EXHIBIT 13.1

                       2001 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,
2001,  there  were  approximately  629 holders of record of the Company's Common
Stock  and  800,000  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.


<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,  2001  and  2000  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.

OVERVIEW

Our 2001 results were highlighted by continued loan and deposit growth despite a
downturn  in  the  national  and state economy exacerbated by the effects of the
September  11, 2001 terrorist attacks.  Our net income decreased to $318,000, as
compared  to  $549,000  in  2000,  primarily  due to decline in our net interest
margin  resulting  from the prime rate dropping eleven times in 2001 to 4.75% at
December  31,  2001.  We  opened a new branch in the Midway community of Forsyth
County,  Georgia  in  2000 and completed construction of a permanent facility at
this location in 2001.  We are in process of building a new main office facility
to  replace  the  leased  facilities  we  currently occupy.   Land has also been
acquired  for  future  branch expansion in neighboring Cherokee County, Georgia.
The Forsyth County area remains one of the fastest growing areas in the country.
We  believe  that our physical expansion will allow us to take advantage of this
growth.


                                        3
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL CONDITION AT DECEMBER 31, 2001 AND 2000

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

                                           December 31,
                                        2001         2000
                                      (Dollars in Thousands)
<S>                                 <C>           <C>
Cash and due from banks             $      2,781  $     2,575
Interest-bearing deposits in banks           186          172
Federal funds sold                         7,366        3,550
Securities                                16,362       25,747
Loans, net                                59,916       47,715
Premises and equipment                     3,048        1,575
Other assets                                 927        1,240
                                    ------------  -----------

                                    $     90,586  $    82,574
                                    ============  ===========

Total deposits                      $     80,785  $    73,260
Other liabilities                            350          485
Stockholders' equity                       9,451        8,829
                                    ------------  -----------

                                    $     90,586  $    82,574
                                    ============  ===========
</TABLE>

FINANCIAL CONDITION AT DECEMBER 31, 2001 AND 2000

As  of  December  31, 2001, we had total assets of $90.6 million, an increase of
10% over December 31, 2000.  Total interest-earning assets were $84.6 million at
December  31, 2001 or 93.4% of total assets as compared to 94.2% of total assets
at  December 31, 2000.  Our primary interest-earning assets at December 31, 2001
were  loans,  which  made up 72% of total interest-earning assets as compared to
62%  at  December  31,  2000.  Our loan to deposit ratio was 76% at December 31,
2001  as  compared  to 66% at December 31, 2000.  Deposit growth of $7.5 million
and  a  decrease  in our securities portfolio of $9.4 has been used to fund loan
growth  of  $12.3  million, with the remainder being used to fund a $3.8 million
increase  in  federal  funds  sold.

Our  securities  portfolio,  consisting  of  U.S.  Agency  securities, state and
municipal  securities,  corporate  securities,  mortgage-backed  securities  and
restricted  equity  securities,  amounted to $16.4 million at December 31, 2001.
Net  unrealized gains on securities amounted to $264,000 at December 31, 2001 as
compared  to net unrealized losses of $227,000 at December 31, 2000.  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  74% 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  (31%),  construction loans to build one- to four-family
residential properties (38%), and nonresidential properties consisting primarily
of  small business commercial properties (31%).  We generally require that loans
collateralized  by  real  estate  not  exceed  80%  of  the  collateral  value.


                                        4
<PAGE>
The  remaining  26%  of the loan portfolio consists 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.

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.

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  33%  at  December  31,  2001  was considered satisfactory.

At  December  31,  2001,  we  had loan commitments outstanding of $10.5 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,  2001,  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,  2001,  our  capital  ratios were considered adequate based on
regulatory minimum capital requirements.   Our stockholders' equity increased by
$622,000  due  to  net income in 2001 of $318,000 and to an increase in the fair
value  of  securities available-for-sale, net of tax, in the amount of $304,000.


                                        5
<PAGE>
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 $184,000 in dividends without regulatory approval.

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,  2001  are  as  follows:

<TABLE>
<CAPTION>
                                           Actual
                            ----------------------------------
                                                    Regulatory
                            Consolidated    Bank   Requirements
                            -------------  ------  -------------
<S>                         <C>            <C>     <C>

Leverage capital ratio             10.33%   8.58%          5.00%
Risk-based capital ratios:
  Core capital                     13.06   10.91           6.00
  Total capital                    14.13   12.00          10.00
</TABLE>

At  December  31,  2001,  we  had  approximately $2.4 million of commitments for
capital  expenditures  to  complete  our  main  office  facility.

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.

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

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

The  impact  of  inflation  on  banks  differs  from its impact on non-financial
institutions.  Banks,  as  financial  intermediaries,  have  assets  that  are
primarily  monetary  in  nature  and  that  tend  to  fluctuate  in concert with
inflation.  A  bank can reduce the impact of inflation if it can manage its rate
sensitivity  gap.  This  gap  represents  the  difference between rate sensitive
assets  and  rate  sensitive  liabilities.   We,  through  our  asset-liability
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".

RESULTS  OF  OPERATIONS  FOR  THE  YEARS  ENDED  DECEMBER  31,  2001  AND  2000


                                        6
<PAGE>
The following is a summary of our operations for the years indicated.

<TABLE>
<CAPTION>
                              Years Ended December 31,
                               2001           2000
                              (Dollars in Thousands)
<S>                        <C>           <C>
Interest income            $      6,471  $        6,060

Interest expense                  3,318           3,073
                           ------------  --------------

Net interest income               3,153           2,987

Provision for loan losses           338             135

Other income                        563             120

Other expenses                    2,913           2,176
                           ------------  --------------

Pretax income                       465             796

Income taxes                        147             247
                           ------------  --------------

Net income                 $        318  $          549
                           ============  ==============

</TABLE>

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

Our  results  of  operations  are  determined  by our ability to manage interest
income  and  expense  effectively,  to  minimize  loan and investment losses, to
generate  non-interest  income,  and  to  control  operating  expenses.  Because
interest  rates  are  determined by market forces and economic conditions beyond
our  control, our ability to generate net interest income 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 3.84% in 2001 as compared
to 4.18% in 2000.  Average loans increased by $11.5 million, which accounted for
the  most significant change in average interest-earning assets, which increased
overall  by  $10.7  million.  Average  interest-bearing liabilities increased by
$9.4  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 7.89% in 2001 from 8.49% in 2000.  The rate
paid  on  average  interest-bearing  liabilities decreased to 4.91% in 2001 from
5.29%  in  2000.  The decrease in net yield is due primarily to decreases in the
rates  earned  on  our  interest-earning  assets,  as  the  prime  rate  dropped
significantly  in  2001.  As  our  interest-bearing  liabilities  mature and are
repriced,  we  expect  to  see  our  net  yield  increase.


                                        7
<PAGE>
Provision for Loan Losses
-------------------------

The  provision  for  loan losses was $338,000 in 2001 as compared to $135,000 in
2000.  The  increase  in  the  provision for loan losses is due primarily to the
growth  of  the portfolio, our assessment of the inherent risk in the portfolio,
and to increased net charge offs of $173,000. The most significant of the charge
offs was concentrated in three borrowers.  We do not believe the increase in net
charge offs to be an indication of a negative trend in the credit quality of our
loan portfolio.   As of December 31, 2001, we had nonperforming loans and assets
totaling  $57,000  as  compared  to $15,000 at December 31, 2000. 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,  2001  and  2000  was  1.25%.

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  $563,000  in  2001 as compared to
$120,000  in  2000.  The  increase  of  $443,000  is  due primarily to increased
mortgage loan origination fees of $309,000, increased service charges on deposit
accounts of $67,000, and an increase in gains on sales of securities of $51,000.
We commenced mortgage loan origination activities in the second quarter of 2001.

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

Other  expense  for  2001  consists  of  salaries  and  employee  benefits ($1.6
million),  equipment  and  occupancy  expenses  ($482,000),  and other operating
expenses  ($873,000).  Salaries  and employee benefits increased by $459,000 due
to  an  increase in the number of full time employees to 32 at December 31, 2001
from  26  at  December  31, 2000 and other annual salary increases including the
employee  cost  to fund our mortgage loan origination operations.  Equipment and
occupancy  expenses increased by $88,000 due primarily to increased depreciation
of $52,000 and increased maintenance costs of $17,000.  Other operating expenses
increased  by  $191,000  due  to  increases  in  director  fees of $58,000, data
processing  fees  of  $55,000,  increased professional fees of $37,000 and other
operating expenses of $41,000.  The increases are normal and are a reflection of
our  overall  growth.

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

We  recognized income tax expense of $147,000 in 2001 as compared to $247,000 in
2000.  The  decrease  was due to lower pretax income in 2001.  The effective tax
rate  was  32%  for  2001  and  31%  for  2000.


                                        8
<PAGE>
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.

At  December  31,  2001,  our  cumulative one-year interest rate-sensitivity gap
ratio  was  76%.  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  88%  of  certificates  of deposit
repricing within a one-year time frame as opposed to 54% of loans and securities
repricing  within a one-year time frame. The ratio in the one-year time frame is


                                        9
<PAGE>
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,
2001,  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.

<TABLE>
<CAPTION>
                                            After       After
                                            Three        One
                                            Months    Year but
                                Within       but       Within     After
                                 Three      Within      Five      Five
                                Months     One Year     Years     Years    Total
                                             (Dollars in Thousands)

<S>                            <C>        <C>         <C>        <C>      <C>
Interest-earning assets:
  Interest-bearing
    deposits in banks          $    186   $      --   $      --  $    --  $   186
  Federal funds sold              7,366          --          --       --    7,366
  Securities                      3,062       1,795       6,757    4,748   16,362
  Loans                          27,174       9,891      23,446      161   60,672
                               ---------  ----------  ---------  -------  -------

                                 37,788      11,686      30,203    4,909   84,586
                               ---------  ----------  ---------  -------  -------
Interest-bearing liabilities:
  Interest-bearing demand
    deposits                     24,185          --          --       --   24,185
  Savings                         1,052          --          --       --    1,052
  Certificates, less than
    $100,000                      7,940      13,084       3,447       --   24,471
  Certificates, $100,000
    and over                      4,960      13,578       1,909       --   20,447
                               ---------  ----------  ---------  -------  -------

                                 38,137      26,662       5,356       --   70,155
                               ---------  ----------  ---------  -------  -------
Interest rate sensitivity
  gap                          $   (349)  $ (14,976)  $  24,847  $ 4,909  $14,431
                               =========  ==========  =========  =======  =======
Cumulative interest rate
  sensitivity gap              $   (349)  $ (15,325)  $   9,522  $14,431
                               =========  ==========  =========  =======
Interest rate sensitivity
  gap ratio                        0.99        0.44        5.64       --
                               =========  ==========  =========  =======
Cumulative interest rate
  sensitivity gap ratio            0.99        0.76        1.14     1.21
                               =========  ==========  =========  =======
</TABLE>


                                       10
<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.


                                       11
<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)

<TABLE>
<CAPTION>
                                                    Years Ended
                                                    December 31,
                                                 2001          2000
                                               (Dollars In Thousands)
<S>                                          <C>           <C>
        ASSETS

   Cash and due from banks                   $     2,199   $      1,835
   Taxable securities                             19,409         20,128
   Nontaxable securities                           1,645          1,850
   Interest-bearing deposits in banks                560            307
   Securities valuation account                      137           (907)
   Federal funds sold                              5,544          5,667
   Loans (2)                                      54,901         43,449
   Allowance for loan losses                        (662)          (538)
   Other assets                                    2,707          2,584
                                             ------------  -------------
                                             $    86,440   $     74,375
                                             ============  =============

   Total interest-earning assets             $    82,059   $     71,401
                                             ============  =============

      LIABILITIES AND STOCKHOLDERS' EQUITY

   Deposits:
      Noninterest-bearing demand             $     9,412   $      7,608
      Interest-bearing demand                     18,765         14,670
      Savings                                      1,019            831
      Time                                        47,807         42,646
                                             ------------  -------------
        Total deposits                            77,003         65,755

   Other liabilities                                 454            434
                                             ------------  -------------
        Total liabilities                         77,457         66,189
   Stockholders' equity                            8,983          8,186
                                             ------------  -------------
                                             $    86,440   $     74,375
                                             ============  =============

   Total interest-bearing liabilities        $    67,591   $     58,147
                                             ============  =============
</TABLE>

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

(2)  Nonaccrual  loans of $39,000 and $18,000 were included in average loans for
     2001  and  2000,  respectively.


                                       12
<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,
                                                           2001                2000
                                                                Average             Average
                                                      Interest    Rate    Interest    Rate
                                                             (Dollars in Thousands)

<S>                                                  <C>         <C>      <C>        <C>
   INTEREST INCOME:
      Interest and fees on loans (1)                 $   5,057     9.21%  $   4,417  10.17%
      Interest on taxable securities                     1,114     5.74       1,174   5.83
      Interest on nontaxable securities (2)                 70     4.27          80   4.30
      Interest on deposits in banks                         19     3.34          17   5.64
      Interest on federal funds sold                       211     3.81         372   6.56
                                                     ----------           ---------
      Total interest income                              6,471     7.89       6,060   8.49
                                                     ----------           ---------

   INTEREST EXPENSE:
      Interest on interest-bearing
        demand deposits                                    428     2.28         412   2.81
      Interest on savings deposits                          19     1.89          20   2.45
      Interest on time deposits                          2,871     6.00       2,641   6.19
                                                     ----------           ---------
      Total interest expense                             3,318     4.91       3,073   5.29
                                                     ----------           ---------

   NET INTEREST INCOME                               $   3,153               $2,987
                                                     ==========           =========

      Net interest spread                                          2.98%              3.20%
                                                                 =======              =====
      Net yield on average interest-earning assets                 3.84%              4.18%
                                                                 =======              =====
</TABLE>

(1)  Interest  and  fees  on  loans  includes  $407,000 and $320,000 of loan fee
     income  for the years ended December 31, 2001 and 2000, respectively. There
     was  no interest income recognized on nonaccrual loans during 2001 or 2000.

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


                                       13
<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.

<TABLE>
<CAPTION>

                                                Year Ended December 31,
                                                     2001 vs. 2000
                                                     Changes Due To:

                                                Rate    Volume     Net
                                                (Dollars in Thousands)

<S>                                            <C>     <C>       <C>
Increase (decrease) in:
   Income from interest-earning assets:
   Interest and fees on loans                  $(444)  $ 1,084   $   640
   Interest on taxable securities                (18)      (42)      (60)
   Interest on nontaxable securities              --       (10)      (10)
   Interest on deposits in banks                  (9)       11         2
   Interest on Federal funds sold               (153)       (8)     (161)
                                               ------  --------  --------
      Total interest income                     (624)    1,035       411
                                               ------  --------  --------

   Expense from interest-bearing liabilities:
   Interest on interest-bearing
   demand deposits                               (79)       95        16
   Interest on savings deposits                   (5)        4        (1)
   Interest on time deposits                     (82)      312       230
                                               ------  --------  --------
      Total interest expense                    (166)      411       245
                                               ------  --------  --------

      Net interest income                      $(458)  $   624   $   166
                                               ======  ========  ========
</TABLE>


                                       14
<PAGE>
                              INVESTMENT PORTFOLIO

TYPES OF INVESTMENTS

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

<TABLE>
<CAPTION>
                                        December 31,
                                    2001          2000
                                  (Dollars In Thousands)
<S>                             <C>          <C>
U.S. Government agencies        $     2,565  $      13,010
State and municipal securities        1,355          1,801
Corporate securities                  5,550          4,319
Mortgage-backed securities            6,692          6,431
                                -----------  -------------
                                $    16,162  $      25,561
                                ===========  =============
</TABLE>

MATURITIES

The  amounts  of  debt  securities, including the weighted average yield in each
category  as  of December 31, 2001 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        $     515      5.54%  $    2,050      5.55%  $       --       --%
State and municipal securities         --        --          438      3.83          467      4.18
Corporate securities                1,280      5.66        3,280      5.59          990      6.72
Mortgage-backed securities             --        --        1,495      4.23        1,109      5.67
                                ---------             ----------             ----------

                                $   1,795      5.63   $    7,263      5.19   $    2,566      5.80
                                =========             ==========             ==========
</TABLE>
<TABLE>
<CAPTION>
                              After ten years          Total
                             Amount    Yield (1)  Amount   Yield (1)
<S>                         <C>        <C>        <C>      <C>
U.S. Government agencies    $      --       -- %  $ 2,565      5.55%
State and municipal               450       4.74    1,355      4.25
Corporate securities               --         --    5,550      5.81
Mortgage-backed securities      4,088       5.80    6,692      5.71
                            ---------             -------

                            $   4,538       5.69  $16,162      5.60
                            =========             =======
</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.


                                       15
<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.

<TABLE>
<CAPTION>
                                              December 31,
                                          2001          2000
                                        (Dollars In Thousands)
<S>                                   <C>           <C>
Commercial                            $     7,795   $      7,553
Real estate-construction                   16,976          8,229
Real estate-mortgage                       27,689         23,569
Consumer installment loans and other        8,212          8,968
                                      ------------  -------------
                                           60,672         48,319
Less allowance for loan losses               (756)          (604)
                                      ------------  -------------
Net loans                             $    59,916   $     47,715
                                      ============  =============
</TABLE>

MATURITIES AND SENSITIVITIES OF LOANS TO CHANGES IN INTEREST RATES

Total loans as of December 31, 2001 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.

<TABLE>
<CAPTION>
                                    (Dollars in Thousands)
<S>                                 <C>
   Commercial
      One year or less              $                 3,837
      After one through five years                    3,925
      After five years                                   33
                                    -----------------------
                                                      7,795
                                    -----------------------

   Construction
      One year or less                               14,488
      After one through five years                    2,488
      After five years                                   --
                                    -----------------------
                                                     16,976
                                    -----------------------

   Other
      One year or less                               15,490
      After one through five years                   20,287
      After five years                                  124
                                    -----------------------
                                                     35,901
                                    -----------------------

                                    $                60,672
                                    =======================
</TABLE>


                                       16
<PAGE>
The following table summarizes loans at December 31, 2001 with the due dates
after one year that have predetermined and floating or adjustable interest
rates.


                                       (Dollars in Thousands)

Predetermined interest rates           $                23,575
Floating or adjustable interest rates                    3,282
                                       -----------------------
                                       $                26,857
                                       =======================

RISK ELEMENTS

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

<TABLE>
<CAPTION>
                                                         December 31,
                                                      2001          2000
                                                    (Dollars In Thousands)
<S>                                               <C>          <C>
   Nonaccrual loans                               $        57  $          15
   Loans contractually past due ninety
      days or more as to interest or
      principal payments and still accruing                25              5
   Restructured loans                                       0              0
   Potential problem loans                                  0              0
   Interest income that would have been recorded
      on nonaccrual and restructured loans under
      original terms                                        5              2
   Interest income that was recorded on
      nonaccrual and restructured loans                     0              0
</TABLE>

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.


                                       17
<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.

<TABLE>
<CAPTION>
                                                Years Ended December 31,
                                                    2001          2000
                                                 (Dollars In Thousands)
<S>                                             <C>             <C>
   Average amount of loans outstanding          $      54,901   $ 43,449
                                                ==============  =========
   Balance of allowance for loan losses
      at beginning of year                      $         604   $    482
                                                --------------  ---------
   Loans charged off
      Commercial and financial                            169         --
      Real estate mortgage                                 --         --
      Installment                                          21         14
                                                --------------  ---------
                                                          190         14
                                                --------------  ---------
   Loans recovered
      Commercial and financial                             --         --
      Real estate mortgage                                 --         --
      Installment                                           4          1
                                                --------------  ---------
                                                            4          1
                                                --------------  ---------
   Net charge-offs                                        186         13
                                                --------------  ---------

   Additions to allowance charged to operating
      expense during year                                 338        135
                                                --------------  ---------
   Balance of allowance for loan losses
      at end of year                            $         756   $    604
                                                ==============  =========
   Ratio of net loans charged off during the
      year to average loans outstanding                  0.34%      0.03%
                                                ==============  =========
</TABLE>
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.


                                       18
<PAGE>
As  of  December  31,  2001  and  2000, 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, 2001             December 31, 2000
                                            Percent of loans in    Percent of loans in
                                               each category             each category
                                 Amount       to total loans   Amount   to total loans
                                              (Dollars in Thousands)
<S>                         <C>               <C>              <C>      <C>
Commercial                  $            226           12.85%  $   181           15.63%
Real estate - construction               114           27.98        91           17.03
Real estate - mortgage                   340           45.64       272           48.78
Consumer installment
loans and other                           76            13.53       60            18.56
                            ----------------  ---------------  -------  ---------------
                            $            756          100.00%  $   604          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,
                                           2001                2000
                                     Amount    Percent   Amount   Percent
                                            (Dollars in Thousands)

Noninterest-bearing demand deposits  $ 9,412       -- %  $ 7,608     --  %
Interest-bearing demand deposits      18,765       2.28   14,670      2.81
Savings deposits                       1,019       1.89      831      2.45
Time deposits                         47,807       6.00   42,646      6.19
                                     -------             -------
                                     $77,003             $65,755
                                     =======             =======

(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, 2001 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                                        $      4,960
     Over three through six months                                      5,599
     Over six through twelve months                                     7,979
     Over twelve months                                                 1,909
                                                                 ------------
          Total                                                  $     20,447
                                                                 ============


                                       19
<PAGE>
                    RETURN ON ASSETS AND STOCKHOLDERS' EQUITY

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

                                    Years Ended December 31,
                                         2001     2000

     Return on assets (1)               0.37%     0.74%
     Return on equity (2)               3.54      6.71
     Dividend payout ratio (3)             -         -
     Equity to assets ratio (4)        10.39     11.01

(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.


                                       20
<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, 2001 and 2000, 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, 2001 and 2000, and the results of their
operations  and  their  cash  flows for the years then ended, in conformity with
accounting  principles  generally  accepted  in  the  United  States of America.




                                   /s/  MAULDIN  &  JENKINS,  LLC


Atlanta,  Georgia
January  30,  2002


                                       21
<PAGE>
<TABLE>
<CAPTION>
                                FORSYTH BANCSHARES, INC.
                                     AND SUBSIDIARY

                               CONSOLIDATED BALANCE SHEETS
                               DECEMBER 31, 2001 AND 2000

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

ASSETS                                                            2001          2000
                                                               -----------  ------------
<S>                                                            <C>          <C>
Cash and due from banks                                        $ 2,781,252  $ 2,575,341
Interest-bearing deposits in banks                                 185,759      171,383
Federal funds sold                                               7,366,000    3,550,000
Securities available-for-sale                                   15,908,655   24,704,538
Securities held-to-maturity, at cost (fair value of $259,177
    and $857,417)                                                  253,198      857,144
Restricted equity securities, at cost                              200,000      185,700

Loans                                                           60,672,166   48,318,792
Less allowance for loan losses                                     756,367      603,723
                                                               -----------  ------------
          Loans, net                                            59,915,799   47,715,069

Premises and equipment                                           3,047,897    1,574,678
Other assets                                                       927,541    1,240,159
                                                               -----------  ------------
          TOTAL ASSETS                                         $90,586,101  $82,574,012
                                                               ===========  ============
LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits
    Noninterest-bearing                                        $10,693,553  $ 8,570,534
    Interest-bearing                                            70,091,698   64,689,183
                                                               -----------  ------------

          Total deposits                                        80,785,251   73,259,717
Other liabilities                                                  349,915      485,692
                                                               -----------  ------------
          TOTAL LIABILITIES                                     81,135,166   73,745,409
                                                               -----------  ------------

Commitments and contingencies

Stockholders' equity
    Common stock, no par value; 10,000,000 shares
       authorized; 800,000 issued and outstanding                7,960,341    7,960,341
    Retained earnings                                            1,326,773    1,008,780
    Accumulated other comprehensive income  (loss)                 163,821     (140,518)
                                                               -----------  ------------
          TOTAL STOCKHOLDERS' EQUITY                             9,450,935    8,828,603
                                                               -----------  ------------

          TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY           $90,586,101  $82,574,012
                                                               ===========  ============
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                       22
<PAGE>
<TABLE>
<CAPTION>
                                     FORSYTH BANCSHARES, INC.
                                          AND SUBSIDIARY

                                 CONSOLIDATED STATEMENTS OF INCOME
                              YEARS ENDED DECEMBER 31, 2001 AND 2000

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

                                                                              2001        2000
                                                                           ----------  -----------
<S>                                                                        <C>         <C>
INTEREST INCOME
    Loans                                                                  $5,056,771  $4,417,053
    Taxable securities                                                      1,114,248   1,174,121
    Nontaxable securities                                                      70,160      79,525
    Deposits in banks                                                          18,723      17,306
    Federal funds sold                                                        211,104     371,635
                                                                           ----------  -----------
          TOTAL INTEREST INCOME                                             6,471,006   6,059,640

INTEREST EXPENSE ON DEPOSITS                                                3,318,057   3,073,092
                                                                           ----------  -----------
          NET INTEREST INCOME                                               3,152,949   2,986,548
PROVISION FOR LOAN LOSSES                                                     337,721     135,213
                                                                           ----------  -----------
          NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES               2,815,228   2,851,335
                                                                           ----------  -----------
OTHER INCOME
    Service charges on deposit accounts                                       207,377     139,908
    Other operating income                                                    349,753      25,385
    Net realized gains (losses) on sales of securities available-for-sale       6,207     (44,684)
                                                                           ----------  -----------
          TOTAL OTHER INCOME                                                  563,337     120,609
                                                                           ----------  -----------
OTHER EXPENSES
    Salaries and employee benefits                                          1,559,278   1,099,840
    Equipment and occupancy expenses                                          481,699     393,620
    Other operating expenses                                                  872,994     682,203
                                                                           ----------  -----------
          TOTAL OTHER EXPENSES                                              2,913,971   2,175,663
                                                                           ----------  -----------

          INCOME BEFORE INCOME TAXES                                          464,594     796,281

INCOME TAX EXPENSE                                                            146,601     247,236
                                                                           ----------  -----------
                    NET INCOME                                             $  317,993  $  549,045
                                                                           ==========  ===========
EARNINGS PER SHARE                                                         $     0.40  $     0.69
                                                                           ==========  ===========
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                       23
<PAGE>
<TABLE>
<CAPTION>
                                     FORSYTH BANCSHARES, INC.
                                          AND SUBSIDIARY

                         CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                              YEARS ENDED DECEMBER 31, 2001 AND 2000

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

                                                                              2001        2000
                                                                            ---------  ----------
<S>                                                                         <C>        <C>
NET INCOME                                                                  $317,993   $  549,045
                                                                            ---------  ----------
OTHER COMPREHENSIVE INCOME:

    Unrealized gains on securities available-for-sale:

        Unrealized holding gains arising during period,
            net of tax  of $188,889 and $265,981, respectively               308,187      542,980

         Reclassification adjustment for (gains) losses realized
            in net income, net of  tax (benefits) of $2,359 and ($15,193),
            respectively                                                      (3,848)      29,491
                                                                            ---------  ----------
OTHER COMPREHENSIVE INCOME                                                   304,339      572,471
                                                                            ---------  ----------
COMPREHENSIVE INCOME                                                        $622,332   $1,121,516
                                                                            =========  ==========
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                       24
<PAGE>
<TABLE>
<CAPTION>
                                         FORSYTH BANCSHARES, INC.
                                              AND SUBSIDIARY

                              CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                  YEARS ENDED DECEMBER 31, 2001 AND 2000

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

                                        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, 1999        800,000  $    7,960,341  $       459,735  $     (712,989)  $ 7,707,087
      Net income                          -               -          549,045               -       549,045
      Other comprehensive loss            -               -                -         572,471       572,471
                                  ---------  --------------  ---------------  ---------------  -----------
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 income          -               -                -         304,339       304,339
                                  ---------  --------------  ---------------  ---------------  -----------
  BALANCE, DECEMBER 31, 2001        800,000  $    7,960,341  $     1,326,773  $      163,821   $ 9,450,935
                                  =========  ==============  ===============  ===============  ===========
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                       25
<PAGE>
<TABLE>
<CAPTION>
                                  FORSYTH BANCSHARES, INC.
                                       AND SUBSIDIARY

                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                           YEARS ENDED DECEMBER 31, 2001 AND 2000

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

                                                                   2001           2000
                                                               -------------  -------------
<S>                                                            <C>            <C>
OPERATING ACTIVITIES
    Net income                                                 $    317,993   $    549,045
    Adjustments to reconcile net income  to net cash
        provided by operating activities:
        Depreciation                                                262,542        201,929
        Provision for loan losses                                   337,721        135,213
        Deferred income taxes                                       (66,121)       (59,071)
        (Gain) loss on sales of securities available-for-sale        (6,207)        44,684
        (Increase) decrease in interest receivable                  218,132       (223,435)
        Increase (decrease)  in interest payable                   (116,142)       135,626
        Net other operating activities                              (45,558)      (126,314)
                                                               -------------  -------------
          Net cash provided by operating activities                 902,360        657,677
                                                               -------------  -------------
INVESTING ACTIVITIES
    Net increase in interest-bearing deposits in banks              (14,376)      (171,383)
    Purchases of securities available-for-sale                   (8,382,020)    (6,834,862)
    Proceeds from maturities of securities available-for-sale    13,781,999        359,383
    Proceeds from sales of securities available-for-sale          3,892,980      3,490,061
    Proceeds from maturities of securities held-to-maturity         603,946         75,435
    Purchases of restricted equity securities                       (14,300)      (185,700)
    Net increase in federal funds sold                           (3,816,000)    (1,490,000)
    Net increase in loans                                       (12,538,451)    (9,778,074)
    Purchase of premises and equipment                           (1,735,761)      (725,472)
                                                               -------------  -------------
          Net cash used in investing activities                  (8,221,983)   (15,260,612)
                                                               -------------  -------------
FINANCING ACTIVITIES
    Net increase in deposits                                      7,525,534     15,219,618
                                                               -------------  -------------
          Net cash provided by financing activities               7,525,534     15,219,618
                                                               -------------  -------------
Net increase in cash and due from banks                             205,911        616,683

Cash and due from banks at beginning  of year                     2,575,341      1,958,658
                                                               -------------  -------------
Cash and due from banks at end of year                         $  2,781,252   $  2,575,341
                                                               =============  =============
</TABLE>


                                       26
<PAGE>
<TABLE>
<CAPTION>
                            FORSYTH BANCSHARES, INC.
                                 AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 2001 AND 2000

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

SUPPLEMENTAL DISCLOSURES
<S>                                                      <C>         <C>
    Cash paid for:
        Interest                                          $3,434,199  $2,937,466

        Income taxes                                      $  268,307  $  381,000

</TABLE>


SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                       27
<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

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

          The  preparation  of financial statements in conformity with generally
          accepted  accounting  principles requires management to make estimates
          and  assumptions  that  affect  the  reported  amounts  of  assets and
          liabilities  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  and  deposits  are  reported  net.

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

          SECURITIES

          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 value with
          unrealized  gains  and  losses  excluded from earnings and reported in
          other  comprehensive  income.


                                       28
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

          SECURITIES (CONTINUED)

          Interest  and  dividends,  including  amortization  of  premiums  and
          accretion  of  discounts, are recognized in interest income. 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 unpaid principal balances less
          the  allowance  for  loan  losses.  Interest  income is accrued on the
          unpaid  balance.

          Nonrefundable  loan fees and certain direct loan origination costs are
          deferred  and  recognized  in  income  over  the  life  of  the loans.

          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  loan  is  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. In addition, regulatory agencies,
          as  an integral part of their examination process, periodically review
          the  Company's  allowance for loan losses, and may require the Company
          to  make  additions  to  the  allowance  based on their judgment about
          information  available  to  them  at  the  time of their examinations.

          A  loan is considered impaired when it is probable the Company will be
          unable  to  collect  all  principal  and  interest  payments  due  in
          accordance  with the contractual terms of the loan agreement. Impaired
          loans  are  measured  by  either  the  present  value


                                       29
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

          LOANS (CONTINUED)

          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 of disposal.
          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,  2001  or  2000.

          TRANSFERS OF FINANCIAL ASSETS

          Transfers  of financial assets are accounted for as sales when control
          over  the assets has been surrendered. Control over transferred assets
          is  deemed  to  be  surrendered when (1) the assets have been isolated
          from  the  Company,  (2)  the  transferee  obtains  the right (free of
          conditions  that  constrain it from taking advantage of that right) to
          pledge  or  exchange  the transferred assets, and (3) the Company does
          not  maintain effective control over the transferred assets through an
          agreement  to  repurchase  them  before  their  maturity.

          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.


                                       30
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

          STOCK  COMPENSATION  PLANS

          Statement  of  Financial  Accounting  Standards  ("SFAS")  No.  123,
          Accounting  for  Stock-Based  Compensation, encourages all entities to
          adopt  a  fair  value  based  method  of accounting for employee stock
          compensation plans, whereby compensation cost is measured at the grant
          date  based  on  the  value  of  the  award and is recognized over the
          service  period, which is usually the vesting period. However, it also
          allows  an  entity  to measure compensation cost for those plans using
          the  intrinsic  value  based  method  of  accounting  prescribed  by
          Accounting  Principles  Board  Opinion  No.  25,  Accounting for Stock
          Issued  to Employees, whereby compensation cost is the excess, if any,
          of  the  quoted  market price of the stock at the grant date (or other
          measurement  date) over the amount an employee must pay to acquire the
          stock.  Stock  options  to  be issued under the Company's stock option
          plan will have no intrinsic value at the grant date, and under Opinion
          No.  25  no compensation cost will be recognized for them. The Company
          has  elected  to  measure  compensation  cost  in  accordance with the
          accounting  methodology  in  Opinion  No.  25.

          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 would be computed by dividing net income by the sum
          of  the  weighted-average number of shares of common stock outstanding
          and  potential  common  shares.  There were no potential common shares
          outstanding  at December 31, 2001 or 2000. The weighted average number
          of  shares  outstanding for the years ended December 31, 2001 and 2000
          was  800,000.

          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.


                                       31
<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, 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
                                ===========  ===========  ============  ===========
 December 31, 2000:
 U. S. Government and agency
   securities                   $12,557,851  $    10,285  $   (57,741)  $12,510,395
 State and municipal securities   1,849,300            -      (47,819)    1,801,481
 Corporate securities             4,362,091            -      (43,415)    4,318,676
 Mortgage-backed securities       6,161,938            -      (87,952)    6,073,986
                                -----------  -----------  ------------  -----------
                                $24,931,180  $    10,285  $  (236,927)  $24,704,538
                                ===========  ===========  ============  ===========

                                   GROSS        GROSS
                                 AMORTIZED   UNREALIZED    UNREALIZED      FAIR
                                   COST         GAINS        LOSSES        VALUE
                                -----------  -----------  ------------  -----------
SECURITIES HELD-TO-MATURITY
  DECEMBER 31, 2001:
  MORTGAGE-BACKED SECURITIES    $   253,198  $     5,979  $         -   $   259,177
                                ===========  ===========  ============  ===========
Securities Held-to-Maturity
  December 31, 2000:
  U. S. Government and agency
  securities                    $   499,988  $       162  $         -   $   500,150
  Mortgage-backed securities        357,156          111            -       357,267
                                -----------  -----------  ------------  -----------
                                $   857,144  $       273  $         -   $   857,417
                                ===========  ===========  ============  ===========
</TABLE>
There  were no securities pledged at December 31, 2001 to secure public deposits
and for other purposes required or permitted by law.  Securities with a carrying
value  of  $3,174,000  were  pledged  at  December  31,  2000.

The  amortized cost and fair value of debt securities as of December 31, 2001 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.


                                       32
<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         $ 1,760,605  $ 1,794,620  $        -  $      -
Due from one to five years    5,114,604    5,261,911           -         -
Due from five to ten years    1,932,995    1,963,282           -         -
Due after ten years             448,918      450,033           -         -
Mortgage-backed securities    6,387,306    6,438,809     253,198   259,177
                            -----------  -----------  ----------  --------
                            $15,644,428  $15,908,655  $  253,198  $259,177
                            ===========  ===========  ==========  ========
</TABLE>

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

                                                 YEARS ENDED DECEMBER 31,
                                              ----------------------------
                                                  2001           2000
                                              -------------  -------------

Gross gains                                   $     28,796   $          -
Gross losses                                       (22,589)       (44,684)
                                              -------------  -------------
Net realized gains (losses)                   $      6,207   $    (44,684)
                                              =============  =============

NOTE 3.   LOANS

          The  composition  of  loans  is  summarized  as  follows:

<TABLE>
<CAPTION>

Changes  in  the  allowance  for  loan  losses  are  as  follows:

                                                     DECEMBER 31,
                                              --------------------------
                                                  2001          2000
                                              ------------  ------------
<S>                                           <C>           <C>
  Commercial, financial, and agricultural     $ 7,795,000   $ 7,553,000
  Real estate - construction                   16,976,000     8,229,000
  Real estate - mortgage                       27,689,000    23,569,000
  Consumer installment and other                8,212,166     8,967,792
                                              ------------  ------------
                                               60,672,166    48,318,792
  Allowance for loan losses                      (756,367)     (603,723)
                                              ------------  ------------
  Loans, net                                  $59,915,799   $47,715,069
                                              ============  ============

                                                YEARS ENDED DECEMBER 31,
                                              --------------------------
                                                     2001          2000
                                              ------------  ------------
Balance, beginning of year                    $   603,723   $   481,930
  Provision for loan losses                       337,721       135,213
  Loans charged off                              (189,586)      (14,017)
  Recoveries of loans previously charged off        4,509           597
                                              ------------  ------------
Balance, end of year                          $   756,367   $   603,723
                                              ============  ============
</TABLE>


                                       33
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE  3.  LOANS  (CONTINUED)

          The  total  recorded  investment  in  impaired  loans  was $56,614 and
          $15,077  at  December  31,  2001 and 2000, respectively. There were no
          impaired  loans  that  had related allowances determined in accordance
          with  SFAS  No. 114, Accounting by Creditors for Impairment of a Loan,
          at  December  31,  2001  and  2000. The average recorded investment in
          impaired  loans  for  2001  and 2000 was $39,308 and $18,121. Interest
          income recognized for cash payments received on impaired loans was not
          material  for  the  years  ended  December  31,  2001  and  2000.

          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, 2001 are as follows:

          Balance, beginning of year  $ 4,767,035
            Advances                    4,952,860
            Repayments                 (5,125,081)
                                      ------------
          Balance, end of year        $ 4,594,814
                                      ============

NOTE  4.  PREMISES  AND  EQUIPMENT

          Premises  and  equipment  are  summarized  as  follows:

                                                             DECEMBER 31,
                                                      ------------------------
                                                         2001         2000
                                                      ----------   -----------
            Land                                      $1,781,652   $  845,359
            Buildings                                    837,272      295,451
            Equipment                                    910,045      646,148
            Leasehold improvements                       140,132      131,302
            Construction in progress,
               estimated cost to complete $2,400,000      61,149       76,229
                                                      -----------  -----------
                                                       3,730,250    1,994,489
            Accumulated depreciation                    (682,353)    (419,811)
                                                      -----------  -----------
                                                      $3,047,897   $1,574,678
                                                      ===========  ===========

          The  Company  leases  its 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.


                                       34
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE  4.  PREMISES  AND  EQUIPMENT  (CONTINUED)

          The  total  minimum  rental  commitment at December 31, 2001 is due as
          follows:

            During the years ending December 31:
                 2002                             $ 87,222
                 2003                               75,972
                 2004                               75,972
                 2005                               75,972
                                                  --------
                                                  $315,138
                                                  ========

          The  total  rental  expense  for the years ended December 31, 2001 and
          2000  was  $90,472  and  $78,097,  respectively.

NOTE  5.  DEPOSITS

          The  aggregate amount of time deposits in denominations of $100,000 or
          more  at  December  31, 2001 and 2000 was $20,447,020 and $22,721,244,
          respectively.  The  scheduled  maturities of time deposits at December
          31,  2001  are  as  follows:

                 2002                          $39,559,860
                 2003                            2,484,840
                 2004                              909,108
                 2005                            1,898,705
                 2006                               63,539
                                               -----------
                                               $44,916,052
                                               ===========

NOTE  6.  EMPLOYEE  AND  DIRECTOR  BENEFIT  PLANS

          In  2000,  the Company adopted an incentive plan that provides for the
          issuance  of  stock options to key employees. The Company has reserved
          80,000  shares  of common stock for this purpose. No options have been
          granted  as  of  December  31,  2001.  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  $9,368  for  the  year  ended  December  31, 2001. There were no
          contributions  charged  to  expense  in  2000.

          In 2001, the Company approved the issuance of 162,250 stock options to
          certain  directors  of  the  Company.  None  of  the options have been
          granted  as  of  December  31,  2001  pending  the  completion  of  an
          independent  appraisal  of  the  fair  value  of  the Company's stock.


                                       35
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  7.  INCOME  TAXES

          Income  tax  expense  consists  of  the  following:

                                         YEARS ENDED DECEMBER 31,
                                         ------------------------
                                             2001        2000
                                         ----------  ------------
                 Current                 $ 212,722   $   306,307
                 Deferred                  (66,121)      (59,071)
                                         ----------  ------------
                   Income tax expense    $ 146.601   $   247,236
                                         ==========  ============

          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,
                                        ----------------------------------------
                                               2001                2000
                                        -------------------  -------------------
                                         AMOUNT    PERCENT    AMOUNT    PERCENT
                                        ---------  --------  ---------  --------
        Income taxes at statutory rate  $157,962        34%  $270,736        34%
          Nontaxable interest            (23,838)       (5)   (21,735)       (3)
          Other items, net                12,477         3     (1,765)        -
                                        ---------  --------  ---------  --------
        Income tax expense              $146,601        32%  $247,236       31 %
                                        =========  ========  =========  ========

The components of deferred income taxes are as follows:

                                                                 DECEMBER 31,
                                                              ------------------
                                                                2001      2000
                                                              --------  --------
     Deferred tax assets:
       Loan loss reserves                                     $234,557  $177,674
       Depreciation                                             52,425    30,592
       Preopening and organization costs                           859    20,197
       Securities available-for-sale                                 -    86,124
       Other                                                     8,019     1,276
                                                              --------  --------
                                                               295,860   315,863
     Deferred tax liabilities, securities available-for-sale   100,406         -
                                                              --------  --------
     Net deferred tax assets                                  $195,454  $315,863
                                                              ========  ========

NOTE  8.  COMMITMENTS  AND  CONTINGENCIES

          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.


                                       36
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE  8.  COMMITMENTS  AND  CONTINGENCIES  (CONTINUED)

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

                                                                DECEMBER 31,
                                                         -----------------------
                                                             2001        2000
                                                         -----------  ----------
               Commitments to extend credit              $10,534,000  $9,667,000
               Standby letters of credit                     189,000     156,000
                                                         -----------  ----------
                                                         $10,723,000  $9,823,000
                                                         ===========  ==========

          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. The amount of collateral obtained,
          if  deemed necessary by the Company upon extension of credit, is based
          on  management's  credit  evaluation  of  the  customer.

          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.

          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  9.  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.

          Seventy-four  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


                                       37
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE  9.  CONCENTRATIONS  OF  CREDIT  (CONTINUED)

          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  $1,625,000.

NOTE  10.  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,  2001,  approximately $184,000 of retained earnings were available
          for  dividend  declaration  without  regulatory  approval.

          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.  The  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 and of
          Tier  I capital to average assets. Management believes, as of December
          31,  2001  and 2000, the Company and the Bank met all capital adequacy
          requirements  to  which  they  are  subject.

          As of December 31, 2001, 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.


                                       38
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE  10.  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, 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>

<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, 2000:
Total Capital to Risk Weighted Assets:
     Consolidated                        $   8,868  18.63%  $ 3,809       8%  $    N/A  N/A
     Bank                                $   8,802  18.49%  $ 3,808       8%  $  4,760  10%
Tier I Capital to Risk Weighted Assets:
     Consolidated                        $   8,347  17.53%  $ 1,905       4%  $    N/A  N/A
     Bank                                $   8,281  17.40%  $ 1,904       4%  $  2,856   6%
Tier I Capital to Average Assets:
     Consolidated                        $   8,347  11.71%  $ 2,853       4%  $    N/A  N/A
     Bank                                $   8,281  11.62%  $ 2,852       4%  $  3,565   5%
</TABLE>


                                       39
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE  11.  FAIR  VALUE  OF  FINANCIAL  INSTRUMENTS

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

          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.


                                       40
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 11.  FAIR  VALUE  OF  FINANCIAL  INSTRUMENTS  (CONTINUED)

          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.

          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.

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

<TABLE>
<CAPTION>
                                      DECEMBER 31, 2001         DECEMBER 31, 2000
                                   ------------------------  ------------------------
                                    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         $10,333,011  $10,333,011  $ 6,296,724  $ 6,296,724
  Securities available-for-sale     15,908,655   15,908,655   24,704,538   24,704,538
  Securities held-to-maturity          253,198      259,177      857,144      857,417
  Restricted equity securities         200,000      200,000      185,700      185,700
  Loans                             59,915,799   61,363,985   47,715,069   47,667,813
  Accrued interest receivable          644,938      644,938      883,070      883,070

Financial liabilities:
  Deposits                         $80,785,251  $82,265,955  $73,259,717  $73,493,907
  Accrued interest payable             248,897      248,897      365,039      365,039
</TABLE>


                                       41
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 12.  SUPPLEMENTAL  FINANCIAL  DATA

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

                                                        YEARS ENDED DECEMBER 31,
                                                        ------------------------

                                                            2001        2000
                                                        -----------  -----------
              Other operating income:
                Mortgage origination fees               $   308,889  $         -

              Other operating expenses:
                Director fees                               105,100       46,700
                Professional fees                           173,426      136,659
                Data processing                             229,800      174,879

NOTE 13.  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,  2001  and  2000:

                           CONDENSED BALANCE SHEETS

                                                             2001        2000
                                                        ------------  ----------
              ASSETS
                Cash                                    $     62,426  $  296,310
                Investment in subsidiary                   7,740,901   7,292,360
                Premises and equipment                     1,606,547   1,199,963
                Other assets                                  41,061      39,970
                                                        ------------  ----------
                    TOTAL ASSETS                        $  9,450,935  $8,828,603
                                                        ============  ==========
                STOCKHOLDERS' EQUITY                    $  9,450,935  $8,828,603
                                                        ============  ==========


                                       42
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13.  PARENT  COMPANY  FINANCIAL  INFORMATION  (CONTINUED)

                           CONDENSED STATEMENTS OF INCOME

                                                              2001       2000
                                                            ---------  ---------
           INCOME:
              Interest income                               $  4,591   $ 11,132
              Dividends from subsidiary                      225,000    250,000
              Rental income from subsidiary                   15,750     30,000
                                                            ---------  ---------
                                                             245,341    291,132
                                                            ---------  ---------
           EXPENSES:
              Depreciation                                    25,943     17,076
              Other expenses                                  76,644     72,159
                                                            ---------  ---------
                                                             102,587     89,235
                                                            ---------  ---------

                   INCOME BEFORE INCOME TAX BENEFITS
                     AND EQUITY IN UNDISTRIBUTED INCOME
                     OF SUBSIDIARY                           142,754    201,897

              INCOME TAX BENEFITS                            (31,036)   (20,312)
                                                            ---------  ---------

                   INCOME BEFORE EQUITY IN UNDISTRIBUTED
                     INCOME OF SUBSIDIARY                    173,790    222,209

              EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARY   144,203    326,836
                                                            ---------  ---------

                   NET INCOME                               $317,993   $549,045
                                                            =========  =========


                                       43
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 13.  PARENT  COMPANY  FINANCIAL  INFORMATION  (CONTINUED)

                 CONDENSED STATEMENTS OF CASH FLOWS

                                                             2001        2000
                                                          ----------  ----------
         OPERATING ACTIVITIES
         Net income                                       $ 317,993   $ 549,045
         Adjustments to reconcile net income to net cash
           provided by operating activities:
           Depreciation                                      25,943      17,076
           Undistributed income of subsidiary              (144,203)   (326,836)
           Other operating activities                        (1,091)     10,188
                                                          ----------  ----------

                NET CASH PROVIDED BY OPERATING ACTIVITIES   198,642     249,473
                                                          ----------  ----------

         INVESTING ACTIVITIES
           Purchase of premises and equipment              (432,526)   (447,238)
                                                          ----------  ----------

                NET CASH USED IN INVESTING ACTIVITIES      (432,526)   (447,238)
                                                          ----------  ----------

         Net decrease in cash                              (233,884)   (197,765)

         Cash at beginning of year                          296,310     494,075
                                                          ----------  ----------

         Cash at end of year                              $  62,426   $ 296,310
                                                          ==========  ==========


                                       44
<PAGE>