<PAGE>

                 UNITED STATES SECURITY AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-Q/A

(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

For the quarterly period ended June 30, 2001

                                       OR

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

For the transition period from _____________to ______________.

                         Commission File Number 0-20251

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


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

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

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

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

     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes  X   No  ____
                                              ---

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

     Common stock, $1 par value per share, 1,829,791 shares issued and
outstanding as of August 9, 2001. 6,668 shares are held as treasury stock.

                                       1

<PAGE>

                            CRESCENT BANKING COMPANY

                                      INDEX

<TABLE>
<CAPTION>
Part I.   Financial Information                                               Page No.
<S>                                                                           <C>
Item 1.   Consolidated Financial Statements

             Consolidated Balance Sheets                                          3

             Consolidated Statements of Operations and
               Comprehensive Income (Loss)                                        4

             Consolidated Statements of Cash Flows                                5

             Notes to Consolidated Financial Statements                           6

Item 2.   Management's Discussion and Analysis
            of Financial Condition and Results of Operations                      8

Item 3.   Quantitative and Qualitative Disclosures about Market Risk             19


Part II.  Other Information

Item 1.   Legal Proceedings                                                      20

Item 2.   Changes in Securities                                                  20

Item 3.   Defaults Upon Senior Securities                                        20

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

Item 5.   Other Information                                                      20

Item 6.   Exhibits and Reports on Form 8-K                                       20
</TABLE>

                                        2

<PAGE>

PART I - FINANCIAL INFORMATION

Item 1.  Consolidated Financial Statements

                    CRESCENT BANKING COMPANY AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

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

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

Premises and equipment, net                                                  6,197,857        6,263,251
Other real estate owned                                                        152,644           21,940
Mortgage servicing rights                                                    3,594,008        3,781,355
Cash surrender value of life insurance                                       3,548,890        3,444,326
Premium on deposits purchased                                                  593,019          630,083
Accounts receivable-brokers and escrow agents                                4,419,540        3,753,749
Derivative asset                                                               218,473               --
                                                                         -------------    -------------
Other assets                                                                 2,007,308        1,729,274
                                                                         -------------    -------------
   Total Assets                                                          $ 340,230,143    $ 242,089,004
                                                                         =============    =============

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

Drafts payable                                                              11,439,478        6,261,741
Accrued interest and other liabilities                                       7,616,617        2,911,142
Derivative liability                                                            44,022               --
                                                                         -------------    -------------
Other borrowings                                                           104,588,913       54,946,856
                                                                         -------------    -------------
      Total liabilities                                                    320,507,266      226,288,182

Shareholders' equity
Common stock, par value $1.00; 10,000,000 shares authorized; 1,828,922
   and 1,820,301 issued, respectively                                        1,828,922        1,820,301
Surplus                                                                      9,205,450        9,121,344
Retained earnings                                                            8,716,027        5,772,774
Less cost of 6,668 shares acquired for the treasury                            (36,091)         (36,091)
Accumulated other comprehensive income (loss)                                    8,569         (877,506)
                                                                         -------------    -------------
      Total stockholders' equity                                            19,722,877       15,800,822
                                                                         -------------    -------------

      Total liabilities and stockholders' equity                         $ 340,230,143    $ 242,089,004
                                                                         =============    =============
</TABLE>

See notes to Consolidated Financial Statements.

                                       3

<PAGE>

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

<TABLE>
<CAPTION>
                                                                             For the three months ended    For the six months ended
                                                                                       June 30,                    June 30,
                                                                                  2001         2000          2001         2000
                                                                                  ----         ----          ----         ----
<S>                                                                          <C>             <C>          <C>          <C>
Interest income
Interest and fees on loans                                                      2,267,275    1,638,462     4,485,167    2,987,223
Interest and fees on mortgage loans held for sale                               2,386,764    1,242,362     4,476,704    2,136,436
Interest on securities:
      Taxable                                                                     276,808      268,267       567,528      521,622
      Nontaxable                                                                    3,838        3,838         7,676        7,676
Interest on deposits in other banks                                                83,356        6,395       147,512       36,855
Interest on Federal funds sold                                                     98,736        5,468       139,012       33,189
                                                                               ----------   ----------    ----------   ----------
                                                                                5,116,777    3,164,792     9,823,599    5,723,001

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

Net interest income                                                             1,376,676    1,240,212     2,741,762    2,131,630
Provision for loan losses                                                         115,000      140,000       230,000      235,000
                                                                               ----------   ----------    ----------   ----------
Net interest income after provision for loan losses                             1,261,676    1,100,212     2,511,762    1,896,630

Other income
Service charges on deposit accounts                                               217,435      101,828       404,389      196,774
Mortgage servicing fee income                                                     157,278      282,568       325,324      552,877
Gestation fee income                                                               71,521      190,641       263,407      536,237
Gains on sale of mortgage servicing rights                                      6,614,895    1,315,185     9,121,335    2,202,679
Gains on sale of mortgage loans held for sale                                     221,283        2,803       506,851       61,454
Other                                                                             159,797        3,028       285,524      149,951
                                                                               ----------   ----------    ----------   ----------
                                                                                7,442,209    1,896,053    10,906,830    3,699,972

Other expenses
Salaries and employee benefits                                                  2,396,801      939,486     3,518,070    1,958,605
Net occupancy and equipment expense                                               252,823      256,627       556,541      495,507
Supplies, postage, and telephone                                                  443,239      296,945       814,930      549,450
Advertising                                                                       101,883      112,929       197,919      262,123
Insurance expense                                                                  54,327       45,877       108,013       87,652
Depreciation and amortization                                                     510,398      389,433       931,959      810,245
Legal, professional, outside services                                             166,582       (8,143)      466,964      235,377
Director fees                                                                      47,775       44,075        91,300       79,400
Mortgage subservicing expense                                                      78,548       90,677       130,047      175,468
Other                                                                             754,482      568,804     1,316,042      877,561
                                                                               ----------   ----------   -----------   ----------
                                                                                4,806,858    2,736,710     8,131,785    5,531,388

Income (loss) before income taxes (benefits) and
cumulative effect of a change in accounting principle                           3,897,027      259,555     5,286,807       65,214
Applicable income taxes (benefits)                                              1,510,099       89,321     1,991,865       19,356
                                                                               ----------   ----------    ----------   ----------

Income (loss) before cumulative effect of a change in
accounting principle                                                           $2,386,928   $  170,234    $3,294,942   $   45,858
                                                                               ----------   ----------    ----------   ----------

Cumulative effect of a change in accounting principle                                   0            0       (69,770)           0
                                                                               ----------   ----------    ----------   ----------

Net income (loss)                                                               2,386,928      170,234     3,225,172       45,858

Other comprehensive income (loss), net of tax

Unrealized gains (losses) on securities available for sale arising
during period                                                                      34,459       36,413       886,075      (21,662)
                                                                               ----------   ----------    ----------   ----------

Comprehensive income (loss)                                                    $2,421,387   $  206,647    $4,111,247   $   24,196
                                                                               ==========   ==========    ==========   ==========
</TABLE>

Basic earnings (loss) per common share before

                                       4

<PAGE>


<TABLE>
<S>                                                                            <C>          <C>          <C>          <C>
cumulative effect of a change in accounting principle                          $  1.31      $  0.10      $   1.81     $   0.03
Cumulative effect of a change in accounting principle                             0.00         0.00         (0.04)        0.00
                                                                               -------      -------      --------     --------
Basic earnings (loss) per common share                                         $  1.31      $  0.10      $   1.77     $   0.03
                                                                               =======      =======      ========     ========

Diluted earnings (loss) per common share before cumulative effect of a
change in accounting principle                                                 $  1.29      $  0.09      $   1.78     $   0.03

Cumulative effect of a change in accounting principle                             0.00         0.00         (0.04)        0.00
                                                                               -------      -------      --------     --------
Diluted earnings (loss) per common share                                       $  1.29      $  0.09      $   1.74     $   0.03
                                                                               =======      =======      ========     ========
Cash dividends per share of common stock                                       $0.0775      $0.0750      $ 0.1550     $ 0.1450
</TABLE>

See Notes to Consolidated Financial Statements

                                       5

<PAGE>

CRESCENT BANKING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(Restated)

<TABLE>
<CAPTION>
                                                                                     For the six months ended
                                                                                             June 30,
                                                                                       2001             2000
                                                                                       ----             ----
<S>                                                                                <C>             <C>
Operating Activities
Net Income                                                                            3,225,172          45,858
Adjustments to reconcile net income to net cash provided by
         (used in) operating activities:
            Accretion of discount on securities                                        (419,345)       (496,004)
            Amortization of deposit intangible                                           37,064          37,063
            Amortization of mortgage servicing rights                                   397,200         330,600
            Provision for loan loss                                                     230,000         235,000
            Depreciation                                                                534,759         479,645
            Gains on sales of mortgage servicing rights                              (9,121,335)     (2,202,679)
            Increase in stock options outstanding                                            --          35,949
            Increase in mortgage loans held for sale                                (53,712,777)     (1,790,385)
            Acquisition of mortgage servicing rights                                (13,118,389)     (6,623,831)
            Proceeds from sales of mortgage servicing rights                         22,029,871       7,187,657
            (Increase) decrease in interest receivable                                  207,920        (276,890)
            Increase in accounts receivable                                            (665,791)       (629,024)
            Increase in drafts payable                                                5,177,737       8,522,800
            Increase (decrease) in interest payable                                      27,864        (178,407)
            Decrease in other assets and liabilities, net                             3,324,346          52,740
                                                                                   ------------    ------------
Net cash provided by (used in) operating activities                                 (41,845,704)      4,730,092

Investing Activities
Net (increase) decrease in interest-bearing deposits in other banks                 (10,425,055)        116,837
Acquisition of securities held-to-maturity                                           (4,439,536)     (1,467,580)
Proceeds from maturities of securities available-for-sale                             2,651,194              --
Proceeds from maturities of securities held-to-maturity                                 543,857              --
Acquisition of securities available for sale                                                 --        (260,500)
Purchase of life insurance policies                                                          --      (1,058,607)
Decrease in Federal funds sold, net                                                 (12,786,000)             --
Net increase in loans                                                               (12,351,160)    (22,748,187)
Purchase of premises and equipment                                                     (469,365)       (907,312)
                                                                                   ------------    ------------

Net cash used in investing activities                                               (37,276,065)    (26,325,349)

Financing Activities
Net increase in deposits                                                             34,649,793      11,959,025
Net increase in other borrowings                                                     49,642,057       9,805,704
Proceeds from exercise of stock options                                                  92,727         194,583
Dividends paid                                                                         (281,920)       (256,213)
                                                                                   ------------    ------------

Net cash provided by financing activities                                            84,102,657      21,703,099

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

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


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

                                       6

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2001


NOTE 1 ---- GENERAL

The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments necessary
for a fair presentation of the financial position and results of operations of
the interim periods have been made. All such adjustments are of a normal
recurring nature. Results of operations for the three and six months ended June
30, 2001 are not necessarily indicative of the results of operations for the
full year or any interim periods.

NOTE 2 ---- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH FLOW INFORMATION

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

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

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

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

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

                                       7

<PAGE>

derivative instruments used to hedge the locked pipeline, are marked to fair
value and recorded as a component of gain on sale of loans in the income
statement.

At the date of adoption, the Company recorded certain transition adjustments as
required by FAS 133. The impact on net income, net of tax, was approximately
$(69,770). Through June 30, 2001 the impact on net income, net of tax, was
$108,160. The $69,770 FAS 133 transition adjustment reflects the January 1, 2001
fair value of the Company's free standing derivative instruments of $112,533,
net of the related tax effect of $42,763. The $108,160 FAS 133 effect on net
income during the six month period ended June 30, 2001 reflects the change in
the fair value of the Company's free standing derivatives of $174,451, net of
the related tax effect of $66,291.

NOTE 3 --- RESTATEMENT OF FINANCIAL STATEMENTS

The Company's statements of income have been restated to properly report loan
origination fees as being netted against loan origination costs as required by
SFAS No. 91. The effect of the restatement for periods ended June 30, 2001 and
2000 is as follows:

<TABLE>
<CAPTION>
                               For the Six Months      For the Three Months
                               ------------------      --------------------
                              Ended June 30, 2001       Ended June 30, 2001
                              -------------------       -------------------
                                As                        As
                                                          --
                            Previously       As       Previously         As
                                                      ----------
                             Reported     Restated     Reported      Restated
                             --------                  --------
     <S>                    <C>          <C>          <C>           <C>
     Net interest income    $ 7,046,331  $2,741,762   $3,856,052    $1,376,676

     Total other operating
          expenses          $12,436,354  $8,131,785   $7,286,234    $4,806,858

<CAPTION>
                               For the Six Months      For the Three Months
                               ------------------      --------------------
                              Ended June 30, 2000       Ended June 30, 2000
                              -------------------       -------------------
                                As                        As
                                                          --
                            Previously       As       Previously         As
                                                      ----------
                             Reported     Restated     Reported      Restated
                             --------                  --------
     <S>                    <C>          <C>          <C>           <C>
     Net interest income    $3,827,399   $2,131,630   $2,216,612    $1,240,212
     Total other operating
          expenses          $7,227,157   $5,531,388   $3,713,110    $2,736,710
</TABLE>

This restatement had no effect on the Company's income before extraordinary
items, net income or earnings per common share.

The Company's statements of cash flows have been restated to properly report the
acquisition and proceeds from sales of mortgage servicing rights as an operating
activity rather than as an investing activity. The effect of the restatement for
periods ended June 30, 2001 and 2000 is as follows:

<TABLE>
<CAPTION>
                                 For the Six Months          For the Six Months
                                 ------------------          ------------------
                                Ended June 30, 2001         Ended June 30, 2000
                                -------------------         -------------------
                                 As                          As
                                                             --
                             Previously         As       Previously          As
                                                         ----------
                              Reported       Restated     Reported       Restated
                              --------                    --------
     <S>                    <C>           <C>           <C>            <C>
     Net cash provided by
     (used) in operating
     activities             $(50,757,186) $(41,845,704) $  4,166,266   $  4,730,092

     Net cash used in
     investing activities   $(28,364,583) $(37,276,065) $(25,761,523)  $(26,325,349)
</TABLE>

                                       8

<PAGE>

The Company also has restated its statements of income and balance sheet to
properly account for derivatives in accordance with FAS 133. Refer to the
section above entitled "Note 2- Summary of Significant Accounting Policies-
Derivative Instruments and Hedging Activities" for a discussion of the Company's
accounting under FAS 133. The correction had the effect of increasing
(decreasing) income before extraordinary items, net income and related earnings
per share amounts as follows:

                                        Six Months Ended    Three Months Ended
                                          June 30, 2001        June 30,2001
                                          -------------        ------------

Income before extraordinary items
   and net income                            $108,160             $73,993

Basic earnings per share                          .05                 .04

Diluted earnings per share                        .06                 .04


NOTE 4 --- SERVICING PORTFOLIO

The Company services residential loans for various investors under contract for
a fee. As of June 30, 2001, the Company had purchased loans for which it
provides servicing with principal balances totaling $461.9 million.

NOTE 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):

<TABLE>
<CAPTION>
                                    Six Months Ended June 30, 2001

                                    Net             Weighted-Average
                                    Income          Shares            Per-Share
                                    (Numerator)     (Denominator)     Amount
                                    ----------------------------------------
<S>                                 <C>             <C>               <C>
Basic earnings per share before
   cumulative effect of a change
   in accounting principle          $ 3,294,942     1,817,318         $ 1.81

Cumulative effect of a change
   in accounting principle          $   (69,770)    1,817,318         $(0.04)

Basic earnings per share            $ 3,225,172     1,817,318         $ 1.77


Effect of Dilutive securities
   stock options                                       33,757

Diluted earnings per share before
   cumulative effect of a change
   in accounting principle          $ 3,294,942     1,851,075         $ 1.78

Cumulative effect of a change
   in accounting principle          $   (69,770)    1,851,075         $(0.04)

Diluted earnings per share          $ 3,225,172     1,851,075         $ 1.74
</TABLE>

                                       9

<PAGE>

<TABLE>
<CAPTION>
                                    Six Months Ended June 30, 2000

                                    Net            Weighted-Average
                                    Income         Shares              Per-Share
                                    (Numerator)    (Denominator)       Amount
                                    -----------------------------------------
<S>                                 <C>            <C>                 <C>
Basic earnings per share            $45,858        1,774,028           $0.03

Effect of dilutive securities
   stock options                                      76,808

Diluted earnings per share          $45,858        1,850,836           $0.03
</TABLE>


<TABLE>
<CAPTION>
                                    Three Months Ended June 30, 2001

                                    Net            Weighted-Average
                                    Income         Shares              Per-Share
                                    (Numerator)    (Denominator)       Amount
                                    -----------------------------------------
<S>                                 <C>            <C>                 <C>
Basic earnings per share before
   cumulative effect of a change
   in accounting principle          $2,386,928     1,819,056           $1.31

Cumulative effect of a change
   in accounting principle          $       --     1,819,056           $  --

Basic earnings per share            $2,386,928     1,819,056           $1.31

Effect of dilutive securities
   stock options                                      37,546

Diluted earnings per share before
    cumulative effect of a change
    in accounting principle         $2,386,928     1,856,602           $1.29

Cumulative effect of a change
    in accounting principle         $       --     1,856,602           $  --

Diluted earnings per share          $2,386,928     1,856,602           $1.29
</TABLE>


<TABLE>
<CAPTION>
                                    Three Months Ended June 30, 2000

                                    Net            Weighted-Average
                                    Income         Shares              Per-Share
                                    (Numerator)    (Denominator)       Amount
                                    -----------------------------------------
<S>                                 <C>            <C>                 <C>
Basic earnings per share            $170,234       1,782,005           $0.10

Effect of dilutive securities
 stock options                                        57,878

Diluted earnings per share          $170,234       1,839,883           $0.09
</TABLE>

                                       10







<PAGE>

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

Special Cautionary Notice Regarding Forward-Looking Statements
--------------------------------------------------------------

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

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

..    the effects of future economic conditions;

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

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

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

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

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

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

General
-------

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

                                       11

<PAGE>

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

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

         The Company's net income for the six months ended June 30, 2001 was
$3.2 million compared to net income of $45,858 for the six months ended June 30,
2000. The increase in net income from the first six months of 2000 to the first
six months of 2001 was primarily the result of an increase in earnings from the
Company's mortgage operation. The mortgage banking operation had net income of
$3.1 million for the first six months of 2001 compared to a net loss of $252,178
in the first six months of 2000. The Company's mortgage banking earnings
increased as the result of a significant increase in production reflecting
declines in interest rates. During the first six months of 2001, the Company
sold servicing rights with respect to $1.4 billion of mortgage loans for a gain
of $9.1 million or a spread on the sale of servicing of 0.69%. This compares to
the first six months of 2000 in which the Company sold servicing rights with
respect to $419.1 million of mortgage loans for a gain of $2.2 million or a
spread on the sale of servicing of 0.53%. The Bank had earnings of $363,130 for
the six months ended June 30, 2001 compared to earnings of $366,456 for the six
months ended June 30, 2000. The Bank experienced a reduction in its net interest
margin during the first six months as a result of the declining interest rate
environment. The Bank's loan portfolio increased approximately 13% during the
first six months to total $105 million at June 30, 2001.

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

         The Company's assets increased 40% during the first six months of 2001
from $242.1 million as of December 31, 2000 to $340.2 million as of June 30,
2001. The increase in total assets in the first six months of 2001 was the
result of the $53.8 million or 49% increase in mortgage loans held for sale. The
increase in assets corresponded with a $49.7 million, or 90.5%, increase in
other borrowings.

         Interest-earning assets (comprised of commercial banking loans,
mortgage loans held for sale, investment securities, interest-bearing balances
in other banks and temporary investments) totaled $310.8 million, or 91.2%, of
total assets at June 30, 2001. This represents a 42% increase from December 31,
2000 when earning assets totaled $218.7 million, or 90.3%, of total assets. The
increase in earning assets resulted primarily from the $53.8 million increase of
residential mortgage loans held for sale. Average mortgage loans held for sale
during the first six months of 2001 of $177.3 million constituted 57.9% of
average earning assets and 53.1% of average total assets. Average mortgage loans
held for sale during 2000 of $82.9 million constituted 47.7% of average
interest-earning assets and 41.6% of average total assets.

         During the first six months of 2001, average commercial banking loans
were $98.0 million. Such loans constituted 32.0% of average earning assets and
29.3% of average total assets. For 2000, average commercial banking loans were
$75.2 million, or 43.3%, of average earning assets and 37.8% of average total
assets. The 30.3% increase in average commercial banking loans was the result of
higher loan demand in the Bank's service area as well as the expansion of the
Bank's operations in Bartow, Cherokee, and Forsyth Counties, Georgia.

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

                                       12

<PAGE>

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

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

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

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

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

         (1)   the value of collateral;

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

         (3)   prevailing and forecasted economic conditions; and

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

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

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

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

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

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

         The allowance for loan losses totaled $1,446,133 or 1.38% of total
commercial banking loans at June 30, 2001, and $1,350,774, or 1.45%, of total
loans at December 31, 2000. The increase in the allowance for loan losses during
the first six months of 2001 was primarily the result of the provision for loan
loss of $230,000. The increase in the allowance for loan loss corresponds to the
13% increase in the commercial banking loans in the first six months of 2001.
The determination of the reserve level rests upon management's judgment about
factors affecting loan quality, assumptions about the economy, and historical
experience. The adequacy of the allowance for loan losses is evaluated
periodically based on a review of all significant loans, with a particular
emphasis on past due and other loans that management believes require attention.
Management believes that,

                                       13

<PAGE>

based solely upon current projections, the allowance at June 30, 2001 was
adequate to cover the risk of loss in the loan portfolio; however, management's
judgment is based upon a number of assumptions about future events which are
believed to be reasonable, but which may or may not be realized. Thus, there is
no assurance that charge-offs in future periods will not exceed the allowance
for loan losses or that additional increases in the allowance for loan losses
will not be required.

         The Company's mortgage loans held for sale are carried at the lower of
aggregate cost or market price and, therefore, the Company is not required to
maintain a reserve for their behalf. The Company does have default and
foreclosure risk during the short-term holding period of the mortgages held for
sale, which is inherent to the residential mortgage industry. However, the
Company has not incurred a loss as a result of this risk and therefore does not
maintain a reserve for this purpose.

         The Bank's policy is to discontinue the accrual of interest on loans
which are 90 days past due unless they are well secured and in the process of
collection. Interest on these non-accrual loans is recognized only when
received. As of June 30, 2001, the Bank had $257,886 of loans contractually past
due more than 90 days, $61,828 of loans accounted for on a non-accrual basis,
and no loans considered to be troubled debt restructurings. As of December 31,
2000, the Bank had $286,393 contractually past due more than 90 days, $21,863 of
loans accounted for on a non-accrual basis, and no loans considered to be
troubled debt restructurings.

         Non-performing loans are defined as non-accrual and renegotiated loans.
Adding real estate acquired by foreclosure and held for sale of $152,644 with
non-performing loans results in non-performing assets of $214,472 at June 30,
2001. This compares to non-performing assets of $43,803 at December 31, 2000.
The Bank is currently holding the foreclosed properties for sale.

                                       14

<PAGE>

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

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

Loans 90 days or more past due on accrual status         $  257,886          $  286,393
Potential problem loans (2)                              $1,705,345          $2,231,684
Potential problem loans/total loans                            1.62%               2.40%
Non-performing assets/total loans
   And foreclosed properties                                   0.20%               0.05%
Non-performing assets and loans 90 days
   or more past due on accrual status/total
   loans and foreclosed properties                             0.45%               0.36%
</TABLE>

---------------------------
(1)  Defined as non-accrual loans and renegotiated loans.
(2)  Loans identified by management as potential problem loans (classified and
     criticized loans) but still accounted for on an accrual basis.

         The Bank invests its excess funds in U.S. Government agency
obligations, corporate securities, federal funds sold, and interest-bearing
deposits with other banks. The Bank's investments are managed in relation to
loan demand and deposit growth, and are generally used to provide for the
investment of funds not needed to make loans, while providing liquidity to fund
increases in loan demand or to offset fluctuations in deposits. Investment
securities and interest-bearing deposits with other banks totaled $29.7 million
at June 30, 2001 compared to $16.3 million at December 31, 2000. Unrealized
gains (losses) on securities amounted to $14,282 and ($1.5) million at June 30,
2001 and December 31, 2000, respectively. Management has not specifically
identified any securities for sale in future periods which, if so designated,
would require a charge to operations if the market value would not be reasonably
expected to recover prior to the time of sale. The Bank had federal funds sold
at June 30, 2001 of $13.6 million compared to $800,000 at December 31, 2000. The
increase in federal funds sold at June 30, 2001 was the result of the $34.6
million or 21.3% increase in the Bank's deposits.

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

         The Bank acquires residential mortgage loans from small retail-oriented
originators in the Southeast United States through various funding sources,
including the Bank's regular funding sources, a $36 million warehouse line of
credit from the FHLB-Atlanta and a $45 million repurchase agreement with UBS.
CMS acquires residential mortgage loans from small retail-oriented originators
in the Southeast, Northeast, Midatlantic and Midwest United States through
various funding sources, including a $75.0 million line of credit from UBS, a
$35 million line of credit from Colonial Bank, and a $75 million repurchase
agreement from UBS. Under the repurchase agreements, the Mortgage Division sells
its mortgage loans and simultaneously assigns the related forward sale
commitments to UBS. Substantially all of the Mortgage Division loans are
currently being resold in the secondary market to Freddie Mac, Fannie Mae and
private investors after being "warehoused" for 10 to 30 days. The Mortgage
Division purchases loans that it believes will meet secondary market criteria,
such as amount limitations and loan-to-value ratios to qualify for resales to
Freddie Mac, Fannie Mae and Ginnie Mae. To the extent that the Mortgage Division
retains the servicing rights on mortgage loans that it resells, it collects
annual servicing fees while the loan is outstanding. The Mortgage Division sells
a portion of its retained servicing rights in bulk form or on a monthly flow
basis. The annual servicing fees and gains on the sale of servicing rights is an
integral part of the Company's mortgage banking operation and its contribution
to net income. The Company currently pays a third party subcontractor to perform
servicing functions with respect to its loans sold with retained servicing.

                                       15

<PAGE>

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

         At June 30, 2001, $3.6 million of mortgage servicing rights were
carried on the balance sheet. At December 31, 2000, the Company carried $3.8
million of mortgage servicing rights on its balance sheet. The Company is
amortizing the mortgage servicing rights over an accelerated period. At June 30,
2001, the Company held servicing rights with respect to loans with unpaid
principal balances totaling $461.9 million compared to $324.7 at December 31,
2000. During the first six months of 2001, the Company sold servicing rights
with respect to $1.4 billion of mortgage loans carried on its balance sheet at
costs of $12.9 million for a gain of $9.1 million. During the first two quarters
2000, the Company sold servicing rights with respect to $419.1 million of
mortgage loans carried on its balance sheet at costs of $5.0 million for a gain
of $2.2 million. The market value of the servicing portfolio is contingent upon
many factors, including, without limitation, the interest rate environment and
changes in such rates, the estimated life of the servicing portfolio, the loan
quality of the servicing portfolio and the coupon rate of the loan portfolio.
There can be no assurance that the Company will continue to experience a market
value of the servicing portfolio in excess of the cost to acquire the servicing
rights, nor can there be any assurance as to the expected life of the servicing
portfolio.

         The Bank's other borrowings consist of borrowings from the Federal Home
Loan Bank of Atlanta (the "FHLB-Atlanta"), which is priced at the FHLB-Atlanta
daily rate plus 25 basis points (4.55% as of June 30, 2001). All mortgage
production generated by CMS is funded through warehouse lines of credit from
Colonial Bank, priced at priced at LIBOR plus 100 basis points (4.86% at June
30, 2001) and UBS, priced at LIBOR plus 150 basis points (5.36% at June 30,
2001).

         The Company had fixed assets, consisting of land, building and
improvements, and furniture and equipment of $6.2 million at June 30, 2001
compared to fixed assets of $6.3 million at December 31, 2000. In 1999, the Bank
provided a supplemental retirement plan to its Banking officers funded with life
insurance. In the first quarter 2000, the Company added the Directors to the
supplemental retirement plan, resulting in $3.6 million of cash value of life
insurance at June 30, 2001.

         The Bank's deposits totaled $196.8 million and $162.2 million at June
30, 2001 and December 31, 2000, respectively, an increase of 21.3% over such
period. Deposits averaged $198.0 million and $125.6 million during the periods
ended June 30, 2001 and December 31, 2000, respectively. Interest-bearing
deposits represented 86% of total deposits at June 30, 2001 compared to 82% at
December 31, 2000. Certificates of deposit composed 76% of total
interest-bearing deposits for June 30, 2001 compared to 72% at December 31,
2000. The composition of these deposits is indicative of the interest
rate-conscious market in which the Bank operates and increases in interest
rates, generally. There is no assurance that the Bank can maintain or increase
its market share of deposits in its highly competitive service area.

                                       16

<PAGE>

Capital
-------

         Capital adequacy is measured by risk-based capital guidelines as well
as against leverage ratios. The risk-based capital guidelines developed by
regulatory authorities assign weighted levels of risk to asset categories to
establish capital requirements. The guidelines currently require a minimum of
8.0% of total capital to risk-adjusted assets. One half of the required capital
must consist of Tier 1 Capital, which includes tangible common shareholders'
equity and qualifying perpetual preferred stock. The leverage guidelines specify
a ratio of Tier 1 Capital to total assets of 3.0% if certain requirements are
met, including having the highest regulatory rating, and 4.0% to 5.0% otherwise.
The guidelines also provide that bank holding companies experiencing internal
growth or making acquisitions will be expected to maintain strong capital
positions substantially above the minimum supervisory levels without significant
reliance on intangible assets. Furthermore, the guidelines indicate that the
Board of Governors of the Federal Reserve System (the "Federal Reserve") will
continue to consider a "Tangible Tier 1 Leverage Ratio" (deducting all
intangibles) in evaluating proposals for expansion or new activity. The Federal
Reserve has not advised the Company, and the FDIC has not advised the Bank, of
any specific minimum leverage ratio or Tangible Tier 1 Leverage Ratio applicable
to either of them. The Bank had agreed with the Georgia Department of Banking
and Finance (the "Banking Department") to maintain a leverage ratio of 8.0%. At
June 30, 2000 the Bank's leverage ratio was 6.64%. To address the leverage ratio
shortcoming, the Company and the Bank have begun to consider alternative means
of raising capital. One such means of increasing capital is $2.5 million of
Trust Preferred Securities from The Bankers Bank in which the Company would
reduce its note with The Bankers Bank by $2.5 million. The Company approved the
Trust Preferred Securities in the second quarter, however, at June 30, 2001 the
transaction was pending.

         At June 30, 2001 the Company's total shareholders' equity was $19.7
million or 5.80% of total assets, compared to $15.8 million or 6.53% of total
assets at December 31, 2000. The decrease in shareholders' equity to total asset
ratio in first six months of 2001 was the result of a 41% increase in total
assets. At June 30, 2001, total capital to risk-adjusted assets was 9.54%, with
8.87% consisting of tangible common shareholders' equity. The Company paid
$281,920 of dividends during the first six months 2001 or $.155 per share. A
quarterly dividend of $.0775 was declared in July 2001 for payment in August
2001.

         In February 1999, the Company entered into a promissory note (the
"Note") with The Bankers Bank for $1.5 million at a rate of "prime" minus 50
basis points (6.25%) for a 10 year term. The Company pledged 100% of the Bank's
common stock as collateral for the Note. The Company transferred the $1.5
million to CMS to increase its capital and liquidity. In July 1999, the Company
increased the amount of the promissory note to $4.5 million to facilitate the
purchase of the Towne Lake branch. The Company was not required to provide
additional collateral for the increased borrowings. The Company contributed the
additional $3.0 million borrowings to the Bank as capital. The Company made a
principal reduction of $450,000 to the promissory note in both August 2000 and
2001.

         During the first six months of 2001, 8,621 shares of Common Stock were
issued pursuant to the Dividend Reinvestment and Stock Purchase Plan (the
"Plan") for an aggregate of $92,727. On March 11, 1998, the Company completed a
stock offering for 270,000 shares of common stock at an issue price of $8.125
per share. The Company effectuated a two for one stock split on September 30,
1998. On January 12, 1999, the Company's Common Stock began trading on the
Nasdaq SmallCap Market under the symbol "CSNT".

Liquidity and Interest Rate Sensitivity
---------------------------------------

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

         Average liquid assets (cash and amounts due from banks,
interest-bearing deposits in other banks, federal funds sold, mortgage loans
held for sale net of borrowings, investment securities and securities held for
sale) totaled $79.4 million and $54.7 million during the periods ending June 30,
2001 and December 31, 2000, representing 40% and 44% of average deposits for
those periods, respectively. Average net non-mortgage loans were 50% and 60% of
average deposits for during the periods ending June 30, 2001 and December 31,
2000, respectively. Average deposits were 65% and 72% of average
interest-earning assets for during the periods ending June 30, 2001 and December
31, 2000, respectively.

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

                                       17

<PAGE>

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

         Interest rate sensitivity varies with different types of
interest-earning assets and interest-bearing liabilities. Overnight federal
funds, on which rates are susceptible to change daily, and loans, which are tied
to the prime rate, differ considerably from long-term investment securities and
fixed-rate loans. Similarly, time deposits over $100,000 and certain
interest-bearing demand deposits are much more interest-sensitive than savings
deposits. In addition, brokered deposits, institutional deposits placed by
independent brokers, are more interest sensitive. The Bank had brokered deposits
of $6.5 million and $6.8 million at June 30, 2001 and at December 31, 2000,
respectively. The Bank utilizes the brokered deposits to fund its mortgage loans
held for sale and manages the use of those funds in relation with the Bank's
liquidity position.

         The following table shows the interest sensitivity gaps for four
different time intervals as of June 30, 2001.

<TABLE>
<CAPTION>
                                                        Interest Rate Sensitivity Gaps
                                                              As of June 30, 2001

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

                                        0-90 Days       91-365 Days          1-5 Years     Over 5 Years
                                        ---------       -----------          ---------     ------------
                                                             (Millions of dollars)
<S>                                  <C>                <C>                  <C>           <C>
Interest-earning assets                  $234.4           $ 23.1               $36.5          $16.8
Interest-bearing liabilities              165.2             79.0                27.3            2.3
                                     --------------------------------------------------------------------

Interest sensitivity gap                  $69.2           $(55.9)              $ 9.2          $14.5
                                     ====================================================================
</TABLE>

         The Company was in an asset-sensitive position for the cumulative
three- month, one-to-five year and over five-year intervals. This means that
during the five-year period, if interest rates decline, the net interest margin
will decline. During the 0-91 day period, which has the greatest sensitivity to
interest rate changes, if rates rise, the net interest margin will improve.
Conversely, if interest rates decrease over this period, the net interest margin
will decline. At June 30, 2001, the Company was within its policy guidelines of
rate-sensitive assets to rate-sensitive liabilities of 80 - 140% at the one-year
interval. Since all interest rates and yields do not adjust at the same time or
rate, this is only a general indicator of rate sensitivity. Additionally, as
described in the following paragraphs, the Company utilizes mandatory
commitments to deliver mortgage loans held for sale, therefore reducing the
interest rate risk. The total excess of interest-bearing assets over interest-
bearing liabilities, based on a five-year time period, was $37 million, or 10.9%
of total assets.

         At June 30, 2001, the Company's commitments to purchase mortgage loans
(the "Pipeline") totaled approximately $716.3 million, an increase of 126% from
the $316.9 million a year earlier. Of the Pipeline, the Company had, as of June
30, 2001, approximately $342.4 million for which the Company had interest rate
risk. The remaining $373.9 million of mortgage loans are not subject to interest
rate risk. The mortgages not subject to interest rate risk are comprised of (i)
loans under contract to be placed with a private investor through a "best
efforts" agreement, whereby the investor purchases the loans from the Company at
the contractual loan rate, (ii) loans with floating interest rates which close
at the current market rate, and (iii) loans where the original fixed interest
rate commitment has expired and will be repriced at the current market rate.

         The Mortgage Division has adopted a policy intended to reduce interest
rate risk incurred as a result of market movements between the time commitments
to purchase mortgage loans are made and the time the loans are closed.
Accordingly, commitments to purchase loans will be covered either by a mandatory
sale of such loans into the secondary market or by the purchase of an option to
deliver to the secondary market a mortgage-backed security. The mandatory sale
commitment is fulfilled with loans closed by the Company, through "pairing off"
the commitment, or purchasing loans through the secondary market. Under certain
conditions the Company seeks best execution by pairing off the commitment to
sell closed loans and fulfilling that commitment with loans purchased by the
Company through the secondary market. The Company covers mortgage loans held for
sale either by a mandatory sale of such loans or by the purchase of an option to
deliver the loans to the secondary market.

                                       18

<PAGE>

         In hedging the Pipeline, the Company must use a best estimation of the
percentage of the Pipeline that will not close (i.e. loans that "fallout").
Loans generally fallout of the Pipeline for various reasons including, without
limitation, borrowers' failures to qualify for the loan, construction delays,
inadequate appraisal values and changes in interest rates which are substantial
enough for the borrower to seek another financing source. An increasing interest
rate environment provides greater motivation for the consumer to lock and close
loans. Conversely, in a decreasing interest rate environment, the consumer has a
tendency to delay locking and closing loans in order to obtain the lowest rate.
As a result, an increasing interest rate environment generally results in the
Company's fallout ratio to be less than in an average market. Conversely, in a
decreasing rate environment, the Company's fallout ratio tends to be greater
than in an average market. If the Company's fallout ratio is greater than
anticipated, the Company will have more mandatory commitments to deliver loans
than it has loans for which it has closed. In this circumstance, the Company
must purchase the loans to meet the mandatory commitment on the secondary market
and therefore will have interest rate risk in these loans. Conversely, if the
Company's fallout ratio is less than anticipated, the Company will have fewer
mandatory commitments to deliver loans than it has loans for which it has
closed. In this circumstance, the Company must sell the loans on the secondary
market without a mandatory commitment and therefore will have interest rate risk
in these loans.

         The Company's success in reducing its interest rate risk is directly
related to its ability to monitor and estimate its fallout. While other hedging
techniques other than mandatory and optional delivery may be used, speculation
is not allowed under the Mortgage Division's secondary marketing policy. As of
June 30, 2001, the Company had in place purchase commitment agreements
terminating between July and September of 2001 with respect to an aggregate of
approximately $136.9 million to hedge the mortgage pipeline of $342.4 million
for which the Bank had an interest rate risk. Additionally, at June 30, 2001,
the Company had purchaser commitments of $98.5 million to hedge the mortgage
loans held for sale of $162.5 million, compared to $52.6 million and $108.8
million, respectively, at December 31, 2000.

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

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

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

         At the date of adoption, the Company recorded certain transition
adjustments as required by FAS 133. The impact on net income, net of tax, was
approximately $(69,770). Through June 30, 2001 the impact on net income, net of
tax, was $108,160.

                                       19

<PAGE>

The $69,770 FAS 133 transition adjustment reflects the fair value of the
Company's free standing derivative instruments as of January 1, 2001, of
$112,533 net of the related tax effect of $42,763. The $108,160 FAS 133 effect
on net income during the six month period ended June 30, 2001 reflects the
change in the fair value of the Company's free standing derivatives of $174,451,
net of the related tax effect of $66,291.

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

Results of Operations
---------------------

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

         The Company experienced significant changes in interest rates and
mortgage production during 2000 and 1999. The Company achieved record mortgage
production with interest rates at historical low levels in the first six months
of 1999. The Company recognized an increase in average interest-earning assets
and interest-bearing liabilities for the year as a result of the record mortgage
production in the first six months. The Federal Reserve Open Market Committee
increased interest rates on three occasions in 1999 for a total of 75 basis
points. Rates began increasing on a 30-year mortgage in mid-second quarter 1999
resulting in a decline in production. In the fourth quarter of 2000, rates began
declining, resulting in an increase in mortgage production. During the first six
months 2001, the Federal Reserve Open Market Committee reduced interest rates on
six occasions for a total of 275 basis points. The Company closed $1.6 billion
of mortgage loans during the first six months of 2000 compared to $541.2 million
during the first six months of 2001.

         The Company had interest income of $9.8 million for the six months
ended June 30, 2001 compared to $5.7 million six months ended June 30, 2000. The
increase in interest income is attributable to the increase in interest-earning
assets which is the result of growth in the commercial bank loan portfolio as
well as a higher volume of mortgage production. The Company's commercial bank
loan portfolio averaged $98.0 million for the first six months of 2001, compared
to $65.2 million for the first six months of 2000.

         The Company had interest income of $5.1 million for the three months
ended June 30, 2001 compared to $3.2 million three months ended June 30, 2000.
The increase in interest income is attributable to the higher volume of
commercial bank loans partially offset by the lower volume of mortgage loan
production.

         The Company had interest expense of $7.1 million for the six months
ended June 30, 2001 and $3.6 million for the six months ended June 30, 2000. The
increase resulted from the growth of the banks deposits as well as a higher
level of other borrowings. All mortgage production through CMS is funded with a
warehouse line of credit; therefore the higher volume in the Northeast and
Midwest mortgage operation resulted in a higher average balance of other
borrowings. In the first two quarters 2001 and 2000, interest expense accounted
for 36% and 32% of total expenses, respectively.

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

         Net interest income for the first six months of 2001 was $2.7 million.
The key performance measure for net interest income is the "net interest
margin," or net interest income divided by average interest-earning assets. The
Company's net interest margin during first six months of 2001 was 2.85%.
Interest spread, which represents the difference between average yields on
interest-earning assets and average rates paid on interest-bearing liabilities,
was 2.38%. Net interest income, interest margin and net interest spread for the
first six months of 2000 were $2.1 million, 2.75%, and 1.90%, respectively. The
increase in net interest income is related to the higher volume of mortgage
loans closed and growth in the commercial loan portfolio. The decrease in net
interest margin and interest spread is indicative of the Company's balance sheet
being asset sensitive in the short term during a period when rate were
decreasing.

         The Company made a provision to the  allowance  for loan losses of
$230,000 in the first six months of 2001. During the first six months of 2001,
the Bank charged-off, net of recoveries, $134,641 of loans to the allowance for
loan losses. The

                                       20

<PAGE>

Company made provisions to the allowance for loan losses in the amount of
$235,000 in first six months of 2000. During the first six months of 2000, the
Bank charged-off, net of recoveries, $11,902 of loans to the allowance for loan
losses. The Company made a provision to the allowance for loan losses of
$115,000 in the second quarter 2001. The Company made provisions to the
allowance for loan losses in the amount of $140,000 in second quarter 2000. The
Bank's determination of the allowance for loan losses is affected by various
factors, including changes in loan concentrations, trends in non performing
loans, the comparison of the allowance to the historical net charge off
experience and economic conditions and risks that affect the Bank. The amount of
the provision for loan losses decreased, in part, between the provisions for the
six and three month periods ended June 30, 2001 and the provisions for the six
and three month periods ended June 30, 2000 because loan growth in the first six
months of 2001 was 13% versus stronger growth in the loan portfolio in the first
six months of 2000 of 42%. As a result of the growth, the Company adjusted its
allowance for loan losses to account for its historical experience with various
borrowers. The allowance for loan losses as a percentage of total non-mortgage
loans decreased slightly over the first six months of 2001 and was 1.38% at June
30, 2001 compared to 1.40% at December 31, 2000. From December 31, 2000 to June
30, 2001, however, net charge offs to average non mortgage loans outstanding
increased slightly from 0.08% at December 31, 2000 to 0.10% at June 30, 2001.
The decreasing trend in allowance for loan losses as a percentage of total loans
relates to and reflects the decreasing trend in the ratios of the number of
potential problem loans to total non-mortgage loans, which represented 1.62% as
of June 30, 2001 and 2.40% as of December 31, 2000.

         Other income was $10.6 million in the first six months of 2001 compared
to $3.7 million in the first six months of 2000. The increase in other income
was related to the increase of gains on the sale of mortgage servicing rights.
During the first six months of 2001, the Company sold servicing rights with
respect to $1.4 billion of mortgage loans for a gain of $9.3 million or a spread
on the sale of servicing of 0.69%. This compares to the first six months of 2000
in which the Company sold servicing rights with respect to $419.1 million of
mortgage loans for a gain of $2.2 million or a spread on the sale of servicing
of 0.53%. The increase in the sale of mortgage rights resulted primarily from
the increase in mortgage production. The Company currently plans to sell a
portion of the servicing rights retained during 2001, although there can be no
assurance as to the volume of the Bank's loan acquisition or that a premium will
be recognized on the sales. Gestation fee income is generated from the sale of
mortgage loans to securities brokers who are gestation lenders through a
gestation repurchase agreement. Under the agreement, the Company sells mortgage
loans and simultaneously assigns the related forward sale commitments to a
securities broker. The Company continues to receive fee income from the
securities broker until the loan is delivered into the forward commitment.
Alternatively, the Company sells loans on an individual basis in the cash market
and subsequently pairs off the forward sale commitment. In this case, the
Company does not receive any gestation fee income, which is income derived from
the spread between the fee the Company received on the mortgage loan and the fee
charged by the security broker during the holding or "gestation" period, prior
to the Company's sale of the loan. Other income was $7.3 million in the second
quarter of 2001 compared to $1.9 million in the second quarter of 2000. The
increase in other income during the second quarter was related to the increase
of gains on the sale of mortgage servicing rights.

         Other operating expenses increased to $8.1 million in the first six
months of 2001 from $5.5 million in the first six months of 2000. The increase
in other operating expenses was related to the increase in volume of the
mortgage operation which included increases in salaries and benefits and third
party mortgage outsourcing expense. Salaries and benefits increased from $2.0
million for the first six months of 2000 to $3.5 million for the first six
months of 2001. Outside service fees increased from $451,388 for the first six
months of 2000 to $924,752 for the first six months of 2001. Other operating
expenses increased to $4.8 million in the second quarter 2001 from $2.7 million
in the second quarter 2000.

         Loan origination fees and certain direct costs of loans are accounted
for in accordance with SFAS No. 91, "Accounting for Nonrefundable Fees and Costs
Associated with Originating or Acquiring Loans and Indirect Costs of Leases."
The costs are netted against the fees and recognized in income over the life of
the loans or when the loans are sold. The costs that are netted against the fees
are reported as a reduction of other operating expenses in the statement of
income. At June 30, 2001, the amount of commercial banking costs netted against
commercial banking loan origination fees totaled $537,142, as compared to
$195,789 at June 30, 2000. This increase in loan fees was the result of the
growth in the Bank's loan portfolio. At June 30, 2001, the amount of mortgage
banking costs netted against mortgage banking loan origination fees totaled
$3,437,756, as compared to $1,328,798 at June 30, 2000. This increase in loan
fees was the result of the growth in CMS' mortgage loan origination.

         The Company had net income of $3.2 million for the six months ending
June 30, 2001, compared to net income of $45,828 for the six months ending June
30, 2000. The Company had net income of $2.3 million for the three months ending
June 30, 2001, compared to net income of $170,234 for the six months ending June
30, 2000. Net income was favorably effected primarily by the increase in
mortgage production and the resulting gain on the sale of mortgage servicing
rights. Income tax as a percentage of pretax net income was 38% and 37% for the
first six months of 2001 and 2000, respectively.

                                       21

<PAGE>

Effects of Inflation
--------------------

         Inflation generally increases the cost of funds and operating overhead,
and to the extent loans and other assets bear variable rates, the yields on such
assets. Unlike most industrial companies, virtually all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates generally have a more significant impact on the performance of a
financial institution than the effects of general levels of inflation. Although
interest rates do not necessarily move in the same direction, or to the same
extent, as the prices of goods and services, increases in inflation generally
have resulted in increased interest rates, and the Federal Reserve has increased
interest rates twice since 1999 in an attempt to prevent inflation. In addition,
inflation results in financial institutions' increased cost of goods and
services purchased, the cost of salaries and benefits, occupancy expense, and
similar items. Inflation and related increases in interest rates generally
decrease the market value of investments and loans held and may adversely affect
liquidity, earnings, and shareholders' equity. Mortgage originations and
refinancings tend to slow as interest rates increase, and likely will reduce the
Company's earnings from such activities and the income from the sale of
residential mortgage loans in the secondary market.

                                       22

<PAGE>

Item 3)   Quantitative and Qualitative Disclosures about Market Risk

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

                                       23

<PAGE>

                           Part II - OTHER INFORMATION

Item 1.  Legal Proceedings - Not Applicable

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

Item 3.  Defaults Upon Senior Securities - Not Applicable

Item 4.  Submission of Matters to a Vote of Security Holders - Not Applicable

Item 5.  Other Information - None

Item 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits

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

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

(b) Reports on Form 8-K - None

                                       24

<PAGE>

                                   SIGNATURES

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

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

Date: April 18, 2002               /s/ J. Donald Boggus, Jr.
      --------------               ---------------------------------------------
                                   J. Donald Boggus, Jr.
                                   President and Chief Executive Officer

Date: April 18, 2002               /s/ Bonnie Boling
      --------------               ---------------------------------------------
                                   Bonnie Boling
                                   Chief Financial Officer