<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 June 30, 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, 1,829,791 shares issued and
outstanding as of August 9, 2001.  6,668 shares are held as treasury stock.
<PAGE>

                            CRESCENT BANKING COMPANY

                                     INDEX

<TABLE>
<CAPTION>


<S>                                                               <C>
Part I.   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                                              19



Part II.  Other Information

Item 1.   Legal Proceedings                                          20

Item 2.   Changes in Securities                                      20

Item 3.   Defaults Upon Senior Securities                            20

Item 4.   Submission of Matters to a Vote of Security Holders        20

Item 5.   Other Information                                          20

Item 6.   Exhibits and Reports on Form 8-K                           20

</TABLE>
<PAGE>

PART I - FINANCIAL INFORMATION

Item 1.  Consolidated Financial Statements

                   CRESCENT BANKING COMPANY AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                    June 30,           December 31,
                                                                      2001                 2000
                                                                  -------------       -------------
<S>                                                               <C>                 <C>
Assets
Cash and due from banks                                           $ 10,101,314        $  5,120,426
Interest bearing deposits in other banks                            11,824,130           1,399,075
Federal fund sold                                                   13,586,000             800,000
Securities available-for-sale                                       11,298,036          12,177,326
Securities held-to-maturity, at cost (fair value of
   $6,345,538 and $2,501,340, respectively)                          6,577,340           2,559,848
Mortgage loans held for sale                                       162,560,415         108,847,638

Loans                                                              104,997,302          92,911,487
Less allowance for loan losses                                      (1,446,133)         (1,350,774)
                                                                  ------------        ------------
  Loans, net                                                       103,551,169          91,560,713

Premises and equipment, net                                          6,197,857           6,263,251
Other real estate owned                                                152,644              21,940
Purchased mortgage servicing rights                                  3,594,008           3,781,355
Cash surrender value of life insurance                               3,548,890           3,444,326
Premium on deposits purchased                                          593,019             630,083
Accounts receivable-brokers and escrow agents                        4,419,540           3,753,749
Other assets                                                         2,684,575           1,729,274
                                                                  ------------        ------------

  Total Assets                                                    $340,688,937        $242,089,004
                                                                  ============        ============



Liabilities
Deposits
    Noninterest-bearing                                           $ 27,562,334        $ 30,194,956
    Interest-bearing                                               169,255,902         131,973,487
                                                                  ------------        ------------
       Total deposits                                              196,818,236         162,168,443

Drafts payable                                                      11,439,478           6,261,741
Accrued interest and other liabilities                               7,550,326           2,911,142
Other borrowings                                                   104,588,913          54,946,856
                                                                  ------------        ------------
     Total liabilities                                             320,396,953         226,288,182


Shareholders' equity
Common stock, par value $1.00; 10,000,000 shares
 authorized; 1,828,922 and 1,820,301 issued, respectively            1,828,922           1,820,301
Surplus                                                              9,205,450           9,121,344
Retained earnings                                                    8,607,867           5,772,774
Less cost of 6,668 shares acquired for the treasury                    (36,091)            (36,091)
Accumulated other comprehensive income (loss)                          685,836            (877,506)
                                                                  ------------        ------------
      Total stockholders' equity                                    20,291,984          15,800,822
                                                                  ------------        ------------

      Total liabilities and stockholders' equity                  $340,688,937        $242,089,004
                                                                  ============        ============

</TABLE>

See notes to Consolidated Financial Statements.
<PAGE>

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

<TABLE>
<CAPTION>


                                                             For the three months ended           For the six months ended
                                                                      June 30,                           June 30,
                                                                  2001         2000                   2001        2000
                                                             --------------------------           ------------------------
<S>                                                            <C>           <C>                   <C>          <C>
Interest income
Interest and fees on loans                                     2,804,417     1,834,251             5,351,980   3,354,194
Interest and fees on mortgage loans held for sale              4,328,998     2,022,973             7,914,460   3,465,234
Interest on  securities:
     Taxable                                                     276,808       268,267               567,528     521,622
     Nontaxable                                                    3,838         3,838                 7,676       7,676
Interest on deposits in other banks                               83,356         6,395               147,512      36,855
Interest on Federal funds sold                                    98,736         5,468               139,012      33,189
                                                              ----------    ----------           -----------  ----------
                                                               7,596,153     4,141,192            14,128,168   7,418,770

Interest expense
Interest on deposits                                           2,438,079     1,201,208             4,635,451   2,319,349
interest on other borrowings                                   1,302,022       723,372             2,446,386   1,272,022
                                                              ----------    ----------           -----------  ----------
                                                               3,740,101     1,924,580             7,081,837   3,591,371


Net interest income                                            3,856,052     2,216,612             7,046,331   3,827,399
Provision for loan losses                                        115,000       140,000               230,000     235,000
                                                              ----------    ----------           -----------  ----------
Net interest income after provision for loan losses            3,741,052     2,076,612             6,816,331   3,592,399

Other income
Service charges on deposit accounts                              217,435       101,828               404,389     196,774
Mortgage servicing fee income                                    157,278       282,568               325,324     552,877
Gestation fee income                                              71,521       190,641               263,407     536,237
Gains on sale of mortgage servicing rights                     6,614,895     1,315,185             9,121,335   2,202,679
Other                                                            259,962         5,831               505,391     211,405
                                                              ----------    ----------           -----------  ----------
                                                               7,321,091     1,896,053            10,619,846   3,699,972


Other expenses
Salaries and employee benefits                                 4,876,177     1,915,886             7,822,639   3,654,374
Net occupancy and equipment expense                              252,823       256,627               556,541     495,507
Supplies, postage, and telephone                                 443,239       296,945               814,930     549,450
Advertising                                                      101,883       112,929               197,919     262,123
Insurance expense                                                 54,327        45,877               108,013      87,652
Depreciation and amortization                                    510,398       389,433               931,959     810,245
Legal, professional, outside services                            166,582        (8,143)              466,964     235,377
Director fees                                                     47,775        44,075                91,300      79,400
Mortgage subservicing expense                                     78,548        90,677               130,047     175,468
Other                                                            754,482       568,804             1,316,042     877,561
                                                              ----------    ----------           -----------  ----------
                                                               7,286,234     3,713,110            12,436,354   7,227,157

Income before income taxes                                     3,775,909       259,555             4,999,823      65,214
Applicable income taxes                                        1,462,974        89,321             1,882,811      19,356
                                                              ----------    ----------           -----------  ----------


Net income                                                    $2,312,935    $  170,234           $ 3,117,012  $   45,858
                                                              ----------    ----------           -----------  ----------

Other comprehensive income (loss), net of tax
Unrealized gain on derivatives designated as hedges
     arising during period                                       623,242             -               677,267           -
Unrealized gains (losses) on securities available
      for sale arising during period                              34,459        36,413               886,075     (21,662)
                                                              ----------    ----------           -----------  ----------


Comprehensive income (loss)                                   $2,970,636    $  206,647           $ 4,680,354  $   24,196
                                                              ==========    ==========           ===========  ==========



Basic earnings per common share                               $     1.27    $     0.10           $      1.72  $     0.03

Diluted earnings per common share                             $     1.25    $     0.09           $      1.68  $     0.03

Cash dividends per share of common stock                      $   0.0775    $   0.0750           $    0.1550  $   0.1450

</TABLE>

See Notes to Consolidated Financial Statements

                                       4
<PAGE>

CRESCENT BANKING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
                                                                          For the six months ended
                                                                                    June 30,
                                                                           2001                 2000
                                                                     -----------------------------------
<S>                                                                  <C>                    <C>
Operating Activities
Net Income                                                              3,117,012                45,858
Adjustments to reconcile net income to net
        cash provided by (used in) operating activities:
            Accretion of discount on securities                          (419,345)             (496,004)
            Amortization of deposit intangible                             37,064                37,063
            Amortization of purchased mortgage servicing rights           397,200               330,600
            Provision for loan loss                                       230,000               235,000
            Depreciation                                                  534,759               479,645
            Gains on sales of mortgage servicing rights                (9,121,335)           (2,202,679)
            Increase in stock options outstanding                              --                35,949
            Increase in mortgage loans held for sale                  (53,712,777)           (1,790,385)
            (Increase) decrease in interest receivable                    207,920              (276,890)
            Increase in accounts receivable                              (665,791)             (629,024)
            Increase in drafts payable                                  5,177,737             8,522,800
            Increase (decrease) in interest payable                        27,864              (178,407)
            Decrease in other assets and liabilities, net               3,432,506                52,740
                                                                     ------------          ------------
Net cash provided by (used in) operating  activities                  (50,757,186)            4,166,266



Investing Activities
Net (increase) decrease in interest-bearing deposits in other banks   (10,425,055)              116,837
Acquisition of securities held-to-matuity                              (4,439,536)           (1,467,580)
Proceeds from maturities of securities available-for-sale               2,651,194                    --
Proceeds from maturities of securities held-to-maturity                   543,857                    --
Acquisition of securities available for sale                                   --              (260,500)
Purchase of life insurance policies                                            --            (1,058,607)
Acquisition of purchased mortgage servicing rights                    (13,118,389)           (6,623,831)
Proceeds from sales of purchased mortgage servicing rights             22,029,871             7,187,657
Decrease in Federal funds sold, net                                   (12,786,000)                   --
Net increase in loans                                                 (12,351,160)          (22,748,187)
Purchase of premises and equipment                                       (469,365)             (907,312)
                                                                     ------------          ------------
Net cash used in investing activities                                 (28,364,583)          (25,761,523)

Financing Activities
Net increase in deposits                                               34,649,793            11,959,025
Net increase in other borrowings                                       49,642,057             9,805,704
Proceeds from exercise of stock options                                    92,727               194,583
Dividends paid                                                           (281,920)             (256,213)
                                                                     ------------          ------------
Net cash provided by financing activities                              84,102,657            21,703,099

Net increase (decrease) in cash and cash equivalents                    4,980,888               107,842
Cash and cash equivalents at beginning of year                          5,120,426             5,553,931
                                                                     ------------          ------------

Cash and cash equivalents at end of year                             $ 10,101,314          $  5,661,773
                                                                     ============          ============


Supplemental Disclosure of Cash Flow Information
                         Cash paid during period for interest           7,053,973             3,769,778
</TABLE>

                                       5
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


June 30, 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 and six months ended June
30, 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 June 30, 2001, the Company had purchased loans for which it
provides servicing with principal balances totaling $461.9 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):

                                  Six Months Ended June 30, 2001

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

Basic EPS                         $3,117,012   1,817,318         $1.72
Effect of Dilutive securities
  Stock options                   -------         33,757

Diluted EPS                       $3,117,012   1,851,075         $1.68
<PAGE>

                                  Six Months Ended June 30, 2000

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

Basic EPS                         $   45,858   1,774,028         $0.03

Effect of Dilutive securities
  Stock options                   -------         76,808

Diluted EPS                       $   45,858   1,850,836         $0.03



                                  Three Months Ended June 30, 2001

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

Basic EPS                         $2,312,935   1,819,056         $1.27

Effect of Dilutive securities
  Stock options                   -------         37,546

Diluted EPS                       $2,312,935   1,856,602         $1.25


                                  Three Months Ended June 30, 2000

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

Basic EPS                         $170,234     1,782,005         $0.10

Effect of Dilutive securities
  Stock options                   -------         57,878

Diluted EPS                       $170,234     1,839,883         $0.09


<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.
<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 June 30,
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 six months ended June 30, 2001 was $3.1
million compared to net income of $45,858 for the six months ended June 30,
2000.  The increase in net income from the first six months of 2000 to the first
six months 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
$2.9 million for the first six months of 2001 compared to a net loss of $130,390
in the first six months of 2000. The Company's mortgage banking earnings
increased as the result of a significant increase in production reflecting
declines in interest rates.  During the first six months of 2001, the Company
sold servicing rights with respect to $1.4 billion of mortgage loans for a gain
of $9.1 million or a spread on the sale of servicing of 0.69%. This compares to
the first six months of 2000 in which the Company sold servicing rights with
respect to $419.1 million of mortgage loans for a gain of $2.2 million or a
spread on the sale of servicing of 0.53%. The Bank had earnings of $363,130 for
the six months ended June 30, 2001 compared to earnings of $366,456 for the six
months ended June 30, 2000.  The Bank experienced a reduction in its net
interest margin during the first six months as a result of the declining
interest rate environment. The Bank's loan portfolio increased approximately 13%
during the first six months to total $105 million at June 30, 2001.

Financial Condition
-------------------

     The Company's assets increased 41% during the first six months of 2001 from
$242.1 million as of December 31, 2000 to $340.7 million as of June 30, 2001.
The increase in total assets in the first six months of 2001 was the result of
the $53.8 million or 49% increase in mortgage loans held for sale. The increase
in assets corresponded with a $49.7 million, or 90.5%, increase in other
borrowings.

     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 $310.8 million, or 91.2%, of total
assets at June 30, 2001. This represents a 42% 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 $53.8 million increase of
residential mortgage loans held for sale.  Average mortgage loans held for sale
during the first six months of 2001 of $177.3 million constituted 57.9% of
average earning assets and 53.1% 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 six months of 2001, average commercial banking loans were
$98.0 million.  Such loans constituted 32.0% of average earning assets and 29.3%
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 30.3% 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.
<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 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, 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 $1,446,133 or 1.38% of total
commercial banking loans at June 30, 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 six months of 2001 was primarily the result of the provision
for loan loss of $230,000. The increase in the allowance for loan loss
corresponds to the 13% increase in the commercial banking loans in the first six
months of  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 June 30, 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.


<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 June 30, 2001, the Bank had $257,886 of loans contractually past
due more than 90 days, $61,828 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 $152,644
with non-performing loans results in non-performing assets of $214,472 at June
30, 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>

                                                                   June 30, 2001             December 31, 2000
                                                                   -------------             -----------------
<S>                                                                <C>                       <C>
Non-performing loans (1)                                              $   61,828                   $   21,863
Foreclosed properties                                                    152,644                       21,940
                                                                      ----------                   ----------
Total non-performing assets                                              214,472                       43,803
                                                                      ==========                   ==========

Loans 90 days or more past due on accrual status                      $  257,886                   $  286,393
Potential problem loans (2)                                           $1,705,345                   $2,231,684
Potential problem loans/total loans                                         1.62%                        2.40%
Non-performing assets/total loans
   And foreclosed properties                                                0.20%                        0.05%
Non-performing assets and loans 90 days
   or more past due on accrual status/
   total loans and foreclosed properties                                    0.45%                        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 $29.7 million at June 30,
2001 compared to $16.3 million at December 31, 2000.  Unrealized gains (losses)
on securities amounted to  $14,282 and ($1.5) million at June 30, 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 June 30,
2001 of $13.6 million compared to $800,000 at December 31, 2000.  The increase
in federal funds sold at June 30, 2001 was the result of the $34.6 million or
21.3% increase in the Bank's deposits.

     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
<PAGE>

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 six months of 2001, the Mortgage Division acquired $1.6
billion of mortgage loans. The Mortgage Division sold in the secondary market
$1.4 billion of mortgage loans.  At June 30, 2001, $162.6 million of mortgage
loans were carried as mortgage loans held for sale on the balance sheet pending
sale of such loans. During the first six months of 2000, the Mortgage Division
acquired $541.2 million of mortgage loans. The Mortgage Division sold in the
secondary market $539.4 million of mortgage loans. At June 30, 2000, $89.1
million of mortgage loans were carried as mortgage loans held for sale on the
balance sheet pending sale of such loans.

     At June 30, 2001, $3.6 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 June 30, 2001, the Company held servicing rights with
respect to loans with unpaid principal balances totaling $461.9 million compared
to $324.7 at December 31, 2000.  During the first six months of 2001, the
Company sold servicing rights with respect to $1.4 billion of mortgage loans
carried on its balance sheet at costs of $12.9 million for a gain of $9.1
million. During the first two quarters 2000, the Company sold servicing rights
with respect to $419.1 million of mortgage loans carried on its balance sheet at
costs of $5.0 million for a gain of $2.2 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 (4.55% as of June 30, 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 (4.86% at June
30, 2001) and UBS, priced at LIBOR plus 150 basis points (5.36% at June 30,
2001).

     The Company had fixed assets, consisting of land, building and
improvements, and furniture and equipment of $6.2 million at June 30, 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 $3.6 million of cash value of life
insurance at June 30, 2001.
<PAGE>

     The Bank's deposits totaled $196.8 million and $162.2 million at June 30,
2001 and December 31, 2000, respectively, an increase of 21.3% over such period.
Deposits averaged $198.0 million and $125.6 million during the periods ended
June 30, 2001 and December 31, 2000, respectively. Interest-bearing deposits
represented 86% of total deposits at June 30, 2001 compared to 82% at December
31, 2000. Certificates of deposit composed 76% of total interest-bearing
deposits for June 30, 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 June 30, 2000 the Bank's leverage ratio was 6.64%.
To address the leverage ratio shortcoming, the Company and the Bank have begun
to consider alternative means of raising capital.  One such means of increasing
capital is $2.5 million of Trust Preferred Securities from The Bankers Bank in
which the Company would reduce its note with The Bankers Bank by $2.5 million.
The Company approved the Trust Preferred Securities in the second quarter,
however, at June 30, 2001 the transaction was pending.

     At June 30, 2001 the Company's total shareholders' equity was $20.3 million
or 5.96% 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 six months of 2001 was the result of a 41% increase in total assets. At
June 30, 2001, total capital to risk-adjusted assets was 9.24%, with 8.57%
consisting of tangible common shareholders' equity. The Company paid $281,920 of
dividends during the first six months 2001 or $.155 per share. A quarterly
dividend of $.0775 was declared in July 2001 for payment in August 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 (6.25%) 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. The Company made a
principal reduction of $450,000 to the promissory note in both August 2000 and
2001.

     During the first six months of 2001, 8,621 shares of Common Stock were
issued pursuant to the Dividend Reinvestment and Stock Purchase Plan (the
"Plan") for an aggregate of $92,727. 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".

Liquidity and Interest Rate Sensitivity
---------------------------------------
<PAGE>

     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 $79.4
million and $54.7 million during the periods ending June 30, 2001 and December
31, 2000, representing 40% and 44% of average deposits for those periods,
respectively.  Average net non-mortgage loans were 50% and 60% of average
deposits for during the periods ending June 30, 2001 and December 31, 2000,
respectively.  Average deposits were 65% and 72% of average interest-earning
assets for during the periods ending June 30, 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 $6.5
million and $6.8 million at June 30, 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 June 30, 2001.


                                       Interest Rate Sensitivity Gaps
                                            As of June 30, 2001

                                           Amounts Repricing In
                          ----------------------------------------------------
                          0-90 Days    91-365 Days    1-5 Years   Over 5 Years
                          ---------    -----------    ---------   ------------
                                            (Millions of dollars)
Interest-earning
 assets                    $234.4        $ 23.1         $36.5         $16.8
Interest-bearing
 liabilities                165.2          79.0          27.3           2.3
                          ----------------------------------------------------
Interest sensitivity
 gap                       $ 69.2        $(55.9)        $ 9.2         $14.5
                          ====================================================
<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 June 30, 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 $37 million, or 10.9%
of total assets.

     At June 30, 2001, the Company's commitments to purchase mortgage loans (the
"Pipeline") totaled approximately $716.3 million, an increase of 126% from the
$316.9 million a year earlier.  Of the Pipeline, the Company had, as of June 30,
2001, approximately $342.4 million for which the Company had interest rate risk.
The remaining $373.9 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 repriced 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
conditions 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
June 30, 2001, the Company had in place purchase commitment agreements
terminating between July and September of 2001 with respect to an aggregate of
approximately $136.9 million to hedge the mortgage pipeline of $342.4 million
for which the Bank had an interest rate risk.
<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 June 30, 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 $851,616.

     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 six months 2001, the Federal Reserve Open Market Committee reduced
interest rates on six occasions for a total of 275 basis points. The Company
closed $1.6 billion of mortgage loans during the first six months of 2000
compared to $541.2 million during the first six months of 2001.

     The Company had interest income of $14.1 million for the six months ended
June 30, 2001 compared to $7.4 million six months ended June 30, 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 six months of 2001 totaled $3.4
million compared to fee income for the first six months of 2000 of $1.3 million.

     The Company had interest income of $7.6 million for the three months ended
June 30, 2001 compared to $4.1 million three months ended June 30, 2000.  The
increase in interest income is attributable to the higher volume of commercial
bank loans partially offset by the lower volume of mortgage loan production and
associated fee income.

     The Company had interest expense of $7.1 million for the six months ended
June 30, 2001 and $3.6 million for the six months ended June 30, 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;
<PAGE>

therefore the higher volume in the Northeast and Midwest mortgage operation
resulted in a higher average balance of other borrowings. In the first two
quarters 2001 and 2000, interest expense accounted for 36% and 32% of total
expenses, respectively.

     The Company had interest expense of $3.7 million for the three months ended
June 30, 2001 and $1.9 million for the three months ended June 30, 2000. The
increase resulted from the growth of the banks deposits as well as a higher
level of other borrowings.

     Net interest income for the first six months of 2001 was $7.0 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
net interest margin during first six months of 2001 was 4.61%.  Interest spread,
which represents the difference between average yields on interest-earning
assets and average rates paid on interest-bearing liabilities, was 4.02%.  Net
interest income, interest margin and net interest spread for the first six
months of 2000 were $3.8 million, 5.70%, and 4.86%, 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 decrease in net interest margin and interest spread
is indicative of the Company's balance sheet being asset sensitive in the short
term during a period when rate were decreasing.

     The Company made a provision to the allowance for loan losses of $230,000
in the first six months of 2001. During the first six months of 2001, the Bank
charged-off, net of recoveries, $134,641 of loans to the allowance for loan
losses. The Company made provisions to the allowance for loan losses in the
amount of $235,000 in first six months of 2000. During the first six months of
2000, the Bank charged-off, net of recoveries, $11,902 of loans to the allowance
for loan losses. The Company made a provision to the allowance for loan losses
of $115,000 in the second quarter 2001. The Company made provisions to the
allowance for loan losses in the amount of $140,000 in second quarter 2000.

     Other income was $10.6 million in the first six months of 2001 compared to
$3.7 million in the first six months of  2000.  The increase in other income was
related to the increase of gains on the sale of mortgage servicing rights.
During the first six months of 2001, the Company sold servicing rights with
respect to $1.4 billion of mortgage loans for a gain of $9.3 million or a spread
on the sale of servicing of 0.69%. This compares to the first six months of 2000
in which the Company sold servicing rights with respect to $419.1 million of
mortgage loans for a gain of $2.2 million or a spread on the sale of servicing
of 0.53%. 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.  Other income was $7.3 million in the
second quarter of 2001 compared to $1.9 million in the second quarter of 2000.
The increase in other income during the second quarter was related to the
increase of gains on the sale of mortgage servicing rights.

     Other operating expenses increased to $12.4 million in the first six months
of 2001 from $7.2 million in the first six months of 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. Other operating expenses increased to $7.3 million
in the second quarter 2001 from $3.7 million in the second quarter 2000.

     The Company had net income of $3.1 million for the six months ending June
30, 2001, compared to net income of $45,828 for the six months ending June 30,
2000. The Company had net income of $2.3 million for the three months ending
June 30, 2001, compared to net income of $170,234 for the six months ending June
30, 2000. Net income was favorably effected primarily by the increase in
mortgage production and the resulting gain on the sale of mortgage servicing
rights. Income tax as a percentage of pretax net income was 38% and 37% for the
first six months of 2001 and 2000, respectively.
<PAGE>

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.
<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.
<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 - Not Applicable

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:     August 9,  2001      /s/ J. Donald Boggus, Jr.
       ---------------------   -------------------------------------
                               J. Donald Boggus, Jr.
                               President and Chief Executive Officer


Date:     August 9,  2001      /s/ Bonnie Boling
       ---------------------   -------------------------------------
                               Bonnie Boling
                               Chief Financial Officer