<PAGE>

                 UNITED STATES SECURITY AND EXCHANGE COMMISSION
                 ----------------------------------------------
                              Washington D.C. 20549
                                    FORM 10-Q

(Mark One)
[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934
For the quarterly period ended March 31, 2002
                                       OR
[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
For the transition period from _____________to ______________.

                           Commission file No. 0-20251

                            Crescent Banking Company
--------------------------------------------------------------------------------
             (Exact Name of Registrant as Specified in its Charter)

                Georgia                                  58-1968323
--------------------------------------------------------------------------------
       (State of Incorporation)              (I.R.S.Employer Identification No.)

       251 Highway 515, Jasper, GA                             30143
-------------------------------------------------------------------------------
  (Address of principal executive offices)                   (Zip code)

                                 (706) 692-2424
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

                                 Not applicable
--------------------------------------------------------------------------------
   (Former name, former address and former fiscal year, if changed since last
                                    report)

        Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No____

        Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:

        Common stock, $1 par value per share, 1,866,766 shares issued and
outstanding as of May 14, 2002. 6,668 shares are held as treasury stock.

<PAGE>

                            CRESCENT BANKING COMPANY

                                      INDEX

<TABLE>
<CAPTION>
                                                                                   Page
                                                                                    No.
<S>                                                                                <C>
Part  1.   Financial Information


Item  1.   Consolidated Financial Statements

              Consolidated Balance Sheets                                           3

              Consolidated Statements of Income and
              Comprehensive Income                                                  4

              Consolidated Statements of Cash Flows                                 5

           Notes to Consolidated Financial Statements                               6

Item  2.   Management's Discussion and Analysis
           of Financial Condition and Results of Operations                        10

Item  3.   Quantitative and Qualitative Disclosures about Market Risk              23

Part  II.  Other Information

Item  1.   Legal Proceedings                                                       27

Item  2.   Changes in Securities                                                   27

Item  3.   Defaults Upon Senior Securities                                         27

Item  4.   Submission of Matters to a Vote of Security Holders                     27

Item  5.   Other Information                                                       27

Item  6.   Exhibits and Reports on Form 8-K                                        27
</TABLE>

<PAGE>

PART I - FINANCIAL INFORMATION



                    CRESCENT BANKING COMPANY AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                   March 31,          December 31,
                                                                      2002               2001
                                                              -------------------------------------
<S>                                                           <C>                     <C>
Assets
Cash and due from banks                                            $ 12,972,097       $ 11,936,985
Interest bearing deposits in other banks                                425,888            235,660
Federal fund sold                                                     2,292,000            179,000
Securities available-for-sale                                         9,107,161          8,931,589
Securities held-to-maturity, at cost (fair value of
    $10,214,183 and $10,351,765, respectively)                       10,564,361         10,414,845
Restricted equity securities                                          2,220,975          1,920,975
Mortgage loans held for sale                                        207,551,693        313,467,820

Loans                                                               135,225,273        123,611,401
Less allowance for loan losses                                       (1,762,225)        (1,596,287)
                                                              -------------------------------------
  Loans, net                                                        133,463,048        122,015,114

Premises and equipment, net                                           6,588,963          6,321,651
Other real estate owned                                                  26,337            332,743
Mortgage servicing rights                                             3,717,692          3,098,579
Cash surrender value of life insurance                                4,636,038          3,634,472
Premium on deposits purchased                                           537,424            555,956
Derivative assets                                                        25,322                 --
Accounts receivable-brokers and escrow agents                         5,388,249          6,024,895
Other assets                                                          2,398,717          1,909,316
                                                              -------------------------------------

  Total Assets                                                     $401,915,965       $490,979,600
                                                              =====================================


Liabilities
Deposits
     Noninterest-bearing                                           $ 54,741,636       $ 45,718,364
     Interest-bearing                                               179,862,995        176,246,435
                                                              -------------------------------------
               Total deposits                                       234,604,631        221,964,799

Drafts payable                                                       16,455,529          9,424,722
Accrued interest and other liabilities                                7,785,904          7,646,141
Derivative liability                                                         --             22,846
Other borrowings                                                    118,229,906        229,081,205
                                                              -------------------------------------
       Total liabilities                                            377,075,970        468,139,713


Shareholders' equity
Common stock, par value $1.00; 10,000,000 shares
    authorized; 1,862,736 and 1,847,929 issued, respectively          1,862,736          1,847,929
Surplus                                                               9,592,519          9,414,713
Retained earnings                                                    13,752,777         11,701,721
Less cost of 6,668 shares acquired for the treasury                     (36,091)           (36,091)
Accumulated other comprehensive loss                                   (331,946)           (88,385)
                                                              -------------------------------------
      Total stockholders' equity                                     24,839,995         22,839,887
                                                              -------------------------------------

      Total liabilities and stockholders' equity                   $401,915,965       $490,979,600
                                                              =====================================
</TABLE>

See notes to Consolidated Financial Statements.

<PAGE>

CRESCENT BANKING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
                                                                   For the three months ended
                                                                              March 31,
                                                                       2002               2001
                                                              -------------------------------------
<S>                                                           <C>                     <C>
Interest income
Interest and fees on loans                                         $  2,328,273       $  2,217,892
Interest and fees on mortgage loans held for sale                     2,898,496          2,089,940
Interest on securities:
   Taxable                                                              360,374            290,720
   Nontaxable                                                             3,838              3,838
Interest on deposits in other banks                                       7,506             64,156
Interest on Federal funds sold                                            5,030             40,276
                                                              -------------------------------------
                                                                      5,603,517          4,706,822
                                                              -------------------------------------
Interest expense
Interest on deposits                                                  1,852,845          2,197,372
interest on other borrowings                                          1,122,018          1,144,364
                                                              -------------------------------------
                                                                      2,974,863          3,341,736
                                                              -------------------------------------


Net interest income                                                   2,628,654          1,365,086
Provision for loan losses                                               170,000            115,000
                                                              -------------------------------------
Net interest income after provision for loan losses                   2,458,654          1,250,086

Other income
Service charges on deposit accounts                                     196,103            186,954
Mortgage servicing fee income                                           436,997            168,046
Gestation fee income                                                     68,196            191,886
Gains on sale of mortgage servicing rights                            4,594,689          2,506,440
Gains on sale of mortgage loans held for sale                           369,750            285,568
Other                                                                   143,542            125,727
                                                              -------------------------------------
                                                                      5,809,277          3,464,621


Other expenses
Salaries and employee benefits                                        4,130,691          2,946,462
Capitalized loan orignation costs                                    (2,321,257)        (1,825,193)
Occupancy and equipment expense                                         387,855            303,718
Supplies, postage, and telephone                                        460,421            371,691
Advertising                                                             138,947             96,036
Insurance expense                                                        62,427             53,686
Depreciation and amortization                                           430,082            421,561
Legal and professional                                                  363,852            300,382
Director fees                                                            61,575             43,525
Mortgage subservicing expense                                           433,071             51,499
Other                                                                   592,927            561,560
                                                              -------------------------------------
                                                                      4,740,591          3,324,927

Income before income taxes and cumulative effect of
a change in accounting principle                                      3,527,340          1,389,780
Applicable income taxes                                               1,333,222            481,766

Income before cumulative effect of a change in
accounting principle                                               $  2,194,118       $    908,014
                                                              -------------------------------------

Cumulative effect of a change in accounting principle                        --            (69,770)
                                                              -------------------------------------

Net income                                                            2,194,118            838,244

Other comprehensive income (loss), net of tax
Unrealized gains (losses) on securities available
   for sale arising during period                                      (243,561)           851,616
                                                              -------------------------------------

Comprehensive income                                               $  1,950,557       $  1,689,860
                                                              =====================================


Basis earnings per common share before cumulative
effect of a change in accounting principle                         $       1.19       $       0.50

Cumulative effect of a change in accounting principle                      0.00              (0.04)
                                                              -------------------------------------

Basic earnings per common share                                    $       1.19       $       0.46
                                                              =====================================



Diluted earnings per common share before
cumulative effect of a change in accounting principle              $       1.14       $       0.49

Cumulative effect of a change in accounting principle                      0.00              (0.04)
                                                              -------------------------------------

Diluted earnings per common share                                  $       1.14       $       0.45
                                                              =====================================

Cash dividends per share of common stock                           $     0.0775       $     0.0775
</TABLE>

See Notes to Consolidated Financial Statements

<PAGE>

                    CRESCENT BANKING COMPANY AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOW



<TABLE>
<CAPTION>
                                                                        For the three months ended
                                                                                   March 31,
                                                                            2002               2001
                                                                   -------------------------------------
<S>                                                                <C>                     <C>
Operating Activities
Net Income (loss)                                                      $   2,194,118       $    838,244
Adjustments to reconcile net income (loss) to net
    cash provided by (used in) operating activities:
      Accretion of discount on securities                                   (309,487)           (89,596)
      Amortization of deposit intangible                                      18,532             18,532
      Amortization of mortgage servicing rights                              210,000            182,950
      Provision for loan loss                                                170,000            115,000
      Depreciation                                                           430,082            300,382
      Gains on sales of mortgage servicing rights                         (4,594,689)        (2,506,440)
      (Increase) decrease in mortgage loans held for sale                105,916,127        (57,182,484)
      Acquisition of mortgage servicing rights                            (3,967,259)        (7,251,718)
      Proceeds from sales of  mortgage servicing rights                    7,986,111          9,961,980
      Income on life insurance policies                                      (64,566)           (61,767)
      Increase in interest receivable                                         (2,883)           (12,284)
      Increase (decrease) in accounts receivable                             636,646         (1,843,352)
      Increase in drafts payable                                           7,030,807          6,131,040
      Increase (decrease) in interest payable                               (144,210)            52,982
      (Increase) decrease in other assets and liabilities, net              (250,713)         1,984,912

                                                                   -------------------------------------
Net cash provided by (used in) operating activities                      115,258,616        (49,361,619)


Investing Activities
Net increase in interest-bearing deposits in other banks                    (190,228)        (4,489,391)
Acquisition of securities held-to-maturity                                  (422,138)                --
Proceeds from maturities of securities available-for-sale                         --          1,131,234
Proceeds from maturities of securities held-to-maturity                           --            520,493
Acquisition of restricted equity securities                                 (300,000)                --
Purchase of life insurance policies                                         (937,000)                --
Net increase in Federal funds sold                                        (2,113,000)       (10,823,000)
Net increase in loans                                                    (11,303,404)        (3,823,599)
Purchase of premises and equipment                                          (697,394)          (271,643)

                                                                   -------------------------------------
Net cash used in investing activities                                    (15,963,164)       (17,755,906)

 Financing Activities
Net increase in deposits                                                  12,639,832         39,399,524
Net increase (decrease) in other borrowings                             (110,851,299)        28,259,455
Proceeds from the issuance of common stock                                    50,069             35,854
Proceeds from the exercise of stock options                                   44,120                 --
Dividends paid                                                              (143,062)          (140,557)

                                                                   -------------------------------------
Net cash provided (used in) by financing activities                      (98,260,340)        67,554,276

Net increase (decrease) in cash and due from banks                         1,035,112            436,751
Cash and due from banks at beginning of year                              11,936,985          5,120,426
                                                                   -------------------------------------

Cash and due from banks at end of period                               $  12,972,097       $  5,557,177
                                                                   =====================================

Supplemental Disclosure of Cash Flow Information
                 Cash paid during period for interest                      3,119,073          3,288,754
</TABLE>

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


March 31, 2002



NOTE 1 ---- GENERAL

The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments necessary
for a fair presentation of the financial position and results of operations of
the interim periods have been made. All such adjustments are of a normal
recurring nature. Results of operations for the three ended March 31, 2002 are
not necessarily indicative of the results of operations for the full year or any
interim periods.

NOTE 2      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH FLOW INFORMATION

For purpose of the statements of cash flows, cash equivalents include amounts
due from banks.

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

On January 1, 2001, the Company adopted Financial Accounting Standards Board
(FASB) No. 133, "Accounting For Certain Derivative Instruments And Hedging
Activities, " and FASB No. 138, "Accounting For Certain Derivative Instruments
And Certain Hedging Activities- An Amendment of FASB No. 133" (collectively,
"FAS 133"). Under FAS 133, all derivative financial instruments are to be
recognized on a company's balance sheet at fair value. On the date the Company
enters into a derivative contract, the Company designates the derivative
instrument as either (i) a hedge of the fair value of a recognized asset,
liability or an unrecognized firm commitment (a "fair value" hedge), (ii) a
hedge of a forecasted transaction or of the variability of cash flows to be
received or paid related to a recognized asset or liability (a "cash flow"
hedge) or (iii) a free-standing derivative instrument. For a fair value hedge,
changes in the fair value of the derivative instrument and changes in the fair
value of the hedged asset or liability attributable to the hedged risk are
recorded in the net income of the current period. For a cash flow hedge, changes
in the fair value of the derivative to the extent that it is effective are
recorded in other comprehensive income within the stockholders' equity section
of the balance sheet and subsequently reclassified as income in the same period
that the hedged transaction impacts net income. For free-standing derivatives
instruments, changes in the fair values are reported in the net income of the
current period. The Company has three types of derivative financial instruments
that meet the criteria of a derivative as outlined in FAS 133: (i) interest rate
lock commitments, (ii) mandatory sales commitments, and (iii) options to deliver
mortgage-backed securities. All of these derivative financial instruments are
considered to be free-standing derivative instruments.

The Company formally documents the relationship between hedging instruments and
hedged items, as well as the risk management objective and strategy for
undertaking various hedging transactions.

The primary market risk facing the Company is interest rate risk related to its
locked pipeline. The locked pipeline is comprised of interest rate lock
commitments issued on residential mortgage loans to be held for sale. In order
to mitigate the risk that a change in interest rates will result in a decline in
the value of the Company's locked pipeline, the Company enters into hedging
transactions. The locked pipeline is hedged with mandatory sales commitments or
options to deliver mortgage-backed securities that generally

<PAGE>

correspond with the composition of the locked pipeline. Due to the variability
of closings in the locked pipeline, which is driven primarily by interest rates,
the Company's hedging policies require that a percentage of the locked pipeline
be hedged with these types of derivative instruments. The Company is generally
not exposed to significant losses, nor will it realize significant gains,
related to it locked pipeline, due to changes in interest rates, net of gains or
losses on associated hedge positions. However, the Company is exposed to the
risk that the actual closings in the locked pipeline may deviate from the
estimated closings for a given change in interest rates. Although interest rates
are the primary determinant, the actual loan closings from the locked pipeline
are influenced by many factors, including the composition of the locked pipeline
and remaining commitment periods. The Company's estimated closings are based on
historical data of loan closings as influenced by recent developments. The
locked pipeline is considered a portfolio of derivative instruments. The locked
pipeline, and the associated free-standing derivative instruments used to hedge
the locked pipeline, are marked to fair value and recorded as a component of
gain on sale of loans in the income statement.

For the three months ended March 31, 2002 the impact on net income, net of tax
was $29,864, compared to the three months ended March 31, 2001 of $103,937. The
$29,864 FAS 133 effect on net income during the three-month period ended March
31, 2002 reflects the change in the fair value of the Company's freestanding
derivatives of $48,168, net of the related tax effect of $18,304.

NOTE 3 --- SERVICING PORTFOLIO

The Company services residential loans for various investors under contract for
a fee. As of March 31, 2002, the Company had purchased loans for which it
provides servicing with principal balances totaling $840.9 million.

NOTE 4 --- EARNINGS PER SHARE

The following is a reconciliation of net income (the numerator) and weighted
average shares outstanding (the denominator) used in determining basic and
diluted earnings per common share (EPS):

<TABLE>
<CAPTION>
                                            Three Months Ended March 31, 2002

                                            Net                        Weighted-Average
                                            Income                     Shares                    Per-Share
                                            (Numerator)                (Denominator)             Amount
                                            -----------------------------------------------------------
<S>                                         <C>                        <C>                       <C>
Basic earnings per share                    $2,194,118                 1,848,361                 $1.19

Effect of dilutive securities
         stock options                      -------                        78,950

Diluted earnings per share                  $2,194,118                 1,927,311                 $1.14

<CAPTION>
                                            Three Months Ended March 31, 2001

                                            Net                        Weighted-Average
                                            Income                     Shares                    Per-share
                                            (Numerator)                (Denominator)             Amount
                                            -----------------------------------------------------------
<S>                                         <C>                        <C>                       <C>
Basic earnings per share before
   cumulative effect of a change
</TABLE>

<PAGE>

<TABLE>
<S>                                         <C>                  <C>                       <C>
   in accounting principle                  $908,014             1,815,106                 $ 0.50

Cumulative effect of a change
   in accounting principle                  $(69,770)            1,815,106                 $(0.04)

Basic earnings per share                    $838,244             1,815,106                 $ 0.46

Effect of dilutive securities
   stock options                                                    31,501

Diluted earnings per share before
   cumulative effect of a change
   in accounting principle                  $908,014             1,846,607                 $ 0.49

Cumulative effect of a change
   in accounting principle                  $(69,770)            1,846,607                 $(0.04)

Diluted earnings per share                  $838,244             1,846,607                 $ 0.45
</TABLE>

NOTE 5 --- SUPPLEMENTAL SEGMENT INFORMATION

Crescent Banking Company (the "Company") has two reportable segments: commercial
banking and mortgages banking. The commercial banking segment provides
traditional banking services offered through Crescent Bank & Trust Company (the
"Bank"). The mortgage banking segment provides mortgage loan origination and
servicing offered through the Bank and Crescent Mortgage Services, Inc. ("CMS").

The Company evaluates performances based on profit and loss from operations
before income taxes not including nonrecurring gains and losses. The Company
accounts for intersegment revenues and expenses as if the revenue/expenses
transactions were to third parties, that is, at current market prices.

The Company's reportable segments are strategic business units that each offers
different products and services. They are managed separately because each
segment has different types and levels of credit and interest rate risk.

<TABLE>
<CAPTION>
                                    For the three Months Ended March 31, 2002

                                    Commercial      Mortgage          All
                                    Banking         Banking           Other            Total
                                    -------------------------------------------------------------
<S>                                 <C>             <C>            <C>               <C>
Interest Income                     $  2,705,021    $  2,898,496           -         $  5,603,517
Interest Expense                    $  1,027,229    $  1,947,634           -         $  2,974,863
                                    -------------------------------------------------------------
Net Interest income                 $  1,677,792    $    950,862           -         $  2,628,654

Provision for loan loss             $    170,000               -           -         $    170,000

Other Revenue from external
    customers                       $    311,400    $  5,497,877           -         $  5,809,277
Other expenses                      $  1,259,909    $  3,285,901   $ 194,781         $  4,740,591

Segment pre-tax earnings/(loss)     $    559,283    $  3,162,838   $(194,781)        $  3,527,340

Segment assets                      $174,147,974    $227,767,991           -         $401,915,965
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                                    For the three Months Ended March 31, 2001

                                    Commercial         Mortgage       All
                                    Banking            Banking        Other          Total
                                    --------------------------------------------
<S>                                 <C>                <C>            <C>            <C>
Interest Income                     $  2,616,882       $  2,089,940           -      $  4,706,822
Interest Expense                    $  1,353,257       $  1,988,479           -      $  3,341,736
                                    -------------------------------------------------------------
Net Interest income                 $  1,263,625       $    101,461           -      $  1,365,086

Provision for loan loss             $    115,000                  -           -      $    115,000

Other Revenue from external
    customers                       $    298,832       $  3,165,789           -      $  3,464,621
Other expenses                      $  1,114,147       $  2,003,993   $ 206,787      $  3,324,927
Segment pre-tax earnings/(loss)     $    333,310       $  1,263,257   $(206,787)     $  1,389,780

Segment assets                      $140,860,760       $178,039,734           -      $318,900,494
</TABLE>

<PAGE>

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

General

        For purposes of the following discussion, the words "we," "us" and "our"
refer to the combined entities of Crescent Banking Company and its wholly owned
subsidiaries, Crescent Bank & Trust Company and Crescent Mortgage Services, Inc.
The words "Crescent," "Crescent Bank" and "CMS" refer to the individual entities
of Crescent Banking Company, Crescent Bank & Trust Company and Crescent Mortgage
Services, Inc., respectively.

Results of Operations

     General Discussion of Our Results

        A principal source of our revenue comes from net interest income, which
        is the difference between:

        .  income we receive on our interest-earning assets, such as investment
           securities and loans; and

        .  our interest-bearing sources of funds, such as deposits and
           borrowings.

The level of net interest income is determined primarily by the average
balances, or volume, of interest-earning assets and the various rate spreads
between the interest-earning assets and our funding sources, primarily through
Crescent Bank. Changes in our net interest income from period to period result
from, among other things:

        .  increases or decreases in the volumes of interest-earning assets and
           interest-bearing liabilities;

        .  increases or decreases in the average rates earned and paid on those
           assets and liabilities;

        .  our ability to manage the interest-earning asset portfolio, which
           includes loans; and

        .  the availability and costs of particular sources of funds, such as
           non-interest bearing deposits, and our ability to "match" our assets
           and liabilities.

        Our other principal source of revenue is the fees and income we earn
from the origination, holding, servicing and sale of residential first mortgage
loans. Revenues from our mortgage banking operations vary significantly due to,
among other things:

        .  changes in the economy, generally, but particularly changes in
           interest rates on mortgage loans;

        .  decreases in interest rates which generally increase our mortgage
           banking revenues as a result of increased volumes of mortgage loans;

        .  increases in interest rates which generally result in lower mortgage
           banking revenues due to decreased volumes of mortgage loans; and

        .  the spread we earn on the sale of mortgage servicing rights which
           fluctuates with the level of interest rates and anticipated changes
           in rates.

        We experienced significant changes in interest rates, that caused
corresponding significant changes in our mortgage production and revenues,
during the first three months of 2002 and 2001, as described below under "--
Results of Operations--Results of Our Mortgage Banking Business."

<PAGE>

         Interest Income
         ---------------

         We had total interest income of $5.6 million for the three months ended
March 31, 2002, compared to $4.7 million for the three months ended March 31,
2001. This 19% increase in interest income is attributable to an increase in
interest-earning assets, which is the result of growth in our commercial bank
loan portfolio, as well as a higher volume of mortgage loan production.

         Interest Expense

         Our total interest expense for the three months ended March 31, 2002
amounted to $3.0 million, compared to $3.3 million for the three months ended
March 31, 2001. This 9% decrease resulted from the declining rate environment
that occurred during 2001 partially offset by the growth of our deposits as well
as a higher level of other borrowings used to support our growth and mortgage
banking business, as described under "--Results of Operations--Results of Our
Mortgage Banking Business." In the first three-month periods of 2002 and 2001,
interest expense accounted for 38% and 49% of total expenses. The decrease in
the percentage of interest expense resulted from the growth of other operating
expenses, principally incurred to support our mortgage banking growth.

         Net Interest Income

         Our net interest income for the first three months of 2002 was $2.6
million. The key performance measure for net interest income is the "net
interest margin," which is equal to net interest income divided by average
interest-earning assets. Our net interest margin during the first three months
of 2002 was 2.73%. Interest spread, which represents the difference between our
average yields on interest-earning assets and our average rates paid on
interest-bearing liabilities, was 2.29%. Net interest income, net interest
margin and interest spread for the first three months of 2001 were $1.4 million,
3.12%, and 2.64%, respectively. The increase in net interest income resulted
primarily from the growth of earning assets. The decrease in net interest margin
and interest spread is indicative of our balance sheet being asset sensitive in
the short term during a period when rates were decreasing. See "Item 3)
Quantitative and Qualitative Disclosures About Our Market Risk."

         Loan Loss Provisions
         --------------------

         We made a provision to the allowance for loan losses of $170,000 in the
first three months of 2002. During the first three months of 2002, Crescent Bank
charged-off, net of recoveries, $4,062 of loans to the allowance for loan
losses. In the first three months of 2001, we made provisions to the allowance
for loan losses in the amount of $115,000 and Crescent Bank charged-off, net of
recoveries, $12,406 of loans to the allowance for loan losses. Crescent Bank's
determination of the allowance for loan losses is affected by various factors,
including changes in loan concentrations, trends in non performing loans, the
comparison of the allowance to the historical net charge off experience and
economic conditions and risks that affect Crescent Bank. The amount of the
provision for loan losses increased, in part, between the provisions for the
three month period ended March 31, 2002 and the provisions for the three month
period ended March 31, 2001 because our growth in our commercial banking loan
portfolio in the first three months of 2002 of $11.6 million was stronger than
our commercial banking loan growth in the first three months of 2001 of $3.6
million. As a result of the increase in commercial banking loan growth, we
adjusted our allowance for loan losses to account for our historical experience
with various borrowers.

         The allowance for loan losses as a percentage of total non-mortgage
loans was 1.30% at March 31, 2002, 1.29% at December 31, 2001 and 1.42% at March
31, 2001. From December 31, 2001 to March 31, 2002, however, net charge-offs to
non mortgage loans outstanding decreased from 0.27% at December 31, 2001 to
0.003% at March, 2002. The trend in allowance for loan losses as a percentage of
total loans may be affected by the trend in the ratios of the number of
potential problem loans to total non-mortgage loans, which represented 2.06% as
of March 31, 2002 and 1.80% as of March 31, 2001.

         Net charge-offs as a percentage of average commercial outstanding loans
was .0003% at March 31, 2002, 0.27% for the twelve months ending December 31,
2001 and 0.10% at March 31, 2001. While net charge-offs to average commercial
banking loans trended downward in the first quarter of 2002, commercial banking
loans past due 90 days or more was 1.66% at March 31, 2002, 0.68% at December
31, 2001 and 0.49% at March 31, 2001. The trend reflected in the increase in
commercial banking loans past 90 days or more is also apparent in the potential

<PAGE>

problem loan to total loan ratio of 2.06% at March 31, 2002 compared to 1.80% at
March 31, 2001. The increase in commercial banking loans past due 90 days or
more and potential problem loans relates to one borrower with a relationship of
$959,274. The Bank is not anticipating a loss with this relationship.

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

         Our other income was $5.8 million in the first three months of 2002
compared to $3.5 million in the first three months of 2001. The increase in
other income was related to the increase of gains on the sale of mortgage
servicing rights we realized in 2002, as described below under "--Results of
Operations--Results of Our Mortgage Banking Business."

         Other Operating Expenses
         ------------------------

         Other operating expenses increased to $4.7 million in the first three
months of 2002 from $3.3 million in the first three months of 2001. The increase
in other operating expenses was related to the increase in volume of our
mortgage operation, as described below under "--Results of Operations--Results
of Our Mortgage Banking Business."

         Net Income
         ----------

         We had net income of $2.2 million for the three months ending March 31,
2002, compared to net income of $908,014 for the three months ending March 31,
2001. The increases in net income primarily resulted from the increase in
mortgage production and resulting gains on the sale of mortgage servicing
rights. See below under "Results of Operations--Results of Our Mortgage Banking
Business." Income tax as a percentage of pretax net income was 38% and 35% for
the first three months of 2002 and 2001, respectively.

     Results of Our Commercial Banking Business

         Interest Income
         ---------------

         We had interest income of $2.7 million for the three months ended March
31, 2002 compared to $2.6 million for the three months ended March 31, 2001.
This increase in interest income is attributable to the increase in
interest-earning assets resulting from the growth of our commercial bank loan
portfolio, partially offset by lower interest rates.

         Interest Expense
         ----------------

         Our interest expense related to the commercial banking business for the
three months ended March 31, 2002 amounted to $1.0 million compared to $1.4
million for the three months ended March 31, 2001. This decrease was result of
lower interest rates partially offset by a 6% increase in our deposits during
the first three months of 2002. In the first three months 2002 and 2001,
interest expense accounted for 42% and 52% of our total commercial banking
business expenses, respectively.

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

         Our net interest income for the commercial banking segment for the
first three months of 2002 was $1.7 million. The related net interest margin
during the first three months of 2002 was 2.89%, while interest spread was
2.38%. Net interest income, net interest margin and interest spread for
commercial banking for the first three months of 2001 were $1.3 million, 3.12%,
and 0.06%, respectively. The increase in net interest income is related to the
higher volume of commercial banking loans. The decrease in each of net interest
margin and interest spread was due partially to the declining interest rate
environment in 2001.

         Other Income

Our other income related to the commercial banking segment was $311,400 in the
first three months of 2002 compared to $298,832 in the first three months of
2001. The increase in other income for the three-month

<PAGE>

period 2002 was primarily due to an increase in fee income from deposit
accounts.

         Other Operating Expenses
         ------------------------

         Other operating expenses related to our commercial banking business
increased to $1.3 million in the first three months of 2002 from $1.1 million in
the first three months of 2001. This increase in other operating expenses was
caused by an increase in staff and overhead expenses related to Crescent Bank's
commercial banking growth in its various markets.

         Loan origination fees and certain direct costs of loans are accounted
for in accordance with SFAS No. 91, "Accounting for Nonrefundable Fees and Costs
Associated with Originating or Acquiring Loans and Indirect Costs of Leases."
The costs are netted against the fees and recognized in income over the life of
the loans or when the loans are sold. The costs that are netted against the fees
are reported as a reduction of other operating expenses in the statement of
income. At March 31, 2002, the amount of commercial banking costs netted against
commercial banking loan origination fees totaled $505,557, as compared to
$329,671 at March 31, 2001. This increase in loan fees was the result of the
growth in the Bank's commercial banking loan portfolio.

         Pretax Net Income
         -----------------

         Our commercial banking business had pre-tax net income of $559,283
million for the three months ending March 31, 2002, compared to pre-tax income
of $333,310 for the three months ending March 31, 2001. Pre-tax income has been
favorably affected by the higher volume of commercial banking loans, partially
offset by the declining rate environment in 2001.

Results of Our Mortgage Banking Business

         We experienced significant changes in mortgage loan production in 2001
and the first three months of 2002 that were directly related to changes in
interest rates. During 2001, the Federal Reserve Open Market Committee reduced
interest rates on eleven occasions for a total reduction of 475 basis points. We
closed $856.7 million of mortgage loans during the first three months of 2002
compared to $672.1 million during the first three months of 2001.

         Interest Income
         ---------------

         We had mortgage banking interest income of $2.9 million for the three
months ended March 31, 2002 compared to $2.1 million for the three months ended
March 31, 2001. This 38% increase in interest income is attributable to the
higher volume of mortgage production.

         Interest Expense
         ----------------

         We had mortgage banking interest expense of $1.9 million for the three
months ended March 31, 2002 and $2.0 million for the three months ended March
31, 2001. The decrease resulted from lower interest rates, partially offset by a
higher level of our borrowings. All of our mortgage production through CMS is
funded with a warehouse line of credit; therefore, the higher volume in the
Northeast and Midwest mortgage operations of CMS resulted in a higher average
balance of other borrowings. In the first quarter of 2002 and 2001, mortgage
banking interest expense accounted for 35% and 50% of total expenses,
respectively. The decrease in the percentage of interest expense resulted from
the growth of other operating expenses, principally incurred to support our
mortgage banking growth.

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

         Our net interest income from our mortgage banking operations for the
first three months of 2002 was $950,862. The net interest margin during the
first three months of 2002 was 1.15%. The interest spread for the same period
was 0.75%. Comparatively, interest income, net interest margin and interest
spread from mortgage banking for the first three months of 2001 were $101,461,
0.06%, and 0.12%, respectively. The increase in net interest income is the
result of our higher volume of mortgage loan production. The improvement in the
net interest

<PAGE>

margin and interest spread was a result of the improved spread between the
long-term interest rates and the short-term interest rates in the first three
months of 2002.

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

         Other income from our mortgage banking business was $5.5 million in the
first three months of 2002 compared to $3.2 million in the first three months of
2001. The increase in other income was related to the increase of gains on the
sale of mortgage servicing rights. During the first three months of 2002, we
sold servicing rights with respect to $638.3 million of mortgage loans for a
gain of $4.6 million, or a spread on the sale of servicing of 0.72%. This
compares to the first three months of 2001 in which we sold servicing rights
with respect to $610.9 million of mortgage loans for a gain of $2.5 million, or
a spread on the sale of servicing of 0.41%. The increase in the sale of mortgage
rights resulted primarily from our increased mortgage loan production. We
currently plan to sell a portion of the servicing rights retained during 2002,
although there can be no assurance as to the volume of the Crescent Bank's loan
acquisition or that a premium will be recognized on the sales.

         Origination fee income is generated from our sale of mortgage loans to
securities brokers who are gestation lenders pursuant to a repurchase agreement.
Under the agreement, we sell mortgage loans and simultaneously assign the
related forward sale commitments to a securities broker. We continue to receive
fee income from the securities broker until the loan is delivered into the
forward commitment. Alternatively, we sell loans on an individual basis in the
cash market and subsequently pair off the forward sale commitment. In this case,
we do not receive any gestation fee income, which is income derived from the
spread between the fee we received on the mortgage loan and the fee charged by
the security broker during the holding or "gestation" period, prior to our sale
of the loan.

         Other Operating Expenses
         ------------------------

         Other mortgage banking business operating expenses increased to $3.3
million in the first three months of 2002 from $2.0 million in the first three
months of 2001. This increase in other operating expenses was related to the
increase in volume of the mortgage operation, which required increases in
salaries and benefits and third party mortgage outsourcing expense. Our salaries
and benefits totaled $3.2 million for the first three months of 2002 compared to
$2.2 million in the first three months of 2001.

         Loan origination fees and certain direct costs of loans are accounted
for in accordance with SFAS No. 91, "Accounting for Nonrefundable Fees and Costs
Associated with Originating or Acquiring Loans and Indirect Costs of Leases."
The costs are netted against the fees and recognized in income over the life of
the loans or when the loans are sold. The costs that are netted against the fees
are reported as a reduction of other operating expenses in the statement of
income. At March 31, 2002, the amount of mortgage banking costs netted against
mortgage banking loan origination fees totaled $1,815,700, as compared to
$1,495,522 at March 31, 2001. This increase in loan fees was the result of the
growth in CMS' mortgage loan origination.

         Pretax Net Income
         -----------------

         The mortgage banking segment had pre-tax net income of $3.2 million for
the three months ending March 31, 2002, compared to a pre-tax income of $1.3
million for the three months ending March 31, 2001. The favorable increase in
net income was primarily the result of an increase in mortgage production and
the resulting gain on the sale of mortgage servicing rights.

Financial Condition

     General Discussion of Our Financial Condition

         Total Assets
         ------------

During the first three months of 2002, our total assets decreased 18% from
$490.9 million as of December 31, 2001 to $401.9 million as of March 31, 2002.
This decrease in total assets in the first three months of 2002 was primarily
the result of a 34% decrease in mortgage loans held for resale, or a decrease of
$105.9 million. The

<PAGE>

decrease in mortgage loans held for sale is the result of the decline in
mortgage production for the month of December 2001 of $419.8 compared to $296.2
million for the month of March 2002. Our decrease in total assets in the first
three months of 2002 corresponded with a $110.8 million, or 48%, increase in
other borrowings. At March 31, 2001, we had total assets of $318.9 million.

         Interest-Earning Assets
         -----------------------

         Our interest-earning assets are comprised of:

         .  commercial banking loans;

         .  mortgage loans held for sale;

         .  investment securities;

         .  interest-bearing balances in other banks; and

         .  temporary investments.

         At March 31, 2002, interest-earning assets totaled $367.4 million and
represented 91% of total assets. This represents a 20% decrease from December
31, 2001 when earning assets totaled $458.8 million, or 93%, of total assets.
The decrease in earning assets resulted primarily from the $105.9 million
decrease of residential mortgage loans held for sale. The absolute volume of
both our commercial banking loans and our residential mortgage loans held for
sale, as well as the volume of each as a percentage of total interest-earning
assets, serve as important determinants of our net interest margin. For detail
with respect to each of our business segments, see "Financial
Condition--Financial Condition of Our Commercial Banking Business" and
"Financial Condition--Financial Condition of Our Mortgage Banking Business"
below. At March 31, 2001, our interest-earning assets totaled $293.3 million and
represented 92% of our total assets.

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

         Our assessment of the risk associated with extending credit and our
evaluation of the quality of our loan portfolio is reflected in the allowance
for loan losses. We maintain an allowance for our commercial banking loan
portfolio only, as detailed below under "Financial Condition--Financial
Condition of Our Commercial Banking Business." We have no allowance for the
portfolio of mortgage loans held for sale.

         Fixed Assets
         ------------

         At March 31, 2002, our fixed assets, consisting of land, building and
improvements, and furniture and equipment, totaled $6.6 million, compared to
fixed assets of $6.3 million at December 31, 2001. At March 31, 2001, we had
$6.2 million of fixed assets.

         In 1999, Crescent Bank provided a supplemental retirement plan to its
Banking officers funded with life insurance. In the first quarter 2000, we added
our directors to the supplemental retirement plan. At March 31, 2002, the total
cash value of the life insurance was $4.6 million.

         At March 31, 2002, our accounts receivable-broker and escrow agents
decreased to $5.4 million from $6.0 million at December 31, 2001. This account
receivable relates to our flow mortgage servicing rights sales and, therefore,
the decrease in the accounts receivable is directly related to the decrease from
December 31, 2001 to March 31, 2002 in our mortgage production and related sale
of servicing rights.

     Financial Condition of Our Commercial Banking Business

         Total Commercial Banking Loans
         ------------------------------

         During the first three months of 2002, our average commercial banking
loans were $130.1 million. These

<PAGE>

loans constituted 33% of our average consolidated earning assets, and 30% of our
average consolidated total assets. For the three month period ended March 31,
2001, we had average commercial banking loans of $94.8 million, or 35%, of our
average consolidated earning assets, and 32% of our average consolidated total
assets. For the twelve month period ended December 31, 2001, we had average
commercial banking loans of $104.3 million, or 33%, of our average consolidated
earning assets, and 30% of our average consolidated total assets. The 25%
increase in average commercial banking loans experienced by Crescent Bank during
the three month period ending March 31, 2002 was the result of higher loan
demand in its service area, as well as the expansion of Crescent Bank's
operations in each of Bartow, Cherokee, and Forsyth Counties, Georgia. Our
commercial banking loans are expected to produce higher yields than securities
and other interest-earning assets.

         Loan Loss Allowance
         -------------------

         The allowance for loan losses represents management's assessment of the
risk associated with extending credit and its evaluation of the quality of the
loan portfolio. Crescent Bank maintains its allowance for loan losses at a level
that it believes is adequate to absorb risk of loss in the loan portfolio. In
determining the appropriate level of the allowance for loan losses, management
applies a methodology that has both a specific component and a general
component. Under the specific component of the methodology, each loan is graded:

         (1)    at the time of the loan's origination;

         (2)    at each of Crescent Bank's loan review meetings; and

         (3)    at any point in time when payments due under the loan are
delinquent.

         Crescent Bank's grading system is similar to the grading systems used
by bank regulators in analyzing loans. To grade a loan, Crescent Bank considers:

         (1)    the value of collateral;

         (2)    the relative risk of the loan, based upon the financial strength
and creditworthiness of the borrower;

         (3)    prevailing and forecasted economic conditions; and

         (4)    Crescent Bank's historical experience with similar loans.

         The actual grading is performed by loan officers and reviewed and
approved by the loan committee. After grading each of the loans, management
reviews the overall grades assigned to the portfolio as a whole and attempts to
identify, and determine the effect of, potential problem loans.

         The general component of the methodology involves an analysis of actual
loan loss experience, a comparison of the actual loss experience of banks in
Crescent Bank's peer group, and assumptions about the economy generally.
Management also considers the regulatory guidance provided by the Federal
Financial Institution Examination Council's Interagency Policy Statement on
Allowance for Loan Losses Methodologies, as well as other widely accepted
guidance for banks and savings institutions generally.

         Crescent Bank's management applies both the specific and general
components of the methodology, together with regulatory guidance, to determine
an appropriate level for the allowance for loan losses. Crescent Bank also hires
independent loan review consultants on a semi-annual basis to review the quality
of the loan portfolio and the adequacy of the allowance for loan losses. The
provision for loan losses during a particular period is a charge to earnings in
that period in order to maintain the allowance for loan losses at a level that
is estimated to be adequate to cover the risk of loss in the loan portfolio
based upon the methodology.

         Crescent Bank's allowance for loan losses is also subject to regulatory
examinations and determinations as to adequacy, which may take into account such
factors as the methodology used to calculate the allowance for loan losses and
the size of the allowance for loan losses compared to a group of peer banks
identified by the regulators.

<PAGE>

During their routine examinations of banks, the Federal Deposit Insurance
Corporation and the Georgia Department of Banking and Finance may require a bank
to make additional provisions to its allowance for loan losses when, in the
opinion of the regulators, their credit evaluations and allowance for loan loss
methodology differ materially from Crescent Bank's.

         While it is Crescent Bank's policy to charge-off in the current period
loans for which a loss is considered probable, there are additional risks of
future losses, which cannot be quantified precisely or attributed to particular
loans or classes of loans. Because these risks include the state of the economy,
management's judgment as to the adequacy of the allowance is necessarily
approximate and imprecise.

         The allowance for loan losses totaled $1.8 million, or 1.30% of total
commercial banking loans, at March 31, 2002, $1.4 million, or 1.42% of total
commercial banking loans, at March 31, 2001, and $1.6 million, or 1.29% of total
loans, at December 31, 2001. The increase in the allowance for loan losses
during the first three months of 2002 was primarily the result of the provision
for loan loss of $170,000. The increase in the allowance for loan losses
corresponds to the $11.6 million increase we experienced in commercial banking
loans in the first three months of 2002. The determination of the reserve level
rests upon our judgment about factors affecting loan quality, assumptions about
the economy and historical experience. Our judgment as to the adequacy of the
allowance for loan losses is evaluated periodically based on a review of all
significant loans, with a particular focus on loans that are past due and other
loans that we believe require attention. We believed that the allowance at March
31, 2002 was adequate at that time to cover risk of losses in our commercial
banking loan portfolio; however, our judgment is based upon a number of
assumptions about future events which we believe to be reasonable but which may
or may not be realized. There is no assurance that charge-offs in future periods
will not exceed the allowance for loan losses or that additional increases in
the allowance for loan losswill not be required. As a result of a weaker economy
generally, and the slowdown in the economy and uncertainties created by the
September 11, 2001 terrorist attacks and the war against terrorism, additions to
the allowances and charge-offs may become necessary.

         Crescent Bank's policy is to discontinue the accrual of interest on
loans which are 90 days past due unless they are well secured and in the process
of collection. We recognize interest on these non-accrual loans only when we
receive the interest. As of March 31, 2002, Crescent Bank had $2.6 million of
commercial banking loans contractually past due more than 90 days, $32,949 of
commercial banking loans accounted for on a non-accrual basis, and no commercial
banking loans considered to be troubled debt restructurings. As of March 31,
2001 and December 31, 2001, Crescent Bank had $337,427 and $509,526 of
commercial banking loans contractually past due more than 90 days, respectively.
One borrower with a relationship of $959,274 attributed to increase in loans
past due 90 days or more loans.

         As of March 31, 2001, Crescent Bank had $14,142 of commercial banking
loans accounted for on a non-accrual basis, and no commercial banking loans
considered to be troubled debt restructurings. As of December 31, 2001, Crescent
Bank had no commercial banking loans accounted for on a non-accrual basis, and
no commercial banking loans considered to be troubled debt restructurings

         Total Non-Performing Commercial Banking Loans
         ---------------------------------------------

         We define non-performing commercial banking loans as non-accrual and
renegotiated commercial banking loans. Our non-performing commercial banking
loans at March 31, 2002 amounted to $32,949 compared to $14,142 at March 31,
2001. If we add real estate acquired by foreclosure and held for sale of $26,337
to our non-performing commercial banking loans, it results in total
non-performing commercial assets of $59,286 at March 31, 2002. This compares to
total non-performing commercial assets of $126,786 at March 31, 2001 and
$332,743 at December 31, 2001. Crescent Bank is currently holding the foreclosed
properties for sale.

<PAGE>

         The chart below represents Crescent Bank's commercial banking assets
that we believe warrant special attention due to the potential for loss, in
addition to the non-performing commercial banking loans and foreclosed
properties related to the commercial banking loans. Potential problem loans
represent commercial banking loans that are presently performing, but where
management has doubts concerning the ability of the respective borrowers to meet
contractual repayment terms.

<TABLE>
<CAPTION>

                                                           March 31,       March 31,     December 31,
                                                              2002            2001            2001
                                                              ----            ----            ----
<S>                                                   <C>                <C>              <C>
Non-performing commercial banking loans (1)            $    32,949        $   14,142      $     -----
Foreclosed properties related to
  commercial banking loans                                  26,337           112,644          332,743
                                                       -----------        ----------      -----------
Total non-performing commercial
assets                                                      59,286           126,786          332,743
                                                       ===========        ==========      ===========
Commercial banking loans 90 days or more
  past due on accrual status                           $ 2,621,526        $  337,427      $   509,526

Potential problem commercial banking loans (2)         $ 2,790,492        $1,739,654      $ 1,494,302

Potential problem commercial
  loans/total commercial banking loans                        2.06%             1.80%           1.21%

Non-performing commercial
  assets/total commercial banking loans and
  foreclosed properties                                       0.04%             0.13%           0.27%

Non-performing commercial assets
  and commercial banking loans 90 days or more
  past due on accrual status/total commercial
  banking loans and foreclosed properties                     1.66%             0.49%           0.68%
</TABLE>
___________
(1)  Defined as non-accrual commercial banking loans and renegotiated commercial
     banking loans.
(2)  Loans identified by management as potential problem loans (classified and
     criticized loans), but that are still accounted for on an accrual basis.

         Total Investment Securities
         ---------------------------

         Crescent Bank invests in U.S. Government and government agency
obligations, corporate securities, federal funds sold, and interest-bearing
deposits with other banks. Crescent Bank's investments are managed in relation
to loan demand and deposit growth, and are generally used to provide for the
investment of funds not needed to make loans, while providing liquidity to fund
increases in loan demand or to offset fluctuations in deposits. Investment
securities and interest-bearing deposits with other banks totaled $22.3 million
at March 31, 2002, compared to $19.1 million at March 31, 2001 and $21.5 million
at December 31, 2001. Unrealized gains/(losses) on securities amounted to
($553,243) at March 31, 2002, and $43,149 and ($147,308) at March 31, 2001 and
December 31, 2001, respectively. We have 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. At March 31, 2002, Crescent Bank had federal
funds sold of $2.3 million, compared to $11.6 million at March 31, 2001 and
$179,000 at December 31, 2001.

         Total Commercial Deposits
         -------------------------

         Crescent Bank's commercial deposits totaled $234.6 million, $201.6
million and $222.0 million at March 31, 2002, March 31, 2001 and December 31,
2001, respectively, representing an increase of 16% over the three-
month period ended March 31, 2002. Commercial deposits averaged $231.7
million during the three-month period ended March 31, 2002, $181.5 million
during the three-month period ended March 31, 2001 and $177.3 million

<PAGE>

during the twelve-month period ended December 31, 2001. Interest-bearing
deposits represented 77% of total deposits at March 31, 2002, compared to 77% at
March 31, 2001 and 79% at December 31, 2001. Certificates of deposit comprised
69% of total interest-bearing deposits for March 31, 2002, compared to 75% at
March 31, 2001 and 72% at December 31, 2001. The composition of these deposits
is indicative of the interest rate-conscious market in which Crescent Bank
operates and increases in interest rates, generally. We cannot provide any
assurance that Crescent Bank can maintain or increase its market share of
deposits in its highly competitive service area. Crescent Bank had no brokered
deposits as of March 31, 2002 compared to $6.8 million and $496,000 million at
March 31, 2001 and December 31, 2001, respectively.

     Financial Condition of Our Mortgage Banking Business

         Average Mortgage Loans Held for Sale

         During the first three months of 2002, average mortgage loans held for
sale amounted to $237.2 million and constituted 61% of average consolidated
earning assets, and 55% of average consolidated total assets. Average mortgage
loans held for sale during the first three months of 2001 of $158.6 million
constituted 58% of average consolidated interest-earning assets and 53% of
average consolidated total assets. Average mortgage loans held for sale during
the twelve months ended December 31, 2001 of $186.7 million constituted 58% of
average consolidated interest-earning assets and 53% of average consolidated
total assets. Our residential mortgage loans held for sale generally generate
net interest income as the rates of interest paid to us on the longer term
mortgage loans are generally greater than those rates of interest that we pay on
our shorter term warehouse line of credit, brokered deposits, and core deposits.

         We carry our mortgage loans held for sale at the lower of aggregate
cost or market price and therefore we do not maintain a reserve for mortgage
loans. We do have default and foreclosure risk during the short-term holding
period of the mortgages held for sale, which is inherent to the residential
mortgage industry. We are at risk for mortgage loan defaults from the time we
fund a loan until the time that loan is sold or securitized into a
mortgage-backed security, which is generally 15 days after funding. When we sell
a loan, we typically make representations and warranties to the purchasers and
insurers that we have properly originated and serviced the loans under state
laws, investor guidelines and program eligibility standards. We rely on our
underwriting department to ensure compliance with individual investor standards
prior to the sale of loans, and we rely on our quality control department to
randomly test loans that we have sold. Purchasers of our loans typically conduct
their own review of the loans, and we may be liable for unpaid principal and
interest on defaulted loans if we have breached our representations and
warranties.

         In some instances, we may even be required to repurchase the loan or
indemnify the purchaser of the loan for those loans in which we breached our
representations and warranties. We regularly make representations and warranties
to purchasers of our mortgage loans that, if breached, would require us to
indemnify the purchaser for losses or to repurchase the loans, and we consider
this practice to be customary and routine. At March 31, 2002, we had $2.5
million of mortgage loans for which we had potential indemnification or
repurchase obligations resulting from breaches or our representations and
warranties. These loans represent approximately 0.29% percent of our total loan
production and, of these loans, $1.2 million were past due 90 days or more. In
the event that the purchaser of these loans experiences any losses with respect
to the loans, we would be required to indemnify the purchaser for its losses or
to repurchase the loans from the purchaser. Although we regularly face potential
indemnification and repurchase obligations with respect to mortgage loans that
we have sold, we have not historically incurred any indemnification losses or
been required to repurchase any loans. As a result, we do not maintain a reserve
for this purpose.

         Our mortgage banking segment acquires residential mortgage loans from
small retail-oriented originators through CMS and the mortgage division of
Crescent Bank. Crescent Bank acquires conventional loans in the Southeast United
States while CMS acquires conventional and FHA/VA loans in the Northeast,
Midatlantic and Midwest United States and FHA/VA loans in the Southeast United
States.

         Crescent Bank acquires residential mortgage loans from approximately
514 small retail-oriented originators in the Southeast United States through
various funding sources, including Crescent Bank's regular funding sources, a
$55 million warehouse line of credit from the Federal Home Loan Bank of Atlanta
and a $45 million repurchase agreement with UBS/Paine Webber. CMS acquires
residential mortgage loans from approximately 591small retail-oriented
originators in the Southeast, Northeast, Midatlantic and Midwest United States
through various funding

<PAGE>

sources, including a $250 million line of credit from UBS/Paine Webber, a $50
million line of credit from Colonial Bank, and a $75 million repurchase
agreement from UBS/Paine Webber. Under the repurchase agreements, we sell our
mortgage loans and simultaneously assign the related forward sale commitments to
UBS/Paine Webber. The majority of our mortgage loans are currently being resold
in the secondary market to Freddie Mac, Fannie Mae and private investors after
being "warehoused" for 10 to 30 days. We purchase loans that we believe will
meet secondary market criteria, such as loans providing for amount limitations
and loan-to-value ratios that would qualify for resales to Freddie Mac, Fannie
Mae and Ginnie Mae. To the extent that we retain the servicing rights on the
mortgage loans that we resell, we collect annual servicing fees while the loan
is outstanding. We sell a portion of our retained servicing rights in bulk form
or on a monthly flow basis. The annual servicing fees and gains on the sale of
servicing rights is an integral part of our mortgage banking business and its
contribution to net income. We currently pay a third party subcontractor to
perform servicing functions with respect to loans we sell, but where we retain
the servicing.

         Total Mortgage Loan Acquisitions and Resales
         --------------------------------------------

         During the first three months of 2002, we acquired $856.7 million of
mortgage loans, and we sold $962.6 million of these mortgage loans in the
secondary market. At March 31, 2002, we carried $207.6 million of mortgage loans
as mortgage loans held for sale on our balance sheet pending sale of such loans.
During the first three months of 2001, we acquired $672.1 million of mortgage
loans while we sold in the secondary market $614.9 million of mortgage loans. At
March 31, 2001, we carried $166 million of mortgage loans as mortgage loans held
for sale on our balance sheet pending sale of such loans.

         Servicing Rights
         ----------------

         At March 31, 2002, we carried $3.7 million of mortgage servicing rights
on our balance sheet, compared to $3.4 million at March 31, 2001 and $3.1
million at December 31, 2001. We are amortizing the mortgage servicing rights
over an accelerated period. We held servicing rights with respect to loans with
unpaid principal balances totaling $840.9 million at March 31, 2002, $351.6
million at March 31, 2001 and $693.8 million at December 31, 2001. During the
first three months of 2002, we sold servicing rights with respect to $638.3
million of mortgage loans carried on our balance sheet at a cost of $2.9 million
for a gain of $4.6 million. During the first three months of 2001, we sold
servicing rights with respect to $610.9 million of mortgage loans carried on our
balance sheet at a cost of $7.7 million for a gain of $2.5 million.

         The market value of our servicing portfolio is contingent upon many
factors, including, without limitation, the interest rate environment, the
estimated life of the servicing portfolio, the loan quality of the servicing
portfolio and the coupon rate of the loan portfolio. We cannot provide assurance
that we will continue to experience a market value of our servicing portfolio in
excess of the cost to acquire the servicing rights, nor can we provide assurance
as to the expected life of our servicing portfolio, or as to the timing or
amount of any sales of our retained servicing rights.

         Other Borrowings
         ----------------

         Crescent Bank's other borrowings consist of borrowings from the Federal
Home Loan Bank of Atlanta, which is priced at the Federal Home Loan Bank of
Atlanta daily rate plus 25 basis points. At March 31, 2002, this rate was 2.44%.
All mortgage production generated by CMS is funded through warehouse lines of
credit from Colonial Bank, priced at one-month LIBOR plus 115 to 155 basis
points with a floor of 250 basis points, and UBS/Paine Webber, priced at
one-month LIBOR plus 100 to 130 basis points. At March 31, 2002, these rates
were 3.75% and 3.14%, respectively.

Capital and Liquidity

         Our capital adequacy is measured by risk-based and leverage capital
guidelines. Developed by regulatory authorities to establish capital
requirements, the risk-based capital guidelines assign weighted levels of risk
to various asset categories. Among other things, these guidelines currently
require us to maintain a minimum ratio of 8.0% of total capital to risk-adjusted
assets. Under the guidelines, one-half of our required capital must consist of
Tier 1 Capital, which would include such things as our tangible common
shareholders' equity and any qualifying

<PAGE>

perpetual preferred stock. The leverage guidelines provide for a minimum ratio
of Tier 1 Capital to total assets of 3.0% if we meet certain requirements,
including having the highest regulatory rating, and cushion the ratio by an
additional 1.0% to 2.0% otherwise. The guidelines also specify that bank holding
companies that are experiencing internal growth or making acquisitions will be
expected to maintain strong capital positions substantially above the minimum
supervisory levels without significant reliance on intangible assets.
Furthermore, the guidelines indicate that the Federal Reserve will continue to
consider a "Tangible Tier 1 Leverage Ratio," calculated without the inclusion of
intangible assets, in evaluating proposals for expansion or new activity. The
Federal Reserve has not advised us, and the FDIC has not advised Crescent Bank,
of any specific minimum leverage ratio or Tangible Tier 1 Leverage Ratio that we
are required to meet. Crescent Bank has agreed with the Georgia Department to
maintain a leverage ratio of 8.0%.

         At March 31, 2002, Crescent Bank's leverage ratio was 7.03%. To address
the leverage ratio shortcoming, we have enhanced our dividend reinvestment plan
and obtained a 46% participation rate, and are pursuing alternative means of
raising capital. On November 9, 2001, we completed a $3.5 million offering and
sale of trust preferred securities. We also commenced a public offering of $7.5
million of its common stock on May 8, 2002. We are offering 555,555 shares of
our common stock at a price of $13.50 per share. The offering is schedule to
expire on July 7, 2002, unless we decide to extend it.

         At March 31, 2002, our total consolidated shareholders' equity was
$24.8 million, or 6.18% of total consolidated assets, compared to $17.4 million,
or 5.45% of total consolidated assets at March 31, 2001, and $22.8 million, or
4.65% of total consolidated assets, at December 31, 2001. The increase in
shareholders' equity to total asset ratio in the first three months of 2002 was
the result of decrease in total consolidated assets.

         At March 31, 2002, our ratio of total consolidated capital to
risk-adjusted assets was 11.19%, 10.53% of which consisted of tangible common
shareholders' equity. We paid $143,062, or $.0775 per share, of dividends to our
shareholders during the first three months of 2002. A quarterly dividend of
$.0775 was declared in April and was paid on May 10, 2002. As of March 31, 2001,
our ratio of total consolidated capital to risk-adjusted assets was 8.84%, 8.17%
of which consisted of tangible common shareholders' equity, and, as of December
31, 2001, total consolidated capital to risk-adjusted assets was 8.98%, 8.46% of
which consisted of tangible common shareholders' equity.

         In connection with the completion of our offering and sale of $3.5
million of trust preferred securities on November 9, 2001, we repaid a portion
of our then outstanding loan from The Bankers Bank and replaced the remaining
$2.6 million that we had outstanding under that loan with a new $2.6 million
line of credit with The Bankers Bank. Our borrowing under this new line of
credit will accrue interest at the prime rate, as reported in the Money Rates
section of The Wall Street Journal, minus 0.50%. Under the terms of the line of
credit, we are required to pay 12 months of interest only, due on a quarterly
basis, followed by ten equal principal payments over 10 years, with interest due
quarterly. We presently expect to use a portion of the net proceeds of our
common stock offering to fully repay this line of credit.

         Liquidity involves our ability to raise funds to support asset growth,
meet deposit withdrawals and other borrowing needs, maintain reserve
requirements, and otherwise sustain our operations. This is accomplished through
maturities and repayments of our loans and investments, our deposit growth, and
our access to sources of funds other than deposits, such as the federal funds
market and borrowings from the Federal Home Loan Bank and other lenders.

         As of March 31, 2002, we had various sources of liquidity, distinct
from our internal equity and operational financing, that were available to us to
support our growth and operations. We have access to $55.0 million in borrowing
through our line of credit with the Federal Home Loan Bank of Atlanta, for which
we had an average drawn balance of $9.5 million for the three months ended March
31, 2002. We also maintain warehouse lines of credit from UBS PaineWebber Inc.
and Colonial Bank totaling $300 million, available to fund the origination and
holding of our mortgage loan business. In addition, we have $11.6 million of
federal funds lines that we may access.

         Our average liquid assets consist of cash and amounts due from banks,
interest-bearing deposits in other banks, federal funds sold, mortgage loans
held for sale net of borrowings, investment securities and securities held

<PAGE>

for sale. These average liquid assets totaled $103.1 million, $76.7 million and
$104.1 million during the three month period ending March 31, 2002, the three
month period ending March 31, 2001, and the twelve month period ending December
31, 2001, representing 44%, 42% and 59% of average deposits for those periods,
respectively. Average net non-mortgage loans were 56%, 52% and 59% of average
deposits during the three month periods ending March 31, 2002 and March 31,
2001, and the twelve month period ending December 31, 2001, respectively.
Average deposits were 59%, 66% and 55% of average interest-earning assets during
the three month periods ending March 31, 2002 and March 31, 2001, and the twelve
month period ended December 31, 2001, respectively.

         Crescent Bank actively manages the levels, types and maturities of
interest-earning assets in relation to the sources available to fund current and
future needs. In addition to the borrowing sources related to the mortgage
operations, Crescent Bank also maintains federal funds lines of credit totaling
$6.1 million. Crescent Bank's liquidity position has also been enhanced by the
operations of their mortgage division due to the investment of funds in
short-term assets in the form of mortgages held for sale. Once funded, mortgages
will generally be held by Crescent Bank for a period of 10 to 30 days. We
believe Crescent Bank's liquidity sources are adequate to meet its operating
needs in the foreseeable future. Similarly, CMS' liquidity is adequate for its
operations due to its investment in the short-term mortgage loans it holds for
resale.

<PAGE>

Item 3)  Quantitative and Qualitative Disclosures about Our Market Risk

         Market risk is the risk of loss arising from adverse changes in fair
value of financial instruments due to a change in economic conditions, interest
rates, regulations and laws. We are inherently affected by different market
risks. Our primary risk is interest rate risk. We do not conduct foreign
exchange transactions or trading activities, which would produce price risk.

     Interest Rate Risk

         Interest rate risk is the risk to earnings or market value of equity
from the potential movement in interest rates. The primary purpose of managing
interest rate risk is to reduce interest rate volatility and achieve reasonable
stability to earnings from changes in interest rates and preserve the value of
our equity. Changes in interest rates affects our volume of mortgage production,
value and retention of mortgage servicing rights and value and effectiveness of
mortgage interest rate hedges.

         We manage interest rate risk by maintaining what we believe to be the
proper balance of rate sensitive assets, rate sensitive liabilities and
off-balance sheet interest rate hedges. The relationship between rate sensitive
assets and rate sensitive liabilities is a key factor in projecting the effect
of interest rate changes on net interest income. Rate sensitive assets and rate
sensitive liabilities are those that can be repriced to current rates within a
relatively short time period. We monitor the rate sensitivity of earning assets
and interest-bearing liabilities over the entire life of these instruments, but
place particular emphasis on the first year.

         As of December 31, 2001

         The following table shows our rate sensitive position at December 31,
2001. Approximately 85% of earning assets and 96% of funding for these earning
assets is scheduled to reprice at least once during the next twelve months. The
total excess of interest-bearing assets over interest-bearing liabilities, based
on a one-year time period, was $1.3 million, or 0.3% of total assets.

                               Interest Rate Sensitivity Gaps as of December 31,
                                                  2002
                                           Amounts Repricing In
                                           --------------------
                                   0-90 Days       91-365       1-5      Over 5
                                   ---------       ------      ----      ------
                                                   Days        Years     Years
                                                   ----        -----     -----
                                           (millions of dollars)
Interest-earning assets...........  $ 365.1     $  24.7       $ 49.5     $ 19.5
Interest-bearing liabilities......    313.1        75.4         16.8          0
                                    -------     -------       ------     ------
Interest sensitivity gap..........  $  52.0     $ (50.7)      $ 32.7     $ 19.5
                                    =======     =======       ======     ======

         We were in an asset-sensitive position for the cumulative three-month,
one- to-five year and over five-year intervals. This means that during the
five-year period, if interest rates decline, the net interest margin will
decline. During the 0-90 day period, which has the greatest sensitivity to
interest rate changes, if rates rise, the net interest margin will improve.
Conversely, if interest rates decrease over this period, the net interest margin
will decline. At December 31, 2001, we were within our policy guidelines of
rate-sensitive assets to rate-sensitive liabilities of 80-140% at the one-year
interval. Since all interest rates and yields do not adjust at the same time or
rate, this is only a general indicator of rate sensitivity.

         We also use mandatory commitments to deliver mortgage loans held for
sale, reducing the interest rate risk. At December 31, 2001, our commitments to
purchase mortgage loans, referred to as the mortgage pipeline, totaled
approximately $759 million. Of the mortgage pipeline, we had, as of December 31,
2001, approximately $265 million had interest rate risk. The remaining $494
million of mortgage loans are not subject to interest rate risk. The mortgages
not subject to interest rate risk are comprised of:

         .   loans under contract to be placed with a private investor through a
             best efforts agreement, where the investor purchases the loans from
             us at the contractual loan rate;

<PAGE>

         .   loans with floating interest rates which close at the current
             market rate; and

         .   loans where the original fixed interest rate commitment has expired
             and which will be repriced at the current market rate.

         As of March 31, 2002
         --------------------

         The following table shows our rate sensitive position at March 31,
2002. Approximately 80% of earning assets and 92% of funding for these earning
assets is scheduled to reprice at least once during the next twelve months. The
total excess of interest-bearing assets over interest-bearing liabilities, based
on a one-year time period, was $69.3 million, or 17% of total assets.

                                     Interest Rate Sensitivity Gaps as of
                                                   March 31, 2002
                                               Amounts Repricing In:
                                 0-90       91-365      1-5        Over 5
                                 Days        Days      Years       Years
                                               (dollars in millions)
Interest-earning assets         $272.0      $ 23.6        $50.4    $21.4
Interest-bearing                 214.3        58.9         24.9       --
                                ------      ------        -----    -----
  Liabilities
Interest sensitivity gap        $ 57.7      $(35.3)       $25.5    $21.4

         We were in an asset-sensitive position for the cumulative three-month,
one- to-five year and over five-year intervals. This means that during the
five-year period, if interest rates decline, the net interest margin will
decline. During the 0-90 day period, which has the greatest sensitivity to
interest rate changes, if rates rise, the net interest margin will improve.
Conversely, if interest rates decrease over this period, the net interest margin
will decline. At March 31, 2002, we were within our policy guidelines of
rate-sensitive assets to rate-sensitive liabilities of 80-140% at the one-year
interval. Since all interest rates and yields do not adjust at the same time or
rate, this is only a general indicator of rate sensitivity.

         We also use mandatory commitments to deliver mortgage loans held for
sale, reducing the interest rate risk. At March 31, 2002, our commitments to
purchase mortgage loans, referred to as the mortgage pipeline, totaled
approximately $688.7 million. Of the mortgage pipeline, we had, as of March 31,
2002, approximately $310.2 million for which we had interest rate risk. The
remaining $378.5 million of mortgage loans are not subject to interest rate
risk.

         Our mortgage division has adopted a policy intended to reduce interest
rate risk incurred as a result of market movements that occur between the time
commitments to purchase mortgage loans are made and the time the loans are
closed. Accordingly, commitments to purchase loans will be covered either by a
mandatory sale of such loans into the secondary market or by the purchase of an
option to deliver to the secondary market a mortgage-backed security. The
mandatory sale commitment is fulfilled with loans closed by us through pairing
off the commitment by purchasing loans through the secondary market. In some
circumstances, we seek best execution by pairing off the commitment to sell
closed loans and fulfilling that commitment with loans we purchase through the
secondary market. We cover mortgage loans held for sale either by a mandatory
sale of the loans or by the purchase of an option to deliver the loans to the
secondary market.

         On January 1, 2001, we adopted Financial Accounting Standards Board
(FASB) No. 133, "Accounting For Certain Derivative Instruments And Hedging
Activities, " and FASB No. 138, "Accounting For Certain Derivative Instruments
And Certain Hedging Activities-An Amendment of FASB No. 133" (collectively, "FAS
133"). Under FAS 133, all derivative financial instruments are to be recognized
on a company's balance sheet at fair value. On the date we enter into a
derivative contract, we designate the derivative instrument as either (i) a
hedge of the fair value of a recognized asset, liability or an unrecognized firm
commitment (a "fair value" hedge), (ii) a hedge of a forecasted transaction or
of the variability of cash flows to be received or paid related to a recognized
asset or liability (a "cash flow" hedge) or (iii) a free-standing derivative
instrument. For a fair value hedge, changes in the

<PAGE>

fair value of the derivative instrument and changes in the fair value of the
hedged asset or liability attributable to the hedged risk are recorded in the
net income of the current period. For a cash flow hedge, changes in the fair
value of the derivative to the extent that it is effective are recorded in other
comprehensive income within the stockholders' equity section of the balance
sheet and subsequently reclassified as income in the same period that the hedged
transaction impacts net income. For free-standing derivative instruments,
changes in the fair values are reported in the net income of the current period.
We have three types of derivative financial instruments that meet the criteria
of a derivative as outlined in FAS 133: (i) interest rate lock commitments, (ii)
mandatory sales commitments, and (iii) options to deliver mortgage-backed
securities. All of these derivative financial instruments are considered to be
free-standing derivative instruments.

         We formally document the relationship between hedging instruments and
hedged items, as well as the risk management objective and strategy for
undertaking various hedging transactions.

         The primary market risk facing us is interest rate risk related to our
locked pipeline. The locked pipeline is comprised of interest rate lock
commitments issued on residential mortgage loans to be held for sale. In order
to mitigate the risk that a change in interest rates will result in a decline in
the value of our locked pipeline, we enter into hedging transactions. The locked
pipeline is hedged with mandatory sales commitments or options to deliver
mortgage-backed securities that generally correspond with the composition of the
locked pipeline. Due to the variability of closings in the locked pipeline,
which is driven primarily by interest rates, our hedging policies require that a
percentage of the locked pipeline be hedged with these types of derivative
instruments. We are generally not exposed to significant losses, nor will we
realize significant gains, related to our locked pipeline, due to changes in
interest rates, net of gains or losses on associated hedge positions. However we
are exposed to the risk that the actual closings in the locked pipeline may
deviate from the estimated closings for a given change in interest rates.
Although interest rates are the primary determinant, the actual loan closings
from the locked pipeline are influenced by many factors, including the
composition of the locked pipeline and remaining commitment periods. Our
estimated closings are based on historical data of loan closings as influenced
by recent developments. The locked pipeline is considered a portfolio of
derivative instruments. The locked pipeline, and the associated free-standing
derivative instruments used to hedge the locked pipeline, are marked to fair
value and recorded as a component of gain on sale of loans in the income
statement.

         Through March 31, 2002 the impact on net income, net of tax, was
$29,864. The $29,864 FAS 133 effect on net income during the three month period
ended March 31, 2002 reflects the change in the fair value of our free standing
derivatives of $48,168, net of the related tax effect of $18,304.

         In hedging our mortgage pipeline, we must use a best estimation of the
percentage of the pipeline that will not close, which we refer to as the
"fallout." Fallout is caused by, among other things, the borrowers' failures to
qualify for the loan, construction delays, inadequate appraisal values and
changes in interest rates, which are substantial enough for the borrower to seek
another financing source. An increasing interest rate environment provides
greater motivation for the consumer to lock rates and close loans. Conversely,
in a decreasing interest rate environment, the consumer has a tendency to delay
locking rates and closing loans in order to obtain the lowest rate. As a result,
an increasing interest rate environment generally results in our fallout ratio
to be less than in an average market. In a decreasing rate environment, our
fallout ratio tends to be greater than in an average market. If our fallout
ratio is greater than anticipated, we will have more mandatory commitments to
deliver loans than we have loans for which we have closed. In this circumstance,
we must purchase the loans to meet the mandatory commitment on the secondary
market and therefore will have interest rate risk in these loans. If our fallout
ratio is less than anticipated, we will have fewer mandatory commitments to
deliver loans than we have loans for which we have closed. In this circumstance,
we must sell the loans on the secondary market without a mandatory commitment
and therefore will have interest rate risk in these loans.

         Our success in reducing our interest rate risk is directly related to
our ability to monitor and estimate the fallout. While we may use other hedging
techniques other than mandatory and optional delivery, our mortgage division's
secondary marketing policy does not allow speculation. As of March 31, 2002, we
had purchase commitment agreements in place, terminating between April and June
of 2002, with respect to an aggregate of approximately $294.5 million to hedge
our locked pipeline and mortgage loans held for sale.

         We use additional tools to monitor and manage interest rate
sensitivity. One of our tools is the shock test.

<PAGE>

The shock test projects the effect of an interest rate increase and decrease for
100 and 200 basis points movements. The test projects the effect on our rate
sensitive assets and liabilities, mortgage pipeline, mortgage servicing rights
and mortgage production.

         We continually try to manage our interest rate sensitivity gap.
Attempting to reduce the gap is a constant challenge in a changing interest rate
environment and one of the objectives of our asset/liability management
strategy.

     Effects of Inflation

         Inflation generally increases the cost of funds and operating overhead,
and, to the extent loans and other assets bear variable rates, the yields on
such assets. Unlike most industrial companies, virtually all of our assets and
liabilities, as a financial institution, are monetary in nature. As a result,
interest rates generally have a more significant impact on our performance than
the effects of general levels of inflation have. Although interest rates do not
necessarily move in the same direction, or to the same extent, as the prices of
goods and services, increases in inflation generally have resulted in increased
interest rates, and the Federal Reserve increased the interest rate three times
in 1999 for a total of 75 basis points in an attempt to control inflation.
However, the Federal Reserve also has reduced interest rates on eleven occasions
for a total of 475 basis points in 2001.

         In addition, inflation results in an increased cost of goods and
services purchased, cost of salaries and benefits, occupancy expense and similar
items. Inflation and related increases in interest rates generally decrease the
market value of investments and loans held and may adversely affect the
liquidity and earnings of our commercial banking and mortgage banking
businesses, and our shareholders' equity. With respect to our mortgage banking
business, mortgage originations and refinancings tend to slow as interest rates
increase, and increased interest rates would likely reduce our earnings from
such activities and the income from the sale of residential mortgage loans in
the secondary market.

<PAGE>

                           Part II - OTHER INFORMATION

Item 1.  Legal Proceedings - Not Applicable

Item 2.  Changes in Securities and Use of Proceeds -  None

Item 3.  Defaults Upon Senior Securities - Not Applicable

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

         The annual meeting of Shareholders of the Company was held on April 18,
2002 at which time the following matters were brought before and voted upon by
the shareholders:

         1)       The election of the following persons to the Board of
                  Directors to serve for a term expiring on the date indicated
                  below of the Annual Meeting of Shareholders:

                                                                      Withhold
                  Name                   Term expiring    For         Authority
                  ----                   -------------    ---         ---------
                  Charles Gehrmann          2005          1,054,677   0
                  J. Donald Boggus, Jr.     2005          1,054,677   0
                  Janie Whitfield           2003          1,054,677   0

         There were no broker non-votes with respect to the election of
directors.

Item 5.  Other Information - None

Item 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits

         3.1      Articles of Incorporation of the Company (incorporated by
                  reference from Exhibit 3.1 to the Company's Registration
                  Statement on Form S-4 dated January 27, 1992, File No.
                  33-45254 (the "Form S-4")).

         3.2      Bylaws of the Company (incorporated by reference from Exhibit
                  3.2 to the Form S-4).

         10.4     Employment Agreement between the Bank and Mr. Robert C.
                  KenKnight dated as of May 1, 1997 (incorporated by reference
                  to Exhibit 10.4 to the December 31, 1997 Form 10K-SB).

(b)      Reports on Form 8-K     -     None

<PAGE>

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                          CRESCENT BANKING COMPANY
                                          ------------------------
                                          (Registrant)







Date: May 15, 2002                        /s/ J. Donald Boggus, Jr.
     -----------------                    -------------------------
                                          J. Donald Boggus, Jr.
                                          President and Chief Executive Officer

Date: May 15, 2002                        /s/ Bonnie Boling
     -----------------                    -----------------
                                          Bonnie Boling
                                          Chief Financial Officer