SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-KSB
(Mark One)

X        Annual Report under Section 13 or 15(d) of the Securities Exchange Act
         of 1934 For the fiscal year ended December 31, 2002

         or

------   Transition Report under Section 13 or 15(d) of the Securities
         Exchange Act of 1934

               For the transition period from ________ to ________

                        Commission file number 333-53536

                        Sweetwater Financial Group, Inc.
                   ---------------------------------------
                 (Name of Small Business Issuer in Its Charter)


         Georgia                        6021                   58-2531498
  ---------------------      --------------------------      ----------------
(State or other Jurisdiction  (Primary Standard Industrial   (I.R.S. Employer
     of Incorporation or       Classification Code Number)  Identification No.)
         Organization)


           3270 Florence Road
        Powder Springs, Georgia                          30127
    --------------------------------                ---------------
(Address of Principal Executive Offices)               (Zip Code)

                                 (770) 943-1400
                              --------------------
                 Issuer's Telephone Number, Including Area Code

        Securities registered pursuant to Section 12(b) of the Act: None.
        Securities registered pursuant to Section 12(g) of the Act: None.

   Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for past 90 days.
Yes    X          No
    --------         -----

   Check if there is no  disclosure  of  delinquent filers  in  response
to Item 405 of  Regulation  S-B in this  form,  and no disclosure will be
contained,  to the best of registrant's  knowledge,  in definitive proxy or
information  statements  incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB.  [X]

   The issuer's revenue for its most recent fiscal year was approximately
$2,207,000. As of March 20, 2003, 944,286 shares of Common Stock were issued
and outstanding.

   The aggregate market value of the Common Stock held by non-affiliates
(shareholders holding less than 5% of an outstanding class of stock, excluding
directors and executive officers) of the Company on March 20, 2003 was
$6,533,060. This calculation is based upon an estimate of the fair market value
of the Common Stock of $10.00 per share, which was the price of the last trade
of which management is aware prior to this date. There is not an active trading
market for the Common Stock and it is not possible to identify precisely the
market value of the Common Stock.

 Transitional Small Business Disclosure Format.(Check one): Yes       No  X
                                                               -----    -----



<PAGE>





Item 1.    Description of Business

         This Report contains statements which constitute forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
the Securities Exchange Act of 1934. These statements are based on many
assumptions and estimates and are not guarantees of future performance. Our
actual results may differ materially from those projected in any forward-looking
statements, as they will depend on many factors about which we are unsure,
including many factors which are beyond our control. The words "may," "would,"
"could," "will," "expect," "anticipate," "believe," "intend," "plan," and
"estimate," as well as similar expressions, are meant to identify such
forward-looking statements. Potential risks and uncertainties include, but are
not limited to:

   o     significant increases in competitive pressure in the banking and
         financial services industries;

   o     changes in the interest rate environment which could reduce anticipated
         or actual margins;

   o     changes in political conditions or the legislative or regulatory
         environment;

   o     general economic conditions, either nationally or regionally and
         especially in primary service area, becoming less favorable than
         expected resulting in, among other things, a deterioration in credit
         quality;

   o     changes occurring in business conditions and inflation;

   o     changes in technology;

   o     changes in monetary and tax policies;

   o     the level of allowance for loan loss;

   o     the rate of delinquencies and amounts of charge-offs;

   o     the rates of loan growth;

   o     adverse changes in asset quality and resulting credit risk-related
         losses and expenses;

   o     changes in the securities markets; and

   o     other risks and uncertainties detailed from time to time in our filings
         with the Securities and Exchange Commission.

General

       Sweetwater Financial Group, Inc. was incorporated in Georgia in March
2000 to operate as a bank holding company pursuant to the Federal Bank Holding
Company Act of 1956 and the Financial Institutions Code of Georgia, and to
purchase 100% of the issued and outstanding stock of Georgian Bank, a state bank
organized under the laws of the State of Georgia, to conduct a general banking
business in Cobb and Paulding Counties.

       On April 4, 2001, we commenced our initial public offering and completed
the sale of 938,453 shares of our common stock at $10.00 per share on July 15,
2001. The offering raised $9.3 million net of sales expenses and commissions.

       We used $8.8 million of the proceeds to capitalize the bank, which opened
for business on November 14, 2001. We completed the construction of our main
office at 3270 Florence Road, Powder Springs, Georgia and moved into the office
in May 2002.

Marketing Focus

      The bank has positioned itself as "the hometown bank" that cares about its
clients. We provide professional and personalized service to our clients by
employing well trained, seasoned bankers who are familiar with our market area
and our clients' individual needs. Our primary target market includes
individuals and small to medium-sized businesses who desire a consistent and
professional relationship with a local banker. Because there is only one other
locally owned bank left in our primary service area, we believe we offer a
unique banking alternative for the market by offering a higher level of customer
service and a management team more focused on the needs of the community than
most of our competitors. We believe that this approach is being enthusiastically
supported by the community, as reflected by our growth to date. In order to
achieve the level of prompt, responsive service that we believe will be
necessary to attract customers and to develop Georgian Bank's image as a local
bank with an individual focus, we intend to continue to leverage our
community-oriented board of directors and local services and decision making to
attract and retain customers.


                                       2
<PAGE>

Location and Service Area

         Our primary service area consists of the southwest Cobb County, and
adjacent portions of Paulding County, Georgia, with a focus on the 10 mile
radius of our main office. Our main office is located within the city limits of
Powder Springs, Georgia on Highway 278 (also known as C.H. James Parkway) and
provides excellent visibility for the bank. Within the first four years of
operation, we plan to open one additional branch strategically located within
our service area. The branch would extend the market reach of our bank, and it
will increase our personal delivery capabilities in this area to more
efficiently market the services of the bank.

         Cobb and Paulding Counties have a growing and dynamic economic
environment that we believe will support Georgian Bank. Cobb County has over
607,000 residents, and it is one of the fastest growing counties in the nation.
According to the Cobb Chamber of Commerce, there are at least 117 Fortune 500
companies doing business in Cobb County. The Home Depot is headquartered in Cobb
County and is one of the top ten employers in the county. Cobb County is one of
the core counties of the metropolitan Atlanta area, which has been one of the
leaders in the nation in job creation in recent years. One factor for Cobb
County's economic growth is its strategic location on the I-75 corridor
immediately north of the City of Atlanta, Georgia.

         Paulding County, immediately west of Cobb County, has also experienced
significant growth in recent years. From 1990 to 2000, the per capita income of
Paulding County residents increased 40%, and is expected to increase by more
than 30% of the next five years.

Deposit Services

         We offer a full range of deposit services that are typically available
in most banks and savings and loan associations, including checking accounts,
NOW accounts, commercial accounts, savings accounts, and other time deposits of
various types, ranging from daily money market accounts to longer-term
certificates of deposit. The transaction accounts and time certificates are
tailored to our principal market area at rates competitive to those offered in
the Cobb and Paulding County area. In addition, we offer certain retirement
account services, including IRAs. We solicit these accounts from individuals,
businesses, churches, non-profits, and government entities.

Lending Activities

         General. We emphasize a range of lending services, including real
estate, commercial, and equity-line and consumer loans to individuals, small- to
medium-sized businesses, and professional concerns that are located in or
conduct a substantial portion of their business in our primary market area. We
compete for these loans with competitors who are well established in our primary
service area and have greater resources and lending limits. As a result, we may
have to charge lower interest rates to attract borrowers.

         The well established banks in the Cobb and Paulding Counties make
proportionately more loans to medium- to large-sized businesses than we do. Many
of our commercial loans are made to small- to medium-sized businesses which may
be less able to withstand competitive, economic, and financial conditions than
larger borrowers.

         Loan Approval and Review. The bank's loan approval policies provide for
various levels of officer lending authority. When the amount of aggregate loans
to a single borrower exceeds that individual officer's lending authority, the
loan request is reviewed and approved by an officer with a higher lending limit
or by the board of directors' loan committee. The bank does not make any loans
to any director or executive officer of the bank unless the loan is approved by
the board of directors of the bank and is made on terms not more favorable to
the director than would be available to a person not affiliated with the bank.
The bank expects to sell residential mortgage loans that it originates on the
secondary market.

                                       3
<PAGE>


         Lending Limits. The bank's lending activities are subject to a variety
of lending limits imposed by federal law. In general, the bank is subject to a
legal limit on loans to a single borrower equal to 25% of the bank's capital and
unimpaired surplus. Different limits may apply in certain circumstances based on
the type of loan or the nature of the borrower, including the borrower's
relationship to the bank. These limits increase or decrease as the bank's
capital increases or decreases. Based upon its capital as of December 31, 2002,
the bank has a legal lending limit of $1.89 million. The bank intends to sell
participations in its loans to other financial institutions to more adequately
meet all of the lending needs of loan customers requiring aggregate extensions
of credit above these limits.

         Real Estate Loans. As of December 31, 2002, loans secured by first or
second mortgages on real estate make up 84% of the bank's loan portfolio. As of
December 31, 2001, the percentage was 78%. Our construction and land development
loans, which comprise 45% of total loans as of December 31, 2002, are primarily
collateralized by one to four family residential properties. Nonresidential real
estate loans, consisting mainly of small business commercial properties, total
27% of total loans as of December 31, 2002. Interest rates for all categories
may be fixed or adjustable. The bank generally charges an origination fee for
each of these type loans.

         Real estate loans are subject to the same general risks as other loans.
The principal credit risk associated with each category of loan, including real
estate loans, is the creditworthiness of the borrower. This category of loans is
particularly sensitive to fluctuations in the value of real estate, which is
generally the underlying security for real estate loans. Fluctuations in the
value of the real estate, as well as other factors arising after the loan is
made, could negatively affect a borrower's cash flow, creditworthiness, and
ability to repay the loan. We attempt to reduce credit risk in the commercial
real estate portfolio by emphasizing loans on owner-occupied office and retail
buildings where the loan-to-value ratio, established by independent appraisals,
does not exceed 80%. In addition, we typically require a valid mortgage lien on
all real property loans along with a title lien policy which insures the
validity and priority of the lien. We attempt to reduce risk by obtaining
personal guarantees where possible and by keeping the loan-to-value ratio of the
completed project below specified percentages. We may also reduce risk by
selling participations in larger loans to other institutions when possible.

         We also have the ability to originate some real estate loans for sale
into the secondary market, although we have not done so to date. We can limit
our interest rate and credit risk on these loans by locking the interest rate
for each loan with the secondary investor and receiving the investor's
underwriting approval prior to originating the loan.

         Commercial Loans. We make loans for commercial purposes in various
lines of businesses. We focus our efforts on commercial loans of less than
$500,000. Equipment loans are typically made for a term of five years or less at
fixed or variable rates, with the loan fully amortized over the term and secured
by the financed equipment and with a loan-to-value ratio of 75% or less. Working
capital loans generally have terms not exceeding one year and are usually
secured by accounts receivable, inventory, or personal guarantees of the
principals of the business. Loans secured by accounts receivable or inventory
are typically repaid as the assets securing the loan are converted into cash,
and in other cases principal is due at maturity. Trade letters of credit,
standby letters of credit, and foreign exchange are handled through a
correspondent bank as agent for the bank.

         We may offer small business loans utilizing government enhancements
such as the Small Business Administration's 7(a) program and SBA's 504 programs,
although we have not generated any such loans to date. These loans are partially
guaranteed by the government to reduce the bank's risk. Government guarantees of
SBA loans will not exceed 80% of the loan value, and will generally be less. As
with other categories of loans, the principal economic risk associated with
commercial loans is the creditworthiness of the borrower. The risks associated
with commercial loans also vary with many economic factors, including the
economy of our primary service area.

         Consumer Loans. We make a variety of loans to individuals for personal
and household purposes, including secured and unsecured installment loans and
revolving lines of credit such as credit cards. Installment loans typically will
carry balances of less than $50,000 and are amortized over periods up to 60
months. Consumer loans may be offered on a single maturity basis where a
specific source of repayment is available. Revolving loan products typically
require monthly payments of interest and a portion of the principal. Consumer
loans are generally considered to have greater risk than first or second
mortgages on real estate because they may be unsecured, or if they are secured,
the value of the security may be difficult to assess and more likely to decrease
than real estate. As with other categories of loans, the principal credit risk
associated with consumer loans is the creditworthiness of the borrower. As of
December 31, 2002, approximately 3% of our loan portfolio consists of consumer
loans not secured by real estate.

         We also offer home equity loans. Our underwriting criteria for and the
risks associated with home equity loans and lines of credit are generally the
same as those for first mortgage loans. Home equity lines of credit generally
have terms of 15 years or less, carry balances less than $125,000, and extend up
to 80% of the available equity of each property. The category comprises 2% of
our loan portfolio as of December 31, 2002.

                                       4
<PAGE>

Other Banking Services

         We offer other bank services including cash management services which
provide sweep accounts for commercial businesses. Lines of credit, 24-hour
telephone banking and PC/internet delivery are offered as well as safe deposit
boxes, direct deposit of payroll and social security checks, U.S. Savings Bonds,
travelers checks, and automatic drafts for various accounts. We have become
associated with the STAR and Cirrus ATM networks that may be used by the bank's
customers throughout the country. We believe that by being associated with a
shared network of ATMs, we will be better able to serve our clients and will be
able to attract clients who are accustomed to the convenience of using ATMs,
although we do not believe that maintaining this association will be critical to
our success. We have installed our own ATM with the opening of the bank's new
main office facility. We also offer debit card and credit card services through
a correspondent bank as an agent for the bank. We do not expect to exercise
trust powers during our initial years of operation.

Employees

         As of March 21, 2003, the bank had 14 full-time employees and 6
part-time employees. Sweetwater Financial Group, the holding company for the
bank, does not have any employees other than its officers.


                           SUPERVISION AND REGULATION

         Both Georgian Bank and Sweetwater Financial Group, Inc. are subject to
extensive state and federal banking laws and regulations which impose specific
requirements or restrictions on and provide for general regulatory oversight of
virtually all aspects of operations. These laws and regulations are generally
intended to protect depositors, not shareholders. The following summary is
qualified by reference to the statutory and regulatory provisions discussed.
Changes in applicable laws or regulations may have a material effect on our
business and prospects. Beginning with the enactment of the Financial
Institution Report Recovery and Enforcement Act in 1989 and following with the
FDIC Improvement Act in 1991 and the Gramm-Leach-Bliley Act in 1999, numerous
additional regulatory requirements have been placed on the banking industry in
the past several years, and additional changes have been proposed. Our
operations may be affected by legislative changes and the policies of various
regulatory authorities. We cannot predict the effect that fiscal or monetary
policies, economic control, or new federal or state legislation may have on our
business and earnings in the future.

USA Patriot Act of 2001

         In October 2001, the USA Patriot Act of 2001 was enacted in response to
the terrorist attacks in New York, Pennsylvania and Washington D.C. which
occurred on September 11, 2001. The Patriot Act is intended to strengthen U.S.
law enforcement's and the intelligence communities' abilities to work cohesively
to combat terrorism on a variety of fronts. The potential impact of the Patriot
Act on financial institutions of all kinds is significant and wide ranging. The
Patriot Act contains sweeping anti-money laundering and financial transparency
laws and imposes various regulations, including standards for verifying client
identification at account opening, and rules to promote cooperation among
financial institutions, regulators and law enforcement entities in identifying
parties that may be involved in terrorism or money laundering.

   Gramm-Leach-Bliley Act

         On November 4, 1999, the U.S. Senate and House of Representatives each
passed the Gramm-Leach-Bliley Act, previously known as the Financial Services
Modernization Act of 1999. This Act was signed into law by President Clinton on
November 12, 1999. Among other things, the Act repeals the restrictions on banks
affiliating with securities firms contained in sections 20 and 32 of the
Glass-Steagall Act. The Act also permits bank holding companies to engage in a
statutorily provided list of financial activities, including insurance and
securities underwriting and agency activities, merchant banking, and insurance
company portfolio investment activities. The Act also authorizes activities that
are "complementary" to financial activities.

         The Act is intended to grant to community banks certain powers as a
matter of right that larger institutions have accumulated on an ad hoc basis.
Nevertheless, the Act may have the result of increasing the amount of
competition that Georgian Bank faces from larger institutions and other types of
companies. In fact, it is not possible to predict the full effect that the
Gramm-Leach-Bliley Act will have on Sweetwater Financial Group, Inc. From time
to time other changes may be proposed to laws affecting the banking industry,
and these changes could have a material affect on our business and prospects. We
cannot predict the nature or extent of the effect on our business and earnings
of fiscal or monetary policies, economic controls, or new federal or state
legislation.

                                       5
<PAGE>


Sweetwater Financial Group, Inc.

         Because it owns the outstanding capital stock of the bank, Sweetwater
Financial Group is a bank holding company under the federal Bank Holding Company
Act of 1956 and the Financial Institutions Code of Georgia, which includes
specific bank holding company statutes.

         The Bank Holding Company Act. Under the Bank Holding Company Act,
Sweetwater Financial Group is subject to periodic examination by the Federal
Reserve and required to file periodic reports of its operations and any
additional information that the Federal Reserve may require. Our activities at
the bank and holding company level will be limited to:

        o   banking and managing or controlling banks;
        o   furnishing services to or performing services for its subsidiaries;
            and
        o   engaging in other activities that the Federal Reserve determines
            to be so closely related to banking and managing or controlling
            banks as to be a proper activity incident thereto.

         Investments, Control, and Activities. With certain limited exceptions,
the Bank Holding Company Act requires every bank holding company to obtain the
prior approval of the Federal Reserve before:

        o   acquiring substantially all the assets of any bank;
        o   acquiring direct or indirect ownership or control of any voting
            shares of any bank if after the acquisition it would own or
            control more than 5% of the voting shares of such bank (unless it
            already owns or controls the majority of such shares); or
        o   merging or consolidating with another bank holding company.

         In addition, and subject to certain exceptions, the Bank Holding
Company Act and the Change in Bank Control Act, together with regulations
thereunder, require Federal Reserve approval prior to any person or company
acquiring "control" of a bank holding company. Control is conclusively presumed
to exist if an individual or company acquires 25% or more of any class of voting
securities of the bank holding company. Control is rebuttably presumed to exist
if a person acquires 10% or more, but less than 25%, of any class of voting
securities and either Sweetwater Financial Group has registered securities under
Section 12 of the Securities Exchange Act of 1934 or no other person owns a
greater percentage of that class of voting securities immediately after the
transaction. Once we have 500 or more shareholders of record as of the end of
any calendar year we must register our common stock under the Securities
Exchange Act of 1934. As of December 31, 2002 we had 477 shareholders of record
and have not registered under this provision. The regulations provide a
procedure for challenge of the rebuttable control presumption.

         Under the Bank Holding Company Act, a bank holding company is generally
prohibited from engaging in, or acquiring direct or indirect control of more
than 5% of the voting shares of any company engaged in nonbanking activities
unless the Federal Reserve Board, by order or regulation, has found those
activities to be so closely related to banking or managing or controlling banks
as to be a proper incident thereto. Some of the activities that the Federal
Reserve Board has determined by regulation to be proper incidents to the
business of a bank holding company include:

       o   making or servicing loans and certain types of leases;
       o   engaging in certain insurance and discount brokerage activities;
       o   performing certain data processing services;
       o   acting in certain circumstances as a fiduciary or investment or
           financial adviser;
       o   owning savings associations; and
       o   making investments in certain corporations or projects designed
           primarily to promote community welfare.

         The Federal Reserve Board imposes certain capital requirements on
Sweetwater Financial Group under the Bank Holding Company Act, including a
minimum leverage ratio and a minimum ratio of "qualifying" capital to
risk-weighted assets. These requirements are described below under "Capital
Regulations." Subject to its capital requirements and certain other
restrictions, Sweetwater Financial Group is able to borrow money to make a
capital contribution to the bank, and these loans may be repaid from dividends
paid from the bank to Sweetwater Financial Group. Our ability to pay dividends
will be subject to regulatory restrictions as described below in "The Bank -
Dividends." Sweetwater Financial Group is also able to raise capital for
contribution to the bank by issuing securities without having to receive
regulatory approval, subject to compliance with federal and state securities
laws.

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         Source of Strength; Cross-Guarantee. In accordance with Federal Reserve
Board policy, Sweetwater Financial Group will be expected to act as a source of
financial strength to the bank and to commit resources to support the bank in
circumstances in which Sweetwater Financial Group might not otherwise do so.
Under the Bank Holding Company Act, the Federal Reserve Board may require a bank
holding company to terminate any activity or relinquish control of a nonbank
subsidiary, other than a nonbank subsidiary of a bank, upon the Federal Reserve
Board's determination that such activity or control constitutes a serious risk
to the financial soundness or stability of any subsidiary depository institution
of the bank holding company. Further, federal bank regulatory authorities have
additional discretion to require a bank holding company to divest itself of any
bank or nonbank subsidiary if the agency determines that divestiture may aid the
depository institution's financial condition.

         Georgia State Regulation. As a bank holding company registered under
the Financial Institutions Code of Georgia, we are subject to limitations on
sale or merger and to regulation by the Georgia Department of Banking and
Finance. Prior to acquiring the capital stock of a state bank, we must obtain
the approval of the Department. We must also receive the Department's approval
prior to engaging in the acquisition of banking or nonbanking institutions or
assets, and we must file periodic reports with respect to our financial
condition and operations, management, and intercompany relationships between
Sweetwater Financial Group and its subsidiaries.

Georgian Bank

         The bank operates as a state bank incorporated under the laws of
Georgia and is subject to examination by the Georgia Department of Banking and
Finance and the FDIC. Deposits in the bank are insured by the FDIC up to a
maximum amount, which is generally $100,000 per depositor subject to aggregation
rules.

       The Georgia Department of Banking and Finance and the FDIC regulates or
monitors virtually all areas of the bank's operations, including:

        o        security devices and procedures;
        o        adequacy of capitalization and loss reserves;
        o        loans;
        o        investments;
        o        borrowings;
        o        deposits;
        o        mergers;
        o        issuances of securities;
        o        payment of dividends;
        o        interest rates payable on deposits;
        o        interest rates or fees chargeable on loans;
        o        establishment of branches;
        o        corporate reorganizations;
        o        maintenance of books and records; and
        o        adequacy of staff training to carry on safe lending and
                 deposit gathering practices.

         The Georgia Department of Banking and Finance and FDIC require the bank
to maintain specified capital ratios and impose limitations on the bank's
aggregate investment in real estate, bank premises, and furniture and fixtures.
The Georgia Department of Banking and Finance and FDIC also require the bank to
prepare quarterly reports on the bank's financial condition and to conduct an
annual audit of its financial affairs in compliance with its minimum standards
and procedures.

         Under the FDIC Improvement Act, all insured institutions must undergo
regular on site examinations by their appropriate banking agency. The cost of
examinations of insured depository institutions and any affiliates may be
assessed by the appropriate agency against each institution or affiliate as it
deems necessary or appropriate. Insured institutions are required to submit
annual reports to the FDIC, their federal regulatory agency, and state
supervisor when applicable. The FDIC Improvement Act directs the FDIC to develop
a method for insured depository institutions to provide supplemental disclosure
of the estimated fair market value of assets and liabilities, to the extent
feasible and practicable, in any balance sheet, financial statement, report of
condition or any other report of any insured depository institution.

                                       7
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The FDIC Improvement Act also requires the federal banking regulatory agencies
to prescribe, by regulation, standards for all insured depository institutions
and depository institution holding companies relating, among other things, to
the following:

        o        internal controls;
        o        information systems and audit systems;
        o        loan documentation;
        o        credit underwriting;
        o        interest rate risk exposure; and
        o        asset quality.

         State banks and their holding companies which have been chartered or
registered or have undergone a change in control within the past two years or
which have been deemed by the Georgia Department of Banking and Finance, FDIC,
or the Federal Reserve Board to be troubled institutions must give the Georgia
Department of Banking and Finance, FDIC or the Federal Reserve Board 30 days
prior notice of the appointment of any senior executive officer or director.
Within the 30 day period, the Georgia Department of Banking and Finance, FDIC
or the Federal Reserve Board, as the case may be, may approve or disapprove any
such appointment.

         Deposit Insurance. The FDIC establishes rates for the payment of
premiums by federally insured banks and thrifts for deposit insurance. A
separate Bank Insurance Fund and Savings Association Insurance Fund are
maintained for commercial banks and savings associations with insurance premiums
from the industry used to offset losses from insurance payouts when banks and
thrifts fail. In 1993, the FDIC adopted a rule which establishes a risk-based
deposit insurance premium system for all insured depository institutions. Under
this system, until mid-1995 depository institutions paid to Bank Insurance Fund
or Savings Association Insurance Fund from $0.23 to $0.31 per $100 of insured
deposits depending on its capital levels and risk profile, as determined by its
primary federal regulator on a semiannual basis. Once the Bank Insurance Fund
reached its legally mandated reserve ratio in mid-1995, the FDIC lowered
premiums for well-capitalized banks, eventually eliminating premiums for
well-capitalized banks, with a minimum semiannual assessment of $1,000. However,
in 1996 Congress enacted the Deposit Insurance Funds Act of 1996, which
eliminated even this minimum assessment. It also separated the Financial
Corporation assessment to service the interest on its bond obligations. The
amount assessed on individual institutions, including the bank, by Financial
Corporation assessment is in addition to the amount paid for deposit insurance
according to the risk-related assessment rate schedule. New changes have been
proposed recently regarding these assessments, including an increase in the
amount of the FDIC insurance, but at this time it is not possible to predict
whether the changes will be implemented or what their effect on us would be.
Generally, we expect that increases in deposit insurance premiums or changes in
risk classification will increase the bank's cost of funds, and we may not be
able to pass these costs on to our customers.

         Transactions With Affiliates and Insiders. The bank is subject to the
provisions of Section 23A of the Federal Reserve Act, which places limits on the
amount of loans or extensions of credit to, or investments in, or certain other
transactions with, affiliates and on the amount of advances to third parties
collateralized by the securities or obligations of affiliates. The aggregate of
all covered transactions is limited in amount, as to any one affiliate, to 10%
of the bank's capital and surplus and, as to all affiliates combined, to 20% of
the bank's capital and surplus. Furthermore, within the foregoing limitations as
to amount, each covered transaction must meet specified collateral requirements.
Compliance is also required with certain provisions designed to avoid the taking
of low quality assets.

         The bank is also subject to the provisions of Section 23B of the
Federal Reserve Act which, among other things, prohibits an institution from
engaging in certain transactions with certain affiliates unless the transactions
are on terms substantially the same, or at least as favorable to such
institution or its subsidiaries, as those prevailing at the time for comparable
transactions with nonaffiliated companies. The bank will be subject to certain
restrictions on extensions of credit to executive officers, directors, certain
principal shareholders, and their related interests. Such extensions of credit
(i) must be made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
third parties and (ii) must not involve more than the normal risk of repayment
or present other unfavorable features.


         The Federal Reserve Board has recently issued Regulation W, which
codifies prior regulations under Sections 23A and 23B of the Federal Reserve Act
and interpretative guidance with respect to affiliate transactions. Regulation W
incorporates the exemption from the affiliate transaction rules but expands the
exemption to cover the purchase of any type of loan or extension of credit from
an affiliate. In addition, under Regulation W:

        o     a bank and its subsidiaries may not purchase a low-quality
              asset from an affiliate;

                                       8
<PAGE>

        o     covered transactions and other specified transactions between a
              bank or its subsidiaries and an affiliate must be on terms and
              conditions that are consistent with safe and sound banking
              practices; and
        o     with some exceptions, each loan or extension of credit by a bank
              to an affiliate must be secured by collateral with a market value
              ranging from 100% to 130%, depending on the type of collateral, of
              the amount of the loan or extension of credit.

         Regulation W generally excludes all non-bank and non-savings
association subsidiaries of banks from treatment as affiliates, except to the
extent that the Federal Reserve Board decides to treat these subsidiaries as
affiliates. Concurrently with the adoption of Regulation W, the Federal Reserve
Board has proposed a regulation which would further limit the amount of loans
that could be purchased by a bank from an affiliate to not more than 100% of the
bank's capital and surplus. Comments on the proposed rule were due by January
13, 2003.

         Dividends. A Georgia state bank may not pay dividends from its capital.
All dividends must be paid out of undivided profits then on hand, after
deducting expenses, including reserves for losses and bad debts. In addition, a
state bank is prohibited from declaring a dividend on its shares of common stock
until its surplus equals its stated capital, unless there has been transferred
to surplus no less than one-tenth of the bank's net profits of the preceding two
consecutive half-year periods (in the case of an annual dividend). The approval
of the Georgia Department of Banking and Finance is required if the total of all
dividends declared by a state bank in any calendar year exceeds the total of its
net profits for that year combined with its retained net profits for the
preceding two years, less any required transfers to surplus.

         Branching. Under current Georgia law, the bank may open branch offices
throughout Georgia with the prior approval of the Georgia Department of Banking
and Finance. In addition, with prior regulatory approval, the bank will be able
to acquire existing banking operations in Georgia. Thus, one or more branch
offices could be the result of merger, consolidation or purchase of assets of
another bank pursuant to Georgia law.

         Community Reinvestment Act. The Community Reinvestment Act requires
that, in connection with examinations of financial institutions within their
respective jurisdictions, the Federal Reserve, the FDIC, or the Georgia
Department of Banking and Finance, as applicable, shall evaluate the record of
each financial institution in meeting the credit needs of its local community,
including low and moderate income neighborhoods. These factors are also
considered in evaluating mergers, acquisitions, and applications to open a
branch or facility. Failure to adequately meet these criteria could impose
additional requirements and limitations on the bank.

         Other Regulations. Interest and other charges collected or contracted
for by the bank are subject to state usury laws and federal laws concerning
interest rates. The bank's loan operations are also subject to federal laws
applicable to credit transactions, including, but not limited to:

        o     the federal Truth-In-Lending Act, governing disclosures of credit
              terms to consumer borrowers;
        o     the Real Estate Settlement Procedures Act of 1974, requiring
              lending institutions to provide consumers with thorough and timely
              information on the nature and costs of settlement, including a
              uniform settlement statement;
        o     the Home Mortgage Disclosure Act of 1975, requiring financial
              institutions to provide information to enable the public and
              public officials to determine whether a financial institution is
              fulfilling its obligation to help meet the housing needs of the
              community it serves;
        o     the Equal Credit Opportunity Act, prohibiting discrimination on
              the basis of race, creed or other prohibited factors in extending
              credit;
        o     the Fair Credit Reporting Act of 1978, governing the use and
              provision of information to credit reporting agencies;
        o     the Fair Debt Collection Act,
              governing the manner in which consumer debts may be collected by
              collection agencies; and
        o     the rules and regulations of the various federal agencies
              charged with the responsibility of implementing such federal
              laws.

The deposit operations of the bank also are subject to:

        o     the Right to Financial Privacy Act, which imposes a duty to
              maintain confidentiality of consumer financial records and


                                       9
<PAGE>

              prescribes procedures for complying with administrative subpoenas
              of financial records; and
        o     the Electronic Funds Transfer Act and Regulation E issued by the
              Federal Reserve Board to implement that act, which governs
              automatic deposits to and withdrawals from deposit accounts and
              customers' rights and liabilities arising from the use of
              automated teller machines and other electronic banking services.

         Capital Regulations. The federal bank regulatory authorities have
adopted risk-based capital guidelines for banks and bank holding companies that
are designed to make regulatory capital requirements more sensitive to
differences in risk profiles among banks and bank holding companies and account
for off-balance sheet items. The guidelines are minimums, and the federal
regulators have noted that banks and bank holding companies contemplating
significant expansion programs should not allow expansion to diminish their
capital ratios and should maintain ratios in excess of the minimums. We have not
received any notice indicating that either Sweetwater Financial Group or
Georgian Bank is subject to higher capital requirements. The current guidelines
require all bank holding companies and federally-regulated banks to maintain a
minimum risk-based total capital ratio equal to 8%, of which at least 4% must be
Tier 1 capital. Tier 1 capital includes common shareholders' equity, qualifying
perpetual preferred stock, and minority interests in equity accounts of
consolidated subsidiaries, but excludes goodwill and most other intangibles and
excludes the allowance for loan and lease losses. Tier 2 capital includes the
excess of any preferred stock not included in Tier 1 capital, mandatory
convertible securities, hybrid capital instruments, subordinated debt and
intermediate term-preferred stock, and general reserves for loan and lease
losses up to 1.25% of risk-weighted assets.

         Under these guidelines, banks' and bank holding companies' assets are
given risk-weights of 0%, 20%, 50%, or 100%. In addition, certain off-balance
sheet items are given credit conversion factors to convert them to asset
equivalent amounts to which an appropriate risk-weight applies. These
computations result in the total risk-weighted assets. Most loans are assigned
to the 100% risk category, except for first mortgage loans fully secured by
residential property and, under certain circumstances, residential construction
loans, both of which carry a 50% rating. Most investment securities are assigned
to the 20% category, except for municipal or state revenue bonds, which have a
50% rating, and direct obligations of or obligations guaranteed by the United
States Treasury or United States Government agencies, which have a 0% rating.

         The federal bank regulatory authorities have also implemented a
leverage ratio, which is equal to Tier 1 capital as a percentage of average
total assets less intangibles, to be used as a supplement to the risk-based
guidelines. The principal objective of the leverage ratio is to place a
constraint on the maximum degree to which a bank holding company may leverage
its equity capital base. The minimum required leverage ratio for top-rated
institutions is 3%, but most institutions are required to maintain an additional
cushion of at least 100 to 200 basis points.

         The FDIC Improvement Act established a new capital-based regulatory
scheme designed to promote early intervention for troubled banks which requires
the FDIC to choose the least expensive resolution of bank failures. The new
capital-based regulatory framework contains five categories of compliance with
regulatory capital requirements, including "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized," and
"critically undercapitalized." To qualify as a "well capitalized" institution, a
bank must have a leverage ratio of no less than 5%, a Tier 1 risk-based ratio of
no less than 6%, and a total risk-based capital ratio of no less than 10%, and
the bank must not be under any order or directive from the appropriate
regulatory agency to meet and maintain a specific capital level. As of December
31, 2002, we qualified as "well capitalized."

         Under the FDIC Improvement Act regulations, the applicable agency can
treat an institution as if it were in the next lower category if the agency
determines (after notice and an opportunity for hearing) that the institution is
in an unsafe or unsound condition or is engaging in an unsafe or unsound
practice. The degree of regulatory scrutiny of a financial institution
increases, and the permissible activities of the institution decreases, as it
moves downward through the capital categories. Institutions that fall into one
of the three undercapitalized categories may be required to do some or all of
the following:

        o   submit a capital restoration plan;
        o   raise additional capital;
        o   restrict their growth, deposit interest rates, and other activities;
        o   improve their management;
        o   eliminate management fees; or
        o   divest themselves of all or a part of their operations.

Bank holding companies controlling financial institutions can be called upon to
boost the institutions' capital and to partially guarantee the institutions'
performance under their capital restoration plans.

                                       10
<PAGE>


         These capital guidelines can affect us in several ways. If we grow at a
rapid pace, our capital may be depleted too quickly, and a capital infusion from
the holding company may be necessary, which could impact our ability to pay
dividends. Our capital levels are currently more than adequate; however, rapid
growth, poor loan portfolio performance, poor earnings performance, or a
combination of these factors could change our capital position in a relatively
short period of time.

         The FDIC Improvement Act requires the federal banking regulators to
revise the risk-based capital standards to provide for explicit consideration of
interest-rate risk, concentration of credit risk, and the risks of untraditional
activities. We are uncertain what effect these regulations would have.

         Failure to meet these capital requirements would mean that a bank would
be required to develop and file a plan with its primary state and/or federal
banking regulator describing the means and a schedule for achieving the minimum
capital requirements. In addition, such a bank would generally not receive
regulatory approval of any application that requires the consideration of
capital adequacy, such as a branch or merger application, unless the bank could
demonstrate a reasonable plan to meet the capital requirement within a
reasonable period of time.

         Enforcement Powers. The Financial Institution Reform Recovery and
Enforcement Act expanded and increased civil and criminal penalties available
for use by the federal regulatory agencies against depository institutions and
certain "institution-affiliated parties." Institution-affiliated parties
primarily include management, employees, and agents of a financial institution,
as well as independent contractors and consultants such as attorneys and
accountants and others who participate in the conduct of the financial
institution's affairs. These practices can include the failure of an institution
to timely file required reports or the filing of false or misleading information
or the submission of inaccurate reports. Civil penalties may be as high as
$1,000,000 a day for such violations. Criminal penalties for some financial
institution crimes have been increased to twenty years. In addition, regulators
are provided with greater flexibility to commence enforcement actions against
institutions and institution-affiliated parties. Possible enforcement actions
include the termination of deposit insurance. Furthermore, banking agencies'
power to issue cease-and-desist orders were expanded. Such orders may, among
other things, require affirmative action to correct any harm resulting from a
violation or practice, including restitution, reimbursement, indemnifications or
guarantees against loss. A financial institution may also be ordered to restrict
its growth, dispose of certain assets, rescind agreements or contracts, or take
other actions as determined by the ordering agency to be appropriate.

         Effect of Governmental Monetary Policies. Our earnings are affected by
domestic economic conditions and the monetary and fiscal policies of the United
States government and its agencies. The Federal Reserve Bank's monetary policies
have had, and are likely to continue to have, an important impact on the
operating results of commercial banks through its power to implement national
monetary policy in order, among other things, to curb inflation or combat a
recession. The monetary policies of the Federal Reserve Board have major effects
upon the levels of bank loans, investments and deposits through its open market
operations in United States government securities and through its regulation of
the discount rate on borrowings of member banks and the reserve requirements
against member bank deposits. It is not possible to predict the nature or impact
of future changes in monetary and fiscal policies.

Item 2.  Description of Property
--------------------------------
         Our main office is located at 3270 Florence Road, Powder Springs,
Georgia 30127 at the intersection of Florence Road and Highway 278 in downtown
Powder Springs. The site is approximately 1.6 acres in size and the building is
approximately 10,000 square feet. We purchased the property through the issuance
of 45,000 shares of our common stock (valued at $10.00 per share) and the
payment of cash in the amount of $280,769.

         On November 14, 2001 we opened the bank for business. Within our first
four years of operation, we plan to open one additional branch located
strategically in our service area, which will expand our market presence and
provide additional convenience to our customers. We will need to obtain
regulatory approval before we can open this branch. We believe that these
facilities will adequately serve the bank's needs for its first five years of
operation.

Item 3.    Legal Proceedings.
------------------------------
         None.

Item 4.    Submission of Matters to a Vote of Security Holders.
--------------------------------------------------------------

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


                                       11
<PAGE>


Item 5.    Market for Common Equity and Related Shareholder Matters.
--------------------------------------------------------------
         There is currently no public trading market for our common stock. As of
March 20, 2003, we had approximately 477 shareholders of record.

         To date, we have not paid cash dividends on our common stock. We
currently intend to retain earnings to support operations and finance expansion
and therefore do not anticipate paying cash dividends in the foreseeable future.
All of our outstanding shares of common stock are entitled to share equally in
dividends from funds legally available when, and if, declared by the board of
directors.

            The following table sets forth equity compensation plan information
at December 31, 2002.
<TABLE>
<CAPTION>

                      Equity Compensation Plan Information
             -------------------------------------------------------
                                                                                                 Number of securities
                                    Number of securities                                       remaining available for
                                        to be issued               Weighted-average             future issuance under
                                      upon exercise of             exercise price of         equity compensation plans(c)
                                    outstanding options,         outstanding options,           (excluding securities
Plan Category                      warrants and rights(a)       warrants and rights(b)         reflected in column(a))
-------------                      -------------------          -------------------            -----------------------

<S>                                         <C>                          <C>                             <C>
Equity compensation                         None                           --                          151,086
plans approved by
security holders (1)

Equity compensation                        329,167                      $10.00                           None
plans not approved
by security holders

         Total                             329,167                      $10.00                         151,086
                              ---------------------------- ---------------------------- ---------------------------------
</TABLE>

(1)      The number of shares of common stock available under the 2002
         Sweetwater Financial Group, Inc. Stock Incentive Plan will
         automatically increase each time we issue additional shares so that it
         continues to equal 16% of our total outstanding shares.

Stock Warrants

         Each of our organizers received, for no additional consideration, a
warrant to purchase one share of common stock for $10.00 per share for each
share purchased during our initial public offering. The warrants are represented
by separate warrant agreements. One third of the warrants vest on each of the
first three anniversaries of the date our bank opened for business, and they are
exercisable in whole or in part during the ten year period following that date.
The warrants may not be assigned, transferred, pledged, or hypothecated in any
way. The shares issued pursuant to the exercise of such warrants are
transferable, subject to compliance with applicable securities laws. If the
Georgia Department of Banking and Finance or the FDIC issues a capital directive
or other order requiring the bank to obtain additional capital, the warrants
will be forfeited, if not immediately exercised.

Item 6.  Management's Discussion and Analysis or Plan of Operation
------------------------------------------------------------------
         The following is a discussion of our financial condition and the
financial condition of our subsidiary, Georgian Bank, at December 31, 2002 and
2001 and the results of operations for the years ended December 31, 2002 and
December 31, 2001. The purpose of this discussion is to focus on information
about our financial condition and our results of operations that are not
otherwise apparent from our audited consolidated financial statements. Reference
should be made to those statements and the selected financial data presented
elsewhere in this report for an understanding of the following discussion and
analysis.

Overview

         Our major achievements during our first full year of operation in 2002
were significant growth in loans and deposits which generated a market base of
customers and which positions the bank to achieve profitability.


                                       12
<PAGE>

Financial Condition at December 31, 2002 and 2001

Following is a summary of our balance sheets for the periods indicated:
<TABLE>
<CAPTION>

                                                                                               December 31,
                                                                                           2002             2001
                                                                                           ----             ----
(Dollars in Thousands)
<S>                                                                                       <C>                <C>
Cash and due from banks                                                            $        906       $       288
Federal funds sold                                                                        5,764             6,264
Securities available for sale                                                             3,643               503
Loans, net                                                                               42,923             5,399
Premises and equipment                                                                    3,396             1,662
Other assets                                                                              2,064               101
                                                                                        -------            ------

                                                                                   $     58,696       $    14,217
                                                                                         ======            ======

Total deposits                                                                     $     50,440       $     5,486
Other borrowings                                                                            116                43
Other liabilities                                                                            96                14
Shareholders' equity (deficit)                                                            8,044             8,674
                                                                                          -----             -----


                                                                                   $     58,696       $    14,217
                                                                                         ======            ======
</TABLE>

         As of December 31, 2002, we had total assets of $58.7 million. We
generated $45.0 million in deposits since December 31, 2001 and invested that
growth in loans, which increased $37.5 million, investment securities, up $3.1
million, and premises and equipment, up $1.7 million. We believe that loan and
deposit growth will continue to be significant during the coming year, although
not as high as 2002. We have established a customer base and will slow growth
from the 2002 rate in an effort to ensure that asset quality remains high and
our pricing of our loan and deposit products yield profitable relationships.

         Our investment portfolio consists of debt securities in the Federal
National Mortgage Association, Federal Home Loan Mortgage Corporation,
Government National Mortgage Corporation and Federal Home Loan Bank. We
purchased $3.7 million of such securities during 2002 to gain higher yields than
federal funds sold and to provide a source of secondary liquidity.

         Most of our loan portfolio is collateralized by real estate located in
our primary market area of Cobb County, Paulding County and surrounding Georgia
counties. A breakdown of our loan portfolio is as follows: commercial loans
secured by collateral other than real estate make up 13% of the portfolio;
construction and land development loans comprise 45% of the loan portfolio and
consists of loans primarily collateralized by one to four family residential
properties; commercial purpose loans secured by real estate, primarily small
business commercial properties, comprise 27% of the loan portfolio, and consumer
loans secured by real estate loans are 12% of the loan portfolio. We generally
require that loans collateralized by real estate not exceed the collateral
values by the following percentages for each type of real estate loan:
<TABLE>
<CAPTION>

<S>                                                                                                        <C>
       One- to four-family residential properties                                                          80%
       Construction loans on one- to four-family residential properties                                    80%
       Nonresidential property                                                                             80%
</TABLE>

The remainder of the loan portfolio consists of consumer loans not secured by
real estate. We require collateral commensurate with the repayment ability and
creditworthiness of the borrower on these loans.

         The specific economic and credit risks associated with our loan
portfolio, especially the real estate portfolio, include, but are not limited
to, a general downturn in the economy which could affect unemployment rates in
our market area, general real estate market deterioration, interest rate
fluctuations, deteriorated or non-existing collateral, title defects, inaccurate
appraisals, financial deterioration of borrowers, fraud, and any violation of
banking protection laws. Construction lending can also present other specific
risks to the lender such as whether developers can find builders to buy lots for
home construction, whether the builders can obtain financing for the
construction, whether the builders can sell the home to a buyer, and whether the
buyer can obtain permanent financing. Currently, real estate values and
employment trends in our market area are stable with only slight indications of
a downturn in the local economy.

                                       13
<PAGE>

        Although the overall United States economy has suffered as a result of
the terrorist attacks on September 11, 2001, our local economy has been only
slightly affected to date.

         We attempt to reduce these economic and credit risks not only by
adhering to loan to value guidelines, but also by investigating the
creditworthiness of the borrower and monitoring the borrower's financial
position. Also, we establish and periodically review our lending policies and
procedures. Banking regulations limit exposure by prohibiting loan relationships
that exceed 25% of our bank's statutory capital and surplus.

Liquidity and Capital Resources

         The purpose of liquidity management is to ensure that there are
sufficient cash flows to satisfy demands for credit, deposit withdrawals, and
our other needs. Traditional sources of liquidity include asset maturities and
growth in core deposits. A company may achieve its desired liquidity objectives
from the management of assets and liabilities and through funds provided by
operations. Funds invested in short-term marketable instruments and the
continuous maturing of other earning assets are sources of liquidity from the
asset perspective. The liability base provides sources of liquidity through
deposit growth, the maturity structure of liabilities, and accessibility to
market sources of funds.

         Scheduled loan payments are a relatively stable source of funds, but
loan payoffs and deposit flows fluctuate significantly, being influenced by
interest rates and general economic conditions and competition. We attempt to
price deposits to meet liquidity and profitability objectives consistent with
local market conditions.

         Our liquidity and capital resources are monitored on a periodic basis
by management and regulatory authorities. As determined under guidelines
established by regulatory authorities and internal policy, our liquidity is
considered satisfactory.

         At December 31, 2002, we had loan commitments outstanding of $14.6
million. Because these commitments generally have fixed expiration dates and may
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. If needed, we have the ability on a
short-term basis to borrow and purchase Federal funds from other financial
institutions. At December 31, 2002, we had arrangements with three commercial
banks for short-term advances of $4,000,000.

         At December 31, 2002, our capital ratios were considered "well
capitalized" based on regulatory minimum capital requirements. Our shareholders'
equity decreased $630,000 during 2002 due primarily to our net loss of $705,000.
Other increases in our shareholders equity resulted from the increase in
unrealized gains on securities available for sale of $16,000 and the exercise of
stock warrants of $58,000.

         Banking regulations limit the amount of the dividends that may be paid
without prior approval of the bank's regulatory agency. Currently, no dividends
can be paid by the bank to the holding company without regulatory approval.

The minimum capital requirements to be considered well capitalized under prompt
corrective action provisions and the actual capital ratios for us and the bank
as of December 31, 2002 are as follows:

<TABLE>
<CAPTION>
                                                                                    Actual
                                                                                ---------------
                                                                Sweetwater Financial     Georgian       Regulator
                                                                    Group, Inc.            Bank        Requirements
                                                                -------------------    -----------     -------------
<S>                                                                    <C>                <C>             <C>
      Leverage capital ratio                                           14.40%             13.58%          5.00%
      Risk-based capital ratios:
      Core capital                                                     16.20%             15.29%          6.00%
      Total capital                                                    17.20%             16.28%          10.00%
</TABLE>

These ratios will decline as asset growth continues, but we expect to exceed the
regulatory minimum requirements at least for the next 12 months. As long as we
have less than $150 million in total assets, our capital levels are measured for
regulatory purposes only at the bank level, not at the holding company level.

          At December 31, 2002, we had no commitments for capital expenditures.

          We believe that our liquidity and capital resources are adequate and
will meet our foreseeable short and long-term needs. We anticipate that we will
have sufficient funds available to meet current loan commitments and to fund or
refinance, on a timely basis, our other material commitments and liabilities.

                                       14
<PAGE>

          Management is not aware of any known trends, events or uncertainties
other than those discussed above that will have or that are reasonably likely to
have a material effect on our liquidity, capital resources or operations.
Management is also not aware of any current recommendations by the regulatory
authorities that, if they were implemented, would have such an effect.

Effects of Inflation
--------------------
          The impact of inflation on banks differs from its impact on
non-financial institutions. Banks, as financial intermediaries, have assets that
are primarily monetary in nature and that tend to fluctuate in concert with
inflation. A bank can reduce the impact of inflation if it can manage its rate
sensitivity gap. This gap represents the difference between rate sensitive
assets and rate sensitive liabilities. We attempt to structure the assets and
liabilities and manage the rate sensitivity gap, thereby seeking to minimize the
potential effects of inflation. For information on the management of our
interest rate sensitive assets and liabilities, see "Asset/Liability
Management."

Results of Operations For The Years Ended December 31, 2002 and
December 31, 2001

          The following is a summary of our operations for the periods
indicated.
<TABLE>
<CAPTION>

                                                                                               Year Ended
                                                                                 December 31, 2002    December 31, 2001
                                                                                         (Dollars in Thousands)
<S>                                                                                  <C>                       <C>
Interest income                                                             $           2,130         $         176
Interest expense                                                                          770                    29
                                                                                          ---                    --
Net interest income                                                                     1,360                   147
Provision for loan losses                                                                 437                    55
Other income                                                                               77                     -
Other expenses                                                                          1,705                   618
                                                                                        -----                   ---
Pretax loss                                                                              (705)                 (526)
Income taxes                                                                                -                     -
                                                                                ---------------------    -----------------

Net loss                                                                    $            (705)        $        (526)
                                                                                         =====                 =====
</TABLE>

Net Interest Income
--------------------
          Our results of operations are determined by our ability to manage
interest income and expense effectively, to minimize loan and investment losses,
to generate non-interest income, and to control operating expenses. Because
interest rates are determined by market forces and economic conditions beyond
our control, our ability to generate net interest income is dependent upon our
ability to obtain an adequate net interest spread between the rate we pay on
interest-bearing liabilities and the rate we earn on interest-earning assets.

         Net interest income was $1,360,000 in the year 2002, an increase of
$1,213,000 from the year 2001. This increase came primarily from increased loans
outstanding, which increased $37.5 million at December 31, 2002 from December
31, 2001. This growth generated a loan income increase of approximately $2.0
million. Income on investments was $59,000 in the year 2002, up $53,000 over
2001, again the result of increased balances, which were up $3.1 million in 2002
over 2001. Offsetting this earning asset income growth was an increase in
interest expense on deposits, which, at $770,000 in the year 2002, was $741,000
above the year 2001.

          Average loans for the year 2002 were $26.8 million, an increase of
$23.1 million over the year 2001; average securities were $1.3 million in the
year 2002, up $.8 million over 2001; and average federal funds sold were $4.5
million, a decrease of $2.0 million from 2001. Loan growth was generated
primarily by business development efforts of our lending officers and directors.

          Average interest-bearing liabilities were $26.3 million in 2002, an
increase of $23.1 million. This is primarily the result of our pricing strategy
for savings deposits. We offer a higher than market rate on this product which
has had a very favorable customer response. The savings category comprised 53%
of our total deposits as of December 31, 2002.

          During the year 2002, the rate earned on average interest-earning
assets was 6.55%, and the rate paid on average interest-bearing liabilities was
2.92%, resulting in a net interest spread of 3.63%.

                                       15
<PAGE>


These are improvements over year 2001 in which the average rate earned
on interest-earning assets was 4.46% and the average rate paid on interest-
bearing liabilities was 2.68%. The net yield on average interest-earning assets
during the year ended December 31, 2002 was 4.18%, an increase of .51% over the
prior year due primarily to higher balances in loans and the resultant increase
in the percentage of earning assets held in loans, which earn significantly
higher yields than other earning assets. Yields on loans decreased in the year
2002 from the prior year as the result of declines in the prime rate and federal
funds market rates. The rate paid on average interest bearing liabilities
increased to 2.92% in 2002 compared to 2.68% in 2001 due to significant growth
in savings and interest bearing demand deposits, up $16.5 million, and the
impact of these higher rate products on total interest expense. A large portion
of our deposit growth in 2002 was in our savings product, due to our pricing
strategy for this product.

Provision for Loan Losses
-------------------------
         The provision for loan losses is the charge to operating earnings that
we believe to be necessary to maintain the allowance for loan losses at an
adequate level. The amount charged to the provision is based on a review of
past-due loans and delinquency trends, actual losses, classified and criticized
loans, loan portfolio growth, concentrations of credit, economic conditions,
historical charge-off activity and internal credit risk ratings. Loan
charge-offs and recoveries are charged or credited directly to the allowance.

          The provision for loan losses was $437,000 in the year 2002 and
$55,000 in 2001. The higher amount provided in 2002 was due to the growth of the
portfolio. Based upon our evaluation of the loan portfolio, we believe the
allowance for loan losses is adequate to absorb possible losses on existing
loans that may become uncollectible. We have not had any nonperforming loans or
assets since inception of business through December 31, 2002. The allowance for
loan losses as a percentage of total loans was 1.13% at December 31, 2002 and
1.01% at December 31, 2001. See "Summary of Loan Loss Experience - Allowance for
Loan Losses."

Other Income
-------------
          Other operating income consists of service charges on deposit accounts
and other miscellaneous revenues and fees. Other income increased $77,000 in
2002 compared to 2001. In September 2002, the bank purchased life insurance on
its president, Kenneth Barber, with a one-time premium of $1.71 million. Income
of $30,600 was recorded for the increase in cash surrender value of this
insurance from the date of purchase through December 31, 2002.

Other Expense
--------------
          Other operating expense for the year ended December 31, 2002 consists
of salaries and employee benefits of $1.04 million, which is $660,000 higher
than 2001; equipment and occupancy expenses of $201,000, up $142,000 over 2001;
and other operating expenses of $459,000, up $284,000 over 2001. The bank opened
for business on November 14, 2001. Therefore, a comparison of other expenses for
the year 2002 to 2001 reflects a full 12 months of operation in 2002 compared to
one and one-half months in 2001. This full year effect impacts all major expense
categories.

As of December 31, 2002, we had 16 full-time equivalent employees compared to 12
at December 31, 2001.

Income Tax
-----------
          We had no income tax expense in year 2002 or 2001 due to pre-tax
operating losses. At December 31, 2002, we have available net operating loss
carryforwards of $1,014,306 for Federal income tax purposes. If unused, the
carryforwards will expire beginning 2021.

Asset/Liability Management
-------------------------
          Our objective is to manage assets and liabilities to provide a
satisfactory, consistent level of profitability within the framework of
established cash, loan, investment, borrowing, and capital policies. Certain
officers are charged with the responsibility for monitoring policies and
procedures that are designed to ensure an acceptable composition of the
asset/liability mix. Our management's overall philosophy is to support asset
growth primarily through growth of core deposits by local individuals,
partnerships, and corporations.

          Our asset/liability mix is monitored on a regular basis with a report
reflecting the interest rate-sensitive assets and interest rate-sensitive
liabilities being prepared and presented to the board of directors on a periodic
basis. The objective of this policy is to monitor interest rate-sensitive assets
and liabilities so as to minimize the impact of substantial movements in market
interest rates on earnings.

                                       16
<PAGE>

An asset or liability is considered to be interest rate-sensitive
if it will reprice or mature within the time period analyzed,usually one year
or less. The interest rate-sensitivity gap is the difference between the
interest-earning assets and interest-bearing liabilities scheduled
to mature or reprice within such time period. A gap is considered positive when
the amount of interest rate-sensitive assets exceeds the amount of interest
rate-sensitive liabilities. A gap is considered negative when the amount of
interest rate-sensitive liabilities exceeds the interest rate-sensitive assets.
During a period of rising interest rates, a negative gap would tend to affect
net interest income adversely, while a positive gap would tend to result in an
increase in net interest income. Conversely, during a period of falling interest
rates, a negative gap would tend to result in an increase in net interest
income, while a positive gap would tend to affect net interest income adversely.
If our assets and liabilities were equally flexible and moved concurrently, the
impact of any increase or decrease in interest rates on net interest income
would be minimal.

          A simple interest rate "gap" analysis by itself may not be an accurate
indicator of how net interest income will be affected by changes in interest
rates. Accordingly, we also evaluate how the repayment of particular assets and
liabilities is impacted by changes in interest rates. Income associated with
interest-earning assets and costs associated with interest-bearing liabilities
may not be affected uniformly by changes in interest rates. In addition, the
magnitude and duration of changes in interest rates may have a significant
impact on net interest income. For example, although certain assets and
liabilities may have similar maturities or periods of repricing, they may react
in different degrees to changes in market interest rates. Interest rates on
certain types of assets and liabilities fluctuate in advance of changes in
general market rates, while interest rates on other types may lag behind changes
in general market rates. In addition, certain assets, such as adjustable rate
mortgage loans, have features (generally referred to as "interest rate caps and
floors") that limit changes in interest rates. Prepayment and early withdrawal
levels also could deviate significantly from those assumed in calculating the
interest rate gap. The ability of many borrowers to service their debts also may
decrease during periods of rising interest rates.

          Changes in interest rates also affect our liquidity position. We
currently price deposits in response to market rates and it is management's
intention to continue this policy. If deposits are not priced in response to
changes in market rates, a loss of deposits could occur that would negatively
affect our liquidity position. We closely monitor pricing our savings product
since it comprised 53% of our total deposits and could be subject to substantial
withdrawals if market rates or the stock market were to rise substantially. We
plan to continue to offer higher than market rates on the product and believe we
can retain and actually increase these deposits in the future with this
strategy. During the year 2002, we lowered the rate offered on our savings
product twice by a total of one-half of one percent and the total balances
continued to increase. We plan to actively market and increase the balances in
our other deposit categories relative to the savings product.

          At December 31, 2002, our cumulative one year interest
rate-sensitivity gap ratio was 93.0%. The gap indicates that more of our
interest-bearing liabilities will reprice during this period than our
interest-earning assets. Our targeted ratio is 80% to 120% in this time period
and we are within our targeted parameter. At this gap level, our net interest
income should not be significantly affected by changes in market interest rates.

          We have also performed basic dynamic forecasts of changes in net
interest income based upon our budget forecast for the year 2003. These
forecasts move beyond the gap model in that they include the growth of assets
and liabilities and the impact of changing market rates on the spread
relationships between rates earned or paid and those market rates. These
projections indicate that our net interest margin would increase in a rising
market rate environment and decline in a falling market, but the change would be
within acceptable limits. The output of the models can be affected significantly
if actual future growth or market rates differ materially from the model's
assumptions.




                                       17
<PAGE>



         The following table sets forth the distribution of the repricing of our
interest-earning assets and interest-bearing liabilities as of December 31,
2002, the interest rate-sensitivity gap, the cumulative interest
rate-sensitivity gap, the interest rate-sensitivity gap ratio and the cumulative
interest rate-sensitivity gap ratio. The table also sets forth the time periods
in which interest-earning assets and interest-bearing liabilities will mature or
may reprice in accordance with their contractual terms. However, the table does
not necessarily indicate the impact of general interest rate movements on the
net interest margin as the repricing of various categories of assets and
liabilities is subject to competitive pressures and the needs of our customers.
In addition, various assets and liabilities indicated as repricing within the
same period may, in fact, reprice at different times within this period and at
different rates.
<TABLE>
<CAPTION>

                                                                      After
                                                                      Three
                                                                      Months      After One
                                                                      but         Year but
                                                          Within      Within      Within      After
                                                       Three Months   One Year   Five Years  Five Years     Total
                                                       ------------   --------   ----------  ----------     -----
                                                 (Dollars in Thousands)

Interest-earning assets:
<S>                                                      <C>           <C>           <C>         <C>        <C>
Federal funds sold                                       $5,764                                             $5,764
Securities                                                               102       2,727        814          3,643
Loans                                                    34,257        1,993       6,809        356         43,415
                                                         ------        -----       -----        ---         ------

                                                         40,021        2,095       9,536      1,170         52,822
                                                         ------        -----       -----      -----         ------

Interest-bearing liabilities:
Interest-bearing demand deposits                          1,357                                              1,357
Savings                                                  31,863                                             31,863
Certificates, less than $100,000                          1,294        3,251         827                     5,372
Certificates, $100,000 and over                           2,658        5,080         734                     8,472
                                                          -----        -----         ---                     -----

                                                         37,172        8,331       1,561                    47,064
                                                         ------        -----       -----                    ------

Interest rate sensitivity gap                            $2,849      $(6,236)     $7,975     $1,170         $5,758
                                                         ======       =======     ======     ======          =====
Cumulative interest rate sensitivity gap                 $2,849      $(3,387)     $4,588     $5,758
                                                         ======       =======     ======     ======
Interest rate sensitivity gap ratio                        1.08         (.25)       6.11          *
                                                         ======       =======     ======     ======
(interest-earning assets divided by interest-bearing
liabilities for the period)
Cumulative interest rate sensitivity gap ratio             1.08         0.93       1.10       1.12
                                                         ======       =======     ======     ======
(cumulative interest-earning assets divided by
interest-bearing liabilities)

*Not calculable.
</TABLE>




                                       18
<PAGE>



               SELECTED FINANCIAL INFORMATION AND STATISTICAL DATA

The tables and schedules on the following pages set forth certain significant
financial information and statistical data with respect to the distribution of
assets, liabilities and shareholders' equity, the interest rates we experienced;
our investment portfolio; our loan portfolio, including types of loans,
maturities, and sensitivities of loans to changes in interest rates and
information on nonperforming loans; summary of the loan loss experience and
allowance for loan losses; types of deposits, and the return on equity and
assets.

                    DISTRIBUTION OF ASSETS, LIABILITIES, AND
                              SHAREHOLDERS' EQUITY:
                    INTEREST RATES AND INTEREST DIFFERENTIALS

Average Balances

The condensed average balance sheet for the periods indicated is presented
below. (1)

<TABLE>
<CAPTION>
                                                                                       From November 14, 2001,
                                                                                       date of commencement of
                                                                                           operations, to
                                                                                   Year 2002      December 31, 2001
                                                                                  ------------     -----------------
ASSETS                                                                                 (Dollars in Thousands)

<S>                                                                                <C>                  <C>
Cash and due from bank                                                      $           707      $          579
Federal funds sold                                                                    4,451               6,402
Securities available-for-sale, at cost                                                1,303                 500
Unrealized gains on securities available-for-sale                                         8                   5
Loans (2)                                                                            26,776               3,676
Allowance for loan losses                                                              (288)                (23)
Other assets                                                                          3,708               1,543
                                                                                --------------      -------------
                                                                            $        36,665      $       12,682
                                                                                =============       ============

Total interest-earning assets                                               $        32,530      $       10,578
                                                                                =============       ============
</TABLE>




LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Deposits:
<S>                                                                                 <C>                  <C>
Noninterest-bearing demand                                                  $         1,896      $          715
Interest-bearing demand and savings                                                  18,170               1,617
Time                                                                                  8,132               1,666
                                                                                --------------      -------------
                     Total Deposits                                         $        28,198      $        3,998

Federal funds purchased                                                                  44                  --
Other liabilities                                                                       117                  55
                                                                                ---------------     ----------------
                   Total Liabilities                                                 28,359               4,053
Shareholders' equity (3)                                                              8,306               8,629
                                                                                --------------      --------------
                                                                            $        36,665      $       12,682
                                                                                =============       =============

Total interest-bearing liabilities                                          $        26,346      $        3,283
                                                                                =============       ==============
</TABLE>

(1)       Average balances were determined using the daily average balances
          during the period from November 14, 2001, date of commencement of
          operations, to December 31, 2001, and from January 1, 2002 though
          December 31, 2002, for each category.

(2)       There were no nonaccrual loans included in average loans.

(3)       Average unrealized gains net of tax effect on securities available
          for sale of $6,000 and $5,000 were included in
          shareholders' equity for the years 2002 and 2001, respectively.




                                       19
<PAGE>



Interest Income and Interest Expense

          The following tables set forth the amount of our interest income and
interest expense for each category of interest-earning assets and
interest-bearing liabilities and the average interest rate for total
interest-earning assets and total interest-bearing liabilities, net interest
spread and net yield on average interest-earning assets.
<TABLE>
<CAPTION>

                                                 Year Ended December 31, 2002     Year Ended December 31, 2001
                                                 ----------------------------     ----------------------------
                                                 Interest      Average Yields         Interest         Average
                                                                                                       Yields (2)
                                                     (Dollars in Thousands)               (Dollars in Thousands)

INTEREST INCOME:
<S>                             <C>               <C>                 <C>            <C>                     <C>
     Interest and fees on loans (1)           $     2,005             7.49%       $         42               8.67%
     Interest on taxable securities                    59             4.50                   3               4.80
     Interest on Federal funds sold                    66             1.49                  17               2.01
     Interest earned during the period
       prior to commencement of
       banking operations                                                                  114                  -
     Total interest income                    $    ------            ------              ------             ------
                                                    2,130             6.55                 176               4.46
INTEREST EXPENSE:
     Interest on interest-bearing
     demand deposits and savings              $       525             2.88        $          4               1.98
     Interest on time deposits                        245             3.01                   7               3.36
     Interest incurred during the period
       prior to commencement of
       banking operations                                                                   18                  -
                                                   -------           ------               ------            -------
       Total interest expense                         770             2.92                  29               2.68



NET INTEREST INCOME                           $     1,360                         $        147
                                                    =====                                  ====

     Net interest spread                                              3.63%                                  1.78%
                                                                      =====                                  =====
     Net yield on average interest
       earning assets                                                 4.18%                                  3.67%
                                                                      =====                                  =====
</TABLE>

(1)       Interest and fees on loans include $380,000 and $11,000 of loan fee
          income for the years ended December 31, 2002 and December 31, 2001.
          There was no interest income recognized on nonaccrual loans during
          2002 or 2001.

(2)       Average yields were annualized for the period from November 14, 2001,
          date of commencement of operations, to December 31, 2001, for each
          category.


                                       20
<PAGE>



Rate and Volume Analysis

The following table describes the extent to which changes in interest rates and
changes in volume of interest-earning assets and interest-bearing liabilities
have affected our interest income and expense during the years indicated. For
each category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (1) change in volume (change
in volume multiplied by previous year rate); (2) change in rate (change in rate
multiplied by previous year volume); and a combination of change in rate and
change in volume. The changes in interest income and interest expense
attributable to both volume and rate have been allocated proportionately to the
change due to volume and the change due to rate.

                   ANALYSIS OF CHANGES IN NET INTEREST INCOME
                 FOR THE YEARS ENDED DECEMBER 31, 2002 and 2001
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                                      2002 compared to 2001
                                                                                       increase (decrease)
                                                                                        due to change in
                                                                            ------------------------------------------
                                                                            -----------     -----------    -----------
                                                                               Rate           Volume         Change
                                                                            -----------     -----------    -----------

Income from interest-earning assets:
<S>                                                                            <C>             <C>             <C>
  Interest and fees on loans............................................    $   (61)        $ 2,024         $ 1,963
  Interest on taxable securities........................................         (1)             54              53

  Interest on Federal funds sold........................................        (38)            (24)            (62)
                                                                            -----------     -----------    -----------
  Total interest income.........................................               (100)          2,054           1,954
                                                                            -----------     -----------    -----------

Expense from interest-bearing liabilities:
  Interest on interest-bearing deposits.................................         21             500             521
  Interest on time deposits.............................................         (5)            243             238
  Interest on borrowings
                                                                                  -             (18)            (18)
                                                                            -----------     -----------    -----------
  Total interest expense................................................         16             725             741
                                                                            -----------     -----------    -----------

          Net interest income...........................................    $   (116)       $ 1,329         $ 1,213
                                                                            ===========     ===========    ===========
</TABLE>





                                       21
<PAGE>



                              INVESTMENT PORTFOLIO

Types of Investments

          The carrying amounts of securities at the dates indicated, which are
all classified as available-for-sale, are summarized as follows:
<TABLE>
<CAPTION>

                                                          December 31, 2002                  December 31, 2001
                                                       (Dollars in Thousands)              (Dollars in Thousands)

           Debt securities:
           <S>                                                 <C>                                 <C>
           U.S. Government and agency
              securities                                     $ 2,526,563                         $ 502,578
           Mortgage backed securities                          1,116,472                            -
                                                            ------------                        ------------
                                                             $ 3,643,035                         $ 502,578
                                                             ===========                        ============
</TABLE>

Maturities
          The amortized cost and fair value of securities as of December 31,
2002 by contractual maturity are shown below.
<TABLE>
<CAPTION>

                                                           Amortized Cost                        Fair Value
                                                           --------------                        ----------
<S>                                                             <C>                                <C>
           Due from one to five years                        $ 2,000,000                        $ 2,024,688
           Due from five to ten years                            500,000                            501,875
           Mortgage backed securities                          1,114,201                          1,116,472
                                                            ------------                        ------------
                                                             $ 3,614,201                        $ 3,643,035
                                                             ===========                        ===========
</TABLE>

As of December 31, 2001 all debt securities had a contractual maturity date of
after one to five years. The weighted average yield of these securities was
4.17% as of December 31, 2002 and 4.52% as of December 31, 2001.


                                 LOAN PORTFOLIO
Types of Loans

         The amount of loans outstanding at the indicated dates are shown in the
following table according to the type of loan.
<TABLE>
<CAPTION>

                                                          December 31, 2002                  December 31, 2001
                                                       (Dollars in Thousands)              (Dollars in Thousands)

<S>                                                             <C>                                 <C>
     Commercial                                                $ 5,652                             $ 831
     Real estate construction                                   19,471                             1,276
     Real estate mortgate                                       17,045                             2,980
     Consumer installment loans and other                        1,394                               403
                                                              ---------                          --------
                                                                43,562                             5,490
     Less deferred loan fees                                      (147)                              (36)
     Less allowance for loan losses                               (492)                              (55)
                                                              --------                           --------
            Net loans                                          $42,923                            $5,399
                                                              ========                           ========

</TABLE>




                                       22
<PAGE>



Maturities and Sensitivities of Loans to Changes in Interest Rates

          Total loans as of December 31, 2002 and December 31, 2001 are shown in
the following table according to contractual maturity classifications one year
or less, after one year through five years, and after five years.
<TABLE>
<CAPTION>

                                                      December 31, 2002              December 31, 2001
                                                      -----------------              -----------------
                                                   (Dollars in Thousands)         (Dollars in Thousands)

     Commercial
<S>                                                         <C>                            <C>
        One year or less                                    $3,363                          $ 803
        After one year through five years                    2,161                             28
        After five years                                       128                              -
                                                            ------                          ------
                                                             5,652                            831
                                                            ------                          ------
     Construction
        One year or less                                    18,653                          1,262
        After one year through five years                      818                             14
        After five years                                         -                              -
                                                            ------                          ------
                                                            19,471                          1,276
                                                            ------                          ------

     Other
         One year or less                                    6,960                          1,979
         After one year through five years                  10,715                          1,113
         After five years                                      764                            291
                                                            ------                         ------
                                                            18,439                          3,383
                                                            ------                         ------

                                                           $43,562                         $5,490
                                                           =======                         ======
</TABLE>

          The following table summarizes loans at December 31, 2002 and 2001
with the due dates after one year that have predetermined and floating or
adjustable interest rates.
<TABLE>
<CAPTION>

                                                                                 (Dollars in Thousands)

<S>                                                                               <C>                 <C>
          Predetermined interest rates                                           $ 7,166            $  928
          Floating or adjustable interest rates                                    7,420               518
                                                                                  ------            ------
                                                                                 $14,586            $1,446
                                                                                 =======            ======
</TABLE>

Risk Elements

          Information with respect to nonaccrual, past due, and restructured
loans is as follows:
<TABLE>
<CAPTION>

                                                                   December 31, 2002              December 31, 2001
                                                                   -----------------              -----------------
                                                                 (Dollars in Thousands)         (Dollars in Thousands)

<S>                                                                       <C>                             <C>
     Nonaccrual loans                                                     $0                              $0
     Loans contractually past due ninety days or more
        as to interest or principal payments and still
        accruing                                                           0                              0
     Restructured loans                                                    0                              0
     Loans, now current about which there are serious
        doubts as to the ability of the borrower to
        comply with loan repayment terms                                   0                              0
     Interest income that would have been recorded on
        nonaccrual and restructured loans under
        original terms                                                     0                              0
     Interest income that was recorded on nonaccrual
        and restructured loans                                             0                              0


</TABLE>

                                       23
<PAGE>

         It is our policy to discontinue the accrual of interest income when, in
the opinion of management, collection of interest becomes doubtful. The
collection of interest becomes doubtful when there is a significant
deterioration in the financial condition of the borrower and full repayment of
principal and interest is not expected unless the loan is both well-secured and
in the process of collection.

     Any loans classified for regulatory purposes as loss, doubtful,
substandard, or special mention that have not been included in the table above
do not represent or result from trends or uncertainties that management
reasonably expects will materially impact future operating results, liquidity,
or capital resources. We believe that these borrowers will comply with their
loan repayment terms.

                         SUMMARY OF LOAN LOSS EXPERIENCE

     The following table summarizes average loan balances for the year
determined using the daily average balances during the period of banking
operations; changes in the allowance for loan losses arising from loans charged
off and recoveries on loans previously charged off; additions to the allowance
which have been charged to operating expense; and the ratio of net charge-offs
during the period to average loans.
<TABLE>
<CAPTION>

                                                                                            2002            2001
                                                                                           (Dollars in Thousands)

<S>                                                 <C> <C>                                 <C>              <C>
Average amount of loans outstanding (since November 14, 2001)                             $ 26,776       $ 3,676
                                                                                            ======        ======
Balance of allowance for loan losses at beginning of period                                     55             -
                                                                                            ------         ------
Loans charged off                                                                               -              -
                                                                                            ------         ------
Loans recovered                                                                                 -              -
                                                                                            ------         ------
Net charge-offs                                                                                 -              -
                                                                                            ------         ------
Additions to the allowance charged to operating expense during period                         437             55
                                                                                            ------         ------
Balance of allowance for loan losses at end of period                                     $   492        $    55
                                                                                            ------         ------
Ratio of net loans charged off during the period to average loans outstanding                   -%             -%
                                                                                            ======         ======
</TABLE>

Allowance for Loan Losses

         We have developed policies and procedures for evaluating the overall
quality of our credit portfolio and the timely identification of potential
problem credits. On a quarterly basis, our bank's board of directors reviews and
approves the appropriate level for the bank's allowance for loan losses based
upon management's recommendations, the results of the internal monitoring and
reporting system, analysis of economic conditions in its markets, and a review
of historical statistical data for both the bank and other financial
institutions.

         Our bank's allowance for loan losses is based upon judgments and
assumptions of risk elements in the portfolio, future economic conditions, and
other factors affecting borrowers. The process includes identification and
analysis of loss potential in various portfolio segments utilizing a credit risk
grading process and specific reviews and evaluations of significant problem
credits. In addition, management monitors the overall portfolio quality through
observable trends in delinquency, charge-offs, and general and economic
conditions in the service area. The adequacy of the allowance for loan losses
and the effectiveness of our monitoring and analysis system are also reviewed
periodically by the banking regulators and our independent auditors.

          Management's judgment as to the adequacy of the allowance is based
upon a number of assumptions about future events which it believes to be
reasonable, but which may or may not be accurate. Because of the inherent
uncertainty of assumptions made during the evaluation process, there can be no
assurance that loan losses in future periods will not exceed the allowance for
loan losses or that additional allocations will not be required. Our losses will
undoubtedly vary from our estimates, and there is a possibility that charge-offs
in future periods will exceed the allowance for loan losses as estimated at any
point in time.



                                       24
<PAGE>



         As of December 31, 2002, we had made no formal allocations of our
allowance for loan losses to specific categories of loans. Based on our best
estimate, the allocation of the allowance for loan losses to types of loans, as
of the indicated date, is as follows:
<TABLE>
<CAPTION>

                                                       December 31, 2002                             December 31, 2001
                                              Amount         Percent of loans in each       Amount        Percent of loans in each
                                                             category to total loans                      category to total loans

                                                    (Dollars in Thousands)                        (Dollars in Thousands)

<S>                                            <C>                     <C>                   <C>                     <C>
Commercial                                     $ 59                    13%                  $ 12                    15%
Real estate - construction                      235                    45                     15                    24
Real estate - mortgage                          184                    39                     21                    54
Consumer installment and other                   14                     3                      7                     7
                                               ====                   ====                   ====                  ====
                                               $492                   100%                  $ 55                   100%
                                               ====                   ====                   ====                  ====
</TABLE>

                                    DEPOSITS

          Average amount of deposits and average rates paid thereon, classified
as to noninterest-bearing demand deposits, interest-bearing demand deposits and
savings deposits, and time deposits, is presented below.
<TABLE>
<CAPTION>

                                                                             2002                         2001 (1)
                                                                     Amount          Percent         Amount        Percent
                                                                    (Dollars in Thousands)         (Dollars in Thousands)

<S>                                                                  <C>              <C>                <C>       <C>
Noninterest-bearing demand deposits                                 $  1,896           --%          $   715          --%
Interest-bearing demand deposits and savings                          18,170          2.88            1,617         1.98
Time deposits                                                          8,132          3.01            1,666         3.36
                                                                     -------                          -----
       Total deposits                                               $ 28,198                        $ 3,998
                                                                     =======                          =====
</TABLE>

(1)       Average balances were determined using the daily average balances
          during the year for the period from November 14, 2001, date of
          commencement of operations, to December 31, 2001.

          The amounts of time certificates of deposit issued in amounts of
$100,000 or more as of December 31, 2002 and 2001 are shown below by category,
based on time remaining until maturity of (1) three months or less, (2) over
three through six months, (3) over six through twelve months, and (4) over
twelve months.
<TABLE>
<CAPTION>

                                                                   December 31, 2002           December 31, 2001
                                                                               (Dollars in Thousands)
<S>                                                                      <C>                         <C>
     Three months or less                                                $2,658                      $ 586
     Over three months through six months                                 5,080                        635
     Over six months through twelve months                                  734                        241
     Over twelve months                                                      -                           -
                                                                       --------                    --------
     Total                                                               $8,472                      $1,462
                                                                       ========                    ========
</TABLE>

                    RETURN ON ASSETS AND SHAREHOLDERS' EQUITY

          The following rate of return information for the years indicated is
presented below.
<TABLE>
<CAPTION>

                                                                              2002                    2001
                                                                              ----                    ----

<S>              <C>                                                        <C>                     <C>
Return on assets (1)                                                        (1.92)%                 (4.15)%
Return on equity (2)                                                        (8.49)%                 (6.10)%
Dividend payout ratio (3)                                                     --                      --
Equity to assets ratio (4)                                                  22.65%                  68.04%
</TABLE>

(1) Net loss divided by average total assets.
(2) Net loss divided by average equity.
(3) Dividends declared per share of common stock divided by net loss per share.
(4) Average shareholders equity divided by average total assets.


                                       25
<PAGE>




Item 7.  Financial Statements
------------------------------
                        SWEETWATER FINANCIAL GROUP, INC.
                                 AND SUBSIDIARY

                          CONSOLIDATED FINANCIAL REPORT
                                DECEMBER 31, 2002



                                TABLE OF CONTENTS


                                                                           Page

INDEPENDENT AUDITOR'S REPORT.................................................27

FINANCIAL STATEMENTS

   Consolidated balance sheets...............................................28
   Consolidated statements of operations.....................................29
   Consolidated statements of comprehensive loss.............................30
   Consolidated statements of shareholders' equity (deficit).................31
   Consolidated statements of cash flows.....................................32
   Notes to consolidated financial statements.............................34-50




                                       26
<PAGE>



                          INDEPENDENT AUDITOR'S REPORT


To the Board of Directors
Sweetwater Financial Group, Inc. and Subsidiary
Powder Springs, Georgia


         We have audited the accompanying consolidated balance sheets of
Sweetwater Financial Group, Inc. and subsidiary as of December 31, 2002 and
2001, and the related consolidated statements of operations, comprehensive loss,
shareholders' equity (deficit) and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.


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


         In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Sweetwater Financial
Group, Inc. and subsidiary as of December 31, 2002 and 2001, 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/ Mauldin & Jenkins, LLC
--------------------------
Atlanta, Georgia
January 30, 2003



                                       27
<PAGE>



                        SWEETWATER FINANCIAL GROUP, INC.
                                 AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2002 AND 2001

<TABLE>
<CAPTION>
                                          Assets                                              2002                 2001
                                          ------
                                                                                       -------------------   ------------------

<S>                                                                                           <C>                   <C>
Cash and due from banks                                                                $          906,026    $        288,419
Federal funds sold                                                                              5,764,000           6,264,000
Securities available-for-sale                                                                   3,643,035             502,578

Loans                                                                                          43,414,667           5,454,073
Less allowance for loan losses                                                                    492,000              55,000
                                                                                       -------------------   ------------------
          Loans, net                                                                           42,922,667           5,399,073

Premises and equipment                                                                          3,396,312           1,661,687
Other assets                                                                                    2,063,654             101,190
                                                                                       ------------------    ------------------

          Total assets                                                                 $       58,695,694    $     14,216,947
                                                                                       ==================    ==================
</TABLE>

<TABLE>
<CAPTION>
                           Liabilities and Shareholders' Equity
                           ------------------------------------

Deposits
<S>                                                                                              <C>                   <C>
    Noninterest-bearing                                                               $         3,375,301    $        401,037
    Interest-bearing                                                                           47,064,458           5,085,256
                                                                                       -------------------   -----------------
           Total deposits                                                                      50,439,759           5,486,293
    Other borrowings                                                                              115,468              42,620
    Other liabilities                                                                              96,321              13,830
                                                                                       -------------------   -----------------
          Total liabilities                                                                    50,651,548           5,542,743

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




Commitments and contingencies
<TABLE>
<CAPTION>
Shareholders' equity
    Preferred stock, $.01 par value; 10,000,000 shares authorized;
<S>                                                                                              <C>                    <C>
     no shares issued and outstanding                                                                  -                   -
    Common stock, $.01 par value, 10,000,000 shares authorized;
     944,286 and 938,453 shares issued and outstanding, respectively                               9,443               9,385
    Capital surplus                                                                            9,369,620           9,311,348
    Accumulated deficit                                                                       (1,353,659)           (649,107)
    Accumulated other comprehensive income                                                        18,742               2,578
                                                                                      --------------------   ------------------

          Total shareholders' equity                                                           8,044,146            8,674,204
                                                                                      --------------------   -----------------

          Total liabilities and shareholders' equity                                 $        58,695,694      $    14,216,947
                                                                                      ====================   =================

</TABLE>

See Notes to Consolidated Financial Statements.

                                       28
<PAGE>
                        SWEETWATER FINANCIAL GROUP, INC.
                                 AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

<TABLE>
<CAPTION>
                                                                                               2002                  2001
                                                                                        -----------------     -----------------

Interest income
<S>                                                                                          <C>                   <C>
    Loans                                                                           $          2,004,941     $        42,295
    Taxable securities                                                                            58,641               6,166
    Federal funds sold                                                                            66,240             127,635
                                                                                        ------------------    -----------------
          Total interest income                                                                2,129,822             176,096
                                                                                        ------------------    ------------------

Interest expense
    Deposits                                                                                     768,625              11,208
    Other borrowings                                                                               1,127              18,042
                                                                                        ------------------    ------------------
          Total interest expense                                                                 769,752              29,250
                                                                                        -----------------     ------------------

          Net interest income                                                                  1,360,070             146,846
Provision for loan losses                                                                        437,000              55,000
                                                                                        -----------------     ------------------
          Net interest income after provision for loan losses                                    923,070              91,846
                                                                                        -----------------     ------------------

Other income
    Service charges on deposit accounts                                                           27,813                 253
    Other operating income                                                                        49,470                  92
                                                                                        -----------------     ------------------
                                                                                                  77,283                 345
                                                                                        -----------------     ------------------

Other expenses
    Salaries and employee benefits                                                             1,044,613             384,716
    Equipment and occupancy expenses                                                             200,967              58,794
    Other operating expenses                                                                     459,325             174,948
                                                                                        -----------------     ------------------
          Total other expenses                                                                 1,704,905             618,458
                                                                                        -----------------     ------------------

          Loss before income taxes                                                              (704,552)           (526,520)

Income taxes                                                                                           -                   -
                                                                                        -----------------     -----------------

          Net loss                                                                      $       (704,552)     $     (526,520)
                                                                                        =================     =================

Basic and diluted losses per share                                                      $          (0.75)     $        (0.56)
                                                                                        =================     =================

</TABLE>

See Notes to Consolidated Financial Statements.

                                       29
<PAGE>








                                         SWEETWATER FINANCIAL GROUP, INC.
                                                  AND SUBSIDIARY

                                   CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
                                      YEARS ENDED DECEMBER 31, 2002 AND 2001

<TABLE>
<CAPTION>
                                                                                      2002               2001
                                                                                 ---------------    ---------------

<S>                                                                                    <C>                <C>
Net loss                                                                         $    (704,552)     $    (526,267)

Other comprehensive income:

        Unrealized holding gains on available-for-sale
             securities arising during period, net of tax of
               $10,092 and $0, respectively
                                                                                        16,164              2,578
                                                                                 ---------------    ---------------

Comprehensive loss                                                               $    (688,388)     $     (523,689)
                                                                                 ===============    ===============

</TABLE>

See Notes to Consolidated Financial Statements.





<PAGE>
                                       30



                        SWEETWATER FINANCIAL GROUP, INC.
                                 AND SUBSIDIARY

            CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
                     YEARS ENDED DECEMBER 31, 2002 AND 2001
<TABLE>
<CAPTION>

                                                                                               Accumulated
                                                                                                 Other             Total
                                        Common Stock             Capital       Accumulated    Comprehensive      Shareholders'
                                  -----------------------                                                           Equity
                                   Shares        Par Value       Surplus         Deficit         Income            (Deficit)
                                  ----------     ----------    ------------  -------------- ----------------   ---------------

<S>                                    <C>           <C>                <C>        <C>           <C>                  <C>
Balance, December 31, 2000               10               -          4,783        (122,840)                -        (118,057)
    Net loss                              -               -              -        (526,267)                -        (526,267)
    Issuance of common stock        938,443           9,385      9,375,045               -                 -       9,384,430
    Stock offering costs                  -               -        (73,587)              -                 -         (73,587)
    Imputed interest costs                -               -          5,107               -                 -           5,107
    Other comprehensive income            -               -              -               -             2,578           2,578
                                  ----------     ----------    ------------- -------------  ----------------   ---------------
Balance, December 31, 2001          938,453           9,385      9,311,348        (649,107)            2,578       8,674,204
    Net loss                              -               -              -        (704,552)                -        (704,552)
    Exercise of stock warrants        5,833              58         58,272               -                 -          58,330
    Other comprehensive income            -               -              -               -            16,164          16,164
                                  ----------     ----------    ------------- -------------  ----------------    ---------------
Balance, December 31, 2002          944,286      $    9,443   $  9,369,620   $ (1,353,659)  $         18,742    $  8,044,146
                                  ==========     ===========   ============= ============== ================    ===============
</TABLE>


See Notes to Consolidated Financial Statements.



<PAGE>
                                       31

                        SWEETWATER FINANCIAL GROUP, INC.
                                 AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001
<TABLE>
<CAPTION>

                                                                                            2002                     2001
                                                                                    --------------------    --------------------
OPERATING ACTIVITIES
<S>                                                                                         <C>                      <C>
    Net loss                                                                       $         (704,552)     $          (526,267)
    Adjustments to reconcile net loss to net cash
        used in operating activities:
        Depreciation                                                                          112,443                   16,908
        Provision for loan losses                                                             437,000                   55,000
        Imputed interest costs                                                                      -                    5,107
        Increase in interest receivable                                                      (140,365)                 (24,659)
        Increase in interest payable                                                           53,301                    5,830
        Net other operating activities                                                        (93,000)                 (82,328)
                                                                                       --------------------   --------------------

              Net cash used in operating activities                                          (335,173)                (550,409)
                                                                                       --------------------   --------------------

INVESTING ACTIVITIES
    Purchases of securities available-for-sale                                             (3,730,147)                (500,000)
    Proceeds from sales and calls of securities available-for-sale                            615,945                        -
    Net (increase) decrease in federal funds sold                                             500,000               (6,264,000)
    Net increase in loans                                                                 (37,960,594)              (5,454,073)
    Purchase of premises and equipment                                                     (1,847,068)              (1,223,595)
    Purchase of insurance policies                                                         (1,710,000)                        -
                                                                                       --------------------    --------------------

            Net cash used in investing activities                                         (44,131,864)             (13,441,668)
                                                                                       --------------------    --------------------

FINANCING ACTIVITIES
    Net increase in deposits                                                               44,953,466                5,486,293
    Proceeds from other borrowings, net                                                        72,848                   42,620
    Proceeds from line of credit                                                                    -                  739,269
    Repayment of line of credit                                                                     -                 (749,269)
    Advances from organizers                                                                        -                   10,000
    Proceeds from issuance of common stock                                                          -                8,814,430
    Proceeds from exercise of stock warrants                                                   58,330                        -
    Stock offering costs                                                                            -                  (69,882)
                                                                                       --------------------    --------------------

            Net cash provided by financing activities                                      45,084,644               14,273,461
                                                                                       ---------------------   --------------------

Net increase in cash and due from banks                                                       617,607                  281,384

Cash and due from banks at beginning of year                                                  288,419                    7,035
                                                                                       --------------------    --------------------

Cash and due from banks at end of year                                             $          906,026     $            288,419

                                                                                       ====================    ====================
</TABLE>

                                       32
<PAGE>





                        SWEETWATER FINANCIAL GROUP, INC.
                                 AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

<TABLE>
<CAPTION>
                                                                                              2002               2001
                                                                                         ---------------    ---------------

SUPPLEMENTAL DISCLOSURES
<S>                                                                                          <C>                <C>
    Cash paid for interest                                                               $      716,451     $       18,313

NONCASH TRANSACTIONS

    Issuance of common stock in exchange for land                                        $            -     $      450,000

    Issuance of common stock for organizer advances                                      $            -     $      120,000
</TABLE>
See Notes to Consolidated Financial Statements.





                                       33
<PAGE>




                        SWEETWATER FINANCIAL GROUP, INC.
                                 AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

                Nature of Business

                     Sweetwater Financial Group, Inc. (the "Company") is a bank
                     holding company whose business is conducted by its
                     wholly-owned subsidiary, Georgian Bank (the "Bank"). The
                     Bank is a commercial bank located in Powder Springs, Cobb
                     County, Georgia. The Bank provides a full range of banking
                     services in its primary market area of Cobb County and the
                     surrounding counties. The Bank commenced its banking
                     operations on November 14, 2001.

                Basis of Presentation and Accounting Estimates

                     The consolidated financial statements include the accounts
                     of the Company and its subsidiary. Significant
                     intercompany transactions and balances have been
                     eliminated in consolidation.

                     In preparing financial statements in conformity with
                     accounting principles generally accepted in the United
                     States of America, management is required to make estimates
                     and assumptions that affect the reported amounts of assets
                     and liabilities and the disclosure of contingent assets and
                     liabilities as of the balance sheet date and the reported
                     amounts of revenues and expenses during the reporting
                     period. Actual results could differ 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
                     valuation allowance against deferred tax assets.

                Cash, Due From Banks and Cash Flows

                     For purposes of reporting cash flows, cash and due from
                     banks includes cash on hand, cash items in process of
                     collection and amounts due from banks. Cash flows from
                     loans, federal funds sold, deposits and other borrowings
                     are reported net.

                     The Company maintains amounts due from banks which, at
                     times, may exceed federally insured limits. The Company has
                     not experienced any losses in such accounts.

                  Securities

                     All debt securities are classified as available-for-sale
                     and recorded at fair value with unrealized gains and losses
                     excluded from earnings and reported in other comprehensive
                     loss.

                     Purchase premiums and discounts are recognized in interest
                     income using the interest method over the terms of the
                     securities. Gains and losses on the sale of securities are
                     determined using the specific identification method.
                     Declines in the fair value of securities below their cost
                     that are deemed to be other than temporary are reflected in
                     earnings as realized losses.



                                       34
<PAGE>





                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

                  Loans

                     Loans are reported at their outstanding principal balances
                     less deferred loan fees and the allowance for loan losses.
                     Interest income is accrued on the unpaid principal balance.

                     Nonrefundable loan fees, net of loan origination costs, are
                     deferred and recognized as an adjustment of the related
                     loan yield over the life of the loan using a method which
                     approximates a level yield.

                     The accrual of interest on loans is discontinued when, in
                     management's opinion, the borrower may be unable to meet
                     payments as they become due, unless the loan is
                     well-secured. All interest accrued but not collected for
                     loans that are placed on nonaccrual or charged off is
                     reversed against interest income. Interest income on
                     nonaccrual loans is subsequently recognized only to the
                     extent cash payments are received, until the loans are
                     returned to accrual status.

                     The allowance for loan losses is established through a
                     provision for loan losses charged to expense. Loan losses
                     will be charged against the allowance when management
                     believes the collectibility of the principal is unlikely.
                     Subsequent recoveries will be credited to the allowance.

                     The allowance is an amount that management believes will be
                     adequate to absorb estimated losses in the loan portfolio.
                     The allowance for loan losses is evaluated on a regular
                     basis by management and is based upon management's periodic
                     review of the nature and volume of the loan portfolio,
                     adverse situations that may affect the borrower's ability
                     to repay, estimated value of any underlying collateral and
                     prevailing economic conditions. This evaluation is
                     inherently subjective as it requires estimates that are
                     susceptible to significant revision as more information
                     becomes available. While management uses the best
                     information available to make its evaluation, future
                     adjustments to the allowance may be necessary if there are
                     significant changes in economic conditions. In addition,
                     regulatory agencies, as an integral part of their
                     examination process, periodically review the Company's
                     allowance for loan losses, and may require the Company to
                     make additions to the allowance based on their judgment
                     about information available to them at the time of their
                     examinations.

                     A loan is considered impaired when it is probable the
                     Company will be unable to collect all principal and
                     interest payments due in accordance with the contractual
                     terms of the loan agreement. Impaired loans are measured by
                     either the present value of expected future cash flows
                     discounted at the loan's effective interest rate, the
                     loan's obtainable market price, or the fair value of the
                     collateral if the loan is collateral dependent. The amount
                     of impairment, if any, and any subsequent changes are
                     included in the allowance for loan losses.





                                       35
<PAGE>





                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

                  Premises and Equipment

                     Land is carried at cost. Premises and equipment are carried
                     at cost less accumulated depreciation. Depreciation is
                     computed principally by the straight-line method over the
                     estimated useful lives of the assets.

                  Securities Sold Under Repurchase Agreements

                     Securities sold under repurchase agreements, which are
                     classified as other borrowings, generally mature within one
                     to four days from the transaction date. Securities sold
                     under repurchase agreements are reflected at the amount of
                     cash received in connection with the transaction. The
                     Company may be required to provide additional collateral
                     based on the fair value of the underlying securities.

                  Income Taxes

                     Deferred income tax assets and liabilities are determined
                     using the balance sheet method. Under this method, the net
                     deferred tax asset or liability is determined based on the
                     tax effects of the temporary differences between the book
                     and tax bases of the various balance sheet assets and
                     liabilities and gives current recognition to changes in tax
                     rates and laws. A valuation allowance is recorded for those
                     deferred tax items for which it is more likely than not
                     that realization will not occur in the near term.

                  Losses Per Share

                     Basic losses per share are computed by dividing net loss by
                     the weighted average number of shares of common stock
                     outstanding. Diluted losses per share are computed by
                     dividing net loss by the sum of the weighted average number
                     of shares of common stock outstanding and potential
                     dilutive common shares. Potential common shares consist of
                     stock warrants and stock options. The effect of potential
                     common shares does not have a dilutive effect on losses per
                     share. Weighted average shares outstanding as of December
                     31, 2002 and 2001 were 938,948 and 938,453, respectively.





                                       36
<PAGE>





                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

                  Stock Compensation Plans

                     At December 31, 2002, the Company has two stock-based
                     compensation plans, which are described more fully in Note
                     7. The Company accounts for those plans under the
                     recognition and measurement principles of APB Opinion No.
                     25, Accounting for Stock Issued to Employees, and related
                     Interpretations. No stock-based compensation cost is
                     reflected in net loss, as all options and warrants granted
                     under those plans had an exercise price equal to the market
                     value of the underlying stock on the date of grant. The
                     following table illustrates the proforma effect on net loss
                     and losses per share if the Company had applied the fair
                     value recognition provisions of Statement of Financial
                     Accounting Standards (SFAS) No. 123, Accounting for
                     Stock-Based Compensation, to stock-based compensation.

<TABLE>
<CAPTION>
                                                                                           Years Ended December 31,
                                                                                        --------------------------------
                                                                                             2002             2001
                                                                                        ----------------  --------------

<S>                                                                                           <C>               <C>
                     Net loss, as reported                                              $     (704,552)   $   (526,267)
                     Deduct: Total stock-based compensation
                           expense determined under fair value based
                           method for all awards                                              (472,147)               -
                                                                                        ----------------  --------------

                     Pro forma net loss                                                 $   (1,176,699)   $   (526,267)
                                                                                        ================  ==============

                     Losses per share:
                        Basic and diluted- as reported                                  $        (0.75)   $      (0.56)
                                                                                          ==============    ============

                        Basic and diluted- pro forma                                    $        (1.25)   $      (0.56)
                                                                                          ==============    ============
</TABLE>

                  Comprehensive Income

                     Accounting principles generally require that recognized
                     revenue, expenses, gains and losses be included in net
                     income (loss). 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 (loss), are components of
                     comprehensive income (loss).

                  Recent Accounting Standards

                  In December 2002, the Financial Accounting Standards Board
                  (FASB) issued SFAS No. 148, "Accounting for Stock-Based
                  Compensation--Transition and Disclosure." SFAS No. 148 amends
                  SFAS No. 123, "Accounting for Stock-Based Compensation," to
                  provide alternative methods of transition for an entity that
                  voluntarily changes to the fair value based method of
                  accounting for stock-based compensation. It also amends the
                  disclosure provisions of SFAS No. 123 to require prominent
                  disclosure about the effects on reported net income of an
                  entity's accounting policy decisions with respect to
                  stock-based compensation. The Company has not elected to adopt
                  the recognition provisions of this Statement for stock-based
                  compensation and has elected to continue with accounting
                  methodology in Opinion No. 25 as permitted by SFAS No. 123.



                                       37
<PAGE>




                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2.  SECURITIES

                  The amortized cost and fair value of securities are summarized
as follows:

<TABLE>
<CAPTION>
                                                                             Gross            Gross
                                                           Amortized       Unrealized       Unrealized          Fair
                                                              Cost           Gains            Losses           Value
                                                         ---------------  -------------    -------------   ---------------
                     Securities Available-for-Sale
                        December 31, 2002:
                        U. S. Government and
<S>                                                             <C>              <C>              <C>             <C>
                           agency securities             $    2,500,000   $     26,563     $     -         $    2,526,563
                         Mortgage backed securities           1,114,201          4,520          (2,249)         1,116,472
                                                         ---------------  -------------    -------------   ---------------

                                                         $    3,614,201   $     31,083     $    (2,249)    $    3,643,035
                                                         ===============  =============    =============   ===============

                        December 31, 2001:
                        U. S. Government and
                           agency securities             $     500,000    $      2,578     $        -      $      502,578
                                                         ==============   =============    =============   ===============
</TABLE>

                  Securities with a carrying value of $957,732 and $115,000 at
                  December 31, 2002 and 2001, respectively, were pledged to
                  secure public deposits and for other purposes as required or
                  permitted by law.

                  The amortized cost and fair value of debt securities as of
                  December 31, 2002 by contractual maturity are shown below.
                  Maturities may differ from contractual maturities of
                  mortgage-backed securities because the mortgages underlying
                  the securities may be called or repaid without penalty.
                  Therefore, these securities are not included in the maturity
                  categories in the following summary.

<TABLE>
<CAPTION>
                                                                                             Amortized           Fair
                                                                                               Cost             Value
                                                                                          ----------------  ---------------

<S>                                                                                            <C>               <C>
                     Due from one to five years                                           $     2,000,000   $    2,024,688
                     Due from five to ten years                                                   500,000          501,875
                     Mortgage backed securities                                                 1,114,201        1,116,472
                                                                                          ----------------  ---------------

                                                                                          $     3,614,201   $    3,643,035
                                                                                          ================  ===============
</TABLE>

NOTE 3.  LOANS

                  The composition of loans as of December 31, 2002 and 2001 is
summarized as follows:

<TABLE>
<CAPTION>
                                                                                            2002               2001
                                                                                     -------------------  -----------------


<S>                                                                                          <C>                  <C>
                      Commercial                                                     $       5,652,066    $       831,039
                      Real estate - construction                                            19,470,548          1,276,405
                      Real estate - mortgage                                                17,045,098          2,979,737
                      Consumer installment and other                                         1,394,425            403,207
                                                                                     -------------------  -----------------

                                                                                            43,562,137          5,490,338
                      Deferred loan fees                                                      (147,470)           (36,315)
                      Allowance for loan losses                                               (492,000)           (55,000)
                                                                                     -------------------  -----------------

                      Loans, net                                                     $      42,922,667    $     5,399,073
                                                                                     ===================  =================
</TABLE>

                                      38
<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3.  LOANS (Continued)

                  Changes in the allowance for loan losses are as follows:

<TABLE>
<CAPTION>
                                                                                           Years Ended December 31,
                                                                                     --------------------------------------
                                                                                            2002               2001
                                                                                     -------------------  -----------------


<S>                                                                                          <C>                  <C>
                      Balance, beginning of year                                     $           55,000   $           -
                        Provision for loan losses                                               437,000            55,000
                        Loans charged off                                                           -                 -
                        Recoveries of loans previously charged off                                  -                 -
                                                                                     -------------------  -----------------

                      Balance, end of year                                           $          492,000   $        55,000
                                                                                     ===================  =================


                Management has identified no amounts of impaired loans as
                defined by SFAS No. 114, Accounting by Creditors for
                Impairment of a Loan, as of and for the years ended December
                31, 2002 and 2001. There were no nonaccrual loans or loans
                past due greater than ninety days and still accruing as of
                December 31, 2002 and 2001.

                In the ordinary course of business, the Company has granted
                loans to certain related parties, including directors,
                executive officers, and their affiliates. The interest rates
                on these loans were substantially the same as rates prevailing
                at the time of the transaction and repayment terms are
                customary for the type of loan. Changes in related party loans
                for the year ended December 31, 2002 are as follows:
</TABLE>

<TABLE>
<CAPTION>

<S>                                                                                                        <C>
                      Balance, beginning of year                                                      $        25,318
                         Advances                                                                           1,559,119
                         Repayments                                                                          (755,375)
                                                                                                      -----------------
                                                                                                      -----------------
                      Balance, end of year                                                            $       829,062
                                                                                                      =================
</TABLE>



NOTE 4.  PREMISES AND EQUIPMENT

                  Premises and equipment are summarized as follows:

<TABLE>
<CAPTION>
                                                                                                December 31,
                                                                                    --------------------------------------

                                                                                          2002                2001
                                                                                    ------------------   -----------------


<S>                                                                                         <C>                  <C>
                      Land and improvements                                         $        730,769     $       730,769
                      Construction in process                                                    -               616,926
                      Building                                                             2,097,726              64,263
                      Furniture and equipment                                                697,168             266,637
                                                                                    ------------------   -----------------

                                                                                           3,525,663           1,678,595
                      Accumulated depreciation                                              (129,351)            (16,908)
                                                                                    ------------------   -----------------

                                                                                    $      3,396,312     $     1,661,687
                                                                                    ==================   =================
</TABLE>

                  The Company's land was purchased during 2001 from a director
                  of the Company in exchange for cash and common stock. The
                  purchase price of the land was $730,769.



                                       39
<PAGE>








                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 5.  DEPOSITS

                    The aggregate amount of time deposits in denominations of
                    $100,000 or more at December 31, 2002 and 2001 was
                    $8,472,205 and $1,461,459, respectively. At December 31,
                    2002, the scheduled maturities of time deposits are as
                    follows:
<TABLE>
<CAPTION>

<S>                 <C>                                                                                       <C>
                    2003                                                                                 $   12,282,956
                    2004                                                                                      1,288,680
                    2005                                                                                        101,316
                    2006                                                                                            -
                    2007                                                                                        171,604
                                                                                                         ----------------
                                                                                                         $   13,844,556
                                                                                                         ================
</TABLE>


NOTE 6.  OTHER BORROWINGS
<TABLE>
<CAPTION>

                  Other borrowings consist of the following:
                                                                                                    December 31,
                                                                                           --------------------------------
                                                                                                 2002             2001
                                                                                           ---------------  ---------------

                      Note payable for the purchase of an automobile with zero percent
                       financing terms. Loan is payable in 36 equal monthly payments
<S>                                           <C> <C>                                              <C>              <C>
                       and matures on October 31, 2004.                                    $      27,578    $       42,620

                      Securities sold under repurchase agreements                                 87,890                 -

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

                                                                                           $     115,468    $       42,620
                                                                                           ==============   ===============
</TABLE>


NOTE 7.  EMPLOYEE AND DIRECTOR BENEFITS

                  Deferred Compensation Plan

                    During 2002, the Company established an executive
                    supplemental income plan for certain key officers whereby
                    benefits are payable at age sixty-one or if they become
                    totally disabled or if they have completed a minimum number
                    of years of service to the Bank. The present value of the
                    estimated liability is being accrued over the expected
                    remaining years of employment. The Company expensed $9,180
                    for the year ended December 31, 2002 under this plan.

                    The Company is also the owner and beneficiary of life
                    insurance policies on the lives of certain key officers. The
                    Company intends to use these policies to fund the benefit
                    plan described above. The carrying value of the policies was
                    $1,740,604 at December 31, 2002. The Company accrued income
                    of $30,604 for the year ended December 31, 2002 for the
                    increase in the cash surrender value of these policies.



                                       40
<PAGE>





                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 7.  EMPLOYEE AND DIRECTOR BENEFITS (Continued)

                  Stock Options

                    The Company adopted a stock option plan during 2002 which
                    grants key employees options to purchase shares of common
                    stock of the Company. Option prices and terms are determined
                    by a committee appointed by the Board of Directors. The plan
                    provides for a total of 151,086 options to purchase common
                    shares of the Company. As of December 31, 2002, no options
                    under the plan have been granted.

                  Stock Warrants

                    In recognition of the efforts and financial risks undertaken
                    by the Company's organizers, the Company granted each
                    organizer an opportunity to purchase one share of common
                    stock for each share purchased in the Company's common stock
                    offering. The warrants vest in three annual installments
                    beginning on the first anniversary of the date the Bank
                    commenced operations and are exercisable in whole or in part
                    during the ten year period following the date the Bank
                    commenced operations, at an exercise price equal to $10 per
                    share. The warrants are nontransferable, but shares issued
                    pursuant to the exercise of warrants will be transferable,
                    subject to compliance with applicable securities laws. At
                    December 31, 2002 and 2001, there were 329,167 and 335,000
                    warrants outstanding, respectively.

                     Other pertinent information related to the warrants is as
                     follows:
<TABLE>
<CAPTION>

                                                                                 Years Ended December 31,
                                                                  -------------------------------------------------------
                                                                            2002                         2001
                                                                  -------------------------   ---------------------------
                                                                                Weighted-                    Weighted-
                                                                                 Average                      Average
                                                                                Exercise                      Exercise
                                                                    Number        Price         Number         Price
                                                                  -----------  ------------   ------------  -------------

<S>                                                                   <C>         <C>             <C>               <C>
                      Warrants outstanding, beginning of year      335,000     $      10.00           -      $        -
                         Granted                                        -               -         335,000           10.00
                         Exercised                                  (5,833)           10.00           -               -
                                                                  ----------                    ----------

                      Warrants outstanding, end of year            329,167            10.00       335,000           10.00
                                                                  ==========                    ==========


                      Exercisable, end of year                     105,834            10.00           -               -
                                                                  ==========                    ==========


                      Weighted-average fair value of warrants
                         granted during the year                               $        -                    $       4.23

                      Weighted-average life of
                         outstanding options                                      8.8 years

</TABLE>



                                       41
<PAGE>



                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 7.           EMPLOYEE AND DIRECTOR BENEFITS (Continued)

                  Stock Warrants (Continued)

                  The fair value of each stock option and stock warrant grant is
                  estimated on the date of grant using the Black-Scholes
                  option-pricing model with the following weighted-average
                  assumptions. No stock options or warrants were granted in
                  2002.

<TABLE>
<CAPTION>
                                                                                         Year Ended December 31,
                                                                                       ----------------------------
                                                                                                 2001
                                                                                       ----------------------------


                        Dividend yield                                                              -
<S>                                                                                             <C>
                        Expected life                                                           10 years
                        Expected volatility                                                         -
                        Risk-free interest rate                                                   5.59%
</TABLE>

                  401(k) Profit Sharing Plan

                  During 2002, the Company adopted a 401(k) Profit Sharing Plan
                  available to all eligible employees, subject to certain
                  minimum age and service requirements. Contributions charged to
                  expense for the year ended December 31, 2002 was $11,581.


NOTE 8.  INCOME TAXES

                  Income taxes consist of the following:
 <TABLE>
<CAPTION>
                                                                                       Years Ended December 31,
                                                                                   ------------------------------------
                                                                                          2002                2001
                                                                                   ------------------   ---------------

<S>                                                                                     <C>                  <C>
                      Deferred                                                     $       (262,480)    $    (196,840)
                      Change in valuation allowance                                         262,480           196,840
                                                                                   ------------------   ---------------

                                     Income tax                                    $             -      $         -
                                                                                   ==================   ===============
</TABLE>

                  The Company's income tax differs from the amounts computed by
                  applying the federal income tax statutory rates to loss before
                  income taxes. A reconciliation of the differences is as
                  follows:

<TABLE>
<CAPTION>
                                                                                           Years Ended December 31,
                                                                                       ----------------------------------
                                                                                            2002              2001
                                                                                       ---------------   ----------------


<S>                                                                                          <C>               <C>
                        Tax provision at statutory rate                                $    (239,548)    $     (178,931)
                           Other items                                                         4,071              3,344
                           State income tax (benefit)                                        (27,003)           (21,253)
                           Change in valuation allowance                                     262,480             196,840
                                                                                       ---------------   ----------------

                        Income tax                                                     $          -      $          -
                                                                                       ===============   ================

</TABLE>



                                       42
<PAGE>





                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 8.  INCOME TAXES (Continued)

                    The components of deferred income taxes are as follows:

<TABLE>
<CAPTION>
                                                                                                December 31,
                                                                                     -----------------------------------
                                                                                           2002              2001
                                                                                     -----------------  ----------------

                   Deferred tax assets:
<S>                                                                                         <C>                <C>
                      Depreciation                                                   $           -      $          738
                      Loan loss reserves                                                      71,429               -
                      Preopening and organization expenses                                   134,725           186,128
                      Net operating loss carryforward                                        382,799            97,645
                      Other                                                                      694                53
                                                                                     -----------------  ----------------

                                                                                             589,647           284,564

                   Valuation allowance                                                      (503,647)         (240,187)
                                                                                     -----------------  ----------------

                                                                                              86,000            44,377
                                                                                     -----------------  ----------------

                   Deferred tax liabilities:
                      Loan loss reserves                                                         -              15,139
                      Depreciation                                                            35,206                 -
                      Securities available-for-sale                                           10,092               980
                      Cash basis adjustment for income tax reporting purposes                 50,794            28,258
                                                                                     -----------------  ----------------

                                                                                              96,092            44,377
                                                                                     -----------------  ----------------


                   Net deferred tax liabilities                                      $       (10,092)    $           -
                                                                                     =================  ================
</TABLE>

                  At December 31, 2002, the Company has available net operating
                  loss carryforwards of $1,014,306 for federal income tax
                  purposes. If unused, the carryforwards will expire beginning
                  in 2021.


NOTE 9.  COMMITMENTS AND CONTINGENCIES

                  Loan Commitments

                     The Company is a party to financial instruments with
                     off-balance sheet risk in the normal course of business to
                     meet the financing needs of its customers. These financial
                     instruments may include commitments to extend credit and
                     standby letters of credit. Such commitments involve, to
                     varying degrees, elements of credit risk and interest rate
                     risk in excess of the amount recognized in the balance
                     sheets.



                                       43
<PAGE>



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9.  COMMITMENTS AND CONTINGENCIES (Continued)

                  Loan Commitments (Continued)

                     The Company'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 amount
                     of those instruments. The Company uses the same credit
                     policies in making commitments and conditional obligations
                     as it does for on-balance sheet instruments. A summary of
                     the Company's commitments is as follows:

<TABLE>
<CAPTION>
                                                                                                 December 31,
                                                                                       ----------------------------------
                                                                                            2002              2001
                                                                                       ---------------   ----------------


<S>                                                                                           <C>               <C>
                      Letters of credit                                                $       64,795    $           -
                      Commitments to extend credit                                         14,490,065          2,631,037
                                                                                       ---------------   ----------------

                                                                                       $  14,554,860     $     2,631,037
                                                                                       ===============   ================

</TABLE>
                     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. Since many of the commitments
                     are expected to expire without being drawn upon, the total
                     commitment amounts do not necessarily represent future cash
                     requirements.

                     Standby letters of credit are conditional commitments
                     issued by the Company to guarantee the performance of a
                     customer to a third party. Those letters of credit 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. Collateral is required in
                     instances which the Company deems necessary.

                  Contingencies

                  In the normal course of business, the Company is involved in
                  various legal proceedings. In the opinion of management, any
                  liability resulting from such proceedings would not have a
                  material effect on the Company's financial statements.

                  Lease Commitments

                     During 2002, the Company leased space for a loan production
                     office under a noncancelable agreement that requires the
                     payment of monthly rentals, required maintenance, and
                     insurance. The lease is for a three-year term and is
                     accounted for as an operating lease. The projected minimum
                     rental commitments due under the operating lease is
                     summarized as follows:

<TABLE>
<CAPTION>
                        Years Ending December 31
<S>                           <C>                                                                                    <C>
                              2003                                                                        $          18,407
                              2004                                                                                   19,142
                              2005                                                                                   14,781
                                                                                                              --------------

                                                                                                          $          52,330
                                                                                                              ==============

</TABLE>


                                       44
<PAGE>



                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 9.  COMMITMENTS AND CONTINGENCIES (Continued)

                  Lease Commitments (Continued)

                     The Company leased a temporary operations facility under a
                     noncancelable agreement which required the payment of
                     monthly rentals, normal maintenance, and insurance. The
                     lease expired on February 28, 2002.

                     The total rental expense for the years ended December 31,
                     2002 and 2001 is $8,652 and $17,523, respectively.

NOTE 10.          CONCENTRATIONS OF CREDIT

                  The Company originates primarily commercial, residential, and
                  consumer loans to customers in Cobb County and surrounding
                  counties. The ability of the majority of the Company's
                  customers to honor their contractual loan obligations is
                  dependent on the economy in these areas. Eighty-four percent
                  of the Company's loan portfolio is secured by real estate, of
                  which a substantial portion is secured by real estate in the
                  Company's market area. The other significant concentrations of
                  credit by type of loan are set forth in Note 3.

                  The Company, as a matter of policy, does not generally extend
                  credit to any single borrower or group of related borrowers in
                  excess of 25% of the lesser of statutory capital or net
                  assets, as defined, or approximately $1,890,000.


NOTE 11. REGULATORY MATTERS

                  The Bank is subject to certain restrictions on the amount of
                  dividends that may be declared without prior regulatory
                  approval. At December 31, 2002, no dividends could be declared
                  without regulatory approval.

                  The Company and the Bank are also subject to various
                  regulatory capital requirements administered by the federal
                  banking agencies. Failure to meet minimum capital requirements
                  can initiate certain mandatory, and possibly additional
                  discretionary actions by regulators that, if undertaken, could
                  have a direct material effect on the financial statements.
                  Under capital adequacy guidelines and the regulatory framework
                  for prompt corrective action, the Company and the Bank must
                  meet specific capital guidelines that involve quantitative
                  measures of the assets, liabilities, and certain off-balance
                  sheet items as calculated under regulatory accounting
                  practices. The capital amounts and classification are also
                  subject to qualitative judgments by the regulators about
                  components, risk weightings, and other factors. Bank holding
                  companies are not subject to prompt corrective action
                  provisions.




                                       45
<PAGE>





                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 11. REGULATORY MATTERS (Continued)

                  Quantitative measures established by regulation to ensure
                  capital adequacy require the Company and the Bank to maintain
                  minimum amounts and ratios of Total and Tier I capital to
                  risk-weighted assets, as defined, and of Tier I capital to
                  average assets, as defined. Management believes, as of
                  December 31, 2002 and 2001, the Company and the Bank met all
                  capital adequacy requirements to which they are subject.

                  As of December 31, 2002, the most recent notification from the
                  Federal Deposit Insurance Corporation categorized the Bank as
                  well capitalized under the regulatory framework for prompt
                  corrective action. To be categorized as well capitalized, the
                  Bank must maintain minimum Total risk-based, Tier I
                  risk-based, and Tier I leverage ratios as set forth in the
                  following table. There are no conditions or events since that
                  notification that management believes have changed the Bank's
                  category.

                  The Company and the Bank's actual capital amounts and ratios
                  as of December 31, 2002 and 2001 are presented in the
                  following tables:

<TABLE>
<CAPTION>
                                                                                                          To Be Well
                                                                                   For Capital        Capitalized Under
                                                                                    Adequacy          Prompt Corrective
                                                             Actual                 Purposes          Action Provisions
                                                     -----------------------   --------------------  ---------------------
                                                       Amount       Ratio       Amount     Ratio      Amount      Ratio
                                                     -----------  ----------   ---------  ---------  ---------   ---------
                                                                            (Dollars in Thousands)
                                                     ---------------------------------------------------------------------
               December 31, 2002:
               Total   Capital   to  Risk   Weighted
               Assets:
<S>                                                  <C>            <C>          <C>        <C>          <C>        <C>
                  Consolidated                       $   8,517      17.20%     $  3,963      8.00%    $   N/A         N/A
                  Bank                               $   8,063      16.28%     $  3,963      8.00%    $ 4,954      10.00%
               Tier  I  Capital  to  Risk   Weighted
               Assets:
                  Consolidated                       $   8,025      16.20%     $  1,982      4.00%    $   N/A         N/A
                  Bank                               $   7,571      15.29%     $  1,982      4.00%    $ 2,972       6.00%
               Tier I Capital to Average Assets:
                  Consolidated                       $   8,025      14.40%     $  2,230      4.00%    $   N/A         N/A
                  Bank                               $   7,571      13.58%     $  2,230      4.00%    $ 2,787       5.00%

               December 31, 2001:
               Total   Capital   to  Risk   Weighted
               Assets:
                  Consolidated                       $   8,727     101.12%     $    691      8.00%    $   N/A         N/A
                  Bank                               $   8,288      96.04%     $    691      8.00%    $   863      10.00%
               Tier  I  Capital  to  Risk   Weighted
               Assets:
                  Consolidated                       $   8,672     100.49%     $    346      4.00%    $   N/A         N/A
                  Bank                               $   8,233      95.40%     $    346      4.00%    $   518       6.00%
               Tier I Capital to Average Assets:
                  Consolidated                       $   8,672      82.15%     $    423      4.00%    $   N/A         N/A
                  Bank                               $   8,233      77.99%     $    423      4.00%    $   528       5.00%
</TABLE>


                                       46
<PAGE>



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 12.          FAIR VALUE OF FINANCIAL INSTRUMENTS

                  The fair value of a financial instrument is the current amount
                  that would be exchanged between willing parties, other than in
                  a forced liquidation. Fair value is best determined based upon
                  quoted market prices. However, in many instances, there are no
                  quoted market prices for the Company's various financial
                  instruments. In cases where quoted market prices are not
                  available, fair values are based on estimates using present
                  value or other valuation techniques. Those techniques are
                  significantly affected by the assumptions used, including the
                  discount rate and estimates of future cash flows. Accordingly,
                  the fair value estimates may not be realized in an immediate
                  settlement of the instrument. SFAS No. 107, Disclosures about
                  Fair Values of Financial Instruments, excludes certain
                  financial instruments and all nonfinancial instruments from
                  its disclosure requirements. Accordingly, the aggregate fair
                  value amounts presented may not necessarily represent the
                  underlying fair value of the Company.

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

                  Cash, Due from Banks, and Federal Funds Sold: The carrying
                  amounts of cash, due from banks, and federal funds sold
                  approximate fair values.

                  Securities:  Fair values for securities are based on quoted
                  market prices.

                  Loans: For variable-rate loans that reprice frequently and
                  have no significant change in credit risk, fair values are
                  based on carrying values. For other loans, the fair values are
                  estimated using discounted cash flow analyses, using interest
                  rates currently being offered for loans with similar terms to
                  borrowers with similar credit quality. Fair values for
                  impaired loans are estimated using discounted cash flow
                  analyses or underlying collateral values, where applicable.

                  Deposits: The carrying amounts of demand deposits, savings
                  deposits, and variable-rate certificates of deposit
                  approximate their fair values. Fair values for fixed-rate
                  certificates of deposit are estimated using a discounted cash
                  flow calculation that applies interest rates currently being
                  offered on certificates to a schedule of aggregated expected
                  monthly maturities on time deposits.

                  Other Borrowings:  The carrying amounts of other borrowings
                  approximate their fair values.

                  Accrued Interest:  The carrying amounts of accrued interest
                  approximate their fair values.

                  Off-Balance Sheet Instruments: Fair values of the Company's
                  off-balance sheet financial instruments are based on fees
                  currently charged to enter into similar agreements. Since the
                  majority of the Company's off-balance sheet instruments
                  consist of nonfee-producing, variable-rate commitments, the
                  Company has determined they do not have a distinguishable fair
                  value.




                                       47
<PAGE>





                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 12. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

                  The estimated fair values and carrying amounts of the
                  Company's financial instruments as of December 31, 2002 and
                  2001 were as follows:

<TABLE>
<CAPTION>
                                                              December 31, 2002                 December 31, 2001
                                                       --------------------------------    -----------------------------
                                                         Carrying            Fair            Carrying          Fair
                                                          Amount            Value             Amount           Value
                                                       --------------   ---------------    --------------   ------------

                     Financial assets:
                        Cash, due from banks,
<S>                                                         <C>              <C>                <C>              <C>
                           and federal funds sold      $   6,670,026    $    6,670,026     $  6,552,419     $ 6,552,419
                        Securities available-for-sale      3,643,035         3,643,035          502,578         502,578
                        Loans                             42,922,667        43,670,000        5,399,073       5,540,000
                        Accrued interest receivable          165,024           165,024           24,659          24,659

                     Financial liabilities:
                        Deposits                          50,439,759        50,675,206        5,486,293       5,498,293
                        Other borrowings                     115,468           115,468           42,620          42,620
                        Accrued interest payable              59,131            59,131            5,830           5,830
</TABLE>


NOTE 13.          SUPPLEMENTARY FINANCIAL DATA

                  Components of other operating expenses in excess of 1% of
total revenue are as follows:
<TABLE>
<CAPTION>

                                                                                         Years Ended December 31,
                                                                                  ----------------------------------------

                                                                                        2002                  2001
                                                                                  ------------------    ------------------

                      Other expenses:
<S>                                                                                        <C>                   <C>
                        Advertising and business development                      $          38,810     $          33,274
                        Stationery and supplies                                              42,546                16,787
                        Data processing                                                      99,952                 9,855
                        Professional services                                               100,735                58,187
                        Telephone                                                            20,415                10,372
                        Insurance                                                            15,590                15,671
                        Software amortization                                                26,441                   914


</TABLE>


                                       48
<PAGE>





                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 14.          PARENT COMPANY FINANCIAL INFORMATION

                  The following information presents the condensed balance
                  sheets of Sweetwater Financial Group, Inc. as of December 31,
                  2002 and 2001, and the condensed statements of operations and
                  cash flows for the years then ended.
<TABLE>
<CAPTION>

                                                           CONDENSED BALANCE SHEETS
                                                                                            2002                2001
                                                                                     ----------------    -----------------

                      Assets
<S>                                                                                         <C>                  <C>
                        Cash                                                         $       453,849      $        438,566
                        Investment in subsidiary                                           7,590,297             8,235,638
                                                                                     ----------------     -----------------


                            Total assets                                             $     8,044,146      $      8,674,204
                                                                                     ================     =================


                        Total shareholders' equity                                   $     8,044,146      $      8,674,204
                                                                                     ================     =================

</TABLE>

                       CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>

                                                                                            2002                2001
                                                                                     ----------------    -----------------

                    Expenses
<S>                                                                                       <C>                 <C>
                       Interest                                                      $             -     $       5,107
                       Other                                                                  43,047               -
                                                                                     ----------------    ---------------

                                                                                              43,047             5,107
                                                                                     ----------------    ---------------


                           Loss before losses of subsidiary                                 (43,047)            (5,107)

                           Equity in losses of subsidiary                                  (661,505)          (521,160)
                                                                                     ----------------    ---------------

                    Net loss                                                         $     (704,552)     $    (526,267)
                                                                                     ================    ===============

</TABLE>



                                       49
<PAGE>





                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 14.          PARENT COMPANY FINANCIAL INFORMATION (Continued)

                       CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                          2002                2001
                                                                                    ------------------  ------------------

                  OPERATING ACTIVITIES
<S>                                                                                        <C>                 <C>
                     Net loss                                                       $       (704,552)   $       (526,267)
                     Adjustments to reconcile net loss to net
                        cash used in operating activities:
                        Equity in losses of subsidiary                                       661,505             521,160
                        Net other operating activities                                              -             (8,690)
                                                                                    ------------------  ------------------


                           Net cash used in operating activities                             (43,047)            (13,797)
                                                                                    ------------------  ------------------


                  INVESTING ACTIVITIES
                     Investment in subsidiary                                                     -           (8,299,220)

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

                           Net cash used in investing activities                                  -           (8,299,220)
                                                                                    ------------------  ------------------


                  FINANCING ACTIVITIES
                     Proceeds from issuance of common stock                                       -            8,814,430
                     Proceeds from exercise of stock warrants                                 58,330                  -
                     Stock offering costs                                                         -              (69,882)
                     Proceeds from line of credit                                                 -              739,269
                     Repayment of line credit                                                     -             (749,269)
                     Proceeds from organizer advances                                             -               10,000
                                                                                    ------------------  ------------------


                           Net cash provided by financing activities                          58,330           8,744,548
                                                                                    ------------------  ------------------


                  Net increase in cash                                                        15,283             431,531

                  Cash at beginning of year                                                  438,566               7,035
                                                                                    ------------------  ------------------


                  Cash at end of year                                               $        453,849    $        438,566
                                                                                    ==================  ==================

</TABLE>



                                       50
<PAGE>






Item 8.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure
         -----------------------------------------------------------------------
         None.

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
         Compliance with Section 16(a) of the Exchange Act
         -----------------------------------------------------------------------

         The following sets forth certain information regarding our executive
officers and directors as of March 22, 2003. Our articles of incorporation
provide for a classified board of directors so that, as nearly as possible,
one-third of the directors are elected each year to serve three-year terms. The
terms of office of the classes of directors expire as follows: Class I at the
2005 annual meeting of shareholders, Class II at the 2003 annual meeting of
shareholders, and Class III at the 2004 annual meeting of shareholders. Our
executive officers serve at the discretion of our board of directors.

   Name                        Age              Position
   Ken L. Barber               48               President, Chief Executive
                                                Officer and Director
   Fred D. Bentley, Jr.        47               Director
   Earl D Ehrhart, IV          43               Director, Vice Chairman
   Phillip T. Homan            58               Director
   Cheryl S. Moultrie          50               Director
   John Wesley Rakestraw       45               Director
   Philip H. Ekern             57               Chief Financial Officer
   Andrew Schival              43               Director
   Charlie Watts               58               Director
   Paul D. Wilkerson           52               Director, Chairman of the Board
   R. Lynn Wilson              52               Director

         Ken Barber, Class III director since February 6, 2001, is the president
and chief executive officer of Georgian Bank and Sweetwater Financial Group,
Inc. Mr. Barber has over 26 years banking experience in Georgia. Prior to
joining Sweetwater Financial Group, Mr. Barber served as president and chief
executive officer of Citizens & Merchants State Bank in Douglasville, Georgia
for 14 years. From 1976 to 1986, he served in various capacities for Wachovia
Corporation, including vice president of commercial lending. Mr. Barber
graduated from the State University of West Georgia with a business
administration degree in 1976 and attended the University of Georgia Banking
School from 1979 to 1981. Mr. Barber served on the Board of Directors of the
Douglas County Chamber of Commerce and the Cobb County Chamber of Commerce and
was active in the Rotary Club for 14 years.

         Fred D. Bentley, Jr., Class I director since August 2000, is a partner
in the law firm of Bentley, Bentley & Bentley, located in Marietta, Georgia. Mr.
Bentley has practiced law for over 20 years and is licensed in Georgia,
Louisiana, and Texas. He currently serves as outside counsel for Cobb County and
as city attorney for the City of Kennesaw. Mr. Bentley graduated from the
University of Georgia with a degree in accounting in 1977 and Emory University
School of Law in 1980. He serves as a trustee on the Kennesaw State University
Foundation and as a member of the Executive Committee of the Marietta Cobb
Museum of Art. Mr. Bentley was named as Honorary Consul General for the nation
of The Gambia in West Africa and has been active in the Olympic movement on
behalf of The Gambia and ANOCA.

         Earl Day Ehrhart, IV, Class I director since our inception in March
2000, and vice chairman of Sweetwater Financial Group, is senior vice
president of The Facility Group, Inc., an architectural and engineering firm
located in Smyrna, Georgia. Mr. Ehrhart is currently serving his third term as
the Minority Whip of the Georgia House of Representatives, and represents
District 36, Powder Springs, Georgia. He is also a member of the Rules,
Insurance, Banks and Banking and Ethics committees. Mr. Ehrhart received a B.A.
degree in political science in 1980 from the University of Georgia. He is the
State Chairman for the Georgia chapter of the American Legislative Exchange
Council (ALEC) and is a member of the ALEC National Board. Mr. Ehrhart currently
serves as a member of the National Republican Legislators Association, the West
Cobb Rotary Club, and the Cobb County Chamber of Commerce.


                                       51
<PAGE>


         Phillip T. "Murray" Homan, Class II director since our inception in
March 2000, owned Sun Valley Beach, Inc., a recreational facility located in
Cobb County, for 28 years. Mr. Homan has served on the Cobb Convention and
Visitors Bureau for over 10 years, four of those years as chairman, and the Cobb
County Board of Zoning and Appeals and the Cobb County Planning Board for nine
years. He has also served as a director and as president of the South Cobb
division of the Cobb Chamber of Commerce, and was a former president of the
National Swim and Recreation Association. Mr. Homan graduated from the Regional
Leadership Institute in 1993. He is currently involved with numerous local civic
organizations including the Powder Springs Business Association, Rotary
International, Optimist Club, and the Red Cross.

         Cheryl Smith Moultrie, Class II director since our inception in March
2000, has over 20 years experience in public relations, marketing, and resource
development, primarily directing major capital campaigns in private higher
education. Ms. Moultrie has served as an executive director for the United Way
in Starksville, Mississippi and as a vice president for resource development in
Spartanburg, South Carolina. She received a B.F.A. in 1974 from Mississippi
University for Women and continued her studies at the University of Mississippi,
where she worked as director of a state grant through the University's office of
Public Relations. Ms. Moultrie serves on the boards of the American Heart
Association, Project Read (Literacy), Keep Cobb Beautiful, Cobb Symphony
Orchestra, Center for Children and Young Adults, Atlanta History Center, State
of Georgia Film Commission, and Southern Flair Magazine. In her role as a board
member, she is an avid promoter and a successful fundraiser for the benefit of
many community and metro-wide agencies and organizations.

         John Wesley Rakestraw, Class I Director since May 17, 2001, has been
the president and chief executive officer of Raker Construction Co., LLC, a
construction company specializing in general contracting, since 1985. Mr.
Rakestraw is an active member of the Paulding County Water and Sewer Board. He
is also a member of the Board of Directors of the Paulding County Boys and Girls
Club. Mr. Rakestraw was appointed in 2001 by Governor Roy Barnes to the Georgia
Technical Adult Education Board and he was also Paulding County's 2001 Business
Leader of the Year.

         Philip Ekern has been the chief financial officer of our company and
our bank since October 17, 2002. Mr. Ekern graduated from the University of
Wisconsin - Milwaukee in 1967 with a B.B. A. degree in Finance. He worked in
various accounting positions at the First National Bank of Milwaukee, Wisconsin
from 1967 to 1972. From 1976 to 1986, Mr. Ekern was employed by the First
National Bank of Cobb County and from 1986 to 1990 by Barnett Banks of Atlanta,
which had purchased the First National Bank of Cobb County. He worked in the
accounting area and was promoted to controller. Mr. Ekern joined Charter Bank &
Trust Co. as chief financial officer in 1990 where he worked until he moved to
Georgian Bank.

         Andrew Schival, Class II director since September 2000, is employed by
Dataliant, Inc. as chief operating officer as well as owner and president of
Andrew Schival CPA, CFP, PC. Mr. Schival is a member or partner of Beatty,
Schival & Assoc., LLC, Schival, Beatty Building, LLC, and Homan Schival
Properties. Mr. Schival has over 15 years experience managing the engagements of
multi-family property management companies including HUD and FmHA insured
complexes. He received a B.A. degree in business administration from Georgia
State University. Mr. Schival is a member of the American Institute of Certified
Public Accountants, the Georgia Society of Certified Public Accountants, the
Cobb County Chamber of Commerce, and the North Fulton Chamber of Commerce.

         L. Charles Watts, Class III director since October 2000, founded W&W
Financial Supplies in 1980, which sells banking supplies throughout Georgia.
From 1973 to 1980, Mr. Watts served as executive vice president of Citizens Bank
in Dallas, Georgia. He served as state representative to the Georgia House of
Representatives from 1982 to 1996. During his tenure in the House, Mr. Watts
served as chairman of the Banks and Banking Committee and as a member of the
Appropriations and Rules Committee. Mr. Watts has also served on the board of
First Federal Savings of Paulding County. Mr. Watts is currently involved with
real estate development ventures in Paulding County. Mr. Watts received an A.A.
degree from Clarke Memorial Jr. College in Newton, Mississippi.

         Paul David Wilkerson, Class III director since our inception in March
2000, and chairman of the board of Sweetwater Financial Group, is the president
and chief executive officer of Wilkerson Packaging Co., Inc., founded in 1982 in
Atlanta, Georgia. Mr. Wilkerson is also the president and a partner of Spirit
Car Wash and Lube Center, Inc. in Hiram, GA. Mr. Wilkerson attended West Georgia
College, Dekalb College and Georgia State University. He is an Armed Forces
Veteran who served during the Vietnam era. Mr. Wilkerson has served on the
boards of various youth organizations, is trustee of Clarkdale United Methodist,
and is a member of the U.S. and Georgia Chambers of Commerce.

                                       52
<PAGE>


         R. Lynn Wilson, Class III director since our inception in March 2000,
and is the owner and president of Lick Log Properties, Inc., a real estate
investment company, and Wilson Air Conditioning Service. Mr. Wilson is also a
partner in G.W. Investments, a real estate investment partnership. All of Mr.
Wilson's businesses are located in Powder Springs, Georgia. Mr. Wilson attended
Southern Polytechnic State College and West Georgia College. He currently serves
as a director of the Conditioned Air Association of Georgia and the West Georgia
Conditioned Air Association, and is a member of the Refrigeration Service
Engineers Society and the Air Conditioning Contractors of America. Mr. Wilson is
an active member of the Cobb, Douglas, and Paulding Chambers of Commerce.

Item 10.  Executive Compensation
---------------------------------
         The following table shows the cash compensation we paid to our Chief
Executive Officer and President for the years ended December 31, 2002 and
December 31, 2001. None of our other executives earned total annual
compensation, including salary and bonus, in excess of $100,000 in 2002.
<TABLE>
<CAPTION>

                                                   Annual Compensation          All Other
                                                                              Compensation
Name and Principal Position               Year       Salary       Bonus

<S>                                       <C>      <C>           <C>           <C>    <C>
Kenneth L. Barber                         2002     $ 179,027     $  --         $8,000 (2)
    President and Chief Executive         2001     $ 145,833     $  --
Officer of the Company and the
Bank
</TABLE>

(1) Executive officers of the company also received indirect compensation in the
form of certain perquisites and other personal benefits. The amount of such
benefits received in the fiscal year by Mr. Barber did not exceed the lesser of
either $50,000 or 10% of his annual salary and bonus. In addition, Mr. Barber
received stock warrants for 85,500 shares in connection with his purchase of
common stock in our initial offering. See "Stock Warrants" under Item 5 above.

(2) The company paid life insurance premiums in the amount of $8,000 in 2002
with respect to term life insurance for the benefit of Mr. Barber. The company
anticipates that Mr. Barber will receive the benefit of the policy's cash
surrender value.

Employment Agreements

         Kenneth L. Barber. On February 27, 2001, we entered into an employment
agreement with Kenneth L. Barber for a five-year term which is extended
automatically at the end of the five years for successive three-year terms,
pursuant to which he serves as the president, chief executive officer, and a
director of both our company and our subsidiary bank. Mr. Barber is paid an
initial salary of $175,000, plus his yearly medical insurance premium. He
receives an annual increase in his salary equal to a minimum of 3% per year. The
board of directors may increase Mr. Barber's salary above this level, but not
below it. He is entitled to receive a one time bonus of 6% of his salary when
the bank has achieved cumulative profitability for three consecutive months. He
is eligible to receive a bonus equal to up to 50% of his base salary based on
profitability and earnings growth of the bank. He is eligible to participate in
any management incentive program of the bank or any long-term equity incentive
program and is eligible for grants of stock options and other awards thereunder.
In January 2003, Mr. Barber was granted options to purchase 30,000 shares of
common stock under this employment agreement and options to purchase 2,500
shares under the Employee Stock Option Plan. The 30,000 options vest over a
five-year period (from his original employment date of February 27, 2001) and
have a term of ten years. The 2,500 options vest over a three year period (also
from his original employment date) and have a term of ten years. Additionally,
Mr. Barber will participate in the bank's retirement, welfare, and other benefit
programs and is entitled to a life insurance policy, a disability policy and
reimbursement for automobile expenses, club dues, and travel and business
expenses.

         Mr. Barber's employment agreement also provides that following
termination of his employment and for a period of 12 months thereafter, he may
not (a) compete with the company, the bank, or any of its affiliates by,
directly or indirectly, forming, serving as an organizer, director or officer
of, or consultant to, or acquiring or maintaining more than 1% passive
investment in, a depository financial institution or holding company thereof if
such depository institution or holding company has one or more offices or
branches within radius of thirty miles from the main office of the company or
any branch office of the company, (b) solicit major customers of the bank for
the purpose of providing financial services, or (c) solicit employees of the
bank for employment. If Mr. Barber terminates his employment for good cause as
that term is defined in the employment agreement or if he is terminated
following a change in control of the bank as defined in the agreement, he will
be entitled to severance compensation of his then current monthly salary for a
period of 24 months, plus all compensation and benefits listed in his employment
agreement for the 24 month period.

                                       53


Director Compensation

         Our bylaws permit our directors to receive reasonable compensation as
determined by a resolution of the Board of Directors. We did not pay any
directors' fees during the last fiscal year. However, we may, pursuant to our
bylaws, begin to compensate our directors at some time in the future.

Deferred Compensation Plan

During 2002, the Company established an executive supplemental income plan for
certain key officers whereby benefits are payable at age sixty-one or if he or
she becomes totally disabled or if he or she has completed a minimum number of
years of service to the Bank. The present value of the estimated liability is
being accrued over the expected remaining years of employment. The Company
expensed $9,180 for the year ended December 31, 2002 under this plan.

The Company is also the owner and beneficiary of life insurance policies on the
lives of its key officers. The Company intends to use these policies to fund the
benefit plan described above. The carrying value of the policies was $1,740,604
at December 31, 2002.

Item 11. Security Ownership of Certain Beneficial Owners and Management
-----------------------------------------------------------------------
         The following table shows how much of our common stock is owned by the
directors, certain executive officers, and owners of more than 5% of the
outstanding common stock, as of March 22, 2003. In addition, each organizer is
entitled to receive a warrant to purchase one share of common stock at a
purchase price of $10.00 per share for every share purchased by that organizer
in the offering. The warrants, which are represented by separate warrant
agreements, vest on each of the first three anniversaries of the bank's opening
for business and are exercisable in whole or in part during the ten year period
following that date.
<TABLE>
<CAPTION>

                                                 Amount and Nature of
                                                Beneficial Ownership(1)                           % of Beneficial
                        Name                                              Right to Acquire (2)      Ownership(3)

<S>                                                     <C>                      <C>                   <C>
       Ken L. Barber.......................             68,288                   28,500                9.9%
       Fred D. Bentley, Jr.................             40,188                   13,333                5.6%
       Earl D. Ehrhart, IV.................             10,588                    3,467                1.5%
       Phillip T. Homan....................             10,188                    3,333                1.4%
       Cheryl S. Moultrie..................             35,188                   11,667                4.9%
       John Wesley Rakestraw...............             10,188                        0                1.1%
       Andrew Schival......................             12,188                    4,000                1.7%
       Charlie Watts.......................             28,188                    9,333                3.9%
       Paul D. Wilkerson...................             25,788                    8,533                3.6%
       R. Lynn Wilson......................             50,188                   16,667                7.0%

       All directors and executive officers            290,980                   98,833                37.4%
       as a group (10 persons)
</TABLE>


(1) Includes shares for which the named person:
        o has sole voting and investment power,
        o has shared voting and investment power with a spouse, or
        o holds in an IRA or other retirement plan program, unless otherwise
        indicated in these footnotes.

         Does not include shares that may be acquired by exercising stock
options or warrants.



                                       54
<PAGE>




(2)      Includes  shares that may be acquired within the next 60 days by
         exercising stock options or warrants but does not include
         any other stock options or warrants.

(3)      Determined by assuming the named person  exercises all options or
         warrants which he or she has the right to acquire within 60
         days, but that no other persons exercise any options or warrants.

Item 12. Certain Relationships and Related Transactions
-------------------------------------------------------
         We enter into banking and other transactions in the ordinary course of
business with our directors, and officers and their affiliates. It is our policy
that these transactions are on substantially the same terms (including price, or
interest rates and collateral) as those prevailing at the time for comparable
transactions with unrelated parties. We do not expect these transactions to
involve more than the normal risk of collectibility or present other unfavorable
features to us. Loans to individual directors and officers must also comply with
our bank's lending policies, regulatory restrictions, and statutory lending
limits, and directors with a personal interest in any loan application will be
excluded from the consideration of such loan application. We intend for all of
our transactions with organizers or other affiliates to be on terms no less
favorable than could be obtained from an unaffiliated third party and to be
approved by a majority of our disinterested directors.

         We have engaged the law firm of Bentley, Bentley & Bentley located in
Marietta, Georgia to provide legal services to Sweetwater Financial Group. Fred
D. Bentley, Jr., who is an organizer and a director of Sweetwater Financial
Group, is a partner in the law firm. Fred D. Bentley, Jr. served as legal
counsel to Sweetwater Financial Group until he accepted an invitation from the
group to become a director. The law firm continues to represent Sweetwater
Financial Group.

         One of our organizers, Lynn Wilson, is a partner in GW Investments. GW
Investments entered into a contract with Sweetwater Financial Group for the sale
of a tract of land consisting of approximately 1.6 acres for the site of the
main office of Georgian Bank. We purchased the property through the issuance of
45,000 shares of our common stock (valued at $10.00 per share) and the payment
of cash in the amount of $280,769. Mr. Wilson also received a warrant to
purchase 45,000 shares in connection with this transaction. We obtained a
certified appraisal of the property by an MAI appraiser, who appraised the
property at $760,000, and a second certified appraisal of $775,000.

Item 13.   Exhibits, List and Reports on Form 8-K
-------------------------------------------------
(a) The following documents are filed as part of this report:

       3.1            Articles of  Incorporation  of the Company  (incorporated
                      by reference to Exhibit 3.1 of the Company's Registration
                      Statement on Form S-1 File No. 333-53536).
       3.2            Bylaws  of  the  Company (incorporated by reference to
                      Exhibit  3.2  of  the  Company's Registration Statement
                      on Form S-1 File No. 333-53536).
       4.1            See Exhibits 3.1 and 3.2 for provisions of the Articles of
                      Incorporation  and Bylaws defining the rights of holders
                      of Common Stock of the Company  (incorporated by reference
                      to Exhibit 4.1 of the Company's Registration Statement on
                      Form S-1 File No. 333-53536).
       4.2            Form of  certificate  of common  stock  (incorporated  by
                      reference  to  Exhibit  4.2 of the Company's Registration
                      Statement on Form S-1 File No. 333-53536).
       4.3            2002 Stock Incentive Plan(incorporated  by reference to
                      Exhibit 4.3 of the Company's Form S-8 File No.333-53536).
       4.4            Form of Warrant Agreement (incorporated  by reference to
                      Exhibit 4.4 of the Company's Form S-8 File No. 333-53536).
      10.1            Employment  Agreement  between the Company and
                      Kenneth L. Barber dated February  27, 2001
                      (incorporated  by reference to Exhibit 10.7 of the
                      Company's Registration  Statement on Form
                      S-1 File No. 333-53536).
      21              Subsidiaries of the Company
      24.1            Power of Attorney (filed as part of the signature page).

(b) Reports on Form 8-K
         The following report was filed on Form 8-K during the fourth quarter
ended December 31, 2002.

                                      55
<PAGE>

         The Company filed a Form 8-K on November 13, 2002 to disclose that the
     Chief Executive Officer, Kenneth L. Barber, and the Chief Financial
     Officer, Philip Ekern, each furnished to the SEC the certification required
     pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
     the Sarbanes-Oxley Act of 2002.



Item 14. Controls and Procedures
---------------------------------
            Within 90 days prior to the date of this report, we carried out an
evaluation, under the supervision and with the participation of our principal
executive officer and principal financial officer, of the effectiveness of the
design and operation of our disclosure controls and procedures. Based on this
evaluation, our principal executive officer and principal financial officer
concluded that our disclosure controls and procedures are effective in timely
alerting them to material information required to be included in our periodic
SEC reports. The design of any system of controls is based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential
future conditions, regardless of how remote.

         In addition, we reviewed our internal controls, and there have been no
significant changes in our internal controls or in other factors that could
significantly affect those controls subsequent to the date of their last
evaluation.




                                       56
<PAGE>




                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934 (the "Exchange Act"), the registrant caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                          SWEETWATER FINANCIAL GROUP, INC.


Date:   March 20, 2003                    By:  /s/ Kenneth L. Barber
       ---------------                    -------------------------------------
                                          Kenneth L. Barber
                                          President and Chief Executive Officer


     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Kenneth L. Barber and Philip Ekern as the true
and lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to this Registration Statement, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto such
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that such attorney-in-fact and agent, or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.

Signatures                   Title                                  Date

/s/ Kenneth L. Barber
----------------------
Kenneth L. Barber            President and Chief Executive       March 20, 2003
                             Officer (principal
                             executive officer)

/s/ Philip Ekern
----------------------
Philip Ekern                 Chief Financial Officer,            March 20, 2003
                             (principal accounting and
                             financial office)

/s/ Fred Bentley, Jr.
-----------------------
Fred Bentley, Jr.            Director                            March 20, 2003

/s/ Early Day Ehrhart, IV
--------------------------
Earl Day Ehrhart, IV         Vice Chairman, Director             March 20, 2003

/s/ Phillip T. Homan
-------------------------
Phillip T. Homan             Director                            March 20, 2003


-------------------------
Cheryl Moultrie              Director                            March 20, 2003


/s/ John Wesley Rakestraw    Director                            March 20, 2003
-------------------------
John Wesley Rakestraw

/s/ Andrew Schival
-------------------------
Andrew Schival               Director                            March 20, 2003

/s/ L. Charles Watts
-------------------------
L. Charles Watts             Director                            March 20, 2003



                                       57
<PAGE>




-------------------------
Paul D. Wilkerson            Chairman, Director                  March 20, 2003

/s/ R. Lynn Wilson
-------------------------
R. Lynn Wilson               Director                            March 20, 2003






                                       58
<PAGE>





                                  EXHIBIT INDEX
Exhibit
Number     Description
-------    ------------
 3.1       Articles of  Incorporation  of the Company  (incorporated by
           reference to Exhibit 3.1 of the  Company's Registration Statement
           on Form S-1 File No. 333-53536).
 3.2       Bylaws of the Company (incorporated by reference to Exhibit 3.2 of
           the Company's Registration Statement on Form S-1 File No. 333-53536).
 4.1       See Exhibits 3.1 and 3.2 for provisions of the Articles of
           Incorporation  and Bylaws defining the rights of holders of Common
           Stock of the Company  (incorporated  by reference to Exhibit 4.1 of
           the Company's Registration Statement on Form S-1 File No. 333-53536).
 4.2       Form of certificate of common stock (incorporated by reference to
           Exhibit 4.2 of the Company's Registration Statement on Form S-1
           File No. 333-53536).
 4.3       2002 Stock Incentive Plan (incorporated by reference to Exhibit 4.3
           of the Company's Form S-8 File No. 333-53536).
 4.4       Form of Warrant Agreement (incorporated by reference to Exhibit 4.4
           of the Company's Form S-8 File No. 333-53536).
 10.1      Employment  Agreement  between the Company and Kenneth L. Barber
           dated February 27, 2001 (incorporated  by reference to Exhibit 10.7
           of the Company's Registration  Statement on Form S-1
           File No. 333-53536).
 21        Subsidiaries of the Company
 24.1      Power of Attorney (filed as part of the signature page).




                                       59





      Certificate pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Kenneth L. Barber, President and C.E.O., certify that:

1.       I have reviewed this annual report on Form 10-KSB of Sweetwater
         Financial Group, Inc.

2.       Based on my knowledge, this annual report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this annual report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this annual report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this annual report;

4.       The registrant's other certifying officer and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
         we have:

         a.     designed such disclosure controls and procedures to ensure that
                material information relating to the registrant, including its
                consolidated subsidiary, is made known to us by others within
                that entity, particularly during the period in which this report
                is being prepared;

         b.     evaluated the effectiveness of the registrant's disclosure
                controls and procedures as of a date within 90 days prior to the
                filing of this annual report (the "Evaluation Date"); and

         c.     presented in this annual report our conclusions about the
                effectiveness of the disclosure controls and procedures based on
                our evaluation as of the Evaluation Date;

5.       The registrant's other certifying officer and I have disclosed, based
         on our most recent evaluation, to the registrant's auditors and the
         audit committee of registrant's board of directors:

         a.     all significant deficiencies in the design or operation of
                internal controls which could adversely affect the registrant's
                ability to record, process, summarize and report financial data
                and have identified for the registrant's auditors any material
                weaknesses in internal controls; and

         b.     any fraud, whether or not material, that involves management or
                other employees who have a significant role in the registrant's
                internal controls; and

6.       The registrant's other certifying officer and I have indicated in this
         report whether there were significant changes in internal controls or
         in other factors that could significantly affect internal controls
         subsequent to the date of our most recent evaluation, including any
         corrective actions with regard to significant deficiencies and material
         weaknesses.


Date:  March 20, 2003



                                          /s/ Kenneth L. Barber
                                         --------------------------------------
                                         Kenneth L. Barber, President and C.E.O.
                                        (Principal Executive Officer)





                                       60
<PAGE>





      Certificate pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Philip Ekern, C.F.O., certify that:

1.       I have reviewed this annual report on Form 10-KSB of Sweetwater
         Financial Group, Inc.

2.       Based on my knowledge, this annual report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this annual report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this annual report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this annual report;

4.       The registrant's other certifying officer and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
         we have:

         a.     designed such disclosure controls and procedures to ensure that
                material information relating to the registrant, including its
                consolidated subsidiary, is made known to us by others within
                that entity, particularly during the period in which this annual
                report is being prepared;

         b.     evaluated the effectiveness of the registrant's disclosure
                controls and procedures as of a date within 90 days prior to the
                filing of this annual report (the "Evaluation Date"); and

         c.     presented in this annual report our conclusions about the
                effectiveness of the disclosure controls and procedures based on
                our evaluation as of the Evaluation Date;

5.       The registrant's other certifying officer and I have disclosed, based
         on our most recent evaluation, to the registrant's auditors and the
         audit committee of registrant's board of directors:

         a.     all significant deficiencies in the design or operation of
                internal controls which could adversely affect the registrant's
                ability to record, process, summarize and report financial data
                and have identified for the registrant's auditors any material
                weaknesses in internal controls; and

         b.     any fraud, whether or not material, that involves management or
                other employees who have a significant role in the registrant's
                internal controls; and

6.       The registrant's other certifying officer and I have indicated in this
         report whether there were significant changes in internal controls or
         in other factors that could significantly affect internal controls
         subsequent to the date of our most recent evaluation, including any
         corrective actions with regard to significant deficiencies and material
         weaknesses.



Date:  March 20, 2003


                                         /s/ Philip Ekern
                                         -------------------------
                                         Philip Ekern, C.F.O.
                                        (Principal Financial and
                                         Accounting Officer)