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                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D. C. 20549

                                 ---------------
                                   FORM 10-KSB

         ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

 For the fiscal year ended December 31, 2000 - Commission File Number: 000-32399

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

                               FMB EQUIBANC, INC.
             (Exact name of registrant as specified in its charter)

               GEORGIA                                      58-2582553
     --------------------------------                  -------------------
     (State or other jurisdiction                        (IRS Employer
     of incorporation or organization)                 Identification No.)

                   201 NORTH MAIN STREET
                    STATESBORO, GEORGIA                          30458
          --------------------------------------               ----------
          (Address of principal executive office)              (Zip Code)

                                 (912) 489-2600
              ----------------------------------------------------
              (Registrant's telephone number, including area code)


SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

     TITLE OF EACH CLASS              NAME OF EACH EXCHANGE ON WHICH REGISTERED
            None                                    Not Applicable

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                     COMMON STOCK, PAR VALUE $1.00 PER SHARE

Indicate by check mark whether  Registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during
the  preceding 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 the past 90 days.

                                    Yes /X/ No  /_/

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation S-K is not contained herein and will not 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-K or any amendment to this
Form 10-K. |X|

The Issuer's revenues for its most recent fiscal year were $8,026,270.

The  aggregate  market  value of the  voting  stock  held by  non-affiliates  of
Registrant (296,449 shares) at March 1, 2000 was $5,298,980. As of such date, no
organized  trading  market existed for the Common Stock of the  Registrant.  The
aggregate market value was computed by reference to the fair market value of the
Common Stock of the  Registrant  based on recent sales of the Common Stock.  The
number of shares  outstanding of Registrant's  Common Stock at March 1, 2000 was
362,600 shares.

Transitional Small Business Disclosure Format (Check one):  Yes /_/   No  /X/


                       DOCUMENTS INCORPORATED BY REFERENCE

         Portions of the  Registrant's  definitive  Proxy Statement for the 2001
Annual  Meeting of  Shareholders  to be filed with the  Securities  and Exchange
Commission  within 120 days of the Registrant's  fiscal year end is incorporated
by reference in answer to Part III of this Report.


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<PAGE>



             CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

         Certain of the statements made in this Annual Report on Form 10-KSB and
in documents incorporated by reference herein, including matters discussed under
the caption  "Management's  Discussion  and Analysis of Financial  Condition and
Results of  Operations,"  as well as oral  statements made by the Company or its
officers,  directors  or employees  may  constitute  forward-looking  statements
within the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities  Act").  Such  forward-looking  statements are based on management's
beliefs,  current  expectations,  estimates and projections  about the financial
services industry, the economy and about FMB Equibanc,  Inc. (the "Company") and
its wholly-owned  subsidiary,  Farmers & Merchants Bank (the "Bank") in general.
Forward-looking  statements include statements about the  competitiveness of the
banking industry, potential regulatory obligations, potential economic growth in
our primary  service area,  our  strategies  and other  statements  that are not
historical  facts. The words "expect,"  "anticipate,"  "intend," "plan," "seek,"
"estimate" and similar expressions are intended to identify such forward-looking
statements;  however, this Report also contains other forward-looking statements
in addition to historical information.  Such forward-looking  statements are not
guarantees of future  performance  and are subject to risks,  uncertainties  and
other factors that may cause actual results,  performance or achievements of the
Company  to differ  materially  from any  results  expressed  or implied by such
forward-looking  statements.  Such  factors  include,  without  limitation,  (i)
increased competition from other financial institutions,  (ii) lack of sustained
growth in the economy of Bulloch County,  Georgia,  (iii) rapid  fluctuations in
interest rates, and (iv) changes in the legislative and regulatory  environment.
Many of such factors are beyond the Company's ability to control or predict, and
readers  are  cautioned  not to  put  undue  reliance  on  such  forward-looking
statements.  The  Company  disclaims  any  obligation  to update  or revise  any
forward-looking  statements contained in this Report, whether as a result of new
information, future events or otherwise.


                                      -1-
<PAGE>




PART I

ITEM 1.  DESCRIPTION OF BUSINESS
         -----------------------

THE COMPANY

         FMB  Equibanc,  Inc.  (the  "Company")  was  incorporated  as a Georgia
corporation on April 25, 2000, to serve as a bank holding  company for Farmers &
Merchants Bank (the "Bank").  On November 1, 2000,  the Company  acquired all of
the  outstanding  shares of the Bank.  The Company is a registered  bank holding
company  under the Bank Holding  Company Act of 1956, as amended (the "BHC Act")
and the Financial Institutions Code of Georgia (the "FICG").

         The Company has been  organized to enhance the Bank's  ability to serve
its future customers'  requirements for financial services.  The holding company
structure  provides  flexibility for expansion of the Company's banking business
through the  acquisition of other  financial  institutions  and the provision of
additional  banking-related  services which the traditional  commercial bank may
not be able to provide  under  present  laws.  In  addition,  a holding  company
structure makes it easier to raise capital for the Bank because the Company will
be able to  issue  securities  without  the need for  prior  banking  regulatory
approval,  and the  proceeds  of debt  securities  issued by the  Company can be
invested in the Bank as primary capital.

         At December 31, 2000, the assets of the Company consisted  primarily of
its ownership of the capital stock of the Bank.

         The Company's  executive offices are located at the Bank's main office,
201 North Main Street, Statesboro, Georgia 30458. The Company's telephone number
at such location is (912) 489-2600. See "Item 2. Description of Properties."

THE BANK

          The Bank was incorporated as a Georgia banking corporation on February
4, 1948 for the purpose of conducting a commercial banking business from Bulloch
County,  Georgia.  The Bank originally conducted its business from a main office
located in Brooklet,  Bulloch County,  Georgia.  In 1991, the bank relocated its
main office to Statesboro, Bulloch County, Georgia. The Bank retained its former
main  office as a branch  office.  The Bank also  maintains  a branch  office in
Statesboro.

MARKET AREA AND COMPETITION

         The primary  service area of the Bank is Bulloch County,  Georgia.  The
Bank encounters competition in its primary service area and in surrounding areas
from six other commercial banks. These competitors offer a full range of banking
services and vigorously compete for all types of services, especially deposits.


                                      -2-
<PAGE>

         The  following  table  illustrates  the June 30, 2000  deposit base and
market  share of the  financial  institutions  located  in  Bulloch  County,  as
reported by the FDIC.

         Bulloch County
         --------------
<TABLE>
<CAPTION>

                                                                                $               %
                                                                              -----           -----
                             FINANCIAL INSTITUTIONS                         (Dollars in millions)
<S>                                                                            <C>             <C>
         Sea Island Bank...........................................            158.1           30.3
         First Bulloch Bank & Trust Company........................            153.5           29.4
         Farmers & Merchants Bank .................................             74.4           14.3
         Eagle Bank and Trust......................................             71.4           13.7
         Wachovia Bank, National Association.......................             58.9           11.3
         The First National Bank & Trust Company...................              4.4            0.8
         Citizens Bank.............................................              1.1            0.2
</TABLE>

         While the Bank  experiences  competition  from  financial  institutions
headquartered in Bulloch County,  some competition also comes from banks outside
of Bulloch County  seeking to make loans in the Bank's primary  service area. In
addition,  in certain  aspects of its banking  business,  the Bank also competes
with credit unions, small loan companies, consumer finance companies,  brokerage
houses,   insurance   companies,   money  market  funds,   and  other  financial
institutions which have recently entered the traditional banking markets.

         The extent to which other types of financial  institutions compete with
commercial  banks has  increased  significantly  within  the past few years as a
result  of  federal  and state  legislation  which  has,  in  several  respects,
deregulated financial  institutions.  See "Supervision and Regulation." The full
impact of this  legislation  and  subsequent  laws that will continue to further
deregulate  the  financial   services  industry  cannot  be  fully  assessed  or
predicted.

DEPOSITS

         The  Bank  offers a wide  range of  commercial  and  consumer  interest
bearing and non-interest bearing deposit accounts,  including checking accounts,
money market  accounts,  negotiable  order of  withdrawal  accounts,  individual
retirement accounts,  certificates of deposit and regular savings accounts.  The
sources of deposits  are the  residents,  businesses  and  employees  within the
Bank's primary service area,  obtained through the personal  solicitation of the
Bank's  officers and  directors,  direct mail  solicitation  and  advertisements
published in the local media. The Bank pays  competitive  interest rates on time
and savings deposits. In addition, the Bank has implemented a service charge fee
schedule  competitive  with other  financial  institutions in the Bank's primary
service area,  covering such matters as maintenance  fees on checking  accounts,
per item processing fees on checking accounts,  returned check charges and other
similar fees and charges.



                                      -3-
<PAGE>



LENDING SERVICES

         LENDING  POLICY.  The Bank  engages  in a full  complement  of  lending
activities,  including real estate loans,  commercial loans,  consumer loans and
agribusiness  loans.  Lending is directed  principally  towards  individuals and
businesses whose demands fall within the Bank's legal lending limits and who are
potential deposit customers of the Bank. This includes loans made to individual,
partnership  or  corporate  borrowers,  and  obtained  for a variety of business
purposes.

         The Bank may  originate  loans and  participate  with other  banks with
respect to loans which exceed the Bank's lending limits.  Management of the Bank
does not believe that loan  participations  necessarily pose any greater risk of
loss than loans that the Bank originates.

         To address the risks  inherent in making loans,  the Bank  maintains an
allowance  for loan losses based on, among other  things,  an  evaluation of the
Bank's loan loss  experience,  the amount of past due and  nonperforming  loans,
current  and  anticipated  economic  changes  and the  values  of  certain  loan
collateral.  Based  upon such  factors,  the  Bank's  management  makes  various
assumptions  and  judgments  about  the  ultimate  collectibility  of  the  loan
portfolio  and  provides an  allowance  for  potential  loan losses based upon a
percentage of the outstanding balances and for specific loans. However,  because
there are  certain  risks  that  cannot be  precisely  quantified,  management's
judgment of the allowance is necessarily  an  approximation  and imprecise.  The
adequacy  and  methodology  of the  allowance  for loan  losses  is  subject  to
regulatory  examination  and compared to a peer group of financial  institutions
identified by the bank's regulatory agencies.

         LOAN  PORTFOLIO.  The following is a  description  of each of the major
categories of the Bank's loan portfolio:

         Real Estate Loans.  The Bank makes a variety of commercial real estate,
construction and development  loans,  and residential  real estate loans.  These
loans include some commercial loans where the Bank takes a security  interest in
real estate out of an abundance of caution and not as the  principal  collateral
for the loan,  but excludes home equity loans,  which are classified as consumer
loans.  As of December 31, 2000, real estate loans comprised 67.9% of the Bank's
loan portfolio.

         o        Commercial  Real  Estate  Loans.  Commercial  real estate loan
                  terms  generally  are limited to five years or less,  although
                  payments may be  structured  on a longer  amortization  basis.
                  Interest rates may be fixed or adjustable.  The Bank generally
                  charges an origination fee. The Bank attempts to reduce credit
                  risk on its commercial real estate loans by emphasizing  loans
                  on owner-occupied  office and retail buildings where the ratio
                  of the  loan  principal  to the  value  of the  collateral  as
                  established by  independent  appraisal does not exceed 90% and
                  net projected cash flow available for debt service equals 120%
                  of the debt service  requirement.  In  addition,  the Bank may
                  require  personal  guarantees from the principal owners of the
                  property supported by a review by the Bank's management of the
                  principal  owners'  personal   financial   statements.   Risks
                  associated   with   commercial   real  estate  loans   include
                  fluctuations  in the value of real  estate,  new job  creation
                  trends, tenant vacancy rates and the quality of the borrower's
                  management.  The Bank limits its risk by analyzing  borrowers'
                  cash flow and collateral  value on an ongoing basis.  The Bank
                  competes for  commercial  real estate  loans with  competitors
                  that are well established in its primary service area.



                                      -4-
<PAGE>



         o        Construction   and   Development   Loans.   Construction   and
                  development  loans are made both on a pre-sold and speculative
                  basis.  If the  borrower has entered into an agreement to sell
                  the property prior to beginning construction, then the loan is
                  considered to be on a pre-sold  basis. If the borrower has not
                  entered  into an  agreement  to sell  the  property  prior  to
                  beginning construction, then the loan is considered to be on a
                  speculative  basis.  Construction  and  development  loans are
                  generally  made with a term of six months and interest is paid
                  periodically.  The ratio of the loan principal to the value of
                  the  collateral  as   established  by  independent   appraisal
                  generally does not exceed 85%.  Speculative loans are based on
                  the borrower's financial strength and cash flow position. Loan
                  proceeds are disbursed  based on the  percentage of completion
                  and  only  after  the  project  has  been   inspected   by  an
                  experienced construction lender or appraiser. Risks associated
                  with construction  loans include  fluctuations in the value of
                  real estate and new job creation trends.

         o        Residential  Real Estate Loans.  The Bank's  residential  real
                  estate loans consist of residential  first and second mortgage
                  loans and  residential  construction  loans.  The Bank  offers
                  fixed  and   variable   rates  on  its   mortgages   with  the
                  amortization  of first  mortgages with maturity dates of three
                  years and  beyond.  These loans are made  consistent  with the
                  Bank's  appraisal  policy  and  with  the  ratio  of the  loan
                  principal  to  the  value  of  collateral  as  established  by
                  independent  appraisal  generally  not to exceed 95%. The Bank
                  believes  these loan to value  ratios  will be  sufficient  to
                  compensate for fluctuations in real estate market value and to
                  minimize  losses  that could  result  from a  downturn  in the
                  residential real estate market.  The Bank limits interest rate
                  risk and credit risk on these loans by locking in the interest
                  rate for each  loan with the  secondary  market  investor  and
                  receiving the investor's  underwriting approval before funding
                  the loan.

         Commercial  Loans.  The Bank  makes a variety  of loans for  commercial
purposes  in  various  lines of  businesses.  The terms of these  loans  vary by
purpose and by type of underlying  collateral,  if any. The Bank typically makes
equipment  loans for a term of five  years or less at fixed or  variable  rates,
with the loan fully  amortized  over the term.  Equipment  loans  generally  are
secured by the financed  equipment,  and the ratio of the loan  principal to the
value of the financed  equipment or other  collateral  is generally 80% or less.
Loans to support working capital typically have terms not exceeding one year and
are usually secured by accounts receivable,  inventory, or other collateral,  as
well as personal guarantees of the principals of the business. For loans secured
by accounts receivable or inventory, principal is typically repaid as the assets
securing  the loan are  converted  into cash,  and for loans  secured with other
types of collateral,  principal is typically due at maturity. The quality of the
commercial  borrower's  management  and its ability  both to  evaluate  properly
changes in the  supply and demand  characteristics  affecting  its  markets  for
products and services and to respond effectively to such changes are significant
factors in a commercial  borrower's  creditworthiness.  As of December 31, 2000,
commercial loans comprised 15.2% of the Bank's loan portfolio.

         Consumer  Loans.  The Bank makes a variety of loans to individuals  for
personal,  family  and  household  purposes,  including  secured  and  unsecured
installment  and term loans,  home equity loans and home equity lines of credit.
Consumer loan repayments depend upon the borrower's  financial stability and are
more likely to be adversely affected by divorce,  job loss, illness and personal
hardships. Because many consumer loans are secured by depreciable assets such as
boats, cars, and trailers,  the loan should be amortized over the useful life of
the asset.  The Bank  generally  requires  that the  borrower be employed for at
least 12 months  prior to  obtaining  the loan.  The loan  officers  of the Bank
review the borrower's past credit history,  past income level, debt history and,
when  applicable,  cash flow to determine  the impact of all of these factors on
the  borrower's  ability to make future  payments as agreed.  As of December 31,
2000, consumer loans comprised 13.5% of the Bank's loan portfolio.




                                      -5-
<PAGE>

         Agribusiness  Loans.  The Bank makes a variety of  agribusiness  loans,
including real estate based loans,  crop loans, and equipment loans. Real estate
based  agribusiness  loans are made consistent with the Bank's  appraisal policy
and with the ratio of loan  principal to value of the  collateral as established
by  independent  appraisal  generally  not  to  exceed  90%.  Loans  secured  by
agricultural  equipment typically have terms of up to five years. As of December
31, 2000, agribusiness loans comprised 3.4% of the Bank's loan portfolio.

         CREDIT RISKS. The principal economic risk associated with each category
of loans that the Bank makes is the  creditworthiness of the borrower.  Borrower
creditworthiness  is affected by general economic conditions and the strength of
the relevant  business  market segment.  General  economic  factors  affecting a
borrower's ability to repay include interest, inflation and employment rates, as
well as other factors affecting a borrower's customers, suppliers and employees.

         The Bank's  loan  portfolio  is heavily  concentrated  with real estate
loans. With respect to real estate loans generally, the ability of a borrower to
repay a real  estate  loan  will  depend  upon a  number  of  economic  factors,
including employment levels and fluctuations in the value of real estate. In the
case of a real estate  purchase  loan,  the  borrower may be unable to repay the
loans at the end of the loan term and may thus be forced to  refinance  the loan
at a higher  interest rate, or, in certain cases,  the borrower may default as a
result of its  inability to  refinance  the loan.  In either  case,  the risk of
nonpayment  by  the  borrower  is  increased.  In  the  case  of a  real  estate
construction  loan,  there is generally no income from the  underlying  property
during the construction  period, and the developer's  personal obligations under
the loan are  typically  limited.  Each of these  factors  increases the risk of
nonpayment by the borrower.  The Bank also faces additional  credit risks to the
extent that it engages in  adjustable  rate  mortgage  loans.  In the case of an
adjustable  rate  mortgage  loan, as interest  rates  increase,  the  borrower's
required  payments  increase,  thus  increasing  the potential for default.  The
marketability  of all real estate  loans,  including  adjustable  rate  mortgage
loans, is also generally affected by the prevailing level of interest rates.

         With respect to commercial loans, the larger financial institutions are
likely to make proportionately  more loans to medium- to large-sized  businesses
than the Bank makes. Many of the commercial loans of the Bank are made to small-
to  medium-sized  businesses  that may be less  able to  withstand  competitive,
economic and financial  pressures  than large  borrowers.  The  commercial  loan
portfolio of the Bank consists of loans to individual, partnership and corporate
borrowers that are primarily  located in the Bulloch  County area.  Accordingly,
our commercial  borrowers will reflect the diversified  businesses of this area,
and include services, retail trade and manufacturing firms. The risks associated
with commercial  loans depend to a large extent upon various  economic  factors,
including  the  strength  of the  economy in the Bulloch  County  area,  and the
ability of the Bank's commercial borrowers to properly evaluate and respond to a
changing  marketplace.  In addition,  the commercial  borrowers of the Bank face
risks related specifically to the unique nature of their business.  For example,
services and retail trade firms may incur risks  associated with labor shortages
and  consumer  preference  changes,  and  manufacturing  firms may  incur  risks
associated  with  raw  material  and  labor  shortages,   as  well  as  currency
fluctuations.

         Consumer  loans  generally  involve  more credit risks than other loans
because of the type and nature of the  underlying  collateral  or because of the
absence  of any  collateral.  Consumer  loan  repayments  are  dependent  on the
borrower's  continuing  financial  stability  and  are  likely  to be  adversely
affected by job loss,  divorce and  illness.  Furthermore,  the  application  of
various  federal and state laws,  including  federal  and state  bankruptcy  and
insolvency  laws,  may limit the amount  which can be recovered on such loans in
the case of default. In most cases, any repossessed  collateral will not provide
an adequate  source of repayment of the outstanding  loan balance.  Although the
underwriting  process for consumer  loans  includes a comparison of the value of
the security,  if any, to the proposed loan amount,  the Bank cannot predict the
extent to which the  borrower's  ability to pay, and the value of the  security,
will be affected by prevailing economic and other conditions.


                                      -6-
<PAGE>



         Agribusiness loans,  including real estate based loans, crop loans, and
equipment loans generally  involve more credit risk than residential real estate
loans,  because of the typically  larger loan amount.  In addition,  payments on
loans are  dependent  upon the  successful  operation or  management of the farm
property securing the loan. The success of the loan may also be affected by many
factors  outside the control of the farm borrower,  such as weather,  government
farm  policy,  international  demand  for  agricultural  products  and  changing
consumer  preferences.  Weather  presents  one of the greatest  risks,  as hail,
drought,  floods,  or other  conditions  can severely limit crop yields and thus
impair loan repayments and the value of the underlying collateral. This risk can
be reduced by the farmer with crop  insurance  which can guarantee set yields to
provide  certainty of repayment.  Unless the circumstances of the borrower merit
otherwise,  the Bank  generally  will  require  its  borrowers  to  obtain  crop
insurance. Another risk is the uncertainty of government support programs, where
support  payments  are made with the  requirement  that a farmer leave idle from
production  certain  amounts of farm land.  Some farmers rely on the income from
support programs to make loan payments,  and if these programs were discontinued
or significantly changed, cash flow problems or defaults could result.  Finally,
many farmers are dependent upon a limited number of key individuals whose injury
or death may result in an inability to operate the farm.

         LOAN  APPROVAL  AND  REVIEW.  The loan  approval  policies  of the Bank
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  considered  and  approved by an officer with a
higher lending limit or the Loan Committee.  The Bank does not make any loans to
directors or  executive  officers of the Bank unless the loan is approved by the
board of directors  and is made on terms not more  favorable to such person than
would be available to a person not affiliated with the Bank.

         LENDING  LIMITS.  The lending  activities  of the Bank are subject to a
variety of lending limits imposed by Georgia law. While  differing  limits apply
in certain circumstances based on the type of loan or the nature of the borrower
(including the borrower's  relationship  to the Bank),  in general,  the Bank is
subject to a loan-to-one-borrower  limit of an amount equal to 15% of the Bank's
unimpaired  capital and surplus or 25% of the unimpaired  capital and surplus if
the excess over 15% is within the  guidelines  of the Georgia  Department  as an
exception to the 15% limit.  The Bank's  lending  limit at December 31, 2000 was
$750,000 plus an additional  $500,000 for loans which meet the guidelines of the
Georgia Department. These limits will increase or decrease as the Bank's capital
increases or decreases as a result of the Bank's earnings or losses, among other
reasons.  Unless the Bank is able to sell  participations  in its loans to other
financial  institutions,  the Bank  will not be able to meet all of the  lending
needs of loan customers requiring aggregate extensions above these limits.

INVESTMENTS

         As of December 31, 2000,  loans  comprised  approximately  71.1% of the
Bank's assets, investment securities comprised approximately 16.3% of the Bank's
assets and federal funds sold comprised approximately 3.2% of the Bank's assets.
The  Bank  invests  primarily  in  direct  obligations  of  the  United  States,
obligations  guaranteed  as to principal  and interest by the United  States and
obligations of agencies of the United States. In addition,  the Bank enters into
federal funds transactions with its principal correspondent banks, and primarily
acts as a net  seller of such  funds.  The sale of  federal  funds  amounts to a
short-term loan from the Bank to another bank.



                                      -7-
<PAGE>


ASSET AND LIABILITY MANAGEMENT

         It is the  objective of the Bank 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 of the Bank are responsible for monitoring policies and procedures that
are  designed  to ensure  an  acceptable  composition  of  asset/liability  mix,
stability, and leverage of all source of funds while adhering to prudent banking
practices.  It is the overall  philosophy  of management to support asset growth
primarily  through  growth  of core  deposits,  which  include  deposits  of all
categories made by individuals, partnerships and corporations. Management of the
Bank seeks to invest the largest  portion of the Bank's  assets in real  estate,
commercial, consumer and agribusiness loans.

         The Bank  regards  certificates  of  deposits  of  $100,000  or more as
volatile deposits.  The Bank has maintained  sufficient liquidity to repay these
deposits on maturity.  While the Bank does not  generally  pursue these types of
deposits,  at times it is profitable to do so and this option is exercised  when
deemed prudent by management. This accounts for the volatility in this liability
category.

         Securities  sold  subject to  repurchase  are only done on an exception
basis to maintain account relationships. Although the Bank from time to time may
enter into repurchase  agreements,  there currently are no repurchase agreements
outstanding. The Bank has available three overnight federal funds purchase lines
totaling  $13,780,000  which may be used to meet liquidity needs. As of December
31, 2000, the Bank had no balances outstanding under these lines.

         The Bank's  asset/liability  mix is  monitored  on a daily basis with a
quarterly report  reflecting  interest  sensitive assets and interest  sensitive
liabilities  being prepared and presented to the Bank's board of directors.  The
objective of this policy is to control interest sensitive assets and liabilities
so as to minimize the impact of  substantial  movements in interest rates on the
earnings of the Bank.

CORRESPONDENT BANKING

         Correspondent banking involves the providing of services by one bank to
another bank,  which cannot  provide that service for itself from an economic or
practical standpoint.  The Bank is required to purchase  correspondent  services
offered by larger banks,  including  checking  collections,  purchase of federal
funds,  security safekeeping,  investment services,  coin and currency supplies,
overline  and  liquidity   loan   participations   and  sales  of  loans  to  or
participations with correspondent banks.

EMPLOYEES

         As of December  31,  2000,  the Bank had 37  full-time  employees.  The
Company does not have any employees who are not also employees of the Bank.


                                      -8-
<PAGE>


                           SUPERVISION AND REGULATION

GENERAL

         The following  discussion  summarizes  material elements of the federal
and state  regulatory  framework  applicable  to the Company and the Bank.  This
discussion is qualified in its entirety by reference to  applicable  federal and
state  statutes and  regulations.  Furthermore,  the  statutes  and  regulations
affecting the Company and the Bank may change after the date of this Report, and
any such changes may have a material adverse effect on the Company or the Bank.

REGULATION OF THE COMPANY

         The  Company is a bank  holding  company  registered  with the Board of
Governors of the Federal Reserve System (the "Federal  Reserve") and the Georgia
Department of Banking and Finance (the "Georgia  Department")  under the BHC Act
and the FICG. As such, the Company is subject to the  supervision,  examination,
and reporting  requirements  of the BHC Act and the FICG, and the regulations of
the Federal Reserve and the Georgia Department.

         ACQUISITIONS. The BHC Act requires every bank holding company to obtain
the prior approval of the Federal Reserve before:

         o        it may acquire direct or indirect  ownership or control of any
                  voting shares of any bank if, after such acquisition, the bank
                  holding  company will  directly or  indirectly  own or control
                  more than 5% of the voting shares of the bank;

         o        it or any of its subsidiaries,  other than a bank, may acquire
                  all or substantially all of the assets of any bank; or

         o        it may  merge or  consolidate  with  any  other  bank  holding
                  company.

         The BHC Act further  provides that the Federal  Reserve may not approve
any acquisition  that would result in monopoly or would be in furtherance of any
combination or conspiracy to monopolize or attempt to monopolize the business of
banking  in any  section  of the  United  States,  or the effect of which may be
substantially  to  lessen  competition  or to tend to create a  monopoly  in any
section of the United  States,  or that in any other manner would be a restraint
of trade,  unless the  anticompetitive  effects of the proposed  transaction are
clearly  outweighed by the public  interest in meeting the convenience and needs
of the community to be served.  The Federal Reserve is also required to consider
the financial and managerial  resources and future prospects of the bank holding
companies and banks  concerned and the convenience and needs of the community to
be served.  Consideration of financial  resources  generally  focuses on capital
adequacy, which is discussed below.

         Under the Riegle-Neal  Interstate Banking and Branching  Efficiency Act
of 1994 ("Riegle-Neal"), the restrictions on interstate acquisitions of banks by
bank holding companies were repealed.  As a result,  the Company,  and any other
bank holding company located in Georgia is able to acquire a bank located in any
other state,  and a bank holding  company located outside of Georgia can acquire
any Georgia-based bank, in either case subject to certain deposit percentage and
other restrictions. The legislation provides that unless an individual state has
elected to prohibit out-of-state banks from operating interstate branches within
its territory,  adequately  capitalized  and managed bank holding  companies are
able to  consolidate  their  multistate  banking  operations  into a single bank
subsidiary and to branch interstate through acquisitions.


                                      -9-
<PAGE>


De novo branching by an  out-of-state  bank is permitted only if it is expressly
permitted  by the laws of the  host  state.  Georgia  does  not  permit  de novo
branching  by an  out-of-state  bank.  Therefore,  the only  method  by which an
out-of-state  bank or bank  holding  company  may enter  Georgia  is  through an
acquisition.  Georgia has adopted an interstate banking statute that removes the
existing  restrictions  on the  ability  of banks to branch  interstate  through
mergers, consolidations and acquisitions.

         ACTIVITIES. The BHC Act has generally prohibited a bank holding company
from engaging in activities other than banking or managing or controlling  banks
or other  permissible  subsidiaries  and from  acquiring or retaining  direct or
indirect  control  of any  company  engaged in any  activities  other than those
determined by the Federal  Reserve to be closely  related to banking or managing
or  controlling  banks as to be a proper  incident  thereto.  Provisions  of the
Gramm-Leach-Bliley  Act of 1999 (the "GLB Act"),  discussed below, have expanded
the  permissible  activities  of a bank  holding  company  that  qualifies  as a
financial  holding  company.  In  determining  whether a particular  activity is
permissible,  the Federal Reserve must consider  whether the performance of such
an activity can be reasonably  expected to produce benefits to the public,  such
as a greater convenience,  increased competition,  or gains in efficiency,  that
outweigh  possible  adverse  effects such as undue  concentration  of resources,
decreased  or unfair  competition,  conflicts of  interest,  or unsound  banking
practices.

         GRAMM-LEACH-BLILEY  ACT. The GLB Act  implemented  major changes in the
statutory  framework for providing  banking and other financial  services in the
United  States.  The  GLB  Act,  among  other  things,  eliminates  many  of the
restrictions on affiliations among banks and securities firms,  insurance firms,
and other financial service providers.  A bank holding company that qualifies as
a financial  holding  company will be permitted to engage in activities that are
financial in nature or incidental or complimentary to a financial activity.  The
activities  that the GLB Act  expressly  lists as  financial  in nature  include
insurance  activities,  providing  financial and investment  advisory  services,
underwriting securities and limited merchant banking activities.

         To  become  eligible  for these  expanded  activities,  a bank  holding
company must qualify as a financial  holding company.  To qualify as a financial
holding  company,  each insured  depository  institution  controlled by the bank
holding  company  must be  well-capitalized,  well-managed,  and have at least a
satisfactory  rating  under  the  Community  Reinvestment  Act (the  "CRA").  In
addition,  the bank  holding  company must file a  declaration  with the Federal
Reserve of its intention to become a financial holding company.

         The GLB Act is  considered  to be one of the most  significant  banking
laws since  Depression-era  statutes were enacted.  The Company does not believe
that the GLB Act will have a material adverse impact on its operations. However,
to the extent that it allows banks,  securities  firms,  and insurance  firms to
affiliate, the financial services industry may experience further consolidation.
The GLB Act may have the result of increasing the amount of competition that the
Company faces from larger  institutions and other companies  offering  financial
products  and  services,  many of which may have  substantially  more  financial
resources than the Company.




                                      -10-
<PAGE>


         SUPPORT OF SUBSIDIARY  INSTITUTIONS.  Under Federal Reserve policy, the
Company is expected to act as a source of financial  strength for, and to commit
resources to support its banking  subsidiaries.  This support may be required at
times when, absent such Federal Reserve policy,  the Company may not be inclined
to provide it. In addition,  any capital loans by a bank holding  company to its
banking  subsidiaries  are  subordinate  in right of payment to deposits  and to
certain  other  indebtedness  of such  banks.  In the  event  of a bank  holding
company's  bankruptcy,  any commitment by the bank holding  company to a federal
bank regulatory  agency to maintain the capital of a banking  subsidiary will be
assumed by the bankruptcy trustee and entitled to a priority of payment.

REGULATION OF THE BANK

         As a  state-chartered  bank,  the Bank is examined and regulated by the
Federal Deposit Insurance  Corporation (the "FDIC") and the Georgia  Department.
The major  functions of the FDIC with respect to insured  banks  include  paying
depositors to the extent  provided by law in the event an insured bank is closed
without adequately providing for payment of the claims of depositors,  acting as
receiver  of state  banks  placed in  receivership  when so  appointed  by state
authorities, and preventing the continuance or development of unsound and unsafe
banking practices.  In addition,  the FDIC also approves  conversions,  mergers,
consolidations, and assumption of deposit liability transactions between insured
banks and  noninsured  banks or  institutions  to  prevent  capital  or  surplus
diminution in such transactions where the resulting bank is an uninsured bank.

         The  Georgia  Department  regulates  all  areas of the  Bank's  banking
operations, including mergers, establishment of branches, loans, interest rates,
and  reserves.  The Bank is also  subject  to  Georgia  banking  and usury  laws
restricting  the amount of interest  that it may charge in making loans or other
extensions  of  credit.  With  respect  to  expansion,  the Bank was  previously
prohibited from establishing  branch offices or facilities outside of the county
in which its main office was located,  with certain exceptions.  Georgia law now
permits,  with  required  regulatory  approval,  the  establishment  of de  novo
branches in an unlimited  number of counties  within the State of Georgia by the
subsidiary  bank(s) of bank  holding  companies  then engaged in the business of
banking in Georgia.

         PROMPT CORRECTIVE  ACTION.  The Federal Deposit  Insurance  Corporation
Improvement Act ("FDICIA")  establishes a system of prompt  corrective action to
resolve the problems of  undercapitalized  institutions.  Under this system, the
federal  banking  regulators are required to establish  five capital  categories
(well  capitalized,  adequately  capitalized,  undercapitalized,   significantly
undercapitalized,  and  critically  undercapitalized)  and are  required to take
certain  mandatory  supervisory  actions,  and  are  authorized  to  take  other
discretionary   actions,   with   respect   to   institutions   in   the   three
undercapitalized  categories, the severity of which will depend upon the capital
category  in which the  institution  is placed.  Generally,  subject to a narrow
exception,  the banking  regulator must appoint a receiver or conservator for an
institution that is critically undercapitalized.  The federal banking regulators
have specified by regulation the relevant capital level for each category.

         An institution that is categorized as  undercapitalized,  significantly
undercapitalized,  or  critically  undercapitalized  is  required  to  submit an
acceptable  capital   restoration  plan  to  its  appropriate   federal  banking
regulator.  A bank holding  company must guarantee that a subsidiary  depository
institution meets its capital restoration plan, subject to certain  limitations.
The obligation of a controlling  holding  company to fund a capital  restoration
plan is limited to the lesser of 5% of an  undercapitalized  subsidiary's assets
or  the  amount   required  to  meet   regulatory   capital   requirements.   An
undercapitalized  institution is also generally  prohibited  from increasing its
average  total  assets,  making  acquisitions,  establishing  any  branches,  or
engaging  in any new line of  business,  except in  accordance  with an accepted
capital  restoration  plan or with the approval of the FDIC.  In  addition,  the
appropriate federal banking regulator may treat an undercapitalized  institution
in the same manner as it treats a significantly  undercapitalized institution if
it determines that those actions are necessary.


                                      -11-
<PAGE>

         At December  31, 2000,  the Bank had the  requisite  capital  levels to
qualify as "well capitalized."

         FDIC INSURANCE  ASSESSMENTS.  The FDIC adopted a risk-based  assessment
system for insured  depository  institutions  that takes into  account the risks
attributable  to  different   categories  and   concentrations   of  assets  and
liabilities.  The  system  assigns  an  institution  to  one  of  three  capital
categories:  (i)  well  capitalized;  (ii)  adequately  capitalized;  and  (iii)
undercapitalized. These three categories are substantially similar to the prompt
corrective  action  categories  described  above,  with  the  "undercapitalized"
category  including   institutions  that  are  undercapitalized,   significantly
undercapitalized,  and critically  undercapitalized for prompt corrective action
purposes.  An  institution  is  also  assigned  by the  FDIC  to  one  of  three
supervisory  subgroups  within each capital group.  An  institution's  insurance
assessment rate is then determined based on the capital category and supervisory
category to which it is assigned.  Under the final risk-based assessment system,
there are nine assessment  risk  classifications  to which different  assessment
rates are  applied.  Assessments  range from 0 to 27 cents per $100 of deposits,
depending on the institution's capital group and supervisory subgroup.

         The FDIC may  terminate  its insurance of deposits if it finds that the
institution  has  engaged in unsafe and  unsound  practices,  is in an unsafe or
unsound  condition to continue  operations,  or has violated any applicable law,
regulation, rule, order, or condition imposed by the FDIC.

         SAFETY AND SOUNDNESS STANDARDS.  The Federal Deposit Insurance Act (the
"FDIA"),  as  amended  by  FDICIA  and  the  Riegle  Community  Development  and
Regulatory  Improvement  Act of  1994,  requires  the  federal  bank  regulatory
agencies to prescribe  standards,  by  regulations  or  guidelines,  relating to
internal  controls,   information  systems  and  internal  audit  systems,  loan
documentation,  credit underwriting,  interest rate risk exposure, asset growth,
asset quality,  earnings,  stock valuation and compensation,  fees and benefits,
and such  other  operational  and  managerial  standards  as the  agencies  deem
appropriate.  The  federal  bank  regulatory  agencies  have  adopted  a set  of
guidelines  prescribing  safety and soundness  standards  pursuant to FDICIA, as
amended.  The  guidelines  establish  general  standards  relating  to  internal
controls and information  systems,  internal audit systems,  loan documentation,
credit  underwriting,  interest rate  exposure,  asset growth and  compensation,
fees,  and benefits.  In general,  the guidelines  require,  among other things,
appropriate systems and practices to identify and manage the risks and exposures
specified in the guidelines.  The guidelines prohibit excessive  compensation as
an unsafe and unsound  practice and describe  compensation as excessive when the
amounts paid are unreasonable or  disproportionate  to the services performed by
an executive officer, employee, director, or principal shareholders. The federal
banking agencies determined that stock valuation standards were not appropriate.
In addition, the agencies adopted regulations that authorize, but do not require
an agency to order an  institution  that has been given notice by an agency that
it is not  satisfying  any of such safety and  soundness  standards  to submit a
compliance plan. If, after being so notified,  an institution fails to submit an
acceptable  compliance  plan or fails in any  material  respect to  implement an
accepted  compliance  plan, the agency must issue an order  directing  action to
correct the  deficiency  and may issue an order  directing  other actions of the
types to which an  undercapitalized  association  is subject  under the  "prompt
corrective  action" provisions of FDICIA. If an institution fails to comply with
such an order, the agency may seek to enforce such order in judicial proceedings
and to impose civil money penalties.  The federal bank regulatory  agencies also
proposed guidelines for asset quality and earnings standards.


                                      -12-
<PAGE>


          Community  Reinvestment  Act. The Bank is subject to the provisions of
the CRA, which requires the FDIC, in connection with its regular  examination of
the Bank,  to assess  the  Bank's  record of  meeting  the  credit  needs of the
communities  it  serves,  including  low-  and  moderate-income   neighborhoods,
consistent with safe and sound banking practices.

         Regulations  promulgated  under the CRA are  intended  to set  distinct
assessment  standards for financial  institutions.  The regulations  provide for
streamlined  procedures for institutions  with assets of less than $250 million.
The regulations contain the following three evaluation tests:

         o        a lending test, which compares the institution's  market share
                  of loans in low- and moderate income areas to its market share
                  of loans in its entire service area;

         o        a service test, which evaluates the provision of services that
                  promote the availability of credit to low- and moderate-income
                  areas; and

         o        an investment test, which evaluates the  institution's  record
                  of investments in  organizations  designed to foster community
                  development,   small-  and   minority-owned   businesses   and
                  affordable   housing   lending,   including  state  and  local
                  government housing or revenue bonds.

         Institutions  are required to make public  disclosure  of their written
CRA evaluations made by regulatory  agencies.  This promotes  enforcement of CRA
requirements   by  providing   the  public  with  the  status  of  a  particular
institution's  community  investment record. In addition to public disclosure of
an institution's CRA assessment, regulatory authorities are required to consider
an  institution's  CRA assessment  when an  institution  applies for approval to
establish  a new branch  which will  accept  deposits,  to  relocate an existing
branch or to merge with another federally regulated financial institution.

         PRIVACY.  The GLB  Act  also  contains  provisions  regarding  consumer
privacy.  These  provisions  require  financial  institutions  to disclose their
policy  for  collecting  and  protecting  confidential  information.   Customers
generally may prevent  financial  institutions  from sharing personal  financial
information  with  nonaffiliated  third  parties,  other than third parties that
market the  institution's  own products and  services.  Additionally,  financial
institutions  generally  may  not  disclose  consumer  account  numbers  to  any
nonaffiliated  third party for use in  telemarketing,  direct mail  marketing or
other marketing through electronic means to the consumer.

PAYMENT OF DIVIDENDS

         The Company is a legal entity  separate and distinct from the Bank. The
principal  sources  of  revenues  to the  Company,  including  cash  flow to pay
dividends to its shareholders,  are dividends from the Bank. There are statutory
and  regulatory  limitations on the payment of dividends by the Bank, as well as
by the Company to its shareholders.

         If,  in the  opinion  of a  federal  banking  regulator,  a  depository
institution  under its  jurisdiction  is  engaged in or is about to engage in an
unsafe or unsound practice (which,  depending on the financial  condition of the
depository  institution could include the payment of dividends),  such regulator
may require,  after notice and hearing,  that such institution  cease and desist
from such practice. The federal banking regulators have indicated



                                      -13-
<PAGE>

that paying dividends that deplete a depository institution's capital base to an
inadequate level would be unsafe and unsound banking  practice.  Under FDICIA, a
depository  institution  may not pay any  dividend if payment  would cause it to
become  undercapitalized  or if it already is  undercapitalized.  Moreover,  the
federal banking  regulators have issued policy statements that provide that bank
holding  companies and insured banks should  generally only pay dividends out of
current  operating  earnings.  The payment of  dividends  by the Company and its
banking subsidiary may also be affected or limited by other factors, such as the
requirement to maintain adequate capital above regulatory guidelines.

         Georgia  law  provides  additional   restrictions  on  the  payment  of
dividends  by the Bank to the  Company.  The Bank must have the  approval of the
Georgia Department to pay cash dividends, unless at the time of such payment:

         o        the total classified assets at the most recent  examination of
                  the Bank do not  exceed 80% of Tier 1 Capital  plus  allowance
                  for loan losses as reflected at such examination;

         o        the aggregate  amount of dividends  declared or anticipated to
                  be  declared in the  calendar  year does not exceed 50% of the
                  net  profits,  after  taxes,  but  before  dividends,  for the
                  previous calendar year; and

         o        the ratio of Tier 1 Capital to Adjusted  Total Assets will not
                  be less than 6%.

CAPITAL ADEQUACY

         The  Company  and the Bank are  required  to  comply  with the  capital
adequacy  standards  established  by the  Federal  Reserve,  in the  case of the
Company,  and the  FDIC,  in the  case of the  Bank.  The  Federal  Reserve  has
established two basic measures of capital  adequacy for bank holding  companies:
(i) a risk-based  measure,  and (ii) a leverage measure.  A bank holding company
must satisfy all applicable capital standards to be considered in compliance.

         The  risk-based  capital  standards  are  designed  to make  regulatory
capital  requirements  more sensitive to differences in risk profile among banks
and bank holding companies,  to account for off-balance-sheet  exposure,  and to
minimize  disincentives for holding liquid assets.  Assets and off-balance-sheet
items, such as letters of credit and unfunded loan commitments,  are assigned to
broad risk categories,  each with  appropriate  weights.  The resulting  capital
ratios  represent  capital as a  percentage  of total  risk-weighted  assets and
off-balance-sheet items.

         The minimum  guideline for the ratio of total capital to  risk-weighted
assets is 8%. At least half of total  capital must be comprised of common stock,
minority  interests  in  the  equity  accounts  of  consolidated   subsidiaries,
noncumulative  perpetual  preferred  stock,  and a limited  amount of cumulative
perpetual preferred stock, less goodwill and certain other intangible assets, or
"Tier I  capital."  The  remainder  may  consist  of  subordinated  debt,  other
preferred  stock,  and a  limited  amount  of loan  loss  reserves,  or "Tier II
capital." At December 31, 2000,  the  Company's  consolidated  total  risk-based
capital ratio and its Tier I risk-based capital ratio (i.e., the ratio of Tier I
capital to risk-weighted assets) were 11.9% and 10.8%, respectively.



                                      -14-
<PAGE>




         In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding  companies.  These guidelines  provide for a minimum
ratio of Tier I capital to average  assets,  less  goodwill  and  certain  other
intangible  assets, of 3% for bank holding companies that meet certain specified
criteria,  including those having the highest  regulatory rating. All other bank
holding  companies  generally  are  required to maintain a leverage  ratio of at
least 3%, plus an additional  cushion of 1% to 2%. The Company's  leverage ratio
at December 31, 2000 was 9%.

         The guidelines  also provide that bank holding  companies  experiencing
internal  growth or making  acquisitions  will be expected  to  maintain  strong
capital positions  substantially  above the minimum  supervisory  levels without
significant reliance on intangible assets. Furthermore,  the Federal Reserve has
indicated  that it will  consider  a  tangible  Tier I  capital  leverage  ratio
(deducting  all  intangibles)  and other  indications  of  capital  strength  in
evaluating proposals for expansion or new activities.

         The Bank is subject to  risk-based  and leverage  capital  requirements
adopted by the FDIC,  which are  substantially  similar to those  adopted by the
Federal Reserve for bank holding companies.

         The Bank was in compliance with applicable minimum capital requirements
as of December  31, 2000.  The Company has not been advised by any  regulator of
any specific minimum capital ratio requirement applicable to it or the Bank.

         Failure to meet capital guidelines could subject a bank to a variety of
enforcement remedies, including issuance of a capital directive, the termination
of deposit  insurance  by the FDIC,  a  prohibition  on the  taking of  brokered
deposits,  and certain other  restrictions on its business.  As described above,
substantial additional  restrictions can be imposed upon FDIC-insured depository
institutions that fail to meet applicable capital requirements.

RESTRICTIONS ON TRANSACTIONS WITH AFFILIATES

         The Company and the Bank are subject to the  provisions  of Section 23A
of the Federal Reserve Act. Section 23A places limits on the amount of:

         o        a bank's loans or extensions of credit to affiliates;

         o        a bank's investment in affiliates;

         o        assets a bank may purchase  from  affiliates,  except for real
                  and personal property exempted by the Federal Reserve;

         o        the amount of loans or  extensions  of credit to third parties
                  collateralized by the securities or obligations of affiliates;
                  and

         o        a bank's  guarantee,  acceptance or letter of credit issued on
                  behalf of an affiliate.

         The total amount of the above  transactions is limited in amount, as to
any one  affiliate,  to 10% of a  bank's  capital  and  surplus  and,  as to all
affiliates combined,  to 20% of a bank's capital and surplus. In addition to the
limitation on the amount of these  transactions,  each of the above transactions
must also meet specified collateral requirements. The Bank must also comply with
other provisions designed to avoid the taking of low-quality assets.



                                      -15-
<PAGE>

         The Company and the Bank are also subject to the  provisions of Section
23B of  the  Federal  Reserve  Act  which,  among  other  things,  prohibits  an
institution from engaging in the above  transactions  with affiliates unless the
transactions  are on terms  substantially  the same, or at least as favorable to
the  institution  or its  subsidiaries,  as  those  prevailing  at the  time for
comparable transactions with nonaffiliated companies.

         The Bank is also subject to restrictions on extensions of credit to its
executive  officers,   directors,   principal  shareholders  and  their  related
interests. These 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.

MONETARY POLICY

         The  earnings  of the Bank,  as well the  Company,  will be affected by
domestic  and  foreign  conditions,  particularly  by the  monetary  and  fiscal
policies of the United States  government and its agencies.  The Federal Reserve
has had, and will 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 mitigate  recessionary and inflationary  pressures
by regulating  the national  money supply.  The  techniques  used by the Federal
Reserve   include   setting  the  reserve   requirements  of  member  banks  and
establishing  the discount rate on member bank  borrowings.  The Federal Reserve
also conducts open market transactions in United States government securities.



                                      -16-
<PAGE>
ITEM 2.  PROPERTIES
         ----------

         The  Company's  executive  office is located at the Bank's main office,
201 North Main Street,  Statesboro,  Georgia  30458.  The Bank's main office was
constructed  in 1991 and contains  approximately  16,000 square feet. All of the
executive  officers of the Company and the Bank are located at this  facility as
are all bookkeeping and computer operations.

         The Bank  also has two  branches,  located  at 620  Zetterower  Avenue,
Statesboro,  Georgia and 29 North Parker Avenue,  Brooklet,  Georgia. The Bank's
main office and all  branches  are owned fee simple  with no major  encumbrances
thereon.

ITEM 3.  LEGAL PROCEEDINGS
         -----------------

         As of the date of this Report,  there are no material legal proceedings
to which the Company or any of its properties were subject.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
         ---------------------------------------------------

         No matters  were  submitted  for a vote of the  Company's  shareholders
during the fourth quarter of 2000.



                                      -17-
<PAGE>



                                     PART II

ITEM 5.  MARKET PRICE AND DIVIDENDS ON THE COMMON STOCK
         ----------------------------------------------

MARKET FOR COMMON STOCK

         Prior to the acquisition of its common stock by the Company, the Bank's
common stock was traded from time to time on an individual  basis, but there was
no established  trading market.  There is no established  trading market for the
Company's  common stock,  and an active public trading market is not expected to
develop in the near future.  The approximate  number of holders of record of the
Company's common stock as of December 31, 2000 was 511.

DIVIDENDS

         The Company is a legal entity  separate and distinct from the Bank. The
principal  sources  of the  Company's  cash  flow,  including  cash  flow to pay
dividends to its  shareholders,  are dividends  paid by the Bank to the Company.
Statutory and regulatory limitations apply to the Bank's payment of dividends to
the  Company  as  well  as  to  the  Company's   payment  of  dividends  to  its
shareholders.

         Dividends  are payable  with respect to the Bank common stock only when
and if declared by the Bank's board of directors.  The Bank is restricted in its
ability to pay  dividends by the FICG,  which  provides  that a bank may not pay
dividends when it is insolvent or when the payment thereof would render the bank
insolvent  or  when  the  declaration  or  payment  would  be  contrary  to  any
restrictions contained in a bank's articles of incorporation. It then places the
following further restrictions on the payment of dividends:

         o        dividends  may not be  declared  or paid at any  time the Bank
                  does  not  have  paid-in  capital  and  appropriated  retained
                  earnings  which,  in  combination,  equal at least  20% of its
                  capital stock; and

         o        dividends  may not be paid  without the prior  approval of the
                  Georgia  Department,   if  the  dividends  are  in  excess  of
                  specified   amounts   fixed  by   regulation  of  the  Georgia
                  Department.

         With respect to the Company, dividends may be paid out of funds legally
available  therefor in accordance  with the  provisions of the Georgia  Business
Corporation Code (the "GBCC").  Under the GBCC, whether dividends may be paid is
determined by  implementing  two basic tests:  an equity  insolvency  test and a
balance  sheet  test.  The equity  insolvency  test  prohibits  the payment of a
dividend if, after giving it effect,  the  corporation  would not be able to pay
its debts as they become due in the usual course of business.  The balance sheet
test  prohibits  the  payment  of a dividend  if,  after  giving it effect,  the
corporation's  total assets would be less than the sum of its total  liabilities
plus the amount  that would be needed to satisfy  the  preferential  rights upon
dissolution  of  shareholders  whose  preferential  rights are superior to those
receiving the dividend.  In addition,  the Federal Reserve generally prohibits a
bank holding  company  from paying any  dividends on its common stock if at such
time its debt to equity  ratio is equal to or  greater  than 30%.  Further,  the
Company's  ability to pay dividends is subject to the financial  performance  of
the Bank,  which is dependent upon, among other things,  the local economy,  the
success of the bank's lending activities, compliance of the bank with applicable
regulations, investment performance and the ability to generate fee income.

         Prior to consummation of the holding company  reorganization,  the Bank
declared annual dividends of $181,300, or $.50 per share in 2000 and 1999.



                                      -18-
<PAGE>
RECENT SALES OF UNREGISTERED SECURITIES

         The  Company  was  formed on April 25,  2000 in order to become the one
bank  holding  company of the Bank.  On April 25,  2000,  solely for purposes of
facilitating the holding company reorganization,  10 shares of common stock were
issued to Leonard E.  Herrington  for aggregate  cash  consideration  of $10.00.
These shares were not  registered  under the Securities Act of 1933, as amended,
in reliance on the  exemption  set forth in Section 4(2)  thereof.  These shares
were subsequently redeemed by the Company for $1.00 per share in accordance with
the terms of the plan of reorganization.

         On November 1, 2000,  in connection  with  effecting a one bank holding
company  reorganization,  and in  accordance  with  the  terms  of the  plan  of
reorganization,  each of the  362,600  outstanding  shares of the Bank's  common
stock were exchanged,  on a one for one basis, for 362,600 shares of the Company
common stock.  These shares were not  registered  under the  Securities  Act, in
reliance on the exemption set forth in Section 3(a)(12) thereof.



                                      -19-
<PAGE>




ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS
         -----------------------------------------------------------

         This   analysis  has  been   prepared  to  provide   insight  into  the
consolidated financial condition of the Company and to address the factors which
the Company believes has affected the Company's results of operations.

         As the  holding  Company  reorganization  pursuant to which the Company
became the sole shareholder of the Bank became  effective  November 1, 2000, all
financial  information for earlier periods relates to the Bank,  rather than the
Company.

Results of Operations

         The Company and the Bank reported consolidated net income of $1,175,077
($3.24  earnings  per share) for the year ended  December  31, 2000  compared to
$913,864  ($2.52  earnings  per share) for the year ended  December 31, 1999 and
$701,850  ($1.94  earnings per share) for the year ended  December 31, 1998. Net
interest income after  provision for loan losses was $3,705,878,  $3,163,041 and
$2,958,301  for the  three  years  ended  December  31,  2000,  1999,  and 1998,
respectively.  The provision for loan losses was $170,000,  $182,500 and $78,000
for the three  years  ended  December  31,  2000,  1999 and 1998,  respectively.
Non-interest income totaled $855,776,  $752,384 and $703,798 for the three years
ended December 31, 2000, 1999 and 1998,  respectively and non-interest  expenses
totaled $2,734,854, $2,488,155 and $2,461,087 for the three years ended December
31, 2000, 1999 and 1998, respectively.

         The Company  believes the increase in net income over these periods can
be  attributed  principally  to a 30%  increase  in the  loan  portfolio,  a 16%
increase in deposit  income and close  monitoring of the Company's  non-interest
expenses.  The  following  table  summarizes  the results of  operations  of the
Company for the three years ended December 31, 2000.
<TABLE>
<CAPTION>
                                                Years Ended December 31,
                                   --------------------------------------------------
                                       2000                1999                 1998
                                   ----------          ----------          ----------
<S>                                <C>                 <C>                 <C>
Interest income                    $7,170,494          $5,787,543          $5,090,155
Interest expense                    3,294,616           2,442,002           2,131,854
                                   ----------          ----------          ----------
Net interest income                 3,875,878           3,345,541           2,958,301
Provision for loan losses             170,000             182,500              78,000
Noninterest income                    855,776             753,384             703,798
Noninterest expenses                2,734,854           2,488,155           2,461,087
                                   ----------          ----------          ----------
Income before taxes                 1,826,800           1,427,270           1,123,012
Income taxes                          651,723             513,406             421,162
                                   ----------          ----------          ----------
  Net income                       $1,175,077          $  913,864          $  701,850
                                   ==========          ==========          ==========
</TABLE>

<TABLE>
<CAPTION>
                                                             Years Ended December 31,
                                                    ---------------------------------------
                                                      2000           1999            1998
                                                    -------        -------          -------
<S>                                                  <C>             <C>             <C>
Return on assets (net income divided by              1.39%           1.28%           1.17%
  average total assets)
Return on equity (net income divided by             16.76%          14.68%          12.42%
  average equity)
Dividend payout ratio (dividends                    15.40%          19.80%          51.50%
  declared per share divided by diluted
  net income per share)
Equity to assets ratio at December 31                9.04%           9.31%           9.36%
  (average equity divided by average
  total assets)
</TABLE>





                                      -20-
<PAGE>




MANAGEMENT'S DISCUSSION AND ANALYSIS

TABLE 1 - NET INTEREST INCOME AND AVERAGE BALANCES ($ IN THOUSANDS)

<TABLE>
<CAPTION>
                                                         2000                                           1999
                                           ------------------------------------     -----------------------------------------

                                                         Interest        Rate                     Interest             Rate
                                           Average       Income/        Earned/       Average      Income/            Earned/
                                           Balance       Expense         Paid         Balance      Expense             Paid
                                          ---------    ----------      --------     ----------   ----------        ----------


<S>                                      <C>            <C>                <C>       <C>            <C>               <C>
Interest-earning assets:
 Deposits in other banks                 $    25        $     1            4.00%     $    45        $     2           4.44%
 Taxable investment securities            15,952            982            6.16%      11,937            690           5.78%
 Nontaxable investment securities            307             13            4.23%          45              2           4.44%
 Federal funds sold                        3,135            195            6.22%       3,519            180           5.12%
 Total loans                              59,309          5,980           10.08%      50,411          4,916           9.75%
                                         -------        -------        --------      -------        -------         ------
    Total interest-earning assets         78,728          7,171                       65,957          5,790
                                         -------        -------                      -------        -------


    Yield on average
       interest-earning assets                                             9.11%                                      8.78%
                                                                       ========                                    =======


Noninterest-earning assets:
 Cash and due from banks                   2,395                                       2,844
 Premises and equipment                    1,975                                       2,066
 Other real estate owned                     268                                         142
 Interest receivable and other assets      1,694                                       1,513
                                         -------                                     -------
    Total noninterest-earning assets       6,332                                       6,565
                                         -------                                     -------
    TOTAL ASSETS                        $ 85,060                                    $ 72,522
                                         =======                                     =======


Interest-bearing liabilities:
 Demand deposits                        $ 12,651            337            2.66%    $ 11,112        $   274           2.47%
 Savings and time deposits                52,013          2,907            5.59%      42,357          2,136           5.04%
 Federal funds purchased                      17              1            5.88%          39              2           5.13%
 Repurchase agreements                         -              -               -          145              4           2.76%
 Federal Home Loan Bank advances             822             50           6.08%          480             26           5.42%
                                         -------        -------        -------       -------        -------         ------
     Total interest-bearing liabilities   65,503          3,295                       54,133          2,442
                                         -------        -------                      -------        -------

   Cost of average interest-bearing
      liabilities                                                         5.03%                                       4.51%
                                                                       =======                                     =======


Noninterest bearing liabilities:
 Demand deposits                          11,500                                      10,540
 Interest payable and other liabilities      713                                       2,086
                                         -------                                     -------
    Total noninterest-bearing
       liabilities                        12,213                                      12,626
                                         -------                                     -------

    Total liabilities                     77,716                                      66,759
Stockholders' equity                       7,344                                       5,763
                                         -------                                     -------

     Total liabilities and
        stockholders' equity            $ 85,060                                    $ 72,522
                                         =======                                     =======

   Net interest income                                  $ 3,876                                     $ 3,348
                                                         ======                                      ======

   Net yield on interest-earning
        assets                                                            4.92%                                       5.08%
                                                                       =======                                     =======
</TABLE>




TABLE 1 - NET INTEREST INCOME AND AVERAGE BALANCES ($ IN THOUSANDS) (continued)


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

                                                      Interest      Rate
                                           Average     Income/     Earned/
                                           Balance     Expense      Paid
                                          ----------  ----------  ----------



Interest-earning assets:
 Deposits in other banks                   $    124    $      8       6.45%
 Taxable investment securities                9,406         525       5.58%
 Nontaxable investment securities                 -           -       0.00%
 Federal funds sold                           2,525         139       5.50%
 Total loans                                 42,452       4,421      10.41%
                                           --------    --------      -----

    Total interest-earning assets            54,507       5,093
                                           --------    --------

    Yield on average
       interest-earning assets                                        9.34%
                                                                     =====


Noninterest-earning assets:
 Cash and due from banks                      2,540
 Premises and equipment                       2,131
 Other real estate owned                         91
 Interest receivable and other assets         1,357
                                           --------

    Total noninterest-earning assets          6,119
                                           --------


    TOTAL ASSETS                           $ 60,626
                                           ========



Interest-bearing liabilities:
 Demand deposits                           $  8,335    $    216       2.59%
 Savings and time deposits                   35,286       1,886       5.34%
 Federal funds purchased                          3           -       0.00%
 Repurchase agreements                        1,003          30       2.99%
 Federal Home Loan Bank advances                 23           -       0.00%
                                            -------     -------       ----
    Total interest-bearing liabilities       44,650       2,132
                                            -------     -------

   Cost of average interest-bearing
      liabilities                                                     4.77%
                                                                      ====


Noninterest bearing liabilities:
 Demand deposits                              9,395
 Interest payable and other liabilities       1,254
                                             ------

    Total noninterest-bearing liabilities    10,649
                                             ------

    Total liabilities                        55,299
                                             ------
Stockholders' equity                          5,327
                                             ------

     Total liabilities and
        stockholders' equity               $ 60,626
                                           ========

   Net interest income                                 $  2,961
                                                       ========


   Net yield on interest-earning
        assets                                                        5.43%
                                                                  ==========

                                      -21-
<PAGE>



MANAGEMENT'S DISCUSSION AND ANALYSIS

TABLE 2 - RATE/VOLUME VARIANCE ANALYSIS ($ IN THOUSANDS)

         The table below sets forth  certain  information  regarding  changes in
interest income and interest  expense for the periods  indicated.  The change in
interest  attributable  to volume has been  determined by applying the rate from
the earlier year to the change in average  balances  outstanding  between years.
The change in interest due to rate has been determined by applying the change in
rate  between  years  to  average  balances   outstanding  in  the  later  year.
Accordingly,  changes  that are not solely due to volume have been  consistently
attributed to rate.

<TABLE>
<CAPTION>
                                                                                Years Ended December 31

                                                          1999 Vs 2000                               1998 Vs 1999
                                            ----------------------------------------      ----------------------------------------
                                                      Increase (Decrease)                         Increase (Decrease)
                                                             Due to                                      Due to
                                            ----------------------------------------      ----------------------------------------
                                              Volume          Rate             Net         Volume          Rate            Net
                                             -------        -------         -------       -------         -------        -------
 <S>                                           <C>            <C>             <C>           <C>             <C>            <C>
Interest income
   Deposits in other banks                 $     0         $     0         $     0         $    (5)        $     0         $    (5)
   Taxable investment securities               232              62             294             141              24             165
   Nontaxable investment securities             12              (1)             11               0               2               2
   Federal funds sold                          (19)             33              14              55             (14)             41
   Loans                                       868             196           1,064             828            (334)            494
                                           -------         -------         -------         -------         -------         -------
      Total                                  1,093             290           1,383           1,019            (322)            697
                                           -------         -------         -------         -------         -------         -------

Interest expense
   Demand deposits                              39              24              63              72             (14)             58
   Savings and time deposits                   485             286             771             378            (128)            250
   Federal funds purchased                      (1)              0              (1)              0               2               2
   Repurchase agreements                        (4)              0              (4)            (26)              0             (26)
   Federal Home Loan Bank advances              19               5              24               0              26              26
                                           -------         -------         -------         -------         -------         -------
      Total                                    538             315             853             424            (114)            310
                                           -------         -------         -------         -------         -------         -------

Net interest income                        $   555         $   (25)        $   530         $   595         $  (208)        $   387
                                           =======         =======         =======         =======         =======         =======
</TABLE>



NET INTEREST INCOME

         Net interest  income is the Company's  primary source of income.  It is
the net of income generated by interest earning assets less the interest paid on
interest  bearing  liabilities.  Interest earning assets for the Company include
loans, investment securities,  federal funds sold, and interest earning deposits
in other banks. The Company's  interest bearing  liabilities  include  deposits,
federal funds purchased, and Federal Home Loan Bank advances.

         In 2000, net interest income was  $3,875,878,  representing an increase
of 15.85% as compared  to 1999.  The average  yield on interest  earning  assets
increased  to 9.11% in 2000 from  8.78% in 1999,  and the  average  rate paid on
interest bearing liabilities  increased to 5.03% in 2000 from 4.51% in 1999. The
net interest  income (net interest  income divided by average  interest  earning
assets)  decreased  to  4.92% in 2000  from  5.08% in  1999.  This  decrease  is
primarily  attributable to a rising interest rate environment and the Bank being
liability sensitive.

         In 1999, net interest income was  $3,345,541,  representing an increase
of 13.1% as compared  to 1998.  The average  yield on  interest  earning  assets
decreased  to 8.78% in 1999 from  9.34% in 1998,  and the  average  rate paid on
interest bearing liabilities  decreased to 4.51% in 1999 from 4.77% in 1998. The
net interest  income (net interest  income divided by average  interest  earning
assets) decreased to 5.08% in 1999 from 5.43% in 1998.


                                      -22-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS

PROVISION FOR LOAN LOSSES

         Credit risk is inherent in the business of making loans.  The Bank sets
aside an allowance for loan losses  through  charges to earnings,  which charges
are  reflected in the income  statement as the  provision  for loan losses.  The
provision for loan losses  represents the amount charged  against current period
earnings to achieve an allowance for loan losses that in  management's  judgment
is adequate to absorb the losses inherent in the Bank's loan portfolio.

         The allowance for loan losses represents management's assessment of the
risk associated  with extending  credit and its evaluation of the quality of the
loan portfolio. Management analyzes the loan portfolio to determine the adequacy
of the  allowance  for loan  losses and the  appropriate  provision  required to
maintain a level  considered  adequate to absorb  anticipated  loan  losses.  In
assessing the adequacy of the allowance,  management  reviews the size,  quality
and risk of loans in the  portfolio.  Management  also considers such factors as
the  collectibility of past due loans,  volume of new loans,  composition of the
loan portfolio, and general economic outlook. The Bank has two principal methods
for analyzing the reserve:  the historical  method (past trend  percentage  plus
classified  loan  percentage)  and the one percent  method (one percent of total
loans plus classified loan percentage).  At December 31, 2000, the allowance for
loan losses was believed to be adequate to provide for  potential  losses in the
loan portfolio.

         The Bank's  allowance  for loan  losses is also  subject to  regulatory
examinations and determinations as to adequacy, which may take into account such
factors as the  methodology  used to calculate the allowance for loan losses and
the size of the allowance for loan losses in comparison to a group of peer banks
identified  by the  regulators.  During  their  routine  examinations  of banks,
regulatory  agencies  may require a bank to make  additional  provisions  to its
allowance  for loan  losses  when,  in the  opinion  of the  regulators,  credit
evaluations and allowance for loan loss methodology differ materially from those
of management.

         The provision for loan losses was $170,000 for the year ended  December
31, 2000,  compared to $182,000 for the year ended  December 31, 1999. The ratio
of the  allowance  for loan  losses to total  loans at the end of the period was
1.15% and 1.61% as of December 31, 2000 and 1999, respectively.


                                      -23-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS

NONINTEREST INCOME

         Noninterest  income  consists  of  revenues  generated  from a range of
financial  services  and  activities.  The majority of  noninterest  income is a
result of service charges on deposit accounts including charges for insufficient
funds, checks and fees charged for nondeposit services. Table 3 below provides a
summary of noninterest  income for the years ended  December 31, 2000,  1999 and
1998.

TABLE 3 - SOURCES OF NONINTEREST INCOME

<TABLE>
<CAPTION>
                                                For the year ended December 31,
                                           ----------------------------------------
                                             2000            1999            1998
                                           --------        --------        --------
<S>                                        <C>             <C>             <C>
Service charges on deposit accounts        $674,217        $583,132        $557,346
Other service charges and fees              168,062         163,001         120,128
Other income                                 13,497           6,251          26,324
                                           --------        --------        --------
                                           $855,776        $752,384        $703,798
                                           ========        ========        ========
</TABLE>


         Noninterest  income  increased by $103,392 in 2000 or 13.7% compared to
1999.  Service  charges on deposit  accounts  increased  by $91,085 for the year
ended December 31, 2000. The increase in service charges on deposit  accounts is
due to an increase in charges for insufficient funds.

         Noninterest  income  increased  by $48,586 in 1999 or 6.9%  compared to
1998.  This was due to an increase in credit  life  insurance,  fees on customer
check sales and an increase in Towne Credit fees (accounts receivable system.)

NONINTEREST EXPENSE

         The major  components of other expense for the years ended December 31,
2000, 1999 and 1998 are disclosed in Table 4.

TABLE 4 - SOURCES OF NONINTEREST EXPENSE


                                  For the period ended December 31,
                           ----------------------------------------------
                              2000              1999               1998
                           ----------        ----------        ----------

Salary and benefits        $1,310,698        $1,216,923        $1,178,717
Occupancy expense             195,007           184,290           187,140
Equipment expense             218,155           219,121           215,928
Other                       1,010,994           867,821           879,302
                           ----------        ----------        ----------

                           $2,734,854        $2,488,155        $2,461,087
                           ==========        ==========        ==========



         Noninterest expenses increased during 2000 by $246,699 or 9.9% compared
to 1999.  This increase was  primarily  due to an increase in other  expenses of
$148,581,  which  includes a $61,624  increase in  marketing.  There was also an
increase in other outside  consulting  fees,  supplies and expense on other real
estate.  In addition,  the Bank  experienced  an increase in salary and benefits
expenses of $93,775.


                                      -24-
<PAGE>


Management's Discussion and Analysis

TABLE 4 - SOURCES OF NONINTEREST EXPENSE (CONTINUED)

         Noninterest  expenses  increased during 1999 by $27,068.  This increase
was primarily  due to an increase of $38,206 in salaries and benefits  expenses,
which was offset by a decrease of $11,481 in other expenses.

         The overhead ratio of noninterest expense to operating income decreased
from 66.96% in 1998 to 57.73% for the year ended  December 31, 2000.  Management
believes that this trend should  continue with the monitoring of the noninterest
expenses.

ANALYSIS OF FINANCIAL CONDITION

TABLE 5 - AVERAGE ASSET MIX ($ IN THOUSANDS)


<TABLE>
<CAPTION>

                                           For the year ended            For the year ended
                                           December 31, 2000             December 31, 1999
                                        ------------------------      ------------------------
                                         Average                      Average
                                         Balance             %        Balance             %
                                        --------          ------      --------          ------
<S>                                     <C>                <C>        <C>                <C>
EARNING ASSETS:
  Loans, net                            $59,309            69.73%     $49,595            69.16%
  Investment securities                  16,259            19.11%      11,982            16.71%
  Federal funds sold                      3,135             3.69%       3,519             4.91%
  Interest-bearing bank balances             25             0.03%          45             0.06%
                                        -------           ------      -------           ------
      Total earning assets               78,728            92.56%      65,141            90.84%
                                        -------           ------      -------           ------


NONEARNING ASSETS:
  Cash and due from banks                 2,395             2.81%       2,844             3.97%
  Property and equipment                  1,975             2.32%       2,066             2.88%
  Other real estate owned                   268             0.32%         142             0.20%
  Other assets                            1,694             1.99%       1,513             2.11%
                                        -------           ------      -------           ------
     Total nonearning assets              6,332             7.44%       6,565             9.16%
                                        -------           ------      -------           ------

     Total assets                       $85,060           100.00%     $71,706           100.00%
                                        =======          ======       =======           ======
</TABLE>

         Average earning assets have increased  20.47% from December 31, 1999 to
December 31, 2000. Total earning assets represent 92.56% of total average assets
at December 31, 2000  compared to 90.84% at December  31, 1999.  At December 31,
2000,  average  loans  represented  70.05% of total average  assets  compared to
69.51% at December 31, 1999. Investments increased from 16.52% in 1999 to 18.91%
in 2000. The percent mix of average assets of loans and investments have changed
minimally from 1999 to 2000.

LOANS

         TYPES OF LOANS.  The loan  portfolio is dominated by real estate loans.
These  loans make up 68% of the total  loan  portfolio  at  December  31,  2000.
Commercial  loans  accounted  for 19% of the  loan  portfolio.  Such  loans  are
generally made to provide  operating lines of credit, to finance the purchase of
inventory or equipment and for other business purposes. Consumer loans accounted
for 13% of the loan  portfolio as of December 31, 2000.  Consumer loans are made
primarily for vehicle purchases, home improvements, personal needs and overdraft
protection.  The amount of loans  outstanding  by type at December  31, 2000 and
1999 is presented in Table 6.



                                      -25-
<PAGE>


MANAGEMENT'S DISCUSSION AND ANALYSIS

TABLE 6 - LOAN PORTFOLIO SUMMARY ($ IN THOUSANDS)

<TABLE>
<CAPTION>
                                         December 31, 2000            December 31, 1999
                                     ------------------------    ---------------------------
                                     Amount              %         Amount             %
                                    -------           ------      -------           ------
<S>                                 <C>                 <C>       <C>                 <C>
Construction and development        $ 2,721             3.94%     $ 1,043             1.96%
1-4 family residential               19,552            28.32%      14,883            27.94%
5 or more family residential            737             1.07%         959             1.80%
Farmland                              4,306             6.24%       3,836             7.20%
Nonfarm, nonresidential              19,574            28.36%      14,844            27.85%
                                    -------           ------      -------           ------
    Total real estate                46,890            67.93%      35,565            66.76%
Agriculture                           2,311             3.35%       2,127             3.99%
Commercial and industrial            10,503            15.22%       8,134            15.27%
Consumer                              9,289            13.46%       7,369            13.83%
Other                                    30             0.04%          81             0.15%
                                    -------           ------      -------           ------
    Total                           $69,023           100.00%     $53,276           100.00%
                                    =======           ======      =======           ======
</TABLE>


         MATURITIES AND SENSITIVITIES TO CHANGES IN INTEREST RATES.  Total loans
as of December 31, 2000 are shown in the following  table  according to type and
maturity  classifications  of (i) three months or less,  (ii) three months to 12
months, (iii) one year to five years, and (iv) over five years.



                                      -26-
<PAGE>



MANAGEMENT'S DISCUSSION AND ANALYSIS

TABLE 7 - MATURITY SCHEDULE OF LOANS ($ IN THOUSANDS)

<TABLE>
<CAPTION>
                                    Commercial,                                                      Total
                                   Financial and          Real                             -------------------------
                                    Agricultural         Estate          Others            Amount               %
                                       -------          -------          -------          -------             ------
<S>                                    <C>              <C>              <C>              <C>                  <C>
FIXED RATE LOANS:
  Three months or less                 $ 2,445          $10,103          $ 1,587          $14,135              20.49%
  Over three months to
    twelve months                        3,295           11,833            2,717           17,845              25.85%
  Over one year to five
    years                                4,961           20,757            4,865           30,583              44.31%
  Over five years                          305            2,167               71            2,543               3.68%
                                       -------          -------          -------          -------             ------
    Total fixed rate loans              11,006           44,860            9,240           65,106              94.33%
                                       -------          -------          -------          -------             ------

VARIABLE RATE LOANS:
  Three months or less                      94              954                3            1,051               1.52%
  Over three months to
    twelve months                        1,714              806               55            2,575               3.73%
  Over one year to
    five years                            --                222                5              227               0.33%
  Over five years                         --                 48               16               64               0.09%
                                       -------          -------          -------          -------             ------
    Total variable rate loans            1,808            2,030               79            3,917               5.67%
                                       -------          -------          -------          -------             ------

TOTAL LOANS:
  Three months or less                   2,539           11,057            1,590           15,186              22.00%
  Over three months to
    twelve months                        5,009           12,639            2,772           20,420              29.58%
  Over one year to
    five years                           4,961           20,979            4,870           30,810              44.64%
  Over five years                          305            2,215               87            2,607               3.78%
                                       -------          -------          -------          -------             ------
    Total loans                        $12,814          $46,890          $ 9,319          $69,023             100.00%
                                       =======          =======          =======          =======             ======
</TABLE>


         Actual  repayments  of loans may  differ  from  contractual  maturities
reflected above because borrowers have the right to prepay  obligations with and
without prepayment penalties. Additionally, the refinancing of such loans or the
potential  delinquency  of such loans could also cause  differences  between the
contractual maturities reflected above and the actual repayment of such loans.



                                      -27-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS

         Interest rates charged on loans vary with the degree of risk,  maturity
and  amount  of the  loan.  Competitive  pressures  and  availability  of  funds
influence  interest  rates.  On average,  loans yielded 9.93% for the year ended
December 31, 2000 compared to an average yield of 9.75% in 1999.

INVESTMENT SECURITIES

         The  Company  uses its  investment  portfolio  as a source of income in
addition to its loan  income and also as a source of  liquidity  for  unexpected
deposit decreases.

         The investment portfolio is a conservative  portfolio consisting mostly
of U.S.  government  agencies  and  mortgage-backed  securities.  In  purchasing
investments,  management not only considers the income to be generated, but also
the liquidity needs of the Company.  Since all the investments are classified as
available for sale,  management does have the option to sell securities prior to
their maturity if the need arises.

         The investment  portfolio was yielding the Company an approximate yield
of 6.07% at December 31, 2000 compared to 6.16% at December 31, 1999.

TABLE 8 - INVESTMENT SECURITIES ($ IN THOUSANDS)

         The following  table  summarizes the maturity of the Bank's  investment
securities and weighted average yield as December 31, 2000.

<TABLE>
<CAPTION>
                                          In One             One Year          After Five
                                           Year           Through Five           Through          After Ten
                                         or Less              Years             Ten Years            Years                 Total
                                        ---------           ---------           ---------           ---------           ----------
<S>                                     <C>                 <C>                 <C>                                     <C>
INVESTMENT SECURITIES:
U.S. Government agencies                $   2,498           $   6,673           $     496           $    --             $    9,667
Mortgage-backed securities                     31                 766               2,091               2,341                5,229
State and municipal securities               --                   100                 205                --                    305
Corporate debt securities                    --                  --                   245                --                    245
Other securities                              259                --                  --                  --                    259
                                        ---------           ---------           ---------           ---------           ----------
    Total                               $   2,788           $   7,539           $   3,037           $   2,341           $   15,705
                                        =========           =========           =========           =========           ==========

WEIGHTED AVERAGE YIELDS:
U.S. Government agencies                    5.88%               5.84%               7.51%            --                      6.22%
Mortgage-backed securities                  5.09%               6.78%               6.91%               5.57%                6.46%
State and municipal securities              --                  4.60%               4.39%            --                      4.38%
Corporate debt securities                   --                  --                  7.23%            --                      7.23%
Other securities                            7.32%               --                  --                  --                   7.32%
                                        ---------           ---------           ---------           ---------           ----------
    Consolidated                            6.12%               5.95%               6.72%               5.57%                6.07%
                                        =========           =========           =========           =========           ==========
</TABLE>



                                      -28-
<PAGE>




MANAGEMENT'S DISCUSSION AND ANALYSIS

TABLE 8 - INVESTMENT SECURITIES (CONTINUED)
DECEMBER 31, 1999, AVAILABLE FOR SALE
<TABLE>
<CAPTION>
                                          In One             One Year          After Five
                                           Year           Through Five           Through          After Ten
                                         or Less              Years             Ten Years            Years                 Total
                                        ---------           ---------           ---------           ---------           ----------
<S>                                     <C>                 <C>                 <C>                                     <C>

INVESTMENT SECURITIES:
U.S. Government agencies                $  --             $   8,221           $     450           $    --             $    8,671
Mortgage-backed securities                  143                 973               1,509               2,908                5,533
State and municipal securities             --                   101                 207                --                    308
Corporate debt securities                  --                  --                   244                --                    244
Other securities                            245                --                  --                  --                    245
                                        -------           ---------           ---------           ---------           ----------
    Total                               $   388           $   9,295           $   2,410           $   2,908           $   15,001
                                        =======           =========           =========           =========           ==========

WEIGHTED AVERAGE YIELDS:
U.S. Government agencies                   --                 5.73%               6.11%                --                  5.75%
Mortgage-backed securities                4.96%               6.62%               6.95%               5.64%                6.19%
State and municipal securities             --                 4.36%               4.38%                --                  4.37%
Corporate debt securities                  --                  --                 7.11%                --                  7.11%
Other securities                          8.25%                --                  --                  --                  8.25%
                                        -------           ---------           ---------           ---------           ----------
    Consolidated                          6.61%               5.90%               6.50%               5.64%                6.16%
                                        =======           =========           =========           =========           ==========
</TABLE>


         The  following  table  summarizes  the book value and market  value and
distribution of the Bank's investment securities as of the dates indicated.  All
securities held at December 31, 2000 and 1999 were  categorized as available for
sale.

<TABLE>
<CAPTION>
                                                                             December 31,
                                                          2000                                          1999
                                            -------------------------------    -      -----------------------------------
                                            Book Value         Market Value            Book Value            Market Value
                                            ----------         ------------            ----------            ------------
                                                                        (dollars in thousands)
<S>                                          <C>                <C>                    <C>                    <C>
U.S.Government
   securities                                $   9,667          $     9,629            $     8,671            $     8,399
Mortgage-backed
   securities                                    5,229                5,199                  5,533                  5,395
State and municipal
   securities                                      305                  306                    308                    307
Corporate debt
   securities                                      245                  249                    244                    240
Other securities                                   259                  259                    245                    245
                                              --------           ----------             ----------             ----------
Total                                        $  15,705          $    15,642            $    15,001            $    14,586
                                             =========          ===========            ===========            ===========
</TABLE>





                                      -29-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS

         Average  federal  funds  sold  totaled  $3,135,464  for the year  ended
December 31, 2000  compared to $3,518,536  for 1999.  Federal funds were down in
2000 due to an increase in loans.  Federal  funds is the  Company's  most liquid
asset with the lowest yielding portion of earning assets. Management makes every
effort to maintain federal funds at the lowest level possible and still maintain
enough funds for loan demand.

DEPOSITS

         The Bank relies on deposits generated in the market area to provide the
majority  of funds  needed by the  Company  to fund  loans and  invest in liquid
assets.  The Bank  specifically  relies on core deposits as the primary  funding
source.

         There was an 18.93%  increase in total  deposits  at December  31, 2000
from  December 31, 1999.  The largest  growth was an increase of $5.9 million in
NOW  accounts.  The Bank  also has  strong  noninterest-bearing  deposits  which
represented 14.59% of total deposits at December 31, 2000 and 15.75% at December
31, 1999.



                                      -30-
<PAGE>




MANAGEMENT's DISCUSSION AND ANALYSIS

         The amounts of deposits classified as to interest-bearing  deposits and
noninterest-bearing deposits for the periods indicated are presented below.

TABLE 9 - DEPOSIT MIX ($ IN THOUSANDS)

<TABLE>
<CAPTION>

                                                    December 31, 2000                      December 31, 1999
                                             -------------------------------       ------------------------------
                                               Balance                  %            Balance                  %
                                             -----------             ------        -----------             ------
<S>                                          <C>                      <C>          <C>                       <C>
INTEREST-BEARING DEPOSITS:
  Now Accounts                               $12,522,941              14.61%       $ 6,654,225               9.24%
  Money Market                                 6,934,733               8.10%         5,081,692               7.05%
  Savings                                      3,886,834               4.54%         3,623,657               5.03%
  Small denomination certificates             26,958,887              31.47%        24,653,185              34.22%
  Large denomination certificates             22,854,997              26.68%        20,669,910              28.70%
                                             -----------             ------        -----------             ------
    Total interest-bearing deposits           73,158,392              85.40%        60,682,669              84.24%
NONINTEREST-BEARING DEPOSITS                  12,507,292              14.60%        11,350,069              15.76%
                                             -----------             ------        -----------             ------
    Total deposits                           $85,665,684             100.00%       $72,032,738             100.00%
                                             ===========             ======        ===========             ======
</TABLE>



         Table 10 provides a maturity  schedule for  certificates  of deposit of
$100,000 and over at December 31, 2000.

TABLE 10 - LARGE TIME DEPOSIT MATURITIES

Analysis of time deposits for $100,000 or more at December 31, 2000:

Remaining maturity of three months or less                   $ 5,683,610
Remaining maturity of three through six months                 5,330,243
Remaining maturity six months through twelve months           10,468,854
Remaining maturity over twelve months                          1,372,290
                                                             -----------
  Total time deposits of $100,000 or more                    $22,854,997
                                                             ===========


         Even though the Company  has seen a large  increase in large  deposits,
management  has not  aggressively  solicited  the more  volatile  deposits.  The
strategy of management is to fund loan and  investment  growth with largely core
deposits.

NONPERFORMING AND PROBLEM ASSETS

         There are certain credit risks  associated in making loans.  Management
assesses  these  risks and  attempts  to manage  them  effectively.  The Company
adheres to internal loan policies and procedures to reduce the risks  associated
with lending.  The policies  include  officer and customer  limits with anything
outside the officer's  limit being approved by the loan  committee.  The Company
has documentation  software in place to help track  documentation  exceptions by
officer.



                                      -31-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS

TABLE 11 - NONPERFORMING ASSETS

         The following  table contains  information  concerning the  outstanding
balances of nonperforming assets at December 31, 2000 and 1999.

                                                         December 31,
                                                 ---------------------------
                                                    2000              1999
                                                  --------          --------

Nonaccrual loans                                  $466,391          $102,448
Loans past due 90 days or more not included
       in nonaccrual loans                               0                 0
Other real estate owned                              1,983           545,019
                                                  --------          --------
                                                  $468,374          $647,467
                                                  ========          ========


         Nonaccrual  loans were .68% and .19% of  outstanding  loans at December
31, 2000 and 1999, respectively. Other real estate at December 31, 2000 reflects
one residential property.

         The reduction in interest income associated with nonaccrual loans as of
December 31, 2000 is as follows:

                                                                Total
                                                               -------
          Interest income that would have been
             recorded on nonaccrual loans under
             original terms                                    $14,109
          Interest income that was recorded on
             nonaccrual loans                                    9,747
                                                               -------
          Reduction in interest income                         $ 4,362
                                                               =======

         It is the general policy of the Bank to stop accruing  interest  income
and place the  recognition  of  interest  on a cash basis  when any  commercial,
consumer or real estate loan is past due as to principal  or  interest,  and the
ultimate  collection  of either  is in  doubt.  Accrual  of  interest  income on
consumer  installment  loans is  suspended  when any  payment  of  principal  or
interest, or both, is more than 90 days delinquent.

CREDIT LOSSES

         The  allowance for loan losses is  established  to provide for expected
losses in the Company's loan  portfolio.  Loan losses and recoveries are charged
or credited directly to the allowance.  Management  determines the provision for
loan losses  required to maintain an allowance  adequate to provide for probable
losses.  Generally,  the  factors  considered  in making this  decision  are the
collectibility of past due loans,  volume of new loans,  composition of the loan
portfolio  and  general  economic  outlook.  The  Company  has two  methods  for
analyzing  the  reserve:  the  historical  method  (past trend  percentage  plus
classified  loan  percentage)  and the one percent  method (one percent of total
loans plus classified loan  percentage).  Based on the two methods,  the Company
believes that the reserve is adequate at this time.

         The  provision  for loan losses and the activity in the  allowance  for
credit losses are detailed in Table 12.



                                      -32-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS

TABLE 12 - CREDIT LOSSES

<TABLE>
<CAPTION>

                                                                         December 31,
                                                                    2000              1999
                                                                  --------          --------
<S>                                                               <C>               <C>
          Allowance for loan losses at beginning of year          $857,947          $767,285
                                                                  --------          --------

          Loans charged off:
               Real estate - construction                             --                --
               Real estate - mortgage                               35,042              --
               Commercial and agricultural                          39,345            40,187
               Consumer                                            239,148           117,875
                                                                  --------          --------
                    Total loans charged off                        313,535           158,062
                                                                  --------          --------

          Recoveries on loans previously charged off:
               Real estate - construction                             --                --
               Real estate - mortgage                               57,230            26,369
               Commercial and agricultural                            --                  60
               Consumer                                             21,831            39,795
                                                                  --------          --------
                    Total recoveries                                79,061            66,224
                                                                  --------          --------

          Net loans charged off                                    234,474            91,838
                                                                  --------          --------

          Additions to allowance charged to
              operations                                           170,000           182,500
                                                                  --------          --------

          Balance of allowance for loan losses
              at end of year                                       $793,473          $857,947
                                                                  ========          ========

          Ratio of net loans charged off during the
             period  to average loans outstanding
             during the period                                         .39               .18
</TABLE>

         Management  allocated  the reserve  for loan  losses to  specific  loan
classes as follows:


<TABLE>
<CAPTION>

                                                   December 31,                          December 31,
                                                      2000                                   1999
                                     -------------------------------------      ---------------------------------
                                                              Percent of                               Percent of
                                                               Loans in                                 Loans in
                                                             Category to                              Category to
                                         Amount              Total Losses        Amount               Total Losses
                                         ------              ------------        ------               ------------
<S>                                    <C>                        <C>           <C>                        <C>
Real estate - Construction             $ 23,804                   3%            $ 17,159                   2%
Real estate - Mortgage                  507,823                  64%             557,666                  65%
Commercial and agricultural             150,760                  19%             163,010                  19%
Consumer                                111,086                  14%             120,112                  14%
                                       --------                ----             --------                ----

                                       $793,473                                $857,947
                                       ========                                ========
</TABLE>



                                      -33-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS

         The Bank's  allowance  for loan  losses is also  subject to  regulatory
examinations and determinations as to adequacy, which may take into account such
factors as the  methodology  used to calculate the allowance for loan losses and
the size of the allowance for loan losses in comparison to a group of peer banks
identified  by the  regulators.  During  their  routine  examinations  of banks,
regulatory  agencies  may require a bank to make  additional  provisions  to its
allowance  for loan  losses  when,  in the  opinion o f the  regulators,  credit
evaluations and allowance for loan loss methodology differ materially from those
of management.

COMMITMENTS AND LINES OF CREDIT

         In the ordinary course of business, the Bank has granted commitments to
extend  credit  and  standby  letters  of credit to  approved  customers.  These
commitments  are  recorded  in the  financial  statements  when they are funded.
Commitments  generally have fixed expiration dates or other termination  clauses
and may require payment of a fee. Since many of the  commitments  expire without
being drawn upon,  the total  commitment  amounts do not  necessarily  represent
future cash requirements.

         The following table summarizes the commitments  outstanding at December
31, 2000 and 1999:

<TABLE>
<CAPTION>
                                                             2000                        1999
                                                       ----------------            ----------------
         <S>                                           <C>                         <C>
         Commitments to extend credit                  $      7,257,602            $      5,094,637
         Standby letters of credit                              170,240                     134,765
                                                       ----------------            ----------------
                                                       $      7,427,482            $      5,229,402
                                                       ================            ================
</TABLE>

         Commitments to extend credit include  unused  commitments  for open-end
lines secured by real estate, marketable securities, accounts receivable, crops,
inventory,  equipment and personal property.  Commitments and standby letters of
credit increased by $2.2 million from December 31, 1999 to December 31, 2000, an
increase of 42.04%.

LIQUIDITY

         Liquidity  represents  the  ability to meet the needs of  customers  to
withdraw funds from deposit  accounts,  to borrow funds and to meet their credit
needs.  The Bank  manages  its  liquidity  needs in such a way that the needs of
depositors and borrowers are met on a timely basis so that the operations of the
Bank are not interrupted. While the Bank looks primarily to core deposits as its
principal  source of liquidity,  Federal funds,  securities  available for sale,
maturities of securities,  and principal payments on loans are also available to
meet the Bank's  liquidity  needs.  Access to funds through  relationships  with
correspondent banks provides an additional source of liquidity.  Liquidity needs
at the Bank can also be met through loan  participations sold to other financial
institutions.

         The table below presents the pertinent liquidity balances and ratio for
the periods ended December 31, 2000 and 1999.

<TABLE>
<CAPTION>

                                                                         December 31,
                                                       --------------------------------------------------
                                                               2000                         1999
                                                       ---------------------        ---------------------
         <S>                                               <C>                         <C>
         Cash and due from banks                           $    5,428,933              $     3,746,213
         Federal funds sold                                $    3,030,000              $     4,680,000
         Investment securities                             $   15,641,669              $    14,585,652
         Time deposits over $100,000
                to total  deposits ratio                              .27                           .29
         Loan to deposit ratio                                        .80                           .73
</TABLE>



                                      -34-
<PAGE>
         Cash and due from banks  totaled $5.4 million at December 31, 2000,  an
increase of 44.9%  compared to 1999.  Federal funds sold totaled $3.0 million at
December 31, 2000,  compared to $4.7 million at December 31, 1999, a decrease of
35.3%. Federal funds sold were up in 1999 due to the anticipated liquidity needs
for the year 2000.  Federal  funds are the Bank's most liquid  interest  earning
asset,  but provide the lowest yield of earning assets.  Management  makes every
effort to maintain federal funds at the lowest level possible and still maintain
enough funds for loan demand.

         At December 31, 2000, the liquidity position of the Bank was considered
by  management  of the  Bank to be  adequate.  Management  knows  of no  trends,
demands,  commitments,  events or  uncertainties  that  should  result in or are
reasonably likely to result in the Company's liquidity  increasing or decreasing
in any material way in the foreseeable future.

ASSET AND LIABILITY MANAGEMENT

         It is the Bank's  objective to manage assets and liabilities to provide
a  satisfactory,  consistent  level  of  profitability  with  the  framework  of
established cash, loan,  investment,  borrowing,  and capital policies.  Certain
officers of the Bank are charged with the responsibility for monitoring policies
and  procedures  that are  designed  to  ensure  acceptable  composition  of the
asset/liability mix.

         The Bank's  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 of the Bank
and the Bank's Asset/Liability  Committee on a quarterly basis. The objective is
to monitor  interest rate sensitive assets and liabilities so as to minimize the
impact of  substantial  movements  in interest  rates on  earnings.  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  schedules  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 adversely affect net interest income,  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  adversely  affect net  income.  If the Bank's  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,  the Bank also  evaluates  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")
which 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
in the event of an interest rate increase.



                                      -35-
<PAGE>
         The   following   table   summarizes   interest-sensitive   assets  and
liabilities for the Bank as of December 31, 2000.

TABLE 13 - INTEREST RATE SENSITIVITY ($ IN THOUSANDS)

<TABLE>
<CAPTION>
                                                          December 31, 2000 Maturities
                                    ------------------------------------------------------------------------------
                                     1 to 3           4 to 12           13 to 60         Over 60
                                     Months            Months            Months           Months           Total
                                    --------          --------          --------         --------         --------
<S>                                 <C>               <C>               <C>              <C>              <C>
EARNING ASSETS:
  Loans                             $ 15,186          $ 20,420          $ 30,810         $  2,607         $ 69,023
  Investments                          2,909               393             9,375            2,410           15,087
  Interest-bearing balances
    with banks                            51              --                --               --                 51
  Federal funds sold                   3,030              --                --               --              3,030
                                    --------          --------          --------         --------         --------
    Total                           $ 21,176          $ 20,813          $ 40,185         $  5,017         $ 87,191
                                    ========          ========          ========         ========         ========
INTEREST-BEARING DEPOSITS:
  Now accounts                      $ 12,523              --                --               --           $ 12,523
  Money market                         6,934              --                --               --              6,934
  Savings                              3,887              --                --               --              3,887
  Certificates of deposit             12,427          $ 33,518          $  3,869             --             49,814
                                    --------          --------          --------         --------         --------
    Total                           $ 35,771          $ 33,518          $  3,869             --           $ 73,158
                                    ========          ========          ========         --------         ========

Interest sensitivity gap            $(14,595)         $(12,705)         $ 36,316         $  5,017         $ 14,033
Cumulative interest
  sensitivity gap                   $(14,595)         $(27,300)         $  9,016         $ 14,033         $ 14,033
Ratio of sensitive assets to
  sensitive liabilities                59.20%            62.09%          1038.64%             N/A           119.18%
Cumulative ratio of
  sensitive assets to
  sensitive liabilities                59.20%            60.60%           112.32%          119.18%          119.18%
</TABLE>


         As  evidenced by the table above,  the Bank is  cumulatively  liability
sensitive  within one year.  Beyond  one year,  the Bank is  cumulatively  asset
sensitive,  and is  particularly  asset  sensitive  in the  range of one to five
years. In a rising interest rate environment, an asset sensitive position (a gap
ratio over 100%) is generally more  advantageous  as earning assets are repriced
sooner  than  the  liabilities.   Conversely,   in  a  declining  interest  rate
environment,  a liability  sensitive  position (a gap ratio of less than 100%)is
generally more advantageous since liabilities are repriced sooner than assets.

CAPITAL ADEQUACY

         The Bank is  subject  to  minimum  capital  standards  set forth by the
federal bank  regulatory  agencies.  The Bank's capital for regulatory  purposes
differs from the Bank's equity as determined under generally accepted accounting
principles.  Generally,  "Tier 1"  regulatory  capital  will  equal  capital  as
determined under generally  accepted  accounting  principles less any unrealized
gains or losses on securities available for sale while "Tier 2" capital includes
the  allowance  for loan  losses up to  certain  limitations.  Total  risk based
capital is the sum or Tier 1 and Tier 2 capital.  The Bank's  capital ratios and
the required minimums at December 31, 2000 are shown below:



                                      -36-
<PAGE>

<TABLE>
<CAPTION>
                                                                        Minimum
                                                                Regulatory Requirement                Actual
                                                                ----------------------                ------

     <S>                                                                  <C>                           <C>
     Total capital to risk adjusted assets.................               8.00                          11.91
     Tier I capital to risk adjusted assets................               4.00                          10.79
     Tier I leverage ratio (to average assets).............               4.00                           9.04
</TABLE>


         Total capital of the Bank also has an important effect on the amount of
FDIC insurance  premiums paid.  Institutions not considered well capitalized are
subject to higher rates for FDIC insurance.

EFFECT OF INFLATION

         Inflation  impacts the growth in total  assets in the banking  industry
and causes a need to increase equity capital at higher than normal rates to meet
capital  adequacy  requirements.  The Bank copes with the  effects of  inflation
through  effectively  managing its interest rate  sensitivity  gap position,  by
periodically reviewing and adjusting its pricing of services to consider current
costs,  and through managing its dividend payout policy relative to its level of
net  income.  The  impact of  inflation  has been  minimal to the Bank in recent
years.

ITEM 7.  FINANCIAL STATEMENTS
         --------------------

         The audited consolidated financial statements of the Company, including
the notes  thereto,  and the report of Dabbs,  Hickman,  Hill & Cannon,  LLP are
included in this Report  beginning  at page F-1 and are  incorporated  herein by
reference.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE
         -----------------------------------------------------------------------

Not applicable.

                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTORS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

         The information  appearing under the headings  "Election of Directors,"
"Executive   Officers"  and  "Section  16(a),   Beneficial  Ownership  Reporting
Compliance" in the Proxy Statement (the "2001 Proxy Statement")  relating to the
annual meeting of shareholders  of the Company,  scheduled to be held on May 24,
2001, is incorporated herein by reference.

ITEM 10. EXECUTIVE COMPENSATION
         ----------------------

         The information appearing under the heading "Executive Compensation" in
the 2001 Proxy Statement is incorporated herein by reference.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
         --------------------------------------------------------------

         The information appearing under the heading "Principal Shareholders" in
the 2001 Proxy Statement is incorporated herein by reference.



                                      -37-
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information appearing under the caption "Certain  Relationships and
Transactions" in the 2001 Proxy Statement is incorporated herein by reference.



                                      -38-
<PAGE>
                                     PART IV

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
         --------------------------------

         (a)      EXHIBITS.  Periodic reports, registration statements and other
information  filed by the Company  with the SEC  pursuant  to the  informational
requirements  of the  Securities  Act of 1993,  as  amended  and the  Securities
Exchange Act of 1934, as amended may be inspected and copied at the SEC's Public
Reference Room, 450 Fifth Street, N.W.,  Washington,  D.C. 20549, and the public
may obtain  information on the operation of the Public Reference Room by calling
the  SEC  at   1-800-SEC-0330.   The  SEC  also   maintains  an  Internet   site
(http://www.sec.gov)  that makes available  reports,  proxy statements and other
information regarding the Company.

           Exhibit No.        Description

               2.1            Plan of  Reorganization  and  Agreement  to Merge,
                              dated as of  April  25,  2000,  by and  among  the
                              Company,  Inc.,  FMB Interim  Corp.  and Farmers &
                              Merchants Bank  (Incorporated  herein by reference
                              to Exhibit 2.1 of the Company's Report on Form 8-K
                              filed on February  27, 2001  (Commission  File No.
                              000-32399)).

               3.1            Articles of  Incorporation  of FMB Equibanc,  Inc.
                              (Incorporated  herein by  reference to Exhibit 3.1
                              of the  Company's  Report  on Form  8-K  filed  on
                              February   27,   2001    (Commission    File   No.
                              000-32399)).

               3.2            Bylaws of FMB Equibanc,  Inc. (Incorporated herein
                              by  reference  to  Exhibit  3.2 of  the  Company's
                              Report  on Form 8-K  filed on  February  27,  2001
                              (Commission File No. 000-32399)).

               10.1           1998 Nonqualified Stock Option Plan.

               10.2           Form of Director Deferred Compensation Agreement.

               10.3*          Employment  Agreement  by and  between  Farmers  &
                              Merchants Bank and Leonard E. Herrington.

               10.4*          Employment  Agreement  by and  between  Farmers  &
                              Merchants Bank and Charles R. Nessmith.

               21.1           Subsidiaries of the Registrant.

*Compensation  plan or  arrangement  required to be listed as an Exhibit to Form
10-KSB.

         (b)      Reports on Form 8-K.
                  -------------------

         None.




                                      -39-
<PAGE>
                                          FMB EQUIBANC, INC.
                                            AND SUBSIDIARY

                                     CONSOLIDATED FINANCIAL REPORT

                                           DECEMBER 31, 2000




                                          TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                                 Page
                                                                                                 ----
<S>                                                                                              <C>
      Independent Auditor's Report                                                               F-2

      Consolidated Balance Sheets                                                                F-3

      Consolidated Statements of Income                                                          F-4

      Consolidated Statements of Changes in Stockholders' Equity                                 F-5

      Consolidated Statements of Cash Flows                                                      F-6

      Notes to Consolidated Financial Statements                                                 F-7
</TABLE>





                                      F-1
<PAGE>



                                            DABBS, HICKMAN, HILL & CANNON, LLP
                                                  Certified Public Accountants

------------------------------------------------------------------------------
                                                      Statesboro, Georgia 30458




                          INDEPENDENT AUDITOR'S REPORT





Board of Directors
FMB Equibanc, Inc.
Statesboro, Georgia 30458


We have audited the  accompanying  consolidated  balance sheets of FMB Equibanc,
Inc.  and its  subsidiary  as of  December  31,  2000 and 1999,  and the related
consolidated  statements of income,  changes in stockholders'  equity,  and cash
flows for the years ended  December 31,  2000,  1999 and 1998.  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  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  financial  position  of FMB  Equibanc,  Inc.  and
subsidiary as of December 31, 2000 and 1999, and the results of their operations
and their cash flows for the years ended  December  31,  2000,  1999 and 1998 in
conformity with generally accepted accounting principles.




/s/ DABBS, HICKMAN, HILL & CANNON, LLP


January 18, 2001



                                      F-2
<PAGE>

<TABLE>
<CAPTION>
                                 FMB EQUIBANC, INC. AND SUBSIDIARY

                                    CONSOLIDATED BALANCE SHEETS
  -----------------------------------------------------------------------------------------------

                                            A S S E T S

                                                               DECEMBER 31,          DECEMBER 31,
                                                                   2000                  1999
                                                               ------------         ------------
<S>                                                            <C>                  <C>
Cash and due from banks                                        $  5,428,933         $  3,746,213
Federal funds sold                                                3,030,000            4,680,000
Investment securities available for sale, at fair value          15,641,669           14,585,652
Loans, less allowance for loan losses of $793,473 and
$ 857,947                                                        68,230,020           52,427,566
Bank premises and equipment, net                                  1,945,026            1,995,330
Accrued interest receivable                                       1,145,236              808,140
Deferred income taxes                                               192,868              339,924
Refundable income taxes                                              29,802                 --
Other assets                                                        325,622              924,054
                                                               ------------         ------------

                 TOTAL ASSETS                                  $ 95,969,176         $ 79,506,879
                                                               ============         ============

                                    L I A B I L I T I E S  A N D
                               S T O C K H O L D E R S'  E Q U I T Y

Deposits
  Demand                                                       $ 12,507,292         $ 11,350,069
  Money market and NOW accounts                                  19,457,674           11,735,917
  Savings                                                         3,886,834            3,623,657
  Time deposits, $100,000 and over                               22,854,997           20,669,910
  Other time deposits                                            26,958,887           24,653,185
                                                               ------------         ------------
                 Total deposits                                  85,665,684           72,032,738

Accrued interest payable                                            349,134              322,087
Income taxes payable                                                   --                 36,104
Federal Home Loan Bank advances                                   2,163,646              474,749
Other liabilities                                                   174,186              229,255
                                                               ------------         ------------
                 Total liabilities                               88,352,650           73,094,933
                                                               ------------         ------------

Commitments and contingent liabilities

Stockholders' equity
  Common stock, $1 par value; authorized 10,000,000
    shares; 362,600 shares issued and outstanding                   362,600              725,200
  Surplus                                                         3,075,660            2,713,060
  Appropriated retained earnings                                  1,561,740            1,561,740
  Unappropriated retained earnings                                2,654,664            1,660,887
  Accumulated other comprehensive income                            (38,138)            (248,941)
                                                               ------------         ------------
                 Total stockholders' equity                       7,616,526            6,411,946
                                                               ------------         ------------

                 TOTAL LIABILITIES AND
                   STOCKHOLDERS' EQUITY                        $ 95,969,176         $ 79,506,879
                                                               ============         ============
</TABLE>



The Notes to Financial Statements are an integral part of these statements.

                                                F-3






<PAGE>


<TABLE>
<CAPTION>
                                  FMB EQUIBANC, INC. AND SUBSIDIARY

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

                                                                       YEARS ENDED
                                                      -----------------------------------------------
                                                      DECEMBER 31,     DECEMBER 31,      DECEMBER 31,
                                                         2000              1999              1998
                                                      ----------        ----------        ----------
<S>                                                   <C>               <C>               <C>
INTEREST INCOME
  Interest and fees on loans                          $5,979,620        $4,915,953        $4,421,583
  Interest and dividends on investment
   securities                                            996,340           691,094           524,561
  Interest on federal funds sold                         194,534           180,496           138,931
  Interest on deposits with banks                           --                --               5,080
                                                      ----------        ----------        ----------
        Total interest income                          7,170,494         5,787,543         5,090,155
                                                      ----------        ----------        ----------

INTEREST EXPENSE
  Interest on deposits                                 3,244,256         2,410,650         2,101,521
  Interest on federal funds purchased                        774             2,009               203
  Interest on other borrowings                              --               3,660            30,130
  Interest on Federal Home Loan Bank Advances             49,586            25,683              --
                                                      ----------        ----------        ----------
        Total interest expense                         3,294,616         2,442,002         2,131,854
                                                      ----------        ----------        ----------

NET INTEREST INCOME                                    3,875,878         3,345,541         2,958,301

PROVISION FOR LOAN LOSSES                                170,000           182,500            78,000
                                                      ----------        ----------        ----------

NET INTEREST INCOME AFTER
  PROVISION FOR LOAN LOSSES                            3,705,878         3,163,041         2,880,301
                                                      ----------        ----------        ----------

NONINTEREST INCOME
  Service charges on deposit accounts                    674,217           583,132           557,346
  Other service charges, commissions, and fees           168,062           163,001           120,128
  Other                                                   13,497             6,251            26,324
                                                      ----------        ----------        ----------
        Total noninterest income                         855,776           752,384           703,798
                                                      ----------        ----------        ----------

NONINTEREST EXPENSES
  Salaries and employee benefits                       1,310,698         1,216,923         1,178,717
  Occupancy expense                                      195,007           184,290           187,140
  Equipment expense                                      218,155           219,121           215,928
  Loss on sale of investment securities                     --               5,408              --
  Other                                                1,010,994           862,413           879,302
                                                      ----------        ----------        ----------
        Total noninterest expenses                     2,734,854         2,488,155         2,461,087
                                                      ----------        ----------        ----------

INCOME BEFORE INCOME TAXES                             1,826,800         1,427,270         1,123,012

INCOME TAXES                                             651,723           513,406           421,162
                                                      ----------        ----------        ----------
NET INCOME                                            $1,175,077        $  913,864        $  701,850
                                                      ==========        ==========        ==========


EARNINGS PER SHARE                                    $     3.24        $     2.52        $     1.94
                                                      ==========        ==========        ==========
AVERAGE SHARES OUTSTANDING                               362,600           362,600           362,600
                                                      ==========        ==========        ==========
</TABLE>


The Notes to Financial Statements are an integral part of these statements.

                                                 F-4



<PAGE>



                                     FMB EQUIBANC, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
                         CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
  ---------------------------------------------------------------------------------------------------------



                                                                    Common Stock
                                                              -------------------------
                                                                 Shares        Par Value          Surplus
                                                              -----------     -----------      -----------
<S>                                                               <C>         <C>              <C>
Balance, January 1, 1998, as originally reported                  362,600     $   725,200      $ 2,713,060

Effect of pooled merger                                              --          (362,600)         362,600
                                                              -----------     -----------      -----------
Balance, January 1, 1998, as restated                             362,600         362,600        3,075,660

Comprehensive income
  Net income                                                         --              --               --
  Other comprehensive income, net of tax
    Change in unrealized losses on investment securities
     available for sale, net of deferred tax of $23,813              --              --               --

          Total comprehensive income

Cash dividends declared, $1.00 per share on 362,600 share            --              --               --
                                                              -----------     -----------      -----------
Balance, December 31, 1998                                        362,600         362,600        3,075,660

Transfers                                                            --              --               --

Comprehensive income
  Net income                                                         --              --               --
  Other comprehensive income, net of tax
    Change in unrealized losses on investment securities
     available for sale, net of deferred tax of $145,512             --              --               --
    Less: reclassification adjustment                                --              --               --

          Total comprehensive income

Cash dividends declared, $.50 per share on 362,600 shares            --              --               --
                                                              -----------     -----------      -----------
Balance, December 31, 1999                                        362,600         362,600        3,075,660

Comprehensive income
  Net income                                                         --              --               --
  Other comprehensive income, net of tax
    Change in unrealized losses on investment securities
     available for sale, net of deferred tax of $140,535             --              --               --

          Total comprehensive income

Cash dividends declared, $.50 per share on 362,600 shares            --              --               --
                                                              -----------     -----------      -----------
Balance, December 31, 2000                                        362,600     $   362,600      $ 3,075,660
                                                              ===========     ===========      ===========
</TABLE>

<PAGE>


                                     FMB EQUIBANC, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
                         CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                                                (CONTINUED)
  ---------------------------------------------------------------------------------------------------------


                                                                                             Accumulated
                                                              Appropriated   Unappropriated      Other
                                                                Retained        Retained      Comprehensive
                                                                Earnings        Earnings         Income            Total
                                                              -----------     -----------      -----------      -----------
<S>                                                           <C>             <C>              <C>              <C>
Balance, January 1, 1998, as originally reported              $   561,740     $ 1,589,073      $   (53,299)     $ 5,535,774

Effect of pooled merger                                              --              --               --               --
                                                              -----------     -----------      -----------      -----------
Balance, January 1, 1998, as restated                             561,740       1,589,073          (53,299)       5,535,774

Comprehensive income
  Net income                                                         --           701,850             --            701,850
  Other comprehensive income, net of tax
    Change in unrealized losses on investment securities
     available for sale, net of deferred tax of $23,813              --              --             35,721           35,721

                                                                                                               -----------
          Total comprehensive income                                                                                737,571

Cash dividends declared, $1.00 per share on 362,600 share            --          (362,600)            --           (362,600)
                                                              -----------     -----------      -----------      -----------
Balance, December 31, 1998                                        561,740       1,928,323          (17,578)       5,910,745

Transfers                                                       1,000,000      (1,000,000)            --               --

Comprehensive income
  Net income                                                         --           913,864             --            913,864
  Other comprehensive income, net of tax
    Change in unrealized losses on investment securities
     available for sale, net of deferred tax of $145,512             --              --           (218,269)        (218,269)
    Less: reclassification adjustment                                --              --            (13,094)         (13,094)

                                                                                                               -----------
          Total comprehensive income                                                                                682,501

Cash dividends declared, $.50 per share on 362,600 shares            --          (181,300)            --           (181,300)
                                                              -----------     -----------      -----------      -----------
Balance, December 31, 1999                                      1,561,740       1,660,887         (248,941)       6,411,946

Comprehensive income
  Net income                                                         --         1,175,077             --          1,175,077
  Other comprehensive income, net of tax
    Change in unrealized losses on investment securities
     available for sale, net of deferred tax of $140,535             --              --            210,803          210,803
                                                                                                               -----------
          Total comprehensive income                                                                              1,385,880

Cash dividends declared, $.50 per share on 362,600 shares            --          (181,300)            --           (181,300)
                                                              -----------     -----------      -----------      -----------

Balance, December 31, 2000                                    $ 1,561,740     $ 2,654,664      $   (38,138)     $ 7,616,526
                                                              ===========     ===========      ===========      ===========
</TABLE>



The Notes to  Financial  Statements  are an integral  part of these statements.

                                                    F-5



<PAGE>


                                         FMB EQUIBANC, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
  ---------------------------------------------------------------------------------------------------------------

                                                                               YEARS ENDED
                                                          -------------------------------------------------------
                                                            DECEMBER 31,        DECEMBER 31,         DECEMBER 31,
                                                                2000                1999                 1998
                                                           ------------         ------------         ------------
<S>                                                        <C>                  <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income                                               $  1,175,077         $    913,864         $    701,850
  Adjustments to reconcile net income to net
    cash provided by operating activities:
      Provision for loan losses                                 170,000              182,500               78,000
      Depreciation                                              197,562              212,756              207,766
      (Gain) loss on disposal of assets                            --                  5,408               (5,298)
      Deferred income taxes                                       6,520              (31,096)              15,082
      Other, net                                                (13,356)               7,645               18,442
      Increase in operating assets:
        Accrued interest receivable                            (337,096)             (41,615)             (50,835)
        Refundable income taxes                                 (29,802)                --                   --
        Other assets                                             55,396             (539,846)            (203,559)
      Increase (decrease) in operating liabilities:
        Accrued interest payable                                 27,047               61,436               50,120
        Income taxes payable                                    (36,104)             (64,040)              (2,550)
        Other liabilities                                       (55,069)              29,434               51,533
                                                           ------------         ------------         ------------
          Net cash provided by operating activities           1,160,175              736,446              860,551
                                                           ------------         ------------         ------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Net (increase) decrease in federal funds sold               1,650,000             (663,000)          (2,477,000)
  Purchases of investment securities available
    for sale                                                 (2,173,949)          (9,408,803)          (6,454,087)
  Proceeds from sale of investment securities
    available for sale                                             --                894,406                 --
  Matured or redeemed investment securities
    available for sale                                        1,482,627            3,562,548            6,272,123
  Matured or redeemed investment securities held
    to maturity                                                    --                500,000            1,000,000
  Net increase in loans                                     (15,958,102)          (9,830,769)          (4,462,455)
  Additions to bank premises and equipment                     (147,258)             (60,461)            (326,127)
  Proceeds from assets and other real estate                    528,684               93,161              523,846
                                                           ------------         ------------         ------------
          Net cash used by investing activities             (14,617,998)         (14,912,918)          (5,923,700)
                                                           ------------         ------------         ------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Net increase in deposits                                   13,632,946           14,838,696            5,584,011
  Increase (decrease) in Federal Home
    Loan Bank advances                                        1,688,897              (10,251)             485,000
  Net increase (decrease) in other borrowings                      --             (1,133,366)              45,727
  Dividends paid                                               (181,300)            (181,300)            (407,925)
                                                           ------------         ------------         ------------
          Net cash provided (used) by financing
            activities                                       15,140,543           13,513,779            5,706,813
                                                           ------------         ------------         ------------

NET INCREASE (DECREASE) IN CASH AND
  DUE FROM BANKS                                              1,682,720             (662,693)             643,664

CASH AND DUE FROM BANKS, JANUARY 1                            3,746,213            4,408,906            3,765,242
                                                           ------------         ------------         ------------

CASH AND DUE FROM BANKS, DECEMBER 31                       $  5,428,933         $  3,746,213         $  4,408,906
                                                           ============         ============         ============
</TABLE>

The Notes to Financial  Statements  are an integral  part of these statements.

                                                        F-6


<PAGE>



                        FMB EQUIBANC, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2000, 1999 AND 1998
-------------------------------------------------------------------------------


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization
------------

FMB Equibanc,  Inc. (the Company) was  incorporated in Georgia on April 25, 2000
for the purpose of  reorganizing  Farmers and  Merchants  Bank (the Bank) into a
one-bank holding company.

Business Combinations
---------------------

In business  combinations  accounted for as pooling of interests,  the financial
position and results of operations  and cash flows of the  respective  companies
are restated as though the companies were combined for all historical periods.

Nature of Operations
--------------------

The Company is a one-bank  holding company with the Bank as its only subsidiary.
The Bank  conducts its banking  operations  through its main office and a branch
office in Statesboro, Georgia and a branch office in Brooklet, Georgia.

Principles of Consolidation
---------------------------

The consolidated  financial  statements  include the accounts of the Company and
Farmers and Merchants Bank. All material  intercompany accounts and transactions
have been  eliminated in  consolidation.  Certain amounts in previous years have
been reclassified to conform to the current year's presentation.

Use of Estimates
----------------

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

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

While management uses available information to recognize losses on loans, future
additions to the allowance may be necessary  based on changes in local  economic
conditions.  In  addition,  regulatory  agencies,  as an integral  part of their
examination  process,  periodically review the Company's allowance for losses on
loans.  Such  agencies  may require the Company to  recognize  additions  to the
allowance based on their judgments  about  information  available to them at the
time of their examination.  Because of these factors,  it is reasonably possible
that the allowance for losses on loans may change materially in the near term.

Cash and Cash Equivalents
-------------------------

For purposes of reporting cash flows,  cash and cash  equivalents are defined as
those amounts included in the balance sheet caption "cash and due from banks."

Investment Securities
---------------------

Debt  securities  that management has the ability and intent to hold to maturity
are  classified  as  held  to  maturity  and  carried  at  cost,   adjusted  for
amortization of premium and accretion of discounts  using methods  approximating
the interest method. Other marketable securities are classified as available for
sale and are carried at fair value.  Unrealized gains and losses, net of tax, on
securities  available  for sale are  reported  in  other  comprehensive  income.
Realized gains  (losses) on securities  available for sale are included in other
income (expense) and, when applicable,



                                       F-7

<PAGE>

FMB EQUIBANC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Investment Securities
---------------------

are  reported  as  a   reclassification   adjustment,   net  of  tax,  in  other
comprehensive  income. Gains and losses on sales of securities are determined on
the specific  identification  method.  Declines in the fair value of  individual
securities held to maturity and available for sale  securities  below their cost
that are other than temporary result in write-downs of the individual securities
to their fair  value.  The  related  write-downs  are  included  in  earnings as
realized losses.

Allowance for Loan Losses
-------------------------

The allowance for loan losses is  maintained at a level which,  in  management's
judgment,  is adequate to absorb credit losses  inherent in the loan  portfolio.
The  amount  of  the  allowance  is  based  on  management's  evaluation  of the
collectibility  of the loan  portfolio,  including the nature of the  portfolio,
credit concentrations,  trends in historical loss experience,  specific impaired
loans,  economic  conditions,   and  other  risks  inherent  in  the  portfolio.
Allowances  for impaired  loans are  generally  determined  based on  collateral
values or the present value of estimated cash flows.  The allowance is increased
by a provision  for loan  losses,  which is charged to  expense,  and reduced by
charge-offs, net of recoveries.

Interest Income on Loans
------------------------

Interest  on loans is accrued  and  credited  to income  based on the  principal
amount outstanding. Loans on which the accrual of interest has been discontinued
are  designated  as  nonaccrual  loans.  The  accrual  of  interest  on loans is
discontinued  either  when  reasonable  doubt  exists  as to  the  full,  timely
collection  of interest or principal or when a loan becomes  contractually  past
due by 90 days or more with  respect to  interest or  principal.  When a loan is
placed on nonaccrual status,  all interest  previously accrued but not collected
is reversed against current period interest income. Income on such loans is then
recognized  only to the  extent  that cash is  received  and  where  the  future
collection  of  principal is  probable.  Interest  accruals are recorded on such
loans only when they are brought  fully  current  with  respect to interest  and
principal and when, in the judgment of management, the loans are estimated to be
fully collectible as to both interest and principal.

Bank Premises and Equipment
---------------------------

Bank premises and equipment are stated at cost.  Depreciation  is computed using
the straight-line  method over the useful lives of the assets which range from 3
to 40 years.

Foreclosed Real Estate
----------------------

At the time of the foreclosure,  foreclosed real estate is recorded at the lower
of the  carrying  amount or fair  value  less cost to sell,  which  becomes  the
property's new basis. Any write-downs based on the asset's fair value at date of
acquisition  are charged to the  allowance for loan losses.  After  foreclosure,
these assets are carried at the lower of their new cost basis or fair value less
cost  to  sell.  Costs  incurred  in  maintaining  foreclosed  real  estate  and
subsequent  adjustments  to the carrying  amount of the property are included in
operations.

Advertising Costs
-----------------

Advertising  costs are expensed as incurred.  Advertising  expense for the years
ended  December  31,  2000,  1999 and 1998 was  $111,952,  $50,223 and  $40,613,
respectively.

Income Taxes
------------

Income taxes are provided  for the tax effects of the  transactions  reported in
the financial  statements and consist of taxes currently due plus deferred taxes
related  primarily  to  differences  between  the  basis of  available  for sale
securities,  allowance for loan losses,  deferred  compensation  and accumulated
depreciation for financial and income tax reporting. The deferred tax assets and
liabilities  represent the future tax return  consequences of those differences,
which will either be taxable or deductible  when the assets and  liabilities are
recovered  or settled.  Deferred  tax assets and  liabilities  are  reflected at
income tax rates  applicable  to the period in which the  deferred tax assets or
liabilities  are  expected to be realized or settled.  As changes in tax laws or
rates are enacted,  deferred tax assets and liabilities are adjusted through the
provision for income taxes.




                                       F-8

<PAGE>

FMB EQUIBANC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Earnings Per Share
------------------

Earnings  per share of common  stock is computed  by dividing  net income by the
weighted average number of shares outstanding during the year.

Off-Balance Sheet Financial Instruments
---------------------------------------

In the  ordinary  course of business,  the Company has entered into  off-balance
sheet  financial  instruments   consisting  of  commitments  to  extend  credit,
commitments  under credit card  arrangements,  commercial  letters of credit and
standby  letters of credit.  Such  financial  instruments  are  recorded  in the
financial  statements  when they are  funded or  related  fees are  incurred  or
received.

NOTE 2 - BUSINESS COMBINATION
On  November  1, 2000,  the Bank  reorganized  into a one-bank  holding  company
structure, becoming a wholly owned subsidiary of the Company. The reorganization
was accomplished  through the merger of FMB Interim Corp., a Georgia Corporation
and a wholly  owned  subsidiary  of the Company  ("Interim"),  with and into the
Bank,  under  the  charter  of the Bank and  with  the  name of the  Bank.  Each
outstanding  share of Farmers and  Merchants  Bank's  common stock was converted
into and exchanged for one share of the Company's  common stock.  The merger was
accounted  for as a  pooling  of  interests,  and  accordingly,  all  historical
financial  information  for the Company has been restated to include Farmers and
Merchants Bank's historical information for all periods presented herein.

NOTE 3 - INVESTMENT SECURITIES
Investment securities have been classified according to management's intent. The
amortized cost and fair values of investment securities are as follows:

<TABLE>
<CAPTION>
                                                                   Gross              Gross
                                              Amortized         Unrealized         Unrealized
                                                Cost               Gains              Losses          Fair Value
                                             -----------        -----------        -----------        -----------
<S>                                          <C>                <C>                <C>                <C>
SECURITIES AVAILABLE FOR SALE

December 31, 2000:
U. S. government agencies obligations        $ 9,667,225        $    22,741        $    60,527        $ 9,629,439
Mortgage-backed securities                     5,229,478             42,661             73,153          5,198,986
State and municipal securities                   305,094                645                 20            305,719
Corporate debt securities                        244,911              4,089               --              249,000
Other securities                                 258,525               --                 --              258,525
                                             -----------        -----------        -----------        -----------
                                             $15,705,233        $    70,136        $   133,700        $15,641,669
                                             ===========        ===========        ===========        ===========

December 31, 1999:
U. S. government agencies obligations        $ 8,670,258               --          $   271,555        $ 8,398,703
Mortgage-backed securities                     5,532,940        $       876            138,510          5,395,306
State and municipal securities                   307,953               --                1,210            306,743
Corporate debt securities                        244,078               --                4,503            239,575
Other securities                                 245,325               --                 --              245,325
                                             -----------        -----------        -----------        -----------
                                             $15,000,554        $       876        $   415,778        $14,585,652
                                             ===========        ===========        ===========        ===========
</TABLE>






                                       F-9




<PAGE>



FMB EQUIBANC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


NOTE 3 - INVESTMENT SECURITIES (CONTINUED)
The scheduled  maturities of securities  available for sale at December 31, 2000
are shown below.  Expected  maturities will differ from  contractual  maturities
because  borrowers  may have the  right to call or  prepay  obligations  with or
without call or prepayment penalties.

                                             Securities Available for Sale
                                            ------------------------------
                                             Amortized            Fair
                                               Cost               Value
                                            -----------        -----------
Due in one year or less                     $ 2,498,002        $ 2,495,350
Due from one year through five years          7,719,228          7,688,808
                                            -----------        -----------
                                             10,217,230         10,184,158
Mortgage-backed securities                    5,229,478          5,198,986
Other securities                                258,525            258,525
                                            -----------        -----------
                                            $15,705,233        $15,641,669
                                            ===========        ===========


There were no sales of investment securities during 2000. Proceeds from sales of
investment securities available for sale during 1999 were $894,406.

The Company is a member of the Federal  Home Loan Bank of Atlanta  (FHLB) and is
required  to  maintain a minimum  stock  holding in FHLB  stock.  Each  member's
required  minimum holding of FHLB stock is calculated  annually by the FHLB. The
investment in FHLB stock is carried at cost,  which  represents fair value.  The
carrying value of FHLB stock  included in other  securities at December 31, 2000
and 1999 is $209,100 and $195,900, respectively.

Investment  securities with a carrying amount of  approximately  $11,321,646 and
$5,083,866 at December 31, 2000 and 1999,  respectively,  were pledged to secure
public deposits as required or permitted by law.

NOTE 4 - LOANS
Major classifications of loans are as follows:

                                          2000                 1999
                                      ------------         ------------
Commercial                            $ 12,813,884         $ 10,314,049
Commercial real estate                  23,879,689           18,689,927
Residential real estate                 18,443,744           15,058,519
Real estate construction                 2,720,870            1,042,687
Consumer and other installment          11,135,456            8,151,996
Overdrafts                                  29,850               28,335
                                      ------------         ------------
        Total loans                     69,023,493           53,285,513
Allowance for loan losses                 (793,473)            (857,947)
                                      ------------         ------------
        Loans, net                    $ 68,230,020         $ 52,427,566
                                      ============         ============





                                       F-10


<PAGE>



FMB EQUIBANC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


NOTE 4 - LOANS (CONTINUED)
Loans on which the accrual of interest has been discontinued or reduced amounted
to  $466,391,  $102,448  and  $135,722  at  December  31,  2000,  1999 and 1998,
respectively.  If interest on those loans had been  accrued,  such income  would
have  approximated   $9,747,   $2,240  and  $2,382  for  2000,  1999  and  1998,
respectively.

Changes in the allowance for loan losses were as follows:

<TABLE>
<CAPTION>
                                          2000              1999              1998
                                       ---------         ---------         ---------
<S>                                    <C>               <C>               <C>
Balance, beginning of year             $ 857,947         $ 767,285         $ 723,635
Provision charged to operations          170,000           182,500            78,000
Loans charged off                       (313,535)         (158,062)         (163,400)
Recoveries                                79,061            66,224           129,050
                                       ---------         ---------         ---------
Balance, end of year                   $ 793,473         $ 857,947         $ 767,285
                                       =========         =========         =========
</TABLE>



NOTE 5 - BANK PREMISES AND EQUIPMENT
Major classifications of these assets are summarized as follows:

                                    2000                1999
                                -----------         -----------
Land                            $   320,992         $   320,992
Buildings                         2,296,453           2,211,967
Furniture and equipment           1,221,792           1,159,915
                                -----------         -----------
        Total cost                3,839,237           3,692,874
Accumulated depreciation         (1,894,211)         (1,697,544)
                                -----------         -----------
        Net book value          $ 1,945,026         $ 1,995,330
                                ===========         ===========



Depreciation expense amounted to $197,562,  $212,756 and $207,766 for 2000, 1999
and 1998, respectively.

Certain  facilities  and equipment are leased under  various  operating  leases.
Rental  expense  for  2000,  1999 and 1998 was  $16,788,  $16,414  and  $21,922,
respectively.

NOTE 6 - DEPOSITS
At December 31, 2000, the scheduled maturities of certificates of deposit are as
follows:

               2001        $45,944,848
               2002          3,456,795
               2003            412,241
                           -----------
                           $49,813,884
                           ===========




                                       F-11


<PAGE>



FMB EQUIBANC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


NOTE 7 - FEDERAL HOME LOAN BANK ADVANCES
The Federal Home Loan Bank Advances at December 31, 2000 consists of a Community
Investment  Program (CIP) advance taken on December 10, 1998, payable in monthly
installments,  including interest at 5.48 percent, through December 10, 2008 and
a short term  advance  taken on October  17,  2000,  payable on April 17,  2001,
including  interest at 6.82  percent.  The  advances are  collateralized  by the
Company's wholly owned residential (1-4 units) first mortgage loan portfolio.

Maturities  of the advances for each of the next five years and in the aggregate
are as follows:

               Year ending December 31
               ------------------------
               2001                                      $1,712,024
               2002                                          13,021
               2003                                          14,102
               2004                                          15,273
               2005                                          16,540
               Later years                                  392,686
                                                         ----------
                                                         $2,163,646
                                                         ==========



NOTE 8 - INCOME TAXES
The provision for income taxes consists of the following:

                                        2000             1999            1998
                                     ---------        ---------       ---------
Current:
   Federal                           $ 578,506        $ 507,007       $ 406,080
   State                                66,697           37,495            --
                                     ---------        ---------       ---------
                                       645,203          544,502         406,080
                                     ---------        ---------       ---------

Deferred:
   Federal                               5,541          (44,832)        (29,485)
   State                                   979           13,736          44,567
                                     ---------        ---------       ---------
                                         6,520          (31,096)         15,082
                                     ---------        ---------       ---------

            Total income taxes       $ 651,723        $ 513,406       $ 421,162
                                     =========        =========       =========








                                       F-12



<PAGE>



FMB EQUIBANC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


NOTE 8 - INCOME TAXES (CONTINUED)
A  reconciliation  of the federal  statutory  income tax rate with the effective
income tax rate reflected in the financial statements is as follows:

<TABLE>
<CAPTION>
                                                2000                             1999                               1998
                                    --------------------------       --------------------------       ---------------------------
<S>                                 <C>                  <C>         <C>                  <C>         <C>                  <C>
Tax based on statutory rate         $ 621,112            34.0%       $ 485,272            34.0%       $ 381,824            34.0%
Effect of tax-exempt income            (4,151)           (0.2)          (1,547)           (0.1)            (778)           (0.1)
Dividends received deduction           (4,614)           (0.3)          (4,911)           (0.3)          (4,577)           (0.4)
Nondeductible expenses                  6,407             0.4            7,941             0.5            6,025             0.5
Other, net                            (34,707)           (1.9)         (24,580)           (1.7)          (5,899)           (0.5)
                                    ---------          ------        ---------          ------        ---------          ------
                                    $ 584,047            32.0%       $ 462,175            32.4%       $ 376,595            33.5%
                                    =========          ======        =========          ======        =========          ======
</TABLE>



The components of the deferred income tax asset are as follows:

                                                     2000              1999
                                                  ---------         ---------
          Deferred tax liabilities                $ (84,745)        $ (98,936)
          Deferred tax assets                       277,613           438,860
                                                  ---------         ---------
                    Net deferred tax asset        $ 192,868         $ 339,924
                                                  =========         =========



NOTE 9 - PROFIT SHARING PLAN
The Bank participates in a 401(k) profit sharing plan. All employees of the Bank
who meet age and  employment  tenure  qualifications  specified  in the plan are
eligible  to  participate.  The Bank can  contribute  to the plan out of the net
income  such  amount  as may be  determined  and  authorized  by  the  Board  of
Directors,  but in no year shall the total contributed  exceed 15 percent of the
total  compensation  paid to employees who are eligible to participate  for that
year. Participants may make voluntary contributions by payroll deduction or cash
payment.  The Bank matches voluntary  contributions made by participants up to 4
percent   of  the   participant's   total   compensation.   Including   matching
contributions, the Bank contributed $25,929, $19,460 and $26,579 to the plan for
2000, 1999 and 1998, respectively.

NOTE 10 - DEFERRED COMPENSATION AGREEMENTS
The  Bank  has  entered  into  deferred  compensation  agreements  with  certain
directors of the Bank to defer  portions of their  director  fees and to receive
equal monthly installments for 120 consecutive months after a certain retirement
age (age 65 in most instances).  If the director dies before retirement age, the
monthly benefit will be paid to the director's designated  beneficiary beginning
the month  following  the death of the  director.  Should the director die after
retirement  age  before  receiving  the  entire 120  monthly  installments,  the
remaining  monthly  installments  will  be  paid  to the  director's  designated
beneficiary.  The Bank is currently funding the deferred compensation agreements
with annuity contracts on each participating director.  Annuity contracts with a
present value of approximately $68,250 and $164,978 are included in other assets
at December 31, 2000 and 1999,  respectively.  A deferred compensation liability
has been set up which  approximates  the  present  value of the future  payments
related to service  rendered to date.  The  deferred  compensation  liability at
December 31, 2000 and 1999, was $61,865 and $151,600, respectively.







                                       F-13

<PAGE>
MB EQUIBANC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


NOTE 11 - RELATED PARTY TRANSACTIONS
At  December  31,  2000  and  1999,  certain  employees,   officers,  directors,
significant  stockholders,  and their affiliates (related parties) were indebted
to the Bank in the aggregate amount of $1,667,175 and $1,308,997,  respectively.
During  2000,  new  loans to such  related  parties  amounted  to  $972,629  and
repayments amounted to $614,451.

During the years ended December 31, 2000, 1999 and 1998,  approximately $15,400,
$7,400  and  $6,800,  respectively,  in legal  fees were paid to a legal firm in
which one of the directors is a partner.

During the years ended December 31, 2000, 1999 and 1998,  approximately $11,100,
$11,600  and  $44,600,  respectively,  in  insurance  premiums  were  paid to an
insurance agency in which one of the directors is a partner.

NOTE 12 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
In the normal  course of business,  the Bank has entered into  off-balance-sheet
financial instruments which are not reflected in the financial statements. Those
financial  instruments  include commitments to extend credit and standby letters
of credit. Such financial  instruments are included in the financial  statements
when funds are disbursed or the instruments  become payable.  Those  instruments
involve,  to varying  degrees,  elements  of credit risk in excess of the amount
recognized in the balance sheet.

                                                 2000               1999
                                              ----------        ----------
          Commitments to extend credit        $7,257,602        $5,094,637
          Standby letters of credit              170,240           134,765
                                              ----------        ----------
                                              $7,427,842        $5,229,402
                                              ==========        ==========


The Bank's exposure to credit loss in the event of  nonperformance  by the other
party to the financial  instruments for commitments to extend credit and standby
letters of credit is represented by the  contractual or notional amount of those
instruments.  The Bank uses the same credit  policies in making  commitments and
conditional obligations as it does for on-balance-sheet  instruments.  A summary
of the Bank's commitments is as follows:

Commitments  to extend  credit are  agreements  to lend to a customer as long as
there is no violation of any condition established in the contract.  Commitments
generally  have fixed  expiration  dates or other  termination  clauses  and may
require  payment of a fee. Since many of the  commitments are expected to expire
without  being  drawn  upon,  the total  commitment  amounts do not  necessarily
represent  future cash  requirements.  The credit risk involved in issuing these
financial  instruments  is  essentially  the same as that  involved in extending
loans to customers.  The Bank evaluates each  customer's  creditworthiness  on a
case-by-case  basis.  The  amount  and type of  collateral  obtained,  if deemed
necessary  by the  Bank  upon  extension  of  credit,  varies  and is  based  on
management's  credit evaluation of the customer.  Collateral held varies but may
include  real  estate  and   improvements,   marketable   securities,   accounts
receivable, crops, inventory, equipment and personal property.

Standby  letters of credit  are  conditional  commitments  issued by the Bank to
guarantee the  performance  of a customer to a third party.  Standby  letters of
credit generally have fixed expiration  dates or other  termination  clauses and
may require  payment of a fee.  The credit risk  involved in issuing  letters of
credit is essentially the same as that involved in extending loans to customers.
The Bank's policy for obtaining  collateral,  and the nature of such collateral,
is essentially the same as that involved in making commitments to extend credit.





                                       F-14

<PAGE>


FMB EQUIBANC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


NOTE 13 - COMMITMENTS AND CONTINGENT LIABILITIES
At December 31, 2000, the Bank had unused federal funds lines of credit totaling
$1,800,000 with correspondent banks.

During 1995, the Bank entered into a data  processing  agreement with a computer
service center.  The agreement is for a three-year term expiring April, 1998 and
includes  automatic  renewal for the same term unless terminated within 180 days
prior to the expiration date.  Monthly fees for the data processing service vary
based on required services,  but average  approximately $8,000 each month. Total
fees  paid in 2000,  1999 and 1998  were  approximately  $101,000,  $86,000  and
$82,000, respectively.

NOTE 14 - CONCENTRATIONS OF CREDIT
All of the Bank's loans,  commitments,  and standby  letters of credit have been
granted to  customers  in the Bank's  market  area  which is  primarily  Bulloch
County,  Georgia and surrounding counties.  The concentrations of credit by type
of loan are set forth in Note 4. The Bank has the practice of  maintaining  cash
balances in excess of federally insured limits with correspondent banks.

NOTE 15 - DISCLOSURES RELATING TO STATEMENT OF CASH FLOWS
Cash paid during the year for interest and income taxes was as follows:

                                 2000              1999               1998
                              ----------        ----------        ----------

          Interest            $3,267,569        $2,380,566        $2,081,734
          Income taxes           709,287           611,864           408,630





Noncash  investing  activities  for 2000,  1999 and 1998  included  an  increase
(decrease) in the unrealized loss on investment securities available for sale of
$(351,338), $363,781 and $(59,534).





                                       F-15

<PAGE>


FMB EQUIBANC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


NOTE 16 - REGULATORY MATTERS
The Company is subject to various regulatory capital  requirements  administered
by the federal  and state  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 Company's  financial  statements.  Under capital adequacy
guidelines  and the  regulatory  framework  for prompt  corrective  action,  the
Company must meet specific capital guidelines that involve quantitative measures
of the Company's  assets,  liabilities,  and certain  off-balance sheet items as
calculated under regulatory accounting practices.  The Company's capital amounts
and  classification  under the  prompt  corrective  action  guidelines  are also
subject to  qualitative  judgements by the  regulators  about  components,  risk
weightings, and other factors.

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require the Company to maintain  minimum amounts and ratios of total  risk-based
capital  and  Tier  I  capital  to  risk-weighted  assets  (as  defined  in  the
regulations) and Tier I capital to average total assets (as defined). Management
believes,  as of  December  31,  2000,  the Company  meets all capital  adequacy
requirements to which it is subject.

As of December 31, 1999,  the most recent  notification  from the  Department of
Banking  and  Finance  categorized  the  Company as well  capitalized  under the
regulatory  framework for prompt  corrective  action.  To be categorized as well
capitalized,  the  Company  must  maintain  minimum  total  risk-based,  Tier  I
risked-based, and Tier I leverage ratios as set forth in the table. There are no
conditions  or events since that  notification  that  management  believes  have
changed the Company's prompt corrective action category.

The Company's actual capital amounts and ratios are also presented in the table.

<TABLE>
<CAPTION>
                                                                         (000's Omitted)
                                                                                                        To Be Well
                                                                                                    Capitalized Under
                                                                         For Capital                Prompt Corrective
                                               Actual                  Adequacy Purposes            Action Provisions
                                         --------------------        --------------------         ---------------------
                                         Amount        Ratio         Amount         Ratio          Amount         Ratio
                                         ------        -----         ------         -----          ------         -----
<S>                                      <C>           <C>            <C>            <C>           <C>           <C>
As of December 31, 2000:
  Total Capital
    (to Risk Weighted Assets)            $8,448        11.91%         $5,673         8.00%         $7,091        10.00%
  Tier I Capital
    (to Risk Weighted Assets)             7,655        10.79%          2,837         4.00%          4,255         6.00%
  Tier I Capital
    (to Average Assets)                   7,655         9.04%          3,387         4.00%          5,081         6.00%
As of December 31, 1999:
  Total Capital
    (to Risk Weighted Assets)             7,386        12.74%          4,640         8.00%          5,800        10.00%
  Tier I Capital
    (to Risk Weighted Assets)             6,661        11.49%          2,320         4.00%          3,480         6.00%
  Tier I Capital
    (to Average Assets)                   6,661         9.31%          2,862         4.00%          4,292         6.00%
</TABLE>







                                       F-16


<PAGE>


Financial Statements for FMB Equibanc, Inc.
FMB EQUIBANC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


NOTE 17 - APPROPRIATED RETAINED EARNINGS
Appropriated  retained earnings at December 31, 2000 represent retained earnings
designated by the Company's board of directors as unavailable for dividends.





                                       F-17


<PAGE>

                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended,  the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized.

                                            FMB EQUIBANC, INC.

Dated:  March 27, 2001                      By:/s/ Leonard E. Herrington
                                               -------------------------
                                                 Leonard E. Herrington
                                                 President and Chief Executive
                                                 Officer



<PAGE>


         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed below by the following persons on behalf of
the Registrant, in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
               Signature                                               Title                                      Date
               ---------                                               -----                                      ----

<S>                                                       <C>                                                <C>
/s/ Leonard E. Herrington                                     Director, President and                        March  27, 2001
---------------------------------
Leonard E. Herrington                                         Chief Executive Officer
                                                           (principal executive officer)

/s/ Sheryl M. Swint                                                   Secretary,                             March  27, 2001
---------------------------------                               Assistant Vice President
Sheryl M. Swint                                              (principal financial and
                                                                accounting officer)

/s/ Frank C. Rozier                                     Chairman of the Board of Directors                   March  27, 2001
---------------------------------
Frank C. Rozier

/s/ Leonard H. Blount                                                Director                                March  27, 2001
---------------------------------
Leonard H. Blount

/s/ F. Wendell Brannen                                               Director                                March  27, 2001
---------------------------------
F. Wendell Brannen

                                                                     Director
---------------------------------
R. Earl Dabbs

                                                                     Director
---------------------------------
Gerald M. Edenfield


/s/ Charles R. Nessmith                                              Director                                March  27, 2001
---------------------------------
Charles R. Nessmith

/s/ William R. Smith                                                 Director                                March  27, 2001
---------------------------------
William R. Smith

                                                                     Director
---------------------------------
Billy G. Tyson
</TABLE>




<PAGE>




                                  EXHIBIT INDEX

           Exhibit No.        Description
           -----------        -----------

               10.1           1998 Nonqualified Stock Option Plan.

               10.2           Form of Director Deferred Compensation Agreement.

               10.3           Employment  Agreement  by and  between  Farmers &
                              Merchants Bank and Leonard E. Herrington.

               10.4           Employment  Agreement  by and  between  Farmers &
                              Merchants Bank and Charles R. Nessmith.

               21.1           Subsidiaries of the Registrant.