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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549



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FORM 10-Q



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(Mark One)

|x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------



For the quarterly period ended March 31, 2005



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 number 0-20251



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Crescent Banking Company

(Exact Name of Registrant as Specified in its Charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Georgia                                                        |  | 58-1968323                          
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|7 Caring Way, Jasper, GA                                       |  | 30143                               
|(Address of Principal Executive Offices)                       |  | (Zip Code)                          



(678) 454-2266

(Registrants Telephone Number, Including Area Code)



Not applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)



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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 by check mark whether the registrant is an
accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes ̈No  x



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



As of May 13, 2005, Crescent Banking Company had 2,573,741 shares of its common stock, par value $1.00 per share, issued and
outstanding, of which 16,668 shares were held by Crescent Banking Company as treasury stock.



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##### Table of Contents

CRESCENT BANKING COMPANY



INDEX



|         |  |                                                                                       |  |         
|-------- |  | ------------------------------------------------------------------------------------- |  | --------
|         |  |                                                                                       |  | Page No.
|Part I.  |  | Financial Information                                                                 |  |         
|         |  |                                                                                      
|Item 1.  |  | Consolidated Financial Statements                                                     |  |         
|         |  |                                                                                      
|         |  | Consolidated Balance Sheets                                                           |  | 1       
|         |  |                                                                                      
|         |  | Consolidated Statements of Operations and Comprehensive Income                        |  | 2       
|         |  |                                                                                      
|         |  | Consolidated Statements of Cash Flows                                                 |  | 4       
|         |  |                                                                                      
|         |  | Notes to Consolidated Financial Statements                                            |  | 6       
|         |  |                                                                                      
|Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 12      
|         |  |                                                                                      
|Item 3.  |  | Quantitative and Qualitative Disclosures about Market Risk                            |  | 28      
|         |  |                                                                                      
|Item 4.  |  | Controls and Procedures                                                               |  | 29      
|         |  |                                                                                      
|Part II. |  | Other Information                                                                     |  |         
|         |  |                                                                                      
|Item 1.  |  | Legal Proceedings                                                                     |  | 29      
|         |  |                                                                                      
|Item 2.  |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 29      
|         |  |                                                                                      
|Item 3.  |  | Defaults Upon Senior Securities                                                       |  | 29      
|         |  |                                                                                      
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                   |  | 29      
|         |  |                                                                                      
|Item 5.  |  | Other Information                                                                     |  | 29      
|         |  |                                                                                      
|Item 6.  |  | Exhibits                                                                              |  | 30      



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##### Table of Contents

PART IFINANCIAL INFORMATION



Item 1. Consolidated Financial Statements



CRESCENT BANKING COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)



|                                                                                                                  |  |                |             |   |                   |   |             |  
|----------------------------------------------------------------------------------------------------------------- |  | -------------- | ----------- | - | ----------------- | - | ----------- | -
|                                                                                                                  |  | March 31, 2005 |             |   | December 31, 2004 |  
|Assets                                                                                                            |  |                |             |   |                   |   |             |  
|Cash and due from banks                                                                                           |  | $              | 6,832,847   |   |                   | $ | 11,672,894  |  
|Interest-bearing deposits in banks                                                                                |  |                | 4,699,343   |   |                   |   | 8,991,796   |  
|Federal funds sold                                                                                                |  |                | 27,239,000  |   |                   |   | 13,210,000  |  
|Investment securities available-for-sale                                                                          |  |                | 14,388,563  |   |                   |   | 13,993,047  |  
|Investment securities held-to-maturity, at cost (fair value approximates $2,058,000 and $2,978,000, respectively) |  |                | 2,069,361   |   |                   |   | 2,725,220   |  
|Restricted equity securities                                                                                      |  |                | 2,933,975   |   |                   |   | 2,601,775   |  
|Mortgage loans held for sale                                                                                      |  |                | 963,375     |   |                   |   | 2,002,958   |  
|Loans                                                                                                             |  |                | 462,686,899 |   |                   |   | 433,356,643 |  
|Less allowance for loan losses                                                                                    |  |                | (5,966,983  | ) |                   |   | (5,828,027  | )
|                                                                                                                  |  |                |             |   |                   |   |             |  
|Loans, net                                                                                                        |  |                | 456,719,917 |   |                   |   | 427,528,616 |  
|Premises and equipment                                                                                            |  |                | 12,945,332  |   |                   |   | 11,507,789  |  
|Other real estate owned                                                                                           |  |                | 1,653,793   |   |                   |   | 2,366,955   |  
|Mortgage servicing rights                                                                                         |  |                | 1,431,088   |   |                   |   | 1,505,528   |  
|Cash surrender value of life insurance                                                                            |  |                | 6,324,951   |   |                   |   | 6,270,456   |  
|Deposit intangible                                                                                                |  |                | 315,042     |   |                   |   | 333,574     |  
|Deferred tax asset                                                                                                |  |                | 3,220,038   |   |                   |   | 3,152,968   |  
|Accounts receivable-brokers and escrow agents                                                                     |  |                | 354,006     |   |                   |   | 448,429     |  
|Other assets                                                                                                      |  |                | 6,209,291   |   |                   |   | 5,051,097   |  
|                                                                                                                  |  |                |             |   |                   |   |             |  
|Total Assets                                                                                                      |  | $              | 548,299,921 |   |                   | $ | 513,363,102 |  
|                                                                                                                  |  |                |             |   |                   |   |             |  
|Liabilities                                                                                                       |  |                |             |   |                   |   |             |  
|Deposits                                                                                                          |  |                |             |   |                   |   |             |  
|Noninterest-bearing                                                                                               |  | $              | 33,385,309  |   |                   | $ | 35,333,077  |  
|Interest-bearing                                                                                                  |  |                | 410,292,222 |   |                   |   | 374,753,387 |  
|                                                                                                                  |  |                |             |   |                   |   |             |  
|Total deposits                                                                                                    |  |                | 443,677,531 |   |                   |   | 410,086,464 |  
|Short-term borrowings                                                                                             |  |                | 17,460,000  |   |                   |   | 13,460,000  |  
|Long-term borrowings                                                                                              |  |                | 28,825,000  |   |                   |   | 32,825,000  |  
|Accrued interest and other liabilities                                                                            |  |                | 3,893,921   |   |                   |   | 3,133,434   |  
|Liabilities related to discontinued operations                                                                    |  |                | 3,396,544   |   |                   |   | 3,727,635   |  
|                                                                                                                  |  |                |             |   |                   |   |             |  
|Total liabilities                                                                                                 |  |                | 497,252,996 |   |                   |   | 463,232,533 |  
|Shareholders equity                                                                                              |  |                |             |   |                   |   |             |  
|Common stock, par value $1.00; 10,000,000 shares authorized; 2,499,735 and 2,499,735 issued, respectively         |  |                | 2,499,735   |   |                   |   | 2,499,735   |  
|Capital surplus                                                                                                   |  |                | 17,029,652  |   |                   |   | 17,029,652  |  
|Retained earnings                                                                                                 |  |                | 31,925,926  |   |                   |   | 30,908,966  |  
|Treasury stock, 16,668 shares                                                                                     |  |                | (296,091    | ) |                   |   | (296,091    | )
|Accumulated other comprehensive loss                                                                              |  |                | (112,297    | ) |                   |   | (11,693     | )
|                                                                                                                  |  |                |             |   |                   |   |             |  
|Total shareholders equity                                                                                        |  |                | 51,046,925  |   |                   |   | 50,130,569  |  
|                                                                                                                  |  |                |             |   |                   |   |             |  
|Total liabilities and shareholders equity                                                                        |  | $              | 548,299,921 |   |                   | $ | 513,363,102 |  
|                                                                                                                  |  |                |             |   |                   |   |             |  



See notes to
Consolidated Financial Statements.



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##### Table of Contents

CRESCENT BANKING COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME



|                                                                                             |  |                                      |           |   |      |   |           |  
|-------------------------------------------------------------------------------------------- |  | ------------------------------------ | --------- | - | ---- | - | --------- | -
|                                                                                             |  | For the three months ended March 31, |          
|                                                                                             |  | 2005                                 |           |   | 2004 |  
|Interest income                                                                              |  |                                      |           |   |      |   |           |  
|Loans                                                                                        |  | $                                    | 6,934,399 |   |      | $ | 4,284,745 |  
|Mortgage loans held for sale                                                                 |  |                                      | 46,035    |   |      |   | 17,363    |  
|Taxable securities                                                                           |  |                                      | 189,036   |   |      |   | 250,452   |  
|Deposits in banks                                                                            |  |                                      | 38,690    |   |      |   | 1,808     |  
|Federal funds sold                                                                           |  |                                      | 121,911   |   |      |   | 40,209    |  
|                                                                                             |  |                                      |           |   |      |   |           |  
|Total interest income                                                                        |  |                                      | 7,330,071 |   |      |   | 4,594,577 |  
|                                                                                             |  |                                      |           |   |      |   |           |  
|Interest expense                                                                             |  |                                      |           |   |      |   |           |  
|Deposits                                                                                     |  |                                      | 2,926,860 |   |      |   | 1,614,525 |  
|Short-term borrowings                                                                        |  |                                      | 107,874   |   |      |   | 21,974    |  
|Long-term borrowings                                                                         |  |                                      | 270,798   |   |      |   | 123,342   |  
|                                                                                             |  |                                      |           |   |      |   |           |  
|Total interest expense                                                                       |  |                                      | 3,305,532 |   |      |   | 1,759,841 |  
|                                                                                             |  |                                      |           |   |      |   |           |  
|Net interest income                                                                          |  |                                      | 4,024,539 |   |      |   | 2,834,736 |  
|Provision for loan losses                                                                    |  |                                      | 388,000   |   |      |   | 517,000   |  
|                                                                                             |  |                                      |           |   |      |   |           |  
|Net interest income after provision for loan losses                                          |  |                                      | 3,636,539 |   |      |   | 2,317,736 |  
|                                                                                             |  |                                     
|Non-interest income                                                                          |  |                                      |           |   |      |   |           |  
|Service charges on deposit accounts                                                          |  |                                      | 214,179   |   |      |   | 235,770   |  
|Mortgage servicing fee income                                                                |  |                                      | 212,327   |   |      |   | 520,805   |  
|Gains on call of investment securities                                                       |  |                                      | 259,248   |   |      |   | 3,008     |  
|Gains on sales of SBA loans                                                                  |  |                                      | 178,467   |   |      |   | 13,602    |  
|Other operating income                                                                       |  |                                      | 370,366   |   |      |   | 299,960   |  
|                                                                                             |  |                                      |           |   |      |   |           |  
|Total non-interest income                                                                    |  |                                      | 1,234,587 |   |      |   | 1,073,145 |  
|                                                                                             |  |                                     
|Non-interest expenses                                                                        |  |                                      |           |   |      |   |           |  
|Salaries and employee benefits                                                               |  |                                      | 2,054,395 |   |      |   | 1,609,609 |  
|Capitalized loan origination costs                                                           |  |                                      | (469,516  | ) |      |   | (412,559  | )
|Occupancy and equipment                                                                      |  |                                      | 277,758   |   |      |   | 229,473   |  
|Supplies, postage, and telephone                                                             |  |                                      | 214,183   |   |      |   | 177,411   |  
|Advertising                                                                                  |  |                                      | 105,629   |   |      |   | 99,409    |  
|Insurance expense                                                                            |  |                                      | 43,655    |   |      |   | 45,200    |  
|Depreciation and amortization                                                                |  |                                      | 311,484   |   |      |   | 368,090   |  
|Legal and professional                                                                       |  |                                      | 282,260   |   |      |   | 168,489   |  
|Director fees                                                                                |  |                                      | 42,900    |   |      |   | 58,050    |  
|Mortgage subservicing expense                                                                |  |                                      | 101,193   |   |      |   | 229,612   |  
|Foreclosed asset expense, net                                                                |  |                                      | 61,960    |   |      |   | 64,506    |  
|Other operating expenses                                                                     |  |                                      | 192,303   |   |      |   | 196,961   |  
|                                                                                             |  |                                      |           |   |      |   |           |  
|Total non-interest expenses                                                                  |  |                                      | 3,218,204 |   |      |   | 2,834,251 |  
|                                                                                             |  |                                     
|Income from continuing operations before income taxes                                        |  |                                      | 1,652,922 |   |      |   | 556,630   |  
|Applicable income taxes                                                                      |  |                                      | 635,962   |   |      |   | 217,498   |  
|                                                                                             |  |                                      |           |   |      |   |           |  
|Income from continuing operations                                                            |  |                                      | 1,016,960 |   |      |   | 339,132   |  
|Loss from operations of discontinued mortgage subsidiary, net of tax benefit of $(94,359)    |  |                                      |          |   |      |   | (147,127  | )
|                                                                                             |  |                                      |           |   |      |   |           |  
|Net income                                                                                   |  |                                      | 1,016,960 |   |      |   | 192,005   |  
|Other comprehensive income                                                                   |  |                                      |           |   |      |   |           |  
|Unrealized gains (losses) on securities available for sale arising during period, net of tax |  |                                      | (100,604  | ) |      |   | 140,057   |  
|                                                                                             |  |                                      |           |   |      |   |           |  
|Comprehensive income                                                                         |  | $                                    | 916,354   |   |      | $ | 332,062   |  
|                                                                                             |  |                                      |           |   |      |   |           |  



See Notes to
Consolidated Financial Statements



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CRESCENT BANKING COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Continued)



|                                                               |  |                                      |       |      |   |       |  
|-------------------------------------------------------------- |  | ------------------------------------ | ----- | ---- | - | ----- | -
|                                                               |  | For the three months ended March 31, |      
|                                                               |  | 2005                                 |       | 2004 |  
|Earnings per share                                             |  |                                      |       |      |   |       |  
|Basic earnings per share                                       |  | $                                    | 0.41  |      | $ | 0.08  |  
|Diluted earnings per share                                     |  | $                                    | 0.40  |      | $ | 0.08  |  
|                                                               |  |                                     
|Earnings per share from continuing operations                  |  |                                      |       |      |   |       |  
|Basic earnings per share from continuing operations            |  | $                                    | 0.41  |      | $ | 0.14  |  
|Diluted earnings per share from continuing operations          |  | $                                    | 0.40  |      | $ | 0.13  |  
|                                                               |  |                                     
|Earnings (loss) per share from discontinued operations         |  |                                      |       |      |   |       |  
|Basic earnings (loss) per share from discontinued operations   |  | $                                    |      |      | $ | (0.06 | )
|Diluted earnings (loss) per share from discontinued operations |  | $                                    |      |      | $ | (0.06 | )
|                                                               |  |                                     
|Cash dividends per share of common stock                       |  | $                                    | 0.085 |      | $ | 0.080 |  



See Notes to
Consolidated Financial Statements



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##### Table of Contents

CRESCENT BANKING COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                                            |  |                                      |             |   |      |   |             |  
|------------------------------------------------------------------------------------------- |  | ------------------------------------ | ----------- | - | ---- | - | ----------- | -
|                                                                                            |  | For the three months ended March 31, |            
|                                                                                            |  | 2005                                 |             |   | 2004 |  
|Operating Activities                                                                        |  |                                      |             |   |      |   |             |  
|Net income                                                                                  |  | $                                    | 1,016,960   |   |      | $ | 192,005     |  
|Adjustments to reconcile net income to net cash provided by (used in) operating activities: |  |                                      |             |   |      |   |             |  
|Loss from discontinued operations                                                           |  |                                      |            |   |      |   | 147,127     |  
|Accretion of discount on securities                                                         |  |                                      | 4,722       |   |      |   | (104,038    | )
|Amortization of deposit intangible                                                          |  |                                      | 18,532      |   |      |   | 18,532      |  
|Net gain on call of investment securities                                                   |  |                                      | (259,248    | ) |      |   | (3,007      | )
|Net (gain) loss on sale of other real estate owned                                          |  |                                      | 28,179      |   |      |   | (50,422     | )
|Net gain on sale of premises and equipment                                                  |  |                                      | (2,100      | ) |      |   |            |  
|Amortization of mortgage servicing rights                                                   |  |                                      | 74,440      |   |      |   | 172,527     |  
|Provision for loan losses                                                                   |  |                                      | 388,000     |   |      |   | 517,000     |  
|Depreciation                                                                                |  |                                      | 218,512     |   |      |   | 177,031     |  
|Net decrease in mortgage loans held for sale                                                |  |                                      | 1,039,583   |   |      |   | 103,715     |  
|Acquisition of mortgage servicing rights                                                    |  |                                      |            |   |      |   | (1,447      | )
|Income on life insurance policies                                                           |  |                                      | (54,495     | ) |      |   | (54,752     | )
|Decrease in deferred income taxes                                                           |  |                                      |            |   |      |   | (18,070     | )
|Increase in interest receivable                                                             |  |                                      | (363,703    | ) |      |   | (146,228    | )
|Decrease in accounts receivable  brokers and escrow agents                                 |  |                                      | 94,423      |   |      |   | 2,079,967   |  
|Increase (Decrease) in interest payable                                                     |  |                                      | 170,438     |   |      |   | (12,326     | )
|Net cash used in discontinued operations                                                    |  |                                      | (331,091    | ) |      |   | (8,067,847  | )
|Net change in other assets, liabilities and other operating activities                      |  |                                      | 65,536      |   |      |   | 2,857,650   |  
|                                                                                            |  |                                      |             |   |      |   |             |  
|Net cash provided by (used in) operating activities                                         |  |                                      | 2,108,688   |   |      |   | (2,192,583  | )
|                                                                                            |  |                                     
|Investing Activities                                                                        |  |                                      |             |   |      |   |             |  
|                                                                                            |  |                                     
|Net (increase) decrease in interest-bearing deposits in banks                               |  |                                      | 4,292,453   |   |      |   | (757,712    | )
|Purchase of securities available-for-sale                                                   |  |                                      | (1,036,114  | ) |      |   | (2,025,374  | )
|Proceeds from maturities/calls of securities available-for-sale                             |  |                                      | 468,634     |   |      |   | 1,022,037   |  
|Proceeds from maturities/calls of securities held-to-maturity                               |  |                                      | 914,675     |   |      |   | 1,416,334   |  
|(Purchase) sale of other securities                                                         |  |                                      | (332,200    | ) |      |   | 75,200      |  
|Sale of premise and equipment                                                               |  |                                      | 2,100       |   |      |   |            |  
|Proceeds from the sale of other real estate owned                                           |  |                                      | 715,006     |   |      |   | 588,623     |  
|Net increase in federal funds sold                                                          |  |                                      | (14,029,000 | ) |      |   | (5,207,000  | )
|Net increase in loans                                                                       |  |                                      | (29,879,301 | ) |      |   | (38,803,832 | )
|Purchase of premises and equipment                                                          |  |                                      | (1,656,055  | ) |      |   | (394,194    | )
|                                                                                            |  |                                      |             |   |      |   |             |  
|Net cash used in investing activities                                                       |  |                                      | (40,539,802 | ) |      |   | (44,085,918 | )
|                                                                                            |  |                                     
|Financing Activities                                                                        |  |                                      |             |   |      |   |             |  
|                                                                                            |  |                                     
|Net increase in deposits                                                                    |  |                                      | 33,591,067  |   |      |   | 23,212,411  |  
|Net increase in other borrowings                                                            |  |                                      |            |   |      |   | 16,000,000  |  
|Purchase of treasury stock                                                                  |  |                                      |            |   |      |   | (260,000    | )
|Proceeds from exercise of stock options                                                     |  |                                      |            |   |      |   | 262,471     |  
|Dividends paid                                                                              |  |                                      |            |   |      |   | (197,684    | )
|Net cash used by discontinued operations                                                    |  |                                      |            |   |      |   | (567,891    | )
|                                                                                            |  |                                      |             |   |      |   |             |  
|Net cash provided by financing activities                                                   |  |                                      | 33,591,067  |   |      |   | 38,449,307  |  
|                                                                                            |  |                                     
|Net decrease in cash and due from banks                                                     |  |                                      | (4,840,047  | ) |      |   | (7,829,194  | )
|Cash and due from banks at beginning of year                                                |  |                                      | 11,672,894  |   |      |   | 16,850,685  |  
|                                                                                            |  |                                      |             |   |      |   |             |  
|Cash and due from banks at end of period                                                    |  | $                                    | 6,832,847   |   |      | $ | 9,021,491   |  
|                                                                                            |  |                                      |             |   |      |   |             |  



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##### Table of Contents

CRESCENT BANKING COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS-(continued)



|                                                                   |  |                                      |   |  |          
|------------------------------------------------------------------ |  | ------------------------------------ | - |  | ---------
|                                                                   |  | For the three months ended March 31,
|                                                                   |  | 2005                                 |   |  | 2004     
|Supplemental Disclosure of Cash Flow Information                   |  |                                      |   |  |          
|Cash paid for:                                                     |  |                                      |   |  |          
|Interest                                                           |  | 3,135,094                            |   |  | 1,939,440
|Income taxes                                                       |  | 80,135                               |   |  | 498,992  
|Principal balances of loans transferred to other real estate owned |  | 300,000                              |   |  | 128,413  
|Unrealized gain (loss) on securities available for sale, net       |  | (100,604                             | ) |  | 140,057  



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



March 31, 2005



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. These unaudited consolidated financial statements should be read in conjunction with the Companys consolidated financial statements and notes thereto in
the 2004 annual report on Form 10-K. 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, 2005 are not necessarily indicative of the results of operations for the full year or any other interim periods.



Certain reclassifications have been made to 2004 consolidated financial
information to conform to the presentation of 2005 information. Such reclassifications had no effect on previously reported consolidated net income or consolidated shareholders equity.



NOTE 2DISCONTINUED OPERATIONS



On November 4, 2003, the Company entered into a definitive agreement with
Carolina Financial Corporation (Carolina) to sell the wholesale residential mortgage business conducted by its subsidiary, CMS. The transaction closed December 31, 2003. Under the definitive agreement, Carolina purchased all of
CMSs mortgage loans, pipeline mortgage loans and premises and equipment and assumed all leases and liabilities related to the transferred assets. The assets were sold at their carrying value. The Company was to be paid 100% of the profits from
the mortgage pipeline during the first 60 days following closing as well as 30% of the pre-tax income of the business for the nine months following the first 60-day period. The Company received no payments from Carolina from either period due to the
losses experienced by Carolinas mortgage subsidiary. The Company retained the mortgage servicing portfolio, which was approximately $263 million at March 31, 2005.



Summarized information for the operations of the discontinued mortgage subsidiary is as follows:



|                                                                |  |                                      |   |      |   |          |  
|--------------------------------------------------------------- |  | ------------------------------------ | - | ---- | - | -------- | -
|                                                                |  | For the three months ended March 31, |  
|                                                                |  | 2005                                 |   | 2004 |  
|Revenues                                                        |  | $                                    |  |      | $ | 193,419  |  
|Expenses                                                        |  |                                      |  |      |   | 434,905  |  
|                                                                |  |                                      |   |      |   |          |  
|Pretax loss from operations of discontinued mortgage subsidiary |  | $                                    |  |      | $ | (241,486 | )
|                                                                |  |                                      |   |      |   |          |  



6



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##### Table of Contents

NOTE 2DISCONTINUED OPERATIONS (Continued)



The consolidated balance sheets at March 31, 2005 and December 31, 2004 include no assets and include liabilities of
$3,396,544 and $3,727,635, respectively, related to discontinued operations. The liabilities included in the consolidated balance sheets related to discontinued operations are the allowance for the recourse liability. When the Company operated its
wholesale residential mortgage business, mortgage loans held for sale were carried at the lower of aggregate cost or market price, and therefore no reserve for mortgage loans held for sale was carried. When a loan was sold, the Company typically
made representations and warranties to the purchasers and insurers that the Company had properly originated and serviced the loans under state laws, investor guidelines and program eligibility standards. The Company relied on the underwriting
department to ensure compliance with individual investor standards prior to the sale of loans along with reliance on the quality control department to randomly test loans that had been sold. Purchasers of loans typically conducted their own review
of the loans, and the Company regularly made representations and warranties to purchasers of mortgage loans that, if breached, would require the Company to indemnify the purchaser for losses or to repurchase the loans. At March 31, 2005 and December
31, 2004, the Company had approximately $7.6 million and $8.0 million of mortgage loans, respectively, for which it had agreed to indemnify the purchaser for losses suffered by the purchaser. In the event that the purchaser of these loans
experiences any losses with respect to the loans, the Company will be required to indemnify the purchaser for its losses or to repurchase the loans from the purchaser. The Company has set up a specific allowance for the recourse liability for the
loans on which the Company has already become obligated to make indemnification payments to the purchaser and an estimated allowance for the recourse liability for probable future losses from loans that the Company may have to indemnify. The
estimated recourse liability at March 31, 2005 and December 31, 2004 for future losses was $3.4 million and $3.7 million, respectively, and was estimated based upon historical information on the number of loans indemnified and the average loss on an
indemnified loan, including higher risk loans secured by manufactured housing. The table below shows the changes in the allowance for recourse obligation from December 31, 2004 to March 31, 2005.



Changes in the allowance for recourse obligation are as
follows:



|                                    |  |      |           |  
|----------------------------------- |  | ---- | --------- | -
|                                    |  | 2005 |          
|Balance at December 31, 2004        |  | $    | 3,727,635 |  
|Provisions for recourse obligations |  |      |          |  
|Losses indemnified                  |  |      | (331,091  | )
|                                    |  |      |           |  
|Balance at March 31, 2005           |  | $    | 3,396,544 |  
|                                    |  |      |           |  



NOTE 3CASH FLOW INFORMATION



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



NOTE 4SERVICING PORTFOLIO



The Company services residential loans for various
investors under contract for a fee. As of March 31, 2005, December 31, 2004 and March 31, 2004, the Company provided servicing to a portfolio of loans with principal balances totaling $263.1 million, $284.3 million and $696.3 million, respectively.
These servicing rights were retained following the sale of the wholesale retail mortgage operations previously conducted by CMS.



7



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##### Table of Contents

NOTE 5EARNINGS (LOSS) PER SHARE



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



|                                              |  |                                   |           |   |                                        |           |                  |   |       |  
|--------------------------------------------- |  | --------------------------------- | --------- | - | -------------------------------------- | --------- | ---------------- | - | ----- | -
|                                              |  | Three Months Ended March 31, 2005 |          
|                                              |  | Net Income (Numerator)            |           |   | Weighted- Average Shares (Denominator) |           | Per-Share Amount |  
|Consolidated                                  |  |                                   |           |   |                                        |           |                  |   |       |  
|Basic earnings per share                      |  | $                                 | 1,016,960 |   |                                        | 2,483,067 |                  | $ | 0.41  |  
|Effect of dilutive securities (stock options) |  |                                   |           |   |                                        | 71,994    |                  |   |       |  
|Diluted earnings per share                    |  | $                                 | 1,016,960 |   |                                        | 2,555,061 |                  | $ | 0.40  |  
|                                              |  |                                   |          
|Continuing Operations                         |  |                                   |           |   |                                        |           |                  |   |       |  
|Basic earnings per share                      |  | $                                 | 1,016,960 |   |                                        | 2,483,067 |                  | $ | 0.41  |  
|Effect of dilutive securities (stock options) |  |                                   |           |   |                                        | 71,994    |                  |   |       |  
|Diluted earnings per share                    |  | $                                 | 1,016,960 |   |                                        | 2,555,061 |                  | $ | 0.40  |  
|                                              | 
|                                              |  | Three Months Ended March 31, 2004 |          
|                                              |  | Net Income (loss) (Numerator)     |           |   | Weighted- Average Shares (Denominator) |           | Per-ShareAmount  |  
|Consolidated                                  |  |                                   |           |   |                                        |           |                  |   |       |  
|Basic earnings per share                      |  | $                                 | 192,005   |   |                                        | 2,465,817 |                  | $ | 0.08  |  
|Effect of dilutive securities (stock options) |  |                                   |           |   |                                        | 47,577    |                  |   |       |  
|Diluted earnings per share                    |  | $                                 | 192,005   |   |                                        | 2,513,394 |                  | $ | 0.08  |  
|                                              |  |                                   |          
|Continuing Operations                         |  |                                   |           |   |                                        |           |                  |   |       |  
|Basic earnings per share                      |  | $                                 | 339,132   |   |                                        | 2,465,817 |                  | $ | 0.14  |  
|Effect of dilutive securities (stock options) |  |                                   |           |   |                                        | 47,577    |                  |   |       |  
|Diluted earnings per share                    |  | $                                 | 339,132   |   |                                        | 2,513,394 |                  | $ | 0.13  |  
|                                              |  |                                   |          
|Discontinued Operations                       |  |                                   |           |   |                                        |           |                  |   |       |  
|Basic earnings (loss) per share               |  | $                                 | (147,127  | ) |                                        | 2,465,817 |                  | $ | (0.06 | )
|Effect of dilutive securities (stock options) |  |                                   |           |   |                                        | 47,577    |                  |   |       |  
|Diluted earnings (loss) per share             |  | $                                 | (147,127  | ) |                                        | 2,513,394 |                  | $ | (0.06 | )



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##### Table of Contents

NOTE 6SUPPLEMENTAL SEGMENT INFORMATION



Prior to December 31, 2003, the Company had two reportable segments: (1) commercial banking, and (2) wholesale mortgage
banking. The commercial banking segment provides traditional banking services (including retail mortgage loan originations) offered through Crescent Bank & Trust Company, the Companys wholly-owned commercial banking subsidiary (the
Bank). The wholesale mortgage banking segment provided wholesale mortgage loan origination and servicing offered through Crescent Mortgage Services, Inc., the Companys wholly-owned mortgage banking subsidiary (CMS). The
Company discontinued its wholesale mortgage operations through the sale of its wholesale mortgage business conducted by CMS effective December 31, 2003 (See Note 2. Discontinued Operations).



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



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



|                                      |  |                                           |             |                  |   |          |              |  |       |  |   |            
|------------------------------------- |  | ----------------------------------------- | ----------- | ---------------- | - | -------- | ------------ |  | ----- |  | - | -----------
|                                      |  | For the three Months Ended March 31, 2005
|                                      |  | Commercial Banking                        |             | Mortgage Banking |   |          | Eliminations |  | Total
|Interest income                       |  | $                                         | 7,330,071   |                  | $ |         |              |  |      |  | $ | 7,330,071  
|Interest expense                      |  | $                                         | 3,305,532   |                  | $ |         |              |  |      |  | $ | 3,305,532  
|                                      |  |                                           |             |                 
|Net interest income                   |  | $                                         | 4,024,539   |                  | $ |         |              |  |      |  | $ | 4,024,539  
|Provision for loan loss               |  | $                                         | 388,000     |                  |   |         |              |  |      |  | $ | 388,000    
|Other revenue from external customers |  | $                                         | 1,234,587   |                  | $ |         |              |  |      |  | $ | 1,234,587  
|Other expenses                        |  | $                                         | 3,218,204   |                  | $ |         |              |  |      |  | $ | 3,218,204  
|Segment pre-tax earnings              |  | $                                         | 1,652,922   |                  | $ |         |              |  |      |  | $ | 1,652,922  
|Segment assets                        |  | $                                         | 548,299,921 |                  | $ |         |              |  |      |  | $ | 548,299,921
|                                      | 
|                                      |  | For the three Months Ended March 31, 2004
|                                      |  | Commercial Banking                        |             | Mortgage Banking |   |          | Eliminations |  | Total
|Interest income                       |  | $                                         | 4,594,577   |                  | $ | 56,040   |              |  |      |  | $ | 4,650,617  
|Interest expense                      |  | $                                         | 1,759,841   |                  | $ | 82,310   |              |  |      |  | $ | 1,842,151  
|                                      |  |                                           |             |                 
|Net interest income (expense)         |  | $                                         | 2,834,736   |                  | $ | (26,270  | )            |  |      |  | $ | 2,808,466  
|Provision for loan loss               |  | $                                         | 517,000     |                  |   |         |              |  |      |  | $ | 517,000    
|Other revenue from external customers |  | $                                         | 1,073,145   |                  | $ | 137,378  |              |  |      |  | $ | 1,260,945  
|Other expenses                        |  | $                                         | 2,834,251   |                  | $ | 352,594  |              |  |      |  | $ | 3,237,266  
|Segment pre-tax earnings/(loss)       |  | $                                         | 556,630     |                  | $ | (241,486 | )            |  |      |  | $ | 315,145    
|Segment assets                        |  | $                                         | 392,473,259 |                  | $ | 314,013  |              |  |      |  | $ | 392,787,272



NOTE 7Stock Compensation
Plans



SFAS No. 123, Accounting for Stock-Based
Compensation, encourages all entities to adopt a fair value based method of accounting for employee stock compensation plans, whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the
service period, which is usually the vesting period. However, it also allows an entity to continue to measure compensation cost for those plans using the intrinsic value based method of accounting prescribed by Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees, whereby compensation cost is the excess, if any, of the quoted market price of the stock at the grant date (or other measurement date) over the amount an employee must pay to acquire the
stock. As prescribed by Opinion No. 25, no compensation cost is recognized for stock options issued under the Companys stock option plans that have no intrinsic value at grant date. Compensation cost is recognized ratably over the vesting
period for stock options which do have intrinsic value at the grant date. The Company has elected to continue with the accounting methodology in Opinion No. 25 and, as a result, has provided pro forma disclosures of net income and earnings per share
and other disclosures, as if the fair value based method of accounting had been applied.



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##### Table of Contents

Note 7Stock Compensation Plans (Continued)



The following table illustrates the effect on net income and earnings per share as if the Company had applied the fair value
recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.



|                                                                                                                                            |  |                                      |           |      |   |        
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------ | --------- | ---- | - | -------
|                                                                                                                                            |  | For the three months ended March 31,
|                                                                                                                                            |  | 2005                                 |           | 2004
|Net income, as reported                                                                                                                     |  | $                                    | 1,016,960 |      | $ | 192,005
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax
effects |  |                                      | 15,653    |      |   | 7,320  
|                                                                                                                                            |  |                                      |           |      |   |        
|Pro forma net income                                                                                                                        |  | $                                    | 1,001,307 |      | $ | 184,685
|                                                                                                                                            |  |                                     
|Consolidated earnings per share:                                                                                                            |  |                                      |           |      |   |        
|Basic  as reported                                                                                                                         |  | $                                    | 0.41      |      | $ | 0.08   
|Basic  pro forma                                                                                                                           |  | $                                    | 0.40      |      | $ | 0.07   
|Diluted  as reported                                                                                                                       |  | $                                    | 0.40      |      | $ | 0.08   
|Diluted  pro forma                                                                                                                         |  | $                                    | 0.39      |      | $ | 0.07   



NOTE 8BUSINESS COMBINATION



On August 19, 2004, the Company and the Bank signed a
definitive Agreement and Plan of Reorganization (the Merger Agreement), by and among the Company, the Bank, Futurus Financial Services, Inc., a bank holding company incorporated in Georgia and headquartered in Alpharetta, Georgia
(Futurus Financial) and Futurus Bank, N.A., a wholly owned subsidiary of Futurus Financial. On April 1, 2005, the Company and the Bank completed the acquisition of Futurus Financial and Futurus Bank, N.A. Pursuant to the Merger
Agreement, in a series of sequential mergers, Crescent Interim Corporation (Crescent Interim), a Georgia corporation and a newly formed, wholly owned subsidiary of the Bank, merged with and into Futurus Financial, immediately followed by
the merger of Futurus Financial with and into the Bank, which was immediately followed by the merger of Futurus Bank, N.A. with and into the Bank. At the effective time of the mergers, which occurred simultaneously on the same day, but in the
sequence provided for in the preceding sentence, the outstanding shares of Futurus Financial common stock were cancelled and in consideration therefor Futurus Financial shareholders received $10.00 per share in cash, aggregating approximately
$8,166,000, and four holders of such outstanding Futurus Financial shares received restricted shares of the Companys common stock as provided in the Merger Agreement, aggregating stock consideration of $1,957,000. The Bank continues to conduct
the business and operations of Futurus Bank.



Shareholders of
Futurus Financial receiving shares of the Companys common stock in the transaction received, for each share of Futurus Financial common stock, a number of shares of the Companys common stock equal to the quotient obtained by dividing (x)
$10.00 by (y) the average daily closing price of the Companys common stock for the 15 consecutive trading days prior to the closing of the transaction. At April 1, 2005, the average daily closing price of the Companys common stock was
$26.45 which created a quotient of 0.3681. The shareholders of Futurus Financial receiving shares of the Companys common stock in the transaction received 74,006 shares in the aggregate. Shareholders of Futurus Financial receiving cash in the
transaction received $10.00 in cash for each share of Futurus Financial common stock cancelled in the transaction.



The purchase consideration was approximately $10,210,000, including $8,166,000 in cash, $1,957,000 in common stock and $87,000 in stock options. The
purchase price resulted in approximately $3,045,000 in goodwill and $336,000 in core deposit and customer relationship intangible. The intangible asset will be amortized over six years, using an accelerated method. Goodwill will not be amortized but
instead evaluated periodically for impairment. Any future write-down of goodwill and amortization of the intangible asset are not deductible for income tax purposes.



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##### Table of Contents

Note 8BUSINESS COMBINATION (Continued)



The following table summarizes the fair value of assets acquired and liabilities assumed from the acquisition on April 1, 2005.



|                                       |  |   |           
|-------------------------------------- |  | - | ----------
|Assets:                                |  |   |           
|Cash and due from banks                |  | $ | 1,297,000 
|Federal funds sold                     |  |   | 195,000   
|Securities available-for-sale          |  |   | 1,267,000 
|Loans, net                             |  |   | 50,099,000
|Premises and equipment, net            |  |   | 1,864,000 
|Cash surrender value of life insurance |  |   | 1,428,000 
|Goodwill                               |  |   | 3,045,000 
|Premium on deposits purchased          |  |   | 336,000   
|Deferred tax receivable                |  |   | 1,598,000 
|Other assets                           |  |   | 361,000   
|                                       |  |   |           
|Total assets acquired                  |  |   | 61,490,000
|                                       | 
|Liabilities:                           |  |   |           
|Deposits                               |  |   | 50,847,000
|Accrued interest and other liabilities |  |   | 433,000   
|                                       |  |   |           
|Total liabilities assumed              |  |   | 51,280,000
|                                       | 
|Net assets acquired                    |  | $ | 10,210,000
|                                       |  |   |           



The following table presents pro forma
information as if the acquisition had occurred at the beginning of 2005 and 2004. The pro forma information includes adjustments for interest income on loans and securities acquired, amortization of intangibles arising from the transaction,
depreciation expense on property acquired, interest expense on deposits assumed, and the related income tax effects. The pro forma financial information is not necessarily indicative of the results of continuing operations as they would have been
had the transactions been effected on the assumed dates.



|                                                      |  |                                         |       |      |   |      
|----------------------------------------------------- |  | --------------------------------------- | ----- | ---- | - | -----
|                                                      |  | 2005                                    |       | 2004
|                                                      |  | (in thousands,except per share amounts)
|                                                      |  |                                        
|Net interest income from continuing operations        |  | $                                       | 4,542 |      | $ | 3,385
|Net income from continuing operations                 |  | $                                       | 912   |      | $ | 133  
|                                                      |  |                                         |       |      |   |      
|Basic earnings per share from continuing operations   |  | $                                       | 0.36  |      | $ | 0.05 
|                                                      |  |                                         |       |      |   |      
|Diluted earnings per share from continuing operations |  | $                                       | 0.35  |      | $ | 0.05 
|                                                      |  |                                         |       |      |   |      



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##### Table of Contents

Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Special Cautionary Notice Regarding Forward Looking Statements



Certain statements made or incorporated by reference in this report, including those under Managements Discussion and Analysis of Financial
Condition and Results of Operations, and elsewhere, are forward-looking statements within the meaning of, and subject to the protections of, Section 27A of the Securities Act of 1933, as amended (the Securities Act),
and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act).



Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates,
intentions, and future performance, and involve known and unknown risks, uncertainties and other factors, many of which may be beyond our control, and 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.



All statements other than statements of historical fact are statements that may be forward-looking statements. Readers can identify these forward-looking
statements through our use of words such as may, will, anticipate, assume, should, indicate, would, believe, contemplate, expect,
estimate, continue, plan, point to, project, could, intend, target, potential and other similar words and expressions of the future. These
forward-looking statements may not be realized due to a variety of factors, including, without limitation:



| |  |  | the effects of future economic or business conditions;
| | - |  | ------------------------------------------------------



| |  |  | governmental monetary and fiscal policies, as well as legislative and regulatory changes, including changes in tax laws and regulations;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the risks of changes in interest rates on the levels, composition and costs of deposits, loan demand, and the values of loan collateral, securities, and interest sensitive assets
and liabilities;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | credit risks of borrowers;
| | - |  | --------------------------



| |  |  | the effects of competition from a wide variety of local regional national and other providers of financial, investment, and insurance services;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the failure of assumptions underlying the establishment of the allowance for loan losses and other estimates;
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | the risks of mergers, acquisitions and divestitures (including the sale to Carolina of the wholesale residential mortgage business conducted by CMS and the merger with Futurus
Financial), including, without limitation, the related time and costs of implementing such transactions and the possible failure to achieve expected gains, revenue growth and/or expense savings expected from such transactions;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in accounting policies, rules and practices;
| | - |  | ----------------------------------------------------



| |  |  | changes in technology or products may be more difficult or costly, or less effective, than anticipated;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | the effects of war or other conflict, acts of terrorism or other catastrophic events that affect general economic conditions; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



| |  |  | other factors and other information contained in this report and in other reports that the Company makes with the Securities and Exchange Commission (the Commission)
under the Exchange Act.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



All written or oral
forward-looking statements that are made by or are attributable to us are expressly qualified in their entirety by this cautionary notice. We have no obligation and do not undertake to update, revise or correct any of the forward-looking statements
after the date of this report, or after the respective dates on which such statements otherwise are made.



12



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##### Table of Contents

Overview



The Company is made up of the following four entities:



| |  |  | Crescent Banking Company (Crescent), which is the parent holding company of Crescent Bank & Trust Company (Crescent Bank or the Bank) and
Crescent Mortgage Services, Inc. (CMS);
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Crescent Bank, a community-focused commercial bank;
| | - |  | ---------------------------------------------------



| |  |  | CMS, a mortgage banking company; and
| | - |  | ------------------------------------



| |  |  | Crescent Capital Trust I, a Delaware statutory business trust.
| | - |  | --------------------------------------------------------------



For purposes of the following discussion, the words the Company, we, us and our refer to the combined
entities of Crescent Banking Company and its wholly owned subsidiaries, Crescent Bank and CMS. The words Crescent, Crescent Bank or the Bank, and CMS refer to the individual entities of Crescent
Banking Company, Crescent Bank & Trust Company and Crescent Mortgage Services, Inc., respectively. The Companys principal executive offices are located at 7 Caring Way, Jasper, Georgia 30143, and the telephone number at that address is
(678) 454-2266. The Company maintains an Internet website at www.crescentbank.com. The Company is not incorporating the information on that website into this report, and the website and the information appearing on the website are not included in,
and are not part of, this report.



As of March 31, 2005, the
Company had total consolidated assets of approximately $548.3 million, total deposits of approximately $443.7 million, total consolidated liabilities, including deposits, of $497.3 million and consolidated shareholders equity of approximately
$51.0 million. The Companys continuing operations in the commercial banking segment and discontinued operations in the residential mortgage wholesale banking segment are discussed in the Results of Operations section of this
discussion and analysis.



Commercial Banking Business



The Company currently conducts its traditional commercial
banking operations through Crescent Bank. The Bank is a Georgia banking corporation that was founded in August 1989. The Bank is a member of the Federal Deposit Insurance Corporation (the FDIC) and its deposits are insured by the
FDICs Bank Insurance Fund (BIF). The Bank is also a member of the Federal Home Loan Bank of Atlanta.



Through the Bank, the Company provides a broad range of banking and financial services to those areas surrounding Jasper, Georgia. As its primary market
area, the Bank focuses on Pickens, Bartow, Forsyth, Fulton and Cherokee Counties, Georgia and nearby Dawson, Cobb and Gilmer Counties, Georgia, which are situated to the north of Atlanta, Georgia. The Banks commercial banking operations are
primarily retail-oriented and aimed at individuals and small- to medium-sized businesses located within its market area. While the Bank provides most traditional banking services, its principal activities as a community bank are the taking of demand
and time deposits and the making of secured and unsecured consumer loans and commercial loans to its target customers. The retail nature of the Banks commercial banking operations allows for diversification of depositors and borrowers, and the
Banks management believes it is not dependent upon a single or a few customers. The Bank does not have a significant portion of commercial banking loans concentrated within a single industry or group of related industries. However,
approximately 90% of the Banks loan portfolio is secured by commercial and residential real estate in its primary market area. The Company does not consider its commercial banking operations to be seasonal in nature.



Continued Expansion



Consistent with the Companys efforts to better service its market, the
Company has engaged in recent expansion of its business. In 2003, the Bank purchased a tract of land in Bartow County for a future branch site in Adairsville, Georgia. Prior to construction of this branch, we opened a loan production office near our
future branch site in May of 2004. We began construction on our new Adairsville, Georgia branch office in the first quarter of 2005, and we expect to open the branch in June 2005, at which point we will concurrently close the loan production office
in Adairsville, Georgia. With the completion of the construction of the new Adairsville branch, the Bank will have three full service branches in Bartow County, Georgia and will be able to better serve the needs of many local residents. In the
second quarter of 2004, the Bank also purchased a tract of land in Forsyth County near our current branch in Cumming, Georgia, which is being operated out of leased space in a shopping center. We intend to begin construction on a full service branch
to replace our current branch location in the second quarter of 2005. In the fourth quarter of 2004, the Bank also purchased a tract of land in south Cherokee County on which it expects to begin construction on a new full service branch in the
second quarter of 2005. In the first quarter of 2005, the Bank also purchased a tract of land in Cherokee County near our current branch in Canton, Georgia which is currently being operated out of leased



13



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##### Table of Contents

space. We intend to begin construction on new full service branch in the second quarter of 2005 to replace our current branch location in Canton, Georgia.
With the completion of these two branches, the Bank will have three full service branches and a loan production office in Cherokee County, Georgia, which is also one of the fastest growing counties in Georgia. In addition, on April 1, 2005, the Bank
opened a loan production office in Cobb County, Georgia.



On
August 19, 2004, the Company and the Bank signed a definitive Agreement and Plan of Reorganization (the Merger Agreement), by and among the Company, the Bank, Futurus Financial Services, Inc., a bank holding company incorporated in
Georgia and headquartered in Alpharetta, Georgia (Futurus Financial) and Futurus Bank, N.A., a wholly owned subsidiary of Futurus Financial. On April 1, 2005, the Company and the Bank completed the acquisition of Futurus Financial and
Futurus Bank, N.A. Pursuant to the Merger Agreement, in a series of sequential mergers, Crescent Interim Corporation (Crescent Interim), a Georgia corporation and a newly formed, wholly owned subsidiary of the Bank, merged with and into
Futurus Financial, immediately followed by the merger of Futurus Financial with and into the Bank, which was immediately followed by the merger of Futurus Bank, N.A. with and into the Bank. At the effective time of the mergers, which occurred
simultaneously on the same day, but in the sequence provided for in the preceding sentence, the outstanding shares of Futurus Financial common stock were cancelled and in consideration therefor Futurus Financial shareholders received $10.00 per
share in cash, aggregating approximately $8,166,000, and four holders of such outstanding Futurus Financial shares received restricted shares of the Companys common stock as provided in the Merger Agreement, aggregating stock consideration of
$1,957,000. The Bank continues to conduct the business and operations of Futurus Bank.



Shareholders of Futurus Financial receiving shares of the Companys common stock in the transaction received, for each share of Futurus Financial common stock, a number of shares of the Companys common
stock equal to the quotient obtained by dividing (x) $10.00 by (y) the average daily closing price of the Companys common stock for the 15 consecutive trading days prior to the closing of the transaction. At April 1, 2005, the average daily
closing price of the Companys common stock was $26.45 which created a quotient of 0.3681. The shareholders of Futurus Financial receiving shares of the Companys common stock in the transaction received 74,006 shares in the aggregate.
Shareholders of Futurus Financial receiving cash in the transaction received $10.00 in cash for each share of Futurus Financial common stock cancelled in the transaction.



This transaction gives the Company a presence in north Fulton County, Georgia, the area primarily served by Futurus Bank,
N.A.



Challenges for the Commercial Banking Business



The Bank has four primary challenges for the future:
interest rate risk, a competitive marketplace, liquidity and credit risk. The Banks principal source of revenue is its net interest income. Net interest income is the difference between the interest income we receive on our interest-earning
assets, such as investment securities and loans, and the interest expense we pay on our interest-bearing liabilities, such as deposits and borrowings. The greatest risk to our net interest margin is interest rate risk from the potential movement in
interest rates, which if not properly managed, can result in a decrease in earnings or earnings volatility. We manage interest rate risk by maintaining what we believe to be the proper balance of rate sensitive assets and rate sensitive liabilities.
Rate sensitive assets and rate sensitive liabilities are those that can be repriced to current rates within a relatively short time period. Many economists feel that interest rates will continue to slowly rise in 2005. During the 0-90 day period,
during which we are most sensitive to interest rate changes, the Bank is considered asset sensitive, and if rates rise, our net interest margin will improve.



The second challenge for the Companys commercial banking business is that it operates in highly competitive markets. The Bank competes directly for
deposits in its commercial banking market with other commercial banks, savings and loan associations, credit unions, mutual funds, securities brokers, and insurance companies, locally, regionally and nationally, some of which compete with offerings
by mail, telephone, computer and the Internet. In its commercial bank lending activities, the Bank competes with other financial institutions as well as consumer finance companies, mortgage companies and other lenders engaged in the business of
extending credit to customers located in its market area. Interest rates, both on loans and deposits, and prices of services are significant competitive factors among financial institutions generally. Important competitive factors, such as office
location, types and quality of services and products, office hours, customer service, a local presence, community reputation and continuity of personnel, among others, are and continue to be a focus of the Bank. Many of the largest banks operating
in Georgia, including some of the largest banks in the country, also have offices within the Banks market area. Virtually every type of competitor for customers of the type served by the Bank has offices in Atlanta, Georgia, which is
approximately 60 miles away from Jasper. Many of these institutions have greater resources, broader geographic markets and higher lending limits than the Company and may offer various services that the Company does not offer. In addition, these
institutions may be able to better afford and make broader use of media advertising, support services, and electronic technology than the Company. To offset these competitive disadvantages, the Bank depends on its reputation as an independent and
locally-owned community bank, its personal service, its greater community involvement and its ability to make credit and other business decisions quickly and locally.



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The third challenge for the Companys commercial banking business is liquidity, or our ability to
raise funds to support asset growth and sustain our operations. Due to the projected high volume of loan growth for 2005 and future years and the competitive pricing by competitors in several of our market areas, the Banks liquidity could come
under pressure. The Bank has the ability to acquire out of market deposits to supplement deposit growth in our market areas and can borrow an additional $21.0 million in Federal Home Loan Bank advances, if necessary. However, if access to these
funds is limited in any way, then our liquidity and ability to support commercial loan demand could be affected. The Bank may have to increase its deposit rates in the future, which would adversely affect its net interest margin and net income.



The fourth challenge for the Companys commercial banking
business is maintaining sound credit quality. The Banks loan portfolio grew 58% during 2004 and 27% (annualized) during the first quarter of 2005, and the Bank expects this growth to continue during the remainder 2005. Also, during 2004, the
Bank added approximately 10 new loan officers which were mainly related to the addition of two new full service branches and two new loan production offices. With the current focus on growth, the Bank must put into place the proper procedures to be
able to monitor the loan growth including the quality of the loan growth. If the credit quality of the Banks loan portfolio declines, then the Banks ability to raise capital and expand could be limited.



Sale of the Mortgage Banking Business



Prior to the sale of our mortgage operations on December 31, 2003, the
Company originated, sold and serviced mortgage loans through its subsidiary, CMS. The Company incorporated CMS as a separate subsidiary in October 1994 and it served as an approved servicer of mortgage loans sold to the Federal Home Loan Mortgage
Corporation, the Federal National Mortgage Association and private investors. CMS offered wholesale mortgage banking services and provided servicing for residential mortgage loans. On December 31, 2003, the Company completed the sale of its
wholesale residential mortgage business conducted by its subsidiary, CMS, to Carolina Financial Corporation (Carolina) and its subsidiary Crescent Mortgage Corporation (CMC). The Company retained the mortgage servicing
portfolio, which was approximately $263 million at March 31, 2005.



The sale of the wholesale residential mortgage business simplified the Companys business model and allowed us to focus on our core community banking business. The Bank currently operates in some of the fastest growing counties in the
United States and the reinvestment of the capital previously invested in CMS, instead of the Bank, coupled with the net proceeds from the sale of the mortgage operation, will be available to support expansion through internal growth and strategic
acquisitions.



Recent Accounting Developments



In January 2003, the FASB issued FASB Interpretation No. (FIN)
46, Consolidation of Variable Interest Entities. This interpretation addresses the consolidation by business enterprises of variable interest entities as defined in the interpretation. In December 2003, the FASB issued a revision to FIN 46
(FIN 46R) to clarify some of the provisions of FIN 46 and to exempt certain entities from its requirements. Public entities, other than small business issuers, were required to apply FIN 46R no later than the end of the first reporting
period ending after March 15, 2004. The Company adopted both FIN 46 and FIN 46R in 2004. This resulted in the deconsolidation of the Companys statutory business trust subsidiary that issued trust preferred securities and holds the
Companys related junior subordinated debentures issued to such trust. As a result of these transactions and FIN 46R, the Company has a long term liability of $3,605,000 related to the junior subordinated debentures issued by the Company to the
trust and an increase in other assets of $105,000 related to the Companys purchase of the common stock of the trust. We believe the trust preferred securities qualify as Tier 1 regulatory capital under the Federal Reserves former and
newly adopted capital rules.



In March 2004, the Emerging
Issues Task Force (EITF) released EITF Issue 03-01, The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments.The Issue provides guidance for determining whether an investment is
other-than-temporarily impaired and requires certain disclosures with respect to these investments. The recognition and measurement guidance for other-than-temporary impairment has been delayed by the issuance of FASB Staff Position EITF 03-1-1 on
September 30, 2004. The adoption of Issue 03-1 did not result in any other-than-temporary impairment.



In December 2004, the FASB issued SFAS No.123(R), Accounting for Stock-Based Compensation(SFAS No. 123(R)). SFAS No. 123(R)
established standards for the accounting for transaction in which an entity exchanges its equity instruments for goods or services. This Statement focuses primarily on accounting for transactions in which an entity obtains employee services in
share-based payment transactions. SFAS No. 123(R) requires that the fair value of such equity instruments be recognized as an expense in the historical financial statements as services are performed. Prior to SFAS No. 123(R), only certain pro forma
disclosures of fair value were required. The provisions of this Statement are effective for the first interim reporting period of the first fiscal year that begins after December 15, 2005. Accordingly, we will adopt SFAS No. 123(R) commencing with
the quarter ending March 31, 2006. If we had included the cost of employee stock option compensation in our



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consolidated financial statements, our net income for the fiscal years ended December 31, 2004, 2003 and 2002 would have decreased by approximately $74,000,
$41,00 and $44,000, respectively, and our net income for the three months ended March 31, 2005 and March 31, 2004 would have decreased by approximately $16,000 and $7,000, respectively.



Critical Accounting Policies and Estimates



The Companys consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of
America, or GAAP, including prevailing practices within the financial services industry. The preparation of consolidated financial statements requires management to make judgments, involving significant estimates and assumptions, in the
application of certain of its accounting policies about the effects of matters that are inherently uncertain. These estimates and assumptions, which may materially affect the reported amounts of certain assets, liabilities, revenues and expenses,
are based on information available as of the date of the financial statements, and changes in this information over time could materially impact amounts reported in subsequent financial statements as a result of the use of revised estimates and
assumptions. Certain accounting policies, by their nature, have a greater reliance on the use of estimates and assumptions, and could produce results materially different from those originally reported. Based on the sensitivity of financial
statement amounts to the policies, estimates and assumptions underlying reported amounts, the relatively more significant accounting policies applied by the Company have been identified by management as:



| |  |  | the allowance for loan losses;
| | - |  | ------------------------------



| |  |  | the recourse obligation reserve; and
| | - |  | ------------------------------------



| |  |  | the value of mortgage servicing rights;
| | - |  | ---------------------------------------



These policies require the most subjective or complex judgments, and related estimates and assumptions could be most subject to revision as new
information becomes available.



The following is a brief
discussion of the above-mentioned critical accounting policies. An understanding of the judgments, estimates and assumptions underlying these accounting policies is essential in order to understand our reported financial condition and results of
operations.



Allowance for Loan Losses



The establishment of our allowance for loan losses is
based upon our assessments of information available to us at the time of determination, and depends upon a number of factors, including our historical experience, economic conditions and issues with respect to individual borrowers. Evaluation of
these factors involves subjective estimates and judgments that may change.



Recourse Obligation Reserve



In the wholesale mortgage business that we formerly operated, we regularly made representations and warranties to purchasers of our mortgage loans that, if breached, would require us to indemnify the purchaser for
losses or to repurchase the loans, and we considered this practice to be customary and routine. The Company records a specific reserve for the recourse liability for the loans on which the Company has already become obligated to make indemnification
payments to the purchaser and an estimated reserve for the recourse liability for probable future losses from loans that the Company may have to indemnify. The establishment of the recourse obligation reserve is based upon our assessments of
information available to us at the time of determination, and depends upon a number of factors, including our historical experience, industry trends and economic conditions. The Company established this recourse obligation reserve during 2003 with
the increase in the number of loans indemnified and the increase in the occurrence of losses from these loans. The trend of such losses experienced in 2003 continued in 2004 and the first quarter of 2005 and we expect this trend may continue. Before
2002, the Banks history of losses was minimal. Therefore, with the limited amount of history, the evaluation of these factors involves subjective estimates and judgments that may change.



Mortgage Servicing Rights



Mortgage servicing rights represent the cost of acquiring the rights to
service mortgage loans. We amortize those rights in proportion to, and over the period of, estimated future net servicing income. Gains related to the sales of mortgage servicing rights represent the difference between the sales proceeds and the
related capitalized mortgage servicing rights. Mortgage servicing rights are amortized over a life of approximately 5 years. Mortgage servicing rights are evaluated for impairment based upon the fair value of the rights as compared to the amortized
cost. Impairment is determined by stratifying mortgage servicing rights by predominant characteristics, such as interest rates and terms. Impairment is recognized through a valuation allowance for



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an individual stratum, to the extent that the fair value is less than the amortized cost. Quarterly, we have an independent third party determine the fair
value of our mortgage servicing rights and evaluate the mortgage servicing rights portfolio for impairment. At March 31, 2005, no valuation allowances were required for our mortgage servicing rights.



Results of Operations



General Discussion of Our Results



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



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



| |  |  | money we pay on our interest-bearing sources of funds, such as deposits and borrowings.
| | - |  | ---------------------------------------------------------------------------------------



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



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



| |  |  | increases or decreases in the average rates earned and paid on those assets and liabilities;
| | - |  | --------------------------------------------------------------------------------------------



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



| |  |  | the availability and costs of particular sources of funds, such as non-interest bearing deposits, and our ability to match our liabilities to fund our assets.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



In 2003, our other principal source of revenue
were the fees and income we earned from the origination, holding, servicing and sale of residential first mortgage loans and mortgage servicing rights from our discontinued mortgage banking operations. In 2004 and the first quarter of 2005, we
continued to earn fees and income, and expect to continue to earn fees and income, from the servicing and sale of mortgage servicing rights which were retained in the sale of our wholesale mortgage business.



Continuing Operations



Through Crescent Bank, the Company provides a broad range of banking and
financial services to those areas surrounding Jasper, Georgia. As its primary market area, Crescent Bank focuses on Pickens, Bartow, Forsyth, Fulton and Cherokee Counties, Georgia and nearby Dawson, Cobb and Gilmer Counties, Georgia, which are
situated to the north of Atlanta, Georgia. The sale of the Companys wholesale residential mortgage business made available $27 million in capital that we are using to expand our commercial banking business through ongoing branching
initiatives. In 2003, the Bank purchased a tract of land in Bartow County for a future branch site in Adairsville, Georgia. Prior to construction of this branch, we opened a loan production office near our future branch site in May of 2004. We began
construction on our new Adairsville, Georgia branch office in the first quarter of 2005, and we expect to open the branch in June 2005, at which point we will close the loan production office in Adairsville, Georgia. With the completion of the
construction of the new Adairsville branch, the Bank will have three full service branches in Bartow County, Georgia and will be able to better serve the needs of many local residents. In the second quarter of 2004, the Bank also purchased a tract
of land in Forsyth County near our current branch in Cumming, Georgia, which is being operated out of leased space in a shopping center. We intend to begin construction on a full service branch to replace our current branch location in the second
quarter of 2005. In the fourth quarter of 2004, the Bank also purchased a tract of land in south Cherokee County on which it expects to begin construction on a new full service branch in the second quarter of 2005. In the first quarter of 2005, the
Bank also purchased a tract of land in Cherokee County near our current branch in Canton, Georgia which is currently being operated out of leased space. We intend to begin construction on new full service branch in the second quarter of 2005 to
replace our current branch location in Canton, Georgia. With the completion of these two branches, the Bank will have three full service branches and a loan production office in Cherokee County, Georgia, which is also one of the fastest growing
counties in Georgia. In addition, on April 1, 2005, the Bank opened a loan production office in Cobb County, Georgia.



During 2004 and the first quarter of 2005, the Bank has seen a significant increase in non-interest expenses related to its expansion efforts. The costs
associated with the expansion and the costs associated with carrying unleveraged capital have placed a strain on earnings from the commercial banking business. See further discussion below under - Results of Our Commercial Banking
Business.



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Results of Our Commercial Banking Business



Interest Income



Our interest income related to commercial banking increased 60% to $7.3
million for the three months ended March 31, 2005 from $4.6 million for the three months ended March 31, 2004. The increase in 2004 in interest income was the result of both a higher volume of average commercial banking loans and a higher yield from
commercial banking loans. Average commercial banking loans increased $156.5 million, or 53%, to $450.0 million for the three months ended March 31, 2005 from $293.5 million for the three months ended March 31, 2004. This growth in commercial banking
loans was the result of higher loan demand in our service area, as well as the expansion of Crescent Banks operations in 2004 and 2005 in each of Bartow, Cherokee and Forsyth Counties, Georgia. The yield from commercial banking loans increased
from 5.87% for the three months ended March 31, 2004 to 6.20% for the three months ended March 31, 2005. The increase in the yield from commercial banking loans during the first quarter of 2005 compared to the first quarter of 2004 was mainly the
result of the repricing of the commercial banking loan portfolio as the Federal Reserve increased interest rates 175 basis points during 2004 and the first quarter of 2005.



Interest Expense



Our interest expense related to the commercial banking business for the three months ended March 31, 2005 amounted to $3.3 million, compared to $1.8
million for the three months ended March 31, 2004. Interest expense related to commercial banking deposits for the three months ended March 31, 2005 was $2.9 million, compared to $1.6 million for the three months ended March 31, 2004. The increase
in interest expense from interest-bearing deposits from the three months ended March 31, 2004 to the three months ended March 31, 2005 resulted from both the increase in the average balance of interest-bearing deposits and the increase in the cost
of funds of interest-bearing deposits. Average interest-bearing deposits increased approximately $132.4 million, or 51% from $261.1 million for the three months ended March 31, 2004 to $393.5 million for the three months ended March 31, 2005. During
2004 and the first quarter of 2005, the Bank ran several deposit promotions, including a high yield money market account and several certificate of deposit specials, in order to fund the high level of loan growth the Bank has experienced. The
Banks out-of market certificates of deposit also increased from approximately $33.3 million at March 31, 2004 to $53.7 million at March 31, 2005. The cost of funds from commercial banking deposits increased from 2.49% for the three months
ended March 31, 2004 to 3.02% for the three months ended March 31, 2005. This increase in the cost of deposits was primarily due to the Banks promotion of its money market account, the average cost of which increased from 0.87% in the first
quarter of 2004 to 2.79% in the first quarter of 2005. The cost of deposits was also affected by the repricing of time deposits, the average cost of which increased from 2.99% to 3.29%. The Bank has run deposit specials involving increased interest
expense in the last six months of 2004 and the first quarter of 2005 due to strong competition in its market area for local deposits. The increase in interest expense from the first quarter of 2004 to the first quarter of 2005 was also attributable
to an increase in average borrowings. Average borrowings increased approximately $25.4 million from 2004 to 2005. This was primarily attributable to the Bank borrowing an additional $18.0 million in Federal Home Loan Bank advances during the last
three quarters in 2004. In the first three months of 2005 and 2004, interest expense accounted for 49% and 34% of our total commercial banking business expenses, respectively. The increase in this percentage resulted from an increase in interest
expense due to an increase in the cost of funds of interest-bearing deposits and an increase in the average balance of interest-bearing deposits.



Net Interest Income



Our net interest income, net interest margin and interest spread for our commercial banking business for the three months ended March 31, 2005 were $4.0
million, 3.21% and 2.86%, respectively. Our net interest income, net interest margin and interest spread for our commercial banking business for the three months ended March 31, 2004 were $2.8 million, 3.41% and 3.02%, respectively. The increase in
net interest income from 2004 to 2005 was due to an increase of 53% in average commercial banking loans. With this loan growth, the Banks average loans to total funding ratio increased from 91% at March 31, 2004 to 94% at March 31, 2005. The
decrease in net interest margin and interest spread during the three months ended March 31, 2005 compared to the same period in 2004 was due to the increase in yield on the Banks interest earning assets being lower than the increase in cost on
the Banks interest bearing liabilities. In comparing the first quarter of 2005 with the first quarter of 2004, the yield on the Banks interest-earning assets increased 38 basis points while the cost on the Banks interest bearing
liabilities increased 53 basis points. The Bank ran several deposit promotions during the first quarter of 2005, including a high yield money market account and several certificate of deposit specials, which caused the Banks cost of funds from
commercial banking deposits to increase significantly. The Bank has run these deposit specials in the last six months of 2004 and the first quarter of 2005 due to strong competition in its market area for local deposits and in order to fund its high
level of loan growth.



Loan Loss Provisions



For the three months ended March 31, 2005, we made a provision for loan
losses of $388,000 and incurred net charge-offs of $249,044 of commercial banking loans. For the three months ended March 31, 2004, we made a provision for loan losses of $517,000 and incurred net charge-offs of $100,883 of commercial banking loans.
The ratios of net charge-offs to average commercial banking loans outstanding were 0.22% (annualized) for the three months ended March 31, 2005, 0.17% for the year



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ended December 31, 2004 and 0.14% (annualized) for the three months ended March 31, 2004. The Banks charge-offs in the first three months of 2005
consisted of one residential real estate loan charge-off of $103,705, two residential construction loan charge-offs of $66,851 and various installment and other consumer loans charge-offs, while the charge-offs in the first three months of 2004
mainly consisted of one commercial real estate loan charge-off of $65,508 and various installment and other consumer loans charge-offs. The decrease in the amount of the provision for loan losses for the three months ended March 31, 2005 from three
months ended March 31, 2004 mainly related to the decrease in the growth of the loan portfolio in first quarter of 2005 compared to the first quarter of 2004. In first quarter of 2005, the loan portfolio grew $29.3 million while in the first quarter
of 2004 the loan portfolio grew $38.6 million. As a result of changes in our commercial loan portfolio, we adjusted our allowance for loan losses to account for our historical experience with various borrowers. The allowance for loan losses as a
percentage of total commercial banking loans was 1.29%, 1.34% and 1.17% at March 31, 2005, December 31, 2004 and March 31, 2004, respectively.



Non-interest Income



Our non-interest income related to our commercial banking business was $1.2 million in the first three months of 2005 compared to $1.1 million in the
first three months of 2004. In the first quarter of 2005, the Bank had gains on calls of investment securities of approximately $259,000 compared to approximately $3,000 in the first quarter of 2004. Gains on sales of SBA loans also increased from
the first quarter of 2004 to the first quarter of 2005. During the first quarter of 2005, the Bank sold six loans for a total gain of approximately $178,000 while during the first quarter of 2004 the Bank sold two loans for a total gain of
approximately $14,000. These increases in non-interest income were substantially offset by a decrease in mortgage servicing fee income. Mortgage servicing fee income for the first quarter of 2005 was approximately $212,000 compared to approximately
$521,000 for the first quarter of 2004. The decrease in mortgage servicing fee income was due to the Bank carrying a smaller servicing portfolio in 2005 compared to 2004. The decrease in the Banks servicing portfolio was primarily due to pay
downs of loans and the sale of servicing rights with respect to approximately $275.9 million of loans in 2004. At March 31, 2005 the mortgage servicing portfolio was $263 million compared to $284.3 million at December 31, 2004 and $696 million at
March 31, 2004.



Non-interest Expense



Our non-interest expenses related to our commercial banking business (other
than income tax expenses) were $3.2 million for the three months ended March 31, 2005, compared to $2.8 million for the three months ended March 31, 2004. The increase in non-interest expense in 2005 was attributable to an increase in salaries and
benefits of approximately $445,000, occupancy and equipment expense of $48,000, and legal and professional fees of approximately $114,000. These increases were offset by a decrease in our mortgage subservicing expense of $128,000. The increase in
salaries and other payroll expenses in 2004 and the first quarter of 2005 were due to the addition of thirty-three new employees, including ten new banking officers, to our commercial banking staff since March 31, 2004 and due to regular annual
raises. This increase in employees is mainly due to the Bank opening two new full service branches and two new loan production offices since March 31, 2004. The increase in occupancy and equipment expense for the quarter ended March 31, 2005
compared to the same period in 2004 was also mainly attributable the Banks expansion efforts in 2004 and 2005 and the related increases in its lease expense, depreciation expense, maintenance expense and utility costs. The increase in legal
and professional fees for the quarter ended March 31, 2005 compared to the same period in 2004 was also a result of the growth and expansion of our commercial banking business, including expenses related to employee search firms, third-party loan
review fees and architectural fees. Mortgage subservicing expense decreased for the three months ended March 31, 2005 compared to the same period in 2004. The reason for the decrease in mortgage subservicing expense is due to the Bank carrying a
smaller servicing portfolio in 2005 compared to 2004. At March 31, 2005 the mortgage servicing portfolio was $263 million compared to $696 million at March 31, 2004.



In the first quarter of 2005, non-interest expenses were decreased by an increase in the amount of commercial banking costs
netted against commercial banking loan origination fees. Loan origination fees and certain direct costs of loans are accounted for in accordance with SFAS No. 91, Accounting for Nonrefundable Fees and Costs Associated with Originating or
Acquiring Loans and Indirect Costs of Leases. The costs are netted against the fees and recognized in income either over the life of the loans or when the loans are sold. The costs that are netted against the fees are reported as a
reduction of non-interest expenses in the statement of income. For the three months ended March 31, 2005, the amount of commercial banking costs netted against commercial banking loan origination fees totaled $469,516, compared to $412,559 for the
three months ended March 31, 2004.



Pretax Net Income



In the first three months of 2005, our commercial banking
pre-tax income was $1.7 million compared to pre-tax income of approximately $557,000 for the three months ending March 31, 2004. Pretax income for the three months ended March 31, 2005 increased approximately $1.1 million, or 197%, compared to the
three months ended March 31, 2004. An increase in net interest income of approximately $1.2 million was the main reason for the increase in pretax income during the first quarter of 2005. The increase in net interest income was mainly due to an
increase of 53% in average commercial banking loans over the three months ended March 31, 2004. See further discussion above under -Results of Operations-Results of Our Commercial Banking Business-Net Interest Income.



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Income Taxes



The effective income tax rate for our commercial banking business for the three months ended March 31, 2005 and March 31,
2004 was 38.48% and 39.07%, respectively. The commercial banking business had larger permanent income tax differences in the first quarter of 2005 compared to the first quarter of 2004 due to state income tax credits paid which reduced the effective
tax rate in the first quarter of 2005.



Discontinued Operations



On December 31, 2003, the Company completed the sale of
its wholesale residential mortgage business conducted by CMS, to Carolina and its subsidiary CMC. In connection with the sale, Carolina and CMC purchased substantially all of CMS mortgage loans, pipeline mortgage loans, and premises and
equipment and assumed responsibility for all leases and liabilities related to the transferred assets.



Following the completion of the sale of assets, the Company and Carolina operated under the terms of a transition services agreement pursuant to which we
continued to provide certain mortgage loan origination services and various other services to Carolina while Carolina obtained the requisite state and government-sponsored entity licenses and approvals necessary to operate the business. The
transition services agreement contemplated us originating mortgage loans in the name of CMS and then immediately selling those loans to Carolina or one of its affiliates. These loans were funded through warehouse facilities maintained by Carolina.
Our obligation to provide services to Carolina under the transition services agreement terminated on July 31, 2004, although Carolina remains obligated to provide certain services to us.



Although the Company will continue to offer retail mortgage products through the Bank, the sale of the wholesale mortgage
operations will enhance the stability of the Companys earnings as interest rate changes will have a much smaller impact on the Companys overall operations. The sale of the Companys wholesale residential mortgage business has also
made available $27 million in capital that we had previously been required to maintain in CMS in order to meet certain financial ratios that were conditions of our warehouse credit facilities. We are using this additional available capital to expand
our commercial banking business through our ongoing branching initiatives.



In addition to making additional capital available to our commercial banking business, the sale of the Companys wholesale residential mortgage business has also resulted in a reduction in the Companys
leverage as it is no longer required to maintain the $290 million in warehouse borrowing capacity which had previously been required to fund our wholesale mortgage loan originations.



Results of Our Mortgage Banking Business



Following the sale of our wholesale residential mortgage business, our mortgage banking business operations during the first
quarter of 2004 mainly consisted of activity and costs associated with winding down the wholesale mortgage business. During the first quarter of 2005, the Company had no results of operations related to the mortgage banking business.



For the three months ended March 31, 2005, the Company had no revenues or
expenses related to the wholesale mortgage banking business. For the three months ended March 31, 2004, the revenues and net loss from the wholesale mortgage banking business were approximately $193,000 and $147,000. Revenues for the first quarter
of 2004 mainly consisted of $71,000 in the recovery of mortgage servicing receivables, $39,000 in mortgage fee income and $56,000 in interest income on repurchased mortgage loans. The expenses mainly consist of professional fees related to the
completion of the sale of the mortgage banking business of approximately $140,000 and bonuses paid to the former mortgage executives for the collection of mortgage servicing receivables along with their employer payroll taxes for the payment of
salary and bonus of approximately $168,000.



Financial Condition



General Discussion of Our Financial Condition



Total Assets



During the first quarter of 2005, our total assets increased $34.9 million,
or 7%, to $548.3 million from $513.4 million as of December 31, 2004. The increase in total assets from December 31, 2004 was mainly comprised of a $29.3 million, or 7%, increase in the Banks commercial loans. Our increase in total assets
corresponded with a $33.6 million, or 8%, increase in deposits from December 31, 2004. At March 31, 2004, we had total assets of $392.9 million.



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Interest-Earning Assets



Our interest-earning assets are comprised of:



| |  |  | commercial banking loans;
| | - |  | -------------------------



| |  |  | mortgage loans held for sale;
| | - |  | -----------------------------



| |  |  | investment securities;
| | - |  | ----------------------



| |  |  | interest-bearing balances in other banks; and
| | - |  | ---------------------------------------------



| |  |  | temporary investments.
| | - |  | ----------------------



At March 31, 2005, interest-earning assets totaled $515.0 million and represented 94% of total assets. This represents a $38.1 million, or 8%, increase
from December 31, 2004, when interest-earning assets totaled $476.9 million, or 93%, of total assets. This increase was mainly related to increases of $29.3 million in the Banks commercial banking loan portfolio and $9.7 million in the
Banks interest-bearing deposits with other banks and federal funds sold from December 31, 2004. See Financial ConditionFinancial Condition of Our Commercial Banking Business below. At March 31, 2004, our
interest-earning assets totaled $356.6 million and represented 91% of our total assets.



Allowance for Loan Losses



Our assessment of the risk associated with extending credit and our evaluation of the quality of our loan portfolio is reflected in the allowance for loan losses. We maintain an allowance for our commercial banking loan portfolio only, as
detailed below under Financial ConditionFinancial Condition of Our Commercial Banking Business.



Premises and Equipment



We had premises and equipment of $12.9 million at March 31, 2005, compared to $11.5 million at December 31, 2004 and $8.4 million at March 31, 2004. The
increase in premises and equipment from December 31, 2004 to March 31, 2005 was primarily due to the purchase of a parcel of land in Cherokee County for approximately $1.1 million for a future branch site in Canton, Georgia, and expenses related to
the construction of a full service branch in Adairsville, Georgia in Bartow County to replace the current loan production office. The increase of $4.5 million from March 31, 2004 to March 31, 2005 was attributable to the Bank purchasing two parcels
of land in Cherokee County for a total cost of approximately $2.5 million for two future branch sites, purchasing one parcel of land in Forsyth County for a total of approximately $444,000 for a future branch site that will replace our current
leased office in Cumming, Georgia, constructing of a full service branch in Cartersville, Georgia in Bartow County that was completed in 2004 with a total cost of approximately $990,000 and construction of a full service branch in Adairsville,
Georgia in Bartow County that will replace the current loan production office.



Cash Surrender Value of Life Insurance



In 1999, Crescent Bank provided a supplemental retirement plan to its banking officers funded with life insurance. In the first quarter 2000, we added our directors to the supplemental retirement plan. At March 31,
2005, the total cash value of life insurance was $6.3 million. At December 31, 2004 and March 31, 2004, the total cash value of the life insurance was $6.3 million and $5.6 million, respectively. The increase of $0.7 million from March 31, 2004 to
March 31, 2005 was due to policy earnings and the purchase of additional life insurance with the addition of one new officer to the supplemental retirement plan.



Financial Condition of Our Commercial Banking Business



Total Commercial Banking Loans



During the first three months of 2005, our average commercial banking loans
were $450.0 million. These loans constituted 91% of our average consolidated earning assets and 83% of our average consolidated total assets. For the first three months of 2004, we had average commercial banking loans of $293.5 million, or 88% of
our average consolidated earning assets and 77% of our average consolidated total assets. For the twelve month period ended December 31, 2004, we had average commercial banking loans of $351.9 million, or 90% of our average consolidated earning
assets and 80% of our average consolidated total assets. Commercial banking loans at March 31, 2005, December 31, 2004 and March 31, 2004 were $462.7 million, $433.4 million and $313.1 million, respectively. The 53% increase in average commercial
banking loans during the three month period ending March 31, 2005 compared to the same period in 2004 was the result of higher loan demand in the Banks service area, as well as the expansion of the Banks operations in each of Bartow,
Cherokee, and Forsyth Counties, Georgia.



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Loan Loss Allowance



The allowance for loan losses represents managements assessment of the risk associated with extending credit and its
evaluation of the quality of the commercial loan portfolio. We maintain our allowance for loan losses at a level that we believe is adequate to absorb the risk of loan losses in the loan portfolio. In determining the appropriate level of the
allowance for loan losses, we apply a methodology that has both a specific component and a general component. Under the specific component of the methodology, each loan is graded:



| | (1) | at the time of the loans origination;
| | --- | --------------------------------------



| | (2) | at each of the Banks loan review meetings; and
| | --- | -----------------------------------------------



| | (3) | at any point in time when payments due under the loan are delinquent or events occur which may affect the customers ability to repay loans.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------



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



| | (1) | the value of collateral;
| | --- | ------------------------



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



| | (3) | prevailing and forecasted economic conditions; and
| | --- | --------------------------------------------------



| | (4) | the Banks historical experience with similar loans.
| | --- | ----------------------------------------------------



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



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



We apply both the specific and general components of the methodology, together with regulatory guidance, to determine an appropriate level for the
allowance for loan losses. We also hire independent loan review consultants on an annual basis to review the quality of the loan portfolio and the adequacy of the allowance for loan losses. The provision for loan losses during a particular period is
a charge to earnings in that period in order to maintain the allowance for loan losses at a level that is estimated to be adequate to cover losses based upon the methodology.



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 compared to a group of peer banks identified by the regulators. During their routine
examinations of banks, the Federal Deposit Insurance Corporation, or the FDIC, and the Georgia Department of Banking and Finance, or the Georgia Department, may require a bank to make additional provisions to its allowance
for loan losses when, in the opinion of the regulators, their credit evaluations and allowance for loan loss methodology differ materially from ours.



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 loss
that 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 $6.0 million, or 1.29%
of total commercial banking loans, at March 31, 2005, $5.8 million, or 1.34% of total loans at December 31, 2004, and $3.7 million, or 1.17% of total commercial banking loans at March 31, 2004. During the first three months of 2005, we made a
provision for loan losses of $388,000, which was primarily due to the $29.3 million increase we experienced in commercial banking loans during that period. Net charge-offs for the three months ended March 31, 2005 were $249,044, or 0.22%
(annualized) of average loans outstanding. Net charge-offs for the year ended December 31, 2004 were $607,150, or 0.17% of average loans outstanding, and for the three months ended March 31, 2004 were $100,883, or 0.14% (annualized) of average
outstanding loans. The determination of the reserve level rests upon our judgment about factors affecting loan quality, assumptions about the economy and historical experience. Our judgment as to the adequacy



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of the allowance for loan losses is evaluated periodically based on a review of all significant loans, with a particular focus on loans that are past due and
other loans that we believe require attention. We believed that the allowance at March 31, 2005 was adequate at that time to cover risk of losses in our loan portfolio; however, our judgment is based upon a number of assumptions, which we believed
at that time to be reasonable, about events that may or may not actually be realized. There is no assurance that charge-offs will not exceed the allowance for loan losses or that additional increases in the allowance for loan loss will not be
required at any time in the future. As a result of a general slowdown in the economy and the uncertainties in the economy created by the war against terrorism, additions to the allowances and charge-offs may become necessary. Also, regulatory
authorities in the ordinary course of their examinations may require the Bank to increase its allowance for loan losses based on circumstances existing at such time.



Total Non-Performing Commercial Banking Assets



We define non-performing commercial banking loans as non-accrual and renegotiated commercial banking loans. Crescent
Banks policy is to discontinue the accrual of interest on loans that are 90 days past due unless they are well secured and in the process of collection. We recognize interest on these non-accrual loans only when we receive the interest.
Crescent Bank had approximately $155,000 of commercial banking loans contractually past due more than 90 days and still accruing interest as of March 31, 2005 compared to approximately $397,000 and $1.6 million, respectively, as of December 31, 2004
and March 31, 2004. Our non-performing commercial banking loans at March 31, 2005 amounted to $2.7 million compared to $1.4 million at December 31, 2004 and $571,000 at March 31, 2004. Crescent Bank had no renegotiated commercial banking loans at
March 31, 2005, December 31, 2004 or March 31, 2004. The increase in non-performing commercial banking loans from December 31, 2004 to March 31, 2005 was mainly related to one loan relationship. This loan relationship totaling approximately $1.0
million is secured by commercial farming equipment, a residential home and mobile homes with land lots; however, during the first quarter of 2005 the Bank discovered problems with the title to the mobile homes and land lots that may result in this
loan being less well-secured than the Bank had originally determined in granting the loan.



The Bank experienced a slight deterioration in the loan portfolio in 2004 and 2005. This deterioration was mainly attributable to the slow down in the economy over the past year, and the related credit and repayment
risks created by that slow down. The Bank has evaluated these loan relationships and foreclosed properties, and, based on available information, presently feels that it is in a well-secured position on most of these relationships. The Banks
loan portfolio is predominantly secured by commercial and residential real estate in its primary market areas. We presently believe that any losses that may come from these loan relationships have been considered in our determination of the loan
loss allowance.



Total non-performing commercial assets totaled
$4.4 million at March 31, 2005. This compares to total non-performing commercial assets of approximately $3.7 million at December 31, 2004 and $5.6 million at March 31, 2004. The Bank foreclosed upon two commercial banking loans totaling
approximately $300,000 during the first three months of 2005. Both properties are residential homes under construction. During the first three months of 2005, the Bank sold two properties totaling approximately $74,000 that were foreclosed upon in
2003 and two properties totaling approximately $396,000 that were foreclosed upon in 2004. The Bank sold one residential home for a loss of approximately $21,000 and three properties consisting of vacant residential home lots for a net loss of
$7,000. The Bank also had one loan of approximately $243,000 on a residential home that had been foreclosed upon in 2004 pay-off in full during the first quarter of 2005. Of the Banks $1.6 million in foreclosed properties that have not been
sold, $1.0 million are related to three loan relationships. One of the properties totaling approximately $215,000 is a residential home located in Pickens County, Georgia. During the fourth quarter of 2004, the Bank wrote down this property by
approximately $35,000 based upon new appraisals and evaluations of the market for the property. The second of the properties totaling approximately $481,000 is a residential subdivision development in Dalton, Georgia, which was originally foreclosed
on in 2003 and recorded at a value of approximately $990,000. The Bank sold 17 lots of the residential subdivision development for approximately $509,000 during 2004 and the first quarter of 2005 and owns an additional 18 lots in the subdivision.
The other property totaling approximately $300,000 consists of two residential homes under construction that were foreclosed on from a residential home builder in the first quarter of 2005. Of the remaining $629,000 in foreclosed properties,
approximately $336,000 is residential homes, $250,000 is mobile homes with land lots and $43,000 is vacant land lots. Crescent Bank is currently holding the foreclosed properties for sale. The foreclosed properties have been recorded at the lower of
cost or market less the costs to sell the properties. The Bank does not foresee any further material losses from these loans and properties.



The following table shows Crescent Banks commercial banking assets that we believe warrant special attention due to the potential for loss, other
than the non-performing commercial banking loans and foreclosed properties related to the commercial banking loans. Potential problem loans represent commercial banking loans that are presently performing, but where management has doubts concerning
the ability of the respective borrowers to meet contractual repayment terms. Potential problem commercial loans increased approximately $206,000 from December 31, 2004 to March 31, 2005. The increase in potential problem commercial loans from
December 31, 2004 to March 31, 2005 was mainly related to one loan relationship with a residential home builder totaling approximately $975,000. The loan relationship is secured by three residential homes under construction and the entire loan
relationship was placed on non-accrual status in April 2005. This increase in potential problem



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loans in the first quarter of 2005 was offset by the foreclosure on a potential problem loan relationship totaling approximately $380,000 and by a charge-off
of a potential problem loan relationship of approximately $121,000. Management feels that the loans categorized as potential problem loans at March 31, 2005 are adequately collateralized and believes that any losses that may come from these loan
relationships have been considered in our determination of the loan loss allowance.



|                                                                                                                 |  |                |           |   |                   |   |           |                |  |   |           |  
|---------------------------------------------------------------------------------------------------------------- |  | -------------- | --------- | - | ----------------- | - | --------- | -------------- |  | - | --------- | -
|                                                                                                                 |  | March 31, 2005 |           |   | December 31, 2004 |   |           | March 31, 2004 | 
|Non-performing loans (1)                                                                                         |  | $              | 2,721,437 |   |                   | $ | 1,367,757 |                |  | $ | 571,469   |  
|Foreclosed properties                                                                                            |  |                | 1,653,793 |   |                   |   | 2,366,955 |                |  |   | 5,021,104 |  
|                                                                                                                 |  |                |           |   |                   |   |           |                |  |   |           |  
|Total non-performing assets                                                                                      |  | $              | 4,375,230 |   |                   | $ | 3,734,712 |                |  | $ | 5,592,573 |  
|                                                                                                                 |  |                |           |   |                   |   |           |                |  |   |           |  
|Loans 90 days or more past due on accrual status                                                                 |  | $              | 155,290   |   |                   | $ | 396,726   |                |  | $ | 1,578,339 |  
|Potential problem loans (2)                                                                                      |  | $              | 5,251,208 |   |                   | $ | 5,044,911 |                |  | $ | 1,989,021 |  
|Potential problem loans/total loans                                                                              |  |                | 1.13      | % |                   |   | 1.16      | %              |  |   | 0.64      | %
|Non-performing assets/total loans and foreclosed properties                                                      |  |                | 0.94      | % |                   |   | 0.86      | %              |  |   | 1.76      | %
|Non-performing assets and loans 90 days or more past due on accrual status/total loans and foreclosed properties |  |                | 0.98      | % |                   |   | 0.95      | %              |  |   | 2.25      | %

---

|(1) | Defined as non-accrual loans and renegotiated loans.
|--- | ----------------------------------------------------

|(2) | Loans identified by management as potential problem loans (criticized loans), but that are still accounted for on an accrual basis.
|--- | -----------------------------------------------------------------------------------------------------------------------------------



Total Investment Securities



The Bank invests in U.S. Government and government agency obligations,
mortgage-backed securities, corporate securities, restricted equity 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, federal funds sold, restricted equity securities
and interest-bearing deposits with other banks totaled $51.3 million at March 31, 2005, compared to $41.5 million at December 31, 2004 and $40.9 million at March 31, 2004. At March 31, 2005, the Bank had federal funds sold and interest-bearing
deposits with other banks of $31.9 million, compared to $22.2 million at December 31, 2004 and $19.2 million at March 31, 2004. The increase in federal funds sold and interest-bearing deposits with other banks of $9.7 million from December 31, 2004
was due to the Bank increasing its local deposits in order to fund the purchase of Futurus Financial Services, Inc. on April 1, 2005. Investment securities and restricted equity securities totaled $19.4 million at March 31, 2005, compared to $19.3
million at December 31, 2004 and $21.7 million at March 31, 2004. The restricted equity securities consist of shares held in the Federal Home Loan Bank of Atlanta in the amount of approximately $2.8 million and shares held in The Bankers Bank in the
amount of $165,975 at March 31, 2005.



Unrealized gains
(losses) on securities amounted to $(187,162) at March 31, 2005, $278,603 at March 31, 2004 and $(19,488) at December 31, 2004. We have not specifically identified any securities for sale in future periods, which, if so designated, would require a
charge to operations if the market value would not be reasonably expected to recover prior to the time of sale. Management of the Bank believes all unrealized losses as of March 31, 2005 represent temporary impairment resulting from temporary
changes in the interest rate market and not as a result of credit deterioration. Total impairment represents less than 2% of amortized cost. All bonds held at March 31, 2005 that have unrealized losses are rated AAA by Moodys and AAA by
Standard and Poors rating agencies. In addition, all of the securities are backed by the U.S. Government or one of its agencies or quasi-agencies.



Total Commercial Bank Deposits



Crescent Banks commercial deposits totaled $443.7 million, $410.1 million and $307.8 million at March 31, 2005, December 31, 2004 and March 31,
2004, respectively, representing an increase of 8.2% over the year ended December 31, 2004 and 44% over the three-month period ended March 31, 2004. Commercial deposits averaged $432.1 million during the three-month period ended March 31, 2005,
$346.4 million during the twelve-month period ended December 31, 2004 and $301.2 million during the three-month period ended March 31, 2004. The increase in deposits from December 31, 2004 to March 31, 2005 is due to the Bank running several deposit
promotions during the first quarter of 2005, including a high yield money market account and several certificate of deposit specials. Certificates of deposit within the Banks market area have increased approximately $24.8 million and money
market accounts have increased approximately $12.4 million since December 31, 2004. The Bank has run deposit specials involving increased interest expense in the last six months of 2004 and in the first quarter of 2005 due to the strong competition
in its market area for local deposits, and in order to fund the high level of loan growth that the Bank has experienced. Interest-bearing deposits represented 92% of total deposits at March 31, 2005, compared to 91% at December 31, 2004 and 89% at
March 31, 2004. Certificates of deposits comprised 74% of total interest-bearing deposits for March 31, 2005, compared to 74% at December 31, 2004 and 78% at March 31, 2004. The composition of these deposits is



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indicative of the interest rate-conscious market in which Crescent Bank operates. We cannot provide any assurance that the Bank will be able to maintain or
increase its market share of deposits in its highly competitive service area. We attempt to offset potential decreases in our share of local deposits by accepting out of market and brokered deposits. The Bank had $53.7 million of out of market and
brokered deposits as of March 31, 2005, compared to $56.7 million and $33.3 million at December 31, 2004 and March 31, 2004, respectively. The cost of brokered deposits has generally been approximately 10 to 15 basis points lower than the costs of
deposits of similar maturity in the local market. However, in the fourth quarter of 2004 and in the first quarter of 2005, the cost of out of market and brokered deposits has increased to levels equal to or in excess of that in our local market. The
costs of out of market and brokered deposits can be volatile, and if our access to these markets is limited in any way, then our liquidity and ability to support commercial loan demand could be affected adversely.



Total Commercial Bank Borrowings



At March 31, 2005, the Bank had borrowed $39.0 million in Federal Home Loan
Bank advances at maturity terms ranging from six months to ten years and with an average rate of 2.87%. In the first quarter of 2005, Crescent Bank has not borrowed any additional funds from the Federal Home Loan Bank. These advances were borrowed
for use with the commercial banking business and are secured by a blanket lien on the Banks 1 4 family first lien mortgage loans, a lien on the commercial banks commercial real estate loans, its investment securities and Federal
Home Loan Bank stock. The Bank had borrowed $21.0 million in Federal Home Loan Bank advances at March 31, 2004.



Financial Condition of Our Mortgage Banking Business



At March 31, 2005 and December 31, 2004, the Company had no assets and liabilities of $3,396,544 and $3,727,635,
respectively, related to discontinued operations. These liabilities consisted of the allowance for the recourse liability. When the Company operated its wholesale residential mortgage business, mortgage loans held for sale were carried at the lower
of aggregate cost or market price, and therefore no reserve for mortgage loans held for sale was carried. When a loan was sold, the Company typically made representations and warranties to the purchasers and insurers that the Company had properly
originated and serviced the loans under state laws, investor guidelines and program eligibility standards. The Company relied on the underwriting department to ensure compliance with individual investor standards prior to the sale of loans along
with reliance on the quality control department to randomly test loans that had been sold. Purchasers of loans typically conducted their own review of the loans, and the Company regularly made representations and warranties to purchasers of mortgage
loans that, if breached, would require the Company to indemnify the purchaser for losses or to repurchase the loans. At March 31, 2005 and December 31, 2004, the Company had approximately $7.6 million and $8.0 million of mortgage loans,
respectively, for which it had agreed to indemnify the purchaser for losses suffered by the purchaser. In the event that the purchaser of these loans experiences any losses with respect to the loans, the Company will be required to indemnify the
purchaser for its losses or to repurchase the loans from the purchaser. The Company has set up a specific allowance for the recourse liability for the loans on which the Company has already become obligated to make indemnification payments to the
purchaser and an estimated allowance for the recourse liability for probable future losses from loans that the Company may have to indemnify. The estimated recourse liability at March 31, 2005 and December 31, 2004 for future losses was $3.4 million
and $3.7 million, respectively, and was estimated based upon historical information on the number of loans indemnified and the average loss on an indemnified loan, including higher risk loans secured by manufactured housing. During the first quarter
of 2005, the Companys allowance for recourse liability was reduced by $331,091 paid to third party purchasers of certain mortgage loans indemnified by the Company.



At March 31, 2005, we carried $1.4 million of mortgage servicing rights on our balance sheet, compared to $1.5 million at
December 31, 2004 and $3.3 million at March 31, 2004. We held servicing rights with respect to loans with unpaid principal balances totaling $263 million at March 31, 2005, compared to $284 million at December 31, 2004 and $696 million at March 31,
2004. The decrease in the Banks servicing portfolio was primarily due to pay downs of loans and the sale of servicing rights with respect to approximately $275.9 million of loans in 2004.



The market value of our servicing portfolio is contingent upon many factors,
including, without limitation, the interest rate environment, the estimated life of the servicing portfolio, the loan quality of the servicing portfolio and the coupon rate of the loan portfolio. According to an independent valuation, the estimated
fair value of our mortgage servicing rights at March 31, 2005 was approximately $2.7 million, compared to the carrying value of $1.4 million. We cannot provide assurance that we will continue to experience a market value of our servicing portfolio
in excess of the cost to acquire the servicing rights, nor can we provide assurance as to the expected life of our servicing portfolio, or as to the timing or amount of any sales of our retained servicing rights.



Capital and Liquidity



Our capital adequacy is measured by risk-based and leverage capital guidelines. Developed by regulatory authorities to
establish capital requirements, the risk-based capital guidelines assign weighted levels of risk to various asset categories. Among other things, these guidelines currently require us to maintain a minimum ratio of 8.0% of total capital to
risk-adjusted assets.



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Under the guidelines, one-half of our required capital must consist of Tier 1 Capital, which would
include such things as our tangible common shareholders equity and any qualifying perpetual preferred stock. The leverage guidelines provide for a minimum ratio of Tier 1 Capital to total assets of 3.0% if we meet certain requirements,
including having the highest regulatory rating, and requires us to cushion the ratio by an additional 1.0% to 2.0% otherwise. The guidelines also specify that bank holding companies that are experiencing internal growth or making acquisitions will
be expected to maintain strong capital positions substantially above the minimum supervisory levels without significant reliance on intangible assets. Higher capital also may be required, depending upon the organizations risk profile.
Furthermore, the guidelines indicate that the Federal Reserve will continue to consider a Tangible Tier 1 Leverage Ratio, calculated without the inclusion of intangible assets, in evaluating proposals for expansion or new activity. The
Federal Reserve has not advised us, and the FDIC has not advised the Bank, of any specific minimum leverage ratio or Tangible Tier 1 Leverage Ratio that we are required to meet. The Bank has agreed with the Georgia Department to maintain a leverage
ratio of 8.0%.



At March 31, 2005, Crescent Banks
leverage ratio was 9.65% compared to 10.27% at December 31, 2004 and 13.45% at March 31, 2004. In first quarter of 2004, following the sale of its wholesale residential mortgage business, CMS contributed $20.75 million in available capital to the
Company, and subsequently, the Company contributed $17.0 million of the $20.75 million to the Bank.



At March 31, 2005, our total consolidated shareholders equity was $51.0 million, or 9.31% of total consolidated assets, compared to $50.1 million,
or 9.77% of total consolidated assets, at December 31, 2004 and $51.8 million, or 13.20% of total consolidated assets, at March 31, 2004. The decrease in the consolidated shareholders equity to total consolidated assets ratio in the first
three months of 2005 was the result of the increase in the Banks total consolidated assets, particularly commercial banking loans, which increased by approximately $29.3 million, or 7%, during this period.



At March 31, 2005, our ratio of total consolidated capital to risk-adjusted
assets was 11.95%, 10.77% of which consisted of tangible common shareholders equity. A quarterly dividend of $0.085 was declared in March 2005 and was paid on April 20, 2005. As of December 31, 2004, total consolidated capital to risk-adjusted
assets was 12.55%, 11.32% of which consisted of tangible common shareholders equity, and as of March 31, 2004, our ratio of total consolidated capital to risk-adjusted assets was 16.33%, 15.30% of which consisted of tangible common
shareholders equity,.



In connection with the completion
of our offering and sale of $3.5 million of trust preferred securities on November 9, 2001, we repaid a portion of our outstanding loan from The Bankers Bank and replaced the remaining $2.6 million that we had outstanding under that loan with a new
$2.6 million line of credit with The Bankers Bank. In June of 2003, the Bank increased its line of credit with The Bankers Bank from $2.6 million to $4.6 million. With this increase, we agreed to increase our minimum capital level from $13 million
to $20 million and to maintain a Tier 1 Leverage Ratio of 7.0% rather than 7.50%. Our borrowings under this line of credit accrue interest at the prime rate, as reported in the Money Rates section of The Wall Street Journal, less 0.50%. Under the
terms of the line of credit, we are required to make payments of interest only for 12 months, due on a quarterly basis, followed by ten equal principal payments over 10 years, with interest due quarterly. We were in compliance with all the covenants
of this line of credit at March 31, 2005. We currently have borrowed the full amount available under this line of credit. Our line of credit with The Bankers Bank is secured by all of the issued and outstanding shares of the common stock of the
Bank. In the event of an uncured default under this line of credit, The Bankers Bank could foreclose upon the common stock of the Bank and deprive the Company of one of its principal sources of income.



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



Our average liquid assets consist of cash and amounts due from banks, interest-bearing deposits in other banks, federal funds sold, mortgage loans held
for sale net of borrowings, investment securities and securities held for sale. These average liquid assets totaled $52.8 million, $46.9 million and $44.4 million during the three month period ended March 31, 2005, the three month period ended March
31, 2004, and the twelve month period ended December 31, 2004, representing 12%, 16% and 11% of average deposits for those periods, respectively. Average liquid assets increased by approximately $5.9 million from December 31, 2004 to March 31, 2005
and as a percentage of average deposits decreased only slightly from December 31, 2004 to March 31, 2005. The Bank on average held a higher balance of federal funds sold and interest-bearing deposits at other banks during the first quarter of 2005
in preparation for the purchase of Futurus Financial Services, Inc. on April 1, 2005. Average net commercial banking loans were 96%, 93% and 95% of average commercial bank deposits and borrowings during the three month periods ended March 31, 2005
and March 31, 2004, and the twelve month period ended December 31, 2004, respectively. Average interest-earning assets were 105%, 106% and 106% of average commercial banking deposits and borrowings during the three month periods ended March 31, 2005
and March 31, 2004, and the twelve month period ended December 31, 2004, respectively. The ratio of average net commercial banking loans to average commercial banking deposits and borrowings increased slightly during the three month period ended
March 31, 2005 indicating that the Banks liquidity is tightening. The increase in this



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percentage is mainly due to the growth in the Banks commercial loan production of approximately $29 million in the first quarter of 2005. In response
to this loan growth, the Bank has run deposit specials involving increased interest expenses in the first quarter of 2005 due to the strong competition in its market area for local deposits, and in order to fund the high level of loan growth that
the Bank has experienced.



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. The Bank maintains federal funds lines of credit totaling $18.5 million and maintains a line of credit up to approximately
$47.4 million at the Federal Home Loan Bank secured by the Banks 1  4 family first lien mortgage loans and commercial real estate loans. At March 31, 2005 we had $39.0 million in the Federal Home Loan Bank Advances outstanding and no
amounts outstanding on our federal funds lines of credit. For the quarter ended March 31, 2005, the average balance in Federal Home Loan Bank advances was approximately $39.0 million. Of the $39.0 million in advances outstanding, all of the advances
are secured by a lien on the Banks 1 -4 family first lien mortgage loans, a lien on commercial real estate loans, its investment securities and Federal Home Loan Bank stock. The Bank currently is holding approximately $12.0 million in
unpledged investment securities and has approximately $8.0 million excess borrowing capacity on its 1  4 family first lien mortgage and commercial real estate lines of credit, which gives the Bank the ability to borrow an additional $20
million in Federal Home Loan Bank advances at March 31, 2005. We presently believe that the Banks liquidity is under pressure due to the volume of commercial bank loan production and the competitive pricing for deposits in the Banks
market area. In 2004, the Bank had used out-of market and brokered deposits to provide liquidity in order to fund loan growth in that out-of market and brokered deposits were usually approximately 10 to 15 basis points lower than the cost of
deposits of similar maturity in the local market. However, in the fourth quarter of 2004 and in the first quarter of 2005, the cost of out of market and brokered deposits increased to levels equal to or even in excess of that in our local market.
The costs of out of market and brokered deposits can be volatile, and if our access to these markets is limited in any way, then our liquidity and ability to support commercial loan demand could be affected adversely. The Bank may have to increase
its deposit rates in the future in its local markets, as it did in the first quarter of 2005, if its liquidity position remains under pressure. In the first quarter of 2005, the Bank ran several deposit promotions, including a high yield money
market account and several certificate of deposit specials, in order to fund the high level of loan growth experienced during this period. Certificates of deposit within the Banks market area increased approximately $24.8 million and money
market accounts increased approximately $12.4 million since December 31, 2004. The cost of funds of interest-bearing deposits increased from 2.83% in the fourth quarter of 2004 to 3.02% in the first quarter of 2005. As seen in the first quarter of
2005, an increase in deposit rates can adversely affect our net interest margin and net income.



Commercial Commitments



The following table presents our other commercial commitments at March 31, 2005. These commitments are not included in our consolidated balance sheet.



Commercial Commitments



|                                 |  |                                            |        |              |   |           |  |           |        |               |   |    |  |   |      
|-------------------------------- |  | ------------------------------------------ | ------ | ------------ | - | --------- |  | --------- | ------ | ------------- | - | -- |  | - | -----
|                                 |  | Amount of Commitment Expiration Per Period
|                                 |  | Total                                      |        | Under 1 Year |   | 1-3 Years |  | 4-5 Years |        | After 5 Years
|                                 |  | (in thousands)                            
|Commitments to extend credit (1) |  | $                                          | 83,261 |              | $ | 55,262    |  | $         | 24,094 |               | $ | 57 |  | $ | 3,848
|Letters of Credit (2)            |  |                                            | 2,431  |              |   | 2,278     |  |           | 153    |               |   |   |  |   |     
|                                 |  |                                            |        |              |   |           |  |           |        |               |   |    |  |   |      
|Total commercial commitments     |  | $                                          | 85,692 |              | $ | 57,540    |  | $         | 24,247 |               | $ | 57 |  | $ | 3,848
|                                 |  |                                            |        |              |   |           |  |           |        |               |   |    |  |   |      

---

|(1) | Commitments to extend credit are agreements to lend to customers in accordance with contractual provisions. These commitments usually are for specific periods or contain termination
clauses and may require the payment of a fee. The total amounts of unused commitments do not necessarily represent future cash requirements, in that commitments often expire without being drawn upon.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Letters of credit and financial guarantees are agreements whereby we guarantee the performance of a customer to a third party. Collateral may be required to support letters of
credit in accordance with managements evaluation.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Off-Balance Sheet Arrangements



At March 31,
2005, the Company has no off-balance sheet arrangements within the meaning of Item 303(a)(4) of Regulation S-K.



27



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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



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



Interest Rate Risk



Interest rate risk is the risk to earnings or market value of equity from
the potential movement in interest rates. The primary purpose of managing interest rate risk is to reduce interest rate volatility and thereby achieve reasonably stable earnings and preserve the value of our equity. Changes in interest rates affect
our volume of mortgage production and the value and retention of mortgage servicing rights. Changes in interest rates also affect our net interest margin and net interest income because such changes affect the amount of interest we receive on
interest-bearing assets and the amount of interest we pay on interest-bearing liabilities.



We manage interest rate risk by maintaining what we believe to be the proper balance of rate sensitive assets and rate sensitive liabilities. The relationship between rate sensitive assets and rate sensitive
liabilities is a key factor in projecting the effect of interest rate changes on net interest income. Rate sensitive assets and rate sensitive liabilities are those that can be repriced to current rates within a relatively short time period. We
monitor the rate sensitivity of earning assets and interest-bearing liabilities over the entire life of these instruments, but place particular emphasis on the twelve-month interval. The following table shows our rate sensitive position at March 31,
2005. Approximately 73% of earning assets and 65% of funding for these earning assets is scheduled to reprice at least once during the next twelve months. The total excess of interest-bearing assets over interest-bearing liabilities, based on a
one-year cumulative time period, was $75.8 million, or 13.8% of total assets.



Interest Rate Sensitivity Gaps

As of March 31, 2005



|                                         |  |                        |         |             |   |         |           |  |   |              |   |       |   |        |  |   |        
|---------------------------------------- |  | ---------------------- | ------- | ----------- | - | ------- | --------- |  | - | ------------ | - | ----- | - | ------ |  | - | -------
|                                         |  | Amounts Repricing In  
|                                         |  | 0-90 Days              |         | 91-365 Days |   |         | 1-5 Years |  |   | Over 5 Years |   | Total
|                                         |  | (thousands of dollars)
|Interest-earning assets                  |  |                        |         |             |   |         |           |  |   |              |   |       |   |        |  |   |        
|Commercial banking loans                 |  | $                      | 301,597 |             | $ | 38,713  |           |  | $ | 96,744       |   |       | $ | 25,633 |  | $ | 462,687
|Investment securities                    |  |                        | 209     |             |   | 655     |           |  |   | 7,406        |   |       |   | 11,122 |  |   | 19,392 
|Mortgage loans held for sale             |  |                        | 963     |             |   |        |           |  |   |             |   |       |   |       |  |   | 963    
|Federal funds sold                       |  |                        | 27,239  |             |   |        |           |  |   |             |   |       |   |       |  |   | 27,239 
|Interest-bearing deposits in other banks |  |                        | 4,699   |             |   |        |           |  |   |             |   |       |   |       |  |   | 4,699  
|                                         |  |                        |         |             |   |         |           |  |   |              |   |       |   |        |  |   |        
|Total interest-earning assets            |  | $                      | 334,707 |             | $ | 39,368  |           |  | $ | 104,150      |   |       | $ | 36,755 |  | $ | 514,980
|                                         |  |                        |         |             |   |         |           |  |   |              |   |       |   |        |  |   |        
|Interest-bearing liabilities             |  |                        |         |             |   |         |           |  |   |              |   |       |   |        |  |   |        
|Interest-bearing demand deposits         |  | $                      | 108,286 |             |   |        |           |  |   |             |   |       |   |       |  | $ | 108,286
|Time deposits                            |  |                        | 56,280  |             |   | 115,556 |           |  |   | 130,170      |   |       |   |       |  |   | 302,006
|Other borrowings                         |  |                        |        |             |   | 17,460  |           |  |   | 23,380       |   |       |   | 5,445  |  |   | 46,285 
|                                         |  |                        |         |             |   |         |           |  |   |              |   |       |   |        |  |   |        
|Total interest-bearing liabilities       |  | $                      | 164,566 |             | $ | 133,016 |           |  | $ | 153,550      |   |       | $ | 5,445  |  | $ | 456,577
|                                         |  |                        |         |             |   |         |           |  |   |              |   |       |   |        |  |   |        
|Interest sensitivity gap                 |  | $                      | 170,141 |             | $ | (93,648 | )         |  | $ | (49,400      | ) |       | $ | 31,310 |  | $ | 58,403 
|Interest sensitivity gap  cumulative    |  | $                      | 170,141 |             | $ | 76,493  |           |  | $ | 27,093       |   |       | $ | 58,403 |  | $ | 58,403 



We continually try to
manage our interest rate sensitivity gap. Attempting to reduce the gap is a constant challenge in a changing interest rate environment and one of the objectives of our asset/liability management strategy. We were in an asset-sensitive position on a
cumulative basis for each time period represented in the preceding table. This means that during each period, if interest rates increase, then the net interest margin will increase, and if interest rates decline, then the net interest margin will
decline. At March 31, 2005, we were within our policy guidelines of rate-sensitive assets to rate-sensitive liabilities of 80-140% at the one-year interval. Since all interest rates and yields do not adjust at the same time or rate, this is only a
general indicator of rate sensitivity.



We use additional tools
to monitor and manage interest rate sensitivity. One of our tools is the shock test. The shock test projects the effect of an interest rate increase and decrease of 100 and 200 basis points on our rate sensitive assets and liabilities, mortgage
servicing rights and mortgage production.



Effects of
Inflation



Inflation generally increases the cost of funds
and operating overhead, and, to the extent loans and other assets bear variable rates, the yields on such assets. Unlike most industrial companies, virtually all of our assets and liabilities are monetary in nature. As a result, interest rates
generally have a more significant impact on our performance than the effects of general levels of



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##### Table of Contents

inflation have. Although interest rates do not necessarily move in the same direction, or to the same extent, as the prices of goods and services, low
inflation or deflation generally have resulted in decreased interest rates while high inflation generally has resulted in increased interest rates. The economy experienced deflation in 2001 and the Federal Reserve reduced interest rates on eleven
occasions for a total of 475 basis points in 2001. Inflation remained low in 2002 and 2003, which reflected that interest rates remained fairly steady in 2002 and 2003, only dropping 50 basis points in 2002 and 25 basis points in 2003. During 2004,
inflation slowly started to increase with the improvement in the economy and the Federal Reserve increased interest rates by 125 basis points. In February and March 2005, the Federal Reserve raised these rates by a total of 50 basis points and
indicated that further increases were likely in the future.



In
addition, inflation results in an increased cost of goods and services purchased, cost of salaries and benefits, occupancy expense and similar items. Inflation and related increases in interest rates generally decrease the market value of
investments and loans held and may adversely affect the liquidity and earnings of our commercial banking and mortgage banking businesses, and our shareholders equity. The value of mortgage servicing rights is also affected by changes in, and
expectations of changes in, interest rates and prepayment rates on mortgage loans. Generally, if interest rates increase, the value of mortgage servicing rights increases, and if prepayment rates increase, the value of mortgage servicing rights
decreases.



Item 4. CONTROLS AND PROCEDURES



Evaluation of Disclosure Controls and Procedures



As of the end of the period covered by this report, the Companys Chief Executive Officer and the Chief Financial Officer evaluated the effectiveness of the Companys disclosure controls and procedures in accordance with Rule
13a-15 under the Exchange Act. Based on their evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Companys disclosure controls and procedures are effective in recording, processing, summarizing and
reporting in a timely manner the information that the Company is required to disclose in its Exchange Act reports.



Changes in Internal Control over Financial Reporting



There were no changes in the Companys internal control over financial reporting that occurred during the period covered by this report that have
materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.



PART IIOTHER INFORMATION



Item 1. Legal ProceedingsNot Applicable



Item 2. Unregistered Sales of Equity Securities and Use of ProceedsNone



Item 3. Defaults Upon Senior SecuritiesNot Applicable



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



The annual meeting of Shareholders of the Company was held on April 21, 2005, at which time the following matters were brought before and voted upon by the shareholders:



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



|                                         |  |               |  |           |  |                               |  |                                 
|---------------------------------------- |  | ------------- |  | --------- |  | ----------------------------- |  | --------------------------------
|Name                                     |  | Term expiring |  | For       |  | Withhold Authority or Against |  | Abstentions and Broker Non-Votes
|J. Donald Boggus, Jr., Class II Director |  | 2008          |  | 2,026,656 |  | 243                           |  | 0                               
|Charles Gehrmann, Class II Director      |  | 2008          |  | 2,026,656 |  | 243                           |  | 0                               



The following
directors terms of office continued after the Annual Meeting of Shareholders: Michael W. Lowe (Class III Director), Janie Whitfield (Class III Director), Cecil Pruett (Class III Director), John S. Dean, Sr. (Class I Director) and
Charles R. Fendley (Class I Director).



Item 5. Other InformationNone



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Item 6. 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  |  | Amendment to the Companys Articles of Incorporation (Incorporated by reference from Exhibit 3.1 to the Companys Registration Statement on Form S-2 filed October 26, 2001,
Commission File No. 333-72300, as amended).
|     | 
|3.3  |  | Bylaws of the Company (incorporated by reference from Exhibit 3.2 to the Form S-4).                                                                                                                                     
|     | 
|31.1 |  | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                 
|     | 
|31.2 |  | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                 
|     | 
|32.1 |  | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                  
|     | 
|32.2 |  | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                  



30



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##### Table of Contents

SIGNATURES



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



|                   |  |                                                            
|------------------ |  | -----------------------------------------------------------
|                   |  | CRESCENT BANKING COMPANY                                   
|                   |  | (Registrant)                                               
|                   | 
|Date: May 13, 2005 |  | /s/ J. DONALD BOGGUS, JR.                                  
|                   |  | J. Donald Boggus, Jr. President and Chief
Executive Officer
|                   | 
|Date: May 13, 2005 |  | /s/ LELAND W. BRANTLEY, JR.                                
|                   |  | Leland W. Brantley, Jr. Chief Financial
Officer            



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##### Table of Contents

EXHIBIT INDEX



|              |  |                                                                                                                                                       
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                           
|31.1          |  | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                               
|              | 
|31.2          |  | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                               
|              | 
|32.1          |  | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|              | 
|32.2          |  | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.