<PAGE>
 
               UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                                  FORM 10-QSB

(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, 1997.

                                 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, $1.00 par value per share, 704,854 shares issued and
outstanding as of May 9, 1997.    No shares are held as treasury stock.



                       Exhibit Index located on page 17.
<PAGE>
 
                           CRESCENT BANKING COMPANY
                                     INDEX

 
PART I   FINANCIAL INFORMATION                                   PAGE NO.
 
Item 1.  Consolidated Financial Statements:
         Consolidated Balance Sheets                                 3
         Consolidated Statements of Operations                       4
         Consolidated Statements of Cash Flows                       5
         Notes to Consolidated Financial Statements                  6
 
Item 2.  Management's Discussion and Analysis                        8
         of Financial Condition and Results of Operations
 
 
Part II  OTHER INFORMATION
 
Item 1.  Legal Proceedings                                          15
 
Item 2.  Changes in Securities                                      15
 
Item 3.  Defaults Upon Senior Securities                            15
 
Item 4.  Submission of Matters to a Vote of Security Holders        15
 
Item 5.  Other Information                                          15
 
Item 6.  Exhibits and Reports on Form 8-K                           15
 

                                                                               2
<PAGE>
 
PART 1 - FINANCIAL INFORMATION

CRESCENT BANKING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS


                                                      March 31      December 31
                                                        1997           1996
                                                     --------------------------
ASSETS
Cash and due from banks                              $ 2,091,373    $ 3,011,864
Federal funds sold                                             -        570,000
Interest bearing deposits in other banks                  95,348         76,703
Securities available for sale                            521,675        882,475
Securities held for investment, at cost (fair
  value of approximately $726,165, at March 31,
  1997 and $749,386 at December 31, 1996)                727,435        748,630

Mortgage loans held for sale                          35,589,563     32,996,668
Loans                                                 30,823,939     28,500,400
Less allowance for loan losses                          (374,912)      (335,512)
                                                     --------------------------
  Loans, net                                          30,449,027     28,164,888

Premises and equipment, net                            2,215,375      2,195,828
Other real estate                                        727,159        727,159
Purchased mortgage servicing rights                    3,733,140      4,093,493
Other assets                                           2,489,751      1,184,644
                                                     --------------------------

                                                     $78,639,846    $74,652,352
                                                     ==========================

LIABILITIES
Deposits
  Noninterest-bearing demand deposits                $ 9,223,170    $12,655,027
  Interest-bearing demand                             12,430,235     11,547,662
  Savings                                              1,438,160      1,366,145
  Time, $100,000 and over                              7,462,193      6,857,157
  Other time                                          24,924,260     23,319,917
                                                     --------------------------
    Total deposits                                    55,478,018     55,745,908

Drafts payable                                         5,821,900      2,438,733
Deferred taxes payable                                   841,390        721,239
Accrued interest and other liabilities                   934,374        675,849
Other borrowings                                       7,751,082      7,396,755
                                                     --------------------------
    Total liabilities                                 70,826,764     66,978,484

SHAREHOLDERS' EQUITY
Common stock, par value $1.00; 2,500,000 shares
  authorized; Issued and outstanding shares - 
  704,854 at 3/31/97 and 12/31/96                        704,854        704,854
Surplus                                                6,355,686      6,355,686
Retained earnings                                        788,633        649,419
Less cost of 3,334 shares acquired for the treasury      (36,091)       (36,091)
    Total stockholders' equity                         7,813,082      7,673,868
                                                     --------------------------
                                                     $78,639,846    $74,652,352
                                                     ==========================


See notes to Consolidated Financial Statements.


                                                                               3
<PAGE>
CRESCENT BANKING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS


                                                    For the three months ended
                                                              March 31,
                                                         1997         1996
                                                    -------------------------
INTEREST INCOME
Interest and fees on loans                           $  753,460    $  647,956
Interest and fees on mortgage loans held for sale       693,362       571,574
Interest on  securities:
     Taxable                                             24,483        21,274
     Nontaxable                                           3,838         3,838
Interest on deposits in other banks                      12,264        23,293
Interest on Federal funds sold                           27,711        20,663
                                                    -------------------------
                                                      1,515,118     1,288,598
                                                    -------------------------
INTEREST EXPENSE
Interest on deposits                                    602,504       470,047
interest on other borrowings                             86,208        26,901
                                                    -------------------------
                                                        688,712       496,948
                                                    -------------------------


Net interest income                                     826,406       791,650
Provision for loan losses                                38,400             -
                                                    -------------------------
Net interest income after provision for loan losses     788,006       791,650

OTHER INCOME
Service charges on deposit accounts                      52,532        44,597
Mortgage servicing fee income                           243,081       182,838
Gestation fee income                                    271,078       249,226
Gains on sale of  mortgage
          servicing rights                              378,915       293,998
Mortgage fee income                                     361,901       273,986
Other                                                     9,692        13,677
                                                    -------------------------
                                                      1,317,199     1,058,322

OTHER EXPENSES
Salaries and employee benefits                          832,467       740,798
Occupancy and equipment expense                          86,777        68,963
Supplies, postage, and telephone                        101,632       103,460
Advertising                                             105,779        74,004
Insurance expense                                        17,810        22,862
Depreciation and amortization                           190,880       151,364
Legal and professional                                  147,920       160,016
Director  fees                                           32,000        16,650
Mortgage subservicing expense                            76,777        62,378
Other                                                   216,719       124,247
                                                    -------------------------
                                                      1,808,761     1,524,742

Income before income taxes                           $  296,444    $  325,230
Applicable income taxes                              $  118,646    $  131,164
                                                    -------------------------

Net income                                           $  177,798    $  194,066
                                                    =========================



Per share of common stock
     Net income                                           $0.25         $0.28
     Cash dividends                                      $0.055            --

Weighted average shares outstanding                     704,854       704,306




                                                                               4

<PAGE>
CRESCENT BANKING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW

<TABLE> 
<CAPTION> 

                                                                      For the three months ended
                                                                               March 31,
                                                                       1997              1996
                                                                    ----------------------------
<S>                                                                 <C>               <C> 
Operating Activities
Net Income                                                           $177,798           $194,066  
Adjustments to reconcile net income  to net                                                       
    cash provided by (used in) operating activities:                                              
            Provision for loan loss                                    38,400                  -  
            Depreciation and amortization                             190,880            151,364  
            Provision for deferred taxes                              120,151            116,974  
            Gains on sales of mortgage servicing rights              (378,915)          (293,998) 
            Increase in mortgage loans held for sale               (2,592,895)        (8,040,422) 
            Increase in interest receivable                           (48,504)          (128,216) 
            Increase  (decrease) in drafts payable                  3,383,167           (247,295) 
            Decrease in interest payable                               10,731             72,439  
            Increase  in other assets and liabilities, net         (1,012,229)          (287,420) 
                                                                   -----------------------------
Net cash used in  operating  activities                              (111,416)        (8,462,508) 
                                                                                                  
                                                                                                  
                                                                                                  
Investing Activities                                                                              
Net (increase) decrease in interest-bearing deposits                                              
            in other banks                                            (18,645)         3,432,918  
Proceeds from sale of securities available for sale                   360,800                  -  
Proceeds from maturities of securities held to maturity                21,195              6,416  
Acquisition of purchased mortgage servicing rights                 (1,375,508)        (1,289,021) 
Proceeds from sales of purchased mortgage                                                         
             servicing rights                                       1,980,493          3,654,588  
Decrease  in Federal funds sold, net                                  570,000          1,020,000  
Net increase  in loans                                             (2,322,539)        (1,061,874) 
Purchase of premises and equipment                                    (72,724)           (95,984) 
                                                                   -----------------------------
Net cash provided by (used in) investing activities                  (856,928)         5,667,043  
                                                                                                  
 Financing Activities                                                                             
Net increase (decrease) in deposits                                  (267,890)         3,655,286  
Net increase in mortgage warehoue line of credit                      354,327            530,000  
Dividends paid                                                        (38,584)                 -  
                                                                   -----------------------------
Net cash provided by  financing activities                             47,853          4,185,286  
                                                                                                  
Net increase in cash and cash equivalents                            (920,491)         1,389,821  
Cash and cash equivalents at beginning of year                      3,011,864          1,791,026  
                                                                   -----------------------------
Cash and cash equivalents at end of year                           $2,091,373         $3,180,847   
                                                                   =============================


Supplemental Disclosure of Cash Flow Information
                             Cash paid  during period for interest   $515,603          $424,509

</TABLE>
 
                                                                               5
<PAGE>
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 1997


NOTE A --- 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-QSB and Article 10 of
Regulations 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,
1997 are not necessarily indicative of the results of operations for the full
year or any interim periods.


NOTE B --- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organizational costs:  The expenses associated with the formation of the Company
--------------------
were paid by the Company and capitalized as organizational costs and are being
amortized on the straight-line method over five years.

Earnings (loss) per share:  Earnings (loss) per share have been computed using
-------------------------
the weighted average number of shares outstanding during each period.

Cash flow information:  For purposes of the statements of cash flows, cash
---------------------
equivalents include amounts due from banks and federal funds sold.

Reclassifications:  Certain amounts as previously reported have been
-----------------
reclassified to conform to the current period presentation.


NOTE C---SERVICING PORTFOLIO

The Bank services residential loans for various investors under contract for a
fee.  As of March 31, 1997, the Bank had purchased loans for which it provides
servicing with principal balances totaling $376.2 million.  The Bank sold $154.5
million of mortgage servicing rights in the first quarter of 1997 for a net gain
of $378,915.

NOTE D---INCOME TAXES

The Company uses the liability method of accounting for income taxes as required
by FASB statement number 109, "Accounting for Income Taxes".

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting

                                                                               6
<PAGE>
 
purposes and the amounts used for income tax purposes.  The significant
temporary differences which create deferred tax assets and liabilities at
January 1, 1996 are outlined in the table below.    Net deferred income tax
liabilities of $841,390 and $721,239 at March 31, 1997 and December 31, 1996,
respectively, are included in other liabilities.
 
Deferred assets:
 
  Allowance for loan losses               $   52,864
  Net operating loss carryforward            549,801
  Alternative minimum tax carryforward        42,084
  Other                                        5,018
                                          ----------
                                             649,767
                                          ----------
 
 Deferred liabilities:
 
  Purchased mortgage servicing rights     $1,206,433
  Tax over book depreciation                 153,025
  Other                                       11,548
                                          ----------
                                           1,371,006
                                          ----------

 Net deferred tax liabilities             $ (721,239)
                                          ==========

                                                                               7
<PAGE>
 
Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS


     The following discussion and analysis of the Company's financial condition
and results of operations should be read in conjunction with the Company's
financial statements and related notes, and the statistical information included
elsewhere herein.  Certain of the matters discussed under this caption,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and elsewhere in this Annual Report may constitute forward-looking
statements for purposes of the Securities Act of 1933, as amended and 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.  The Company's actual results may differ materially
from the results anticipated in these forward looking statements due to a
variety of factors, including, without limitation:  the effects of future
economic conditions; governmental monetary and fiscal policies, as well as
legislative and regulatory changes; the risk of changes in interest rates on the
level and composition of deposits, loan demand, and the values of loan
collateral, securities, and 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 locally,
regionally, nationally and internationally, together with such competitors
offering banking products and services by mail, telephone, and computer and the
Internet; 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.


SUMMARY

     The Company had a profit during the first quarter of 1997 of $177,798
compared to $194,066 for the first quarter 1996.    The decrease in first
quarter profit is the primary result of the expenses associated with the start-
up of the New England mortgage operations, offset by the increase in net
interest income as a result of a higher level of commercial bank loans and
mortgage loans held for sale.

BALANCE SHEETS

     The Company experienced a  5.3% increase in total assets in the first
quarter of 1997as the Bank's assets totaled $78.6 million as of March 31, 1997
compared to $74.7 million at December 31, 1996.  The increase in the Bank's
assets has been primarily related to the increase commercial banking loans and
increase of mortgage production and related increase in drafts payable.  The
drafts payable represents mortgage loans closed.

     Earning assets at March 31, 1997 (comprised of commercial bank loans,
mortgage loans held for sale, investment securities, securities available for
sale, interest-bearing balances in other banks and temporary investments)
totaled $67.8 million or 86.2% of total assets as compared to December 31, 1996
when earning assets totaled $63.8 million or 85.4% of total assets.  The

                                                                               8
<PAGE>
 
increase in earning assets as a percentage of total assets was the result of the
increase in commercial bank loans and mortgage loans held for sale.  Mortgage
loans held for sale totalled $35.6 million at March 31, 1997 compared to $33.0
million at December 31, 1996.   Mortgage loans held for sale averaged $26.5
million and constituted 43.9% of average earning assets and 37.5% of average
assets for the three months ended March 31, 1997.  Average commercial bank loans
of $29.5 million constituted 48.9% of average earning assets and 41.7% of
average total assets during the three months ended March 31, 1997.  Commercial
banking loans  totaled $30.8 million at March 31,1997 compared to $28.5 million
at  December 31, 1996.  Generally loans tend to produce higher yields than
securities and other interest-earning assets.  In addition, mortgage loans held
for sale 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 and regular funding
sources.  Therefore, absolute volume of commercial loans and mortgage loans held
for sale and the volume as a percentage of total earning assets is an important
determinant of net interest margin.

     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 excess
funds at minimal risk while providing liquidity to fund increases in loan demand
or to offset fluctuations in deposits.  Thus, investment securities are managed
in order to minimize the Company's exposure to interest rate risk.  At March 31,
1997, interest-bearing deposits in other banks securities available for sale and
investment securities were $1.3 million compared to $1.7 million at December 31,
1996.   The decrease in liquid funds was the result of the increase of mortgage
loans held for sale and commercial banking loans during the first quarter.
Federal funds sold total $570,000 at December 31, 1996.

     The allowance for loan losses represents a reserve for potential losses in
the loan portfolio.  The provision for loan losses is a charge to earnings in
the current period to maintain the allowance at a level management has
determined to be adequate.  The allowance for loan losses totaled $374,912 or
1.22% of total loans at March 31, 1997,  compared to $335,512 or 1.18% of total
loans at December 31, 1996.  The determination of the reserve level rests upon
management's judgment about factors affecting loan quality and assumptions about
the economy.  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 considers the allowance appropriate and 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 prove valid.  Thus, there can be 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.

     As a result of management's policy of ongoing review of the loan portfolio,
loans may be considered for classification as non-accrual when it is not
reasonable to expect collection of interest under the original terms.  As of
March 31, 1997, the Bank had $165,902 of loans accounted for on a non-accrual
basis, $5,642 contractually past due more than 90 days and no loans considered
to be troubled debt restructurings, as defined by Financial Accounting Standards
Board Statement No. 15 ("FASB #15").  As of December 31, 1996, the Bank had
$167,916 of loans accounted for on a non-accrual basis, $23,140 contractually
past due more than 90 days and no loans considered to be troubled debt
restructurings as defined by FASB #15. Loans identified by management as
potential problem loans (classified and criticized loans) but still on accrual

                                                                               9
<PAGE>
 
totaled $358,697 and $405,089 at March 31, 1997 and December 31, 1996,
respectively.   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 loans will be recognized only when received.

     The mortgage division acquires mortgage loans from small retail-oriented
originators in the Southeast through the utilization of a variety of funding
sources.  These sources include Bank's regular funding sources, a $18.0 million
warehouse line of credit from the Federal Home Loan Bank of Atlanta and a $40
million gestation repurchase agreement.  Under the repurchase agreement, the
Bank sells mortgage loans and simultaneously assigns the related forward sale
commitments to the security broker.    Substantially all of the mortgage loans
are currently being resold in the secondary market to the Federal Home Loan
Mortgage Corporation ("Freddie Mac"), Federal National Mortgage Association
("Fannie Mae"),  and private investors after being "warehoused" for 10 to 30
days.    Warehoused loans must meet secondary market criteria such as amount
limitations and loan to value ratios to qualify for resales to Freddie Mac and
Fannie Mae.  To the extent that the Bank retains the servicing rights on
mortgage loans that it resells, it collects annual servicing fees while the loan
is outstanding.  The Bank periodically sells a portion of its retained servicing
rights in bulk form.  The annual servicing fees and gains on the sale of
servicing rights are an integral part of the mortgage banking operation and its
contribution to net income.  The Bank also currently pays a third party
subcontractor to perform servicing functions with respect to its loans sold with
retained servicing.

     The Company also provides additional mortgage loan activities throughout
the Southeast through its subsidiary Crescent Mortgage Services, Inc. ("CMS").
In the fourth quarter, 1996, the Company announced the expansion of CMS to
provide wholesale mortgage services the Northeast region of the untied States.
The office is located in Manchester, New Hampshire with a market area to include
all of the New England states.  The office is staffed with ten employees with
production beginning in the first quarter 1997.  Funding for the Northeast will
be provided through a $26 million line of credit from Paine Webber and a $5
million line of credit from Home Federal Savings Bank in Springfield, Minnesota.

     For the three months ended March 31, 1997, the mortgage division had
acquired $119.1 million of mortgage loans and sold $116.5 million in the
secondary market with servicing rights retained by the Bank.  The Bank carried
$35.6 million as mortgage loans held for sale on the balance sheet as sales of
the loans were pending.  As of March 31, 1997, capitalized cost of $3.7 million
related to the purchase of the mortgage loans and associated servicing rights
was carried on the balance sheet as purchased mortgage servicing rights.  The
Bank is amortizing the purchased mortgage servicing rights over an accelerated
period.  The Bank sold $154.5 million of mortgage servicing rights in the first
quarter of 1997 for a gain of $378,915.  As of March 31, 1997, the Bank held the
rights with respect to loans with unpaid principal balances totaling $376.2
million.    The market value of the servicing portfolio is contingent upon many
factors including interest rate environment, estimated life of the servicing
portfolio, loan quality of the servicing portfolio and coupon rate of the loan
portfolio.  There can be no assurance that the Bank 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 deposits totalled $55.5 million at March 31, 1997 compared to a
total of $55.7 million at December 31, 1996.  Interest-bearing deposits
represented 83% of total deposits at March 31, 1997, with certificates of
deposit representing 70% of total interest-bearing deposits, compared to

                                                                              10
<PAGE>
 
December 31, 1996  when interest-bearing deposits represented 77% of total
deposits with certificates of deposit representing 70% of total interest-bearing
deposits.  The increase of interest bearing deposits as a percentage of total
deposits was the result of an decrease of non-interest bearing deposits.  The
composition of these deposits is indicative of the rate conscious market in
which the Bank operates.

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.  These guidelines currently require a minimum of
8.00% of total capital to risk-adjusted assets. One-half of the required capital
must consist of tangible common shareholders' equity and qualifying perpetual
preferred stock ("Tier 1 capital").  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, or between 4.0% and 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 Federal Reserve Board will continue to consider a "Tangible tier 1
leverage ratio" (deducting all intangibles) in evaluating proposals for
expansion or new activity.  The Federal Reserve Board 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 it.  The Bank has agreed
with the Department of Banking and Finance to maintain a leverage ratio of 8.0%.
At March 31, 1997, the Bank's leverage ratio was 9.65%.

     As of March 31, 1997  total shareholders' equity was 7.8 million or 9.9% of
total assets compared to $7.7 million or 10.3% of total assets at December 31,
1996.   The decrease in the shareholders' equity to asset ratio from December
31, 1996 to March 31, 1997 was the result of  an 5.3% increase in total assets.
As of March 31, 1997, total capital to risk-adjusted assets was 13.6%, with
13.0% consisting of tangible common shareholders' equity.

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.

     Average liquid assets (cash and amounts due from banks, interest bearing
deposits in other banks, federal funds sold, mortgages held for sale net of
borrowings, drafts payable, investment securities and securities available for
sale) totaled $28.0 million or 50.6% of average deposits at March 31, 1997.
Average liquid assets totaled $24.1 million or 47% of average deposits at
December 31, 1996.

     Average loans were 53% and 55% of average deposits for March 31, 1997 and
December 31, 1996, respectively.  Average deposits were 92% and 90% of average
earning assets for March 31, 1997 and December 31, 1996, respectively.

                                                                              11
<PAGE>
 
     The Bank actively manages the levels, types and maturities of 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
$18 million warehouse line of credit, the Bank also maintains a federal funds
line of credit totalling $4.6 million.  Management believes its liquidity
sources are adequate to meet its operating needs.

     Net interest income, the Bank's primary source of earnings, can fluctuate
with significant interest rate movements.  To lessen the impact of these margin
swings, the balance sheet should be structured so that repricing opportunities
exist for both assets and liabilities in roughly equivalent amounts at
approximately the same time intervals.  Imbalances in these repricing
opportunities at any point in time affect interest rate sensitivity.

     Interest rate sensitivity refers to the responsiveness of interest-earning
assets and interest-bearing 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 impact of interest rate fluctuations on the net
interest margin.  Management generally attempts to maintain a balance between
rate-sensitive assets and liabilities to minimize the overall interest rate
risks 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 more interest sensitive than savings deposits.

     The following table shows the interest sensitivity gaps for four different
time intervals as of March 31,1997.  The Bank was in a cumulative asset-
sensitive position for all time intervals.  This means that during these periods
of asset sensitivity, if interest rates decline, the net interest margin will
decline.  Conversely, if interest rates increase over this period, the net
interest margin will improve.    Since all interest rates and yields do not
adjust at the same velocity, this is only a general indicator of rate
sensitivity.


                         INTEREST RATE SENSITIVITY GAPS
                              AS OF MARCH 31, 1997
<TABLE>
<CAPTION>
                                        Amounts Repricing In
                                  -------------------------------
<S>                             <C>        <C>      <C>      <C>
                                  0 - 90  91 - 365   1-5   Over 5
                                   Days     Days    Years   Years
                                  ------  --------  -----  ------
                                       (Millions of dollars)
 
Interest-earning assets            $52.2   $ 4.8    $ 9.1   $1.7
Interest-bearing liabilities        27.7    18.2     17.3      -
                                   -----   -----    -----   ----
Interest sensitivity gap           $22.6   $(7.2)   $ (.1)  $2.0
                                   =====   =====    =====   ====
</TABLE>

                                                                              12
<PAGE>
 
     The mortgage division has adopted a policy intended to minimize potential
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 into the secondary market or by the purchase of an option to
deliver to the secondary market a mortgage-backed security.

     While other hedging techniques may be used, speculation is not allowed
under the mortgage division's secondary marketing policy.  As of March 31, 1997,
the Bank had in place purchase commitment agreements terminating from April to
July 1997 with respect to an aggregate of approximately $50.4 million to hedge
the  mortgage pipeline of $69.5 for which the Bank has interest rate risk.  At
December 31, 1996, the Financial Accounting Standards Board had issued an
exposure draft "Accounting for Derivative and Similar Financial Instrument and
for Hedging Activities."  The pronouncement would require the forward
commitments to be recorded as an asset or liability with the changes in fair
value recorded in the income statement.  Management has not yet determined the
impact of this pronouncement on its financial statements.

      Attempting to minimize the interest-rate sensitivity gap is a continual
challenge in a changing interest rate environment.

RESULTS OF OPERATIONS

     The primary source of revenue for the Bank is net interest income, which is
the difference between income 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 earning-asset portfolio (which includes
loans) and the availability of particular sources of funds, such as non-interest
bearing deposits.

     The Bank's interest income increased from $1,288,598 for the three months
ended March 31, 1996 to $1,515,118 for the three months ended March 31, 1997.
The Bank's interest expense increased from $496,948 for the three months ended
March 31, 1996 to $688,712 for the three months ended March 31, 1997.  The
increase in interest income is  primarily the result of higher level of
commercial bank loans and mortgage loans held for sale in the first quarter of
1997 compared to the first quarter 1996.  The Bank's average deposits was higher
in the first three months of 1997 compared to the first three months of 1996
resulting in an increase in interest expense.  In addition, the Company's other
borrowings were higher in the first quarter 1997 due to the funding of the New
England mortgage loans held for sale which resulted in a higher level of
interest expense.  For the three months ended March 31, 1997 and 1996, interest
expense accounted for 28% and 25% of total expenses, respectively.

Net interest income for the first quarter 1997 was $826,406.  The Bank's net
interest margin for the first quarter 1997 was 5.5%.  Interest spread, which
represents the difference between average yields on earning assets and average
rates paid on interest-bearing liabilities, was 5.4%.  Net interest income, net

                                                                              13
<PAGE>
 
interest margin and interest spread for the first quarter 1996 were $791,650,
6.5% and 4.8%, respectively.   The increase in net interest income is primarily
the result of a high level of earning assets.

The Bank made provisions to the allowance for loan losses in the total amount of
$38,400 during the first three months of 1997.  The Bank did not make a
provision to the allowance for loan losses in the first quarter 1996 as a
result of the large classified loan being paid in full.  During the first
quarter of 1997, the Bank had no charge-offs.  During the first three months of
1996,  the Bank had net charge-offs of $24,987.

Other income was $1,317,199 for the first three months of 1997, compared to
$1,058,322  for the first three months of 1996.  The increase in other income
for the first three months of 1997 was related to the higher level of gestation
fee income and a higher level of gains on the sale of mortgage servicing rights.
The first quarter 1997, the company sold servicing rights with respect to loans
with a principal balances of $154.5 million for a gain of $378,915 compared to
sale with respect to principal balances of $294.5 for a gain of $293,998 in the
first quarter 1996.  Other expenses were $1,808,761 in the first three months of
1997, compared to $1,524,742 in the first three months of 1996.   The increase
in other expenses in the first three months of 1997 was related to salaries and
other start-up costs related to the New England mortgage operation.

The Company had after-tax net income of $177,798 for the first three months of
1997, compared to a pre-tax net income  of $194,066 for the first three months
of 1996.  The decrease in net income is reflective of the expenses associated
with the start-up of the New England mortgage office.  Income tax as a
percentage of pretax net income was 40% for both the first quarter 1997 and
1996.

EFFECTS OF INFLATION

Assets and liabilities of financial institutions are virtually all monetary in
nature.  Therefore, inflation does not affect a financial institution as
strongly as do changes in interest rates.  While the general level of inflation
does underlie most interest rates, interest rates react more to changes in the
expected rate of inflation and to changes in monetary and fiscal policy.
Inflation affects operating expenses in that salaries, supplies and outside
services tend to increase during periods of high inflation.

                                                                              14
<PAGE>
 
PART II - OTHER INFORMATION

Item 1.  Legal Proceedings - Not Applicable

Item 2.  Changes in Securities -  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 17,
1997 at which the following matters were brought before and voted upon by the
shareholders.
 
     1)  The election of the following person to the        
         Board of Directors to serve for a term             
         expiring on the date of the 1999 Annual Meeting of          
         Shareholders:                                       

         Name               For                  Withhold Authority
 
         Michael Lowe       457,654                   -0-
         Arthur Howell      457,654                   -0-

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

     The following members of the Board of Directors were not up for re-election
at the 1997 Annual Meeting, their terms expiring on the dates of 1998 and 1999
Annual Meetings of Shareholders, respectively: A. James Elliott, Ed. Rast, Harry
C. Howard, and Charles Fendley.

Item 5.  Other Information - Not applicable

Item 6.  Exhibits and Reports on Form 8-K


(a)  Exhibits

     4.   1991 Substitute Stock Option Plan. Incorporated with reference to
          Exhibit 4 on the Company's Form 10K-SB for year ending December 31,
          199 4.
     10.1 Same as Exhibit 4.
     10.2 Employee Agreement with Robert C. Kenknight. Incorporated by reference
          to Exhibit 10.2 to the Company's Form 10K-SB for year ending December
          31,1994.
     11.  Statement regarding computation of per share earnings
     27.  Financial Data Schedule

(b)  none

                                                                              15
<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       5/9/97                    /s/ J. Donald Boggus, Jr.
      -----------------                  --------------------------------
                                         J. Donald Boggus, Jr.
                                         President, Chief Executive Officer, and
                                         Chief Financial Officer



 


 

                                                                              16
<PAGE>
 
                                 INDEX TO EXHIBITS



Exhibit
-------


  4.             1991 Substitute Stock Option Plan.  Incorporated with
                 reference to Exhibit 4 on the Company's Form 10K-SB for
                 year ending December 31, 1994.
       
  10.1           Same as Exhibit 4.
       
  10.2           Employee Agreement with Robert C. KenKnight.
                 Incorporated by reference to Exhibit 10.2 to the
                 Company's Form 10K-SB for year ending December 31,
                 1994.
       
  11.            Statement Regarding Computation of Per Share Earnings
       
  27             Financial Data Schedule

                                                                              17