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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

[X] Annual Report under Section 13 or 15(d) of the Securities Exchange Act of
    1934 for the fiscal year ended December 31, 1998

                       Commission file number: 333-10909

                            FORSYTH BANCSHARES, INC.
             (Exact name of registrant as specified in its charter)

<TABLE>
<CAPTION>

<S>                                                   <C>
                    Georgia                                      58-2231953
(Name of Small Business Issuer in its Charter)       (I.R.S. Employer Identification No.)


501 Tri-County Plaza, Highways 9 and 20, Cumming, Georgia            30040
       (address of principal executive office)                    (Zip Code)
</TABLE>

        (Issuer's telephone number, including area code): (770) 886-9500

             Securities registered under Section 12(b) of the Act:

      Title of Each Class              Name of Each Exchange on Which Registered
      -------------------              -----------------------------------------
            None                                          None

             Securities registered under Section 12(g) of the Act:

                           Common Stock, No Par Value
                                (Title of Class)

     Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes   X        No      
    ----          -----

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

    State the issuer's revenues for its most recent fiscal year: $3,925,777.

    State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked price of such common equity, as
of a specified date within the past 60 days: As of March 15, 1999, the
aggregate market value of voting stock of the Registrant held by non-affiliates
of the Registrant based solely on the initial public offering price, was
approximately $8,000,000.

    State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: As of March 15, 1999, there
were 800,000 shares of the Registrant's common stock outstanding.

    Documents Incorporated by Reference:


-       Portions of the Annual Report to Shareholders for the fiscal year ended
        December 31, 1998 are incorporated by reference into Parts I and II.
-       Portions of the definitive proxy statement for the Annual Meeting of
        Shareholders to be held on May 18, 1999 are incorporated by reference
        into Part III.


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                           SPECIAL CAUTIONARY NOTICE
                      REGARDING FORWARD LOOKING STATEMENTS

         Certain of the statements made herein under the caption "Management's
Discussion and Analysis of Results of Operations and Financial Condition" and
elsewhere in this Annual Report are forward-looking statements for purposes of
the Securities Act of 1933, as amended (the "Securities Act") and the Securities
Exchange Act of 1934, as amended (the" Exchange Act"), and as such may involve
known and unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of Forsyth Bancshares, Inc. (the
"Company") to be materially different from future results, performance or
achievements expressed or implied by such forward-looking statements. Such
forward looking statements include statements using the words such as "may,"
"will," "anticipate," "should," "would," "believe," "contemplate," "expect,"
"estimate," "continue," "may," "intend" or other similar words and expressions
of the future. Our actual results may differ significantly from the results we
discuss in these forward-looking statements.

         These forward-looking statements involve risks and uncertainties and
may not be realized due to a variety of factors, including, without limitation:
the effects of future economic conditions; governmental monetary and fiscal
policies, as well as legislative and regulatory changes; the risks of changes
in interest rates on the level and composition of deposits, loan demand, and
the values of loan collateral, securities, and other interest-sensitive assets
and liabilities; interest rate risks; the effects of competition from other
commercial banks, thrifts, mortgage banking firms, consumer finance companies,
credit unions, securities brokerage firms, insurance companies, money market
and other mutual funds and other financial institutions operating in the
Company's market area and elsewhere, including institutions operating,
regionally, nationally and internationally, together with such competitors
offering banking products and services by mail, telephone, computer and the
Internet; the possible effects of the Year 2000 problem on the Company,
including such problems at the Company's vendors, counter-parties and
customers; and the failure of assumptions underlying the establishment of
reserves for possible loan losses. All written or oral forward-looking
statements attributable to the Company are expressly qualified in their
entirety by these Cautionary Statements.

                                     PART I

ITEM 1.  BUSINESS

General

         The Company is a Georgia corporation that is a bank holding company
registered with the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") under the Bank Holding Company Act of 1956, as amended
(the "BHCA") and with the Department of Banking and Finance of the State of
Georgia (the "DBF") under the Georgia Financial Institutions Code (the
"Financial Institutions Code"). The Company had total consolidated assets of
$59.8 million, total deposits of $51.4 million and total stockholders equity of
$8.0 million at December 31, 1998. Through its wholly-owned subsidiary, The
Citizens Bank of Forsyth County (the "Bank"), the Company operates a commercial
banking business in Forsyth County, Georgia.
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         The Bank is community oriented and focuses primarily on offering real
estate, commercial and consumer loans and various deposit and other services to
individuals, small to medium-sized businesses and professionals primarily in
Cumming, Georgia and the surrounding area, including Forsyth County (the
"Forsyth County Area"). The Bank is the only locally owned and managed
commercial bank operating in the Forsyth County Area. The Company management
team is comprised of several banking professionals with many years of
experience in Georgia with this and other banking organizations. The Bank
competes against the larger regional and super-regional banks operating in its
market by emphasizing the stability and accessibility of its management,
management's long-term familiarity with the market, immediate local decision
making and the pride of local ownership.

         The Company was incorporated as a Georgia corporation on February 14,
1996, primarily to own and control all of the capital stock of the Bank. The
Company currently engages in no business other than owning and managing the
Bank. The Bank received final regulatory approval on January 30, 1997 from the
DBF and the Federal Deposit Insurance Corporation (the "FDIC") to begin
business on February 3, 1997. The Company received final approval to acquire
the capital stock of the Bank from the DBF on October 15, 1996 and from the
Federal Reserve Bank of Atlanta (the "Federal Reserve"), as delegate of the
Federal Reserve Board on November 25, 1996. The Bank commenced operations on
February 3, 1997 as a commercial bank engaging in a general commercial and
retail banking business.

         The organizers of the Company and the Bank (the "Organizers") chose a
holding company structure under which the Company acquired all of the capital
stock of the Bank because, in the judgment of management, the holding company
structure provides flexibility that would not otherwise be available. The
holding company structure can assist the Bank in maintaining its required
capital ratios because, subject to compliance with Federal Reserve Board debt
guidelines, the Company may borrow money and contribute the proceeds to the
Bank as primary capital. Moreover, a holding company may engage in certain
non-banking activities that the Federal Reserve Board has deemed to be closely
related to banking. See "-- Supervision and Regulation." Although the Company
has no present intention of engaging in any of these activities, if
circumstances should lead the Company's management to believe that there is a
need for these services in the Bank's market area and that such activities
could be profitably conducted, management of the Company would have the
flexibility of commencing these activities upon filing a notice or application
with the Federal Reserve.

Marketing Focus

         Most of the banks in the Forsyth County Area are now local branches of
large regional banks. Although size gives the larger banks certain advantages
in competing for business from large corporations, including higher lending
limits and the ability to offer services in other areas of Georgia and the
Forsyth County Area, management believes that there is a void in the community
banking market in the Forsyth County Area and that the Bank can successfully
fill this void. As a result, the Company generally does not attempt to compete
for the banking relationships of large corporations, but concentrates its
efforts on small to medium-sized businesses and on individuals.

         The Bank's current plan is to advertise aggressively, using a wide
range of media to target market segments and emphasize the Company's local
ownership, community bank nature and ability to provide more personalized
service than its competition. Management, as long-time




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residents and business people in the Forsyth County Area, has determined the
credit needs of the area through personal experience and communications with
their business colleagues. Management believes that the area will react
favorably to the Bank's emphasis on service to small businesses, professional
concerns and individuals. However, no assurances in this respect can be given.

Location and Service Area

         The Bank is a general commercial and retail banking business,
emphasizing the needs of small to medium-sized businesses, professional
concerns and individuals, primarily in Cumming, Georgia and the surrounding
area, including Forsyth County. The principal executive offices and telephone
number of both the Company and the Bank are located at 501 Tri-County Plaza,
Highways 9 and 20, Cumming, Georgia 30040, (770) 886-9500.

         The Bank's primary service area is Forsyth County, Georgia, which is
located in North Georgia. Forsyth County was named the nation's fastest growing
county in a recent report issued by the U.S. Census Bureau. The estimated total
population of Forsyth County grew from 44,083 in 1990 to 86,130 in 1998, a
growth rate of 95.4%. During the same period of time, the population growth rate
for all of Georgia was 18.0%. In 1997, the average estimated effective buying
income per household in Forsyth County was $64,000 and the estimated
unemployment rate was 2.6%. The only major city in the county is Cumming,
Georgia, which may be reached via major highways including Georgia Highways 9,
20, 141, 306, 369 and 400.

         The principal components of the economy of Forsyth County are
wholesale and retail trade, manufacturing, services and construction
industries. According to the Cumming/Forsyth County Chamber of Commerce, the
largest employers in the county include Tyson Foods, Inc., Siemans Industrial
Automation and Scientific Games, Inc. Dozens of manufacturing industries
operate in Forsyth County and industrial and business developments may expand
and establish additional facilities in Forsyth County.

Deposits

         The Bank offers a full range of deposit services that are typically
available in most banks and savings and loan associations, including checking
accounts, NOW accounts, savings accounts and other time deposits of various
types, ranging from daily money market accounts to longer-term certificates of
deposit. The transaction accounts and time certificates are tailored to the
Bank's principal market area at rates competitive to those offered in the
Forsyth County Area. In addition, the Bank offers certain retirement account
services, such as Individual Retirement Accounts ("IRAs"). All deposit accounts
are insured by the FDIC up to the maximum amount allowed by law (generally,
$100,000 per depositor, subject to aggregation rules). The Bank solicits these
accounts from individuals, businesses, associations, organizations and
governmental authorities. As of December 31, 1998, the Bank's deposits were
allocated among certain categories as follows: 9.97% demand deposits, 23.19%
NOW accounts, and 66.84% time and savings deposits.



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Lending Activities

         General. The Bank emphasizes a range of lending services, including
real estate, commercial and consumer loans, to small to medium-sized
businesses, professional concerns and individuals that are located in or
conduct a substantial portion of their business in the Bank's market area. As
of December 31, 1998, the Bank's loans were allocated as follows: 48% real
estate loans, 31% commercial loans and 21% consumer loans.

         Credit Risk. There are certain risks inherent in making all loans. A
principal economic risk inherent in making loans is the creditworthiness of the
borrower. Other risks inherent in making loans include risks with respect to
the period of time over which loans may be repaid, risks resulting from changes
in economic and industry conditions, risks inherent in dealing with individual
borrowers and, in the case of a collateralized loan, risks resulting from
uncertainties as to the future value of the collateral. Management will
maintain an allowance for loan losses based on, among other things, an
evaluation of economic conditions and regular reviews of delinquencies and loan
portfolio quality. Based upon such factors, management makes various
assumptions and judgments about the ultimate collectability of the loan
portfolio and provides an allowance for potential loan losses based upon a
percentage of the outstanding balances and for specific loans when their
ultimate collectability is considered questionable. Certain specific risks with
regard to each category of loans are described under the separate subheading
for each type of loan below.

         Real Estate Loans. A primary component of the Bank's loan portfolio is
loans secured by first or second mortgages on real estate. These loans
generally consist of commercial real estate loans, construction and development
loans and residential real estate loans (but exclude home equity loans, which
are classified as consumer loans). With the exception of residential real
estate loans, loan terms generally are limited to five years or less, although
payments may be structured on a longer amortization basis. Interest rates may
be fixed or adjustable, and are more likely fixed in the case of shorter term
loans. The Bank generally charges an origination fee. Management will attempt
to reduce credit risk in the commercial real estate portfolio by emphasizing
loans on owner-occupied office and retail buildings where the loan-to-value
ratio, established by independent appraisals, does not exceed 80%. The Bank's
policy is for the loan-to-value ratio for (i) first and second mortgage loans
and (ii) construction loans not to exceed 80%. In addition, the Bank may
require personal guarantees of the principal owners of the property backed with
a review by the Bank of the personal financial statements of the principal
owners. The principal economic risk associated with each category of
anticipated loans, including real estate loans, is the creditworthiness of the
Bank's borrowers. The risks associated with real estate loans vary with many
economic factors, including employment levels and fluctuations in the value of
real estate. The Bank competes for real estate loans with a number of bank
competitors which are well-established in the Forsyth County Area. Most of
these competitors have substantially greater resources and lending limits than
the Bank. As a result, the Bank may have to charge lower interest rates to
attract borrowers. See "--Competition." The Bank may also originate loans for
sale into the secondary market. The Bank intends to limit interest rate risk
and credit risk on these loans by locking the interest rate for each loan with
the secondary investor and receiving the investor's underwriting approval prior
to originating the loan.

         Commercial Loans. The Bank makes loans for commercial purposes in
various lines of businesses. Commercial loans include both secured and
unsecured loans for working capital 





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(including inventory and receivables), business expansion (including
acquisition of real estate and improvements) and purchases of equipment and
machinery. Equipment loans are typically made for a term of five years or less
at fixed or variable rates, with the loan fully amortized over the term and
secured by the financed equipment and with a loan-to-value ratio of 80% or
less. Working capital loans typically have terms not exceeding one year and
will usually be secured by accounts receivable, inventory or personal
guarantees of the principals of the business. For loans secured by accounts
receivable or inventory, principal is typically repaid as the assets securing
the loan are converted into cash, and in other cases principal will typically
be due at maturity. The principal economic risk associated with each category
of anticipated loans, including commercial loans, is the creditworthiness of
the Bank's borrowers. The risks associated with commercial loans vary with many
economic factors, including the economy in the Forsyth County Area. The
well-established banks in the Forsyth County Area will make proportionately
more loans to medium to large-sized businesses than the Bank. Many of the
Bank's current and future commercial loans are and will likely be made to small
to medium-sized businesses which may be less able to withstand competitive,
economic and financial conditions than larger borrowers.

         Consumer Loans. The Bank makes a variety of loans to individuals for
personal and household purposes, including secured and unsecured installment
and term loans, home equity loans and lines of credit and revolving lines of
credit such as credit cards. These loans typically carry balances of less than
$25,000 and, in the case of non-revolving loans, are amortized over a period
not exceeding 48 months or are 90-day term loans, in each case bearing interest
at a fixed rate. The revolving loans typically bear interest at a fixed rate
and require monthly payments of interest and a portion of the principal
balance. The underwriting criteria for home equity loans and lines of credit
generally are the same as applied by the Bank when making a first mortgage
loan, as described above, and home equity lines of credit typically expire 10
years or less after origination. As with the other categories of loans, the
principal economic risk associated with consumer loans is the creditworthiness
of the Bank's borrowers, and the principal competitors for consumer loans are
the established banks in the Forsyth County Area.

         Loan Approval and Review. The Bank's loan approval policies provide
for various levels of officer lending authority. When the amount of aggregate
loans to a single borrower exceeds that individual officer's lending authority,
the loan request is considered and approved by an officer with a higher lending
limit or the officers' loan committee. The Bank has established officers'
lending limits, and any loan in excess of this lending limit must be approved
by the loan committee. The Bank will not make any loans to any director,
officer or employee of the Bank unless the loan is approved by the Bank's Board
of Directors, or a committee thereof, and is made on terms not more favorable
to such person than would be available to a person not affiliated with the
Bank.

         Lending Limit. Under the Financial Institutions Code, the Bank is
limited in the amount it can loan to a single borrower (including the
borrower's related interests) by the amount of the Bank's statutory capital
base. The limit is 15% of the statutory capital base unless each loan in excess
of the 15% is approved by the Bank's Board of Directors, or a committee
thereof, and unless the entire amount of the loan is secured by good collateral
or other ample security. In no event, however, may the aggregate amount loaned
to any borrower exceed 25% of the Bank's statutory capital base, subject to
certain exceptions relating to the type and adequacy of the collateral for such
loan. These limits will increase and decrease as the Bank's statutory capital
base increases and decreases. The Bank does not have any internal policy
restrictions concerning 


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loans to one borrower other than the limits imposed by the Financial
Institutions Code and those relating to loans to affiliates. See "--Supervision
and Regulation -- The Bank -- Transactions With Affiliates and Insiders." Unless
the Bank is able to sell participations in its loans to other financial
institutions, the Bank will not be able to meet all the lending needs of loan
customers requiring aggregate extensions of credit above these limits.

Other Banking Services

         Other bank services provided by the Bank include safe deposit boxes,
travelers checks, direct deposits of payroll and social security checks and
automatic drafts for various accounts. The Bank is associated with a shared
network of automated teller machines that may be used by Bank customers
throughout Georgia and other regions. The Bank does not currently and does not
plan to exercise trust powers during its initial years of operation. The Bank
may in the future offer a full-service trust department, but cannot do so
without the prior approval of the DBF.

Competition

         The banking business is highly competitive. The Bank competes as a
financial intermediary with other commercial banks, savings and loan
associations, mortgage banking firms, consumer finance companies, credit
unions, securities brokerage firms, insurance companies, money market mutual
funds and other financial institutions operating in the Forsyth County Area and
elsewhere. As of December 31, 1998, there were 11 commercial banks, with 25
commercial bank branches and one credit union operating in Forsyth County. A
number of these competitors are well-established in the Forsyth County Area.
Most of these institutions have substantially greater resources and lending
limits than the Bank and offer certain services, such as extensive and
established branch networks and trust services, that the Bank either does not
currently nor expect to provide. In addition, non-depository institution
competitors are generally not subject to the extensive regulations applicable
to the Company and the Bank. Recent federal legislation permits commercial
banks to establish operations nationwide, further increasing competition from
out-of-state financial institutions. Furthermore, recently enacted Georgia
legislation greatly diminishes the historical legal restrictions on
establishing branch banks across county lines in Georgia, thus creating further
opportunities for other financial institutions to compete with the Bank. As of
July 1, 1998, banks may establish branch banks statewide without limitation. In
addition, on-line computer banking via the Internet or otherwise may also
become an increasing source of competition for community financial institutions
such as the Bank. As a result of these competitive factors, the Bank may from
time to time be required to pay higher rates of interest to attract deposits.
Management believes that the Bank will be able to compete effectively with
these institutions in the Bank's proposed markets, but no assurances can be
given in this regard.

         Forsyth County is a rapidly growing market area. Currently, the Bank
is the only locally owned and operated bank in Forsyth County. Management
believes that this enhances the Bank's ability to maintain strong local support
and to continue its growth.

Supervision and Regulation

         The Company and the Bank are subject to state and federal banking laws
and regulations which impose specific requirements or restrictions on and
provide for general regulatory oversight with respect to virtually all aspects
of operations. These laws and regulations are generally 


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intended to protect depositors, not shareholders. To the extent that the
following summary describes statutory or regulatory provisions, it is qualified
in its entirety by reference to the particular statutory and regulatory
provisions. Any change in applicable laws or regulations may have a material
effect on the business and prospects of the Company. Beginning with the
enactment of the Financial Institutions Reform, Recovery and Enforcement Act of
1989 ("FIRREA") and following with the Federal Deposit Insurance Corporation
Improvement Act (the "FDICIA"), which was enacted in 1991, numerous additional
regulatory requirements have been placed on the banking industry, and
additional changes have been proposed. The operations of the Company and the
Bank may be affected by legislative changes and the policies of various
regulatory authorities. The Company is unable to predict the nature or the
extent of the effect on its business and earnings that fiscal or monetary
policies, economic control, or new federal or state legislation may have in the
future.

The Company

         General. Because it owns the outstanding capital stock of the Bank,
the Company is a bank holding company within the meaning of the BHCA and the
Financial Institutions Code. The activities of the Company will also be
affected by the Glass-Steagall Act of 1933 (the "Glass-Steagall Act").

         The BHCA. Under the BHCA, the Company is subject to periodic
examination by the Federal Reserve and will be required to file periodic
reports of its operations and such additional information as the Federal
Reserve may require. The Company's and the Bank's activities are limited to
banking, managing or controlling banks; furnishing services to or performing
services for its subsidiaries and engaging in other activities that the Federal
Reserve determines to be so closely related to banking, managing or controlling
banks as to be a proper incident thereto.

         Investments, Control and Activities. With certain limited exceptions,
the BHCA requires every bank holding company to obtain the prior approval of
the Federal Reserve before: (i) acquiring substantially all the assets of any
bank; (ii) acquiring direct or indirect ownership or control of any voting
shares of any bank if after such acquisition it would own or control more than
5% of the voting shares of such bank (unless it already owns or controls the
majority of such shares); or (iii) merging or consolidating with another bank
holding company.

         In addition, and subject to certain exceptions, the BHCA and the
Change in Bank Control Act, together with regulations thereunder, require
Federal Reserve approval (or, depending on the circumstances, no notice of
disapproval) prior to any person or company acquiring "control" of a bank
holding company, such as the Company. Control is conclusively presumed to exist
if an individual or company acquires 25% or more of any class of voting
securities of the bank holding company. Control is rebuttably presumed to exist
if a person acquires 10% or more, but less than 25%, of any class of voting
securities and either the Company has registered securities under Section 12 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") or no
other person will own a greater percentage of that class of voting securities
immediately after the transaction. The regulations provide a procedure for
challenge of the rebuttable control presumption.

         Under the BHCA, a bank holding company is generally prohibited from
engaging in, or acquiring direct or indirect control of, more than 5% of the
voting shares of any company 


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<PAGE>   9
engaged in non-banking activities, unless the Federal Reserve Board, by order
or regulation, has found those activities to be so closely related to banking
or managing or controlling banks as to be a proper incident thereto. Some of
the activities that the Federal Reserve Board has determined by regulation to
be proper incidents to the business of a bank holding company include making or
servicing loans and certain types of leases, engaging in securities brokerage
and limited insurance activities, performing certain data processing services,
acting in certain circumstances as a fiduciary or investment or financial
adviser, owning savings associations and making investments in certain
corporations or projects designed primarily to promote community welfare.

         The Federal Reserve Board will impose certain capital requirements on
the Company under the BHCA, including a minimum leverage ratio and a minimum
ratio of "qualifying" capital to risk-weighted assets. These requirements are
described below under "-- Capital Regulations." Subject to its capital
requirements and certain other restrictions, the Company may be able to borrow
money to make a capital contribution to the Bank, and such loans may be repaid
from dividends paid from the Bank to the Company (although the ability of the
Bank to pay dividends will be subject to regulatory restrictions as described
below in "-- The Bank -- Dividends"). The Company may also be able to raise
capital for contribution to the Bank by issuing securities, subject to
compliance with federal and state securities laws.

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

         The Financial Institutions Code. All Georgia bank holding companies
must register with the DBF under the Financial Institutions Code. A registered
bank holding company must provide the DBF with information with respect to the
financial condition, operations, management and inter-company relationships of
the holding company and its subsidiaries. The DBF may also require such other
information as is necessary to keep itself informed about whether the
provisions of Georgia law and the regulations and orders issued thereunder by
the DBF have been complied with, and the DBF may make examinations of any bank
holding company and its subsidiaries.

         Under the Financial Institutions Code, it is unlawful without the
prior approval of the DBF: (i) for any bank holding company to acquire direct
or indirect ownership or control of more than 5% of the voting shares of the
bank; (ii) for any bank holding company or subsidiary thereof, other than a
bank, to acquire all or substantially all of the assets of a bank; or (iii) for
any bank holding company to merge or consolidate with any other bank holding
company. It is also unlawful for any bank holding company to acquire direct or
indirect ownership or control of more than 5% of the voting shares of any bank
unless such bank has been in existence and continuously operating or
incorporated as a bank for a period of five years or more prior to the date of
application to the DBF for approval of such acquisition. In addition, in any
such acquisition by an 


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existing bank holding company, the initial banking subsidiary of such bank
holding company must have been incorporated for not less than two years before
the holding company can acquire another bank.

         The Financial Institutions Code and applicable provisions of federal
law allow interstate banking by permitting bank holding companies to acquire
Georgia banking organizations so long as the Georgia-based banks to be acquired
have been in existence and continuously operated as banks for five years or
more. Georgia bank holding companies are likewise permitted to acquire banking
organizations in other states, subject to similar aging requirements. Effective
June 1, 1997, banks located in substantially all states may merge or
consolidate with Georgia-based banks that satisfy the five-year age
requirement. Following such mergers or consolidations, the resulting bank may
expand in each state where its predecessors were located, subject to the
branching laws of that particular state. Those acquisitions and transactions
are generally subject to federal and Georgia approval as described above. See
"-- The Bank -- Branching."

         Glass-Steagall Act. The Company will also be restricted in its
activities by the provisions of the Glass-Steagall Act, which will prohibit the
Company from owning subsidiaries that are engaged principally in the issue,
flotation, underwriting, public sale or distribution of securities. The
interpretation, scope and application of the provisions of the Glass-Steagall
Act currently are being considered and reviewed by regulators and legislators,
and the interpretation and application of those provisions have been challenged
in the federal courts.

The Bank

         General. The Bank is a state-chartered non-member bank organized under
the laws of the State of Georgia and subject to examination by the DBF.
Deposits in the Bank are insured by the FDIC up to a maximum amount (generally
$100,000 per depositor, subject to aggregation rules). The DBF and the FDIC
regulate or monitor virtually all areas of the Bank's operations, including
security devices and procedures, adequacy of capitalization and loss reserves,
loans, investments, borrowings, deposits, mergers, issuances of securities,
payment of dividends, interest rates payable on deposits, interest rates or
fees chargeable on loans, establishment of branches, corporate reorganizations,
maintenance of books and records and adequacy of staff training to carry on
safe lending and deposit gathering practices. The DBF and FDIC require the Bank
to maintain certain capital ratios and impose limitations on the Bank's
aggregate investment in real estate, bank premises, furniture and fixtures. The
Bank is also required by the DBF and FDIC to prepare quarterly reports on the
Bank's financial condition and to conduct an annual audit of its financial
affairs in compliance with minimum standards and procedures prescribed by the
DBF and FDIC.

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


                                       9
<PAGE>   11
to prescribe, by regulation, standards for all insured depository institutions
and depository institution holding companies relating, among other things, to:
(i) internal controls, information systems and audit systems; (ii) loan
documentation; (iii) credit underwriting; (iv) interest rate risk exposure; and
(v) asset quality.

         State non-member banks and their holding companies which have been
chartered or registered or have undergone a change in control within the past
two years or which have been deemed by the DBF or the Federal Reserve Board,
respectively, to be troubled institutions must give the DBF or the Federal
Reserve Board, respectively, 30 days prior notice of the appointment of any
senior executive officer or director. Within the 30-day period, the DBF or the
Federal Reserve Board, as the case may be, may approve or disapprove any such
appointment. This two-year period has expired for the Company and the Bank, and
neither has been notified that it is in a troubled condition.

         Deposit Insurance. The FDIC establishes rates for the payment of
premiums by federally insured banks and thrifts for deposit insurance. A
separate Bank Insurance Fund ("BIF") and Savings Association Insurance Fund
("SAIF") are maintained for commercial banks and thrifts, respectively, with
insurance premiums from the industry used to offset losses from insurance
payouts when banks and thrifts fail. Insurance premiums are established on the
basis of risk, where the institutions posing the highest risk of failure pay
higher premiums than those posing a lower risk of failure. These rates range
from zero to twenty-seven basis points. In recent years, the amount of the
deposit insurance premiums have been substantially reduced. As a result of the
enactment of the Federal Deposit Insurance Funds Act of 1996 on September 30,
1996, commercial banks are now required to pay part of the interest on the
Financing Corporation's ("FICO") bonds issued to deal with the savings and loan
crisis of the late 1980s. As a result, commercial bank deposits are now also
subject to assessment by FICO upon the approval by the FDIC Board ("FICO
Assessment") of such assessment. Beginning in 1997 and until the earlier of
December 31, 1999 or the date on which the last saving association ceases to
exist, the assessment rate FICO imposes on a commercial bank must be at a rate
equal to one-fifth the assessment rate applicable to deposits assessable by the
SAIF. The Bank's FICO Assessment for 1998 was $4,608, and the Bank believes it
will be at least approximately $7,000 for 1999. Increases in deposit insurance
premiums will increase the Bank's cost of funds, and there can be no assurance
that deposit insurance premiums will not increase in the future.

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

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



                                      10
<PAGE>   12
with non-affiliated companies. The Bank is subject to certain restrictions on
extensions of credit to executive officers, directors, certain principal
shareholders and their related interests. Such extensions of credit: (i) must
be made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
third parties; and (ii) must not involve more than the normal risk of repayment
or present other unfavorable features.

         Dividends. The principal source of the Company's cash revenues will
come from dividends received from the Bank. Under the Financial Institutions
Code, cash dividends on the Bank's common stock may be declared and paid only
out of its retained earnings, and dividends may not be declared at any time at
which the Bank's paid-in capital and appropriated retained earnings do not, in
combination, equal at least 20% of its capital stock account. In addition, the
DBF's current rules and regulations require prior DBF approval before cash
dividends may be declared and paid if: (i) the Bank's ratio of equity capital
to adjusted total assets is less than 6%; (ii) the aggregate amount of
dividends declared or anticipated to be declared in that calendar year exceeds
50% of the Bank's net profits, after taxes but before dividends, for the
previous calendar year; or (iii) the percentage of the Bank's assets classified
as adverse as to repayment or recovery by the DBF at the most recent
examination of the Bank exceeds 80% of the Bank's equity capital as reflected
at such examination. In addition, the Federal Reserve Board has stated that
bank holding companies should refrain from or limit dividend increases or
reduce or eliminate dividends under circumstances in which the bank holding
company fails to meet minimum capital requirements or in which its earnings are
impaired. Current federal law would prohibit, except under certain
circumstances and with prior regulatory approval, an insured depository
institution, such as the Bank from paying dividends or making any other capital
distribution if, after making the payment or distribution, the institution
would be considered "undercapitalized," as the term is defined in the
applicable regulations.

         Branching. The Bank currently operates only from its main office.
However, the Bank anticipates establishing a branch office in the Forsyth
County community known as Midway. Recently, Georgia legislation greatly
diminished the historical legal restrictions on establishing branch banks
across county lines in Georgia. Under Georgia law as of July 1, 1998, banks may
establish branch banks statewide without limitation. In addition, the Company,
with prior regulatory approval, is permitted to acquire interests in and
operate banks throughout the state provided such banks have been in existence
for five years, and under current Georgia law any bank acquired by the Company
could be merged into the Bank and its offices could then be operated as
branches of the Bank. The Bank has plans currently to open one branch office in
1999 and, depending upon profitability and community needs, additional branches
may be considered in the future.

         Community Reinvestment Act. The Community Reinvestment Act requires
that, in connection with examinations of financial institutions within their
respective jurisdictions, the Federal Reserve, the FDIC and the DBF shall
evaluate the record of the financial institutions in meeting the credit needs
of their local communities, including low and moderate income neighborhoods,
consistent with the safe and sound operation of those institutions. These
factors are also considered in evaluating mergers, acquisitions and
applications to open a branch or facility.

         Other Regulations. Interest and certain other charges collected or
contracted for by the Bank are subject to state usury laws and certain federal
laws concerning interest rates. The 



                                      11
<PAGE>   13
Bank's loan operations are also subject to certain federal laws applicable to
credit transactions, such as: (i) the federal Truth-In-Lending Act, governing
disclosures of credit terms to consumer borrowers; (ii) the Home Mortgage
Disclosure Act of 1975, requiring financial institutions to provide information
to enable the public and public officials to determine whether a financial
institution will be fulfilling its obligation to help meet the housing needs of
the community it serves; (iii) the Equal Credit Opportunity Act, prohibiting
discrimination on the basis of race, creed or other prohibited factors in
extending credit; (iv) the Fair Credit Reporting Act of 1978, governing the use
and provision of information to credit reporting agencies; (v) the Fair Debt
Collection Act, governing the manner in which consumer debts may be collected
by collection agencies; and (vi) the rules and regulations of the various
federal agencies charged with the responsibility of implementing such federal
laws. The deposit operations of the Bank also are subject to the Right to
Financial Privacy Act, which imposes a duty to maintain confidentiality of
consumer financial records and prescribes procedures for complying with
administrative subpoenas of financial records, and the Electronic Funds
Transfer Act and Regulation E issued by the Federal Reserve Board to implement
that act, which governs automatic deposits to and withdrawals from deposit
accounts and customers' rights and liabilities arising from the use of
automated teller machines and other electronic banking services.

Capital Regulations

         The federal bank regulatory authorities have adopted risk-based
capital guidelines for banks and bank holding companies that are designed to
make regulatory capital requirements more sensitive to differences in risk
profiles among banks and bank holding companies and account for off-balance
sheet items. The guidelines are minimums, and the federal regulators have noted
that banks and bank holding companies contemplating significant expansion
programs should not allow expansion to diminish their capital ratios and should
maintain ratios in excess of the minimums. Neither the Company nor the Bank has
received any notice indicating that either entity will be subject to higher
capital requirements. The current guidelines require all bank holding companies
and federally-regulated banks to maintain a minimum risk-based total capital
ratio equal to 8%, of which at least 4% must be Tier 1 capital. Tier 1 capital
includes common stockholders' equity, qualifying perpetual preferred stock and
minority interests in equity accounts of consolidated subsidiaries, but
excludes goodwill and most other intangibles and excludes the allowance for
loan and lease losses. Tier 2 capital includes the excess of any preferred
stock not included in Tier 1 capital, mandatory convertible securities, hybrid
capital instruments, subordinated debt and intermediate term-preferred stock
and general reserves for loan and lease losses up to 1.25% of risk-weighted
assets.

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



                                      12
<PAGE>   14
         The federal bank regulatory authorities have also implemented a
leverage ratio, which is equal to Tier 1 capital as a percentage of average
total assets less intangibles, to be used as a supplement to the risk-based
guidelines. The principal objective of the leverage ratio is to place a
constraint on the maximum degree to which a bank holding company may leverage
its equity capital base. The minimum required leverage ratio for top-rated
institutions is 3%, but most institutions are required to maintain an
additional cushion of at least 100 to 200 basis points.

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

         Under the FDICIA regulations, the applicable agency can treat an
institution as if it were in the next lower category if the agency determines
(after notice and an opportunity for hearing) that the institution is in an
unsafe or unsound condition or is engaging in an unsafe or unsound practice.
The degree of regulatory scrutiny of a financial institution will increase, and
the permissible activities of the institution will decrease, as it moves
downward through the capital categories. Institutions that fall into one of the
three undercapitalized categories may be required to: (i) submit a capital
restoration plan; (ii) raise additional capital; (iii) restrict their growth,
deposit interest rates, and other activities; (iv) improve their management;
(v) eliminate management fees; or (vi) divest themselves of all or a part of
their operations. Bank holding companies controlling financial institutions can
be called upon to boost the institutions' capital and to partially guarantee
the institutions' performance under their capital restoration plans.

         These capital guidelines can affect the Company in several ways. As
noted, the Bank currently qualifies as "well capitalized." However, rapid
growth, poor loan portfolio performance or poor earnings performance or a
combination of these factors, could change the Company's capital position in a
relatively short period of time, making an additional capital infusion
necessary.

         The FDIC has adopted supplements to the capital standards to address
market risk in larger organizations. The federal banking regulators continue to
refine the capital standards. It is uncertain what effect such modifications,
when and if implemented, would have on the Company and the Bank.

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



                                      13
<PAGE>   15
         The DBF requires the Bank to maintain a ratio (the "Primary Capital
Ratio") of total capital (which is essentially Tier 1 capital plus the
allowance for loan losses) to total assets (defined as balance sheet assets
plus the allowance for loan losses) of at least 6%. In addition, the Bank
expects that, in accordance with DBF policy and prior practice, the Bank will
be required to maintain a Primary Capital Ratio of 8% during its first three
years of operation.

Enforcement Powers

         FIRREA expanded and increased civil and criminal penalties available
for use by the federal regulatory agencies against depository institutions and
certain "institution-affiliated parties" (primarily including management,
employees and agents of a financial institution and independent contractors
such as attorneys, accountants and others, who participate in the conduct of
the financial institution's affairs). These practices can include the failure
of an institution to timely file required reports or the filing of false or
misleading information or the submission of inaccurate reports. Civil penalties
may be as high as $1,000,000 a day for such violations. Criminal penalties for
some financial institution crimes have been increased to 20 years. In addition,
regulators are provided with greater flexibility to commence enforcement
actions against institutions and institution-affiliated parties. Possible
enforcement actions include the termination of deposit insurance. Furthermore,
FIRREA expanded the appropriate banking agencies' power to issue
cease-and-desist orders that may, among other things, require affirmative
action to correct any harm resulting from a violation or practice, including
restitution, reimbursement, indemnifications or guarantees against loss. A
financial institution may also be ordered to restrict its growth, dispose of
certain assets, rescind agreements or contracts, or take other actions as
determined by the ordering agency to be appropriate.

Future Legislative Developments

         Other legislative and regulatory proposals regarding changes in
banking, and the regulation of banks, thrifts and other financial institutions
and bank and bank holding company powers are being considered by the executive
branch of the Federal government, Congress and various state governments,
including Georgia. Among other items under consideration are the possible
combination of the BIF and SAIF, changes in or repeal of the Glass-Steagall Act
which separates commercial banking from investment banking, changes in the BHC
Act to broaden the powers of "financial services" companies to own and control
depository institutions and engage in activities not closely related to
banking, and liberalization on the ability of banking organizations to
underwrite or sell insurance. Certain of these proposals, if adopted, could
significantly change the regulation of banks and the financial services
industry. It cannot be predicted whether any of these proposals will be
adopted, and, if adopted, how these proposals will affect the Company and the
Bank.

Effect of Governmental Monetary Policies

         The earnings of the Bank will be affected by domestic economic
conditions and the monetary and fiscal policies of the United States government
and its agencies. The Federal Reserve Board's monetary policies have had, and
will likely continue to have, an important impact on the operating results of
commercial banks through its power to implement national monetary policy in
order, among other things, to curb inflation or combat a recession. The
monetary policies of the Federal Reserve Board have major effects upon the
levels of bank loans, 



                                      14
<PAGE>   16
investments and deposits through its open market operations in United States
government securities and through its regulation of the discount rate on
borrowings of member banks and the reserve requirements against member bank
deposits. It is not possible to predict the nature or impact of future changes
in monetary and fiscal policies.

Employees

         The Bank had 13 full-time and no part-time employees at December 31,
1998. The Company does not have any employees other than its officers.

ITEM 2.  PROPERTIES

         The site of the Bank's principal facility is located at 501 Tri-County
Plaza, Highways 9 and 20, Cumming, Georgia 30040. The Company leases its
principal facility consisting of approximately 6,000 square feet under a
Sublease Agreement, as amended, with NationsBank, N.A. (South), the initial
term of which expires August 31, 2000. The base annual rent under the sublease
was $69,525 in 1998 and will be $71,611 and $73,759 in years 1999 and 2000,
respectively. During 1997, the Company completed all initial necessary building
renovations and leasehold improvements, at a cost of approximately $118,000.
The main office facilities include a teller line, customer service area,
offices for the Bank's lenders and officers, a vault with safe deposit boxes,
drive-in teller lanes, and a drive-up automated teller machine.

         In addition to the Bank's principal facility, the Company plans to
construct a branch facility and lease the facility to the Bank. The site of the
Bank's proposed branch facility is located at the corner of Highway 9 and
Campground Road, Cumming, Georgia 30041, which is in the Forsyth County
community of Midway. The Company purchased the site consisting of approximately
3.87 acres in October of 1998 for a purchase price of $607,892. While the site
currently consists of only a vacant lot, the Company plans to build a branch
office with facilities similar to those of the main office. The Company also
anticipates the purchase of a modular unit to be used as a temporary branch
office until the construction is completed.

ITEM 3.  LEGAL PROCEEDINGS

         There are no pending legal matters.

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

         No matter was submitted to a vote of security holders by solicitation
of proxies or otherwise during the fourth quarter of the Company's fiscal year
ended December 31, 1998.



                                      15
<PAGE>   17
                                    PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         Information required by this item is set forth under the heading
"Market for the Company's Common Stock and Related Shareholder Matters" on page
23 in the Annual Report to Shareholders for the year ended December 31, 1998,
and is incorporated herein by reference.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND 
        FINANCIAL CONDITION OF FORSYTH BANCSHARES, INC.

         Information required by this item is set forth under the heading
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" on pages 3 through 22 in the Annual Report to Shareholders for the
year ended December 31, 1998, and is incorporated herein by reference.

ITEM 7. FINANCIAL STATEMENTS

         Information required by this item is set forth in the Consolidated
Financial Statements and Notes to Consolidated Financial Statements on pages 25
through 49 and in the "Independent Auditor's Report" on page 24 in the Annual
Report to Shareholders for the year ended December 31, 1998, and is
incorporated herein by reference.

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

         The firm of Porter Keadle Moore, LLP acted as the Company's
independent auditors for the fiscal year ended December 31, 1997. On March 17,
1998, the Company's Board of Directors retained Mauldin & Jenkins, LLC as the
Company's independent public accountants and replaced the Company's former
auditors, Porter Keadle Moore, LLP. There were no disagreements with the former
auditors on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure with respect to the
Company's financial statements for the fiscal year ended December 31, 1997 or
up through the time of replacement. Prior to retaining Mauldin & Jenkins, LLC,
the Company had not consulted with them regarding accounting principles. The
Company changed its independent public accountants for general business and
pricing reasons and to separate the functions of the Company's internal auditor
and the Company's independent public accountants, which were both being
performed by Porter Keadle Moore, LLP. Since March 17, 1998, Mauldin & Jenkins,
LLC has acted as the Company's independent public accountants and J. M. Thomas
& Associates, CPA has acted as the Company's internal auditor.



                                      16
<PAGE>   18
                                    PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         Information required by this item is set forth under the heading
"Information Regarding Nominees and Continuing Directors" and under the heading
"Section 16(a) Beneficial Ownership Reporting Compliance" of the definitive
proxy statement for the Company's Annual Meeting to be held on May 18, 1999,
and is incorporated herein by reference.

ITEM 10. EXECUTIVE COMPENSATION

         Information required by this item is set forth under the heading
"Director Compensation" and under the heading "Executive Compensation" of the
definitive proxy statement for the Company's Annual Meeting to be held on May
18, 1999, and is incorporated herein by reference.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         Information required by this item is set forth under the heading
"Information Regarding Nominees and Continuing Directors" and under the heading
"Common Stock Ownership of Certain Beneficial Owners" of the definitive proxy
statement for the Company's Annual Meeting to be held on May 18, 1999, and is
incorporated herein by reference.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Information required by this item is set forth under the heading
"Certain Transactions and Business Relationships" of the definitive proxy
statement for the Company's Annual Meeting to be held on May 18, 1999, and is
incorporated herein by reference. 

ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

         (a) The following documents are filed as part of this report:

(a)(1)  Financial Statements

         The following financial statements of the Company and the independent
auditor's report thereon are included in the Company's 1998 Annual Report to
Shareholders and are incorporated by reference in Item 7 hereof:

Consolidated Balance Sheets as of December 31, 1998 and 1997.

Consolidated Statements of Operations for the years ended December 31, 1998 and
1997.

Consolidated Statements of Comprehensive Income (Loss) for the years ended
December 31, 1998 and 1997.



                                      17
<PAGE>   19
Consolidated Statements of Stockholders' Equity for the years ended December
31, 1998 and 1997.

Consolidated Statements of Cash Flows for the years ended December 31, 1998 and
1997.

Notes to Consolidated Financial Statements.

(a)(2)  EXHIBITS

3.1      Articles of Incorporation.(1)

3.2      Bylaws.(1)

4.1      Specimen Stock Certificate.(1)

10.1     Sublease Agreement by and among the Company, the Bank and NationsBank,
         N.A. (South), dated February 9, 1996.(1)

10.2     First Amendment to Sublease Agreement by and among the Company, the 
         Bank and NationsBank, N.A. (South), dated February 16, 1996.(1)

10.3     Second Amendment to Sublease Agreement by and among the Company, the 
         Bank and NationsBank, N.A. (South), dated May 10, 1996.(1)

10.5     Employment Agreement by and between the Company and David H. Denton, 
         dated June 28, 1996.(1)

13.1     The following sections of the 1998 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 the Consolidated 
           Financial Statements.

16.1     Letter on Change in Certifying Accountant.

21.1     Subsidiaries of the Company.

27.1     Financial Data Schedule (for SEC use only).

------------------------
(1)      Incorporated by reference to exhibits of the same number in the 
         Company's Registration Statement on Form S-1 (File No. 333-10909).

         (b) NO REPORTS ON FORM 8-K WERE FILED DURING THE LAST QUARTER OF THE
PERIOD COVERED BY THIS REPORT.


                                      18
<PAGE>   20
                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, as of March 26, 1999.

                               Forsyth Bancshares, Inc.

                               By:  /s/  David H. Denton
                                    -------------------------------------
                                         David H. Denton
                                         President and Chief Executive Officer

         In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant in the capacities and on
the dates indicated.


<TABLE>
<CAPTION>

                Signature                                    Title                             Date
                ---------                                    -----                             ----
         <S>                                               <C>                           <C>
        /s/ Catherine M. Amos                              Director                       March 26, 1999
  ------------------------------------
            Catherine M. Amos

        /s/ Jeffrey S. Bagley                     Vice Chairman of the Board              March 26, 1999
  ------------------------------------
            Jeffrey S. Bagley

        /s/ Danny M. Bennett                               Director                       March 26, 1999
  ------------------------------------
            Danny M. Bennett

       /s/ Michael P. Bennett                              Director                       March 26, 1999
  ------------------------------------
           Michael P. Bennett

         /s/ Bryan L. Bettis                               Director                       March 26, 1999
  ------------------------------------
             Bryan L. Bettis

       /s/ Talmadge W. Bolton                              Director                       March 26, 1999
  ------------------------------------
           Talmadge W. Bolton

       /s/ Thomas L. Bower III                             Director                       March 26, 1999
  ------------------------------------
           Thomas L. Bower III

     /s/ Charles R. Castleberry                            Director                       March 26, 1999
  ------------------------------------
         Charles R. Castleberry

         /s/ David H. Denton                President, Chief Executive Officer and        March 26, 1999
  ------------------------------------                     Director
             David H. Denton                               

          /s/ Holly R. Hunt                         Vice-President, Secretary             March 26, 1999
  ------------------------------------                    and Treasurer
              Holly R. Hunt
</TABLE>



                                      19
<PAGE>   21

<TABLE>

  <S>                                               <C>                                   <C>
        /s/ Charles D. Ingram                              Director                       March 26, 1999
  ------------------------------------
            Charles D. Ingram

      /s/ Herbert A. Lang, Jr.                             Director                       March 26, 1999
  ------------------------------------
          Herbert A. Lang, Jr.

        /s/ John P. McGruder                               Director                       March 26, 1999
  ------------------------------------
            John P. McGruder

         /s/ James J. Myers                          Chairman of the Board                March 26, 1999
  ------------------------------------
             James J. Myers

          /s/ Danny L. Reid                                Director                       March 26, 1999
  ------------------------------------
              Danny L. Reid

        /s/ Charles R. Smith                               Director                       March 26, 1999
  ------------------------------------
            Charles R. Smith

       /s/ Wyatt L. Willingham                             Director                       March 26, 1999
  ------------------------------------
           Wyatt L. Willingham

          /s/ Jerry M. Wood                                Director                       March 26, 1999
  ------------------------------------
              Jerry M. Wood
</TABLE>



                                      20

<PAGE>   22

          SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED
      PURSUANT TO SECTION 15(D) OF THE SECURITIES ACT OF 1933, AS AMENDED,
        (THE "ACT") BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
                       PURSUANT TO SECTION 12 OF THE ACT

         Subsequent to the filing of this Annual Report on Form 10-KSB, the
Company will distribute to its securities holders an Annual Report to
Shareholders and Proxy Statement in connection with its 1999 Annual Meeting of
Shareholders. The Company will furnish four copies of such materials to the
Commission when such materials are sent to the shareholders.



                                      21
<PAGE>   23
                                 EXHIBIT INDEX

<TABLE>
<CAPTION>

       ITEM                           DESCRIPTION
       ----                           -----------
       <S>           <C>
       3.1           Articles of Incorporation.(1)

       3.2           Bylaws.(1)

       4.1           Specimen Stock Certificate.(1)

       10.1          Sublease Agreement by and among the Company, the Bank and
                     NationsBank, N.A. (South), dated February 9, 1996.(1)

       10.2          First Amendment to Sublease Agreement by and among the
                     Company, the Bank and NationsBank,  N.A. (South), dated 
                     February 16, 1996.(1)

       10.3          Second Amendment to Sublease Agreement by and among the
                     Company, the Bank and NationsBank, N.A. (South), dated 
                     May 10, 1996.(1)

       10.5          Employment Agreement by and between the Company and David
                     H. Denton, dated June 28, 1996.(1)

       13.1          The following sections of the 1998 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

       16.1          Letter on Change in Certifying Accountant.

       21.1          Subsidiaries of the Company.

       27.1          Financial Data Schedule (for SEC use only)

</TABLE>

----------------------------
(1)      Incorporated by reference to exhibits of the same number in the
         Company's Registration Statement on Form S-1 (File No. 333-10909).