<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, 2001
                                      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, 1,824,461 shares issued and
outstanding as of May 11, 2001.  6,668 shares are held as treasury stock.
<PAGE>

                            CRESCENT BANKING COMPANY

                                     INDEX



Part 1. Financial Information                                          Page No.

Item 1. Consolidated Financial Statements

            Consolidated Balance Sheets                                   3

            Consolidated Statements of Operations and
                   Comprehensive Income (loss)                            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              8

Item 3. Quantitative and Qualitative Disclosures about Market Risk       18



Part II. Other Information

Item 1.  Legal Proceedings                                               19

Item 2.  Changes in Securities                                           19

Item 3.  Defaults Upon Senior Securities                                 19

Item 4.  Submission of Matters to a Vote of Security Holders             19

Item 5.  Other Information                                               19

Item 6.  Exhibits and Reports on Form 8-K                                19

<PAGE>

PART I - FINANCIAL INFORMATION



                   CRESCENT BANKING COMPANY AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                              March 31,    December 31,
                                                                2001           2000
                                                            ----------------------------
<S>                                                         <C>            <C>
Assets
Cash and due from banks                                     $  5,557,177   $  5,120,426
Interest bearing deposits in other banks                       5,888,466      1,399,075
Federal fund sold                                             11,623,000        800,000
Securities available-for-sale                                 11,103,625     12,177,326
Securities held-to-maturity, at cost (fair value of
   $1,985,063 and $2,501,340, respectively)                    2,071,418      2,559,848
Mortgage loans held for sale                                 166,030,122    108,847,638

Loans                                                         96,550,240     92,911,487
Less allowance for loan losses                                (1,371,632)    (1,350,774)
                                                            ------------   ------------
  Loans, net                                                  95,178,608     91,560,713

Premises and equipment, net                                    6,234,512      6,263,251
Other real estate owned                                          112,644         21,940
Purchased mortgage servicing rights                            3,394,583      3,781,355
Cash surrender value of life insurance                         3,506,099      3,444,326
Premium on deposits purchased                                    611,551        630,083
Accounts receivable-brokers and escrow agents                  5,597,101      3,753,749
Other assets                                                   1,977,750      1,729,274
                                                            ------------   ------------

  Total Assets                                              $318,886,656   $242,089,004
                                                            ============   ============

Liabilities
Deposits
    Noninterest-bearing                                     $ 46,808,936   $ 30,194,956
    Interest-bearing                                         154,759,031    131,973,487
                                                            ------------   ------------
       Total deposits                                        201,567,967    162,168,443

Drafts payable                                                12,392,781      6,261,741
Accrued interest and other liabilities                         4,313,760      2,911,142
Other borrowings                                              83,206,311     54,946,856
                                                            ------------   ------------
     Total liabilities                                       301,480,819    226,288,182

Shareholders' equity
Common stock, par value $1.00; 10,000,000 shares
 authorized; 1,823,708 and 1,820,301 issued, respectively      1,823,708      1,820,301
Surplus                                                        9,153,791      9,121,344
Retained earnings                                              6,436,294      5,772,774
Less cost of 6,668 shares acquired for the treasury              (36,091)       (36,091)
Accumulated other comprehensive income (loss)                     28,135       (877,506)
                                                            ------------   ------------
      Total stockholders' equity                              17,405,837     15,800,822
                                                            ------------   ------------

      Total liabilities and stockholders' equity            $318,886,656   $242,089,004
                                                            ============   ============
</TABLE>

See notes to Consolidated Financial Statements.

                                       3
<PAGE>

                   CRESCENT BANKING COMPANY AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF OPERATIONS AND
                          COMPREHENSIVE INCOME (LOSS)


                                                     For the three months ended
                                                               March 31,
                                                           2001        2000
                                                     ---------------------------
Interest income
Interest and fees on loans                             $2,547,563  $1,519,943
Interest and fees on mortgage loans held for sale       3,585,462   1,442,261
Interest on  securities:
     Taxable                                              290,720     253,355
     Nontaxable                                             3,838       3,838
Interest on deposits in other banks                        64,156      30,460
Interest on Federal funds sold                             40,276      27,721
                                                       ----------  ----------
                                                        6,532,015   3,277,578
                                                       ----------  ----------
Interest expense
Interest on deposits                                    2,197,372   1,118,141
interest on other borrowings                            1,144,364     548,650
                                                       ----------  ----------
                                                        3,341,736   1,666,791
                                                       ----------  ----------


Net interest income                                     3,190,279   1,610,787
Provision for loan losses                                 115,000      95,000
                                                       ----------  ----------
Net interest income after provision for loan losses     3,075,279   1,515,787

Other income
Service charges on deposit accounts                       186,954      94,946
Mortgage servicing fee income                             168,046     270,309
Gestation fee income                                      191,886     345,596
Gains on sale of  mortgage
          servicing rights                              2,506,440     887,494
Other                                                     245,429     205,574
                                                       ----------  ----------
                                                        3,298,755   1,803,919

Other expenses
Salaries and employee benefits                          2,946,462   1,738,488
Occupancy and equipment expense                           303,718     238,880
Supplies, postage, and telephone                          371,691     252,505
Advertising                                                96,036     149,194
Insurance expense                                          53,686      41,775
Depreciation and amortization                             421,561     420,812
Legal and professional                                    300,382     243,520
Director  fees                                             43,525      35,325
Mortgage subservicing expense                              51,499      84,791
Other                                                     561,560     308,757
                                                       ----------  ----------
                                                        5,150,120   3,514,047

Income (loss) before income taxes (benefits)           $1,223,914   ($194,341)
Applicable income taxes (benefits)                     $  419,837    ($69,965)
                                                       ----------  ----------

Net income (loss)                                      $  804,077   ($124,376)
                                                       ----------  ----------

Other comprehensive income (loss), net of tax
Unrealized gain on derivatives designated as hedges
     arising during period                                 54,025          --
Unrealized gains (losses) on securities available
      for sale arising during period                      851,616     (58,075)
                                                       ----------  ----------

Comprehensive income (loss)                            $1,709,718   ($182,451)

Basic earnings (loss) per common share                 $     0.44      ($0.07)

Diluted earnings (loss) per common share               $     0.44      ($0.07)

Cash dividends per share of common stock               $   0.0775    $ 0.0700


See Notes to Consolidated Financial Statements

                                       4
<PAGE>

                   CRESCENT BANKING COMPANY AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOW

<TABLE>
<CAPTION>


                                                                  For the three months ended
                                                                             March 31,
                                                                      2001           2000
                                                                 ---------------------------
<S>                                                             <C>            <C>
Operating Activities
Net Income (loss)                                               $    804,077      ($124,376)
Adjustments to reconcile net income (loss) to net
  cash provided by (used in) operating activities:
    Accretion of discount on securities                              (89,596)      (220,174)
    Amortization of deposit intangible                                18,532         18,532
    Amortization of purchased mortgage servicing rights              182,950        163,400
    Provision for loan loss                                          115,000         95,000
    Depreciation                                                     300,382        238,880
    Increase in stock options outstanding                                 --         47,867
    Gains on sales of mortgage servicing rights                   (2,506,440)      (887,494)
    (Increase) decrease in mortgage loans held for sale          (57,182,484)    19,972,943
    Increase in interest receivable                                  (12,284)      (188,509)
    Increase in accounts receivable                               (1,843,352)      (397,144)
    Increase in drafts payable                                     6,131,040        897,235
    Increase (decrease) in interest payable                           52,982       (104,470)
    (Increase) decrease in other assets and liabilities, net       1,957,312       (173,168)
                                                                ------------   ------------
Net cash provided by (used in) operating activities              (52,071,881)    19,338,522


Investing Activities
Net (increase) decrease in interest-bearing deposits
    in other banks                                                (4,489,391)        71,394
Acquisition of securities held-to-maturity                                --     (1,467,580)
Proceeds from maturities of securities available-for-sale          1,131,234             --
Proceeds from maturities of securities held-to-maturity              520,493             --
Purchase of life insurance policies                                       --     (1,021,903)
Acquisition of purchased mortgage servicing rights                (7,251,718)    (3,527,758)
Proceeds from sales of purchased mortgage
    servicing rights                                               9,961,980      3,561,091
Net increase in Federal funds sold                               (10,823,000)            --
Net increase  in loans                                            (3,823,599)   (10,244,162)
Purchase of premises and equipment                                  (271,643)       (61,813)
                                                                ------------   ------------
Net cash used in investing activities                            (15,045,644)   (12,690,731)

Financing Activities
Net increase in deposits                                          39,399,524      4,810,561
Net increase (decrease) in other borrowings                       28,259,455    (12,991,359)
Proceeds from the issuance of common stock                            35,854         19,800
Dividends paid                                                      (140,557)      (123,220)
                                                                ------------   ------------
Net cash provided (used in) by financing activities               67,554,276     (8,284,218)

Net increase (decrease) in cash and due from banks                   436,751     (1,636,427)
Cash and due from banks at beginning of year                       5,120,426      5,553,931
                                                                ------------   ------------
Cash and due from banks at end of period                        $  5,557,177   $  3,917,504
                                                                ============   ============
Supplemental Disclosure of Cash Flow Information
      Cash paid during period for interest                      $  3,288,754   $  1,771,261
</TABLE>

                                       5
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


March 31, 2001



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 months ended March 31, 2001 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.

NOTE 3 --- SERVICING PORTFOLIO

The Company services residential loans for various investors under contract for
a fee.As of March 31, 2001, the Company had purchased loans for which it
provides servicing with principal balances totaling $351.6 million.

NOTE 4 --- EARNINGS (LOSS) PER SHARE

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

                                  Three Months Ended March 31, 2001

                                Net          Weighted-Average
                                Income       Shares            Per-Share
                                (Numerator)  (Denominator)     Amount
                                ----------------------------------------

Basic EPS                       $804,077      1,815,106         $0.44

Effect of Dilutive securities
         Stock options           -------         31,501

Diluted EPS                      $804,077     1,846,607         $0.44

                                       6
<PAGE>

                                  Three Months Ended March 31, 2000

                                Net          Weighted-Average
                                Income       Shares            Per-Share
                                (Numerator)  (Denominator)     Amount
                                ----------------------------------------

Basic EPS                        $(124,376)   1,764,018       $(0.07)

Effect of Dilutive securities
         Stock options             -------       93,962

Diluted EPS                      $(124,376)   1,857,980       $(0.07)

                                       7
<PAGE>

Item 2) MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Special Cautionary Notice Regarding Forward-Looking Statements

     The following discussion and analysis of the consolidated financial
condition and results of operations of Crescent Banking Company and its
subsidiaries (the "Company") should be read in conjunction with the Company's
financial statements and related notes included elsewhere herein. Certain of the
statements made or incorporated by reference herein constitute forward-looking
statements for purposes of Section 27A the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended, and as such
may involve known and unknown risks, uncertainties and other factors which may
cause the actual results, performance or achievements of the Company to be
materially different from future results, performance or achievements expressed
or implied by such forward-looking statements. Such forward looking statements
include statements using the words such as "may," "will," "anticipate,"
"should," "would," "believe," "contemplate," "expect," "estimate," "consider,"
"continue," "intend," "possible" or other similar words and expressions.

     The Company's actual results may differ significantly from these forward-
looking statements because forward-looking statements involve risks and
uncertainties, including, without limitation, the following:

 .  the effects of future economic conditions;

 .  governmental monetary and fiscal policies, as well as legislative and
   regulatory changes;

 .  the risks of changes in interest rates on the level and composition of
   deposits, loan demand, and the values of loan collateral, mortgages,
   securities, and other interest-sensitive assets and liabilities; interest
   rate risks;

 .  the effects of competition from other commercial banks, thrifts, mortgage
   banking firms, consumer finance companies, credit unions, securities
   brokerage firms, insurance companies, money market and other mutual funds and
   other financial institutions operating in the Company's market area and
   elsewhere, including institutions operating, regionally, nationally and
   internationally, together with such competitors offering banking products and
   services by mail, telephone, computer and the Internet;

 .  the effect of any mergers, acquisitions or other transactions to which the
   Company and/or its subsidiaries may from time to time be a party, including,
   without limitation, the Company's ability to successfully integrate and
   operate any businesses that it acquires; and

 .  the failure of assumptions underlying the establishment of reserves for
   possible loan losses.

     All written or oral forward-looking statements attributable to the Company
are expressly qualified in their entirety by these Cautionary Statements.

General

     The Company is a Georgia corporation that was incorporated on November 19,
1991, to facilitate the Company becoming the parent holding company of Crescent
Bank and Trust Company (the "Bank"). The Bank is a Georgia banking corporation
that has been engaged in the general commercial banking business since it opened
for business in August 1989. The Bank began wholesale mortgage banking
operations in February 1993. The Company provides a broad range of banking and
financial services in the areas surrounding Jasper, Georgia and has recently
expanded through branches and loan production offices in nearby areas of Bartow,
Cherokee and Forsyth Counties, Georgia. The Company also provides wholesale
residential mortgage banking services to correspondents located in the Atlanta,
Georgia metropolitan area and throughout the Southeast United States. In March
1998, the Bank expanded a loan production office in Bartow County, Georgia to a
full service Bank branch. In February 1999, the Bank opened a loan production
office in Canton, Georgia, converting it to a full service branch in September
1999. The Bank purchased a branch on Towne Lake Parkway, Woodstock, Georgia in
June 1999. In February 2000, the Bank opened a loan production office in
Cumming, Georgia, converting it to a full service branch in December 2000.

                                       8
<PAGE>

     The Company also owns 100% of Crescent Mortgage Services, Inc. ("CMS"),
which offers wholesale residential mortgage banking services in the Southeast,
Northeast, MidAtlantic and Midwest United States and provides servicing for
residential mortgage loans. CMS was incorporated on October 11, 1994 and is an
approved servicer of mortgage loans sold to the Federal Home Loan Mortgage
Corporation ("Freddie Mac"), the Federal National Mortgage Association ("Fannie
Mae") and private investors. CMS expanded it operations in November 1994 when it
opened an office in Manchester, New Hampshire to serve the Northeast. In
February 1998, the Company expanded its mortgage operations by engaging in
Federal Housing Administration and Veterans Administration mortgage lending. CMS
opened a wholesale mortgage banking office in Chicago, Illinois in December 1998
and a satellite office in Columbia, Maryland in August 2000.

     On September 30, 1998, the Company completed a two-for-one split of its
common stock, par value $1.00 per share (the "Common Stock"), and, on January
12, 1999, the Company's Common Stock began trading on the Nasdaq SmallCap Market
under the symbol "CSNT." At the end of December 2000, the Company introduced its
Dividend Reinvestment and Stock Purchase Plan (the "Plan"), and, as of March 31,
2001, participation in the Plan exceeded 33% of common shares outstanding. The
Plan is designed to promote long-term investment in the Company by providing
individuals with a convenient and inexpensive way to invest in the Company's
common stock. Under the Plan, shareholders may purchase additional shares by
reinvesting their cash dividends, and both shareholders and non-shareholders can
purchase shares by making optional cash investments through the Plan.

     The Company's net income for the three months ended March 31, 2001 was
$804,077 compared to a net loss of $124,376 for the three months ended March 31,
2000. The increase in net income from the first quarter of 2000 to the first
quarter of 2001 was primarily the result of an increase in earnings from the
Company's mortgage operation. The mortgage banking operation had net income of
$706,177 for the first quarter 2001 compared to a net loss of $220,160 in the
first quarter 2000. The increase in mortgage banking earnings was largely due to
rate decreases during the first quarter of 2001. The Federal Reserve Open Market
committee lowered rates three times during the first quarter of 2001 totaling
150 basis points.  The Bank had earnings of $217,153 in the first quarter 2001,
13% greater than earnings of $191,462 in the first quarter 2000. The Bank
experienced loan growth of $3.7 million in the first quarter 2001. The Bank's
loan portfolio totaled $96.6 million at March 31, 2001.

Financial Condition

      The Company's assets increased 31.7% during the first quarter 2001 from
$242.1 million as of December 31, 2000 to $318.9 million as of March 31, 2001.
The increase in total assets in the first quarter 2001 was primarily the result
of a $57.2 million, or 52.6%, increase in residential mortgage loans held for
sale. The increase in assets corresponded with a $28.3 million, or 51.5%,
increase in other borrowings. All mortgage production generated by CMS is funded
through warehouse lines of credit from Colonial Bank ("Colonial Bank"), and UBS
Warburg, LLC ("UBS"), and therefore the increase in mortgage loans held for sale
resulted in a higher average balance of other borrowings. The increase in
mortgage loans held for sale from the first quarter 2000 to the first quarter
2001 was the result of a decrease in market interest rates, which increased
mortgage loan originations.

     Interest-earning assets (comprised of commercial banking loans, mortgage
loans held for sale, investment securities, interest-bearing balances in other
banks and temporary investments) totaled $293.3 million, or 92.0%, of total
assets at March 31, 2001. This represents a 34% increase from December 31, 2000
when earning assets totaled $218.7 million, or 90.3%, of total assets. The
increase in earning assets resulted primarily from the $57.2 million increase of
residential mortgage loans held for sale. Average mortgage loans held for sale
during the first quarter 2001 of $158.6 million constituted 57.8% of average
earning assets and 52.7% of average total assets. Average mortgage loans held
for sale during 2000 of $82.9 million constituted 47.7% of average interest-
earning assets and 41.6% of average total assets.

     During the first quarter 2001, average commercial banking loans were $94.8
million. Such loans constituted 34.5% of average earning assets and 31.5% of
average total assets. For 2000, average commercial banking loans were $75.2
million, or 43.3%, of average earning assets and 37.8% of average total assets.
The 26% increase in average commercial banking loans was the result of higher
loan demand in the Bank's service area as well as the expansion of the Bank's
operations in Bartow, Cherokee, and Forsyth Counties, Georgia.

                                       9
<PAGE>

     Commercial banking loans are expected to produce higher yields than
securities and other interest-earning assets. In addition, residential mortgage
loans held for sale generally generate net interest income due to the greater
rates of interest paid to the Bank on the longer term mortgage loans over the
rates of interest paid by the Bank on its shorter term warehouse line of credit,
brokered deposits and core deposits. Therefore, the absolute volume of
commercial banking loans and residential mortgage loans held for sale and the
volume as a percentage of total interest-earning assets are an important
determinant of the net interest margin thereof.

     The allowance for possible loan losses represents management's assessment
of the risk associated with extending credit and its evaluation of the quality
of the loan portfolio. Management analyzes the loan portfolio to determine the
adequacy of the allowance for loan losses and the appropriate provision required
to maintain a level considered adequate to absorb anticipated loan losses. In
assessing the adequacy of the allowance, management reviews the size, quality
and risk of loans in the portfolio. Management also considers such factors as
the Bank's loan loss experience, the amount of past due and nonperforming loans,
specific known risk, the status and amount of nonperforming assets, underlying
collateral values securing loans, current and anticipated economic conditions
and other factors which affect the allowance for potential credit losses. An
analysis of the credit quality of the loan portfolio and the adequacy of the
allowance for loan losses is prepared by the Bank's credit administration area
and presented to the Loan Committee on a regular basis. In addition, the Bank
has engaged an outside loan review consultant, on a semi-annual basis, to
perform an independent review of the quality of the loan portfolio and adequacy
of the allowance. The provision for loan losses is a charge to earnings in the
current period to maintain the allowance at a level that management estimates to
be adequate.

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

     While it is the 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 $1,371,632, or 1.42%, of total
commercial banking loans at March 31, 2001, and $1,350,774, or 1.45%, of total
loans at December 31, 2000. The increase in the allowance for loan losses during
the first quarter 2001 was primarily the result of the provision for loan loss
of $115,000. The increase in the allowance for loan loss corresponds to the 4%
increase in the commercial banking loans in the first quarter 2001.  The
determination of the reserve level rests upon management's judgment about
factors affecting loan quality, assumptions about the economy, and historical
experience. The adequacy of the allowance for loan losses is evaluated
periodically based on a review of all significant loans, with a particular
emphasis on past due and other loans that management believes require attention.
Management believes that, based solely upon current projections, the allowance
at March 31, 2001 was adequate to cover possible losses in the loan portfolio;
however, management's judgment is based upon a number of assumptions about
future events which are believed to be reasonable, but which may or may not be
realized. Thus, 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 losses will not be required.

     The Bank does not maintain a reserve with respect to mortgage loans held
for sale due to the anticipated low risk associated with the loans during the
Bank's expected short holding period, and the firm commitment takeouts from
third parties for such production. The Company does 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. However, the Company has not
incurred a loss as a result of this risk and therefore does not maintain a
reserve for this purpose.

                                       10
<PAGE>

     The 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. Interest on these non-accrual loans is recognized only when
received. As of March 31, 2001, the Bank had $337,427 of loans contractually
past due more than 90 days, $14,142 of loans accounted for on a non-accrual
basis, and no loans considered to be troubled debt restructurings. As of
December 31, 2000, the Bank had $286,393 contractually past due more than 90
days, $21,863 of loans accounted for on a non-accrual basis, and no loans
considered to be troubled debt restructurings.

     Non-performing loans are defined as non-accrual and renegotiated loans.
Adding real estate acquired by foreclosure and held for sale of $112,644 with
non-performing loans results in non-performing assets of $126,786 at March 31,
2001. This compares to non-performing assets of $43,803 at December 31, 2000.
The Bank is currently holding the foreclosed properties for sale.

     The chart below summarizes those of the Bank's assets that management
believes warrant special attention due to the potential for loss, in addition to
the non-performing loans and foreclosed properties. Potential problem loans
represent 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, 2001   December 31, 2000
                                                  ------------------------------------
<S>                                                 <C>              <C>

Non-performing loans (1)                                $   14,142          $   21,863
Foreclosed properties                                      112,644              21,940
                                                        ----------          ----------
Total non-performing assets                                126,786              43,803
                                                        ==========          ==========

Loans 90 days or more past due on accrual status        $  337,427          $  286,393
Potential problem loans (2)                             $1,739,654          $2,231,684
Potential problem loans/total loans                           1.80%               2.40%
Non-performing assets/total loans
     And foreclosed properties                                0.13%               0.05%
Non-performing assets and loans 90 days
     or more past due on accrual status/
     total loans and foreclosed properties                    0.49%               0.36%
</TABLE>
-----------
(1)  Defined as non-accrual loans and renegotiated loans.
(2)  Loans identified by management as potential problem loans (classified and
     criticized loans) but still accounted for on an accrual basis.


     The Bank invests its excess funds in U.S. Government agency obligations,
corporate securities, federal funds sold, and interest-bearing deposits with
other banks. The 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 $19.1 million at March 31,
2001 compared to $16.1 million at December 31, 2000. Unrealized gains (losses)
on securities amounted to $43,149 and ($1.5) million at March 31, 2001 and
December 31, 2000, respectively. Management has not specifically identified any
securities for sale in future periods which, if so designated, would require a
charge to operations if the market value would not be reasonably expected to
recover prior to the time of sale. The Bank had federal funds sold at March 31,
2001 of $11.6 million compared to $800,000 at December 31, 2000. The increase in
federal funds sold at March 31, 2001 was the result of the $39.4 million or
24.3% increase in the Bank's deposits.


                                       11
<PAGE>

     The Company's Mortgage Division (the "Mortgage Division") acquires
residential mortgage loans from small retail-oriented originators through its
operations of CMS and the mortgage division of the Bank. The Bank acquires
conventional loans in the Southeast United States while CMS acquires
conventional loans in the Northeast, Midatlantic and Midwest United States and
FHA/VA loans in the Southeast United States.

     The Bank acquires residential mortgage loans from small retail-oriented
originators in the Southeast United States through various funding sources,
including the Bank's regular funding sources, a $36 million warehouse line of
credit from the FHLB-Atlanta and a $45 million repurchase agreement with UBS.
CMS acquires residential mortgage loans from small retail-oriented originators
in the Southeast, Northeast, Midatlantic and Midwest United States through
various funding sources, including a $75.0 million line of credit from UBS, a
$35 million line of credit from Colonial Bank, and a $75 million repurchase
agreement from UBS. Under the repurchase agreements, the Mortgage Division sells
its mortgage loans and simultaneously assigns the related forward sale
commitments to UBS. Substantially all of the Mortgage Division 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. The Mortgage
Division purchases loans that it believes will meet secondary market criteria,
such as amount limitations and loan-to-value ratios to qualify for resales to
Freddie Mac, Fannie Mae and Ginnie Mae. To the extent that the Mortgage Division
retains the servicing rights on mortgage loans that it resells, it collects
annual servicing fees while the loan is outstanding. The Mortgage Division sells
a portion of its 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 the Company's mortgage banking operation and its contribution
to net income. The Company currently pays a third party subcontractor to perform
servicing functions with respect to its loans sold with retained servicing.

     During the first quarter 2001, the Mortgage Division acquired $672.1
million of mortgage loans. The Mortgage Division sold in the secondary market
$614.9 million of mortgage loans.  At March 31, 2001, $166 million of mortgage
loans were carried as mortgage loans held for sale on the balance sheet pending
sale of such loans. During the first quarter 2000, the Mortgage Division
acquired $226.9 million of mortgage loans. The Mortgage Division sold in the
secondary market $246.9 million of mortgage loans. At March 31, 2000, $67.3
million of mortgage loans were carried as mortgage loans held for sale on the
balance sheet pending sale of such loans.

     At March 31, 2001, $3.4 million of purchased mortgage servicing rights were
carried on the balance sheet. At December 31, 2000, the Company carried $3.8
million of purchased mortgage servicing rights on its balance sheet. The Company
is amortizing the purchased mortgage servicing rights over an accelerated
period. At March 31, 2001, the Company held servicing rights with respect to
loans with unpaid principal balances totaling $351.6 million compared to $324.7
at December 31, 2000.  During the first quarter 2001, the Company sold servicing
rights with respect to $610.9 million of mortgage loans carried on its balance
sheet at costs of $7.7 million for a gain of $2.5 million. During 2000, the
Company sold servicing rights with respect to $1.3 billion of mortgage loans
carried on its balance sheet at costs of $15.9 million for a gain of $6.2
million The market value of the servicing portfolio is contingent upon many
factors, including, without limitation, the interest rate environment and
changes in such rates, the estimated life of the servicing portfolio, the loan
quality of the servicing portfolio and the coupon rate of the loan portfolio.
There can be no assurance that the Company will continue to experience a market
value of the servicing portfolio in excess of the cost to acquire the servicing
rights, nor can there be any assurance as to the expected life of the servicing
portfolio.

     The Bank's other borrowings consist of borrowings from the Federal Home
Loan Bank of Atlanta (the "FHLB-Atlanta"), which is priced at the FHLB-Atlanta
daily rate plus 25 basis points (5.88% as of March 31, 2001). All mortgage
production generated by CMS is funded through warehouse lines of credit from
Colonial Bank, priced at priced at LIBOR plus 100 basis points (6.38% at March
31, 2001) and UBS, priced at LIBOR plus 1.50 basis points (6.58% at March 31,
2001).

     The Company had fixed assets, consisting of land, building and
improvements, and furniture and equipment of $6.2 million at March 31, 2001
compared to fixed assets of $6.3 million at December 31, 2000. In 1999, the Bank
provided a supplemental retirement plan to its Banking officers funded with life
insurance. In the first quarter 2000, the Company added the Directors to the
supplemental retirement plan, resulting in $3.5 million of cash value of life
insurance at March 31, 2001.

                                       12
<PAGE>

     The Bank's deposits totaled $201.6 million and $162.2 million at March 31,
2001 and December 31, 2000, respectively, an increase of 24.3% over such period.
Deposits averaged $181.5 million and $125.6 million during the periods ended
March 31, 2001 and December 31, 2000, respectively. Interest-bearing deposits
represented 77% of total deposits at March 31, 2001 compared to 82% at December
31, 2000. Certificates of deposit composed 75% of total interest-bearing
deposits for March 31, 2001 compared to 72% at December 31, 2000. The
composition of these deposits is indicative of the interest rate-conscious
market in which the Bank operates and increases in interest rates, generally.
There is no assurance that the Bank can maintain or increase its market share of
deposits in its highly competitive service area.


Capital

     Capital adequacy is measured by risk-based capital guidelines as well as
against leverage ratios. The risk-based capital guidelines developed by
regulatory authorities assign weighted levels of risk to asset categories to
establish capital requirements. The guidelines currently require a minimum of
8.0% of total capital to risk-adjusted assets. One half of the required capital
must consist of Tier 1 Capital, which includes tangible common shareholders'
equity and qualifying perpetual preferred stock. The leverage guidelines specify
a ratio of Tier 1 Capital to total assets of 3.0% if certain requirements are
met, including having the highest regulatory rating, and 4.0% to 5.0% otherwise.
The guidelines also provide that bank holding companies experiencing internal
growth or making acquisitions will be expected to maintain strong capital
positions substantially above the minimum supervisory levels without significant
reliance on intangible assets. Furthermore, the guidelines indicate that the
Board of Governors of the Federal Reserve System (the "Federal Reserve") will
continue to consider a "Tangible Tier 1 Leverage Ratio" (deducting all
intangibles) in evaluating proposals for expansion or new activity. The Federal
Reserve has not advised the Company, and the FDIC has not advised the Bank, of
any specific minimum leverage ratio or Tangible Tier 1 Leverage Ratio applicable
to either of them. The Bank had agreed with the Georgia Department of Banking
and Finance (the "Banking Department") to maintain a leverage ratio of 8.0%. At
March 31, 2001 the Bank's leverage ratio was 6.98%. To address the leverage
ratio shortcoming, the Company and the Bank have begun to consider alternative
means of raising capital.

     At March 31, 2001 the Company's total shareholders' equity was $17.4
million or 5.46% of total assets, compared to $15.8 million or 6.53% of total
assets at December 31, 2000. The decrease in shareholders' equity to total asset
ratio in first quarter 2001 was the result of a 31.7% increase in total assets.
At March 31, 2001, total capital to risk-adjusted assets was 8.84%, with 8.17%
consisting of tangible common shareholders' equity. The Company paid $140,557 of
dividends during the first quarter 2001 or $.0775 per share.  A quarterly
dividend of $.0775 was declared in April 2001 for payment in May 2001.

     In February 1999, the Company entered into a promissory note (the "Note")
with The Bankers Bank for $1.5 million at a rate of "prime" minus 50 basis
points (7.00%) for a 10 year term. The Company pledged 100% of the Bank's common
stock as collateral for the Note. The Company transferred the $1.5 million to
CMS to increase its capital and liquidity. In July 1999, the Company increased
the amount of the promissory note to $4.5 million to facilitate the purchase of
the Towne Lake branch. The Company was not required to provide additional
collateral for the increased borrowings. The Company contributed the additional
$3.0 million borrowings to the Bank as capital. In August 2000, the Company made
a principal reduction of $450,000 to the promissory note.


     During the first quarter 2001, 3,407 shares of Common Stock were issued
pursuant to the Dividend Reinvestment and Stock Purchase Plan (the "Plan") for
an aggregate of $35,854.  On March 11, 1998, the Company completed a stock
offering for 270,000 shares of common stock at an issue price of $8.125 per
share. The Company effectuated a two for one stock split on September 30, 1998.
On January 12, 1999, the Company's Common Stock began trading on the Nasdaq
SmallCap Market under the symbol "CSNT".

                                       13
<PAGE>

Liquidity and Interest Rate Sensitivity

     Liquidity involves the ability to raise funds to support asset growth, meet
deposit withdrawals and other borrowing needs, maintain reserve requirements,
and otherwise sustain operations. This is accomplished through maturities and
repayments of loans and investments, deposit growth, and 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.

     Average liquid assets (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 for sale) totaled $76.7
million and $54.7 million during the periods ending March 31, 2001 and December
31, 2000, representing 42% and 44% of average deposits for those periods,
respectively. Average net non-mortgage loans were 52% and 60% of average
deposits for during the periods ending March 31, 2001 and December 31, 2000,
respectively. Average deposits were 66% and 72% of average interest-earning
assets for during the periods ending March 31, 2001 and December 31, 2000,
respectively.

     The Bank actively manages the levels, types and maturities of interest-
earning assets in relation to the sources available to fund current and future
needs to ensure that adequate funding will be available at all times. In
addition to the borrowing sources related to the mortgage operations, the Bank
also maintains federal funds lines of credit totaling $6.1 million. The Bank's
liquidity position has also been enhanced by the operations of the 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 the
Bank for a period of 10 to 30 days. Management believes its liquidity sources
are adequate to meet its operating needs.

     Interest rate sensitivity refers to the responsiveness of interest-bearing
assets and liabilities to changes in market interest rates. The rate-sensitive
position, or gap, is the difference in the volume of rate-sensitive assets and
liabilities, at a given time interval. The general objective of gap management
is to actively manage rate-sensitive assets and liabilities to reduce the
effects of interest rate fluctuations on the net interest margin. Management
generally attempts to maintain a balance between rate-sensitive assets and
liabilities as the exposure period is lengthened to minimize the overall
interest rate risk to the Bank.

     Interest rate sensitivity varies with different types of interest-earning
assets and interest-bearing liabilities. Overnight federal funds, on which rates
are susceptible to change daily, and loans, which are tied to the prime rate,
differ considerably from long-term investment securities and fixed-rate loans.
Similarly, time deposits over $100,000 and certain interest-bearing demand
deposits are much more interest-sensitive than savings deposits. In addition,
brokered deposits, institutional deposits placed by independent brokers, are
more interest sensitive. The Bank had brokered deposits of $6.8 million and $6.7
million at March 31, 2001 and at December 31, 2000, respectively. The Bank
utilizes the brokered deposits to fund its mortgage loans held for sale and
manages the use of those funds in relation with the Bank's liquidity position.

     The following table shows the interest sensitivity gaps for four different
time intervals as of March 31, 2001.

                             Interest Rate Sensitivity Gaps
                                   As of March 31, 2001

                                   Amounts Repricing In
                      -----------------------------------------------

                      0-90 Days  91-365 Days  1-5 Years  Over 5 Years
                      ---------  -----------  ---------  ------------
                                  (Millions of dollars)

Interest-earning
 Assets                 $224.3     $ 22.9       $33.8        $12.3
Interest-bearing
 Liabilities             134.2       70.9        31.5          1.4
                      --------------------------------------------
Interest sensitivity
 Gap                    $ 90.1     $(48.0)      $ 2.3        $10.9
                      ============================================

                                       14
<PAGE>

     The Company was 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 0-91 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, 2001, the Company was within its 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.
Additionally, as described in the following paragraphs, the Company utilizes
mandatory commitments to deliver mortgage loans held for sale, therefore
reducing the interest rate risk. The total excess of interest-bearing assets
over interest-bearing liabilities, based on a five-year time period, was $44.4
million, or 14% of total assets.

     At March 31, 2001, the Company's commitments to purchase mortgage loans
(the "Pipeline") totaled approximately $656 million, up 128.7% from the $286
million at December 31, 2000. Of the Pipeline, the Company had, as of March 31,
2001, approximately $280.5 million for which the Company had interest rate risk.
The remaining $375.5 million of mortgage loans are not subject to interest rate
risk. The mortgages not subject to interest rate risk are comprised of (i) loans
under contract to be placed with a private investor through a "best efforts"
agreement, whereby the investor purchases the loans from the Company at the
contractual loan rate, (ii) loans with floating interest rates which close at
the current market rate, and (iii) loans where the original fixed interest rate
commitment has expired and will be reprice at the current market rate.

     The Mortgage Division has adopted a policy intended to reduce interest rate
risk incurred as a result of market movements 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 the Company, through "pairing off" the
commitment, or purchasing loans through the secondary market. Under certain
condition the Company seeks best execution by pairing off the commitment to sell
closed loans and fulfilling that commitment with loans purchased by the Company
through the secondary market. The Company considers the cost of the hedge to be
part of the cost of the Company's servicing rights, and therefore the hedge is
accounted for as part of the cost of the Company's servicing portfolio. As a
result, any gain or loss on the hedge reduces or increases, as appropriate, the
cost basis of the servicing portfolio.

     In hedging the Pipeline, the Company must use a best estimation of the
percentage of the Pipeline that will not close (i.e. loans that "fallout").
Loans generally fallout of the Pipeline for various reasons including, without
limitation, 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 and close
loans. Conversely, in a decreasing interest rate environment, the consumer has a
tendency to delay locking and closing loans in order to obtain the lowest rate.
As a result, an increasing interest rate environment generally results in the
Company's fallout ratio to be less than in an average market. Conversely, in a
decreasing rate environment, the Company's fallout ratio tends to be greater
than in an average market. If the Company's fallout ratio is greater than
anticipated, the Company will have more mandatory commitments to deliver loans
than it has loans for which it has closed. In this circumstance, the Company
must purchase the loans to meet the mandatory commitment on the secondary market
and therefore will have interest rate risk in these loans. Conversely, if the
Company's fallout ratio is less than anticipated, the Company will have fewer
mandatory commitments to deliver loans than it has loans for which it has
closed. In this circumstance, the Company must sell the loans on the secondary
market without a mandatory commitment and therefore will have interest rate risk
in these loans.

     The Company's success in reducing its interest rate risk is directly
related to its ability to monitor and estimate its fallout. While other hedging
techniques other than mandatory and optional delivery may be used, speculation
is not allowed under the Mortgage Division's secondary marketing policy. As of
March 31, 2001, the Company had in place purchase commitment agreements
terminating between April and June of 2001 with respect to an aggregate of
approximately $168.8 million to hedge the mortgage pipeline of $280.5 million
for which the Bank had an interest rate risk.

                                       15
<PAGE>

     In September 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities". This
statement is required to be adopted for fiscal years beginning after September
15, 2000. The Company adopted this statement effective January 1, 2001. SFAS No.
133 requires the Company to recognize all derivatives as assets or liabilities
in the balance sheet at fair value. For derivatives that are not designated as
hedges, the gain or loss must be recognized in earnings in the period of change.
For derivatives that are designated as hedges, changes in the fair value of the
hedged assets, liabilities, or firm commitments must be recognized in earnings
or recognized in other comprehensive income until the hedged item is recognized
in earnings, depending on the nature of the hedge. The ineffective portion of a
derivative's change in fair value must be recognized in earnings immediately. At
March 31, 2001, unrealized gains, net of tax, associated with the Company's
$168.8 million of mandatory commitments reportable as other comprehensive income
under SFAS No. 133 was $54,025.

     Management continually tries to manage the interest rate sensitivity gap.
Attempting to minimize the gap is a continual challenge in a changing interest
rate environment and one of the objectives of the Bank's asset/liability
management strategy.

Results of Operations

     A principal source of revenue for the Bank is net interest income, which is
the difference between income received on interest-earning assets, such as
investment securities and loans, and interest-bearing sources of funds, such as
deposits and borrowings. The level of net interest income is determined
primarily by the average balances ("volume") of interest-earning assets and the
various rate spreads between the interest-earning assets and the Bank's funding
sources. Changes in net interest income from period to period result from
increases or decreases in volume of interest-earning assets and interest-bearing
liabilities, increases or decreases in the average rates earned and paid on such
assets and liabilities, the ability to manage the interest-earning asset
portfolio (which includes loans) and the availability of particular sources of
funds, such as non-interest bearing deposits.

     The Company experienced significant changes in interest rates and mortgage
production during 2000 and 1999. The Company achieved record mortgage production
with interest rates at historical low levels in the first six months of 1999.
The Company recognized an increase in average interest-earning assets and
interest-bearing liabilities for the year as a result of the record mortgage
production in the first six months. The Federal Reserve Open Market Committee
increased interest rates on three occasions in 1999 for a total of 75 basis
points. Rates began increasing on a 30-year mortgage in mid-second quarter 1999
resulting in a decline in production. In the fourth quarter of 2000, rates began
declining, resulting in an increase in mortgage production. During the first
quarter 2001, the Federal Reserve Open Market Committee reduced interest rates
on three occasions for a total of 150 basis points. The Company closed $226.9
million of mortgage loans during the first quarter 2000 compared to $672.1
million during the first quarter 2001.

     The Company had interest income of $6.5 million for the three months ended
March 31, 2001 compared to $3.3 million three months ended March 31, 2000. The
increase in interest income is attributable to the increase in interest-earning
assets which is the result of growth in the commercial bank loan portfolio as
well as a higher volume of mortgage production. In addition, fee income
associated with mortgage loans is included in interest income.  Fee income
associated with mortgage loans for the first quarter 2001 totaled $1.5 million
compared to fee income for the first quarter 2000 of $548,210.

     The Company had interest expense of $3.3 million for the three months ended
March 31, 2001 and $1.7 million for the three months ended March 31, 2000. The
increase resulted from the growth of the banks deposits as well as a higher
level of other borrowings. All mortgage production through CMS is funded with a
warehouse line of credit; therefore the higher volume in the Northeast and
Midwest mortgage operation resulted in a higher average balance of other
borrowings. In the first quarters 2001 and 2000, interest expense accounted for
39% and 32% of total expenses, respectively.

     Net interest income for the first quarter 2001 was $3.2 million. The key
performance measure for net interest income is the "net interest margin," or net
interest income divided by average interest-earning assets. The Company's

                                       16
<PAGE>

net interest margin during first quarter 2001 was 5.29%. Interest spread, which
represents the difference between average yields on interest-earning assets and
average rates paid on interest-bearing liabilities, was 4.29%. Net interest
income, interest margin and net interest spread for the first quarter 2000 were
$1.6 million, 5.21%, and 4.51%, respectively. The increase in net interest
income is related to the fee income related to a higher volume of mortgage loans
closed. Loan fee income, such as processing fees associated with the purchase of
mortgage loans, is included as interest income as the mortgage loans are sold.

     The Company made a provision to the allowance for loan losses of $115,000
in the first quarter 2001. The Company made provisions to the allowance for loan
losses in the amount of $95,000 in first quarter 2000. During the first quarter
of 2001, the Bank charged-off, net of recoveries, $94,142 of loans to the
allowance for loan losses. During the first quarter of 2000, the Bank charged-
off, net of recoveries, $12,406 of loans to the allowance for loan losses.

     Other income was $3.3 million in the first quarter 2001 compared to $1.8
million in the first quarter 2000. 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 2001, the Company 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%. During the first three months of 2000, the Company sold
servicing rights with respect to $172.6 million of mortgage loans for a gain of
$887,494 or a spread on the sale of servicing of 0.51%. The increase in the sale
of purchased mortgage rights resulted primarily from the increase in mortgage
production. The Company currently plans to sell a portion of the servicing
rights retained during 2001, although there can be no assurance as to the volume
of the Bank's loan acquisition or that a premium will be recognized on the
sales. Gestation fee income is generated from the sale of mortgage loans to
securities brokers through a gestation repurchase agreement. Under the
agreement, the Company sells mortgage loans and simultaneously assigns the
related forward sale commitments to a securities broker. The Company continues
to receive fee income from the securities broker until the loan is delivered
into the forward commitment.

     Other operating expenses increased to $5.2 million in the first quarter
2001 from $3.5 million in the first quarter 2000.   The increase in other
operating expenses was related to the increase in volume of the mortgage
operation which included increases in salaries and benefits and third party
mortgage outsourcing expense.

     The Company had net income of $804,077 in the first quarter 2001, compared
to net loss of $124,376 in the first quarter 2000. Net income was effected
primarily by the increase in mortgage production and the reduced gain on the
sale of mortgage servicing rights. Income tax (benefits) as a percentage of
pretax net income (loss) was 34% and 36% for the first quarter 2001 and 2000,
respectively.

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 the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates generally have a more significant impact on the performance of a
financial institution than the effects of general levels of inflation. 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 has increased
interest rates twice since 1999 in an attempt to prevent inflation. In addition,
inflation results in financial institutions' increased cost of goods and
services purchased, the 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
liquidity, earnings, and shareholders' equity. Mortgage originations and
refinancings tend to slow as interest rates increase, and likely will reduce the
Company's earnings from such activities and the income from the sale of
residential mortgage loans in the secondary market.

                                       17
<PAGE>

Item 3) Quantitative and Qualitative Disclosures about Market Risk



     The Company's primary market risk exposure is interest rate risk and, to a
lesser extent, credit risk and liquidity risk. Interest rate risk is the
exposure of a banking organization's financial condition and earnings ability to
movements in interest rates. Interest rate risk is discussed under "liquidity
and Interest Rate Sensitivity" in Item 2, "Management's Discussion and Analysis
of Financial Condition and Results of Operations", of this report, and in the
same sections of the Company's 2000 Annual Report to Shareholders (the "Annual
Report"), as well as under "Effects of Inflation" in the 2000 Annual Report.
Interest rate risk especially affects the Company's mortgage banking operations.

                                       18
<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 19,
2001 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
             ----               -------------  ---------  ---------
             A. James Elliott       2004       1,287,536     300
             John S. Dean, Sr.      2004       1,287,536     300
             Charles B. Wynne       2002       1,287,236     600


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


         2)  The approval of the Crescent Banking Company 2001 Non-Employee
             Director Stock Option Plan:

             For            Against    Abstained
             ---            -------    ---------
             1,037,071      15,621      8,471

         3)  The approval of the Crescent Banking Company 2001 Long-Term
             Incentive Plan:

             For            Against    Abstained
             ---            -------    ---------
              1,040,310     12,382      8,471

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")).

                                       19
<PAGE>

     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

                                       20
<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 14, 2001            /s/ J. Donald Boggus, Jr.
       -------------           -------------------------------------
                               J. Donald Boggus, Jr.
                               President and Chief Executive Officer

Date:  May 14, 2001            /s/ Bonnie Boling
       ------------            -------------------------------------
                               Bonnie Boling
                               Chief Financial Officer

                                       21