EXHIBIT 13.1

                       2002 ANNUAL REPORT TO SHAREHOLDERS


MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS.

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

INDEPENDENT AUDITOR'S REPORT.

CONSOLIDATED FINANCIAL STATEMENTS AND NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS.



<PAGE>
                      MARKET FOR THE COMPANY'S COMMON STOCK
                         AND RELATED SHAREHOLDER MATTERS

     There  is currently no market for the Company's shares of Common Stock, and
it  is  not  likely that an active trading market will develop for the shares in
the  future.  There  are  no  present plans for the Company's Common Stock to be
traded  on  any  stock  exchange of over-the-counter market.  As of December 31,
2002,  there  were  approximately  614 holders of record of the Company's Common
Stock  and  1,775,000  shares  of  Common  Stock  issued  and  outstanding.

     No cash dividends have been paid to date on the Company's Common Stock, and
it  is  anticipated that earnings will be retained for the foreseeable future to
support  the Company's rapid growth and expansion.  The Company currently has no
source of income other than dividends and other payments received from the Bank.
The  amount  of dividends that may be paid by the Bank to the Company depends on
the  Bank's  earnings  and  capital position and is limited by federal and state
law,  regulation  and  policies.

     The Company has only one compensation plan that allows for shares of Common
Stock  to  be  issued  upon  the  exercise  of  outstanding stock options, or in
connection  with  other  stock  based  awards  to  key employees.  The Company's
Long-Term Incentive Plan (the "Incentive Plan") was adopted effective January 1,
2000  and approved by the shareholders at the 2000 Annual Meeting.  The terms of
the Incentive Plan authorize the Company's Board of Directors to issue awards to
key employees of the Bank, which may consist of stock options, restricted stock,
stock  appreciation  rights  or performance shares.  The rate of vesting, option
price,  term  and  other  conditions  applicable to such awards are fixed by the
Board  of  Directors  in  such  award.  However, the terms of the Incentive Plan
provide  that  all outstanding awards shall automatically be fully vested in the
event  of any change in control of the Company or the Bank.  The following table
sets  out  certain  information with respect to the currently outstanding awards
under  the  Incentive  Plan.

<TABLE>
<CAPTION>
                                    NUMBER OF SECURITIES          WEIGHTED AVERAGE        NUMBER OF SECURITIES
                                      TO BE ISSUED UPON          EXERCISE PRICE OF      REMAINING AVAILABLE FOR
                                   EXERCISE OF OUTSTANDING      OUTSTANDING OPTIONS,     FUTURE ISSUANCE UNDER
                                OPTIONS, WARRANTS AND RIGHTS    WARRANTS AND RIGHTS    EQUITY COMPENSATION PLANS
                                -----------------------------  ----------------------  --------------------------
<S>                             <C>                            <C>                     <C>
                                             (a)                         (b)                      (c)
                                -----------------------------  ----------------------  --------------------------
Equity Compensation Plans                  24,500                      $ 8.33                   135,500
  approved by security holders
Equity Compensation Plans not                 -                           -                        -
  approved by security holders
                                -----------------------------  ----------------------  --------------------------
Total                                      24,500                      $ 8.33                   135,500
                                -----------------------------  ----------------------  --------------------------
</TABLE>


<PAGE>
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The  following  is  a  discussion  of  our financial condition and the financial
condition  of  our  bank  subsidiary,  The  Citizens  Bank of Forsyth County, at
December  31,  2002  and  2001  and the results of operations for the years then
ended.  The  purpose  of  this  discussion  is to focus on information about our
financial  condition  and  results of operations that are not otherwise apparent
from our audited consolidated financial statements.  Reference should be made to
those  statements  and  the  selected financial data presented elsewhere in this
report  for  an  understanding  of  the  following  discussion  and  analysis.

FORWARD-LOOKING STATEMENTS

We  may  from  time  to  time  make  written or oral forward-looking statements,
including  statements  contained in our filings with the Securities and Exchange
Commission  and  our  reports  to stockholders.  Statements made in this report,
other  than  those  concerning  historical  information,  should  be  considered
forward-looking and subject to various risks and uncertainties.  Forward-looking
statements  are  made based upon management's belief as well as assumptions made
by, and information currently available to, management pursuant to "safe harbor"
provisions  of the Private Securities Litigation Reform Act of 1995.  Our actual
results  may  differ  materially from the results anticipated in forward-looking
statements  due  to  a  variety  of factors, including governmental monetary and
fiscal policies, deposit levels, loan demand, loan collateral values, securities
portfolio  values,  interest rate risk management, the effects of competition in
the  banking  business  from  other  commercial banks, thrifts, mortgage banking
firms,  consumer  finance  companies, credit unions, securities brokerage firms,
insurance  companies,  money  market  funds  and  other  financial  institutions
operating  in  our  market  area and elsewhere, including institutions operating
through the Internet, changes in governmental regulation relating to the banking
industry,  including regulations relating to branching and acquisitions, failure
of  assumptions  underlying  the  establishment  of  reserves  for  loan losses,
including the value of collateral underlying delinquent loans and other factors.
We  caution that these factors are not exclusive.  We do not undertake to update
any  forward-looking  statement  that may be made from time to time by us, or on
our  behalf.

CRITICAL ACCOUNTING POLICIES

We  have  adopted  various  accounting  policies which govern the application of
accounting principles generally accepted in the United States in the preparation
of  our  financial statements. Our significant accounting policies are described
in  the  footnotes to the consolidated financial statements at December 31, 2002
as  filed  on  our  annual  report  on  Form  10-KSB.

Certain  accounting policies involve significant judgments and assumptions by us
which  have  a  material  impact  on  the  carrying  value of certain assets and
liabilities.  We  consider  these  accounting policies to be critical accounting
policies.  The  judgments  and  assumptions  we  use  are  based  on  historical
experience  and  other  factors,  which  we  believe  to be reasonable under the
circumstances.  Because  of the nature of the judgments and assumptions we make,
actual  results could differ from these judgments and estimates which could have
a  material  impact  on  our  carrying  values of assets and liabilities and our
results  of  operations.


<PAGE>
We  believe  the  allowance for loan losses is a critical accounting policy that
requires the most significant judgments and estimates used in preparation of our
consolidated  financial statements. Refer to the portion of this discussion that
addresses  our  allowance for loan losses for a description of our processes and
methodology  for  determining  our  allowance  for  loan  losses.

OVERVIEW

Our  2002  results  were  highlighted  by  continued loan and deposit growth and
increased profitability despite the continued slowdown in the national and state
economies.  Our  net  income  increased  to $638,240, as compared to $318,000 in
2001, primarily due to the decreasing cost of funds. We completed building a new
main  office  facility  during  the fourth quarter to replace the cramped leased
facilities  we occupied since conception, and we are seeking desirable locations
for  further expansion. With Forsyth County remaining one of the fastest growing
areas  in  the  country,  we  believe that our physical expansion is required in
order  to  continue  to  meet  the  needs  of  the  community.

The  directors  declared  a  two-for-one  stock  split  in lieu of paying a cash
dividend.  In  addition,  we  were able to raise $1.5 million in capital through
several  of  our  directors  exercising  stock  options  granted to them.  1.775
million  shares  were  outstanding at December 31, 2002.  The additional capital
will  be  used  to  fund  the  bank's  growth.

FINANCIAL CONDITION AT DECEMBER 31, 2002 AND 2001

The following is a summary of our balance sheet for the years indicated:

                                                        December  31,
                                                       2002       2001
                                                    (Dollars in Thousands)

Cash and due from banks                             $   1,903  $ 2,781
Interest-bearing deposits in banks                        214      186
Federal funds sold                                      3,461    7,366
Securities                                             18,950   16,362
Loans, net                                             69,661   59,916
Premises and equipment                                  5,334    3,048
Other assets                                              686      927
                                                    ---------  -------

                                                    $ 100,209  $90,586
                                                    =========  =======

Total deposits                                      $  87,966  $80,785
Other liabilities                                         467      350
Stockholders' equity                                   11,776    9,451
                                                    ---------  -------

                                                    $ 100,209  $90,586
                                                    =========  =======

As  of  December 31, 2002, we had total assets of $100.2 million, an increase of
10.62% over December 31, 2001.  Total interest-earning assets were $93.1 million
at December 31, 2002 or 93% of total assets


<PAGE>
as  compared  to  84.6%  of  total  assets  at  December  31,  2001. Our primary
interest-earning  assets at December 31, 2002 were loans, which made up 75.7% of
total  interest-earning assets as compared to 72% at December 31, 2001. Our loan
to  deposit  ratio was 80.2% at December 31, 2002 as compared to 76% at December
31, 2001. Deposit growth of $7.2 million and a decrease in federal funds sold of
$3.9  million  has  been  used  to  fund  loan  growth of $9.8 million, with the
remainder  being  used  to fund a $2.5 million increase in securities portfolio.

Our  securities  portfolio,  consisting  of  U.S.  Agency  securities, state and
municipal  securities,  corporate  securities,  mortgage-backed  securities  and
restricted  equity  securities,  amounted to $18.9 million at December 31, 2002.
Net  unrealized gains on securities amounted to $585,000 at December 31, 2002 as
compared  to  net unrealized gains of $264,000 at December 31, 2001.  Management
has  not  specifically  identified  any  securities  for sale in future periods,
which,  if  so  designated,  would  require a charge to operations if the market
value  would  not  be  reasonably expected to recover prior to the time of sale.

We  have  69% of our loan portfolio collateralized by real estate located in our
primary market area of Forsyth County and surrounding counties.  Our real estate
mortgage  portfolio  consists  of  loans  collateralized  by  one-to-four-family
residential  properties  (34%),  construction  loans to build one-to-four family
residential properties (38%), and nonresidential properties consisting primarily
of  small business commercial properties (28%).  We generally require that loans
collateralized  by  real  estate  not  exceed  80%  of  the  collateral  value.

The  remaining  31%  of  the loan portfolio consist of commercial, consumer, and
other  loans.  We require collateral commensurate with the repayment ability and
creditworthiness  of  the  borrower.

The  specific  economic  and  credit  risks  associated with our loan portfolio,
especially the real estate portfolio, include, but are not limited to, a general
downturn  in  the  economy  which  could affect unemployment rates in our market
area,  general  real  estate  market  deterioration, interest rate fluctuations,
deteriorated  or  non-existing collateral, title defects, inaccurate appraisals,
financial  deterioration  of  borrowers,  fraud,  and  any  violation of banking
protection  laws.  Construction lending can also present other specific risks to
the  lender  such  as  whether developers can find builders to buy lots for home
construction,  whether  the  builders can obtain financing for the construction,
whether  the  builders  can  sell the home to a buyer, and whether the buyer can
obtain permanent financing.  Currently, real estate values and employment trends
in  our  market area are stable with no indications of a significant downturn in
the  local  economy.  However,  we  cannot predict the impact global events will
have  on  our  local  economy.

We  attempt  to  reduce  these economic and credit risks not only by adhering to
loan  to value guidelines, but also by investigating the creditworthiness of the
borrower  and  monitoring the borrower's financial position.  Also, we establish
and  periodically  review  our  lending  policies and procedures.  State banking
regulations limit exposure by prohibiting secured loan relationships that exceed
25% of the Bank's statutory capital and unsecured loan relationships that exceed
15%  of  the  Bank's  statutory  capital.


<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

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

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

Our  liquidity  and  capital  resources  are  monitored  on  a periodic basis by
management,  State  and  Federal  regulatory  authorities.  As  determined under
guidelines  established  by  regulatory  authorities  and  internal  policy, our
liquidity  ratio  of  27.01%  at  December 31, 2002 was considered satisfactory.

At  December  31,  2002,  we  had loan commitments outstanding of $11.5 million.
Because  these  commitments  generally have fixed expiration dates and many will
expire without being drawn upon, the total commitment amounts do not necessarily
represent  future  cash  requirements.  If  needed,  we  have  the  ability on a
short-term  basis  to  borrow  and  purchase  federal funds from other financial
institutions.  At  December  31,  2002,  we had an arrangement with a commercial
bank  for  short-term advances of $2,000,000, in addition to $8,300,000 which is
available  to  us,  subject to available collateral, in the form of Federal Home
Loan  Bank  advances.

At  December  31,  2002,  our  capital  ratios were considered adequate based on
regulatory  minimum capital requirements.  Our stockholders' equity increased by
$2.3  million  due to net income in 2002 of $638,000; to an increase in the fair
value  of  securities available-for-sale, net of tax, in the amount of $199,000;
and  to several of our directors exercising stock options granted to them, which
contributed  $1.5  million.  For  regulatory  purposes, net unrealized gains and
losses  on  securities available-for-sale are excluded in the computation of the
capital  ratios.

The primary source of funds available to Forsyth Bancshares, Inc. is the payment
of dividends by the Bank.  Banking regulations limit the amount of the dividends
that  may  be  paid  without  prior  approval  of  the Bank's regulatory agency.
Currently, the Bank could pay $340,000 in dividends without regulatory approval.
Another  source  of  funds  is the stock options granted to the directors during
2002.  Options to purchase 324,500 shares were granted to the directors. Options
for  175,000  shares  were  exercised  in  December,  raising  $1.5  million  in
additional  capital  for  Forsyth  Bancshares,  Inc.


<PAGE>
The  minimum capital requirements to be considered well capitalized under prompt
corrective  action  provisions  and  the actual capital ratios on a consolidated
basis  and  for  the  Bank  as  of  December  31,  2002  are  as  follows:

                                             Actual
                              ----------------------------------
                                                       Regulatory
                              Consolidated    Bank    Requirements
                              -------------  -------  -------------

  Leverage capital ratio           11.60  %  8.48  %        5.00  %
  Risk-based capital ratios:
    Core capital                      14.24    10.43           6.00
    Total capital                     15.34    11.55          10.00

These  ratios  may decline as asset growth continues, but are expected to exceed
the regulatory minimum requirements.  Anticipated future earnings will assist in
keeping  these  ratios  at  satisfactory  levels.

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

Effects of Inflation
--------------------

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


<PAGE>
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001

The following is a summary of our operations for the years indicated.

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

Interest income                                      $5,792  $ 6,471

Interest expense                                      2,155    3,318
                                                     ------  -------

Net interest income                                   3,637    3,153

Provision for loan losses                               196      338

Other income                                            897      563

Other expenses                                        3,359    2,913
                                                     ------  -------

Pretax income                                           979      465

Income taxes                                            341      147
                                                     ------  -------

Net income                                           $  638  $   318
                                                     ======  =======


Net Interest Income
-------------------

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

Our  net  yield on average interest-earning assets was 4.14% in 2002 as compared
to  3.84% in 2001.  Average loans increased by $9.4 million, which accounted for
the  most significant change in average interest-earning assets, which increased
overall  by  $6 million.  Average interest-bearing liabilities increased by $6.6
million  with  average  interest-bearing demand and time deposits accounting for
the vast majority of this increase.  The rate earned on average interest-earning
assets  decreased to 6.59% in 2002 from 7.89% in 2001.  The rate paid on average
interest-bearing liabilities decreased to 2.94% in 2002 from 4.91% in 2001.  The
increase  in net yield is due primarily to the decrease in the rates paid on our
interest-bearing  liabilities  more than offsetting the decrease in the yield on
our  interest-earning  assets.  Management  believes  this  trend  will continue
during  the  first  half  of  2003.


<PAGE>
Provision for Loan Losses
-------------------------

The  provision  for  loan losses was $196,000 in 2002 as compared to $338,000 in
2001.  The  decrease  in the provision for loan losses is due to the decrease of
the  amount  of  charge-offs  for the year 2002. As of December 31, 2002, we had
nonperforming  loans  and  assets  totaling  $16,000  as  compared to $57,000 at
December  31, 2001.  Based upon our evaluation of the loan portfolio, we believe
the  allowance for loan losses to be adequate to absorb losses on existing loans
that  may  become  uncollectible.  Our  evaluation considers significant factors
relative  to  the credit risk and loss exposure in the loan portfolio, including
past  due  and  classified  loans,  historical experience, underlying collateral
values,  and  current economic conditions that may affect the borrower's ability
to  repay.  The  allowance  for  loan losses is evaluated by segmenting the loan
portfolio  into  unclassified  and classified loans.  An allowance percentage is
applied  to  the  unclassified  loans  to establish a general allowance for loan
losses.  The  allowance  percentage  determined  is  based  upon  our experience
specifically  and  the  historical experience of the banking industry generally.
The  classified  loans,  including  impaired loans, are analyzed individually in
order  to  establish  a  specific allowance for loan losses.  The total of these
allowances  are compared to the minimum allowance level range in accordance with
internal  policy,  (1.20% to 1.30% of total loans outstanding), with the greater
amount  being recorded as the allowance for loan losses.  The allowance for loan
losses  as  a percentage of total loans at December 31, 2002 and 2001 was 1.26%.

Other Income
------------

Other  income  consists  of  service  charges on deposit accounts, mortgage loan
origination fees, other miscellaneous revenues and fees, and gains and losses on
securities  transactions.  Other  income  was  $897,000  in  2002 as compared to
$563,000  in  2001.  The  increase  of  $334,000  is  due primarily to increased
mortgage  loan  origination  fees  of $263,000, and increased service charges on
deposit  accounts of $63,000. The increase in mortgage loan origination fees was
due to the mortgage department beginning operations in June 2001, as compared to
operating  for  a  full  year  in  2002.

Other Expenses
--------------

Other  expense  for  2002  consists  of  salaries  and  employee  benefits ($1.8
million),  equipment  and  occupancy  expenses  ($508,000),  and other operating
expenses ($1 million).  Salaries and employee benefits increased by $286,000 due
to annual salary increases including the employee cost to fund our mortgage loan
origination  operations.  Equipment  and occupancy expenses increased by $26,000
due  primarily  to increased property taxes.  Other operating expenses increased
by  $133,000  due  to increases in mortgage department expenses of $19,000, data
processing  fees  of  $29,000, increase advertising expenses of $9,000 and other
operating expenses of $76,000.  The increases are normal and are a reflection of
our  overall  growth.

Income Tax
----------

We  recognized income tax expense of $341,000 in 2002 as compared to $147,000 in
2001.  The  increase was due to higher pretax income in 2002.  The effective tax
rate  was  35%  for  2002  and  32%  for  2001.

Management  is  not  aware  of  any other known trends, events or uncertainties,
other  than  those discussed above, that will have or that are reasonably likely
to  have  a  material  effect  on  our  liquidity,  capital


<PAGE>
resources  or  operations.  Management  is  also  not  aware  of  any  current
recommendations  by  the  regulatory authorities that, if they were implemented,
would  have  such  an  effect.

Asset/Liability Management
--------------------------

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

Our asset/liability mix is monitored on a regular basis with a report reflecting
the interest rate-sensitive assets and interest rate-sensitive liabilities being
prepared  and  presented to the Bank's Executive Committee on a quarterly basis.
The  objective  of  this policy is to monitor interest rate-sensitive assets and
liabilities  so  as  to minimize the impact of substantial movements in 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 scheduled
to mature or reprice within such time period.  A gap is considered positive when
the  amount  of  interest  rate-sensitive  assets exceeds the amount of interest
rate-sensitive  liabilities.  A  gap  is  considered negative when the amount of
interest  rate-sensitive liabilities exceeds the interest rate-sensitive assets.
During  a  period  of rising interest rates, a negative gap would tend to affect
net  interest  income adversely, while a positive gap would tend to result in an
increase  in  net  interest  income.  Conversely,  during  a  period  of falling
interest  rates,  a  negative  gap  would  tend  to result in an increase in net
interest  income,  while a positive gap would tend to affect net interest income
adversely.  If  our  assets  and  liabilities  were  equally  flexible and moved
concurrently,  the  impact  of any increase or decrease in interest rates on net
interest  income  would  be  minimal.

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

Changes  in  interest  rates  also  affect our liquidity position.  We currently
price  deposits  in response to market rates and it is management's intention to
continue this policy.  If deposits are not priced in response to market rates, a
loss  of  deposits  could  occur  that  would  negatively  affect  our liquidity
position.


<PAGE>
At  December  31,  2002,  our  cumulative one-year interest rate-sensitivity gap
ratio  was  66%.  Our  targeted ratio is 80% to 120% in this time horizon.  This
indicates  that our interest-bearing liabilities will reprice during this period
at  a rate faster than our interest-earning assets.  We are currently not within
our  targeted  parameters  due  primarily  to  85%  of  certificates  of deposit
repricing within a one-year time frame as opposed to 48% of loans and securities
repricing within a one-year time frame.  The ratio in the one-year time frame is
significantly  impacted  by  the  classification  of all interest bearing demand
deposits as immediately rate sensitive for purposes of this analysis.  It is our
belief that competitive market rates are being paid for certificates of deposit,
and  as  long  as  the  rates  remain competitive, liquidity, while not assured,
should  not  be  adversely  affected.

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


<PAGE>
<TABLE>
<CAPTION>
                                            After       After
                                            Three        One
                                            Months    Year but
                                 Within      but       Within     After
                                 Three      Within      Five      Five
                                 Months    One Year     Years     Years    Total
<S>                             <C>       <C>         <C>        <C>      <C>
                                            (Dollars in Thousands)
Interest-earning assets:
  Interest-bearing
    deposits in banks           $   214   $           $          $        $   214
  Federal funds sold              3,461                                     3,461
  Securities                        964       1,519      14,409    1,873   18,765
  Loans                          29,469      10,891      29,667      508   70,535
                                --------  ----------  ---------  -------  -------

                                 34,108      12,410      44,076    2,381   92,975
                                --------  ----------  ---------  -------  -------

Interest-bearing liabilities:
  Interest-bearing demand
    deposits                     26,938                                    26,938
  Savings                         1,172                                     1,172
  Certificates, less than
    $100,000                      6,327      14,229       4,287            24,843
  Certificates, $100,000
    and over                      7,392      14,665       3,467            25,524
                                --------  ----------  ---------  -------  -------

                                 41,933      28,894       7,754        0   78,477
                                --------  ----------  ---------  -------  -------

Interest rate sensitivity
  gap                           $(7,721)  $ (16,484)  $  36,322  $ 2,381  $14,498
                                ========  ==========  =========  =======  =======

Cumulative interest rate
  sensitivity gap               $(7,721)  $ (24,205)  $  12,117  $14,498
                                ========  ==========  =========  =======
Interest rate sensitivity
  gap ratio                        0.82        0.43        5.68        -
                                ========  ==========  =========  =======
Cumulative interest rate
  sensitivity gap ratio            0.82        0.66        1.15     1.18
                                ========  ==========  =========  =======
</TABLE>


<PAGE>
               SELECTED FINANCIAL INFORMATION AND STATISTICAL DATA

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



<PAGE>
                    DISTRIBUTION OF ASSETS, LIABILITIES, AND
                              STOCKHOLDERS' EQUITY:
                    INTEREST RATES AND INTEREST DIFFERENTIALS

AVERAGE BALANCES

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

                                                Years  Ended
                                                December  31,
                                              2002        2001
                                           (Dollars in Thousands)
              ASSETS

  Cash and due from banks                  $    2,093   $ 2,199
  Taxable securities                           17,398    19,409
  Nontaxable securities                         1,358     1,645
  Interest-bearing deposits in banks              201       560
  Securities valuation account                    358       137
  Federal funds sold                            4,596     5,544
  Loans (2)                                    64,379    54,901
  Allowance for loan losses                      (810)     (662)
  Other assets                                  4,776     2,707
                                           -----------  --------
                                           $   94,349   $86,440
                                           ===========  ========

  Total interest-earning assets            $   87,932   $82,059
                                           ===========  ========

    LIABILITIES AND STOCKHOLDERS' EQUITY

  Deposits:
    Noninterest-bearing demand             $   10,428   $ 9,412
    Interest-bearing demand                    22,793    18,765
    Savings                                     1,163     1,019
    Time                                       49,395    47,807
                                           -----------  --------
      Total deposits                           83,779    77,003

  Other liabilities                               440       454
                                           -----------  --------
      Total liabilities                        84,219    77,457
  Stockholders' equity                         10,130     8,983
                                           -----------  --------
                                           $   94,349   $86,440
                                           ===========  ========

  Total interest-bearing liabilities       $   73,351   $67,591
                                           ===========  ========

(1)  For each category, average balances were determined using the daily average
     balances  during  the  year.

(2)  Nonaccrual  loans of $14,000 and $39,000 were included in average loans for
     2002  and  2001,  respectively.


<PAGE>
INTEREST INCOME AND INTEREST EXPENSE

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

<TABLE>
<CAPTION>
                                                             Years Ended December 31,
                                                           2002                   2001
                                                                Average            Average
                                                    Interest     Rate     Interest   Rate
<S>                                                <C>         <C>        <C>        <C>
                                                           (Dollars in Thousands)

INTEREST INCOME:
    Interest and fees on loans (1)                 $   4,779       7.42%  $   5,057  9.21%
    Interest on taxable securities                       871       5.01       1,114  5.74
    Interest on nontaxable securities (2)                 58       4.27          70  4.27
    Interest on deposits in banks                         10       5.19          19  3.34
    Interest on federal funds sold                        74       1.61         211  3.81
                                                   ----------             ---------
    Total interest income                              5,792       6.59       6,471  7.89
                                                   ----------             ---------

INTEREST EXPENSE:
    Interest on interest-bearing
      demand deposits                                    295       1.29         428  2.28
    Interest on savings deposits                          11       0.95          19  1.89
    Interest on time deposits                          1,849       3.74       2,871  6.00
                                                   ----------             ---------
    Total interest expense                             2,155       2.94       3,318  4.91
                                                   ----------             ---------

NET INTEREST INCOME                                $   3,637               $  3,153
                                                   ==========             =========

    Net interest spread                                            3.65%             2.98%
                                                               =========             =====
    Net yield on average interest-earning assets                   4.14%             3.84%
                                                               =========             =====
</TABLE>

(1)  Interest  and  fees  on  loans  includes  $349,000 and $407,000 of loan fee
     income  for the years ended December 31, 2002 and 2001, respectively. There
     was  no interest income recognized on nonaccrual loans during 2002 or 2001.

(2)  Average  rates  on  nontaxable  securities have not been presented on a tax
     equivalent  basis.


<PAGE>
RATE AND VOLUME ANALYSIS

The  following table describes the extent to which changes in interest rates and
changes  in  volume  of interest-earning assets and interest-bearing liabilities
have  affected  our  interest income and expense during the year indicated.  For
each  category  of  interest-earning  assets  and  interest-bearing liabilities,
information  is provided on changes attributable to (1) change in volume (change
in volume multiplied by old rate); (2) change in rate (change in rate multiplied
by  old  volume);  and (3) a combination of change in rate and change in volume.
The  changes in interest income and interest expense attributable to both volume
and rate have been allocated proportionately on a consistent basis to the change
due  to  volume  and  the  change  due  to  rate.

                                               Year Ended December 31,
                                                   2002 vs. 2001
                                                  Changes Due To:

                                               Rate     Volume     Net
                                               (Dollars in Thousands)

Increase (decrease) in:
    Income from interest-earning assets:
    Interest and fees on loans               $(1,071)  $   793   $  (278)
    Interest on taxable securities              (134)     (109)     (243)
    Interest on nontaxable securities             --       (12)      (12)
    Interest on deposits in banks                  6       (15)       (9)
    Interest on Federal funds sold              (106)      (31)     (137)
                                             --------  --------  --------
         Total interest income                (1,304)      625      (679)
                                             --------  --------  --------

    Expense from interest-bearing liabilities:
    Interest on interest-bearing
        demand deposits                         (212)       79      (133)
    Interest on savings deposits                 (10)        2        (8)
    Interest on time deposits                 (1,114)       92    (1,022)
                                             --------  --------  --------
        Total interest expense                (1,336)      173    (1,163)
                                             --------  --------  --------

        Net interest income                  $    32   $   452   $   484
                                             ========  ========  ========


<PAGE>
                              INVESTMENT PORTFOLIO

TYPES OF INVESTMENTS

The carrying amounts of securities at the dates indicated are summarized as
follows:

                                          December  31,
                                         2002       2001
                                     (Dollars in Thousands)

  U.S. Government agencies         $     1,566  $ 2,565
  State and municipal securities         1,417    1,355
  Corporate securities                   4,556    5,550
  Mortgage-backed securities            11,205    6,692
                                   -----------  -------
                                   $    18,744  $16,162
                                   ===========  =======

MATURITIES

The  amounts  of  debt  securities, including the weighted average yield in each
category  as  of December 31, 2002 are shown in the following table according to
contractual maturity classifications (1) one year or less, (2) after one through
five  years,  (3)  after  five  through  ten  years  and  (4)  after  ten years.

<TABLE>
<CAPTION>

                                                              After one               After five
                                    One year or less     through five years       through ten years
                                   Amount    Yield (1)     Amount    Yield (1)   Amount    Yield(1)
<S>                              <C>         <C>         <C>         <C>        <C>        <C>
U.S. Government agencies         $        0          %   $    1,566     5.56 %  $      0         %
State and municipal securities            0                     454     5.57         497      6.11
Corporate securities                  2,245       5.48        2,311     6.04           0
Mortgage-backed securities               32       5.50        6,146     4.50         857      5.16
                                 ----------              ----------             ---------

                                 $    2,224       5.48   $   14,409     4.87   $   1,407      5.63
                                 ==========              ==========             =========


                                        After ten years           Total
                                     Amount     Yield (1)   Amount      Yield (1)

U.S. Government agencies         $        0            %  $   1,566       5.56%
State and municipal                     466        6.97       1,417       6.22
Corporate securities                      0           0       4,556       5.79
Mortgage-backed securities            4,170        4.61      11,205       4.56
                                 ----------               ----------

                                 $      449        6.97   $  18,744       5.07
                                 ==========               ==========
</TABLE>

(1)  The  weighted  average  yields  were computed using coupon interest, adding
     discount  accretion or subtracting premium amortization, as appropriate, on
     a  ratable  basis  over  the  life  of  each  security.


<PAGE>
                                 LOAN PORTFOLIO

TYPES OF LOANS

The  amounts  of  loans  outstanding  at  the  indicated  dates are shown in the
following  table  according  to  the  type  of  loan.

                                             December  31,
                                           2002       2001
                                       (Dollars in Thousands)

  Commercial                             $ 14,022   $ 7,795
  Real estate-construction                 18,507    16,976
  Real estate-mortgage                     30,500    27,689
  Consumer installment loans and other      7,517     8,212
                                         ---------  --------
                                           70,546    60,672
  Less allowance for loan losses             (885)     (756)
                                         ---------  --------
      Net loans                          $ 69,661   $59,916
                                         =========  ========

MATURITIES AND SENSITIVITIES OF LOANS TO CHANGES IN INTEREST RATES

Total  loans  as of December 31, 2002 are shown in the following table according
to  contractual  maturity  classifications  (1)  one year or less, (2) after one
through  five  years,  and  (3)  after  five  years.

                                   (Dollars in Thousands)
  Commercial
    One year or less              $                 6,421
    After one through five years                    7,574
    After five years                                   27
                                  -----------------------
                                                   14,022
                                  -----------------------

  Construction
    One year or less                               15,485
    After one through five years                    2,989
    After five years                                   33
                                  -----------------------
                                                   18,507
                                  -----------------------

  Other
    One year or less                               16,168
    After one through five years                   21,409
    After five years                                  440
                                  -----------------------
                                                   38,017
                                  -----------------------

                                  $                70,546
                                  =======================


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

                                          (Dollars in Thousands)

    Predetermined interest rates                 $30,140
    Floating or adjustable interest rates          2,332
                                                 -------
                                                 $32,472
                                                 =======


RISK ELEMENTS

Information with respect to nonaccrual, past due, restructured and other problem
loans  at  December  31,  2001  and  2000  is  as  follows:

                                                   December  31,
                                                    2002   2001
                                              (Dollars in Thousands)

  Nonaccrual loans                                $  16  $  57
  Loans contractually past due ninety
    days or more as to interest or
    principal payments and still accruing             0     25
  Restructured loans                                  0      0
  Potential problem loans                             0      0
  Interest income that would have been recorded
    on nonaccrual and restructured loans under
    original terms                                    1      5
  Interest income that was recorded on
    nonaccrual and restructured loans                 0      0

Potential problems loans are defined as loans about which we have serious doubts
as  to  the  ability  of  the borrower to comply with the present loan repayment
terms  and which may cause the loan to be placed on nonaccrual status, to become
past  due  more  than  ninety  days,  or  to  be  restructured.

Our policy is to discontinue the accrual of interest income when, in the opinion
of management, collection of interest becomes doubtful.  This status is accorded
interest  when  (1)  there  is  a  significant  deterioration  in  the financial
condition  of  the  borrower and full repayment of principal and interest is not
expected  and  (2)  the principal or interest is more than ninety days past due,
unless  the  loan  is  both  well-secured  and  in  the  process  of collection.

Loans  that  are  classified  for  regulatory  purposes  as  loss,  doubtful,
substandard,  or  special mention that have not been included in the table above
do  not  represent  or  result  from  trends  or  uncertainties  that management
reasonably  expects  will materially impact future operating results, liquidity,
or  capital resources.  These classified loans do not represent material credits
about  which  management  is  aware of any information that causes management to
have  serious doubts as to the ability of such borrowers to comply with the loan
repayment  terms.


<PAGE>
                         SUMMARY OF LOAN LOSS EXPERIENCE

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

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

  Average amount of loans outstanding           $   64,379   $  54,901
                                                ===========  ==========

  Balance of allowance for loan losses
    at beginning of year                        $      756   $     604
                                                -----------  ----------

  Loans charged off
    Commercial and financial                            34         169
    Real estate mortgage                                --          --
    Installment                                         37          21
                                                -----------  ----------
                                                        71         190
                                                -----------  ----------

  Loans recovered
    Commercial and financial                            --          --
    Real estate mortgage                                --          --
    Installment                                          4           4
                                                -----------  ----------
                                                         4           4
                                                -----------  ----------

  Net charge-offs                                       67         186
                                                -----------  ----------

  Additions to allowance charged to operating
    expense during year                                196         338
                                                -----------  ----------

  Balance of allowance for loan losses
    at end of year                              $      885   $     756
                                                ===========  ==========

  Ratio of net loans charged off during the
       year to average loans outstanding               .11%       0.34%
                                                ===========  ==========

ALLOWANCE FOR LOAN LOSSES

The  allowance  for  loan  losses  is  maintained  at  a  level  that  is deemed
appropriate  by  management  to adequately cover all known and inherent risks in
the  loan  portfolio.  Our  evaluation of the loan portfolio includes a periodic
review  of loan loss experience, current economic conditions that may affect the
borrower's  ability  to  pay  and  the underlying collateral value of the loans.


<PAGE>
As  of  December  31,  2002  and  2001, the allocation of our allowance for loan
losses does not specifically correspond to the categories of loans listed below.
Based  on  our best estimate, the allocation of the allowance for loan losses to
types  of  loans,  as  of  the  indicated  dates,  is  as  follows:

<TABLE>
<CAPTION>
                                 December 31, 2002          December 31, 2001
                                           Percent of                 Percent of
                                           loans in                   loans in
                                        each  category             each  category
                              Amount    to total loans    Amount   to total loans
<S>                         <C>        <C>              <C>      <C>
                                            (Dollars in Thousands)

Commercial                  $     175           19.88%  $   226           12.85%
Real estate - construction        227           26.23       114           27.98
Real estate - mortgage            385           43.23       340           45.64
Consumer installment
  loans and other                  98           10.66        76           13.53
                            ---------  ---------------  -------  ---------------
                            $     885          100.00%  $   756          100.00%
                            =========  ===============  =======  ===============
</TABLE>

                                    DEPOSITS

Average  amount  of  deposits  and  average rates paid thereon, classified as to
noninterest-bearing  demand  deposits, interest-bearing demand deposits, savings
deposits,  and  time  deposits  is  presented  below.  (1)

                                             Years Ended December 31,
                                             2002               2001
                                       Amount    Percent   Amount   Percent
                                               (Dollars in Thousands)

Noninterest-bearing demand deposits   $ 10,428        --%  $ 9,412       -- %
Interest-bearing demand deposits        22,793       1.29   18,765     2.28
Savings deposits                         1,163        .95    1,019     1.89
Time deposits                           49,395       3.74   47,807     6.00
                                      --------             -------
                                      $ 83,779             $77,003
                                      ========             =======

(1)  Average  balances  were  determined using the daily average balances during
     the  year.

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

                                                          (Dollars in Thousands)

  Three months or less                                           $ 7,392
  Over three through six months                                    7,034
  Over six through twelve months                                   7,631
  Over twelve months                                               3,467
                                                                 -------
    Total                                                        $25,524
                                                                 =======


<PAGE>
                    RETURN ON ASSETS AND STOCKHOLDERS' EQUITY

The  following  rate  of return information for the years indicated is presented
below.

                              Years Ended December 31,
                                    2002    2001

  Return on assets (1)              0.68%   0.37%
  Return on equity (2)              6.30    3.54
  Dividend payout ratio (3)            -       -
  Equity to assets ratio (4)       10.74   10.39

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


<PAGE>







                          INDEPENDENT AUDITOR'S REPORT



TO THE BOARD OF DIRECTORS
FORSYTH BANCSHARES, INC.
CUMMING, GEORGIA


          We  have  audited  the  accompanying  consolidated  balance  sheets of
FORSYTH  BANCSHARES,  INC.  AND SUBSIDIARY as of December 31, 2002 and 2001, and
the  related  statements  of income, comprehensive income, stockholders' equity,
and  cash  flows  for  the years then ended.  These financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion  on  these  financial  statements  based  on  our  audits.


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


          In  our  opinion,  the  financial statements referred to above present
fairly,  in all material respects, the financial position of Forsyth Bancshares,
Inc.  and  subsidiary as of December 31, 2002 and 2001, and the results of their
operations  and  their  cash  flows for the years then ended, in conformity with
accounting  principles  generally  accepted  in  the  United  States of America.


                                         /s/Mauldin & Jenkins, LLC




Atlanta, Georgia
February 21, 2003


<PAGE>
<TABLE>
<CAPTION>
                                   FORSYTH BANCSHARES, INC.
                                        AND SUBSIDIARY

                                 CONSOLIDATED BALANCE SHEETS
                                  DECEMBER 31, 2002 AND 2001

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

                                ASSETS                                  2002         2001
                                                                    ------------  -----------
<S>                                                                 <C>           <C>
Cash and due from banks                                             $  1,902,847  $ 2,781,252
Interest-bearing deposits in banks                                       214,059      185,759
Federal funds sold                                                     3,461,000    7,366,000
Securities available-for-sale                                         18,712,368   15,908,655
Securities held-to-maturity, at cost (fair value of $31,643
    and $259,177)                                                         31,643      253,198
Restricted equity securities, at cost                                    205,900      200,000

Loans                                                                 70,546,477   60,672,166
Less allowance for loan losses                                           885,266      756,367
                                                                    ------------  -----------
          Loans, net                                                  69,661,211   59,915,799

Premises and equipment                                                 5,334,104    3,047,897
Other assets                                                             685,590      927,541
                                                                    ------------  -----------

          TOTAL ASSETS                                              $100,208,722  $90,586,101
                                                                    ============  ===========

                    LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits
    Noninterest-bearing                                             $ 11,286,519  $10,693,553
    Interest-bearing                                                  76,679,881   70,091,698
                                                                    ------------  -----------
          Total deposits                                              87,966,400   80,785,251
Securities sold under repurchase agreements                               16,435            -
Other liabilities                                                        450,367      349,915
                                                                    ------------  -----------
          TOTAL LIABILITIES                                           88,433,202   81,135,166
                                                                    ------------  -----------

Commitments and contingencies

Stockholders' equity
    Common stock, no par value; 10,000,000 shares authorized;
       1,775,000 and 800,000 issued and outstanding, respectively      9,447,841    7,960,341
    Retained earnings                                                  1,965,013    1,326,773
    Accumulated other comprehensive income                               362,666      163,821
                                                                    ------------  -----------
          TOTAL STOCKHOLDERS' EQUITY                                  11,775,520    9,450,935
                                                                    ------------  -----------

          TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                $100,208,722  $90,586,101
                                                                    ============  ===========

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                                FORSYTH BANCSHARES, INC.
                                     AND SUBSIDIARY

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

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

                                                                     2002        2001
                                                                  ----------  ----------
<S>                                                               <C>         <C>
INTEREST INCOME
    Loans, including fees                                         $4,779,363  $5,056,771
    Taxable securities                                               870,561   1,114,248
    Nontaxable securities                                             57,796      70,160
    Deposits in banks                                                 10,450      18,723
    Federal funds sold                                                74,085     211,104
                                                                  ----------  ----------
          TOTAL INTEREST INCOME                                    5,792,255   6,471,006
                                                                  ----------  ----------

INTEREST EXPENSE
    Deposits                                                       2,154,004   3,318,057
    Other borrowings                                                     878           -
                                                                  ----------  ----------
          TOTAL INTEREST EXPENSE                                   2,154,882   3,318,057
                                                                  ----------  ----------

          NET INTEREST INCOME                                      3,637,373   3,152,949
PROVISION FOR LOAN LOSSES                                            196,374     337,721
                                                                  ----------  ----------
          NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES      3,440,999   2,815,228
                                                                  ----------  ----------

OTHER INCOME
    Service charges on deposit accounts                              270,301     207,377
    Mortgage origination fees                                        571,938     308,889
    Other operating income                                            49,806      40,864
    Net realized gains on sales of securities available-for-sale       5,028       6,207
                                                                  ----------  ----------
          TOTAL OTHER INCOME                                         897,073     563,337
                                                                  ----------  ----------

OTHER EXPENSES
    Salaries and employee benefits                                 1,845,072   1,559,278
    Equipment and occupancy expenses                                 507,584     481,699
    Other operating expenses                                       1,006,108     872,994
                                                                  ----------  ----------
          TOTAL OTHER EXPENSES                                     3,358,764   2,913,971
                                                                  ----------  ----------

          INCOME BEFORE INCOME TAXES                                 979,308     464,594

INCOME TAX EXPENSE                                                   341,068     146,601
                                                                  ----------  ----------

                    NET INCOME                                    $  638,240  $  317,993
                                                                  ==========  ==========

BASIC EARNINGS PER SHARE                                          $     0.40  $     0.20
                                                                  ==========  ==========

DILUTED  EARNINGS PER SHARE                                       $     0.40  $     0.20
                                                                  ==========  ==========

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                              FORSYTH BANCSHARES, INC.
                                   AND SUBSIDIARY

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

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

                                                                  2002       2001
                                                                ---------  ---------
<S>                                                             <C>        <C>
NET INCOME                                                      $638,240   $317,993
                                                                ---------  ---------

OTHER COMPREHENSIVE INCOME:

    Unrealized gains on securities available-for-sale:

        Unrealized holding gains arising during period,
            net of tax  of $123,784 and $188,889, respectively   201,962    308,187

         Reclassification adjustment for gains realized
            in net income, net of  tax of $1,911 and $2,359,
            respectively                                          (3,117)    (3,848)
                                                                ---------  ---------

OTHER COMPREHENSIVE INCOME                                       198,845    304,339
                                                                ---------  ---------

COMPREHENSIVE INCOME                                            $837,085   $622,332
                                                                =========  =========


SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>


<PAGE>
<TABLE>
<CAPTION>

                                            FORSYTH BANCSHARES, INC.
                                                 AND SUBSIDIARY

                                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                     YEARS ENDED DECEMBER 31, 2002 AND 2001

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

                                            COMMON STOCK                           ACCUMULATED
                                      -------------------------                       OTHER           TOTAL
                                       SHARES       AT AMOUNT       RETAINED      COMPREHENSIVE   STOCKHOLDERS'
                                                     PAID-IN        EARNINGS       INCOME (LOSS)     EQUITY
                                      ---------  --------------  --------------  ---------------  ------------
<S>                                   <C>        <C>             <C>             <C>              <C>
  BALANCE, DECEMBER 31, 2000            800,000  $    7,960,341  $     1,008,780  $     (140,518)  $ 8,828,603
      Net income                              -               -          317,993               -       317,993
      Other comprehensive loss                -               -                -         304,339       304,339
                                      ---------  --------------  --------------  ---------------  ------------
  BALANCE, DECEMBER 31, 2001            800,000       7,960,341        1,326,773         163,821     9,450,935
      Net income                              -               -          638,240               -       638,240
      Two-for-one common stock split    800,000               -                -               -             -
      Exercise of stock options         175,000       1,487,500                -               -     1,487,500
      Other comprehensive income              -               -                -         198,845       198,845
                                      ---------  --------------  --------------  ---------------  ------------
  BALANCE, DECEMBER 31, 2002          1,775,000  $    9,447,841  $     1,965,013  $      362,666   $11,775,520
                                      =========  ==============  ===============  ===============  ===========
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


<PAGE>
<TABLE>
<CAPTION>

                                   FORSYTH BANCSHARES, INC.
                                        AND SUBSIDIARY

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

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

                                                                     2002           2001
                                                                 -------------  -------------
<S>                                                              <C>            <C>
OPERATING ACTIVITIES
    Net income                                                   $    638,240   $    317,993
    Adjustments to reconcile net income to net cash
        provided by operating activities:
        Depreciation                                                  263,453        262,542
        Provision for loan losses                                     196,374        337,721
        Deferred income taxes                                          27,785        (66,121)
        Gain on sales of securities available-for-sale                 (5,028)        (6,207)
        Increase in interest receivable                                85,643        218,132
        Decrease  in interest payable                                 (37,125)      (116,142)
        Net other operating activities                                144,227        (45,558)
                                                                 -------------  -------------

          Net cash provided by operating activities                 1,313,569        902,360
                                                                 -------------  -------------

INVESTING ACTIVITIES
    Net increase in interest-bearing deposits in banks                (28,300)       (14,376)
    Purchases of securities available-for-sale                    (12,165,444)    (8,382,020)
    Proceeds from maturities of securities available-for-sale       7,331,870     13,781,999
    Proceeds from sales of securities available-for-sale            2,355,607      3,892,980
    Proceeds from maturities of securities held-to-maturity           221,555        603,946
    Purchases of restricted equity securities                          (5,900)       (14,300)
    Net (increase) decrease in federal funds sold                   3,905,000     (3,816,000)
    Net increase in loans                                          (9,941,786)   (12,538,451)
    Purchase of premises and equipment                             (2,549,660)    (1,735,761)
                                                                 -------------  -------------

          Net cash used in investing activities                   (10,877,058)    (8,221,983)
                                                                 -------------  -------------

FINANCING ACTIVITIES
    Net increase in deposits                                        7,181,149      7,525,534
    Net increase in securities sold under repurchase agreements        16,435
    Proceeds from exercise of stock options                         1,487,500
                                                                 -------------  -------------

          Net cash provided by financing activities                 8,685,084      7,525,534
                                                                 -------------  -------------

Net increase (decrease) in cash and due from banks                   (878,405)       205,911

Cash and due from banks at beginning  of year                       2,781,252      2,575,341
                                                                 -------------  -------------

Cash and due from banks at end of year                           $  1,902,847   $  2,781,252
                                                                 =============  =============
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                            FORSYTH BANCSHARES, INC.
                                 AND SUBSIDIARY

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

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

<S>                                              <C>         <C>
SUPPLEMENTAL DISCLOSURES
    Cash paid for:
        Interest                                 $2,192,007  $3,434,199

        Income taxes                             $  205,636  $  268,307


SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>


<PAGE>

                            FORSYTH BANCSHARES, INC.
                                 AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          NATURE OF BUSINESS

            Forsyth  Bancshares,  Inc. (the "Company") is a bank holding company
            whose  business  is  conducted  by  its wholly-owned subsidiary, The
            Citizens  Bank  of  Forsyth  County,  (the  "Bank").  The  Bank is a
            commercial  bank  located  in  Cumming, Forsyth County, Georgia. The
            Bank provides a full range of banking services in its primary market
            area  of  Forsyth  County  and  surrounding  counties.

          BASIS OF PRESENTATION AND ACCOUNTING ESTIMATES

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

            In  preparing  financial  statements  in  conformity with accounting
            principles  generally  accepted  in  the  United  States of America,
            management is required to make estimates and assumptions that affect
            the reported amounts of assets and liabilities and the disclosure of
            contingent  assets  and liabilities as of the balance sheet date and
            the  reported  amounts of revenues and expenses during the reporting
            period.  Actual  results could differ from those estimates. Material
            estimates that are particularly susceptible to significant change in
            the  near term relate to the determination of the allowance for loan
            losses,  the valuation of foreclosed real estate and deferred taxes.

          CASH,  DUE  FROM  BANKS  AND  CASH  FLOWS

            For  purposes  of  reporting  cash  flows,  cash  and due from banks
            includes  cash  on  hand,  cash  items  in process of collection and
            amounts  due  from banks. Cash flows from loans, federal funds sold,
            interest-bearing  deposits  in  banks, deposits, and securities sold
            under  repurchase  agreements  are  reported  net.

            The  Bank  is  required  to  maintain reserve balances in cash or on
            deposit  with  the  Federal  Reserve  Bank, based on a percentage of
            deposits.  The  total  of  those  reserve balances was approximately
            $332,000  at  December  31,  2002.

          SECURITIES

            Debt  securities that management has the positive intent and ability
            to  hold to maturity are classified as held-to-maturity and recorded
            at amortized cost. Securities not classified as held-to-maturity are
            classified  as  available-for-sale  and  recorded  at  fair


<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

          SECURITIES (CONTINUED)

            value  with  unrealized  gains and losses excluded from earnings and
            reported  in other comprehensive income, net of related deferred tax
            effect.  Restricted equity securities without a readily determinable
            fair  value  are  recorded  at  cost.

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

          LOANS

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

            Nonrefundable  loan  fees  and certain direct loan origination costs
            are  deferred  and  recognized  in income over the life of the loans
            using  a  method  which  approximates  a  level  yield.

            The  accrual  of  interest  on  loans  is  discontinued  when,  in
            management's opinion, the borrower may be unable to meet payments as
            they become due, unless the loan is well-secured. Interest income on
            nonaccrual  loans is subsequently recognized only to the extent cash
            payments  are  received  until  the  loans  are  returned to accrual
            status.

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

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


<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

          LOANS (CONTINUED)

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

          PREMISES AND EQUIPMENT

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

          OTHER REAL ESTATE OWNED

            Other  real  estate  owned  represents  properties  acquired through
            foreclosure. Other real estate owned is held for sale and is carried
            at the lower of cost or fair value less estimated costs to sell. Any
            write-down  to  fair  value  at  the  time of transfer to other real
            estate  owned  is  charged to the allowance for loan losses. Revenue
            and  expenses from operations and changes in the valuation allowance
            are included in net expenses from foreclosed assets. The Company had
            no  other  real  estate  owned  at  December  31,  2002  or  2001.

          INCOME TAXES

            Deferred  income tax assets and liabilities are determined using the
            balance  sheet method. Under this method, the net deferred tax asset
            or liability is determined based on the tax effects of the temporary
            differences  between  the  book and tax bases of the various balance
            sheet  assets  and  liabilities  and  gives  current  recognition to
            changes  in  tax  rates  and  laws.

          STOCK COMPENSATION PLANS

            At  December  31,  2002,  the  Company  has two stock-based employee
            compensation  plans,  which  are described more fully in Note 8. The
            Company  accounts  for  those  plans  under  the  recognition  and
            measurement  principles  of APB Opinion No. 25, Accounting for Stock
            Issued  to  Employees,  and  related Interpretations. No stock-based
            employee  compensation  cost  is  reflected  in  net  income, as all
            options granted under those plans had an exercise price equal to the
            market  value  of  the  underlying  stock  on the date of grant. The
            following  table  illustrates  the effect on net income and earnings
            per  share  if  the  Company  had applied the fair value recognition
            provisions of SFAS No. 123, Accounting for Stock-Based Compensation,
            to  stock-based  employee  compensation.


<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

            STOCK COMPENSATION PLANS (CONTINUED)

                                                           YEARS ENDED
                                                           DECEMBER 31,
                                                        ------------------
                                                          2002      2001
                                                        --------  --------

  Net income, as reported                               $638,240  $317,993
  Deduct: Total stock-based employee compensation
     expense determined under fair value based
     method for all awards, net of related tax effects   545,403         -
                                                        --------  --------
  Pro forma net income                                  $ 92,837  $317,993
                                                        ========  ========
  Earnings per share:
  Basic - as reported                                   $    .40  $    .20
  Basic - pro forma                                     $    .06  $    .20
                                                        ========  ========
  Diluted - as reported                                 $    .40  $    .20
                                                        ========  ========
  Diluted - pro forma                                   $    .06  $    .20
                                                        ========  ========


          EARNINGS PER SHARE

            Basic  earnings per share are computed by dividing net income by the
            weighted-average  number  of  shares  of  common  stock outstanding.
            Diluted  earnings  per  share are computed by dividing net income by
            the  sum  of  the  weighted-average number of shares of common stock
            outstanding  and  potential  common  shares. Potential common shares
            consist  of  stock  options.

          COMPREHENSIVE INCOME

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

          ACCOUNTING STANDARDS

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


<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2.   SECURITIES

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

<TABLE>
<CAPTION>
                                                            GROSS        GROSS
                                             AMORTIZED   UNREALIZED    UNREALIZED      FAIR
                                               COST         GAINS        LOSSES        VALUE
                                            -----------  -----------  ------------  -----------
<S>                                         <C>          <C>          <C>           <C>
            SECURITIES AVAILABLE-FOR-SALE
              DECEMBER 31, 2002:
              U. S. GOVERNMENT AND AGENCY
              SECURITIES                    $ 1,501,007  $    65,495  $         -   $ 1,566,502
              STATE AND MUNICIPAL SECURITIES  1,357,052       59,708            -     1,416,760
              CORPORATE SECURITIES            4,344,889      210,894            -     4,555,783
              MORTGAGE-BACKED SECURITIES     10,924,475      248,848            -    11,173,323
                                            -----------  -----------  ------------  -----------
                                            $18,127,423  $   584,945  $         -   $18,712,368
                                            ===========  ===========  ============  ===========
              December 31, 2001:
              U. S. Government and agency
                securities                  $ 2,505,076  $    59,869  $         -   $ 2,564,945
              State and municipal securities  1,359,710        3,049       (7,392)    1,355,367
              Corporate securities            5,392,336      157,198            -     5,549,534
              Mortgage-backed securities      6,387,306       57,300       (5,797)    6,438,809
                                            -----------  -----------  ------------  -----------
                                            $15,644,428  $   277,416  $   (13,189)  $15,908,655
                                            ===========  ===========  ============  ===========

                                                           GROSS         GROSS
                                             AMORTIZED   UNREALIZED    UNREALIZED      FAIR
                                               COST         GAINS        LOSSES        VALUE
                                            -----------  -----------  ------------  -----------
            SECURITIES HELD-TO-MATURITY
              DECEMBER 31, 2002:
              MORTGAGE-BACKED SECURITIES    $    31,643  $         -  $         -   $    31,643
                                            ===========  ===========  ============  ===========
              December 31, 2001:
              Mortgage-backed securities    $   253,198  $     5,979  $         -   $   259,177
                                            ===========  ===========  ============  ===========
</TABLE>

            Securities  with  a  carrying  value  of  $5,372,565 were pledged at
            December  31,  2002 to secure public deposits and for other purposes
            required  or  permitted  by law. There were no securities pledged at
            December  31,  2001.

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


<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2.   SECURITIES (CONTINUED)

<TABLE>
<CAPTION>
                                                 SECURITIES             SECURITIES
                                             AVAILABLE-FOR-SALE      HELD-TO-MATURITY
                                          ------------------------  -------------------
                                           AMORTIZED      FAIR      AMORTIZED    FAIR
                                             COST         VALUE        COST      VALUE
                                          -----------  -----------  ----------  -------
<S>                                       <C>          <C>          <C>         <C>
              Due within one year         $ 2,192,030  $ 2,245,229  $        -  $     -
              Due from one to five years    4,086,944    4,330,973           -        -
              Due from five to ten years      475,000      496,740           -        -
              Due after ten years             448,974      466,103           -        -
              Mortgage-backed securities   10,924,475   11,173,323      31,643   31,643
                                          -----------  -----------  ----------  -------
                                          $18,127,423  $18,712,368  $   31,643  $31,643
                                          ===========  ===========  ==========  =======
</TABLE>

Gross  gains and losses on sales of securities available-for-sale consist of the
following:

<TABLE>
<CAPTION>
                                                          YEARS ENDED DECEMBER 31,
                                                          ------------------------
                                                              2002        2001
                                                          -----------  -----------
<S>                                                       <C>          <C>
              Gross gains                                 $   10,349   $   28,796
              Gross losses                                    (5,321)     (22,589)
                                                          -----------  -----------
              Net realized gains                          $    5,028   $    6,207
                                                          ===========  ===========
</TABLE>

NOTE 3.   LOANS

The composition of loans is summarized as follows:

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                         --------------------------
                                                             2002           2001
                                                         ------------  ------------
<S>                                                      <C>           <C>

            Commercial, financial, and agricultural      $14,021,244   $ 7,795,000
            Real estate - construction                    18,507,410    16,976,000
            Real estate - mortgage                        30,500,205    27,689,000
            Consumer installment and other                 7,517,618     8,212,166
                                                         ------------  ------------
                                                          70,546,477    60,672,166
            Allowance for loan losses                       (885,266)     (756,367)
                                                         ------------  ------------
            Loans, net                                   $69,661,211   $59,915,799
                                                         ============  ============
</TABLE>

Changes in the allowance for loan losses are as follows:

<TABLE>
<CAPTION>
                                                           YEARS ENDED DECEMBER 31,
                                                           ------------------------
                                                               2002         2001
                                                           -----------  -----------
<S>                                                        <C>          <C>

             Balance, beginning of year                    $  756,367   $  603,723
               Provision for loan losses                      196,374      337,721
               Loans charged off                              (71,063)    (189,586)
               Recoveries of loans previously charged off       3,588        4,509
                                                           -----------  -----------
             Balance, end of year                          $  885,266   $  756,367
                                                           ===========  ===========
</TABLE>

            The  total  recorded investment in impaired loans, consisting solely
            of  loans  on nonaccrual status, was $16,259 and $56,614 at December
            31,  2002  and 2001, respectively. There were no impaired loans that
            had  related  allowances determined in accordance with SFAS No. 114,
            Accounting  by


<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3.   LOANS (CONTINUED)

          Creditors for Impairment of a Loan, at December 31, 2002 and 2001. The
          average  recorded  investment  in impaired loans for 2002 and 2001 was
          $13,861  and  $39,308.  Interest  income  recognized for cash payments
          received  on  impaired  loans  was  not  material  for the years ended
          December  31,  2002  and  2001. Loans past due ninety days or more and
          still  accruing interest was $-0- and $25,000 at December 31, 2002 and
          2001,  respectively.

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

            Balance, beginning of year                    $ 4,595,414
              Advances                                      7,696,404
              Repayments                                   (4,155,829)
                                                          ------------
            Balance, end of year                          $ 8,135,989
                                                          ============

NOTE 4.   PREMISES AND EQUIPMENT

          Premises and equipment are summarized as follows:

                                                            DECEMBER 31,
                                                     ------------------------
                                                         2002         2001
                                                     -----------  -----------

            Land                                      $1,781,652   $1,781,652
            Buildings                                  2,885,022      837,272
            Equipment                                  1,400,745      910,045
            Leasehold improvements                             -      140,132
            Construction in progress                           -       61,149
                                                      -----------  -----------
                                                       6,067,419    3,730,250
            Accumulated depreciation                    (733,315)    (682,353)
                                                      -----------  -----------
                                                       5,334,104   $3,047,897
                                                      ===========  ===========

          Prior  to  moving into new banking facilities in December of 2002, the
          Company  operated  from  leased  main  office  and  operations  center
          facilities  under noncancelable operating lease agreements. The leases
          require  the payment of normal maintenance, utilities and insurance on
          the  property.  The  Company  also  leases  various  other  equipment.

          The  operations  center  lease  terminated  upon  the  move to the new
          banking  facilities.  The  Company  is  in  process of negotiating the
          termination  of the old main office lease. However, as of December 31,
          2002,  the  Company  was  contractually  obligated under the lease for
          future  minimum  lease  payments  as  follows:

            2003                                                    $  75,972
            2004                                                       75,972
            2005                                                       75,972
                                                                    ---------
                                                                      227,916
                                                                    =========

          The  total  rental  expense  for the years ended December 31, 2002 and
          2001  was  $90,518  and  $90,472,  respectively.


<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5.   DEPOSITS

          The  aggregate amount of time deposits in denominations of $100,000 or
          more  at  December  31, 2002 and 2001 was $25,523,515 and $20,447,020,
          respectively.  The  scheduled  maturities of time deposits at December
          31,  2001  are  as  follows:

            2003                                          $   42,716,582
            2004                                               5,213,790
            2005                                               2,249,474
            2006                                                 118,951
            2007                                                 171,688
                                                          --------------
                                                          $   50,470,485
                                                          ==============


NOTE 6.   SECURITIES SOLD UNDER REPURCHASE AGREEMENTS

          Securities  sold  under  repurchase  agreements,  which  are  secured
          borrowings,  generally  mature  within  one  to  four  days  from  the
          transaction  date.  Securities  sold  under  repurchase agreements are
          reflected  at  the  amount  of  cash  received  in connection with the
          transactions.  The  Company  may  be  required  to  provide additional
          collateral  based  on the fair value of the underlying securities. The
          Company  monitors  the  fair  value  of the underlying securities on a
          daily  basis.  Securities sold under repurchase agreements at December
          31,  2002  and  2001  were  $16,435  and  $0,  respectively.

NOTE 7.   EMPLOYEE BENEFIT PLAN

          The  Company has a 401-K profit sharing plan available to all eligible
          employees,  subject  to  certain minimum age and service requirements.
          Contributions charged to expense were $21,800 and $9,368 for the years
          ended  December  31,  2002  and  2001,  respectively.

NOTE 8.   STOCK COMPENSATION PLANS

          The  Company  has  an incentive plan that provides for the issuance of
          stock  options  to  key  employees.  The  Company has reserved 160,000
          shares  of  common  stock for this purpose. The options are granted at
          the  fair value of the Company's common stock on the date of grant and
          expire  in  ten  years from the date of grant. In 2002, 24,500 options
          were  granted  to key employees that vest over a period of five years.

          In  2002,  the  Company  granted  324,500  stock  options  to  certain
          directors  of  the Company. The options were granted at the fair value
          of  the  Company's common stock on the date of grant and expire in ten
          years  from  the  date  of  grant. These options vested on the date of
          grant.


<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8.   STOCK COMPENSATION PLANS (CONTINUED)

          Other  pertinent  information  related  to  the options is as follows:

<TABLE>
<CAPTION>
                                                       YEAR ENDED DECEMBER 31,
                                                       -----------------------
                                                               2002
                                                       -----------------------
                                                                    WEIGHTED-
                                                                     AVERAGE
                                                                     EXERCISE
                                                         SHARES       PRICE
                                                       -----------  ----------
<S>                                                    <C>          <C>
            Outstanding at beginning of year                   -    $       -
               Granted                                    349,000        8.49
               Exercised                                 (175,000)       8.50
               Terminated                                       -           -
                                                       -----------
            Outstanding at end of year                    174,000        8.48
                                                       ===========

            Options exercisable at year-end               149,500        8.50
                                                       ===========
            Weighted-average fair value of options
               granted during the year                                   2.70
</TABLE>

          Information  pertaining to options outstanding at December 31, 2002 is
          as  follows:

<TABLE>
<CAPTION>
                                          OPTIONS OUTSTANDING               OPTIONS EXERCISABLE
                                -----------------------------------------  ----------------------
                                              WEIGHTED-
                                               AVERAGE                                  WEIGHTED-
                                              REMAINING      WEIGHTED-                   AVERAGE
                  RANGE OF        NUMBER     CONTRACTUAL      AVERAGE         NUMBER     EXERCISE
               EXERCISE PRICES  OUTSTANDING      LIFE      EXERCISE PRICE  EXERCISABLE    PRICE
               ---------------  -----------  ------------  --------------  ------------  --------
<S>            <C>              <C>          <C>           <C>             <C>           <C>

                 8.33 - $8.50     174,000      10 years        $ 8.48         149,500     $ 8.50
</TABLE>

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



                                                                  YEAR ENDED
                                                              DECEMBER 31, 2002
                                                             ------------------

              Dividend yield                                           0%
              Expected life                                        10 years
              Expected volatility                                    0.01%
              Risk-free interest rate                                3.86%



<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9.   INCOME TAXES

          Income  tax  expense  consists  of  the  following:

                                                      YEARS ENDED DECEMBER 31,
                                                      ------------------------
                                                          2002        2001
                                                      -----------  -----------

                  Current                             $  313,283   $  212,722
                  Deferred                               27,785      (66,121)
                                                      -----------  -----------
                      Income tax expense              $  341,068   $  146,601
                                                       ===========  ===========

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

                                                       YEARS ENDED DECEMBER 31,
                                                       ------------------------
                                                           2002         2001
                                                       -----------  -----------
                  Income taxes at statutory rate       $  332,965   $  157,962
                    Nontaxable interest                   (17,488)     (23,838)
                    Other items, net                       25,591       12,477
                                                       -----------  -----------
                  Income tax expense                   $  341,068   $  146,601
                                                       ===========  ===========

          The  components  of  deferred  income  taxes  are  as  follows:

                                                             DECEMBER 31,
                                                         ------------------
                                                           2002      2001
                                                         --------  --------

            Deferred tax assets:
              Loan loss reserves                         $308,660  $234,557
              Depreciation                                      -    52,425
              Preopening and organization costs                 -       859
              Other                                         4,750     8,019
                                                         --------  --------
                                                         313,410   295,860
                                                         --------  --------
            Deferred tax liabilities:
              Securities available-for-sale               222,279   100,406
              Depreciation                                 45,335         -
                                                         --------  --------
                                                          267,614   100,406
                                                         --------  --------
            Net deferred tax assets                      $ 45,796  $195,454
                                                         ========  ========



<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10.   EARNINGS PER SHARE

          Presented below is a summary of the components used to calculate basic
          and  diluted  earnings  per  common  share.

<TABLE>
<CAPTION>
                                                           YEARS ENDED DECEMBER 31,
                                                           ------------------------
                                                               2002        2001
                                                           -----------  -----------
<S>                                                        <C>          <C>
          Basic Earnings  Per Share:
            Weighted average common shares outstanding       1,601,167    1,600,000
                                                           ===========  ===========
            Net income                                     $   638,240  $   317,993
                                                           ===========  ===========
            Basic earnings  per share                      $       .40  $      0.20
                                                           ===========  ===========

          Diluted Earnings Per Share:
            Weighted average common shares outstanding       1,601,167    1,600,000
            Net effect of the assumed exercise of stock
               options based on the treasury stock method
               using average market prices for the year              -            -
                                                           -----------  -----------
            Total weighted average common shares and
               common stock equivalents outstanding          1,601,167    1,600,000
                                                           ===========  ===========
          Net income                                       $   638,240  $   317,993
                                                           ===========  ===========
          Diluted earnings per share                       $       .40  $      0.20
                                                           ===========  ===========
</TABLE>


NOTE 11.  COMMITMENTS AND CONTINGENCIES

          LOAN COMMITMENTS

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

            The Company's exposure to credit loss in the event of nonperformance
            by  the  other  party to the financial instrument for commitments to
            extend  credit  and  standby letters of credit is represented by the
            contractual  amount  of those instruments. The Company uses the same
            credit  policies  in


<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11.  COMMITMENTS AND CONTINGENCIES (CONTINUED)

          LOAN COMMITMENTS (CONTINUED)

            making  commitments  and  conditional  obligations  as  it  does for
            on-balance sheet instruments. A summary of the Company's commitments
            is  as  follows:

                                                          DECEMBER 31,
                                                    ------------------------
                                                       2002         2001
                                                    -----------  -----------

            Commitments to extend credit            $11,425,991  $10,534,000
            Standby letters of credit                   115,394      189,000
                                                    -----------  -----------
                                                    $11,541,385  $10,723,000
                                                    ===========  ===========

            Commitments to extend credit are agreements to lend to a customer as
            long  as  there  is no violation of any condition established in the
            contract.  Since  many  of  the  commitments  are expected to expire
            without  being  drawn  upon,  the  total  commitment  amounts do not
            necessarily  represent  future  cash  requirements.

            Standby  letters of credit are conditional commitments issued by the
            Company to guarantee the performance of a customer to a third party.
            Those  letters  of credit are primarily issued to support public and
            private  borrowing arrangements. The credit risk involved in issuing
            letters  of  credit  is  essentially  the  same  as that involved in
            extending  loans  to  customers. Collateral is required in instances
            which  the  Company  deems  necessary.

          CONTINGENCIES

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

NOTE 12.  CONCENTRATIONS OF CREDIT

            The  Company  originates  primarily  commercial,  residential,  and
            consumer  loans  to  customers  in  Forsyth  County  and surrounding
            counties.  The ability of the majority of the Company's customers to
            honor their contractual loan obligations is dependent on the economy
            in  these  areas.

            Sixty-nine  percent  of the Company's loan portfolio is concentrated
            in  loans  secured by real estate, of which a substantial portion is
            secured  by  real  estate  in  the  Company's  primary  market area.
            Accordingly,  the  ultimate  collectibility of the loan portfolio is
            susceptible to changes in market conditions in the Company's primary
            market  area. The other significant concentrations of credit by type
            of  loan  are  set  forth  in  Note  3.

            The Company, as a matter of policy, does not generally extend credit
            to  any  single  borrower or group of related borrowers in excess of
            25%  of  statutory  capital,  or  approximately  $1,875,000.


<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13.  REGULATORY MATTERS

          The Bank is subject to certain restrictions on the amount of dividends
          that  may  be  declared without prior regulatory approval. At December
          31,  2002,  approximately $340,500 of retained earnings were available
          for  dividend  declaration  without  regulatory  approval  in  2003.

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

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

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


<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13.  REGULATORY MATTERS (CONTINUED)

          The Company and Bank's actual capital amounts and ratios are presented
          in  the  following  table:

<TABLE>
<CAPTION>
                                                                                          TO BE WELL
                                                                       FOR CAPITAL    CAPITALIZED UNDER
                                                                        ADEQUACY      PROMPT CORRECTIVE
                                                         ACTUAL         PURPOSES      ACTION PROVISIONS
                                                    ---------------  ---------------  -----------------
                                                    AMOUNT   RATIO   AMOUNT   RATIO    AMOUNT    RATIO
                                                    -------  ------  -------  ------  --------  -------
                                                                    (DOLLARS IN THOUSANDS)
                                                    ---------------------------------------------------
<S>                                                 <C>      <C>     <C>      <C>     <C>       <C>
          DECEMBER 31, 2002:
          TOTAL CAPITAL TO RISK WEIGHTED ASSETS:
               CONSOLIDATED                         $12,298  15.34%  $ 6,412      8%  $    N/A     N/A
               BANK                                 $ 9,143  11.55%  $ 6,332      8%  $  7,915     10%
          TIER I CAPITAL TO RISK WEIGHTED ASSETS:
               CONSOLIDATED                         $11,413  14.24%  $ 3,206      4%  $    N/A     N/A
               BANK                                 $ 8,258  10.43%  $ 3,166      4%  $  4,749      6%
          TIER I CAPITAL TO AVERAGE ASSETS:
               CONSOLIDATED                         $11,413  11.60%  $ 3,936      4%  $    N/A     N/A
               BANK                                 $ 8,258   8.48%  $ 3,896      4%  $  4,870      5%

          December 31, 2001:
          Total Capital to Risk Weighted Assets:
               Consolidated                         $10,044  14.13%  $ 5,688      8%  $    N/A     N/A
               Bank                                 $ 8,334  12.00%  $ 5,556      8%  $  6,946     10%
          Tier I Capital to Risk Weighted Assets:
               Consolidated                         $ 9,287  13.06%  $ 2,844      4%  $    N/A     N/A
               Bank                                 $ 7,577  10.91%  $ 2,778      4%  $  4,167      6%
          Tier I Capital to Average Assets:
               Consolidated                         $ 9,287  10.33%  $ 3,598      4%  $    N/A     N/A
               Bank                                 $ 7,577   8.58%  $ 3,532      4%  $  4,415      5%
</TABLE>


NOTE 14.  FAIR VALUE OF FINANCIAL INSTRUMENTS

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


<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 14.  FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

          requirements.  Accordingly, the aggregate fair value amounts presented
          may  not  necessarily  represent  the  underlying  fair  value  of the
          Company.

          CASH,  DUE  FROM BANKS, INTEREST-BEARING DEPOSITS IN BANKS AND FEDERAL
          FUNDS  SOLD:  The  carrying  amounts  of  cash,  due  from  banks,
          interest-bearing  deposits in banks and federal funds sold approximate
          fair  values.

          SECURITIES:  Fair  values for securities are based on available quoted
          market  prices.  The  carrying  values  of  equity  securities with no
          readily  determinable  fair  value  approximates  fair  value.

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

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

          SECURITIES  SOLD  UNDER REPURCHASE AGREEMENTS: The carrying amounts of
          securities  sold  under  repurchase  agreements approximate their fair
          values.

          ACCRUED INTEREST: The carrying amounts of accrued interest approximate
          their  fair  values.

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


<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14.  FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

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

<TABLE>
<CAPTION>
                                                         DECEMBER 31, 2002         DECEMBER 31, 2001
                                                     ------------------------  ------------------------
                                                      CARRYING       FAIR       CARRYING       FAIR
                                                       AMOUNT        VALUE       AMOUNT        VALUE
                                                     -----------  -----------  -----------  -----------
<S>                                                  <C>          <C>          <C>          <C>
          Financial assets:
            Cash, due from banks, interest-
              bearing deposits in banks,
              and federal funds sold                 $ 5,577,906  $ 5,577,906  $10,333,011  $10,333,011
            Securities available-for-sale             18,712,368   18,712,368   15,908,655   15,908,655
            Securities held-to-maturity                   31,643       31,643      253,198      259,177
            Restricted equity securities                 205,900      205,900      200,000      200,000
            Loans                                     69,661,211   71,214,000   59,915,799   61,363,985
            Accrued interest receivable                  579,295      579,295      664,938      664,938

          Financial liabilities:
            Deposits                                  87,966,400   88,605,400   80,785,251   82,265,955
            Securities sold under
              repurchase agreements                       16,435       16,435            -            -
           Accrued interest payable                      211,772      211,772      248,897      248,897
</TABLE>


NOTE 15.  STOCK SPLIT

          The  Company  declared  a  two-for-one  common  stock  split  in 2002.
          Earnings  per  share  and  all  per  share  amounts for the year ended
          December  31,  2001 have been retroactively adjusted for the increased
          number  of  shares  of  common  stock.

NOTE 16.  SUPPLEMENTAL FINANCIAL DATA

          Components  of other operating expenses in excess of 1% of revenue are
          as  follows:

                                                       YEARS ENDED DECEMBER 31,
                                                       ------------------------
                                                           2002         2001
                                                       -----------  -----------

            Director fees                              $   100,975  $   105,100
            Professional fees                              137,229      173,426
            Data processing                                258,930      229,800
            Office supplies                                 78,157       58,555


<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 17.  PARENT COMPANY FINANCIAL INFORMATION

          The  following  information  presents  the  condensed  balance sheets,
          statements of income, and cash flows of Forsyth Bancshares, Inc. as of
          and  for  the  years  ended  December  31,  2002  and  2001:

<TABLE>
<CAPTION>
                                   CONDENSED BALANCE SHEETS

                                                                        2002         2001
                                                                   ------------  -----------
<S>                                                                <C>           <C>

          ASSETS
            Cash                                                     $ 2,158,649   $   62,426
            Investment in subsidiary                                   8,620,941    7,740,901
            Premises and equipment                                       970,698    1,606,547
            Other assets                                                  25,232       41,061
                                                                   -------------  ------------

                TOTAL ASSETS                                         $11,775,520   $9,450,935
                                                                   =============  ============

          STOCKHOLDERS' EQUITY                                       $11,775,520   $9,450,935
                                                                   =============  ============


                                 CONDENSED STATEMENTS OF INCOME

                                                                        2002          2001
                                                                   -------------  ------------
          INCOME:
            Interest income                                        $     11,262   $     4,591
            Dividends from subsidiary                                         -       225,000
            Rental income from subsidiary                                     -        15,750
                                                                   -------------  ------------
                                                                         11,262       245,341
                                                                   -------------  ------------
          EXPENSES:
            Depreciation                                                 15,848        25,943
            Other expenses                                               64,401        76,644
                                                                   -------------  ------------
                                                                         80,249       102,587
                                                                   -------------  ------------

                  INCOME (LOSS) BEFORE INCOME TAX BENEFITS
                    AND EQUITY IN UNDISTRIBUTED INCOME
                    OF SUBSIDIARY                                       (68,987)      142,754

            INCOME TAX BENEFITS                                         (26,033)     (31,036)
                                                                   -------------  ------------

                  INCOME (LOSS) BEFORE EQUITY IN UNDISTRIBUTED
                    INCOME OF SUBSIDIARY                                (42,954)      173,790

            EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARY                681,194       144,203
                                                                   -------------  ------------
                  NET INCOME                                       $     638,240  $   317,993
                                                                   =============  ============
</TABLE>


<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 17.  PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)

<TABLE>
<CAPTION>
                               CONDENSED STATEMENTS OF CASH FLOWS

                                                                                    2002        2001
                                                                               -----------  ----------
<S>                                                                             <C>          <C>
          OPERATING ACTIVITIES
            Net income                                                          $  638,240   $ 317,993
            Adjustments to reconcile net income to net cash
              provided by (used in) operating activities:
              Depreciation                                                          15,848      25,943
              Undistributed income of subsidiary                                 (681,194)   (144,203)
              Net other operating activities                                        15,829      (1,091)
                                                                                -----------  ----------

                   NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES            (11,277)    198,642
                                                                                -----------  ----------

          INVESTING ACTIVITIES
            Purchase of premises and equipment                                           -    (432,526)
            Proceeds from sale of premises and equipment to subsidiary             620,000           -
                                                                                -----------  ----------

                   NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES             620,000    (432,526)
                                                                                -----------  ----------

          FINANCING ACTIVITIES
            Proceeds from exercise of stock options                              1,487,500           -
                                                                                -----------  ----------

                   NET CASH PROVIDED BY FINANCING ACTIVITIES                     1,487,500           -
                                                                                -----------  ----------

          Net increase (decrease) in cash                                        2,096,223    (233,884)

          Cash at beginning of year                                                 62,426     296,310
                                                                                -----------  ----------

          Cash at end of year                                                   $2,158,649   $  62,426
                                                                                ===========  ==========
</TABLE>


<PAGE>