EXHIBIT NO. 99.1



MCINTOSH BANCSHARES, INC.

AND SUBSIDIARIES



Consolidated Financial Statements



December
31, 2004 and 2003



(with Independent Accountants
Report thereon)



---



REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors and
Shareholders

McIntosh Bancshares, Inc.

Jackson, Georgia



We have audited the consolidated balance sheets of McIntosh Bancshares, Inc.
(the Company) and subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements of earnings, changes in shareholders equity, comprehensive income and cash flows for 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 the standards of the Public Company Accounting Oversight Board (United States). 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 provided 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, 2004 and 2003, 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 23, 2005





---

MCINTOSH BANCSHARES, INC. AND SUBSIDIARIES



Consolidated Balance Sheets



For the Years Ended December 31, 2004 and 2003



|                                                                                                     |  |      |             |   |      |   |             |  
|---------------------------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | -
|Assets                                                                                               |  |      |             |   |      |   |             |  
|                                                                                                     |  | 2004 |             |   | 2003 |  
|Cash and due from banks                                                                              |  | $    | 5,245,461   |   |      | $ | 6,251,668   |  
|Interest bearing deposits with FHLB                                                                  |  |      | 307,048     |   |      |   | 193,151     |  
|Federal funds sold                                                                                   |  |      | 8,190,000   |   |      |   | 6,512,000   |  
|Investment securities held to maturity (market value of $2,829,951 and $1,564,292)                   |  |      | 2,799,614   |   |      |   | 1,488,321   |  
|Investment securities available for sale                                                             |  |      | 46,222,510  |   |      |   | 48,597,595  |  
|Other investments                                                                                    |  |      | 2,128,393   |   |      |   | 1,284,992   |  
|Loans                                                                                                |  |      | 233,583,283 |   |      |   | 202,993,089 |  
|Less: Allowance for loan losses                                                                      |  |      | (2,912,623  | ) |      |   | (3,177,816  | )
|                                                                                                     |  |      |             |   |      |   |             |  
|Loans, net                                                                                           |  |      | 230,670,660 |   |      |   | 199,815,273 |  
|                                                                                                     |  |      |             |   |      |   |             |  
|Premises and equipment, net                                                                          |  |      | 5,494,176   |   |      |   | 4,165,059   |  
|Accrued interest receivable                                                                          |  |      | 2,024,100   |   |      |   | 1,778,973   |  
|Other assets                                                                                         |  |      | 8,016,911   |   |      |   | 6,686,130   |  
|                                                                                                     |  |      |             |   |      |   |             |  
|Total Assets                                                                                         |  | $    | 311,098,873 |   |      | $ | 276,773,162 |  
|                                                                                                     |  |      |             |   |      |   |             |  
|Liabilities and Stockholders Equity                                                                 |  |      |             |   |      |   |             |  
|                                                                                                     |  |     
|Liabilities:                                                                                         |  |      |             |   |      |   |             |  
|Deposits:                                                                                            |  |      |             |   |      |   |             |  
|Demand                                                                                               |  | $    | 26,755,195  |   |      | $ | 22,560,316  |  
|Money Market and NOW accounts                                                                        |  |      | 95,024,031  |   |      |   | 83,848,090  |  
|Savings                                                                                              |  |      | 10,945,848  |   |      |   | 10,617,592  |  
|Time deposits of $100,000 or more                                                                    |  |      | 60,443,256  |   |      |   | 52,797,831  |  
|Time deposits                                                                                        |  |      | 64,673,641  |   |      |   | 64,416,206  |  
|                                                                                                     |  |      |             |   |      |   |             |  
|Total Deposits                                                                                       |  |      | 257,841,971 |   |      |   | 234,240,035 |  
|Borrowed funds                                                                                       |  |      | 22,000,000  |   |      |   | 14,000,000  |  
|Accrued interest payable and other liabilities                                                       |  |      | 2,075,405   |   |      |   | 1,989,900   |  
|                                                                                                     |  |      |             |   |      |   |             |  
|Total Liabilities                                                                                    |  |      | 281,917,376 |   |      |   | 250,229,935 |  
|                                                                                                     |  |      |             |   |      |   |             |  
|                                                                                                     |  |     
|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                                                                                    |  |      | 17,196,988  |   |      |   | 14,263,823  |  
|Accumulated other comprehensive income                                                               |  |      | 280,593     |   |      |   | 575,488     |  
|                                                                                                     |  |      |             |   |      |   |             |  
|Total stockholders equity                                                                           |  |      | 29,181,497  |   |      |   | 26,543,227  |  
|                                                                                                     |  |      |             |   |      |   |             |  
|Total Liabilities and stockholders equity                                                           |  | $    | 311,098,873 |   |      | $ | 276,773,162 |  
|                                                                                                     |  |      |             |   |      |   |             |  





---

MCINTOSH BANCSHARES, INC. AND SUBSIDIARIES



Consolidated Statements of Earnings



For the Years Ended December 31, 2004 and 2003



|                                                                                                                            |  |      |            |   |      |   |            |  
|--------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                                                                                                            |  | 2004 |            |   | 2003 |  
|Interest income:                                                                                                            |  |      |            |   |      |   |            |  
|Loans, including fees                                                                                                       |  | $    | 15,329,420 |   |      | $ | 13,808,066 |  
|Interest on investment securities:                                                                                          |  |      |            |   |      |   |            |  
|U.S. Treasury, U.S. Government agency and Mortgage-backed securities                                                        |  |      | 1,284,083  |   |      |   | 1,237,575  |  
|State, county and municipal                                                                                                 |  |      | 461,182    |   |      |   | 517,467    |  
|Other investments                                                                                                           |  |      | 117,899    |   |      |   | 108,836    |  
|Federal funds sold and other short-term investments                                                                         |  |      | 90,655     |   |      |   | 119,272    |  
|                                                                                                                            |  |      |            |   |      |   |            |  
|Total interest income                                                                                                       |  |      | 17,283,239 |   |      |   | 15,791,216 |  
|                                                                                                                            |  |      |            |   |      |   |            |  
|Interest expense:                                                                                                           |  |      |            |   |      |   |            |  
|Interest-bearing demand and money market                                                                                    |  |      | 755,198    |   |      |   | 669,654    |  
|Savings                                                                                                                     |  |      | 43,410     |   |      |   | 42,381     |  
|Time deposits of $100,000 or more                                                                                           |  |      | 1,993,256  |   |      |   | 1,766,529  |  
|Other time deposits                                                                                                         |  |      | 2,068,292  |   |      |   | 2,336,321  |  
|Other                                                                                                                       |  |      | 614,863    |   |      |   | 395,097    |  
|                                                                                                                            |  |      |            |   |      |   |            |  
|Total interest expense                                                                                                      |  |      | 5,475,019  |   |      |   | 5,209,982  |  
|                                                                                                                            |  |      |            |   |      |   |            |  
|Net interest income                                                                                                         |  |      | 11,808,220 |   |      |   | 10,581,234 |  
|Provision for loan losses                                                                                                   |  |      | 457,557    |   |      |   | 427,072    |  
|                                                                                                                            |  |      |            |   |      |   |            |  
|Net interest income after provision for loan losses                                                                         |  |      | 11,350,663 |   |      |   | 10,154,162 |  
|                                                                                                                            |  |      |            |   |      |   |            |  
|Other Income:                                                                                                               |  |      |            |   |      |   |            |  
|Service charges                                                                                                             |  |      | 1,964,366  |   |      |   | 1,828,588  |  
|Investment securities gains                                                                                                 |  |      | 21,015     |   |      |   | 12,600     |  
|Other real estate owned gains                                                                                               |  |      | 582        |   |      |   | 0          |  
|Fixed assets (losses)                                                                                                       |  |      | (9,831     | ) |      |   | (84        | )
|Other income                                                                                                                |  |      | 1,290,435  |   |      |   | 1,428,065  |  
|                                                                                                                            |  |      |            |   |      |   |            |  
|Total other income                                                                                                          |  |      | 3,266,567  |   |      |   | 3,269,169  |  
|                                                                                                                            |  |      |            |   |      |   |            |  
|Other expenses:                                                                                                             |  |      |            |   |      |   |            |  
|Salaries and employee benefits                                                                                              |  |      | 5,909,980  |   |      |   | 5,367,252  |  
|Occupancy and equipment                                                                                                     |  |      | 1,115,936  |   |      |   | 1,041,642  |  
|Other operating                                                                                                             |  |      | 2,325,311  |   |      |   | 1,990,129  |  
|                                                                                                                            |  |      |            |   |      |   |            |  
|Total other expenses                                                                                                        |  |      | 9,351,227  |   |      |   | 8,399,023  |  
|                                                                                                                            |  |      |            |   |      |   |            |  
|Earnings before income taxes                                                                                                |  |      | 5,266,003  |   |      |   | 5,024,308  |  
|Income tax expense                                                                                                          |  |      | 1,661,192  |   |      |   | 1,575,176  |  
|                                                                                                                            |  |      |            |   |      |   |            |  
|Net earnings                                                                                                                |  | $    | 3,604,811  |   |      | $ | 3,449,132  |  
|                                                                                                                            |  |      |            |   |      |   |            |  
|Net earnings per common share based on average outstanding shares of 1,119,409 in 2004 and 1,119,409 in 2003                |  | $    | 3.22       |   |      | $ | 3.08       |  
|                                                                                                                            |  |      |            |   |      |   |            |  
|Fully diluted net earnings per common share based on average outstanding shares of 1,126,880 in 2004 and 1,122,007 in
2003. |  | $    | 3.20       |   |      | $ | 3.07       |  
|                                                                                                                            |  |      |            |   |      |   |            |  





---

MCINTOSH BANCSHARES, INC. AND SUBSIDIARIES



Consolidated Statements of Comprehensive Income



For the Years Ended December 31, 2004 and 2003



|                                                                                          |  |      |           |   |      |           |  
|----------------------------------------------------------------------------------------- |  | ---- | --------- | - | ---- | --------- | -
|                                                                                          |  | 2004 |           |   | 2003 |          
|Net Earnings                                                                              |  | $    | 3,604,811 |   |      | 3,449,132 |  
|Other comprehensive income, net of income tax:                                            |  |      |           |   |      |           |  
|Unrealized gains on securities available for sale:                                        |  |      |           |   |      |           |  
|Holding gains arising during period, net of tax of ($148,828) and ($160,846)              |  |      | (288,902  | ) |      | (312,231  | )
|Less: Reclassification adjustment for gains on sale of securities, net of tax of ($3,088) |  |      | (5,993    | ) |      |          |  
|                                                                                          |  |      |           |   |      |           |  
|Total other comprehensive (loss)                                                          |  |      | (294,895  | ) |      | (312,231  | )
|                                                                                          |  |      |           |   |      |           |  
|Comprehensive income                                                                      |  | $    | 3,309,916 |   |      | 3,136,901 |  
|                                                                                          |  |      |           |   |      |           |  





---

MCINTOSH BANCSHARES, INC. AND SUBSIDIARIES



Consolidated Statements of Cash Flows



For the Years ended December 31, 2004 and 2003



|                                                                                      |  |      |             |   |      |   |             |  
|------------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | -
|                                                                                      |  | 2004 |             |   | 2003 |  
|Cash flows from operating activities:                                                 |  |      |             |   |      |   |             |  
|Net earnings                                                                          |  | $    | 3,604,811   |   |      | $ | 3,449,132   |  
|Adjustments to reconcile net earnings to net cash provided by operating activities:   |  |      |             |   |      |   |             |  
|Depreciation, accretion and amortization                                              |  |      | 700,247     |   |      |   | 814,955     |  
|Gain on sales and calls of securities                                                 |  |      | (21,015     | ) |      |   | (12,600     | )
|Provision for loan losses                                                             |  |      | 457,557     |   |      |   | 427,072     |  
|Provision for deferred income taxes                                                   |  |      | (145,089    | ) |      |   | (171,434    | )
|Loss on disposal of equipment                                                         |  |      | 9,831       |   |      |   | 84          |  
|Gain on sale of other real estate                                                     |  |      | (582        | ) |      |   |            |  
|Change in:                                                                            |  |      |             |   |      |   |             |  
|Accrued interest receivable and other assets                                          |  |      | (1,077,385  | ) |      |   | (321,801    | )
|Accrued interest payable and other liabilities                                        |  |      | 85,505      |   |      |   | 172,457     |  
|                                                                                      |  |      |             |   |      |   |             |  
|Net cash provided by operating activities                                             |  |      | 3,613,880   |   |      |   | 4,357,865   |  
|                                                                                      |  |      |             |   |      |   |             |  
|                                                                                      |  |     
|Cash flows from investing activities:                                                 |  |      |             |   |      |   |             |  
|Proceeds from maturities and paydowns of securities available for sale                |  |      | 24,393,562  |   |      |   | 22,571,281  |  
|Proceeds from maturities and paydowns of securities held to maturity                  |  |      | 705,000     |   |      |   | 1,022,000   |  
|Proceeds from redemption of other investments                                         |  |      | 550,000     |   |      |   | 26,300      |  
|Proceeds from sales of securities available for sale                                  |  |      | 1,540,185   |   |      |   |            |  
|Proceeds from sales of other real estate                                              |  |      | 83,945      |   |      |   |            |  
|Purchases of securities available for sale                                            |  |      | (24,149,857 | ) |      |   | (29,266,788 | )
|Purchases of securities held to maturity                                              |  |      | (1,996,401  | ) |      |   |            |  
|Purchases of other investments                                                        |  |      | (1,393,401  | ) |      |   | (76,300     | )
|Net change in loans                                                                   |  |      | (31,597,824 | ) |      |   | (27,085,321 | )
|Purchases of premises and equipment                                                   |  |      | (1,893,689  | ) |      |   | (157,205    | )
|                                                                                      |  |      |             |   |      |   |             |  
|Net cash used by investing activities                                                 |  |      | (33,758,480 | ) |      |   | (32,966,033 | )
|                                                                                      |  |      |             |   |      |   |             |  
|                                                                                      |  |     
|Cash flows from financing activities:                                                 |  |      |             |   |      |   |             |  
|Net change in deposits                                                                |  |      | 23,601,936  |   |      |   | 29,783,525  |  
|Change in other borrowed funds                                                        |  |      | 8,000,000   |   |      |   | 1,000,000   |  
|Dividends paid                                                                        |  |      | (671,646    | ) |      |   | (503,735    | )
|                                                                                      |  |      |             |   |      |   |             |  
|Net cash provided by financing activities                                             |  |      | 30,930,290  |   |      |   | 30,279,790  |  
|                                                                                      |  |      |             |   |      |   |             |  
|Net increase in cash and cash equivalents                                             |  |      | 785,690     |   |      |   | 1,671,622   |  
|Cash and cash equivalents at beginning of period                                      |  |      | 12,956,819  |   |      |   | 11,285,197  |  
|                                                                                      |  |      |             |   |      |   |             |  
|Cash and cash equivalents at end of period                                            |  | $    | 13,742,509  |   |      | $ | 12,956,819  |  
|                                                                                      |  |      |             |   |      |   |             |  
|                                                                                      |  |     
|Supplemental schedule of noncash investing and financing activities:                  |  |      |             |   |      |   |             |  
|Change in net unrealized gain on investment securities available-for-sale, net of tax |  |      | (294,895    | ) |      |   | (312,231    | )
|Transfer of loans to other real estate owned                                          |  |      | 284,880     |   |      |   |            |  
|Supplemental disclosures of cash flow information:                                    |  |      |             |   |      |   |             |  
|Cash paid during the year for                                                         |  |      |             |   |      |   |             |  
|Interest                                                                              |  |      | 5,425,772   |   |      |   | 5,260,906   |  
|Income taxes                                                                          |  |      | 1,806,000   |   |      |   | 1,742,000   |  





---

MCINTOSH BANCSHARES, INC. AND SUBSIDIARIES



Consolidated Statements of Changes in Stockholders' Equity



|                                                            |  |           |  |           |  |            |   |  |               |   |  |            |  
|----------------------------------------------------------- |  | --------- |  | --------- |  | ---------- | - |  | ------------- | - |  | ---------- | -
|                                                            |  |           |  |           |  |            |   |  | Accumulated   |   |  |            |  
|                                                            |  |           |  |           |  |            |   |  | Other         |   |  |            |  
|                                                            |  | Common    |  |           |  | Retained   |   |  | Comprehensive |   |  |            |  
|For The Years Ended December 31, 2004 and 2003              |  | Stock     |  | Surplus   |  | Earnings   |   |  | Income        |   |  | Total      |  
|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 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 |  
|Net earnings                                                |  |          |  |          |  | 3,604,811  |   |  |              |   |  | 3,604,811  |  
|Change in unrealized gains on securities available for sale |  |          |  |          |  |           |   |  | (294,895      | ) |  | (294,895   | )
|Cash dividend paid, $0.60 per share                         |  |          |  |          |  | (671,646   | ) |  |              |   |  | (671,646   | )
|                                                            |  |           |  |           |  |            |   |  |               |   |  |            |  
|Balance, December 31, 2004                                  |  | 2,798,523 |  | 8,905,393 |  | 17,196,988 |   |  | 280,593       |   |  | 29,181,497 |  
|                                                            |  |           |  |           |  |            |   |  |               |   |  |            |  





---

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)
|------- | ------------------------------------------------------



Premium and discount on all noncallable 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 on callable investment securities is amortized to interest income on a straight-line method over the period to the call date of the related investment. Discount on
callable investment securities is accreted to interest income on a straight-line method over the period to 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.



Other Real Estate Owned



Other real estate
owned represents properties acquired through or in lieu of foreclosure and is initially recorded at the lower of cost or fair value less estimated disposal costs. Any write-down to fair value within 60 days after transfer to other real estate owned
is charged to the allowance for loan losses. Costs of improvements are capitalized, whereas costs relating to holding other real estate owned and valuation adjustments subsequent to 60 days of transfer are expensed. Revenue and expenses from
operations and changes in the valuation allowance are included in net expenses from foreclosed assets. The Company had $201,517 and $0 in other real estate owned at December 31, 2004 and 2003, respectively.



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, 2004 and 2003. During 2004 and 2003, 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, 2004 and 2003. 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 2004 and 2003 are as follows:



|                                     |  |             |           |               |           |                  |      |  
|------------------------------------ |  | ----------- | --------- | ------------- | --------- | ---------------- | ---- | -
|                                     |  | NetEarnings |           | Common Shares |           | Per Share Amount |     
|For the year ended December 31, 2003 |  |             |           |               |           |                  |      |  
|Basic earnings per share             |  | $           | 3,449,132 |               | 1,119,409 |                  | 3.08 |  
|Effect of dilutive securities        |  |             |          |               | 2,598     |                  | (.01 | )
|                                     |  |             |           |               |           |                  |      |  
|Diluted earnings per share           |  | $           | 3,449,132 |               | 1,122,007 |                  | 3.07 |  
|                                     |  |             |           |               |           |                  |      |  
|For the year ended December 31, 2004 |  |             |           |               |           |                  |      |  
|Basic earnings per share             |  | $           | 3,604,811 |               | 1,119,409 |                  | 3.22 |  
|Effect of dilutive securities        |  |             |          |               | 7,471     |                  | (.02 | )
|                                     |  |             |           |               |           |                  |      |  
|Diluted earnings per share           |  | $           | 3,604,811 |               | 1,126,880 |                  | 3.20 |  
|                                     |  |             |           |               |           |                  |      |  



Recent Accounting
Pronouncements



In January 2003, the Financial Accounting
Standards Board (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.





---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



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



Recent Accounting Pronouncements (Continued)



In November 2003, the 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, 2003. The disclosure requirements in the interpretation are effective for financial statements of interim
or annual periods ending after December 15, 2003. The adoption of the interpretation did not have a material effect on the Companys financial condition or results of operations.



In December 2003, 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, 2003 and interim periods beginning after December 15, 2003. The Company
has not adopted Statement No. 123 for accounting for stock-based compensation as of December 31, 2004; however all required disclosures of Statement No. 148 are included under the heading Stock Option Plan.



In December 2004, the FASB issued Statement No. 123R, Share-Based
Payment, a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation.This Statement supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees,and its related implementation guidance. This Statement
establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are
based on the fair value of the entitys equity instruments or that may be settled by the issuance of those equity instruments. This Statement focuses primarily on accounting for transactions in which an entity obtains employee services in
share-based payment transactions such as the issuance of stock options in exchange for employee services. This Statement requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based
on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the awardthe requisite service period (usually the
vesting period). A nonpublic entity, likewise, will measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of those instruments, except in certain circumstances. Specifically,
if it is not possible to reasonably estimate the fair value of equity share options and similar instruments because it is not practicable to estimate the expected volatility of the entitys share price, a nonpublic entity is required to measure
its awards of equity share options and similar instruments based on a value calculated using the historical volatility of an appropriate industry sector index instead of the expected volatility of its share price. The grant-date fair value of
employee share options and similar instruments will be estimated using option-pricing models adjusted for the unique characteristics of those instruments (unless observable market prices for the same or similar instruments are available). This
Statement is effective for public entities that file as small business issuers as of the beginning of the first interim or annual reporting period that begins after December 15, 2005. This Statement applies to all awards granted after the required
effective date and to awards modified, repurchased, or cancelled after that date. The Company expects adoption in the first quarter of 2006.





---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



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



Stock Option Plan



The Company has a Stock Option Plan under which a maximum of 52,938 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 the 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 and stock splits occurring since the grant date. Therefore, the number of shares granted and the weighted average exercise prices have been adjusted for any stock dividends or stock splits 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 Option No. 25, Accounting for Stock Issued to Employees. Therefore, no compensation expense has been recognized in
2004 and 2003 related to the stock option plan. The effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS Statement No. 123, Accounting for Stock-Based Compensation, to
stock-based compensation is presented in the table below.



|                                                                                                                            |  |                          |           |      |   |          
|--------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | --------- | ---- | - | ---------
|                                                                                                                            |  | Years Ended December 31,
|                                                                                                                            |  | 2004                     |           | 2003
|Net income, as reported                                                                                                     |  | $                        | 3,604,811 |      | $ | 3,449,132
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of tax |  |                          | 66,019    |      |   | 56,242   
|                                                                                                                            |  |                          |           |      |   |          
|Pro forma net income                                                                                                        |  | $                        | 3,538,792 |      | $ | 3,392,890
|                                                                                                                            |  |                          |           |      |   |          
|Earnings per share:                                                                                                         |  |                          |           |      |   |          
|Basic  as reported                                                                                                         |  | $                        | 3.22      |      | $ | 3.08     
|                                                                                                                            |  |                          |           |      |   |          
|Basic  pro forma                                                                                                           |  | $                        | 3.16      |      | $ | 3.03     
|                                                                                                                            |  |                          |           |      |   |          
|Diluted  as reported                                                                                                       |  | $                        | 3.20      |      | $ | 3.07     
|                                                                                                                            |  |                          |           |      |   |          
|Diluted  pro forma                                                                                                         |  | $                        | 3.14      |      | $ | 3.02     
|                                                                                                                            |  |                          |           |      |   |          



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 liabilities and expenses on the statements of condition and income for the year ended December 31, 2003 have been reclassified with no effect on
income, to be consistent with the classifications adopted for the year ended December 31, 2004.





---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|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, 2004
and 2003, the Banks reserve requirement was approximately $2,748,000 and $2,343,000, respectively. The Bank maintained cash balances which were adequate to meet the requirements.



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



Investment securities at December 31, 2004 and 2003 are as follows:



|                                           |  |               |            |                 |   |                  |  |   |              |   |  |   |           
|------------------------------------------ |  | ------------- | ---------- | --------------- | - | ---------------- |  | - | ------------ | - |  | - | ----------
|                                           |  | CarryingValue |            | UnrealizedGains |   | UnrealizedLosses |  |   | Market Value
|Securities Held to Maturity:               |  |               |            |                 |   |                  |  |   |              |   |  |   |           
|December 31, 2004:                         |  |               |            |                 |   |                  |  |   |              |   |  |   |           
|U. S. Government Agencies                  |  | $             | 1,999,760  |                 | $ |                 |  | $ | (3,359       | ) |  | $ | 1,996,401 
|States and political subdivisions          |  |               | 799,854    |                 |   | 33,696           |  |   |             |   |  |   | 833,550   
|                                           |  |               |            |                 |   |                  |  |   |              |   |  |   |           
|                                           |  | $             | 2,799,614  |                 | $ | 33,696           |  | $ | (3,359       | ) |  | $ | 2,829,951 
|                                           |  |               |            |                 |   |                  |  |   |              |   |  |   |           
|December 31, 2003:                         |  |               |            |                 |   |                  |  |   |              |   |  |   |           
|States and political subdivisions          |  | $             | 1,488,321  |                 | $ | 75,971           |  | $ |             |   |  | $ | 1,564,292 
|                                           |  |               |            |                 |   |                  |  |   |              |   |  |   |           
|Securities Available-for-Sale              |  |               |            |                 |   |                  |  |   |              |   |  |   |           
|December 31, 2004:                         |  |               |            |                 |   |                  |  |   |              |   |  |   |           
|U. S. Government Agencies and corporations |  | $             | 22,079,214 |                 | $ | 116,815          |  | $ | (91,828      | ) |  | $ | 22,104,201
|Mortgage-backed securities                 |  |               | 13,775,851 |                 |   | 81,259           |  |   | (86,189      | ) |  |   | 13,770,921
|States and political subdivisions          |  |               | 8,942,304  |                 |   | 426,868          |  |   | (20,534      | ) |  |   | 9,348,638 
|Corporate debt securities                  |  |               | 1,000,000  |                 |   |                 |  |   | (1,250       | ) |  |   | 998,750   
|                                           |  |               |            |                 |   |                  |  |   |              |   |  |   |           
|                                           |  | $             | 45,797,369 |                 | $ | 624,942          |  | $ | (199,801     | ) |  | $ | 46,222,510
|                                           |  |               |            |                 |   |                  |  |   |              |   |  |   |           
|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
|                                           |  |               |            |                 |   |                  |  |   |              |   |  |   |           





---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



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



Other investments are comprised of the following for the years ending December 31:



|                                   |  |      |           |      |   |          
|---------------------------------- |  | ---- | --------- | ---- | - | ---------
|                                   |  | 2004 |           | 2003
|Federal Home Loan Bank             |  | $    | 1,543,400 |      | $ | 700,000  
|Community Financial Services, Inc. |  |      | 335,030   |      |   | 335,029  
|Nexity Financial Corporation       |  |      | 249,963   |      |   | 249,963  
|                                   |  |      |           |      |   |          
|                                   |  | $    | 2,128,393 |      | $ | 1,284,992
|                                   |  |      |           |      |   |          



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, 2004, 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                              |   | Amortized Cost |  | Market Value
|Due in one year or less    |  | $                                      | 2,199,743 |                                          | $ | 2,198,986      |  | $            | 4,810,752  |  | $ | 4,840,616 
|Due from one to five years |  |                                        | 599,871   |                                          |   | 630,965        |  |              | 18,726,985 |  |   | 18,994,535
|Due from five to ten years |  |                                        |          |                                          |   |               |  |              | 6,579,260  |  |   | 6,730,635 
|Due after ten years        |  |                                        |          |                                          |   |               |  |              | 1,904,521  |  |   | 1,885,803 
|Mortgage-backed securities |  |                                        |          |                                          |   |               |  |              | 13,775,851 |  |   | 13,770,921
|                           |  |                                        |           |                                          |   |                |  |              |            |  |   |           
|                           |  | $                                      | 2,799,614 |                                          | $ | 2,829,951      |  | $            | 45,797,369 |  | $ | 46,222,510
|                           |  |                                        |           |                                          |   |                |  |              |            |  |   |           



Gross gains and
losses on sales and calls of securities consist of the following for the years ended December 31:



|                                    |  |      |        |   |      |   |       
|----------------------------------- |  | ---- | ------ | - | ---- | - | ------
|                                    |  | 2004 |        |   | 2003
|Gross gains on calls of securities  |  | $    | 11,935 |   |      | $ | 12,600
|Gross gains on sales of securities  |  |      | 16,466 |   |      |   |      
|Gross losses on sales of securities |  |      | (7,386 | ) |      |   |      
|                                    |  |      |        |   |      |   |       
|                                    |  | $    | 21,015 |   |      | $ | 12,600
|                                    |  |      |        |   |      |   |       



Proceeds from the
sales of securities for years ended December 31, 2004 and December 31, 2003 were $1,540,185 and $0, respectively.



Investment securities with a carrying value of $41,171,357 and $36,852,269 at December 31, 2004 and 2003, respectively, were pledged to secure public
funds and certain other deposits as required by law.





---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



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



The following table shows the gross unrealized losses and fair value of securities, aggregated by category and length of time that securities have been in
a continuous unrealized loss position for years ending December 31, 2003 and 2004, respectively.



|                                          |  |                         |          |                    |           |   |                       |  |   |           |   |  |   |          
|----------------------------------------- |  | ----------------------- | -------- | ------------------ | --------- | - | --------------------- |  | - | --------- | - |  | - | ---------
|                                          |  | Less Than Twelve Months |          | Over Twelve Months
|                                          |  | Gross Unrealized Losses |          |                    | FairValue |   | GrossUnrealizedLosses |  |   | FairValue
|December 31, 2003:                        |  |                         |          |                    |           |   |                       |  |   |           |   |  |   |          
|U.S. Government agencies and corporations |  | $                       | (47,624  | )                  |           | $ | 2,957,038             |  | $ |          |   |  | $ |         
|State and political subdivisions          |  |                         | (2,161   | )                  |           |   | 202,839               |  |   |          |   |  |   |         
|Corporate debt securities                 |  |                         |         |                    |           |   |                      |  |   |          |   |  |   |         
|Mortgage-backed securities                |  |                         | (95,537  | )                  |           |   | 8,639,828             |  |   |          |   |  |   |         
|                                          |  |                         |          |                    |           |   |                       |  |   |           |   |  |   |          
|Total securities                          |  | $                       | (145,322 | )                  |           | $ | 11,799,705            |  | $ |          |   |  | $ |         
|                                          |  |                         |          |                    |           |   |                       |  |   |           |   |  |   |          
|December 31, 2004:                        |  |                         |          |                    |           |   |                       |  |   |           |   |  |   |          
|U.S. Government agencies and corporations |  | $                       | (78,937  | )                  |           | $ | 14,195,914            |  | $ | (16,250   | ) |  | $ | 1,983,750
|State and political subdivisions          |  |                         | (20,528  | )                  |           |   | 1,236,538             |  |   | (6        | ) |  |   | 204,994  
|Corporate debt securities                 |  |                         | (1,250   | )                  |           |   | 998,750               |  |   |          |   |  |   |         
|Mortgage-backed securities                |  |                         | (4,732   | )                  |           |   | 2,673,396             |  |   | (81,457   | ) |  |   | 4,887,905
|                                          |  |                         |          |                    |           |   |                       |  |   |           |   |  |   |          
|Total securities                          |  | $                       | (105,447 | )                  |           | $ | 19,104,598            |  | $ | (97,713   | ) |  | $ | 7,076,649
|                                          |  |                         |          |                    |           |   |                       |  |   |           |   |  |   |          



Management evaluates
securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market conditions warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has
been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in
fair value.



As of years ended December 31, 2003 and 2004, no
debt securities have unrealized losses with aggregate depreciation of 5% or more from their amortized cost basis. In analyzing an issuers financial condition, management considers whether the securities are issued by the federal government or
its agencies, whether downgrades by bond rating agencies has occurred, and industry analysts reports. As management has the ability to hold debt securities until maturity, or for the foreseeable future if classified as available for sale, no
declines are deemed to be other than temporary.





---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



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



Major classifications of loans at December 31, 2004 and 2003 are summarized as follows:



|                                       |  |      |             |   |      |   |             |  
|-------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | -
|                                       |  | 2004 |             |   | 2003 |  
|Commercial, financial and agricultural |  | $    | 31,134,460  |   |      | $ | 24,868,473  |  
|Real estate - mortgage                 |  |      | 144,055,896 |   |      |   | 125,729,003 |  
|Real estate - construction             |  |      | 42,527,213  |   |      |   | 36,855,388  |  
|Consumer                               |  |      | 14,059,355  |   |      |   | 13,501,198  |  
|Tax-exempt                             |  |      | 1,806,359   |   |      |   | 2,039,027   |  
|                                       |  |      |             |   |      |   |             |  
|                                       |  |      | 233,583,283 |   |      |   | 202,993,089 |  
|Less: Allowance for loan losses        |  |      | (2,912,623  | ) |      |   | (3,177,816  | )
|                                       |  |      |             |   |      |   |             |  
|                                       |  | $    | 230,670,660 |   |      | $ | 199,815,273 |  
|                                       |  |      |             |   |      |   |             |  



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:



|                                           |  |      |           |   |      |   |           |  
|------------------------------------------ |  | ---- | --------- | - | ---- | - | --------- | -
|                                           |  | 2004 |           |   | 2003 |  
|Balance at beginning of year               |  | $    | 3,177,816 |   |      | $ | 2,839,548 |  
|Provision charged to expense               |  |      | 457,557   |   |      |   | 427,072   |  
|Loans charged off                          |  |      | (742,268  | ) |      |   | (114,603  | )
|Recoveries of loans previously charged off |  |      | 19,518    |   |      |   | 25,799    |  
|                                           |  |      |           |   |      |   |           |  
|                                           |  | $    | 2,912,623 |   |      | $ | 3,177,816 |  
|                                           |  |      |           |   |      |   |           |  



Impaired loans,
consisting solely of loans on nonaccrual status, totaled $1,307,371 and $782,948 at December 31, 2004 and 2003, respectively. Allocations of the general loan loss reserve related to impaired loans totaled $197,611 and $222,931 at December 31, 2004
and 2003, respectively. The average balance for impaired loans in the years ended December 31, 2004 and 2003 was approximately $1,526,000 and $655,000, respectively. There was no interest income recognized on impaired loans for the years ended
December 31, 2004 and 2003.



Loans past due ninety days or
more and still accruing interest totaled $115,880 and $294,547 at December 31, 2004 and 2003, respectively.





---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



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



Premises and equipment are comprised of the following:



|                                                |  |      |            |   |      |   |            |  
|----------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                                |  | 2004 |            |   | 2003 |  
|Land                                            |  | $    | 531,512    |   |      | $ | 531,512    |  
|Buildings                                       |  |      | 3,815,170  |   |      |   | 3,803,650  |  
|Furniture, fixtures and equipment               |  |      | 3,390,927  |   |      |   | 2,972,209  |  
|Construction in process, substantially complete |  |      | 1,416,427  |   |      |   |           |  
|                                                |  |      |            |   |      |   |            |  
|                                                |  |      | 9,154,036  |   |      |   | 7,307,371  |  
|Less accumulated depreciation                   |  |      | (3,659,860 | ) |      |   | (3,142,312 | )
|                                                |  |      |            |   |      |   |            |  
|                                                |  | $    | 5,494,176  |   |      | $ | 4,165,059  |  
|                                                |  |      |            |   |      |   |            |  



Depreciation expense
totaled approximately $555,000 and $511,000 in 2004 and 2003, respectively.



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



Maturities of time deposits at December 31, 2004 are as follows:



|             |  |   |            
|------------ |  | - | -----------
|Maturing in: |  |   |            
|2005         |  | $ | 68,605,483 
|2006         |  |   | 24,115,277 
|2007         |  |   | 14,044,400 
|2008         |  |   | 11,104,520 
|2009         |  |   | 7,247,217  
|             |  |   |            
|             |  | $ | 125,116,897
|             |  |   |            



For the years ended
December 31, 2003 and 2004 the Bank had $0 and $5,652,000, respectively, in brokered deposits outstanding. The weighted average rate on these deposits was 2.66 percent per annum. Brokered deposits mature through September 15, 2007.



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



The Bank has invested in FHLB stock for the purpose of establishing credit lines with the FHLB. Advances on the credit lines are secured by liens against
the Banks qualifying real estate loans. Total qualifying real estate loans eligible as collateral amounted to $104,700,000 at December 31, 2004. Outstanding borrowings totaled $22,000,000 and $14,000,000 at December 31, 2004 and 2003,
respectively. All advances outstanding at December 31, 2004 carrying fixed and variable interest rates ranging from 2.22 to 3.50 percent per annum, require monthly or quarterly payments of interest only and mature through March 17, 2014. The FHLB
has the option to convert $19,000,000 of the advances at dates through March 2009 to advances bearing interest based on the three-month floating LIBOR rate. At December 31, 2004, total credit availability for the Bank totaled approximately
$40,000,000.





---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



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



The following are the components of income tax expense for the years ending December 31:



|                         |  |      |           |      |   |           |  
|------------------------ |  | ---- | --------- | ---- | - | --------- | -
|                         |  | 2004 |           | 2003 |  
|Current                  |  | $    | 1,516,103 |      | $ | 1,746,610 |  
|Deferred                 |  |      | 145,089   |      |   | (171,434  | )
|                         |  |      |           |      |   |           |  
|Total income tax expense |  | $    | 1,661,192 |      | $ | 1,575,176 |  
|                         |  |      |           |      |   |           |  



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:



|                                                    |  |      |           |   |      |   |           |  
|--------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | -
|                                                    |  | 2004 |           |   | 2003 |  
|Income taxes computed at federal statutory tax rate |  | $    | 1,790,441 |   |      | $ | 1,708,265 |  
|Increase (decrease) resulting from:                 |  |      |           |   |      |   |           |  
|Tax-exempt interest                                 |  |      | (183,617  | ) |      |   | (177,651  | )
|Nondeductible interest on tax-exempt investments    |  |      | 32,341    |   |      |   | 17,680    |  
|Other, net                                          |  |      | 22,027    |   |      |   | 26,882    |  
|                                                    |  |      |           |   |      |   |           |  
|                                                    |  | $    | 1,661,192 |   |      | $ | 1,575,176 |  
|                                                    |  |      |           |   |      |   |           |  



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, 2004 and 2003:



|                                |  |      |           |      |   |          
|------------------------------- |  | ---- | --------- | ---- | - | ---------
|                                |  | 2004 |           | 2003
|Deferred income tax assets:     |  |      |           |      |   |          
|Allowance for loan losses       |  | $    | 1,010,154 |      | $ | 1,156,525
|Pension plan contributions      |  |      | 40,389    |      |   | 40,389   
|Deferred compensation           |  |      | 267,019   |      |   | 189,679  
|Other                           |  |      | 761       |      |   | 24,416   
|                                |  |      |           |      |   |          
|Total gross deferred tax assets |  | $    | 1,318,323 |      | $ | 1,411,009
|                                |  |      |           |      |   |          





---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|NOTE 8. | INCOME TAXES (Continued)
|------- | ------------------------



|                                                            |  |      |          |   |      |   |          |  
|----------------------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | -
|                                                            |  | 2004 |          |   | 2003 |  
|Deferred income tax liabilities:                            |  |      |          |   |      |   |          |  
|Accumulated depreciation on premises and equipment          |  | $    | (256,692 | ) |      | $ | (204,289 | )
|Unrealized gain on investment securities available for sale |  |      | (144,548 | ) |      |   | (296,464 | )
|                                                            |  |      |          |   |      |   |          |  
|Total gross deferred tax liabilities                        |  |      | (401,240 | ) |      |   | (500,753 | )
|                                                            |  |      |          |   |      |   |          |  
|Net deferred income tax asset                               |  | $    | 917,083  |   |      | $ | 910,256  |  
|                                                            |  |      |          |   |      |   |          |  



|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:



|                                                    |  |      |         |   |      |   |         |  
|--------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                                    |  | 2004 |         |   | 2003 |  
|Service cost of the current period                  |  | $    | 185,241 |   |      | $ | 147,048 |  
|Interest cost on the projected benefit obligation   |  |      | 108,185 |   |      |   | 90,222  |  
|Return on plan assets                               |  |      | (73,900 | ) |      |   | (51,403 | )
|Net amortization of prior service cost, transaction |  |      |         |   |      |   |         |  
|Liability, and net gain                             |  |      | (26,812 | ) |      |   | (5,242  | )
|                                                    |  |      |         |   |      |   |         |  
|Pension expense, net                                |  | $    | 192,714 |   |      | $ | 180,625 |  
|                                                    |  |      |         |   |      |   |         |  





---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



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



Defined Benefit Pension Plan (Continued)



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



|                                                                                                                                                                                                                    |  |      |            |   |      |   |           |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | --------- | -
|                                                                                                                                                                                                                    |  | 2004 |            |   | 2003 |  
|Actuarial present value of benefit obligations:                                                                                                                                                                     |  |      |            |   |      |   |           |  
|Vested benefit obligation                                                                                                                                                                                           |  | $    | 1,029,393  |   |      | $ | 765,142   |  
|                                                                                                                                                                                                                    |  |      |            |   |      |   |           |  
|Accumulated benefit obligation                                                                                                                                                                                      |  |      | 1,090,620  |   |      |   | 817,375   |  
|                                                                                                                                                                                                                    |  |      |            |   |      |   |           |  
|Projected benefit obligation                                                                                                                                                                                        |  |      | 2,262,882  |   |      |   | 1,695,032 |  
|Fair value of assets held in the plan                                                                                                                                                                               |  |      | 1,152,580  |   |      |   | 850,593   |  
|                                                                                                                                                                                                                    |  |      |            |   |      |   |           |  
|Unfunded excess of projected benefit obligation over planned assets                                                                                                                                                 |  |      | 1,110,302  |   |      |   | 844,439   |  
|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 |  |      | (1,008,075 | ) |      |   | (744,834  | )
|Unamortized liability at transition                                                                                                                                                                                 |  |      | 6,345      |   |      |   | 8,967     |  
|                                                                                                                                                                                                                    |  |      |            |   |      |   |           |  
|Accrued pension expense liability                                                                                                                                                                                   |  | $    | 108,572    |   |      | $ | 108,572   |  
|                                                                                                                                                                                                                    |  |      |            |   |      |   |           |  



The following table
includes a reconciliation of projected benefit obligation for 2004 and 2003:



|                                               |  |      |           |      |   |           |  
|---------------------------------------------- |  | ---- | --------- | ---- | - | --------- | -
|                                               |  | 2004 |           | 2003 |  
|Projected benefit obligation beginning of year |  | $    | 1,695,032 |      | $ | 1,340,955 |  
|Service cost                                   |  |      | 185,241   |      |   | 147,048   |  
|Interest cost                                  |  |      | 108,185   |      |   | 90,222    |  
|Distributions                                  |  |      |          |      |   | (61,476   | )
|Actuarial (gains)/losses                       |  |      | 274,424   |      |   | 178,283   |  
|                                               |  |      |           |      |   |           |  
|Projected benefit obligation end of year       |  | $    | 2,262,882 |      | $ | 1,695,032 |  
|                                               |  |      |           |      |   |           |  



The following table
includes a reconciliation of the fair value of plan assets for 2004 and 2003:



|                               |  |      |           |      |   |         |  
|------------------------------ |  | ---- | --------- | ---- | - | ------- | -
|                               |  | 2004 |           | 2003 |  
|Fair value  beginning of year |  | $    | 850,593   |      | $ | 623,661 |  
|Contributions                  |  |      | 192,714   |      |   | 180,625 |  
|Return on plan assets          |  |      | 109,273   |      |   | 107,783 |  
|Distributions                  |  |      |          |      |   | (61,476 | )
|                               |  |      |           |      |   |         |  
|Fair value  end of year       |  | $    | 1,152,580 |      | $ | 850,593 |  
|                               |  |      |           |      |   |         |  





---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



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



Defined Benefit Pension Plan (Continued)



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



|                                                              |  |      |   |  |      |  
|------------------------------------------------------------- |  | ---- | - |  | ---- | -
|                                                              |  | 2004 |   |  | 2003 |  
|Weighted average discount rate - projected benefit obligation |  | 6.25 | % |  | 6.25 | %
|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.



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 $192,714 and $180,625 to the plan in 2004 and 2003, respectively.



Profit Sharing 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 $258,000 and $264,000 in 2004 and 2003, respectively.



Deferred Compensation Plans



The Bank has entered into salary continuation agreements with its directors,
its chief executive officer and five other officers. In 2004 and 2003, the Bank expensed $203,740 and $166,621, 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 2004 and 2003, cash value income totaled $233,147 and $238,694, respectively. As of December 31, 2004 and 2003, other assets included $5,637,743 and $4,684,525, respectively, in surrender value,
and other liabilities included salary continuation benefits payable of $703,451 and $499,711, respectively.





---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



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



Deferred Compensation Plans (Continued)



The Bank also maintains split dollar insurance on its chief executive officer. In 2004 and 2003, the increase in cash surrender value recorded in income
totaled $11,734 and $11,276, respectively. As of December 31, 2004 and 2003, other assets include accrued cash surrender value of $168,761 and $157,027, respectively.



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



A summary status of the Companys Stock Option Plan as of December 31, 2004 and 2003, and changes during the years ending on those dates is as
follows:



|                                                               |  |               |  |                                     |       |               |        |                                     |   |      
|-------------------------------------------------------------- |  | ------------- |  | ----------------------------------- | ----- | ------------- | ------ | ----------------------------------- | - | -----
|                                                               |  | 2004          |  | 2003                               
|                                                               |  | Option Shares |  | WeightedAverageOptionPrice PerShare |       | Option Shares |        | WeightedAverageOptionPrice PerShare
|Outstanding, beginning of year                                 |  | 51,219        |  | $                                   | 30.51 |               | 34,031 |                                     | $ | 29.75
|Granted during the year                                        |  |              |  |                                     |      |               | 17,188 |                                     |   | 32.00
|                                                               |  |               |  |                                     |       |               |        |                                     |   |      
|Outstanding, end of year                                       |  | 51,219        |  | $                                   | 30.51 |               | 51,219 |                                     | $ | 30.51
|                                                               |  |               |  |                                     |       |               |        |                                     |   |      
|Number of shares exercisable                                   |  | 35,969        |  |                                     |       |               | 27,225 |                                     |   |      
|                                                               |  |               |  |                                     |       |               |        |                                     |   |      
|Weighted-average fair value of options granted during the year |  |               |  | $                                   |      |               |        |                                     | $ | 7.42 



Information pertaining
to options outstanding at December 31, 2004 is as follows:



|                         |  |                     |  |                                           |  |                                |       |                    |        |                                |   |      
|------------------------ |  | ------------------- |  | ----------------------------------------- |  | ------------------------------ | ----- | ------------------ | ------ | ------------------------------ | - | -----
|                         |  | Options Outstanding |  | Options Exercisable                      
|Range of Exercise Prices |  | Number Outstanding  |  | Weighted -AverageRemainingContractualLife |  | Weighted -AverageExercisePrice |       | Number Exercisable |        | Weighted -AverageExercisePrice
|$29.75 32.00            |  | 51,219              |  | 6 years                                   |  | $                              | 30.51 |                    | 35,969 |                                | $ | 29.87



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, | 
|                        |  | 2004                    |  | 2003     |  
|Dividend yield          |  | N/A                     |  | 1.40     | %
|Expected life           |  | N/A                     |  | 10 years |  
|Expected volatility     |  | N/A                     |  | 0        | %
|Risk-free interest rate |  | N/A                     |  | 4.55     | %





---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



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



As of December 31, 2004 and 2003, 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 $1,736,751 and $2,077,607, respectively. During 2004 and 2003, $1,576,548 and $1,855,432 of such loans were made and repayments totaled $1,917,404 and $2,493,856, 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 $4,165,467 at December 31, 2004.



|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, 2004, 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.





---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



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



|                                       |  |                             |        |       |                                  |   |        |        |        |  |      |        |  |       |        |  |      |  
|-------------------------------------- |  | --------------------------- | ------ | ----- | -------------------------------- | - | ------ | ------ | ------ |  | ---- | ------ |  | ----- | ------ |  | ---- | -
|                                       |  | Well CapitalizedRequirement |        |       | AdequatelyCapitalizedRequirement |   |        | Actual |       
|                                       |  | Amount                      |        | Ratio |                                  |   | Amount |        | Ratio  |  |      | Amount |  | Ratio |       
|                                       |  | (Dollars in Thousands)      |       
|As of December 31, 2004:               |  |                             |        |       |                                  |   |        |        |        |  |      |        |  |       |        |  |      |  
|Tier I Capital to Average Assets       |  | $                           | 15,332 |       | 5.00                             | % |        | $      | 9,199  |  | 3.00 | %      |  | $     | 28,300 |  | 9.2  | %
|Tier I Capital to Risk Weighted Assets |  | $                           | 14,647 |       | 6.00                             | % |        | $      | 9,765  |  | 4.00 | %      |  | $     | 28,300 |  | 11.6 | %
|Total Capital to Risk Weighted Assets  |  | $                           | 24,412 |       | 10.00                            | % |        | $      | 19,530 |  | 8.00 | %      |  | $     | 31,213 |  | 12.8 | %
|                                       |  |                             |        |       |                                  |  
|As of December 31, 2003:               |  |                             |        |       |                                  |   |        |        |        |  |      |        |  |       |        |  |      |  
|Tier I Capital to Average Assets       |  | $                           | 13,466 |       | 5.00                             | % |        | $      | 8,080  |  | 3.00 | %      |  | $     | 25,367 |  | 9.4  | %
|Tier I Capital to Risk Weighted Assets |  | $                           | 12,560 |       | 6.00                             | % |        | $      | 8,373  |  | 4.00 | %      |  | $     | 25,367 |  | 12.1 | %
|Total Capital to Risk Weighted Assets  |  | $                           | 20,934 |       | 10.00                            | % |        | $      | 16,747 |  | 8.00 | %      |  | $     | 27,991 |  | 13.4 | %



Management believes,
as of December 31, 2004, 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, 2004, stockholders equity of the Bank available for the payment of dividends after that date to the Parent Company without prior regulatory approval was approximately $1,816,000.



|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, 2004 and 2003, commitments to extend credit totaled $35,775,188 and $40,332,098, respectively.





---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|NOTE 13. | OFF BALANCE-SHEET FINANCIAL INSTRUMENTS (Continued)
|-------- | ---------------------------------------------------



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, 2004 and 2003, commitments under
letters of credit aggregated $1,063,629 and $881,793, respectively. In 2004 and 2003, 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.



|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 variable and fixed rate borrowings approximates
their carrying value.





---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



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



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.



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, 2004 and 2003 are as follows:



|                                       |  |                   |             |                     |   |                |  |                     |             |  |   |            
|-------------------------------------- |  | ----------------- | ----------- | ------------------- | - | -------------- |  | ------------------- | ----------- |  | - | -----------
|                                       |  | December 31, 2004 |             | December 31, 2003  
|                                       |  | Carrying Value    |             | Estimated FairValue |   | Carrying Value |  | Estimated FairValue
|Financial assets:                      |  |                   |             |                     |   |                |  |                     |             |  |   |            
|Cash and cash equivalents              |  | $                 | 13,742,509  |                     | $ | 13,742,509     |  | $                   | 13,129,866  |  | $ | 13,129,866 
|Investment securities                  |  |                   | 49,022,124  |                     |   | 49,052,461     |  |                     | 50,085,916  |  |   | 50,161,887 
|Other investments                      |  |                   | 2,128,393   |                     |   | 2,128,393      |  |                     | 1,284,992   |  |   | 1,284,992  
|Loans                                  |  |                   | 230,670,660 |                     |   | 233,728,922    |  |                     | 199,815,273 |  |   | 204,460,755
|Cash surrender value of life insurance |  |                   | 5,806,504   |                     |   | 5,806,504      |  |                     | 4,841,552   |  |   | 4,841,552  
|Financial liabilities:                 |  |                   |             |                     |   |                |  |                     |             |  |   |            
|Deposits                               |  | $                 | 257,841,971 |                     | $ | 260,670,185    |  | $                   | 234,413,082 |  | $ | 239,107,361
|Other borrowed funds                   |  |                   | 22,000,000  |                     |   | 22,000,000     |  |                     | 14,000,000  |  |   | 14,000,000 



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)



|                                                           |  |      |            |      |   |           
|---------------------------------------------------------- |  | ---- | ---------- | ---- | - | ----------
|                                                           |  | 2004 |            | 2003
|Assets                                                     |  |      |            |      |   |           
|Cash                                                       |  | $    | 78,144     |      | $ | 127,412   
|Investment in McIntosh State Bank subsidiary               |  |      | 28,903,908 |      |   | 26,216,933
|Investment in McIntosh Financial Services, Inc. subsidiary |  |      | 59,085     |      |   | 33,490    
|Other investments                                          |  |      | 249,963    |      |   | 249,963   
|                                                           |  |      |            |      |   |           
|Total assets                                               |  | $    | 29,291,100 |      | $ | 26,627,798
|                                                           |  |      |            |      |   |           
|Liabilities and Stockholders Equity                       |  |      |            |      |   |           
|Other liabilities                                          |  | $    | 109,603    |      | $ | 84,571    
|                                                           |  |      |            |      |   |           
|Total liabilities                                          |  |      | 109,603    |      |   | 84,571    
|                                                           |  |      |            |      |   |           
|Stockholders equity:                                      |  |      |            |      |   |           
|Common stock                                               |  |      | 2,798,523  |      |   | 2,798,523 
|Surplus                                                    |  |      | 8,905,393  |      |   | 8,905,393 
|Retained earnings                                          |  |      | 17,196,988 |      |   | 14,263,823
|Accumulated other comprehensive income                     |  |      | 280,593    |      |   | 575,488   
|                                                           |  |      |            |      |   |           
|Total stockholders equity                                 |  |      | 29,181,497 |      |   | 26,543,227
|                                                           |  |      |            |      |   |           
|Total liabilities and stockholders equity                 |  | $    | 29,291,100 |      | $ | 26,627,798
|                                                           |  |      |            |      |   |           





---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



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



CONDENSED STATEMENTS OF EARNINGS

(Parent Only)



|                                                               |  |      |           |   |      |   |           |  
|-------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | -
|                                                               |  | 2004 |           |   | 2003 |  
|Dividend from Bank subsidiary                                  |  | $    | 650,000   |   |      | $ | 615,000   |  
|Operating expenses                                             |  |      | (52,654   | ) |      |   | (39,712   | )
|                                                               |  |      |           |   |      |   |           |  
|Income before equity in undistributed earnings of subsidiaries |  |      | 597,346   |   |      |   | 575,288   |  
|Equity in undistributed earnings of subsidiaries               |  |      | 3,007,465 |   |      |   | 2,873,844 |  
|                                                               |  |      |           |   |      |   |           |  
|Net earnings                                                   |  | $    | 3,604,811 |   |      | $ | 3,449,132 |  
|                                                               |  |      |           |   |      |   |           |  



CONDENSED STATEMENTS
OF CASH FLOWS

(Parent Only)



|                                                                                    |  |      |            |   |      |   |            |  
|----------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                                                                    |  | 2004 |            |   | 2003 |  
|OPERATING ACTIVITIES                                                                |  |      |            |   |      |   |            |  
|Cash flows from operating activities:                                               |  |      |            |   |      |   |            |  
|Net earnings                                                                        |  | $    | 3,604,811  |   |      | $ | 3,449,132  |  
|Adjustments to reconcile net earnings to net cash provided by operating activities: |  |      |            |   |      |   |            |  
|Equity in undistributed earnings of subsidiaries                                    |  |      | (3,007,465 | ) |      |   | (2,873,844 | )
|Change in other liabilities                                                         |  |      | 25,032     |   |      |   | (8,500     | )
|                                                                                    |  |      |            |   |      |   |            |  
|Net cash provided by operating activities                                           |  |      | 622,378    |   |      |   | 566,788    |  
|                                                                                    |  |      |            |   |      |   |            |  
|FINANCING ACTIVITIES                                                                |  |      |            |   |      |   |            |  
|Cash flows from financing activities, consisting of dividends paid                  |  |      | (671,646   | ) |      |   | (503,735   | )
|                                                                                    |  |      |            |   |      |   |            |  
|Net cash flows used by financing activities                                         |  |      | (671,646   | ) |      |   | (503,735   | )
|                                                                                    |  |      |            |   |      |   |            |  
|Net change in cash                                                                  |  |      | (49,268    | ) |      |   | 63,053     |  
|                                                                                    |  |     
|Cash at beginning of year                                                           |  |      | 127,412    |   |      |   | 64,359     |  
|                                                                                    |  |      |            |   |      |   |            |  
|Cash at end of year                                                                 |  | $    | 78,144     |   |      | $ | 127,412    |  
|                                                                                    |  |      |            |   |      |   |            |  





---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|NOTE 16. | OTHER COMMITMENTS AND OBLIGATIONS
|-------- | ---------------------------------



The Bank has entered into operating lease commitments for one banking office and properties for signage and an ATM site. The following table outlines the
total annual obligations arising from these leases:



|                    |  |                  |        
|------------------- |  | ---------------- | -------
|                    |  | AnnualObligation
|2005                |  | $                | 97,383 
|2006                |  |                  | 97,713 
|2007                |  |                  | 96,522 
|2008                |  |                  | 87,671 
|2009                |  |                  | 87,000 
|2010 and thereafter |  |                  | 480,000
|                    |  |                  |        
|                    |  | $                | 946,289



|NOTE 17. | 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, 2004 and 2003 are as follows:



|                                                      |  |      |         |      |   |        
|----------------------------------------------------- |  | ---- | ------- | ---- | - | -------
|                                                      |  | 2004 |         | 2003
|Other operating income:                               |  |      |         |      |   |        
|Secondary market mortgage origination fees            |  | $    | 532,471 |      | $ | 725,736
|Increase in cash surrender value of insurance polices |  |      | 244,881 |      |   | 249,969
|                                                      |  |     
|Other operating expenses:                             |  |      |         |      |   |        
|Professional fees                                     |  | $    | 334,935 |      | $ | 281,726
|Data processing expenses                              |  |      | 307,956 |      |   | 135,135