<PAGE>

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                              --------------------

FORM 10-KSB
(Mark One)

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

                   For the fiscal year ended December 31, 2002

               [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
          For the transition period from _____________to _____________

                       Commission File Number ____________

                      THE PB FINANCIAL SERVICES CORPORATION
                 (Name of small business issuer in its charter)

                GEORGIA                                        58-2466560
                -------                                        ----------
    (State or other jurisdiction of                         (I.R.S. Employer
    incorporation or organization)                       Identification Number)

9570 Medlock Bridge Road, Duluth, Georgia   30097
-----------------------------------------   -----
         (Address of principal executive offices)              (Zip Code)

Issuer's telephone number (770) 814-8100

Securities registered pursuant to Section 12(b) of the Exchange Act: None

Securities registered pursuant to Section 12(g) of the Exchange Act: Common
Stock, Par Value $5 Per Share

Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or Section 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports)
and (2) has been subject to such filing requirement for the past 90 days.

                  Yes [X]                             No [ ]

Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]

State issuer's revenues for its most recent fiscal year. $10,316,431

                                        1

<PAGE>

Aggregate market value of the voting stock held by non-affiliates computed by
reference to the price at which the stock was sold, or the average bid and asked
prices of such stock, as of a specified date within the past 60 days:
$12,823,015

                    APPLICABLE ONLY TO CORPORATE REGISTRANTS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the last practicable date. 942,176 as of March 31, 2003

Transitional Small Business Disclosure format (check one):  Yes [ ] No [X]

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Annual Report to Shareholders for the fiscal year ended December
31, 2002, are incorporated by reference into Part II. Portions of the Proxy
Statement for the Annual Meeting of Shareholders, scheduled to be held April 29,
2003, are incorporated by reference into Part III.

                                        2

<PAGE>

                                      TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                      PAGE
<S>             <C>                                                                  <C>
PART I.

      ITEM 1.   DESCRIPTION OF BUSINESS                                                  4

      ITEM 2.   DESCRIPTION OF PROPERTY                                                 32

      ITEM 3.   LEGAL PROCEEDINGS                                                       33

      ITEM 4.   SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS                    33

PART II.

      ITEM 5.   MARKET AND REGISTRANT'S COMMON EQUITY AND RELATED                    33-34
                  STOCKHOLDERS MATTERS

      ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL                    35-41
                  CONDITION AND RESULTS OF OPERATIONS

      ITEM 7.   FINANCIAL STATEMENTS                                                    42

      ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON                        42
                  ACCOUNTING AND FINANCIAL DISCLOSURE

PART III.

      ITEM 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL                   42
                  PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

     ITEM 10.   EXECUTIVE COMPENSATION                                                  42

     ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS                         43

     ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                          43

     ITEM 13.   EXHIBITS, LISTS, AND REPORTS ON FORM 8-K                             43-44

     ITEM 14.   CONTROLS AND PROCEDURES                                                 44
</TABLE>

                                        3

<PAGE>

A WARNING ABOUT FORWARD-LOOKING STATEMENTS

Certain statements in this Annual Report on Form 10-KSB contain "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995, which statements generally can be identified by the use of
forward-looking terminology such as "may", "will", "expect", "estimate",
"anticipate", "believe", "target", "plan", "project", or "continue" or the
negatives hereof or other variations thereon or similar terminology and are
subject to risks and uncertainties, including, but not limited to, economic
conditions, competition, interest rate sensitivity and exposure to regulatory
and legislative changes. The above factors, in some cases, have affected, and in
the future could affect, the Company's financial performance and could cause
actual results for fiscal 2003 and beyond to differ materially from those
expressed or implied in such forward-looking statements. The Company does not
undertake to publicly update or revise its forward-looking statements even if
experience or future changes make it clear that any projected results expressed
or implied therein will not be realized.

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

                                   THE COMPANY

In July 1999, The PB Financial Services Corporation (the "Company") became the
holding company for The Peachtree Bank (the "Bank") upon regulatory and
shareholder approvals. The Company is the sole shareholder of The Peachtree
Bank. The holding company structure provides flexibility for expansion of the
Company's banking business through the possible acquisition of other financial
institutions and the provision of additional banking-related services that a
traditional commercial bank may not provide under present laws. In addition, the
holding company structure makes it easier to raise capital for the Bank. For
example, banking regulations require the Bank to maintain a minimum ratio of
capital to assets. In the event that the Bank's growth prevents it from
maintaining this minimum ratio, the Company may borrow funds, subject to capital
adequacy guidelines of the Federal Reserve, and contribute them to the capital
of the Bank and otherwise raise capital in a manner unavailable to the Bank
under the existing banking regulations.

The Company has no present plans to acquire any additional operating
subsidiaries. The Company may, however, make additional acquisitions in the
future in the event that the acquisitions are deemed to be in the best interests
of the Company and its shareholders. Any future acquisitions would be subject to
certain regulatory approvals and requirements. See "Business - Bank Holding
Company Regulation."

                                    THE BANK

GENERAL

In January 1998, the Georgia Department of Banking and Finance and the FDIC
granted final approval to the organizers of The Peachtree Bank to organize the
Bank as a state-chartered

                                        4

<PAGE>

commercial bank and for FDIC insurance of the Bank's deposits. The Bank began
its banking operations on October 5, 1998. During the fourth quarter of 2002,
the Bank became a member of the Federal Reserve System and consequently, the
Federal Reserve replaced the FDIC as the Bank's primary federal regulator.

The Bank is a full-service commercial bank, specializing in the banking needs of
individuals and small-to medium-sized businesses and professional affiliations.
The Bank offers personal and business checking accounts, money market accounts,
interest-bearing accounts, savings accounts, and various types of certificates
of deposit. The Bank also offers installment loans, real estate loans,
construction loans, second mortgage loans, commercial loans and home equity
lines of credit. It also acts as an issuing agent for U.S. Savings Bonds,
travelers checks, money orders and cashier's checks. It offers ATM cards, debit
cards, official bank checks, telephone banking, bank by mail, direct deposit of
payroll and social security checks and wire transfer facilities. The Bank has a
drive-in teller facility, and automatic teller machine offering 24-hour
transactions, safe deposit boxes and night depository facilities.

MARKET AREA AND COMPETITION

The Bank competes with other commercial banks, savings and loan associations,
credit unions, and money market mutual funds operating in the Bank's market
area. Currently, there are 40 financial institutions with branch locations or
main offices in the Bank's primary market area of northeast Fulton County,
western Gwinnett County, and northern Dekalb County, Georgia. Several of the
financial institutions located in the Bank's market area are large regional
banks, such as Wachovia, SunTrust, SouthTrust, First Union and Bank of America.
The larger regional banks' presence in the area is through branch offices, with
many of the customer service functions, as well as authority for loan approval,
being located outside of the Bank's primary market area. The Bank competes with
the larger regional banks as well as other financial institutions in its market
area by emphasizing its local management and ownership and by focusing on
personal service to its customers and strong community involvement.

DEPOSITS

The bank offers a wide range of commercial and consumer deposit accounts,
including checking accounts, money market accounts, a variety of certificates of
deposit, and IRA accounts. The Bank attracts deposits with an aggressive
marketing plan, a broad product line, and competitive products and services. The
Bank pays competitive interest rates on money market accounts and certificates
of deposit and has implemented a service charge fee schedule competitive with
other financial institutions in the Bank's market area. The primary sources of
deposits are northeast Fulton County, Georgia, western Gwinnett County, Georgia
and northern Dekalb County, Georgia residents and businesses and their
employees.

LOAN PORTFOLIO

GENERAL. The Bank engages in a broad range of lending activities, including real
estate-related loans, construction loans for residential and commercial
properties, consumer/installment loans and home equity lines of credit to
individuals, and commercial loans with particular emphasis on small-and medium
sized businesses and professional concerns. The principal economic risk
associated with each category of loans is the creditworthiness of the borrower.
General

                                        5

<PAGE>

economic conditions and the strength of the services and retail market segments
affect borrower creditworthiness. Risks associated with real estate loans also
include fluctuations in the value of real estate, new job creation trends,
tenant vacancy rates and, in the case of commercial borrowers, the quality of
the borrower's management. In addition, a commercial borrower's ability to
properly evaluate changes in the supply and demand characteristics affecting its
markets for products and services, and to respond effectively to these changes,
are significant factors in determining risks associated with the
creditworthiness of a commercial borrower. Other economic factors affecting a
commercial borrower's ability to repay a loan include interest, inflation,
employment rates, customers, suppliers and employees.

LOAN CATEGORIES. The Bank makes commercial real estate loans, construction and
development loans, residential real estate and consumer loans in and around its
primary market area. The Bank also makes commercial loans where the Bank takes a
security interest in real estate out of an abundance of caution, but not as the
principal collateral for the loan.

COMMERCIAL REAL ESTATE LOANS. Commercial real estate loan terms are generally
limited to five years or less, although payments may be structured on a longer
amortization basis. Interest rates may be fixed or adjustable, although rates
generally will not be fixed for a period exceeding 60 months. The Bank generally
charges an origination fee on this type of loan. Credit risk on commercial real
estate loans is managed by: 1) emphasizing loans on owner-occupied office and
retail buildings; 2) limiting the ratio of the principal amount of the loan to
the value of the collateral, as established by an independent appraisal, to
generally no more than 80%, and 3) requiring that the net projected cash flow
available for debt service comfortably exceeds the debt service requirement.

In addition, the Bank may require personal guarantees from the property owners
supported by the Bank's review of the owners' personal financial statements.
Risks associated with commercial real estate loans include fluctuations in the
value of real estate, new job creation trends, tenant vacancy rates and the
quality of the borrower's management. The Bank tries to limit its risk by
analyzing borrowers' cash flow and collateral value on an ongoing basis.

CONSTRUCTION AND DEVELOPMENT LOANS. Construction and development loans are made
both on a pre-sold and speculative basis. If the borrower has entered into an
agreement to sell the property prior to beginning construction, the loan is
considered to be made on a pre-sold basis. If the borrower has not entered into
an agreement to sell the property prior to beginning construction, then the loan
is considered to be made on a speculative basis. Construction and development
loans made on a pre-sold basis are generally made with a term of nine months and
interest is paid monthly. Typically the ratio of the principal amount of the
loan to the discounted cash flow value of the collateral, as established by
independent appraisal, generally does not exceed 75%. Speculative loans are
based on the borrower's financial strength and cash flow position. The ratio of
the principal amount of the loan to the discounted cash flow value of the
collateral generally does not exceed 75% on speculative loans. Speculative
loans, as of December 31, 2002, were 82.3% of total construction loans. Loan
proceeds are disbursed as the project is completed and only after the project
has been inspected by an experienced construction lender or board approved
appraiser. Risks associated with construction loans include fluctuations in the
value of real estate and new job creation trends.

                                        6

<PAGE>

COMMERCIAL LOANS. The Bank makes commercial loans to small-and medium-sized
businesses and professional concerns. The terms of these loans vary by their
purpose and underlying collateral. The Bank typically makes equipment loans for
a term of seven years or less at fixed or variable rates, with the loan being
fully amortized over the term. Equipment loans are generally secured by the
equipment, and normally the ratio of the loan amount to the value of the
financed equipment (or other collateral) is 75% or less. Loans to support
working capital typically have terms of one year or less and usually are secured
by accounts receivable, inventory and/or personal guarantees of the principals
of the business. For loans secured by accounts receivable or inventory, the
principal is typically repaid as the assets securing the loan are converted into
cash, and for loans secured with other types of collateral, principal is
typically due at maturity. The quality of the commercial borrower's management,
its ability to properly evaluate changes in the supply and demand
characteristics affecting its markets for products and services, and its ability
to respond effectively to such changes are significant factors in a commercial
borrower's continued creditworthiness.

CONSUMER LOANS. The Bank makes a variety of loans to individuals for personal,
family and household purposes, including secured and unsecured lines of credit.
Consumer loan repayments follow standard banking practices for repayment
considering local area market conditions and competition. Because depreciable
assets such as boats, cars and trailers secure many consumer loans, the Bank
amortizes these loans over the useful life of the asset. The loan officer
reviews the borrower's past credit history, past income level, debt history and,
when applicable, cash flow to determine the impact of all of these factors on
the borrower's ability to make future payments as agreed.

INVESTMENTS

At December 31, 2002, investment securities comprised approximately 9.5% of the
Bank's assets, with net loans comprising approximately 77.2% of assets. The Bank
invests primarily in obligations of the United States, corporate bonds, state
and county municipals, Federal Home Loan Bank stock and Federal Reserve Bank
stock. The Bank also engages in Federal funds transactions with its principal
correspondent banks and acts as a net seller of such funds. The sale of federal
funds amounts to a short-term loan from the Bank to another bank.

ASSET/LIABILITY MANAGEMENT

The Bank's objective is to manage its assets and liabilities to provide a
satisfactory and consistent level of profitability within the framework of
established cash, loan, investment, borrowing, and capital policies. Certain
Bank officers are responsible for developing and monitoring policies and
procedures that ensure acceptable composition of the asset/liability mix.
Management's overall philosophy is to support asset growth primarily through the
growth of core deposits, which include deposits of all categories made by
individuals, partnerships, and corporations. Management seeks to invest the
largest portion of the Bank's assets in commercial, construction, and consumer
loans.

The Bank's asset/liability mix is monitored daily, and a report reflecting
interest-sensitive assets and interest-sensitive liabilities is prepared and
presented to the Bank's Board of Directors monthly. The objective of this
regular review is to control interest-sensitive assets and liabilities so as to
minimize the impact of substantial movements in interest rates on the Bank's
earnings.

                                        7

<PAGE>

EMPLOYEES

At December 31, 2002, the Company employed 32 full time employees and 3
part-time employees through its subsidiary, the Bank. The Company considers its
relationship with its employees to be excellent.

SELECTED STATISTICAL INFORMATION

The following statistical information is provided for The PB Financial Services
Corporation for the year ended December 31, 2002 and 2001. The data is presented
using daily average balances. This data should be read in conjunction with the
financial statements appearing elsewhere in this Annual Report.

AVERAGE BALANCE SHEETS AND NET INTEREST ANALYSIS

The tables below show the year-end average balances for each category of
interest earning assets and interest-bearing liabilities for the years ended
December 31, 2002 and 2001, and the average rate of interest earned or paid
thereon.

                                        8

<PAGE>

                               December 31, 2002
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                                    Average                                     Yield/
                                                                    Balance               Interest              Rate
                                                                  -----------             --------              ------
<S>                                                               <C>                     <C>                   <C>
AVERAGE ASSETS
Interest-earning assets:
   Taxable Investment securities (1)                              $    12,123             $    659               5.44%
   Tax exempt investment securities (1) (2)                             3,703                  225               6.08%
   Interest bearing deposits with banks                                   322                    5               1.55%
   Federal funds sold                                                   4,493                   76               1.69%
   Net Loans (including loan fees) (3)                                122,282                8,321               6.80%
                                                                  -----------             --------              -----
              Total interest-earning assets                           142,923                9,286               6.50%
                                                                                          --------              -----

Allowance for Loan Losses                                              (1,172)
Cash and due from banks                                                 4,834
Other assets                                                            7,166
                                                                  -----------
              Total average assets                                $   153,751
                                                                  ===========

AVERAGE LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
  Deposits:
    Interest-bearing demand                                       $    32,735             $    346               1.06%
    Savings                                                             3,313                   58               1.75%
    Time, $100,000 or more                                             46,781                1,586               3.39%
    Other Time                                                         38,655                1,392               3.60%
    Repurchase agreements                                               1,685                   29               1.72%
    Fed Funds Purchased                                                   256                    6               2.34%
    Note Payable                                                        5,029                  132               2.62%
    Trust Preferred Securities                                            133                    7               5.26%
                                                                  -----------             --------              -----
              Total interest-bearing liabilities                      128,587                3,556               2.77%
                                                                                          --------              -----
Noninterest-bearing deposits                                           13,495
Other liabilities                                                         519
                                                                  -----------
              Total average liabilities                                14,014

Stockholders' equity                                                   11,150
                                                                  -----------
              Total average liabilities and
                stockholders' equity                              $   153,751
                                                                  ===========

Excess of interest-bearing assets over
  interest-bearing liabilities                                    $    14,336
                                                                  -----------
Ratio of interest-earning assets to
  interest-bearing liabilities                                         111.15%
                                                                  ===========
Net interest income                                                                       $  5,730
                                                                                          ========
Net interest spread                                                                                              3.73%
                                                                                                                =====
Net yield on average interest-earning assets                                                                     4.01%
                                                                                                                =====
</TABLE>

     (1)  Average balance has been calculated based on amortized costs of
          investment securities.

     (2)  Interest income on tax-exempt loans and securities is presented on a
          taxable-equivalent basis basis, using a income tax rate of 38%. The
          taxable-equivalent amounts included in the above table aggregated
          approximately $86,000 in 2002.

     (3)  Includes one non accrual loan with an approximate balance of $558,000
          at December 31, 2002. Interest earned on net loans includes $682,601
          in loan fees.


                                       9
<PAGE>

                               December 31, 2001
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                                   Average                                    Yield/
                                                                   Balance               Interest              Rate
                                                                 -----------             --------             ------
<S>                                                              <C>                     <C>                  <C>
AVERAGE ASSETS
Interest-earning assets:
 Taxable Investment securities (1)                               $    10,981             $    731              6.66%
  Tax exempt investment securities (1) (2)                       $     1,631                   92              5.64%
  Interest bearning deposits with banks                                   46                    1              2.17%
  Federal funds sold                                                   3,776                  141              3.73%
  Net Loans (including loan fees) (3)                                 81,963                7,166              8.74%
                                                                 -----------             --------              ----
              Total interest-earning assets                           98,397                8,131              8.26%
                                                                                         --------              ----

Allowance for Loan Losses                                               (806)
Cash and due from banks                                                2,992
Other assets                                                           5,966
                                                                 -----------
              Total average assets                               $   106,549
                                                                 ===========

AVERAGE LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
  Deposits:
    Interest-bearing demand                                      $    26,848             $    822              3.06%
    Savings                                                              348                    5              1.44%
    Time, $100,000 or more                                            33,282                1,903              5.72%
    Other Time                                                        24,488                1,442              5.89%
    Repurchase agreements                                              3,444                  127              3.69%
    Fed Funds Purchased                                                   81                    3              3.70%
    Note Payable                                                         459                   23              5.01%
                                                                 -----------             --------              ----
              Total interest-bearing liabilities                      88,950                4,325              4.86%
                                                                                         --------              ----
Noninterest-bearing deposits                                           8,427
Other liabilities                                                        659
                                                                 -----------
              Total average liabilities                                9,086

Stockholders' equity                                                   8,513
                                                                 -----------
              Total average liabilities and
                stockholders' equity                             $   106,549
                                                                 ===========

Excess of interest-bearing assets over
  interest-bearing liabilities                                   $     9,447
                                                                 -----------
Ratio of interest-earning assets to
  interest-bearing liabilities                                        110.62%
                                                                 ===========
Net interest income                                                                      $  3,806
                                                                                         ========
Net interest spread                                                                                            3.40%
                                                                                                               ====
Net yield on average interest-earning assets                                                                   3.87%
                                                                                                               ====
</TABLE>

     (1)  Average balance has been calculated based on amortized costs of
          investment securities.

     (2)  Interest income on tax-exempt loans and securities is presented on a
          taxable-equivalent basis basis, using a income tax rate of 38%. The
          taxable-equivalent amounts included in the above table aggregated
          approximately $67,000 in 2001.

    (3)   All loans are accruing interest. Interest earned on net loans
          includes $640,838 in loan fees.

                                       10

<PAGE>

RATE AND VOLUME ANALYSIS

The following tables reflect the changes in net interest income resulting from
changes in interest rates and from changes in the asset and liability volume.
The change in interest attributable to rate has been determined by applying the
change in rate between years to average balances outstanding in the later year.
The change in interest due to volume has been determined by applying the rate
from the earlier year to change in average balance outstanding between years.
Thus, the change in interest due to both rate and volume has been allocated to
the volume and rate components in proportion to the relationship of the dollar
amounts of the absolute changes in each.

                          YEAR ENDED DECEMBER 31, 2002
                   COMPARED WITH YEAR ENDED DECEMBER 31, 2001

<TABLE>
<CAPTION>
                                                                                              CHANGES DUE TO
                                                            TOTAL INCREASE           --------------------------------
                                                              (DECREASE)               RATE                   VOLUME
                                                            ---------------          ---------               --------
                                                                               (DOLLARS IN THOUSANDS)
<S>                                                         <C>                      <C>                     <C>
Income from interest-earning assets:
  Taxable investment securities                             $          (67)          $   (138)               $    71
  Tax exempt investment securities (1)                                 133                  8                    125
  Deposits at other banks                                                4                  -                      4
  Federal funds sold                                                   (65)               (88)                    23
  Loans and fees on loans                                            1,155             (1,832)                 2,987
                                                            --------------           --------                -------
              Total interest income                                  1,160             (2,050)                 3,210

Expense from interest-bearing liabilities:
  Demand and money market                                             (476)              (627)                   151
  Savings                                                               53                  1                     52
  Time, $100,000 or more                                              (317)              (932)                   615
  Other Time                                                           (50)              (690)                   640
  Repurchase agreements                                                (98)               (50)                   (48)
  Notes Payable                                                        109                (19)                   128
  Trust Preferred Securities                                             7                  -                      7
  Federal funds purchased                                                3                 (1)                     4
                                                            --------------           --------                -------
              Total interest expense                                  (769)            (2,318)                 1,549

              Net interest income                           $        1,929           $    268                $ 1,661
                                                            ==============           ========                =======
</TABLE>

(1)  Interest income on tax-exempt securities is presented on a
     taxable-equivalent basis, using an income tax rate of 38%.

                                       11

<PAGE>

                          YEAR ENDED DECEMBER 31, 2001
                   COMPARED WITH YEAR ENDED DECEMBER 31, 2000

<TABLE>
<CAPTION>
                                                                                               CHANGES DUE TO
                                                            TOTAL INCREASE           --------------------------------
                                                              (DECREASE)               RATE                   VOLUME
                                                            --------------           ---------               --------
                                                                              (DOLLARS IN THOUSANDS)
<S>                                                         <C>                      <C>                     <C>
Income from interest-earning assets:
  Taxable investment securities                             $           78           $     32                $    46
  Tax exempt investment securities (1)                                  92                  -                     92
  Deposits at other banks                                                1                  -                      1
  Federal funds sold                                                  (223)              (120)                  (103)
  Loans and fees on loans                                            1,420               (910)                 2,330
                                                            --------------           --------                -------
              Total interest income                                  1,368               (998)                 2,366

Expense from interest-bearing liabilities:
  Demand and money market                                             (271)              (492)                   221
  Savings                                                               (1)                (3)                     2
  Time, $100,000 or more                                               145               (106)                   251
  Other Time                                                           645                (85)                   730
  Repurchase agreements                                                (39)               (64)                    25
  Notes Payable                                                         16                 (5)                    21
  Federal funds purchased                                              (18)                (7)                   (11)
                                                            --------------           --------                -------
              Total interest expense                                   477               (762)                 1,239

              Net interest income                           $          891           $   (236)               $ 1,127
                                                            ==============           ========                =======

</TABLE>

(1)  Interest income on tax-exempt securities is presented on a taxable-
     equivalent basis, using an income tax rate of 38%.

ASSET/LIABILITY MANAGEMENT

The following table sets forth the distribution of the repricing of the
Company's interest-earning assets and interest-bearing liabilities as of
December 31, 2002, the interest rate sensitivity gap (i.e., interest rate
sensitive assets less interest rate sensitive liabilities), the cumulative
interest rate sensitivity gap, the interest rate sensitivity gap ratio (i.e.,
interest rate sensitive assets divided by interest rate sensitive liabilities)
and the difference to total interest earning assets. The table also sets forth
the time periods in which earning assets and liabilities will mature or may
reprice in accordance with their contractual terms. However, the table does not
necessarily indicate the impact of general interest rate movements on the net
interest margin since the repricing of various categories of assets and
liabilities is subject to competitive pressures and the needs of the Bank's
customers. In addition, various assets and liabilities indicted as repricing
within the same period may in fact reprice at different times within such period
and at different rates.

                                       12

<PAGE>

INTEREST RATE GAP SENSITIVITY

                              At December 31, 2002
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                              Three        Four to       One to        Over
                                             Months        Twelve         Five         Five
                                             or Less       Months         Years        Years         Total
                                            -----------------------------------------------------------------
<S>                                         <C>          <C>            <C>           <C>          <C>
Interest-earning assets:
  Federal funds sold                        $   6,812    $        -     $       -     $       -    $    6,812
  Investment securities (1)                        70         1,113         6,494         8,971    $   16,648
  Loans                                        84,904         9,495        46,177           277    $  140,853
                                            -----------------------------------------------------------------
    Total interest-earning assets           $  91,786    $   10,608     $  52,671     $   9,248    $  164,313
                                            =================================================================

Interest-bearing liabilities
  Deposits
    Interest-bearing demand and savings     $  42,062    $        -     $       -     $       -    $   42,062
    Time, $100,000 or more                     17,689        25,858         6,324             -        49,871
    Other Time                                 11,887        30,141         6,203             -        48,231
    Repurchase Agreements                       1,380             -             -             -         1,380
   Other Borrowings                                 -             -         6,400             -         6,400
   Trust Preferred Securities                       -             -             -         4,000         4,000
                                            -----------------------------------------------------------------
    Total interest-bearing
      liabilities                           $  73,018    $   55,999     $  18,927     $   4,000    $  151,944
                                            =================================================================

Interest rate sensitivity gap
  per period                                $  18,768    $  (45,391)    $  33,744     $   5,248    $   12,369
                                            =================================================================

Interest rate sensitivity gap ratio            125.70%        18.94%       278.28%       231.20%       108.14%
                                            =================================================================

Cumulative interest rate sensitivity gap    $  18,768    $  (26,623)    $   7,121     $  12,369
                                            ====================================================

Cumulative difference to total interest
  earning assets                                11.42%       -16.20%         4.33%         7.53%
                                            ===================================================
</TABLE>

(1) The above schedule excludes stock in Federal Home Loan Bank of $320,000 and
stock in the Federal Reserve Bank of $350,600, which has no contractual
maturity.

Certain shortcomings are inherent in the method of analysis presented in the
foregoing table. For example, although certain assets and liabilities may have
similar maturities or periods to repricing, they may react, in different
degrees, or at different points in time, to changes in market interest rates.
Changes in interest rates, prepayment rates, early withdrawal levels and the
ability of borrowers to service their debt, among other factors, may vary
significantly from the assumptions made in the table. The Company actively
manages the mix of asset and liability maturities to control the effects of
changes in the general level of interest rates on net interest income. Except
for its effect on the general level of interest rates, inflation does not have a
material impact on the Company due to the rate variability and short-term
maturities of its earning assets. In particular, approximately 58.0% of the loan
portfolio is comprised of loans that are variable rate terms or short-term
obligations.

                                       13

<PAGE>

INVESTMENT PORTFOLIO

TYPES OF INVESTMENTS

The amortized cost and estimated market value of securities available for sale
are as follows:

<TABLE>
<CAPTION>
                                         Amortized       Unrealized       Unrealized       Market
                                           Cost             Gains           Losses         Value
                                      ---------------   ------------     ------------   -------------
<S>                                   <C>               <C>              <C>            <C>
December 31, 2002:
  U.S. Government agencies             $   7,158,707     $   185,124     $      -       $   7,343,831
  Muncipal securities                      4,195,870         140,976           74       $   4,336,772
  Mortgage-backed securities               4,293,008          98,367            -       $   4,391,375
  Corporate Bonds                          1,000,000               -            -       $   1,000,000
                                       -------------     -----------     --------       -------------
                                       $  16,647,585     $   424,467     $     74       $  17,071,978
                                       =============     ===========     ========       =============
</TABLE>

<TABLE>
<CAPTION>
                                         Amortized       Unrealized       Unrealized       Market
                                           Cost             Gains           Losses         Value
                                      ---------------   ------------     ------------   -------------
<S>                                   <C>               <C>              <C>            <C>
December 31, 2001:
  U.S. Government agencies             $   2,992,034     $    44,656     $   40,184     $   2,996,506
  Muncipal securities                      3,296,535           1,762         78,230     $   3,220,067
  Mortgage-backed securities               3,675,164         121,774              -     $   3,796,938
  Corporate Bonds                          2,028,511         132,888              -     $   2,161,399
                                       -------------     -----------     ----------     -------------
                                       $  11,992,244     $   301,080     $  118,414     $  12,174,910
                                       =============     ===========     ==========     =============
</TABLE>

Other investments include equity securities with no readily determinable fair
value. These investments are carried at cost.

The Company does not have investments to one issuer totaling more than 10% of
equity.

                                       14

<PAGE>

MATURITIES OF INVESTMENTS

The carrying amounts of investment securities in each category as of December
31, 2002 is shown in the following table according to maturity:

<TABLE>
<CAPTION>
                          U.S        WTD                      WTD     Mortgage     WTD                  WTD                   WTD
                         Govt        Avg     Municipal        Avg      Backed      Avg    Corporate     Avg                   Avg
                       Agencies     Yield   Securities (1)   Yield   Securities   Yield     Bonds      Yield     Total       Yield
                       --------     -----   --------------   -----   ----------   -----   ---------    -----   ----------    -----
                                                     Dollars in thousands)
<S>                    <C>          <C>     <C>              <C>     <C>          <C>     <C>          <C>     <C>           <C>
Maturities

  Within one year      $    996     3.05%   $          157    1.94%  $       30    5.20%  $       -       -    $    1,183    2.96%

  After 1 to 5 years      3,587     4.12%            2,286    4.53%         621    6.47%          -       -         6,494    4.49%

  After 5 to 10 years     2,576     4.68%            1,476    6.64%           -       -           -       -         4,052    5.39%

  After 10 years              -        -               277    7.05%       3,642    5.76%      1,000    9.00%        4,919    8.15%
                       --------     ----    --------------   -----   ----------   -----   ---------    ----    ----------    ----

Total                  $  7,159     4.17%   $        4,196    5.34%  $    4,293    5.86%  $   1,000    9.00%   $   16,648    5.52%
                       ========     ====    ==============   =====   ==========   =====   =========    ====    ==========    ====
</TABLE>

(1) -Average Yields are presented on a tax equivalent basis

The above schedule excludes Other Investments which consists of Federal Home
Loan Bank stock in the amount of $320,000 and Federal Reserve Bank stock in the
amount of $350,600 which has no contractual maturity. Mortgage backed security
maturities are based on the average life at the projected repayment speed.

                                       15

<PAGE>

LOAN PORTFOLIO

TYPES OF LOANS

The composition of loans outstanding at the indicated dates is presented in the
following table. Management is not aware of any additional concentrations.

<TABLE>
<CAPTION>
                                                      December 31,        Percent of     December 31,      Percent of
                                                         2002               Total           2001             Total
                                                     ----------------------------------------------------------------
                                                                             (In Thousands)
<S>                                                   <C>                 <C>            <C>               <C>
Commercial                                             $   24,517           17.41%        $  15,775          16.09%
Real estate-construction                                   44,309           31.46%           24,708          25.21%
Real estate-commercial and residential                     59,851           42.49%           48,814          49.80%
Installment loans to individuals                            8,038            5.71%            5,686           5.80%
Real estate-home equity                                     4,138            2.94%            3,035           3.10%
                                                       ----------          ------         ---------         ------
Total loans                                               140,853          100.00%           98,018         100.00%
Less:  Allowance for loan losses                            1,383                               982
       Net deferred loan fees                                 291                               378
                                                       ----------                         ---------
Loans, net                                             $  139,179                         $  96,658
                                                       ==========                         =========
</TABLE>

Loans are reported at the gross amount outstanding, reduced by the net deferred
loan fees and a valuation allowance for loan losses. Interest income is
recognized over the term of the loans based on the unpaid daily principal amount
outstanding. Loan origination fees are deferred and recognized as income over
the actual life of the loan using the interest method. Loans are generally
placed on nonaccrual status when the payment of principal and/or interest is
past due 90 days or more or when management of the Bank determines upon
consideration of economic and business factors affecting collection efforts that
collection of interest is doubtful. As of December 31, 2002, there was one loan
on nonaccrual for $588,204 and $64,000 of loans greater than 90 days past due
but still accruing interest. As of December 31, 2001, there were no nonaccrual
or nonperforming loans.

                                       16

<PAGE>

MATURITIES AND SENSITIVITY OF LOANS TO CHANGES IN INTEREST RATES

The following table summarizes major classifications of loans by contractual
maturity of individual loans as of December 31, 2002, including loans that may
be subject to renewal at their contractual maturity. Renewal of such loans is
subject to review and credit approval, as well as modification of terms upon
their maturity. Actual repayments of loans may differ from matruities reflected
below because borrowers have the right to prepay obligations with or without
prepayment penalties.

<TABLE>
<CAPTION>
                                                                       Due After
                                                          Due in       1 Year but
                                                          1 Year       Less Than      Due After
                                                          or Less       5 Years        5 Years        Total
                                                       --------------------------------------------------------
                                                                     (Dollars in thousands)
<S>                                                    <C>            <C>            <C>           <C>
Loan category:
  Commercial                                           $     17,981   $      6,316   $       220   $     24,517
  Real estate-construction                                   42,848          1,461             -         44,309
  Real estate-commercial and residential                     24,632         35,199            20         59,851
  Installment loans to individuals                            4,936          3,065            37          8,038
  Real estate-home equity                                     4,001            137             -          4,138
                                                       --------------------------------------------------------
Total loans                                            $     94,398   $     46,178   $       277   $    140,853
                                                       ========================================================
</TABLE>

For the above loans, the following is a presentation of an analysis of
sensitivities to changes in interest rates at December 31, 2002 (dollars in
thousands):

<TABLE>
<CAPTION>
                                                                       Due After
                                                          Due in       1 Year but
                                                          1 Year       Less Than      Due After
                                                          or Less       5 Years        5 Years        Total
                                                       --------------------------------------------------------
<S>                                                    <C>            <C>            <C>           <C>
Interest category:
  Predetermined interest rate                          $     12,726   $     46,178   $       277   $     59,181
  Floating interest rate                                     81,672              -             -         81,672
                                                       --------------------------------------------------------
Total loans                                            $     94,398   $     46,178   $       277   $    140,853
                                                       ========================================================
</TABLE>

SUMMARY OF LOAN LOSS EXPERIENCE

The Company's allowance for loan losses was approximately $1,383,000 at December
31, 2002, compared to $982,000 at December 31, 2001, representing .99% of loans
and 1.0% of year end total loans outstanding for December 31, 2002 and 2001,
respectively.

The allowance for loan losses reflects management's assessment and estimate of
the risks associated with extending credit and its evaluation of the quality of
the loan portfolio. The Bank periodically analyzes the loan portfolio in an
effort to review asset quality and to establish an

                                       17

<PAGE>

allowance for loan losses that management believes will be adequate in light of
anticipated risks and loan losses. In assessing the adequacy of the allowance,
size, quality and risk of loans in the portfolio are reviewed.

An analysis of the credit quality of the loan portfolio and the adequacy of the
allowance for loan losses is prepared by management and presented to the Board
of Directors on a quarterly basis. In addition, the Bank has engaged an outside
loan review consultant to perform, and report on an annual basis, an independent
review of the quality of the loan portfolio relative to the accurateness of the
Bank's loan grading system. The allowance for loan losses is established through
charges to expense in the form of a provision for loan losses. Loan losses and
recoveries are charged and credited directly to the allowance.

The Bank's allowance for loan losses is also subject to regulatory examinations
and determinations as to adequacy, which may take into account such factors as
the methodology used to calculate the allowance for loan losses and the size of
the allowance for loan losses compared to a group of peer banks identified by
the regulators. During their routine examinations of banks, the FDIC and the
Department of Banking and Finance may require the Company to recognize additions
to the allowance based on their judgments about information available to them at
the time of their examination.

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. After review of all relevant matters affecting loan
collectability, management believes that the allowance for loan losses is
appropriate.

At December 31, 2002, the Bank had one non-accrual loan with a balance of
approximately $588,000. Interest income that would have been recorded on
nonaccrual loans for the year ended December 31, 2002, had it performed in
accordance with its original terms, amounted to approximately $30,000. Interest
income on nonaccrual loans included in the results of operations for 2002
amounted to approximately $27,000. Total loans past due thirty days or more at
December 31, 2002, were approximately $632,000, or .45% of total loans. The Bank
had approximately $64,000 in loans past due more than 90 days and still accruing
interest.

                                       18

<PAGE>

The following is an analysis of the allowance for loan losses for the twelve
months ended December 31, 2002 and 2001:

The following summarizes the activity in the allowance for loan losses for the
following periods:

<TABLE>
<CAPTION>
                                                                         December 31,
                                                              2002                         2001
                                                        ----------------              --------------
<S>                                                     <C>                           <C>
Average amount of loans outstanding                      $   122,282,063               $  81,963,058

Balance at beginning of period                                  $981,639               $     741,629

Charge-offs:
  Commercial                                                           -                           -
  Real estate-construction                                             -                           -
  Real estate-commercial and residential                               -                           -
  Installment loans to individuals                                10,682                           -
  Real estate-home equity                                              -                           -
                                                         ---------------               -------------
     Total charge-offs                                            10,682                           -
                                                         ---------------               -------------

Recoveries:
  Commercial                                                           -                           -
  Real estate-construction                                             -                           -
  Real estate-commercial and residential                               -                           -
  Installment loans to individuals                                 5,450                           -
  Real estate-home equity                                              -                           -
                                                         ---------------               -------------
     Total recoveries                                              5,450                           -
                                                         ---------------               -------------

Net charge-offs                                                    5,232                           -
                                                         ---------------               -------------
Provision charged to operations                                  406,269                     240,010
                                                         ---------------               -------------

                                                         ---------------               -------------
Balance at end of year                                   $     1,382,676               $     981,639
                                                         ===============               =============

Ratio of net charge-offs during the period to average
  loans outstanding during the period                              0.004%                      0.000%
</TABLE>

                                       19

<PAGE>

DEPOSITS

Average amount of deposits and average rate paid thereon, classified as to
noninterest-bearing demand deposits, interest-bearing demand deposits, savings
deposits, and time deposits, for the periods indicated are presented below:

<TABLE>
<CAPTION>
                                                          December 31, 2002                December 31, 2001
                                                   --------------------------------   ---------------------------

                                                       Average         Average           Average       Average
                                                       Amount         Rate Paid           Amount      Rate Paid
                                                   --------------------------------   ---------------------------
                                                                                        (Dollars in thousands)
<S>                                                <C>                <C>             <C>             <C>
Deposits:
  Noninterest-bearing demand                       $        13,495         -          $       8,427         -
  Interest-bearing demand                                   32,735      1.06%                26,848     3.06%
  Savings                                                    3,313      1.75%                   348     1.44%
  Time                                                      85,436      3.49%                57,770     5.79%
                                                   ---------------                    -------------

              Total                                $       134,979                    $      93,393
                                                   ===============                    =============
</TABLE>

MATURITIES OF TIME DEPOSITS OF $100,000 OR MORE

Maturities of time certificates of deposit of $100,000 or more outstanding at
December 31, 2002 are summarized as follows:

<TABLE>
<CAPTION>
                                                      (Dollars in thousands)
<S>                                                   <C>
Months to maturity:
  3 or less                                                 $  17,689
  3 to 6                                                       14,472
  6 to 12                                                      11,386
  Over 12                                                       6,324
                                                            ---------

              Total                                         $  49,871
                                                            =========
</TABLE>

                                       20

<PAGE>

RETURN ON ASSETS AND SHAREHOLDERS EQUITY

The rate of return information for the periods indicated is presented below.

<TABLE>
<CAPTION>
                                                 Year Ended December 31,
                                             2002                     2001
                                           --------------------------------
<S>                                         <C>                      <C>
Return on assets                             0.80%                   0.45%
Return on equity                            11.04%                   5.59%
Dividend payout ratio                        0.00%                   0.00%
Equity to assets ratio                       7.25%                   7.99%
</TABLE>

SUPERVISION AND REGULATION

Both the Company and the Bank are subject to extensive state and federal banking
regulations that impose restrictions on and provide for general regulatory
oversight of their operations. These laws are generally intended to protect
depositors and not shareholders. The following discussion describes the material
elements of the regulatory framework that applies to us.

THE COMPANY

Since the Company owns all of the capital stock of the Bank, it is a bank
holding company under the federal Bank Holding Company Act of 1956. As a result,
the Company is primarily subject to the supervision, examination, and reporting
requirements of the Bank Holding Company Act and the regulations of the Federal
Reserve.

ACQUISITIONS OF BANKS. The Bank Holding Company Act requires every bank holding
company to obtain the Federal Reserve's prior approval before:

         -   acquiring direct or indirect ownership or control of any voting
             shares of any bank if, after the acquisition, the bank holding
             company will directly or indirectly own or control more than 5% of
             the bank's voting shares;

         -   acquiring all or substantially all of the assets of any bank; or

         -   merging or consolidating with any other bank holding company.

Additionally, the Bank Holding Company Act provides that the Federal Reserve may
not approve any of these transactions if it would result in or tend to create a
monopoly or, substantially lessen competition or otherwise function as a
restraint of trade, unless the anticompetitive effects of the proposed
transaction are clearly outweighed by the public interest in meeting the
convenience and needs of the community to be served. The Federal Reserve is also
required to consider the financial and managerial resources and future prospects
of the bank holding companies and banks concerned and the convenience and needs
of the community to be served. The Federal Reserve's consideration of financial
resources generally focuses on capital adequacy, which is discussed below.

                                       21

<PAGE>

Under the Bank Holding Company Act, if adequately capitalized and adequately
managed, the Company or any other bank holding company located in Georgia may
purchase a bank located outside of Georgia. Conversely, an adequately
capitalized and adequately managed bank holding company located outside of
Georgia may purchase a bank located inside Georgia. In each case, however,
restrictions may be placed on the acquisition of a bank that has only been in
existence for a limited amount of time or will result in specified
concentrations of deposits.

For example, Georgia law prohibits a bank holding company from acquiring control
of a financial institution until the target financial institution has been
incorporated for three years.

CHANGE IN BANK CONTROL. Subject to various exceptions, the Bank Holding Company
Act and the Change in Bank Control Act, together with related regulations,
require Federal Reserve approval prior to any person or company acquiring
"control" of a bank holding company. Control is conclusively presumed to exist
if an individual or company acquires 25% or more of any class of voting
securities of the bank holding company. Control is rebuttably presumed to exist
if a person or company acquires 10% or more, but less than 25%, of any class of
voting securities and either:

         -   the bank holding company has registered securities under Section 12
             of the Securities Act of 1934; or

         -   no other person owns a greater percentage of that class of voting
             securities immediately after the transaction.

The Company common stock is registered under the Securities Exchange Act of
1934. The regulations provide a procedure for challenge of the rebuttable
control presumption.

PERMITTED ACTIVITIES. Generally, bank holding companies are prohibited under the
Bank Holding Company Act, from engaging in or acquiring direct or indirect
control of more than 5% of the voting shares of any company engaged in any
activity other than:

         -   banking or managing or controlling banks; and

         -   an activity that the Federal Reserve determines to be so closely
             related to banking as to be a proper incident to the business of
             banking.

Activities that the Federal Reserve has found to be so closely related to
banking as to be a proper incident to the business of banking include:

         -   factoring accounts receivable;

         -   making, acquiring, brokering or servicing loans and usual related
             activities;

         -   leasing personal or real property;

         -   operating a non-bank depository institution, such as a savings
             association;

                                       22

<PAGE>

         -   trust company functions;

         -   financial and investment advisory activities;

         -   conducting discount securities brokerage activities;

         -   underwriting and dealing in government obligations and money market
             instruments;

         -   providing specified management consulting and counseling
             activities;

         -   performing selected data processing services and support services;

         -   acting as agent or broker in selling credit life insurance and
             other types of insurance in connection with credit transactions;
             and

         -   performing selected insurance underwriting activities.

Despite prior approval, the Federal Reserve may order a bank holding company or
its subsidiaries to terminate any of these activities or to terminate its
ownership or control of any subsidiary when it has reasonable cause to believe
that the bank holding company's continued ownership, activity or control
constitutes a serious risk to the financial safety, soundness, or stability of
it or any of its bank subsidiaries.

A bank holding company that qualifies and elects to become a financial holding
company is permitted to engage in activities that are financial in nature or
incidental or complementary to financial activity. The Bank Holding Company Act
expressly lists the following activities as financial in nature:

         -   lending, trust and other banking activities;

         -   insuring, guaranteeing, or indemnifying against loss or harm, or
             providing and issuing annuities, and acting as principal, agent, or
             broker for these purposes, in any state;

         -   providing financial, investment, or advisory services;

         -   issuing or selling instruments representing interests in pools of
             assets permissible for a bank to hold directly;

         -   underwriting, dealing in or making a market in securities;

         -   other activities that the Federal Reserve may determine to be so
             closely related to banking or managing or controlling banks as to
             be a proper incident to managing or controlling banks;

         -   foreign activities permitted outside of the United States if the
             Federal Reserve has determined them to be usual in connection with
             banking operations abroad;

                                       23

<PAGE>

         -   merchant banking through securities or insurance affiliates; and

         -   insurance company portfolio investments.

To qualify to become a financial holding company, the Bank and any other
depository institution subsidiary of the Company must be well capitalized and
well managed and must have a Community Reinvestment Act rating of at least
satisfactory. Additionally, the Company must file an election with the Federal
Reserve to become a financial holding company and must provide the Federal
Reserve with 30 days' written notice prior to engaging in a permitted financial
activity. Although the Company is eligible to elect to become a financial
holding company, the Company has no plans to make such an election.

SUPPORT OF SUBSIDIARY INSTITUTIONS. Under Federal Reserve policy, the Company is
expected to act as a source of financial strength for the Bank and to commit
resources to support the Bank. This support may be required at times when,
without this Federal Reserve policy, the Company might not be inclined to
provide it. In addition, any capital loans made by the Company to the Bank will
be repaid only after its deposits and various other obligations are repaid in
full. In the unlikely event of the Company's bankruptcy, any commitment by it to
a federal bank regulatory agency to maintain the capital of the Bank will be
assumed by the bankruptcy trustee and entitled to a priority of payment.

THE BANK

Since the Bank is a commercial bank chartered under the laws of the State of
Georgia and is a Federal Reserve member bank, it is primarily subject to the
supervision, examination and reporting requirements of the Federal Reserve Bank
of Atlanta and the Georgia Department of Banking and Finance. The Federal
Reserve Bank of Atlanta and Georgia Department of Banking and Finance regularly
examine the Bank's operations and have the authority to approve or disapprove
mergers, the establishment of branches and similar corporate actions. Both
regulatory agencies have the power to prevent the continuance or development of
unsafe or unsound banking practices or other violations of law. Additionally,
the Bank's deposits are insured by the FDIC to the maximum extent provided by
law. The Bank is also subject to numerous state and federal statutes and
regulations that affect its business, activities and operations.

BRANCHING. Under current Georgia law, the Bank may open branch offices
throughout Georgia with the prior approval of the Georgia Department of Banking
and Finance. In addition, with prior regulatory approval, the Bank may acquire
branches of existing banks located in Georgia. The Bank and any other national
or state-chartered bank generally may branch across state lines by merging with
banks in other states if allowed by the applicable states' laws. Georgia law,
with limited exceptions, currently permits branching across state lines through
interstate mergers.

Under the Federal Deposit Insurance Act, states may "opt-in" and allow
out-of-state banks to branch into their state by establishing a new start-up
branch in the state. Currently, Georgia has not "opted-in" to this provision.
Therefore, interstate merger is the only method through which a bank located
outside of Georgia may branch into Georgia. This provides a limited barrier of

                                       24

<PAGE>

entry into the Georgia banking market, which protects us from an important
segment of potential competition. However, because Georgia has elected not to
"opt-in," the Company's ability to establish a new start-up branch in another
state may be limited. Many states that have elected to "opt-in" have done so on
a reciprocal basis, meaning that an out-of-state bank may establish a new
start-up branch only if their home state has also elected to "opt-in."
Consequently, until Georgia elects to "opt-in" its election, the only way the
Company will be able to branch into states that have elected to "opt-in" on a
reciprocal basis will be through interstate merger.

PROMPT CORRECTIVE ACTION. The Federal Deposit Insurance Corporation Improvement
Act of 1991 establishes a system of prompt corrective action to resolve the
problems of undercapitalized financial institutions. Under this system, the
federal banking regulators have established five capital categories--well
capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized and critically undercapitalized--in which all institutions are
placed. The federal banking agencies have also specified by regulation the
relevant capital levels for each of the other categories. At December 31, 2002,
the Bank was qualified for the "well capitalized" category.

Federal banking regulators are required to take various mandatory supervisory
actions and are authorized to take other discretionary actions with respect to
institutions in the three undercapitalized categories. The severity of the
action depends upon the capital category in which the institution is placed.
Generally, subject to a narrow exception, the banking regulator must appoint a
receiver or conservator for an institution that is critically undercapitalized.

An institution in any of the undercapitalized categories is required to submit
an acceptable capital restoration plan to its appropriate federal banking
agency. A bank holding company must guarantee that a subsidiary depository
institution meets its capital restoration plan, subject to various limitations.
The controlling holding company's obligation to fund a capital restoration plan
is limited to the lesser of 5% of an undercapitalized subsidiary's assets at the
time it became undercapitalized or the amount required to meet regulatory
capital requirements. An undercapitalized institution is also generally
prohibited from increasing its average total assets, making acquisitions,
establishing any branches or engaging in any new line of business, except under
an accepted capital restoration plan or with FDIC approval. The Federal Reserve
regulations also establish procedures for downgrading an institution to a lower
capital category based on supervisory factors other than capital.

FDIC INSURANCE ASSESSMENTS. The FDIC has adopted a risk-based assessment system
for insured depository institutions that takes into account the risks
attributable to different categories and concentrations of assets and
liabilities. The system assigns an institution to one of three capital
categories: (1) well capitalized; (2) adequately capitalized; and (3)
undercapitalized. These three categories are substantially similar to the prompt
corrective action categories described above, with the "undercapitalized"
category including institutions that are undercapitalized, significantly
undercapitalized, and critically undercapitalized for prompt corrective action
purposes. The FDIC also assigns an institution to one of three supervisory
subgroups based on a supervisory evaluation that the institution's primary
federal regulator provides to the FDIC and information that the FDIC determines
to be relevant to the institution's financial condition and the risk posed to
the deposit insurance funds. Assessments range from 0 to 27 cents per $100 of
deposits, depending on the institution's capital group and supervisory subgroup.
In addition, the FDIC imposes assessments to help pay off the $780 million in
annual

                                       25

<PAGE>

interest payments on the $8 billion Financing Corporation bonds issued in the
late 1980s as part of the government rescue of the thrift industry. This
assessment rate is adjusted quarterly and is set at $1.68 cents for the first
quarter of 2003.

The FDIC may terminate its insurance of deposits if it finds that the
institution has engaged in unsafe and unsound practices, is in an unsafe or
unsound condition to continue operations, or has violated any applicable law,
regulation, rule, order or condition imposed by the FDIC.

COMMUNITY REINVESTMENT ACT. The Community Reinvestment Act requires that, in
connection with examinations of financial institutions within their respective
jurisdictions, the Federal Reserve or the FDIC shall evaluate the record of each
financial institution in meeting the credit needs of its local community,
including low and moderate-income neighborhoods. These facts are also considered
in evaluating mergers, acquisitions, and applications to open a branch or
facility. Failure to adequately meet these criteria could impose additional
requirements and limitations on the Bank and the Company. Since the Company's
aggregate assets are not more than $250 million, under the Gramm-Leach-Bliley
Act, the Bank is subject to a Community Reinvestment Act examination only once
every 60 months if the Banks receives an outstanding rating, once every 48
months if the Bank receives a satisfactory rating and as needed if the Bank
rating is less than satisfactory. Additionally, the Bank must publicly disclose
the terms of various Community Reinvestment Act-related agreements.

OTHER REGULATIONS. Interest and other charges collected or contracted for by the
Bank are subject to state usury laws and federal laws concerning interest rates.
For example, under the Soldiers' and Sailors' Civil Relief Act of 1940, a lender
is generally prohibited from charging an annual interest rate in excess of 6% on
any obligation for which the borrower is a person on active duty with the United
States military.

The Bank's loan operations are also subject to federal laws applicable to credit
transactions, such as:

         -   The federal Truth-In-Lending Act, governing disclosures of credit
             terms to consumer borrowers;

         -   The Home Mortgage Disclosure Act of 1975, requiring financial
             institutions to provide information to enable the public and public
             officials to determine whether a financial institution is
             fulfilling its obligation to help meet the housing needs of the
             community it serves;

         -   The Equal Credit Opportunity Act, prohibiting discrimination on the
             basis of race, creed or other prohibited factors in extending
             credit;

         -   The Fair Credit Reporting Act of 1978, governing the use and
             provision of information to credit reporting agencies;

         -   The Fair Debt Collection Act, governing the manner in which
             consumer debts may be collected by collection agencies;

                                       26

<PAGE>

         -   Soldiers' and Sailors' Civil Relief Act of 1940, governing the
             repayment terms of, and property rights underlying, secured
             obligations of persons in military service; and

         -   The rules and regulations of the various federal agencies charged
             with the responsibility of implementing these federal laws.

         -   In addition to the federal and state laws noted above, the Georgia
             Fair Lending Act ("GFLA") imposes restrictions and procedural
             requirements on most mortgage loans made in Georgia, including home
             equity loans and lines of credit. GFLA became effective on October
             1, 2002 and was amended on March 7, 2003. While selected provisions
             of GFLA apply regardless of the interest rate or charges on the
             loan, the majority of the requirements apply only to "high cost
             home loans," as defined by GFLA. We have implemented procedures to
             comply with all GFLA requirements.

The deposit operations of the Bank are subject to:

         -   The Right to Financial Privacy Act, which imposes a duty to
             maintain confidentiality of consumer financial records and
             prescribes procedures for complying with administrative subpoenas
             of financial records; and

         -   The Electronic Funds Transfer Act and Regulation E issued by the
             Federal Reserve to implement that act, which govern automatic
             deposits to and withdrawals from deposit accounts and customers'
             rights and liabilities arising from the use of automated teller
             machines and other electronic banking services.

CAPITAL ADEQUACY

The Company and the Bank are required to comply with the capital adequacy
standards established by the Federal Reserve, and the Georgia Department of
Banking and Finance, in the case of the Bank. The Federal Reserve has
established a risk-based and a leverage measure of capital adequacy for bank
holding companies.

The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profiles among banks and bank
holding companies, to account for off-balance-sheet exposure, and to minimize
disincentives for holding liquid assets. Assets and off-balance-sheet items,
such as letters of credit and unfunded loan commitments, are assigned to broad
risk categories, each with appropriate risk weights. The resulting capital
ratios represent capital as a percentage of total risk-weighted assets and
off-balance-sheet items.

The minimum guideline for the ratio of total capital to risk-weighted assets is
8%. Total capital consists of two components, Tier 1 Capital and Tier 2 Capital.
Tier 1 Capital generally consists of common shareholders' equity, minority
interests in the equity accounts of consolidated subsidiaries, qualifying
noncumulative perpetual preferred stock, and a limited amount of qualifying
cumulative perpetual preferred stock and trust preferred securities, less
goodwill and other specified intangible assets. Tier 1 Capital must equal at
least 4% of risk-weighted assets. Tier 2 Capital generally consists of
subordinated debt, other preferred stock and hybrid capital and a limited amount
of loan loss reserves. The total amount of Tier 2 Capital is limited to 100% of
Tier 1 Capital. At December 31, 2002 the Company's ratio of total capital to
risk-

                                       27

<PAGE>

weighted assets was 11.1% and the Company's ratio of Tier 1 Capital to
risk-weighted assets was 10.1%.

In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio of Tier 1 Capital to average assets, less goodwill and other specified
intangible assets, of 3% for bank holding companies that meet specified
criteria, including having the highest regulatory rating and implementing the
Federal Reserve's risk-based capital measure for market risk. All other bank
holding companies generally are required to maintain a leverage ratio of at
least 4%. At December 31, 2002, the Company's leverage ratio was 9.1%. 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 reliance on
intangible assets. The Federal Reserve considers the leverage ratio and other
indicators of capital strength in evaluating proposals for expansion or new
activities.

The Bank and the Company are also both subject to leverage capital guidelines
issued by the Georgia Department of Banking and Finance, which provide for
minimum ratios of Tier 1 capital to total assets. These guidelines are
substantially similar to those adopted by the Federal Reserve in the case of the
Company and those adopted by the FDIC in the case of the Bank.

Failure to meet capital guidelines could subject a bank or bank holding company
to a variety of enforcement remedies, including issuance of a capital directive,
the termination of deposit insurance by the FDIC, a prohibition on accepting
brokered deposits, and certain other restrictions on its business. As described
above, significant additional restrictions can be imposed on FDIC-insured
depository institutions that fail to meet applicable capital requirements. See
"Prompt Corrective Action."

PAYMENT OF DIVIDENDS

The Company is a legal entity separate and distinct from the Bank. The principal
source of the Company's cash flow, including cash flow to pay dividends to its
shareholders, is dividends that the Bank pays to it. Statutory and regulatory
limitations apply to the Bank's payment of dividends to the Company as well as
to the Company's payment of dividends to its shareholders.

If, in the opinion of the federal banking regulator, the Bank were engaged in or
about to engage in an unsafe or unsound practice, the federal banking regulator
could require, after notice and a hearing, that it cease and desist from its
practice. The federal banking agencies have indicated that paying dividends that
deplete a depository institution's capital base to an inadequate level would be
an unsafe and unsound banking practice. Under the Federal Deposit Insurance
Corporation Improvement Act of 1991, a depository institution may not pay any
dividend if payment would cause it to become undercapitalized or if it already
is undercapitalized. Moreover, the federal agencies have issued policy
statements that provide that bank holding companies and insured banks should
generally only pay dividends out of current operating earnings. See "Prompt
Corrective Action."

The Georgia Department of Banking and Finance also regulates the Bank's dividend
payments and must approve dividend payments that would exceed 50% of the Bank's
net income for the

                                       28

<PAGE>

prior year. The Company's payment of dividends may also be affected or limited
by other factors, such as the requirement to maintain adequate capital above
regulatory guidelines.

RESTRICTIONS ON TRANSACTIONS WITH AFFILIATES

The Company and the Bank are subject to the provisions of Section 23A of the
Federal Reserve Act. Section 23A places limits on the amount of:

         -   loans or extensions of credit to affiliates;

         -   investment in affiliates;

         -   the purchase of assets from affiliates, except for real and
             personal property exempted by the Federal Reserve;

         -   loans or extensions of credit to third parties collateralized by
             the securities or obligations of affiliates; and

         -   any guarantee, acceptance or letter of credit issued on behalf of
             an affiliate.

The total amount of the above transactions is limited in amount, as to any one
affiliate, to 10% of a bank's capital and surplus and, as to all affiliates
combined, to 20% of a bank's capital and surplus. In addition to the limitation
on the amount of these transactions, each of the above transactions must also
meet specified collateral requirements. The Company must also comply with other
provisions designed to avoid the taking of low-quality assets.

The Company and the Bank are also subject to the provisions of Section 23B of
the Federal Reserve Act which, among other things, prohibit an institution from
engaging in the above transactions with affiliates unless the transactions are
on terms substantially the same, or at least as favorable to the institution or
its subsidiaries, as those prevailing at the time for comparable transactions
with nonaffiliated companies.

The Bank is also subject to restrictions on extensions of credit to its
executive officers, directors, principal shareholders and their related
interests. These extensions of credit (1) must be made on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with third parties, and (2) must not involve more
than the normal risk of repayment or present other unfavorable features.

PRIVACY

Financial institutions are required to disclose their policies for collecting
and protecting confidential information. Customers generally may prevent
financial institutions from sharing nonpublic personal financial information
with nonaffiliated third parties except under narrow circumstances, such as the
processing of transactions requested by the consumer. Additionally, financial
institutions generally may not disclose consumer account numbers to any
nonaffiliated third party for use in telemarketing, direct mail marketing or
other marketing to consumers.

ANTI-TERRORISM LEGISLATION

                                       29

<PAGE>

In the wake of the tragic events of September 11th, on October 26, 2001, the
President signed the Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001.
Under the USA PATRIOT Act, financial institutions are subject to prohibitions
against specified financial transactions and account relationships as well as
enhanced due diligence and "know your customer" standards in their dealings with
foreign financial institutions and foreign customers. For example, the enhanced
due diligence policies, procedures, and controls generally require financial
institutions to take reasonable steps--

         -   to conduct enhanced scrutiny of account relationships to guard
             against money laundering and report any suspicious transaction;

         -   to ascertain the identity of the nominal and beneficial owners of,
             and the source of funds deposited into, each account as needed to
             guard against money laundering and report any suspicious
             transactions;

         -   to ascertain for any foreign bank, the shares of which are not
             publicly traded, the identity of the owners of the foreign bank,
             and the nature and extent of the ownership interest of each such
             owner; and

         -   to ascertain whether any foreign bank provides correspondent
             accounts to other foreign banks and, if so, the identity of those
             foreign banks and related due diligence information.

Pursuant to the mandate of the USA PATRIOT Act, the Secretary of the Treasury
issued regulations effective April 24, 2002 applicable to financial
institutions. Because all federally insured depository institutions are required
to have anti-money laundering programs, the regulations provide that a financial
institution which is subject to regulation by a "federal functional" is in
compliance with the regulations if it complies with the rules of its primary
federal regulator governing the establishment and maintenance of anti-money
laundering programs.

Under the authority of the USA PATRIOT Act, the Secretary of the Treasury
adopted rules on September 26, 2002 increasing the cooperation and information
sharing between financial institutions, regulators and law enforcement
authorities regarding individuals, entities and

                                       30

<PAGE>

organizations engaged in, or reasonably suspected based on credible evidence of
engaging in, terrorist acts or money laundering activities. Under the new rules,
a financial institution is required to:

         -   expeditiously search its records to determine whether it maintains
             or has maintained accounts, or engaged in transactions with
             individuals or entities, listed in a request submitted by the
             Financial Crimes Enforcement Network ("FinCEN");

         -   notify FinCEN if an account or transaction is identified;

         -   designate a contact person to receive information requests;

         -   limit use of information provided by FinCEN to: (1) reporting to
             FinCEN, (2) determining whether to establish or maintain an account
             or engage in a transaction and (3) assisting the financial
             institution in complying with the Bank Secrecy Act; and

         -   maintain adequate procedures to protect the security and
             confidentiality of FinCEN requests.

Under the new rules, a financial institution may also share information
regarding individuals, entities, organizations and countries for purposes of
identifying and, where appropriate, reporting activities that it suspects may
involve possible terrorist activity or money laundering. Such
information-sharing is protected under a safe harbor if the financial
institution:

         -   notifies FinCEN of its intention to share information, even when
             sharing with an affiliated financial institution;

         -   takes reasonable steps to verify that, prior to sharing, the
             financial institution or association of financial institutions with
             which it intends to share information has submitted a notice to
             FinCEN;

         -   limits the use of shared information to identifying and reporting
             on money laundering or terrorist activities, determining whether to
             establish or maintain an account or engage in a transaction, or
             assisting it in complying with the Bank Security Act; and

         -   maintains adequate procedures to protect the security and
             confidentiality of the information.

Any financial institution complying with these rules will not be deemed to have
violated the privacy requirements discussed above.

The Secretary of the Treasury also adopted a new rule on September 26, 2002
intended to prevent money laundering and terrorist financing through
correspondent accounts maintained by U.S. financial institutions on behalf of
foreign banks. Under the new rule, financial institutions:

         -   are prohibited from providing correspondent accounts to foreign
             shell banks;

                                       31

<PAGE>

         -   are required to obtain a certification from foreign banks for which
             they maintain a correspondent account stating the foreign bank is
             not a shell bank and that it will not permit a foreign shell bank
             to have access to the U.S. account;

         -   must maintain records identifying the owner of the foreign bank for
             which they may maintain a correspondent account and its agent in
             the Unites States designated to accept services of legal process;

         -   must terminate correspondent accounts of foreign banks that fail to
             comply with or fail to contest a lawful request of the Secretary of
             the Treasury or the Attorney General of the United States, after
             being notified by the Secretary or Attorney General.

The new rule applies to correspondent accounts established after October 28,
2002.

PROPOSED LEGISLATION AND REGULATORY ACTION

New regulations and statutes are regularly proposed that contain wide-ranging
proposals for altering the structures, regulations and competitive relationships
of the nation's financial institutions operating in the United States. The
Company cannot predict whether or in what form any proposed regulation or
statute will be adopted or the extent to which the Company's business may be
affected by any new regulation or statute.

EFFECT OF GOVERNMENTAL MONETARY POLICES

The Company's earnings are affected by domestic economic conditions and the
monetary and fiscal policies of the United States government and its agencies.
The Federal Reserve Bank's monetary policies have had, and are likely to
continue to have, an important impact on the operating results of commercial
banks through its power to implement national monetary policy in order, among
other things, to curb inflation or combat a recession. The monetary policies of
the Federal Reserve affect the levels of bank loans, investments and deposits
through its control over the issuance of United States government securities,
its regulation of the discount rate applicable to member banks and its influence
over reserve requirements to which member banks are subject. The Bank cannot
predict the nature or impact of future changes in monetary and fiscal policies.

ITEM 2.  DESCRIPTION OF PROPERTY

The main office of The Peachtree Bank is located on a 1.2-acre tract of land in
northeast Fulton County, Georgia, which was purchased at a price of
approximately $610,000. The Bank's operations are conducted through its main
office, which is located at this site. The Bank operates its business in a
building of approximately 16,000 square feet in size which was constructed and
furnished at cost, including all furnishings, site preparation, landscaping,
paving, security equipment and automatic teller machine, of approximately
$3,297,000. Currently, the Bank utilizes approximately 10,300 square feet of the
space in the building. Additional space over and above that required to operate
the Bank is leased and generates lease income for the Bank. The Bank will
continue to lease this space until such time as the Bank requires use of the
space. The building is of brick construction and has six inside teller windows,
four drive-in lanes and one drive-up ATM.

                                       32

<PAGE>

Additional branch locations are located in western Gwinnett County, Georgia and
northern Dekalb County, Georgia. Both of these locations are leased offices. The
Gwinnett County location is 1,442 square feet and leases for approximately
$2,000 per month, increasing 4% each year of the lease term. The lease expired
on April 30, 2002, however there are five one-year options for renewal until
March 31, 2007. The northern Dekalb County location is 3,037 square feet and
leases for approximately $4,000 per month, increasing 3% each year of the lease
term. The lease expires on May 31, 2011.

Other than normal real estate commercial lending activities of the Bank, the
Company generally does not invest in real estate, interests in real estate, real
estate mortgages, or securities of or interests in persons primarily engaged in
real estate activities.

ITEM 3.  LEGAL PROCEEDINGS

There are no material pending legal proceedings to which the Company is a party
or of which any of its properties is subject; nor are there material proceedings
known to the Company to be contemplated by any governmental authority; nor are
there material proceedings known to the Company, pending or contemplated, in
which any director, officer, or affiliate or any principal security holder of
the Company or any associate of any of the foregoing, is a party or has an
interest adverse to the Company.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's common stock is not traded on an established trading market. As a
result, sales prices known to the Company do not necessarily reflect the price
that would be paid for the common stock in an active market. A Fairness Opinion
was conducted in June 2001, valuing the prices of The PB Financial Services
Corporation common stock at $13.61 per share. The sales price of all stock sales
since this date have been $13.61 per share. For the first five months of 2001,
based on the limited trading information available to the Company, the sales
price of the Company's Common Stock was $10.00 per share. As of March 25, 2003,
the number of holders of record of the Company's common stock was 578.

It is the policy of the Board of Directors of the Company to reinvest earnings
for such period of time as is necessary to ensure the success of the operations
of the Company. There are no current plans to initiate payment of cash
dividends, and future dividend policy will depend on the Company's earnings,
capital requirements, financial condition and other factors considered relevant
by the Board of Directors. The Company declared no dividends in 2002 and 2001.

In 2001, the Company issued 139,869 unregistered shares of common stock.
Beginning on September 28, 2001, the Company sold shares of common stock, $5 par
value, to its directors

                                       33

<PAGE>

and limited family members of the directors through a private placement. The
price of the stock was $13.61 per share. As of December 31, 2001, 139,869 shares
had been sold resulting in an aggregate value of $1,903,617. From December 31,
2001, to February 28, 2002, the date of closing for this private placement,
additional 26,332 shares were sold resulting in an additional aggregate value of
$358,379. Therefore, the private placement resulted in a total increase of
166,201 shares of common stock with an aggregate value of $2,261,996. No
discounts or commissions were paid in connection with the sale of the shares.
The sale of these shares of common stock qualified for the exemption from
registration under Rule 506 of the Securities Act of 1933.

THE PB FINANCIAL SERVICES CORPORATION STOCK OPTION PLAN INFORMATION

         The following table sets forth information regarding the number of
shares subject to options issued and reserved for future issuance under The
Peachtree Bank 1998 Stock Option Plan and The PB Financial Services Corporation
Directors' Stock Option Plan. The Company does not maintain any other equity
compensation plan.

<TABLE>
<CAPTION>
                                                                                                NUMBER OF SHARES
                                                                                                   REMAINING
                                                       NUMBER OF                                  AVAILABLE FOR
                                                    SECURITIES TO BE         WEIGHTED-           FUTURE ISSUANCE
                                                      ISSUED UPON        AVERAGE EXERCISE        UNDER THE PLAN
                                                      EXERCISE OF            PRICE OF               (EXCLUDES
                                                      OUTSTANDING           OUTSTANDING            OUTSTANDING
                                                        OPTIONS               OPTIONS                OPTIONS)
                                                    ----------------     ----------------       ----------------
<S>                                                 <C>                  <C>                    <C>
Equity compensation plans approved by security           89,500             $    11.13                10,500
holders

Equity compensation plans not approved by                     0                    N/A                     0
security holders

Total                                                    89,500             $    11.13                10,500
</TABLE>

                                       34

<PAGE>

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW

The following discussion of the Company's financial condition and results of
operations should be read in conjunction with the Company's financial
statements, related notes and statistical information included herein.

The Bank's main office has operated as a commercial banking business based in
Duluth, Georgia since October 5, 1998. During the first quarter of 2001, the
Bank opened a branch in Buford, Georgia in Gwinnett County. In July 2001, the
Bank opened an additional branch in Dunwoody, Georgia in Dekalb County. This
branch is operating under the trade name of "The Peachtree Bank of Dunwoody - A
Division of The Peachtree Bank." In addition, in July 2001, the Bank was granted
Trust Powers by the Georgia Department of Banking and Finance and the FDIC. The
Trust and Financial Services Division of the Bank began operations during the
first quarter of 2002.

The Company was formed on July 15, 1999, for the purpose of becoming a bank
holding company by acquiring and owning the capital stock of the Bank. Because
the primary activity of the Company is the ownership and operation of the Bank,
the Company's financial performance has been determined primarily by the
operation of the Bank. Accordingly, the discussion below relates principally to
the operations of the Bank.

SIGNIFICANT ACCOUNTING POLICIES

The Company's accounting policies are fundamental to understanding management's
discussion and analysis of results of operations and financial condition. Many
of the Company's accounting policies require significant judgment regarding
valuation of assets and liabilities and/or significant interpretation of the
specific accounting guidance. A description of the Company's significant
accounting policies can be found in Note 1 of the Notes to Consolidated
Financial Statements in the Company's 2002 Annual Report to Shareholders. The
following is a summary of the more judgmental and complex accounting policies of
the Company.

Many of the Company's assets and liabilities are recorded using various
valuation techniques that require significant judgment as to recoverability. The
collectibility of loans is reflected through the Company's estimate of the
allowance for loan losses. The Company performs periodic and systematic detailed
reviews of its lending portfolio to assess overall collectability. In addition,
certain assets and liabilities are reflected at their estimated fair value in
the consolidated financial statements. Such amounts are based on either quoted
market prices or estimated values derived by the Company utilizing dealer quotes
or market comparisons.

USE OF ESTIMATES

Management of the Company has made a number of estimates and assumptions
relating to reporting of assets and liabilities and the disclosure of contingent
assets and liabilities to prepare

                                       35

<PAGE>

these consolidated financial statements in conformity with generally accepted
accounting principles. Actual results could differ from those estimates.

RESULTS OF OPERATIONS

The Company's results of operations are impacted by its ability to effectively
manage interest income and expense, to minimize loan and investment losses, to
generate noninterest income and to control noninterest expense. Because interest
rates are determined by market forces and economic conditions beyond the control
of the Company, the ability to generate net interest income depends on the
Company's ability to maintain an adequate spread between the rate earned on
interest-earning assets and the rate paid on interest-bearing liabilities, such
as deposits and borrowings. Thus, net interest income is the key performance
measure of income.

NET INTEREST INCOME

The Company reported net income of $1,231,489 for December 31, 2002, compared to
$476,259 for December 31, 2001. Net interest income in 2002 was approximately
$5,645,000 compared to approximately $3,780,000 in 2001. This increase can be
attributed a $44.5 million increase in average interest-earning assets, due
primarily to an increase average loans outstanding which increased $40.3
million. Average assets for 2002 grew $47.2 million due primarily to a year of
strong loan demand in the Company's primary market area and the addition of the
two branch locations in mid-2001. The increase in interest income due to volume
of average earning assets was partially offset by the decreases in the yields on
average earning assets. As of December 31, 2002 the yield on average earning
assets was 6.50% compared to 8.26% for December 31, 2001. The decrease in the
yield on average-earning assets can be attributed to the reductions in the prime
rate during 2001.

The increases in average loans outstanding and investments in 2002 were funded
primarily with deposits. Average interest-bearing liabilities increased by $39.6
million in 2002, while average noninterest-bearing deposits grew by $5.1 million
during the same period. The interest rate paid on average interest-bearing
liabilities was 2.75% in 2002 compared to 4.86% in 2001.

PROVISION FOR LOAN LOSSES

The provision for loan losses was $406,209 in 2002 compared to $240,010 in 2001.
The increase in the provision for loan losses was attributable to fact that loan
growth in 2002 was $42.5 million compared to loan growth in 2001 of $23.8
million. The provision for loan losses reflects management's estimate of
potential loan losses inherent in the portfolio and the creation of an allowance
for loan losses adequate to absorb such losses. The allowance for loan losses
represented approximately .99% and 1.0% of total loans outstanding at December
31, 2002 and 2001. During 2002, there was a net charge off of $5,232 and no
charge-offs in 2001.

NONINTEREST INCOME

Below are the components of noninterest income at December 31, 2002 and 2001:

                                       36

<PAGE>

<TABLE>
<CAPTION>
                                                    December 31, 2002           December 31, 2001
                                                    -----------------           -----------------
<S>                                                 <C>                         <C>

Service charges on deposit accounts                   $    339,592                 $  212,621
Gain on sale of securities                                 180,780                     47,500
Mortgage referral commissions                              389,749                    600,971
Other                                                      205,895                    122,588
                                                      ------------                 ----------
Total noninterest income                              $  1,116,016                 $  983,680
                                                      ============                 ==========
</TABLE>

Noninterest income for 2002 was $1,116,016 compared to $983,680 for December 31,
2001, an increase of 13.45%. This was largely due to $180,780 of gains recorded
on the sales of investment securities during the third quarter of 2002.
Additionally, service charges increased $126,971, largely due to the 22.9%
increase in the number of demand deposit and savings accounts since December 31,
2001. Other income increased $83,307 primarily due to an increase in cash
surrender value life insurance of approximately $43,000 and the $23,000 in fee
income recognized from the Trust Operations which began operations during the
first quarter of 2002. These increases were offset by the decrease in mortgage
referral commissions of $211,222. This decrease is due to a reduced number of
mortgage originators at the Bank during 2002.

NON-INTEREST EXPENSE

Below are the components of noninterest expense at December 31, 2002 and 2001:

<TABLE>
<CAPTION>
                                             December 31, 2002           December 31, 2001
                                             -----------------           -----------------
<S>                                          <C>                         <C>
Salaries and employee benefits                 $  2,438,737                 $  2,186,245
Occupancy expense                                   535,400                      438,049
Other operating expense (1)                       1,471,507                    1,139,095
                                               ------------                 ------------
Total noninterest expense                      $  4,445,644                 $  3,763,389
                                               ============                 ============
</TABLE>

(1) Significant components (those greater than 1% of total income) of other
operating expenses include:

<TABLE>
<CAPTION>
                                             December 31, 2002           December 31, 2002
                                             -----------------           -----------------
<S>                                          <C>                         <C>
Data Processing                                   160,892                     135,147
Directors Fees                                    177,000                      92,200
</TABLE>

The increase in non-interest expense is a direct result of the growth the Bank
has experienced through branching in 2001. The largest component of non-interest
expense is salaries and benefits, which increased to $2,438,737 compared to
$2,186,245 in the prior year. This is due to the recognition of a full year of
salary and benefits for ten full time equivalent employees that were added
during the second quarter of 2001. In addition, occupancy and FF&E expense has
increased $97,351. This is primarily due to the infrastructure added for the
additional branch locations during 2001 and the recognition of a full year of
deprecation on these assets. Other expenses increased $332,426. This increase is
due to a combination of many factors, including $40,000 in trust department
expenses, a $63,000 increase is cash surrender value life insurance

                                       37

<PAGE>

benefit expense and $22,000 in operating losses. In addition, a $85,000 increase
in directors fees (directors received fees for twelve months in 2002 and only
nine months in 2001). In addition, due to the increased number of branch
locations, the Bank has experienced other increases such as $15,000 in courier
fees, $26,000 in data processing, $12,000 in dues and subscriptions as well as a
$22,000 increase in audit and accounting fees. The increases in non-interest
expenses have a direct effect on the efficiency ratio (noninterest expense
divided by total income) which was 43.09% at December 31, 2002 compared to 41.4%
at December 31, 2001. As a percentage of total average assets, non-interest
expense was 2.9% and 3.5% at December 31, 2002 and 2001, respectively.

FINANCIAL CONDITION

<TABLE>
<CAPTION>
                         Balance at                 Balance at
                       December 31, 2002          December 31, 2001        $ Change        % Change
                       ----------------------------------------------------------------------------
<S>                    <C>                        <C>                      <C>             <C>
Total Assets              $  180,273                 $  127,331            $  52,942         41.6%
Net Loans                 $  139,179                 $   96,658            $  42,521         44.0%
Total Deposits            $  155,989                 $  109,332            $  46,657         42.7%
</TABLE>

At December 31, 2002, the Company's total assets were approximately $180,273,000
compared to approximately $127,331,000 at December 31, 2001. The increase in
total assets from 2001 to 2002 was approximately $52,942,000 or 41.6%. Total
assets as of December 31, 2002, principally consisted of $15,552,000 in cash and
cash equivalents, $17,072,000 in investment securities, and $139,179,000 in net
loans. Total assets as of December 31, 2001, principally consisted of
$11,629,000 in cash and cash equivalents, $12,175,000 in investment securities,
and $96,658,000 in net loans. The growth in assets in 2002 was primarily funded
by the $46,657,000 increase in deposits.

The Company's total loans (net of the reserve for possible loan losses and
deferred loan fees) increased to approximately $139,179,000 at December 31,
2002, from approximately $96,658,000 at December 31, 2001. This increase in net
loans of 44.0% can be attributed to continued lending activities in a relatively
high growth area of metropolitan Atlanta where new residential construction and
commercial development continues to be strong. The branch locations added in mid
2001, also contributed significantly to the increase in loans. At December 31,
2002, the two branches had total loans outstanding of approximately $38,415,000.

The Company's total deposits increased to approximately $155,989,000 at December
31, 2002, a 42.7% increase from the December 31, 2001, balance of approximately
$109,332,000. The majority of this deposit growth was in time deposits which
increased $30,700,000 and savings deposits which increased $7,333,0000. Savings
deposits increased due to the introduction of "The Peachtree Prime" account in
April 2002. This product is available to individuals and businesses with a rate
of Prime less 2.5%. Time deposit growth is attributed to The Peachtree Bank
offering a competitive interest rate in order to fund loan demand. In addition
during 2002, there was a continued emphasis on non interest and interest bearing
demand deposits which increased $4,937,000 and $3,686,000 respectively. Interest
bearing demand is primarily composed of money market accounts that offer tiered
rates that are competitive with similar products offered by investment brokerage
firms.

                                       38

<PAGE>

INVESTMENTS

The investment portfolio consists of U.S. Agency and Agency sponsored debt
securities, Corporate Bonds, State and County Municipals, federal funds sold,
Federal Home Loan Bank Stock and Federal Reserve Bank Stock that provide the
Bank with a source of liquidity and a long-term and relatively stable source of
income. Additionally, the investment portfolio provides a balance to interest
rate and credit risk in other categories of the balance sheet while providing a
vehicle for the investment of available funds, furnishing liquidity, and
supplying securities to pledge as required collateral for certain deposits.

LIQUIDITY

The Bank must maintain, on a daily basis, sufficient funds to cover the
withdrawals from depositors' accounts and to supply new borrowers with funds. To
meet these obligations, the Bank keeps cash on hand, maintains account balances
with its correspondent banks, and purchases and sells federal funds and other
short-term investments. Asset and liability maturities are monitored in an
attempt to match these to meet liquidity needs. It is the policy of the Bank to
monitor its liquidity to meet regulatory requirements and their local funding
requirements.

Liquidity represents the ability to provide steady sources of funds for loan
commitments and investment activities, as well as to maintain sufficient funds
to cover deposit withdrawals and payment of debt and operating obligations.
These funds can be obtained by converting assets to cash or by attracting new
deposits. The Company's primary source of liquidity is its ability to maintain
and increase deposits through the Bank. Deposits increased by $46.7 million in
2002.

The following are the key liquidity balances and ratios for the year ended
December 31, 2002:

<TABLE>
<S>                                                         <C>
Cash and cash equivalents                                   $ 15,552,439
Investment securities available for sale                    $ 17,071,978
CDs over $100,000 to total deposits ratio                           32.0%
Loan to deposit ratio                                               89.2%
</TABLE>

At December 31, 2002 cash and cash equivalents amounted to $15.6 million,
representing 8.6% of total assets. Securities available for sale provide a
secondary source of liquidity and amounted to $17.1 million at December 31, 2002
and 9.5% of total assets.

At December 31, 2002, certificates of deposit over $100,000 represented 32.0% of
total deposits. Certificates of deposit over $100,000 are generally more
volatile than other deposits. As a result, management continually monitors the
competitiveness of the rates it pays on certificates of deposit over $100,000
and periodically adjusts its rates in accordance with market demands.
Significant withdrawals of the large certificates of deposit may have a material
adverse effect on the Bank's liquidity. As a majority of the certificates of
deposit were obtained by Bank customers in its market area, management believes
the volatility of the deposits is lower than if such deposits were obtained from
depositors outside its market area, as outside depositors are more likely to be
interest rate sensitive.

                                       39

<PAGE>

The Bank maintains relationships with correspondent banks that can provide funds
to it on short notice, if needed. The Bank currently has arrangements with
correspondent banks for short-term unsecured advances up to $4,000,000.

CAPITAL ADEQUACY

The following table presents the Company's and Bank's regulatory capital
position at December 31, 2002:

<TABLE>
<CAPTION>
                                                                    Actual Ratio          Required Ratio
                                                                    ------------          --------------
<S>                                                                 <C>                   <C>
AS OF DECEMBER 31, 2002:
  Total Capital (to Risk-Weighted Assets)
    Consolidated                                                       11.08%                  8.0%
    Bank                                                               10.86%                  8.0%
  Tier 1 Capital (to Risk-Weighted Assets)
    Consolidated                                                       10.06%                  4.0%
    Bank                                                                9.95%                  4.0%
  Tier 1 Capital (to Average Assets)
    Consolidated                                                         9.1%                  4.0%
    Bank                                                                 9.0%                  4.0%
</TABLE>

The above ratios indicate that the capital position of the Bank is sound and
that the Bank is well positioned for future growth. For a more complete
discussion of the actual and required ratios of the Bank as of December 31,
2002, see note 12 to the financial statements.

TRUST PREFERRED SECURITIES

In December of 2002, the Company participated in offering of trust preferred
securities in the amount of $4 million. The Company formed PB CAPITAL TRUST I
(the "Trust"), a wholly-owned statutory trust subsidiary for the purpose of
issuing the trust preferred securities. The Trust used the proceeds from the
issuance of the trust preferred securities to acquire junior subordinated notes
of the Company. The trust preferred securities essentially mirror the debt
securities, carry a cumulative preferred dividend at the variable rate of The
Wall Street Journal plus 100 basis points. The debt securities and the preferred
securities each have 30-year lives. The trust preferred securities and the debt
securities are callable by the Company or the Trust, at their respective option
after five years, and at varying premiums and sooner in specific events, subject
to prior approval by the Federal Reserve Board, if then required. The Company
has treated the trust preferred securities as Tier 1 capital to the extent
allowed for regulatory purposes, and the remainder as Tier 2 capital. This
transaction allowed the Company to repay amounts outstanding under its line of
credit with SunTrust Bank and to contribute the remaining proceeds to the Bank
as additional capital.

ASSET/LIABILITY MANAGEMENT

It is the Company's objective to manage assets and liabilities to provide a
satisfactory, consistent level of profitability within the framework of
established cash, loan, and investment, borrowing

                                       40

<PAGE>

and capital policies. Certain officers are charged with the responsibility of
monitoring policies and procedures that are designed to ensure acceptable
composition of the asset/liability mix. It is the overall philosophy of
management to support asset growth primarily through the growth of core
deposits, which include deposits of all categories made by local individuals,
partnerships and corporations. The objective of the policy is to control
interest-sensitive assets and liabilities so as to minimize the impact of
substantial movements in interest rates on earnings.

The asset/liability mix is monitored on a regular basis. A report reflecting the
interest-sensitive assets and interest-sensitive liabilities is prepared and
presented to the Board of Directors on a monthly basis.

One method used to measure a bank's interest rate exposure is through its
repricing gap. The gap is calculated by determing all assets that reprice or
mature within a given time frame and subtracting all liabilities that reprice or
mature within the same time frame. The difference between these two amounts is
called the "gap", which is the amount of either liabilities or assets that will
reprice without a corresponding asset or liability repricing.

A negative gap (more liabilities repricing that assets) generally indicates that
the bank's net interest income will decrease if interest rates rise and will
increase if interest rates fall. A positive gap generally indicates that a
bank's net interest income will decrease if interest rates fall and will
increase if interest rates rise.

The table on page 13 summarizes the amounts of interest-earning assets and
interest-bearing liabilities outstanding at December 31, 2002 that are expected
to mature, prepay or reprice in each of the future time periods shown. Except as
stated in the table, the amount of assets or liabilities that mature or reprice
during a particular period was determined in accordance with the contractual
terms of the asset or liability. Adjustable rate loans are included in the
period in which interest rates are next scheduled to adjust rather than in the
period in which they are due, and fixed rate loans and mortgage backed
securities are included in the periods in which they are anticipated to be
repaid based on scheduled maturities. The Bank's savings accounts and
interest-bearing demand accounts (NOW and money market deposit accounts), which
are generally subject to immediate withdrawal, are included in the "Three Months
or Less" category, although historical experience has proven these deposits to
be more stable over the course of a year.

                                       41

<PAGE>

ITEM 7.  FINANCIAL STATEMENTS

The following financial statements are included in the Company's Annual Report
to Shareholders at pages 2 through 21 and are incorporated herein by reference.

         Report of Independent Certified Public Accountants

         Financial Statements

         Consolidated Balance Sheets dated as of December 31, 2002 and 2001

         Consolidated Statements of Earnings for the years ended December 31,
         2002 and 2001

         Consolidated Statements of Shareholders' Equity for the years ended
         December 31, 2002 and 2001

         Consolidated Statements of Comprehensive Income for the years ended
         December 31, 2002 and 2001

         Consolidated Statements of Cash Flows for the years ended December 31,
         2002 and 2001

         Notes to Consolidated Financial Statements

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable

                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

The responses to this Item are included in the Company's proxy statement for the
Annual Meeting of Shareholders to be held April 29, 2003, under the headings, "
Proposal 1 - Election of Directors - (Nominees and Continuing Directors)" at
pages 3 through 5. "Ownership of PB Financial Services Common Stock" at pages 10
through 11, and "Compliance with Section 16(a) of the Exchange Act" at page 12
and are incorporated herein by reference.

ITEM 10. EXECUTIVE COMPENSATION

The responses to this Item are included in the Company's proxy statement for the
Annual Meeting of Shareholders to be held April 29, 2003, under the heading.
"Compensation of Directors and Executive Officers," at pages 7 through 9, and
are incorporated herein by reference.

                                       42

<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The responses to this Item are included in the Company's proxy statement for the
Annual Meeting of Shareholders to be held April 29, 2003, under the headings,
""Ownership of PB Financial Services Common Stock" at pages 10 through 11, and
are incorporated herein by reference.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The responses to this Item are included in the Company's proxy statement for the
Annual Meeting of Shareholders to be held April 29, 2003, under the headings,
"Certain Transactions," at page 9, and "Compensation of Directors and Executive
Officers," at pages 7 through 8, and are incorporated herein by reference.

ITEM 13. EXHIBITS, LISTS, AND REPORTS ON FORM 8-K

(a)   Exhibits

<TABLE>
<CAPTION>
Exhibit
 Number                                      Exhibit
-------                                      -------
<S>                  <C>
   3.1               Articles of Incorporation (1)

   3.2               Bylaws (2)

   4.1               Instruments Defining the Rights of Security Holders. See Articles of
                     Incorporation at Exhibit 3.1 hereto and Bylaws at Exhibit 3.2 hereto.

  10.1 *             Employment Agreement between Monty G. Watson and The Peachtree
                     Bank dated as of January 13, 1998 (3)

  10.2 *             The PB Financial Services 1998 Outside Directors Option Plan. (4)

  13.1               The PB Financial Services Corporation 2002 Annual Report to
                     shareholders. Except with respect to those portions specifically
                     incorporated by reference into this Report, the Company's 2002 Annual
                     Report to Shareholders is not deemed to be filed as part of this Report.

  21.1               Subsidiaries of The PB Financial Services Corporation. (4)

  24.1               Power of Attorney (appears on the signature pages to this Annual Report
                     on 10-KSB).

  99.1               Certification Pursant to 18 U.S.C Section 1350 as Adopted Pursant
                     to Section 906 of the Sarbanes-Oxley Act of 2002
</TABLE>

                                       43

<PAGE>

* Compensatory plan or arrangement

    (1) Incorporated herein by reference to Exhibit 2(a) in The PB Financial
        Services Corporation's Registration Statement on Form 8-A, Commission
        File No. 000-26725, filed July 15, 1999.

    (2) Incorporated herein by reference to Exhibit 2(b) in The PB Financial
        Services Corporation's Registration Statement on Form 8-A, Commission
        File No. 000-26725, filed July 15, 1999.

    (3) Incorporated by reference to exhibit of same number in the Company's
        Third Quarter Form 10QSB for the quarter ended September 30, 2002.

    (4) Incorporated by reference to exhibit of same number in the Company's
        Annual Report on Form 10KSB for the year ended December 31, 1999.

(a) Reports on Form 8-K filed in the fourth quarter of 2002: None.

ITEM 14. CONTROLS AND PROCEDURES

Within 90 days prior to the date of this report, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based
upon that evaluation, the Company's Chief Executive Officer and Chief Financial
Officer concluded that the Company's disclosure controls and procedures are
effective in timely alerting them to material information relating to the
Company (including its consolidated subsidiaries) that is required to be
included in the Company's periodic filings with the Securities and Exchange
Commission. There have been no significant changes in the Company's internal
controls or, to the Company's knowledge, in other factors that could
significantly affect those internal controls subsequent to the date the Company
carried out its evaluation, and there have been no corrective actions with
respect to significant deficiencies and material weaknesses.

                                       44

<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

                                    THE PB FINANCIAL SERVICES CORPORATION

                                    By:   /s/ Monty G. Watson
                                          -------------------
                                          Monty G. Watson
                                          President and Chief
                                          Executive Officer

                                    Date: March 31, 2003

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears on the
signature page to this Report constitutes and appoints Monty G. Watson and Kelly
J. Johnson, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place, and stead, in any and all capacities, to sign any and all amendments to
this Report, and to file the same, with all exhibits hereto, and other documents
in connection herewith with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

/s/ Robert D. Cheeley                                     DATE:  March 31, 2003
-------------------------------------------------------------------------------
Robert D. Cheeley, Director

/s/ Daniel B. Cowart                                      DATE:  March 31, 2003
-------------------------------------------------------------------------------
Daniel B. Cowart, Director

/s/ Paul D. Donaldson                                     DATE:  March 31, 2003
-------------------------------------------------------------------------------

                                       45

<PAGE>

Paul D. Donaldson, Director

/s/ Charles L. Douglas                                    DATE:  March 31, 2003
-------------------------------------------------------------------------------
Charles L. Douglas, Director

/s/ Dexter R. Floyd                                       DATE:  March 31, 2003
-------------------------------------------------------------------------------
Dexter R. Floyd, Director

/s/ J. Edwin Howard                                       DATE:  March 31, 2003
-------------------------------------------------------------------------------
J. Edwin Howard, Director

/s/ John J. Howard                                        DATE:  March 31, 2003
-------------------------------------------------------------------------------
John J. Howard, Director

/s/ J. Stephen Hurst                                      DATE:  March 31, 2003
-------------------------------------------------------------------------------
J. Stephen Hurst, Director

/s/ Kelly J. Johnson                                      DATE:  March 31, 2003
-------------------------------------------------------------------------------
Kelly J. Johnson, Chief Financial Officer
(Principal Financial and Accounting Officer)

/s/ Charles Machemehl, III                                DATE:  March 31, 2003
-------------------------------------------------------------------------------
Charles Machemehl, III, Director

/s/ J. Paul Maggard                                       DATE:  March 31, 2003
-------------------------------------------------------------------------------
J. Paul Maggard, Director

/s/ Monty G. Watson                                       DATE:  March 31, 2003
-------------------------------------------------------------------------------
Monty G. Watson, Director, President, and
Chief Executive Officer

                                       46

<PAGE>

           CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED
            PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Monty G. Watson, Chief Executive Officer, certify that:

1.       I have reviewed this quarterly report on Form 10-KSB of The PB
         Financial Services Corporation;

2.       Based on my knowledge, this quarterly report does not contain any
         untrue statement of a material fact or omit to state a material fact
         necessary to make the statements made, in light of the circumstances
         under which such statements were made, not misleading with respect to
         the period covered by this annual report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this quarterly report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this annual report;

4.       The registrant's other certifying officers and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
         we have:

         a)  designed such disclosure controls and procedures to ensure that
             material information relating to the registrant, including its
             consolidated subsidiaries, is made known to us by others within
             those entities, particularly during the period in which this annual
             report is being prepared;

         b)  evaluated the effectiveness of the registrant's disclosure controls
             and procedures as of a date within 90 days prior to the filing date
             of this annual report (the "Evaluation Date"); and

         c)  presented in this annual report our conclusions about the
             effectiveness of the disclosure controls and procedures based on
             our evaluation as of the Evaluation Date;

5.       The registrant's other certifying officers and I have disclosed, based
         on our most recent evaluation, to the registrant's auditors and the
         audit committee of registrant's board of directors (or persons
         performing the equivalent function):

         a)  all significant deficiencies in the design or operation of internal
             controls which could adversely affect the registrant's ability to
             record, process, summarize and report financial data and have
             identified for the registrant's auditors any material weaknesses in
             internal controls; and

         b)  any fraud, whether or not material, that involves management or
             other employees who have a significant role in the registrant's
             internal controls; and

6.       The registrant's other certifying officers and I have indicated in this
         annual report if there were significant changes in internal controls or
         in other factors that could significantly affect internal controls
         subsequent to the date of our most recent evaluation, including any
         corrective actions with regard to significant deficiencies and material
         weaknesses.

         March 31, 2003                                 /s/ Monty G. Watson
                                                        -------------------
                                                        Monty G. Watson
                                                        Chief Executive Officer

                                       47

<PAGE>

           CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED
            PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Kelly J. Johnson, Chief Financial Officer, certify that:

1.       I have reviewed this annual report on Form 10-KSB of The PB Financial
         Services Corporation:

2.       Based on my knowledge, this annual report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this annual report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this annual report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this annual report;

4.       The registrant's other certifying officers and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
         we have:

         a)  designed such disclosure controls and procedures to ensure that
             material information relating to the registrant, including its
             consolidated subsidiaries, is made known to us by others within
             those entities, particularly during the period in which this annual
             report is being prepared;

         b)  evaluated the effectiveness of the registrant's disclosure controls
             and procedures as of a date within 90 days prior to the filing date
             of this annual report (the "Evaluation Date"); and

         c)  presented in this annual report our conclusions about the
             effectiveness of the disclosure controls and procedures based on
             our evaluation as of the Evaluation Date;

5.       The registrant's other certifying officers and I have disclosed, based
         on our most recent evaluation, to the registrant's auditors and the
         audit committee of registrant's board of directors (or persons
         performing the equivalent function):

         a)  all significant deficiencies in the design or operation of internal
             controls which could adversely affect the registrant's ability to
             record, process, summarize and report financial data and have
             identified for the registrant's auditors any material weaknesses in
             internal controls; and

         b)  any fraud, whether or not material, that involves management or
             other employees who have a significant role in the registrant's
             internal controls; and

6.       The registrant's other certifying officers and I have indicated in this
         annual report if there were significant changes in internal controls or
         in other factors that could significantly affect internal controls
         subsequent to the date of our most recent evaluation, including any
         corrective actions with regard to significant deficiencies and material
         weaknesses.

         March 31, 2003                                /s/ Kelly J. Johnson
                                                       --------------------
                                                       Kelly J. Johnson
                                                       Chief Financial Officer

                                       48

<PAGE>

                     THE PB FINANCIAL SERVICES CORPORATION


                       CONSOLIDATED FINANCIAL STATEMENTS


                           DECEMBER 31, 2002 AND 2001


                 (WITH INDEPENDENT ACCOUNTANTS' REPORT THEREON)





<PAGE>


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS





To the Board of Directors and Shareholders
The PB Financial Services Corporation
Duluth, Georgia


We have audited the accompanying consolidated balance sheets of The PB
Financial Services Corporation as of December 31, 2002 and 2001, and the
related consolidated statements of earnings, changes in shareholders' equity,
comprehensive income and cash flows for the years then ended. These financial
statements are the responsibility of management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The PB Financial
Services Corporation as of December 31, 2002 and 2001, and the results of their
operations and their cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States of America.




/s/ Porter Keadle Moore, LLP
--------------------------------
Atlanta, Georgia
February 28, 2003

<PAGE>


                     THE PB FINANCIAL SERVICES CORPORATION

                          CONSOLIDATED BALANCE SHEETS

                           DECEMBER 31, 2002 AND 2001


<TABLE>
<CAPTION>
                                                                               2002             2001
                                                                            -------------   -------------
                                           Assets
<S>                                                                         <C>                 <C>
Cash and due from banks                                                     $   8,092,709       4,622,756
Interest-bearing deposits with banks                                              647,729         114,000
Federal funds sold                                                              6,812,000       6,892,000
                                                                            -------------   -------------

           Cash and cash equivalents                                           15,552,438      11,628,756

Investment securities available for sale                                       17,071,978      12,174,910
Other investments                                                                 670,600         185,000
Loans, net                                                                    139,178,889      96,658,337
Premises and equipment, net                                                     4,031,909       4,076,973
Accrued interest receivable and other assets                                    3,767,038       2,607,153
                                                                            -------------   -------------

                                                                            $ 180,272,852     127,331,129
                                                                            =============   =============
                          Liabilities and Shareholders' Equity
Deposits:
  Noninterest-bearing demand                                                $  15,825,206      10,887,833
  Interest-bearing demand                                                      34,295,234      30,609,208
  Savings                                                                       7,767,153         434,009
  Time, $100,000 or more                                                       49,870,527      41,267,419
  Other time                                                                   48,230,919      26,133,943
                                                                            -------------   -------------

            Total deposits                                                    155,989,039     109,332,412

Securities sold under repurchase agreements                                     1,379,781       3,366,143
Note payable and other borrowings                                               6,400,000       3,980,000
Trust preferred securities                                                      4,000,000            --
Accrued interest payable and other liabilities                                    666,748         570,697
                                                                            -------------   -------------

            Total liabilities                                                 168,435,568     117,249,252
                                                                            -------------   -------------

Commitments

Shareholders' equity:
  Common stock, $5 par value, 10,000,000 shares authorized,
    942,176 and 915,244 shares issued and outstanding                           4,710,880       4,576,220
  Additional paid-in capital                                                    5,295,775       5,066,056
  Retained earnings                                                             1,550,530         319,041
  Accumulated other comprehensive income                                          280,099         120,560
                                                                            -------------   -------------

            Total shareholders' equity                                         11,837,284      10,081,877
                                                                            -------------   -------------

                                                                            $ 180,272,852     127,331,129
                                                                            =============   =============
</TABLE>


See accompanying notes to consolidated financial statements.


                                      F-2
<PAGE>


                     THE PB FINANCIAL SERVICES CORPORATION

                      CONSOLIDATED STATEMENTS OF EARNINGS

                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001


<TABLE>
<CAPTION>
                                                                                 2002          2001
                                                                              -----------   -----------

<S>                                                                           <C>             <C>
Interest income:
  Interest and fees on loans                                                  $ 8,320,849     7,165,882
  Interest on federal funds sold                                                   76,316       141,193
  Interest on investment securities
     U.S. Government agencies and mortgage-backed securities                      469,697       511,853
     Municipals                                                                   139,236        66,657
     Corporate bonds                                                              176,343       210,917
     Other                                                                         17,974         9,007
                                                                              -----------   -----------

            Total interest income                                               9,200,415     8,105,509
                                                                              -----------   -----------

Interest expense:
  Interest-bearing demand deposits                                                345,741       821,637
  Savings deposits                                                                 58,187         5,425
  Time deposits                                                                 2,978,172     3,344,849
  Other                                                                           173,482       153,375
                                                                              -----------   -----------

            Total interest expense                                              3,555,582     4,325,286
                                                                              -----------   -----------

            Net interest income                                                 5,644,833     3,780,223

Provision for loan losses                                                         406,269       240,010
                                                                              -----------   -----------

            Net interest income after provision for loan losses                 5,238,564     3,540,213
                                                                              -----------   -----------

Other income:
  Service charges on deposit accounts                                             339,592       212,621
  Gain on sale of securities                                                      180,780        47,500
  Mortgage referral commissions                                                   389,749       600,971
  Other                                                                           205,895       122,588
                                                                              -----------   -----------

            Total other income                                                  1,116,016       983,680
                                                                              -----------   -----------

Other expenses:
  Salaries and employee benefits                                                2,438,737     2,186,245
  Occupancy                                                                       535,400       438,049
  Other operating                                                               1,471,507     1,139,095
                                                                              -----------   -----------

            Total other expenses                                                4,445,644     3,763,389
                                                                              -----------   -----------

            Earnings before income taxes                                        1,908,936       760,504

Income tax expense                                                                677,447       284,245
                                                                              -----------   -----------

            Net earnings                                                      $ 1,231,489       476,259
                                                                              ===========   ===========

Basic earnings per share                                                      $      1.31          0.59
                                                                              ===========   ===========

Diluted earnings per share                                                    $      1.23          0.57
                                                                              ===========   ===========
</TABLE>


See accompanying notes to consolidated financial statements.


                                      F-3
<PAGE>


                     THE PB FINANCIAL SERVICES CORPORATION

           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001


<TABLE>
<CAPTION>
                                                                                                         Accumulated
                                                      Common Stock          Additional                     Other
                                                  ----------------------      Paid-In       Retained    Comprehensive
                                                   Shares      Amount         Capital       Earnings       Income      Total
                                                  -------   ------------     ---------      ---------      -------   ----------

<S>                                               <C>       <C>             <C>              <C>         <C>          <C>
Balance, December 31, 2000                        775,375   $  3,876,875     3,861,784       (157,218)      35,417    7,616,858

Net earnings                                         --             --            --          476,259         --        476,259

Issuance of common stock                          139,869        699,345     1,204,272           --           --      1,903,617


Change in net unrealized gain on
   investment securities available
   for sale, net of tax                              --             --            --             --         85,143       85,143
                                                  -------   ------------     ---------      ---------      -------   ----------

Balance, December 31, 2001                        915,244      4,576,220     5,066,056        319,041      120,560   10,081,877

Net earnings                                         --             --            --        1,231,489         --      1,231,489

Issuance of common stock                           26,332        131,660       226,719           --           --        358,379


Exercise of stock options                             600          3,000         3,000           --           --          6,000


Change in net unrealized gain on
   investment securities available
   for sale, net of tax                              --             --            --             --        159,539      159,539
                                                  -------   ------------     ---------      ---------      -------   ----------


Balance, December 31, 2002                        942,176   $  4,710,880     5,295,775      1,550,530      280,099   11,837,284
                                                  =======   ============     =========      =========      =======   ==========
</TABLE>



See accompanying notes to consolidated financial statements.


                                      F-4
<PAGE>


                     THE PB FINANCIAL SERVICES CORPORATION

                CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001


<TABLE>
<CAPTION>
                                                                                 2002            2001
                                                                             -------------    ----------
<S>                                                                          <C>              <C>
Net earnings                                                                 $   1,231,489       476,259
                                                                             -------------    ----------

Other comprehensive income:
     Unrealized gains arising during the period, net of taxes
       of $143,652 and $60,010, respectively                                       278,854       116,493

     Reclassification adjustment for gains on sales of investment
       securities available for sale included in net earnings, net of
       taxes of $61,465 and $16,150, respectively                                 (119,315)      (31,350)
                                                                             -------------    ----------

Other comprehensive income, net of tax                                             159,539        85,143
                                                                             -------------    ----------

Comprehensive income                                                         $   1,391,028       561,402
                                                                             =============    ==========
</TABLE>


See accompanying notes to consolidated financial statements.


                                      F-5
<PAGE>


                     THE PB FINANCIAL SERVICES CORPORATION

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001


<TABLE>
<CAPTION>
                                                                                 2002              2001
                                                                            --------------    --------------
<S>                                                                         <C>               <C>
Cash flows from operating activities:
  Net earnings                                                              $    1,231,489           476,259
  Adjustments to reconcile net earnings to net cash
     provided by operating activities:
      Depreciation, amortization and accretion                                     392,727           279,594
      Provision for loan losses                                                    406,269           240,010
      Deferred income taxes                                                       (152,524)          (86,101)
      Gain on sale of investment securities                                       (180,780)          (47,500)
      Change in:
        Net deferred loan fees                                                     (86,779)          119,661
        Cash surrender value life insurance                                        (73,946)          (30,576)
        Accrued interest receivable and other assets                              (123,617)          (72,766)
        Accrued interest payable and other liabilities                              96,051            47,546
                                                                            --------------    --------------
            Net cash provided by operating activities                            1,508,890           926,127
                                                                            --------------    --------------
Cash flows from investing activities:
  Purchase of investment securities available for sale                          (9,529,163)       (7,512,799)
  Proceeds from calls and maturities of investment securities
     available for sale                                                          2,765,692         6,374,727
  Proceeds from sales of investment securities available for sale                2,204,200         1,547,500
  Purchase of other investments                                                   (485,600)          (64,900)
  Purchase of cash value life insurance                                           (716,000)       (1,277,000)
  Net change in loans                                                          (42,840,042)      (24,114,746)
  Purchases of premises and equipment                                             (262,953)         (732,133)
                                                                            --------------    --------------

            Net cash used by investing activities                              (48,863,866)      (25,779,351)
                                                                            --------------    --------------
Cash flows from financing activities:
  Net change in deposits                                                        46,656,627        26,506,640
  Net change in note payable                                                      (280,000)          198,285
  Net change in securities sold under repurchase agreements                     (1,986,362)        1,084,778
  Proceeds from Federal Home Loan Bank borrowings                                6,400,000         3,700,000
  Repayments on Federal Home Loan Bank borrowings                               (3,700,000)             --
  Proceeds from issuance of trust preferred securities                           4,000,000              --
  Transaction costs associated with trust preferred securities                    (175,986)             --
  Proceeds from exercise of stock options                                            6,000              --
  Proceeds from issuance of common stock                                           358,379         1,903,617
                                                                            --------------    --------------
            Net cash provided by financing activities                           51,278,658        33,393,320
                                                                            --------------    --------------
Net change in cash and cash equivalents                                          3,923,682         8,540,096
Cash and cash equivalents at beginning of year                                  11,628,756         3,088,660
                                                                            --------------    --------------
Cash and cash equivalents at end of year                                    $   15,552,438        11,628,756
                                                                            ==============    ==============
Supplemental disclosures of cash flow information:
  Cash paid during the year for:
     Interest                                                               $    3,546,275         4,369,278
     Income taxes                                                           $      703,000           415,500
Noncash investing and financing activities:
  Change in net unrealized gain on investment
     securities available for sale, net of tax                              $      159,539            85,143
</TABLE>


See accompanying notes to consolidated financial statements.


                                      F-6
<PAGE>


                     THE PB FINANCIAL SERVICES CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(1)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Organization
         ------------
         The Peachtree Bank (the "Bank") was organized in January 1998 upon
         receipt of its banking charter from the Georgia Department of Banking
         and Finance. In 2002, the Bank was approved to become a member of the
         Federal Reserve Bank. The Bank is primarily regulated by the Federal
         Reserve Bank and undergoes periodic examinations by this regulatory
         agency. The Bank, whose main office is in Duluth, Georgia, provides a
         full range of commercial and consumer banking services primarily in
         Fulton County, Georgia and the surrounding metropolitan Atlanta area.

         On July 15, 1999, the Bank became a subsidiary of The PB Financial
         Services Corporation (the "Company") as a result of a tax-free
         reorganization in which the shareholders of the Bank exchanged all
         outstanding Bank stock for stock in the Company.

         In December 2002, the Company formed PB Capital Trust I (the "Trust")
         for the purpose of issuing trust preferred securities.

         Principles of Consolidation
         ---------------------------
         The consolidated financial statements include the financial statements
         of the Company and its wholly owned subsidiaries, the Bank and the
         Trust. All significant intercompany balances and transactions have
         been eliminated in consolidation.

         Basis of Presentation
         ---------------------
         The accounting principles followed by the Company and the Bank, and
         the methods of applying these principles, conform with accounting
         principles generally accepted in the United States of America ("GAAP")
         and with general practices in the banking industry. In preparing the
         financial statements in conformity with GAAP, management is required
         to make estimates and assumptions that affect the reported amounts in
         the financial statements. Actual results could differ significantly
         from these estimates. Material estimates common to the banking
         industry that are particularly susceptible to significant change in
         the near term include, but are not limited to, the determination of
         the allowance for loan losses.

         Cash and Cash Equivalents
         -------------------------
         Cash and cash equivalents include cash on hand, amounts due from
         banks, interest-bearing deposits with banks and federal funds sold.

         Investment Securities
         ---------------------
         The Bank classifies its securities in one of three categories:
         trading, available for sale, or held to maturity. Trading securities
         are bought and held principally for sale in the near term. Held to
         maturity securities are those securities for which the Bank has the
         ability and intent to hold the security until maturity. All other
         securities not included in trading or held to maturity are classified
         as available for sale. At December 31, 2002 and 2001, the Bank
         classified all of its investment securities as available for sale.

         Available for sale securities are recorded at fair value. Unrealized
         holding gains and losses, net of the related tax effect, are excluded
         from earnings and are reported as a separate component of
         shareholders' equity until realized.

         A decline in the market value of any available for sale investment
         below cost that is deemed other than temporary is charged to earnings
         and establishes a new cost basis for the security.

         Premiums and discounts are amortized or accreted over the life of the
         related security as an adjustment to the yield. Realized gains and
         losses for securities classified as available for sale are included in
         earnings and are derived using the specific identification method for
         determining the cost of securities sold.

         Other Investments
         -----------------
         Other investments include equity securities with no readily
         determinable fair value. These investments are carried at cost.


                                      F-7
<PAGE>


                     THE PB FINANCIAL SERVICES CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


(1)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

         Loans and Allowance for Loan Losses
         -----------------------------------
         Loans and Allowance for Loan Losses Loans are stated at principal
         amount outstanding, net of the allowance for loan losses and deferred
         loan fees. Interest on loans is calculated by using the simple
         interest method on daily balances of the principal amount outstanding.
         Loan origination fees, net of direct loan origination costs, are
         deferred and recognized as income over the life of the related loan on
         a level-yield basis.

         A loan is considered impaired when, based on current information and
         events, it is probable that all amounts due according to the
         contractual terms of the loan will not be collected. Impaired loans
         are measured based on the present value of expected future cash flows,
         discounted at the loan's effective interest rate, or at the loan's
         observable market price, or the fair value of the collateral if the
         loan is collateral dependent.

         Accrual of interest is discontinued on a loan when management
         believes, after considering economic conditions and collection
         efforts, that the borrower's financial condition is such that
         collection of interest is doubtful. Interest previously accrued but
         not collected is reversed against current period earnings and interest
         is recognized on a cash basis when such loans are placed on nonaccrual
         status.

         The allowance for loan losses is established through a provision for
         loan losses charged to earnings. Loans are charged against the
         allowance for loan losses when management believes the collectibility
         of the principal is unlikely. The allowance represents an amount
         which, in management's judgment, will be adequate to absorb probable
         losses on existing loans that may become uncollectible.

         Management's judgment in determining the adequacy of the allowance is
         based on evaluations of the collectibility of loans. These evaluations
         take into consideration such factors as changes in the nature and
         volume of the loan portfolio, current economic conditions that may
         affect the borrower's ability to pay, overall portfolio quality, and
         review of specific problem loans. In determining the adequacy of the
         allowance for loan losses, management uses a loan grading system that
         rates individual loans into nine risk classifications. These risk
         categories are assigned allocations of loss based on management's
         estimate of potential loss which is generally based on an analysis of
         historical loss experience, current economic conditions, performance
         trends, and discounted collateral deficiencies. The combination of
         these results is compared monthly to the recorded allowance for loan
         losses and material differences are adjusted by increasing or
         decreasing the provision for loan losses. Management uses an
         independent external loan reviewer to challenge and corroborate the
         loan grading system and provide additional analysis in determining the
         adequacy of the allowance for loan losses and the future provisions
         for estimated losses.

         While management uses available information to recognize losses on
         loans, future additions to the allowance may be necessary based on
         changes in economic conditions. In addition, various regulatory
         agencies, as an integral part of their examination process,
         periodically review the Bank's allowance for loan losses. Such
         agencies may require the Bank to recognize additions to the allowance
         based on judgments different than those of management.

         Premises and Equipment
         ----------------------
         Premises and equipment are stated at cost less accumulated
         depreciation. Depreciation is computed using the straight-line method
         over the estimated useful lives of the assets (or the lesser of the
         estimated useful lives or lease terms for leasehold improvements).
         When assets are retired or otherwise disposed, the cost and related
         accumulated depreciation are removed from the accounts, and any gain
         or loss is reflected in earnings for the period. The cost of
         maintenance and repairs which do not improve or extend the useful life
         of the respective asset is charged to expense as incurred, whereas
         significant renewals and improvements are capitalized. The range of
         estimated useful lives for premises and equipment are generally as
         follows:

<TABLE>
<S>                                              <C>
           Buildings and improvements            10 - 40 years
           Furniture and equipment                3 - 10 years
           Leasehold improvements                     10 years
</TABLE>

         Securities Sold Under Repurchase Agreements
         -------------------------------------------
         Repurchase agreements are treated as financing activities, and are
         carried at the amounts at which the securities will be repurchased as
         specified in the respective agreements.


                                      F-8
<PAGE>


                     THE PB FINANCIAL SERVICES CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


(1)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
         Income Taxes
         ------------
         Deferred tax assets and liabilities are recognized for the future tax
         consequences attributable to differences between the financial
         statement carrying amounts of existing assets and liabilities and
         their respective tax bases. Additionally, the recognition of future
         tax benefits is required to the extent that realization of such
         benefits is more likely than not. Deferred tax assets and liabilities
         are measured using enacted tax rates expected to apply to taxable
         income in the years in which the assets and liabilities are expected
         to be recovered or settled. The effect on deferred tax assets and
         liabilities of a change in tax rates is recognized in income tax
         expense in the period that includes the enactment date.

         In the event the future tax consequences of differences between the
         financial reporting bases and the tax bases of the Bank's assets and
         liabilities results in deferred tax assets, an evaluation of the
         probability of being able to realize the future benefits indicated by
         such asset is required. A valuation allowance is provided for the
         portion of the deferred tax asset when it is more likely than not that
         some portion or all of the deferred tax asset will not be realized. In
         assessing the realizability of the deferred tax assets, management
         considers the scheduled reversals of deferred tax liabilities,
         projected future taxable income, and tax planning strategies.

         Mortgage Referral Commissions
         -----------------------------
         The Company earns commissions from third party investors who fund
         residential mortgage loans for which the Company performs certain loan
         origination services. Accordingly, the loans are not funded or
         recorded by the Company, and the commissions are recorded as they are
         earned (i.e., when the loan closes) in the accompanying consolidated
         statements of earnings as mortgage referral commissions.

         Stock-Based Compensation
         ------------------------
         The Company has an employee stock option plan and a director stock
         option plan. The plans were adopted for the benefit of directors and
         key officers and employees in order that they may purchase Company
         stock at a price equal to the fair market value on the date of grant.
         A total of 100,000 shares were reserved for possible issuance under
         the employee stock option plan. A total of 157,612 shares were
         reserved for possible issuance under the director stock option plan.
         The options vest over periods of time as specified in the option
         agreements and expire after ten years.

         A summary of activity in these stock option plans is presented below:


<TABLE>
<CAPTION>
                                                    2002                         2001
                                         ----------------------------   ---------------------------
                                                         Weighted                       Weighted
                                           Option     Average Option      Option     Average Option
                                           Shares     Price Per Share     Shares    Price Per Share
                                         ----------   ---------------   ---------   ---------------
<S>                                      <C>          <C>               <C>         <C>
Outstanding, beginning of year              228,698       $  10.04        213,198      $  10.00
Granted during the year                      25,500          13.61         15,500         10.58
Cancelled during the year                    (5,900)         10.00           --            --
Exercised during the year                      (600)         10.00           --            --
                                         ----------       --------      ---------      --------

Outstanding, end of year                    247,698       $  10.41        228,698      $  10.04
                                         ==========       ========      =========      ========

Number of shares exercisable                201,398       $  10.01        193,899      $  10.00
                                         ==========       ========      =========      ========
</TABLE>


                                      F-9
<PAGE>


                     THE PB FINANCIAL SERVICES CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


(1)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
         Stock-Based Compensation, continued
         As allowed under GAAP, no compensation expense has been recognized
         related to these plans. Had compensation cost been determined based
         upon the fair value of the options at the grant dates, the Company's
         net earnings and net earnings per share would have been reduced to the
         proforma amounts indicated below.


<TABLE>
<CAPTION>
                                                                                                  2002                2001
                                                                                              -------------       ----------
<S>                                <C>                                                        <C>                 <C>
Net earnings                       As reported                                                $   1,231,489          476,259
                                   Effect of stock option grant, net of tax                         (23,905)        (146,915)
                                                                                              -------------       ----------

                                   Proforma                                                   $   1,207,584          329,344
                                                                                              =============       ==========

Basic earnings per share           As reported                                                $        1.31             0.59
                                   Proforma                                                   $        1.29             0.41

Diluted earnings per share         As reported                                                $        1.23             0.57
                                   Proforma                                                   $        1.21             0.39
</TABLE>


         The weighted average grant-date fair value of options granted in 2002
         and 2001 was $4.35 and $6.96, respectively. The fair value of each
         option is estimated on the date of grant using the Minimum Value
         options-pricing model with the following weighted average assumptions
         used for grants in 2002 and 2001: dividend yield of 0%, risk-free
         interest rate of 4% and 5%, respectively, and an expected life of ten
         years. The options have a weighted average remaining contractual life
         of approximately seven years.

         Net Earnings Per Share
         Basic earnings per share are based on the weighted average number of
         common shares outstanding during the period while the effects of
         potential shares outstanding during the period are included in diluted
         earnings per share. The average market price during the year is used
         to compute equivalent shares.

         The reconciliation of the amounts used in the computation of both
         "basic earnings per share" and "diluted earnings per share" for each
         period is presented as follows:


<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 2002              Net             Common      Per Share
                                                Earnings          Shares        Amount
                                              ------------        -------      -------
<S>                                           <C>                 <C>         <C>
Basic earnings per share                      $  1,231,489        939,212      $  1.31
                                                                               =======
Effect of stock options                               --           59,088
                                              ------------      ---------

Diluted earnings per share                    $  1,231,489        998,300      $  1.23
                                              ============      =========      =======

<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 2001              Net             Common      Per Share
                                                Earnings          Shares       Amount
                                              ------------        -------      -------

Basic earnings per share                      $    476,259        809,580      $  0.59
                                                                               =======
Effect of stock options                               --           33,093
                                              ------------      ---------

Diluted earnings per share                    $    476,259        842,673      $  0.57
                                              ============      =========      =======
</TABLE>


                                     F-10
<PAGE>


                     THE PB FINANCIAL SERVICES CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


(2)      INVESTMENT SECURITIES
         Investment securities available for sale at December 31, 2002 and 2001
         are as follows:


<TABLE>
<CAPTION>
                                                                    December 31, 2002
                                               ----------------------------------------------------------------
                                                                     Gross           Gross
                                                Amortized         Unrealized       Unrealized        Estimated
                                                  Cost               Gains           Losses          Fair Value
                                              -------------         -------         --------         ----------
<S>                                           <C>                   <C>              <C>             <C>
U.S. Government agencies                      $   7,158,707         185,124               --          7,343,831
Municipal securities                              4,195,870         140,976               74          4,336,772
Trust preferred securities                        1,000,000            --                 --          1,000,000
Mortgage-backed securities                        4,293,008          98,367               --          4,391,375
                                              -------------         -------         --------         ----------
    Total                                     $  16,647,585         424,467               74         17,071,978
                                              =============         =======         ========         ==========


<CAPTION>
                                                                    December 31, 2002
                                               ----------------------------------------------------------------
                                                                     Gross           Gross
                                                Amortized         Unrealized       Unrealized        Estimated
                                                  Cost               Gains           Losses          Fair Value
                                              -------------         -------         --------         ----------
U.S. Government agencies                      $   2,992,034          44,656           40,184          2,996,506
Municipal securities                              3,296,535           1,762           78,230          3,220,067
Corporate bonds                                   2,028,511         132,888             --            2,161,399
Mortgage-backed securities                        3,675,164         121,774             --            3,796,938
                                              -------------         -------         --------         ----------
    Total                                     $  11,992,244         301,080          118,414         12,174,910
                                              =============         =======         ========         ==========
</TABLE>


         The amortized cost and estimated fair value of investment securities
         available for sale at December 31, 2002, by contractual maturity, are
         shown below. Expected maturities will differ from contractual
         maturities because borrowers have the right to call or prepay
         obligations with or without call or prepayment penalties.


<TABLE>
<CAPTION>
                                            Amortized        Estimated
                                             Cost            Fair Value
                                         -------------      -------------
<S>                                      <C>                    <C>
Due within one year                      $   1,151,026          1,166,129
Due from one to five years                   8,449,827          8,673,641
Due from five to ten years                   1,476,354          1,552,341
Due after ten years                          1,277,370          1,288,492
Mortgage-backed securities                   4,293,008          4,391,375
                                         -------------      -------------
                                         $  16,647,585         17,071,978
                                         =============      =============
</TABLE>

         For the years ended December 31, 2002 and 2001, the Company sold
         investment securities available for sale for $2,204,200 and
         $1,547,500, respectively, with the following gross gains and losses
         recognized:


<TABLE>
<CAPTION>
                                      2002            2001
                                   ----------      ----------
<S>                                <C>                 <C>
         Gross gains               $  180,780          50,000
         Gross losses                    --            (2,500)
                                   ----------      ----------

                                   $  180,780          47,500
                                   ==========      ==========
</TABLE>


         At December 31, 2002 and 2001 securities with a carrying value of
         approximately $5,845,000 and $4,355,000, respectively, were pledged to
         secure public deposits and for other purposes as required by law.
         Investment securities with a carrying value of approximately
         $2,714,000 and $4,858,000 at December 31, 2002 and 2001, respectively,
         were allocated by the Bank for collateral under repurchase agreements.


                                     F-11
<PAGE>


                     THE PB FINANCIAL SERVICES CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(3)      LOANS
         Major classifications of loans at December 31, 2002 and 2001 are
         summarized as follows:


<TABLE>
<CAPTION>
                                                                2002               2001
                                                            --------------      ------------
<S>                                                         <C>                 <C>
         Commercial                                         $   24,516,918        15,774,748
         Real estate - commercial and residential               59,851,148        48,814,217
         Real estate - construction                             44,308,943        24,707,770
         Real estate - home equity                               4,138,049         3,035,413
         Consumer                                                8,037,613         5,685,713
                                                            --------------      ------------

                                                               140,852,671        98,017,861
         Less:  Allowance for loan losses                        1,382,676           981,639
                Net deferred loan fees                             291,106           377,885
                                                            --------------      ------------

                                                            $  139,178,889        96,658,337
                                                            ==============      ============
</TABLE>


         The Bank grants loans and extensions of credit to individuals and a
         variety of firms and corporations located primarily in Fulton County,
         Georgia. Although the Bank has a diversified loan portfolio, a
         substantial portion of the loan portfolio is collateralized by
         improved and unimproved real estate and is dependent upon the real
         estate market.

         Changes in the allowance for loan losses were as follows:


<TABLE>
<CAPTION>
                                                      2002              2001
                                                  -------------       ---------
<S>                                               <C>                   <C>
         Balance at beginning of year             $     981,639         741,629
         Provision charged to operations                406,269         240,010
         Loans charged off                              (10,682)           --
         Recoveries                                       5,450            --
                                                  -------------       ---------

         Balance at end of year                   $   1,382,676         981,639
                                                  =============       =========
</TABLE>


(4)      PREMISES AND EQUIPMENT

         Major classifications of premises and equipment are summarized as
         follows:


<TABLE>
<CAPTION>
                                                      2002              2001
                                                  ------------      ------------
<S>                                               <C>               <C>
         Land                                     $    610,482           610,482
         Buildings and improvements                  2,674,132         2,653,506
         Furniture and equipment                     1,654,189         1,411,862
         Leasehold improvements                        241,746           241,746
                                                  ------------      ------------

                                                     5,180,549         4,917,596

         Less accumulated depreciation               1,148,640           840,623
                                                  ------------      ------------

                                                  $  4,031,909         4,076,973
                                                  ============      ============
</TABLE>


         Depreciation expense was $308,017 and $289,705 for the years ended
         December 31, 2002 and 2001, respectively.

         The Bank leases certain office facilities to third parties. During
         both 2002 and 2001, this rental income totaled approximately $78,000.



                                     F-12
<PAGE>


                      THE PB FINANCIAL SERVICES CORPORATION

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(5)      DEPOSITS
         At December 31, 2002, the scheduled maturities of time deposits are as
         follows:

<TABLE>
<S>                        <C>
                 2003      $  85,574,395
                 2004          6,711,200
                 2005          4,070,810
                 2006            299,271
                 2007          1,445,770
                           -------------
                           $  98,101,446
</TABLE>


(6)      NOTE PAYABLE AND OTHER BORROWINGS
         During 2002, the Company obtained a $250,000 line of credit with
         another financial institution. The debt is secured by 100% of the
         stock of the Bank, and calls for interest to be paid quarterly at the
         prime rate less 50 basis points. The line of credit matures in August
         2003. The loan agreement contains covenants relating to the level of
         the allowance for loan losses, payments of dividends, regulatory
         capital adequacy and return on average assets. At December 31, 2002,
         the Company was in compliance with all loan covenants. The Company had
         no balances outstanding under this line of credit at December 31,
         2002.

         During 2001, the Company obtained a $1,700,000 line of credit with
         another financial institution. The debt was unsecured, with a negative
         pledge on the stock of the Bank, and called for interest to be paid
         quarterly at the prime rate less 110 basis points. The loan agreement
         contained covenants relating to the level of the allowance for loan
         losses, regulatory capital adequacy and return on average assets. At
         December 31, 2001, the Company was in compliance with all loan
         covenants. The Company had $280,000 outstanding under this line of
         credit at December 31, 2001. During 2002, the Company cancelled this
         line of credit and paid all amounts due.

         During 2001 the Bank entered into a credit facility with the Federal
         Home Loan Bank ("FHLB") of Atlanta, whereby the FHLB provides credit
         to the Bank under varying terms. Amounts advanced by the FHLB are
         collateralized by a blanket lien on all 1-4 family first mortgage
         loans and selected commercial loans.

         The FHLB advances at December 31, 2002 and 2001 are summarized as
         follows:


<TABLE>
<CAPTION>
                                        Interest     Rate
         Maturity Date                    Rate       Type         2002           2001
         -------------                   -----      ------     ----------      ---------
<S>                                     <C>         <C>        <C>             <C>
         December 23, 2002               2.45%      Fixed      $     --        3,700,000

         November 10, 2003               1.80%      Fixed       2,300,000           --

         June 23, 2004                   2.08%      Fixed       2,100,000           --

         December 23, 2004               2.31%      Fixed       2,000,000           --
                                                               ----------      ---------

                                                               $6,400,000      3,700,000
                                                               ==========      =========
</TABLE>


         Additionally, the Bank has $4,000,000 available for the purchase of
         overnight federal funds from three correspondent financial
         institutions.



                                     F-13
<PAGE>


                     THE PB FINANCIAL SERVICES CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(7)      TRUST PREFERRED SECURITIES
         In December 2002, the Company issued, through a wholly owned Delaware
         statutory trust, PB Capital Trust I (the "Trust"), $4,000,000 of
         Floating Rate Junior Subordinated Debentures (the "trust preferred
         securities"). These debentures qualify as Tier 1 capital under Federal
         Reserve Guidelines within certain limitations. All of the common
         securities of the Trust are owned by the Company. The proceeds from
         the issuance of the common securities and the trust preferred
         securities were used by the Trust to purchase $4,120,000 of junior
         subordinated debentures of the Company, which carry a deferrable
         floating rate equal to the Wall Street Journal prime rate plus 100
         basis points. At December 31, 2002, this rate was 5.25%. The proceeds
         received by the Company from the sale of the junior subordinated
         debentures were used to strengthen the capital position of the Company
         and to accommodate current and future growth. The debentures and
         related accrued interest represent the sole assets of the Trust. The
         debentures and related earnings statement effects are eliminated in
         the Company's financial statements.

         The trust preferred securities accrue and pay distributions quarterly,
         equal to the Wall Street Journal prime rate plus 100 basis points per
         annum of the stated liquidation value of $50,000 per capital security.
         The Company has entered into contractual arrangements which, taken
         collectively, fully and unconditionally guarantee payment of accrued
         and unpaid distributions required to be paid on the trust preferred
         securities, the redemption price with respect to any trust preferred
         securities called for redemption by the Trust, and payments due upon a
         voluntary or involuntary dissolution, winding up, or liquidation of
         the Trust.

         The trust preferred securities are mandatorily redeemable upon
         maturity of the debentures on December 31, 2032, or upon earlier
         redemption as provided in the indenture. The Company has the right to
         redeem the debentures purchased by the Trust in whole or in part, on
         or after December 31, 2007. As specified in the indenture, if the
         debentures are redeemed prior to maturity, the redemption price will
         be the unpaid principal amount, plus any accrued unpaid interest.

(8)      INCOME TAXES

         The components of income tax expense are as follows:

<TABLE>
<Caption>
                                                                                    2002               2001
                                                                                ------------       ------------
<S>                                                                             <C>                <C>
                  Current                                                       $    829,971            370,346
                  Deferred                                                          (152,524)           (86,101)
                                                                                ------------       ------------

                                                                                $    677,447            284,245
                                                                                ============       ============
         </TABLE>


         The differences between income tax expense and the amount computed by
         applying the statutory federal income tax rate to earnings before
         income taxes are as follows:


<TABLE>
<CAPTION>
                                                                                   2002               2001
                                                                                ------------       ------------

<S>                                                                             <C>                <C>
         Pre-tax income at statutory rates                                      $    649,038            258,571
         Differences:
           Nondeductible meals and entertainment                                       8,597              8,167
           State taxes, net of federal benefit                                        48,594            (12,526)
           Tax exempt interest                                                       (47,340)           (22,724)
           Increase in cash surrender value of life insurance                        (25,142)           (10,396)
           Other                                                                      43,700             63,153
                                                                                ------------       ------------

                                                                                $    677,447            284,245
                                                                                ============       ============
</TABLE>


                                     F-14
<PAGE>


                     THE PB FINANCIAL SERVICES CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(8)      INCOME TAXES, CONTINUED
         The following summarizes the tax effects of temporary differences that
         give rise to significant portions of the deferred tax assets and
         deferred tax liabilities. The net deferred tax asset is included as a
         component of other assets at December 31, 2002 and 2001.


<TABLE>
<CAPTION>
                                                                                        2002              2001
                                                                                     -----------       -----------
<S>                                                                                  <C>                   <C>
         Deferred tax assets:
             Allowance for loan losses                                               $   505,848           351,628
             Deferred loan fees                                                          110,504           143,445
             Deferred organizational costs                                                27,037            56,243
             Deferred compensation                                                        54,352              --
             Other                                                                        11,318            12,691
                                                                                     -----------       -----------

                         Total gross deferred tax assets                                 709,059           564,007
                                                                                     -----------       -----------

         Deferred tax liabilities:
             Unrealized gain on investment securities available for sale                (144,294)          (62,107)
             Accumulated depreciation                                                   (104,653)         (112,125)
                                                                                     -----------       -----------

                         Total gross deferred tax liabilities                           (248,947)         (174,232)
                                                                                     -----------       -----------

                         Net deferred tax asset                                      $   460,112           389,775
                                                                                     ===========       ===========
</TABLE>


(9)      RELATED PARTY TRANSACTIONS
         The Bank conducts transactions with directors and executive officers,
         including companies in which they have beneficial interests, in the
         normal course of business. It is the policy of the Bank that loan
         transactions with directors and officers be made on substantially the
         same terms as those prevailing at the time made for comparable loans
         to other customers. The following is a summary of activity for related
         party loans for 2002:


<TABLE>
<S>                             <C>
         Beginning balance      $ 3,474,000
         New loans                3,737,000
         Repayments              (3,585,000)
                                -----------

         Ending balance         $ 3,626,000
                                ===========
</TABLE>


         At December 31, 2002 and 2001, the Bank had deposit relationships with
         related parties of approximately $3,128,000 and $3,142,000,
         respectively.

         The Bank had a lease agreement with one of its directors for office
         space located in the Bank's building. Although the lease expired
         December 31, 2001, the Bank continues to lease the space on a
         month-to-month basis and requires monthly lease payments of $1,069
         plus certain executory costs.

(10)     COMMITMENTS

         The Bank leases various banking facilities and equipment under
         operating lease arrangements. Future minimum lease payments required
         for all operating leases having a remaining term in excess of one year
         at December 31, 2002 are as follows:

<TABLE>
<CAPTION>
                Year Ending December 31,                               Amount
                ------------------------                             ---------
 <S>                                                                  <C>
                         2003                                        $  56,743
                         2004                                           54,647
                         2005                                           52,596
                         2006                                           54,174
                         2007                                           55,798
                         Thereafter                                    220,284
                                                                     ---------

                         Total minimum obligation                    $ 494,242
                                                                     =========
</TABLE>


         The total rent expense was approximately $71,000 and $52,000 for 2002
         and 2001, respectively.


                                     F-15
<PAGE>


                     THE PB FINANCIAL SERVICES CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(10)     COMMITMENTS, CONTINUED
         The Bank is a party to financial instruments with off-balance-sheet
         risk in the normal course of business to meet the financing needs of
         its customers. These financial instruments include commitments to
         extend credit and standby letters of credit. Those instruments
         involve, to varying degrees, elements of credit risk in excess of the
         amount recognized in the balance sheet. The contract amounts of those
         instruments reflect the extent of involvement the Bank has in
         particular classes of financial instruments.

         The exposure to credit loss in the event of nonperformance by the
         other party to the financial instrument for commitments to extend
         credit and standby letters of credit is represented by the contractual
         amount of those instruments. The Bank uses the same credit policies in
         making commitments and conditional obligations as it does for
         on-balance-sheet instruments.

         In most cases, the Bank does require collateral or other security to
         support financial instruments with credit risk.

<TABLE>
<CAPTION>
                                                                                                Contractual Amount
                                                                                          ------------------------------
                                                                                              2002              2001
                                                                                          ------------      ------------
<S>                                                                                       <C>                 <C>
         Financial instruments whose contract amounts represent credit risk:
              Commitments to extend credit                                                $ 33,995,000        40,704,000
              Standby letters of credit                                                   $  1,527,000         5,639,000
</TABLE>


         Commitments to extend credit are agreements to lend to a customer as
         long as there is no violation of any condition established in the
         contract. Commitments generally have fixed expiration dates or other
         termination clauses and may require payment of a fee. Since many of
         the commitments may expire without being drawn upon, the total
         commitment amounts do not necessarily represent future cash
         requirements. The Bank evaluates each customer's creditworthiness on a
         case-by-case basis. The amount of collateral obtained, if deemed
         necessary by the Bank, upon extension of credit is based on
         management's credit evaluation. Collateral held varies but may include
         unimproved and improved real estate, certificates of deposit, or
         personal property.

         Standby letters of credit are conditional commitments issued by the
         Bank to guarantee the performance of a customer to a third party.
         Those guarantees are primarily issued to businesses in the Bank's
         delineated trade area. The credit risk involved in issuing letters of
         credit is essentially the same as that involved in extending loan
         facilities to customers. The Bank holds real estate, equipment,
         automobiles and customer deposits as collateral supporting those
         commitments for which collateral is deemed necessary.

(11)     BENEFIT PLANS
         The Bank has a 401(k) plan for the benefit of employees with
         eligibility subject to certain minimum age and service requirements.
         Under this plan, employees may contribute from two to fifteen percent
         of their salaries, up to the legal contribution limit. At its
         discretion, the Bank may match a portion of participants'
         contributions. The Bank may also make an annual discretionary profit
         sharing contribution to the plan. The Bank contributed approximately
         $15,800 and $14,600 to the plan in 2002 and 2001, respectively.

         During 2001, the Company adopted a post-retirement benefit plan to
         provide retirement benefits to certain of the Company's executive
         officers and its board of directors and to provide death benefits for
         the designated beneficiaries. Under this plan, single-premium,
         split-dollar, whole-life insurance contracts were purchased on the
         lives of certain executive officers and members of the board of
         directors. The increase in the cash surrender value of the contracts,
         less the Bank's cost of funds, constitutes the Company's contribution
         to the plan each year. In the event the insurance contracts fail to
         produce positive returns, the Company has no obligation to contribute
         to the plan. At December 31, 2002 and 2001, the cash surrender value
         of the insurance contracts was $2,097,522 and $1,307,576,
         respectively, and is included in the consolidated balance sheet as a
         component of other assets. For the years ended December 31, 2002 and
         2001, the Company recorded income, representing the increase in the
         cash surrender value of the contracts, of approximately $74,000 and
         $31,000, respectively, and incurred expenses of approximately $72,000
         and $8,600, respectively.


                                     F-16
<PAGE>


                     THE PB FINANCIAL SERVICES CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(12)     REGULATORY MATTERS
         The Company and the Bank are subject to various regulatory capital
         requirements administered by the federal banking agencies. Failure to
         meet minimum capital requirements can initiate certain mandatory and
         possibly additional discretionary actions by regulators that, if
         undertaken, could have a direct material effect on the financial
         statements. Under capital adequacy guidelines and the regulatory
         framework for prompt corrective action, the Company and the Bank must
         meet specific capital guidelines that involve quantitative measures of
         the assets, liabilities and certain off-balance-sheet items as
         calculated under regulatory accounting practices. The capital amounts
         and classification are also subject to qualitative judgments by the
         regulators about components, risk-weightings, and other factors.

         Quantitative measures established by regulation to ensure capital
         adequacy require the Company and the Bank to maintain minimum amounts
         and ratios (set forth in the table below) of total and Tier 1 capital
         to risk-weighted assets, and of Tier 1 capital to average assets (all
         as defined). Management believes, as of December 31, 2002, that the
         Company and the Bank meet all capital adequacy requirements to which
         they are subject.

         As of December 31, 2002 the most recent notification from the Federal
         Reserve Bank categorized the Bank as well capitalized under the
         regulatory framework for prompt corrective action. To be categorized
         as well capitalized the Bank must maintain minimum total risk-based,
         Tier 1 risk-based and Tier 1 leverage ratios as set forth in the
         table. There are no conditions or events since that notification that
         management believes have changed the Bank's category.

         The Company's and the Bank's actual capital amounts and ratios are
         presented below.

<TABLE>
<CAPTION>
                                                                                                          To Be Well
                                                                                                      Capitalized Under
                                                                                 For Capital          Prompt Corrective
                                                           Actual             Adequacy Purposes       Action Provisions
                                                     -------------------     -------------------    ---------------------
                                                       Amount       Ratio      Amount      Ratio      Amount        Ratio
                                                     ---------     -----     ---------     -----    ---------       -----
                                                                              (dollars in thousands)
<S>                                                  <C>            <C>      <C>           <C>      <C>             <C>
         AS OF DECEMBER 31, 2002:
          Total Capital (to Risk-Weighted Assets)
           Consolidated                              $  16,940      11.1%    $  12,215       8.0%          N/A       N/A
           Bank                                      $  16,549      10.9%    $  12,195       8.0%    $  15,244      10.0%
          Tier 1 Capital (to Risk-Weighted Assets)
           Consolidated                              $  15,409      10.1%    $   6,107       4.0%          N/A       N/A
           Bank                                      $  15,166      10.0%    $   6,098       4.0%    $   9,147       6.0%
          Tier 1 Capital (to Average Assets)
           Consolidated                              $  15,409       9.1%    $   6,777       4.0%          N/A       N/A
           Bank                                      $  15,166       9.0%    $   6,771       4.0%    $   8,463       5.0%

         AS OF DECEMBER 31, 2001:
          Total Capital (to Risk-Weighted Assets)
           Consolidated                              $  10,943       9.8%    $   8,900       8.0%          N/A       N/A
           Bank                                      $  11,118      10.0%    $   8,897       8.0%    $  11,121      10.0%
          Tier 1 Capital (to Risk-Weighted Assets)
           Consolidated                              $   9,961       9.0%    $   4,450       4.0%          N/A       N/A
           Bank                                      $  10,136       9.1%    $   4,449       4.0%    $   6,673       6.0%
          Tier 1 Capital (to Average Assets)
           Consolidated                              $   9,961       9.0%    $   4,413       4.0%          N/A       N/A
           Bank                                      $  10,136       9.2%    $   4,411       4.0%    $   5,514       5.0%
</TABLE>


                                     F-17
<PAGE>

                     THE PB FINANCIAL SERVICES CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(13)     SHAREHOLDERS' EQUITY
         Dividends paid by the Bank are the primary source of funds available
         to the Company. Banking regulations limit the amount of dividends that
         may be paid without prior approval of the regulatory authorities.
         These restrictions for the Bank are based on the level of regulatory
         classified assets, prior year's earnings, and the ratio of equity
         capital to total assets. At December 31, 2002 and 2001, total
         stockholders' equity of the Bank was $15,446,465 and $10,257,423,
         respectively. The amount of dividends that the Bank could pay in 2003
         without obtaining prior regulatory approval is approximately $634,000.

         During 2002 and 2001, the Company sold 26,332 and 139,869 shares of
         common stock, respectively, through a private placement at a price of
         $13.61 per share. The private placement resulted in the sale of a
         total of 166,201 shares of common stock (total proceeds of $2,261,996)
         and was completed on February 28, 2002. The proceeds of this offering
         were used to increase the Bank's regulatory capital ratios and for
         general corporate purposes.

(14)     OTHER OPERATING EXPENSE
         Other operating expense for the years ended December 31, 2002 and 2001
         included the following items that exceeded one percent of total
         revenues:

<TABLE>
<CAPTION>
                              2002       2001
                            --------    -------
<S>                         <C>         <C>
         Data processing    $160,892    135,147
         Directors fees     $177,000     92,200
</TABLE>


(15)     FAIR VALUE OF FINANCIAL INSTRUMENTS
         The Company is required to disclose fair value information about
         financial instruments, whether or not recognized on the face of the
         balance sheet, for which it is practicable to estimate that value. The
         assumptions used in the estimation of the fair value of the Company's
         financial instruments are detailed below. Where quoted prices are not
         available, fair values are based on estimates using discounted cash
         flows and other valuation techniques. The use of discounted cash flows
         can be significantly affected by the assumptions used, including the
         discount rate and estimates of future cash flows. The following
         disclosures should not be considered a surrogate of the liquidation
         value of the Company, but rather a good faith estimate of the increase
         or decrease in value of financial instruments held by the Company
         since purchase, origination, or issuance.

         Cash and Cash Equivalents
         -------------------------
         For cash, due from banks, interest-bearing deposits with banks and
         federal funds sold, the carrying amount is a reasonable estimate of
         fair value.

         Investment Securities
         ---------------------
         Fair values for investment securities are based on quoted market
         prices.

         Other Investments
         -----------------
         The carrying amount of other investments approximates fair value.

         Loans
         -----
         The fair value of fixed rate loans is estimated by discounting the
         future cash flows using the current rates at which similar loans would
         be made to borrowers with similar credit ratings. For variable rate
         loans, the carrying amount is a reasonable estimate of fair value.

         Cash Surrender Value of Life Insurance
         --------------------------------------
         The cash surrender value of life insurance policies are carried at the
         value for which such policies may be redeemed for cash.

         Deposits
         --------
         The fair value of demand deposits, interest-bearing demand deposits,
         and savings is the amount payable on demand at the reporting date. The
         fair value of fixed maturity certificates of deposit is estimated by
         discounting the future cash flows using the rates currently offered
         for deposits of similar remaining maturities.


                                     F-18
<PAGE>


                     THE PB FINANCIAL SERVICES CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(15)     FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED

         Securities Sold Under Repurchase Agreements
         -------------------------------------------
         Securities Sold Under Repurchase Agreements The carrying value of
         securities sold under repurchase agreements approximates fair value.

         FHLB advances
         -------------
         The fair value of FHLB advances is estimated based upon discounted
         future cash flows using a discount rate comparable to the current
         market rate for such borrowings.

         Note Payable
         ------------
         The carrying amount of the note payable approximates fair value.

         Trust Preferred Securities
         --------------------------
         Because the Company's trust preferred securities were issued at a
         floating rate, the carrying amount is a reasonable estimate of fair
         value.

         Commitments to Extend Credit and Standby Letters of Credit
         ----------------------------------------------------------
         Commitments to extend credit and standby letters of credit are
         generally short-term and at variable interest rates. Therefore, both
         the carrying value and estimated fair value associated with these
         instruments are immaterial.

         Limitations
         -----------
         Fair value estimates are made at a specific point in time, based on
         relevant market information and information about the financial
         instrument. These estimates do not reflect any premium or discount
         that could result from offering for sale at one time the Company's
         entire holdings of a particular financial instrument. Because no
         market exists for a significant portion of the Company's financial
         instruments, fair value estimates are based on many judgments. These
         estimates are subjective in nature and involve uncertainties and
         matters of significant judgment and therefore cannot be determined
         with precision. Changes in assumptions could significantly affect the
         estimates.

         Fair value estimates are based on existing on and off-balance-sheet
         financial instruments without attempting to estimate the value of
         anticipated future business and the value of assets and liabilities
         that are not considered financial instruments. Significant assets and
         liabilities that are not considered financial instruments include
         deferred income taxes and premises and equipment. In addition, the tax
         ramifications related to the realization of the unrealized gains and
         losses can have a significant effect on fair value estimates and have
         not been considered in the estimates.

         The carrying amount and estimated fair values of the Company's
         financial instruments at December 31, 2002 and 2001 are as follows:


<TABLE>
<CAPTION>
                                                                           2002                              2001
                                                               ------------------------------       ---------------------------
                                                                Carrying           Estimated        Carrying         Estimated
                                                                  Amount           Fair Value         Amount         Fair Value
                                                               -------------       ----------       ----------       ----------
<S>                                                            <C>                 <C>              <C>              <C>
       Assets:
             Cash and cash equivalents                         $  15,552,438       15,552,438       11,628,756       11,628,756
             Investment securities available for sale          $  17,071,978       17,071,978       12,174,910       12,174,910
             Other investments                                 $     670,600          670,600          185,000          185,000
             Loans                                             $ 139,178,889      139,704,187       96,658,337       96,373,428
             Cash surrender value of life insurance            $   2,097,522        2,097,522        1,307,576        1,307,576

         Liabilities:
             Deposits                                          $ 155,989,039      156,803,370      109,332,412      110,286,508
             Securities sold under repurchase agreement        $   1,379,781        1,379,781        3,366,143        3,366,143
             Federal Home Loan Bank advances                   $   6,400,000        6,413,568        3,700,000        3,695,572
             Note payable                                      $        --               --            280,000          280,000
             Trust preferred securities                        $   4,000,000        4,000,000             --               --
</TABLE>


                                     F-19
<PAGE>


                      THE PB FINANCIAL SERVICES CORPORATION

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


(16)     THE PB FINANCIAL SERVICES CORPORATION (PARENT COMPANY ONLY) FINANCIAL
         INFORMATION


                                 BALANCE SHEETS

                           DECEMBER 31, 2002 AND 2001


<TABLE>
<CAPTION>
                                                                                      2002               2001
                                                                                  ------------      ------------
                                               Assets
<S>                                                                               <C>                     <C>
Cash                                                                              $    153,586            64,708
Investment in subsidiaries                                                          15,566,465        10,257,423
Other assets                                                                           241,744            39,746
                                                                                  ------------      ------------

                                                                                  $ 15,961,795        10,361,877
                                                                                  ============      ============

                                   Liabilities and Shareholders' Equity
Other liabilities                                                                 $      4,511                --
Note payable                                                                                --           280,000
Junior subordinated debentures                                                       4,120,000                --
Shareholders' equity                                                                11,837,284        10,081,877
                                                                                  ------------      ------------

                                                                                  $ 15,961,795        10,361,877
                                                                                  ============      ============
</TABLE>



                             STATEMENTS OF EARNINGS

                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001


<TABLE>
<CAPTION>
                                                                2002              2001
                                                           -------------       ----------
<S>                                                        <C>                 <C>
Interest expense                                           $     (33,812)         (20,057)
Other operating expenses                                         (24,116)         (18,764)
                                                           -------------       ----------

Loss before income tax benefit and equity in
     undistributed earnings of subsidiaries                      (57,928)         (38,821)

Income tax benefit                                                22,012           14,753
                                                           -------------       ----------

Loss before equity in undistributed
     earnings of subsidiaries                                    (35,916)         (24,068)

Equity in undistributed earnings of subsidiaries               1,267,405          500,327
                                                           -------------       ----------

Net earnings                                               $   1,231,489          476,259
                                                           =============       ==========
</TABLE>


                                      F-20
<PAGE>


                      THE PB FINANCIAL SERVICES CORPORATION

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(16)     THE PB FINANCIAL SERVICES CORPORATION (PARENT COMPANY ONLY) FINANCIAL
         INFORMATION, CONTINUED

                            STATEMENTS OF CASH FLOWS

                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001


<TABLE>
<CAPTION>
                                                                                    2002               2001
                                                                                -------------       -------------
<S>                                                                             <C>                 <C>
Cash flows from operating activities:
    Net earnings                                                                $   1,231,489             476,259
    Adjustments to reconcile net earnings to net cash used by
      operating activities:
        Equity in undistributed earnings of subsidiaries                           (1,267,405)           (500,327)
        Deferred income taxes                                                         (56,229)             11,183
        Change in other assets                                                         30,217             (25,929)
        Change in other liabilities                                                     4,511                  --
                                                                                -------------       -------------


            Net cash used by operating activities                                     (57,417)            (38,814)
                                                                                -------------       -------------

Cash flows used by investing activities, consisting of
    capital infusions in subsidiaries                                              (3,882,098)         (1,998,380)
                                                                                -------------       -------------

Cash flows from financing activities:
    Proceeds (repayments) of note payable                                            (280,000)            198,285
    Proceeds from issuance of junior subordinated debentures                        4,120,000                  --
    Transaction costs associated with trust preferred securities                     (175,986)                 --
    Issuance of common stock                                                          358,379           1,903,617
    Proceeds from exercise of stock options                                             6,000                  --
                                                                                -------------       -------------

                   Net cash provided by financing activities                        4,028,393           2,101,902
                                                                                -------------       -------------

                   Net change in cash                                                  88,878              64,708

Cash at beginning of year                                                              64,708                  --
                                                                                -------------       -------------


Cash at end of year                                                             $     153,586              64,708
                                                                                =============       =============
</TABLE>


                                      F-21