December 31, 2003:               |  |                             |        |       |                                  |   |        |        |        |  |      |        |  |       |        |  |      |  
|Tier I Capital to Average Assets       |  | $                           | 13,466 |       | 5.0                              | % |        | $      | 8,080  |  | 3.0  | %      |  | $     | 25,367 |  | 9.4  | %
|Tier I Capital to Risk Weighted Assets |  | $                           | 12,560 |       | 6.0                              | % |        | $      | 8,373  |  | 4.0  | %      |  | $     | 25,367 |  | 12.1 | %
|Total Capital to Risk Weighted Assets  |  | $                           | 20,934 |       | 10.0                             | % |        | $      | 16,747 |  | 8.0  | %      |  | $     | 27,991 |  | 13.4 | %
|                                       |  |                             |        |       |                                  |  
|As of December 31, 2002:               |  |                             |        |       |                                  |   |        |        |        |  |      |        |  |       |        |  |      |  
|Tier I Capital to Average Assets       |  | $                           | 12,119 |       | 5.00                             | % |        | $      | 7,271  |  | 3.00 | %      |  | $     | 22,153 |  | 9.1  | %
|Tier I Capital to Risk Weighted Assets |  | $                           | 10,994 |       | 6.00                             | % |        | $      | 7,329  |  | 4.00 | %      |  | $     | 22,153 |  | 12.1 | %
|Total Capital to Risk Weighted Assets  |  | $                           | 18,315 |       | 10.00                            | % |        | $      | 14,652 |  | 8.00 | %      |  | $     | 24,450 |  | 13.4 | %





---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|NOTE 12. | STOCKHOLDERS EQUITY (Continued)
|-------- | --------------------------------



Management believes, as of December 31, 2003, that the Parent Company and the Bank meet all capital
requirements to which they are subject.



Banking regulations
limit the amount of dividends which the Bank may pay without obtaining prior approval. Under current state banking laws, the approval of the Georgia Department of Banking and Finance will be required if the total of all dividends declared in the
calendar year exceeds 50 percent of the net profits for the previous calendar year, and the ratio of equity capital to adjusted total assets is less than 6 percent. At December 31, 2003, stockholders equity of the Bank available for the
payment of dividends after that date to the Parent Company without prior regulatory approval was approximately $1,750,000.



|NOTE 13. | OFF BALANCE-SHEET FINANCIAL INSTRUMENTS
|-------- | ---------------------------------------



The Bank is a party to financial instruments with off-balance-sheet risk to meet the financing needs of its customers. These financial instruments include
commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. The contract amounts of these
instruments reflect the extent of involvement the Bank has in particular classes of financial instruments



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



Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being
drawn upon, the total commitment amounts do not necessarily represent future cash requirements. At December 31, 2003 and 2002, commitments to extend credit totaled $40,332,098 and $33,255,737, respectively.



Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in
extending loans to customers. At December 31, 2003 and 2002, commitments under letters of credit aggregated $881,793 and $765,924, respectively. In 2003 and 2002, the Bank was not required to perform on any letters of credit.



The Bank evaluates each customers creditworthiness on a case-by-case
basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on managements credit evaluation of the other party. Collateral held varies but may include accounts receivable; inventory; property,
plant and equipment; and income-producing commercial properties on those commitments for which collateral is deemed necessary.





---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|NOTE 14. | FAIR VALUE OF FINANCIAL INSTRUMENTS
|-------- | -----------------------------------



The assumptions used in the estimation of the fair value of the Companys financial instruments are detailed below. Where quoted prices are not
available, fair values are based on estimates using discounted cash flows and other valuation techniques. The use of discounted cash flows can be significantly affected by the assumptions used, including the discount rate and estimates of future
cash flows. The following disclosures should not be considered a surrogate of the liquidation value of the Company or its subsidiaries, but rather a good-faith estimate of the increase or decrease in value of financial instruments held by the
Company since purchase, origination or issuance.



Cash and
Cash Equivalents - For cash and cash equivalents, the carrying amount is a reasonable estimate of fair value.



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



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



Other Investments - The carrying value of other investments is
estimated to approximate fair value.



Cash Surrender Value
of Life Insurance - The carrying value of cash surrender value of life insurance approximates fair value.



Deposits - The fair value of demand deposits, savings accounts, NOW accounts, and certain money market deposits are the amount payable on demand at
the reporting date. The fair value of fixed maturity certificates of deposit is estimated by discounting the future cash flows using the rates currently offered for deposits of similar remaining maturities.



Other Borrowed Funds



The fair value of the FHLB fixed rate borrowings approximates their carrying
value.



Commitments to Extend Credit and Standby Letters of
Credit



Off-balance sheet financial instruments
(commitments to extend credit and stand-by letters of credit) are generally short-term and at variable interest rates. Therefore, both the carrying value and the fair value associated with these instruments are immaterial.



Limitations



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





---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|NOTE 14. | FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
|-------- | -----------------------------------------------



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



The carrying amount and estimated fair values of the
Companys financial instruments at December 31, 2003 and 2002 are as follows:



|                                       |  |                   |             |                      |   |                |  |                      |             |  |   |            
|-------------------------------------- |  | ----------------- | ----------- | -------------------- | - | -------------- |  | -------------------- | ----------- |  | - | -----------
|                                       |  | December 31, 2003 |             | December 31, 2002   
|                                       |  | Carrying Value    |             | Estimated Fair Value |   | Carrying Value |  | Estimated Fair Value
|Financial assets:                      |  |                   |             |                      |   |                |  |                      |             |  |   |            
|Cash and cash equivalents              |  | $                 | 13,129,866  |                      | $ | 13,129,866     |  | $                    | 11,524,941  |  | $ | 11,524,941 
|Investment securities                  |  |                   | 50,085,916  |                      |   | 50,161,887     |  |                      | 45,176,481  |  |   | 45,304,196 
|Other investments                      |  |                   | 1,284,992   |                      |   | 1,284,992      |  |                      | 1,234,992   |  |   | 1,234,992  
|Loans                                  |  |                   | 199,815,273 |                      |   | 204,460,755    |  |                      | 173,157,024 |  |   | 177,417,644
|Cash surrender value of Life insurance |  |                   | 4,841,552   |                      |   | 4,841,552      |  |                      | 4,616,207   |  |   | 4,616,207  
|Financial liabilities:                 |  |                   |             |                      |   |                |  |                      |             |  |   |            
|Deposits                               |  | $                 | 234,413,082 |                      | $ | 239,107,361    |  | $                    | 204,696,254 |  | $ | 207,565,243
|Other borrowed funds                   |  |                   | 14,000,000  |                      |   | 14,000,000     |  |                      | 13,000,000  |  |   | 13,000,000 



Due to the short-term
duration of most of the off-balance-sheet financial instruments (commitments to extend credit and stand-by letters of credit), management has chosen not to defer any fees associated with those instruments. Additionally, most of the off-balance-sheet
financial instruments (or their underlying credit instrument) carry variable rates. Therefore, management has determined that both the carrying value and the fair value associated with the off-balance-sheet financial instruments is immaterial.





---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|NOTE 15. | CONDENSED FINANCIAL INFORMATION OF McINTOSH BANCSHARES, INC.
|-------- | ------------------------------------------------------------



CONDENSED BALANCE SHEETS

(Parent
Only)



|                                                           |  |      |            |      |   |           
|---------------------------------------------------------- |  | ---- | ---------- | ---- | - | ----------
|                                                           |  | 2003 |            | 2002
|Assets                                                     |  |      |            |      |   |           
|Cash                                                       |  | $    | 127,412    |      | $ | 64,359    
|Investment in McIntosh State Bank subsidiary               |  |      | 26,216,933 |      |   | 23,641,973
|Investment in McIntosh Financial Services, Inc. subsidiary |  |      | 33,490     |      |   | 46,838    
|Other investments                                          |  |      | 249,963    |      |   | 249,963   
|                                                           |  |      |            |      |   |           
|Total assets                                               |  | $    | 26,627,798 |      | $ | 24,003,133
|                                                           |  |      |            |      |   |           
|Liabilities and Stockholders Equity                       |  |      |            |      |   |           
|Other liabilities                                          |  | $    | 84,571     |      | $ | 93,072    
|                                                           |  |      |            |      |   |           
|Total liabilities                                          |  |      | 84,571     |      |   | 93,072    
|                                                           |  |      |            |      |   |           
|Stockholders equity:                                      |  |      |            |      |   |           
|Common stock                                               |  |      | 2,798,523  |      |   | 2,798,523 
|Surplus                                                    |  |      | 8,905,393  |      |   | 8,905,393 
|Retained earnings                                          |  |      | 14,263,823 |      |   | 11,318,426
|Accumulated other comprehensive income                     |  |      | 575,488    |      |   | 887,719   
|                                                           |  |      |            |      |   |           
|Total stockholders equity                                 |  |      | 26,543,226 |      |   | 23,910,061
|                                                           |  |      |            |      |   |           
|Total liabilities and stockholders equity                 |  | $    | 26,627,798 |      | $ | 24,003,133
|                                                           |  |      |            |      |   |           





---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|NOTE 15. | CONDENSED FINANCIAL INFORMATION OF McINTOSH BANCSHARES, INC. (Continued)
|-------- | ------------------------------------------------------------------------



CONDENSED STATEMENTS OF EARNINGS

(Parent Only)



|                                                                                      |  |      |            |   |      |   |            |  
|------------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                                                                      |  | 2003 |            |   | 2002 |  
|Dividend from Bank subsidiary                                                         |  | $    | 615,000    |   |      | $ | 250,000    |  
|Operating expenses                                                                    |  |      | (63,712    | ) |      |   | (45,421    | )
|                                                                                      |  |      |            |   |      |   |            |  
|Income before income tax benefit and equity in undistributed earnings of subsidiaries |  |      | 551,288    |   |      |   | 204,579    |  
|Income tax benefit                                                                    |  |      | 24,000     |   |      |   | 15,500     |  
|                                                                                      |  |      |            |   |      |   |            |  
|Income before equity in undistributed earnings of subsidiaries                        |  |      | 575,288    |   |      |   | 220,079    |  
|Equity in undistributed earnings of subsidiaries                                      |  |      | 2,873,844  |   |      |   | 2,864,995  |  
|                                                                                      |  |      |            |   |      |   |            |  
|Net earnings                                                                          |  | $    | 3,449,132  |   |      | $ | 3,085,074  |  
|                                                                                      |  |      |            |   |      |   |            |  
|                                                                                     
|CONDENSED STATEMENTS OF CASH FLOWS (Parent Only)                                      | 
|                                                                                      |  | 2003 |            |   | 2002 |  
|OPERATING ACTIVITIES                                                                  |  |      |            |   |      |   |            |  
|Cash flows from operating activities:                                                 |  |      |            |   |      |   |            |  
|Net earnings                                                                          |  | $    | 3,449,132  |   |      | $ | 3,085,074  |  
|Adjustments to reconcile net earnings to net cash provided by operating activities:   |  |      |            |   |      |   |            |  
|Equity in undistributed earnings of subsidiaries                                      |  |      | (2,873,844 | ) |      |   | (2,864,995 | )
|Change in other liabilities                                                           |  |      | (8,500     | ) |      |   | (17,177    | )
|                                                                                      |  |      |            |   |      |   |            |  
|Net cash provided by operating activities                                             |  |      | 566,788    |   |      |   | 202,902    |  
|                                                                                      |  |      |            |   |      |   |            |  
|FINANCING ACTIVITIES                                                                  |  |      |            |   |      |   |            |  
|Cash flows from financing activities, consisting of dividends paid                    |  |      | (503,735   | ) |      |   | (335,823   | )
|                                                                                      |  |      |            |   |      |   |            |  
|Net cash flows used by financing activities                                           |  |      | (503,735   | ) |      |   | (335,823   | )
|                                                                                      |  |      |            |   |      |   |            |  
|Net change in cash                                                                    |  |      | 63,053     |   |      |   | (132,921   | )
|Cash at beginning of year                                                             |  |      | 64,359     |   |      |   | 197,280    |  
|                                                                                      |  |      |            |   |      |   |            |  
|Cash at end of year                                                                   |  | $    | 127,412    |   |      | $ | 64,359     |  
|                                                                                      |  |      |            |   |      |   |            |  





---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|NOTE 16. | MISCELLANEOUS OPERATING INCOME AND EXPENSES
|-------- | -------------------------------------------



Significant components of other operating income and expense included in the consolidated statements of earnings in excess of 1% of interest and other
income for the years ended December 31, 2003 and 2002 are as follows:



|                                                 |  |      |         |      |   |        
|------------------------------------------------ |  | ---- | ------- | ---- | - | -------
|                                                 |  | 2003 |         | 2002
|Other operating income:                          |  |      |         |      |   |        
|Secondary market mortgage origination fees       |  | $    | 725,736 |      | $ | 610,706
|Cash surrender value income of insurance polices |  |      | 249,969 |      |   | 178,186
|Other operating expenses:                        |  |      |         |      |   |        
|Professional fees                                |  | $    | 281,726 |      | $ | 286,469